Chubb Limited Q1 2026 Earnings Call | Net Income Hits $2.3B as P&C Underwriting Income Surges 14%

Good morning. We had an excellent quarter and start to the year. Our results speak to the strength and resilience of our company. Underwriting results were excellent across all major lines of business globally. High inflation, geopolitical risk, and economic growth continue to be the dominant themes. Financial markets remain strong, including equity and credit, and a growing energy sector, to name a few. In times of stress, strong companies outperform weaker ones. Our diversified nature of the company, by geography, by line of business, and by distribution, continues to be a source of strength. Our core operating return on tangible equity was 20.6%, and our core operating ROE was 14.5%. I have more to say about financial items. Turning to growth, pricing, and the rate environment. P&C premiums grew 7.2%, with consumer up 14.2%, and commercial up 4.6%. International P&C premiums grew 14.4%, with Asia up 6.1%, and Latin America up 4.1%. Europe grew 7.8%. In North America, commercial lines pricing was up 8.2%. In our international retail commercial business, P&C rates were down 2%, and financial lines rates were down 7.4%. In North America, commercial property pricing was up 3.7%, and casualty lines were up 8.25%. The market is competitive, particularly in shared and layered property. We shrank our exposure in that line. In our middle market and small commercial business, P&C premiums grew 3.3%, with P&C lines up almost 5%, and financial lines down 5.7%. In North America, commercial property and casualty pricing, excluding large account property, was up 8.2%. Exposure change was 2.3%. Property pricing was down 2.6%, and exposure was up 4%. However, going further, property pricing was down 14.3% in the shared and layered market. And specialty, for the business we wrote, market pricing for the business we gave up or passed on was down between 30% and 40%. The larger the premium, the greater the price decline. In our middle market and small commercial property, pricing was up 8.3%. In Latin America, pricing was up 9.6%, with exposure up 8.4%. In Asia, pricing was up 1.1%, and exposure was up 4.3%. And in Europe, pricing was about flat. Our overall loss experience in North America commercial was little changed, with no change in casualty and other long-tail lines. On the consumer side of North America, our high-growth personal lines business had a very good quarter with premium growth of 8.3%. North America works benefits grew 16%. The life division produced $316 million of pretax income in the quarter, up 8%. And adjusting for a few items that benefited last year, core life was up 11%. In summary, we had an excellent quarter. We executed well in a difficult environment. Generally, strong companies outperform weaker ones. Our diversified nature, market-leading presence, and operating discipline continue to be sources of strength. I'll now turn the call over to Peter, and we'll come back and take questions.

You know, as I said, the degree, the pattern, the timing is unknowable. However, global supply chains depend substantially. You mentioned Asia. The US, we depend on supply chains through Asia. We depend on supply chains through the Middle East. The impact of the geopolitical risk on supply chain availability, of commodities, and other inputs, and the impact on shipping, of course, is going to have an inflationary impact. How it passes through to inflation in the US, the degree of it, and where it actually shows up is not really knowable at this time. But it's going to be zero, that's for sure. And how transient it is is unknowable also. The longer it goes on, the stickier it will be. That's the sort of the mental model I have. How it shows up in insurance, I don't know. It's not something that I'm overly concerned about. It will likely be transient. We'll see what it is when it shows up, and we will respond to it accordingly.

I think about it a little differently. I think about the small commercial market, retail, and I actually think the greater opportunity for growth is in the vast retail insurance market. But what we have done to transform that, and what we're doing now with AI and large language models and enterprise software that comes from that, well, yes, it is a real growth area for our company over the next five years. And by the way, not only in the US, but we will grow in markets internationally.

Yeah, thank you. And let's step back and put a perspective on it. The market rates. So, I gave you Chubb. I gave you what we lost business for. If I sort of step back and look at overall market rates in shared and layered in North America and in London, pricing overall is off 25% in the quarter, heading to 30%. You can actually see it's accelerating in that trend. And by the way, loss cost, to put a point on it, loss cost, they're moving at about 4% to 5% in shared and layered property. So you can work out the math there. Always, so the capital that is chasing a relatively finite amount of business, and by the way, in a concentrated way, if you look at the property catastrophe market in the United States, it is boxed up and brought to underwriters. You don't access it like retail insurance. You can, and it's urban-based. It doesn't take a lot of capability. It takes some balance sheet capital and a couple of underwriters, and you know, you're in the market. So it's a hunger that way. The difference, and I wrote about it in the shareholder letter so you can read that, I won't repeat it, the difference is the incentive systems. You know, the majority of them are just volume-based. What they bring, they bring a cheaper price and a higher commission. And the reinsurance market and alternative capital, and the number of slices of the apple in the supply chain taken by intermediation, that is what you are seeing. And by the way, the loser at the end of the day is the ultimate risk taker who puts up the capital. And this sort comes home rather quickly, so stay tuned.

I haven't changed my view of our goal in digital transformation. The technology is evolving, and the most significant development in the last number of months, that frankly is still emerging, there's a lot to talk about it, but how it actually operationalizes is not yet known. What brings it are enterprise solutions that some of the leaders of large language models are working to actually operationalize all that they have in development. And I think those trends, as they emerge, will accelerate, improve, lower costs, make it easier. So, you know, I'll stop right there. It's an exciting time, and you have to spend, and I spend much more time on this subject than I did even two years ago. You need to have, you know, you listen to others, but you've got to have first-hand knowledge. And otherwise, you yourself start to become irrelevant as a leader. That's on my mind.

Sure, Gregory, and a different angle, and it's the right question. You know, first, just on Anthropic, and it's the notion of finding vulnerabilities, and we've redefined vulnerabilities. The threshold for vulnerability has been lowered. What were minor vulnerabilities can now be aggregated in a much more insightful way. Anthropic is a code generator, so it can read code. So it shouldn't be shocking that since it can read code, look at another use that has emerged. And then others think, Gemini, and the company's business model, they go and they do searches for information, that means they know systems, computers, they know how to access the systems. So firstly, it can look at finding vulnerabilities. Now, it's not just you can use this to find your own vulnerabilities. Most companies also use software in their estates, and so third-party, and to the degree software is that way in the estate, you can find vulnerabilities. So, you know, the arms race now is about hygiene and services to support identifying and fixing. And clearly, how important are you, do you identify and patch? And now the tools to patch are more automated, quicker, and you need to have faster speed. So that's the defense side of it. While we know the offense side is just around the corner. By the way, from what we can tell so far, in cyber attacks using AI, it's only one area of concern. So where it didn't involve a human, other than that human in the loop, when they're using it so far, from an underwriting point of view, obviously policy and pricing are on our minds. Large companies will be much better at hygiene and have much stronger perimeters to get through, to penetrate, than small companies. Small companies, on the other hand, are less targeted individually but create more systemic concerns. And then finally, the biggest meatball there is middle market companies. They are a target. They've got more data. All that is percolating. All that, as an underwriter, I give you all you have to be thoughtful about.

Well, we run in our various businesses, call it 85% and north of retention. Large accounts, the property I talked about is where we, you know, well, we shrank volume. And by the way, that half the volume we shrank, most of it was because we walked away. We also purchased additional reinsurance that impacted our premium growth and reduced our exposure. But we always have a new business, quote unquote, penalty. So I don't see, I'm thinking about what you're saying, and I don't really see much of an impact. Any new business, underwriting, property, if anything, what we do is we underwrite and price if we can.

Do you want to take that offline or you want to answer? Yeah, I'll just real quick. So, the savings-oriented products, as you know, are more spread-based than underwriting margin-based, and that's how you have to think about it. And so, if you will, if we're selling elevated amounts of premium, there would be a policy benefit that would match it, but over time the margin comes through the investment product. And I don't just understand it's Asia, and first quarter in Asia, classically agency business is very fast. I don't expect to see this kind of growth continue in single premium business. Return on capital for it is brilliant. I'm not in love with the margin of it, but I'll tell you what, it's like mutual fund business. You write a lot of it and you make some money. But I expect more of growth in regular premium and risk-based product as we go forward in the year.

At the right moment, it does. I mean, ultimately, I have to tell you, and you know, I have been in this business a long time, and this industry has certain syndicates about it, and there's a belief that therefore these things will be durable, like the cost of intermediation. Brokers, over numbers of years, are in an age of digitalization, age of AI, what technology ultimately will bring down. And if you look at the equation, I think it will.

Yeah. Terms and conditions, just on the margin. Not zero, but on the margin. And as to duration, well look, I don't know. What I do know is you underwrite business in property, and I haven't noticed that the attritional loss environment in property, property premium, property pricing is made up of two things: attritional loss, so you got to price to support attritional loss, and then catastrophe. I haven't noticed a diminution in the attritional loss environment. That's pretty steady, and you know, it has a little volatility to it, the size of losses, but pretty darn steady. And on the cat side, well, unless you believe that the models are wrong or that somehow the climate environment is going to change or has changed and is going to become something other than what it has been, then you know, we are in a cat environment. And the only way out for capital providers at that point is to adjust pricing, and they got the right instincts. And so generally, in my mind, you go to a dumb place pretty quick, then the reaction the other way will be quicker. But you know what? I don't know with certainty, but that's kind of my mental model.

No, the pattern in pricing so far is about what I observed to you in prior quarters. And the lines that need price, you're getting price in excess of loss cost. And where the pricing is adequate, it is generally flat to or in some instances below loss cost increases. But I see it at this point, as I look through the stack, as pretty rational. Not everywhere, of course, you know, it's a market, but overall I do. And I even have been surprised in certain areas where the market responds and creates more opportunity where rate is required and the market is respected.

As we see it, we built it organically, and we're continuing to. It's fundamentally part of our accident and health strategy. It's an agency force combined that we have co-opted to not sell individual insurance but small group works benefits business. And it is predominantly a supplemental business that, you know, us for dread disease, hospital cash, etc., to lower-middle income to middle-income people, and provides a supplemental product. It's the same but with a different distribution for larger accounts, middle market, upper-middle market to large jumbo. Now where we've won business, and it works very closely with our P&C distribution. We cross-sell works benefits and not cross-sell one to the other, is because in fact the relationships and the accounts, we are benefiting from that in the growth of works benefits. And again, it's product mix, more of life into risk-based product. When I look at the overall story of our life business, and you look at our international life business, which you overdosed on, it's a testament to what we are doing between accident and health and life, both are growing.

I was approached by our government to put together the program that you have, that we announced, to support shipping through the Gulf and open up when they think that the risk environment is such that they can support with military convoys that would transit the Gulf. And that has to occur is to underwrite those risks. And the role of our insurance is to be part of a convoy that the US would, the US military would run. The insurance is sorted by US insurers taking 50%, and the other 50% is taken by an arm of the UK government. We have done it number one for our country and to our military, number two to support the global commons and the economy, to the degree that we are practicing our craft. And you know, in place, and when such, if they are, then you know, this will obviously generate, would potentially generate premium revenue. And you know, stay tuned.

Yeah, I think you're missing something. We have disclosed quite clearly, particularly the last investor dinner and in quarters before, quite a bit of detail about our alternative assets and the investment activity there, what our strategy is. Half of it is our partners. We described what that is about, and by the way, we've been very clear about the income that it is producing and the income we expect to produce over the next few years that we expect to achieve as we talked about capital deployment. So that's all there, but we're happy to, you know, separately take it offline and give you detail around it. I think Peter wanted to give you a line to talk offline. It does show up in adjusted NII, and you can see it on the income statement, income from private partnerships.

Yeah, I'm not really going there except to say to you that it's axiomatic in here when pricing becomes marginal or inadequate, we have various tools to manage exposure, and our appetite for exposure is one of those.

Welcome to the insurance business. It's not scary. It just is what it always turns out to be. Now, as I said earlier, we're seeing it only on the margin right now. Other than that, we're not at this point seeing changes to terms and conditions, and we're quite mindful. By the way, when we look at pricing changes, we value the changes. So we don't just say price goes this, and by the way, change in waiting periods, deductibles, CPI, etc., that's just off to the side. No, we actually put value on it.

I am on the margin of it so far. And frankly, it's what's so interesting today. I look at middle market and small commercial, admitted, admitted is much, much more disciplined. So, and that is again back to the comment I made about distribution, capital, systems. Some people, to see some go back to admitted, would surprise me. To see more of a pattern in a softening market, where I'm seeing it is more, you know, on the margin in the property. You know, that people get so excited to write habitational wood-frame business in California. Good luck to them.