Chubb Limited

Q1 2023 Earnings Conference Call

4/26/2023

spk09: 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 first quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, Again, press star 1. Thank you. It is now my pleasure to turn today's call over to Ms. Karen Beyer, Director of Investor Relations. Please go ahead.
spk00: Thank you, and welcome everyone to our March 31, 2023 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 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 Peter Enns, our Chief Financial Officer. And then we'll take your questions. Also with us to assist with your questions today are several members of our management. And now it's my pleasure to turn the call over to Evan.
spk04: Good morning. We had an excellent start to the year. highlighted by double-digit operating earnings growth that led to record results. We had double-digit premium revenue growth that was global, broad-based, and driven by strong results in our commercial and consumer P&C businesses and our international life business. World-class underwriting results with an 86-3 combined ratio, record net investment income, and life income that more than doubled. North America PNC rate and price increases re-accelerated in the quarter. It was, in a word, a standout performance that I expect will continue. We grew operating income almost 12% to $1.8 billion, and that drove a 15% increase to $4.41 per share, both records. In context, Of what was an active CAT quarter, our published combined ratio reflects simply outstanding underwriting performance from our PNC businesses. The 83.4 ex-CAT current accident year combined ratio was a record. On the investment income side, record adjusted net investment income of $1.2 billion was up over 30%. Our portfolio yield is now 3.8 versus 3% a year ago, with our reinvestment rate averaging 5.5%. Our investment income run rate will continue to grow as we reinvest cash flow at higher rates. Life insurance premium revenue more than doubled, while life earnings doubled to $244 million. Driven by our business in Asia, and predominantly the addition of the Cigna operations, which are mostly A&H and product makeup. In this time of economic and financial market volatility and uncertainty, Chubb is a safe haven. Our business model and the fundamentals of our business are very strong and broad-based. Our earnings and revenue are growing. We have an exceptionally strong capital position and a conservative level of leverage. and our operating cash flow of $11.22 billion and over $2.25 billion this quarter speaks to our strong liquidity. Our unrealized loss as a percentage of tangible equity is 17% and will amortize back to par over a short period. Rising interest rates are our friend, and most important, as you know, you can't have a run on the bank in our business. So again, This speaks to an attractive profile that distinguishes Chubb. Peter's going to have more to say about financial items, including CATS, prior period development, investment income, book value, and a rising ROE. Now turning to growth and the pricing and rate environment. Consolidated net written premiums for the company increased over 16.5% in the quarter on a published basis. or over 18% in constant dollars, comprised of 11% growth in our P&C business globally and 129% growth in life premiums. P&C premium growth in the quarter was balanced and broad-based. North America, Europe, and Asia all produced double-digit growth. Beginning with North America, commercial premiums were up almost 12%, or 6.2% excluding agriculture. Adjusted for the impact of one-off loss portfolio transfers in our major accounts division, year-over-year North America regular commercial flow grew 7.6%, which is representative of the minimum rate growth we expect for the balance of the year. And by the way, the 7.6% is broken down as 10% growth in P&C and minus 2% growth in financial lines. Our major accounts and specialty division grew 6.3% or 8.7 adjusted for the LPTs. And that was 11.4% P&C and minus 7% financial lines. In our middle market and small commercial business, premiums were up 6.5% or 7% in PNC and up 2% in financial lines. Renewal retention for our retail commercial businesses was 97%. On the consumer side in North America, our high net worth personal lines business was up almost 10%, an exceptionally strong result. And in fact, the strongest organic growth in over 15 years. Turning to our international general insurance operations, net premiums were up 10% in constant dollars, or 6% after FX impact, with commercial up 10.8 and consumer up over 8.5. Growth was led by our Asia-Pacific region, with premiums up over 18.5%, with commercial lines up about 15%, and consumer lines up over 22%. And Europe produced overall growth of over 10%. In terms of the commercial PNC rate environment, rates and price increases reaccelerated. Pricing for total North America commercial PNC, which includes rate of 6.4 and exposure change of 4.5, increased 11.2%. against a loss cost trend of 6.7. Pricing for commercial property and casualty, excluding financial lines and workers' comp, was up 16.9%. Property pricing was up 27%, with rates up 16.4 and exposure change of 9.1. Casualty pricing was up 9.9%, which includes 7.4 of rate and 2.3 of exposure. As I said last quarter, for professional lines and workers' comp, which includes risk management, the competitive environment is aggressive, and rates have continued to decline in recognition of favorable experience. In the quarter, rates and pricing for North America financial lines and aggregate were down about 2%. And in workers' comp, which includes both primary comp In risk management, pricing was up 6.4, with rates down 0.5% and exposure up about 6.8%. Internationally, we continued to achieve improved rate-to-exposure across our commercial portfolio. In our international retail business, pricing was up about 8%, with rates up 4.8%, an exposure change of about 2.9, while loss costs across our international commercial portfolio are trending at 6.5%. Turning to our consumer businesses, in North America, high net worth personal lines business, again, net written premiums were up almost 10%, with our true high net worth client segment up over 15%. Retentions were 104% on a premium basis and about 91% on an account basis. We continue to benefit from a flight to quality and capacity. In our homeowners business, we achieved pricing of about 13%, while the homeowners loss cost trend is running about 10.5%. International consumer lines premiums, again, grew over 8.5%. in the quarter in constant dollars. Our international A&H division had another strong quarter with premiums up about 20%. Asia Pacific was up 34 and a half, while the UK was up over 12%. Premiums in our international personal lines business were down a point and a half, and it was impacted by our business in Europe. In our international life insurance business, again, premiums and income overall more than doubled. Our business in Korea and the majority of Asia is off to a good start to the year. I was just in Korea two weeks ago. Our leadership, the franchise, the strategy, the execution, and the growth are all in really good shape. And this is a very large business for Chubb. In summary, we had an excellent quarter and have had a strong start to the year with a lot of momentum heading into the second quarter. Looking forward, we are confident in our ability to continue growing revenue and operating earnings, which in turn drive EPS through the three engines of P&C underwriting income, investment income, and life income. Add to that our business model. financial strength, stability, and liquidity, and I believe you, Evan Chubb, both the reassurance of safety and the attractive prospects of a long-term growth company. I'll turn the call over to Peter, and then we're going to come back and take your questions.
spk13: Thank you, Evan, and good morning. Before we begin, I want to note that previously reported numbers and the financial supplement we just filed were adjusted to reflect the impact from the adoption of LDTI accounting, which primarily relates to our life insurance business. The cumulative impact of LDTI on our book value and overall results is immaterial. Please refer to page 31 of the financial supplement for detailed information. Turning to our first quarter results, as you've just heard, we are starting out the year in an exceptionally strong financial position. Our P&C divisions, expanding life business, and strong investment performance produced operating cash flow of $2.3 billion. We grew our assets to over $200 billion, and this includes invested assets of about $116 billion that continued to benefit from the current rate environment and generated our fourth consecutive quarter of record net investment income. I would note S&P and Fitch both reaffirmed our AA ratings and stable outlook, reflecting our strong financial position. Relative to capital-related actions in the quarter, we returned $772 million to shareholders, including $428 million in share repurchases at an average price of $212.81 per share and $344 million in dividends. Book value and tangible book value per share increased 5% and 8.7% respectively from last quarter. The increase reflects our record core operating income and net realized and unrealized gains of $1.7 billion in the investment portfolio, partially offset by the capital return to shareholders I already mentioned. Our core operating ROE for the quarter was 12.6%, and our core operating return on tangible equity was 19.4%. A year ago, Evan stated our target for 2023 core operating ROE excluding excess capital, or on a deployed capital basis to be 13% and core operating return on tangible equity to be 20%. In this first quarter of 2023, we estimate these deployed capital ROE results to be in the range of 13.5% to 14% and 23% to 23.5% respectively. Adjusted net investment income for the quarter is $1.2 billion and top last year's record quarter last quarter's record by over 7%, reflecting higher reinvestment rates that impact recurring income, as well as certain items totaling approximately $35 million, including higher-than-expected private equity distributions that vary from quarter to quarter. We now expect our adjusted net investment income on a recurring basis to rise from this quarter's 1.165 to 1.2 to 1.22 next quarter. and we expect it to continue to rise from there for the remainder of the year given our positive cash flows, portfolio turnover, and the current reinvestment rate environment. Let me make a few more comments on investments given recent economic and market events. We continue to maintain our consistent conservative approach to our investment process, and our portfolio remains high quality with an average rate A rating. Our overall exposure to banks is 8% of invested assets with two-thirds of that in G-CIFIs. We have no exposure to Silicon Valley, Signature, or First Republic banks. We have no exposure to Credit Suisse contingent capital securities and do not invest in Tier 1 bank COCOs as an investment policy. Our exposure to regional banks is less than 1% of our portfolio and is in high-quality names. Our total direct exposure to commercial real estate is 4% of invested assets, and 87% of that total is in investment grade securities with an average rating of AA. This portfolio is skewed to multifamily and industrial sectors with under 20% related to the commercial office segment. High yield credit is currently 14% of our portfolio and is targeted to the upper tier of the high yield market, rated BBB, with a current average rating of B+. broadly diversified with over 900 issuers and mandated to outperform and down markets. Back to our underwriting business. The quarter included pre-tax catastrophe losses of 458 million, split 76% in the US and 24% internationally. In the US, the loss activity consisted of winter-related storms and other severe weather events. Internationally, results were primarily impacted by storms in New Zealand and Australia. Prior period development in the quarter was a favorable $196 million. Included in that total is adverse development of $6 million related to the 2022 axe and ear cat losses, comprised of $119 million adverse development from Winter Storm Elliot and $113 million favorable from Hurricane Ian. Excluding cat-related development, we had favorable development of $202 million across all lines, commercial and consumer. with $228 million favorable related to short tail lines and an adverse development of $26 million in long tail lines, $10 million of which was from corporate runoff lines. Our paid-to-incurred ratio for the quarter was 92% or 82% after adjusting for CATS, prior peer development, and a large payment related to the Boy Scouts of America settlement. Our core operating effective tax rate was 18.1% for the quarter at the low end of our expected annual range, I would highlight the first quarter often has a lower tax rate than the full year, and we continue to expect our annual core operating effective tax rate for this year to be in the range of 18 to 19%. Lastly, relative to Wattai, we closed on some of our outstanding shares during the quarter, which brought our ownership interest to 64%. We continue to apply equity accounting for the first quarter, and we'll consolidate Wattai once we go over two-thirds ownership. which we think will likely occur in the second quarter when we anticipate exceeding 80%. I'll now turn the call back over to Karen.
spk00: Thank you. At this point, we're happy to take your questions.
spk09: 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. Your first question comes from the line of David Mote-Magnon with Evercore ISI. Your line is open.
spk15: Good morning, David.
spk01: Thanks.
spk15: Good morning.
spk01: Good morning. Good morning, Evan. So, you know, really encouraging to see the reacceleration in North America commercial pricing. It sounds like most of that was rate versus exposure. I guess I also heard that you said, you know, you expect a 7.6% sort of minimum growth in North America commercial throughout the course of the year. So wondering if you could just unpack that. how you see that progressing between, you know, both, you know, rate on existing, you know, policies as well as just growth in terms of adding, you know, new incremental units of exposure.
spk04: Yeah. No. David, I, as you know, we don't give forward guidance really. And, you know, I gave you a little flash, but I'm not going to go further than that. I and you know I was pretty clear I expect the the trend you see in pricing and I expect the trend you see in sort of pattern and growth to continue and and you got a sense of PNC lines growing and you got a sense of professional or financial lines And beyond that, it's not simply about North America. And look at the company globally and frankly, look at the international PNC and I expect the pattern to continue. Look at consumer lines and I expect the pattern to continue. Look at life and I expect the pattern to continue. Investment income and I expect the pattern to continue.
spk16: Okay, great.
spk01: I appreciate that. And then as my follow-up, Evan, in your letter, you spoke about how Chubb enhanced its ability to collect and assess loss cost data more quickly and accurately, and that helps you be more insightful in pricing and reserving. I was wondering if you could just elaborate on how you enhanced this ability and if that played in. I heard you may have ticked up the loss trend a little bit in North America commercial wondering what insight gave you to do or this enhanced ability to view lost trend data, how that played into potentially changing how you're viewing trend going forward.
spk04: Yeah, you know, and I talked about this, you're right, in the letter and on previous calls. And that is, like so many, businesses, you know, if you take a bigger picture view of it, insurance and, you know, among other financial companies and non-financial, we're coming out of a, and have come out of a period of very low inflation, zero cost of money fundamentally, a world overwhelmed by liquidity.
spk16: And
spk04: In a low inflation environment, you don't have to be necessarily as insightful on loss cost at a particular moment in time. Lag has less of an impact on you. You have to watch it very carefully. But the time element of date of when of data when you get it, you could be a little more relaxed. It's a quarter old, two quarters old, less important. In an inflationary environment, which we experienced and began a while ago, that's a killer. And for those of us who've experienced inflation, that time value can mean everything. inaccuracy. And that's where we really immediately, when we saw it, jumped on it and measured that time lag in data, which, you know, you have to get to the source of input when you're looking at inflation, whether it's on the physical side of when a repair is actually occurring to an automobile or a home, or it's on the liability side very quickly in the development of that. You have to be on top of the trend, and you really have to unpack severity from frequency, and then you have the impact of COVID on frequency. And then you add to that the tools we have available in terms of external data and the use of it. and our ability to manipulate and use data, internal and external, more insightfully and more quickly. You add the capabilities and analytics of this organization with claims and actuarial and underwriting together, and I think it's a competitive weapon and advantage, particularly the speed at which we can react. And I think any modern financial organization that distinguishes itself, that's part of the action.
spk16: Great. Thank you. You're welcome.
spk09: Your next question is from the line of Mike Zaremski with VMO. Your line is open.
spk15: Good morning. First question on reinsurance costs.
spk12: Any, you know, given industries experiencing higher reinsurance costs, both on property and on the casualty side, and maybe that's not the case for Chubb, feel free to correct me. Is Chubb contemplating any changes in its strategy, maybe retentions, or is this still TBD as things progress?
spk04: No, no material change. And, you know, we obviously aren't going to, as you can appreciate, I'm not going to discuss our own reinsurance programs. For our own protections, that's proprietary. But our retentions have not changed in any material way. And we've got a big balance sheet. We take a lot of risk, net. And we really don't buy reinsurance for earnings protection so much. We buy it more for balance sheet protection and, depending on the line of business, volatility. And that's been a steady policy of ours and we maintain it regardless of cycle.
spk15: Got it.
spk12: Follow-up on market conditions, and you gave us a lot of good color. You know, if we – the acceleration in pure rate, you know, accelerated a lot more than I think there might have been a tad bit of a lost cost pickup just on the North America commercial side, but maybe you can kind of lend some more color on on, you know, do you feel the market's being more rational in terms of kind of adjusting to lost cost trends and also higher reinsurance pricing? And it sounded like you were optimistic that things have, you know, competitive conditions have gotten a little bit better quarter over quarter. Thanks.
spk04: Yeah, you know, I think it's a little bit of a mixed bag. property certainly and short tail certainly responding I think in larger account business responding a little better than in in middle market though middle market has a stability to it it's more in PNC lines I think that financial lines, certain areas of financial lines, and so in those areas, I generally like the tone. You know, we're seeing excess casualty, particularly in larger account business, respond. I'm imagining in time middle market will need to and will. So rate is pretty, our rates are increasing there. When I look at professional lines, and you have to unpack it between financial lines, between professional liability, and there are all kinds of classes in D&O, both private and public D&O. I think public D&O market is You know, there were a lot of players with no data and no experience. And they're receiving, many of them, capacity by those who don't seem to have their eye on the ball. And there's an area where I think the market is overshooting the mark. And, you know, of course, we'll always trade, in that case, you know, volume for... And under the right underwriting and it's not an area that I think is devoid of risk particular as you look forward everything from You know recession and volatility and financial markets to climate change You know claims of greenwashing and all of that, you know, so it doesn't That you know, and that's just a line, you know, so, you know on the margin so I It's a mixed bag. Comp is overall experience is good. Exposure is growing. And on the other hand, you've got to be careful on exposure because wages are rising. That means indemnity severity rise. And I've said it before, at this point, you know, the market could shoot the market up. So you've got to be a little cautious. But overall in direction, you see the direction in PNC lines. And I think that direction is a tone that will continue and a pattern that I expect will continue.
spk16: Thank you.
spk09: Your next question is from the line of your own, Kinnar with Jefferies. Your line is open.
spk07: Thank you. Good morning. My first question, I guess more specifically to North America Commercial, do you see the overall book?
spk04: But anyway, go ahead.
spk07: Well, I could do that, but I'm not sure we have enough time. With North America commercial, do you see the book overall as rate adequate today? Yes. You do. So with that in mind, I guess, why would we not see more acceleration of premiums given that rates are adequate and picking up? Why wouldn't you lean into that a little more with greater exposure?
spk04: Well, you said overall. And so that's overall. So And so I'm happy to answer overall. And by the way, I said to you 10% growth in P&C lines. And I said financial lines, professional lines, financial lines in aggregate down. So I think in areas where we like the
spk16: pricing, you're seeing the business grow.
spk04: And I'll leave it at that. I'm not going to go deeper than that. I think I just gave what investors need to know.
spk07: Okay. Okay. And then my other question was on the G&A expense side. It seemed to be a modest pickup in North America, both personal and commercial. Are there any specific platform investments you can call out, or is it just wage inflation hiring?
spk04: No, the expense ratio, you'll note, was up because pension expenses, fundamentally it was pension expenses with the rise in in interest rates that. Picked up and. You know that's just. That's something that you know you can't control really. Isn't just that it's an accounting adjustment. For future pension costs on. We have a defined benefit pension plan that's closed for many years it was legacy. Chubb that. Had that. And so that's the impact. That's all.
spk06: Got it. So is that a reasonable run rate to think of for the rest of the year?
spk04: Yeah, reasonable. So you'll note the pattern of expense ratio. It's usually a little higher this quarter than in future quarters when I look at it. The pension will be consistent each quarter.
spk16: And then there's other stuff around that. Got it. Thanks so much. You're welcome.
spk09: Your next question is from the line of Greg Peters with Raymond James. Your line is open.
spk05: Excellent. Good morning, everyone. Evan, in your prepared comments, I think you mentioned a recent trip to Korea. You talked about the life results. Maybe you can give us an update on the Cigna acquisition, how the integration is proceeding, and if there's any update on sort of ROE targets related to Cigna. now that it's in the Chubb family.
spk04: Yeah, I'll just take the last part first. As you know, the egg is scrambled now, and so we don't really spike that part out. But look, I'm energized by what I see in Asia and what we have bubbling around. And by the way, I'm going to do third quarter earnings from Asia. I'm going to do it from Singapore because I'm going to spend six or seven weeks out there. You know, the integration is going so well, and we're so energized by what we see in the power of the organization with the two parts pulled together. The integration has gone extremely well. And of course, all the efficiencies, that's the easy part. In a sense, that's all right on target. But it's the growth and the breadth of capability. Our direct marketing business, we're the largest direct marketers of insurance in Asia. There's not a doubt to me. both through telemarketing, through digital, life and non-life, the breadth of product there, the number of partnerships that we have between the organizations and the compelling offering given the breadth and the ability of our life and non-life together to work together like one organization. No one else really has that. customer database we have between the companies that numbers in the millions of customers to cross-market and cross-sell to that we're just actively doing through telemarketing and digital. The growth of our agency organization, whether it's in Korea through independent life agency distribution, or in places like Thailand and Vietnam with tens of thousands of agents that are growing. When I look across Korea, Thailand, Indonesia, Taiwan, even Hong Kong that's small, but the combination of the two, and growth is accelerating in these areas, the number of partnerships that we have. When I add it all together, I feel really good about what we have as franchise and capability and the potential of it over time. By the way, a lot of the same features I see in Latin America, a much smaller region, just the geography and the size of economies. Wow, it's excellent. And then, by the way, I'm sure you noticed that in the quarter, Europe grew 10%. That's 40% of their business renews in the year. And they do in the year. And they grew at 10%. So it's really broad-based. And I like what I see.
spk05: Yeah, the Europe numbers are kind of surprising, you know, against the backdrop of the macro news that we read about here and there. You'd spent, you know, some time during the discussion talking about all the data resources, the analytics you have, and one of the topics that's become more popular and more recent is this chat GPT. So maybe you can segue and talk about how you're deploying AI across your organization and the opportunity you have to drive further efficiencies as you utilize these types of tools.
spk16: Yeah. I'll touch on it a little bit. You know, chat GPT is, generalized AI which is text-based analytics and deep thinking we use other kinds of AI deep learning and others beyond that or that are numbers based math based
spk04: As well We've been Experimenting in in the use of various forms of AI is the point against different Areas of our business Depending on the kind of opportunity or problem or enhancement of power that we're trying to address from underwriting and insight and risk cohorts to claims to marketing and analytics or customer interface and customer service or telemarketing. And we've been doing this for the last five years. We have a variety of use cases that have proven themselves out.
spk16: And we continue to iterate with it.
spk04: We have a lot of data. And we have an ability to enhance that data with external data. It's not simply about AI tools. It's about data. and your ability with that. So therefore, you keep pulling a string and your data infrastructure becomes so important. And data engineering becomes so important because it's a fuel that AI needs to feed on itself and all its varieties to become insightful and powerful to you. In most cases, it's not going to replace our highest skilled knowledge workers. It won't do that for quite a while. But it certainly enhances the abilities and the capability. I'm not worried about my job. It certainly enhances their capabilities. And now... We're in the dawn of the period where we use these tools at scale. And the things that we have built and experimented with, the momentum builds and they start rolling out at scale. And that means insight. That means speed. That means accuracy.
spk16: That means cost. That means momentum. And, you know, and think of that in terms of a number of years. It's not months. Great. Thank you for the answers. You're welcome. Yeah.
spk09: Your next question is from the line of Elise Greenspan with Wells Fargo. Your line is open.
spk10: Hi, thanks. Good morning, Evan. My first question is on the reinsurance market. You guys saw, you know, some growth in your reinsurance segment, but it sounds like from your commentary, you know, you're seeing better opportunities, it sounds like, on the primary property side than perhaps, you know, to write more property reinsurance business, but I was hoping you could just expand on that comment and correct me if I'm wrong.
spk04: Yeah, no, you're correct. We're, you know, we got a finite balance sheet. We can't take infinite amount of risk. And we like the risk reward and the total opportunity. On the primary side, we're much more biased on the primary side than we are on the CAT RE side. And so that is correct. So, you know, our CAT RE and CAT and property excess and property quota share business, so not just straight CAT RE, Those are areas where we're taking more exposure, but you're right, overwhelmingly, when we look at the market and the risk-reward, we're more primary-oriented.
spk10: Thanks. And then my second question, Peter, I know you said that you guys will consolidate the YTAI ownership, you know, when it goes above 80%. I'm not sure if Chubb has disclosed the earnings from YTAI historically, or can you just give us a sense of the expected contribution once that is consolidated or any help you can provide there?
spk13: Yeah, we typically don't or we have not disclosed YTAI's earnings specifically. We'll have more comments after it closes and we consolidate. And what I've said historically is it won't have a material impact on a net basis to us in terms of earnings.
spk04: What we think, you know, it'll be, you know, pretty neutral. Yeah. Initially.
spk10: Okay, thank you.
spk09: Your next question is from the line of Tracy Ben Gigi with Barclays. Your line is open.
spk11: Good morning. Hey. All right, quick question. Do you manage your business more on net growth than growth, or is that vice versa? I'm just thinking about capital consumption. If you're retaining more, could that dampen how much you want to grow growth premiums?
spk04: No. Frankly, we disclose our net to gross, and you see that's pretty steady. You know, we manage, we measure both, and we use both gross and net for different reasons, different purposes. When I'm going to manage the balance sheet, it's net. When I'm going to look at marketing and swinging a stick, on our capacity, et cetera. It's gross. It's a much more complicated answer question, but it's when you get to operating. But it's both.
spk11: Okay. So I just wanted to make sure that I understood prior comments correctly. So the 4% growth in gross premium rent we saw in North America
spk04: Commercial lines which was lower than we've seen in prior quarters that had to do more with business that has more volatility to it because of risk management business and and certain kinds of businesses that have a a gross line component to it, but in that case, I'm driven and RI and all our discussion is When we look at stick to the bones is on the net basis.
spk11: Got it.
spk04: I'm also curious to talk net, not gross, but both are important to us as operators for different reasons.
spk11: Got it. I'm also curious, did you increase your loss picks from banking via no claims activity this quarter? I noticed that your North America commercial underlying loss ratio improved both sequentially and year-over-year. So I'm wondering if that improvement would be in spite of any raise in loss picks.
spk16: No. Thank you. You're welcome.
spk09: Your next question is from the line of Alex Scott with Goldman Sachs. Your line is open.
spk02: Hi. Good morning. The first one I had was just to see if you could give us some context for where court reopening is at and just sort of the timing of how the backlog is progressing and, you know, maybe even how that's informing some of the analytics and things you're doing around loss costs.
spk04: Look, frequency of loss and casualty is just has been on a March where it's rising and reverting to the mean of pre-COVID. It varies by line of business. In some lines of business, the frequency of loss is still below pre-COVID. In some others, it has reverted to pre-COVID trend. So it varies. But overall, frequency has been increasing, and that's proxy that, you know, and that's been going for a while, so that's a little bit of yesterday's news, that the courts, you know, they've been reopened over a year or so. You know, there you go, and the lawyers are all active.
spk02: Got it. And then maybe a little bit more of a housekeeping question for you, but on the life insurance segment, I mean, should we think about LDTI, you know, moving the run rate up or down, you know, at the margin? Just, you know, a little difficult to tell from the outside because we only have a couple quarters of Cigna, and so, you know, not too long of a track record to look at under the recasted financials.
spk13: Alex, the way I would think about it is, and you pointed out between Cigna coming online, purchase gap, and LDTI, there's been movement in the numbers. The first quarter of this year, things are settling, and we think are representative of a run rate going forward.
spk02: Got it. Thank you.
spk13: You're welcome.
spk09: Your next question is from the line of Brian Meredith with UBS. Your line is open.
spk08: Yeah, thanks. Evan, can I just quickly clarify something and get a bunch of questions on it? The 7.6% growth rate that you mentioned, That's premium growth for the remainder of the year, minimum premium growth to expect for the remainder of the year. Is that correct? A North America commercial?
spk04: I gave you a feeling of a forward view that I would expect it to be no less than that. And then I gave you a breakdown of the 7.6 that was 11 in P&C lines and was negative in... in financial lines.
spk08: Yep, makes sense. So it's premium growth. Great.
spk04: Yeah, that was not rate or trend or anything. That was premium.
spk08: That's what I thought. That's what I thought. I just wanted to clarify. Sorry, I was going to get a bunch of questions on it. The second question, I'm just curious. I'm trying to kind of do some mental math here on this, and that can be dangerous. But looking at your 11 and change pricing in North American commercial versus the 7.6, premium growth. Was there something going on with mix or something would cause the pricing to be greater than the premium growth?
spk04: There's always something going on with mix.
spk08: So is it a mix issue or something going on?
spk04: And remember, I gave you P&C growth versus financial lines growth. And I didn't give you any more than that. I'm not going to go deeper than that. And then, you know, I gave you rate and trend. And, you know, you have renewal retention rate. I gave you that. New business varied by area. So, you know, is there anything more to it really? Not really. Now, in properties. I should say this to you as you ask it in property where you see the rate rate includes because we can measure it so accurately the change in terms and conditions so if deductible changes that's worth rate and so you could exceed this exposure actually go down there and if you're following me and so that also When you want to roll around math in your brain, that may help you a little bit.
spk08: That's really, really helpful. And then can I just, one follow-up? Cyber market, can you just tell us kind of what your thoughts are there now in the cyber market? Is that an attractive market at this point from a pricing and what's happened with term and condition in the last couple of years?
spk04: Yeah. You know, the terms and conditions, there's a lot of noise in particular. It's around... cat exposure and war and definitions of war, or I think war is a misnomer. It's hostile actions by nation states. And that would be more the term and conditions of what's going on. But beyond that, the cyber loss environment is not benign. Ransomware frequency of loss. and severity is picking up. It was temporarily down. Cyber pricing and underwriting has responded to the external environment, I think, reasonably well. And if it maintains discipline, then I'm not concerned. I would assume that all cyber underwriters see what we see in terms of the loss environment, and you've got to be aware of it. But other than that, it's, I think, reasonably disciplined in underwriting and pricing.
spk08: Perfect. Thank you.
spk04: You're welcome.
spk09: Your next question is from the line of Ryan Tunis with Autonomous Research. Your line is open.
spk03: Hey, thanks. Good morning. Yeah, I mean, I guess just taking a step back, it's a life-related question. I'm just curious, like over the past, call it five years or so, if you could just kind of walk us through how your thought process has evolved to appreciate that business a little bit more. I guess it comes from a place where the Cigna deal, it felt like a nice little financial acquisition, but I didn't think it was going to put you in Singapore for seven weeks. You're clearly more enthusiastic about this business. How has your thinking evolved to really think that's a growth engine for Chubb?
spk04: First, I want to take a step back on that and say Asia is on my mind. It's not simply the life business. Half the business is PNC. And that is robust. Asia itself is, you know, don't hold me to the number, I have it in my head, but it's roughly a $10 billion region for us. Important. It's massive region in scale. It's the greatest, it has the greatest growth potential economically. I think of any region in the world over the next decade, two decades, though it has a volatility to it, naturally. India, China, Southeast Asia, the dynamism of developed Asia, of Korea, Japan, it's just, it's massive. Australia is part of Asia to us and to the Australians. And it's non-life and life. And I look at it as one organization. It's CHUBB. The way they work together is awesome. We began our life business about a decade. I began it over a decade ago. I mean, heck, I was pounding on the door of Vietnam to get one of the few life licenses they gave out in 2002, 2003, I was banging on that door. And we've been at it since, growing organically, and then through acquisition, and the Cigna just turbocharged it. At the same time in our non-life business, we were growing from dust, an A&H business that could have been incubated in a life company or a non-life company. Cigna is to a large degree A&H business. Our life business is a combination of agency distribution and direct marketing. And the direct marketing is non-life and life. And the life products themselves are much more Back to the future, because Asia is different. And they're traditional life products that have much better ROE characteristics to them. They have very low guarantees. They have traditional savings. They have a lot of risk element to them that we like, A&H in particular, whether it's dread disease or hospital cash. very limited basic medical that the customer buys along with savings. And, you know, savings rates are high in Asia. You have a very young population, the youngest in the world, and a growing labor force. And it's combined with a very family-oriented culture and ethic. And and the drives long-term savings and you have low social safety nets and so Private insurance means more that all plays to life and to non-life And frankly operating my office from there In and I'm going to be out of both Hong Kong and Singapore is I is simply there is such opportunity. And I travel back and forth, have for decades, a few times a year. But this is just to be more insightful and deeper about it in terms of strategy as we go forward. And my colleagues, many of them, will do the same. Thank you. We're a global company.
spk03: Just quickly, I guess this is more nuanced, might be for Peter, but you mentioned some LPT activity in North America commercial. Just curious if that had any impact on the loss ratio year over year.
spk04: Very, it was minor in terms of, you know, its impact at the loss ratio down, expense ratio up. That's what happens with it, but very, very minor. You can measure it at a tenth of a percent. Thank you. Because we did.
spk09: At this time, I would like to turn the call back over to Ms. Karen Beyer.
spk00: Thank you, everyone, for joining us today. And if you have any follow-up questions, we'll be around to take your calls. Enjoy the day. Thanks.
spk09: Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.
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Q1CB 2023

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