Chubb Q2’s Results Reflect Continued P/C Pricing Momentum

By | July 25, 2018

Chubb has a very good second quarter in both underwriting and investments, reporting net income of $1,294 million compared with $1,305 million for the same quarter last year.

P/C net premiums written increased 5.6 percent to $7.5 billion and global P/C net premiums written increased 6.1 percent to $7.1 billion. P/C underwriting income was $824 million, up 2.1 percent. Net investment income was up 4 percent.

Evan G. Greenberg, chairman and chief executive officer, credited continued positive pricing in P/C lines, an overall retention rate exceeding 95 percent and a sizable increase in new small and middle market business.

“We are taking advantage of market conditions that continue to improve in the U.S. and some territories outside the U.S. with commercial P/C price increases this quarter in those locations the best we’ve seen in some time. We wrote more new business while renewing our customers at record retention levels,” he said in prepared remarks.

He told analysts he thinks the positive pricing will continue. “I’m going to speak in a rational way and markets aren’t always rational. The pricing trends should continue and we will continue to push on that,” he commented.

Greenberg touted the company’s increasing digitalization, including a new mobile app, a driver behavior tracking feature and digital marketing efforts targeting underserved personal lines customers. Another of its digital platforms, the Chubb Small Commercial Marketplace, makes it easy for independent agents to place and service small business insurance.

“We are benefiting from contributions that are only possible because of the scale and capabilities created by today’s Chubb. This includes a number of growth initiatives, by example, in our North American and international middle market and small commercial divisions, and the level of investment we are making in our digital efforts to improve our competitive profile,” Greenberg said.

Greenberg disagreed with an analyst who suggested that technology may make scale less of an advantage over smaller competitors going forward. Greenberg said he still thinks scale will be an advantage because it takes money to invest in digital technologies and deploy them widely. “How much money do you have that you can afford to spend and on what scale can you do it?” he asked. He said Chubb has the resources to deploy technology across geographies, products and customer segments. “Sure, you can thrive if you don’t have scale but if you get to a certain size, scale matters,” he said.

The P/C combined ratio of 88.4 percent compared with 88.0 percent in the prior year’s quarter. The P/C combined ratio benefited from current accident year results and positive prior year reserve releases. P/C current accident year combined ratio excluding catastrophe losses was 88.1 compared with 87.5 prior year.
Core operating income was $1,253 million compared with $1,180 million for the same quarter last year.

North America commercial P/C insurance net premiums written in the middle market and small commercial divisions increased 4.4 percent. This growth reflects a 5.7 percent increase in P/C lines and an increase of 1.6 percent in financial lines. Net premiums written in the small commercial division increased 26.5 percent.

Greenberg took a “wait-and-see” attitude on the effect of tariffs on business and inflation, noting that most tariffs apply to goods and the contracts take time to show up in the stream of commerce. “Let’s see what happens in trade overall,” he said.

Greenberg indicated that Chubb is taking reports of big jury awards in talc-based asbestos cases in stride, noting that asbestos issues have been around for years including with tile manufacturers, small motor manufacturers and, now, baby powder. “I’m not going speculate about it,” he said. “We’ll just see how the facts emerge.”

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