Q3 2020 Chubb Ltd Earnings Call
Third quarter <unk>.
This conference call.
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We will conduct a question and answer session. After the prepared remarks, and if you would like to ask a question.
Right.
For opening remarks, and introductions I would like.
Karen.
Senior Vice President Investor Relations. Please go ahead.
Thank you and welcome to our September Thirtyth, 2023rd quarter earnings Conference call.
Our report today will contain forward looking statements, including statements relating to the Companys performance I see the business mix and economic market conditions, which are subject to risks and uncertainties and actual results may differ materially. Please see our recent FCC filings earnings release and financial supplement.
Which are available on our website at investors don't shop Dot com for more information on factors that could affect these matters.
We will also refer today to non-GAAP financial measures reconciliations of which for the most direct comparable GAAP measure and related details are provided in our earnings press release and financial supplement.
Now I'd like to introduce our speakers first we have Evan Greenberg, Chairman and Chief Executive Officer.
I was like Phil Bancroft, our Chief Financial Officer.
I'll take your question also.
Also with US today to assist with your questions are several members of our management team.
And now it's my pleasure to turn the call over to Evan.
Good morning.
The quarter was marked by continued insurance market hardening.
Economy struggling to reopen globally at a very active ingredient for catastrophes.
Current industry estimates ranging between 35 and 40 billion in insured natural one bad my gosh globally.
As an industry leader, we of course hub or share of exposure in losses.
Published a PMC combined ratio of 95%.
It was impacted by 925 million of net cat losses.
Good performance all considered supported by both significant underlying underwriting margin improvement and very strong commercial PMC revenue growth globally, as we capitalize on favorable underwriting conditions to begin.
In terms of cats, we tracked over 40 separate events globally in the quarter of very high frequency 'cause endorsements wants to Kirk in season, we're now into the Greek also got.
So I come Hurricanes, we had the day rate drilling in the Midwest the wildfires, along the west coast on a number of international weather events.
The increasing trend of both frequency and severity of that that's from a variety of natural perils when flies in fire related informs our views on current and future expected GAAP loss levels as well as our view of required rate to ensure the exposure in both <unk>.
So I like consumer property related lines, where we can get paid adequately for the volatility and uncertainty we will maintain and even grow our exposures, where we cannot we shrink I don't know either case shape our portfolio according to our risk appetite.
Foreign your wildfire is a good example of both shrinking in shaping the portfolio.
We shrunk our overall insured Holy cow, 16% over the past few years and improve the shape of the portfolio.
Reducing the home count 21% in fire were exposed areas.
Overall for Cat risk there was more to come as we continue to improve the tools, we use both science and technology to better assess the risk and concentration of exposure in the areas of flood wildfire iweb.
Our global PMC, which excludes agriculture ex cat current accident year combined ratio was 85%.
An improvement of 3.3 points over prior year with underwriting income up 36% in constant dollars. That's a result of both margin improvement and earned premium growth of 10% in commercial lives.
Over two points of the margin improvement were loss ratio related.
I once was expense ratio related.
The loss ratio component about a point was margin improvement because earned rate exceeded loss cost trends.
The balance was a modest <unk> recognition of the favorable impact from the health related shutdowns and economic conditions, principally a reduction in loss frequency and U.S. Latin American automobile.
Oh, the 1.2 points expense ratio improvement the acquisition related portion is due to mix of business I He loves consumer more commercial.
No the operating portion one half insufficiency related and the balance is due to current operating conditions.
That was for crop insurance much has been written about the impact of the rate show on crops.
The rate show from all we can see we are on track for an average crop insurance year.
Finally.
Given the relatively improved visibility and stability in both the risk and business environment as compared to the first three quarters of the year.
Given our very strong capital position, we're lifting the moratorium on our share repurchase activities.
So we'll have more to say about investment income book value cats and prior period development.
Turning to gross and the rate environment PMC premium revenue in the quarter grew about six and a half a percent globally in constant dollars.
Made up of 10.8% growth in commercial PNC, and 3.3% decline in consumer lines, which included negative growth in globally, and H. and international personal lines and positive growth in North America personal lives.
In the quarter, we continued to experience a strong a continuously improving commercial PMC pricing environment, particularly in North America, the UK Continental Europe in certain locations in Asia Pacific.
Continues to spread it further.
In North America commercial P.M.C. net premiums grew over 11%, which is very strong and by the way includes a reduction in growth of five points due to reduced exposures from the decline in economic activity, including employment you.
Your business was up 15% and renewal retention remains strong at 93.6% on a premium basis.
In our North America major accounts and specialty business net premiums written grew over 12% well or middle market and small commercial business grew about five and a half.
No International General insurance operations commercial PMC net premiums grew 13% in the quarter in constant dollars.
Our international retail commercial grew 11.
Our London wholesale business grew nearly 22%.
[music] business was up over 6.5% overall internationally.
Retail commercial PMC growth by region with net premiums written up 26% in Continental Europe, 11, and a half in Asia Pacific at about 9% in UK Ireland.
Globally.
It was markets, where we grew you continued to achieve improved rate to exposure across our commercial portfolio and all returned to that.
Overall rates increased in North America commercial PNC by over 15%.
Major account service management casualty rates were up six and a half.
Little casualty was up 31%.
Property rates were up 22.
National lines rates were up 23.
Orient us wholesale business property rates were up 21 cash.
Casualty was up almost 32 and financial lines up about 25 and a half.
And then our middle market U.S. business rates for property were up 16 casualty rates were up over 11, excluding comp which was down 1.2.
And financial lines rates were up over 17%.
And your National General insurance operations rates were up 15% in international retail 32 in London wholesale.
Consumer lines growth globally in the quarter remains heavily impacted by the pandemics effects on consumer related activities.
In our international personal lines business predominantly auto home and cell phone premium shrank, 1.7% while.
While our globally and H. premiums at U.S. and international together were down about 12 and a half weeks.
We expect both to return to growth sometime during 21.
Our North America personal lines business grew about 3% as we continue to experience flight to safety and quality and our high net worth segment.
New business in that line was up over 11%.
Retention remained very strong at 95%.
Our global Reed business grew premiums, 27% constant dollar you underwriting environment is improving in reinsurance and global reach us become more of a growth area.
Lastly, our Asia focus dinner night national likes business had a decent quarter with net premiums written up about 9.5% in constant dollars.
In sum we are in a hard market are firming market for commercial PMC, depending on where you are in the world where cohort of business I know you just spread it well.
Well, we are growing we are achieving rates like exceed loss cost and therefore, we are achieving margin improvement more.
More lines of business on a policy year basis are coming closer to achieving combined ratio levels that will produce adequate risk adjusted returns. However, most areas rates need to continue moving higher.
They will based on everything we see given the risk environment interest rate levels and for how long business with inadequately priced by many companies the car.
<unk> market is a reasonable response and the trend in my judgment is enduring.
John Keogh, John Lupica, Juan Luis Ortega can provide further color on the quarter, including current market conditions and pricing trends.
Closing our company is in excellent shape, we have the people the capabilities the culture and the commander control structure to execute and continue capitalizing on this improved underwriting environment.
Our fundamentals and balance sheet are strong and we normalize again, where we can get paid adequately to assume the risk and volatility we're leaning into it by growing exposure in rate as we look forward, we expect to grow our E. P us through both revenue growth and improved margins.
I'll turn the call over to Phil and then we'll come back on we'll take your questions.
Thank you Evan.
Our financial position remains exceptionally strong total capital grew to 73 billion and our double a rated portfolio of cash and invested assets grew over $5 billion to.
To 118 billion.
Our strong underlying underwriting results and investment performance produced a 3.5 billion of positive cash flow in the quarter.
Among the capital related actions, we returned 353 million to shareholders in dividends and in September we issued 1 billion of 10 year debt at an interest rate of 138%.
The proceeds will be used to Prefund 1 billion of debt due in November 22.
The interest rate of two and 76%.
Adjusted net investment income from the quarter of 900 million pretax was higher than our estimated range and benefited from increased corporate bond call activities in.
In addition, there was a 32 million of investment income previously included in other income from our private equity partnership funds, where we own greater than 3%.
We are now classified as adjusted net investment income.
We believe reclassifying they seem to come as investment income is more appropriate we.
We adjusted the prior period results to align with this new president in the financial supplement.
Well there are a number of factors could impact the variability in investment income, we now expect our quarterly run rate to be in the range of 890 to 900 million. This considers the reclassification of private equity income described above.
In light of the reclassification. We asked we now estimate other income and expense to range between zero and a 5 million expense going forward.
As a separate matter, we continue to record the change in the fair value Mark on our private equity funds outside of core operating income.
As realized gains and losses instead of as investment income as other companies do in this quarter the mark to market gain related to private equities was 428 million after tax.
Book and tangible book value per share were up 3% and 4.7% respectively in the quarter favorably impacted by net realized and unrealized gains of 1.1 billion after tax principally in our fixed income investment portfolio from lower interest rates and mark to market.
Gains on private equities.
At September Thirtyth, our investment portfolio was in a net unrealized gain position of.
4 billion after tax.
Our net catastrophe losses for the quarter were 925 million pretax or 797 million after tax primarily attributable to severe weather related events globally.
Wildfires.
There were no changes to the previously reported.
Aggregate Crow with 19 loss estimate.
On June Thirtyth.
Additional information on catastrophe losses as detailed in our financial supplement.
Our net loss reserves increased 1.5 billion in constant dollars in the quarter and are paid to incurred ratio was 73%.
We had favorable prior period development in the quarter of a 146 million pretax or 126 million after tax.
This included 35 million pretax adverse development related to legacy environmental exposures. The remaining favorable development of 181 million comprises 312 million of favorable development from long tail lines principally from accident years.
2016, and prior and adverse development of 131 million and short tail lines.
Our core operating effective tax rate for the quarter was 68%.
We continue to expect our annual core operating tax rate to be in the range of 15% to 17%.
I'll turn the call back to Karen.
Thank you and at this point, we're happy to take your questions.
And again.
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Yes.
Function is turned off.
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Again that is star one.
And our first question will come from Mike.
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Hey, good morning. Thanks.
I guess.
First question.
We can kind of talk about M&A.
M&A appetite.
And your willingness to.
Entertain additional kind of transformational M&A I think one of your peers surely this we kind of talked about looking to break up the company.
You do.
Do you have any view on whether you think theres kind of properties out there that could become available that you consider engaging in M&A what.
Well very short answer it'll be real quick.
I'm not commenting on M&A.
And jobs.
Appetite.
And whether we're entertaining this or that just stay tuned.
Okay. Okay.
Okay moving on a Q2 I guess.
D. environments I guess one of the the main question is I get asked is is whether we feel cope that as the charges are more in the rear view mirror.
Or is there a chance that.
Companies kind of thought I'd have to change their loss picks.
Really.
Clearly Kobe <unk> demonstrating pick results this quarter.
Yeah, a lot of improvement in the margin some of that to the benefit from some call that most likely to the less claims frequency, but I guess the question is is the pandemic drags on through next year or is that something that could cause job to to change as it's called the loss picks just trying to.
Think about how how sturdy they charge you took last quarter as to how to think about it potentially changing thanks.
We took no adjustment to our code that charge.
We see our reserved as adequate.
Thing that shows us.
Any reason.
To be to be imagining.
Any charge. Thank you very much for your [noise].
And our next question will come from Greg Peters with Raymond James.
Go ahead.
Good morning. Thanks.
Thanks for all the information that call on pricing.
So back to get them all in the second quarter Populates call. When asked about market conditions, you apply that pops up almost 50% to get business was in a hard market.
The buyer, but would you would you characterize the change from the second to third quarter as as being more of your business being in hard market wasn't the same lines. Just gets you more to express is these conditions.
No you know Greg I haven't.
Alkylator that precisely.
But it has spread to.
More lines of business and much more cohorts of risk and when I think of cohorts.
And that's why I use that term.
Its line, it's it's customer cohorts within line. So if you think of.
Large account versus upper middle market versus metro versus small and then I do it by territory.
Think about it across geography, and when I look at it that way it continues to spread.
It's more in the middle market.
Then it was it's in more geographies, it's in more large account business in more geographies and it's spreading the more lines of business and within lines of business, it's been accelerating.
Got it.
Thanks for that answer my follow up would be just in your prepared comments you talked about the expense ratio and I think for one portion you identified half efficiency gains and half is operating conditions. I guess, you know considering the effect of coated in the economic slowdown.
On things like TV et cetera.
As we look toward it looks little tough this year, we think about next year and the fall is how much of the expense improvement scheme sake, but youre that you've realized or structural and will be what the company going forward it although actual transitory or sort of onetime in nature.
Correct.
I gave you such transparency.
I came down as I did for you in the commentary it was a gift and I gave you a sense of what you know at least I can see right now our current condition related.
Verses, what is structural related and from there I don't have a crystal ball to go forward.
But I gave you.
[laughter] batches. So so so the <unk> will have to start with all that [laughter].
That they like the half is run rate related and the rest of it has to do with the environment well I cant tell you precisely you know when does travel open up when does businesses open up like when do you bucket I, not just traveling but but meetings and.
And and other activities that have to do with people the people contact and all the rest of that I can't tell you that.
Got it all right. Thanks.
You got it.
Our next question.
All right now.
And the leasing thank you good morning, Ben.
Question on you know.
<unk> all the comments on price increases you very helpful.
North America rate up over 15% in the quarter.
The other comment you pointed to wait feeding trend.
Now on to beat that by about one point, but that's on your overall Bob.
We think about earning it.
15% of weight within North America commercial can you give us a sense.
How about we didn't could translate into margin improvement over the next year, maybe you don't want to get into specific numbers, but just as you think about the trajectory within North America commercial given that you're getting touch screen right now.
<unk>.
Yeah, you know.
Look go lease it it's going to earn its way in and it will continue.
I've been ameliorating and positive impact on margin.
That is.
That is what I'm, telling you.
And I see margin improvement in the loss ratio all things being equal.
And I gave you a sense on the expense ratio.
Beyond that I'm, not going to get to point estimates and I'm not going to I'm not going to as you know I don't we don't give forward guidance. So I I actually creep right to the line to give you a better sense than I hop off of that number the 15 breaks down.
By line of business and and you know some lines.
Require more rigs than other lines do and it depends on loss trend it depends on where you're starting from and I gave you a sense as well.
On a policy year basis, it's not a matter of making underwriting profit.
Sure that's my minimum Red line.
In a soft market.
Hard more harder market, what we strive for over any cycle.
Is to earn a proper risk adjusted rate of return, which means a combined ratio that will generate jobs that are.
We consider all the factors trended loss ratio et cetera, and we're we're coming closer in different lines of business to pricing levels that we will achieve that it's not there yet and.
We will continue to.
I imagine and I see that will come and I'm confident that we will continue to publish improved margins as we go forward.
And you know all things being equal because I can't predict volatility and the risk environment costs et cetera.
So.
I hope that helps you.
Yes, that's helpful.
My second question on no you've been pretty bullish on the market I would say over the past few quarters I last night, and we have a hardening market is definitely but if you think about the rates like 15% in North America commercial strongly Oh.
Internationally as well market no feel like when the strongest market had thought they'd like the only about 2000 and and obviously they tend.
Great that job, but you feel like today, we're getting that right and have the.
The best Sellers met.
As opposed to being 2000 as compared to today.
I don't see it as a.
As like the early two thousands I don't see it that way in terms of rate I. You know look at least look at the loss cost environment.
We just look at the cat environment, you got to be able to pay forgot.
Modeled the non modeled and in short tail lines, you know the industry is chasing.
A risk environment in that area.
You look at casualty when you look through.
Co bid plus and minus.
You know I can expand on that comment of coal that plus and minus.
Later.
But when you when you look through you have the loss cost environment that is not benign.
And you know you have an industry that that in my judgment fell behind on pricing.
Quite a bit behind.
The momentum is very good but it's got a ways to go and then you know there are some areas look at the size of workers comp in the market.
Dumb workers comp rates have continued to go down and.
You know that's it that's we don't see that as a growth area the job.
Really you know workers comp continues to go down and I'm, you know I I wonder if the industry won't overshoot the mark in that area. You know right. Now you have you know we can come back to it. It's one of the areas that may have some frequency benefit from co good et cetera, but that ultimately becomes a head fake.
And then you play catch up so you know mixed bag the way I don't see it as the early two thousands but I see it as a very healthy trend and we are rental hard market and it needs to sustain itself.
And stuff and I appreciate all the color.
And our next question will come from Michael Phillips.
Yeah.
Thank you good morning, Evan.
On the environment, and that's kind of drilling down into you know you talked about areas, where you'd see growth opportunities and they are going after pretty aggressively because the rate is good can you talk about what you want to talk about there is a specific areas and many lines or whatever the way you want to talk about it.
We try with them.
No I'm not going to.
I'm not that some ducs proprietary that I'm not going to get into.
And I don't think that benefits and investing thesis.
So I'm I'm, not I'm, sorry, Mike I'm not going there.
Okay, Thanks and.
And then I guess, you talked about that's not going to hold all the other stuff I'm not going to help others did benefit from some jobs in the home.
Okay fair enough. Thanks.
But you talked about in the past maybe an updated view on.
But what's your job.
Mike I lost you you just said overseas John and then cut out on me.
That's what it is it's better.
Got it I'll tell you.
[laughter], Okay, no thats a update on on let Latin American overseas General and both for like a book.
Did you say Latin America I did yes.
And you Wonder you wanted an update on Latin America.
Good.
Okay.
You know Latin America is.
Only three months since like I think I gave you the last update on it and not much has changed.
Latin America is the one region.
Right I think it's going to suffer the most and we will continue to suffer when you add the combination of.
Economic conditions there.
Political.
And government related policies.
Leadership.
The general infrastructure.
The management of health care.
And the capabilities.
Government health care and the security.
Situation.
Numerous countries in Latin America, you know it all mixes to where.
You can't be overly optimistic it's not a region, where I'm expecting to see growth.
We are we have.
Negative growth right now and I expect that that will turn around because we have a large consumer lines business.
And that is beginning to see it's beginning to stabilize and quarter on quarter is starting to look a little better I will I will then get to where you know is the year, we get him to 2021, it'll it'll have the it'll stop being a drag in and you'll have a.
Year on year comparison, or an old proof.
And some of the fundamentals in Latin America are stabilizing, but I don't see it as a real growth area now and.
At the same time I would say this we make money in Latin America, and our combined ratios are healthy.
We have a good book of business, we have a good position.
We've got a great team.
And.
And and.
So were positioned to take advantage, if we got a lot of opportunity.
And we're signing up a lot of new distribution et cetera, and so you know overtime and at some point.
And that's why it's good to be a diversified global company as we are at some point you know Latin America will contribute in a better way to the organization.
Two.
Okay. Thank you.
Thanks.
You're welcome.
Our next question will come from David.
Evercore ISI.
Good morning, David.
Hey, good morning, Evan.
Just want hoping to get a bit more of your commentary just around loss cost trends and you had kind of mentioned it in response to at least his question.
But just just wondering any sort of update on what you're seeing in third quarter.
In the third quarter as economic activity has picked up courts have reopened.
And you know how much conservatism you feel you're baking into your to your loss picks given the environment underneath some of the statements you made on on the losses on the margin improvement.
Mhm.
You know look.
And.
You know what a divide this.
We use normalized trend to price.
Which is really data through the first quarter of 20.
We look through Cove it.
Both the pluses and minuses.
That.
In our.
Judgment are temporarily distorting.
And so we view coded on one hand does as a cat event and it's a cat event, that's the that's producing some plus and minus.
On the one hand.
You have the cove it benefit from reduction in frequency.
And that's showing that showing up and it shows up early.
On the other hand.
Coated losses are emerging.
So far.
From our global look at it they were in the 30 billion range.
And it's mostly short tail.
Are we stick to our view of the open that industry code that loss.
Most companies to meet appear to be recognizing cope with losses as they emerge and they're going to emerge over the next few years.
You haven't really seen the cobot casualty end of it.
Or I should it maybe in your parlance long tail does the benefit.
From frequency.
We're seeing right now.
Open medley.
[music].
Offset.
The ultimate development on coated.
I doubt, it, but I, but I don't know.
So as things stand that means again, we price looking through both.
The benefit.
Of lower frequency.
And.
We look through the Cove it.
Loss itself as we treat it as a cat.
We did our darndest to recognize that the ultimate and there's nothing we see so far that changes our view of that.
But all.
So that's fundamentally how we look at it in my judgment I tell any good underwriter should be thinking about us.
So then that's as you imagine that the world Ulta.
Ultimately reverts to.
The normal trend lines, we had been saying.
In casualty professional lines property et cetera, et cetera, I'm not sure that's what we used to price and.
And to imagine.
The appropriate returns on the business.
Maybe that gives you.
A better.
Organized way.
I'm thinking about this.
No that does that's very helpful. I appreciate the color there and then and.
And so and so is it sounds like there's really.
There's nothing right now that that would make you trade that would make you change your ultimate trend and you know whether that's so.
So you feel comfortable that there may even be conservatism potentially baked and depending on how some of these short term benefits.
Come through.
[laughter].
Your first part I agree with your second part you have said twice to me.
No the summit study and it did in body answer exactly.
[laughter].
So I thought I'd give it a shot but I appreciate that.
If I could just ask one.
It was a good shot [laughter].
[laughter].
It just just one more this is just a just a quick one I know you've said in the past the DNS book is around 10%.
The total company's premium base, but that was after a time, where you cut that by roughly half over 10 years.
Just from your prepared remarks, it sounds like we're and rate adequacy in more and more of those lines. So my question is how big do you think you can ask can be calm as a percentage of.
The entire company as we look forward over the next few years.
Well first of all.
E N S is growing.
Radar adequacy by returning into my comments about policy year.
Be careful with the state.
Just because you're getting a lot of rate you got to know where the classes started from.
You know, we shrug I'm going to give you. An example, we shrunk primary casualty.
The U.S. yeah.
Just for batting clean.
Business in my judgment in the U.S., probably running 150.
Anyway, so how much risk do you think that area needs to get to produce a reasonable risk.
Risk adjusted let alone Bravo.
Uh huh.
So you know you you know what you need.
It depends on where you're starting.
And so imagine that now.
N.S. is is one of the growth is one of the growth engines right now for John.
Between West Chester, Bermuda and London.
Exactly as I told you before it's a growth engine and how big can it become as a percentage of the company while the rest of the company is not standing still except temporarily the consumer lines businesses, you know going backwards a little bit.
So I'd return, you I, probably which I can't I'm not going to do return you do that old joke about you know how you know.
What would be.
It will it will it will grow as a percentage of the company.
Thank you.
Thank you.
And our next question will come from Brian Meredith.
Please go ahead.
Yes, thanks, good to lunch a true for you and the first one you mentioned you're lifting the moratorium.
On share buyback, yet you still got obviously, some pretty significant growth opportunities here given that you're in this hard market, you're starting to see your growth accelerate here and how do you think about balancing the capital management with the growth here. It's just simply because you just stock too cheap you're like it's a much better return to buy back stock today.
Rather than allocated to some new business or how you're thinking about that.
Oh, My God No Brian your way over thinking this we have plenty of capital flexibility. There is not a problem fitness I'm going to starve any business of growth because the capital.
No no.
The businesses are are are are left to grow as rapidly.
Underwriting conditions in our risk appetite warrant and our ability to get out of our own way and get after it allows.
And so no and at the same time I can guarantee you with the share price I'm a buyer.
Gotcha Gotcha. So it was really the share price of profit you're kind of lets just lifted more torn here.
<unk> this is a.
No. It's not just the share price. It's you know I I. That's that's actually my last consideration. That's my consideration in terms of do we buy or not buy once we've looked at a moratorium. The moratorium listing is based on simply good.
Balance sheet and capital management and stewardship of the business and that is based on our visibility and confidence in and in both understanding the environment. We're in the risk environment, the economic environment et cetera.
The stability of of of the organization versus that as we see it and overall balance sheet position.
And and all of that says to US okay, it's prudent to lift that moratorium.
Makes sense and then my second question Devin you talked about some lines getting closer to kind of the acceptable risk adjusted return I'm just curious given the current interest rate environment. I know you've talked about are we using kind of where you would like to get to it you know there where do you think it pardon.
Pardon me.
We use the word current interest rate environment.
Gotcha and what do you think do you feel appropriate we're trying to kind of a return on equity is right now for for your business right and do you think given this for a market hard market, where they were in can you get there.
Well I'm certainly driving to get there and this isn't calculus, where you approach it never reach it.
You know I expect to achieve it.
You know there's a there's there's the most clear right management position I can give you.
And.
And I think that's in the injuries industry's best interest.
To achieve stability.
In the face of all the more hostile.
Loss environment.
And the uncertainty in the environment.
This industry needs to achieve the proper risk adjusted return and that varies by area of business and by company do read but I'll tell you what our objective of achieving that 15% range has not changed that's.
That's right.
Great. Thank you.
You got it.
And our next question will come from Ryan Tunis Autonomous Me [laughter] go ahead.
Hey, guys. Good morning, so overseas general really good underwriting quarter.
I guess I'm trying to understand is how exposed is that to the dynamic between rate and loss trend I think historically this has been more of a stable margin business. Its a lot of age some personal lines.
So yeah, I mean, I mean to what extent do you think that that segment should benefit in some of the same way as North America commercial age pull margin improvement standpoint, moving forward.
Well you know the market is not the firming market is not about day and age and it's not about personal lines. Those are very idiosyncratic and they go to their.
Their own rhythm.
Personal lines and in particular is a country by country line by line.
But the commercial lines business and international has many of the same trends that North America does and it varies by country.
I guarantee in the short tail lines you know, it's got to it's got the same trends if I Miss and faces the same kinds of exposures that I'm sure you have noticed.
By the way just remember Australia wildfires flies live hail storms, just take them across the various geographies and international and then in the long tail areas well I prefer you to professional lines into you know different countries cash.
Multi marine in certain markets it has its own.
It it did I mean, it has its own.
Rhythm to it and patterns, but the seasons are the same as North America.
Barry spoke to it.
Got you and then I guess just from the expense ratio it almost feels like in this whole markets. You know if you you guys had kind of getting at 30% expense ratio to kind of keep doing one not usually a lot of operating leverage if you will but we have seen your expense ratio improved over the past couple of quarters number one.
Yes, yes.
Yeah.
Is there a dynamic there of expense ratio improvement as well that's tied to the combination of <unk> yeah.
Oh topline going into more elevated pace you can use to stay.
I Didnt get the last part of that question I understood. What you said expense ratio blah, blah, blah, blah, blah, but I got to expenses.
I didn't get the punch line Ryan Yes.
Hi, James we usually think about its hard mortgage loss ratio.
Most stores, but we're seeing your expense ratio improved watching their expenses grow it you know the lower your premiums.
Is that just like the things you think they can continue in this type of market like should we also be thinking that.
No I said getting the rate adequacy as you're growing faster you should also season.
Ongoing positive toward in terms of expense ratio improvement.
Well I think I gave it to you already when I gave you the operating expense ratio.
Told you how much was you know kind of cold and health related environmental.
And well and and excluding that about half the improvement in the Opex was was our own structural.
And so that gives you a that I think that answers your question.
And so I, but I, but I don't give forward guidance.
On the other hey on what I'm, what I also tried to give you, which you know I don't have a crystal ball on it not isn't the acquisition ratio, we benefit from mix because of consumer lines.
Coming down.
And you know God glass, that's one that I hope turns itself around.
And we have the pleasure of seeing our acquisition ratio to a degree go back up because of the I.N.H. business and and some of the personal lines business right.
Yeah.
One other thing I, just wonder whether you said that this was popular I'll. Let you can help me with it but it seems like a year ago. We were I was worried about reserves the seasoning of accident years, just across the industry and your long tail reserve releases 312 million were higher than 280 million last year.
Adding to this is like 16 in prior before was 15 and prior.
So it feels like the you know whatever information content, we're getting this year or so.
Some of those.
Green or older accident years has been positive.
Is there a different and you see a different dynamic as we get into kind of the 17, 18, 19 stuff, where where we actually did start to see a little bit more of a pickup or I'm just trying to interpret the because it does seem like a high quality result, I'm just trying to interpret you know what you're learning.
Just about the recent cold that stuff, but also you know the.
You know in terms of the stuff to fill it.
Consulting standpoint, good that.
The euro clinical like around the rail right and I know, what you're getting over yet.
Thank you [laughter].
I know, what you're asking me.
You know I've been saying for some time that the more recent accident years in casualty well, we look at trends and and you know others have spoken about it so called social inflation, which.
You know I think is too narrow way of thinking of things, but in any event.
You see.
A you saw rates continue to go down.
And then lost costs.
Particularly in the frequency onto a degree of depending on the area of severity trends worsening we saw it.
We've been aware of that.
And we have reserved in price for it.
I'm not sure the industry has reserved adequately for 17 18 and 19.
And and we'll see over time, but I think that's also part of the impetus that continues you know card market.
Resolve.
To recognize and get paid for the exposure.
And for some.
Maybe to address wholesale have.
And and in some of those more recent accident years, we'll see.
Thank you.
You're welcome next question.
Our next question will come from Yaron Kinar with Goldman Sachs.
Good morning, Thanks for taking my question I know my first question is around premium so I can clean growth this quarter actually came in stronger than the cautious so and that was set last quarter. It sounds to me like the tone.
There's also change and become a little more constructive here.
What what's changed if I may ask.
What did you just Oh I'm sorry, your yard I I'm not sure what you asked me okay.
I think last quarter.
Tone I heard about kind of second half of the year premium growth was cautious and results this quarter were actually.
Quite strong on the premium growth side. It sounds to me like the tone has also become more constructive going forward.
So I am just trying to understand what has changed from where you were seeing.
The environment a quarter ago to where we are today.
I see.
[laughter].
You know, we don't exist in a vacuum we.
We live in a world right now look around you.
By the way are you talking to me from an office or your home.
I don't know.
Okay. Your home because we're in a health crisis, and and we got an economy with fits and starts.
And we've got a globally the visibility is not great. We have economic activity in terms of businesses are they opened or closed we have a hard market and we have exposures are they reduced are they the same are there increasing try.
Thanks to guess all of it in and then in a general environment don't I'm, saying it to you. This way first because don't narrow your site to simply the insurance market. What do you Miss the real picture that it's in context of a bubble world that that is on.
Precedented in our lifetimes.
So if I'm going to give if I'm going to be responsible in any of my comments.
In a in that regard of course I'm in a I'm going to be reasonably sober in water ice side.
We're benefiting from all of the insurance market related dynamics, we've been talking about and on the other hand, we have the vagaries of the World I just mentioned and that's what you add together.
Doug we're doing our best to drive through that there will be some you know in our business, particularly by the nature of it large account middle market small consumer.
And the regions of the World we operate in there will be some variability in growth rate quarter on quarter you.
You know.
Between the quarters, but overall all things considered I'm very confident in chubb's ability to outperform.
Okay.
And then my second question, probably a broader question. So since if I look at the PMC market.
The tone from the supply side, including from Chubb is that there is more need for full momentum for rate momentum to continue with the low interest rate environment with loss trend uncertainty.
Do you think that the demand side of the market can and will support this considering that the underlying ratios are actually grew they know that they're getting from favorable frequency, they're getting rate in excess of trend collect lots that seem to be manageable to date and part of your development doesn't seem to be.
Particular track at this point.
You know yard.
First of all I'm not sure in that comment you just listen to what I had to say I'm, sorry about what's the cold that benefit versus cobas losses or how.
How do I think about that.
What I was very clear about so that's head fake and you ought to go back and think about that.
With all due respect, but I think we you see through that when you look at the trends and you look with the industry requires to achieve a reasonable risk adjusted and you know we'll clients decide that wow, the arbitrage will large clients decide well the arbitrage.
So I got for you because you were selling to me, she and and I can't take advantage of that anymore. So I think all increased my retentions and take more myself will that occur sure it'll occur and it always occurs and it's natural and it should happen and that's not a problem to me.
Is the industry overcharging, and therefore, there will be a they'll be a natural response against that absolutely not and and by the way. The last point that I think that I'm going to make to you that I think you left out when you talked about industry.
Industry loss costs, you talked about loss ratio well win lets also talk about the reinsurance market and the reinsurance market I have some sense of their exposures and I have some sense of what they're running and we have yet to see but.
Real response from the reinsurance industry, which increases the cost to the insurance industry, which means that you know rates continued to move because costs go up and you know.
Do I think for the industry. This is great behavior no I hate the cycles. This way, it's because the clients took advantage of very cheap pricing that kept going down year by year, the industry kept providing that to them. The brokers kept broking it and no one came up.
Clean hands in it and it gets to a point downward pressure builds and it goes the other way and it does it in a way that I don't think its the most responsible way of doing this but that's where we are.
Thank you for the questions.
Hi, Matt.
Question and answer session I would now like to turn.
<unk> for any additional or closing remarks.
Thank you all for your time and attention. This morning, we look forward to speaking with you again next quarter. Thank you and have a great day.
And this concludes today's conference. Thank you for your participation and you may now disconnect.
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HM.
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