Good day, and welcome to the Chubb Limited Second Quarter 2020 Earnings Conference Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Karen Beyer, Senior Vice President, Investor Relations. Please go ahead.

Thank you, and welcome to our June 30, 2020, second quarter earnings conference call. Our report today will contain forward-looking statements including statements relating to company performance and the impact of the COVID-19 pandemic and its economic and other effects, pricing and business mix, and economic and market conditions, which are subject to risks and uncertainties, and actual results may differ materially. Please see our recent SEC filings, earnings release and financial supplement, which are 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 today. First, we have Evan Greenberg, Chairman and Chief Executive Officer; followed by Phil Bancroft, our Chief Financial Officer. Then we'll take your questions. Also with us to assist with your questions are several members of our management team. And now it's my pleasure to turn the call over to Evan.

Good morning. COVID-19 is an event of historic proportions, impacting societies and economies globally. This hit businesses and individuals hard and the impact will be with us for some time. Chubb has and is performing well, while naturally shouldering our burden of responsibility, supporting our insureds' businesses and consumers. COVID-19 is a slow rolling global catastrophe impacting virtually all countries; unlike other natural catastrophes it has no geographic or time limits and the event continues as we speak. Together the health and consequent economic crisis will likely produce the largest loss in insurance history, particularly considering its worldwide scope and how both sides of the balance sheet are ultimately impacted. We pre-announced a few weeks ago an after tax COVID-related loss estimate of $1.2 billion, which essentially cost us a quarter of earnings. This loss is an estimate of our ultimate loss from the pandemic and economic crisis based on everything we know and can project. The estimate does not include, for the most part, the credit for potentially lower current accident year losses from a decrease in exposures, except for a very modest amount. Looking beyond this quarter's catastrophe losses and the shadow it casts is an important story to tell about our company. Our underlying health and vitality are excellent. And we are capitalizing on current industry commercial P&C conditions. Our published P&C combined ratio was 112.3% with total after tax cash charge of $1.5 billion, including $353 million of natural catastrophe and civil unrest related losses. Separately, we took an after tax charge of $205 million in unfavorable prior period development for child molestation related claims emerging predominantly from reviver statutes that came into effect last year. On a current accident year basis, excluding cats, the combined ratio was 87.4%, 0.5% improvement over prior year with current accident year underwriting income of over 18% in constant dollars. The loss ratio was essentially flat with prior year, while the expense ratio was down 1.5 points. We benefited from expense saves due to the shutdown as well as our ongoing efficiency efforts, while we continued to invest in important areas to improve our competitive profile. In the quarter, book value benefited from actions taken by the Fed to support the economy during this exigent time, which positively impacted asset values, but will pressure future investment income. Per share book value grew about 5%, while tangible was up over 7%; both are now essentially flat for the year. Phil will have more to say about investment income, book value, cats and prior period development. Broadly speaking, two themes impacted the growth in the quarter. On the one hand shrinking exposures from the decline in economic activity weighed negatively on growth. And on the other hand, favorable commercial P&C underwriting conditions contributed to growth. In the quarter, P&C net premiums grew 1.4% in constant dollars. Growth was impacted due to a one-time charge we took to estimate the ultimate impact on premiums that we will incur from exposure adjustments on in-force policies due to a reduction in economic activity. Excluding the charge, which is a better way of viewing our underlying quarterly growth, we grew 3.9%. This is made up of 9.1% positive growth globally in commercial P&C and 6.3% negative growth in consumer lines, which includes A&H, travel and personal lines. In the quarter, we continued to experience favorable underwriting conditions in commercial P&C, which varied by geography and product lines. The commercial P&C pricing environment is particularly strong in North America, the UK, continental Europe and certain locations in Asia Pacific. And it continues to spread further in North America, which includes the U.S., Canada and Bermuda. Commercial P&C net premiums grew 10% adjusting for the one-time premium charge I just mentioned, and on the back of strong new business growth and premium retention, with our major accounts and specialty business growing over 12% and our middle market and small commercial business growing 6.5%. In our international general insurance operations, commercial P&C net premiums grew over 5.5% in the quarter in constant dollars. Chubb Global Markets, our London wholesale business, grew over 20%, while our commercial P&C business in continental Europe grew nearly 16%. In those markets where we grew, we continued to achieve improved rate through exposure across most core commercial product lines. Overall rates increased in North America commercial P&C by 14%. Major accounts and specialty rates per property were up 21%, casualty rates were up over 25.5%, and financial lines rates were up over 18.5%. In our middle market business, rates per property were up 18%, casualty rates were up over 12% excluding workers' compensation, comp rates were down 1% and financial lines rates were up 14.5%. In our international general insurance operations, rates were up 16% in our international retail business and 20% in our London wholesale. Consumer lines growth globally in the quarter was severely impacted given the pandemic's effects on consumer-related activities. Our North America personal lines business was an exception, as we experienced flight to safety and quality in our high net worth segment. Net premiums written in the quarter were up 2% on an adjusted basis and retentions remained very strong at almost 97%. In our international personal lines business, predominantly auto, home and cell phone, premiums shrank 12.5%, while our global A&H premiums, U.S. and international together, were down 13.5%. Our Asia-focused international life insurance business however had a good quarter with net written premiums up 30% in constant dollar. In sum, to provide you a better perspective, though we typically provide limited guidance we expect Chubb will have on a published basis positive premium revenue growth for the full year. John Keogh, John Lupica, Paul Krump and Juan Luis Ortega can provide further color on the quarter, including current market conditions and pricing trends. As a company, we continue to operate around the globe as a normal company during extremely abnormal times. Depending on where you are in the world, with exceptions, the substantial portion of our international staff is back in the office on any given day. This includes most of Asia Pacific, where about 50% are back in the office and in some countries 100%. Europe, with the exception of Spain and Italy, about 25% are back. And while the UK remained closed, we expect about 20% to 25% to return in August. We have been ready to begin our return to the office in the U.S., but took a pause, given the increase in infection rates in many parts of the country. Among developed countries in the world, the U.S. stands out in its inability to manage the health crisis on a national basis. And this is damaging our economic recovery and our image globally. We're conditioned to have stabilized in the U.S. like the Northeast. We've begun to bring employees back to the office for meetings, to collaborate, learn and plan. We are ready to return on a broader basis when conditions warrant. The health and wellbeing of our staff is a paramount concern. Insurance is an essential service. We never stopped or even paused in providing coverage, paying claims, or providing risk engineering and other services to our customers and clients. We are very active on a daily basis with our clients and distribution partners globally and we have done so with service levels that are virtually the same as we provide normally. I'm going to say a few words about the business interruption issue that I know is on the minds of many. As you know, the insurance industry is under attack by the trial bar over business interruption claims. They represent many businesses which purchased BI coverage that does not provide cover for pandemic and these customers are understandably disappointed and upset. Plaintiffs' attorneys are attempting to torture or reverse engineer insurance contract language to conjure business interruption coverage that for the most part simply doesn't exist. Coverage for pandemic was never contemplated in standard business interruption policies and therefore no premiums were ever charged for that risk. In fact, state insurance regulators who approved the policies have been clear that this risk is not covered and that the industry could not cover the massive open-ended tail risk of a global pandemic, because it threatens the industry's solvency. Without the Federal government playing a major role to cover the tail risk, pandemics are simply uninsurable on a broad basis. Standard BI policies, which are an addendum to a fire policy, require direct physical loss or damage to the property. For example, a fire or flood damages the property and prevents the business from operating while repairs are being made. COVID-19 does not cause physical loss or damage to a property despite the trial bar's efforts to influence some government officials in the wording of their civil public shutdown orders. Standard BI coverage provides good value for the money. We estimate the industry pays out about $0.70 in insurance claims for every business interruption production dollar collected with most of the remaining amount paid in commissions, premium taxes and other expenses. For Chubb, in addition to our normal losses this year, we will pay BI claims for policies that specifically covered certain pandemic-related shutdowns, such as those for the entertainment industry. We care deeply about properly supporting and servicing all of our policyholders, and I have particular sympathy for the millions of businesses that have suffered terribly during the pandemic forced economic shutdowns, but it would be wrong, in fact catastrophic and irresponsible, to pay the claims of those who didn't have coverage and didn't pay premiums for that coverage by using funds that have been properly reserved for the legitimate claims of the vast majority of our policyholders, who number over 100 million globally. To provide some context, in 2019 Chubb paid $24 billion on approximately 4 million property and casualty claims, again to pay billions of dollars on covered claims. Rating reserves or capital needed to pay claims on other kinds of policies, such as auto and home, commercial insurance exposures, and to respond to natural catastrophes such as hurricanes and wildfires would be irresponsible to the vast majority of our policyholders and to our shareholders. On the business interruption challenges of the current COVID-19 crisis, the insurance industry has an important role to play in society and in the economy. And that includes fully participating in the development of a prospective future pandemic business interruption solution to crises that arise. Earlier this month, Chubb released its pandemic business interruption program designed to mitigate the economic disruption and losses in the event of a future pandemic. Our framework is not the first plan to be introduced, but the public-private partnership framework we developed has important differences from the other leading proposals. By sharing our ideas and approach we hope to spark and influence a productive debate on a solution that will work for businesses of all sizes: taxpayers, our industry, and the economy more broadly. First and foremost, I believe the industry can and should take pandemic risks along with the government. This is a peril that can be covered to a greater degree than we do today, as long as the tail exposure is covered by the government. It is our job to figure out how to do that. We can do more than simply play an administrative role where we belittle ourselves and are less relevant than we should be. The framework we announced has attributes that we believe will make for a successful program. It accounts for the different needs of small, medium and to a modest degree large businesses. Premium for small business will be affordable and they will be paid quickly. Large companies would pay a fair and risk-adjusted price to both the government and insurers for pandemic cover and a program built on free market principles. The government gets paid for the use of its balance sheet, not a handout to larger companies. Our framework has incentives for broad participation by the industry and by committing insurance industry capital and providing opportunity for increased risk sharing over time as direct and secondary markets develop. The pandemic burdens shouldered by the government will ultimately be lessened to a degree. This is an important issue for our nation. We look forward to contributing to the dialogue as policymakers work to refine the most effective solution. Before I turn things over to Phil, I want to say a few words about an issue that concerns all of us, and that's the persistent challenges arising from bigotry, racism and racial injustice in society, particularly for Black people. The events that unfolded across our nation these past few months has focused our attention on what we should do as citizens and as a company. We characterize Chubb’s culture as an inclusive meritocracy. We earnestly strive to achieve an environment where all colleagues feel comfortable to perform to their full potential and are recognized for their contributions. It's a never-ending work in progress, and we can do more. We recently developed and shared with our employees an action plan to which we will hold ourselves accountable. The plan has a few simple objectives. We want to enhance our individual and collective understanding of racism in society and strive within Chubb to be anti-racist in our behavior as individuals and as an organization. We want to actively support each other. It starts with more frank dialogue between our employees of color, particularly Black colleagues, and our white colleagues to create better understanding and awareness about the realities of racism. We will hold leaders more accountable for curating and leading an environment of inclusion and we'll eliminate policies and practices that potentially create bias and inhibit our ability to create greater racial mix of our workforce at all levels of the company. This is an enduring process, not a momentary event in time. We believe we have a responsibility to do our part with candor, open minds and a commitment to change. In closing, our company is very strong. Our balance sheet is in excellent shape, in fact outstanding shape, and we are operating well around the globe during very difficult times. Our underlying strengths are enduring. We are capitalizing on favorable market conditions as we simultaneously navigate the extreme headwinds and uncertainty created by COVID-19. With that, I'll turn the call over to Phil, and then I'm going to come back and take your questions.

Thank you, Evan. Our financial position at quarter end is exceptionally strong. COVID-19 is an earnings event for Chubb, while our balance sheet remains in excellent shape. Our balance sheet features a $112 billion, AA rated cash and investment portfolio with a duration of four years and a consistently conservative approach to loss reserving and total capital of $70 billion. We are a balance sheet business operating in extremely uncertain times, and we have maintained a conservative level of capital. Our operating cash flow for the quarter was $2 billion, and our liquidity on a global basis continues to be excellent. In the quarter, we returned $353 million to shareholders in dividends. Adjusted net investment income for the quarter of $857 million pretax was below our guidance range, mainly due to foreign exchange, lower rates on our floating rate obligations and an acceleration of prepayments in the mortgage loan portfolio. We remained consistent and conservative in our investment strategy and do not expect to materially adjust the portfolio's asset allocation. We intend to maintain a high-quality bias and conservative duration. Fed easing actions have inflated asset values causing a disconnect with underlying credit conditions, so that many classes of debt appear mispriced. We will continue to focus on risk-adjusted returns and not reach for yield. There are a number of factors that impact the variability in investment income. We now expect our quarterly run rate to be in the range of $850 million to $860 million. Turning to book value, our share book and tangible book value were up 4.9% and 7.2% respectively in the quarter. Our core operating loss and dividend payment were more than offset by net realized and unrealized gains for the quarter of $3.1 billion after tax, including $2.7 billion in our investment portfolio, $410 million from favorable foreign currency movements, and $110 million mark-to-market gain in our variable annuity reinsurance portfolio. The gain in the investment portfolio is due mainly to the narrowing of credit spreads in our corporate bond portfolio and the decline in interest rates. At June 30th, our investment portfolio was in a net unrealized gain position of $3.4 billion after tax. Our net catastrophe losses for the quarter were $1.8 billion pretax or $1.5 billion after tax as previously announced and are further detailed in our financial supplement. Our net loss reserves increased $2.7 billion in constant dollars, including the significant catastrophe losses and adverse prior period development. The paid-to-incurred ratio was 59% reflecting the catastrophe losses. We had unfavorable prior period development in the quarter of $75 million pretax or $52 million after tax. This included a charge for U.S. child molestation claims of $259 million pretax or $205 million after tax as previously announced. The vast majority of these losses were reviver statute-related. Excluding this charge we had favorable prior period development in the quarter of $184 million pretax split approximately 79% in long-tail lines principally from accident years 2016 and prior and 21% in short-tail lines. Our core operating effective tax rate for the quarter of 15.3% was impacted by the high level of catastrophe losses. Through six months, our core operating effective tax rate was 16.5% slightly higher than our expected 14% to 16% range. We now expect our annual core operating tax rate to be in the range of 15% to 17%. With that, I'll turn the call back over to Karen.

Thank you. At this point, we're happy to take your questions.

And we will take our first question from Michael Phillips with Morgan Stanley. Please go ahead.

Thanks. Good morning, everybody. Evan, thanks for all those comments especially on the BI stuff, and appreciate that. I guess, can you talk about the impact that COVID and shelter-in-place is having on your acquisition expense ratio? And then longer term, maybe you've made some good strides in your expense ratio in general, even prior to COVID. So how should we think about a good run rate going forward from there?

Yes. The acquisition ratio benefits fundamentally from a change in mix of business. You had consumer lines that, as I said, had negative growth and they run a higher acquisition cost than commercial P&C does, and we're growing underneath, as you could see commercial P&C at a rapid clip, and it has a lower acquisition ratio. The operating expense ratio did benefit reasonably well in the quarter from the COVID-related shutdown, and I expect that we'll continue to receive benefit from that as we go forward in future quarters. And so overall I think the expense ratio will continue to benefit in future quarters. How much and to what degree, I'm not going to prognosticate or give guidance on.

Okay. No, thanks. That's helpful. I guess, second question on COVID and frequency benefits on commercial lines. Can you talk about what specific lines maybe benefit the most from frequency benefits? And then with some of the reopenings we've seen recently, has there been any change in trends, certainly on the frequency that you've noticed an uptick on because of the reopenings?

Commercial lines, fundamentally most classes of business in traditional property and casualty benefit to a degree and it varies by line of business from the COVID shutdown. On the other hand, we took a massive charge to recognize the COVID-related claims that will arise, but excluding that, frequency and severity in most traditional lines will benefit because, and are benefiting at least to this point in time because commercial activities are down. And that would be both in the short-tail lines as well as in the long-tail lines, but it varies by class. Obviously in professional lines to a lesser degree than say in general casualty or excess casualty. Our policy has always been to recognize bad news early and to be slow to recognize good news. Any benefit we might be seeing short-term from the reduction in economic activity, in the shelter-in-place and the lack of social activity around the world, we are very slow to recognize and will be, because we're in very uncertain times and we don't know what the future is going to bring. Secondly, overall through commercial P&C for the most part we are achieving rates that are in excess of loss cost trends. And again, we're in uncertain times and we're conservative in our approach.

And we will take our next question from Elyse Greenspan with Wells Fargo. Please go ahead.

Hi. Thank you. Good morning. My first question, Evan, follows up on your response to the last question. You guys are getting a lot of price, 14% within your North America commercial book picked up pretty nicely from where you guys were last quarter. Can you just give us a sense of where loss trend is within that business, and just as we think — and I recognize you give us some guidance on the premium side and you don't like to give forward guidance, but as we think about price up in the teens and depending upon where your loss trend is, just trying to get a sense of the potential for margin improvement within that North America commercial book?

No, I understand. Elyse, I'm not going to give you much satisfaction in that question. We don't give forward guidance on that as you know, and I'm going to rest on the statement that in most commercial lines areas, we are, in aggregate, achieving rate in excess of the loss cost trend. Secondly, we haven't noticed a major permanent change in trends, but on the other hand you're masked by all of the COVID-related impact. We measure it typically quarterly, but at this point we measure it monthly because of the economic shutdown, and you really can't see what the actual is though it is lower. We do price on anticipation of reversion to the mean as the economy opens back up and activity returns to normal. I'm going to leave it at that, Elyse.

Okay. That's helpful. Then I had a couple of other numbers questions unrelated to North America commercial. In the last couple of Q2s, you guys had LPTs on the book that tended to be due typically to higher loss ratios. Was there any LPTs on the book this second quarter?

There were, and as you know, we write LPTs virtually most quarters; the amount varies by quarter. This quarter we did have LPTs as we do in most quarters, and it was within a reasonable range of what we wrote last year in the second quarter. Last year was a pretty big quarter for LPTs. This year we wrote a number of transactions as well.

Okay. Great. And then within North America commercial your retention went up to 84.5; it had been trending in the high-70s. Was there anything specific to the second quarter or is it more of a change in mix in terms of that book on a go-forward basis?

No, it's more of a change of mix of business than a major shift in retention net to gross.

And next we’ll hear from Ryan Tunis with Autonomous Research. Please go ahead.

Hey guys. Good morning. Following up on that last one in North America commercial, there's clearly some cross currents there, so the structured transactions, some COVID frequency benefits but there's about 0.7 points of year-over-year underlying loss ratio improvement. Evan, is that a fair representation of what you think the relationship is right now between rate and loss trend? Maybe around 0.7 points in North America commercial? Or is it higher than that you think moving forward?

As I said, Ryan, I'm not going to prognosticate future. We just don't provide guidance that way. A couple of things: one, we are achieving rate in aggregate in excess of loss cost trend. Two, we haven't noticed a major change in trends, but it is masked by COVID-related impacts. Three, we have COVID-related benefit from the economic shutdown. Given the period of great uncertainty we're in, we are very slow and fundamentally haven't recognized good news while we took what we think is a reserve to ultimate for COVID-related losses. We have been conservative in our balance sheet management. In periods of great uncertainty that's our normal policy, and if there's favorable news, we will recognize it in a prudent way later.

Understood. And my follow-up is, can you just talk a little bit about the COVID charge that you took? It's obviously conservative. If you ever have to add to it, what do you think the reason would be? Would it be another outbreak later in the year? Give us a sense of why — the degree of conservatism around that loss selection?

We modeled it using top-down and bottom-up approaches. We projected what we think the economic patterns are going to look like, what we think the health situation is and will be, and how the two work together. Based on all the information we know today, we modeled both short-tail and long-tail losses using historical perspective and how events evolve. We used all that to project a loss to ultimate. Did we get it precisely right? No one knows what the next six or nine months will look like precisely. There's great uncertainty, but we did our best in these uncertain times to try to reflect the ultimate loss on our balance sheet liabilities.

And next we will hear from Paul Newsome with Piper Sandler. Please go ahead.

Good morning and hope you're all well. I was wondering if you can talk about how the business interruption claim issue has evolved, not necessarily just in the U.S. but outside the U.S. It looks like to me at least that the courts are trending in the industry's favor so far in the U.S., but I don't have a great sense of how that's happening outside the U.S. and how that might differ from the U.S.?

It's very early days. The U.K., for example, is in a process where the regulator has stepped in to avoid a free-for-all of lawsuits and a waste of expense, time and money. They're representing policyholders' arguments in one place before a panel of judges with the industry presenting its arguments. That will unfold and come to a conclusion likely around year-end. In other countries such as Australia, it's bubbling and there are a number of court cases proceeding to test wording veracity against different regulation. The most activity and the longest, most prolonged period to resolve will be in the United States.

And then my second question, we've seen a lot of rate increases in the reinsurance business. Has the changing market environment changed your view on the fairly narrow approach you take in the reinsurance business overall?

We buy reinsurance fundamentally to provide limits of liability beyond what we want on our balance sheet and for protection of volatility where it makes sense. We measure all reinsurance and buy it where the risk/reward and pricing are appropriate. Those principles lead to a steady approach. When rates are not adequate to earn a reasonable risk-adjusted return, we shrink exposure. When rates justify greater volatility, we will increase our net exposures and buy reinsurance accordingly.

I was thinking more about the actual reinsurance business that you have and whether you might be interested in expanding it.

Yes, we are more active in our reinsurance business and it is a greater growth area for Chubb now. In London and our E&S business we've been disciplined and shrunk for a number of years because we weren't getting paid to take risk. We are getting paid more adequately to take risk in a number of classes, and that business is growing by the quarter. Our reinsurance business, from what we can tell today, will continue to expand as we go forward.

Thank you very much.

And next, we will hear from Greg Peters with Raymond James. Please go ahead.

Hi, good morning. Just FYI, Evan, there is a little bit of feedback that we're hearing throughout the call. So I'm not sure what's going on there, but we're hearing it.

Yes, I'm hearing it too and I hate it. Can you still hear the answers well enough to get the information?

Yes, it's coming through. It's just there's a little feedback somewhere in the system. So it's mutual. In your prepared remarks, you offered to have some of the other executives provide some commentary around conditions, pricing, et cetera, in the respective segments of the business. I was wondering if you could follow through with that offer.

Love to. Thank you for asking. I'm going to start with John Lupica on major and specialty, and then I'll have Paul Krump do middle market.

Sure. Thank you, Evan, and thank you, Greg. Let me give you a little more color on what we're seeing in major and specialty. I'll start with rate and premium retention. On our major portfolio, we're looking at over 16 points of pure rate increase. In Westchester, our E&S business, we're looking at 18 points of rate increase. And in Bermuda, our high excess business, we're looking at 48 points of rate increase. Breaking that down into segments on the retail side: our primary casualty risk management business is getting some of its best rate in the history of that organization at 8 points of rate and the adjusted premium retention ratio of 97.5% taking into account one large fronted trade. In our excess casualty book, we are getting 48 points of rate and achieving 111 points of premium retention. In our property business, we're getting 21 points of rate with 109 points of pure premium retention. In our financial lines, another note in the retail business that Evan had noted, 18 points of rate and 103 points of premium retention. We're seeing the same in our E&S lines of business. Our property business is getting 18 points of rate with 103 points of premium retention. Casualty is getting 31 points of rate with 87 points of premium retention. And our financial lines is getting 17 points of rate. So, as you can see, a pretty healthy rate environment and premium retention inside of the retail and E&S marketplace.

Hi, Greg. Good morning. I'll start with property: Evan had mentioned getting over 18 points of rate there; our retention in that line is 95%, which is excellent. With respect to package, we're getting 6 points of rate and 97% retention. In our excess umbrella, we're getting over 20 points of pure rate increase and 94% retention. Auto has got 11 points of rate in the last quarter with 99% retention. In our professional lines, as Evan mentioned, we're at 14.5% rate and about 98% retention. As respects terms and conditions, obviously a lot of these rate increases were accompanied by tightening terms and conditions. In particular, we're pleased with where deductibles are going and how much they've increased. We've also been able to trim down some of the sub-limits for cat perils of flood and quake as well. On excess umbrella, we've been working on attachment points and that's been going extremely well also.

More than you asked for, Greg.

If you take all of those businesses that were just summarized with rather robust rates, what percentage of the total premium are we talking about, just to put this in perspective because not all of your business is getting these type of rate increases?

When I add in the international areas that are achieving similar hard market conditions, it's over 50% of our premiums globally — not just commercial P&C but across our total business.

Okay. Thank you. And then obviously it begs the question: when we're hearing about substantial rate increases, what's the commercial customer response to this because this is far exceeding inflation trends with the rest of their business and a lot of your commercial customers are experiencing pressures because of COVID and the economic slowdown? I have to believe you're getting a lot of customer pushback, or maybe you could give us some perspective around that.

We're not seeing significant pushback. There's a lot of goodwill between us and customers. Why is this occurring? Because loss cost trends, even when benign, have exceeded premium rates charged for a prolonged period. Rates went down while loss costs continued to rise. Industry results overall became severely elevated and many lines were inadequately priced. If companies sought market share aggressively in prior periods, they're now feeling the consequences. Rates are now moving toward adequacy, and in some lines adequacy is achieved while others need to move further due to loss cost trends and social inflation. Another dynamic is that capacity has pulled back; Chubb is stepping up. We're offering capacity and consistent solutions — not in and out. We've been consistently communicating to customers that the period of declining premiums was irrational and will not last; we will remain steady. As capacity shrinks we have stepped up with bigger lines, bigger solutions and more creative products. Our reputation and goodwill with customers has been building. Yes, insurance pricing is going up during COVID, but the trend toward adequate pricing was occurring before COVID. To deploy capital you must be paid adequately; risk capital is precious.

And we will take our final question from David Motemaden with Evercore. Please go ahead.

Thanks. Good morning. Just a quick numbers question on the current accident year loss ratio ex-cat in North America commercial. In the past, you've talked about the impact that some of these large structured transactions have had on the loss ratio. In 2018 and 2019 second quarters, it was around 100 basis points of elevation in the loss ratio. How should I think about that impact this quarter within North America commercial?

It did have an impact this quarter. I can't give you an exact basis point number on the call; it had an elevated impact. We wrote LPTs fairly consistent in the neighborhood of what we wrote in aggregate last year.

Year-on-year the impact was 70 basis points.

Great. Thanks Evan and Phil, that's helpful. And then just a question: the recent GOP stimulus includes some liability shields for businesses and health care providers. How important is this for you and the industry? Outside of this going through, what underwriting actions are you taking to mitigate future liability claims that you may be getting?

I think liability safe harbor proposed in the bill is very important to our nation. We confront extreme economic headwinds between managing the health crisis and opening the economy. The burden on all businesses in the U.S. is extreme. Adding liability exposure for businesses that are practicing protocols to protect employees and customers would foist additional economic expense that mainly benefits the trial bar. That would be a travesty. Creating some legal certainty for businesses in an environment of tremendous uncertainty is the right approach. We applaud and actively support these efforts as a company — not for the insurance industry's benefit primarily, but for the benefit of society. We need to open the economy and control the health crisis better than we are.

And that will conclude today's question-and-answer session. I would now like to turn the call over to Karen Beyer for any additional or closing remarks.

Thank you all for your time and attention this morning. We look forward to speaking with you again next quarter. Thanks, and have a good day.

This concludes today's conference. Thank you for your participation. You may now disconnect.