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    Earnings call· Mar 2025(Q1 FY25)

    Chubb Q1 FY25 earnings call CB

    Apr 23, 2025 Source

    Executive summary

    Chubb Q1 FY25 — Strong Underwriting and Investment Income Despite Cat Losses

    Chubb delivered a resilient Q1 FY25, showcasing strong underlying underwriting and double-digit investment income growth, despite significant catastrophe losses from California wildfires. The company's global diversification and disciplined approach to pricing in competitive markets, particularly in middle market and casualty lines, underpin its strategy. Management remains confident in achieving double-digit operating earnings and EPS growth, navigating external uncertainties like tariffs and inflation.

    Highlights

    6

    • Core operating income reached $1.5 billion, demonstrating underlying strength.

    • Total company premiums grew 5.7% in constant dollars, reflecting broad-based growth.

    • The current accident year combined ratio improved by nearly 1.5 points to 82.3%, indicating excellent underwriting.

    • Adjusted net investment income increased 12.7% to $1.7 billion, driven by higher yields.

    • International Life Insurance premiums and deposits were up 15.5% in constant dollars, highlighting strong global expansion.

    • North America personal insurance new business growth was almost 20%, with upper high net worth segments growing over 16%.

    Concerns

    5

    • Core operating income was down 31% year-over-year, primarily due to significant catastrophe losses.

    • The published combined ratio was 95.7% with underwriting income of $441 million, impacted by $1.6 billion in cat losses.

    • Alternative investments produced approximately $25 million lower than usual private equity distribution-related income.

    • Large account-related short-tail business is experiencing increased competition, leading to softening prices.

    • Financial lines remain soft, with North America pricing down 3.2%.

    Guidance & targets

    3
    CategoryTargetConfidence
    Annual Core Operating Effective Tax Rate
    19% to 19.5%
    medium materiality
    High
    Operating Earnings and EPS Growth
    double-digit rate
    high materiality
    High
    Adjusted Net Investment Income
    midpoint of our previously guided 6-month guidance
    medium materiality
    Medium

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Total Company
    Total company premiums grew 5.7% in constant dollars.
    		—5.7%——
    P&C
    P&C revenue grew 3.2%, or 5% in constant dollars. Commercial P&C was up 4.6% and consumer was up 6%. Adjusting for one-time items, P&C premium revenue grew over 6.5% in constant dollars.
    Constant dollar growth: 5%Commercial growth: 4.6%Consumer growth: 6%Adjusted constant dollar growth (excluding one-time items): over 6.5%
    		—3.2%——
    North America
    North America premiums were up 3.4%, or 6.4% when adjusted for one-time items. Personal insurance grew 10.1% (adjusted) and commercial grew 5.3% (adjusted). Middle market premiums increased almost 8%, with P&C up over 10%. Major Account and Specialty declined 1.7%, but was up 3.1% adjusted, with E&S business growing 10.7%.
    Adjusted premiums growth (excluding one-time items): 6.4%Personal Insurance growth (adjusted): 10.1%Commercial growth (adjusted): 5.3%Commercial P&C lines growth: 6.4%Financial lines growth: -1.3%Middle Market premiums growth: almost 8%Middle Market P&C growth: over 10%Middle Market Financial lines growth: -2%Major Account and Specialty premiums decline: 1.7%Major Account and Specialty adjusted premiums growth: 3.1%Major Account and Specialty P&C growth: 3.6%Major Account and Specialty Financial lines growth: -1%E&S business growth (within Major Account and Specialty): 10.7%Major Accounts Retail business decline (within Major Account and Specialty): 1.3%High Net Worth Personal Lines growth (adjusted): 10.1%Upper High Net Worth segments premiums growth: over 16%Personal Insurance new business growth: almost 20%
    		—3.4%——
    International General Insurance
    International General Insurance premiums were up 1.8%, or 6.5% in constant dollars. International commercial lines grew about 7.5% and consumer was up 5%. Asia and Latin America both grew 6.1%, while Europe grew 5.5%.
    Constant dollar growth: 6.5%Commercial lines growth: about 7.5%Consumer growth: 5%Asia growth: 6.1%Latin America growth: 6.1%Europe growth: 5.5%Europe constant dollar growth: 6%London Wholesale premiums growth: nearly 8%
    		—1.8%——
    Global Reinsurance
    Global Reinsurance business had a strong quarter with premium growth of 14%.
    		—14%——
    International Life Insurance
    International Life Insurance, primarily in Asia, saw premiums and deposits grow 15.5% in constant dollars. The division produced over $290 million of pretax income, up 15.7% in constant dollars.
    Premiums and deposits constant dollar growth: 15.5%Pretax income constant dollar growth: 15.7%
    		———$290 million pretax income
    Combined Insurance Company (U.S. Worksite)
    The U.S. Worksite business of Combined Insurance Company grew 18.6%.
    		—18.6%——

    Operational metrics

    26
    Core operating income
    $1.5 billiondown 31%
    Q1 FY25

    Core operating income for the quarter.

    Underwriting income
    $441 million
    Q1 FY25

    Underwriting income for the quarter, despite significant cat losses.

    Net loss payments for California wildfires
    $600 million
    Q1 FY25

    Net loss payments related to California wildfires included in operating cash flow.

    Average share price on repurchases
    $286.18
    Q1 FY25

    Average price paid for share repurchases during the quarter.

    Book value per share growth (excluding AOCI)
    0.9%
    Q1 FY25

    Growth in book value per share, excluding accumulated other comprehensive income.

    Tangible book value per share growth (excluding AOCI)
    1.6%
    Q1 FY25

    Growth in tangible book value per share, excluding accumulated other comprehensive income.

    Catastrophe losses (excluding California wildfires)
    $170 million
    Q1 FY25

    Catastrophe losses for the quarter, excluding the California wildfires, primarily weather-related.

    Prior period development (active companies)
    $268 millionfavorable
    Q1 FY25

    Favorable prior period development in active companies, with a split between short-tail and long-tail lines.

    Adjusted net investment income (Q1)
    $1.67 billion
    Q1 FY25

    Adjusted net investment income for the first quarter, which was at the lower end of the 6-month guidance, impacted by specific factors.

    Paid-to-incurred ratio
    87%
    Q1 FY25

    Paid-to-incurred ratio for the quarter, with a variant excluding certain items.

    Core effective tax rate
    19.1%
    Q1 FY25

    Core effective tax rate for the quarter, within the guided range.

    North America Commercial P&C pricing (excluding fin lines and comp)
    up 8.3%
    Q1 FY25

    Overall pricing change for North America Commercial P&C, excluding financial lines and workers' compensation.

    North America Property pricing
    up 3.1%
    Q1 FY25

    Property pricing in North America, with rates slightly down but offset by exposure change.

    North America Property pricing (large account)
    down 9.6%
    Q1 FY25

    Property pricing specifically for large account business in North America, both admitted and E&S.

    North America Property pricing (middle and small)
    up 10.2%
    Q1 FY25

    Property pricing for middle and small accounts in North America, both admitted and E&S.

    North America Casualty pricing
    up 13.4%
    Q1 FY25

    Casualty pricing in North America, showing strong rate increases.

    North America Financial lines pricing
    down 3.2%
    Q1 FY25

    Financial lines pricing in North America, driven entirely by rate changes.

    North America Primary Comp pricing
    flat
    Q1 FY25

    Pricing for primary workers' compensation in North America.

    North America Large account risk management comp pricing
    up 7.5%
    Q1 FY25

    Pricing for large account risk management workers' compensation in North America.

    North America Commercial selected loss cost trend
    6.5%declined modestly from 6.8% in '24
    Q1 FY25

    Selected loss cost trend for North America Commercial, with specific trends for casualty and property.

    North America Homeowners pricing
    up 12.5%
    Q1 FY25

    Homeowners pricing in North America.

    North America Homeowners loss costs
    8.7%
    Q1 FY25

    Homeowners loss costs in North America.

    International Retail Commercial P&C pricing
    up 2.6%
    Q1 FY25

    P&C pricing in International Retail Commercial business.

    International Retail Commercial Financial lines pricing
    down 5.5%
    Q1 FY25

    Financial lines pricing in International Retail Commercial business.

    International Retail Loss cost trends
    5%down 80 basis points from '24, 5.8% to 5%
    Q1 FY25

    Loss cost trends in International Retail, showing a decline from the prior year.

    Technology spend
    $1.1 billion-$1.2 billion
    Annual

    Annual technology spend, with a breakdown between maintenance and development.

    Industry KPIs

    10
    MetricValueDetails
    Combined ratio95.7%%
    Capital returns$751 millionUSD
    ROE operating ROE13%%
    Catastrophe losses$1.64 billionUSD
    Book value per share$164USD
    Net investment income$1.7 billionUSD
    Life specific when present—
    Net premiums written earned—
    Renewal rate change pricing—
    Prior year reserve development$255 millionUSD

    Deals & partnerships

    1
    Liberty MutualAcquisition of Liberty Mutual's business in Thailand and Vietnam, offering P&C products.$275 million in premiums (2024, combined operations)

    The acquired businesses offer a range of consumer and commercial P&C products with distribution through 56 branches and 2,600 brokers and agents. Over 90% of the combined premium is in Thailand. The Thailand portion closed April 1, 2025.

    Risks & headwinds

    5
    Uncertainty and confusion surrounding government's approach to tradeCurrent

    Impacting business and consumer confidence, increasing odds of recession and higher inflation.

    Mitigation: Calls for quick agreements on trade, reduction/elimination of tariffs, and reconciliation of priorities to restore certainty and predictability.

    Increased odds of recession and higher inflationCurrent to near-term

    Higher inflation is 'all but certain'; degree is an open question. Tariffs and federal budget deficit impact interest rates, yield curve, spreads, asset values, and the dollar negatively.

    Mitigation: As a multinational, revenue and income benefit from a weaker dollar; as buy-and-hold fixed income investors, they benefit from higher yields. Monitoring early data around goods and labor costs to adjust pricing.

    Increased competition in large account-related short-tail businessCurrent

    A lot more capital is chasing the business, prices are softening. North America large account property pricing down 9.6%.

    Mitigation: Disciplined underwriting, not writing business below a technically adequate price.

    Softness in financial linesCurrent

    North America financial lines pricing down 3.2% (all rate); International Retail Commercial financial lines pricing down 5.5%.

    Mitigation: Implied by overall underwriting discipline and focus on other growth areas.

    Potential impact of tariffs on short-tail lines of businessNear-term to medium-term

    Magnitude of loss trend impact is unclear due to moving target of tariff policies.

    Mitigation: Watching closely; will adjust pricing in cohorts if inflation changes due to tariffs. Underwriting with facts, not conjecture.

    What to watch in Q2 FY25

    5

    Adjusted Net Investment Income (Q2)

    Q2 FY25
    CurrentQ1 was $1.67 billion, at the lower end of previously guided 6-month guidance.
    TargetAt the midpoint of previously guided 6-month guidance.

    Why it matters

    Investment income is a significant contributor to profitability, and its trajectory impacts overall earnings.

    While the direction of financial markets remains uncertain and volatile, we expect second quarter adjusted net investment income to be at the midpoint of our previously guided 6-month guidance.

    Q&A highlights

    6

    How does Chubb's growth strategy adapt to increasing price competition, tariffs, inflation, and recession risks, both domestically and internationally?

    Evan Greenberg stated the strategy is enduring, focusing on global middle market, small business, U.S. E&S, North America personal lines, and international consumer. He acknowledged competitive pressures in large accounts but highlighted disciplined markets in middle market and casualty. He emphasized Chubb's geographic presence, industry expertise (e.g., Climate+, cyber), and technology use for distribution and efficiency.

    “There's no change to our strategy. Our strategy is enduring. We see growth opportunities that sometimes you get more joy for the pleasure depending on market conditions, sometimes you get less. But that doesn't change the opportunities.”

    asked by Gregory Peters · answered by Evan G. Greenberg

    2 min read6 chapters

    Detailed Narrative

    01

    External Environment and Macro Outlook

    Management highlighted significant uncertainty and confusion surrounding government trade policy, impacting business confidence and increasing the odds of recession and higher inflation. Competing priorities between trade, economic, and fiscal objectives were noted, with a call for quick resolution to reduce tariffs and reconcile policies for certainty and predictability. The CEO expressed concern about tariffs and the federal budget deficit's negative impact on interest rates, asset values, and the dollar.

    02

    Underwriting Performance and Catastrophe Impact

    Despite $1.6 billion in catastrophe losses from California wildfires, Chubb achieved a published combined ratio of 95.7% and $441 million in underwriting income. The underlying current accident year combined ratio improved by nearly 1.5 points to 82.3%, demonstrating strong underwriting fundamentals. Favorable prior-year reserve development contributed $255 million, with $313 million from short-tail lines and $45 million unfavorable from long-tail commercial lines.

    03

    Investment Income and Balance Sheet Strength

    Adjusted net investment income grew 12.7% to $1.7 billion, benefiting from a 5% fixed income portfolio yield and a 5.5% new money rate. Book value reached an all-time high of $164 per share, and adjusted operating cash flow was $2 billion, even after $600 million in wildfire payments. The company returned $751 million to shareholders, including $385 million in share repurchases and $366 million in dividends.

    04

    Market Conditions and Pricing Discipline

    The commercial P&C market presents a 'tale of two cities,' with large account and E&S short-tail business becoming competitive and prices softening due to increased capital. Conversely, middle market and small commercial property, along with casualty lines, remain disciplined with rising rates, allowing Chubb to grow in these areas. Financial lines continue to be soft, with North America pricing down 3.2%.

    05

    Strategic Growth Areas and Technology Investment

    Chubb's growth strategy remains enduring, focusing on global middle market and small business, U.S. E&S, North America personal lines, and international consumer business. The company invests over $1 billion annually in technology, with about half dedicated to development, enhancing analytics, AI capabilities, distribution connectivity, and cycle times, contributing to its industry-leading expense ratio.

    06

    International Expansion and Capital Allocation

    Chubb continues to allocate capital for growth and investments, such as the acquisition of Liberty Mutual's business in Thailand and Vietnam, which will make Chubb the #4 P&C company in Thailand. While mindful of global volatility🌐, the company maintains a long-term investment perspective, with no additional capital investment foreseen in China, where its exposure is already established.

    AI-generated summary of the company’s earnings call. Not investment advice.