Chubb(CB) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an after-tax COVID-related loss estimate of $1.2 billion, which accounted for approximately 25% of earnings [7] - The published P&C combined ratio was 112.3%, with a total after-tax cash charge of $1.5 billion, including $353 million from natural catastrophe and civil unrest-related losses [8] - Book value per share grew about 5%, while tangible book value increased over 7%, both remaining essentially flat for the year [10] - Operating cash flow for the quarter was $2 billion, and the company returned $353 million to shareholders in dividends [34] Business Line Data and Key Metrics Changes - P&C net premiums grew 1.4% in constant dollars, with a better underlying growth of 3.9% when excluding a one-time charge [11] - Commercial P&C net premiums grew 10% after adjusting for the one-time premium charge, driven by strong new business growth and premium retention [12] - In international general insurance operations, commercial P&C net premiums grew over 5.5% in constant dollars, with Chubb Global Markets growing over 20% [13] - Consumer lines growth globally was severely impacted, with North America personal lines experiencing a flight to safety in the high net worth segment [14][15] Market Data and Key Metrics Changes - Overall rates increased in North America commercial P&C by 14%, with major accounts and specialty rates per property up 21% [14] - Casualty rates increased over 25.5%, and financial lines rates were up over 18.5% [14] - Retention rates remained strong at almost 97% [15] Company Strategy and Development Direction - The company is capitalizing on favorable commercial P&C underwriting conditions while navigating the challenges posed by COVID-19 [10][31] - Chubb has released a pandemic business interruption program aimed at mitigating economic disruption in future pandemics, advocating for a public-private partnership framework [25][28] - The company emphasizes maintaining a conservative approach to capital management and risk-adjusted returns in its investment strategy [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant impact of COVID-19 on the economy and the insurance industry, describing it as a historic event with long-lasting effects [6][7] - The company expects to achieve positive premium revenue growth for the full year, despite the challenges posed by the pandemic [16] - Management expressed confidence in the company's strong balance sheet and operational capabilities during uncertain times [31][33] Other Important Information - The company highlighted its commitment to addressing social issues, including racism and inclusion within its workforce [29][30] - Management discussed the importance of liability shields for businesses in the context of the ongoing pandemic, supporting legislative efforts to provide such protections [82] Q&A Session Summary Question: Impact of COVID on acquisition expense ratio - Management noted that the acquisition ratio benefits from a mix of business change, with commercial P&C growing rapidly and having a lower acquisition ratio [40] Question: Frequency benefits on commercial lines - Management indicated that most classes of business in traditional property and casualty benefit from reduced frequency due to COVID-related shutdowns [41][42] Question: Pricing trends in North America commercial - Management confirmed that they are achieving rates in excess of loss cost trends, but did not provide specific forward guidance [46] Question: Business interruption claims evolution - Management discussed the ongoing legal landscape regarding business interruption claims, noting that the situation is evolving differently in various countries [59][60] Question: Reinsurance business outlook - Management stated that they are becoming more active in the reinsurance business due to improved pricing conditions [63] Question: Liability shields for businesses - Management emphasized the importance of liability safe harbors for businesses during the pandemic, supporting legislative efforts to provide such protections [82]