Q4 2021 Chubb Ltd Earnings Call
Speaker 1: Please stand by. We're about to begin.
Please standby we're about to begin.
Speaker 1: Good day and welcome to the TEB Limited fourth quarter year end 2021 earnings conference call. Today's call is being recorded. If you would like to ask a question over the phone, please signal by pressing star 1 on your telephone keypad. For opening remarks and introductions, I would like to turn the call over to Karen Byer, Senior Vice President Investor Relations. Please go ahead.
Good day and welcome to the Chubb limited fourth quarter year end 2021 earnings conference call.
Today's call is being recorded if you would like to ask a question over the phone. Please signal 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 Investor Relations. Please go ahead.
Speaker 2: Thank you and welcome to our December 31, 2021, fourth quarter and year-end earnings conference call. Our report today will contain forward-looking statements, including statements relating to company performance, pricing, and business mix.
Thank you and welcome to our December 31st 2021 fourth quarter and year end 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 <unk>.
Speaker 2: growth opportunities, and economic and market conditions, which are subject to risk and uncertainties and actual results may differ materially. Please see our recent SEC filings, earnings release, and financial supplements, which are available on our website at investors.chub.com for more information on factors that can affect these matters.
Object to risks and uncertainties 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 don't shop Dot com for more information on factors that can affect these matters.
Speaker 2: 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 sub-
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.
Speaker 2: And now I'd like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Peter N. our Chief Financial Officer. And...
And now I'd like to introduce our speakers first we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Peter and our Chief Financial Officer, and then we'll take your questions also with us to assist with your questions are several members of our management team.
Speaker 2: Also with us to assist with your questions are several members of our management team. And now it's my pleasure to turn...
And now it's my pleasure to turn the call over to Evan.
Yeah.
Good morning.
Speaker 3: As you saw from the numbers, we had an excellent finish to the year, with record operating earnings and underwriting results. Double digit commercial premium growth.
As you saw from the numbers, we had an excellent finish to the year with record operating earnings and underwriting results.
Double digit commercial premium growth globally.
Strong levels of rate increase and slow, but improving growth in our consumer business globally.
Speaker 3: slow but improving growth in our consumer business glow.
Speaker 3: This performance led to one of the best years in our company's history. With the best organic growth in P&C premiums in over 15 years, and record financial results spanning both net and core operating income. Calendar and current accident you're underwriting. The Great???, which was released last year was bones.
This performance led to one of the best years in our company's history with the best organic growth and P&C premiums in over 15 years and record financial results spanning both net and core operating income calendar and current accident year underwriting income and.
And investment income simply stunning results across the board and a testament to the organization and so many of my colleagues last year.
Speaker 3: simply stunning results across the board and a testament to the organization and so many of my colleagues last year.
Speaker 3: Core operating income in the quarter was 1.65 billion or 381 per share, up nearly 20% over prior year. For the year we produced net and core operating income of 8.5 and 5.6 billion respectively. Again, both record results.
Core operating income in the quarter was $1 65 billion were $3 81 per share up nearly 20% over prior year for the year, we produced net and core operating income a beat and a half and $5 6 billion respectively.
Again, both record results in.
Speaker 3: In the quarter 1.27 billion of underwriting income was a 31% increase over prior year with a combined ratio of 85 and a half. Allow me to die.
In the quarter 1.27 billion of underwriting income was up 31% increase over prior year with a combined ratio of 85 and a half.
Allow me to digress for just a second.
Speaker 3: In my judgment, the calendar year or published combined ratio is the primary measure of underwriting performance that investors and managements should focus on because natural catastrophes are a regular and expected occurrence and the volatility cannot be dismissed away.
In my judgment, the calendar year or publish combined ratio is the primary measure of underwriting performance that investors and management should focus on because natural catastrophes are a regular unexpected occurrence.
Volatility cannot be dismissed away.
Speaker 3: Our PNC current accident year combined ratio excluding catastrophes was 83.9, a two and a half point improvement over prior year. This is an important but secondary measure that provides useful insight into the current underlying strength of our business.
Our P&C current accident year combined ratio, excluding catastrophes was 80 392, and a half point improvement over prior year. This is an important but secondary measure that provides useful insight into the current underlying strength of our businesses.
Speaker 3: Full year PNC underwriting income was a record, $3.7 billion, up over 200%. And that's with $2.4 billion of catastrophe losses in the second costliest year for the industry in terms of cash.
Full year P&C underwriting income was a record $3 7 billion up over 200% and that's with $2 4 billion of catastrophe losses in the second costliest year for the industry in terms of cats.
Speaker 3: On the investment side, adjusted net investment income, top 900 million for the quarter, and was a record 3.7 billion for the year. With the Fed finally accepting that inflation is a reality, that is not going away anytime soon, interest rates are rising, and we'll continue to rise.
On the investment side adjusted net investment income topped 900 million for the quarter and was a record $3 7 billion for the year with.
With the fed finally, accepting that inflation is a reality that is not going away anytime soon interest rates are rising and we will continue to rise Kiwi is coming to a rapid and spreads should begin to widen, particularly if the fed begins to shrink their balance sheet.
Speaker 3: QE is coming to a rapid end and spreads to begin to widen, particularly if the Fed begins to shrink their balance sheet as they should.
Speaker 3: As a reminder, every 100 basis points of yield for us provide about 1.2 billion of additional investment income. And we run about a four-year portfolio duration.
They should.
As a reminder, every hundred basis points of yield for US provides about $1 2 billion of additional investment income and.
And we run about a four year portfolio duration.
Speaker 3: As I remarked over a year ago, we're in a period of very strong wealth creation, which is reflected vividly by our quarterly and full year results. And I expect this trend will continue driven by further growth and margin expansion.
As I remarked over a year ago, we're in a period of very strong wealth creation, which is reflected vividly.
Our quarterly and full year results and I expect this trend will continue driven by further growth and margin expansion.
Speaker 3: Peter will have more to say about Katz, prior period development, investment income, book value, and other financial life.
Peter will have more to say about cats prior period development investment income book value and other financial items.
Speaker 3: Before I get to our discussion of growth and rate, as you saw in the press release, we have entered into agreements with several shareholders to purchase additional ownership interests in Wattai Group in China. Upon regulatory approval, which we expect some time during 22, our total aggregate ownership will be north of 80%.
Before I get to our discussion of growth in rate as you saw in the press release, we have entered into agreements with several shareholders to purchase additional ownership interest in <unk> group in China.
On regulatory approval, which we expect sometime during 'twenty two our total aggregate ownership will be north of 80%.
Speaker 3: Separately, integration planning for this FIGNA transaction, which we announced in the fourth quarter, and I covered on our last call, is progressing well. We expect to close in the first half of the year.
Separately integration planning for the Cigna transaction, which we announced in the fourth quarter and I covered on our last call is progressing well, we expect to close in the first half of the year.
Speaker 3: Now, turning to growth in the rate environment, PNC premiums in the quarter increased 9.6%, with commercial up 13% and consumer up 2.2%. This strong performance capped a year where we grew our premium revenue 13%, the strongest organic growth since 2003, with commercial up 17.7% and consumer up 2.3%.
Now turning to gross in the rate environment P&C premiums in the quarter increased nine 6% with commercial up 13, and consumer up to point to.
This strong performance capped a year, where we grew our premium revenue, 13% the strongest organic growth since so three with commercial up 17, 7% and consumer were up 2.3.
Speaker 3: Growth in the quarter was broad-based, with contributions from virtually all commercial businesses globally.
Rose in the quarter was broad based with contributions from virtually all commercial businesses globally from large corporate to middle market to small from traditional to specialty the agriculture, including most regions of the world.
Speaker 3: from large corporate to middle market to small, from traditional to specialty to agriculture, including most regions of the world. Commercial premiums for North America were up over 11%, while in overseas general they grew 15%.
Commercial premiums for North America were up over 11% well in overseas General they grew 15% for.
Speaker 3: For the year, we have grown our commercial business almost 18 percent. And for perspective, since 2019, it has grown by nearly a third, or over $5 billion of net premium. And that's the size of, or bigger than, most insurers.
For the year, we have grown our commercial business almost 18%.
And for perspective since 2019, it has grown by nearly a third or over 5 billion of net premium.
That's the size of or bigger than most insurers.
Speaker 3: In terms of rate, the level of rate increases remains robust and is naturally slowing, as portfolios achieve for approach-rate addicts.
In terms of rate the level of rate increases remains robust and is naturally slowing.
<unk> portfolios achieve or approach rate adequacy.
Speaker 3: At the same time, where there's short or long tail exposure, the loss environment is anything but benign. The level of rate increases remains well in excess of loss costs, and I expect this trend to continue for some time.
At the same time, whether short or long tail exposure the loss environment is anything but benign.
The level of rate increases remains well in excess of loss costs and I expect this trend to continue for some time.
Speaker 3: In the quarter in North America, total premiums grew 8.7 percent with commercial up over 11.
In the quarter in North America total premiums grew eight 7% with commercial up over 11, driven.
Speaker 3: Driven by growth in our major accounts and specialty business of 12% and our middle market and small commercial business of 9.7.
Driven by growth in our major accounts and specialty business of 12% and our middle market and small commercial business of nine seven.
Speaker 3: total exposure change is actually down 0.6% in the quarter. And it's a combination of an increase in economic exposure of 3.4% due to higher payrolls, sales, and other economically sensitive activity. And on the other hand, a decline in exposure due to underwriting change.
Total exposure change is actually down <unk>, 6% in the quarter and it's a combination of an increase in economic exposure of three 4% due to higher payrolls sales and other economically sensitive activity and on the other hand.
A decline in exposure due to underwriting changes such as increased attachment points and higher deductibles.
Speaker 3: such as increased attachment points and higher deductions.
Speaker 3: a good thing, though it negatively impacted growth. Our retail businesses achieved a hundred percent retention this quarter on a premium basis, and 89 percent on an account basis. Both.
Good thing, though it negatively impacted growth our retail businesses achieved a 100% retention this quarter on a premium basis and 89% on an account basis.
<unk> very strong.
Speaker 3: Overall rates increased in North America commercial lines ten and a half.
Overall rates increased in North America commercial lines to enter in a half percent.
Speaker 3: Lost costs are trending about five and a half and vary by line.
Loss costs are trending about five and a half and vary by line.
Speaker 3: In general, loss costs for short-tail classes are running about 4 percent, though again, we anticipate these to rise and have reacted accordingly.
General loss cost for short tail classes are running about 4%, though again, we anticipate these to rise and if reacted accordingly.
Speaker 3: In long tail, excluding workers' comp, we are trending at a 6% rate, and our first dollar workers' comp book is trending between 4 and 4.5.
In long tail, excluding workers' comp, we are trending at a 6% rate in our first dollar workers' comp book is trending between four and four and a half.
Speaker 3: Let me give you a better sense of the rate increase movement in North America.
Let me give you a better sense of the rate increase movement in North America.
Speaker 3: In major accounts, which serves the largest companies in America, rates increased in the quarter by 10.5 percent.
Major accounts, which serves the largest companies in America rates increased in the quarter by tender and a half percent risk.
Speaker 3: Risk management related primary casualty rates were up over four percent.
Risk management related primary casualty rates were up over 4%.
Speaker 3: General casualty rates were up over 16 and varied by class of
General casualty rates were up over 16 and varied by class of casualty and <unk>.
Speaker 3: Property rates were up 9.7% while financial lines rates were up over 17%.
Property rates were up 9.7, while financial lines rates were up over 17%.
And our E&S wholesale business Ray.
Speaker 3: Rates increased by 14.5% in the quarter. Property rates were
<unk> increased by 14, 5% in the quarter.
Property rates were up 12 and a half.
Speaker 3: Casualty was up almost 17% while financial lines rates were up 18.5%.
Casualty was up almost 17.
Financial lines rates were up 18, 5%.
In our middle market business rates increased in the quarter about 9%.
Speaker 3: rates increased in the quarter about nine percent.
Speaker 3: Rates for property were up nine, casualty excluding comp were up nearly nine, and comp rates were down one and a half percent.
Rates for property were up nine.
Casualty, excluding comp were up nearly nine.
And comp rates were down 1.5%.
Speaker 3: While comp pricing, on the other hand, which is rate plus exposure, was up about 3%.
While comp pricing on the other hand, which is rate plus exposure was up about 3%.
Speaker 3: And finally, financial lines rates were up about 19%.
And finally financial lines rates were up about 19%.
Speaker 3: Turning to our international general insurance operation.
Turning to our general International General insurance operations commercial P&C premiums grew 15% on a published basis.
Speaker 3: Commercial PNC premiums grew 15% on a published basis.
Speaker 3: International retail commercial grew over 13, while our London wholesale business grew 28.
International retail commercial grew over 13, well, our London wholesale business grew 28%.
Speaker 3: Retail commercial growth varied by region, with premiums up 19% in our UK and Europe division.
Retail commercial growth varied by region with premiums up 19% and our U K and Europe Division <unk>.
Speaker 3: Asia Pacific was up about twelve and a half, while our Latin America commercial business grew over nine percent.
Asia Pacific was up about 12, and a half while our Latin America commercial business grew over 9%.
Speaker 3: Internationally, like in the U.S., we continue to achieve improved rate-to-exposure across our commercial portfolio.
Internationally like in the U S. We continued to achieve improved rate to exposure across our commercial portfolio.
Speaker 3: In our international retail business, rates increased in the quarter 13 percent.
In our international retail business rates increased in the quarter, 13% with.
Speaker 3: Property Update, Financial Lines Up 30, and Primary and Access Casualty Up 7 and 11 Respects.
With property up eight financial lines up 30.
And primary and excess casualty up 711, respectively.
Speaker 3: By the way, these rate increases were nearly identical to those from the prior.
By the way these rate increases were nearly identical to those from the prior quarter.
Speaker 3: In our London wholesale business in the quarter, property rates were up 8, financial lines rates were up 24, and marine up 5.
In our London wholesale business in the quarter property rates were up eight financial lines rates were up 24 and marine up five.
Speaker 3: Outside North America, loss costs are currently trending about 3 percent, though that varies by class of business and country.
Outside North America lost costs are currently trending about 3%, though that varies by class of business in country.
Speaker 3: While international consumer lines growth in the quarter continued to be heavily impacted by the pandemic's ongoing effects on consumer-related activity,
Well international consumer lines growth in the quarter continued to be heavily impacted by the pandemic ongoing effects on consumer related activities growth continued to slowly recover and was three and a half on a published and constant dollar basis.
Speaker 3: Growth continued to slowly recover, and was 3.5% on a published and constant dollar basis.
Speaker 3: A clear example of that is our international ANHD.
A clear example of that is our internationally and H division, which grew for the third consecutive quarter.
Speaker 3: which grew for the third consecutive quarter, and on a currency-adjusted basis, Q4 was our best quarter since the beginning of the pandemic, with growth of 5.5%.
And on a currency adjusted basis Q4 was our best quarter since the beginning of the pandemic with growth of five 5%.
Speaker 3: across Asia and Latin America in our direct-marketed business through banks, retailers, and digital
Across Asia, and Latin America, and our direct marketing business through banks retailers and digital platforms. We are seeing activity pick up for consumer lending credit card growth in branch openings in fact, our direct marketing business grew double digits in Latin America.
Speaker 3: We are seeing activity pick up for consumer lending, credit card growth, and branch openings.
Speaker 3: In fact, our direct marketing business grew double digits in Latin America, and we had our best growth quarter of the year in Asia.
And we had our best growth quarter of the year and Asia Pac.
Speaker 3: All in all, I expect growth in our consumer lines to continue to improve as the year goes along. The underlying health of the business is actually...
All in all I expect growth in our consumer lines to continue to improve as the year goes along the.
The underlying health of the business is excellent.
Speaker 3: Net premiums in our North America high net worth personal lines business were up 3.3%.
Net premiums in our North America high net worth personal lines business were up three 3%.
Speaker 3: Our true high net worth, client segment, the heart of our business grew 13 in the court.
Our true high net worth client segment, the heart of our business grew 13 in the quarter.
Speaker 3: Overall retention was very strong this quarter at nearly 98%. And we achieved pricing which includes rate and exposure of 13% and a half percent in our homeowner's portfolio.
Overall retention was very strong this quarter at nearly 98%.
We achieved pricing, which includes rate and exposure of 13% 13, 5% and our homeowners' portfolio.
Speaker 3: Claim severity in our U.S. Personal Lines business is running just under 9%, with homeowners cost to repair and rebuild increasing 11%.
Claims severity in our U S personal lines business is running just under 9% with homeowners cost to repair and rebuild the increasing 11.
Speaker 3: in our Asia-focused international life insurance business.
In our Asia focused international life insurance business net premiums plus deposits were up about 25 in the quarter.
Speaker 3: Net premiums plus deposits were up about 25 in the quarter. Profitability was impacted this quarter from a true up of our COVID reserve chart.
Profitability was impacted this quarter from a true up of our Covid reserve charges, which overall for the company were a net positive but negatively impacted life.
Speaker 3: which overall for the company were net positive, but negatively impacted life.
Speaker 3: Lastly, net premiums in our global REIT business were up 37%.
Lastly.
Net premiums in our global re business were up 37%.
Speaker 3: And while conditions have improved in reinsurance, we remain cautious in most lines. Rates and terms in most classes are still not adequate to earn what we believe is needed to justify the volatility and earn an appropriate risk-adjusted return.
While conditions have improved and reinsurance we remain cautious in most lines rates and terms in most classes are still not adequate to earn what we believe is needed to justify the volatility and earn an appropriate risk adjusted return.
Speaker 3: We had an outstanding year, and I look ahead, looking ahead, we're off to a very good start in the first quarter overall. Market conditions remain consistent with what we experienced in the fourth quarter.
We had an outstanding year.
And I look and looking ahead, we're off to a very good start in the first quarter overall.
Market conditions remain consistent with what we experienced in the fourth quarter.
Speaker 3: 2022 should be a good year in terms of continued growth and margin improvement as we capitalize on favorable underwriting conditions for our commercial P&C businesses globally. I expect rates to continue to increase.
'twenty two should be a good year in terms of continued growth and margin improvement as we capitalize on favorable underwriting conditions for our commercial P&C businesses globally.
Expect rates to continue to exceed loss cost.
Speaker 3: Sumer lines growth should return as the pandemic eases though as you know
Consumer lines growth should return as the pandemic eases, though as you know there is no certainty in.
Speaker 3: In the future, as rates, interest rates rise and spread potentially widen, our investment income will rise.
In the future as rates interest rates rise and spreads potentially widen our investment income will rise and.
Speaker 3: and our strategic investments, such as Signo and Wantai, will provide us with greater revenue, earnings, and growth opportunities.
Our strategic investments such as Cigna, what di will provide us with greater revenue earnings and growth opportunity.
Speaker 3: All of this gives me great confidence in the future.
All of this gives me great confidence in the future.
Speaker 3: I'll now turn the call over to Peter and then we're gonna come back and take your quest.
I'll now turn the call over to Peter.
We're going to come back and take your questions.
Speaker 4: Thank you, Evan, and good morning, everyone. Consistent with the record earnings that Evan highlighted, other key financial metrics were also excellent, including a strong return on equity and book and tangible book value per share that now stand at all time highs.
Thank you Ellen and good morning, everyone.
Consistent with the record earnings that <unk> highlighted other key financial metrics were also excellent including a strong return on equity and book and tangible book value per share that now stand at all time highs.
Speaker 4: Our strong performance produced operating cash flow of 2.6 billion for the quarter and a record 11.1 billion for the year.
Our strong performance produced operating cash flow of $2 6 billion for the quarter and a record $11 1 billion for the year.
Speaker 4: We continue to build on our balance sheet strength with capital of 76 billion and cash and invested assets of 124 billion.
We continued to build on our balance sheet strength with capital of 76 billion and cash and invested assets of 124 billion.
Speaker 4: Our investment portfolio of 122 billion supported by our positive operating cash flow continues to be of a very high quality, which we expect will continue to support growth in our investment income.
Our investment portfolio of 122 billion supported by our positive operating cash flow continues to be of a very high quality, which we expect will continue to support growth in our investment income.
Speaker 4: At the end of the year, our investment portfolio remained in an unrealized gain position of $2.3 billion after tax.
At the end of the year, our investment portfolio remained in an unrealized gain position of $2 3 billion after tax.
Speaker 4: Among the capital-related actions in the quarter, we returned 1.2 billion to shareholders, including 905 million in share repurchases, and 342 million in dividend.
Among the capital related actions in the quarter, we returned $1 2 billion to shareholders, including $905 million in share repurchases and 342 million in dividends for.
Speaker 4: For the year, we returned over 6 billion to shareholders, equaling 112% of our core earnings.
For the year, we returned over 6 billion to shareholders equaling, 112% of our core earnings.
Speaker 4: This included 4.9 billion in share repurchases, or 6.5% of our outstanding shares, and dividends of 1.4 billion. As of December 31, 2.6 billion of the share repurchase authorization remain.
This included $4 9 billion in share repurchases were six 5% of our outstanding shares and dividends of $1 4 billion as of December 30, 126 billion of the share repurchase authorization remains.
Speaker 4: In November , we issued 600 million of 30-year debt and 1 billion of 40-year debt at a very attractive weighted average cost of under 3%.
In November we issued 600 million of 30 year debt and $1 billion, a 40 year debt at a very attractive weighted average cost of under 3%.
Speaker 4: The proceeds will be used to fund up to 1.1 billion of the purchase price of Signe's business in Asia Pacific.
The proceeds will be used to fund up to $1 1 billion of the purchase price of Cigna's business in Asia Pacific the.
Speaker 4: The remainder will be used for general corporate purposes, including the repayment of $475 million of debt due in March 2023.
The remainder will be used for general corporate purposes, including the repayment of $475 million of debt due in March 2023.
Speaker 4: Book and tangible book value per share increased 1.7% and 2.7% respectively from last quarter and 6.1 and 7.6% respectively from last year. And now stand at all time high of 139.99 and 94.38 per share respectively from last year.
Book and tangible book value per share increased one, 7% and two 7% respectively from last quarter, and six 1% and seven 6% respectively from last year and now stand at all time high of 139, 99, and $94 38 per share respectively.
Speaker 4: A reported ROE for the quarter and the year was 14.4% and 14.3% respectively.
Our reported ROE for the quarter and the year was 14, 4% and 14, 3% respectively. Our core operating return on tangible equity for the quarter and year was $17 seven 7% and 15, 3%, respectively, while our core operating ROE for the quarter and year was 11, 6%.
Speaker 4: Our core operating return on tangible equity for the quarter and year was 17.7% and 15.3% respectively. While our core operating RLE for the quarter and year was 11.6% and 9.9%.
And nine 9%.
Speaker 4: Adjusting for the market market gains on our private equity portfolio, our core operating ROE was 13.1% for the quarter and 13.6% for the year.
Adjusting for the Mark to market gains on our private equity portfolio, our core operating Roe.
It was 13, 1% for the quarter.
13, 6% for the year.
Speaker 4: As I have noted in the past, our investment income is based on many factors. We met our quarterly investment income target of 900 million this quarter after a few quarters of exceeding it, reflecting slightly lower distributions on our PE portfolio compared to recent us,
As I have noted in the past our investment income is based on many factors we met our quarterly investment income target of $900 million. This quarter. After a few quarters of exceeding us, reflecting slightly lower distributions on our PE portfolio compared to recent quarters.
Speaker 4: We continue to expect our quarterly run rate to be approximately 900 million in 2022.
We continue to expect our quarterly run rate to be approximately $900 million in 2022.
Speaker 4: Pretax catastrophe losses for the quarter were 275 million, primarily from weather-related events, with about 214 million in the US and 61 million international.
Pre tax catastrophe losses for the quarter were $275 million, primarily from weather related events with about $214 million in the U S and $61 million internationally.
Speaker 4: We had favorable prior period development of 145 million pre-tax, which included 364 million of favorable development for direct COVID-related liabilities from acts in year 2020.
We had favorable prior period development of $145 million pretax, which included 364 million of favorable development for direct COVID-19 related liabilities from accident year 2020.
Speaker 4: We recognize the net charge of $375 million related to the $800 million pending settlement with Boyce Guets of America that we previously announced.
We recognized a net charge of $375 million related to the $800 million pending settlement with Boy Scouts of America that we previously announced.
Speaker 4: The net charge takes into account reinsurance and are previously carried reserved.
The net charge takes into account reinsurance and our previously carried reserve.
Speaker 4: We also recognize 53 million of adverse development related to asbestos as part of our annual reserve review. Excluding these items, the remaining development was essentially all favorable development in short tail lines, principally in our property and A&H lines.
We also recognized $53 million of adverse development related to asbestos as part of our annual Reserve review.
Excluding these items the remaining development was essentially all favorable development in short tail lines, principally in our property and a anh lives.
Speaker 4: Our reserve position remains strong, with net reserves increasing by 3.8 billion or 7.4% in constant dollars for the year. Our pay to incurred ratio for the quarter was 98%. Primarily reflecting significant net catastrophe loss payments, the seasonality of our crop insurance business, and favorable prior period development. Adjusting for these items, our pay to incurred ratio for the quarter was 78%. Our pay to incurred ratio for the year.
Our reserve position remains strong with net reserves, increasing by $3 8 billion or seven 4% in constant dollars for the year.
Our paid to incurred ratio for the quarter was 98%, primarily reflecting significant net catastrophe loss payments the seasonality of our crop insurance business and favorable prior period development adjusting for these items are paid to incurred ratio for the quarter was 78% or.
We're paid to incurred ratio for the year was 81%.
Speaker 4: Our core operating effect at tax rate was 15.7% for the quarter and 15.4% for the year.
Our core operating effective tax rate was 15, 7% for the quarter and 15, 4% for the year.
Speaker 4: For 2022, we expect our annual core operating effective tax rate will increase slightly to be in the range of 15.5% to 17.5%. I'll turn the call back over to Karen.
For 2022, we expect our annual core operating effective tax rate will increase slightly to be in the range of 15, and a half to 17, 5%.
I will turn the call back over to Karen.
Thank you at this point, we're happy to take your questions.
Speaker 1: And if you would like to ask a question, please sign up by pressing star one on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. If you find your question has been answered, you may remove yourself from the queue by pressing star two. And we'll go ahead and take our first question from Yaron Canara from Jeffries. Please go ahead.
I Wonder if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if youre using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. If you play. Your question has been answered you may remove yourself from the queue by pressing star Kim.
Go ahead and take our first question from Yaron <unk> from Jefferies. Please go ahead.
Speaker 5: Good morning, everybody. I guess my first question goes back to Evan's comments on tightening terms and conditions and commercial lines and how it's impacted, I guess, the higher-quality, but at the same time some premium pressure. Can you maybe talk about, is this a step up in tightening of terms and conditions that you had this quarter, or were some of the favorable offsets you had in prior quarters, have those diminished to some extent? Maybe we can better understand...
Hey, good morning, everybody.
I guess my first question goes back to Evans comments on tightening terms and conditions in commercial lines and how it is.
<unk> I guess, the higher quality, but at the same time from a.
Premium pressure can you maybe talk about it.
Is this a step up in <unk>.
Tightening of terms and conditions that you had this quarter, where some of the offset favorable off if he had in prior quarters have those diminish to some extent what maybe we can better understand what drove that.
Speaker 6: demo Allen Business
Got to call this out this quarter.
Speaker 3: no i just gave you one there's actually it's something that happens every quarter and um... has been happening every quarter we've been terms and conditions have been have been along with pricing are
No I just gave you one there's actually it's something that happens every quarter.
Hasnt been happening every quarter, we've been terms and conditions have been.
I've been.
Along with pricing or.
<unk>.
<unk>.
I've been a reality for the.
Speaker 3: the last couple of years. And the only thing we did was, I just refined to give a better sense when I listened to discussions about exposure.
The last couple of years.
The only thing we did was I just refined.
To give.
A better sense, when I listen to discussions about exposure.
Speaker 3: There is simply discussion about economic exposure changes generally. And I thought it might be helpful to just not for the sake of the number, but to sensitize you.
There is simply discussion about economic exposure changes generally.
Thought it might be helpful to just not not for the sake of the number but to sensitize U.
Speaker 3: investors better to the fact that there are two kinds of exposure changes that take place So you know I was just um
Investors better to the fact that there are two kinds of exposure changes that take place. So you know I was just.
Speaker 3: I was just doing that not because there was anything particular this quarter, but better for your education.
I was just doing that not because there was anything particular this quarter, but better for your education that's it.
Speaker 3: It's not something I intend to always do. I haven't done it really in the past and I don't know
Okay.
I intend to always do I haven't done it really in the past and I don't know I was more ambitious.
Speaker 5: And trying to tie it back to the premium growth numbers, then why would his commercial lines premium slow down sequentially then? Kaym
Got it.
And trying to tie it back to the premium growth numbers, then why would have commercial lines premium.
Slowed down sequentially.
Well why would it slow down because.
Essentially I mean, it was a great growth quarter.
Speaker 3: It was a double digit quarter in commercial lines growth. Wow, that's the eight out of nine quarters. And by the way, the fourth quarter was one of the strongest quarters we've had.
It was a double digit quarter in commercial lines growth Wow. That's that's the eight out of nine quarters and by the way the fourth quarter was one of the strongest quarters, we've had for growth and theirs is a certain seasonality.
Speaker 3: growth. And there's, there's a certain seasonality that occurs in commercial lines, but you know what overall, I was an outstanding growth. So, you know, there you go.
That occurs in commercial lines, but you know what overall I think it was an outstanding growth. So no. There you go.
Speaker 5: And the market, you know, the market is, you know, you're going to get a cute face of hard market, and then you go into different phases of the hard market where it begins to heal, others start writing business, and you know, there you go, but an outstanding growth. Right now, I'm not challenging.
And the market.
The market is.
As you know you're in the acute phase of hard market and then they use then you go into different phases of the hard market where.
It begins to heal others start writing business and there you go but an outstanding growth.
Alright.
Challenging that.
I certainly didn't wanted to little maybe both of you guys achieved.
Speaker 3: My second question, many insurers are building some extra conservatism into lost trends. I think some adjvantines have started to quantify that recently. Can you maybe talk about your approach to these lost trends and what are you building in extra cushion? Can you quantify that? I'm not going to quantify any of that. What I'm going to...
My second question.
Many insurers or building some extra conservatism into loss trends I think some management teams have started to quantify that recently can you maybe talk about your approach to IL two.
The velocity trend and whether you are building out an extra question can you quantify that.
I'm not going to quantify it.
Any of that.
And Ah.
Say is this a couple of points number one.
Speaker 3: We have always managed our reserves prudently, concerned.
We have always managed our reserves prudently conservatively.
Speaker 3: As you know, we recognize bad news early.
As you know we recognize bad news early.
Speaker 3: slow to recognize good news, understanding the development patterns that occur and are not 100% predictable with precision in our business. Secondly.
Slow to recognize good news understanding.
The development patterns.
<unk>.
Occur and are not 100% predictable.
With precision and our business secondly.
Covid.
<unk>.
And we've said this for many quarters.
Impacted.
Speaker 3: the reporting and the incurred pattern of claims. Courts shut down businesses.
The the.
The reporting and the incurred pattern of claims.
Courts shut down businesses shut down.
Et cetera.
And.
Speaker 3: to be able to accurately project that is
To be able to accurately project that.
Is a fool's errand.
Speaker 3: And so we've taken the approach since the beginning of COVID that the ultimate trend pattern doesn't change the reporting pattern.
And so we've taken the approach.
Since the beginning.
Of Covid that the ultimate trend pattern doesn't it.
It doesn't change.
The reporting pattern may change.
And that naturally.
Speaker 3: as we look at prior year reserve developments as well as our current year picks is impacted by that.
We look at prior year reserve developments as well as our current your picks.
Is impacted by that.
And I think you answered my answers are Colorado's youre.
Youre welcome.
Speaker 7: And we'll move on to our next question for my Ram ski from Wolf Research. Please go ahead.
And we'll move onto our next question from Mike Rahm Ski from Wolfe Research. Please go ahead.
Mike you may be on mute.
Okay.
Yes.
Okay.
Let's move along as it is it working now.
Okay, Yes, it's moving this is working so sorry about that so.
Speaker 8: Yes, it's moving. It's working. Sorry about that. So a question on loss cost. Thank you for the color about loss cost. It sounds like it didn't change much sequentially. Curious if there are any major loss cost level distinctions between very old ventages, which seems to be, you know,
A question on loss costs will need to thank you for the color about loss costs. It sounds like it didn't change much sequentially I'm curious if there are kind of any any major loss cost level distinctions between very old vintages, which seems to be you know popping up in the news about material losses coming from.
Speaker 3: popping up in the news about material losses coming from business written well over a decade ago, kind of versus the more recent five, six, seven year ventages. Wondering if there's any distinction there we should be thinking about. No, not that I...
Business written in well over a decade to go kind of versus system. The more you know.
More recent 567 year vintages wondering if theres any distinction there we should be thinking about.
No not that I <unk>.
No.
Okay.
No.
Speaker 8: Okay, great. My follow-up question is on capital. Maybe you can post the signal deal and they're announced what tie increased stake. If you can update us on the excess capital position and whether
Okay great.
My follow up question is on capital, maybe kind of post the <unk>.
Cigna deal and they're announced what Ty increased stake if you can update us on on the excess capital position.
And weather.
Speaker 8: The buyback expectation is going to continue in terms of the expectation for the repurchase authorization to be utilized.
But the buyback expectation is going to continue in terms of the <unk>.
The expectation for the repurchase authorization to be utilized.
I'll, let Peter.
Speaker 4: Sure, look for both SIGNAN and WATAI in terms of how we're going to finance them. We expect to finance them using existing cash resources and cash flow. We do not expect to issue any additional debt nor issue any equity. And we don't expect either to have any impact on our dividend nor our buyback.
Sure.
For both Cigna and what Ty.
In terms of how we're going to finance them, we expect to finance them using existing cash resources and cash flow, we do not expect to issue any additional debt nor issue any equity.
And we don't expect either to have any impact on our dividend or buybacks.
Speaker 8: And so, no, is there still an access capital drag post that or is most access capital being utilized? Thanks.
And so no no is there still have excess capital track post.
Most of that or is most of the excess capital being utilized.
We don't call it a drag.
Speaker 3: We maintain our capital.
We maintain our capital.
Speaker 3: Our philosophy doesn't change and we maintain surplus
Position, our philosophy doesn't change.
We maintain surplus capital for for.
Speaker 3: good things and we're in the risk business so we retain for opportunity and we maintain surplus cap.
For good things and we're in the risk business. So we've maintained for opportunity and we maintained surplus capital for risk.
Speaker 1: And we'll go ahead and move on to our next question from Elise Grinchman with Walls Fargo. Please go ahead.
And we'll go ahead and move onto our next question from Elyse Greenspan with Wells Fargo. Please go ahead.
Speaker 1: Hi, thanks. Good morning. My first question, you guys have shown some good level of expense ratio improvement about two points over the past two years. Is there room for further improvement there, especially on the DNA side, as you guys have earned premium leverage? And can you just give us a sense of where perhaps the expense ratio could go over the longer term?
Hi, Thanks. Good morning. My first question you guys have shown some.
A good level of interest expense, we shampooed men about two points over the past two years is there a room for further improvement there.
Firstly on the G&A side as you guys have earned premium leverage.
And can you just give us a sense of where perhaps the expense ratio could go over the longer term.
Okay.
Speaker 3: Yeah, I'm not going to give you a forward guidance, Elise. But I'm going to give you a couple of...
Yeah, I'm not going to give you a forward guidance elyse.
But I'm going to give you a couple of.
Speaker 3: of thought. Number one, on one hand, the acquisition ratio has also improved because
Thoughts number one.
On one hand, the acquisition ratio has also improved because.
Speaker 3: Consumer lines have become a smaller percentage of the total.
Consumer lines have become a smaller percentage of the total business is commercial lines has grown.
Speaker 3: and consumer lines initially shrank and then has been recovering slowly. So you'll naturally see a change that way in the acquisition ratio over time as consumer lines.
Consumer lines initially shrank and then has been recovering slowly so you'll naturally see.
<unk>.
A change that way in the acquisition ratio over time as consumer lines grows more quickly.
Speaker 3: On the other hand, on the G&A side, you know, we already run the lowest in the industry. And two things are occurring. One, we are investing for this.
On the other hand on the on the G&A side.
We we already run the lowest in the industry.
And two things are occurring one we are investing for the future.
Speaker 3: And we are hardly slowing down in that, in the digitization of the company and the transformation of how we do business.
<unk>.
And we are hardly slowing down in that.
In in the Digitization of the company and the transformation of how we do business.
Speaker 3: And that's going to, that pays dividends and will continue to pay dividends. So we will invest. On the other hand, we continue to achieve efficiency.
That's good news that pays dividends and will continue to pay dividends. So we will invest on the other hand, we continue to achieve efficiencies.
Speaker 3: as a result of things like straight through processing and robotic.
As a result of things like straight through processing and robotics.
And.
Other activities. So you know I'm not going to forecast for the future, but I feel pretty good about where we are in G&A.
Okay. Thank you and then my second question on S&P is in the process of rolling out changes to their capital charges.
And I was hoping you guys could you just give us some thoughts as we're you know I know in the review process with companies now I think a big component of what they were looking to do relates to changes around diversification and I would think a company like you guys and especially with the upcoming cygnet deal could screen well from a diversification and capital perspective.
But if you can just.
Some color there. Thank you.
Speaker 4: Sure, at least you know, I appreciate your sentiment, but you don't do the model. I would be, I think it would be great if you went to work for us and think, but Peter, anyway, go ahead. I mean, I think at least we need to, they've asked for comment mid-March and then after that they're gonna go away and make their decisions and publish their model. So we need to let them finish getting their input and doing their work and making their decisions. Based on what we know now, we don't expect any change of consequence to our capital position.
Sure Elyse you ought to.
I appreciate your sentiment, but you don't do the model y.
I would be I think it would be great. If you went to work for S&P, but Peter anyway go ahead.
I think at least we need to they've asked for comment mid March and then after that they're going to go away and make their decisions and publish their model. So we need to let them finish getting their input and doing their work in making their decisions based on what we know now we don't expect any change of consequence to our capital position.
Okay. Thanks for the color.
Speaker 1: And we'll move on to our next question from up Michael Phillips with Morgan Stanley . Please go ahead.
And we'll move on to our next question from Michael Phillips with Morgan Stanley . Please go ahead.
Speaker 9: Thanks, Morning. Evan, back to your earlier comments for you, ambitious, given the new comments on the exposure. And you broke it down between economic and underwriting. What are your thoughts on how those two pieces play out for this coming year?
Thanks, Good morning.
Back to your earlier comments, where you're ambitious given the new comments on the exposure.
Look it down between economic and underwriting how do you what are your thoughts on how those those two pieces play out for this coming year.
Speaker 3: Oh, I don't know. I'm not going to forecast. Sorry, I can't help you with the worksheet that way. I'm not going to forecast both economic exposure change, I mean, ask the Fed, and, and, and, nor on the underwriting side, though, I do anticipate that the underwriting side is probably getting closer to a
Oh, I don't know I'm not going to forecast.
Sorry, I can't help you with worksheet that way I'm not going to forecast.
Both economic exposure change I mean.
Ask the fed.
Hum.
Nor on the underwriting side, though I do anticipate that the underwriting side.
It's probably getting closer to a steady state.
Okay.
Okay that makes sense, given where we are with rates that makes sense I guess.
Speaker 9: That makes sense. Like I'm aware with the mixed sense, I guess. Second question on your release on the COVID. Can you give us some characteristics kind of what's behind that? With that more North America release, exposure's there that you release the reserves or outside North America. And then what's left, I guess, I think my math says you had about a billion dollars left and that all is still in reserves or what's the characteristics or what we're paying to your COVID covers. Thank you.
Second question on on your release on the call, but can you give us some characteristics kind of what's behind that was that more north America release exposures, there that you've released reserves or outside North America and then what.
What's left I guess I think my message out about a $1 billion left is that all still in reserves or whats the characteristics of what remains for your COVID-19 .
<unk>. Thank you.
Speaker 3: It will give you a little color around that. Paul O'Connell, our chief actor, I'm gonna ask him to come.
We will give you a little color around that.
Paul O'connell, our chief actuary of him and ask him to comment on that sure. Thank you.
Speaker 4: So, as we stated in the commentary, we recognize favorable prior period of development of $364 million on our 2020 accident year reserves for direct COVID.
So as we sit here in the commentary we recognized favorable prior period development of $364 million on our 2020 accident year reserves for a direct COVID-19 .
Speaker 10: It was a split between North America commercial and overseas general. We had some minor truops and product lines like P&H and property, but bulk of it really was financial lines that drove the private area development. At the outset of our pandemic, at the health of the pandemic, we modeled Washington's product line.
It was split it was split between North America commercial and overseas General.
We had some minor true ups in product lines, like A&H and property, but bulk of it really was financial lines that.
That drove the prior to redevelopment.
At the outset of our pandemic at the outset of the pandemic, we modeled losses for these product lines.
Speaker 10: And, you know, our projections didn't really anticipate the young President at the levels of economic stimulus that occurred globally in 2020 and continued into 20-
And our projections didn't really anticipate the unprecedented levels of <unk>.
Economic stimulus that occurred globally in 2020 and continued into 2021.
Speaker 10: we've been observing favorable or reported loss activity that's been lower than expected, but we've been delaying reacting to those trends.
We have been observing.
Favorable or reported loss activity, that's been lower than expected, but we have been delaying reacting to those trends.
Speaker 10: Out of caution, knowing the delays in the claims process and its support.
Out of caution knowing the delays in the claims process foreclosure.
Speaker 10: but I think and the impact that that has on reporting patterns for clients. Like we feel comfortable at this point in time and so we took action in the quarter. We continue to maintain what we think is a sufficient provision, you know, for COVID in the aggregate and for these product lines.
But I think.
And the impact that that has on reporting patterns for claims that we feel comfortable at this point in time.
And so we took action in the quarter.
We continue to maintain what we think is sufficient provision for COVID-19 .
In the aggregate in for these product lines.
Speaker 10: And this is a substantial amount of bivine or included in that in that category.
And it is a substantial amount of IV and are included in that.
Thank you Eric.
Sure.
Speaker 9: And I guess the remaining piece, is that still, can you comment on how much of that is North America versus outside?
And I guess the remaining pieces that still can you comment on how much of that is north America versus outside.
Speaker 3: no we're not going to split it that way uh... and but the substantial outstanding um... is in reserves both case and i've been
No, we're not going to split it that way.
And but the substantial outstanding isn't reserves, both case and IV NR.
Okay. Thank you for your comments.
Youre welcome.
Speaker 1: We'll move on to our next question from Greg Peters with Raymond James. Please go ahead.
Well move onto our next question from Greg Peters with Raymond James. Please go ahead.
Speaker 9: Good morning. I at least as a tough competitor, I've been so I support your proposal to move over to Asimp. I'm really happy to hear that as well.
Good morning.
Alright.
Elisa is a tough competitor and then so I support your proposal.
The S&P.
That's for sure.
Happy to hear that as well so.
Speaker 5: I want to pivot back to the top line number, which the 13% for the year.
I wanted to I wanted to pivot back to the topline.
Number, which the 13% for the year.
Speaker 5: We'd like to put that into our models for eternity, but that doesn't seem realistic. So there's two pieces that I was looking for for their color on. First, the component of the growth that you think is due just to the reopening of the economies worldwide in 21 versus 20, and then, and then secondly, it seems like consumer, there's an opportunity for that to grow in 22 versus 21. I'm wondering if you could come in on that as well.
We'd like to put that into our models for eternity, but that doesn't seem realistic.
There's two pieces that I was looking for further color on.
First the component of the growth that you think is due just to the reopening of the economies worldwide in 'twenty, one versus 'twenty and then and then secondly.
It seems like consumer there is an opportunity for that to grow in 'twenty two versus 21 wondering if you can comment on that as well.
Yeah.
Speaker 3: You know, the first thing I'm gonna say to you is...
You know the first couple of minutes.
Hey to you is.
Speaker 3: which I've said before, we each have our hell to live in. I certainly got mine. And you've got yours too, so I can only do so much. You get your hell. And...
Which I've said before.
We each have our held to live in I certainly got mine.
And you've got yours too so I can only do so.
Yeah.
And.
Speaker 3: You have to divine, Oracle, what you think. Look.
You have to divide Oracle, what you think.
Look.
Speaker 3: i can't give you i i don't have in my head none of us sitting here right now having our head or actually would be able to guess with any precision um... how much of the growth was due to uh... economic activity re-opening except as we look at exposure change and that's not we don't have a good handle on that outside the u-s with precision um...
I can't give you I don't have in my head none of US sitting here right now have in our head.
Or or actually would be able to guess with any precision.
How much of the growth was due to.
Economic activity reopening accept as we look at exposure change and that's not we don't have a good handle on that outside the U S with precision.
Speaker 3: and you know on one hand. But the vast, vast majority of our growth was
And you know on one hand, but the vast vast majority of our growth.
It was market share.
Right.
Speaker 3: And that's just all there is to it.
And.
That's just all there is to it.
Speaker 3: And, you know, Chubb is firing on all cylinders that way, and we are a dominant competitor to reckon with across geographies and portfolios.
And.
Chubb is firing on all cylinders that way.
We are a dominant competitor to reconcile reckoned with.
Across <unk>.
<unk> fees portfolio segments.
I get to the consumer business the consumer business is going to continue in my judgment to improve.
Speaker 3: The consumer business is going to continue in my judgment to improve.
Speaker 3: as the year goes along. And I tried to give you some color of signs of that that we see. Travel is picking up in most of the regions of the world. Consumer spending and financing.
As the year goes along and I tried to give you some color of signs of that that we see travel is picking up and most of the regions of the world consumer spending and financing.
Speaker 3: activities are returning. Purchases are returning. I mean, we're one of the, we're the largest cell phone insurer in Europe , from what we know, and growing quickly in other parts of the world, as an example, and we see that beginning to recover and do better as people go to stores to buy cell phones.
Activities are returning.
Purchases are returning I mean, one of the.
We're the largest cell phone insurer in Europe from what we know and and.
And growing quickly in other parts of the World as an example, we see that beginning to recover and do better as people go to stores to buy cellphones.
Speaker 3: but I can't predict with any precision because there's a certain volatility to it. So how it's gonna move quarter by quarter, I can't predict that to you. But what I can tell you is, in everything we see on all of our planet,
But I can't predict with any precision because there is a certain volatility to it so how it's going to move quarter by quarter Hum.
I can't predict that to you.
But what I can tell you is in all everything we see in all of our planning.
Speaker 3: And then I look at all the new partnerships we put on and continue to put on that open up further strength to it. Consumer Lions is going to be returned as a growth engine as we go foe.
And then I look at all the new partnerships, we've put on and continue to put on that open up further strength to whet consumer lines is going to be returned as a growth engine as we go forward.
Speaker 3: And what that level is, I can't predict with precision.
On what that level is I can't predict with precision.
Speaker 5: And the second question would be on inflation. And I know you've commented on it, well, in your opening comments and then improve these calls, but it certainly seems to be consuming a lot of oxygen on conference calls, especially in the personal auto space. And...
Got it.
The second question would be on inflation and I know you've commented on it in your opening comments and then in previous calls, but it certainly seems to be consuming a lot of oxygen on conference calls, especially.
And the personal auto space and.
Whether it's wage inflation for employees.
Repair cost inflation, you mentioned housing.
Inflation trends and your your home business.
What's your when do you think about this in 'twenty, two and 'twenty three.
Maybe give us some additional color around your interpretation of what youre seeing in the marketplace and its impact on Chubb.
You know we.
It's interesting.
Speaker 3: I'll give you a comment on short tail and long tail and that's why I also said
I'll give you a comment on short tail and long tail and that's why I also said.
Speaker 3: It's not the loss environment is hardly benign. And then throw into that.
It's not the loss environment is hardly benign.
And then throw into that.
You have inflation, yes.
Social inflation.
Or.
Speaker 3: as you know and I'm using that word though I think it's too blunt instrument a word and I disaggregated but it's casualty related.
As you know and I'm using that word, though I think it's too blunt instrument, a word tonight disaggregated, but it's casualty related.
You have.
Natural cat and climate change.
Speaker 3: that is causing loss inflation.
That is causing loss inflation.
Speaker 3: modeled and non-modeled on the cat side on the property side of the business as well. And you have Cyber which is a growing exposure in a very hostile environment and that the industry.
<unk> modeled and non modeled on the cat side on the property side of the business as well.
Ciber.
Which is a growing exposure.
They had a very hostile environment.
The industry.
Has to continue to come to grips with.
Speaker 3: A job I feel good that we're managing and vigilant. And all of our management and vigilance turns into action and continues.
A job I feel good that we're on.
We're managing.
And.
And vigilant.
And all of our management and vigilance.
Turns into action.
<unk> action.
Because otherwise, it's just a bunch of talk.
Ed.
And I feel.
Speaker 3: good about God in our businesses. When I look at...
Good about that and or businesses when I look at.
Speaker 3: inflation the way you're asking it. When I look...
Inflation the way you're asking it.
When I look at short tail.
Speaker 3: It shows up in homeowners. It's not showing up to the same degree in agriculture.
It shows up in homeowners, it's not showing up to the same degree in aggregate.
Speaker 3: commercial property on the other hand.
In commercial.
And commercial property.
On the other hand, we see.
Speaker 3: inflation, that shows up in severity of...
Inflation in some of that shows up in severity of loss.
Speaker 3: And on the other hand, we've seen benefits from frequency of loss, X-Cat. And some of that is COVID-related.
And on the other hand, we've seen benefits from frequency of loss.
Scott and some of that is COVID-19 related et cetera.
Speaker 3: We have in our own praises.
We have.
In our own pricing.
Speaker 3: So I gave you a loss cost number that is the observable inflation we see.
So I gave you a loss cost number that is the observable.
Inflation, we see today, but.
Speaker 3: but we do anticipate and have been anticipating that of course what you see
But we do anticipate and have been anticipating that of course, what you see.
Speaker 3: Generally and general inflation will find its way more into commercial property and we have considered that in how we price.
Generally in general inflation will find its way more.
Into commercial property.
And we have considered that and.
And how we price and how we reserve claims.
The combined number two.
Speaker 3: In casualty, on the casualty side, severity in a number of classes continues to increase.
In casualty on the casualty side.
Severity and a number of classes continues to increase.
Speaker 3: and on the other hand you have had the benefit of reduction
And on the other hand, you have had the benefit.
<unk> of reduction.
From.
Speaker 3: from free and frequency due to COVID in certain classes of this.
From free in frequency due to COVID-19 and certain classes of business.
Speaker 3: We think that is, it's obvious, the amount of claims per dollar of exposure over time is going to revert to the mean unless something so fundamental in society is changed and that's nothing we can say.
We think that that is it's obvious.
Hum.
The amount of claims per exposure Dol.
Per dollar of exposure.
Over time is going to revert to the mean.
Unless something so fundamental in society has changed and that's nothing we can see.
Speaker 3: And so we continue to recognize that in our pricing and reserves because it's a timing question.
And so we continue to recognize that in our pricing and reserves because it's a timing question.
Sure.
Speaker 5: And there, I think I gave you a mouthful, Greg, and hopefully. You did. The other piece would just be on compensation for employees for seeing, you know, that's being reported that there's inflation pressures there. I'm just curious on your comment on that.
And there I think I gave you a mouthful, Greg and you did hopefully.
Yep.
The other piece would just be on compensation for employees, we're seeing.
That's being reported that there's inflation pressures there I'm just curious on your comment on that.
Speaker 3: Yeah, look, we're we're of the marketplace and of the world and we're competing for talent and I want the best and brightest to to work here and it's a marketplace for that. And certainly, you know, compensation is one of the drivers also culture.
Yeah.
Look we're wary of the marketplace in the world and we're competing for talent I don't want the best and brightest to work here and it's a marketplace for that.
And certainly you know compensation is one of the drivers also culture.
Hum.
Speaker 3: and working for a winner, and a place that gives you opportunity is also compelling to the kind of person we want to attract. But we have wage inflation, and no different than the kind of inflation others are talking about in aggregate. You know, I see it in the 3.5%, 4% range.
And working for a winter.
A place that gives you opportunity is also compelling.
To the kind of person we want to attract but we've had we have wage inflation no different than the kind of inflation others are talking about in aggregate you know I see it in the three and a half 4% range.
Okay.
Thank you.
Speaker 1: And we'll move on to our next question from David McMadden with Evercore ISI, please go ahead.
And we'll move onto our next question from David Mcmahon with Evercore ISI. Please go ahead.
Speaker 5: Thanks. Good morning. Just a question on the Hawaii tie. Good to see you guys taking your ownership stake or put an agreement in place to take your stake up to 86%. How should we think about the capital that will be deployed in that if it does get approved in 2022?
Okay.
Thanks.
Hi, David Good morning, just a question on the <unk> good to see.
You guys are taking your ownership stake or put an agreement in place to take your stake up to 86%.
How should we think about the capital that will be deployed in that if.
If it if it does get approved in 2022.
Okay.
Speaker 3: You know, first of all, let's keep in mind, and you said it right, that we have agreements in place. It does require regulatory approval. That is not a quick process in China. And so we...
You know.
First of all.
That's.
Keep in mind.
And you said it right.
We have agreements in place.
It does.
Require regulatory approval.
That is not a quick process in China.
And.
It's always fraught with sensitivities.
And I can't predict.
The geopolitical.
But I feel good about receiving approvals.
There's a lot of goodwill towards us.
In terms of.
Capital.
Speaker 3: What do you mean? How much have we spent to purchase Watai? Or what do you ask?
What do you mean, how much have we spent to purchase what type or what are you asking me.
Speaker 3: Yeah, is it the price based on the initial deal that you guys struck in 2019 and we can just sort of use that as a guideline or is it something different than that? Each tranche is different.
Yeah. It is it is it is the price based on.
The initial deal that you guys struck in 2019, and we can just sort of use that.
As a as a guideline or or is it something different than that.
No each tranche is different.
I didnt negotiate each shareholder differently.
What do you got it.
Speaker 5: Yeah, and I guess, okay, so I guess that's still TBD and depends on each tranche.
Yeah, and I guess, okay. So I guess, that's still TBD and it depends on each tranche.
I guess, yes, I guess, we'll just wait and see there.
Speaker 3: It does and we'll update you more later in the year about what tie as we get closer to approvals and all that. We'll give you more information.
It does and we will update you more later in the year about what Ty.
As we got closer to approvals and all of that will give you more information.
Speaker 5: Okay, great. And then, you know, maybe, you know, there's been a lot of talk on inflation in this call. And I just wanted to just ask a question on the North America personal lines, where the current accident year loss ratio had second straight quarter, where it was under 51%. Was there anything one-off?
Okay great.
And then.
Yes, maybe yeah theres been a lot of talk on inflation in this call and I just wanted to just ask a question on North America personal lines.
Where the current accident year loss ratio had second straight quarter, where it was under a 51%.
Was there anything one off.
Speaker 5: in those results or in specifically in the quarters results like non-CAT weather, light non-CAT weather, or is that representative of a sustainable level just as a result of some of the actions that you've taken there over the past year or so?
And those results are in specifically in the quarter's results.
Like non cat weather like non cat weather or is that representative of a sustainable level.
Just as a result of some of the actions that you've taken there over the past year or so.
Yeah, and so let's.
Speaker 3: You're focused on the current accident, your ex-cat, in that comment, right, in that question? That's right.
You're focused on the current accident year ex cat and that comment right in that question that's right.
Speaker 3: Okay, um, you know, look, you, you, you.
Okay.
You know look you you you.
Set it right on one hand.
And but let's just extend the thought a little bit we've taken much rate in portfolio underwriting action.
Speaker 3: And but let's just extend the thought a little bit. We've taken much rate and portfolio underwriting action over the years.
Over the past few years.
Speaker 3: And that includes much more sophisticated pricing.
And that includes much more sophisticated pricing capability.
Speaker 3: And 21, you know, they'll look at the quarter, look at the year, is an excellent result.
And in 'twenty, one get they'll look at the quarter and look at the year is an excellent result.
Speaker 3: And I'm not going to provide forward guidance.
And I'm not going to provide forward guidance.
Speaker 3: As you know, but we do expect a combination
As you know, but we do expect a combination.
Speaker 3: And so it's really a combination of continued benefit from our actions, but coupled with some reversion to the meat.
And so it's really a combination of continued benefit from our actions.
Coupled with some reversion to the mean.
Speaker 3: given likely beneficial impacts from frequency due to COVID in 21.
Given likely beneficial impacts from frequency due to COVID-19 in 'twenty one.
And I think that answers your question for you.
Yes. It did thank you.
Youre welcome.
Speaker 1: Now we'll move on to our next question from Paul Newsom with Piper Sandler. Please go ahead.
And we'll move on to our next question from Paul Newsome with Piper Sandler. Please go ahead.
Speaker 11: Good morning. I'll be right to the corner. I was hoping to ask a big picture question. Retentions by virtually every company I cover are still at a credible high.
Good morning, congrats on the quarter.
I was hoping to ask.
Big picture question.
Retention.
Virtually every company I cover are still at incredible highs.
Speaker 11: which is unusual for a hard market. But the child is taken share. And the child is taken share.
Which is unusual for a hard market, but chubb has taken share.
Speaker 11: Where do you think just broadly speaking to the kinds of companies that drivers it's taken share from them?
Where where do you think just broadly speaking the kinds of companies that Chubb is taking share from them.
Speaker 12: It may be more focused on North America as we I know that a little bit better But I'm just curious as to where you think you're having the most effectiveness from a competitive perspective Warren
And maybe more focus on North America, but I know that a little bit better, but I'm just curious as to where you think you're having the most.
Factoring this from a competitive perspective.
We're in.
Equal opportunity competitor.
We're <unk>.
Taking share.
I have been increasing share.
Speaker 3: And, you know, in particular, we're increasing our ratings. That's what I care about. Across the board, it's been in most all product lines. It's been most all customers.
And you know in particular, we're increasing our writings, that's what I care about.
Across the board.
It's been in.
Most all product lines.
It's been.
Most all customer segments.
Most all geographies.
North America and internationally.
And.
No it's not.
Speaker 3: It's a combination. And remember, when you're looking at high retention rates, and that's why I gave you two numbers, well, it's pretty easy.
It's a combination and remember when youre looking at high retention rates and that's why I gave you two numbers.
Well.
It's pretty easy to look at a high retention rate.
Speaker 3: uh... when the level of on a premium basis when the level of rate increases are running as they are
When the level of on a premium basis when the level of rate increases are running as they are.
And so.
Speaker 3: You get that as a financial number, but it doesn't really tell you on an operate.
You get that as a.
As a financial number.
Doesn't really tell you on an operating.
Speaker 3: the operating answer. That's more based on unit retention.
The operating answer that's more based on unit retention.
Speaker 3: And I gave you that, which is very high. So you probably want to be poking around on that book.
And I gave you that which is very high so you probably wanted.
The poking around on that.
And.
Speaker 3: But we have, we came into this market.
But we have we.
We came into this market.
Speaker 3: with a clear mind, knowing our mind, knowing...
With a clear mind, knowing or mind knowing.
Speaker 3: our sense of risk appetite pricing requirements.
Our sense of risk appetite pricing.
Pricing requirements.
Speaker 3: and across segments, across geographies, and we were ready to jump off the mark. And when we could see. And we were ready to jump off the mark.
And across segments across geographies.
And.
We were ready to jump off the Mark.
And when we could see.
That.
It was conditions that were favorable.
Speaker 3: to our view of risk adjusted return and that's all we've executed on. And we're doing it, it relawed from the
So our view of risk adjusted return and that's all we've executed on.
And we're doing it relentlessly.
Covid be damned.
Speaker 3: Great. The same question. The job has been present in the marketplace.
Great.
Second question <unk> has been present in the market place.
Speaker 3: We win all the time or not is not a question, but we are present
No question do we went all the time or not is not a question, but we are present.
Speaker 3: It's been a good year. That's no question about it. Um, and then eight thoughts on the current environment. Um, again, you know, with commercial insurance, um, margins, improving as much for most insurers, I think. Um, do you think there's any change in what you think the, the sellers will be willing to sell like the environment in general? I'm sorry. I think pipeline. Mm-hmm. Yeah. You didn't come through really clearly to me there. Can you just repeat that?
It's been a good year, there's no question about it.
But M&A thoughts.
On the current environment.
Jim.
Commercial insurance.
Margins improving as much fruit for most insurers I think.
<unk>.
Do you think there's any change in what you think the sellers will be willing to sell it.
Jim Im sorry, Tom got a big pipeline mhm.
You didn't come through really clearly to me there can you just repeat that.
Speaker 11: So I'm just asking about the M&A environment and what you think is the current situation in the context of that commercial insurance, for example, or generally seen some better margins. And I would imagine that means the seller is less willing to sell that every hard market's different.
Joe I was just asking about the M&A environment and what you think is the current situation.
In the context of that.
Commercial insurance for example are generally seeing some better margins I would imagine that means the sellers are.
Less willing to sell but.
Every every hard market is different.
Speaker 3: Yeah, um, I don't know. I'm pretty at rest at the moment and um, um,
Yeah.
I don't know im pretty at rest at the moment.
Good.
Speaker 3: And, you know, I don't notice a lot of activity out there at the moment.
And.
I don't notice a lot of activity out there at the moment.
Speaker 12: This is a great time to grow and we've made a couple of moves that I'm very focused on.
This is a great time to grow in.
We've made a couple of moves that that.
Very focused on.
And of course, they doomed.
Absolutely. Thank you.
Speaker 1: We'll take our next question from Tracy Bengege from Barclays. Please go ahead.
We'll take our next question from Tracy <unk> from Barclays. Please go ahead.
Speaker 13: Thank you. Just to offer another question on a lot, Ty, congrats on your progress so far. I'm wondering if you could share with us early thoughts on what you could do as a majority owner in terms of having an immediate impact and what your vision is over the long term. Yeah.
Thank you just another question on what Ty Congrats on your progress so far I'm wondering if you could share with US early thoughts on what you could do as a majority owner in terms of having an immediate impact and what your vision is over the long term.
Yeah.
Tracy I don't.
Speaker 12: I don't see it as really an immediate impact. I don't think of it that way. This is a very rare asset.
I don't see it as really an immediate impact.
I don't think of it that way.
This is a.
Very rare.
Asset.
For a foreign or to be able to.
Purchase.
It has.
Speaker 3: A lot of potential with it. When you think about it's non-life, it's life.
A lot of potential with it when you think about.
It's non life.
It's life.
Its asset management.
Mutual funds.
Retail and institutional.
Speaker 3: have licenses to manage pension
The licenses to manage.
Pension money.
Speaker 3: have a license to manage insurance companies assets. It has 600 offices.
Have a license to manage insurance company's assets.
It has 600 offices.
Throughout the provinces.
It's.
Reasonably small.
Speaker 3: billion and a quarter billion and a half of pnc premium about a billion of life premium with you know now thirty five forty thousand agents the growth potential if you believe which I do the china will continue
<unk> billion in a quarter billion, an alpha of P&C premium about $1 billion of life premium with.
Now 35 to 40000 agents.
The growth potential if you believe.
Which I do.
The China.
We'll continue.
Should grow.
And.
We will continue to.
Merge though it won't be in a straight line.
But that.
That as a society and the size and scale.
Speaker 3: that as a society and the size and scale.
Speaker 3: It requires a much larger insurance and financial services industry, and requires much greater private sector. Part
It requires a much larger insurance and financial services industry.
Requires much greater private sector.
Dissipation.
Speaker 12: can't do it in a state-controlled manner or just won't sustain the kind of growth that it requires. And then over time, China moves to the left, it moves back to the center a little more to the right. That will occur. And then when I look at why-
Can't do it.
State controlled manner, or just won't sustain the kind of growth that it requires and that over time, China moves to the left it moves back to the center a little more to the right.
That will occur.
And then when I look at what Ty itself.
Speaker 3: It's it's potential within any of its businesses is huge, but it takes
It's it's potential within any of its businesses.
Is huge.
But it takes time.
It takes time to two.
Two.
Speaker 3: Effect strategy, train people, implement strategy, and be patient that you take risk.
Affect strategy.
Trained people.
Implement strategy and be patient that you take risk.
Speaker 3: when you can get adequately paid and you don't you don't break discipline um... all of
When you can get adequately paid and you don't you don't break discipline.
All of that.
Is in front of us.
Speaker 3: And I look at it over a five to seven year time horizon, and, you know,
And I look at it over a five to seven year time horizon.
And you know it's the.
Speaker 3: It's one of the next great peaks for Chubb to climb.
It's one of the next great peaks for Chubb decline.
And we will.
Speaker 13: That was great color. I realized you've been asked a number of questions on excess capital, and there's always complexities like F&P capital model. I have my own views. I published that. I know you have featured capital commitments like signal a lot. Ty maybe an easier question to ask. And you've been asked this before. Just looking at the fourth quarter, RLE, could you just remind us this quarter how many points you would attribute to excess capital? I know last quarter, you said, one and a half points.
That was great color.
Realize you've been asked a number of questions on excess capital and there's always complexities.
Capital model I have my own views I publish that I know you have future capital commitments like Cigna <unk>, maybe an easier question to ask and you've been asked this before just looking at the fourth quarter.
Could you just remind us this quarter, how many points you would attribute to excess capital I know last quarter, you said one five points.
It's about a point and a half.
Yeah.
Speaker 14: Got it. Thank you.
Got it thank you.
You got it.
Speaker 1: And we'll go ahead and take our next question from Alex Scott with Goldman Sachs. Please go ahead.
Yes.
And we will go ahead and take our next question from Alex Scott with Goldman Sachs. Please go ahead.
Speaker 15: Hi, good morning. First one I had is just on the paid claims. I heard the paid to occurred ratios or reference. Today, I just thought I'd ask if you can frame for us how much if it all paid claims are still coming in below where they would normally be in a non-pandemic environment and over what time period do you expect that to normalize?
Hi, Good morning, first one I had is just on the paid claims.
I heard the paid to incurred ratios that are referenced today I just thought I'd ask if you can.
And a frame for us how much if at all paid claims are still kind of coming in below where they would normally be in a non non pandemic environment and over what time you take.
Time period, do you expect that to normalize.
No we're not.
We're not going into any detail like that.
Speaker 15: Got it. Okay. And then maybe a different question on the signal business. Can you just give it an update on the time and a closing? I know you mentioned first half. I think there's a series of countries with approvals. And if there's any update to you thinking on earnings contribution, and there's any sort of lingering COVID impacts that to think about, is that comes online?
Got it Okay and then.
Maybe different question on the Cigna business can you just give an update on the timing of closing I know you mentioned first half I think there's a series of countries with approvals in.
If there's any update to your thinking on earnings contribution.
Does any sort of lingering COVID-19 impacts to think about it as that comes online.
No I don't see I'm not.
Speaker 3: Not that I notice some lingering COVID impact.
Not that I notice some lingering COVID-19 impacts.
And.
Speaker 12: Timing is going to be in the first half of the year. That's as far as we're going to pen it. I will update you a bit more when we close on an updated view.
Timing is going to be in the first half of the year that says that's as far as we're going to panic.
And we will update you a bit more when we close on them on.
On an updated view of what we might expect.
Speaker 3: Got it. I'm going to do it prematurely because then I'm speculating and we're not going to
Got it is going to do it immature Lee because then I'm speculating and we're not going to do that.
Speaker 3: The one thing I will tell you is there's not going to be a rolling close. There's going to be one close.
The one thing I will tell you is theres not going to be a rolling close is going to be one close.
Understood.
Thanks.
Speaker 12: That's why the approval thing you're saying is not exactly relevant tangentially so but not in the way you might
That's why we will go ahead approval.
We're saying.
It is not exactly relevant.
Tangentially, so but not in the way you might be thinking.
Got it alright, thank you.
Speaker 1: And we'll go ahead and take our last question from Ryan and Tune us from Adonimus Research. Please go ahead.
You're welcome.
And we'll go ahead and take our last last question from Ryan Tunis from Autonomous Research. Please go ahead.
Hey, Thanks, just I guess, one more follow up on one why tie.
And I guess I was just kind of thinking and a lot of the countries. You're in you really understand the tort environment underwriting environment, the legal environment risks like that.
How do you feel about right.
Insurance contracts.
Speaker 11: things like that, tort law in China, rather than some of the other places you're operating, and is it mostly property coverage at this juncture and non-life, or is there casualty too?
Things like that tort law in China.
Relative to some of the other places you are operating in is it mostly property coverage at this juncture in non life reserve casualty too.
Well.
Speaker 3: you know every country and if you ask me the
You know every country I mean, if you ask me the.
The <unk>.
Speaker 3: my confidence in the rule of law globally.
My confidence in the rule of law globally.
Well.
Speaker 3: There's a wide spectrum of variation among all the countries.
There's a wide spectrum of variation.
Among all the countries.
Speaker 3: world, including starting right here in the United States.
Over the world, including starting right here in the United States.
Speaker 3: where people legally torture the contract to death, forgetting the intent.
Were people legally torture the contract to death forgetting the.
<unk>.
The intent.
Coverage.
Speaker 3: So, you know, I wouldn't throw a stone at China on that basis, and I'd say that China fits right into the spectrum of countries that way. We've been doing business there. I've been doing business there for 30 years, and the company's been doing business there for 20 years now. So we know something about it. With that said,
So you know I wouldn't throw a stone in China on that basis, and I'd say the China.
<unk> fits right into the the spectrum of countries that way.
We've been doing business there.
I've been doing business there for 30 years and the company has been doing business there for <unk>.
20 years now so we know something about it.
With that said.
Casualty related coverages.
Speaker 3: No different than the court system in China and commercial law
No different than the court system in China.
And commercial law.
Speaker 3: and law around individual responsibility, that is evolving and has been evolving, and those portfolios.
And law around individual responsibility.
That that is evolving and how that's been evolving.
And those portfolios have been.
Growing as well.
Speaker 3: And we underwrite though, understanding the risk environment. It's an example.
And we underwrite though.
You're standing.
The risk environment.
As an example.
But I'll just give you one example.
Just to add a little color to it.
If you can underwrite DNO.
Speaker 12: United States, while you get pretty darn good accounting disclosure. And if I'm going to under write D&O and check...
In the United States, well, you get pretty darn good accounting disclosure.
And if I'm going to underwrite D&O in China.
Buyer Beware theres not.
The same.
Speaker 12: level, nor veracity in many instances to accounting disclosure.
Level nor.
Nor veracity in many instances to accounting disclosure.
We understand that.
Speaker 12: doesn't mean that it's a binary answer either. So I will...
It doesn't mean mean that it's a binary answer either.
So I will leave you with that to chew on Ryan.
Speaker 12: Appreciate it, thanks for the color. I know oftentimes you don't talk a lot about what you're doing with re-insurance, but yeah, I guess I was just curious, getting through the 1-1 renewals, is there a potential that next year you might retain a little bit more and that could be an additional, that premium growth tail. And yeah, things are pretty steady.
I appreciate it thanks for the color.
I know oftentimes you don't talk a lot about what youre doing with reinsurance but.
Yes, I guess I was just curious getting through the one one renewals is there a potential that next year, you might retain a little bit more than that could be an additional net premium growth tailwind.
Things are pretty steady.
Got it.
Such as much thank you.
You got it.
Speaker 1: And with that, that does conclude our question after session. I would now like to turn the call back over to Karen for any closing remarks.
And with that that does conclude our question and answer session I would now like to turn the call back over to Karen for any closing remarks.
Speaker 2: Thanks everyone for your time and attention this morning. We look forward to speaking with you again next quarter. Have a great day.
Thanks, everyone for your time and attention. This morning, we look forward to speaking with you again next quarter have a great day.
Speaker 1: And with that, that does conclude here. Cool. Thank you for participation. You may now disconnect.
Yes.
And with that that does conclude today's call.
Thank you for your participation you may now disconnect.
Okay.
Okay.
[music].
Yes.
[music].
Speaker 16: And.
Speaker 16: Here's my