Chairman & CEO, Chubb Limited
Chubb Ltd ($CB) Q2 2026 Earnings Call
... in our earnings press release and financial supplements now I'd like to introduce our speakers first we have Evan Greenberg ...
About Evan Greenberg
In Chubb’s Q2 FY26 earnings call on June 30, 2026, Evan Greenberg reported that the company had “a very strong quarter.” He highlighted growth in the company’s international life insurance business, with premiums and deposits rising nearly 14.5%, and noted that the majority of life exposure is in Asia, with most growth in North Asia (China, Hong Kong, Korea, and Taiwan). Greenberg also stated that premiums in the North America Chubb worksite benefits business were up 14%, and that the life division produced $332 million in pre-tax income, up 9% from the prior year. He described Chubb as an “all-weather firm” and a “consistent compounder of wealth,” expressing confidence in the company’s ability to generate strong growth and operating earnings. During the Q&A session, Greenberg commented on regulatory developments affecting Hong Kong, describing an “overreaction” to government and regulator pronouncements. He said Chubb had no impact from the actions and did not expect an impact going forward, characterizing the measures as aimed at “bad actors” abusing capital flows and investment product rules. When asked about market conditions, Greenberg acknowledged a “sober” view that differs from some competitors’ perspectives, though he did not elaborate on what competitors might see differently.
Transcript (71 segments)
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Operator0:00
Thank you for standing by. My name is Jay and I'll be your conference operator today. At this time, I would like to welcome everyone to the Chubb Limited second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Susan Spieac, senior vice president, investor relations. You may begin.
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Susan Spieac0:32
Thank you and welcome to our June 30th, 2026 second quarter earnings conference call. Our report today will contain forward-looking statements, including statements relating to the company performance, pricing, and business mix, growth opportunities, and economic and market conditions, which are subject to risks and uncertainties, and actual results may differ materially. See our recent SEC filings, earnings release, and financial supplement, which are all available on our website at investors.chubb.com for more information on factors that could affect these matters. We will also refer today to non-GAAP financial measures, reconciliations of which to the most direct comparable GAAP measures, and related details are provided in our earnings press release and financial supplements. Now, I'd like to introduce our speakers. First, we have Evan Greenberg, chairman and chief executive officer, followed by Peter Ends, our chief financial officer, and Chris Hogan, our chief investment officer. Then we will take your questions. Also with us today to assist with your questions are several members of our management team. And it's now my pleasure to turn the call over to Evan.
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Evan Greenberg1:44
Good morning. We had a very strong quarter. The results speak to our strengths and competitive profile, the health of our balance sheet, the growth of our invested asset, and the diversification of our businesses globally with the opportunities they present. All set against our disciplined approach to underwriting. Strong PNC underwriting, investment, and life income results led to core operating earnings of 2.8 billion or 726 per share, up 14.6% and 18.2% respectively over the prior year. Our most important measure of shareholder wealth creation, tangible book value per share, is up 17.1% year-over-year. Our annualized core operating return on tangible equity was 21.2% for the quarter and core operating ROE was 14.5%.
PNC underwriting income was more than 1.9 billion, up almost 19%. With a combined ratio of 83.8 on a current accident year basis, excluding cats, the combined ratio was 82.2%. On the investment side of our business, adjusted net investment income was a record 1.888 billion, up more than 11%. Supported by excellent performance in our fixed income and alternative asset portfolios. The fixed income portfolio yield was 5.1% and our current new money rate averaged 5.5% as of June 30. Our invested asset now stands at 175 billion, up from 161 billion a year ago. Life income of 332 million was up 9%.
As you know, we are well diversified globally by geography and product and by the type of customer we serve in both commercial and consumer businesses. And we are well diversified by distribution channel, reaching customers the way they want to buy. Our pattern of growth speaks to this. The substantial majority of our businesses are growing with the balance flat or purposely shrinking due to inadequate pricing or terms. The most obvious and visible example of this is US large account and ENS property where we again shed a significant volume of premium. Property aside, the vast majority of the balance of our businesses in the US and globally are growing at various rates. Some faster, some slower. Market and macro conditions dependent, including personal lines, small and middle market commercial, A&H, life, and even large account business, excluding property. Peter is going to have more to say about financial items.
Looking more closely at growth pricing in the rate environment, global PNC premiums were up 3%. Or 6.3% excluding large account ENS property. Overseas general grew 10.2%. Or 4.8% in constant dollar. North America was up about half a percent with commercial down 2.3% while personal lines and A were up each 6%. Commercial was up 4.1% in major and specialty property. Again, aside for context and observing from a broader perspective, soft market conditions have begun to spread beyond property to more casualty lines particularly ENS. Though certain classes of large account middle market are growing more competitive, pricing in certain areas of casualty are failing to keep pace with loss costs which are hardly benign. Keep in mind, US casualty loss costs are rising at a pretty steady 6 to 7% for primary casualty and 9.5 to 12% for excess. And that is per year and it varies by class of business as to whether it is rising six or seven or nine and a half or twelve. Pricing becomes marginal or inadequate pretty quickly when you are running those kinds of loss costs. In the meantime, financial lines continues to be soft. And here we notice an unsurprising pattern where experienced large companies are much more disciplined and rational while naive newer players particularly financial lines MGAs and smaller companies are underwriting in prices and terms that are inadequate. In fact, of late, we have observed brokers securing coverage terms from these markets that experienced underwriters discontinued 20, 25 years ago. And for good reason. Again, from Chubb's perspective, while all this impacts us, we are so well diversified that it has relatively and absolutely less impact overall.
With that as a baseline, I am going to give you more quarter color on the quarter by division and region. Our international retail business, which produces more than 17 billion in gross premiums annually, operates in 51 countries and is about 90% of our overseas general division and it grew almost 12% in the quarter or about six in constant dollar. Consumer related businesses both A&H and personal lines were up more than 12%. With commercial lines up over 11%, Latin America grew 15.6%. Asia grew 12%. Europe grew nearly 7.5%. In our London wholesale business, the market is highly competitive and not only in property. It is worth noting that London is actively writing US casualty for the last few quarters, a move we have seen before. The volume is growing and it rates in terms that can only end one way. There is a reason US casualty is going to London and it isn't due to a lack of capacity in the United States. Premiums in our London wholesale business, which is about 10% of international PNC, were down about 1% in the quarter. In North America commercial, premiums in our middle market and small commercial division grew almost 9%. With PNC lines up 12% and financial lines down about 3%, this is a powerhouse franchise which produces more than 9.5 billion in gross premiums annually with a vast geographic footprint and broad product capability serving small and midsize companies of all kinds from a wide range of industries. Premiums in major account and specialty or ENS declined 9% in the quarter because of property. In North America, pricing for commercial property and casualty excluding fin lines and comp was up 1.3%. With rates down 1.4% and exposure change of 2.7%. Property pricing was down about 6% with rates down 10.5% and exposure up 52%. But going a step further, property pricing was down 12% in shared and layered major and specialty for the business we wrote. Market pricing for the business we gave up or passed on was down around 40%. In middle market and small commercial, property pricing was up 2.3%. Casualty pricing in North America was up 7.1%. With rates up 6.4% and exposure up 0.7%. And fin lines pricing was up 0.3%.
On the consumer side of North America, our high-net-worth personal lines business, the clear market leader in that category, had a really good quarter with premium growth of 6% and renewal retention on an account basis of 90%. Our North America personal lines business is now more than $8 billion in gross premiums annually. In our international life insurance business, premiums and deposits rose almost 14.5%. The vast majority of our life exposure, as you know, is in Asia. And the majority of our growth is in North Asia, meaning China, Hong Kong, Korea, and Taiwan. Premiums in our North America Chubb worksite benefits business were up 14%. Our life division produced 332 million of pre-tax income in the quarter, up 9% from last year. The life division now produces annual premiums of over 8 billion. Five years ago, it was 2.5 billion. Our diversification, presence, and capabilities globally, and our operating discipline provide us with continued growth opportunities and resilience. This quarter's results add to a long track record that demonstrates we are a consistent compounder of wealth. We are an all-weather firm. We have many sources of opportunity on both the liability and the asset side of the balance sheet and we are patient. Cats and FX aside, I am confident in our ability to continue to outperform and to generate strong growth and operating earnings in EPS and most importantly double-digit tangible book value, our most important indicator of shareholder wealth. I will now turn the call over to Peter and then I am going to come back and we will take your questions.
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Peter Ends13:06
Thank you, Evan, and good morning. We had another strong quarter led by our PNC divisions globally, growing life business and strong investment performance. All of which further strengthen our financial position, including invested assets of 175 billion and 3.5 billion of adjusted operating cash flows. There are a few capital related matters I would like to touch on. First, we issued 2.2 billion of debt across a few currencies at a weighted average cost of 4.2% and an average term of about 7.5 years. The use of proceeds is for general corporate purposes, which includes the repayment and refinancing of debt. Secondly, in May, our board authorized a new 7.5 billion share repurchase program that took effect on July 1st with no expiration date. In the quarter, we returned 1.4 billion of capital to shareholders, including 979 million in share repurchases at an average price of $327.18 per share and 395 million in dividends. We ended the quarter with an all-time high in book value of 75 billion or $19,545 per share. Book and tangible book value per share excluding AOCI grew 2.8% and 3.8% respectively for the quarter and 11.4% and 15.8% from last year. Pre-tax catastrophe losses were 475 million for the quarter principally from weather related events in the US. Prior period development in the quarter in our active companies was a favorable 441 million split 89% short tail lines and 11% long tail lines. Our corporate runoff portfolio had adverse development of 158 million with over two-thirds of that coming from molestation related claims development. Our paid to incurred ratio for the quarter was 90% and our net loss reserves increased to nearly 69 billion representing a growth of 4% from the second quarter last year. Excluding cats, PPD, and agriculture, our paid to incurred ratio was 86%. Our core operating effective tax rate is 19.2% for the quarter, which is below our previously guided range due to shifts in the mix of income and discrete tax benefits related to equity awards and certain investments. We continue to expect our core operating effective tax rate for the full year to be in the range of 19.5 to 20%. Turning to investments, our A-rated portfolio increased about 2.5 billion in the quarter to 173 billion and is up 14.3% or 9% over the last 12 months, supported by approximately 16 billion in adjusted operating cash flows. Adjusted net investment income of 1.888 billion was above our previously guided range, primarily due to strong growth in the invested asset base and higher than projected private equity income. To give you a bit more color on investment income and the portfolio, I will turn it over to our chief investment officer, Chris Hogan.
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Chris Hogan16:16
Thank you, Peter. Good morning, everyone. Our public fixed income portfolio generated 1.63 billion of income in the quarter, up 12% year-over-year. And our private investments, which make up 12% of the portfolio, contributed $250 million of income, up 9.5% year-over-year. Our fixed income portfolio will continue to generate consistent and growing quarter-to-quarter income. And as we thoughtfully grow our private investments, income from that book, while more variable, will continue to trend higher over time. This is an ideal environment for investment grade bond investors. Our reinvestment rate of 5.5% is a structurally attractive level sitting well above the portfolio's book yield of 5.1%. The portfolio and insurance operations continue to generate excellent cash flow that we are investing at yields that both compound book value and drive significant income growth. Financial assets in many markets are expensive and priced to perfection. At the same time, longer-term yields remain exposed to structural pressures, rising federal deficits, corporate credit demands, persistent inflation, and the potential for foreign rotation out of US assets. These forces may lead to higher yields, wider credit spreads, and pressure on risk asset valuations. We remain disciplined and focused on risk-adjusted returns maintaining a substantial balance of high-quality liquid investment grade assets and a conservative duration. This positioning is central to our current strategy. It will allow us to move quickly to take advantage of market dislocations as opportunities develop. I will now turn the call back over to Susan.
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Susan Spieac18:05
Thank you. At this point, we are happy to take your questions. Operator, please open up the line for questions.
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Operator18:13
The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit yourself to one question and one follow-up.
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Matt Himerman18:43
Hey, good morning everybody. A couple questions. First question is just international life and accident and health. There was some regulatory decrees, changes in Singapore on deductibles for accident health and then investment related products in Hong Kong for mainland China visitors. I am just curious if there was any impact in the quarter, any product redesign required.
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Evan Greenberg19:08
Sorry, they were playing with the buttons here for a second. Matt, could you please repeat the question itself?
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Matt Himerman19:18
Sure. So in Singapore there were some regulatory changes to deductible levels for accident health products. And in Hong Kong obviously there was a decree related to investment products for mainland China visitors. I am just curious whether or not those had any material impact on flows in the quarter if there is any need to change product design at all to address those.
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Evan Greenberg19:45
No, I will keep it simple. No, there was no impact. We do not write that kind of accident and health that you are imagining in Singapore. We write supplemental health. We do not write traditional major medical and typical hospitalization. That is not our business. And that is what the Singapore decree that you referenced was about. So no impact to us there. It is not our game. And in Hong Kong on the flows, I think there is an overreaction. First of all, we did not have an impact and I do not expect an impact on Chubb going forward. I think there was an overreaction to the government and regulator pronouncements and actions they took. They were really around bad actors, those who are abusing the system and the rules that are in place that allow capital flows north to south and allow for investment products in Hong Kong.
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Matt Himerman21:04
Thanks for that. And then just one follow-up. Taking a step back, you have pretty sober views of market conditions and I would say that is a pretty consistent perspective that I think you bring to looking at the market. I guess how and I would say increasingly that feels a bit different in terms of potentially prospective views on profitability from some of your other competitors. I am curious what they see that might be different than what you are seeing and just how you are thinking about the distribution of outcomes as it pertains to the market today. Appreciate it. Thank you, Evan.
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Evan Greenberg21:43
Yeah, I cannot get into the heads of others and I do not know what they are specifically looking at. We all face the same market conditions and we all face the same realities. So I am just going to call it as I see it. This is what it is and the results speak for themselves. And I am very confident in spite of market conditions, which market is the market, in Chubb's ability to continue to produce outstanding results and to outperform just given what we have purposely built over so many years, the breadth of diversification globally and within product and commercial and consumer, that really despite commercial PNC conditions gives us that leg up to outperform. So I am going to call it as I see it and I cannot speak to what others are thinking or have to say.
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Mayer Shields23:37
Great. Thanks so much and good morning. In North America commercial, looks like ceded premiums were up a little bit more than 20% year-over-year. Just hoping give us a little color on the nature of the increasing reinsurance spend and where we would see that in future results.
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Evan Greenberg23:54
Yeah, first of all, it is a variation. It varies by line of business and so there is some mix involved in there, but in certain areas we are purposely reinsuring a bit more. You could imagine that in property, you could imagine that in certain areas of fin lines as we have said before. And of course we are. And if there is a hungry market at times irrationally, it makes sense to us to feed the hungry.
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Mayer Shields24:37
Okay, no, fair enough. A second question maybe taking a step back. You have talked a lot about the upside of diversification. Would having a much bigger base of written reinsurance premiums be of strategic benefit?
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Evan Greenberg24:53
You mean to grow our reinsurance business?
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Mayer Shields24:57
Yeah. Either to grow it or to buy a bigger reinsurance platform than you currently write.
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Evan Greenberg25:02
No, it makes zero sense.
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Mayer Shields25:05
Okay, perfect. Thank you.
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Evan Greenberg25:12
You are welcome. I mean, I could have backed further to you, but I think you get it. No, that does not make any sense. Our playbook goes in the other direction.
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Bob Hang25:32
Hi, good morning. My first question is on the overseas general insurance. If we look at the accident year loss ratio overall the past five quarters, it has been improving fairly steadily. I think part of the press release talks about business mix in that business is improving. Is it right to think that as you grow the Asia and LatAm business faster than the European business, we should see like a natural improvement on accident year loss ratio? Is that the right way to think about it?
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Evan Greenberg26:08
Yeah, the trend of improvement that you note is a trend and it is a consequence of mix of business. Consumer and then within commercial, and consumer is accident and health and a variety of personal lines from auto to specialty personal lines depending on the country we are in. And then within commercial, a greater mix shift towards mid and small than large. I think the way though that you think about geography is not exactly right. I would think more of product as I said. We are growing mid and small in parts of Europe in a meaningful way. We are growing it in Latin America not to the same degree because of volatility and cat exposure. And we are growing in Asia of course. So I would not think about it as Asia, Latin America versus Europe. I would disabuse you of that part.
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Bob Hang27:41
Okay, really helpful. Thank you for helping me think about that. My second question is on North America personal line. Obviously, your personal line different from everybody else's and a lot of personal line carriers are seeing pricing pressure. You are not really seeing that. How durable is your rate environment in your particular part of the personal line business? Can you maybe help us think about just the industry dynamic for your specific target market?
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Evan Greenberg28:15
Yeah, first of all, I think most of the discussion that you are engaged in around personal lines in the United States is general market auto. And we are not active within that. And then to a degree but a much lesser degree general market homeowners. We are in the high-net-worth business where it is far more about the richness of coverage and the services you are capable of providing and the broad range of product because there is a spectrum of high-net-worth customer but the complexity of their insurance needs is the hallmark regardless of where you are in that spectrum and your ability to underwrite it and then yes to price it and to manage it. And then the other part of it that people miss is they buy for the claim service and the richness of the claim service that you provide. It is not a matter of did you just pay them an amount of money because they had a loss. They want to be put back in the condition they were in before the loss. Imagine an antique home. Imagine a specially designed home in a cat exposed area. Gets very expensive, very technical, hard to manage. Imagine their liability claims. They are buying for a lot more than price and your ability to get paid adequately. We have improved and if you look at our loss ratio over years, it is not simply about rate increase. It is the complexity in our actual rating algorithms and our risk selection and applying rate against exposure in a far more sophisticated manner. And by the way, that is one example of use of technology and that continues to evolve and will continue to evolve. So I feel quite confident in the future. And by the way, I am the biggest fan of this wonderful franchise that we have.
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Bob Hang30:58
Really appreciate that. Thank you very much.
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Evan Greenberg31:01
You are welcome.
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Tracy Benjigi31:10
Thank you. Good morning. It feels like there is a lower barrier of entry in a way for large accounts since London insurers are getting into US casualty. MGAs are disrupting property. So maybe a higher barrier for small to middle market in a way. Where small commercial you really need a strong field operation setup. Is it fair to say that is something you inherited from legacy Chubb? And since you had such remarkable growth small to middle market this quarter, can you touch on the strength of your field operations or if I am on to something regarding that competitive moat?
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Evan Greenberg31:46
Thank you, Tracy, for the question. Inherited from legacy Chubb? When we put Ace and Chubb together, which is about 11 years ago now, it was putting together in essence a brokerage, large account, specialty player and I am restricting that to the United States because it was a global player and with large accident and health and growing personal lines with an agency based middle market small, much less small but middle market and specialty and high-net-worth player, US dominated. And the ability to put those two together, agency and brokerage, very different cultures, together under one roof and have one unified strategy and one benefit from the other, which each brought skills to the table. That was the thesis and frankly I think it has proven to be a wonderful combination and what a powerhouse franchise in mid and small. We have grown small. Have benefited significantly from that. Broadening the product capability of that agency business, broadening our appetite and our ambition to move into small commercial and lower middle market. Mixing of skills of people between the two has just burnished that franchise, our branch operations and the reach that you reference. But along with technology as it takes hold and emerges, it allows us to reach in a cost-effective way the broadest range of distribution, not just the very large players in distribution, who are our important partners, but all forms of distribution, small brokers and agents and to do it effectively. Our own in-house wholesaler that can service us on their behalf. All that is coming to play and then with technology, and one of the hallmarks of Chubb which we are the pioneers of is industry practices where we actually in the middle market deliver discrete product, discrete coverages that are tailored to the needs of very specific industries. It is not some marketing gimmick and where people are trained to be expert in that area, where engineering is trained to be expert in that area and to focus on those industries along with product, along with the distribution reach. That is what creates this unique powerhouse in mid and small. And there are only a few of us who have that capability. Excellent.
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Tracy Benjigi35:23
Can you also unpack your comments a bit more on soft market conditions spreading to certain areas of casualty? Just my own observation, it feels like hard pricing really is a commercial auto story as excess casualty also includes auto. Do you share that view?
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Evan Greenberg35:42
I am not sure I understood the last part of what you just said. You said comment on casualty and then you said something about hard market and auto.
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Tracy Benjigi35:56
Yeah. Okay, sorry, let me just rephrase. So the areas that we are seeing the most hardening on casualty is either commercial auto or excess casualty. And within excess casualty that also includes commercial auto. So I am curious if it is really a commercial auto story on the pricing side for casualty.
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Evan Greenberg36:22
No, it is across casualty. My comment about casualty stands. Numerous areas, not all but most areas of casualty, rate is at this moment not keeping pace with loss cost and I impact loss costs. And this notion that somehow loss costs are becoming more benign, I am not sure where that notion comes from, but it seems to me to just be talk. There is zero evidence across the industry that loss costs have abated. They are continuing to inflate at a steady rate. And I think there is an issue in the minds of maybe in the investing community that somehow steady means improving. They are not accelerating, but they are increasing at a steady rate. Do not confuse the two. And then what the results look like by casualty, well, it varies by area of the business, etc. And whether there is room or there is not room to be more competitive, I will not go any further than that.
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Tracy Benjigi38:05
Thank you.
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Evan Greenberg38:07
You are welcome.
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Rob Cox38:23
Hey, how is it going? Sorry about that. Yeah, I just wanted to ask on small and middle. I am just curious. I noticed the growth acceleration in the quarter. Curious if you feel like technology is breaking down any of the historic incumbent advantage in that market.
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Evan Greenberg38:46
In which market? Small middle.
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Rob Cox38:48
Small middle.
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Evan Greenberg38:50
Whether technology is big. Look, I think that technology, but data and scale and size and breadth of capability that brings you and insight is a competitive advantage. And I think it is a competitive advantage that these things play out over years and I have said it before. I think that is a structural secular advantage.
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Rob Cox39:25
Got it. Thank you. And then I just wanted to ask on Europe. I think the growth was a little bit lighter there this quarter. Is there any economic disruption that you see kind of expanding out from the Middle East conflict that worked into those numbers? And just curious if you could size how you are thinking about underwriting risks and potential opportunities from the Middle East as well.
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Evan Greenberg39:53
Yeah, to answer your question directly, I do not notice an economic impact from the Middle East that impacted the quarter. The quarter was just variability based on competitive market and London versus the continent less so, large versus mid and small, and just the mix of all of that and variability in the quarter. And looking out, I remain quite bullish on our opportunities in Europe. We have got a large installed base, we have numerous areas of strategic focus that we are actively engaged in, and we are just beavering away growing the business and we have an outstanding business on the continent and in the UK going far beyond a London wholesale business.
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Rob Cox41:01
Thank you, Evan.
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Evan Greenberg41:02
You are welcome.
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Dave Moll Madden41:13
Hi, thanks. Good morning. Just a question on the loss cost trends in North America commercial. So, I heard you on the one long tail lines. Does not sound like you have changed anything there. Still being conservative. I am wondering what you are seeing on the shorter tail lines. The favorable development has been pretty strong there. And are you thinking about making any changes there potentially? I am just sort of looking at some of your peers potentially making changes there.
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Evan Greenberg41:48
Yeah, shorter tail it is steady. We are not seeing a change. It is bouncing around the 4.5%. And that is pretty steady. The only thing I will tell you about the long tail that I cited, those are not conservative numbers. Those are actual trends as we observe them longer term and shorter term. And we got a lot of data. And by the way, we triangulate it with those who observe industry. They are not specific to Chubb.
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Dave Moll Madden42:30
Yeah, that is helpful. And then maybe just on looking at the stellar accident year loss ratio ex-cat within North America commercial. I mean you guys had called out I think in the 10Q last quarter just the adverse mix impact from less property as driving that deterioration. I guess I am wondering as we see the mix shift more towards middle market, should that have a bigger offset as we go forward just sort of thinking about the margins here which remains stellar but obviously the pricing is under pressure.
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Evan Greenberg43:20
Yeah, let me answer it like this. Combined ratio for Chubb. Let us look at Chubb. Our combined ratio, it is a hallmark. It is an expression of who we are. We are an underwriting company. Volatility aside, cats and large events, our combined ratios are sustainable. Obviously within a reasonable range of variability. But they are sustainable. That is the beauty of the size and scale of the company. Our diverse portfolio of quality businesses, our underwriting focus, and that is within North America and then more broadly across Chubb. That is the whole point. The bigger the portfolio, the greater the diversification of it, the less variability, the greater the stability of it overall. As you start breaking down into this little piece or that little piece, then variability becomes greater. And then add to that our employment of tech and AI and the insights and efficiencies we are and will gain, and those also support combined ratio. So I feel confident about it.
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Dave Moll Madden45:02
Great. Thank you.
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Gregory Peters45:11
Oh, good morning. So, a couple things. Both in your press release and in your comments, Evan, you talk about how you are confident in the ability to outperform and generate strong growth in operating earnings in EPS and double digit growth in tangible book value. With the pricing competition that you are talking about and its effect on your topline, maybe you could sort of bridge the gap on how you think the organization is positioned to continue to generate strong EPS growth.
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Evan Greenberg45:52
Absolutely. I am aware and mindful of the chatter since last night around the one word change we made. It is really Kremlin watchers. So let me take all that and wrap it into the right context. Look, for many quarters including the first half of this year, we have produced double digit EPS growth. This quarter alone over 18%, simply outstanding. My outlook statement is not guidance and it is looking out beyond the next few quarters to simply give a direct directional sense over a longer period. And so when you take that given market conditions, we have simply broadened the range of outcomes modestly and they include double digit by the way within that of EPS. Softening commercial PNC market conditions balanced against our global mix of businesses including our mix of business within North America. Think mid and small commercial and personal lines, our vast international and consumer, our life, our invested asset, and our capital management. We have many sources and handles to pull. I am quite confident, in fact I am confident in our ability to produce very strong and potentially double-digit EPS growth and we will produce strong earnings growth as we go forward.
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Gregory Peters47:08
Thank you. I have asked this question of one or two others and I think it is appropriate for you for your company as well. You know, there have been a bunch of stories that have hit the press over the last couple months about the rising costs of technology. Thinking about token costs and things like that with an impact on the market. You spoke last year about using technology to generate material savings for your organization over the middle term. So I am just curious how you can reconcile for us the rising costs of technology deployment versus the ability to harvest those savings and generate improving margins.
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Evan Greenberg48:29
Yeah. First of all, the chatter that you have been reading about, I think the investing community broadly ought to put it in context. It is more that token usage is really about the vast token usage among tech companies and those that are AI and tech companies. They use vast amounts in model development. That comment is not really applying to general businesses. We know our token usage. We know our token costs. Frankly, it is within our economic model and how we measure expenses. Our token costs and the usage that way is a fraction, a minor fraction relative to the efficiencies and the insights and the improvements that we gain. And we measure it in hard dollars. This is not liberal arts around here.
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Gregory Peters50:24
Fair enough. Thanks for the answers.
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Evan Greenberg50:27
You are welcome.
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Andrew Clegererman50:35
Hey, good morning. So, looking at the US net written premium, you mentioned that there is continued softness in financial lines and flat to down pricing in workers comp. Yet financial lines net written was up 2.6% and workers comp up 6.2%. So I am kind of curious where you might be seeing the opportunities in those lines and that you are confident in the performance going forward there.
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Evan Greenberg51:15
Sure. First of all in comp, remember we play it up and down the stack from large company where we are a market leader, mid and small where we are market leaders. So it will vary by state, by industry, by type of business. And so it is selection within there and exposure changes. Think payrolls, think number of employees. Those bounce around and that improves or subtracts from your premium revenue growth each quarter. In financial lines, financial lines a broad set of businesses. And there again we play in very large account and we play in small and mid. And it is not just public D&O, it is private D&O, it is not-for-profit D&O, it is E&O, and a lot of broad classes of E&O. Fidelity, which is a form of surety but different than that, is part of financial lines. And we put cyber as part of our umbrella in financial lines. So it is across a broad range. While we have been and I have been vocal that not-for-profit private D&O is very soft and overly soft where the underwriting does not make sense and pricing, there are other areas where it remains adequate. It varies up and down the street.
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Andrew Clegererman53:10
Yeah, very much so. The diversification is really helping here. And just looking at your Chubb benefits business, which is a relatively small portion of life, but it was up 14%. So, do you see this business just continuing to grow organically or is it something that might need some inorganic investment to accelerate it?
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Evan Greenberg53:41
Look, we have been adding in a steady way for over five years now. And thank you for that question. It divides into two pieces. Chubb benefits, the part that works very closely through the brokerage distribution with our predominantly with our mid and small PNC commercial colleagues where we are selling all lines and that is very successful way of distributing. And secondly, the old combined agency force we retooled it and it is predominantly focused on small and lower middle market companies to sell worksite benefits and install them. We have invested a lot in distribution, in product, but particularly in technology and our ability to deliver product and service it right at the desktop of individual employees and to do it in a frictionless way. We are focused on growing organically. We just see a tremendous opportunity to continue growing that business at double digits and that is our focus. And you know what, over time as I look at it over the next number of years, it will emerge as a more significant contributor to Chubb's results top and bottom line.
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Andrew Clegererman55:23
Thank you.
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Alex Scott55:32
Hey, thanks for putting me in. I ask one on the paid to incurred. Yeah, I think before the pandemic averaged something in the high 90s. Just looking at it still running at 90. I know some of that is from a bit more growth and the natural lag, but could you talk about why that would be running?
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Evan Greenberg55:56
Why it is continuing to run as it is. Just the fact that it is running at 90 versus I think pre-COVID averaged around 97. So I am just trying to understand why.
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Alex Scott56:09
I think that is excellent. It speaks to overall the strength of our reserves. Next one, capital. You did not talk as much about the excess capital this quarter but you guys have had stellar earnings obviously it is building. How should we think about the current levels there and the different options you are looking at for deployment and what that could mean for the EPS growth that we are all focused on?
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Peter Ends57:02
Sure. I will take that one. It is Peter. Look, nothing is changing our framework. We are deploying capital accretively in underwriting and investments. We will continue to return capital through dividends, repurchases. You have seen us do that over time, balanced by opportunity, so nothing has really changed.
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Alex Scott57:22
Okay, thanks guys.
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Susan Spieac57:36
Thank you everyone for joining us today. If you have any follow-up questions, we will be around to take your calls. Enjoy the day and again, thank you.
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Operator57:46
Thank you. That concludes today's conference call. You may now disconnect.