Q3 2023 Chubb Limited Earnings Call

Ladies and gentlemen, thank you for standing by.

My name is Brent and I will be your conference operator today.

At this time I would like to welcome everyone to the Chubb Limited third quarter 2023 earnings 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.

He would like to ask a question.

Please press star followed by the number one on your telephone keypad, if he would like to withdraw your question again press Star one.

It is now my pleasure to turn today's call.

MS Karen Beyer, Senior Vice President and director of Investor Relations Ma'am. Please go ahead.

Thank you and welcome everyone to our September 32023 third quarter earnings Conference call. Our report today will contain forward looking statements, including statements relating to company performance pricing and business mix growth.

Unity, 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 <unk> com.

Just your thoughts <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 statements.

And now I'd like to introduce our speakers first we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Peter <unk>, Our Chief Financial Officer, then we'll take your questions also with us to assist with your questions. Today are several members of our management team.

Now, it's my pleasure to turn the call over to Evan.

Good morning.

As you saw from the numbers, we had another outstanding quarter.

Our performance was marked by double digit global P&C premium growth.

World Class P&C underwriting results, including an 88 four combined ratio.

Record net investment income.

Strong life operating income all leading to record operating earnings per share.

Once again, our premium revenue growth was well spread and broad based with excellent results in our commercial and consumer businesses in both our North American and international operations.

Our annualized core operating ROE was 13% with a return on tangible equity of 21 chip.

Core operating income was $4 95 per share was up 58% over prior year.

For the first nine months, we have produced record operating income of $5 9 billion or $14 27 per share up 27, 5%.

In the quarter, our underwriting performance was driven by a combination of strong earned premium growth.

Excellent underwriting margins, which included an ex cat current accident year combined ratio of $84 three were 83, excluding agriculture.

Favorable prior period reserve development in both North America and overseas General.

And relatively average cat losses compared to our expected.

P&C underwriting income of $1 3 billion was up almost 84%.

Our positive reserve development speaks to the strength of our reserves and our reasonably cautious or conservative approach to reserving.

So I've said for years, we generally strive to recognize bad news early and.

They are slow to recognize good news.

We're in a balance sheet business our loss reserves is the most important part of the liability side of our balance sheet.

On the asset side record adjusted net investment income of $1 4 billion was up $361 million or 34% over prior year.

Our portfolio yield was four 1% at the end of the third quarter versus three four a year ago.

While our reinvestment rate is currently operating six 2%.

We have very strong liquidity and our investment income run rate will continue to grow as we reinvest our cash flow at higher rates.

Our growing income without a change to our invested asset risk profile.

In the quarter.

We increased our ownership in <unk> group to 69, 6% in our consolidated results, which were accretive to EPS and ROE.

Earlier this month, we closed on additional shares under our ownership stands now at over 72%.

I expect this to increase further and reach between 83% 86%.

A summary of the financial impact of what Ty is provided for you in the earnings release and the financial supplement.

Pedro will have more to say about financial items.

<unk> cats prior period reserve development and investment income book value, our OEM block time.

Now turning to growth pricing and the rate environment.

Consolidated net premiums for the company increased over 9% in the quarter.

<unk> made up of eight for growth in our P&C business globally at about 15% and our life Division.

Global P&C premium growth, which excludes agriculture was 12, 3%.

With commercial lines up total standard half and consumer lines up about <unk>.

In agriculture crop premiums were lower than last year due to the timing of when we recognize them.

Year to date premiums or in fact up modestly.

As to the higher combined ratio in agriculture. This quarter, we simply recognized a quarter earlier than last year. What we think is the likely development for the year based on what we know today about crop conditions and pricing.

In terms of the commercial P&C rate environment.

It's in price increases in property and casualty lines in aggregate remained strong in the quarter in both North America and our international divisions.

While decreases in financial lines in North America continued.

We remain vigilant and diligent about staying on top of loss cost inflation.

Beginning with North America commercial premiums, excluding agriculture, we're up eight 7%.

AMC growth was kind of in a half excluding financial lines, which were up 1%.

Our very large middle market Division had its best quarter of the year with premium growth of 16, 3% and middle market financial lines up one 5%.

Our major accounts and specialty division grew seven 2% with PMC up eight four and financial lines flat.

Overall pricing for total North America commercial increased nine 3% include.

Including rate of five nine and exposure change that acts like rate of three 2%.

Let me provide a bit more color around rates and pricing.

Pricing for commercial property and casualty was up 13, 9%.

Property pricing was up 23% with rates up 16, 6% and exposure change of five and a half.

Casualty pricing in North America was up 11%.

With rates up eight seven and exposure up 2%.

Workers' comp, which includes both primary comp as large account risk management pricing was up five 5% with rates essentially flat and exposure up 6%.

We are trending loss costs in North America at six 7% same as last quarter and again that compares to pricing of 923.

In general, we're trending loss cost and short tailed classes at five 8% and long tail, excluding workers' comp loss costs are trending at seven one.

And our first dollar workers' comp book is trending at four point and sell it.

For financial lines, the underwriting environment remains aggressive, particularly in D&O rates have continued to decline in the quarter rates and pricing for North America financial lines in aggregate were down $4 eight and three eight respectively.

We're trending financial lines loss costs at $4 seven.

Renewal retention for our commercial businesses in North America was 92, seven and our new business grew 14%.

On the consumer side, our high net worth personal lines business added another excellent quarter with premiums up over 95% with strong retention and new business growth in <unk>.

Our homeowners business, we achieved pricing of 15%.

All our selected loss cost trend was similar to last quarter at $10.

Turning to our international General insurance operations net premiums were up about 21, 5% and this includes a seven and a half contribution to growth from the <unk> consolidation.

Our international commercial business grew 17, 5%, while consumer was up 28 four.

In our international retail business growth was broad based with all major regions producing double digit growth.

Latin America led the way this quarter with premiums up 23% made up of commercial lines growth of 16 and consumer up more than 28.

Europe, and Asia Pac had strong quarters with growth of 14, 2% and 10, 2% respectively.

We continue to achieve improved rate to exposure across our international commercial portfolio with pricing up nine 3% rates up $5 seven and exposure change of three four.

Property and casualty lines pricing was up 11 seven with.

With rates up seven 1% and exposure up four 3%.

While financial lines pricing was up two 3%.

Loss cost inflation across our international commercial portfolio remained steady from last quarter.

And being at six 6%.

Within our international consumer our A&H in personal lines divisions, both had strong quarters with premiums up 16, 5% and over 40% respectively.

Personal lines growth in Latin America rebounded sharply with premiums up 43% on the back of growth in our Mexican auto portfolio were taking significant rate actions to reflect the loss cost environment.

In our international life business, which is almost entirely Asia premiums up nearly 20%.

Including the impact of the <unk> consolidation.

Life segment income was up nearly 15% $288 million.

In summary, we had a simply outstanding quarter contributing to outstanding year to date results. We are growing exposure in a thoughtful and balanced way mindful of the risk environment and an underwriting conditions, which are favorable in many areas of our business.

Looking forward, we are confident in our ability to continue growing revenue and operating earnings globally, which in turn drive EPS through the three engines of P&C underwriting income investment income license.

I'm going to turn this call over to Peter and then I'm going to come back and taking the questions.

Thank you Kevin and good morning.

First I want to note that we completed our first quarter with <unk> group as a consolidated subsidiary.

The results of <unk> are reported at 100% within our financials.

With only a certain key metrics reported at the company's 69, 6% ownership interest, including consolidated core operating and net income.

Book, and tangible book value and ROE measures.

Turning to our results chop reached two milestones this quarter.

Method assets reached 130 billion and adjusted net investment income topped $1 4 billion.

Operating cash flow was a record $4 7 billion, reflecting our record investment income and strong premium collections.

During the quarter, Moody's affirmed and moved our outlook from stable to positive and as you know S&P affirmed our group's rating with stable outlook earlier this year.

Our operating ROE on a deploy capital basis is approximately 15, 5% and the related operating return on tangible equity is approximately 27%.

Book value per share, excluding OCI increased two 6% and 7% for the quarter and year to date, respectively, reflecting outstanding results for both periods.

Tangible book value per share, excluding <unk> decreased four 2% for the quarter was seven.

Five percentage points coming from the dilutive impact of consolidating what Ty.

With the consolidation on July one Chubb had additional goodwill and intangibles of $3 5 billion pretax.

In Q3, we've already earned back almost two thirds of that amount and expect to earn back the rest within this current fourth quarter.

<unk> had a modest impact on our results this quarter in line with expectations.

Adding 12, SaaS or two 5% to core operating income per share.

Third of which related to the favorable impact of purchase accounting adjustments in the quarter, which will decline over the next year.

As previously noted adjusted net investment income for the quarter was a record 141 5 billion or $140 million above the top end of our guidance of which $100 million is related to <unk>, which was not included in our prior guidance.

In the fourth quarter, we expect adjusted net investment income to be approximately $1 43, 5% to 145 billion on a recurring basis, including <unk> and to continue to grow from there.

We remain consistent and conservative with our investments with 83% of our fixed income portfolio rated investment grade at an overall average credit rating of AA.

This quarter, we recognized an unrealized loss on our portfolio of $2 2 billion after tax reflecting rising interest rates. We also recognized a modest favorable 18 million recovery of expected credit losses net of an inventory impairment charge in the quarter, which attest to the overall quality of our portfolio.

What type of investment at assets added $12 7 billion gross or $6 4 billion attributable to chop to our investment portfolio.

With over two decades as a strategic partner with <unk>, we have a deep insight into <unk> portfolio and it fits well with our overall conservative approach to investing.

87% of <unk> investment portfolio is fixed income related and is very high quality with an average credit rating of a and with 98, 5% rated investment grade.

Turning to our underwriting business for the quarter, we had pre tax catastrophe losses of $670 million principally from weather related events and wildfires in North America. Okay.

Total catastrophe losses were split, 82% U S and 18% internationally.

Prior period development in the quarter and our active businesses was a favorable $261 million pre tax.

The PPD in our active business. This quarter consisted of $316 million favorable development, the short tail lines and $55 million of unfavorable development in long tail lines.

Our corporate run off lines had adverse development of 61 million principally related to environmental exposures.

Our paid to incurred ratio for the quarter was 73% and was 84% through nine months.

This quarter reflects the impact of strong premium growth on reserves and the timing of our crop insurance payments.

Our core operating effective income tax rate was 18, 8% for the quarter, which is within our guided range of 18, 5% to 19% for this year.

I'll now turn the call back over to Karen.

Thank you at this point, we're happy to take your questions.

At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad.

I would like to withdraw your question again.

Star one. Thank you. Your first question comes from the line of Bob <unk> with Morgan Stanley. Your line is open.

Good morning, Congratulations on the quarter. My first question is actually on our reserving you obviously talked about recognizing bad news first that good news later.

Curious about your thoughts on the recent development European reinsurance I've talked about more about the cautionary view of our U S casualty reserves.

<unk> has been around for a year, but this is clearly something that European reinsurers are talking more about now just given their recent.

Renewed caution so to speak in the U S. Casualty is that are there any adverse trend that youre seeing across the industry.

Brent: Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today.

That would justify this view any specific factors that you would like to call out curious about your view on this thank you.

Brent: At this time, I would like to welcome everyone to the Chubb Ltd third quarter, 2023 earnings 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 you would like to ask a question, 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.

While this is hardly a new topic.

I am not going to really rehash old ground, we've been talking about this.

For a number of years so no there is nothing new.

And just look back on our quarters look back on what we use for loss cost development.

Karen Byer: It is now my pleasure to turn today's call over to Ms. Karen Byer, Senior Vice President and Director of Investor Relations. Ma'am, please go ahead. Thank you, and welcome everyone to our September 30, 2023 third quarter earnings conference call. Our report today will contain four looking statements, including statements relating to company performance, pricing, and business. Growth opportunities and economic and market conditions, which are subject to risks and uncertainties, and actual results made different materially.

Reinsurers are just simply and we've been saying.

They have lagged wreck in recognition.

And so they're just beginning to catch up to it welcomed pilgrim.

I really don't know what to add beyond that there is there is no news to us.

And frankly.

I don't think Theres really not much news to them and they've just been slow to be willing to recognize it.

And when do you fall behind on casualty.

Karen Byer: Please see our recent SEC filing, earnings release, and financial supplement, which are available on our website at investors.com for more information on factors that could affect these matters. We will also refer today to non-gap financial measures, reconciliation of which to the most direct comparable gap measures and related details are provided in our earnings press release and financial statement. Supplement.

It's very painful.

You got to catch up.

Okay got it that's actually very helpful. My second question is on cyber insurance. There has been a few very notable cyber breaches of the consumer sector Casino gaming and more recently, a cyber security firm also had a pretty serious headline Brent <unk>.

Chubb is a industry leader in hybrid insurance curious and also given that your recent partnership with Sentinel won curious about your view on how the recent headline news could impact pricing environment as well as the industry as a whole and then how you think about positioning in cyber insurance going forward.

Karen Byer: And now I'd like to introduce our speakers.

Karen Byer: First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Peter and our Chief Financial Officer. Then we'll take your questions. Also with us to assist with your questions today are several members of our management team.

Karen Byer: And now it's my pleasure to turn the call over to Evan.

<unk>.

Yes.

Ciber.

Evan Greenberg: Good morning. As you saw from the numbers, we had another outstanding order. Our performance was marked by double digit global PNC premium growth, world class PNC underwriting results, including an 88 for combined ratio, record net investment income, and strong life operating income, all leading to record operating earnings for share. Once again, our premium revenue growth was well spread and broad based with excellent results and our commercial and consumer businesses in both our North American and international operations.

It is a relatively new line for the industry.

And around a number of years, but slim.

When you view it relative to other lines of business is relatively new exposure.

By the way, it's an evolving exposure.

The World is more interconnected in every thing today for example than it even was more so than it was three years or five years ago.

The world is a hostile environment.

Geo politically.

And from a criminal.

Element point of view.

The ability to use cyber as a tool.

Evan Greenberg: Our annualized core operating ROE was 13 and a half with a return on tangible equity of 21.2. More operating income with 495 per share was up 58% over prior year. And for the first nine months, we have produced record operating income of $5.9 billion for 1427 per share of up 27.5%. In the quarter, our underwriting performance was driven by a combination of stronger and premium growth. Joseph, excellent underwriting margins, which included an ex-cat, current accident, your combined ratio of 84.3, or 83, excluding agriculture, favorable prior to reserve development in both North America and overseas general, and relatively average cat losses compared to our expected.

Mischief for worse.

And for ill gotten gains is evolving.

The tools that.

Those actors use are evolving.

At the same time the industry.

And Chubb included are improving our ability to manage the risk.

And to underwrite and provide risk management capabilities around these exposures.

So on one hand, the criminal element.

Is gaining more tools.

And at the same time.

Law enforcement.

And those like our industry are gaining better tools and better insight it's both.

<unk>.

It's a.

Active.

Environment from a loss point of view.

Evan Greenberg: PNC underwriting income of 1.3 billion was up almost 84%. Our positive reserve development speaks to the strength of our reserves and our reasonably cautious or conservative approach to reserving. As I've said for years, we generally strive to recognize bad news early that are slow to recognize good news. We're in a balance sheet business. Our loss reserves are the most important part of the liability side of our balance sheet. On the asset side, record adjusted net investment income of 1.4 billion was up 361 million worth 34% over prior year.

Frequency.

Severity of loss.

And.

Industry pricing.

And industry.

Coverage.

Oster reflect that.

Notice it.

Some segments of the business, where I think there is discipline.

And then there are other segments of the business that I think could use more discipline.

And the good news about crop.

Round crop cyber unlike.

St Casualty it reveals its secrets quickly.

So.

If you were to lose senior underwriting and Youre, just chasing market share youre going to get caught pretty darn remarks.

Evan Greenberg: Our portfolio yield was 4.1% at the end of the third quarter versus 3.4 a year ago. While our reinvestment rate is currently averaging 6.2%. We have very strong liquidity and our investment income run rate will continue to grow as we reinvest our cash flow at higher rates. We are growing income without a change to our invested asset risk profile. In the quarter, we increased our ownership in a lot-time group to 69.6% and now we're consolidating results, which were a creative to EPS and ROE. Earlier this month, we closed on additional shares and our ownership stands now at over 72%. I expect this to increase further and reach between 83 and 86%.

And I'll stop right.

Thank you very much for that.

Your next question comes from the line of Greg Peters with Raymond James Your line is open.

Alright, good morning, everyone will I assume it's good morning, unless you're in Singapore are in Europe.

I'm Brian <unk>.

In New York City.

Oh.

While our bank good morning, do as well.

Yeah. So.

I was listening to your comments.

And.

You mentioned you highlighted the Mexican auto business, you, obviously highlighted success through very North American personal lines business.

Hi.

<unk> like we're dealing with a once in a generation hard market in the auto insurance market and I know you have a specialty business for your personal lines in North America, but I'm wondering if you have any thoughts of branching out into other areas of the market considering all of the dislocations that are occurring there.

Evan Greenberg: A summary of the financial impact of WATI is provided for you in the earnings release and the financial supplement.

Evan Greenberg: Peter will have more to say about financial items, including cats, prior period, reserve development, investment income, book value, ROE and WATI. Now turning to growth pricing in the rate environment. Consolidated net premiums for the company increased over 9% in the quarter. Made up of 8.4 growth in our PMC business globally, at about 15% in our life division. Global PMC premium growth, which excludes agriculture, was 12.3% with commercial lines up almost 100 and a half and consumer lines up about 17.

Okay.

In the <unk>.

In general personal lines market.

In North America.

That's not.

That's not a market for us.

We don't bring anything to that.

Party.

And frankly I think it is wells it is a well served market.

Some would suggest that's over served.

We are we have.

Evan Greenberg: In agriculture, crop premiums were lower than last year due to the timing of when we recognized them. Year-to-date premiums were in fact upmodestly. As to the higher combined ratio in agriculture this quarter, we simply recognized to quarter earlier than last year what we think is the likely development for the year based on what we know today about crop conditions. And price. Lucy, in terms of the commercial PNC rate environment, rates in price increases in property and casualty lines, and aggregate remains strong in the quarter in both North America and our international divisions, while decreases in financial lines in North America continued, we remain vigilant and diligent about staying on top of lost cost inflation.

It's pretty big niche.

High net worth in the United States and our capabilities.

Our insights are just so specially built for that that we have a real true.

Franchise advantage.

Distinctive and Thats, what great looks.

When you get outside the United States.

John a lot of general market auto and homeowners the commodity business.

And most chase it for volume rather than four.

Decent return on underwriting.

We're very selective in how we do it.

We we constantly search and research.

Environments around the world.

It can suit our approach to underwriting and we can bring a distinct advantage to the marketplace.

Evan Greenberg: Beginning with North America, commercial premiums excluding agriculture were up 8.7%. PNC growth was 10.5 excluding financial lines which were up 1%. Our very large middle market division had its best quarter of the year with premium growth of 16.3%, and middle market financial lines up 1.5%. Our major accounts in specialty division grew 7.2% with PNC up 8.4% and financial lines flat. Overall pricing for total North America commercial increased 9.3%, including rate of 5.9% and exposure change that acts like rate of 3.2%.

And build a franchise of size okay.

Has.

Our competitive advantage.

For a number of reasons, Mexico is one of those for us.

Where we ensure over 2 million autos and.

And.

We run a combined ratio that is the envy of the industry.

Okay.

Thanks for the color there.

I guess I'm going to pivot.

So the follow up question on back to the reinsurance business I think I asked you about this the previous quarter, but.

It's striking to me when I look at your global reinsurance business and I don't see a lot of growth in the topline I know you are growing your property exposures, but.

Evan Greenberg: Let me provide a bit more color around rates and pricing. Pricing for commercial property and casualty was up 13.9%. Property pricing was up 23% with rates up 16.6 and exposure change of 5.5%. Casualty pricing in North America was up 11%, with rates of 8.7 and exposure up 2%. The workers' comp, which includes both primary comp and large account risk management, pricing was up 5.5%, which rates essentially flat and exposure up 6%.

There's a lot of rhetoric in the marketplace about where we are with the one one renewals with pricing and reinsurance.

I thought I'd ask you about your views on how you think pricing for reinsurance is going to evolve over the next year.

I look at your topline results probably isn't.

We don't have a favorable to you, but Doug throw that out for you to comment on please.

Yes.

Greg last year.

In the third quarter, so just to level set.

There were as you know much larger cat events.

Evan Greenberg: We are trending loss costs in North America at 6.7%, the same as last quarter, and again that compares to pricing of 9.3%. In general, we are trending loss costs in short-tailed classes at 5.8%. In long-tailed excluding workers' comp, loss costs are trending at 7.1%, and our first dollar workers' comp book is trending at 4.7%. For financial lines, the underwriting environment remains aggressive, particularly in DNO. Rates have continued to decline. In the quarter, rates in pricing for North America financial lines in aggregate were down 4.8 and 3.8 respectively.

So we collected a lot of reinstatement premiums last year.

In the third quarter that we didn't have those level of cat events. This year. So if you adjust for that.

Our reinsurance business actually grew.

The third quarter by 20%.

So just to level set about that or not.

We're not running away from the reinsurance business.

On the other hand.

As I have said.

<unk>.

For Chubb.

It is.

Better trade to us to grow our insureds proper.

Property catastrophe related exposure.

Evan Greenberg: We are trending financial lines' loss costs at 4.7%. Renewal retention for our commercial businesses in North America was 92.7, and our new business grew 14%. On the consumer side, our high net worth personal lines business had another excellent quarter, which premiums up over 9.5%, with raw strong retention and new business growth.

That it has to do it through our insurance or reinsurance operations.

And so we have put.

Much more capital.

Taking more exposure.

On the insurance side, where we've got great transparency, we've got great distribution reach we've got underwriting expertise opened down the food chain from personal lines small commercial to large industrial commercial E&S across North America across the globe.

Evan Greenberg: Lee. In our homeowners' business, we achieved pricing of 15%. Law our selected loss cost trend was similar to last quarter, at 10.5%. Turning to our international general insurance operations, net premiums were up about 21.5%. And this includes a 7.5 contribution to growth from the Wattai in solidation. Our international commercial business grew 17.5%. While consumer was up 28.4%. In our international retail business, growth was broad-based, with all major regions, producing double-digit growth.

And.

So we're participating heavily in choosing to do it there.

On the.

We'll see what one one produces.

And if we like the risk adjusted returns.

On a relative basis to insurance.

Then we would lean in and do more in the property cat area that's not.

Money is not burning a hole in our pocket by any means.

On the other side reinsurance casualty also I just said.

Evan Greenberg: Latin America led the way this quarter, with premiums up 23%. Made up of commercial lines growth of 16, and consumer up more than 28. Europe and Asia pack had strong quarters, with growth of 40.5%. 13.2% and 10.2%, respectively. We continued to achieve improved rate to exposure across our international commercial portfolio, with pricing up 9.3%. Rates up 5.7% and exposure change of 3.4%. Property and casualty lines pricing was up 11.7%, with rates up 7.1% and exposure up 4.3%.

Look it's not a new story to us about casualty and.

Nor too or are those who run our reinsurance business.

The insights of Chubb's reinsurance business.

<unk>.

So we've been very very cautious and we have shrunk our market share significantly.

If casualty re improves directed to them.

A point where reflects.

Environment.

And you can earn a reasonable risk adjusted return.

See us write more there.

Other than that.

We've got plenty of handles to full and Chubb.

And.

And.

Evan Greenberg: While financial lines pricing was up 2.3%. Loss cost inflation across our international commercial portfolio remained steady from last quarter, trending at 6.6%. Within our international consumer, our ANH and personal lines divisions both had strong quarters, with premiums up 16.5%, and over 40% respectively. Personal lines growth in Latin America rebounded sharply, with premiums up 43% on the back of growth in our Mexican auto portfolio, where we're taking significant rate actions to reflect the loss cost environment. In our international life business, which is almost entirely Asia, premiums are nearly 20%. Including the impact of the Watt High consolidation. Life segment income was up nearly 15%, 288 million.

We remain patient and cautious.

The only way to outperform.

In the insurance business as far as China Hope results.

Got it thanks for the detail.

Youre welcome.

Your next question comes from the line of David <unk> with Evercore ISI. Your line is open.

Okay.

Thanks, Good morning.

I just had a question on North America commercial.

The growth there.

Yes, obviously, the net premium written growth is coming in just as you said it would happen, but I'm looking at the gross premium written growth in that decelerate a bit.

Two 3% from 9% last quarter I'm wondering if you could just walk through some of the moving pieces as to why that that decelerated a little bit.

Yes, thanks, so much David.

Look it's pretty simple.

Evan Greenberg: In summary, we had a simply outstanding quarter, contributing to outstanding year-to-date results. We are growing exposure in a thoughtful and balanced way, mindful of the risk environment and underwriting conditions, which are favorable in many areas of our business. Looking forward, we are confident in our ability to continue growing revenue and operating earnings globally, which in turn drives EPS, through the three engines of P&C underwriting income, investment income, life income.

It was a couple of non repeat.

Or one off.

Fronted or structured deals so adjusting for those and really like.

Two or three.

The gross growth was actually in line right in line with that so theres no underlying.

Trend or or or broad sort of systemic it was simply related to.

Couple of fronting deals.

Got it understood.

Peter Enns: I'm going to turn this call over to Peter, and then I'm going to come back and take a question. Thank you, Evan, and good morning.

And then just on Peter had mentioned.

Overall ongoing reserve developments still strong on the ongoing business in all in.

Peter Enns: First, I want to note that we completed our first quarter with Watt High Group as a consolidated subsidiary. The results of Wattai are reported at 100% within our financials, with only certain key metrics reported at the company's 69.6% ownership interest, including consolidated core operating and net income, book intangible book value and ROE measures.

He had cited $55 million of unfavorable on long tail lines.

Which is small but just just wondering if you could just talk about what segments that was focused and what lines were driving that and maybe maybe a little bit of.

Of detail on what's going on.

Yes, it's Tom.

Peter Enns: Turning to our results, Chubb reached two milestones this quarter. Off 1.4 billion. Operating cash flow is a record, 4.7 billion, reflecting our record investment income and strong premium collections. During the quarter, Moody's affirmed and moved our outlook from stable to positive, and as you know, S&P affirmed our groups rating the stable outlook earlier this year. Core operating ROE on a deployed capital basis is approximately 15.5%, and the related operating return on tangible equity is approximately 27%. Book value per share excluding AOCI increased 2.6%, and 7% for the quarter and year to day respectively, reflecting outstanding results for both periods.

It's no there is nothing new no news story about it.

It's good.

<unk> auto and excess casualty.

And it's those years of.

17% to 19.

Maybe a little bit of 16.

That's about it.

Got it makes sense. Thank you.

This fight.

There aren't more words for beta.

We've all been talking about it so.

For a number of years.

It is just continues.

To develop the vet.

Just strive to stay right on top of it.

Your next question is from the line of Mike Zaremski with BMO capital markets. Your line is open.

Peter Enns: Tangible book value per share excluding AOCI decreased 4.2% for the quarter, with 7.5% of points coming from the dilutive impact of consolidating Wattai. With the consolidation on July 1, Chubb had additional goodwill and intangibles of 3.5 billion pre-tax. In Q3, we already earned back almost two-thirds of that amount, and expect to earn back the rest within this current fourth quarter. Wattai had a modest impact on result this quarter, in line with expectations, adding 12 cents for 2.5% to core operating income per share.

Hey, good morning morning.

Good morning, Evan.

I guess I'll ask a question specifically on the North America commercial segment, and it's kind of.

It has to do with I guess reserves too.

Kicking off with some of the other questions, but if I just look at year to date.

Definitely it's in the <unk> phenomenon, but I'll cite Chubb stats reserve release levels running, let's just say, 50% below last year, 50% below given chubb's like historical five years looking at our model.

Peter Enns: The third of which related to the favorable impact of purchase accounting adjustments in the quarter, which will decline over the next year. As previously noted, adjusted net investment income for the quarter was a record 1.415 billion or 140 million above the top end of our guidance, of which 100 million is related to Wattai, which was not included in our prior guidance. In the fourth quarter, we expect adjusted net investment income to be approximately 1.435 to 1.45 billion on a recurring basis, including Wattai, and to continue to grow from there. We remain consistent and conservative with our investments, with 83% of our fixed income portfolio rated investment grade, and an overall average credit rating of A.

I guess.

<unk> Something's changed and I guess the question, we get from investors and by way of cognizant. The absolute combined ratios is great. But the question. We get from investors is preserved release levels have changed so much why havent loss cost inflation assumptions changed that materially is that anything you would like to comment there.

Loss cost.

Inflation.

Let me key off of that for a second.

<unk>.

I think your mental model.

It may not be exactly right.

Loss cost inflation.

Over the last two years.

And may be longer longer.

Peter Enns: This quarter, we recognize unrealized loss on our portfolio of 2.2 billion aftertax, reflecting rising interest rates. We also recognize a modest favorable $18 million recovery of expected credit losses net of an immaterial impairment charge in the quarter, which is test to the overall quality of our portfolio. Wattai's investment assets added $12.7 billion gross, or $6.4 billion attributable to CHUB, to our investment portfolio. With over two decades, as a strategic partner with Wattai, we have deep insight into Wattai's portfolio, and it fits well with our overall conservative approach to investments.

You've watched it step up.

Sure.

Our disclosed loss cost inflation.

And.

When it steps up.

At first impacts your view.

And therefore your pricing on your loss ratios for your current accident year.

You then.

After we apply it going back.

On your in force reserves.

But your in force reserves continue to develop.

And as they develop if they develop with more inflation in the current calendar year than you will imagined.

Peter Enns: [inaudible] Our corporate runoff lines had adverse development of 61 million principally related to environmental exposures. Our pay to incurred ratio for the quarter was 73% and was 84% through nine months. This quarter reflects the impact of strong premium growth on reserves and the timing of our crop insurance payments.

Do you think it has credibility.

Then you have to adjust those reserves going back and then that informs your inflation factor you are going to use in the current period.

That's why you see inflation.

Hi is loss cost inflation has evolved over the last few years with the notion of.

Increase of.

Frequency of severity in particular.

You had the pandemic.

And those who I think we're smarter.

We're careful.

And didn't imagine that pattern changed even though you couldnt observe them.

And kept trending the same.

Bye.

The trend is the same.

Inflation was a little worse when you look back on it then you have to keep adjusting for that.

Peter Enns: Our core operating effective income tax rate was 18.8% for the quarter, which is within our guided range of 18.5% to 19% for this year.

We have produced.

What I can tell.

600 million through three quarters or more of.

Karen Byer: I'll now turn the call back over to Karen. Thank you.

Karen Byer: At this point, we're happy to take your questions. At this time, I would like to remind everyone in order to ask a question, press star followed by number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you.

Of prior period reserve.

Positive <unk>.

Development.

So on a trend.

Of a net $800 million.

And we've had legacy.

Runoff exposure asbestos environmental model with space and all of that.

Bob Hwang: Your first question comes from the line of Bob Hwang with Morgan Stanley. Your line is open. Good morning. Congratulations on the quarter. My first question is actually on reserving. You obviously talked about recognizing bad news first and good news later. Karen's about your thoughts on the recent development. European reinsures have talked more about the cautionary view on the US casualty reserves. Social inflation has been around for years, but this is clearly something that European reinsures are talking more about now.

<unk> and <unk>.

<unk>.

I think.

When you look back historically on Chubb.

Reserve development.

As.

Pretty steady and pretty prudent there.

Okay.

Very helpful. I appreciate you are yes.

Partially correcting.

The way I was thinking about it I guess my my quick follow up is.

Bob Hwang: Just given their recent renewed caution, so to speak, on the US casualty said, are there any adverse trend that you're seeing across the industry that would justify this view? Any specific factor that you would like to call out? Karen's about your view on this. Thank you.

You've talked.

More than some of your peers about exposure acting as rates.

And maybe it's not fair that but some of them. Some of your peers say that only some exposure access rate I don't know if thats a conversation you want to have we want to delve into whether.

Evan Greenberg: Well, this is hardly a new topic. And I'm not going to really rehash old ground. We've been talking about this for a number of years. So no, there's nothing new. And just look back on our quarters, look back on what we use for loss cost development. Reinsures who just simply, and we've been saying it, they've lagged in recognition. And so they're just beginning to catch up to it.

Do you think the vast majority of chat specific exposure really does act as rate more so than in others or anything you want to add there. Thanks.

No I think both comments are consistent.

It depends on what line of business Youre talking about.

Just.

Our exposure its adjusted exposure.

And therefore, it is just to reflect only that portion of the exposure.

It acts like rate.

And that will vary by line different for <unk>.

Evan Greenberg: Welcome, Phil. I really don't know what to add beyond that. There's no news to us. And frankly, I don't think there's really that much news to them. They've just been slow to be willing to wrecking. Johnson, and when you fall behind on casualty, it's, it's, it's very painful. You got to catch up. Okay, got it. That's actually very helpful.

General.

Casualty than it is for workers' comp.

For property, how you look at.

How are you viewing so.

The percentages and the ingredients it varies by line of business.

And that's reflected in how we.

<unk> disclosed we look at it for ourselves and disclosed to you.

And then by the way depending on the line of business. We also.

Make it one step more complicated but.

Bob Hwang: My second question is on cyber insurance. There has been a few very notable cyber breaches, the consumer sector, casino gaming, and more recently, a cyber security firm also had a pretty serious headline breach. Given Chubb is an industry leader in cyber insurance, curious, and also given that your recent partnership with Sentinel-1, curious about your view on how the recent headline news could impact pricing environment, as well as the industry as a whole, and then how you think about chub positioning your cyber insurance going forward.

You don't need to worry we just show you and not have it.

Also there is economic.

Then we have insurance adjustments that can take exposure down we increase retention of our client and casualty, we increase deductibles and property, that's actually reducing exposure.

Now to adjust and get some added.

Very helpful sooner.

And you'll go back in Q1 network.

Evan Greenberg: Yeah, you know, cyber is a relatively new line for the industry. I've been around a number of years, but when you view it relative to other lines of business, it's relatively new exposure. And by the way, it's an evolving exposure. The world is more interconnected in everything today, for example, than it even was more so than it was three years or five years ago. The world has a hostile environment, geo politically, and from a criminal element point of view, the ability to use cyber as a tool of mischief or worse and for ill-gotten gain is evolving on the tools that those actors use are evolving.

Thanks, Mike. Your next your next question is from the line of Paul Newsome with Piper Sandler Your line is open.

Good morning, congratulations on the quarter.

<unk>.

Just a couple of them.

My follow up question on the crop business was there anything that was the trigger early recognition of the <unk>.

Commodity prices are.

Sure.

Good.

Stuck out sort of why the.

The change.

Evan Greenberg: At the same time, the industry and chub included are improving our ability to manage the risk and to underwrite and provide risk management capabilities around these exposures. So on one hand, the criminal element is gaining more tools and at the same time law enforcement and those like our industry are gaining better tools and better insight. It's both. So it's evolving. It's an active environment from a lost point of view, frequency and severity of loss.

No not not really call. We just had better information by the nature of this growing season for instance winter wheat we.

That in the third quarter and in winter wheat as an example.

It's under pressure this year.

Relatively and so that goes into the loss ratio number.

California had storm events and et cetera that that revealed losses earlier. So we were just we just had better data to be able to adjust this year in the quarter than we did in the third quarter than we did last year were really emerged very late.

I would say tailwind of harvesting.

Okay Thats great.

And then.

Different topic, a little bit on the reserve.

Travelers from the other peers are talking about healthcare inflation.

Got it.

Late and helping our workers' comp reserves in particular.

Are you seeing some of the same effects there as well.

The health care piece.

Across all sorts of things.

Evan Greenberg: And industry pricing and industry coverage has to reflect that. I notice it in some segments of the business where I think there is discipline. And then there are other segments of the business that I think could use more discipline.

Businesses is coming a little bit better than others.

Thank you.

No.

We're.

In fact, we've used.

Not this quarter, we have done it in the past we've.

Reflected on.

I'm a bit higher medical inflation trend.

Evan Greenberg: And the good news about crop cyber, unlike state casualty, it reveals its secrets quickly, and so if you're too loose in your underwriting and you're just chasing market share, you're going to get caught pretty darn close. And I'll stop right there. Thank you very much for that.

Recognizing that medical inflation overall.

As more elevated.

And what you see in our current period when Youre booking in action here.

As is only so relevant.

Cars.

<unk> has a tail to it.

Medical has a tail to it.

So you you.

Greg Peters: Your next question comes from the line of Greg Peters with Raymond James. Your line is open. All right. Good morning, everyone. Well, I assume it's good morning, again, unless you're in Singapore or in Europe. I'm right here in New York City. Well, awesome. Thank you very much. Good morning. You as well. Yeah, so I was listening to your comments. And you mentioned you highlighted the Mexican auto business. You obviously highlighted the success of your North American personal lives business. It feels like we're dealing with a once in a generation hard market in the auto insurance market. And I know you have a specialty business for your personal lines in North America.

<unk> reflect that.

At least here, we reflect that prudently.

How we think about medical inflation when we.

Construct our loss picks.

Alright, I appreciate let some others ask questions. Thanks Neal.

Youre welcome.

Your next question comes from the line of Tracy then Gigi with Barclays. Your line is open.

Good morning, real quick for clarification your commentary about 13, 9% pricing increases in North America commercial that's ex financial lines right.

Correct, Okay, so keeping that in mind it looks like we're seeing strong but sequentially less momentum in property pricing.

Evan Greenberg: But I'm wondering if you have any thoughts of branching out into other areas of the market, considering all of the dislocations that are occurring there. In the in general personal lines market in North America, that's not a that's not a market for us. We don't bring anything to that party. And frankly, I think it is well served market. Some would suggest it's over served. We are we have a not a pretty big niche.

Is there a seasonality to keep in mind, otherwise Keith shed some light on the competitive environment.

Writing capacity entering ability to pass on higher reinsurance cost or to some extent more retention, Nebraska by church.

Uh huh.

I don't.

I don't.

Square with that comment.

I believe I gave you like 23% and property.

Property pricing remains extremely strong.

So.

Hi.

Your.

You are seeing something that we're not seeing.

Oh no doubt 23 is great I was just comparing that to 31, 5% in the second quarter.

Evan Greenberg: I net worth in the United States and our capabilities and our insights are just so specially built for that that we have a real true fragile advantage. We're distinctive. And that's what we look for. When you get outside the United States, general auto general market auto and homeowners, the commodity business and most chasing for volume rather than for a decent return on underwrite, we're very selective of how we do it. We we constantly search and research environments around the world where it can suit our approach to underwriting and we can bring a distinct advantage to the marketplace and and build a franchise of size that has a competitive advantage.

So it just.

No no there is nothing.

This is volatility quarter to quarter depends what.

We might write a little more in commercial lines versa in middle market versus.

What we wrote in an E&S versus what we wrote in major accounts, but on a cohort for cohort, we're not seeing a difference.

Okay very good also real quick just a follow up to David's question was there any sizable workers' comp offset so the 55 million adverse development you talked for a long tail line.

There was in middle market.

Workers comp not large account workers comp.

We.

This is the quarter that we study middle market.

Okay, but was it large enough where it might've been.

A larger charge you took in auto and excess liability you might have seen a nice offset.

No, Matt we don't come out with parts and pieces.

Evan Greenberg: For a number of reasons, Mexico is one of those for us where we ensure over two million autos and and we run a combined ratio that is the envy of the industry. Jeffrey. Thanks for the color there.

And so.

We look at it we roll it all together.

There was more in on.

And ex us together.

On a gross basis.

And then there are other lines that are better and so you add it all together and it nets.

Greg Peters: I guess I'm going to pivot to this follow up question on back to the reinsurance business. I think I asked you about this in the previous quarter, but it's just striking to me when I look at your global reinsurance business, and I don't see a lot of growth in the top line. I know you are growing your property exposures, but there's a lot of rhetoric in the marketplace about where we are with the 1-1 renewals, with pricing and reinsurance.

Okay. Thank you.

Okay.

Your next question is from the line of Rone can are with Jefferies. Your line is open.

Thank you good morning, everybody.

First question. So we're hearing from some executives.

Concern about medical loss environment.

Looking ahead.

While it's currently benign.

There is concern that maybe picking up so how are you thinking about that with regards to both.

Evan Greenberg: I'd ask you about your views on how you think pricing for reinsurance is going to evolve over the next year. If I look at your top line results, it probably isn't, probably don't have a favorable view, but throw that out for you to comment on, please. Greg, last year, in the third quarter, suggest a level set, there were, as you know, much larger cat events, and so we collected a lot of reinstatement premium last year in the third quarter that we didn't have those level of cat events this year. So, if you would just for that, our reinsurance business actually grew in the third quarter by 20%. So, just a level set about that. We're not running away from the reinsurance business.

Prior accident year reserves and forward appetite.

And lastly, I'll leave it to you whether you wanted to discuss this.

On a company basis or what your views are with regards to the industry and how it has approached us and maybe even touch on which lines other than workers' comp that I think we're all aware of could be most impacted by that.

We are on I think I just answered it.

So I'll repeat myself.

We adjusted.

Our.

Loss picks to reflect.

Our installation.

Numbers, we use.

We just did.

To reflect our view.

Of higher medical inflation.

Already.

Evan Greenberg: On the other hand, as I have said, I think it's a, for job, it is a better trade to us to grow our insurance property and pass for fee related exposure. There it is to do it through our reinsurance operations. And so, we have put much more capital or taking more exposure on the insurance side where we've got great transparency. We've got great distribution reach. We've got underwriting expertise up and down the food chain from personal lines to small commercial, to large industrial commercial to E&S across North America, across the globe.

We did that a number of quarters ago.

Were steady in the use of that because we already raised.

Okay and do you think the industry is in a relatively similar position.

I don't underwrite for the industry, So I don't see what the industry.

Evan Greenberg: And so, we're participating heavily and choosing to do it there. On the, and we'll see what one one produces. And if we like the risk adjusted returns on a relative basis to insurance, then we would lean in and do more in the property cat area. It's not, it's some money's not burning a hole in our pocket by any means. On the other side, reinsurance casualty. Well, as I just said, you know, look, it's not a new story to us about casualty.

So I don't know what each company effects I can only.

Chuck.

If anybody wants to give me theres all opine on it but.

<unk> outflows.

Well I guess I can maybe frame it a different way.

Since you have adjusted for that is already I would think that your pricing is also accordingly adjusted.

Are you finding that your prices are still competitive with the industries or is the industry still out of it.

Essentially pricing for a lower loss equation.

I don't see.

You're conflating two things.

What people actually charge in the marketplace.

And what their loss picks are what their charge reflects Dave.

They may be reflecting the same things I reflect and they're willing to underwrite to a 100.

And I'm not.

So I can't.

I can't take that bet, you are putting out there.

<unk>.

Evan Greenberg: And nor to our, are those who run our reinsurance business, and they have the insights of jobs insurance. Business, and so we've been very, very cautious, and we've shrunk our market share significantly. If casualty re-improves, the two-point where it reflects the environment, and you can earn a reasonable risk adjusted return, you'd see us right more there. Other than that, we've got plenty of handles to pull in job, and we remain patient and cautious. It's the only way to outperform in the insurance business as far as I'm overwhelmed. Got it. Thanks for the detail. You're welcome.

Okay.

Sure enough.

I, just don't know what their each picking for loss cost.

And then how whether they want to underwrite to a 97 or 95, when a child, we're just not going to do that.

Okay point taken makes sense.

The other question I had North America commercial the underlying loss ratio improved year over year.

<unk> was a bit elevated relative to the first half were there any one off this quarter or in the first half of course should we look at the year to date as a reasonable run rates.

Yes.

Take a step back if you would with me for a second.

Look at the combined ratios were putting pump.

They are.

World Class they are unbelievably good theyre believable because they're frequently.

David Milton: Your next question comes from the line of David Milton with Evercore ISI. Your line is open. Thanks, good morning. I just had a question on North America commercial and the growth there. Obviously, the net premium rent and growth is coming in just as you said it would, Evan, but I'm looking at the growth premium rent and growth in that decelerate a bit to 3% from 9% last quarter. I'm wondering if you could just walk through some of the moving pieces to why that decelerated a little bit.

Tremendous north Americas loss ratio year on year.

That's improved almost a handful.

From what is really.

World class to be dealing with.

It speaks for itself. These are great combined ratios.

<unk>.

And when you look sequential Dennis for you to look into that.

I just don't relate to that.

Fair enough and certainly great combined no Noah.

Buddy.

David Milton: Yeah, thanks so much, David. Look, it's pretty simple. It was a couple of non-repeat or one-off fronted or structured deals, so adjusting for those and really like two or three. The growth growth was actually in line right in line with net, so there's no underlying trend or broad sort of systemic that was simply related to a couple of fronting deals. Got it. Understood. And then just on Peter had mentioned overall ongoing reserve development still strong on ongoing business and all in.

It's like it's it's.

Tremendous and you take that kind of those kinds of <unk>.

Underwriting margins.

You add.

Stronger premium growth to it.

You.

Look at what I think is responsible pricing across the portfolio.

Ex cat current accident year for insurers right now.

Are going to look lower.

Cause everybody is more cat levered in their pricing and their combined ratio because they are writing more property.

And they are getting the price on property, the writing more property and taking more cat exposure of course.

David Milton: He had cited 55 million of unfavorable on long-tail lines, which is small, but just wondering if you could just talk about what segments that was focused in and what lines were driving that and maybe a little bit of detail on what's going on. You know, there's nothing new, no news story about it. It's auto and excess casualty, and it's those years of 17 to 19, maybe a little bit of 16, and that's about it. Got it.

And the real action to me is therefore, what's your published combined ratio.

Are you are you charging adequately.

And by the way that includes are you charging adequately for your property and property cat exposure.

There'll be volatility quarter to quarter, but over a period of time.

And.

Vast within there.

Are you picking for your casualty combined ratios.

And how are you underwriting for that.

And when you mix the two together you better be running a pretty darn. Good current accident year ex cat combined ratio that's more the way I would be thinking about this if I was on the outside.

Evan Greenberg: Makes sense. Thank you. There are more words for me that we've all been talking about it, so you know, for a number of years and it is, you know, just continues, to develop a bit, you know, we just strive to stay right on top of it.

Noted thank you.

Youre welcome.

Your next question comes from the line of Brian Meredith with UBS. Your line is open.

Hey, Thanks morning, Evan.

First one any green shoots at all and maybe the pricing environment for financial lines here I mean, it's been pretty competitive here for a while I know that we've talked about the cyber losses coming through what are you seeing there.

Mike Zaremski: Your next question is from the line of Mike Zaremski with BMO Capital Markets. Your line is open. Good morning, Evan. I guess I'll ask a question specifically on the North America commercial segment and it's kind of, you know, has to do with, I guess, reserves, too, taking off with some of the other questions. But, you know, if I just look at your date, and this definitely isn't a chub-specific phenomenon, but I'll cite chub stats.

Oh.

No.

No.

It's pretty.

Okay.

It.

This industry just as a.

And Ah.

What I think is a pretty dumb stuff at times.

Financial lines. This is a very broad category.

Mike Zaremski: Reserve release level is running, let's just say 50% below last year, 50% below, you know, even chub's like historical five years looking at our model. I guess it implies something's changed and I guess the question we get from investors and by the way of cognizant, the absolute combined ratios is great.

It is everything from public DNO to private D&O.

Nonprofit DNO.

Errors and omissions of all kinds cyber insurance so.

It's a real dog's breakfast of a lot of different lines and each one goes to its own drum right now a bit there are there are large pockets in there that.

Evan Greenberg: But the question we get from investors is that, you know, if reserve release levels have changed so much, why haven't lost cost inflation assumptions changed, but materially, is that of anything you'd like to comment there? Lost cost inflation. Let me tee off of that for a second. I think your mental model may not be exactly right. Lost cost inflation over the last two years and maybe longer, longer, you've watched it step up or disclosed lost cost inflation.

That I think are stable.

And under managed adequately are handled decently.

Then you have a couple where my God.

The number of <unk> that have pens today.

The amount of capacity that proliferates and by the way a lot of that capacity coming back to the same balance sheets aggregating back and you've got this sort of circular firing squad, which we tend to do now and again.

Evan Greenberg: And when it steps up, it first impacts your view, and therefore you're pricing and your lost ratios for your current accident. You then have to apply it going back on your enforced reserves. But your enforced reserves continue to develop. And as they develop, if they develop with more inflation in the current calendar year than you imagined, and you think it has credibility, then you have to adjust those reserves going back. And then that informs your inflation factor you're going to use in the current period.

It's in those areas.

I don't see Green shoots and then the rest behaves reasonably to me.

So I wouldn't want my first message to you don't want financial lines altogether, and then secondly, there's a couple of them areas.

Makes sense and then my second question Evan.

Bigger picture just thinking about just generally the cash general casualty lines here.

As you kind of pointed out really attractive combined ratios that you are printing in the industry in general and then we're also looking at long term interest rates that are gosh, a decade high right.

Are we seeing any.

Weakness at all from a pricing perspective, do you anticipate that's going to start happening here in the next 12 months just given the return profile of the business and how attractive it is.

No.

Yeah.

I haven't.

Seen it really <unk>.

Because.

Higher interest rates also a proxy for loss cost inflation.

Evan Greenberg: And that's why you see inflation has lost cost inflation has evolved over the last few years with the notion of increase of frequency of severity in particular. You had the pandemic and those who I think were smart, were careful and didn't imagine that patterns had changed even though you couldn't observe. Joseph, and kept trending the same. But you trended the same, and if inflation was a little worse when you look back on it, then you have to keep adjusting for that.

So.

You've got an industry that I think is.

Is trying to stay on top of loss cost or how does that debt.

The impetus behind them.

Stay on top of loss cost in casualty.

And.

You know other than workers' comp at Hudson Bill.

Totally benign.

As you well know and it's been around for a while so.

Right.

I think that.

Higher yields are ameliorating.

And by the way if you do the math.

Our new translate the higher yields to what it means.

To earn the same return what combined ratio effect, you would get to achieve the same return.

Evan Greenberg: We have produced what I can tell, the 600 million through three-quarters or more of prior period reserve, positive development. That's on a trend of a net 800 million. And we've had legacy runoff exposure asbestos, environmental, molestation, all of that, included in that. I think when you look back historically on Chubb, the reserve development is pretty steady and pretty prudent there.

It's modest in combined ratio relatively a point here a point there.

Not like Wow I can raise my combined ratios five points to achieve the same 15% as an example risk adjusted return.

No you can't.

And we run the math.

Makes sense. Thank you.

Youre welcome.

Due to time constraints. Your final question comes from the line of Alex Scott with Goldman Sachs. Your line is open.

Hi.

I wanted to ask about the environment broadly in Asia.

The different countries and just now that you've scaled up that business in a bigger way with the addition of why typing consolidated and so forth. So what are you seeing in the environment.

Evan Greenberg: That's a very helpful, appreciate you partially correcting the way I was thinking about it. I guess my quick follow-up is, you've talked more than some of your peers about exposure acting as rates, and maybe it's not fair, but some of your peers say that only some exposure access rate. I don't know if that's a conversation you want to have or you want to delve into whether you think the vast majority of Chubb's specific exposure really does act as rate, more so than others or anything you want to add there.

Where do you see the growth opportunities looking at.

Yeah well.

We touched a bunch on it last quarter and I'm gonna.

Just okay.

It does it change two or three button, so I'm going to reiterate it a bit to you. We operate in 12 countries in Asia half our business is commercial <unk> consumer and the consumer's spreads across non life and life.

Evan Greenberg: Thanks. No, I think both comments are consistent. It depends on what line of business you're talking about. And we adjust our exposure. It's adjusted exposure. And therefore, it adjusts to reflect only that portion of the exposure that acts like rate. And that'll vary by line, different for general casualty than it is for workers gone. Different for property how you view it. So the percentage is, and the ingredients, it varies by line of business.

We're the largest direct marketers of insurance in Asia easily on our life and non life operations work closely together.

We have huge digital capabilities that have grown out it just.

And the World is converting and direct response marketing from phone based to digital do a combination of the two.

Our agency operations for distribution, our brokerage operations for distribution, we play up and down the food chain of lower.

Lower middle market right through to the largest corporate and we segment distribution and product that way and it is across 12 distinct markets Asia.

Evan Greenberg: And that's reflected in how we look at it for ourselves and disclose it to you. And then by the way, depending on the line of business, we also, to make it one step more complicated, but you don't need to worry, we just show you a net of it. We also, there's economic. And then we have insurance adjustments that can take exposure down. We increase retention of a client in casualty. We increase deductibles in property. That's actually reducing exposure and not adjusts and gets netted.

In North America are the two regions I think that will have the greatest.

Economic growth potential over the next decade or two in Asia get out of China Asia is theory for hybrid very dynamic.

North Asia older population Southeast Asia with over 700 million people young populations.

Those economies are growing more quickly than they are reemerging look at Vietnam today look, even where Indonesia is going today, Singapore those markets are all in Thailand.

Evan Greenberg: So it's the other helpful tutor. Yeah, you'll go back and chew on that. Thanks, Mike.

Those markets are so dynamic with a lot of opportunity, but it's hard work.

Paul Newsome: Your next question is from the line of Paul Newsome with Piper Sandler. Your line is open. Good morning.

Really know those markets and we've been there for decades, and we have spent the time to build and build and build capability on a local market basis. It's nothing to say you are in Asia, It's where are you in your capability in Thailand or Vietnam Marine.

Paul Newsome: Congratulations on the corner. Just a couple of, or maybe follow up questions. On the crop is this, was there anything that was that triggered the early recognition of the change? Some of the questions are, you know, sir, anything that stuck out for the, why the little bit of a change? No, not, not really Paul. We just had better information by the nature of this growing season. For instance, when are we, we, we, you know that in the third quarter, and when are we just an example?

Many of these markets they are distinct and you've got to have local capability knowledge and a good command and control around underwriting.

I'm very energized about what I see for this company over time in Asia, and I think it will continue to represent over time, a greater share of our business.

Thanks for the question.

Thanks.

Paul Newsome: Well, it's under pressure this year, relatively. And so that goes into the loss ratio number. California had storm events and et cetera, that, that reveal losses earlier. So, we were just, we just had better data to be able to adjust this year in the quarter than we, in the third quarter, than we did last year. We're really emerged very late. I think, Carolyn, the harvesting.

At this time I would like to turn the call back over to MS. Karen buyer.

Thank you everyone for joining us today, if you have any follow up questions, we'll be around to take your call.

And today.

Ladies and gentlemen. This concludes today's conference call you may now disconnect.

Please wait the conference will begin shortly.

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Evan Greenberg: Okay, that's great. And then different topics, a little bit on the reserve, but, you know, travel or some of the other peers are talking about health care inflation being a good guy. Of late, and helping out workers, not reserves in particular. Are you seeing some of the same effects there as well, where the health care piece, which, you know, crosses all certain things in your businesses is coming in a little bit better than others than expected?

Okay.

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Evan Greenberg: No, we're, in fact, we've used them and we knocked this quarter. We had done it in the past. We've reflected on a bit higher medical inflation trend, recognizing that medical inflation overall is more elevated. And what you see in a current period, when you're booking an accident here, is, is only so relevant because composite tail to it and medical house a tail to it. And so, you, you reflect that, at least here, we reflect that fruitantly, and how we think about medical inflation when we construct our laws picks. Appreciate what Taylor has asked questions. Thanks for the help.

Okay.

Evan Greenberg: You're welcome.

Okay.

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Tracy Dolin: Here next question comes from a line of a Tracy, then Gigi with Barclays. Your line is open. Good morning, real quick for clarification, your commentary about 13.9% pricing increases in North America, commercial, that's financial lines, right?

Evan Greenberg: Okay, so keeping that in mind, it looks like we're seeing strong but sequentially less momentum in property pricing. Is there seasonality to keep in mind, otherwise key shed some light on the competitive environment, writing capacity entering, ability to pass on higher reinsurance,[inaudible] Yaron, I think I just answered it, so I'll repeat myself. We adjusted our loss picks to reflect in our inflation numbers we use. We adjusted to reflect our view of higher medical inflation already, and we did that a number of quarters ago, and we're steady in the use of that because we already raised it.

Evan Greenberg: Okay, and do you think the industry is in a relatively similar position? I don't underwrite for the industry, so I don't see what the industry affects. I don't know at each company, I can only manage CHOP. If everybody wants to give me theirs, I'll find one. Well, I guess I could maybe phrase it a different way. Since you have adjusted for this already, I would think that your pricing is also accordingly adjusted.

Evan Greenberg: Are you finding that your prices are still competitive with the industries, or is the industry still essentially pricing for a lower loss inflation? I don't see you're conflating two things, what people actually charge in the marketplace, and what their loss picks are, what their charge reflects. They may be reflecting the same things I reflect, and they're willing to underwrite to 100, and I'm not. So I can't take that bait you're putting out there.

Evan Greenberg: Okay, fair enough. I just don't know what they're each picking for loss cost, and then how would they want to underwrite to a 97 or a 95 when a CHOP were just not going to do that? Yeah, point taken. It makes sense.

Evan Greenberg: The other question I had, North America commercial, the underlying loss ratio, improved year over year, not the last was a bit elevated relative to the first half. Were there anyone else this quarter, or in the first half, should we look at the year to date as a reasonable run rate? Yeah, and take a step back, if you would, with me for a second. Look at the combined ratios we are putting up.

Evan Greenberg: They are world's best, they are unbelievably good, they're believable, because they're real, they're tremendous. North America's loss ratio year on year has improved almost a half, from what is a really world-class to be dealing with? I get speech for itself, these are great combined ratios. And when you look a sequential list or you look at that, I just don't relate to that. Is there an answer really great combined? No, no. It's like a lot of it.

Evan Greenberg: It's like it's it's tremendous. And you know, you take that kind of those kinds of underwriting margins. You add strong or premium growth to it. You look at what I think is responsible pricing across the portfolio. Ex-cat for an accident here for insurers right now are going to look lower because everybody is more cat levered in their pricing in their combined ratio because they're writing more property. And they're getting the price on probably the writing more property and taking more cat exposure.

Evan Greenberg: Of course. And the real action to me is, therefore, what's your publish combined ratio? Are you are you charging adequately? And by the way, that includes are you charging adequately for your property and property cat exposure? There'll be volatility quarter to quarter, but over a period of time and, best within there, what are you picking for your casualty combined ratios? And how are you underwriting for that? And when you mix the two together, you better be running a pretty darn good current accident here, ex-cat combined ratio. That's more of the way I would be thinking about this if I was on the outside. Noted. Thank you.

Brian Meredith: Your next question comes from the line of Brian Meredith with UBS. Your line is open. Thanks, morning, Evan. First one, any green tooth at all and maybe the pricing environment for financial lines here, I mean, it's been pretty competitive here for a while. I know that we've talked about the cyber losses coming through. What are you seeing there?

Evan Greenberg: No, no, I'm not saying it's pretty, you know, this industry just as a, you know, does what I think is some pretty dumb stuff at times. And financial lines is a very broad category. It has everything from public D&O to private D&O, nonprofit D&O. Errors and omissions of all kinds. Collins, Siver Insurance, so it's a real dog's practice of a lot of different lines, and each one goes to its own drum right now a bit.

Evan Greenberg: MGA's that have pens today, and the amount of capacity that proliferates, and by the way a lot of that capacity coming back to the same balance sheets aggregating back, and you've got this sort of circular firing squad, which we tend to do now and again. It's in those areas that I don't see green shoots, and then the rest behaves reasonably to me.

Evan Greenberg: So I wouldn't want my first message to you, don't loan financial lines altogether, and then secondly, there's a couple of dumb areas.

Evan Greenberg: Makes sense, and then my second question, Evan, a little bigger picture at this thinking about generally the cast general castly lines here, you know, as you kind of pointed out really attractive combined ratios that you're printing and in the industry in general. And now we're also looking at, you know, long-term interest rates that are got decade high, right, are we seeing any, you know, weakness at all from a pricing perspective, you anticipate this going to start happening here in the next 12 months, just given the return profile of the business and how attractive it is.

Evan Greenberg: You know, I haven't seen it really, because higher interest rates are also a proxy for loss cost inflation. So you've got an industry that I think is trying to stay on top of loss cost. Or has that impetus behind them to stay on top of loss cost in casualty? And, you know, other than in workers comp, it hasn't been, you know, totally benign, as you well know, and it's been around for a while.

Evan Greenberg: So I think that higher yields are humiliating. And by the way, if you do the math, and you translate the higher yields to what it means to earn the same return, what combined ratio effect you would get to achieve the same return, it's modest in combined ratio. Relatively, a point here, a point there, it's not like, wow, I can raise my combined ratio as five points to achieve the same 15% as an example risk adjusted return. No, you can't. And we run the math.

Evan Greenberg: Excellent. Thank you. You're welcome.

Alex Scott: Due to time constraints, your final question comes from line of Alex Scott with Goldman Sachs. Your line is open. Johnson. Hi, I wanted to ask about the environment broadly in Asia, you know, across the different countries. And just now you've scaled up that business in a bigger way with the addition of, you know, why typing and consolidating and so forth. What are you seeing in the environment? You know, where do you see the growth opportunities looking ahead?

Alex Scott: Yeah, well, you know, we touched a bunch on it last quarter. And I'm going to just take it. It doesn't change it to our three buttons. So I'm going to reiterate it a bit to you. We operate in 12 countries in Asia. Half our business is commercial, half is consumer. And the consumer spreads across non-life and life. We're the largest direct marketers of insurance in Asia easily. And our life and non-life operations work closely together.

Alex Scott: We have huge digital capabilities that have grown out at GOST. And the world is converting in direct response marketing from phone-based to digital to a combination of the two. Our agency operations for distribution are brokerage operations for distribution. We play up and down the food chain with lower, lower middle market right through to the largest corporate and we segment distribution and product that way. And it is across 12 distinct markets.

Evan Greenberg: Asia and North America are the two regions I think that will have the greatest economic growth potential over the next decade or two. And Asia get out of China. Asia is very vibrant, very dynamic. North Asia, older populations, Southeast Asia with over 700 million people, young populations. And those those economies are growing more quickly and they're emerging. Look at Vietnam today. Look even where Indonesia is going today. Singapore, those markets are all in Thailand.

Evan Greenberg: Those markets are so dynamic with a lot of opportunity, but it's hard work. You have to really know those markets. And we've been there for decades. And we have spent the time to build and build and build capability on a local market basis. It's nothing to say you're in Asia. It's where are you in your capability in Thailand or Vietnam or any of these markets. They're distinct and you've got to have local capability, knowledge and a good command and control around underwriting. I'm very energized about what I see for this company over time in Asia. And I think it'll continue to represent over time a greater share of our business. Thanks for the question. Thanks.

Karen Byer: At this time, I would like to turn the call back over to Ms. Karen Byer.

Karen Byer: Thank you everyone for joining us today. If you have any follow-up questions, we'll be around to take your call.

Karen Byer: Enjoy the day.

Brent: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Brent: Please wait.

Brent: The conference will begin shortly. Thank you very much.