Q4 2023 Earnings Summary
- Chubb expects to continue growing operating earnings at a double-digit pace, even after adjusting for the one-time tax benefit, demonstrating strong confidence in future profitability.
- The company's loss reserves are as strong as they've ever been, reflecting robust financial strength and prudent risk management.
- Chubb's significant data and scale advantages in agriculture insurance allow them to effectively manage climate change risks and maintain favorable pricing, positioning them well in this challenging segment.
- Uncertainty about the impact of Bermuda tax changes on Chubb's effective tax rate in 2025, as management admits it's "too complicated and early to know" how the new laws will interact and they "really don't have any visibility on it."
- Challenging pricing environment in North American financial lines, particularly in D&O insurance, where rates continue to decline and the underwriting environment remains aggressive, with no expectation for pricing to bottom out soon.
- Exposure to climate change risks in the agriculture business, where managing these risks is challenging due to limited flexibility in pricing or policy language, potentially impacting profitability.
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Loss Cost Trends
Q: How are loss cost trends affecting underwriting results?
A: Evan Greenberg explained that casualty loss cost trends have been reasonably steady over the year, with no material changes. Any slight increase is due to business mix rather than underlying loss costs. He expressed confidence in the stability of loss costs, noting that while some pockets have been more elevated, overall trends are steady and well understood. -
Capital Deployment Strategy
Q: Any updates on deploying excess capital?
A: Peter Enns stated that the drag from excess capital has modestly increased due to new S&P models and other factors. Chubb plans to continue deploying capital through a mix of share buybacks and opportunistic M&A, with no significant changes to their strategy. -
Reserve Strength and Releases
Q: Are reserve releases linked to underwriting actions?
A: Evan Greenberg clarified that there is no connection between reserve changes and recent underwriting actions. He emphasized that Chubb's loss reserves are as strong as they've ever been, due to consistent underwriting and robust loss cost data. -
North America Commercial Growth
Q: Expectations for North America Commercial growth in 2024?
A: While Evan Greenberg did not provide specific guidance, he indicated confidence in the business's well-priced book and favorable underwriting environment. He noted strong double-digit growth in property-related lines and rate adequacy in casualty lines, suggesting continued robust performance. -
Large Account Excess Casualty
Q: What corrective actions are taken in excess casualty?
A: Greenberg highlighted that Chubb has taken underwriting actions in the large account excess casualty space due to increased loss costs, particularly in segments like trucking and logistics with "wheels" exposure. The actions involve exposure changes and modest premium adjustments, without impacting the overall franchise. -
E&S in Personal Lines
Q: Shift to E&S in high-net-worth personal lines?
A: Chubb is writing more business on the Excess & Surplus lines to tailor coverage in cat-exposed areas where admitted markets lack flexibility. While the vast majority of the portfolio remains admitted, the trend is towards more E&S placements to meet customer needs effectively. -
Property Rate Adequacy
Q: Is property insurance adequately priced?
A: Greenberg affirmed that property rate adequacy is strong, underpinned by thorough data analysis and portfolio management. He expressed confidence in the pricing and risk assessment of their property book, particularly in cat-exposed wholesale markets. -
Workers' Compensation Trends
Q: Details on workers' comp loss trends?
A: Chubb observes a steady 4.6% loss trend in workers' compensation. Greenberg noted they recognize higher medical loss trends, adjusted accordingly, and see no significant issues in severity or frequency. -
China Business Outlook
Q: How is the China asset management business performing?
A: Despite economic uncertainties, Chubb's asset management business in China manages over $100 billion in assets, primarily fixed income. Greenberg described it as an outstanding franchise with strong performance rankings, positioned well for future growth when China's economy accelerates. -
Bermuda Tax Rate Impact
Q: Expected impact of Bermuda tax rate changes?
A: Peter Enns stated it's too early to determine the impact of Bermuda's tax rate increase in 2025. The complexity arises from how Bermuda law will interact with OECD rules and potential changes in other jurisdictions, leaving the outcome uncertain.