Chubb Limited (CB) Earnings Call Transcript & Summary

Thank you for standing by. My name is Jerrill, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chubb Limited Second Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Susan Spivak, Senior Vice President, Investor Relations. You may begin.

Thank you, and welcome to our June 30, 2026, second quarter earnings conference call. Our report today will contain forward-looking statements, including statements relating to the company's 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 supplement. Now I'd like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer; followed by Peter Enns, 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.

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 P&C underwriting, investment and life income results led to core operating earnings of $2.8 billion or $7.26 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%. P&C 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 $1.88 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 U.S. large account and E&S property, where we again shed a significant volume of premium. Property aside, the vast majority of the balance of our businesses in the U.S. 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 P&C premiums were up 3% or 6.3%, excluding large account and E&S property. Overseas general grew 10.2% or 4.8% in constant dollar. North America was up about 0.5% with commercial down 2.3%. While personal lines and ag were up each 6%. Commercial was up 4.1%, major in 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 E&S. So those certain classes of large account, middle market are growing more competitive. Pricing in certain areas -- in numerous areas of casualty are failing to keep pace with loss cost, which are hardly benign. Keep in mind, U.S. casualty loss costs are rising at a pretty steady 6% to 7% for primary, casualty and 9.5% to 12% for access. And that's per year, and it varies by class of business as to whether it's rising 6% or 7% or 9.5% or 12%. Pricing becomes marginal or inadequate pretty quickly when you're running those kinds of loss cost. In the meantime, financial lines continues to be soft. And here, we notice an unsurprising pattern, where experience 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've observed broker 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 of this impacts us, we are so well diversified that it has relatively and absolutely less impact overall. With that as a baseline, I'm going to give you more 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 6% 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's worth noting that London is actively writing U.S. casualty for the last few quarters, a movie we have seen before. The volume is growing, and it rates in terms that can only end one way. There's a reason U.S. 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 P&C were down about 1% in the quarter. In North America Commercial, premiums on our middle market and small commercial division grew almost 9%, with P&C 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 midsized companies of all kinds from a wide range of industries. Premiums in major accounts and specialty or E&S, 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 5.2%. But going to step further, property was -- pricing was down 12% in shared and layered, major in 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 of 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 pretax 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 or 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'm confident in our ability to continue to outperform and to generate strong growth and operating earnings and EPS and most important, double-digit intangible book value, our most important indicator of shareholder wealth. I'll now turn the call over to Peter, and then will come back, and we're going to take your questions.

Thank you, Evan, and good morning. We had another strong quarter led by our P&C 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'd like to touch on. First, we issued $2.2 billion of debt across a few currencies at a weighted average cost of 4.2% at 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 1 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 $195.45 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. Pretax catastrophe losses were $475 million for the quarter, principally from weather-related events in the U.S. Prior period -- pretax 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 2/3 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 $1.88 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'll turn it over to our Chief Investment Officer, Chris Hogan.

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're investing at yields that both compound book value and drive significant income growth. Financial assets in many markets are expensive and price of perfection. At the same time, longer-term yields remain exposed to structural pressures, rising federal deficits, corporate credit demand, persistent inflation and the potential for foreign rotation out of USFS. These forces may lead to higher yields, wider credit spreads and pressure on risk asset valuation. We remain disciplined and focused on risk-adjusted returns, maintaining a substantial balance of high-quality, liquid investment-grade assets and the 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'll now turn the call back over to Susan.

Thank you. At this point, we're happy to take your questions. Operator, please open up the line for questions. .

[Operator Instructions] Your first question comes from the line of Matt Heimermann of Citi.

A couple of questions. First question is just international Life and Accident & Health. There was some regulatory decrees, changes in Singapore on deductibles for accident health and then investor-related products in Hong Kong for Mainland China visitors. I'm just curious if there was any impact in the quarter or any product redesign required.

Sorry, they were playing with the buttons here for a second, Matt. Can you just repeat the question itself?

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'm just curious whether or not those had any material impact on flows in the quarter, if there's any need to change product design at all to address those?

No, I'll keep it simple. No. There was no impact. We don't write that kind of accident and health that you're imagining in Singapore. Remember, we write supplemental health. We don't write traditional major medical and typical hospitalization. That's not our business. And that's with the Singapore decree that you referenced was about. So no impact to us there. It's not our game. And in Hong Kong, on the flows, the -- I think there's an overreaction. First of all, we did not have an impact. And I don't expect an impact on Chubb going forward. I think there was a an overreaction to the government and the regulator pronouncements and actions they took, they were really around, what I'll say, bad actors those who were using the system and the rules that are in place that allow capital flows north to south and allow for investment products in Hong Kong.

And then just one follow-up. Taking a step back, you have got pretty sober views of market conditions. And I would say that's 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'm curious what they see that might be different than what you're seeing and just how you're thinking about the distribution of outcomes as it pertains to the market today?

Yes. I can't -- I'm not in the heads of others, and I don't know what they're specifically looking at. We all face the same market conditions. And we all face the same realities. And so I'm just going to -- I think it's just best as you see it. I mean, this is what it is. And the results, people can use words, but the results speak for themselves. And I'm 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 our -- which we've purposely built over so many years on the breadth of diversification globally and within product and commercial and consumer that really despite commercial P&C conditions gives us that leg up to outperform. So I'm going to call it as I see it. And I can't speak to what others are thinking or out to

Your next question comes from the line of Meyer Shields of KBW.

In North America Commercial, it looks like ceded premiums were up a little bit more than 20% year-over-year. I was hoping you can give us a little color on the nature of the increasing reinsurance spend and where we would see that in future results?

Yes. First of all, it's a variation just -- it varies by line of business and so there's some mix involved in there. But in certain areas, we are purposely reinsuring a bit more. You could imagine that in property. You can imagine that in certain areas of fin lines, as we've said before. And of course, we are. And if there's a hungry market at times may rationally makes sense to us to feed the hungry.

Okay. No, fair enough. Second question, maybe taking a step back. You've talked a lot about the upside of diversification. With having a much bigger base of written reinsurance premiums be of strategic benefit?

You mean to grow our reinsurance business?

Yes, either to grow it or to buy a reinsurance.

I'm sorry?

Or to buy a bigger reinsurance platform than you currently write?

No, it makes -- I mean I could have back it further to your buyer, but I think you get it no, that don't make any sense. Our flat book goes in the other direction.

Your next question comes from the line of Bob Huang of Morgan Stanley.

My first question is on the overseas general insurance. If we look at the accident year loss ratio over, call it, the past 5 quarters, it's 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, should we see like a natural improvement on accident year loss ratio? Is that the right way to think about it? I'm curious your thoughts on that.

Yes. The trend of improvement that you note is a trend, and it is a consequence of mix of business, okay? Consumer -- and then within commercial and consumer is accident It's -- and a variety of personal lines, from auto to specialty personal lines, depending on the country we're 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 within more of product, as I said it, we're growing mid and small in parts of Europe in a meaningful way. We're growing it in Latin America, not to the same degree. You got another Latin American countries, the volatility in the CAD exposure. And we're growing in Asia, of course. And so I wouldn't think about -- I agree and you just get what I just said to you, everything except, okay, Asia, Latin America versus Europe, I would disabuse you of that part.

Okay. Really helpful. My second question is on North America personal lines. Obviously, your personal line is different from everybody else's. And a lot of a lot of personal line carriers are seeing pricing pressure. You're not really seeing that. Like 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 dynamics for your specific target market?

Yes. First of all, I think most of the discussion that you're engaged in around personal lines in the United States is general market auto. And that is -- we're 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're capable of providing and the broad range of product because this 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 under manage it. And then the other part of it that is just people miss is, they buy for the claims service. And the richness of the claims service that you provide, it's 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. I imagine they're live, the sensitivity around their liability claims. They're buying for a lot more than price. And your ability to get paid adequately, we've improved. And if you look at our loss ratio over years, not simply about rate increase. It's 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's one example of use of technology, and that continues to evolve and will continue to evolve. So I feel quite confident and -- in the future. And by the way, I am the biggest fan of this wonderful franchise that we have.

Your next question comes from the line of Tracy Benguigui of Wolfe Research.

It feels like there's a lower barrier of entry in a way for large accounts since London insurers are getting into U.S. 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 set up. Is it fair to say that's something you inherited from legacy Chubb? And since you had such remarkable growth in small to middle market this quarter, can you touch on the strength of your field operations or onto something regarding that competitive moat?

Thank you. And Tracy, thanks for the question. Inherited from legacy, Chubb. When we put Chubb together, which is about 11 years ago now, it was putting together, in essence, a brokerage, large account, specialty,player, and I'm 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 U.S. 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's proven. Its proven just to be a wonderful combination in what a powerhouse franchise. And mid- and small -- and we've 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 that has just furnished that franchise. Our branch operations and the reach that you referenced, 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 with all forms of distribution, small brokers and agents and to do it effectively. Our own in-house wholesaler that can serve us on their behalf. All that is coming to play. And then with technology, our ability and one of the hallmarks of Chubb, we are the pioneers of it, industry practices. We actually, in the middle market, deliver discrete product, discrete coverages that are tailored to actually the needs of very specific industries. It's not some marketing 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's what creates this unique powerhouse in mid and small. And there are only a few of us who have that capability.

Excellent. You also unpack your comments a bit more on soft market conditions spreading to certain areas of casualty plus 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?

I didn't -- 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.

Yes. Okay. Sorry, let me just rephrase. So the areas that we're seeing the most harding on casualty is either commercial auto or excess cash casualty and within excess casualty that also includes commercial auto. So I'm curious if it's really a commercial auto story on the pricing side for casualty.