Good day, and welcome to the Chubb Limited First Quarter 2022 Earnings Conference Call. Today's conference is being recorded. Now 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 March 31, 2022, first quarter earnings conference call. Our report today will contain forward-looking statements, including statements relating to company 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. 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. First, we have Evan Greenberg, Chairman and Chief Executive Officer; followed by Peter Enns, our Chief Financial Officer; and then we'll take your questions. Also with us to assist with your questions this morning are several members of our management team. And now it's my pleasure to turn the call over to Evan.

Good morning. We had an excellent start to the year with record per share operating earnings and underwriting results, double-digit global P&C commercial lines premium growth, accompanied by rate increases in excess of loss cost, and improving growth in our consumer business globally. Core operating income in the quarter was $1.64 billion or a record $3.82 per share, up 52% on a per share basis over prior year. In the quarter, we produced simply outstanding underwriting results. $1.28 billion of underwriting income was more than double prior year with a combined ratio of 84.3%, both records. Our P&C current accident year combined ratio, excluding catastrophes, was 83.5%, a 1.7 point improvement over prior year, with about 1 point from loss ratio improvement and the balance, expense driven. On the investment income side, adjusted net investment income was circa $900 million for the quarter. We are predominantly a buy-and-hold fixed income investor. And given rising interest rates and widening spreads, we expect investment income to increase from here. Every 100 basis points increase in interest rates for us is worth, on an annualized basis, about $1.2 billion in pretax investment income. We have a portfolio duration of about 4 years. So a rise in rates begins to earn in reasonably quickly. Peter will have more to say about other financial items. Let me say a few words about the Russian-Ukraine war. The events unfolding before our eyes are a human tragedy of epic proportions with profound geopolitical implications. Our actual incurred losses to date from the event are minimal. And from all we know today, while additional losses may develop over time, this will not represent a meaningful event for Chubb. Integration planning around the Cigna transaction is quite active and remains on track. We expect to receive regulatory approvals leading to a close during the second quarter. There are no changes of substance to the guidance we gave you, and any changes are modestly positive. We will update you after closing. Now turning to growth. The rate environment and inflation, global P&C premiums, which exclude agriculture, increased 8.8% in the quarter on a published basis or 10.7% in constant dollars, with commercial up 12% and consumer up 8%. Growth in the quarter was broad-based with contributions from virtually all commercial businesses globally. From large corporate to middle market to small, from traditional to specialty in most all regions of the world, commercial P&C premiums, excluding agriculture for North America were up 10.5%, while in overseas general, they grew 13 in constant dollars, but we then had 5 points of FX impact to the published results. Agriculture premiums were down in the quarter because of a return of premium to the government. It's based on our level of profitability for the '21 crop year. This is a favorable and expected development. You will recall that crop insurance is a business where revenue and losses are shared with the government. For the '22 crop year, we will have a substantial increase in premium revenue over last year, given commodity prices and other factors. Most of this will be recognized in the third quarter. Returning to commercial P&C. In terms of rate, the level of rate increase remains strong, and as I have said before, is naturally moderating as individual portfolios achieve adequacy and additional rate is then required to keep pace with loss costs. The rate environment is reasonably orderly. And in aggregate, rate increases remain in excess of observed and projected loss costs. In the quarter, in North America, total P&C premiums, excluding agriculture, grew 9.6%, again, with commercial up 10.5%. Growth this quarter in commercial Lines was led by our middle market and small commercial business with premiums up almost 12%, followed by our major accounts in specialty division, which grew 9.5%. Total exposure change was a positive 1 point in the quarter, a combination of an increase in economic exposure of about 3.2% due to higher payroll, sales and other economically sensitive activity, and on the other hand, a decline in exposure due to underwriting changes, such as increased attachment points, and higher deductibles, which is a good thing. Renewal retention for our retail commercial businesses is 100% on a premium basis, very strong. Overall rates increased in North America commercial lines 8.7%. Major accounts, which serves the largest companies in America, rates increased 9.3%. General casualty rates were up over 15.5% and varied by class of casualty, while risk management-related primary comp and casualty rates were up 3.7%. Property rates were up 9.1%, and financial lines rates were up 13.9% and varied by subcategory. In our E&S wholesale business, rates increased by more than 11%. Rates were up 13.3% in casualty, about 10% in property. Casualty was up 10%, and financial lines rates were up 15.4%. And in our middle-market business, rates increased 7.7% or 9.5% excluding comp. Rates for property were up over 8%. Casualty rates, excluding comp, were up 8.5%, and comp rates were down 1.5%. The comp pricing, which is rate plus exposure was up over 9%. And finally, financial lines in middle market were up 17%. We are trending loss costs at 6%, and it varies by line. In general, we're trending loss costs in the rates we charge for short-tail classes just over 6.5%, though the actual is running lower. In long-tail, excluding workers' comp, we continue to trend at a 6% rate overall. And our first dollar workers' comp book is trending between 4% and 4.5%. In short-tail classes, we are actively monitoring property valuations, loss costs as they develop and the real-time drivers of cost or changes in inflation, labor, parts and supplies as well as the delays caused by supply chain disruptions given the length of time to repair or replace. This can add additional pressure on costs. In long-tail lines, we actively monitor and study both frequency and severity of each class. Turning to our international general insurance operations. Retail commercial P&C premiums grew 15.5% in constant dollars, while our London wholesale business grew just over 5.5%. Retail and commercial growth varied by region, with premiums up 18.5% in Latin America, followed by growth of about 16.5% in our U.K. and Europe division, and Asia-Pac was up 14.5%. Internationally, like in the U.S., we continued to achieve improved rate to exposure across our commercial portfolio. In our international retail business, rates increased in the quarter, 10%. While in our London wholesale business, rates increased 9%, both varied by class and by region as well as country within region. Outside North America, loss costs are currently trending about 4%, though that varies by class of business in country. In general, loss costs for short-tail classes are running just under 4%. And we anticipate this to increase. In long-tail, we are trending at about a 4.5% rate. International consumer lines growth in the quarter continued to recover from the pandemic's impact on consumer-related activity, and premiums increased about 9.5%, though FX then scrubs 6 points off the growth rate. Premiums in our International A&H business grew 8.6% in constant dollars. Our international personal lines business grew over 10%. Latin America led the way with A&H and Personal Lines growth of over 18% and 17.5%, respectively, while Asia-Pac's growth for these two product lines was over 6% and 24.5%, respectively. Net premiums in our North America high net worth personal lines business were up about 7.5%. Last year's reinsurance reinstatement premiums, due to cat losses, had a negative impact on growth. Adjusted for other one-time items, our underlying growth was about 5.5% in the quarter. Our true high net worth client segment, the heart of our business, grew over 13% in the quarter, driven by a flight to quality of competitors leaving certain markets, while overall retention was very strong at nearly 99%. In our homeowners business, we achieved pricing, which includes rate and exposure of 12.3%, while homeowners loss costs are running in the 11% range. In our Asia-focused international life insurance business, net premiums plus deposits were flat in constant dollar, but will increase in future quarters. While net premiums in our Global Re business were up 22%. In sum, we had an outstanding quarter all around, and we are off to a great start to the year. As I look ahead, I remain optimistic and confident in the things we can control by way of naturally growing more cautious given the world around us. Economic growth, general inflation and central bank actions and the war come to mind. We will continue to capitalize on unfavorable underwriting conditions for our commercial P&C businesses globally. Consumer lines growth should continue to recover. As interest rates rise, our investment income will as well. And as I stated last quarter, our strategic investments, including the acquisition of Cigna, and likely later in the year, Huatai, will provide us with greater revenue and earnings growth opportunities. I'll now turn the call over to Peter, and then we'll be back to take your questions.

Good morning, everyone. As you've just heard from Evan, we are starting the year with an exceptional quarter with strong top line growth and record P&C underwriting results that produced operating cash flow of $2.4 billion for the quarter. Turning to our balance sheet and capital management. Our financial position remains exceptionally strong with $73 billion in total capital. We continue to remain extremely liquid with cash and short-term investments of over $5 billion. I would note, S&P and Fitch both reaffirmed our AA ratings and stable outlook, reflecting our strong financial position. Among the capital-related actions in the quarter, we returned $1.3 billion or 82% of core earnings to shareholders, including $1 billion in share repurchases and $340 million in dividends. As of March 31, $1.6 billion of the $5 billion share repurchase authorization remains available through June 30. We plan to seek authorization from our Board for our annual share repurchase program prior to that date. During the quarter, rising interest rates caused a mark-to-market pretax unrealized loss of $4.7 billion or 4.5% of our fixed income portfolio. As a comparison, the Barclays Global Aggregate Bond Index declined by 6.2% for the quarter. This adverse mark-to-market movement of $3.8 billion after tax or 6.5% of our book value drove the decline in book and tangible book value per share of 4.4% and 6.8%, respectively. Excluding the unrealized mark-to-market in the investment portfolio, book and tangible book value per share increased by 2.1% and 2.9%, respectively. As noted in our supplement, the market rate on our fixed maturity portfolio was 3.4% for the quarter-end, exceeding our book yield of 3%. As of last Friday, the market reinvestment rate had increased to 3.8%. Reflecting this rising rate environment, we now expect our adjusted investment income for the second quarter to be in the range of $915 million to $925 million, and then it will go up from there. Our reported ROE for the quarter was 13.6%, and our core operating return on tangible equity was 17.1%. Our core operating ROE was 11.3%. Pretax catastrophe losses for the quarter were $333 million, including $138 million for Australian storms, $65 million for wildfires in Colorado, and $130 million for other global weather-related events. We had favorable prior period development of $240 million pretax, essentially all in short-tail lines of $228 million, principally in A&H, property, and surety. Our paid-to-incurred ratio for the quarter was 91% or 80 in prior period development. Our core operating effective tax rate for the quarter was 16.9%, and we continue to expect our annual core operating effective tax rate for '22 to be in the range of 15.5% to 17.5%. Now to finish with a couple of discrete items. First, relative to our exposure in Russia. Our Russian entities have been separated operationally from Chubb and are managing their affairs independently and have been deconsolidated. During the quarter, we impaired the full carrying value of these entities and have recognized a realized loss of $87 million. Relative to Cigna, we have amended our purchase agreement to remove the joint venture in Turkey. This amendment will have a minimal impact on the transaction. As Evan mentioned, we will provide an update with more specifics on the acquisition during the second quarter earnings call. I'll now turn it back to Karen.

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

We will begin with Yaron Kinar from Jefferies.

And congratulations on the quarter. I know I've asked similar questions in the past, so I hope you have a little bit of patience this time around. You have, what, the investment environment, adding a good 150 basis points ROE for every 100 basis points of interest rate improvement. The loss ratios look great. You're still earning well over trend. At what point do you start taking the foot off of the rate cut off or go after more exposure as opposed to pushing for rate?

We don't think of it that way exactly. I mean, first of all, the market itself is a governor on rate. We're in a competitive market. We pursue the rate we think we need, and that actually, it's the other way around, that actually determines the outcome of growth. We're underwriters first. And the rate we require for both exposure and adequacy of rate to exposure plus inflation is part of that, that's the starting point for us.

And then my second question, I think for the last several quarters, if we look at the rate environment in commercial internationally, it's been higher than in North America, yet the loss trends are lower internationally. Can you maybe help us think through why that would be? Is it because of the lower interest rate environment overseas? Or are there other drivers there?

Well, you know what? You have 55 countries that we're operating in around the globe. So there is no one neat simple answer. On the long-tail side, most countries don't have the kind of legal environment that we have. There are a few that come to mind that are similar like Australia and the U.K. The balance, it's a much lower inflationary environment on loss costs for long-tail lines of business. And then short tail, it really varies by jurisdiction. And Europe is very different than Australia, which will be very, very different than, say, Malaysia or Korea in terms of parts and supplies and the nature of short-tail losses. So it's a mixed bag. And that's why we're on the ground operating locally in every jurisdiction around the world. We know the markets. We're part of the market. And so we approach from the idiosyncrasies of that local market when we think about adequacy of pricing and underwriting.

We'll now move to our next question, which will come from Michael Phillips with Morgan Stanley.

Evan, as you just said, you're part of a pretty competitive environment and that kind of governed a lot of things. Given the decelerating rate environment for the industry, and I think it's pretty unique times with loss trends that are accelerating pretty rapidly. Do you think there's an opportunity for the industry to find pockets where rates will actually convert and accelerate again sooner than they otherwise would have?

It's definitely possible that as losses in certain areas increase, the industry responds. In personal auto, for instance, we see the industry reacting. The same goes for commercial auto and cyber. When loss costs become evident, the industry takes action. In property, we are seeing continued growth at a double-digit rate. This trend reflects updated views on catastrophe exposure due to climate change, which is widely accepted by knowledgeable underwriters. This shift drives inflation and increased loss costs. So, I'm addressing your question by providing insights that I believe make the situation clear.

This is more for you and specific to your North American Commercial Lines book. When you look at that book, Evan, do you step back and think, 'I wish we had more of this'? Or do you see there are opportunities—perhaps not the best term, but pockets of opportunity—either in the size of accounts or lines of business where you wish we did more in North American partial lines?

It's more of a personal question. If you know me, you know my natural state is always active. We are an ambitious group, and we have approximately 1% or less of the global insurance market. We are still working towards that. There are numerous growth opportunities for this company, and fundamentally, there's a lot of potential for us to improve ourselves. Therefore, we are continually striving for progress.

Now moving to Greg Peters with Raymond James.

The first question pertains to the political environment, including the war, tensions, lockdowns, and supply chain challenges. You referenced in your letter the potential for a new world order. I'm curious about the strategic distinction between being a global reinsurer or insurer versus having a more regional focus. Has your perspective on this shifted given the significant fluctuations and the narratives we're observing in the media and reality?

Nothing has changed. We take a medium-term and longer-term view of opportunity and strategy when we think about growth for the company. Let's take Asia. Asia is where probably more than one-half to two-thirds of the world's growth will likely take place over the next decade, two decades and longer out. Chubb's presence and increasing presence there is a good thing. It will allow us to capitalize on those opportunities, and that means that's where the insurance industry is going to grow. When I think about Latin America, yes, it has a volatility signature to it that is more extreme, but we recognize that and how we approach the business. But the trend line over time is increased growth opportunity for a number of reasons in particular. And so no, it doesn't give me pause for thought on the underlying thesis, but the world goes through periods of greater volatility in rest and sometimes a little less. You recognize that, and you build that into your thinking when you approach your strategy and tactics and how you expose your company, but it is a natural consequence of the strategy you take on when you go global that you will expose yourself. I would also say this, I don't think that any country or region of the world, given the interconnectedness of the globe is immune. We're certainly not immune at home. And if you're in the United States as a U.S.-only insurer, you haven't insulated yourself from the global issues by any means. Just look at inflation. And by the way, the war in Ukraine, with cyber that goes across borders. So we all live on the same planet, nowhere to hide.

Greg, you mentioned the capital returns in the quarter, stating that over 80 percent of the earnings were returned to shareholders. As we consider future trends, is this the general approach you envision, assuming there aren't any significant mergers or acquisitions? I'd say that was just an outcome I was indicating, and we have a capital framework, which Evan has been clear on the past, which is we will hold capital for risk and opportunity and return capital beyond that to shareholders. So we will reauthorize with our Board's permission a new program in the second quarter, and we'll report on that on that basis. But there's no change to anything, and that 83% or 82% was an outcome.

We'll now hear from Elyse Greenspan with Wells Fargo.

Evan, in your annual report, you also talked about achieving an ROE of about 13% in 2023 and kind of heading north from there. So when you make that statement, how are you thinking about the rate versus trend environment playing out over the next couple of years? Do you see it still a good glide path for written rate to rain in excess of loss trend?

We have considered all our inputs. I'm not going to discuss specific items, but our perspective on the market outlook is reflected in that statement. I believe rates will continue to moderate, but it varies by line of business and the loss cost environment. I expect the industry will respond accordingly. If there are any classes where rates exceed what is necessary to achieve an adequate risk-adjusted return on capital, you may notice some adjustments in those classes, which is common. We anticipate a fairly orderly marketplace overall, but we recognize that every marketplace contains a level of unpredictability, which we account for in our strategy.

And then in terms of growth, right, you guys saw almost 11% global P&C that's ex add growth in the quarter. Obviously, there was some impact of FX there. But as we think about the global economies improving, consumers are bouncing back, would you expect premium growth to remain kind of within that level or perhaps pick up from here?

Nice try, Elyse. You know I don't give forward guidance, but I remain quite confident in Chubb's ability to outperform.

But am I right in thinking that consumer just has some tailwinds, right, just given the environment and the headwinds that, that business, I guess, has faced over the past couple of years?

Yes, I think you're reasonably right. It varies by region, but you see the trend, follow the footprints and where we have been going quarter-on-quarter. And I think that's a reasonably good way to think about it.

Our next question will come from David Motemaden with Evercore ISI.

Evan, I just had a question a bit on the exposure change, specifically in North America commercial. It sounded like that detracted around 2 points from growth this quarter, which obviously at close to 11% was still good. But I'm wondering if you could talk a bit more about some of the underwriting actions that you've been taking. I know this is something you constantly work on, but it feels like it was a bit more of a concerted effort or it has been more of a concerted effort over the last year or so. So just wondering where we are in this exposure management. And is this something that is going to continue to be a drag going forward? Are we through most of it? And maybe secondly, if we could think about how to quantify the benefit to margins from these changes, whether that be on both underlying or cat load?

Yes. I think you misunderstood a bit, David. It didn’t reduce by 2 points; it actually added about 1 point. I mentioned there was a 1 point growth in exposure for commercial lines in North America. Out of that, 3.2 points were driven by economic factors. We’ve also seen an offset from underwriting due to changes in terms, conditions, and deductibles, which we can quantify. This situation has developed over a longer period, not just in the last year. In a hard market, clients require the tools they need as they face significant price increases. Deductibles and attachment points typically remain unchanged for years during a softer market cycle, even while inflation persists. The value of a $1 million deductible from a decade ago is vastly different today. Clients in a hard market are aware of the value of money exchange and prefer not to do so. Thus, we adjust accordingly, and this isn’t just a rate increase; it's a logical adjustment of structural terms with clients, particularly reflected in changes to deductibles and attachment points. You've got the right idea. Regarding margin, I appreciate your effort, but I'm not going to discuss that right now. We do have precise internal calculations for most classes. I did want to address Elyse's point. Elyse, without trying to hedge, I do expect consumer sectors to keep recovering and showing improved growth. The only factor outside my control is potential war or any regions entering recession. However, from what I see currently, I anticipate continued recovery.

Anything further, David?

Have you noticed any increase in competitors' aggressiveness in pricing as interest rates have risen, given that higher rates are benefiting return on equity across the industry? Or has the uncertain environment, with high inflation, influenced the competitive landscape?

David, think about it. They've just started rising relatively short period ago. Portfolios have to turn over to actually earn it in. And they moved very, very quickly. And by the way, on one side is interest rates. And on the other side is inflation, and the industry needs to stay ahead on inflation. So no, the answer is I have not seen that.

Moving on to Ryan Tunis with Autonomous Research.

I don't want to comment on the rest of the Ukraine conflict, Evan. In the annual letter, one thing that stood out to me was our position as a market leader in various political risk classes, particularly related to our remote subsidiary, which I think is referred to as sovereign risk. I was pleasantly surprised, in a positive way, that losses from Russia and Ukraine were minimal. So, first, can you help us understand how you managed to avoid losses tied to that? And second, what types of opportunities are you seeing on the back end of it?

Yes. We are beginning to see opportunities in political risk, but we remain conservative and cautious in how we underwrite this area. We are clear about our position. It's possible that further losses could arise, but I can't predict that. If I could, we would have acknowledged it already. Given recent events, additional losses might occur due to confiscations, expropriations, or the inability to use an asset. We maintain close communication with our clients, and currently, we haven't identified any individual circumstances that could lead to significant losses. If losses do occur, our overall exposure is monitored carefully by country, industry, and type of coverage, whether it's for debt, equity, or currency and convertibility. We are very deliberate in our approach. If a loss does materialize in the future, it won't significantly impact Chubb, as we don't maintain large limits on any single client. Overall, any potential developments would likely unfold over an extended time frame, and the total impact would not be considerable for Chubb.

And then my follow-up, I guess, very strong underlying loss ratio improvement in the commercial segments. Is it fair to say that pretty much all that is from the earned pricing versus loss trend dynamic? Or was there anything else that you'd point to that might have made that outside first quarter?

It's really tied to long-tail lines, and we're in the first quarter of the year, based on the peg-loss ratios that you choose. For short-tail lines, it's essentially the same. We don't see any underlying issues, and there weren't any one-time or unusual items that contributed. Overall, I'm pleased with the resilience and quality of the results. It reflects well on all my colleagues and the broad nature of our performance.

Now moving to Paul Newsome with Piper Sandler.

Congratulations on the quarter. Does the 6% loss trend you mentioned include the Accident and Health book? I’m curious if there’s a difference in the claims inflation trends between the pure property casualty book and the Accident and Health book. If there is a difference, how might our understanding of aggregate trends change once Chubb finalizes this deal with you?

Paul, let me clarify that for you. The information I provided was about the commercial lines business, specifically focusing on short-tail. Within the commercial sector, there is a very small Accident & Health segment, which you can almost see in the premiums. It doesn’t significantly impact the overall results. I won’t delve into additional details beyond this. In fact, I believe I’ve been more open than many others in reporting. I’ve shared as much as I can regarding individual segments. However, the Accident & Health segment barely influences the trend metrics since the 6% loss trend pertains to North America, specifically within the commercial area.

Next question will come from Alex Scott with Goldman Sachs.

First question I had for you is just to see if you could describe what you're seeing with court reopenings? And if that's having any impact, I guess, either positive or negative on just the updated view of loss cost trends that are sort of separate from the CPI-type inflation?

What did you just say? I'm sorry. What was the first part of that?

Sure. I'll repeat it. Sorry. I was interested if you could describe what you were seeing with court reopenings? And how that's impacting loss cost trends, either positive or negative?

We are noticing an increase in frequency related to court openings, and we are observing a higher number of claims being adjudicated due to these openings. There is nothing affecting the trends.

And the second question I had was just on the cyber insurance. And I guess a, are you seeing anything there? And b, the war exclusion language you have in your policies. Could you just describe if that's changed at all since sort of 2017 and things maybe learned from the outcome with Merck? And whether the language would be more protective against events like what happened in 2017?

First of all, let me work backwards, and then I'm going to come to the first part because let's be precise with each other. First of all, Merck. Merck was not a cyber insurance policy. Merck was a property insurance policy. And I wish those who are thinking about this or writing about this externally would put their heads around that, that it was property insurance, not cyber insurance, huge difference. And I hope that helps you. Secondly, when you started by saying, am I seeing anything there in cyber, what do you mean, am I seeing anything there? Help me and then I'll help you.

Sorry, have you received any claims that are at all associated with the conflict in Ukraine and Russia?

The largest single factor territory of attack into the United States for the last number of years has been Russia. Clearly, when it comes to ransomware attack, more comes out of Russia than any other jurisdiction in the world. In fact, China is not a source of that. China's more a source of espionage. And so it hasn't abated, and it hasn't increased actually from what we see. And when we talk to the experts, those in the cybersecurity industry, there are certain changes of patterns that I won't go into. But overall, it was a hostile environment and it continues to be in that regard. It has a certain frequency and severity signature to it. We haven't seen anything systemic. And I think you probably know that because otherwise, you'd have been reading about it in the New York Times.

Next question is from Meyer Shields with KBW.

Evan, I'm trying to understand regarding the Cigna businesses, when or if interest rates rise in those markets, is that usually countered by more aggressive pricing or does it result in higher returns?

In which businesses?

In the businesses that you're buying from Cigna.

No, pricing doesn't really change. It's very independent of the interest rate environment. This is not a long-term or savings-oriented business. For the most part, it is primarily a risk business, specifically a morbidity business. Think about it in terms of supplemental health-related products and dread disease-related products. There is an element of return of premium, which has a savings aspect to it. However, that is a filed rate and changes very slowly. So, no, it’s not an interest-sensitive business.

I’m not sure if it's too soon to ask, but has Chubb's property book changed this year due to commodity prices? Specifically, has there been any change in the mix by state or by commodity?

No, it has not. We have 20-some-odd percent market share in crop in the United States. That's a huge tanker. That thing moves pretty slowly if you're thinking about change and exposure, which in that sense, you'd be thinking about change in mix of crop. You'd be thinking about territory change. And the only change in mix of crop comes in the aggregate to the degree that farmers change their behaviors, and it aggregates to something significant like a change from corn to soybeans, et cetera. But we generally see that most every year, a bit of that on the margin.

We will now hear from Brian Meredith with UBS.

I have a couple of quick questions here for you. First, I'm just curious, looking at the ceded premium in your North American business, up pretty large on a year-over-year basis. Was that just a timing issue? Or is there something else going on? Maybe more of an opportunity here to buy some less expense in reinsurance and put some good margin in place.

We are always on the lookout for that. However, there was nothing significant; it was merely a mix and an anomaly in the quarter. It fluctuated a bit, as you're aware.

And then I guess my second question, I'm just curious, looking out over the next kind of 6 to 12 months, balance sheet is obviously in much better shape for a lot of these P&C insurance companies. Pricing maybe we're kind of in the seventh to eighth inning. What's your view with respect to the M&A environment out there and the opportunities that may be presented to you? I know you've got a couple of larger ones internationally, but I'm sure you've got the capabilities to do lots of M&A.

Yes, I understand you're referring to the industry, Brian. My perspective on it does not pertain to Chubb.

Yes.

I don't have a definitive opinion on the matter. On one hand, the cost of capital has increased, raising the threshold for deals. Many companies have strong balance sheets, but much of the mergers and acquisitions activity in the industry, which is often labeled as strategic, actually stems from a position of weakness. Companies facing pressure to grow due to balance sheet issues may pursue M&A. Overall, I don't see a strong drive for widespread M&A, especially considering the current risks in the environment, which may lead to caution among companies. You'll likely see activity in smaller and midsized acquisitions, but I doubt there will be much in terms of larger deals. However, it's hard to predict.

Ladies and gentlemen, this will conclude your question-and-answer session for today. I'll be happy to turn the call back over to Karen Beyer for any closing remarks.

Thank you, everyone, for joining us today. If you have any follow-up questions, we'll be around to take your call. Enjoy the day. Thank you.

With that, ladies and gentlemen, this does conclude your conference for today. We do thank you for your participation, and you may now disconnect.