Allstate, Chubb Profits Rise on Disaster Claim Decline, Premium Growth

Chubb Ltd. and Allstate Corp., two of the best-known names in property-and-casualty insurance, posted strong gains in fourth-quarter net income, as their core insurance operations benefited from fewer catastrophe claims and growth in premium volume.

Source: WSJ | Published on February 5, 2020

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For U.S. property-casualty insurers, the most-recent quarter included Texas tornadoes and California wildfires, but the damage was light compared with the fourth quarter of 2018. Then, Hurricane Michael landed near Mexico Beach, Fla., and California wildfires caused historic devastation.

Across the insurance industry, investors are looking closely at movement in prices to gain comfort that years of price competition may finally be ending.

Prudential Financial Inc., one of the nation’s biggest life insurers by assets, reported a jump in net income, too. But it posted declines in sales of bread-and-butter life-insurance policies and retirement-income products to individuals in results reflecting tough conditions across the U.S. life-insurance industry.

Ultralow interest rates are hurting yields on life insurers’ bondholdings, driving up the prices they charge to consumers and leading to less-generous benefits.

Chubb’s bottom line more than tripled, to $1.17 billion, while Allstate reversed a year-earlier loss to post $1.71 billion in net income. Chubb is one of the nation’s biggest insurers of businesses and is a leading seller of property insurance to wealthy people, as measured by premium. Allstate is a top issuer of car and home policies.

Shares of all three insurers, which reported their results after the close of trading Tuesday, were up sharply, led by Chubb with a 4.6% gain.

Chubb’s catastrophe losses totaled $353 million, down from $506 million the prior-year period, while Allstate’s dropped to $295 million from $963 million. Chubb has a global business, and its most-recent results also were weighed down by Typhoon Hagibis in Japan and civil unrest in Hong Kong and Chile.

Chubb’s results gave investors comfort that years of price competition may be ending. Chief Executive Evan Greenberg said in an earnings call Wednesday morning that premium rates are “improved and improving.” He cited percentage increases ranging from the mid single digits to more than 20% across different types of coverage.

Chubb’s property-casualty “net premiums written,” an industry term for revenue, grew 9% in the quarter to $7.4 billion, lifted by new sales and rate increases.

In contrast, car insurers like Allstate have won approval from many state insurance departments for rate increases on a fairly steady basis since 2015, when a spike in traffic deaths caught the industry by surprise.

At that time, more drivers were suddenly on the road with increased mileage amid the economic recovery and distracted driving was growing as a concern. An overall jump in claims contributed to widespread profit declines, as did higher costs of repairing new vehicles due to sophisticated safety equipment

Allstate’s overall premiums grew 4.4% to $8.74 billion. The company said the average premium in auto is up 3%.

“The personal-lines pricing environment has been more consistent than the ups and downs in the commercial space,” Chief Executive Tom Wilson said in an interview.

Mr. Wilson credited an expense-reduction campaign for part of the company’s profit surge. It has been deploying additional technology to wring out costs.

Chubb said earnings improved even as its U.S. agriculture-insurance business posted an underwriting loss due to crop-yield shortfalls resulting from poor growing conditions. The company insures more than 100 crops over some 65 million acres.

Prudential posted fourth-quarter net income of $1.13 billion, up from $842 million, in the year-earlier quarter. But its “adjusted operating income,” which analysts follow closely because it excludes nonrecurring items, fell 8.2% to $950 million from $1.04 billion.

Wells Fargo Securities analyst Elyse Greenspan noted higher expenses and lower fee-based income and premiums in the U.S. Prudential unit selling to individuals. The insurer’s Japan operations delivered mixed sales results, she said.

Prudential’s investment-management arm, on the other hand, reported higher asset-management fees from an increase in average assets under management, driven by market appreciation and fixed-income net flows, the company said.