Q4 2019 Earnings Call
Ladies and gentlemen, please standby.
Good day and welcome to the trouble limited fourth quarter year end 2019 earnings Conference call. Today's conference is being recorded if you like to ask a question. Please press star one on your telephone keypad for opening remarks, and introductions I would like to turn the call over to cure in buyer Senior Vice President Investor Relations. Please go ahead.
Thank you and good morning, everyone welcome to jobs at December 31st 2019 fourth quarter yearend earnings Conference call.
I'll report today will contain forward looking statements, including statements relating to company performance and growth opportunities.
Seating business mix, and economic and market conditions, which are subject to risks and uncertainties and actual results may differ materially.
We see our recent FCC filings earnings release, and financial supplement which are available on our website that investors don't shop Dot com for more information on factors that could affect these matters.
We will also refer today your non-GAAP financial measures reconciliations of which two the most directly comparable GAAP measures and related detailed.
Provided in our earnings press release and financial supplement.
Now, it's my pleasure to introduce or speakers. This morning first he has been green.
Chairman and Chief Executive Officer, followed by still Bancroft, Our Chief Financial Officer will then take your question.
Possibly go to assist with your questions a several.
Okay.
Now I will turn the call over to happen.
Good morning.
You saw from the numbers, we work for the core operating income in the fourth quarter.
28 for sure.
13% from prior year.
The quarter was more like excellent premium Robin you broke globally.
Driven by an improved in improving pricing and underwriting environment.
Spreading more lines of business and more territories.
Organic growth and the commercial winds underwriting environment, where the best in over five years.
We also experienced a fairly active quarter globally for weather related and mad make faster fees.
In the impact of weather on our U.S. agriculture business.
Core operating income was just over $1 billion.
Which PNC combined ratio for the quarter 92, something about a half a point improvement over prior year period.
PNC underwriting income up 12%.
On the one here, we benefited from lower year over year catastrophe losses.
You may have noticed.
Hi off what bark total losses in the quarter was from one of them tornado that destroyed a mile biomarker when I say off affluent neighborhood.
Suburbs of Dallas, where job cuts significant market share.
What are the odds, but that's our business.
On the other hand or do you saw for more pre announcement, we reported an underwriting loss of 23 million for the quarter and our crop insurance business attributable to yield shortfalls were difficult growing conditions.
Paired with an underwriting gain of 161 million than last year's fourth quarter.
As I pointed out before by its nature crop insurance as a business with got like exposures. After all it's about moisture in temperature.
The weather.
The risk reward for crop insurance, it's been favorable for job over the long short or medium term, but after three exceptional years and 16 to 18 last year was below average.
The quarter Global PMC combined ratio, which excludes agriculture is 91, nine compared with 95 to prior year and on a current accident year basis, excluding God. It was an outstanding 88, six versus 89 89 nine.
Last year.
To briefly recap your core operating earnings of 4.6 billion were up over 5%.
I don't see underwriting income up for now.
Global PNC underwriting income, which again excludes sag was up 18.5%.
Global PMC combined ratios both the calendar on current accident year, we're simply excellent calendar year was down from the year before the current accident year, excluding cats was flat with prior year.
Okay, and tangible book value per share were up 11.7, and 18.6% respectively for the year driven by a combination of income and the mark from falling interest rates.
So we'll have more to say about the investment income book value cats in prior periods at all.
Turning to grow on the rate environment and see premium revenue in the quarter in constant dollars was excellent.
As I noted a moment ago, the strongest organic premium revenue growth in over five years.
Premiums grew 9.8% before foreign exchange, which had less than a point negative impact.
Pricing environment continued to improve quarter on quarter with the rate of increase accelerating spreading more classes of business and risk items.
Overall prices increased in North America, commercial which includes both major workouts and specialty as well as middle market in small commercial by 8.3% bought a written basis.
First as a current loss cost trend of about four and a half or so.
Renewal price change includes both rate of 9%.
A slight decline on exposure.
Have a person.
We continue to benefit from a flight to quality is more business continues to meet our underwriting standards and new and existing customers choose job.
New business was up nearly 10% in the quarter.
Renewal retention was excellent 95, and a half on a premium.
87% on a policy count basis.
Major accounts in specialty commercial excluding gag premiums grew over 200 and a half for Sir.
With major accounts retail growth of 9%.
Your next wholesale growth of 10%.
In terms of rate increases rates for major accounts were up 200, a half or sorry.
With risk management up five and a half excess casualty up 27%.
Property and short tail winds up 29.
Management liability rates increased 20%.
In our Westchester units wholesale business rates were up 15%.
Property up overnight gene casualty up 15, and financial lines up nearly 12.
All well above third quarters increases rates in our job Bermuda business were up 33%.
Turning to our U.S. middle market in small commercial division premiums grew over southerner enhanced or so.
Excluding workers comp we grew 10%.
Renewal retention in our middle market business was nearly 94%.
They don't like market pricing was up 5%.
Good and comp it was up nearly seven.
Racing for casualty ARX comp was up about sex.
I'll call pricing was down about four and Uh huh.
Package was up 6%.
Property up Kinder and a half from financial lines rates were up almost state.
In our North America personal lines business net premiums in the quarter were up overnight in person.
Adjusted for additional reinsurance items, which negatively impacted prior year growth, we grew four and a half per se.
Retention remains strong at 97 in the house on a premium basis and over 89% on a policy basis.
Homeowners pricing was up nearly 13% in the quarter.
Making great progress.
Being the portfolio to more closely focus on clients, who meet our risk profile.
Turning to our international business growth remained strong in our overseas General insurance operations.
Premiums written up 9% in constant dollars.
FX and had a negative impact about two and a half percentage points.
Net premiums for London market wholesale business were up 22%.
Well, our retail division was up almost eight.
The score broadly distributed across the globe.
It was in our international retail is led by Continental Europe up nearly 200.5% than the tough square in many years, followed by Latin America, and Asia Pac over nine eight respectively, I'd be UK up over five and a half.
Overall rates in our international retail business were up 10%.
Property up 11 casualty up three financial lines up 17%.
It's in our London wholesale business were up 20%.
Property up 21.
That's it lines up 16 and aviation up 27%.
Or is your focused international life insurance business had a strong quarter.
Net premiums up over 14% in constant dollar.
Contribution to earnings of 36 million up over 12% from prior year.
John Keogh, John LUPA, Paul Krump.
Well, one Luis Ortega can provide further color on the quarter, including current market conditions and pricing trends.
Closing it was a good quarter and year for job growth.
<unk> revenue growth continued to accelerate as more business meets our underwriting standards, we achieved greater price adequacy in a rapidly improving underwriting environment.
We have started the new year in excellent shape with a lot of momentum.
Organization was built on a global scale to capitalize on market conditions such as this.
We have patiently waited and remain disciplined.
Due to work culture, and the craft of underwriting excellence.
No capitalizing on greater opportunity.
The same time.
We're not taking our ROI off the execution of our many important long term strategic initiatives.
Position us for future revenue and earnings growth.
What do you are increasing ownership stake and watch I insurance group.
Yes, we are making with our digital efforts.
Growing international consumer lines operation.
Our growth strategies for middle market and small commercial around the globe.
Got it.
The call over to fill that we'll be back could take your questions.
Thank you Evan.
We completed the year very strong overall financial position businesses and investment performance produced positive cash flow of 1.4 billion for the quarter and 6.3 billion for the year.
Our total capital grew to over 70 billion.
Our cash and invested assets grew 8.6 billion for the year to a 111 billion.
In addition, as evident benches are booked in tangible book value per share grew 11.7% at 18.6% respectively.
For the year, excluding unrealized gains from declining interest rates book and tangible book value per share <unk>, 5.5% and 8.1% respectively.
Among the capital related actions in the quarter, we returned 650 million to shareholders.
Including 340 million in dividends and 310 million in share repurchases.
For the year Weve returned 2.9 billion to shareholders.
The 1.4 billion in dividends and over 1.5 billion in share repurchases at an average price of $146.61 per share.
In December we issued 1.6 billion a five year.
Yes, and European markets at an average interest rate.
Slide 9%.
For the year, you have issued 2.8 billion of euro debt and paid over 500 million of mature.
This day, who used to fund certain future debt.
The other corporate users.
Our annualized core operating or are we for the year was right person and our core operating return on tangible equity is 14.6 per se.
As previously announced in December we increased our ownership stake and walk talking insurance group the 30.9%.
Agreed to purchase another 22.4% in two separate transactions.
Since you know certain approvals and other conditions.
The whole the majority stake when we complete the second transaction until then we continue to apply equity accounting to our watch I ownership.
Adjusted net investment income for the quarter was 893 million pretax.
And 3.6 billion pre tax for the year.
Investment income in the quarter was slightly below our previous guidance due to lower than expected private equity distributions.
Well there are a number of factors that impact the variability investment income we now expect a quarterly run rate give a range of 885 to 895 million.
After tax net realized and unrealized gains were 268 million cubic.
And 3 billion for the year, primarily from a decline as interest rates in the fixed income portfolio.
That catastrophe losses for the quarter 430 million pretax were 350 million after tax as previously announced and our further detail in the financial supplement.
We had favorable prior period development in the quarter of 233 million pretax or 199 million after tax.
This is net of 74 million adverse development from our legacy runoff exposure principally related to assess.
Remaining favorable development of 307 million split approximately 67% and long tail lines, principally from accident years 2015 in prior and 33% in short tail lines.
The full year agriculture, combined ratio was 95.1% compared with 75.5 in the prior year or decline of 296 million ton underwriting income from higher crop losses.
Given this years results, we do not expect the 2019 crop year to develop anywhere near as favorably in 2020 as the 2018 years dissolved in the first quarter of 2019 as a reminder, we had positive development over of over 60 million.
And last year's first quarter.
On a constant dollar basis net loss reserves decreased 118 million in the quarter, reflecting the impact of catastrophe loss payments.
Favorable prior period development and crop insurance payments in the quarter.
On a reported basis the paid do occurred ratio was 106%.
After adjusting for the items noted above the paid billing for ratio was 98%.
For the year net loss reserves increased 514 million on a constant dollar basis.
Our reported.
Hey, doing currently assist ratio year was 99% and was 92% adjusted for the items noted above.
Our core operating effective tax rate for the quarter was 14.2%, which is in line with our annual expected range.
Well here there is that at the lower end of the range given the impact of catastrophe losses in the tool.
For the year, our core operating effective tax rate was 14.9 per se.
For 2020, we expect our annual poor operating effective tax rate to continue to be in the range of 14% to 16%.
I'll turn the full effect.
I mean parents sorry.
Thank you and at this point, we'll be happy to take your question.
And ladies and gentlemen, if you'd like to ask a question and you can think about pressing star one on your telephone keypad just keep in mind. If you are using a speaker phone leased or the new functions for at least so that people can reach our equipment.
So again start one for questions, we will begin with.
Phillips with Morgan Stanley.
Hey, good morning, thank everybody appreciate it.
I guess first question Evan the very high level question in the kind of apologize in advance it's kind of a generic question, but a little ideas and thoughts on this.
No look the industry's reacting to that send to the pass if you will from pricing and that we are trying to ensure the industry.
When we bought have to do as much because your prior years doses, which already strong and so you know the question here is kind of more how do you think about the answer is really your account by Calfee told of your underwriting and would you guys do probably well look at a high level then how do you steer the ships with thinking about just the trade off.
Between you'd have a cushion that you could maybe not really worry about margin expansion is most because you got such great into its margins and think about the growth that you could possibly get even higher growth. If you gave up a little bit more on the margin.
Since you just kind of how do you think about the total between the pricing that you want to get to go to want to get much the margins.
Yes.
On that.
Yeah, I don't them.
I don't think about it that way.
Not how in underwriting organization really thinks about it.
Your.
Your question is in a sense.
We simplistic.
We.
He quote.
The rates and prices.
And underwriting terms that we requiring each line of business.
Earn what we think is an adequate risk adjusted return has expressed by a combined ratio in that line of business.
Then all mixes together again portfolio, which you then see ties and overall published average combined ratio.
And.
So you can't in the commercial PMC business, which runs higher than the average that you'd look out for the whole company. You then dig down by line and their aligns with business that are.
We think are adequate now.
Or maybe a bit above adequate in some cases.
And there are lines of business that are below adequate.
And we'll continue to drive for rate were ever we see adequacy.
And we like the risk reward.
Were hardly holding back on growth.
And [laughter] I think the question is a little ironic this quarter.
You are asking because in the backdrop fundamentally a 10% growth rate.
On an organization of the size.
[laughter] I hope that helps you.
Okay. Thanks.
A little more detailed done all the only thing you why not take you out of second question.
Yeah. Thanks. This is more detailed on on overseas general.
Kind of Nitpicky question here on on your expense ratio I'd think about that and 2020 I mean, it looks like it's picked up but throughout my team more on the acquisition and stuff. So.
You know what's behind that.
For 20 Twond.
Yeah, it's pretty its pretty.
Simple about a third of it.
Yes.
The increases related to one time items last year.
Right.
Benefited last year's expense ratio.
About a third of it is is mix its business, where it its business. It runs a lower loss ratio higher expense ratio in some of the partnerships. We have we'll we'll we'll we'll have that that signature to them.
Because they're the mix of product is a lower loss ratio related and the third as investments we've been making in certain businesses, particularly in Asia and to a degree in Latin America to grow on for future growth and.
Well grow into our sleeves, there and the expense ratio will.
Well and will ameliorate improved.
Okay. Thank you [noise].
Welcome.
Well no here from Paul Newsome with Piper Sandler.
Good morning regulations on the quarter.
Thanks.
I wanted to ask about North American caption of the loss trend that you mentioned because that seems to be it the topic of just how much you might be accelerating.
Can you talk about maybe what's going on there as well as I would imagine coming if I'm wrong. There are pieces in there with some pretty high loss trends, maybe do you know professional liability and then we're up the offsets.
Yeah no.
Yeah without going into too much detail just to give the shape of that a little bit first of all I don't agree with your last comment I think it's I know, it's not how we see it.
Do you know is an old story, we've been talking about it for a while PID free.
Frequency and severity both moved up.
With that was a couple of years ago, and we've seen it pretty steady at that elevated level. So we don't see die.
Continuing to deteriorate.
Overall, and that's all classes, you know that we'd mix together in there there are some classes individual classes subclasses that that have an increasing frequency, but overall.
[music].
And in primary casualty, we see [noise] <unk>.
And severity stable.
We haven't.
In the risk transfer primary casualty area, we haven't we haven't.
No just.
Deterioration.
In workers' comp and the risk transfer comp business through the year we've seen.
And increase.
Of severity, particularly on the 18 and 19 years.
And by the way so all of our loss cost trends.
We're comfortable with our Pemex and you know we're constantly looking at updated data and and the trends we see.
Are reflected in our loss cost pecs.
For the year for the back years and.
Inform us as we go forward into the 20 years.
I hope that helps you know any kind of.
And then secondly, I just wanted to make sure I think I guess is this but.
Asian exposure to all this virus that just the economic turmoil, that's resulting there.
I would imagine tell me if I'm wrong that you've got fairly minimal exposure some losses, but there might be some sales disruption just because people want to be able to get out its got to kind of a good way to think about it or is there something else I should be thinking about.
Right Okay.
You know were Rob.
We're.
Experienced were informed.
Our underwriting.
From past.
Pandemics.
And for.
Potential Pandemics Sars was.
It was a good run out this.
And.
Given our underwriting position.
And how we think about supply chains, and how we think about property.
And Apparels, we cover et cetera.
We see very minimal.
Loss exposure.
From this we have a very small almost non existent accident and health business.
China.
And we don't see we imagine modest impact from everything we can tell.
From.
Economic.
Slowdown.
Or economic activity, but you know time will tell in that regard.
No.
Don't know.
The true infection rate likely.
And and we don't know when this is going to peak.
And so you know that's what I can give you based on what we know today.
Oh, that's it can distinguish Boston thank you very much.
Okay.
Well these greenspan with Wells Fargo has the next question.
Hi, Thanks, Good morning, My first question.
I've been in your prepared remarks, you talked about strongest well. If you guys have seen in five years. You also painted a picture. If you know a lot of price going through your book that you said continued into 2020. So as we think about 2020 on do you see price.
Growth stock picking up as we move throughout the year and I guess how long.
Do you have a line of sight and turns out how long do you think the upward pricing momentum might last.
Yeah.
You're asking me a.
A bunch of questions that you know I'm not going to answer much [laughter] like he spent I I.
I admire you for for asking.
Look I cant I'm not going to prognosticate, the balance of the or a minute. The only thing I'll tell you is.
I think growth.
You know, we ran about 7% and 19.
And I think that's you know what will be in the range.
Not better you know in the 20 underwriting years my sense of it but no no guarantees and you know and there's always a little volatility quarter to quarter.
Given some seasonality and mix of business so.
You never see it and just some steady.
Anyway on pricing I I think it.
Indoors the fundamentals.
And so I the environment, we see is the environment I imagine.
Continue for some time, it's rational.
There are many reasons for it.
And and there's nothing that I see.
That tells me that momentum.
Slow if anything it's picked up.
It is spreading more broadly.
Industry needs rate.
And needs it in.
And quite a number of classes and across the globe.
And then you're at a low interest rate environment.
You can hardly rely on investment income to bail you out.
And the industry needs rate because right. It's just not kept pace with loss cost trend.
Quite a number of years the math so something.
People.
Seem to over intellectual was.
And then.
On the other side of the coin.
In the numerator there are few discrete classes where the.
Loss environment is more hostile.
And that is out there that is understood. This node and you know.
And.
You either recognize didn't reflected in your reserves.
And then your loss picks in pricing in the past.
Or it's something that you're doing with currently into some funny right. They got just varies by organization.
Okay. That's helpful.
And then secondly on you know we've heard a lock in the reinsurance market about prices going up.
You know at January one and I think there were some expectations, we'll see that continuing throughout the year. This job you know of any thoughts of you know changing their reinsurance program and its significant degree obsolescence took place in 20 Nike.
Your outbound program.
You know I'm not.
I'd say that is a a treaty by Treaty book of business by book of business decision.
We make rational decisions around all of that and so.
I'm not going to make any general statements.
Okay and then one last question on you know in the past you guys had given out your excess capital in terms of touch back on your we could you let us know about where that will say after odd.
After you make the odds you know next investment, but then on the white Guy. So like have you increase your state over the next couple of deals.
Yeah go ahead.
The 7%.
Dragon.
I'm, sorry, 5% to 7%.
Sort of flux is a half a person.
Right.
57 basis, yes.
Thanks.
Okay, great. Thank you very nicely.
What we said is 50 Doug.
75 basis points of.
Drag on all away.
Okay, great. Thanks, I appreciate the color.
The walk.
[noise] and our next question will come from your own Konare with Goldman Sachs.
Good morning, everybody.
I haven't actually going to publish lots of previous culture, you put that you've seen the do you know a cost trends started deteriorate or at least two years ago about two years ago, just curious what would happen six months of over four months ago when.
Right, starting really move up why was there because you're halfway there.
Yeah, sure and by the way we saw it you know two or three years ago is three years, we've been talking about it because it was a 17 year 17, 18, 19, so sorry, even longer.
You know luck you get you get notices.
This is churn in do you get notices of circumstance you get you then get notices of claim you got those churning and twin Kurds and then ultimately they moved to cash flow.
And those who have large books of those speech and and play both primary and the access they see it I mean I made plane first.
Why your access they see it earlier and have a sense of it hasn't been data understand have the experience to now.
It's cases are going to turn into which what kind of loss I'm. What is very realistic loss of metal for round that case. They have the data in understanding to seed law firm behavior and and by the way the nature of the type of claims.
So that are changing and how they're being made and and and so you get a sense of all of that early if you're in that position.
And which we are there were a market leader that way.
We see it on a global basis, we could we could look at it early there were others just.
They they IRI guided late may arrive at it when it turns into incurred and paid losses and you get an it you get an education, but your pay a tuition for it.
Yes.
Got it Okay. That's helpful. Thank you and that Mike My second question not really related most of my personal [laughter] Delta between adjusted net premiums written and gross and net pins growth has been.
ER positive for the last four quarters and again this quarter turned negative just trying to understand that the dynamic there I know that you guys. It added a quota share insurance reinsurance policy for California, but just trying to understand that.
You are I think your confuse I'm, sorry, I, maybe we're looking at different numbers for you confused we we grew.
First of all to publish basis at 9%.
When you adjust for the California.
Reinsurance.
[music].
Which we placed last year I wondered how to bigger impact last year than this year, because we made a premium transferred to the move on earned premium.
If you understand how that works.
Therefore.
The the the adjusted real growth rate is 4.5%.
Board a half percent if you look back on previous quarters.
As our best growth.
Premium terms in year.
And.
It has a combination of rate.
And a reasonable level of retention.
We also shapes the portfolio.
And there are areas, where we're eliminating exposure and oh by the way, we got 13 points price change in the quarter.
Okay. That's very helpful. Thank you, yes, I got it thank you.
Mike Zaremski with credit Suisse hasn't next question.
[noise] Hey, good morning.
Question, maybe sticking on personal lines.
Yeah, the pricing in first line seems to have accelerated and I know you've talked about.
Reshaping the portfolio, you know and I and I also believe than in past quarters you cited.
As the saying loss costs and personal lines.
So as high as the high single digits, maybe you can kind of talk about.
Why loss cost inflation is at that level you.
Some other.
If you have competitors don't don't speak to it being that high and maybe talk about probably about a the reshaping and what were you are not reshaping. Thanks.
Yeah sure I first of all I don't know, who you're thinking of as a competitor.
But.
Right and general market homeowners.
Right.
Absolutely.
And.
Sure market, we haven't there.
Yes.
Our reach our national reach.
On that business is just.
Hold.
The loss costs.
In the homeowners business.
Other than 90% range.
They have been for some time.
Okay.
Cost of materials.
Cost of labor.
There is a labor shortage.
And materials, particularly at the high.
Very expensive.
Business interruption business interruption homeowners out out of their homes interrupted or an extra living expense.
It's up because.
There is.
There is more remediation work in a claim but then there was in the past.
You know more wells Boulder.
Other conditions that people are more concerned about is that are focused on it.
Get attention.
And then frequency of loss.
Contributed particularly in on.
Other water related which we've talked about for some time and others have.
Same issue so.
When you rattled off those are the.
You know.
Main contributing factors.
To to loss cost trend.
I don't see it a middle your rating by the way not much.
Okay. That's that's very helpful and.
Lastly.
Thanks for the color on on loss expense trend I'm curious.
When you talked about the the trend in North America does that take into account.
Some of the state.
Changes in terms of the statutes of limitations or something.
Survivor statues, so maybe you could comment on.
On that thanks.
Yeah. It takes it takes into account everything we know.
And or in our portfolio, so I'm not really being anything out.
However.
On the revive or statute.
Changes.
Well I mean, you know, there's there's notices theres notice activity.
And filing of false claims.
But there's very little information at this moment.
To respond to.
And that's going to be in my judgment quite a while developing.
And.
You know I don't there's there's there's not much to respond to it at this point.
Just take New York for example.
The.
All of the.
Cases, being consolidated with one Corden judge.
Is going to just figure out how to.
How to move forward with these in though in a structured way.
So the rules and the the process by which east will be adjudicated.
Is yet to be determined.
You can.
I think discovery you can't get information.
Can't do anything right now and that's the plaintiffs and the defendant.
Let alone the Indian sure that it's a derivative of all of those so you know it's going to evolve over.
A period of time, but right now anything we know.
Our words as we're worried can be estimate who doesn't work is enormous.
And we'll now take a question from Ryan Tunis with autonomous cars.
[laughter] good morning, I didn't just it just from North America commercial.
I was hoping you could give us some color I know you'd characterize the actually your loss ratio improvement.
64 versus 66, a year ago pointed out of improvement.
No actually.
John is that mostly the burn to send me an excessive twin [laughter] benign attritional activity I'm, just trying to think about.
What's going up a little margin standpoint.
I would I'd characterize it I'd characterize it as darn good.
[laughter] thick you'd go Oh and.
Look last year [laughter].
We did take.
Some reserve charge you will recall, so think about it for a short tail.
That did not repeat.
And we recognized a higher loss pick for that and.
You know the the improvement is a combination of earned rate.
Underwriting.
Which.
Frankly is more powerful than the earned rate.
And and actions we take in that regard.
And.
That's about it because we've seen a lot change your loss environment.
Got it but once the so on and one more for happen, but so on the other onetime consolidation.
How should we think about would be impacted that might have on either you know on book value per share a tangible book value per share if you do over 50% threshold.
Yeah, It's way too early for that where you go we're evaluating it will continue to evaluate it but I'm not ready to give you an impact on tangible at this point.
Understood.
And then I guess keeping on these legacy issues you haven't.
The trend I guess the industry in general how are you thinking about.
It would be opioid litigation going on how that might manifest.
You know as an insurance liabilities.
Yeah, and I don't think of that as legacy alright, good ideas.
You know, it's like it's like other mass tort.
That exists so I don't.
See like this year, though.
You know it's.
Constella opioid.
You got to make it gets we don't cover insurance doesn't cover.
Financial loss, we cover.
A loss due to bodily injury.
Property damage.
And.
You have to have that clear linkage in liabilities you got to prove liability and you've got approved in liability that have resulted in bodily injury and property damage.
Angela.
And.
The cases that are brought against farmer right now.
Abroad for financial loss.
Does.
The municipalities and Society had a big financial penalty as a result, as the overuse of opioid such that that's what's alleged.
And making the case to insurance.
You got there's plenty of you know you got to leave the hurdle I just said in that regard.
Got to be able to demonstrate.
No.
Weren't aware when you bought insurance that these things were going on in their plant and and and other defenses and so you know right now as far as coverage.
And then would exist we look at our portfolio through that lens through those eyes.
[noise] that we.
She an estimated liability we reflected in our records in order books and records and their north therefore reserves.
Sure.
Okay, I guess my one follow up there would be something to the insurance understand the difference between behind financial insisted type <unk>.
Okay.
This is something if you're able to sort out with your clients or is this something ultimately is going after we resolved.
Sure it's related disputes policy or anything like that sort of thing.
You know one Brian welcome to the insurance business it varies by insured.
And you know and and Hey, both intellectually and their own character of you know do they do you understand the spirit and intent and then versus let's go torture the language.
And see what we can get.
And so you know it's all over the long.
Always so.
Thanks.
Went out here from higher Shields KBW.
Great. Thanks, Good morning, and then in your opening comments you noted that there was a small headwinds to premium books from exposure that go to last quarter's small increase I was wondering whether there's anything significant that James.
No and at what I gave you Meyer with simply which is kind of.
Overly simplistic way of doing it's what I said deal was that pricing was up eight and a half in North America, all that business is rolled off.
On.
You know when that it was made up of nine and raid and a half and exposure dynamics and the negative exposure that exposure change is just you know we out we have businesses with positive exposure change and more in the middle market in small commercial and then it jumps all those.
As a lot in the in the large account business and so I wouldn't.
Others, There's it's got puts and calls and then there's no general theme to to read into that whatsoever.
Okay Fantastic and then in the two North America, None agriculture segment of the.
Bigger year over year increase in admin expenses than we'd seen year to date.
In September and I was hoping you could add some color to what's readiness.
In which one are you looking at North America.
Excellent personal like you had been expenses.
Sorry.
The benefit of expenses.
Did you say North America, though.
Yeah, North American commercial North America personal.
North America personal there was nothing you go ahead. So there was there were a couple of items in the prior year related to pension and other benefits that benefited us last year and so it makes it looked like it increase this year.
Pension adjustment an expense.
Perfect. Thanks, so much.
Can bounce around a little bit year by year. You know you don't know it'll depend on interest rate levels and all that at the under this year, how it'll look versus the you know the your before.
Okay. That's it thank you very much.
Our next question will come from brand Meritage the DBS.
Yeah. Thanks to your for you I mean, just a quick follow up a pair of course about the exposure I'm. Just curious are you guys picking up market share right now and kind of what does the unit kind of growth in North America commercial as well as an overseas or is just not the time for you guys have picked up market share.
Oh, I think we're picking up market share, but as far as unit you know I I think that numbers, it's hard to demonstrate that but unit growth. We don't have a unit growth.
Interesting okay booking.
I got you, but I guess I do know, we're picking up market share.
Picking up market share. So so I guess because then the question I guess married asking you to eight and half percent pricing in North America right, you said, a little bit exposure I would've thought that would be even higher you're missing it no you're you're missing how to define exposure.
<unk> growing X we are grown that that's not how insurance companies when they say exposure growth.
Give it to you so we're growing exposure by writing more clients.
Half a percent that goes into pricing happens to do with how clients clients have or rate against exposure to determine their premium that's their own payroll that's their own receipts et cetera, and they then reported that to you are not goes into there.
Your actual premium price.
He would it mean right yeah, you're not I got very different that's very different than you know is job in its written premium growing exposure Oh, we're growing exposure.
Okay. That's helpful. And then my second question I'm, just curious undergo globally in each business growth, it's been fairly muted for for little while is that's just a function of just economic activity globally or is there something else to read into that.
No.
Latin America is growing quite well Europe grows and I don't know unexciting, you know sort of steady rate low single digit it's Asia Pac where the underlying activity is very good and it's growing well, but we lost.
A client I'm, sorry, I am commercial bank earlier in the year, and we talked about that and that has impacted that growth rate year on year trend.
<unk>, you'll you'll see as the year goes along the day in age growth pickup.
Great. Thank you.
You're welcome.
And once again, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone keypad, well now hear from David mode Maiden from Evercore.
Hi, Thanks for taking the question.
Just a quick numbers one for for evident maybe Phil just on the civil unrest.
Losses that we saw the 33 million.
This is any of that spilling over into one Q, especially in Chile, I just given the protests are still still going on there.
No not that we see.
De Minimis.
Okay, Great and then.
Yeah I saw in the December slides, Evan you had laid out around 45% of the of your business is exposed to a hardening.
Hardening rate environment I'm, just wondering what what that percentages today, just given that it's spreading to other lines in other geographies.
That's up it's up its not up dramatically we haven't updated the number yet.
Okay, Great and then with the the wide tie investment.
Or the increase stake I just just wondering why are you guys chose to increase your share there as oppose to maybe applying to get a fully owned license there like some of your peers ABS.
Well, we do [laughter], we have a fully owned and Chubb insurance is a wholly owned.
Completely 100% foreign invested.
And if you want to go on that direction.
The.
You know 100 your plan.
Or more.
We have with Wad Tae sik.
600 offices around the country.
We have most all provinces.
It's a life insurance company.
Right.
And foreigners had just been allowed to now own.
The majority of life insurance.
But it has a life insurance company that.
We.
We built.
Hope to build.
That is.
Doing.
Closing on a billion the revenue.
God PMC company doing.
No bad billion and a half or so.
Got a retail mutual fund.
License good luck gotten one of those.
Its got so much capability that it gives us.
Build from.
And if you go.
Simply.
As a foreigner entering China.
No vote to build it is very hostile.
Both the regulatory and the business environment very difficult to get it done.
I have to do it province by Province, you've got to go city by city.
And I'm not simply you get it isn't a national level, that's not how it works in China.
So this is a.
This is a very.
Russias asset.
If we execute well.
Uh huh.
Recognizing the future value with that so.
Yep understood.
I guess just thinking about.
In terms of of the number board seat you there I guess, how much how much control do you have over over why timing, obviously that will increase as you buy up your stake and and just some of those benefits that you had mentioned in terms of having the local expertise, which which you know pre k. as Ed mentioned as well with Darryl.
As you chip with Citic do you see any risk a once you guys go up to talk a whole wholly ownership or maybe even up to like a 100% that that that becomes a headwind.
No.
I don't.
And.
You know I've been doing business there.
For almost 30 years, so I know something about the environment there.
And approach it.
[music].
Hi, guys open and from a perspectives that I'm going to.
That's the perspective, with which I'm going to give you the next comment.
When we have majority.
We have very clear control.
Now.
Substantial influence.
I'm control to do more things in there, but obviously with the majority is when you're clear control.
Wow.
So.
Relatively near term.
Secondly.
China is like doing business anywhere if you if you're.
A builder of business versus an investor.
When you wonder stay on did not in some sterile away.
It is that every territory every country.
China in particular are complicated.
And you record and they have risk around them Theres no guarantees.
But the opportunity.
If you execute well.
The opportunity in China is simply dramatic.
It's a country of a lot of talented people.
Our ability to source or what.
Ability to recognize leadership.
Our ability to use taro, what we have around the region and around the world crude in China.
Those tools and those advantages.
And we've got its a country of relationships, we have a lot of.
And so you know it is it is again not without risk.
But.
Given the rewarded with potential I did it was the largest what will be the largest economy in the world in the second largest now well I'll tell you what.
Itself, it's not a hard decision to make that long term potential value creation for this organization and that's what it's about long term value creation.
Yes, no don't totally agree thanks for thanks for the thoughts appreciate it.
Uh huh.
In fact, we have time for one more question and that question will come from Greg Peters with Raymond James.
Great. Thank you for fitting me in Evan I just had one question I guess, that's sort of dovetails with this long term value creation comment you just made.
If I look in your earnings press releases you always include both a core operating return on equity result, and then you include a core operating return on equity on tangible equity result, So you know I'm not trying to be argumentative, but could you remind me.
We have the thought process behind the tangible reference I assume the goodwill from chop and other acquisitions continues to be valuable Sun.
Looking for clarification or you are sure it is I.
First of all I think tangible is your most constraining factor when youre.
When you.
The balance sheet risk business.
You can only pay claims.
Against tangible.
Only grow your revenue and exposure.
To the extent of your tangible wherewithal.
You can only.
Borrow.
And you can only.
Make acquisitions.
The extent of tangible.
Your most constraining.
Dr.
Tangible is also the purist.
Book straight book.
As.
Accounting.
What I'd say is more accounting related.
Would then it gets more subjective and objective.
When I look good.
But the.
Return on equity versus tangible return on equity.
Tangible is the one I have my on more for value creation.
When I look at equity.
And the return on equity.
<unk> I look at it over a long term and you said it right to me depends on it varies by company and you have to build the with upside.
The goodwill I think isn't appreciating asset in this company.
Not a no hardly a depreciating or stagnant.
It opens the path just such future value creation held reorganization.
It is occurring overtime it will occur over time.
And.
The good will you grow into that goodwill and because it's in appreciating asset Chubb.
At Ace combination created most of that created that value that way. So that's how we see yet and and I think it's the I think it's the right balance and how we think about.
Value creation.
Thanks to the question I Didnt take it as argumentative.
Thanks for fitting me in.
That will conclude our question answer session I'll turn the call. That's your host for closing remarks.
Thank you all of your time attention. This morning, we look for one thing you again next quarter. Thank you wouldn't have a good day.
Well that ladies and gentlemen, this does conclude your conference for today, we do thank you for your participation you may now disconnect.
[noise].
Okay.
[noise].