Chubb Limited

Please stand by. We're about to begin. Today, welcome to the Chubb Limited First Quarter 2021 Earnings Call. Today's call is being recorded. To ask a question on today's call, please press star 1. For opening remarks and introductions, I'd like to turn the call over to Ms. Karen Beyer, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Welcome everyone to our March 31, 2021 First Quarter Earnings Conference Call. Our report today will contain forward-looking statements, including statements relating to company performance, pricing and business mix, growth opportunities, and economic and market conditions, which are subject to risk and uncertainty. And actual results may differ materially. Please see our recent SEC filings, earnings release, and financial supplement, which are available on our website at investors.shub.com for more information on factors that could affect these matters. We will also refer today to non-GAAP financial measures, reconciliations of which, to the most direct comparable GAAP measures and related details, are provided in our earnings press release and financial supplement. Now I'd like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Phil Bancroft, our Chief Financial Officer. And then we'll take a question. Also with us to assist with your questions today are several members of our management team. And now it's my pleasure to turn the call over to Evan.

Good morning. We had a really good start to the year, highlighted by excellent premium revenue growth globally, powered by our commercial businesses, double-digit commercial P&C rate increases, and expanding underwriting margins, leading the record in XCAT underwriting results and simply world-class margins. It was an active quarter for natural catastrophes due primarily to the winter storm losses in Texas, though even with that, we produced a really good calendar year combined ratio, which speaks to our improved risk-adjusted underwriting returns. The published PNC combined ratio was 91.8 and included catastrophe losses of 9.1 percentage points compared with 3.3 last year. The current accident year combined without CATS was 85.2 compared to 87.5 prior year. The 2.3 percentage point improvement was made up of a point of loss ratio with the balance related to the expense ratio. Adjusted net investment income in the quarter was $930 million, up about 1.5%. And that excludes private equity gains, which most other companies include. On that basis, investment income grew 50%. In sum, core operating income in the quarter of $2.52 per share was down $40 million from prior year to $1.1 billion. while net income of $2.3 billion was up significantly over prior years, $252 million. Phil will have more to say about the expense ratio, CAT, prior period development, investment income, and book value. Turning to growth and the rate environment, P&C premiums were up 9.7% globally, with commercial premiums up 15.6%. and consumer lines down 2.5. Foreign exchange had a positive impact on growth of 1.6 points. The consumer lines result included negative growth in global A&H, flat revenue in international personal lines, and about 2.5% underlying growth in North America personal lines. We continue to experience a very strong commercial PNC pricing environment globally. And based on what we see today, I'm confident these conditions will endure. Jubb was built in all aspects over years to capitalize on these conditions. In North America, commercial PNC premiums grew almost 15%. New business was up 21.7% and renewal retentions remained strong at 95% on a premium basis. In North America, major accounts and specialty business, net premiums written grew about 17.5%, or about 15%, excluding year-over-year impact of large structured transactions. Our middle market and small commercial business grew over 11%. Overall rate increases in North America commercial were up by 14.5%, while lost costs are trending up about 5.5%, though it varies up or down depending upon line of business. Let me give you a better sense of the rate environment. In major accounts, risk management-related primary casualty rates were up almost 8%. General casualty rates were up 34.5% and varied by category of casualty. Property rates were up nearly 20%. And financial lines rates were up almost 21%. In our ENS wholesale business, property was up 15.5%. Casualty and financial lines rates were up 25%. In our middle market business, rates for property were up 16%. Casualty was up 12%, excluding comp, with comp up 1%. And financial lines rates were up 18.5%. In our international general insurance operations, commercial premiums grew over 20% on a published basis, or 15% in constant dollar. International retail commercial grew about 17.5%, and our London wholesale business grew 38.5%. Retail commercial growth varied by region, with premiums up over 26.5% in Asia-Pac, 22.5% in Europe, with equally strong growth in both the UK and on the continent. Our Latin America commercial lines business returned to growth in the quarter, with premiums up 4.7%. Internationally, like in the US, in those markets where we grew, we continued to achieve improved rate to exposure across our commercial portfolio. In overseas, Jen, rates were up about 14.5%. with a loss cost trend of 3%, though that varies by class of business and country. Rates were up 14% in our international retail business and 20% in our London wholesale business. Keep in mind, these outstanding commercial insurance growth rates in the U.S. and overseas were achieved in spite of the headwinds we face from negative exposure growth due to reduced business activity. On the other hand, consumer lines growth globally in the quarter continued to be impacted by the pandemic's effects on consumer-related activities. During the quarter, there were signs of recovery beginning, breaking consumer down between A&H and personal lines. Our international personal lines business produced modest growth of 1.2% on a published basis, fundamentally flat, constant dollar growth. while our international A&H business shrank 3.7%. Travel globally, both business and consumer related, remains depressed, and that hits A&H hard, while our direct marketing and group employee benefits A&H business is beginning to pick up modestly. If we exclude the travel business, our international A&H business grew almost 2% on a published basis. We expect growth to continue to improve as the year goes along, though predicting the continued impact of the pandemic in Asia, Latin America, and Europe is difficult. Net premiums in our North America high net worth personal lines business were up about 2.5%, excluding reinsurance reinstatements, auto renewal credits in California, and wildfire exposure-related cancellations. As I have said before, this outstanding franchise is about customers who choose Chubb for the service and richness of coverage and are willing to pay for them. These client segments, which are at the heart of what we do, grew 8% in the quarter. Overall portfolio retention remains strong in high net worth at over 94%, and we achieve positive pricing, which includes rate and exposure, of 11% in our homeowners portfolio. Looking ahead, we have been and are taking continued action to shape this portfolio. To that point, we're taking ongoing action to reduce our wildfire exposure in parts of California as a consequence of our inability to achieve adequate rate and terms for the coverage. This will have an impact for the remainder of the year of about 50 million bucks or about 1.25% impact on our growth rate. Lastly, in our Asia-focused international life insurance business, net premiums plus deposits were up over 18.5% in the quarter. In sum, as I have said the past few quarters or longer, we are in a hard-affirming market for commercial PNC in most of the world. The rate environment, in my judgment, is irrational. and necessary response to years of industry underpricing and a more uncertain risk environment today, driven by climate change, the litigation environment, and cyber-related exposures. Given our years of data and analytics capabilities and underwriting know-how, we know what rate we need in order to achieve an adequate risk-adjusted rate of return from underwriting, and that is the objective. and it is a relentless focus, though we're never perfect. Some lines are there, others have a way to go. Virtually all of our commercial PNC lines of business continue to achieve rates that exceed loss cost, and so margins continue to improve. As you can see, we're off to an outstanding start to the year. My colleagues and I are confident in our ability to grow our business and continue to expand margins. And as I said, I expect as the year progresses, our sizable consumer business will return to growth. Our organization is focused. It's mission-driven. The quality of Chubb's service and consistency is a widely recognized differentiator. They are the wellhead of our reputation. We are leaning into the current favorable underwriting conditions and capitalizing wherever we can get paid adequately to assume risk and volatility. We are growing exposure. Our people are energized and focused, and we have all of the capabilities in place to grow our company profitably while increasing shareholder value. In light of recent events concerning the Hartford, and for the sake of absolute clarity, I want to reiterate once again our enduring views concerning M&A and capital management. We look at lots of deals every year, different sizes, small to large, different geographies and product areas, and we pull the trigger infrequently. We have lots of optionality. We have made 17 acquisitions over the past 15 years and have an excellent track record of advancing the company's capabilities while creating shareholder value. Our approach is steady and consistent. We are extremely patient, disciplined, and the money is not burning a hole in our pocket. If we believe a transaction will advance our strategy and further what we are building organically and is good for shareholders, we won't hesitate to pull the trigger. As regards surplus capital, we're, again, very consistent. We hold capital for risk and growth, both organic and non-organic. Beyond that, we return surplus capital to shareholders. We are highly confident about our future and wealth creation prospects, and we approach the Hartford from that position of strength. This was another opportunity to create additional value and would not distract us from capitalizing on an organic growth opportunity. With that said, the purpose of today's call is to discuss our first quarter financials and our company's business. I'll now turn the call over to Phil, and then we're going to come back and take your questions.