Q1 2021 Chubb Ltd Earnings Call
Please standby we're about to begin.
Good day and welcome to the Chubb Ltd first quarter 2021 and the earnings call today's call is being recorded.
And I ask a question on todays call. Please press star one for opening remarks, and introductions I'd like to turn on the call over to MS. Karen Beyer Senior Vice President of Investor Relations. Please go ahead.
Thank you welcome everyone to our March 31, and 2021 first quarter earnings Conference call.
Reported today will contain forward looking statements, including statements relating to company performance pricing and business mix growth opportunities and economic and market conditions, which are subject to risks and uncertainty and actual results may differ materially. Please see our recent SEC filings earnings release and <unk>.
<unk> supplement which are available on our website at investors <unk> 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 to the most direct comparable GAAP measures 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, followed by Phil Bancroft, Our Chief Financial Officer, and they will.
Also with us to assist with your questions today are several members of our management team.
And now it's my pleasure to turn the call over to Evan.
Good morning.
We had a really good start to the year highlighted by excellent premium revenue growth globally powered by our commercial businesses double digit commercial P&C rate increases and expanding underwriting margins leading to record ex cat underwriting results and <unk>.
Simply world class margins.
It was an active quarter for natural catastrophes, due primarily to the winter storm losses and taxes.
Even with that we produced a really good calendar year combined ratio, which speaks to our improved risk adjusted underwriting returns the.
The published P&C combined ratio was 91, eight and included catastrophe losses of nine one percentage points compared with $3 three last year. The current accident year combined without cats was 85, two compare at day 87, and five prior year the too.
Two three percentage point improvement was made up of book when the loss ratio with the balance related to the expense ratio.
Adjusted net investment income in the quarter was $930 million up about one five per cent and.
And that excludes the private equity gains, which most other companies include on that basis investment income grew 50% and <unk>.
And some core operating income and the quarter of $2 52 per share was down 40 million Bucks from prior year to $1 1 billion, while net income of $2 3 billion was up significantly over prior years $2 $52 million.
Phil will have more to say about the expense ratio cat prior period development investment income and book value.
Turning to growth and.
And the rate environment P&C premiums were up nine 7% globally with commercial premiums up 15, 6% and consumer lines down to five foreign.
Foreign exchange had a positive impact on growth of one six points. The consumer lines result included negative growth and global A&H flow.
What revenue and international personal lines and about two and 5% underlying growth in North America personal lines.
We continue to experience a very strong commercial P&C pricing environment globally and based on what we see today I'm confident these conditions will endure.
Job was built at all aspects over years to capitalize on these conditions and.
North America commercial P&C premiums grew almost 15%.
New business was up 21, seven and renewal retention remains strong at 95% on the premium basis.
And North America major accounts and specialty business net premiums written grew about 17 or and a half percent or about 15% excluding year over year impact of large structured transactions on.
Our middle market and small commercial business grew over 11%.
Overall rate increases and North America commercial were up by 14, 5% while loss costs are trending up about 5.5%.
And it varies up or down depending upon line of business. Let me give you a better sense of the rate environment and.
The major accounts and risk management related primary casualty rates were up almost 8%.
General casualty rates were up 34, and a half and varied by category of casualty property rates were up nearly 20% and financial lines rates were up almost 21%.
And our E&S wholesale business property was up 15 on a half casualty and financial lines rates were up 25%.
And our middle market business rates for property were up 16 casualty was up 12, excluding comp with comp up 1% and financial lines rates were up 18 and a half.
And our international General insurance operations commercial premiums grew over 20% on of published basis or 15% and constant dollar.
The international retail commercial grew about 17, and a half and our London wholesale business grew 38 and the half retail.
Commercial growth varied by region with premiums up over 26, and a half and Asia Pac 22, and a half and Europe with equally strong growth in both the U K and on the continent are of Latin America commercial lines of business returned to growth and the quarter with premiums up four 7%.
Internationally like and the U S and those markets, where we grew and we continued to achieve improved rate to exposure across our commercial portfolio and overseas Gen rates were up about 14 or and a half where the loss cost trend of 3% though of that varies by.
Class of business and country.
Rates were up 14% and on the international retail business, and 20% and our London wholesale business.
Keep in mind these outstanding commercial insurance growth rates and the U S and overseas were achieved in spite of the headwinds we face from negative exposure growth due to reduced business activity.
On the other hand consumer lines growth globally, and the quarter continued to be impacted by the pandemic effects on consumer related activities. During the quarter there were signs of recovery beginning.
Breaking consumer down between A&H and personal lines, our international personal lines business produced modest growth of one 2% on the published basis fundamentally flat constant dollar, while our international A&H business shrink three 7%.
Travel globally, both business and consumer related remains depressed and that it's a and a chart well our direct marketing of group employee benefits A&H business is beginning to pick up modestly if we exclude the travel business our international A&H business group.
Almost 2% on the published basis, we expect growth to continue to improve as the year goes along.
And though predicting the continued impact of the pandemic and Asia, Latin America, and Europe is difficult.
Net premiums and our North America of high net worth personal lines business were up about two 5% excluding reinsurance reinstatement of.
Auto renewal credits and California wildfire.
Wildfire exposure related cancellations advise as I have said before this outstanding franchise is about customers, who choose chubb for the service and richness of coverage and the world.
And willing to pay for them.
These client segments, which are at the heart of what we do grew 8% and the quarter.
Overall portfolio retention remains strong and high net worth at over 94% and we achieved positive pricing, which includes rate and exposure of 11% and our homeowners' portfolio.
Looking ahead, we have been and are taking continued action to shape the portfolio.
To that point, we're taking ongoing actions to reduce our wildfire exposure and parts of California as a consequence of our inability to achieve adequate rate and terms for the coverage. This will have an impact for the remainder of the year of about 50 million Bucks or about one point.
And of quarter per cent impact on our growth rate.
Lastly, and our Asia focused international life insurance business net premiums plus deposits were up over 18, and a half per cent in the quarter.
And some as I have said the past few quarters or longer we were and are harder firming market for commercial P&C and most of the world the rate environment and my judgment is a rational and necessary to response to years of industry Underpricing and.
And the more uncertain risk environment today, driven by climate change and the litigation environment and cyber related exposures, given our years of data and analytics capabilities and underwriting Knowhow, we know what rate we need in order to achieve an adequate risk adjusted rate of rich.
Earned from underwriting and non.
And that is the objective and it is a relentless focus though we're never perfect. Some lines of their others of a way to go virtually all of our commercial P&C lines of business continued to achieve rate that exceed loss cost and so margin continued to improve.
As you can see we're off to an outstanding start to the year My colleagues and I are confident and our ability to grow our business and continue to expand margins and as I said I expect as the year progresses, our sizable consumer business will return to growth our organization is <unk>.
Focused its mission driven and the quality of Chubb service and consistency is a widely recognized differentiator there the well head of our reputation and we are leaning in to the current favorable underwriting conditions and capitalizing wherever we can get paid adequately to assume risk.
And volatility we are growing exposure our people are energized and focused and we of all of the capabilities and place to grow our company profitably, while increasing shareholder value.
In light of recent events concerning the Hartford and for the sake of absolute clarity.
Wanted to reiterate once again, our enduring views concerning M&A and capital management, we look at lots of deals every year different sizes small of the large different geographies and product areas and we.
We pull the trigger infrequently.
We have lots of Optionality, we have made 17 acquisitions over the past 15 years and have an excellent track record of advancing the company's capabilities, while creating shareholder value.
Our approach is steady and consistent we're extremely patient and disciplined and the money is not burning a hole in our pocket. If we believe the transaction will advance our strategy and further what we are building organically and is good for shareholders, we wont hesitate to pull.
Of the trigger.
As regards surplus capital were again very consistent we hold capital for risk and growth both organic and Nonorganic beyond that we return surplus capital to shareholders. We are highly confident about our future and wealth created creation prospects.
And we approached the Hartford from that position of strength. This was another opportunity to create additional value and would not distract us from capitalizing on the organic growth opportunity.
With that said the purpose of today's call as the discuss our first quarter financials, and our company's business I'll now turn the call over to Phil and then we're going to come back and take your questions.
Thank you Evan.
Our financial position remains exceptionally strong our balance sheet and includes a 121 billion double a rated portfolio of cash and invested assets.
Over 74 billion and capital stemming from our superior operating and investing performance our operating cash flow remains very strong and was $2 1 billion per the quarter.
Among the capital related actions and the quarter, we'd return $871 million.
The shareholders, including $352 million, and dividends and $519 million and share repurchases.
Adjusted pre tax investment income for the quarter of $930 million was higher than our estimated range and benefited from increased corporate bond call activities.
Well there are a number of factors that impact the variability and the investment income we expect our quarterly run rate to be approximately $900 million.
Our annualized core operating ROE and core operating return on tangible equity were eight 2% and 12, 8% respectively for the quarter.
Yes.
Separately as Evan mentioned, we continued to presents the fair value Mark on our private equity funds outside of core operating income as realized gains and losses instead of net investment income as other companies do.
The gain from the fair value Mark this quarter would've added three one percentage points the core operating Roe.
Book and tangible book value per share decreased by <unk>, 4% and 6% respectively for the quarter due to unrealized losses of $1 9 billion after tax and our investment portfolio from rising interest rates. This loss was tempered by adjusted realized gains of.
And $1 2 billion of after tax mainly from the mark to market gains and private and public equities and and our variable annuity reinsurance portfolio.
At March 31 of our investment portfolio remains and an unrealized gain position of $2 8 billion after tax.
Our pre tax P&C net catastrophe losses for the quarter were $700 million from severe weather related events globally, including $657 million of losses from the storms and the U S.
We had favorable prior period development and the quarter of $192 million pretax of 156 billion of after tax the favorable development is split approximately 20% and long tail lines, principally from accident years 2017 and prior.
And 80% and short tail lines.
And there was no change to the previously reported aggregate P&C COVID-19 losses, the majority of which remain as incurred but not reported.
For the quarter, our net loss reserves increased $1 1 billion and are paid to incurred ratio was 77%.
The P&C administrative expense ratio of eight 6% and the quarter improved by 70 basis points over the prior year about half related to onetime items that we don't expect to repeat.
Our core operating effective tax rate was 15, 5% for the quarter, which is within our expected range of 15% to 17% for the year.
I'll turn the call back over to Karen.
Thank you Phil.
Happy to take your questions.
Yes.
Thank you and if you'd like to ask a question and please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure you weren't mute function is turned off to the buyer signal to each of our equipment again press star one to ask a question.
Well go first to Michael Phillips with Morgan Stanley.
Thanks, Good morning, and congrats on the nice quarter again, Evan and I appreciate it all the time here.
And I guess I wanted to focus first on you sound and still very bullish on commercial and exposure growth.
And the push for.
And you said last quarter of commercial lines. So its legs. This quarter, you're confident the conditions will continue on or I guess with your numbers that you gave on pricing and loss trends. There is still so quite of bit of a gap there and that's good.
<unk> narrowed the what you said prior I guess two part questions.
How adequate our current rates across the board of it's hard to imagine that or not.
And then I guess.
And so you want to push for exposure growth still so is commercial lines still of the place to push given what might be a narrowing gap and the rate versus loss trend.
You know, it's funny how people.
Think about.
Right right now.
And this obsession with.
Our rate increases decelerating the rate of increase decelerate and accelerating whereas it.
Hum.
But are you trying to achieve you're trying to achieve.
The risk adjusted return, which translates to a combined ratio.
That is at least adequate to return a good risk adjusted return and so let's call that <unk>.
<unk> 15 per center.
Depends on the line of business, let's call it 15%.
And.
As you approach that as you achieve it.
Do you need to keep increasing rates and <unk>.
Ask yourself of that question.
And you need rates to remain there you got to achieve at least lost cost.
And we're achieving we have more and more of our portfolio and its proprietary so I will not go into what percentages of the portfolio.
Hi.
A proper risk adjusted return in terms of combined ratios on.
On a policy year and <unk>.
Accident year basis and.
And we measure both of them.
And.
With that in total.
Look.
The overall level of rate increase.
And look at the margin between.
Right.
And exposure and and.
The loss cost.
Now with that let.
Let me go a step further for you because of this.
Session about this.
When I look at the third and fourth quarter last year and I measure of the first quarter against it right now and I'm, taking the time on this question because I know all of your colleagues or most of them have this question on their minds.
And when I look at the.
The level of rate increase this quarter measured against the prior oak.
Okay.
Property and North America in aggregate.
Got rate increases and the mid teens, which is about two to three points lower than it was.
And when I look at the average of the third and fourth quarter last year property has been getting rate on rate on rate on rate went.
And when I look at.
Primary casualty the rates are up they are higher than they were on the average.
And I look at excess and umbrella.
The rate of increase is flat.
With the average of of the quarters when I look at financial lines the rate of increase is flat.
With prior quarters, when I look at marine and it's up.
And I look at aviation, it's flat to down.
When I do this internationally.
And the same trend property debt.
<unk> two to three points.
And the rate of increase from what it was the other two quarters.
Primary casualty is flat.
Excess and umbrella the rate of increase is flat financial lines is up.
And marine.
Dan.
So no sorry, marine is up and and aviation is down a little debt.
So you know what I think that gives you guys as much color.
So I can give you and to answer that question that.
From the every angle of ICANN the right know is on everyone's mind.
You know what the conditions are excellent.
Thank you very much ahead of the question Mike well. Thanks, Yeah. Thank you. That's helpful. On conditions are excellent and so that leads to strength and I didnt quite sure of how to ask it Evan but I'm curious to hear what you can say, but not not even asking about hartford, but.
Typically at all but just in general and clearly there was some capital to be deployed there and as you said not burning a hole in our pocket youre very infrequent and pose for grant and frequently.
If something like that size it is off the table and the right and the conditions are still pretty right I guess, how should we think about where to go from here for maybe another capital deployment round of authorization voices more organic or just kind of what what can we expect for what was possibly to be used there and how it might be used and the near term.
But you can imagine Michael is steady as she goes we have clear mines and we were at rest we adopt our buybacks from a 1 billion of and a half two and $5 billion.
And we will we will actively resume and that.
We had to take a pause during the.
The.
This episode with the Hartford and.
And beyond that steady as she goes we got capital for risk and opportunity and we are patient people.
Okay. Thank you very much of I appreciate it congrats.
Thank you very much.
We'll go next to Greg Peters with Raymond James.
Good morning.
I don't want this day count as of question, but I believe Phil This is going to be your last earnings call on.
And if I'm correct well.
Congratulations on your retirement.
Well, thank you very much.
The weighted number 78.
He's here.
And he is going over the wall.
[laughter] part of that number 78 net.
Yeah.
<unk>.
Yeah Yeah.
New I B I knew I I knew that would be an issue.
And remember every year with me is like dog here.
Yeah.
Yesterday that at all.
Yeah.
And they look.
[laughter], while the rumors about working for you or our FX, So I'm sure.
The good time.
I don't know what they are talking about I don't know with Reg the adjust the rumor [laughter].
[laughter].
So you know one of the areas that you spent time in previous calls talking about is the expense ratio because it has it showed improvement last year because of in part some COVID-19 related <unk>.
<unk> savings and things like that and then you know it is still it still seems like it's on a general pathway of improvement. So I was wondering perhaps if you can give us an updated view when we look at these other companies that we follow most of them try and.
Map out of.
Between the 40 to 70 basis point operational improvement and their expense ratio year on year out.
I'm wondering if you can just give us an updated view on your expense ratio.
Yes.
Most of them are bloated.
Our expense ratio, let's look at our expense ratio and absolute d'oeuvres.
Versus others, our operating expense ratio and.
And.
North America is.
<unk>.
As in the single digits and.
And continuing to head marginally lower.
And then it will through efficiencies, which I have talked about.
<unk> times debt with technology.
And in all forms so I won't.
Go into it in great detail, but.
Analytics Robo.
The robotics straight through processing et cetera.
We are on track to continue to drive.
Efficiencies and the operations.
And the same and overseas general the difference there is youre across 50, some odd countries and so.
By its nature.
A different expense structure and it continues to improve.
So we're growing.
Our P&C business.
The commercial businesses.
Out of rate far in excess of.
Growing operating expense operating expenses of marginally so we're leveraging against that.
Both exposure and policy count is up.
But you also got the.
Added benefit which drives the ratio down of.
And simply price increase the feeds and there also.
It runs.
The lower.
Acquisition cost.
And does the consumer lines of business, but of runs of higher loss ratio.
That's just axiomatic control of it.
And that business will.
<unk> operating in the range that it's in that you see right now.
Up or down a couple of it.
Tenths of a percent and.
And my mind.
As we look forward.
The consumer businesses will come back.
And as they come back they have had higher acquisition cost the.
The.
The operating expense so the internal expense ratio will go down.
Cause you will have more volume returning against it.
The acquisition ratio, which will remain steady within the line it'll become a greater mix of our total and <unk>.
So that will go the other way is just natural and.
On.
But that business then runs the lower loss ratio of the margins are excellent as you know.
So maybe that gives you.
The color you're looking for.
And David Thanks, and my follow up question.
Yeah boy, so many different areas and I could go on but I'm going to focus on the operations.
You said in your prepared remarks the <unk>.
Loss cost trend was running around and just about five points across the book.
And then during your comments and then your response to the previous question you talked about really some.
Really robust rate action.
The actions being taken cross certain lines of business like general casualty financial lines things like that.
Should I think about the loss cost trend and those lines is running higher because of the rate youre able to achieve or is that just and industry loss cost trend the.
Debt youre able to get the rate Youre getting.
Let's see if I answer it this way for you.
The market.
Place in terms of rate.
Is striving the marketplace because you operate within the marketplace.
Is striving for two things.
And that is you have those who have a hold of Phil.
Because they have deficiency.
And lines of business remember the industry operates like a giant of retro.
And then the.
They also need rate for adequacy today.
That's the marketplace.
If you.
You have operated.
Adequacy.
Along the way you don't have that first part that hold the Phil.
And achieving market rate.
You're achieving.
Better than <unk>.
Adequate.
And the benefits here, we'll see.
Alright.
We're certainly internationally of loss cost.
Period.
When you remove the.
The transient and impact of COVID-19.
And.
And so we'll see.
And how it all plays in terms of of.
The margin we play things conservatively.
But we are.
We are receiving right.
That ensures the portfolio.
We will achieve adequacy in terms of risk adjusted rate of return.
Ross of the book.
And.
And if we have more than that well that will just speak for itself over time.
Got it thanks for the answers.
That's the best I can give you.
Understood.
Okay.
We'll go next to David non maiden with Evercore ISI.
Alright, thanks, and good morning.
And then I just wanted to follow up a little bit.
On the loss cost trend in North America commercial.
And it sounds like that's ticked up a bit.
To five five.
It sounds like it's been ticking up.
I guess, it's obviously a minor detail given the amount of rate that youre getting and continuing to earn and above trend.
But wondering if you could just talk about what you're seeing that's driving that increase I know theres a lot of moving pieces mix and everything else.
But just sort of wondering if maybe you can you can just elaborate on what was driving the increase and the loss trend.
Yeah and.
My God Youre looking at about a half of point change so let's just.
Keep it and perspective.
You have a couple of things so in the short tail lines you have non modeled.
Cat loss.
That is on and accelerated trend.
Everyone sees it you know that.
I'll move on from there but that.
You know finds its way into your if youre prudent and do your expected loss cost.
Secondly on the casualty side.
Given the litigation environment.
And across different.
And our lines of business.
You know, we have watched and have talked about it and.
Leslie.
That it is the loss cost environment, there is not benign.
And and.
And so.
And as we.
And always relentlessly study.
Our trends.
Across each class.
And we reflected over a period of time and how we view loss cost and.
And we react very quickly.
Particularly if there is any bad news, we were very slowly to good news and.
So.
It's those two that are.
Their debt or.
Conspire between short and the long tail.
Got it that's helpful was there anything in the quarter or.
Some of the courts started to reopen and was there anything specifically on the litigation environment that you saw during the quarter.
Or it's just more of a question.
David No news and a quarter.
We just do study that we look at we're looking at years passed and trending forward. When you think about these things.
They don't you don't react of loss cost trends arent based upon news of.
This or that in any given.
Quarter there based on.
And a more stable period of time and a much bigger dataset.
Obviously.
Yes got it that makes sense. Thanks for that and then I wanted to switch gears a little bit.
On to the international life business.
Another good quarter strong sales there.
Up 14% constant currency.
I was hoping maybe you could dive into the different regions between Asia, and Latam and what's driving success there in each region and.
Maybe just stepping back a bit and just talk about the opportunity here.
And if you think M&A is a lever that you're evaluating to maybe increase scale and in any of these markets.
So great question.
The business is overwhelmingly Asia.
Latin America.
Think predominantly Chile.
And Banco de Chile, and our partnership with them.
And Chile is a is of great market, but July has truly been suffering.
From COVID-19 and.
And the lockdown.
And.
While it's a very good business it has.
Headwind in terms of growth related to that but it's coming back and that will.
Continued to do very well spanked distribution.
On both branch and direct marketing related it's more credit related type products and.
Short term than it is.
Long term product.
Though there is there is a mix of that of the portfolio. When you go to Asia.
The growth is coming predominantly right now and in this quarter Vietnam.
Tyler.
Hong Kong.
Hi, one doing well on.
And our business and Korea, getting better, but it's small and.
And it'll take a while the cash flow.
What's not consolidated and those numbers, but we that we.
We added as a line item because we don't have over 50% yet is the increase in lot of tie which is doing well and by the way we are on our path.
And.
It's sort of very sensitive moment, so I don't want to talk about it much but that will consolidate.
And <unk>.
Confident we'll finish what we got to get done to be able to consolidate a lifetime.
Doug.
And that life business is growing well so.
The organic growth and those are agency based businesses for the most part with some direct marketing as well, particularly in Thailand.
And bank distribution and Taiwan, but if you look at Vietnam tie.
Thailand, Hong Kong China.
And those are predominantly those are the agency businesses, where our agency force is growing.
Or long term products guarantees.
Our extremely low like and the 1% to 2% range.
And.
And there's a healthy mix of savings and protection product and.
And that business as you know we built it from dust predominantly.
And it always.
Cash and a shadow of a few billion dollars now.
And I see great growth potential for that as the.
The regards M&A I made the statement.
When I came to the end of my commentary I said, we have lots of Optionality, we have optionality. When we're looking at opportunity with that means is across product lines across geographies across customer segments.
And that includes the life insurance business and.
If we found the right thing.
Was it was accrete.
The accretive to our strategy and it was good for shareholders, we wouldn't hesitate for a minute.
Thanks for the question.
Thank you.
Yes.
We'll go next to the Elyse Greenspan with Wells Fargo.
Hi, Thanks, and good morning.
My first question on.
And I tie together some of the comments we've heard throughout the call on just in terms of <unk>.
Market conditions on and then you still seem pretty positive there and then on.
As we think about the rest of this year right. We will have on the economy continues to improve so exposure growth should pick up so should we think about your commercial businesses, both within the U S and internationally.
Given the dynamics of maybe some stabilization and to slight deceleration in pricing, but yes.
So a question on the lease.
I guess the question is and trying to understand should we think about print and we think about premium growth within commercial shall we think about that.
The stable relative to the Q1, and perhaps even improving as we get the economic improvement on.
Picking up from here.
You know I don't there's nothing on the horizon that I see.
Debt that tells me, we're going to really decelerate and the and the commercial area.
It varies by businesses as we look at it but.
On.
We're feeling very good about it.
Okay. That's helpful. And then my second question on <unk>.
And as I was reading on your annual letter on.
You made mention of social inflation and.
Throughout the call is kind of brought it up in terms of just what we're seeing today, but theres obviously the issues the industry you know.
Your line with of course go back many many decades.
And I was just hoping you can kind of on.
And so get your updated view on kind of elaborate on some of the what you mentioned your annual part of you guys think about some of kind of the looming issues on at the industry.
Yourself and others on dealing with today.
Yeah, it's a.
It's not a new issue to us.
We have been.
We've been on top of it for a while the revival statutes.
On.
Okay.
Produce.
Lots of notices.
They then start to ripen.
And you get facts.
And you, Matt Youre able to match them up against.
Coverages that were in force.
I had a period of time.
And as they do.
<unk>.
Recognize any lai of we have been and.
Continue to recognize liabilities that we have against those.
And that is all baked into.
Our published loss ratios that you see.
On the revival statutes have been open.
For a period of time.
And.
So in most all jurisdictions the.
The reported.
Notices of circumstances.
Decelerate it's tremendously.
And when they first open up.
There are some states that are continuing to consider opening up revival statutes and theirs.
So this is an event the industry deals with over time and these things evolve over time.
I might add you know we're very sympathetic.
To those.
And it breaks your heart, where you use.
You see the circumstances of children abused by adults.
Sexually on.
Where they're for real.
And then on the other side of the coin.
The trial bar is a money making machine.
And there is that combined with new technologies of social media.
And litigation funding.
And they see it as another dog Boulder eat out of.
And there is also a lot of suspect and specious behavior there.
And that is.
That is involved here and.
And our job is to tease out what's real and.
Defend against anything.
That debt we suspect.
Is is just for yield guidance gain.
That's helpful.
For the color of it and I also just wondering what the and Mike.
And Mike Congrats on to sell on his upcoming retirement.
Lease was that also because he went over the wall.
[laughter]. Thank you Alicia.
Thanks.
We'll go next to yarn Qunar with Goldman Sachs.
Good morning, everybody.
And so I'm a bit obsessive and my nature. So I hope you can indulge and other question on on rates.
Im not asking me to be redundant youre wrong don't ask me to do that.
I'll try and stuff.
Ask me something all of new.
That's right.
So you said market conditions singer.
I think the we are seeing more lines of achieving rate adequacy as you pointed out we're in the third year of rate increases in excess of try and interest rates have increased.
Why wouldnt, Chubb, specifically or the industry more broadly be willing to give up more rate per volume as we look at the euro debt.
That doesn't make any sense to me at this point.
Look at combined ratios.
Of most.
Look at.
The loss environment.
And I'll tell you what I think.
And the industry overall.
Is not in the place where it has achieved.
Adequate.
Risk adjusted when you consider both things I talked about and by the way we are driving.
I can't speak about the industry.
But I'll tell you what Chubb is growth just look at it Chubb is growing exposure.
We're achieving rate.
And we are growing a lot of business.
Because.
That's it.
It's at prices that we think are adequate to produce.
And adequate risk adjusted return on.
Our new business was up over 20%.
Well.
And our renewal Retentions are high.
We're growing.
We're growing market share.
Because the pricing is right.
The RIN or risk business.
Pricing is and.
Adequacy is where you start.
That's as good as I can give you yard beyond that youre over thinking it.
Okay, that's very helpful and.
And clearly you guys are growing off of a very large base to begin with so.
Yes, no no other questions on that front.
I guess switching gears a little bit.
We've heard some talk about potential tax reform.
Realize these are very early days here, but can you maybe share your views on.
Corporate tax reform its potential impact on Chubb and Chubb positioning.
You know what I don't know wind off of.
And.
And you know we have both the corporate tax rate.
Debt.
That could go up there talk and 21 go into 'twenty five or 'twenty eight.
And we'll see how that plays.
And then secondly.
You've got guilty and Pete.
And then you've got the notion of a minimum global tax rate.
Multilateral agreement with OECD.
All of these plates are spending.
The Green book is not yet out.
That would tell us any detail of what's in that the tax reform for the <unk>.
The increase pack and sort of reform.
Proposal and gum.
And and so we don't even know what the administration is proposing other than in headlines.
And so we really can't speculate at this point.
We just don't know.
And when it comes out we'll have a better sense and then.
Got to run the Gauntlet and Congress.
And.
And and.
And we will see from there.
So I can't speculate at this point of view.
Fair enough and I appreciate the thoughts there.
Youre welcome.
The next to Brian Meredith with UBS.
Yes, Thanks, a couple of them here quickly for you Evan the.
First one if I <unk>.
Look at the rate activity that you've been generating of the last several quarters and North American commercial and then the five 5% loss cost inflation you do the math and you get a lot more underlying loss ratio improvement and Youre booking right now is that because youre just conservatism with respect to potential social inflation trends or is there something else that we're just not thinking about.
Brian and I don't know, what Youre thinking about and I don't know what you guys are thinking about the right.
We have always operated the company conservatively and I'm not going on.
I'm going to stop right there.
Okay.
And.
And then the second question I'm, just curious if I look at let's say and I.
And I will say the steel.
Let's see we produced over two points of margin improvement.
It was an accident year combined ratio of 85, 2%.
My God.
World Class Huh.
No doubt completely agree.
And the second one just sticking with North American commercial.
Written premium net written premium growth really attractive and the quarter gross written premium growth also kind of increase but clearly youre seeing some benefits from just lower ceded premiums any change and kind of the reinsurance strategy as we head into 2021.
So not a change of strategy.
Yeah.
Not a change of strategy there.
We have.
It varies by line of business, there's mix within there and then.
There is also within some lines of business, we've increased our net.
Net advertising.
Got you.
Thank you for one more.
We have a better spread of risk.
Thank you.
Youre welcome.
We'll go next to Ryan Tunis with autonomous research.
Hey, Thanks, good morning.
My question was.
Just on some of the language from the statement of you guys put out last week.
Just hoping for some clarification and Theres a comment where you said and this is involving the Hartford the pass through of transaction would've been engagement coming from the Hartford on the terms of our last proposal.
I guess my question is is that just a general comment about your desire to do friendly M&A or are you trying to say something about that being your last proposal.
Look the.
The chapter with the Hartford is closed we have moved along.
And.
Beyond that Ryan I'm, not going on you know now and.
<unk> and talk about.
<unk> events.
Understood.
Sure.
But.
And in terms of thinking about M&A now.
I guess, it's been five years since Chubb.
Back again.
I think the big gating item was he didn't want to dilute tangible book value per share I am just trying to understand as you think about M&A targets and many.
And your thinking evolved in terms of.
What's the most important financially the earnings accretion and is it still.
Mainly.
Our accretion or dilution to tangible book value per share.
First of all Ryan.
With all due respect your comment about <unk>.
Tangible book as of nonsense comma.
It was dilutive to begin with the tangible and then it will of Howard It's way way out of it almost 29%. So I don't know what how youre thinking about it it's hard to do.
M&A that isn't.
And that isn't dilutive to tangible and then the question is is in the first moment and then the question is is how accretive visit and how quickly do you return so.
With all due respect I don't think Youre thinking clearly number two.
And make a one.
And I'm not going to go into chubb's metrics of what's most important that's not important here and by the way every deal has its own signature.
And so.
You wanted to fit on a bumper sticker and it doesn't work.
But I'm going to make one comment about M&A today.
PFS accretion.
When you use a lot of cash is of midgets lift.
That's really easy.
And and.
<unk>.
I don't Miss that one whatsoever.
None of US do so that's the easiest metric.
That's not what it's about when you measure.
And the creation of value.
Thank you very much of the question.
Thanks for the thoughts.
Okay.
We'll take our last question from Meyer Shields Tw.
Yes.
Thanks, two really quick ones I think one Evan should we infer.
Anything significant about reinsurance pricing from the fact that gross written premiums were down year over year.
No.
Okay.
The second question I was hoping you could comment on non travel and health.
And pricing.
On an accident health pricing, yes and on travel.
Non travel yeah.
Meyer it's Mac.
And remember we don't do a lot of health insurance its supplemental health.
On the accident business. So it's.
It's fundamentally stable and actually up a few points.
Rates have been moving up particularly in the corporate travel area.
The commercial business.
And in our direct marketing business, it's very it's very steady.
Okay. That's perfect. Thank you.
Youre welcome.
Okay.
And at this time there are no further questions.
Okay.
Thanks, everyone for your time and attention. This morning, and we look forward to speaking with you again next quarter have a great day.
This does concludes today's conference we thank you for your participation.
[music].