Chubb's Q1 Earnings Show Resilience Amid Catastrophe Headwinds

Chubb Limited’s first-quarter 2025 earnings underscored the duality of its business: extraordinary resilience in core underwriting and investment performance, overshadowed by record catastrophe losses. Net income fell 38% year-over-year to $1.33 billion, dragged down by a staggering $1.64 billion in pre-tax losses from California wildfires. Yet beneath the noise, Chubb’s fundamentals remain intact, offering investors a mix of caution and optimism.

The Catastrophe Overhang

The headline numbers are grim. Catastrophe losses surged to $1.64 billion—more than triple the $435 million reported in Q1 2024—primarily from wildfires in California. This single event alone erased nearly all of Chubb’s underwriting gains. The North America Personal P&C segment’s combined ratio skyrocketed to 159.5%, a stark contrast to 87.4% a year earlier, as wildfire reinstatement premiums and claims piled up.

Yet when stripped of catastrophes, Chubb’s underwriting machine remains robust. Excluding disasters, current accident year underwriting income rose 12% to $1.83 billion, with a combined ratio of 82.3%—a testament to disciplined pricing and loss control. Overseas General’s combined ratio improved to 83.4%, and casualty lines in commercial markets stayed “firm,” as CEO Evan Greenberg noted.

Premium Growth: The Engine That Keeps Churning

Chubb’s top line grew 3.2% in P&C net premiums to $10.93 billion, but the details matter. North America commercial premiums rose only 2.1%, hampered by one-time structured transactions in 2024. Excluding those, growth hit 3.1%. Meanwhile, North America personal premiums jumped 6.6%, but this included wildfire reinstatement premiums. Organic growth, excluding those, reached a robust 10.1% in personal insurance and 5.3% in commercial.

The overseas story is stronger. Overseas General premiums grew 1.8% in reported terms but 6.5% in constant dollars, with commercial insurance surging 7.3%. Asia and Latin America led the way, each up 6.1%, while Europe expanded 5.5%. Life Insurance also shone, with premiums up 5.3% ($1.72 billion), driven by double-digit growth in international markets.

Investments and ROE: The Good, the Bad, and the Volatile

Chubb’s investment performance was a bright spot. Net investment income jumped 12.2% to $1.56 billion, fueled by higher yields and a $152 billion investment portfolio. However, return on equity (ROE) tumbled to 8.2%, down from 14.3% a year earlier, as catastrophe losses and lower equity from unrealized investment gains weighed. Core operating ROE was 8.6%, but this still lags the 13.4% seen in 2024.

The balance sheet remains solid. Book value per share rose 2.7% to $164.01, driven by investment gains and foreign exchange benefits. Tangible book value increased 3.9% to $104.27, signaling shareholder-friendly capital management. Chubb returned $751 million to shareholders via buybacks and dividends, maintaining its commitment to capital discipline.

CEO’s Take: Underlying Strength vs. External Headwinds

Greenberg emphasized two truths: Chubb’s core business is firing on all cylinders, but external risks are mounting. “The underlying performance of our business is strong,” he said, citing underwriting margins and investment gains. Yet he warned of “trade policy uncertainty,” rising recession odds, and inflation risks, which could crimp consumer and corporate confidence.

Competitive pressures in large commercial property markets are another concern. While casualty pricing remains firm, Greenberg noted “some softness in property,” reflecting a crowded market. Still, Chubb’s focus on high-margin casualty and specialty lines—80% of its global P&C and life business—provides a buffer against broader economic slowdowns.

Conclusion: A Buy for the Long Run, but Beware Volatility

Chubb’s Q1 results are a reminder that insurance is a cyclical business. The California wildfires are an outlier, but they highlight the sector’s inherent risks. Investors should focus on the trends beneath the noise:

• Underwriting discipline: Excluding catastrophes, Chubb’s combined ratio improved 1.4 points to 82.3%, a sign of sustained pricing power.
• Premium momentum: Organic growth in personal insurance (10.1%) and overseas commercial (7.3%) points to sustainable expansion.
• Investment resilience: The $1.56 billion in net investment income shows the portfolio’s stability, even as rates rise.

However, risks loom large. Catastrophe losses could remain elevated in 2025, and a potential recession could dampen premium growth. Chubb’s ROE has fallen sharply, and its stock (CHUB) has underperformed peers year-to-date, down 5% as of mid-April.

For long-term investors, Chubb’s dividend yield of 1.6% and fortress balance sheet provide ballast. But traders should brace for volatility tied to weather and macroeconomic news. Chubb’s strategy to grow operating income and EPS at a double-digit rate (excluding catastrophes and FX) is achievable—if the skies stay clear.

In short, Chubb is a buy for those willing to tolerate the swings of an industry where a single wildfire can redefine a quarter.