Chubb Limited

Ladies and gentlemen, please stand by. Good day and welcome to the Chubb Limited fourth quarter year-end 2019 earnings conference call. Today's conference is being recorded. If you would like to ask a question, please press star 1 on your telephone keypad. For opening remarks and introductions, I would like to turn the call over to Karen Beyer, Senior Vice President, Investor Relations. Please go ahead.

Thank you and good morning, everyone. Welcome to Chubb's December 31st, 2019, fourth quarter year-end earnings conference call. Our report today will contain forward-looking statements, including statements relating to company performance and growth opportunities, pricing and business mix, and economic and market conditions, which are subject to risk and uncertainty, and actual results may differ materially. Please see our recent SEC filings, earnings release, and financial supplements, which are available on our website at investors.chubb.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, it's my pleasure to introduce our speakers this morning. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Phil Bancroft, our Chief Financial Officer. We'll then take your questions. Also with us to assist with your questions are several members of our management team. And now, I will turn the call over to Evan.

Good morning. As you saw from the numbers, we reported core operating income in the fourth quarter. of $2.28 per share, up 13% from prior year. The quarter was marked by excellent premium revenue growth globally, driven by an improved and improving pricing and underwriting environment that is spreading to more lines of business and more territories. Organic growth and the commercial lines underwriting environment were the best in over five years. We also experienced a fairly active quarter globally for weather-related and man-made catastrophes, including the impact of weather on our U.S. agriculture business. Core operating income was just over $1 billion. Our published PNC combined ratio for the quarter was 92.7, about a half a point improvement over prior year, with PNC underwriting income up 12%. On the one hand, we benefited from lower year-over-year catastrophe losses. You may have noticed that half of our total CAT losses in the quarter was from one event, a tornado that destroyed a mile-by-a-mile-and-a-half affluent neighborhood in the suburbs of Dallas, where Chubb had significant market share. What are the odds? But that's our business. On the other hand, as you saw from our pre-announcement, we reported an underwriting loss of $23 million for the quarter in our crop insurance business, attributable to yield shortfalls from difficult growing conditions compared with an underwriting gain of $161 million in last year's fourth quarter. As I pointed out before, by its nature, crop insurance is a business with cat-like exposures. After all, It's about moisture and temperature, i.e., the weather. The risk-reward for crop insurance has been favorable for Chubb over the long, short, and medium term. And after three exceptional years in 16 to 18, last year was below average. For the quarter, the global PNC combined ratio, which excludes agriculture, was 91.9 compared with 95.2 prior year. And on a current accident year basis, excluding cats, it was an outstanding 88.6 versus 89.9 last year. To briefly recap the year, core operating earnings of $4.6 billion were up over 5%, with PNC underwriting income up 4.5%. Global PNC underwriting income, which again excludes ag, was up 18.5%. The global PNC combined ratios, both calendar and current accident year, were simply excellent. The calendar year was down from the year before, and the current accident year, excluding CATS, was flat with prior year. Book intangible book value per share were up 11.7 and 18.6% respectively for the year, driven by a combination of income and the mark from falling interest rates. Bill will have more to say about the investment income book value, cats, and prior period development. Turning to growth and the rate environment, PNC premium revenue in the quarter in constant dollars was excellent. And as I noted a moment ago, the strongest organic premium revenue growth in over five years. Net premiums grew 9.8% before foreign exchange, which had less than a point of negative impact. The pricing environment continued to improve quarter on quarter, with the rate of increase accelerating and spreading to more classes of business and risk types. Overall prices increased in North America commercial, which includes both major accounts and specialty, as well as middle market and small commercial, by 8.3% on a written basis, versus a current lost cost trend of about 4.5%. Renewal price change includes both rate of 9% and a slight decline in exposure of about a half a percent. We continue to benefit from a flight to quality. More business continues to meet our underwriting standards, and new and existing customers choose CHEP. New business was up nearly 10% in the quarter, and renewal retention was excellent, 95.5% on a premium, and 87% on a policy count basis. In major accounts and specialty commercial, excluding ag, premiums grew over 10.5%, with major accounts retail growth of 9% and E&S wholesale growth of 10%. In terms of rate increases, rates for major accounts were up 10.5%, with risk management up 5.5%, excess casualty up 27%, and property and short tail lines up 20%. Management liability rates increased 20%. In our Westchester E&S wholesale business, rates were up 15%. Property up over 19%, casualty up 15%, and financial lines up nearly 12%. All well above third quarters increases. Rates in our Chubb Bermuda business were up 33%. Turning to our U.S. middle market and small commercial division, premiums grew over 7.5%. And excluding workers' comp, we grew 10%. Renewal retention in our middle market business was nearly 94%. Middle market pricing was up 5%. And excluding comp, it was up nearly 7%. Pricing for casualty ex-comp was up about 6%, while comp pricing was down about 4.5%. Package was up 6%. Property up 10.5%. And financial lines rates were up almost 8%. In our North America personal lines business, net premiums in the quarter were up over 9%. But adjusted for additional reinsurance items, which negatively impacted prior year growth, we grew 4.5%. Retention remained strong at 97.5% on a premium basis. and over 89% on a policy basis. Homeowners' pricing was up nearly 13% in the quarter. We are making great progress in reshaping the portfolio to more closely focus on clients who meet our risk profile. Turning to our international business, growth remains strong in our overseas general insurance operations, with premiums written up 9% in constant dollars. and FX then had a negative impact, about 2.5 percentage points. Net premiums for our London market wholesale business were up 22%, while our retail division was up almost 8%, with growth broadly distributed across the globe. Growth in our international retail was led by continental Europe, up nearly 10.5% and the best growth in many years, followed by Latin America and Asia-Pac, up over nine and eight respectively, and the UK up over five and a half. Overall rates in our international retail business were up 10%. Property up 11%, casualty up three, and financial lines up 17%. Rates in our London wholesale business were up 20%, property up 21%, financial lines up 16%, and aviation up 27%. Our Asia-focused international life insurance business had a strong quarter, with net premiums up over 14% in constant dollar, and a contribution to earnings of $36 million, up over 12% from prior year. John Keogh, John Lupica, Paul Crump, and Juan Luis Ortega can provide further color on the quarter, including current market conditions and pricing trends. Closing, it was a good quarter and year for Chubb. Premium revenue growth continued to accelerate as more business meets our underwriting standards and we achieve greater price adequacy in a rapidly improving underwriting environment. We have started the new year in excellent shape with a lot of momentum. Our organization was built on a global scale to capitalize on market conditions such as this. We have patiently waited and remain disciplined and true to our culture and the craft of underwriting excellence. We are now capitalizing on greater opportunity. At the same time, we are not taking our eye off the execution of our many important long-term strategic initiatives that position us for future revenue and earnings growth, including our increasing ownership stake in Watai Insurance Group, progress we are making with our digital efforts, our growing international consumer lines operation, and our growth strategies for middle market and small commercial around the globe. With that, I'll turn the call over to Phil, and then we'll be back to take your questions.