The conference operator welcomed everyone to the Chubb Limited second quarter 2023 earnings conference call, and then introduced Karen Beyer, the Senior Vice President and Director of Investor Relations. She explained that the call would contain forward-looking statements, and provided a link to the SEC filings for more information. She then introduced Evan Greenberg, the Chairman and Chief Executive Officer, and Peter Enns, the Chief Financial Officer, and mentioned that other members of the management team were present to answer questions. Finally, she handed the call over to Evan Greenberg, who was speaking from Singapore.

The company had a record quarter with double-digit premium revenue and earnings growth, a combined ratio of 85.4, record net investment income, and life earnings that doubled due to their business in Asia. Investment income run rate will continue to grow as they reinvest cash flow at higher rates and compound income. Core operating ROE was 13.8 with a return on tangible equity of 21%.

Peter will discuss financial items such as cats, prior period development, investment income, book value and ROE. Consolidated net written premiums for the company increased 16.1% in the quarter on a published basis, or 16.8% in constant dollars. Global P&C premium growth was balanced and broad-based, with North America, Asia-Pac and Europe all producing double-digit growth. Commercial premiums excluding ag were up 10.5% in North America, while financial lines premiums decreased due to a disciplined response to the underwriting environment. Total premium in the E&S business, the Westchester, grew 12%, while the major accounts division grew 14%. Middle market division premiums were up 5%, but workers comp was flat and financial lines premiums declined. Pricing for total North America commercial lines increased 12.8%, with rate of 8.7% and exposure change of 3.8%. Loss costs in North America were trending at 6.7%.

In the quarter, property premiums grew over 40% in major accounts and E&S property, while middle market property grew 11.4%. Casualty pricing in North America was up 11.3%, with rates up 9% and exposure up 2.2%. Financial lines rates and pricing were down 4.5%, and the high net worth personal lines business grew 11%. Homeowners achieved 14.7% pricing while the loss cost trend remained steady at 10.5%. Auto is a small part of the high net worth business, and there was a reserve release in the prior year's reserves.

In the international general insurance operations, net premiums increased by 11% in constant dollars and 9.3% after FX. Growth was seen in the commercial, consumer, retail, and London wholesale businesses. In Asia, premiums grew 17.5% in commercial lines and 23% in consumer P&C, while A&H premiums increased 16% and life premiums tripled to over a billion dollars. Asia is a key region for growth, with $9 billion in total premium and a balanced 50/50 split between non-life and life. The company has presence and capabilities in 11 markets across north, Southeast Asia, and Australia.

Across Asia, there is a diverse range of cultures and economies, with an innovative mindset and strong work ethic. We have record financial results and favorable underwriting conditions, allowing us to grow our exposure and drive double-digit earnings per share growth. We have strong digital capabilities, a fast-growing digital insurance business, and partnerships with financial institutions and e-commerce leaders that give us access to hundreds of millions of consumers.

Chubb reported strong underwriting and investment performance in the second quarter, resulting in record results and $2.5 billion of operating cash flow. The company returned $1.1 billion of capital to shareholders, and book value and tangible book value per share increased by 2.2% and 3.1%, respectively. Adjusted net investment income was $1.24 billion, a 30% increase from last year, and is expected to rise to $1.27 billion in the third quarter. The company also reclassified its $8 billion held-to-maturity portfolio to available for sale to have more flexibility to invest at higher yields.

In the quarter, there was a pre-tax catastrophe loss of $400 million for weather-related events in the U.S., and favorable pre-tax development of $260 million, split between short tail and long tail lines. Corporate runoff lines had adverse development of $60 million. The paid to incurred ratio was 89%, and the core operating effective income tax rate was 19%. The acquisition of Cigna contributed to year-over-year segment income growth. On July 1, the acquisition of additional shares of Huatai Group increased the aggregate ownership to 69.6%.

Evan Greenberg discusses the rate environment in property and casualty insurance, which is accelerating due to loss environment and reinsurance costs. He states that this is a rational response and that the loss cost trends in casualty have been moving higher for a few years.

Evan Greenberg answers a question about Chubb's catastrophe losses, which were lower than the consensus models for a normal second quarter. He explains that there is variability quarter to quarter and that Chubb had a good experience this quarter, due to their well-rounded business and risk selection. He then answers a question about the North American commercial underlying loss ratio, explaining that it reflects the totality of the commercial business, and is a mix of all lines, including rate and trend.

Evan Greenberg is asked by Greg Peters about his views on the advancements in technology, specifically in artificial intelligence and large language models. He responds that his company closely monitors their expense ratio and is aware of the importance of these developments. He also states that they are patient and lean towards conservatism in their loss PICs.

AI has been employed in the operations, underwriting, claims, and marketing sides of the business for a few years now, and its usage is being scaled up with the expectation of gaining significant benefits. Large language models are being explored for their potential benefits in underwriting and claims, but it is an iterative process that will take longer than some believe.

Evan Greenberg explains that Chubb is focusing more on its property insurance business due to the favorable risk-adjusted returns it is seeing, as opposed to the reinsurance business where the risk-adjusted returns are not as favorable. He notes that the property insurance business is growing in terms of rate, exposure, and structural changes. He invites Greg Peters to discuss the reinsurance business further if he wishes.

Evan Greenberg explains that the main reason for the difference between the 14% growth excluding financial lines and the 18% increase in price excluding financial lines is due to structural changes, such as deductible and attachment point changes, which act like rate or exposure and don't add to premium but support loss cost. In response to a follow-up question, he states that it is in rate or exposure, not premium.

Evan Greenberg and David Motemaden are discussing the transparency of ACE's premium growth and retention rates. Greenberg states that the two are not comparable, and Motemaden is satisfied with the explanation. Greenberg then states that he is feeling good about ACE's premium growth over the rest of the year. Elyse Greenspan then asks for a sense of how premium growth will transpire for the rest of the year.

Evan Greenberg provides an update on the size of the cyber insurance book and how the company is feeling about the rate adequacy of the business. He notes that the company is one of the top two cyber insurers globally and that the business is growing in certain segments, but the overall business is growing. He also states that the rate environment has leveled off and that terms and conditions are in form, and the company has rolled out a form that addresses systemic risk and ransomware.

Evan Greenberg states that Chubb has ample capital flexibility and is not looking for acquisitions. He notes that there is plenty of opportunity for organic growth in Asia, which is currently "full up" and "fabulous". He also mentions that they are mindful of medical inflation and payroll increases when considering rate and price, which could affect their PIC on loss cost and comp.

Evan Greenberg is answering questions from Tracy Benguigui about the company's growth opportunities, joint ventures, and reserve development for molestation claims. He explains that the reviver statutes open up the top of the funnel for potential losses, and the company will reflect any liabilities they see. He then clarifies that the statute of limitations vary by state, and in most cases it only applies to child abuse.

Evan Greenberg explains that the majority of Huatai's life insurance business is accident and health related, with individual policies that offer greater stability. He also states that a minority percentage of the business is tied to savings and protection policies with accident and health riders, and these policies have either no interest rate risk, or very low guarantees such as 1-2% in a whole life policy.

Evan Greenberg and Brian Meredith are discussing the regulatory environment in the North American personal lines business, and Greenberg notes that Chubb has a distinct brand and service that allows them to have more customers. He also mentions that some competitors have been overly competitive and have underpriced risk.

Evan Greenberg of Chubb commented on the competitive environment for casualty lines in North America, noting that they are securing adequate rate and terms and conditions and staying on top of loss development and loss trends. He also stated that he believes these lines need to move and that they are doing so.

Evan Greenberg expressed confidence in the company's reserves, citing their long track record and reserve policy. He also noted that prior period reserve development was a reflection of the strength of the reserves. Alex Scott thanked him for his response and Karen Beyer concluded the call by inviting any follow-up questions.

This summary was generated with AI and may contain some inaccuracies.