Chubb Limited (NYSE: CB) has delivered a strong performance in the third quarter of 2024, with core operating earnings per share (EPS) increasing by over 15.5%. The company's global property and casualty (P&C) premium revenue saw a 7.6% rise, with an even more robust 8.5% growth in constant dollars. Evan Greenberg, Chairman and CEO, expressed confidence in the company's growth potential and its ability to continue increasing operating earnings and EPS.
Key Takeaways
- Core operating income rose to $2.3 billion, a 14.3% increase.
- Global P&C premium revenue grew by 7.6%, or 8.5% in constant dollars.
- North American personal insurance premiums increased by 10%, while commercial premiums grew by 7.2%.
- International general insurance premiums and life insurance premiums grew in constant dollars by 4.9% and 10.6%, respectively.
- The global reinsurance business experienced a substantial premium increase of approximately 35%.
- Chubb Limited returned $782 million to shareholders through buybacks and dividends.
- Catastrophe losses totaled $765 million in pretax for the quarter, with a strong published combined ratio of 87.7%.
Company Outlook
- Chubb Limited is confident in its ability to continue growing operating earnings and EPS.
- The company is on track to exceed $1 billion in life insurance operating income for the year 2024.
- Management remains cautiously optimistic about market conditions and Chubb's growth potential.
Bearish Highlights
- Chubb Limited noted an increase in competition in the London wholesale market.
- The company experienced significant pretax catastrophe losses totaling $765 million during the quarter.
Bullish Highlights
- Commercial P&C market conditions are favorable, with casualty pricing in North America up by 12.7% and property pricing up by 6.7%.
- Rates have risen by 3.7%, indicating strong market dynamics.
- Favorable prior period development contributed $299 million pretax.
Misses
- There were no specific misses reported in the earnings call.
Q&A Highlights
- CEO Evan Greenberg highlighted the company's record earnings year and its superior rate of growth for operating earnings and EPS.
- Greenberg acknowledged internal frustrations related to capitalizing on opportunities and executing efficiently to meet the company's own expectations.
Chubb Limited's third-quarter earnings reflect a robust financial performance, with growth evident across various business segments. The company's investment in assets, favorable market conditions, and strategic capital management have positioned it well for continued success. Despite facing substantial catastrophe losses, Chubb Limited maintains a strong combined ratio and remains optimistic about its future prospects. The leadership's confidence in the company's growth trajectory and the acknowledgment of internal challenges suggest a focused approach to leveraging opportunities in the coming periods.
Full transcript - Chubb Corp (NYSE:CB) Q3 2024:
Conference Operator: Thank you for standing by, and welcome to the Chubb Limited Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. I'd now like to turn the call over to Karen Beyer, Senior Vice President, Investor Relations.
You may begin.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited: Thank you, and welcome everyone to our September 30, 2024 Q3 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 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 supplement, which are available on our website at investors. 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 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 team. And now it's my pleasure to turn the call over to Evan.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Good morning. As you've seen, we had another really great quarter with strong double digit growth in both P and C Underwriting and Investment Income, leading to core operating EPS growth of over 15.5%. Global P and C Premium revenue, which excludes agriculture, grew 7.6 percent or 8.5 percent in constant dollars, which is the clearer way to view intrinsic growth and once again reflected the broad and diversified nature of our company and the opportunities we're capitalizing on around the world with strong contributions from our North America P and C, International P and C and Life Insurance (NS:LIFI) Businesses. Core operating income for the quarter was $2,300,000,000 up 14.3%. Earnings for the year are currently at record levels with net and operating income up 16.9% 13.8%, respectively.
The three sources of earnings growth P and C Underwriting, Investment Income and Life Income each delivered a strong result. Our published combined ratio for the quarter was 87.7 percent with P and C underwriting income of $1,500,000,000 up over 11.5 percent despite an active quarter for the industry globally in terms of natural catastrophes, hurricanes, floods, fires, tornadoes and other severe convective storm activity. On an ex cat, current accident year basis, a secondary measure of underwriting, we produced record underwriting income of $2,000,000,000 up 11.5% with a combined ratio of 83.4%. For the year, we have produced record underwriting income on both the published and current accident year basis. As a company in the business of risk, we pride ourselves on being world class underwriters.
It's who we are. We're also asset managers with an excellent long term record of invested asset allocation and risk adjusted returns. Our invested asset now stands at $151,000,000,000 and it will continue to grow as a consequence of our basic business of insurance. For the quarter, adjusted net investment income topped 1,600,000,000 up
Unidentified Speaker: 15.9%.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Our fixed income portfolio yield is 4.9 versus 4.7 a year ago, and our current new money rate is averaging 5.5%. In our judgment, given the broad based health of the U. S. Economy and the pattern of inflation when one reads past the headlines, the Fed will likely take a reasonably cautious approach to lowering rates. Given the size and continued growth of our federal deficit, which is simply unsustainable, we believe the yield curve will steepen and that too will support our future reinvestment rate.
We remain confident in our ability to reinvest our cash flows at rates that will continue to accrete to the overall portfolio yield. Life Insurance segment income of $284,000,000 was ahead of plan. And while you know it's our policy to generally refrain from guidance, we are well on pace to exceed our Life division income target of $1,000,000,000 for the year. Our annualized core operating ROE for the quarter was 13.9 percent with a return on tangible equity of 21.7%. Peter will have more to say about financial items.
Turning to growth, pricing and the rate environment. Global P and C net premiums, which excludes agriculture, increased 7.6 in the quarter or again 8.5 in constant dollar, with commercial premiums up 8.1 and consumer up 9.4%. Again, growth was global and broad based geographically by product and customer segment. North America, Europe, Asia and Latin America all contributed favorably. Life premiums grew 10.6% in constant dollar with growth of 10% in international life and 15 in combined North America.
In terms of the commercial P and C rate environment, market trends were consistent with those of the previous quarter. Overall conditions are favorable in both property, which is incrementally more competitive in certain areas and casualty, which is incrementally firmer. Loss cost inflation remains steady and within what we have contemplated in our pricing and reserving. Pricing for both remains ahead of loss costs. Property has become more competitive in the large account and E and S segments, while middle market property pricing was in fact up over prior quarter.
We are large in all three segments of the market. Our property book is well priced and terms and conditions remain steady. As with prior quarter, casualty is firming in the areas that need rate and we see this trend in casualty enduring. Overall, our casualty rate and price were up over prior quarter. Let me give you a little more color by division.
Beginning with North America, premiums excluding agriculture were up 7.8% and consisted of 10% growth in personal insurance and 7.2% in commercial, with P and C lines up nearly 10% and financial lines down about 5%. We wrote more than $1,200,000,000 of new business, up over 18% versus prior year, and our renewal retention rate on a policy count basis is 89.6%. Again, both speak to the reasonably disciplined tone of the market, the power of Chubb and our excellent operating performance. Premiums in our major accounts and specialty division increased 7.2% with P and C up 9.5% and financial lines down over 6%. Within major and specialty, our E and S business grew 11% with strong contributions for both property and casualty related lines.
Premium in our middle market division increased just under 7% with P and C up 10.7% and financial lines down 5.7%. Again, the underwriting environment in North America is generally favorable and rational, financial lines aside. Pricing for property and casualty, excluding financial lines and workers' comp, was up 9.9% with rates up 8% and exposure change of 1.8%, again with both rates and pricing up from 2nd quarter. Financial lines pricing was down 3.2% with rates down about 3.4. In workers' comp, which includes both primary and large account risk management, pricing was up 4.2% with rates up 1.4 and exposure up 2.8.
Breaking down P and C pricing further, property pricing was up 6.7 with rate of 3.7% and exposure change of 2.9. Percent. Casualty pricing in North America was up 12.7 percent, well in excess of loss costs with rates up 11.9% and exposure 0.7%. Our loss cost in North America, again, remains stable, no change and in line with what we contemplate in our loss effects. In agriculture, where we are the market leader, we gained increased market share and wrote more policies, ensuring more farmers in fields, though premiums were down from prior year, primarily due to lower commodity prices than last year.
Commodity prices are used to price the premiums we charge farmers. Far more importantly, our crop underwriting results this quarter were excellent. And from everything we know now, 2024 is shaping up to be a very good underwriting year. 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 exceeding 25%. Premium growth for our true high net worth segments, the group that seeks our brand for the differentiated coverage and service we're known for was 16.8%.
Our homeowners pricing was up 13.7% in the quarter and ahead of loss cost trend, which remained steady. Turning to our international general insurance operations, it was a decent quarter. Net premiums were up 4.9 or 7.5 in constant dollars. Our international commercial business grew 6.7%, while consumer was up 8.5%. Asia Pacific led the way with premiums up 9.2%.
Latin America grew over 7.5%, while Europe grew over 7%, with the continent of Europe up 8.7%. Premiums in our international retail commercial P and C business 6.5% in constant dollar. P and C lines were up almost 11% and financial lines were down 10%. It is worth noting adjusting for a one time premium benefit we received in the Q3 of last year, underlying growth was over 14% in P and C lines internationally with financial lines down 3.8. We continue to achieve positive rate to exposure across our international retail commercial portfolio with P and C lines pricing up 6.3 and financial lines pricing down 3.5.
Premiums in our international wholesale business grew about 8% in constant dollar. As is typical, the London wholesale market is growing more competitive and frankly for me is exhibiting classic London underwriter and broker behavior. Generally speaking, underwriting prosperity likely won't endure over time and London will underperform in due course, except for those few real underwriters who know how to manage what is simply a trade. I have seen this movie many times. Our international personal lines business had an excellent quarter with growth of 12.7%, led by Asia Pacific and Latin America.
And our global reinsurance business had a strong quarter. Premiums were up about 35%. We had a combined ratio of 94.4%, which included a more active cat loss quarter. Again, in our international life insurance business, which is fundamentally Asia, premiums and deposits were up about 21% in constant dollar. International Life earnings grew over 9% in the quarter in constant dollar.
So that's a lot of news. And in summary, we had another excellent quarter and having a record earnings year. While we're in the risk business and volatility is a natural feature, we are very confident in our ability to continue growing our operating earnings and EPS at a superior rate, P and C revenue growth and underwriting margins, investment income and life income.
Peter Enns, Chief Financial Officer, Chubb Limited: I'm going to turn
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: the call over to Peter and then we're going to come back and take your questions. Good morning.
Peter Enns, Chief Financial Officer, Chubb Limited: As you have just heard from Evan, despite an elevated levels of industry wide cats, we had another strong quarter that generated adjusted operating cash flow for the quarter and through 9 months of $4,600,000,000 and a record $11,700,000,000 respectively. Our results further strengthened our overall financial position, ending the quarter with all time highs in book value of nearly $66,000,000,000 and invested assets of $151,000,000,000 dollars On July 31, we issued $700,000,000 of 5 year debt and $600,000,000 of 10 year debt at an attractive weighted average cost of under 5%. The proceeds will be used for general corporate purposes, including repayment of $700,000,000 dollars of euro denominated debt due in December. We returned $782,000,000 of capital to shareholders this quarter, including $413,000,000 in share repurchases and $369,000,000 in dividends and $2,400,000,000 in total through 9 months. Book and tangible book value per share excluding AOCI increased 2.7% and 4.3% respectively for the quarter and 7.7% and 10.6% respectively year to date benefiting from core operating income partially offset by the capital return to shareholders.
Core operating ROE and return on tangible equity were 13.6% and a record 21.5 percent respectively year to date. Turning to investments, our A rated portfolio produced adjusted net investment income of $1,640,000,000 which included approximately $40,000,000 of higher than normal income from private equity. Regarding underwriting results, the quarter included pretax catastrophe losses of $765,000,000 of which $250,000,000 was related to Hurricane Helene and the balance principally from weather related events split 70% in the U. S. And 30% internationally.
Prior period development in the quarter in our active companies was a favorable $299,000,000 pretax with favorable development of $358,000,000 in short tail lines, primarily from property and $59,000,000 of unfavorable development in long tail lines, which was primarily from general casualty. Our corporate runoff portfolio had adverse development of CAD 55,000,000 primarily environmental liability related. Our paid to incurred ratio for the quarter the year was 77%. Our core effective tax rate was 17.7 percent for the quarter, which is below our previously guided range due to shifts in the mix of income as well as certain discrete tax benefits recorded in the quarter. We expect our 4th quarter core effective tax rate to now be between 19% 19.25% with the full year between 18% 18.25%.
We expect to provide guidance on the 2025 tax rate as part of our Q4 earnings at the end of January. I'll now turn the call back over to Karen.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited: Thank you. And at this point, we're happy to take your questions.
Conference Operator: Thank you. We'll now begin the question and answer session. Your first question comes from the line of Bob Wang from Morgan Stanley (NYSE:MS). Your line is open.
Bob Wang, Analyst, Morgan Stanley: Good morning. So first question is on the North America commercial. I think if we like you said before, right, pricing ex financial lines, ex workers' comp continued to be very strong over the last few quarters and you had really incredible margins in this business. Just given the pricing and the growth, should we expect growth to accelerate from here? Or how should we think about growth in this business ex financial lines, ex workers' comp going forward?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Yes. First of all, I don't we don't give forward guidance as you know. So I'm not going to answer that in a specific way. You see the amount of new business we risk. You see our retention rate.
You see we're in a healthy market and we're in underwriters market. Risk selection, structure of risk, how you structure it and pricing matter. All underwriters aren't created equal. So we compete for business. And some areas of business have become more competitive naturally speaking to property.
I'm confident when I look forward at Chubb's ability to continue to grow above trend when I look at longer term trend, and as I look forward over a period of time. And I'll leave it at that.
Bob Wang, Analyst, Morgan Stanley: Great. Thank you. Second question is on the international business. Apology in advance if I misinterpreted your commentary. But it sounded like what you're saying is that in London, there could be more competition.
Does that imply that a lot of the international growth going forward will be driven by Asia and elsewhere? If that is the case, does the upcoming election potentially have an impact on the growth in that area?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: First of all, our London wholesale business
Unidentified Speaker: is
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: proportionately is not the overwhelming part of our international business. It's about 10%. And so put that in perspective, 90% is our global retail, international, Europe grew 8.5%, Latin America grew 7.5%, Asia grew in the 9s. So it's that vast territory. And then the UK itself grows well and then which is UK retail, which is a big business.
And then you have the London wholesale market, where business comes to London to get placed. And that's what my comment was referring to the classic London market competition that I just thought I would call out because you start to see the behavior that is classic of London. The election, I'm not sure how you linked it to the election and the election outcome. You'd have to enlighten me. But does that help you?
Bob Wang, Analyst, Morgan Stanley: Okay. No, no, I think it does. Really appreciate the U. K. Comments there.
Thank you.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: You got it. I feel good about our international growth capabilities.
Conference Operator: Your next question comes from the line of Brian Meredith (NYSE:MDP) from UBS Financial. Your line is open.
Brian Meredith, Analyst, UBS Financial: Yes. Thank you. Evan, I'm just curious given the hurricane activity we've seen in the elevated, call it, cat losses, what are you seeing in the property lines right now? And what's your expectations if we go into oneone renewals both on the primary and reinsired side?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Yes. On the primary side, in the middle market, small commercial, which is really the vast majority of business in insurance in North America, overall when you look at the industry, pricing is remains firm and prices continue to go up. And it's both hurricane and active SCS activity modeled, non modeled loss. And the market needs the price and it continues to move in that direction. When you get to shared and layered particularly whether it's large account or it's E and S related, that's where there is more the business is well priced, but there is rate pressure.
Rates are coming down, though they remain at good levels. And because there's more capital that's entered the market, more competition. And again, in particular, I call out London behavior that is almost aberrant relative to everybody else. But it remains a robust market.
Brian Meredith, Analyst, UBS Financial: Great. Thank you. And my second question, Peter, you mentioned there was $59,000,000 of call it general casualty adverse development in North America. What accident years was that coming from? And maybe break it down a little more, was it GL, commercial auto?
What's driving some of that development?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Yes, it was 2019 to 22 years and it was in the general casualty areas. The negative look, we do a lot of studies in the Q3 of casualty in the U. S. And it was there were puts and calls so that you really have a clearer view of it. There were a number of long tail classes in the quarter that were part that had positive results.
And then there was in particular excess casualty that produced a negative result. So it's a kind of a mixed bag. It's not all in one direction. And that is what all added up to the North America casualty reserve charge, which was Thanks, Evan. Appreciate it.
Conference Operator: Your next question comes from the line of David Muhammed from Evercore ISI. Your line is open.
Peter Enns, Chief Financial Officer, Chubb Limited: Thanks. Good morning. Evan, I
David Muhammed, Analyst, Evercore ISI: think over the last several quarters, you guys had called out some troubled classes in North America commercial that you guys were reworking. I think it was a $50,000,000 drag last quarter. I know there was also some of that in 4Q 2023. Is that largely behind you at this point aside from just sort of the normal course managing the book where we should see continued acceleration in some of those commercial casualty lines?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: We have another quarter or 2 to go before we finish. We began Q4 last year in most of it. We have a part of it that we began really in Q1. So we have we had about another $50,000,000 or so this quarter and it will continue into 4th and a little bit into 1st. But in the grand scheme of the total premiums we write, it's just not that significant.
And remember, it's not it's a combination of whether some business moves to others who just don't get it. But a lot of it is due to how we change terms and attachment points and we eliminate dollar swapping. This is a large account related comments. And then of course, the excess areas are getting a lot of rate that help to ameliorate. So maybe that helps you with it.
David Muhammed, Analyst, Evercore ISI: Yes. No, thanks. That's helpful.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: When you look at the broad nature of our business, I mean, let's just keep a perspective. We write 20 some odd 1,000,000,000 of net premiums in North America. Personal lines is about 7 of that. So all the rest is commercial, massive. Number 2 middle market player, a large E and S player, major agricultural writer, large major account writer.
And so when you start hearing numbers like that we're talking about this area in large account casualty, well, it's not unimportant relative to the business, keep perspective, it's small.
David Muhammed, Analyst, Evercore ISI: Right. No, that's fair. And I see the rate is also accelerating there in casualty. So that's good to see as well. Maybe just moving on the property side, the catastrophe losses over the last several years and in the Q3, this Q3 were definitely surprisingly low just given the mix shift to property that you guys have had over the last several years.
I guess I'm wondering if just from your perspective, is this Q3 sort of in line with sort of a normal Q3 that you would expect? And I guess as you think about the mix of property and casualty business, is this sort of are you still comfortable shifting more to property or is that something where just given the market dynamics it should stabilize at this point? Yes.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: The cat losses were a bit lower in the quarter than we would have modeled than our modeling that we contemplated pricing would have produced. So our annual expected. That to me is just loss volatility. We're in a business that in a risk business, there's volatility and there's two sides to the volatility. There's a favorable side and an unfavorable side because your average expected loss that you divide into 4 quarters is just an average.
It's just that. And it contemplates all return periods in the loss and in the pricing. So that makes sense to me that I'd see volatility. You're not going to hit the number. You're either up or down from it and number 1.
Number 2, we have a lot of capital flexibility. I think we're good underwriters of the business. So our risk selection and portfolio construction and ensuring we have good pricing, I think contributes to Chubb's overall results in a major way versus the industry. And we're going to write the business whether it is property or casualty. We have an appetite for the volatility.
We are going to write the business wherever it is. If we understand it, we can price it, structure it and assume. And so we're going to we're continuing to lean into property. We're continuing to lean into cash and personal lines and all other areas where we see there is growth potential. And frankly, the most frustrating thing inside our own organization, we can't get after opportunity fast enough and execute efficiently enough for our own appetite and expectations.
Bob Wang, Analyst, Morgan Stanley: Thank you.
Conference Operator: Our next question comes from the line of Yaron Kinar from Jefferies. Your line is open.
Yaron Kinar, Analyst, Jefferies: Thank you. Good morning. And maybe just continuing on the previous questions. So when we look at North America Casualty, it is where you're getting the most rate, I think, based on the data I quickly tried to jot down and definitely exceeding loss trend, but that's also where the exposure growth has been less pronounced. I'm guessing that's because of the work you're doing on fixing the trouble classes that you referenced.
So without asking for guidance here, but just based on the data, is it fair to think of a growing appetite for casualty coming through and results as the troubled lines are fixed?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: I don't know where you're getting that picture, but I can tell you that our casualty lines are actually growing quickly. And I'm not going to give you a breakdown. But our casualty lines are actually growing quickly. And in North America in the areas where we see decent pricing. And I don't see much of an overhang of $50,000,000,000 hardly much of an overhang.
So I can't agree with you, your line of logic and I have to leave you to think your own thoughts.
Yaron Kinar, Analyst, Jefferies: I'm just referencing the exposure growth of 70 basis points you called out and casualty pricing in North America.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: No, that's you're missing it. That's not growth in premium. That's okay. I have a store. My store sold more goods this year than last year.
It sold 1% more in goods. My theater sold 1% more tickets than last year. That's exposure growth and we rate off of that. That's how you get to price. You're confusing price and rate with growth in premium, 2 different things.
My unit growth of number of customers I wrote is totally different. Yaron, you got to go just learn those basics. Sorry. Okay. All
Yaron Kinar, Analyst, Jefferies: right. And then in the London behavior that you have referenced, is that the competitive nature true in both casualty and property?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Yes, across the board.
Yaron Kinar, Analyst, Jefferies: Okay. Thank you.
Conference Operator: Your next question comes from the line of Gregory Peters from Raymond (NS:RYMD) James. Your line is open.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited0: Good morning, Gregory. Good morning, everyone. Evan, for my first question, I want to go back to your comments around the life insurance business. As you pointed out, you rarely give forward guidance, so this is somewhat of a departure. Looking at some of the statistics with the growth in constant dollars and the growth in deposit assets, just curious why we're not seeing that translate to more income growth?
Is there something going on inside there other than currency? Or just some clarification on that would be helpful.
Peter Enns, Chief Financial Officer, Chubb Limited: It's Peter, Greg. The top line growth on Total (EPA:TTEF) Life and on international, as you know, and was said was around 10%. The income growth in international was just over 9%, so pretty much tracking. The combined insurance business in the last half of last year I called out in the 4th quarterly earnings call had a bit of a non recurring or oversized item. So if you back that out, the growth rate would be relatively consistent for all of life with international.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited0: Great. Thanks for the reminder on that. Appreciate that. The second question I had was on capital. Noted your comments around dividends and share repurchase in the Q3.
The results of your company are outstanding. The free cash flow is really strong. Curious, if you have any changed view on share repurchase versus shared special dividends as the stock price appreciates or given the results if there's any change on your views on capital management?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: No, it's steady as she does. We're returning a healthy amount of capital to shareholders and the balance of capital that we hold, we can put to work at good risk adjusted returns that well exceed our cost of capital. And we're that's the balance.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited0: Fair enough. Thanks for your time.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: You're welcome.
Conference Operator: Your next question comes from the line of Ryan Tunis from Autonomous Research. Your line is open.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited1: Hey, thanks. Good morning. So, Evan, I guess on your comments about competition in London Wholesale,
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited2: typical behavior there.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited1: I guess my concern, maybe you can talk me off the ledge on this a bit. But to me that market is lending wholesale is pretty intertwined. And when I hear commentary like that, I start wondering a little bit about like what might be coming next. I mean, is that a fair concern? Or when you say that, are you really just honing in on just strictly London?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: No, I think it's I'm saying it particularly about London. And look, the business in London overall, the market is profitable. But my real point was the kind of behavior I'm seeing them exhibit, the way they're trying to attract more capital to a finite amount of business, the behavior of the capital as I look at it and the guys is that it's in, it just sets the table for the same movie I've watched that will occur over a number of years many times. And they just can't ultimately stand prospering. And so I'm just calling it out because I'm seeing it or I'm seeing it begin and it is peculiar in particular to the London.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited1: Got it. And then I guess just a follow-up, thinking about international life. So it took more than a decade to get to $1,000,000,000 of premium. Any suggestion you want to give us on how long it's going to take to get the next $1,000,000,000 of operating earnings there?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: In life? International. In international? No. I think it's life.
Did you say international life, Ryan?
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited1: I did, yes.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Yes. Stay tuned, buddy. It ain't going to take a decade.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited1: Thanks.
Conference Operator: Your next question comes from the line of Alex Scott from Barclays (LON:BARC). Your line is open.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited3: Hi, good morning. Thanks for taking the question. First one I had for you is just on the casualty pricing dynamics we're seeing in the market. I mean, on one hand, we're seeing some unfavorable here or there in some of these specific product lines like excess liability and so forth. But overall profitability seems pretty good when we look at overall ROEs across many of these businesses.
And I just wanted to get your thoughts on price adequacy in general across some of those casualty lines. And how much need is there for the industry in your view to keep pushing price and casualty?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Yes. There is no general statement. It varies by area of casualty, by customer cohort, by geography. There is no simple and that's why it's always an underwriters market. And you got to have the data, you got to have the experience, and then you got to have the command and control to actually put them to work.
And you got to have the analytics and actuarial to back it up. So there is no general statement that could put casualty, which is a massive class of insurance in a neat box and on a bumper sticker.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited3: Understood. And sorry for the more broad based question. It's just something I grapple with, looking at the specific products versus like the overall profitability of companies.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Honestly, I'd help you out, give it to you.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited3: Understood. Next (LON:NXT) one I have is just on the asset base, I guess, is we're seeing, I guess, lower paid claims relative to incurred sort of an elongation of the claim cycle and casualty, we're seeing asset base is kind of grow more than they otherwise would, which the good part about that is you get more net investment income potentially. I mean, how should we think about the growth in the asset base?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: I think you just said something that you're going to have to think about how you connected those dots. You just said elongated payout pattern and I don't relate to an elongated payout pattern. I do relate to strength of reserves that all things being equal paid to incurred can point to. And I do understand growth in business and in longer tail areas and mix in that regard. But I don't relate to a notion of elongated payout pattern generally speaking.
And I don't know, I got the data, at least when it comes to CHOP.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited3: Can I I mean the invested asset base growing at a pretty strong clip? I mean what's the underlying drag
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: on that? In the year? Our business has been growing and our margins have been good. And so our invested asset base, yes, continues to grow and our capital has been growing. And that invested asset is a source of income and superior returns on a risk adjusted well in excess of cost of capital.
So that is a source of strength for the company. And we will continue to grow the invested asset on purpose and we will continue to focus on returns within that portfolio as a good asset allocator would, which is my earlier comments about us as an asset manager. We're a manager of capital, claim reserves, that's 3rd party and that will continue to grow. Thanks very much. You're welcome.
Conference Operator: Your next question comes from the line of Andrew Kligerman from TD Cowen. Your line is open.
Unidentified Speaker: Hey, good morning. Tom, you're thinking about the financial lines where premium was down 6.2%, and I think you highlighted rate off low single digit, but you still generated about $1,000,000,000 in a quarter of premium. So I'm wondering how much of that was D and O? Can you still make money in D and O? And just how are you thinking about the outlook there?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: I'm not going to give you a breakdown of how much was DNO, that's proprietary. But I am but what I will tell you is we're not writing the business if we can't make money. And we have a very large installed customer base. We have a long storied reputation in G and O and Financial Lines. We're a brand, a major brand in it.
And when they're looking for someone to write their primary, that is manage their risk. More often than not, they want Chubb on. And the competition then is more in the excess layers. And yes, we're writing DNO because where we are, we're making.
Unidentified Speaker: That makes a lot of sense. And then just maybe to kind of follow on that London movie commentary that you gave. You're doing such exceptional underlying combined 80.8 in North America, 84.8 in overseas. Evan, could you see an environment where it just gets more competitive globally and these excellent these exceptional combines maybe erode a little bit. You still do great, but it's 5 years into the hard market already.
Didn't we see this loss ratio?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Here is what you're missing. You're looking at it on an ex cat basis when everyone is cat levered. Look at published combined ratios. That's what tells you, you can't chuck out the losses and leave the premium in the denominator. I reject that discussion because that's just not understanding risk.
And so and that's what those ex cat look like. And then ask yourself in and you have to do the work. But when you look at various companies, you look at various markets, you got to understand how much is cat levered, how much is not cat levered to get a real help. And then that's why I continue to say published combined ratio is your most important indicator. And then after that, a secondary indicator, all things being equal is ex cat.
It tells you some things, but don't over read it.
Unidentified Speaker: So what I'm right. So what I should just simply read in is that the combines on an absolute basis are still very high for the industry and the outlook is good for Chubb.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: They're good. They're delivering good returns for the industry overall, and it varies by company. Some companies it's delivering good returns, some it's not. They're decent. There's not a lot of room to move.
If you're thinking about pricing adequacy, it's not like industry ROEs are off the charts. They're decent. They're good on a risk adjusted basis. And then loss trend is relentless. Every year you have loss trend.
So you can't just stand still. Just to stay where you are, you've got to get rate or price.
Unidentified Speaker: Makes a lot of sense.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: You got it, Budd.
Conference Operator: Your next question comes from the line of Elyse Greenspan from Wells Fargo (NYSE:WFC). Your line is open.
Unidentified Speaker: Hi, thanks. Good morning. My first question, you guys said, right, there was $59,000,000 of, I guess, strengthening on long tail reserves. I know in response to an earlier question, there were some pushes and pulls. Can you guys give us a sense of what was released in workers' comp versus what was added to excess casualty in the quarter?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: No. We've given I gave as much color around that there was in long tail, there was both positive and negative and negative was more excess related and beyond that we're not giving detail.
Unidentified Speaker: Okay. Thanks. And then you guys typically provide an investment income guide. I don't think that was given this quarter. Any color you can provide there just relative to Q4 and forward?
Peter Enns, Chief Financial Officer, Chubb Limited: Elyse, I in last quarter, I gave last 6 months guidance. So what I would say for the 4th quarter is we will be at the high end of that guidance for the Q4 on a recurring basis. Obviously, there's things that are harder to predict, like I spiked out the $40,000,000 in the Q3 that was higher than normal on PE. But I'd say the high end of the guidance rate, kind of in level on a recurring basis for the 4th quarter.
Unidentified Speaker: And then on tax, you said you would give us right next year with Q4. But given just Bermuda tax changes going into effect, just directionally, would that imply you guys would think the tax rate would be higher next year relative to this year's guide?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Elyse, we typically give the full year guidance in the Q4.
Peter Enns, Chief Financial Officer, Chubb Limited: That's as far as we go. There is uncertainty, so we're not giving anything more specific.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited: Okay. Thank you.
Conference Operator: Your next question comes from the line of Meyer Shields from KBW. Your line is open.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited2: Great. Thanks. If I can go back to the division of pricing to rate and exposure unit, to the extent that more of pricing is coming from rate rather than closed units, does that have implications for loss ratio progress?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Does it what?
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited2: Does that have if more of pricing comes from rates than exposure units, does that imply a difference in terms of how when these premiums are earned, the loss ratio will move?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: No, not at all. Look, be careful. I didn't say exposure. Maybe we're using different terms. An exposure unit to me would be that I wrote more policies.
I took more insureds. That doesn't go into price. We're only talking rate and price times exposure. And so we have rate and then we have a certain kind of exposure that equals price and you apply it against units of exposure, which is insured. And so the exposure part of price is just like rate.
It acts like rate, the portion of it that we count. And that has nothing to do with it all earns exactly the same way. Okay. That's helpful. Because driving the premium And if it's an annual policy, it's earned $1.12 a month.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited2: Okay. No, I think I understand that. Yes, I apologize for the terminology issue. 2nd question though, to the extent that that component of pricing is slowing down, to the extent that that reflects maybe slowing economic growth, does that itself have implications for underwriting profitability?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Not that we no. Not as we see it, no. Not all things be and that's a whole different theoretical discussion that depends on the line of business, what we're talking about. So, oh my God, no, if you want to sit in and have a gestalt discussion about that sometime later, I'll do it.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited2: All right. I'll bring the herring.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: No, no, only in sour cream sauce.
Conference Operator: Your next question comes from the line of Mike Zaremski from BMO. Your line is open.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited4: Hey, good morning. So just kind of back to the casualty competitive marketplace. So casualty pricing has accelerated in recent quarters to approximately 12%. And as you state too, that's well above what most companies publicly stated their loss cost assumption. I guess I'm just trying to understand like why pricing would be accelerating all the way up to 12, especially in today's higher interest rate environment, which is good for long tail lines if loss costs are indeed well below that number?
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: Yes. So what I've been clear about and that you're trying to be too simplistic. There are many cohorts of casualty. The majority significant, the vast majority of our portfolio is adequately priced. There are areas where price has had to accelerate to achieve an adequate risk adjusted return.
It's those everyone's book of casualty is different. And our portfolio of casualty has produced these kinds of rate increases, which were made up of just to keep pace with loss costs where we are adequately priced and greater levels of rate increase where we're pushing to achieve price adequacy and it all mixes together. And by the way, what's producing outstanding combined ratios and that's as far as I can take it.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited4: Okay. Okay. That's understood. Maybe just switching gears lastly since you were willing to offer some color on your guidance on life insurance. So if I if the target this year was, I guess, dollars 1,000,000,000 or so
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: No, I'm not giving you forward looking no, Mike, it's not going to happen. I'm not giving you forward looking guidance. The only thing I was doing is because it was a year where it's the 1st year and I was just doing it for all of you because this was our 1st year where you didn't have noise of acquisitions in that in it and you're trying to get it where are we in relative to where we think we should be. That was why I gave a comment about the 2024 full year where our own target was, I just said, in excess of $1,000,000,000 for operating income and that we are well on track to achieve that or exceed that. And that it was just to give you guys a sort of a landing place.
And then from there, we don't get forward.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited4: Okay, got it. Because last year was over $1,000,000,000 but yes, there's definitely some noise and obviously earnings there have been great. So okay, thank you for taking my questions.
Evan Greenberg, Chairman and Chief Executive Officer, Chubb Limited: You're welcome. But by the way, it's a growth area. Thanks.
Karen Beyer, Senior Vice President, Investor Relations, Chubb Limited: Thank you everyone for joining us today. If you have any follow-up questions, we'll be around stage of call. Enjoy the day. Thanks.
Conference Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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