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Here’s What’s behind Chubb’s Net Income in 4Q17

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Feb. 2 2018, Updated 4:35 p.m. ET

Net income

Chubb’s (CB) net income in 4Q17 was $1.5 billion compared to $1.6 billion in 4Q16. The company saw a rise in net premiums earned, from $7.1 billion in 4Q16 to $7.2 billion in 4Q17. Its policy acquisition costs in 4Q17 stood at $1.44 billion compared to $1.41 billion in 4Q16.

In 2017, Chubb’s net premiums earned were $29 billion. In 2016, they were $28.7 billion. Between 4Q16 and 4Q17, the company’s administrative expenses rose from $708 million to $737 million.

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Net investment income

Chubb generated adjusted net investment income of $873 million in 4Q17, which represents a rise of 3.5% on a YoY (year-over-year) basis. It exceeds the guidance due to a rise in call activity related to the corporate bond portfolio. However, since private equity distributions also exceeded the projections, net investment income saw a favorable momentum.

Chubb saw a marginal rise in its adjusted interest expense, from $167 million in 4Q16 to $168 million in 4Q17. Between 4Q16 and 4Q17, the company saw a rise in policy benefits from $161 million to $176 million.

Chubb’s free cash flow yield on an LTM (last 12-month) basis was 2.1%. Its peers (XLF) American International Group (AIG), Allstate (ALL), and Arch Capital Group (ACGL) had free cash flow yields of 1.8%, 6.1%, and 3.7%, respectively, on an LTM basis.

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