Business Description
Chubb Limited is a global insurance and reinsurance organization that operates through six business segments, providing a wide range of insurance products and services . The company offers property and casualty (P&C) insurance, accident and health (A&H) insurance, crop insurance, and life insurance, among other products . Chubb emphasizes product and geographic diversification, contributing to its stability in the face of industry volatility .
- North America Commercial P&C Insurance - Provides property and casualty (P&C) and accident and health (A&H) insurance to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda .
- Overseas General Insurance - Offers commercial and consumer P&C insurance in 51 countries outside North America .
- North America Personal P&C Insurance - Focuses on high net worth personal lines, offering products like homeowners and automobile insurance .
- Global Reinsurance - Provides reinsurance solutions to various clients .
- Life Insurance - Includes life and asset management businesses, with significant contributions from the Huatai Group acquisition .
- North America Agricultural Insurance - Provides crop insurance and other agricultural coverages .
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Q3 2024 Summary
What went well
- Chubb's North America commercial business reports strong margins, with pricing remaining strong, enabling the company to grow above trend over time .
- Chubb's invested asset base continues to grow, serving as a source of income and superior returns . The company is focused on capital and asset management to enhance returns .
- Chubb sees robust international growth, with Asia Pacific growing in the 9% range, Europe growing 8.5%, and Latin America growing 7.5%. The company feels confident about its international growth capabilities .
What went wrong
- Financial lines premium decreased by 6.2%, and the company did not provide a breakdown of critical segments like D&O insurance, raising concerns about profitability in these areas.
- Reserve strengthening of $59 million on long-tail reserves, especially in excess casualty, suggests potential underwriting challenges, as the company declined to provide detailed explanations.
- Analysts questioned the growth in the asset base due to lower paid claims relative to incurred, implying an elongation of the claims cycle in casualty lines, which the company did not fully address.
Q&A Summary
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Casualty Reserve Charge
Q: What's behind the $59 million adverse development in casualty reserves?
A: The $59 million reserve charge in North America casualty relates to accident years 2019 to 2022, primarily in excess casualty ( , ). There were both positive and negative developments in long-tail classes, but excess casualty produced negative results. Overall, the charge was modest relative to the total premiums written ( , ). -
North America Commercial Growth
Q: Should we expect accelerated growth in North America commercial ex financial lines and workers' comp?
A: While not providing specific guidance, Chubb is confident in its ability to continue to grow above trend over time in North America commercial lines, excluding financial lines and workers' comp ( ). The company emphasizes risk selection, structure, and pricing in a healthy market where "all underwriters aren't created equal" ( ). -
London Market Competition
Q: Is increased competition in London affecting the international business growth outlook?
A: The London wholesale market constitutes about 10% of Chubb's international business ( , ). While there is traditional competitive behavior in London that could impact rates, the majority (90%) of international growth is driven by regions like Europe (grew 8.5%), Latin America (7.5%), and Asia (grew in the 9% range) ( ). Chubb feels good about its international growth capabilities despite the competitive dynamics in London ( , ). -
Property Lines and Catastrophe Losses
Q: Given recent hurricane activity and cat losses, what's the outlook for property lines and renewals?
A: In the primary market, especially middle-market and small commercial, pricing remains firm and continues to rise due to hurricane and severe convective storm activity ( , ). In shared and layered property business, there is rate pressure with rates coming down but remaining at good levels due to increased competition, particularly from London ( ). Chubb is comfortable leaning into property and catastrophe risks, leveraging its underwriting expertise and capital flexibility ( ). -
Capital Management Strategy
Q: Any change in views on capital management, specifically regarding share repurchases and dividends?
A: No changes are planned; Chubb will maintain a steady approach to capital management, returning a healthy amount of capital to shareholders while investing in opportunities that offer risk-adjusted returns well above the cost of capital ( ). -
Life Insurance Income Growth
Q: Why isn't life insurance top-line growth translating into more income growth?
A: The top-line growth in total life and international life was around 10%, with income growth in international life at over 9%, so they're tracking closely ( ). The combined insurance business had an oversized nonrecurring item in the prior year; adjusting for that, growth rates are consistent across life operations ( ). -
D&O Profitability and Outlook
Q: Can you still make money in D&O given the premium decline in financial lines?
A: Chubb continues to write D&O where it can make money ( ). The company has a large installed customer base and a strong reputation in D&O and financial lines. While not providing a breakdown, they emphasize not writing business that isn't profitable ( ). -
Underwriting Profitability Concerns
Q: Could increased global competition erode your excellent combined ratios?
A: Chubb focuses on published combined ratios as the most important indicator, rather than ex-catastrophe figures ( ). The industry is delivering decent returns, but there's not much room to move on pricing adequacy. Loss trends are relentless, so maintaining rates is essential to preserve profitability ( , ). -
Casualty Pricing Dynamics
Q: What's your view on price adequacy in casualty lines and the need to keep pushing rates?
A: Price adequacy in casualty varies by area, customer, and geography; there's no general statement ( ). It's always an underwriter's market, requiring data, experience, analytics, and actuarial support to make pricing decisions ( ). -
Growth in Asset Base and Investment Income
Q: How should we think about the growth in the asset base and its impact on investment income?
A: Chubb's invested asset base continues to grow due to business growth and healthy margins ( ). This growth is intentional, providing a source of income and superior risk-adjusted returns well above the cost of capital. The company will continue to focus on returns within the portfolio as a prudent asset allocator ( ). -
Investment Income Guidance
Q: Can you provide guidance on investment income for the next quarter?
A: For the fourth quarter, Chubb expects to be at the high end of its previous guidance on a recurring basis ( ). While some items like private equity returns are harder to predict, the recurring investment income remains strong ( ). -
Tax Rate Outlook
Q: Will Bermuda tax changes lead to a higher tax rate next year?
A: Chubb typically provides full-year guidance in the fourth quarter and did not offer specifics regarding the tax rate due to uncertainty ( ).
Key Metrics
Revenue by Segment - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
North America Commercial P&C Insurance | 4,369 | 4,248 | 4,735 | 5,064 | 18,416 | 4,880 | 4,900 | 4,735 | ||||||||||||||||||||||||||||||||||||||||||||||
- Net Premiums Written | 1,293 | - | 1,452 | - | 5,465 | 1,633 | - | 1,452 | ||||||||||||||||||||||||||||||||||||||||||||||
North America Personal P&C Insurance | 1,320 | 1,271 | 1,407 | 1,538 | 5,536 | 1,471 | 1,512 | 1,407 | ||||||||||||||||||||||||||||||||||||||||||||||
North America Agricultural Insurance | 159 | 573 | 1,540 | 897 | 3,169 | 128 | 635 | 1,540 | ||||||||||||||||||||||||||||||||||||||||||||||
Overseas General Insurance | 2,786 | 2,696 | 3,311 | 3,438 | 12,231 | 3,198 | 2,908 | 3,311 | ||||||||||||||||||||||||||||||||||||||||||||||
Global Reinsurance | 244 | 222 | 239 | 257 | 962 | 295 | 339 | 239 | ||||||||||||||||||||||||||||||||||||||||||||||
Life Insurance | 1,264 | 539 | 1,442 | 2,153 | 5,398 | 1,611 | 1,256 | 1,442 | ||||||||||||||||||||||||||||||||||||||||||||||
Corporate | 0 | 0 | - | - | 0 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Property and Other Short-Tail Lines | - | 2,346 | - | - | - | - | - | 2,314 | ||||||||||||||||||||||||||||||||||||||||||||||
Commercial Casualty | - | 2,024 | - | - | - | - | - | 2,548 | ||||||||||||||||||||||||||||||||||||||||||||||
Financial Lines | - | 1,244 | - | - | - | - | - | 1,249 | ||||||||||||||||||||||||||||||||||||||||||||||
Workers' Compensation | - | 537 | - | - | - | - | - | 539 | ||||||||||||||||||||||||||||||||||||||||||||||
Commercial Multiple Peril | - | 391 | - | - | - | - | - | 433 | ||||||||||||||||||||||||||||||||||||||||||||||
Surety | - | 174 | - | - | - | - | - | 188 | ||||||||||||||||||||||||||||||||||||||||||||||
Total Commercial P&C Lines | - | - | - | - | - | - | - | 7,271 | ||||||||||||||||||||||||||||||||||||||||||||||
Agriculture | - | 767 | - | - | - | - | - | 1,379 | ||||||||||||||||||||||||||||||||||||||||||||||
Personal Homeowners | - | 1,174 | - | - | - | - | - | 1,287 | ||||||||||||||||||||||||||||||||||||||||||||||
Personal Automobile | - | 460 | - | - | - | - | - | 624 | ||||||||||||||||||||||||||||||||||||||||||||||
Personal Other | - | 485 | - | - | - | - | - | 509 | ||||||||||||||||||||||||||||||||||||||||||||||
Total Personal Lines | - | - | - | - | - | - | - | 2,420 | ||||||||||||||||||||||||||||||||||||||||||||||
Global A&H - P&C | - | 786 | - | - | - | - | - | 855 | ||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Lines | - | 293 | - | - | - | - | - | 352 | ||||||||||||||||||||||||||||||||||||||||||||||
Total Property and Casualty Lines | - | - | - | - | - | - | - | 12,277 | ||||||||||||||||||||||||||||||||||||||||||||||
Net Investment Income | - | - | - | - | 4,937 | 1,391 | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 11,057 | 9,549 | 12,674 | 17,369 | 50,649 | 12,894 | 12,292 | 14,849 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue by Geography - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
Europe, Middle East, and Africa | 1,721 | 1,307 | 1,264 | 736 | 5,028 | 1,869 | 1,409 | 1,347 | ||||||||||||||||||||||||||||||||||||||||||||||
Asia | 733 | 772 | 1,099 | 5,624 | 8,228 | 1,161 | 1,177 | 1,279 | ||||||||||||||||||||||||||||||||||||||||||||||
Latin America | 661 | 613 | 695 | 774 | 2,743 | 777 | 697 | 701 | ||||||||||||||||||||||||||||||||||||||||||||||
Other | 43 | 51 | 51 | - | - | 28 | 51 | 40 | ||||||||||||||||||||||||||||||||||||||||||||||
North America | - | - | - | - | 29,713 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Japan | 105 | 142 | 102 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 11,057 | 2,885 | 3,211 | 28,559 | 45,712 | 3,835 | 3,334 | 3,367 | ||||||||||||||||||||||||||||||||||||||||||||||
KPIs - Metric / Quarter | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
**Net premiums written** ($ million) | 10,710 | 11,951 | 13,104 | 11,596 | - | 12,221 | 13,360 | 13,829 | ||||||||||||||||||||||||||||||||||||||||||||||
**Net premiums earned** ($ million) | 10,100 | 10,999 | 12,700 | 11,897 | - | 11,583 | 12,300 | 13,400 | ||||||||||||||||||||||||||||||||||||||||||||||
**Catastrophe losses** ($ million, pre-tax) | 458 | 400 | 670 | 300 | - | 435 | 580 | 765 | ||||||||||||||||||||||||||||||||||||||||||||||
**Combined ratio** (%) | 86.3 | 85.4 | 88.4 | 85.5 | - | 86.0 | 86.8 | 87.7 | ||||||||||||||||||||||||||||||||||||||||||||||
**CAY combined ratio excluding catastrophe losses** (%) | 83.4 | 83.3 | 84.3 | 80.4 | - | 83.7 | 83.2 | 83.4 | ||||||||||||||||||||||||||||||||||||||||||||||
**Net amount at risk** ($ million) | 2,296 | 2,048 | 2,138 | 1,872 | - | 1,683 | 1,630 | 1,595 | ||||||||||||||||||||||||||||||||||||||||||||||
**Cash Surrender Value** ($ million) | 5,124 | 5,369 | 5,251 | 5,346 | - | 5,655 | 5,625 | 5,790 | ||||||||||||||||||||||||||||||||||||||||||||||
**Weighted-average crediting rate** (%) | 3.6 | 3.8 | 3.8 | 3.0 | - | 2.9 | 2.8 | 2.7 | ||||||||||||||||||||||||||||||||||||||||||||||
**Guaranteed minimum crediting rates** ($ million) | 1,432 | 1,414 | 2,383 | 1,314 | - | 563 | 546 | 464 | ||||||||||||||||||||||||||||||||||||||||||||||
**Weighted average duration** (years) | 13.5 | 16.4 | 18.7 | 4.8 | - | 19.3 | 19.1 | 4.7 |
Executive Team
Questions to Ask Management
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Can you provide more detail on the $59 million of unfavorable development in long-tail lines, particularly in general casualty, and explain how you plan to address this issue?
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With premiums in financial lines down 6.2% and low single-digit rate decreases, can you elaborate on the profitability of your D&O business and the outlook for this segment?
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Given the increased competition and rate pressure in the shared and layered property market, especially due to what you describe as "aberrant" behavior in the London market, how do you anticipate this will impact your underwriting margins and what strategies are you implementing to maintain profitability?
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Despite strong cash flows and record capital levels, you stated a "steady as she goes" approach to capital management; can you discuss why there is no change in your view on share repurchases versus special dividends, particularly with the appreciating stock price?
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You expressed confidence in your ability to continue growing above trend without providing forward guidance; given the rate pressures in some lines and potential economic headwinds, what underpins this confidence in sustaining above-trend growth?
Past Guidance
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024
- Guidance:
- Core Effective Tax Rate: Expected to be between 19% and 19.25% for Q4 2024, with the full year between 18% and 18.25% .
- Investment Income: Expected to be at the high end of the guidance range provided for the last six months on a recurring basis .
- Life Insurance Income: On pace to exceed the life division income target of $1 billion for the year .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Remainder of FY 2024
- Guidance:
- Adjusted Net Investment Income: Expected to average approximately $1.57 billion to $1.63 billion for the remainder of the year .
- Core Effective Tax Rate: Expected to be within 18.75% to 19.25% for the remainder of the year .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: Q1 2024
- Guidance: No specific guidance metrics were provided. The CEO stated they do not guide growth for the year, and the CFO mentioned it was too early to provide guidance on the tax rate for the next year .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Tax Rate: Expected annual core operating effective tax rate for calendar 2024 to be in the range of 18.75% to 19.25% .
- Operating Earnings Growth: Expected to continue growing at a double-digit pace through P&C revenue growth, underwriting margins, investment income, and life income .