Chubb Limited Q3 FY2025 earnings call

• Record earnings quarter with core operating income $3B up 29% and EPS $7.49 up 31%, supported by record underwriting and investment results.
• Geographically diversified with presence in North America, Asia, Latin America, U.K., Europe; diverse customer segments including consumer, commercial P&C, life insurance.
• Published underwriting income $2.3B up 55% with a combined ratio of 81.8%, adjusted net investment income $1.8B up 8.3%.
• Total premiums grew 7.5%; commercial P&C underwriting environment in transition with competition growing and property prices softening.
• Digital and AI efforts contributing to growth and transformation; balance sheet strong with loss reserves never stronger, book value nearly $72B, cash and invested assets over $168B.

Core operating income was $3 billion, up 29%, leading to EPS of $7.49 per share, up 31%. Total company premiums grew 7.5%, with consumer up almost 16% and commercial up 3.3%. Overseas General premiums were up 9.7% (nearly 7.5% in constant dollars), with consumer up 15.5% and commercial lines growing nearly 6%. North America P&C total premiums were up 4.4%, with personal lines up over 8% and commercial up 3.5%. International life insurance premiums were up 26.5% (adjusting for a one-time premium in New Zealand, growth was just over 16.5%). North America combined insurance company premiums were up 18%, and the Life division produced $324 million of pretax income, up over 14%.

• Maintain superior earnings growth including double-digit EPS, book and tangible book value growth, core operating ROE to 14-plus percent over medium term.
• Stepped up share buybacks as stock trades below intrinsic value.
• Expect adjusted net investment income in Q4 to be between $1.775B and $1.81B.

• Catastrophe risk is volatile (e.g., California wildfires, convective storm activity).
• Property pricing softening in some areas, competition growing in certain segments.
• Federal budget deficits, inflation, and dollar rotation could impact investment returns.
• Reserves development can be adverse, e.g., corporate runoff portfolio had adverse development of $61M mostly environmental related.

Q: Just had a question on the ROE outlook increase to 14% plus from 13% in December. Can you talk through the moving pieces?

A: 3 engines of growth: underwriting, life income, and invested asset/investment income. Growing earnings, capital base, share buybacks, and invested asset contribute.

Q: Excess capital, how to think about it today?

A: Not excess capital as it's accretive to ROE when deployed on invested asset side; surplus capital is 2 points or north of 2 points drag on ROE.

Q: Color on overseas general growth outperforming peer group?

A: Majority of overseas general business is middle market, small commercial, consumer; well diversified, with growth in Asia, Latin America, U.K., and continent.

Q: North America E&S growth?

A: Property shrank but casualty grew, large digital capability, pet insurance programs contribute; diversification and balance drive growth.

Q: Inorganic growth opportunities in Asia?

A: Not noticing many sellers in Asia, focus on organic growth across consumer, commercial, distribution, and countries.

Q: A&H business decline in North America?

A: One-off large customer not coming to terms, impacted A&H all year; internationally growing at ~7.5% with growth in Asia, Latin America, travel-related and direct marketing businesses.

Q: Reinsurance business premium decline?

A: Disciplined about reinsurance, write business when priced adequately, shrink when not; property softening impacts reinsurance.

Q: Private investments impact on investment income?

A: Increasing allocation to private investments (including private equity) with higher current yield, leading to faster growth in more volatile components of investment income; has coupon yield and terminal value component.