Chubb CB Q3 2025 Earnings Call

Good morning. As you saw from the numbers, we had an excellent quarter. In fact, a record earnings quarter. Core operating income of $3 billion was up 29%, leading to EPS of $7.49 per share, up 31% from a year ago. Both supported by record underwriting and investment results, as well as solid premium revenue growth. The results put a point on the broad-based and diversified nature of our company geographically, by customer segment, and by product area. Most of our businesses in regions of the world contributed. Geographically that means North America, Asia, Latin America, and UK Europe. When I say customer segments that contributed strong growth this quarter, that means globally both consumer homeowners and auto, specialty personal lines, life and international A&H. When I say commercial P&C, particularly middle market and small commercial, our ENS business, crop insurance, and a broad range of large account casualty and financial lines. And growth was generated by numerous distribution sources: brokerage, agency, phone-based direct marketing, and digital. In short, a wide variety of diverse businesses and geographies are contributing to growth globally. Our balance of business and presence, about half US and half outside, provides a wide range of opportunities which supports long-term profitable growth. Importantly, it also supports our ability to manage the commercial P&C cycle with discipline, something we are well known for doing. We expect to continue generating superior margin and earnings growth and in fact an increase to our return on shareholder equity in the quarter. Record underwriting income on both a published and current accident year XCAT basis was supported of course by a quiet cat quarter, but more importantly by current underwriting. Year margin improvement and strong prior period development. Published underwriting income of $2.3 billion was up 55% from a year ago with a record combined ratio of 81.8%, about 6 percentage points better than a year earlier. Though cat losses were light in the quarter, rest assured catastrophe risk is alive, well, and obviously by definition volatile. Remember the California wildfires first quarter and convective storm activity through much of the year. Cat volatility aside, our underlying underwriting results were simply excellent in the quarter. Current accident year underwriting income excluding cats was a record $2.2 billion, up 10%, supported by a combined ratio of 82.5%, nearly a full point improvement from prior year with most all of it coming from loss ratio improvement. On the invested asset side for the quarter, adjusted net investment income was a record $1.88 billion, up 8.3%. Our fixed income portfolio yield is 5.1% and our current new money rate is averaging 5.2. Our operating cash flow in the quarter was quite strong at $4.5 billion, which is contributing to strong growth in our invested asset, which is up nearly 10% over the last 12 months. Current fiscal, financial, and economic conditions favor attractive fixed income and alternative asset portfolio returns for our growing invested asset. Federal budget deficits, inflation, and rotation from the dollar support what we believe will be a steeper yield curve as we look to the future, which in turn should support our reinvestment rates and future investment income growth. Tangible book value growth, our primary measure of wealth creation, was 17% per share from a year ago and 6.6% from the previous quarter. Our annualized core operating return on tangible equity in the quarter was 24.5%. Simply an outstanding result. Peter's going to have more to say about financial items in a couple of minutes. Turning to growth, pricing, and the rate environment, total company premiums grew 7.5%, with consumer up almost 16% and commercial up 3.3%. Commercial P&C growth this quarter was impacted by two items that benefited North America last year. Our underlying renewable commercial P&C business grew about 5.5%, which is more representative of our run rate. Premiums in our life insurance division grew over 24.5%. In terms of the commercial P&C underwriting environment, I would characterize the market globally as in transition. Competition continues to grow, especially large account related short-tail business, both admitted and ENS. A lot more capital is chasing the property business and prices are softening while terms and conditions remain steady. On the other hand, middle market and small commercial property is more disciplined and orderly, though greater competition is beginning to show, as expected, particularly in upper middle market. In mid-market, property rates continue to rise but naturally at a slower pace. Casualty pricing overall, large account ENS and middle market, is also slowing, though it continues to firm in the areas that require rate. It's quite rational. Financial lines remain soft, but we're seeing signs of firming in discrete classes. I'll give you some more color by division for a change. Let's begin this quarter with our international business. Premiums in our overseas general division were up 9.7%, or nearly 7.5% in constant dollars. Consumer was up 15.5% and commercial lines grew nearly 6%. From a region of the world perspective, Asia grew over 14%, Europe grew almost 5%, and Latin America grew over 10.5%. Consumer lines grew more than 25% in Asia and more than 12.5% in Latin America. Premiums in our London wholesale business grew over 8.12%. Our international retail and ENS business again illustrates the power of Chubb's diversification. In our international retail commercial business, P&C rates were down 1.3% and financial lines rates were down over 8%. Turning to North America, total P&C premiums were up 4.4%, including over 8% in personal lines and 3.5% growth in commercial. Adjusting for the two non-recurring items we wrote last year that did not repeat this year, renewable premiums in our North America commercial business grew 6.2%, with P&C lines up 5.8% and financial lines up almost 8.12%. Drilling down, our North America high net worth personal lines business generated more than $1.8 billion in net written premium for the quarter. This business is now almost as large as our North America middle market and major accounts commercial businesses, each with premiums in the quarter of $2.1 billion. Again, illustrating our company's diversification, premium growth for our true high net worth segments was about 11.5%. On the commercial P&C side in North America, premiums in our middle market business, where we're the second largest writer in the US, grew 4.1% to $2.1 billion. Middle market workers comp growth was impacted by one of the 24 year items I mentioned, namely an annual retrospective premium exposure adjustment that we make every year in the third quarter that benefited us much less this year than last. Adjusting for that, we grew middle market almost 7%, with P&C lines up 8.6% and financial lines flat. Premiums in major accounts and specialty grew 2.5%, with major up 3.2% and ENS up 6.6%. The major accounts division was up 5.66% adjusting for the impact of a large one-off LPT written last year in North America commercial. We had a very good quarter for new business. It was up 24% versus prior year with double-digit growth in major, specialty, middle market, and small commercial. Our renewal retention rate on a policy count basis was over 86%. Commercial pricing for property and casualty excluding financial lines and comp was up 4.3%, with rates up 2.4% and exposure change of 1.9%. Property pricing was flat with rates down 3.3% and exposure change of 3.2%. Going a step further, property pricing was down 13.5% in large account business in ENS and up 6.2% in middle market and small commercial. Casualty pricing in North America was up 8%, with rates up 7.5% and exposure up half a percent. Financial lines pricing was down almost 2%. With workers comp, primary comp pricing was flat while large account risk management pricing was up almost 5%. In North America commercial, there was no change to our selected loss cost trends. In our international life insurance business, which is fundamentally Asia, premiums were up 26.5%. We had a large one-time premium in New Zealand and adjusting for that, growth was up just over 16.5%. In North America, combined insurance company premiums were up 18%. Our life division produced $324 million of pre-tax income in the quarter, up over 14%. Chubb's fundamentals and our positioning are excellent. We're performing at a high level almost anywhere you look in the company. We have broad global diversification and a disciplined, energized, and talented team of professionals whom I couldn't be more proud of to call my colleagues. We are reaping results and planting seeds for the future. Our digital and AI efforts, years in the making, are contributing to growth and beginning to transform the company and how we do business. Our balance sheet, starting with loss reserves, has never been stronger. We estimate that 70 to 80% of our businesses present attractive growth opportunities. Looking forward from all we can see, our performance is enduring. We will maintain superior earnings growth including double-digit growth in EPS, book value, tangible book value, and core operating ROE increasing to 14% plus over the medium term. In the quarter, we stepped up share buybacks because we are an excellent investment with our stock trading well below intrinsic value. Increased buyback activity will continue while at the same time we will continue to build additional capital and our invested asset. I'm going to turn the call over to Peter now and then we're going to come back and take questions.

Yeah. I'll help you think it through conceptually. Not a worksheet. Look, I think this is the place where I start the mental model here. It's 14% plus by the way. The plus is an important sign. We have strong and growing earning power and as we look forward we see that enduring. It's growing earnings and there are three engines of it. You keep a mental model of that: underwriting, life income, and our invested asset. Investment income, the growth in underwriting, it's commercial and consumer P&C, it's very broad-based in non-life including A&H. Our life earning power is growing, our invested asset and alternative allocation to alternatives. So investment income is growing. Each of those as we look forward we see good sustainability to growth of earnings. Then with growth of earnings, it means our capital base obviously with those earnings growth and that earning power continues to grow. We're trading well, as we see it, below intrinsic value. And by the way, as you continue to grow earnings and if it's sustainable, then frankly your intrinsic value continues to move out. We will buy back above previous trend as you saw this quarter. We will continue to do that and at the same time we're going to continue to build our invested asset that also contributes to growth of earning power. That's as simple as I believe I can break it down for you.

Yeah, you know everybody migrates. Me too. I don't really view it as excess capital because we're earning it, it's accretive to ROE as we deploy it on the invested asset side. To the degree that it isn't supporting insurance underwriting activity, that's what you'll think of as surplus capital, but we're generating an excellent return on the alternative side in particular as we grow that in our invested asset. I more think of it that way. But to answer your point directly, it's two points or north of two points.

You're welcome.

Yeah, I want to correct your mental model. I think the majority, the vast majority of our overseas general business in P&C is not ENS and it is not large account multinational. The majority of it is middle market, small commercial, and consumer business: personal lines, automobile, homeowners, depending on the territory you're in. We do it selectively and we talk about it: A&H business, digitally derived, direct marketing, agency, brokerage, vast in Asia, big in Latin America, and in the UK and on the continent. Our business is well diversified. Middle market in particular and large account. Large account businesses fundamentally when you get down to it are UK, parts of the continent, Australia. That's a better mental model than the one you start with, which is most of the neighborhood that you talk to, which is crowded in London and shared and layered trades and ENS and large multinational. In that business it's property that is most competitive, which is where the globe is moving in a similar direction: large account shared and layered, but beginning to show up in parts of middle market it's property. Where I have any concern about underpricing of business at the moment, it's particularly in parts of that area of property. The balance, particularly in most casualty lines, is adequately priced or where it's not the market is responding with pricing to achieve adequacy. Financial lines bumps around the bottom. So buyer beware.

Yeah, the acquisition is simply mix of business: more middle market, small, and consumer lines. They run a more favorable loss ratio.

You're welcome.

Ryan, how are you?

Yeah, without giving away competitive secrets, property shrank and it shrank significantly as it should. I mean, we gave up rate and we gave up exposure where we can't get paid adequately, price to model for CAT. We're simply going to walk away. On the other hand, there are areas of casualty that grew and we are large in small commercial ENS. We have a very large and growing completely digital capability and that contributes very well to growth. Then we have a few program areas like you'll notice we're in the pet insurance business, and those areas contribute to growth as well. Got it. It's diversification again and balance. It's not achieved overnight. It's what you just patiently do and then it bears fruit over time.

Yeah, there's a wild card right now. Interesting enough, I'm not seeing a big impact to the macro. The US is doing well. So overall the economy, you can't get away from it, the US economy has remained strong though labor is slowing down and the growth of payroll is slowing. That showed up in the workers comp adjustment. Europe is slow in economic growth, but it's been slow and it continues slow. Latin America has stood up pretty well. It varies by country within Asia, but it stood up reasonably well. Korea is slow right now, but it isn't really impacting the growth of our business too much because of the nature of our products and distribution. Thailand is impacted on one hand, on another hand Singapore does well. Australia is doing quite well economically. So it varies across the board. It's a little volatile, but I don't notice a big impact.

You know, we must be talking to different people because frankly I haven't noticed that kind of chatter or many sellers in Asia. Most seem to be happy to make a go of it. So I'm not noticing that. One thing I know: I've got a dance card that's pretty full. Our plate is very full with organic growth opportunities across consumer, across small mid, in particular commercial, a variety of distribution, and a whole lot of countries. So we're just flat out busy growing organically right now, building capability, and reaping what we got. So I haven't really noticed much of that, Matt.

No, I wouldn't. It speaks to a market economy. People make choices. They have their own choice to make. I'm not going to second guess their own analysis and the strategic outcome of that. That broker is doing what they're doing with their eyes wide open, I assume, and they look at the positive and they look at the negative and they must see that the positives outweigh the negative. That's their choice to make. It's every other broker's choice to react. I'm glad there isn't regulation that somehow impacts the ability of the market to make rational choices, each on their own.

Let's have a dynamic market. And by the way, a dynamic market is by definition messier.

You're a guy.

Hey, good morning.

Tracy, nice try. I will share no detail about our reserve position and our reserve strength beyond what I just said. That's proprietary. So I'm not going to do that. There will be additional color on our reserves in the 10-Q that'll come out and you can look at those. But I think my comment that our reserves have never been stronger stands on its own weight.

No, that's a specialty add-on. We are the second largest writer in the United States of middle market customers. So you start with that. The amount of data we have, the product, the spread of product that we offer, and the capability we deliver it through our branch operation and more and more supported by technology to enable the process. Our industry practices business: we are the pioneers, the inventors of the notion of industry practice that some others are trying to copy. We offer product and suites of product with wordings designed by industry. It's not just marketing. It's true underwriting and product differentiation in the various customer cohorts because we break down the middle market by industry and specialize across a wide swath of industries, targeting customers in those industries. We segment the middle market between large and sort of middle and then lower middle market, which is a different buyer than the balance of middle market. It's more akin to small commercial and the ability to take the seams out and deliver to a customer whether they're small or lower middle in a totally digital way, and to have the broadest suite of products so that you meet all of the customers' needs that way. Growing marketing capability to be able to segment by geography: where are the customers that we are most compelling for. We have the best offering, the growing ability of our software with our people to deliver in that, and to do it in a way that drives not just more submission activity but at a close ratio that is superior. That is what Chubb's middle market and small commercial in a nutshell is about, and that is spreading around the globe.

Yeah, it was North America that declined. We had a very large customer that we couldn't come to terms with. The underwriting, the pricing wasn't going to meet our standard, so we mutually agreed to part ways on that at the end of last year. That's impacted A&H in North America all year. It's a one-off. Internationally the business is growing at around 7.5%. Asia in particular and Latin America. It's growing and the opportunity is in a number of areas. Our travel related business is growing quickly because it's 100% digital and our ability to deliver through airlines on an embedded basis or through large travel agencies and improvement of product and even being able to settle claims on a digital basis is giving us a lot of runway. Our direct marketing business not just by phone but by digital direct to consumer through platform partners like a new bank in Latin America or Grab in Asia or ByteDance, through both an embedded and now what we call click to engage or click to call where we marry up voice and direct digital together to be able to sell a higher average ticket product. It's a very vibrant strategy with a lot of growth runway to it both non-life, which is what you see disclosed there, and on the life side, 60 to 70% of our business is A&H. So when I look at it going forward, I think about growth in Asia, Latin America both growth regions, Europe more flattish, and North America we see growth picking up. To remind you, when I say the combined was up 18%, that's work site marketing and most of that is A&H, and then some risk-based life insurance, but it's dread disease, hospital cash. So again, that's another proxy of A&H business. We love A&H business around here for decades.

I like it as a buyer. Look, our reinsurance business, and you know this, we've always run it a bit as a trade. Frankly, it's the other side of that same coin of property softening and we're not going to chase property cat unless we think it's priced adequately. We're disciplined about price to model. There is no sort of gut feel or I observe one or two quarters where cat activity was light so something has changed. Please. So we're disciplined about it and we will write the business when we're going to get paid adequately and we will shrink when we're not. There's a pretty good example.

I'm sorry, say that again.

Yeah, I'm going to give it to Peter in a second, but let's be very careful of more volatile. It's not more volatile in its signature. It's just a question of realized gains versus interest rate income off of a fixed versus equity base. That's all. But go ahead, Peter.

I like the pattern.

I mean we like to continue patterns that we find that we like. It is part of our strategy as we digitize, as AI over time matures more within the company. We expect the growth rate of expense to decline as revenue grows. Over time, we expect the total employee population declines as revenue grows. Both technology and AI in various forms at different parts of the process of conducting our business continue to mature and continue to take hold sort of business by business. So it takes time but we're seeing results. It's not futuristic. We're harvesting now.

You're welcome.

I've been the CEO of this company for 21 years. We have built a culture, a discipline, and an ability to monitor and survey our discipline and the way we work at an extremely granular level on a real-time basis. Culture here means the higher you go, the harder you work. It's an inverted pyramid. It is a privilege. If you don't feel that way and you need a quote unquote different work life balance, then this may not be the place for you. The people who embrace this, the management team, we've been together some 15 years, some 20 years, some 25 years, decades. We've all grown up with the same ethos of how you run and discipline and manage a business. We're fundamental builders. We love what we do. So it's granular. You look at the results, but it's the result of those macro results of granular effort across hundreds of businesses in dozens of countries with a management structure that can discipline and drive it on a daily basis. We are all traveling and on the ground tirelessly to examine and know our businesses. We love it. I've been asked this question of enduring for over 20 years. How are you guys going to keep repeating it? And by the way, you can lose it quickly if you start laying back or getting a little complacent or starting to believe your own stuff that is written about you. We're not. We act like we're chased every day. This company has only $60 some odd billion of revenue in a $4 trillion industry. We've got the world in front of us and that's what drives us.

Yeah, overall casualty development was $38 million negative. That was $104 million in the US and $60 million negative and $66 million positive internationally.

No, sir.

You're welcome.

Correct. Yes. Correct. We're going to, from all we see, continue to grow income. I gave you the parts and pieces of growing income which is growing earning power. We will continue to build our invested asset and we will continue with that income. Capital will build and at the same time we will increase our buybacks. We'll do both as long as we're trading below intrinsic value and we are trading well below.

Yeah, I think you're referring to high net worth North America or globally?

Okay. In North America, look, competition takes what it is. We have competitors out there who sell at a price significantly below Chubb. If you are a Chubb customer, and we respect our customers, but if price becomes a real problem for you, then we have two or three other phone numbers we'll give you of others who will sell it at a price below us. But it's about service. It's about the richness of product. Anybody who has a claim with Chubb, our reputation never leaves our ability in risk engineering and again the richness of the coverage we offer. So it's not just claim service in terms of speed and how we deal with a customer, but it's how the richness of that coverage comes alive at that time. It's our broad reach and appetite. We can underwrite a customer anywhere they are for any kind of home they're in. We offer the broadest range of coverages from their fine arts and jewelry to large limits of casualty to yachts and boats anywhere in the world. No one steps up to this. We do define the class, yet we're hungry and we're humble about it. We keep stepping up to reinforce and rebuild ourselves. Competition is heating up as it heats up more in cat concentrated extreme cat areas. We can't write it all. I'm not going to try to dominate in any area where I wrote 100% of the cat market here. Are you kidding me? So there's room for others to come on in and write your share. And by the way, you can write it at an adequate risk adjusted price. Don't worry. So competition wanes and waxes. It's more about the price in that case, but not the richness of coverage and service that we provide.

You're welcome.