Chubb Corp., the insurer of high-end homes and mega-yachts, said fourth-quarter profit fell 1.9 percent as investment income declined.
Net income dropped to $558 million, or $2.35 a share, from $569 million, or $2.24, a year earlier when there was more stock outstanding, the Warren, New Jersey-based company said in a statement Thursday. Operating profit, which excludes some investment results, was $2.29 a share, beating the $2.17 estimate of 20 analysts surveyed by Bloomberg.
Property-casualty insurers have been struggling with low bond yields that pressure investment returns and increased competition as hedge funds seek to bet on weather-related risks. Chubb also faces the prospect of an intensifying rivalry with Ace Ltd. after the Zurich-based company agreed to buy the Fireman’s Fund unit serving wealthy clients, according to Paul Newsome, an analyst with Sandler O’Neill & Partners LP.
“The low-interest-rate environment isn’t favorable for Chubb,” Newsome said in an interview before the results. “They’re seeing their investment portfolio returns decline.”
Chubb said that 2015 operating profit will probably be in the range of $7.35 to $7.65 a share, compared with the average estimate of $7.82 in a Bloomberg survey of 21 analysts. The forecast assumes that investment income will fall 6 percent to 8 percent. Fourth-quarter investment income slipped 6.9 percent to $325 million before tax.
Book value, a measure of assets minus liabilities, rose to $70.12 a share on Dec. 31 from $70 three months earlier. In the fourth quarter, Chubb repurchased 3.4 million shares at a cost of $346 million.
The insurer on Thursday approved a new buyback program for as much as $1.3 billion of the company’s stock. That compares with a $1.5 billion authorization last January.
Chubb has slipped 0.9 percent this year to $102.52 as of 4:03 p.m. in New York, after climbing 7.1 percent in 2014. Results were released after the close of regular trading.
Travelers Cos., the only property-and-casualty insurer in the Dow Jones Industrial Average, said on Jan. 22 that fourth- quarter profit rose 5.1 percent to $1.04 billion. Ace said Tuesday that net income fell 44 percent to $555 million as the company had an investment loss tied to variable-annuity reinsurance.
Chubb’s premium revenue in the fourth quarter rose 2.5 percent from a year earlier to $3.12 billion. The insurer posted a combined ratio of 84.3, meaning it retained 15.7 cents on each premium dollar after claims and expenses. That improved from a ratio of 85.5 percent a year earlier.
For the full year, net income fell to $2.1 billion or $8.62 per share, from $2.3 billion, or $9.04.