Chubb Limited

Thank you. I'd now like to turn the call over to Karen Byer, Senior Vice President Investor Relations. You may begin.

Thank you, and welcome everyone to our December 31, 2024, fourth quarter and year-end 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 uncertainties and actually results may differ materially. Please see our recent SEC filings, earnings release and financial supplements, which are available on our website at .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 provided in our earnings press release and financial supplements. 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 stick with your questions this morning are several members of our management team. It would be my pleasure to turn the call over to Evan.

Good morning. Before I begin, I want to take a moment to speak about the terrible tragedy surrounding the California wildfires, the lives lost and tremendous loss of property. A major disaster still unfolding. Our job and the role we play in society is to support our policy. Our colleagues have been on the ground, supported by chubb colleagues throughout the US, Debring to assist those clients who have lost property, been displaced from their homes and businesses, had their lives severely disrupted. Oh, it doesn't erase the enormous difficulty they have and will continue to experience. We're doing all we can in small and big ways to ease their burden. Thoughts are with those who have suffered and our gratitude goes to those firefighters and emergency workers served tirelessly. From a financial perspective, our current estimate of the cost of supporting our customers and helping them recover and rebuild from their catastrophe is one and a half billion net pre-tax and is a first quarter 2025 event. Now, turning to our results for the fourth quarter, 24, which you have all seen, we had a great quarter, which contributed to an outstanding year. In fact, the best in our company's history. For the quarter, record PNC underwriting income with a world class combined ratio of 85.7, together with another quarter of record investment income, led to core operating income of two and a half billion dollars. Operating earnings were up .4% on a pre-tax basis, with .5% per share. No after tax, they were distorted by the one time tax benefit we received last year. Looking through that, operating income was up over seven and a half percent after tax. Global PNC premium revenue, which excludes agriculture, grew .7% in the quarter, with good contributions from our PNC businesses globally, both North America and overseas general. Premiums in our life insurance division grew eight and a half percent, constant dollar. For the year, we generated operating income of 9.1 billion dollars, up 11 and a half percent, adjusted for the one time tax benefit, and 13% on a per share basis. Looking more broadly, over the past three years, core operating income has grown over 65% and has nearly doubled the amount from pre-COVID 2019. All three major sources of income for our company produced record results last year. PNC underwriting income of 5.9 billion was up over seven percent, with a published combined ratio of 86.6. Adjusted net investment income grew .3% to 6.4 billion dollars, and life insurance income topped a billion dollars. For the year, we grew global PNC premiums .9% and life premiums .5% in constant dollar. Shareholder returns were strong. Our core operating ROE was about 14%, and our return on tangible equity was 21.6. Per share book and tangible book value grew 8.8 and 14.1 respectively. Our results, top and bottom line, continue to demonstrate the broad and diversified nature of the company and the consistency of contributions from our businesses around the world. North America, Asia, Europe, Latin America, both commercial and consumer. As we look forward to 2025, we have good momentum and are optimistic about the year ahead, both top and bottom line. Pat losses and FX notwithstanding. Returning to the quarter, our underwriting performance was outstanding, while absorbing a more normal level of pat losses. PNC underwriting income was 1.6 billion, and the current accident year combined ratio, excluding cats, was 82.2%, more than two points better than prior year, and also a record result. Our prior year's reserve development in the quarter, and for the year, was 213 million and 856 million respectively, and speaks to the strength of reserves, the conservative nature of our loss reserving practices. On the asset side, we're investment managers, our other business, and we had another excellent quarter in terms of performance. Our invested asset now stands at 151 billion, and it will continue to grow. For the quarter, adjusted net investment income was a record 1.7 billion, up 13.7%. Our fixed income portfolio yield is 5% versus 4.8 a year ago, and our current new money rate is averaging 5.6%. Peter will have more to say about financial items. Turning to growth, pricing, and the rate environment, again, global PNC premiums increased 6.7 in the quarter, with commercial up 6.4 and consumer up 7.5%. All regions of the world contributed favorably. Life premiums grew 8.5%. In terms of the commercial PNC rate environment, market trends or themes were consistent with those of the previous quarter. Property has grown more competitive, and large accounts shared and layered at ENS, while pricing is favorable. Casualty is stable or firming, depending on the class, and overall pricing is ahead of loss cost track. And financial lines, particularly D&O and employment practices liability, is where more competition is reaching for market share at the expense of current accident year underwriting margins. Overall, market conditions are favorable, and we see good growth opportunity for over 80% of our global PNC business, commercial and consumer, as well as for our life business. North America and overseas general, Asia, Europe, and Latin America, each with many areas of favorable growth opportunity. Our middle market and small commercial businesses globally, our US ENS business, our US high net worth business, global ANH in life, international personal lives, our digital business, and specialty businesses, such as our growing climate plus business. Now turning to the quarter, let me give you some more color by division. Beginning with North America, premiums excluding agriculture were up 6.3 and consisted of 10% growth in personal insurance and .1% growth in commercial, with PNC lines up .2% and financial lines down 2.9. We had another strong quarter for new business, up over 22% versus prior year, and our renewal retention on a policy count basis was 90.4%. These again speak to the reasonably disciplined tone of the market and our excellent operating performance. Premiums in our major account and specialty division increased 4.6%, with PNC up .8% and financial lines down 1.7%. Within major and specialty, our Westchester ENS business grew 8%. Premiums in our middle market division increased 6.2%, with PNC up 10%, and financial lines down 5%. Pricing for property and casualty, excluding financial lines and comp, was up 9.9%, with rates up .2% and exposure change of 1.6%. Financial lines pricing was down 3.3, with rates down 3.6. In workers comp, which includes both primary comp and large account risk management, pricing was up 4.7%, with rates up 2.5 and exposure up 2.1. Breaking down PNC pricing further, property pricing was up 6.9%, with rates up 3.5 and exposure change of 3.3. Casualty pricing in North America was up 12.7%, with rates up 11.8 and exposure up 0.8%. Loss costs in North America remain stable, no change, and in line with what we contemplate in our loss specs. Our North America commercial lines business ran an amazing .9% published confined ratio for the year, again an amazing result. In agriculture, where we are the market leader, our crop underwriting results this quarter were excellent, and we finished the year with $354 million in underwriting profit. Premiums were down from prior year due to lower commodity prices and the formulas for risk sharing with the government. On the consumer side of North America, our high net worth personal lines business had another outstanding quarter, with premium growth of 10%, including new business growth of 34%. Premiums in our true high net worth segments, the group that seeks our brand for the differentiated coverage and service we are known for, grew 17.6%. Our homeowners pricing was up over 12% the quarter and ahead of loss cost trend, which remains steady. For the year, we ran an outstanding .6% combined ratio in our high net worth personal lines business. Turning to our international general insurance operations, premiums in the quarter for our retail business were up 7.7%, with commercial lines up .3% and consumer up 4.7%. From a region of the world perspective, Asia Pac led the way, with premiums up 12.2%. Europe grew 8.2%, including growth of 12% on the continent. Latin America grew just .5% and was impacted by foreign exchange. If you adjust for that, Latin America was up .5% in constant dollars.

In our international

retail commercial business, PNC pricing was up .7% and financial lines pricing was down more than 6%. Premiums in our London wholesale business were essentially flat. They were up 1.1%, with prices down 4% as the London market continued to grow more competitive. For the year, our overseas general business ran an excellent .4% combined ratio. Our global reinsurance business had a strong quarter, with premium growth of about 20% and finished the year with premiums up 32% and a combined ratio of 85.9%, reflecting a more disciplined reinsurance market, both property and pockets of casualties. In our international life business, which is fundamentally Asia, premiums and deposits were up over 26% in constant dollar, and combined insurance company, our US worksite business grew 17.8%. Our life division finished the year with pre-tax income of $1.1 billion, which was ahead of what we originally projected for the year. We have good momentum in our life business, which continues to build. In summary, we had a great quarter and a great year. While we're in the risk business and there's plenty of uncertainty in the world, we're confident in our ability to continue growing operating earnings and EPS at a double-digit rate, TADS and FX notwithstanding. Our earnings growth will come from three sources, PNC underwriting, investment income, and life income. Now I'll turn the call back over to Peter. Thank you, Evan, and good morning. As you just heard, we concluded the year with another strong quarter, contributing to record full year results across our three primary sources of earnings. Our balance sheet finished the year in an exceptionally strong position, the book value of $64 billion and total invested assets of $151 billion. The quarter and full year produced adjusted operating cash flow of $4.2 billion and a record $15.9 billion respectively. It's also worth noting that during the quarter, AMBEST affirmed our company's rating and stable outlook, and in January, SAP affirmed our rating and stable outlook. During the quarter, we returned $1.1 billion of capital to shareholders, including $725 million in share repurchases and $367 million in dividends. We returned $3.5 billion in total for the year, including $2 billion in share repurchases and $1.5 billion in dividends, which represented approximately 38% of our full year core operating earnings. The average share price on repurchases for the year was $269.23. Book value for the quarter and the year was adversely impacted by unrealized -to-market losses on our high-quality fixed income portfolio due to interest rate changes, which we expected amortized back to par over time, as well as foreign exchange losses. Book and tangible book value per share excluding AOCI grew .9% and .3% respectively for the quarter and 10.8 and .4% respectively for the year. Our core operating return on tangible equity for the quarter and year was 22% and .6% respectively, while our core operating ROE for the quarter and year was 14.3 and 13.9%. Turning to investments, our A-rated portfolio, which now has an average book yield of 5%, produced adjusted net investment income of $1.69 billion, which included approximately $25 million of -than-normal income from private equity. We expect our quarterly adjusted net investment income to have a run rate between $1.67 and $1.75 billion over the next six months. Regarding underwriting results, the quarter included pre-tax catastrophe losses of $607 million, of which $309 million was from Hurricane Milton

and

$140 million from Hurricane Helene. The remaining balance was principally from weather-related events split 31% in the U.S. and 69% internationally. Prior period development in the quarter in our active companies was a favorable $352 million pre-tax, with favorable development split 17% in long tail lines, primarily from general casualties, and 83% in short tail lines, primarily from property and agriculture. Our corporate runoff portfolio had adverse development of $139 million, primarily asbestos-related. Our -to-incurrent ratio for the year was 83%. Our core effective tax rate was .2% for the quarter and .5% for the year, which are below our previously guided range due to shifts in mix of income. We expect our annual core operating effective tax rate for 2025 to be in the range of 19 to 19.5%, including the transition cash tax benefit provided on the adoption of the new permuted income tax. I'll now turn the call back over to Karen.

Thank you. And at this point, we'll be happy to take your questions.

Thank you. We'll now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Brian Meredith from UBS. Your line is open.

Yeah, thank you. A couple questions here for Evan. I'm wondering if you could dig into a little bit the CAL FIRE loss estimate that you've given out there. You know, does it include assessment, subrogation, kind of ground up, maybe give us a little context on kind of how we should be thinking about the $1.5 billion number?

Yeah. First of all, it's a ground up number. It's our own losses. We don't go off of what we imagine as a total industry wildfire loss in the market share area. This is our number. And that our adjusters on the ground have been able to estimate property by property. It does include an assessment for our rejection of an assessment from the FARE plan. And we don't take credit in ours for subrogation.

Great. That's helpful. Thank you. And then my second question, Evan, I'm just curious. Looking at 2025, I mean, it's still getting some solid growth and commercial lines call it mid to high single digit organic growth here in premium. But if you think of 2025, is that kind of a good number to target organically? And then is this kind of the period that we're looking at that maybe it's you should start looking a little bit more at inorganic growth opportunities?

I love you, Brian. Yeah, you know, I don't give, we don't give guidance on forward looking. But your first statement, you know, your logic sounds pretty decent to me. I didn't say it. You said it. And as for inorganic growth, you know, money is not burning a hole in our pocket. And as you know, it's opportunistic and it's in support of our organic strategies. And it's got to be the right thing at the right price. And so, you know, we're always

looking. Great. Appreciate it.

You're welcome. Your next question comes from the line of David Modomadam from Evercore ISI. Your line is open.

Hey, good morning. I had a question on the for Peter and Evan on the favorable long tail reserve development. 17% of the 350 or so on the active companies. Sounds like that was driven by general casualty. That's a bit of a change versus what you guys have experienced over the last several quarters. So I'm wondering if you could elaborate on the favorable development that you're seeing there, because that's quite different than what you and others have been reporting. And any clarity on what sort of accident yours is coming from, too, would be helpful. Well,

I'm going to correct your mental model to be going. Our casualty. We study different portfolios of casualty each quarter. Some casualty portfolios we have taken reserve strengthening. Some portfolios we've taken no action. Some portfolios we've had reserve releases. And there has not been a consistency for quarter, except the consistency is the portfolios we study each quarter. And so cohort casualty we studied this quarter. I had favorable development given the reserve strength in that portfolio.

Got it helpful. Thank you for that. And then maybe, you know, obviously strong results in North America commercial that included a little bit of a headwind from the structured transactions to could you of that 40 basis point headwind, could you just help me think about the impact that had on the loss ratio? And, you know, how we should think about the durability of that loss ratio going forward.

You're saying on structured transaction, what's its impact in the quarter on loss ratio?

Yeah.

Structured transactions typically run off. Now, we don't break down the pieces and going to give you each, you know, the component of that exactly. But they, what you should know is they run a higher loss ratio than the average portfolio does.

Got it. Okay. Thank you.

David, does that help you?

Yeah, yeah, that does help. I mean, I guess you guys had given the 40 basis points just on the total combined ratio. I guess I can just use that sort of as like a placeholder for what sort of impact that may have had on the, maybe a little bit bigger on the loss ratio. Maybe.

I don't have, we don't have any chance, but it's probably, you know, it's in the range. Okay.

Got it.

Understood. That's helpful.

Thank

you.

Okay. Thanks.

You're welcome.

Your next question comes from a line of Gregory Peters from Raymond James. Your line is open.

Good morning, everyone. And, Evan, in response to Brian's question, you said you love him. I don't recall you ever saying you love a cell site analyst. So, the new year is definitely starting off good for us.

Don't mess it up, Greg.

All right. So, I'm sure I can. That's, anyway, in your press release, you say you're, you're, you're, you're growing operating earnings and EPS at a double digit rate. You talk about the three buckets, PC, investment income and life insurance. So, maybe you can, from a big picture perspective, unpack life insurance and talk about where you see the growth coming, you know, next year or this year, I should say 25. And how it might compare with how the growth came out for 24.

Yeah, you know, there was a lot of

consolidation impact on the life income in the 23 year. A little bit of noise and 24. There was one time stuff and 23. And so, you know, to look through the underlying growth rate of that, it produced us really solid double digit growth rate and income. When I looked through it, it was in that 12 to 14% range. When I look forward, I see that continuing and even strengthening. We have good momentum and it's it's it's obviously Asia and it's both North Asia and it's Southeast Asia. Our business in Korea, while the revenue growth is not overly exciting, the margin of that business continues to expand and our overall income is growing. It's a ballast of the business. It's supported by then faster countries that are growing much more quickly. Hong Kong, Taiwan, China, now growing more quickly for us. And each of those producing improved margin and and therefore faster income growth. Southeast Asia with Vietnam and Thailand, they had slower growth this past year and they were accelerating as we go forward. And finally, we have two other businesses in Indonesia and in New Zealand that are that are good businesses picking up momentum. It's in direct response marketing. It's in agency and over 60% of the business, about 70% of it is really accident and health and risk based type products. And the rest is very conservatively structured savings related products because people in Asia, you have two themes. You have an aging population in the north that requires a certain kind of savings and health related product. And then you have people in Southeast Asia, which a younger population family oriented. There are no social safety nets. And so they rely on these kinds of products much more than they do in other parts of the world. And I'll remind you, unlike many regions of the world, these parts of Asia are growing, particularly Southeast Asia. The economic growth is is is multiples of what we're seeing in the West. And that just means a rising middle class.

Thanks for the perspective in detail. I guess pivoting to the other bucket, which is PC. You know, it seems like the broader market is producing some pretty good results relative to longer term averages. And we're hearing about increased competition across a broader set of lines of business. Even you and your comments talked about financial lines. So maybe you could spend some a minute and give us some perspective on how you think where we are in the cycle and and how how Chubb's going to be positioned to come out of it.

Yeah, you know,

it

goes to

my comment about 80 percent of the business growth. And where you therefore see the pockets of competition, you know, as a backdrop and in the way you think about cycles. And I've been thinking about this for a while. We're in a more inflationary period is the insurance industry. And it's a prolonged one than we have seen in a very long time. We went through decades of really relatively low inflation on the on the short tail class side virtually pretty flat. And on the long tail side, there's always been pockets, but it was running at a lower level. We're in a period of sustained inflation. So to just stay in place, rates have to move. Doesn't mean margins if they just keep pace with loss costs. So a certain amount of industry growth is just to reflect inflation. The competition is increasing in shared and large account business. So first, large account will grow more slowly because you have you have a couple of lines of business where competition increases property, shared and layered property. But it's well priced. And it doesn't mean

that

there's a decrease in margin. It means that to retain business, you become a bit more competitive. It's harder to grow more want that business. So you're not going to see growth, but you're going to see you see good results from all we're imagining as we go forward. .N.S. property. Same thing. Financial lines in large account. Same thing. And then primary casualty is is is not a real growth business, but it it's a ballast that supports growth of many other lines for large account. So large account, not so much in middle market and small commercial growth opportunity.

And

it's a growth opportunity across many segments. And by the way, there's certain secular change taking place in that business. And by the way, it's not simply in the United States. It's global. And then the consumer lines business from high net worth to personal lines outside the United States to our accident and health businesses, particularly with middle class in Asia and in Latin America on both the the the light side and the non life side. When I add it all up, that anyway, does that give you a sense? Yeah, it does. What

do you mean by the secular change comment?

When you

particularly

in

in middle market in the United States, I'll take that as an example. With all of the change in climate and cat activity and with the change in the legal environment around the trial bar and social inflation,

regional and mutuals have a harder time. They're not equipped

with

the data, with the balance sheet,

with the depth of business and reinsurance relationships to be able to compete and with the technology to be able to compete the same way. And that over time is shifting market share and

it's shifting and it advantages a few larger players. That makes sense. Thanks. Thanks for the answers. You're welcome.

Your next question comes from the line of Mayor Shields from KBW. Your line is open.

Great. Thank you. Good morning. First, can you walk us through any changes to your reinsurance purchasing at January 1?

None.

Okay, that's pretty easy. I don't know if this is significant. That's fine. It makes writing the note easier. There was a little bit of an uptick in administrative expenses in North America commercials and I was hoping you could walk us through that. I don't know if it's incentive compensation or something else.

A little uptick in what in North America?

The admin expenses.

No, it's just, oh my God, it's 0.1%.

It's just noise. Okay.

I'm sorry, go ahead. Yeah, I was looking at the dollars, not the percentage.

No, it's just

variability in the quarter.

Okay, perfect. Thank you

so much.

There's not a trend in that.

Your next question comes from a line of Mike Zaremski from BMO. Your line is open.

Hey, morning. First, it's a follow up to your insights about the secular change in the US middle market space. So, you know, if I think through your comments in the past, Evan, you've said that, you know, Chubb has aspirations to move more down market and your definition of mid market or small market might be also different than some of the peers. But just curious if you're painting a picture that, you know, Chubb's competitive advantages are growing versus some of its peers, would you still have aspirations to kind of do inorganic things in the small mid market space in the US or less so as time goes on?

Our focus

is on organic SME, small

and

middle market.

And it's organic. And that is our focus and has been our focus. Anything that's inorganic is simply opportunistic. And that's not our focus. It's opportunistic.

Okay, and lastly, switching gears on the investment portfolio. There's been a bit of a of a increase in equities over the last couple quarters were up to about nine, nine billion. I don't know if you can see that. I don't just anything changing there in terms of kind of over the next year you expect to see different mix shift in the investment portfolio.

Thanks. Hi, Mike. It's Peter. First off, that specific $5 billion shift relates to us actually moving about 5 million of investment grade corporates into a fund for call it investment efficiency purposes between different entities. The underlying is still investment grade fixed income, but because of gap, we have to show it as equity. So it's no wonder one change in that. In terms of the going forward, we've spoken about, you know, our strategy. You'll see the investor presentation will be a change in investment allocation, slight change, which we put out there that investor deck.

Thank you,

Peter. Your next question comes from a line of Andrew Klagerman from TD Cowan. Your line is open.

Thank you. Thank you. Good morning. So, Evan, in casualty lines, you mentioned the 12% rate increases in North America. That sounds really solid. But in reinsurance, you said there were pockets of strength and I'm hearing overall and reinsurance casualty. There's there's a lot of softness going on. So one, why the disconnect and two, what are those pockets of weakness in casualty reinsurance?

Well, now I said there's pockets of opportunity in reinsurance casualty. You have to be very, you have to be so very select. And, you know, I'm not going to go into more detail than that. But let's be clear, we have not been significant by any means reinsurance casualty writers. And in fact, we shrank and shrank and shrank over quite a number of years because we didn't see the market producing an underwriting profit. And we see select, you know, the market is stressed in reinsurance casualty.

And we

see, you know, we see selective pockets, not going to overstate it. Got it.

And then with regard to the financial lines.

Got it.

And then with regard to financial lines, it looks like that's that's the area where you're seeing premiums decline across the board. You know, it's been about three years now of continuous decline, particularly in public, you know, what is it that players like about it, that they continue to go after it and you just don't think it's good business in this, at this point.

Well, we love the business. It's the pricing. Yeah.

Well,

you know, look, the during the pandemic, there was a significant drop off in securities class actions. And in other forms of of loss, let's call it employment practices liability during that period of financial crisis. And so those years are producing favorable results. And the head fake around it, which is why I use the words current accident year is in terms of loss. The number of securities class actions, the frequency of loss is reverting back to the mean. And in some areas like employment practices, in fact, frequency of loss is increasing. Pretty quickly. Severity of loss continues to trend. And so I think what they don't see or they ignore is what's coming about current accident year margins and pressure. We know this. We have a big book of this business. And and Chubb is is a leader in this business across classes. And so. We were patient. And, you know, we know how to help and flow in that period. So it's not something you like looking at, but on the other hand, we got plenty of other tables to play.

Makes a lot of sense. Thanks.

Your next question comes from the line of Alex Scott from Barclays. Your line is open.

Hey, good morning. First one I have for you all is sort of the fallout from what we're going to see in California from the wildfires. And I guess specifically, you know, what will your approach be to the market going forward? We have to make any changes in the way you approach that market and just interested in any thoughts you have on what needs to be done to make to sort of stabilize the insurance market there.

Yeah, thank you for that question. Look, California is a difficult market for insurance companies, and it has only become more difficult over time.

The

state, along with the pressure it receives from consumer advocacy advocacy groups, suppresses the ability to charge a fair price for the risk and tailor coverages to improve availability and affordability of insurance for the citizens of the state. Insurers are unable to generate a reasonable risk adjusted return commensurate with the risk of ensuring natural perils such as wildfire and the cost in California associated with reconstruction following a disaster. This suppression of pricing signals, which are rising, encourages more risk taking by individuals and businesses as to where they choose to live or work. And it encourages less risk management or loss mitigation activity. And they're part as well by federal, state and local governments. We all have a hand in loss mitigation activity that actually is occurring or not occurring. In a word, economics incents behaviors, and California is impacting those economic signals. As insurers have reduced their exposures in the state, the state has offered more underpriced coverage through its own insurer of last resort. Frankly, it's an unsustainable model. And one way or the other, the citizens of the state pay the price for coverage. California is not alone in this regard, but it certainly stands out. We've been shrinking our exposure in California for some time. For example, in the area where the wildfires occurred, our exposure has been reduced by over 50%. We're not going to write insurance where we cannot achieve a reasonable risk

adjusted return for taking the risk. That's really helpful.

Maybe just a follow on question to that. Would you expect what's going on in California and sort of the fallout from that to affect property pricing more broadly? I mean, it seems like the world's becoming a riskier place. And certainly, price adequacy seems pretty good in property and other areas. But will this be enough to change thinking, whether at the primary or reinsurance level, in your view?

You know, it's too early

to tell. I don't know yet. As the loss, the magnitude of this loss emerges and grows, more of it

begins to find its way to reinsurance balance sheets and to other balance sheets. And that's going to be the question. What is the ultimate size of loss and where does it end up? And that will give us, that will determine whether it has a broader impact

on

overall property pricing. Which in my judgment, overall is adequate. And this is a reminder of why the industry needs to maintain

pricing adequacy.

Thanks.

Your next question comes from a line of Elise Greenspan from Wells Fargo. Your line is open.

Hi, thanks. Good morning. My first question. Can you guys provide, I guess, what the current excess capital drag on your ROE is?

I'm sorry, the current excess capital ROE drag.

Yeah, we haven't disclosed that in a while, Elise. And again, how we're thinking about things consistent with what we talked about in our investor presentation is looking at our capital as also a source of investment as we gradually and incrementally increase our asset allocation towards alts. That's just starting. So I'll say right now, looking at the year behind us, it would be in a range similar to, call it a year ago, that we discussed and people backward computed. So it was in the range of on ROE looking backwards of around 2% on ROE and 6% on ROE.

That's helpful. And then my second question, you provided tax guidance, and I think you had said, right, that it, you know, considers some transition cash tax benefit from Bermuda. I had also thought that there was some, the potential, right, for some reversals of the DTAs that were set up. So I'm assuming, I think that might not take place this year, but might be a couple years out. Are you guys just assuming, you know, there's no change in the DTA structure of what was set up a year ago?

So, yeah, Elise, from an accounting perspective, it's based on Bermuda law. Bermuda law isn't expected to change. I mean, if it changes, we'd have to look at it. OECD came out with some administrative guidance a couple of weeks ago that has to be reviewed and see how it applies. As you may have seen, the new administration has come through with saying they're not going to participate in the global minimum tax OECD. And are, you know, advocating on that basis. So we have a sense of where we have a very clear sense of where we are for 25 and 26. And one thing we know is law of return is very uncertain, particularly with the new administration, along with China, India and some other very large countries not being involved at all as well. Not only involved, Swiss law. Swiss law,

yeah. Yeah, it's messy.

And then, you know, I'll throw one in for Evan, right? You guys have been talking about competition and financial lines for some time and obviously pulled back there. What do you think it takes, I guess, for things to get better there? Is there something, or are you not expecting conditions, I guess, to change at any point kind of in the near term?

I think it's, I think as losses emerge and it re-normalizes, that

will be an ameliorating

effect. Okay, thank

you.

Your next question comes from a line of young Kenar from Jeffries. Your line is open.

Thank you. Good morning. Evan, at the risk of maybe changing your sentiment around the Southside analysts here so quickly, I do want to go back to something I asked last quarter with regards to North America commercial premium growth, which was 2% on a gross premium basis. And I'm just trying to reconcile that with the pricing environment, which seems to be ahead of that and the opportunities that you're seeing and the appetite that you have. Maybe you can walk us through the puts and takes there.

I'm not sure what your, can you be more clear?

Sure. So your premium growth, gross premium growth was 2%. I think the pricing environment in North America, PNC, if we take the bits and pieces of pricing that you offered, is north of that. Seems to also be ahead of long term.

I think you have to start with net premium growth, not gross premium growth. Why would

that be?

Well, because net gross premium growth has too many distortions of transactions that

we do

that frankly distort that number, large transactions, where it may be a self-insured program or it's a structured program. And so gross has puts and calls based on the premium flows with our clients. If you get to a middle market business, it's more steady. But when you have large account and then you have gross line, even in the E&S business, with client, that's what makes a lot of noise and a lot of difference. You're never going to get there. You have to start at net premium. Now, I can just tell you that. You know, and I'm giving you that as an explanation. Not as a, because there's nothing to debate it.

Fair enough. And if we take the net premium growth, which was 5% versus roughly 7% pricing.

Well, it's a mix of

business.

There's a mix of business. There's a retention. It doesn't translate directly. It never does. When you start with a retention rate, you then have to add new business. You have to do it line by line and the mix of it. And so you'll hear overall pricing, but now take overall pricing and you have to adjust for the mix of business. When you're trying to translate to revenue, if you want offline, we will give you a simple math lesson of that and take you through

it. I mean, I'm always,

I don't mean a lesson in a bad way. I mean, we'll take you through and give you some, you know, maybe another way to help you think about it.

Great. Always eager to learn. Thank you.

And that concludes our question and answer session. I will now turn the call back over to Karen Byer for closing remarks.

Thank you everyone for joining us today. And if you have any follow up questions, we'll be around to take your call. Enjoy the day. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.