Chubb Limited

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, 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. It is now my pleasure to turn today's call over to Ms. Karen Beyer, Senior Vice President and Director of Investor Relations. Ma'am, please go ahead.

Thank you, and welcome everyone to our September 30th, 2023 Third 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 risks and uncertainties, 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.shov.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 statement. Supplements. And 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. Then we'll take your questions. 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. 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 88-4 combined ratio, record net investment income, and 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 13.5 with a return on tangible equity of 21.2. Core operating income of $4.95 per share was up 58% over prior year. And 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 84.3, or 83, excluding agriculture, favorable prior period reserve development in both North America and overseas general, and relatively average CAT losses compared to our expected. 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 and 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, or 34% over prior year. 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 Watai Group, to 69.6%, and now we're consolidating results, which were accretive 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%. A summary of the financial impact of Wattai is provided for you in the earnings release and the financial supplement. Peter will have more to say about financial items, including CATS, prior period, reserve development, investment income, book value, ROE, and WATAI. Now turning to growth, pricing, and 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 and about 15% in our life divisions. Global P&C premium growth, which excludes agriculture, was 12.3%, with commercial lines up almost 10.5% and consumer lines up about 17%. In agriculture, crop premiums were lower than last year due to the timing of when we recognized them. Year-to-date premiums are, 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, rates and price increases in property and casualty lines in aggregate remain strong in the quarter in both North America and our international divisions, while decreases in financial lines in North America continued. We remained vigilant and diligent about staying on top of lost cost inflation. Beginning with North America, commercial premiums excluding agriculture were up 8.7%. P&C 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 and 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%. 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%, an exposure change of 5.5%. Casualty pricing in North America was up 11%, with rates up 8.7% and exposure up 2%. Workers' comp, which includes both primary comp and large account risk management, pricing was up 5.5%, with rates essentially flat and exposure up 6%. 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're trending loss costs in short-tail classes at 5.8%. In long-tail, 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 D&O. Rates have continued to decline. In the quarter, rates and pricing for North America financial lines in aggregate were down 4.8 and 3.8, respectively. We're trending financial lines loss costs at 4.7. Renewal retention for our commercial lines 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, with premiums up over 9.5%, with strong retention and new business growth. In our homeowners business, we achieved pricing of 15%, while 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 consolidation. 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. 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 orders with growth of 14.2% and 10.2% respectively. 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%, while financial lines pricing was up 2.3%. Lost cost inflation across our international commercial portfolio remained steady from last quarter, trending at 6.6%. Within our international consumer, our A&H and personal lines divisions both had strong orders, 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 lost cost environment. In our international life business, which is almost entirely Asia, premiums are up nearly 20%, including the impact of the Watai 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 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 PNC underwriting income, investment income, life income. I'm going to turn this call over to Peter, and then I'm going to come back and take on the questions. Thank you, Evan, and good morning. First, I want to note that we completed our first quarter with Watai Group as a consolidated subsidiary. The results of Watai are reported at 100% within our financials, with only certain key metrics reported and net income, book and tangible book value, and ROE measures. Turning to our results, CHUB reached two milestones this quarter. Invested 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. 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%. Intangible book value per share excluding AOCI decreased 4.2% for the quarter, with 7.5 percentage points coming from the dilutive impact of consolidating Wattai. With the consolidation on July 1st, 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. Watai had a modest impact on results this quarter, in line with expectations, adding $0.12, or 2.5%, to core operating income per share, a 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. 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 insight into Wattai's portfolio and it fits well with our overall conservative approach to investing. 87% of Wattai's 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 underrated business for the quarter wildfires in North America. Total catastrophe losses were split 82% U.S. and 18% internationally. Prior period development in the quarter in our active businesses was a favorable $261 million pre-tax. The PPD in our active businesses this quarter consisted of $316 million favorable development in short tail lines and $55 million of unfavorable development in long tail lines. Our corporate runoff $1 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.