US tax reform boosts Chubb earnings

US property/casualty (P&C) insurer Chubb has included a provisional tax benefit of $450 million in its fourth quarter 2017 results related to the 2017 US tax reform.

“Tax reform is good for our economy, and Chubb will benefit from both a lower corporate rate and additional insurance exposure growth as the economy continues to expand,” said CEO Evan Greenberg.

The Tax Cut and Jobs Act of 2017 (US Tax Reform) was enacted on December 22, 2017, reducing the statutory federal income tax rate from 35 percent to 21 percent, effective January 1, 2018.

The 2017 Tax Reform increased Chubb’s book value by $450 million and decreased tangible book value by $293 million, primarily due to the impact of the reduced US corporate tax rate on deferred tax balances and excess foreign tax credits created by the deemed repatriation of foreign subsidiary earnings.

Overall, net income for the quarter ended Dec. 31, 2017 was $1.53 billion, a decrease from $1.61 billion registered in the same period a year ago.

The fourth quarter P&C combined ratio deteriorated to 90.7 percent compared with 87.8 percent in the prior year.

“The quarter was impacted by the two largest wildfires in California history,” Greenberg said.

The full year 2017 net income declined 6.6 percent year on year to 3.86 billion. The full-year P&C combined ratio was 94.7 percent in 2017 compared with 88.7 percent in the prior year. Net premiums written grew 4.2 percent year on year to $27.10 billion in 2017.

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"For the year, we produced $3.8 billion in core operating income, down 20 percent from what we would have earned with a normalized level of annual catastrophe losses and without the benefit from tax reform,” Greenberg noted.

“In terms of the current rate environment, positive commercial P&C rate movement accelerated in the quarter month by month, with prices firming in a number of important classes, both property and casualty-related. We achieved some of the best rate change in a number of years and the positive trend has continued into January with momentum appearing to build in certain classes.