Chubb Ltd Q3 FY2022 Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Chubb Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. Thank you. It’s now my pleasure to turn today’s call over Ms. Karen Beyer, Senior Vice President of Investor Relations. Please go ahead.

Thank you, everyone, and welcome to our September 30, 2022, third 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. As you saw from the numbers, we had an excellent quarter in spite of catastrophe losses with terrific underwriting results, including outstanding combined ratios, record net investment income, double-digit constant dollar P&C premium growth, well-balanced between commercial and consumer. And finally, surging Life division revenue growth with the addition of Cigna's Asia business. Commercial P&C pricing was strong and exceeded loss costs in aggregate and in most individual lines of business. Core operating income in the quarter was $1.3 billion, or $3.17 per share, up 20% over prior. In the quarter, we produced $710 million of underwriting income, up 15% with a published combined ratio of 93.1%. Pre-tax catastrophe losses were $1.2 billion, of which $975 million was from Ian. For the year, record underwriting income of $3.4 billion was up more than 40% or $1 billion leading to an 87.5% combined ratio, an improvement of nearly three points over the prior year. Underpinning the published combined ratio was the ex-cat current accident year combined ratio, which was 84% for the quarter, adding to a record 837 for the year, simply stunning. Hurricane Ian was a large event distinguished by its size, wind speed and amount of water, both surge and flood. The models we use contemplate a cat three or greater event striking Florida about every three years. We are fully prepared to take catastrophe risk and the associated volatility. After all, it's what we do for a living. As long as we are adequately compensated and the concentration of exposure is within our balance sheet wherewithal. In my judgment, current pricing for catastrophe risk is inadequate in many portfolios, and property pricing should continue to adjust to the realities of the natural catastrophe environment, as well as the increased cost for reinsurance protection and potential lack of availability. Returning to the quarter, investment income was a record $1.1 billion, up over 12% from the prior year, topping $1 billion for the first time. As I noted in our recent calls, with rising interest rates and widening spreads, investment income is and will continue to rise. Our reinvestment rate is now averaging 5.8% against a portfolio yield of 3.4%. During the quarter, we continued to accelerate the turnover of our portfolio in a targeted way, so that we could put cash to work more quickly at higher yields. Investment income will make up a growing percentage of our company's earnings as we look forward. Obviously, rising rates have produced a sizable negative mark on our invested assets. But as a reminder, we are a buy and hold fixed income investor and the market is transitory. To put a point on that, our portfolio credit quality is high, and we expect about half of the mark will accrete back to book value over about a two-year period. As you saw, the addition of Cigna's business in Asia, which we closed in the quarter, is making an immediate contribution to revenue and earnings in line with what we expected. It is accretive to our consolidated results, including operating income and return on equity. Peter will provide more information around the financial items. Turning to growth and the rate environment. Total P&C net written premiums globally increased 8.5% in the quarter on a published basis, or 11.2% in constant dollar, with commercial up 11.7% and consumer up over 9.5%. Consolidated net premiums for the company, which include our Life Insurance segment, increased 17.3% in constant dollars, reflecting the consolidation of the Cigna Asia business. P&C premium growth in earnings in the quarter were again balanced and broad-based, with contributions from virtually all our commercial businesses globally. Total North America premiums were up over 10.5% with commercial up 11.4% or 8.1% excluding agriculture and our high net worth personal lines business, up over 7% in the quarter. Overseas General grew 11.7% in constant dollars, but only 2% after foreign exchange, with commercial up 11% and consumer up 12.7%. With the strongest US dollar in 20 years, the negative impact of FX masks the real strength of our business. Agriculture premiums were up nearly 22% in the quarter, driven overwhelmingly by crop insurance growth, as a result of commodity price increases and market share gains, we produced near record underwriting income off the back of what we project to be a decent growing season. In terms of the commercial P&C rate environment, market conditions remain quite favorable for most lines of business. The vast majority of our portfolio is achieving favorable risk-adjusted returns. So additional rate is required, primarily to keep pace with loss costs which, as I have been saying, are hardly benign in both long-tail and short-tail lines. The market is reasonably disciplined. But given loss cost inflation, and what will be slowing growth and exposure in the future given economic conditions, casualty rates in most classes will need to rise at an accelerated rate or else the industry will fail to keep pace. In North America, growth this quarter in Commercial Lines was led by our Major Accounts and Specialty divisions, which grew 9.7%, followed by our Middle Market and Small Commercial business, which grew 5.7%, and our Middle Market division, P&C lines grew almost 9%, while Financial Lines declined about 5.5%, primarily due to a lack of IPOs, M&A activity and new business. Renewal retention for our Retail Commercial business was virtually 100% on a premium basis. Overall rates in North America Commercial Lines, excluding compensation, were up 5%, while total pricing, which includes rate and exposure, increased 8.5%. We are staying on top of inflation in terms of pricing and reserving. In North America Commercial Lines, we assume loss cost trends of 6.5%, the same as the second quarter. In major accounts, which serves the largest companies in America, rates increased 5.3%, with pricing up $8.6 million and General casualty rates were up 8.7%. Property rates were up 9.7%, and financial lines rates were up 4.3%. In our E&S wholesale business, rates increased 9%, with pricing up nearly 13%. Property rates were up about 11.5%. Casualty rates were up 8.5% and Financial Lines rates were up almost 9%. In our Middle Market business, rates increased 4.2%, excluding compensation, with pricing up about 6.5%, rates for property were up over 6% and pricing was up double-digit, casualty rates were up 6.5%, with pricing up over 8% and comp rates were down 3.8%. However, comp pricing was up 6.5%. Financial Lines rates were up just over 1%, with pricing up about 2%. Our North America high net worth personal lines business had a very good quarter, with net premiums up over 7%, driven by strong new business activity. Our true high net worth client segment grew 12.5%, while overall retention was very strong at over 98%. In our homeowners business, we achieved pricing of about 11%, while the homeowners loss cost trend is running about 10.5%. Turning to our International General Insurance operations. In constant dollars, if you haven't noticed, 2022 is the best organic growth we have experienced in nearly a decade. In the quarter, retail commercial P&C premiums grew 12.3%, while London wholesale grew over 9.5%. Retail commercial growth was led by Latin America with premiums up 23.5%, followed by growth of nearly 15.5% in Asia Pacific and over 10% in our UK and Europe division. Internationally, like in the US, we continued to achieve improved rate to exposure across our commercial portfolio. In our International Retail business, rates increased in the quarter 9%. While we estimate pricing was up about 12%. Rates varied by class and by region as well as country within the region. Outside North America, we are currently trending loss costs at about 6.5%. Again, similar to the second quarter, though that varies by class of business and country. Like in North America, these trends factors are contemplated in both our reserving and in our accident year loss picks. International consumer lines growth in the quarter picked up considerable momentum with premiums up over 13%, though FX scrubbed about 11.5 points off the growth. Our international Accidental & Health division had an exceptionally strong quarter. Premiums grew over 22.5% in constant dollars with Asia Pacific up over 34%, the UK up over 26% and Latin America up 17%. Our international personal lines business grew more modestly in the quarter, with premiums up 4.5% in constant dollars. Premiums in sub-life were up 117% in constant dollars and impacted heavily by the Cigna acquisition. Cigna's operation contributed about $740 million in net premiums written and $160 million in income to the Life segment this quarter. We have hit the ground running in terms of integration and execution of our growth strategies in Asia. So to sum it all up, all of our businesses across the globe contributed to growth and earnings in the quarter. We are firing on all cylinders. We are operating in a challenging economic environment, given inflation, the specter of recession and financial market volatility, as well as the geopolitical environment and the evolving risks from climate change. Despite all of that, looking forward, we are quite bullish on the future, given our growth and exceptional underwriting margins in our commercial and consumer P&C businesses, the strong trajectory for investment income, and the contributions from the Cigna acquisition to our growing Asia Life business. We expect EPS to continue to grow at a healthy rate into the future. I'll turn the call over to Peter and then we're going to come back and take your questions.

Thank you, Evan. Good morning. Our strong underlying business performance continued in the third quarter, producing operating cash flow of $3.4 billion and contributing to a record $8.6 billion through nine months. We remain in a position of exceptional financial strength with over $63 billion in total capital and strong liquidity, with cash and short-term investments of $6.7 billion at quarter end, and this is after paying $5.4 billion cash for the Cigna business on July 1. Among the capital-related actions in the quarter, we returned $1 billion to shareholders, including $685 million in share repurchases at an average price of $186.22 and $346 million in dividends. Tangible book value per share decreased 15.2% since June reflecting changes in AOCI, which includes realized and unrealized losses of $3.6 billion after tax, resulting from rising interest rates on our fixed income portfolio, and foreign currency translation losses of $466 million. Additionally, the increased goodwill and intangibles of $1.5 billion related to the Cigna acquisition represented 370 basis points of the decrease. Excluding AOCI and Cigna, the tangible book value per share increased 0.4% since last quarter. We continue to expect to recover the Cigna dilution within six months, as we said when we announced the acquisition. Book value per share declined 7% for the quarter, reflecting those same AOCI factors. As you saw, the addition of Cigna's Accidental & Health and Life businesses in Asia are making an immediate contribution in line with what we expected. For the quarter, the acquisition contributed 7% accretion to operating EPS, 50 basis points to our annualized core operating ROE of 9.4% and 110 basis points to our tangible ROE of 14.4%. Our integration efforts are progressing well, and we are on track with expected expense synergies and net integration costs, as we previously announced. Almost all of Cigna's businesses are part of our Life segment, and going forward, we will not report on a stand-alone basis. We remain consistent and conservative in our investment strategy with 82% of our fixed income portfolio rated investment grade and do not contemplate any major change to our current asset allocation. The Cigna portfolio of approximately $4.3 billion is also high quality with an average credit rating of A+ and 96% of the fixed-income portfolio rated investment grade. As Evan noted, as rates continue to rise, our portfolio's reinvestment rate has increased from 2.3% in December to 5.8% on September 30, while our current book yield is 3.4% versus 3.2% in the second quarter. With market rates above our book yield, we have tactically taken advantage of opportunities to increase the portfolio's yield. We have been selectively utilizing gains from equity-related investments and interest rate hedges to fund turning over parts of the fixed income portfolio in this higher rate environment. This, along with the normal turnover of our portfolio, the addition of Cigna's investments as well as certain other items contributed to adjusted net investment income of $1.5 billion in the quarter. Updating our quarterly guidance, we now expect adjusted net investment income to be in the range of $1.4 billion to $1.6 billion. Relative to Hurricane Ian, approximately 77% of the pre-tax catastrophe losses were incurred in the commercial lines, 23% in personal lines. We had favorable prior period development in the quarter of $222 million pre-tax or $162 million after-tax. This is net of $73 million pre-tax adverse development from our legacy runoff exposures, principally environmental related. The remaining favorable development of $295 million is split approximately 11% long-tail lines, principally from accident years 2018 and prior, and 89% in short-tail lines. Our paid-to-incurred ratio for the quarter was 75% or 79% after adjusting for catastrophes and prior period developments. Our core operating effective tax rate for the quarter was 19.3%, which is above the high end of our previously announced annual range of 16.5% to 18.5%. This is primarily due to the Cigna acquisition and catastrophe losses in lower tax-paying jurisdictions in the quarter. We expect our annual core operating effective tax rate for the full year 2022 to be in the range of 17.5% to 18%. I'll now turn the call back over to Karen.

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

Your first question comes from the line of Michael Phillips with Morgan Stanley. Your line is open.

Thank you. Good morning, Evan. Good morning, everybody. Evan, I wanted to draw down on your comments on the loss trends in North America at 6.5%, your pricing and reserving above that. You talked about in the second quarter that what you're actually seeing in the market is somewhat below that. I assume that's still the case, but I wonder if that's narrowed a bit this quarter?

It's similar.

Similar. Okay, great. And then industry-level question. I was just curious about your thoughts here. With all that's going on in the property category insurance market. Does that extend to other areas? Does that extend to primary casualty? And will that help lengthen the hard market? And how about in primary markets there?

I have a different perspective. This isn't about capital for the reinsurance industry; it's about risk and whether to deploy capital accordingly. In terms of casualty, the situation is distinct. The industry must recognize that loss cost trends in the casualty segment are not favorable for several reasons we understand, and that pricing must keep up with these trends to remain effective. Reinsurers are often slow to acknowledge the exposure to loss costs, which is a significant risk for them. They need to be mindful of the current environment, and I think we're starting to observe this reflected in the terms and conditions they offer insurers. This response from the reinsurance industry varies between casualty and property, with each having its own challenges.

Yeah. Okay, great. Thank you, Evan.

You're welcome.

Your next question is from the line of David Motemaden with Evercore ISI. Your line is open.

Evan Greenberg, it's nice to hear from you.

I get about it, and it has been a while, by the way. I guess there are some strange pronunciations.

I would like to get an update on Chubb's growth prospects in the property market. You mentioned that you have the capacity to grow as long as you are compensated, but some pricing still needs to accelerate. How should we understand the potential you have to capitalize on this? It seems that property is currently about 16% of your overall business. Is there a limit you consider regarding the introduction of too much natural catastrophe risk into your earnings, or how do you view the growth potential in this area?

David, the 16% is a global number. And I think that's, first of all, the right way to think about it. We're a global company. And so when we think about property and growing property, it's a global opportunity for us. And so in that respect, absolutely, and it remains and is a growth area for us. What you then balance it against is we have a finite balance sheet. So we can only take so much concentration in any one geographic area when you imagine that the potential maximum loss or the loss concentration will produce over certain return periods against your capital. And then it's simply the question, are we paid adequately for the risk and for the volatility we take. And then the last item is reinsurance. And not just the cost of it, but availability because that's renting additional capital and our ability to do that. And that is what impacts certain territories, and that's not new. That's standard in how you shape your portfolio and think about concentration of exposure, but we're playing a global opportunity here.

Got it. That's helpful. I would like to follow up on the casualty rates. You mentioned that you believe rates need to increase more quickly, or else the industry won't keep up with the trends. Can you discuss what you're observing across the different lines? It seems like Professional Lines may be experiencing a decline. It appears that you are maintaining discipline based on your premium growth in Financial Lines. Could you elaborate on that and share your thoughts on the market positioning and competitiveness in that sector?

Yes. So I gave you kind of a breakdown in long-tail lines, and I won't give a further breakdown that way. But two or three points. One, when it comes to financial lines, experience has been quite good. Overall, when I look at our pricing, it produces favorable risk-adjusted returns. Market competitiveness has been in response to the absolute pricing levels and to experience, but there's plenty of risk out there. And while it's become competitive and is reasonably rational, it can't continue this way into the future or else, frankly, it becomes irrational and would be naive. We have remained disciplined and we are disciplined. There are certain pockets where we deem pricing to be irrational, and therefore, we walk away. On the other hand, what is impacting growth, and I reiterate it, remember, you're coming off of a very hot market last year. Interest rates were low. Equity markets were elevated. There was so much money around. There was a ton of M&A and IPO activity that produced more exposure. We're in a different world today, and so that exposure has shrunk, and that does impact growth as well.

Got it. That makes sense. Thank you.

You're welcome.

Your next question is from the line of Yaron Kinar with Jefferies. Your line is open.

Thank you. Good morning, everybody. Maybe following up on a couple of the previous questions. With the reinsurance market hardening, what is the opportunity set that you see for Chubb as a result of this hardening? Are you going to lean further into reinsurance? Are you going to take more net on the primary side? How are you thinking about the dynamics there?

Well, I'm hardly going to read my playbook to you for broadcast out there. In that regard, just stay tuned. But beyond that, property cat is not a growth area for Chubb. Property catastrophe re is not a growth area. Not of any significance.

Okay. And maybe changing direction a little bit here. I was curious as to your stated thoughts on China and the opportunities out there, especially with Huatai in the face of the political and economic changes there?

Yeah. First of all, we expect to announce the Huatai approval from the China regulator of the Huatai transaction imminently. So that will be shortly. Secondly, I see China as a long-term, medium and long-term opportunity for Chubb, and you've got to be patient. Of course, and I'll say it right upfront, the trajectory of China from a geopolitical perspective, wilderness, authoritarian political system, United States and Europe, so the Western world, democratic, individual rights-oriented and the geopolitical aspirations of China versus the balance of versus the US. If we don't find a way to coexist, we're on a path towards conflict. That risk is out there, and you know that. The party and with now the full consolidation of power under Xi, that's not a surprise. It's just the curtain was pulled back on it and it was crisply displayed over the last 1.5 weeks. But that's not a surprise. The consolidation of party control over the economy and industrial policy, and the notion of ideology and security over economic growth as a priority, in my judgment, will ultimately be against China's own interests. Xi has an ambitious agenda and to fulfill that and address financial market and economic weakness, you have to have economic growth. The pie has to grow. And my own view is over a reasonable period of time, I don't know, is it one year? Is it three years? They will be forced to moderate their approach to economic policy, their ideology, but their approach to economic policy. Practically in their own interest because they need economic growth. And so when it comes to what I tell you, in the short term, we face those economic headwinds there without a doubt. We had a sense of that. But in time and over the medium and longer term, if we don't get into a shooting war, we're optimistic about the long term that we're making. It is the second largest economy in the world and the need for insurance will continue to grow, and that we control. We are the first foreign company to have control of a financial services holding company in China, which I think is a long-term asset for the company, and we're stewards of long-term capability for this organization. And so I'm balancing the risk and the reward. In the short-term, I don't expect it to be a major contributor to Chubb's growth and earnings. But in the longer term, I do. And finally, on a micro level, I'd say this. Our ability to operate in China, Chubb as a foreigner, we have a good reputation. And I see that we won't face any more regulatory issues or discrimination than what I can see that Chinese companies themselves will face. And in that regard, I see us on a level playing field.

Thanks for that comprehensive answer and looking forward to things to come.

You’re welcome.

Your next question is from the line of Elyse Greenspan with Wells Fargo. Your line is open.

Hi thanks. Good morning Evan. My first question, in your prepared remarks, you pointed to casualty rates needing to go up because you said that there could be slowing exposure. So, and you also see positive pricing following the hurricane. So, I know you gave us a lot of color on North America commercial pricing? So, is the overall view that, that 5% rate, which I know excludes exposure that that's going to start to trend up in the fourth quarter?

Elyse, regarding your question about the quarter-to-quarter data, I want to provide a broader perspective without focusing on specific periods. It's important to recognize that inflation and loss cost trends are present. While I can't predict the exact quarter, I believe that exposure growth in the industry is likely to decline as economic growth slows, which in turn will impact exposure growth. Looking toward the future, not specifically the fourth quarter, we can expect that rates will need to increase if the industry wants to keep pace with loss costs. I can assure you that Chubb will continue to manage loss costs effectively.

That's helpful. My second question is about the completion of the Cigna deal. It seems like you're close to announcing approval for an increased stake in Huatai. Can you provide an update on the M&A pipeline and how it has changed over the past year?

Elyse, as you know, I don't discuss what we're considering in terms of acquisitions. However, I can tell you that right now, Chubb is not pursuing any acquisitions, and M&A is not a focus for me at this time. My focus is on strengthening our balance sheet and maintaining capital flexibility. I believe we are entering a period where we will see weaknesses emerge over time due to economic and financial market conditions, and we are willing to wait patiently.

Thanks, Evan.

Your next question is from the line of Greg Peters with Raymond James. Your line is open.

Good morning Evan and Peter, as well as the management team. Evan, could you shift your focus from China to other regions like Europe? I'm trying to understand your perspective on growth, especially considering challenges such as the emerging energy crisis, supply chain disruptions, and food security, even though you've reported significant growth this year. How do you plan to navigate these headwinds for the upcoming year?

It's not entirely clear what the situation looks like. Different regions of the world are responding in unique ways. The US economy, for instance, shows quite a bit of resilience compared to others. Employment is still growing, the overall economy remains fundamentally strong, and consumers have considerable disposable income, largely due to government support. However, this situation may only be temporary. I believe the Federal Reserve is taking the right steps and will maintain a high-interest rate environment for a longer period to ensure inflation is addressed. While the US economy will inevitably slow down, the extent of whether a recession occurs is uncertain. Personally, I think if a recession does happen, it will likely be mild. In contrast, Europe presents a different scenario. The region was not experiencing robust economic growth before the Ukraine conflict, and the ongoing war, along with energy availability issues, is causing energy rationing that affects both industry and growth. However, for certain areas within the insurance industry, the shifting risk landscape may provide opportunities for better pricing and rate conditions. This could be beneficial for us despite the challenges. Looking at the Lloyd's market, which is heavily reliant on reinsurance, the current contraction in that market and our strong balance sheet create additional avenues for growth. Shifting to Asia, there hasn’t been a significant recession affecting most countries there. While inflation is rising, the growth remains relatively strong. Our business in Asia presents many opportunities, and it is well-balanced across consumer and commercial segments, as well as between different types of insurance. Overall, I believe there are plentiful growth opportunities, regardless of any short-term impacts related to economic conditions. Therefore, when considering everything, I feel quite optimistic about our prospects for growth, while also remaining mindful of the external challenges and uncertainty surrounding the economy and inflation.

Yes, that makes sense. Thanks. I guess I'll pivot and...

You got it. The number. That's your job, not my job. I feel really optimistic about the company.

When you're seeing growth in your gross premium written at over 11 percent, that's a strong statistic to highlight for this year so far. As I've previously mentioned, I'm interested in the improvement in the expense ratio. If I consider the year-to-date figures rather than just the quarterly results, I assume part of that reflects the growth and the leverage from the top line that you're generating. Can you help clarify what's temporary and related to that growth versus what's more permanent in terms of genuine efficiency improvements? Also, could you elaborate on the factors driving that improvement?

I'm not going to answer it directly, but I will provide you with some clarification. What you really need is an understanding of how we approach this. Apart from the variations in our business mix and the seasonal effects that can influence the ratio from quarter to quarter, the company is committed to improving operational expenditures over the long term. We currently operate with a very high level of efficiency. Keep in mind that, similar to how interest rates can decrease by smaller increments over time, we need to be aware that our success can sometimes work against us. However, it is part of our culture and operational guidelines that we consistently grow our revenue at a faster rate than our expenses. That said, it's essential to balance this with the investments we make in our business to enhance our capabilities and efficiencies in the future. We maintain strict guidelines regarding how quickly we will allow our expenses to rise in relation to revenue. Additionally, we must consider the investments we undertake to boost future efficiencies. While we are operating efficiently now, there is still significant potential for improvement, particularly in our cost of goods operation. I am currently focused on Juan Luis, who is under pressure to ensure these improvements are realized.

I can use some of that. So thank you.

Which part can you use?

Your next question comes from the line of Tracy Benguigui with Barclays. Your line is open.

Thank you. Good morning. Hey, turning to investments. It looks like you've been slightly extending the duration of your assets in the last few quarters. It's now at 4.5 years. I think historically, it's been closer to four years. I'm wondering if you're still at or below the duration of your liabilities. Or should we expect further extension of asset duration from here given the Cigna acquisition? I guess, I'm just trying to get a sense of where you're seeing investment opportunities given the shape of the yield curve, which is less kind of at the longer end than what we see?

Tracy, our assets and liabilities show that the duration of our liabilities is currently longer than that of our invested assets by a comfortable margin. At this point, we don't anticipate extending duration, as it is not our focus or strategy. The mix of business, particularly with Cigna, has influenced this situation as well. Peter, would you like to add anything?

Yeah. Tracy, the vast majority of the change you saw relates to two things. One is the Cigna assets coming on, which had a slightly longer duration, which reflects their underlying business. And secondly, mortgage-backed securities, extending out just with a higher rate environment. So there's nothing that we've done proactively or decisively to affect that ratio.

Perfect. Thank you for confirming that. On the Cigna earning contribution of $160 million, that's tracking ahead of your $450 million annual run rate. So is $450 million still the right run rate, or are you more constructive and you could earn more on a quarter basis?

So what I said was consolidating this into our Life segment going forward. We provided guidance on the initial announcement, and then we gave an update around the earnings accretion. So we don't want to provide ongoing guidance around what that income is going to look like. We just wanted to give you comfort that we were hitting our numbers.

Got it. Thank you.

Your next question is from the line of Meyer Shields with KBW. Your line is open.

Thanks. I have two questions. First, regarding the Life Insurance segment, is there anything unusual in Cigna's results due to seasonality or other factors that wouldn't happen again, or is this a fair representation of the earnings flow?

There was nothing unusual in the earnings. There was a slight increase on a relative basis for some COVID charges in the prior year in the other international businesses, not Cigna. So the current is what it is.

Okay. Perfect. Thanks. And then, Evan, I think this is a big picture question. You talked about casualty rates needing to pick up some steam. Does the industry face sort of irresistible momentum that will make that difficult or impossible, or am I too pessimistic on its agility as an industry?

Can you say that again?

I'm curious about the signs of competition we're seeing in some commercial casualty lines. This industry has historically been very cyclical, meaning conditions can worsen before they improve. I'm interested in your view of the industry's ability to withstand this momentum this time.

I can't predict the future. Major players have access to the same data we do, along with experience that reveals similar trends in the casualty sector. I'm not sounding any alarm bells; we need to keep things in perspective. Pricing remains favorable, and I'm considering the long-term outlook rather than just the current situation. It's not difficult to foresee that growth in exposure won't continue to be advantageous. The industry will need to increase rates. We're currently in a loss cost environment influenced by inflation, which is running higher than in the past. If the industry does not adapt to this reality quickly and ensure that rates respond accordingly, it could face significant challenges. At present, I’m focused on the facts and remain neutral about the situation. However, when I examine Chubb’s combined ratios compared to others, there isn’t much leeway for most companies. Therefore, I have to believe they will act rationally.

Okay. That’s very helpful. Thank you.

Your next question is from the line of Brian Meredith with UBS. Your line is open.

Hey thanks. Good morning, Evan. Couple for you. First one, combined US, it's been trending downwards here all year. I know you've got a recession coming up, which probably is tough from a growth perspective. But what's going on there, and are there any kind of fixes going on?

I'm glad you asked that question. I'm actually quite optimistic about Combined US. COVID had a significant impact for a couple of reasons. First, the individual agency sales business, which relies on selling to small businesses or individuals, saw a drop because agency sales during COVID just dried up. Secondly, worksite sales, which involve voluntary benefits for small and medium-sized businesses, were also dramatically affected during COVID. We're investing in retooling both agency and worksite segments, and we're starting to see improvements in new business sales. However, it may take until Route 23 before we see the true impact on new business volumes and how they convert into renewal business, especially considering the natural lapse rate. I believe Combined is a growth business, and you should really start to see the results from 2024 onwards.

Great. That's helpful. And then second question...

That's the boiler room facts around it.

Got you. That makes sense. A second question, Evan, can you remind us how much of your Commercial business is, call it E&S or non-admitted? And do you ascribe to the theory that the E&S market, so the non-admitted markets will continue to grow at a faster rate than the admitted markets here, just given the complexity of risks?

It will depend on the specific line of business. For property catastrophe exposure, there will be challenges. I believe the excess and surplus lines market will face pressure due to the availability of reinsurance and the capital that utilizes E&S to support it. This issue is likely to affect the overall E&S market. However, I think the rate changes will overshadow this challenge. Conversely, in the casualty segment, the admitted market, which has lost substantial volume to the E&S market, is likely to experience faster growth moving forward compared to E&S.

Interesting. Thank you.

I can only be wrong. From my point of view, I'm playing both tables aggressively where I see opportunity in rationality. So whoever wins the race, wins the race.

Your final question comes from the line of Alex Scott with Goldman Sachs. Your line is open.

Hi. Good morning. I had a follow-up on the reinsurance cost, potentially going up and you talked a lot about the opportunities. I just thought I'd ask about Chubb is a buyer of reinsurance. Could you provide any information on the cost of your current catastrophe reinsurance programs? And anything you might add that help us think about how those prices may go up at the end of the year?

No, I'm not answering that question. The only thing I'm going to answer is we're not a January 1. We don't renew our catastrophe reinsurance January 1. Thank you very much.

Okay. And maybe just one quick one on the Life Insurance business, I mean, do you anticipate any kind of change to the run rate of earnings from the accounting changes that are going into effect at the end of the year?

Nothing we can disclose at this time.

I would now like to turn today's call back over to Ms. Karen Beyer.

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

Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.