Chubb Limited

Ladies and gentlemen, please stand by. Good day and welcome to the Chubb Limited first quarter 2022 earnings conference call. Today's conference is being recorded. If you would like to ask a question, please press star one on your telephone keypad. Now 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 welcome to our March 31, 2022 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 released, and financial supplements, which are available on our website at investors.chubbs.com for more information on factors that could affect . We will also refer today to non-GAAP financial measures, reconciliations of which to the most direct comparable GAAP measures and related details are provided in our earnings press release and financial supplement. Now I'd like to introduce our speakers. First we have Evan Greenberg, Chairman and Chief Executive Officer. followed by Peter Enns, our Chief Financial Officer. And then we'll take your questions. Also with us to assist with your questions this morning are several members of our management team. And now it's my pleasure to turn the call over to Evan.

Good morning. We had an excellent start to the year with record per share operating earnings and underwriting results. double-digit global P&C commercial lines premium growth, accompanied by rate increases in excess of loss costs, and improving growth in our consumer business globally. Core operating income in the quarter was $1.64 billion, or a record $3.82 per share, up 52% on a per-share basis over prior years. In the quarter, we produced simply outstanding underwriting results. 1.28 billion of underwriting income was more than double prior year with a combined ratio of 84.3, both records. Our PNC current accident year combined ratio excluding catastrophes was 83.5%, a 1.7 point improvement over prior year, with about one point from loss ratio improvement and the balance expense driven. On the investment income side, adjusted net investment income was circa $900 million for the quarter. We are predominantly a buy and hold fixed income investor, and given rising interest rates and widening spreads, we expect investment income to increase from here. Every 100 basis points increase in interest rates for us, is worth on an annualized basis about $1.2 billion in pre-tax investment income. We have a portfolio duration of about four years, so a rise in rates begins to earn in reasonably quickly. Peter will have more to say about other financial items. Let me say a few words about the Russian-Ukraine war. The events unfolding before our eyes are a human tragedy of epic proportions with profound geopolitical implications. Our actual incurred losses to date from the event are de minimis. And from all we know today, while additional losses may develop over time, this will not represent a meaningful event for Chubb. Integration planning around the Cigna transaction is quite active and remains on track. We expect to receive regulatory approvals leading to a close during the second quarter. There are no changes of substance to the guidance we gave you, and any changes are modestly positive. We will update you after closing. Now turning to growth, the rate environment and inflation. Global PNC premiums, which exclude agriculture, increased 8.8% in the quarter on a published basis. were 10.7% in constant dollars, with commercial up 12% and consumer up 8%. Growth in the quarter was broad-based, with contributions from virtually all commercial businesses globally. From large corporate to middle market to small, from traditional to specialty in most all regions of the world, commercial P&C premiums excluding agriculture for North America were up 10.5%. While in overseas general, they grew 13 in constant dollars. But we then had five points of FX impact to the published results. Agriculture premiums were down in the quarter because of a return of premium to the government. It was based on our level of profitability for the 21 crop year. This is a favorable and expected development. You will recall that crop insurance is a business where revenue and losses are shared with the government. For the 22 crop year, we will have a substantial increase in premium revenue over last year, given commodity prices and other factors. Most of this will be recognized in the third quarter. Returning to commercial PNC, in terms of rate, the level of rate increase remains strong. And as I have said before, is naturally moderating as individual portfolios achieve adequacy and additional rate is then required to keep pace with loss costs. The rate environment is reasonably orderly, and in aggregate, rate increases remain in excess of observed and projected loss costs. In the quarter in North America, total PNC premiums excluding agriculture grew 9.6%. again with commercial up 10.5%. Growth this quarter in commercial lines was led by our middle market and small commercial business, with premiums up almost 12%, followed by our major accounts and specialty division, which grew 9.5%. Total exposure change was a positive one point in the quarter, a combination of an increase in economic exposure of about 3.2%, due to higher payrolls, sales, and other economically sensitive activity. And on the other hand, a decline in exposure due to underwriting changes, such as increased attachment points and higher deductibles, which is a good thing. Renewal retention for our retail commercial businesses was 100% on a premium basis, very strong. Overall rates increased in North America commercial lines 8.7%. Major accounts, which serves the largest companies in America, rates increased 9.3%. General casualty rates were up over 15.5% and varied by class of casualty, while risk management-related primary comp and casualty rates were up 3.7%. Property rates were up 9.1%. financial lines rates were up 13.9% and varied by subcategory. In our E&S wholesale business, rates increased by more than 11%. Rates were up 13.3% in property. Casualty was up 10% and financial lines rates were up 15.4%. And in our middle market business, rates increased 7.7%, or 9.5% excluding comp. Rates for property were up over 8%. Casualty rates, excluding comp, were up 8.5%. And comp rates were down 1.5%. But comp pricing, which is rate plus exposure, was up over 9%. And finally, financial lines in middle market were up 17%. We are trending loss costs at 6%, and it varies by line. In general, we're trending lost costs in the rates we charge for short-tail classes just over 6.5%, though the actual is running lower. In long-tail, excluding workers' comp, we continue to trend at a 6% rate overall, and our first dollar workers' comp book is trending between 4% and 4.5%. In short-tail classes, we are actively monitoring property valuations, loss costs as they develop, and the real-time drivers of costs for changes in inflation, labor, parts and supplies, as well as the delays caused by supply chain disruptions given the length of time to repair or replace. This can add additional pressure on costs. In long tail lines, we actively monitor and study both frequency and severity of each class. Turning to our international general insurance operations, retail commercial PNC premiums grew 15.5% in constant dollar, while our London wholesale business grew just over 5.5%. Retail commercial growth varied by region, with premiums up 18.5% in Latin America. followed by growth of about 16.5% in our UK and Europe division, and Asia pack was up 14.5%. Internationally, like in the U.S., we continued to achieve improved rate to exposure across our commercial portfolio. In our international retail business, rates increased in the quarter 10%, while in our London wholesale business, rates increased 9%. both varied by class and by region, as well as country within region. Outside North America, loss costs are currently trending about 4%, though that varies by class of business and country. In general, loss costs for short-tail classes are running just under 4%, and we anticipate this to increase. In long-tail, we are trending at about a 4.5% rate. International consumer lines growth in the quarter continued to recover from the pandemic's impact on consumer-related activity. Premiums increased about 9.5%, though FX then scrubbed six points off the growth rate. Premiums in our international A&H business grew 8.6% in constant dollar. Our international personal lines business grew over 10%. Latin America led the way with ANH and personal lines growth of over 18% and 17.5% respectively, while AsiaPAC's growth for these two product lines was over 6% and 24.5% respectively. Net premiums in our North America high net worth personal lines business were up about 7.5%. Last year's reinsurance reinstatement premiums due to CAT losses had a negative impact on growth then. Adjusted for that, plus other one-time items, our underlying growth was about five and a half in the quarter. Our true high net worth client segment, the heart of our business, grew over 13 in the quarter, driven by a flight to quality and competitors leaving certain markets, while overall retention was very strong at nearly 99%. In our homeowners business, we achieved pricing, which includes rate and exposure of 12.3%, while homeowners' loss costs are running in the 11 range. In our Asia-focused international life insurance business, net premiums plus deposits were flat in constant dollar, but will increase in future quarters, while net premiums in our global re-business were up 22%. In sum, we had an outstanding quarter all around, and we are off to a great start to the year. As I look ahead, I remain optimistic and confident in the things we can control. So I have naturally grown more cautious given the world around us. Economic growth, general inflation and central bank actions, and the war come to mind. We will continue to capitalize unfavorable underwriting conditions for our commercial P&C businesses globally, consumer lines growth to continue to recover. As interest rates rise, our investment income will as well. And as I stated last quarter, our strategic investments, including the acquisitions of Cigna, and likely later in the year, Wattai, will provide us with greater revenue and earnings growth opportunity. I'll now turn the call over to Peter, and then we'll be back to take your questions.