Chubb Declines After Missing Estimates, Lowering 2014 Forecast

Jul 25, 2014 11:46 am ET

July 25 (Bloomberg) -- Chubb Corp., the insurer of corporate boards and mega-yachts, fell the most since April as the company lowered its 2014 forecast after second-quarter profits missed estimates.

Chubb dropped 3.9 percent to $89.14 at 11:31 a.m. in New York, the second-most in the 84-company Standard & Poor’s Financials Index. The Warren, New Jersey-based company has dropped about 7.8 percent this year.

Net income fell 14 percent to $499 million on higher claims costs tied to fires, the company said late yesterday. Profit excluding some investment results was $1.70 a share, missing the $1.90 average estimate of 20 analysts surveyed by Bloomberg. Chubb is facing pricing pressure as rivals seek business among the most profitable clients, Dino Robusto, who runs the commercial unit, said in a conference call.

“We remain cautious on the shares as the competitive environment worsens,” Cliff Gallant, an analyst with Nomura Holdings Inc., wrote in a note to investors. “We expect that the Street’s earnings-per-share expectations for 2015 remain too high.”

The insurer now expects full-year operating profit of $6.75 to $6.95 a share, Chubb said yesterday. That compares with a projection in January of $7.10 to $7.40 and reflects lower-than- planned earnings in the first six months of the year.

“This was the worst quarter we’ve had since I’ve been here in terms of fire losses,” John Finnegan, the chief executive officer since late 2002, said on the call. “We still made $2 a share in net income. We’re sorry we didn’t hit what we expected to hit.”