Chubb Ltd. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• California Wildfires: Chubb is supporting policyholders affected by California wildfires, with an estimated $1.5 billion net pre-tax cost for Q1 2025.
• Fourth Quarter and Year Results: Fourth quarter core operating income was $2.5 billion, with record P&C underwriting income and investment income. Full-year operating income was $9.1 billion, up 11.5% adjusted for one-time tax benefit.
• Business Segments:
  • North America: P&C premium revenue excluding agriculture grew 6.3% in Q4, with commercial lines having an 83.9% combined ratio for the year. High net worth personal lines had 10% premium growth.
  • International General Insurance: Retail business premiums grew 7.7% in Q4, with Asia Pac leading. Overseas general business had an 86.4 combined ratio for the year.
  • Reinsurance: Strong quarter with about 20% premium growth, full-year combined ratio 85.9.
  • Life Insurance: Fundamentally Asia, with premiums and deposits up over 26% in constant dollar, driven by growth in regions like Korea, Hong Kong, Taiwan, and Southeast Asia.
• Pricing and Growth: Global P&C premiums grew 6.7% in Q4, with commercial up 6.4% and consumer up 7.5%. Life premiums grew 8.5%. Market conditions favorable for over 80% of global P&C business and life business.

Segment Performance

• P&C Business: Fourth quarter global P&C premium revenue (excluding agriculture) grew 6.7%, with North America and overseas general P&C businesses contributing. For the year, global P&C premium revenue grew 9.9%. Fourth quarter record P&C underwriting income with a combined ratio of 85.7, and full-year P&C underwriting income was $5.9 billion with a combined ratio of 86.6. North America commercial lines business had an 83.9% published combined ratio for the year.
• Life Insurance Division: Fourth quarter premiums grew 8.5% in constant dollars. For the year, life premiums grew 18.5% in constant dollars, with pre-tax income of $1.1 billion.
• North America: Fourth quarter P&C premium revenue excluding agriculture grew 6.3%. Personal insurance grew 10%, commercial grew 5.1%. The North America commercial lines business had an 83.9% published combined ratio for the year. High net worth personal lines business had 10% premium growth, including 34% new business growth.
• International General Insurance: Fourth quarter retail business premiums grew 7.7%, with Asia Pac leading at 12.2% growth. For the year, overseas general business had an 86.4 combined ratio.
• Reinsurance Business: Fourth quarter premium growth was about 20%, and for the year, premiums were up 32% with a combined ratio of 85.9.
• Agriculture: Crop underwriting results were excellent in the quarter, with $354 million in underwriting profit for the year, but premiums were down due to lower commodity prices and government risk sharing formulas.

Guidance

• 2025 is expected to have double-digit growth in operating earnings and EPS, despite cat losses and FX, with confidence in top and bottom line growth.
• Core operating effective tax rate for 2025 is expected to be in the range of 19% to 19.5%, including the transition cash tax benefit from the adoption of the new Bermuda income tax.
• Expect quarterly adjusted net investment income to have a run rate between $1.67 billion and $1.75 billion over the next six months.

Risks

• California Wildfires: Uncertainty regarding the ultimate size of the loss and its impact on overall property pricing.
• Financial Lines Competition: Competition in financial lines, particularly D&O and employment practices liability, is putting pressure on current accident year underwriting margins.
• Reinsurance Market: Selective pockets of stress in reinsurance casualty, requiring careful selection.
• Tax Policy Changes: Potential impact of OECD policy changes on Bermuda tax structure and deferred tax assets (DTAs), with uncertainty over long-term implications.

Question and Answer

• **Q: Brian Meredith asks about the Cal fire loss estimate and 2025 growth and inorganic growth.

A: Evan Greenberg says the $1.5 billion is a ground-up number including fair plan assessment, no subrogation credit; on growth, organic growth is mid to high single digit, inorganic is opportunistic and price-dependent.

• **Q: David Motemaden asks about favorable long tail reserve development and structured transactions impact.

A: Evan Greenberg says casualty portfolios have varying reserve developments, structured transactions run a higher loss ratio than average; on structured transactions impact, it's in the range.

• **Q: Greg Peters asks about life insurance growth in 2025.

A: Evan Greenberg says life income had consolidation impact in 2023, underlying growth in 12%-14% range, continuing and strengthening with growth in Asia regions.

• **Q: Meyer Shields asks about reinsurance purchasing and North America administrative expenses.

A: Evan Greenberg says no changes to reinsurance purchasing, North America administrative expenses uptick is just noise.

• **Q: Mike Zaremski asks about U.S. middle market competition and investment portfolio shift.

A: Evan Greenberg says focus is on organic SME, Peter Enns says investment portfolio shift is for investment efficiency, no underlying change in fixed income.

• **Q: Andrew Kligerman asks about casualty reinsurance disconnect and financial lines competition.

A: Evan Greenberg says reinsurance casualty is selective, financial lines competition is due to pricing and loss frequency reverting to mean.

• **Q: Alex Scott asks about California wildfires impact on market.

A: Evan Greenberg says it's too early to tell, but loss magnitude will determine impact on property pricing.

• **Q: Elyse Greenspan asks about excess capital drag on ROE and tax DTA.

A: Peter Enns says excess capital drag on ROE is in similar range to prior year, tax guidance considers Bermuda transition cash tax benefit, DTA structure based on Bermuda law not expected to change soon.

• **Q: Yaron Kinar asks about North America commercial net premium growth.

A: Evan Greenberg says gross premium growth has distortions, need to focus on net premium growth, which is a mix of business and retention.