Q3 2021 Chubb Ltd Earnings Call
Ladies and gentlemen, please standby.
Good day and welcome to the Chubb Limited third quarter 2021 earnings today's call is being recorded.
If you would like to ask a question you can simply by pressing star one on your telephone keypad for opening remarks, and introductions I would like to turn the call over to Karen Beyer Senior Vice President of Investor Relations. Please go ahead.
Good morning, everyone and welcome to our September 30th 2021 third quarter earnings Conference call.
Our report 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 financial 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 Peter <unk>, Our Chief Financial Officer, then we'll take your questions.
Also with us 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.
We had a very strong third quarter highlighted by outstanding P&C premium revenue growth globally of 17%.
Simply excellent underwriting results on both the calendar and current accident year basis, despite elevated catastrophe losses.
Our results were powered by double digit commercial lines growth strong continued underlying margin expansion the strength of our reserves and our broad diversification of businesses.
Core operating income in the quarter of $2 64 per share was up 32% where $250 million over prior year to $1 2 billion. While net income of 1.8 was up 53% from prior year.
The year on both a net and core operating income basis, we have produced record earnings.
Again, it was an active quarter for natural catastrophes, yet with over one 1 billion of Cats, We reported a 93.4 combined ratio with P&C underwriting income up 58% to $617 million, which speaks to the underlying strength of our business.
And again broad diversification of our company sources of revenue and earnings both domestically and globally.
Year to date, we have produced $2.4 billion in underwriting income for a combined ratio of 94 and that includes $2 1 billion of cat losses, and what is shaping up to be another year of sizable weather related loss events.
Did the new normal brought on by climate change and other societal changes.
Speaking again to our underwriting health on a current accident year ex cat basis underwriting income in the quarter was $1 4 billion up 23% with a combined ratio of 84.8 compared to 85 seven prior year quarterly underwriting record.
If we exclude the one time positive adjustment, we took last year due to lower frequency of loss because of the COVID-19 related shutdown. Our current accident year combined ratio unaffected improved two points.
This is more reflective of our margin expansion and we included a simple exhibit.
Our press release showing the detailed.
The strength of our balance sheet and conservative approach to loss reserving was again in evidence this quarter as we reported 321 million in favorable prior period Reserve development.
Net investment income in the quarter was $940 million up 4.5%.
Peter is going to have more to say about cats and prior period development investment income and book value.
Turning to growth in the rate environment.
As I said at the opening PNC premiums were up nearly 17% globally were 15 and a half in constant dollar with commercial premiums up 22%.
<unk> up 4%.
The 17% growth for the quarter and 14 point to for the first nine months topped last quarters. It was the strongest organic growth we have seen again since 2004.
Growth in the quarter was broad based with contributions virtually all commercial P&C businesses globally for Meyer.
Our agriculture business to those serving large companies to mid sized and small in most regions of the world and distribution channels.
The robust commercial P&C pricing environment remains on pace in most all important regions of the world with continued year on year improvement in rate to exposure on the business, we wrote both new and renewal.
In North America total P&C net premiums grew over 17% with commercial premium up about 22, and a half excluding agriculture, which had a fantastic quarter in its own right with premium growth of over 40% commercial P&C premiums were up over 16 and a half in.
North America.
New business was up 13% for all commercial lines and renewal retention remains strong at over 97% on a premium basis.
The 16 or in a half commercial premium growth is a composite of 15, 5% growth in our major accounts and specialty business and over 18% and our middle market and small commercial business simply a standout quarter for this division.
Overall rates increased in North America commercial lines by over 12%.
Once again lost costs are currently trending about 5.5%.
Vary up or down depending upon line of business and again like last quarter just to remind you in general commercial lines loss costs for short tail classes are trending around 4%, though we anticipate to this to increase in the future while long tailed loss costs excluding <unk>.
<unk> are trending about 6%.
Let me give you a better sense of the rate increase movement in North America.
In major accounts, which serves the largest companies in America rates increased in the quarter by just over 13% risk.
Risk management related primary casualty rates were up over 6%.
General casualty rates were up about 21% and vary by category of casualty property rates were up 12 and financial lines rates were up 17%.
And our E&S wholesale business rates increased by 16% in the quarter property rates were up 13 casualty was up 20 and financial lines rates were up about 21.
In our middle market business rates increased in the quarter nearly 9.5%.
Rates for property were up over 11% casualty rates were up.
9.5%, excluding workers' comp with comp rates down 2%.
Natural lines rates were up 18%.
Turning to our international General insurance operations.
Commercial P&C premiums grew 25% on a published basis.
We're 16 in constant dollar.
International retail commercial P&C grew nearly 17% or 12 in constant dollar, while our London wholesale business grew over 31%.
Retail commercial P&C growth varied by region.
With premiums up almost 28% in our European Division Asia Pacific was up 15, and a half while Latin America commercial lines grew about six and a half.
Internationally like in the U S. In those markets, where we grew we continued to achieve improved rate to exposure across our commercial portfolio.
In our international retail commercial P&C business.
<unk> increased in the quarter by 15%.
Property rates were up 11 financial lines up, 33% and primary and excess casualty up 7% at 11% respectively.
And in our London wholesale business rates increased in the quarter by 11%.
Pretty up 13 financial lines up 14 marine up eight.
Outside North America loss costs are currently trending about 3%.
So that varies by class of business and country.
Consumer lines growth globally in the quarter continued to recover from the pandemics ongoing effects on consumer related activities.
Our international consumer business grew almost 10% in the quarter on a published basis were 5% in constant dollar and.
And breaking that down a little further international personal lines grew almost 11% on a published basis, while international A&H grew over eight and a half.
Or just 5% in constant dollar.
Latin America had a particularly strong quarter in consumer.
With personal lines in A&H premiums up 18, 5%.
17, 5% respectively.
Howard by both our traditional and digitally focused distribution relationships.
Premiums in our North America high net worth personal lines business were up just over 1%.
Justin for non renewals in California, and Covid related auto renewal credits, we grew 3% in the quarter.
Our true high net worth client segment, the heart of our business grew 11% in the quarter.
Overall retention remains strong at 95, 7% and we achieved positive pricing, which includes rate and exposure of 14% and our homeowners' portfolio.
Verity trends in personal lines in the U S remain elevated.
Last lastly, in our Asia focused international life insurance business net premiums plus deposits were up over 52% in the quarter, while net premiums that are global revisit this were up over 22%.
In sum, we continue to capitalize on broad based and favorable market conditions and improving economic conditions.
All of our businesses did well or are improving from agriculture to all forms of commercial P&C globally, both retail and wholesale serving large companies to middle market and small to our improving global personal lines in A&H businesses to our Asia life businesses.
As to our global re business.
One sentence, both growth and margin expansion are two trends that will continue.
In the quarter as you saw we announced a definitive agreement to acquire the life and non life insurance companies that how's the personal accident supplemental health and life insurance businesses of Cigna and Asia Pacific for 5.75 billion in cash.
This highly complementary transaction advances our strategy to expand our presence in the Asia Pacific region, including our company's Asia based life company presence and add significantly to our already sizeable global A&H business.
Upon completion of the transaction, which we expect during 2022.
Asia Pacific share of Chubb's global portfolio will represent approximately 20% of the company.
For many years, we have admired cigna business in Asia, including its people product innovation distribution and management capabilities.
The underlying economics and value creation to the transaction are very attractive and these businesses will contribute to our company strategically for decades to come.
The transaction once again demonstrates our patients and advancing our strategies and confirms our consistent.
Disciplined approach to holding capital for risk and growth, both organic and inorganic our company has considerable earning power and a patient hand to deploy capital effectively over time, we returned excess of what we need to shareholders in the form of dividend.
And share repurchases, while we continue to build future revenue and earnings generation capabilities.
Conclusion. This was another excellent quarter of growing our business and our exposures.
Spending our margins and investing in our future.
All in a period with substantial cats, which are not unexpected my management team and I have never been more confident in our ability to continue to outperform and deliver strong sustainable shareholder value I will now turn the call over to Peter and then we'll be back to take your questions.
Thank you Ivan and good morning again, everyone.
As you've just heard from even our overall franchise continues to deliver outstanding topline growth margin improvement and profit growth.
Now, let me discuss our balance sheet and capital management.
Our financial position remains exceptionally strong, including our cash flow liquidity.
<unk> portfolio reserves and capital.
It all starts with our operating performance, which produced $3 3 billion in operating cash flow for the quarter and $8 5 billion for the first nine months we.
We continue to remain extremely liquid with cash and short term investments of $5 1 billion at the end of the quarter, even after our significant capital management actions.
Among the capital related actions in the quarter, we returned $1 9 billion to shareholders, including $1 5 billion in share repurchases and $346 million in dividends.
Through the nine months ended September 30, we returned over $5 billion, including almost 4 billion in share repurchases or over 5% of our outstanding shares and dividends of over $1 billion.
The agreement to acquire sickness, A&H and life insurance businesses in Asia Pacific is not expected to impact our share repurchase and dividend commitments.
Our investment portfolio of 122 billion continues to be very high quality and we have not made any material changes during the quarter to two our investment allocation.
The portfolio increased $759 million in the quarter and at September 30, our investment portfolio remained in an unrealized gain position of $2 9 billion after tax.
Adjusted pretax net investment income for the quarter was $940 million similar to last quarter and $40 million higher than our estimated range benefiting from higher private equity distributions.
As I noted on the second quarter earnings call. Our investment income is based on many factors and notwithstanding our better than expected results over the last few quarters. We continue to expect our quarterly run rate to be approximately $900 million.
Pre tax catastrophe losses for the quarter were $1 1 billion with about $1 billion in the U S of which $806 million was from hurricane either.
And $135 million from international events of which 95 was from flood losses in Europe.
Our reserve position remains strong with net reserves, increasing $1 7 billion or three 2% on a constant dollar basis, reflecting the impact of catastrophe losses in the quarter and 2021 growth in particular from our agricultural business, which has a seasonality impact on reserves.
We had favorable prior period development of $321 million pretax, which includes $33 million of adverse development related to legacy environmental exposures. The remaining favorable development of $354 million was split approximately 30% in long tail lines principally from accident years 2017.
And prior and 70% in short tail lines, principally from our 2020, North American personal lines.
Our paid to incurred ratio was 73% were very strong 75% after adjusting for cats PPD and agriculture.
Book value decreased by $744 million or one.
<unk>.
Reflecting 11611 6 billion and core operating income and a net gain on our investment portfolio of $190 million, which was more than offset by foreign exchange losses of $305 million and the $1 9 billion of share repurchases and dividends.
Book and tangible book value per share increased six 4%, respectively from last quarter.
Our reported ROE for the quarter and year to date was 12, 3% in 2014, 4% respectively.
Our core operating ROE in core operating return on tangible equity were eight 2% and 12, 6% respectively.
For the quarter as a reminder, we do not include the fair value Mark on our private equity funds and core operating income as many of our peer companies do.
For comparison purposes, our core operating ROE increases by five percentage points to 13 point to in our core operating income increases by a $1 61 per share to $4 25.
Year to date, our core operating are we including the fair value Mark on our P funds.
Would be 13, 8%.
I'll turn the call back over to Karen.
Thank you at this point, we're happy to take your questions.
Ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad do you keep in mind. If you are using a speakerphone make sure. Your mute function is released so that people can reach our equipment. Once again for your questions. Today Star One we will begin with Michael Phillips with Morgan Stanley.
Thank you good morning, everybody.
Evan.
In your in your comments in the press release, you talked about some actions because of climate change.
Apples with vaccines are going to take.
Andy can you talk about what some of those are in what we can expect to see from those actions either I don't know exposure changes or cat load changes that might change in the future because what youre doing.
Yeah, I'm going to.
Answer it a little differently than that.
Okay.
It's a broader statement that I'm, making.
Making.
And in the press release it was not.
Not simply about job it's the industry.
The industry and Chubb included has seen in recent years arise.
And the frequency and severity of insured losses globally from commercial and personal property arising from Nat cat, and especially losses from less well modeled or non modeled causes.
Our objective with all of this is twofold price business adequately get paid for the risk secondly, understand and manage accumulation of exposures against weather related pearls modeled and non or less well modeled.
Factors that are contributing to the rise in loss actually fall into three categories.
However, the historical record.
Provide some interesting context when thinking about today's risk environment. For example, recent land falling U S. Hurricane activity is not especially anomalous in either frequency or frequency of intense storms as measured by wind speed compared to say the first.
Part of the 20th century.
And repeats of storms from this earlier period would in fact generate losses far greater than any modern storm in terms of industry loss.
All of which is already contemplated in our modeling and risk management.
And with all that said, though there is evidence now that the amount of precipitation contained within the storms.
Peers to be greater than that is increasing the amount of loss emanating from events.
The second factor that contributes.
These changes to the exposure footprint of insurable personal and commercial properties.
Increases in actual exposure units and values from GDP growth demographic shifts to higher risk geographies and aging building stock are all examples of factors that are leading to higher loss potential.
And finally.
The third the impact of natural events is further amplified by increasingly vulnerable infrastructure.
For example, the levee failures during hurricane Katrina and O five and the stomach electric grid failure. During the 2021, Texas freeze we're actively working to reflect the impact of all of these trends and our pricing rich risk selection in exposure management, we have.
Significant advances in modeling, especially secondary perils, such as floods and wildfires, but there is still way to go.
Our loss costs consider recent experience together with explicit recognition of factors that can be quantified.
Such as sea level rise exposure growth or demographic shifts and we continue to refine our portfolio.
Management.
Our portfolio management to manage risk aggregation and an ever more granular level.
The net results for us are dynamically risk adjusted rates that appropriately reflect.
<unk> and charges for both recent loss experience and exposure concentrations. So we're striving to stay on top of this and we have an awful lot of resource dedicated to the effort and frankly I think we're in pretty good shape.
Okay. Thanks, Thank you for the details appreciate that.
I guess second question then on appreciate the details you gave a little bit.
Yes, sure is that better.
Yeah, that's a little better.
Okay.
My hats.
I appreciate the details on our loan loss trend numbers that you gave this quarter I guess clearly lots of debates going on on the casualty side with with loss trends, especially on the casualty side here of a long tail that you gave them a five five or six ex comp I guess, what what pieces of that if you can kind of break that down would be most worrisome to you that could could.
That number change.
Again, I think because of all the debates going on some financial inflation.
Actual inflation different things that are happening are there any pieces of that that you'd be more worried about there that could make that number go up.
No.
You know, there's there's no one ingredient I'm not worried.
So I wouldn't characterize it as worry if you're worried don't be in the casualty business.
These are these are dynamics that are that are enduring and so all of the.
All of the ingredients, whether it is social inflation.
The trial bar.
As a business litigation funding.
At this moment in time understanding the latency because courts are closed and not taking the head have been closed and not taking the head fake on the lag.
And then you have simply economic.
Inflation.
And science and legal environment changing with legislation all of that has been our consistent factors some rear their head a little more than others at times and we're mindful of all of that and that's what we that's.
That's what we try to do a good job of of anticipating and you know by the nature of it you can only anticipate so much of it.
And.
The future is unknowable till it arrives in fact and.
So therefore, you managed conservatively.
Declarer Bad news early and good news late.
Thanks for the question.
Thank you.
Yeah.
Well now move to a question from David moat laden with Evercore ISI.
Hi, good morning.
I was just hoping to just get a quick update on the upset our excess capital position.
Capital return has been a highlight so far this year, but its always earnings power and capital generation and I know in the past I think at the end of last year, you said excess capital was about a two point drag on the ROE.
But since then you've returned about 5 billion through buybacks and dividends.
So I guess, a long winded way of asking you know where do you guys think the excess capital position was at the end of the quarter.
Yeah, it's in the range of about it's come down from about two to about one and a half.
Got it and then just just thinking about potential uses of capital obviously, you still have oh.
Some some headroom on the 5 billion share repurchase.
And then the Cigna acquisition.
I guess I'm also just wondering just any sort of thoughts around the timing of buying up the additional ownership stake in Hawaii Thai.
And sort of how we should thinking you should be thinking about that.
When it comes to what Thai the ownership stake buying that up which.
Buying it up to.
Over 50%.
And you know good luck prognosticating, specifically with China.
Over the next few months.
Number of months and then.
Going well in excess of that.
Potentially.
Is I would say through 2022.
Got it that's.
That's helpful and then maybe if I could just sneak one more in.
Another good quarter of growth across the board, but wanted to just drill down a little bit in North America commercial.
Last quarter, you talked about exposure being negative and I was wondering if that's still the.
The case, and you know, obviously pricing and new business. It sounded like they were very strong, but I'm wondering if you could maybe break down some of the other components of the strong growth this quarter.
Yes, so look exposure growth.
In aggregate.
Net net had about a half a point impact.
On our North America commercial lines growth.
And that includes both positives from economic activity and then structural changes like deductible increases in Retentions et cetera.
That would go the other way and it all nets out to about a half a point.
Great. Thank you.
Youre welcome.
Next we'll hear from Elyse Greenspan with Wells Fargo.
Hi, Thanks, good morning.
And then on you talked about robust price increases that we've seen for a while across the industry.
As you think out over the course of the next year.
Do you think the industry can broadly maintain rate in excess of loss trend just as you think about the underlying dynamics out there.
Elyse I do.
I think.
Look I I.
I don't have a crystal ball, but from everything I see right now.
About rates and the.
The shape and pattern of how when I look over a number of quarters what.
I would call is simply a moderation in the rate of increase.
When I look at that and I look at the.
The loss cost environment.
And then I look at our retention rates.
Hence the kinds of rates, where we're we're achieving so we achieve certain rate increases.
Our retention rate on business, which then tells me about the tone of the marketplace.
All of that tells me.
Is that the industry.
Should continue to.
To achieve right.
In excess of loss cost for some time to come.
Okay, Great and then in terms of North America commercial and the underlying loss ratio. There was around 150 basis points year over here and you guys didn't call anything out obviously, the COVID-19 frequency impacted others Beckman.
Was there any one off noise or is that a pretty good indicator.
<unk> margin.
With American commercial.
It's a pretty good underlying run rate.
Number there is not one offs.
Okay, great. Thanks for the color.
Youre welcome.
Next question will come from Mike Zaremski Wolfe research.
Yeah.
Hey, great good morning.
I guess I'm going back to loss costs.
I might have missed.
Some of the exact wording oven, but I think you said you expected.
Some of the short tail commercial classes to to increase in the future.
If you could provide some color around that.
You know right now in short tail.
There is evidence.
Of inflation in the homeowners line and has been for.
Some time.
But not so much in commercial property paid losses.
But given labor costs and commodity prices.
And supply chain problems and scarcity of materials.
We expect cost to rise and.
We're building that view into future claim payments and our pricing.
Which is only prudent.
That's all.
Saying, where we're anticipating.
We're.
We're anticipating just into a common sense way ahead.
Ahead of it.
Not waiting for it to be on top of it.
I guess as a follow up Evan that's interesting because I was looking at some of the carriers. It seemed like paid losses are down in the casualty lines.
Due to some of the courts being let's say.
Delayed our clogs are running at a slower pace as chubb's seeing that too and in the casualty lines.
Yeah, let's not confuse though.
What I said about short tail.
What you just said about casualty.
We and all the.
The whole industry, we've been saying for over a year and a half now.
That obviously with courts closed.
Dockets full.
That's it.
It has a delay in the processing.
Or the final adjudication.
Casualty related claims.
And.
That's a that's a pattern of paid pattern.
And change but.
You know any any good.
The writer.
There's not going to take that head fake and believes that change of pattern means a change in ultimate loss.
And so therefore, we don't.
Believes that a change of the trends.
And so therefore.
As I said earlier, we remain with the 6% trend factor.
And the page will ultimately come through.
Okay understood lastly.
As well as the lagging incurred.
Understood Thai and then lastly, just thanks for the granular details about the underlying loss ratio benefits <unk> of last year.
I heard your answer to we heard your answer to Lisa's question in North American commercial but I.
I guess I just want to make sure since you guys didn't break out the granular benefits.
Last year or early 2021, we should be assuming there was some benefits in those same segments. When we're thinking about kind of future quarters year over year results.
Mostly from personal lines.
I don't know what you are saying.
I guess just arrived.
I'll give you the frequency benefits Evan.
It was just didn't.
Okay, but frequency benefits higher yep yep.
They happened later, not just <unk> and <unk> and probably <unk> of this year. So we should be taking that to account.
So.
Not that we not that we see.
Okay.
Yes.
We will now move to Tracy then Gregory with Barclays.
Hey, good morning, looking at the Signet deal can you describe any cohesiveness.
Current markets across seven countries or the marketplace dynamics more siloed.
Tracy.
You know it.
It's like describing these are countries.
They're not markets they are individual countries with their own cultures, there their own <unk>.
<unk> economic dynamics.
They are one social systems they are individual languages.
These are.
I wouldn't view it in a sterile way, it's like it's you know.
Asia is vast and.
And no different than saying well can we talk about the United States and France.
In the in the same breath, no or the United States, France, and Brazil, you have to think of them.
Each independently.
That's the whole point of <unk>.
Managing a global business.
You understand the local market.
Idiosyncrasies opportunities and risks.
The geographies are greatly vary by each.
Okay. Thank you.
Just going back to capital management back in February you shared S&P's decision to leverage capital benchmark take Appalachian Chipotle.
People are a lot of excess capital.
As you know S&P as published in advance no day plans to update its capital model do not know a lot of holiday that will come in and request for chronic comes out, but I guess, what I'm getting at is there.
This development compel you to sit on the sidelines with respect to capital deployment until more is understood or will you cross that bridge or more information it now.
We will cross that bridge when more information is known.
We have.
Very close and productive dialogue always on an ongoing basis with rating agencies.
Thank you for taking my question.
Youre welcome Thanks for asking.
Our next question comes from Greg Peters with Raymond James.
Good morning, everyone.
I guess I'd like to focus my first question around retention and recruiting.
You talked about in one of your previous answers labor shortages.
And Theres a lot of news in the marketplace around the availability of.
Of workers I think the St. Louis Fed without something earlier this week about 3 million workers may have retired.
Due to Covid.
So maybe you could give us your perspective around what's going on at Chubb with retention and recruiting.
Yes. Thanks.
You know like with all companies.
It's a.
It's a constant effort and it's a difficult marketplace for recruiting.
And and.
Retention rates.
Our <unk>.
Modestly lower.
And it's a combination of people moving around in.
And more retirements than just making different choices in their lives and outcome of clearly of Covid.
In many ways we've.
We have.
To manage we've significantly.
Beefed up.
<unk> improved our resource capabilities around recruiting.
And we have such an intense focus on it.
And.
The.
In aggregate the number of open positions we had in June.
In North America is down.
Today from what it was then we're making progress and continue to make progress, but you have to grind on it.
People want.
Many people want different.
A different way to work they want more flexibility in.
And in.
The days that they work or the hours that they work and while we remain a work from office company.
We will be we have.
We have adjusted and recognize that.
Given <unk>.
Given the ability with technology today.
That has been proven over the and has accelerated the proving of that over the last year and a half since we went into shutdown or closer to two years now.
About a year and half.
The our ability to productively work.
Not simply from the office, but from home allows for greater flexibility and we recognize that in.
And therefore, our adjusting our own expectations around that.
So.
Sure.
We're mindful.
Obviously.
And that we're in a marketplace that competes for talent.
We want the.
The best and the brightest.
And those and the most ambitious I should say really the most ambitious to want to work for Chubb.
We are an ambitious company, we're not going to moderate our goals and our objectives.
<unk>.
Because of employment concerns.
To just step up our game to make sure we're a place where those who share our ambition and want to work hard bought wanted a different kind of work life balance and where they work from home we want them to work here.
We want them to be motivated to be here and so we're making strides in that I think good strides.
As I said the overall number of open positions here is down.
And down.
Not a small amount.
Thank you for that answer and I guess, it's sort of related but we're hearing right.
We're seeing in the news a lot of.
Changes going on in distribution brokers, just roll ups private equity involved and roll ups were seeing.
You know large companies hire producers from other companies and then you highlighted your your higher retention ratios of your business can you talk about what the changes are in the distribution outside of Chubb, how that's affecting your business. It doesn't seem like it is is there some risk out there as we look forward.
That it might be disruptive to your renewal ratios.
No I don't believe so.
Chubb has.
Enjoys an extremely strong position.
With all of the top brokerage.
An agent agency plant in the country.
Strong dialogues strong presence, our spread of product and capability and our local capability. We are simply a very compelling offering to any broker who has to worry agent who has to make a market.
That's their job to make a market.
And pretty hard to make a market without job.
So.
We bring a lot of compelling capability and tools.
<unk>.
And frankly.
As they compete against each other and it's a it's a fierce market within the brokerage community of how they compete for business.
Chubb is a is an important ingredient in helping them in their effort to compete and our partnership between ourselves as very well balanced.
It seems like a fair answer thanks for your time.
Youre welcome.
Yes.
Ryan Tunis with autonomous has the next question.
Hey, Thanks, good morning.
Another quarter of solid improvement in the policy acquisition cost ratios.
Especially in the commercial line segment.
Curious, what's driving that is that better terms and reinsurance.
How sustainable is that trend Devin.
Okay.
So not better terms on reinsurance.
It's sustainable.
You know, it's a mix of business driven predominantly within commercial lines.
And it's it's.
Theres fee business, There's commission business.
And what you see is pretty steady and on the margin.
And though not unimportant commission rates in some lines of business as rates have increased have come down.
It also benefits to it to a degree.
We think it's got it.
And then.
And then a follow up more on terms and conditions, if I recall at the beginning of the hard market one of the things that kind of bother you was I think an excess casualty business.
I think I remember you talking about $1 million attachment points and how that it becomes stale over the years.
Is that.
I guess two years later into the hard market is that is that something thats been corrected those attachment points.
Broadly self corrected I am just wondering if there's something there.
It might help us in addition to rate.
Oh yeah.
You know it doesn't self correct, but it's is.
It is definitely.
With it when you're in a hard market.
It is one of the ingredients that also helps clients to ameliorate rate increase.
And there they are motivated and and incentive.
Cause you go from 1 million to $2 million attachment point and what you pay you get out of a dollar swap layer with us the difference between a million and $2 million is adequately priced so it's rational you retain that for yourself.
And so attachment points and duals.
And limits for different exposures within our policy.
Are all ingredients that have been and continue to be adjusted to today's economic.
Environment and a more rational construction.
Policy terms and conditions and that is taking place and has been taking place on a broad basis.
I'll remind you Ryan.
<unk> transparent about it.
Within how we.
When we look at rate increase.
We include that.
Within.
Our definition of increase in rate because in the in the areas in the lines, where we can measure it definitively we can.
Certain lines very well.
And.
Yes, I mean, you mentioned that happens in a hard market is that the type of thing that down the road when we're not in a hard market to those terms and conditions theres new limits deductibles attachment points.
Tend to stick and maybe a little bit better than headline.
The headline rate.
Yes.
The.
The attachment point.
The deductibles.
<unk> be much stickier.
<unk>.
Then right is.
Yes.
Got it.
And depending on the business, particularly in middle market.
More than stickier it endures it tends to endure.
Thanks.
Youre welcome.
And as a reminder, if you would like to ask a question. Please press star one we will now move to Brian Meredith with UBS.
Yes. Thanks, two quick questions here for you first what happened with the AG business. The massive growth years was a new client was there something happen.
From an accounting perspective.
Boy, who was it new clients they were like they must have had.
The size of it.
Exactly [laughter] client portal.
<unk> will take over the Western U S basketball, it's John.
John Lupica.
Thanks, Brian.
It does.
The base prices were up significantly year over year in our spring crops.
Corn, and beans were up 18% and 29% respectively.
We had another record year in terms of policy count acquisition growth and new acres classified produce itself.
Really drove the viewpoint.
The base price John Johns, referring to you know in a simple way you apply a rate against exposure and exposure is the commodity price of say corn or beans and.
That price.
Which is a February price that's.
That's when you priced the policies is up significantly over the prior year.
Because you know commodity prices.
Yes makes sense.
My second question is just wanted to talk a little bit about your globally.
Client farm that was like 200.
Okay.
[laughter].
And then the next I'd, just like to talk a little bit about the global A&H business.
I know there is a component a big component of it is travel related but any indications that's going to turnaround here I would have thought that with the economic growth. We're seeing that would have already started to see.
Some nice growth out of it.
Yeah.
No.
Sure.
<unk>.
Travel business is predominantly Asia and Latin America.
And if you've been following it Asia has been locked down.
Until very recently, where it's just starting to open.
Countries like Australia that have been closed for a year and a half.
They're just going to open in November.
<unk>.
Singapore, Thailand, Korea, Hong Kong, Taiwan, they've all been locked down and they are just starting to open now.
Through November and we're starting to see.
Growth pick up in fact.
And one Luis can can remind us I think it's the month of <unk>.
September or October is our first month, where we've seen real growth and it was like let's say 8%.
We're all jumping up and down about it however to remind you our travel is off about 85% from what it was 19, so 8% is got a ways to go.
Great. Thank you.
Youre welcome.
Okay.
And we will take our last question from Meyer Shields with K B W.
Great. Thanks for fitting me in.
One brief question to start with Evan are you looking to add or shrink exposure in homeowners in Florida and California.
Well Meyer I'll remind you we gave.
Some forward information that in California, we were shrinking we were.
We were shrinking not a small amount.
In our footprint.
That is exposed to wildfire, both both highly exposed and and even moderately exposed to wildfire, which is not a small amount and we gave an amount of premium that related to that that would impact us.
And that's because in the state of California.
And their own wisdom.
We cannot charge, an adequate price for the risk and not by a small amount. So someone else will have the pleasure of writing that business. Unfortunately.
And and so we've been shrinking that.
In particular, Florida, we've been pretty steady.
Okay.
It's helpful. And then maybe a broad question can you talk about maybe the opportunities and potential risks.
To Chubb of the infrastructure bills that Congress is now considering.
Well the opportunities are.
Our great it's good.
Over time, it's going to add a lot of activity to construction.
Around infrastructure now you know, it's you passed the Bill and then.
A shovel in the ground takes a period of time and the infrastructure Bill if I recall correctly.
Is to generate infrastructure improvements over a decade.
But it all you know a trillion dollars is an awful lot of infrastructure.
Now you know the the issue of labor will be very interesting to see it's one thing to want to.
To want to realize those infrastructure projects that are country sorely needs.
And on the other hand, the labor to affect.
Those projects.
Is something that Congress is going to have to wrestle with and read into that immigration.
And temporary work visas.
Sure for Mexicans.
And others south of the border.
Very capable and executing that labor.
And by the way I want to go home.
After they they they after working here I don't want to necessarily remain here.
We have to rationally recognize that and.
And address that as part of a.
One true truly one trillion dollar infrastructure package of where to spend it and and make the difference we expect in the insurance industry will be a beneficiary of that.
Because those projects need to be insured.
Both construction and surety.
Okay perfect. Thank you so much.
And ladies and gentlemen, this concludes our question and answer session I'll turn the call back over to your host for any additional or closing remarks.
Thanks to everyone for your time. This morning, we look forward to speaking with you again next quarter have a great day.
With that ladies and gentlemen, this does conclude your conference for today, we do thank you for your participation and you may now disconnect.
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