Q2 2023 Chubb Limited Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by.
As Brent and I will be your conference operator today.
At this time I would like to welcome everyone to the Chubb Limited second quarter 2023 earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If he would like to ask a question at that time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again Press Star one. Thank you. It's now my pleasure to turn today's call over to MS. Karen Beyer, Senior Vice President and director of Investor Relations. Please go ahead.
Thank you and welcome to our June 32023 second 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 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 Chubb.
<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, and then we'll take your questions.
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.
Yes.
Good morning.
As I mentioned on our last call I'm coming to you this quarter from Singapore.
Our regional headquarters for Asia Pacific the outlook in Asia for growth across our businesses commercial P&C as well as consumer non life and life, both short and long term is significant.
The region is simply energizing, we are a large organization of talented executives and a strong diverse capability focused on the execution of a broad set of strategies throughout the region.
As you saw in our press release, we had a simply outstanding quarter. In fact, another record quarter performance with double digit premium revenue and earnings growth as a result of world class P&C underwriting results that produced an 85 four combined ratio.
Record net investment income and a doubling of our life earnings are premium revenue growth was so well spread in broad based driven by outstanding double digit growth in our commercial and consumer P&C businesses in both North America and internationally and over 100%.
Growth in our life business.
Our annualized core operating ROE was 13, eight with a return on tangible equity of 21%.
Core operating income topped $2 billion up 14% or 16 or to have on a per share basis. Both were record results for the first six months, we produced operating earnings of $3 $9 billion or not.
<unk> 32 per share up 13, and $15 eight respectively.
Our underwriting performance resulted from a combination of strong premium growth excellent current accident year marches with a combined ratio of 83, three and favorable prior period reserve development, particularly in North America.
On the investment side record adjusted net investment income of $1 2 billion was up $290 million or 31% over prior year. Our portfolio yield is now 4% versus three two a year ago with our reinvestment rate averaging five.
8% are investment income run rate will continue to grow as we reinvest cash flow at higher rates and compound income without changing our risk profile.
And then life earnings doubled to $254 million driven by our business in Asia, which is overwhelmingly supplemental A&H Peter.
Peter will have more to say about financial items, including cats and prior period development investment income book value in a row.
Now turning to more color around growth pricing and the rate environment consolidated net written premiums for the company increased $16 one in the quarter on a published basis or 16 eight in constant dollars made up of 10, 5% growth in our P&C business globally and almost one.
130% in life premiums global P&C premium growth in the quarter was very well balanced and broad based in fact, our strong this quarter for growth since the third quarter of 21, North America Asia Pac and Europe , all produced double digit growth it's worth noting.
Since 2019, we've grown our commercial P&C business by 50%.
In terms of the commercial P&C rate environment.
Rates and price increases in property and casualty lines were strong in the quarter in both North America and internationally, while financial lines globally continued to soften and we have been diligent about staying on top of loss cost and our positive prior year Reserve development reflects a step.
<unk> conservative approach to reserving.
Beginning with North America commercial premiums, excluding <unk> were up 10, 5%.
<unk> growth was 14% excluding financial lines, while financial lines premiums decreased reflecting a disciplined response to the underwriting environment.
<unk> premium in our E&S business, the Westchester grew 12%, while our major accounts division grew 14 or 11% excluding loss portfolio transfers.
Our middle market Division premiums were up 5% with P&C growth of nine or middle market workers comp book was flat and financial lines premiums in middle market declined about one 5%.
Overall pricing for total North America commercial lines increased 12, 8%, including rate of eight seven and exposure change of three eight pricing for commercial property and casualty excluding financial lines was up 17, 7%.
We are trending lowest costs in North America at six seven and it varies by line in general we are trending loss costs and short tail classes at five eight and long tail, excluding comp loss costs are trending at seven three and our first dollar work.
<unk> comp book is trending at four seven.
Let me provide a bit more color around rate and growth.
Property pricing was up 31, 5% with rates up 22, and exposure change of seven 8% major accounts and E&S property together grew premiums over 40% in the quarter, while middle market property grew 11 four.
Casualty pricing in North America was up 11, three with rates up almost nine and exposure up to two <unk>.
We grew casualty in the quarter, 8%.
And workers' comp, which includes both primary comp in large account risk management pricing was up just over 5%.
With rates up five and exposure up for primary workers' comp premiums declined two 9% in the quarter.
For financial lines, the competitive environment remains aggressive, particularly in D&O and rates have continued to decline in the quarter rates and pricing for North America financial lines in aggregate were down about four 5% our fin lines book shrink three seven.
Renewal retention for our retail commercial businesses was very strong at 98, 5%.
On the consumer side in North America.
Our high net worth net worth personal lines business had another strong quarter with premiums up almost 11%.
Our growth was balanced across a broad range of geographies and our retention was very strong at 104% on a premium basis and over 90% on an account basis.
And our homeowners business, we achieved pricing of 14, 7%, while the homeowners loss cost trend remains steady at 10 and a half.
There is a lot of attention placed on consumer auto experience. So I thought I would comment briefly on it.
For Us auto is a small part of our high net worth business and you may have noticed that we had a modest reserve release in our prior year's reserves for our North America personal lines segment in the quarter. This release was primarily in auto and we are comfortable with our reserves and loss picks.
For auto.
Turning to our international General insurance operations net premiums were up 11% in constant dollar or nine three after FX.
Our international commercial business grew 12% consumer was up nine and a half our international retail business grew over 10, and a half while our London wholesale business grew about 14%.
In our international retail business growth was led by Asia Pacific with premiums up 17, 5%.
Up of commercial lines growth of over 12, and consumer P&C up more than 23% Europe .
Europe produced overall growth of 10, 5% with the continent up more than 12.
We continue to achieve improved rate to exposure across international commercial portfolios, our retail business pricing was up 8.9 with rates up five and exposure change of $3 seven.
While loss costs across our international commercial portfolio are trending at six 6%.
Our international A&H Division had another strong quarter with premiums up over 16% and.
In Asia, our A&H business grew 31% driven by our direct marketing and travel insurance business and the consolidation of Cigna, Thailand.
In the U K and Europe , A&H premiums were up 11 and a half.
And then our international life business, which is almost entirely Asia premiums tripled to over $1 billion.
Since I'm here I wanted to conclude with a bit more about operations in Asia, which have very strong growth and momentum across our businesses, both consumer non life and life and commercial P&C.
We have significant opportunity for growth, both short and long term in a broad variety of markets across a broad range of customers and distribution channels. Our total premium in the region is about $9 billion and well balanced with half non life split 50, 50 consumer and commercial.
And the other half life.
Our overall presence and capabilities in North South East Asia, and Australia are spread across 11 markets with distinct and significant areas of growth opportunity in each.
Across the region, we have a broad range of product capabilities focused on different customer segments with varied and meaningful distribution strengths, including the diverse and growing list of partnerships with financial institutions and E. Commerce leaders that give us access to hundreds of millions of.
Tumors, we have strong digital capabilities and our fast growing digital insurance business encompassing more of our products.
We are the largest direct marketers of insurance, mostly A&H products to consumers in Asia through both non life and life companies that are unifying to offer more products to more customers.
From a macro perspective, the region is so dynamic and fast with a diversity of cultures and large economies.
Some with large young population some with large aging populations that have a different set of needs broadly speaking in Asia. There is an innovation oriented mindset, a strong work ethic and a deep dynamism supply chains and capital flows are growing deeper across the region.
There is a growing infrastructure investment.
As a result regional commerce and trade is growing and becoming more connected between southeast Asia, North Asia, India, and Australia, there was a lot to be optimistic about.
In summary, we are having an outstanding year with record quarterly and first half financial results, we're growing exposure in a thoughtful and balanced way and underwriting conditions are favorable and a lot of areas of our business. We have a lot of momentum heading into the second half and as I look ahead, we are.
Again, we're confident in our ability to continue this pattern of growth in revenue and earnings.
And in turn drive double digit EPS growth I'm going to turn the call over to Peter and then where you can come back and take your questions.
Thank you Evan and good morning.
As you've just heard Chubb delivered another quarter of strong underwriting and investment performance, leading to record results, which generated $2 5 billion of operating cash flow this quarter and $4 8 billion through the first half of the year.
We returned $1 $1 billion of capital to shareholders this quarter, including $724 million in share repurchases at an average price of $197 four per share and $354 million in dividends.
Book value and tangible book value per share, excluding <unk> increased two 2% and three 1% respectively for the quarter and four 3% and six 5% respectively through the first half of the year, reflecting record core operating income net of the capital returned to shareholders.
<unk> earlier.
In addition to the quarterly ROE as Evan just gave you our year to date core operating ROE and return on tangible equity of three two and 22% respectively exceed the target range, even as laid out in the past.
Adjusted net investment income from the quarter was <unk>, two 4 billion or $20 million above the top end of our guidance primarily from higher private equity income.
The increase over last year of 30% was driven by strong cash flow, our accelerated portfolio turnover and higher reinvestment rates.
In the third quarter, we expect adjusted net investment income to rise from $1 billion to $4 billion. This quarter to around 1.2 dollars 7 billion on a recurring basis and to continue to grow from there.
Relative to our invested assets, we continue to tactically execute our portfolio turnover strategy, while maintaining our conservative credit posture.
During the quarter, we reclassified our $8 billion held to maturity portfolio to available for sale to have even more flexibility to put money to work at higher yields. These.
These securities had $397 million after tax of net unrealized losses that reduced book value at the time of the change.
It is important to note that the transfer itself has no economic impact is the underlying securities remained unchanged and are of a very high quality with an average rating of double a.
We will look to sell parts of this portfolio, only where and when we think it makes economic sense and not all of the unrealized loss will become realized.
Turning to our underwriting business the quarter included pre tax catastrophe losses of $400 million principally from weather related events in the U S.
Period development in the quarter and our active businesses was a favorable $260 million pre tax which was split about evenly between short tail and long tail lines and included $146 million for North American commercial and $61 million for overseas General.
Our corporate run off lines had adverse development of $60 million principally related to molestation claim development.
As I noted the PPD in overseas general for the quarter was $61 million versus $173 million last year.
The larger favorable PPD in the quarter last year was concentrated in the 2020 accident year and included favorable development from Covid related economic shutdowns the year to date favorable PPD for overseas General was $204 million comparable to last year's $233 million and 100.
$81 million in 2021, all in short tail lines for these years.
Our paid to incurred ratio for the quarter was 89% or 83% after adjusting for cats in PPD.
Turning to our life segment year over year segment income growth came primarily from the acquisition of Cigna.
Our core operating effective income tax rate was 19% for the quarter, which is at the top end of our guided range of 18% to 19%. We now expect our annual.
Operating effective tax rate for 2023 to be in the range of 18, 5% to 19% excluding the impact of consolidating <unk>.
On July one we completed the acquisition of additional shares of <unk> group, increasing our aggregate ownership to 69, 6%.
We expect the closing of additional shares this quarter, which will bring our ownership up to 83, 2%.
Beginning in Q3, we will consolidate <unk> results within our financials.
We currently estimate consolidation will result in a small amount of accretion to operating income and EPS book value and ROE.
And a modest amount of dilution to tangible book value, which we estimate will recover within the next few quarters how.
However, I would note we are still working through our purchase accounting analysis I will now turn the call back over to Karen.
Thank you at this point, we'll be happy to take your questions.
Yes.
As a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Your first question is from the line of Mike Zaremski with BMO. Your line is open.
Okay, great good morning.
I guess first question would be on the.
Thanks for the commentary on loss trend on the commercial side.
I'd like it's data flattish and get the rate environment.
Accelerated sequentially I'm just curious.
Any context on.
Why the rate environment is it's accelerating if loss costs are kind of staying steady and I know that just for you and does your loss costs also.
It include higher.
Reinsurance cost if you are experiencing higher reinsurance costs. Thanks.
Well.
The rate, it's all baked into it of course, but the rate environment.
Accelerated in property and I think that speaks for itself as you know.
Where it's about.
The loss environment, particularly around CAD and inflation costs in <unk> and.
In property generally.
And reinsurance costs have moved up in property and I think thats a.
In total that's a very rational response and in casualty loss cost trends have been moving higher.
I think it's reflective of.
The trend we've been observing over the last number of years, it's not a new story.
So story.
We're open on top of but I think it's rational.
And you see comp and professional lines I talked about going the other way so.
So I think the market frankly, and the Reacceleration as a as a rational response to the external environment.
And my one follow ups I know you touched on catastrophe losses, they actually looked a bit lighter than at least what the consensus models for a kind of a normal <unk> for for Chubb.
Whereas some other competitors maybe more retail based have have experienced much much higher than and kind of quote unquote normal.
Catastrophe levels any any commentary on your cat load this quarter or was it just.
Yes that was it.
Kind of in line with expectations.
The.
You know.
Cat losses or number in line with.
Particularly with expectations.
It's a.
They're either greater or less than.
You might imagine in any quarter on Europe .
The average annual loss pick you would you would choose for that.
This was a very.
Heavy cat quarter for the industry.
Think most companies have record reported.
Significantly higher.
Cat losses than than average.
I don't think there is.
Any particular magic as to why Chubb's was lower.
We underwrite well we have a good spread of business week we.
We select risk well, but.
That doesn't mean, we choose where.
It translates to we choose where we're tornado is going to land and come down.
If it had moved 10 miles to the east or west.
We could have had greater losses.
It's a variation it has a variability quarter on quarter.
And we.
We had a very good experience this quarter. Thanks.
Thanks for the question.
Your next question is from the line of Euro and Qunar with Jefferies. Your line is open.
Thank you very much good morning, everybody.
I guess my first question just looking at North America.
Our shows underlying loss ratio the improvement there.
Is there a mix component there is that mostly rate over trend can you maybe elaborate on that.
Yes.
The current accident year loss ratio. It reflects the totality of the commercial business. So it's a mix of all the lines right.
Property and casualty rate and price.
<unk> loss cost and that some that is potentially a positive to the ultimate loss ratio margin.
In the case of comp and financial lines.
Right and price.
Lag the selected trends.
And in that case.
The ultimate margin is.
Is potentially shrinking or it's neutral.
And so our loss pick reflects all of that.
We're patient and we lean towards conservatism in our loss picks.
Okay.
And then my second question, just with regards to rate adequacy, particularly in financial lines and property just going into very different directions, we're seeing rates moving in those lines.
Hi.
Are the rates adequate in both of those today.
I think for the business we've written.
Yes, the rates are adequate for our portfolio.
And our loss picks reflect that.
And the kind of combined ratio, we're putting up has a mix of all of that in there and it speaks for itself.
Thanks, so much and good luck with.
Does that make sense to you.
Okay.
Okay.
Your next question is from the line of Greg Peters with Raymond James Your line is open.
Well I think it might be close to what 830 P. M. Your time, so I'm going to say good evening to you and your management team.
Hum.
Thank you very much it is it's a it's about a.
30.
I spend time right.
Okay.
Okay.
Yes.
The first question.
So the first question.
Your prepared comments you spoke about innovation.
Hello.
Specifically in Asia and.
And there's been a lot of rhetoric in the marketplace.
Been ongoing but it seems to have accelerated this year around artificial intelligence.
Large language models general debate.
And.
We obviously closely monitor your expense ratio so.
Maybe you could spend a minute and talk about your perspectives on these very important technology developments and how you think about it.
For your company not only in North America, but on a global basis.
Yeah.
And thanks for that question.
We've been employing AI.
Four.
Quite a number of years now.
Five or six years anyway.
And particularly.
It's algorithmic AI.
Not generalized.
Large language models.
<unk>.
It's employed in the operation side of the business.
To a degree in the underwriting and claim side and the marketing side.
<unk> parts.
Et cetera.
And there've been a lot of.
Experiments.
And.
Use cases.
Prove themselves out but more now.
The stage, where we're <unk>.
Cabling.
And we'll over the next.
Two or three years.
To receive what we think are significant benefits out of that.
Insightful.
And <unk>.
Abilities in underwriting and claims and discrete areas.
And.
The service side of our business.
Where we see cost.
And lower level work that can come out.
Or improve in its accuracy.
All of that is.
Things, we know and we.
We're scaling the tools.
At the same time.
As you can imagine.
We.
Our onto large language models.
The potential benefit that.
It will ultimately bring.
Beyond algorithmic.
Particularly in underwriting.
And claims and the ability to work with.
Either.
Replace work that is done or make it more accurate or work alongside underwriters.
It's not a silver bullet and we're doing this on a global basis.
Some regions more than marketing some more more focused on portfolio underwriting.
Whatever anyone's doing spreads to the other.
And it's just where we start on one and end with another.
The.
The generalized and large language is going to be iterative.
It'll be over time.
Do you think about insurance.
The parameterization risk.
Or factor around what we do.
How many lines of business the exposures the geographies you cross and so by its nature.
It's going to be iterative and take longer than some of the breathless.
Rhetoric that I here.
But we're focused on that.
Part of what a modern insurance company is going to look like.
And is looking like.
Okay.
I feel like we could probably have a long conversation on that topic.
Appreciate the comments I need to pivot.
As my follow up question to the reinsurance business.
<unk>.
We'll talk about it.
Okay.
Let me know when you're available.
Okay.
Tomorrow from Robert.
Go ahead.
Okay.
I don't know if I can make it there tomorrow, but.
Okay.
Reinsurance.
No.
When you look at what's going on in the market and I know you are very close to it it seems like especially in property cat seems like these these conditions some of the hardest market conditions, we've experienced in 20 plus years and yet if I look at your global reinsurance business and look at the growth.
It seems like.
It seems like you're not really growing your exposures just growing their rate.
Maybe you could provide some perspective on on how youre looking at the reinsurance business in the context and maybe your perspective as the rates are inadequate.
Give you a perspective on your on the reinsurance market would be helpful.
Yes.
Look I don't disagree with anything you said.
<unk>.
But you'll notice at the same time.
Our property insurance business is growing like 40% right now.
And that's a combination of.
Rate and exposure.
Some of that exposure is not premium by the way.
Its structural changes.
<unk>.
And its unit count is a lot of exposure growing.
And in property Cat.
Growing more exposure as we grow that and it's growing at in the tail.
When we look at the risk reward and by the way the property insurance as we grow it across geographies.
Is also growing exposure in the tail.
We prefer.
To put our emphasis on the property insurance business and the spread of risk, we're getting we've never seen better pricing.
And better risk adjusted.
Returns that we see right now.
In.
Large account E&S middle market in a variety of geographies across the globe.
And.
We're putting more emphasis on that.
And we are on property cat.
Thank the risk adjusted returns.
As favorable.
CIT plain and simple.
Yes.
Thanks for the answers.
Got it.
Okay.
Your next question is from the line of David Mcmahon with Evercore ISI. Your line is open.
Good morning, David.
Hey, good morning, Evan or good evening for you Evan.
Just wanted to ask I guess sort of related to the last question just about.
Premium growth in North American commercial and the difference between the 14% growth excluding financial lines and I think you said it was about 18% increase in price excluding financial lines, maybe you could just talk about the drivers of that disconnect.
Yes.
You know there is a lot of chatter ive.
<unk> about that.
And the last.
First number of months.
It's actually pretty straightforward.
The majority of the difference between the two numbers.
As a result of structural changes.
It's.
Included.
In our price.
Is.
The impact of things like deductible changes in attachment points, where.
Where we can put a value on it.
And so it acts like rate or.
Or it acts like exposure.
It doesn't add to premium.
Necessarily that portion of it.
But it adds to potential margin or another way of saying it it supports loss cost.
And the point of talking about rate and exposure that way rather than by the way putting exposure over into loss ratio and saying here's the loss ratio trend, which is different than loss cost trend is to give a sense about that and so here is the price we get.
The rate plus the trend.
Yet a portion of the rate depends on line of business or of the exposure is actually not premium.
And as I said it acts like.
Like premium, but it's not premium and <unk>.
So that's the difference between the two.
Hey, Doug.
Yeah, yeah that that makes sense.
<unk>.
And I guess, just maybe just a quick follow up on that any way to size I guess terms and condition changes versus I guess, the premium increase change or if I were to look at the rate increase.
And right or it's in exposure, we look at it but we don't go that far and start disclosing that.
But what you got him know is look at our overall premium growth our retention rates that we give you here, it's very healthy and then what you can see is Wow. This is the amount of rate.
And price that.
Goes against loss cost. So you can get a transparency around that you don't add the two.
The gather they're not comparable that way, they're answering two different questions.
Got it okay, yeah that makes sense I appreciate that that's helpful.
Welcome.
And then I guess, just maybe on the North America commercial.
Current accident year loss ratio ex cat.
Was there.
No the second quarter tends to be.
And LPT heavy LPT quarter.
Was there any of that or or anything else like non cat property losses, either way within the 70 basis points year over year improvement.
Nope.
It's interesting we're kind of looking at each other like.
We havent noticed the second quarter in particular is a <unk> quarter.
Come lumpy through the year.
Great. Thank you.
Youre welcome.
Your next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open.
Hi, Thanks, Good evening oven My first question.
Last quarter you know.
Sticking with North America commercial you had pointed to premium growth for the balance of the year kind of being above kind of seven 6%.
You guys exceeded that margin by a good amount this quarter.
Good good property growth Tom It seems like that was a good driver. There can you just give us a sense of how you think premium growth kind of transpire over the balance of the year relative to your expectations last quarter.
Our lease some feeling pretty good.
I'm feeling good.
Okay I had to try.
My My second question.
We saw.
Great that to a point estimate.
But it.
We're feeling good.
And you saw what I said in the commentary and what I said in the press release that we are.
Going to continue to.
And this sort of pattern.
I'm not putting a number.
Okay. That's helpful. My second question.
We saw.
Share repurchase.
Improve go up this quarter.
I think you guys, obviously had a new authorization and are sitting in a good amount of excess capital.
To read into that number and just how we think about the level of anything new in terms of thinking about the level of capital over time from here.
No we thought we are undervalued.
We think were undervalued were buyers.
Okay got it thanks, Kevin.
Your next.
<unk> is from the line of Ryan Tunis with Autonomous Research Your line is open.
Hey, good evening guys.
The first question.
Hi, Don.
On cyber.
First of all we're exactly things that live in the disclosures is that.
Is that in financial lines as well.
Curious if you can give an update on the size of that book and how youre thinking about that business from a rate adequacy standpoint.
Yes.
Statutorily have seen we write a sizeable book and.
I don't know that we've disclosed the total global premium.
But what.
What I would tell you is we're one of the top.
I don't have the updated numbers, so I want to be careful but we're in the top three of cyber writers, maybe the top two of cyber riders globally.
<unk>.
The business is growing in <unk>.
Certain segments for us, but the overall business is growing.
And.
And the rate environment has leveled off.
Terms and conditions on what we underwrite.
Our form we were first to really leaders to rollout a form that.
Dresses systemic risk to a greater degree and addresses the severity.
Sure.
And ransomware and other one off.
The underwriting we're vigilant about it.
The growth we're growing it the pricing is pretty good.
Most segments there are some segments that need rate and in those areas, we're leaning back a little bit.
That's what I would tell you about cyber.
Got it.
Appreciate the commentary, but the line by line commentary on loss trend, but if I heard you correctly.
You said workers' comp you're trending at around 4%.
<unk>.
About $4 I think I said about four seven for memory.
Okay.
Well, that's I guess, a little bit higher than that.
I would've thought that line was running.
Are you seeing any type of pick up in inflation. There are you putting it differently than you have in.
Yes, Bruce of orders or just.
We've increased it.
In the last.
Earlier in the year there is two things one mindful of medical inflation.
Number two payroll increases.
So you know on one hand that benefits exposure change as we just talked about right and price and on the other hand.
Wages go up and that translates to severity on the indemnity side and so those two things together rationally are going to push up your pick on loss cost in gum.
Yes.
Thank you.
Youre welcome.
Your next question comes from the line of Tracy <unk> with Barclays. Your line is open.
Thank you Greg.
I know your last name.
Thanks.
As you sit right now in Singapore, when you look at your opportunity set how would you rank in terms of capital deployment priority is underwriting capacity given your views of achieving rate adequacy versus acquisitions in emerging markets.
Even be JV.
Yes, I am not.
First of all we have plenty of capital flexibility.
That is not a question we are not constraining organic growth whatsoever.
And I can tell you I would make two comments to you.
We are not on the acquisition Hunt we are focused on there is so much opportunity around what we've got.
Noam strategy around organic growth in Asia, we are just full up its fabulous.
In North America, and other parts of the World, We've got plenty of growth opportunity and that's what we're getting after.
And we've got a great rate environment to take on more exposure in areas like property and we are taking it's not a question of capital to question, if you're willing to take on the volatility.
That goes along with it.
Because it's.
We think we're getting paid well for that and it's a good thing to invest in with shareholder capital.
And that's our priority that's what we're focused on and then you use the word JV.
And.
I read the same article.
Do you know what don't believe what you read.
Okay, Thanks, and I wasn't implying that you don't have.
Strong capital.
I've noticed that you reported $49 million of unfavorable reserve development.
From a spacing claims it's not a large number but im curious what youre seeing right now on Revivor kits.
Based on the work we've done.
Are those charges, reflecting the 11 states, where new statute of limitation reform law went into effect or does the reserves also are flat.
38 States introduced new reform Delta here.
No.
Tracy it's it's more case specific.
The only thing the revival statutes as they open them up does it opens up the top of the funnel.
So more potential losses from years past.
Legacy is going way back events flow into the top of the funnel and then eventually.
Some ripen up some percentage of them ripen into claims and cases.
And ultimately dollars incurred and when we see a liability we are going to reflect it.
A very basic question of the statute of limitations only apply to child abuse or is it more broad based.
Well it depends on the state it varies some have opened it up more broadly and some it's only about most it's only about child abuse.
Got it thank you.
Wait a minute are typically of a colleague who may be correcting me about that now.
No.
Answer was right.
Your next question is from the line of Brian Meredith with UBS. Your line is open hey, good.
The evening Evan.
So even looking at Cotai can it be consolidated here in ownership, increasing life insurance is becoming a pretty meaningful component of your overall earnings mix I think you get north of 10% I'm wondering if maybe you can give us a quick snapshot of what the business mix looks like there how much of savings products versus indemnity products.
Short tail long tail is much of a capital intensive just give us some perspective on what how we should think about that life insurance business.
Yeah.
You know about 80% 90% of the business.
Straight up accident and health business.
Same kind of business, we write on the non life side.
In the life side, you're right a longer duration policy.
And they're all individual policies. So if on the non life side.
<unk> made direct market the same kind of products in there annually renewable and they have a certain lapse rate tool and on the life side I may sell them through agents.
And or through direct marketing and its dread disease in its hospital cash and its cancer.
Its accident insurance and it'll be sold predominantly most of the book we have are our individual policies and they are longer duration, which adds a great stability of long term asset.
And then there is a percentage, but it's a minority percentage of the business, where it's tied to our savings and protection policy, but yet we loaded up with accident and health riders, so youre going to buy a large amount of protection the stuff we love her.
Along side.
A very traditional low low much lower risk savings product, that's either on us on a par basis, where okay. Any any interest rate risk is fundamentally to the customer and we share the upside with them, where it's got extremely low.
Guarantees like in the 1% range or 2% and our whole life policy.
Yes.
Great. That's helpful. Thank you.
The overwhelming majority of this business is risk based accident and health business.
Great. That's really helpful. And then just one more focus I guess on your personal lines business I'm. Just curious could you talk a little bit about what youre seeing happening in the regulatory environment given the level of rate, we've seen going through and like personal auto homeowners are you starting to see any pushback by regulators.
Yes.
It varies by state.
I think it's pretty well known to you it's it's not hidden.
<unk>.
You know.
We are employing where we want to grow exposure.
And we need more flexibility of terms were of rates, we are using E&S to a greater extent.
The tool to be able to take more exposure and do it in a thoughtful way.
<unk> portfolios.
And.
We do that both.
In states where exposure.
Is is concentrated in caught and we're also doing it in states, where the regulatory environment doesn't allow us.
Greater flexibility to be able to actually serve the public's need.
Great. Thank you.
Youre welcome.
Okay.
Your next question is from the line of Meyer Shields with <unk>. Your line is open.
Thanks.
Follow up on Brian's question, if I can is there a specific opportunity.
Core growth in North America personal because of.
Regulatory friction that is leading a number of competitors really pull back.
Wow.
I don't think it's.
Yes on the margin there is that.
What we have.
<unk> strong brand.
And.
Meyer I think.
The recognition of our brand and service all things being equal.
More customers proven.
Our cohort want to bite shop, and then it's a question of.
Price.
In terms and there have been competitors who've been overly competitive in the area.
Think of.
In the past naively, so or for other reasons.
Under priced risk.
And.
We're in a market now I think where there is greater discipline in the business.
That creates opportunity for us.
In addition to the notion of others, who may have gotten it wrong and theyre pulling back.
Now, we don't have an endless appetite and.
And we will shape our portfolio.
But we are using every tool we can to take more risk and more exposure in a balanced way not to become the cat writer of high net worth but the national writer of high net worth balanced.
And to do that.
Full.
And sound way that is enduring.
Okay. That's helpful. And then just a brief question I think I know the yesterday, but the consolidation of lock high impact.
The book value yield.
The investment portfolio.
Two a very minor degree.
Okay perfect. Thanks, so much.
Your next question is from the line of Alex Scott with Goldman Sachs. Your line is open.
First one I had is on.
On casualty in North America.
You all have been fairly vocal about the need for accelerating rate there and I just wanted to get your updated thoughts on.
Is that occurring at the rate you think you needed to for the industry to have adequate pricing and what kind of competitive environment are you seeing there in casualty lines in North America.
Well.
I can't speak for the industry.
Yeah.
I can speak for Chubb.
I like the level of rate, we are securing and the terms and conditions.
Against the various cohorts of casualty we right.
And I think we're I know, we're staying on top of loss development on loss trends and then we reflected in the pricing.
And the terms.
And I had said in previous quarters that I thought.
These lines needed to move.
In fact.
They are.
Got it.
The second question I had is around the casualty reserves I'm sure you see this is a fair amount of chatter around the 2013 to 2019 accident years.
People looking at the loss cost trend.
Longer tail lines in <unk>.
Thinking through should we be confident that those reserves.
I. Appreciate this is probably a bit of an annoying question, but is there is there anything you would add to that discussion tell people think through your confidence in those reserves.
Just in light of the environment.
Well.
Pretty simply I would say this look at our track record.
We've been doing this for how long how many decades through all kinds of cycles.
And.
And look at our reserve policy and look into our reserving track record.
And by the way Peter just made some expansive comments around prior period reserve development, which is simply a reflection of strength of reserve.
We are quite confident.
Uncomfortable with the level of our reserves.
Thanks.
Youre welcome.
At this time I would like to turn today's call back over to Karen Beyer.
Thank you everyone for joining us today do you have any follow up questions, we'll be around to take your calls thank you.
Ladies and gentlemen, thank you for participating. This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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