Chubb Ltd Q1 FY2023 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 Limited First Quarter 2023 Earnings Conference Call. It is now my pleasure to turn today's call over to Ms. Karen Beyer, Director of Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to our March 31, 2023 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 supplements. 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 today 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, highlighted by double-digit operating earnings growth that led to record results. We had double-digit premium revenue growth that was global, broad-based and driven by strong results in our commercial and consumer P&C businesses and our International Life business. World-class underwriting results with an 86.3% combined ratio, record net investment income and life income that more than doubled. North America P&C rate and price increases reaccelerated in the quarter, it was a standout performance that I expect will continue. We grew operating income almost 12% to $1.8 billion, and that drove a 15% increase to $4.41 per share, both records. In the context of what was an active CAT quarter, our published combined ratio reflects simply outstanding underwriting performance from our P&C businesses. The 83.4% ex-cat current accident year combined ratio was a record. On the investment income side, record adjusted net investment income of $1.2 billion was up over 30%. Our portfolio yield is now 3.8% versus 3% a year ago, with our reinvestment rate averaging 5.5%. Our investment income run rate will continue to grow as we reinvest cash flow at higher rates. Life Insurance premium revenue more than doubled, while life earnings doubled to $244 million, driven by our business in Asia and predominantly the addition of the Cigna operations which are mostly A&H and product makeup. In this time of economic and financial market volatility and uncertainty, Chubb is a safe haven. Our business model and the fundamentals of our business are very strong and broad-based. Our earnings and revenue are growing. We have an exceptionally strong capital position and a conservative level of leverage and our operating cash flow of $11 billion in '22 and over $2.25 billion this quarter speaks to our strong liquidity. Our unrealized loss as a percentage of tangible equity is 17% and will amortize back to par over a short period. Rising interest rates are our brand and most importantly, as you know, you can have a run on the bank in our business. So again, this speaks to an attractive profile that distinguishes Chubb. Peter is going to have more to say about financial items, including cats, prior period development, investment income, book value and rising ROE. Now turning to growth and the pricing and rate environment. Consolidated net written premiums for the company increased over 16.5% in the quarter on a published basis or over 18% in constant dollars, comprised of 11% growth in our P&C business globally and 129% growth in life premiums. P&C premium growth in the quarter was balanced and broad-based. North America, Europe and Asia all produced double-digit growth. Beginning with North America, commercial premiums were up almost 12% or 6.2% excluding Agriculture. Adjusted for the impact of one-off loss portfolio transfers in our major accounts division, year-over-year North America regular commercial flow grew 7.6%, which is representative of the minimum rate growth we expect for the balance of the year. And by the way, the 7.6% is broken down as 10% growth in P&C and minus 2% growth in financial lines. Our major accounts and specialty division grew 6.3% or 8.7% adjusted for the LPTs. And that was 11.4% P&C and minus 7% financial lines. In our middle market and small commercial business, premiums were up 6.5% or 7% in P&C and up 2% in financial lines. Renewal retention for our retail commercial businesses was 97%. On the consumer side in North America, our high net worth personal lines business was up almost 10%, an exceptionally strong result. And in fact, the strongest organic growth in over 15 years. Turning to our International General Insurance operations, net premiums were up 10% in constant dollars or 6% after FX impact with commercial up 10.8% and consumer up over 8.5%. Growth was led by our Asia Pacific region with premiums up over 18.5%. And with commercial lines up about 15% and consumer lines up over 22%. And Europe produced overall growth of over 10%. In terms of the Commercial P&C rate environment, rate and price increases reaccelerated. Pricing for total North America Commercial P&C, which includes rate of 6.4% and exposure change of 4.5% increased 11.2% against a loss cost trend of 6.7%. Pricing for commercial property and casualty, excluding financial lines and workers' comp was up 16.9%. Property pricing was up 27%, with rates up 16.4% and exposure change of 9.1%. Casualty pricing was up 9.9%, which includes 7.4% of rate and 2.3% of exposure. As I said last quarter, for professional lines and workers' comp, which includes risk management, the competitive environment is aggressive and rates have continued to decline in recognition of favorable experience. In the quarter, rates and pricing for North America, financial lines and aggregate were down about 2% and in workers' comp, which includes both primary comp and risk management, pricing was up 6.4%, with rates down 0.5% and exposure up about 6.8%. Internationally, we continued to achieve improved rate to exposure across our commercial portfolio. In our international retail business, pricing was up about 8%, with rates up 4.8%, and exposure change of about 2.9%. While loss costs across our international commercial portfolio are trending at 6.5%. Turning to our consumer businesses. In North America, high net worth personal lines business, again, net written premiums were up almost 10%. With our true high net worth client segment up over 15%. Retentions were 104% on a premium basis and about 91% on an account basis. We continue to benefit from a flight to quality and capacity. In our homeowners business, we achieved pricing of about 13%, while the homeowners loss cost trend is running about 10.5%. International consumer lines premiums again grew over 8.5% in the quarter in constant dollars. Our international A&H division had another strong quarter, with premiums up about 20%. Asia Pacific was up 34.5% while the U.K. was up over 12%. Premiums in our international personal lines business were down 1.5 points, and it was impacted by our business in Europe. In our International Life Insurance business, again, premiums and income overall more than doubled. Our business in Korea and the majority of Asia is off to a good start to the year. I was just in Korea two weeks ago, our leadership, the franchise, the strategy, the execution and the growth are all in really good shape. And this is a very large business for Chubb. In summary, we had an excellent quarter and have had a strong start to the year with a lot of momentum heading into the second quarter. Looking forward, we are confident in our ability to continue growing revenue and operating earnings, which in turn drive EPS through the three engines of P&C underwriting income, investment income and life income. Add to that our business model, financial strength, stability and liquidity, and I believe you have in Chubb, both the reassurance of safety, and the attractive prospects of a long-term growth company. I'll turn the call over to Peter, and then we're going to come back and take your questions.

Thank you, Evan, and good morning. Before we begin, I want to highlight that the numbers in the financial supplement we filed were adjusted to reflect the impact of adopting LDTI accounting, mainly affecting our Life Insurance business. The cumulative impact of LDTI on our book value and overall results is not significant. Please refer to Page 31 of the financial supplement for more information. Now, regarding our first quarter results. As mentioned, we are starting the year from a very strong financial position. Our P&C divisions, growing life business, and strong investment performance yielded operating cash flow of $2.3 billion. We increased our assets to over $200 billion, including about $116 billion in invested assets, which have benefited from the current rate environment and generated our fourth consecutive quarter of record net investment income. S&P and Fitch have both reaffirmed our AA ratings and stable outlook, which reflects our solid financial position. In terms of capital-related actions during the quarter, we returned $772 million to shareholders, which includes $428 million in share repurchases at an average price of $212.81 per share and $344 million in dividends. Our book value and tangible book value per share rose by 5% and 8.7%, respectively, from last quarter. This increase is due to our record core operating income and net realized and unrealized gains of $1.7 billion in the investment portfolio, partially offset by the capital returned to shareholders. Our core operating ROE for the quarter was 12.6%, and our core operating return on tangible equity was 19.4%. A year ago, Evan stated our target for 2023 core operating ROE, excluding excess capital or on a deployed capital basis, was 13% and our core operating return on tangible equity was targeted at 20%. In this first quarter of 2023, we estimate the deployed capital ROE results to be between 13.5% and 14% and between 23% and 23.5%, respectively. Adjusted net investment income for the quarter was $1.2 billion, exceeding last year's record quarter by over 7%, due to higher reinvestment rates that affect recurring income as well as certain items totaling approximately $35 million, including higher-than-expected private equity distributions. We anticipate our adjusted net investment income on a recurring basis to increase from this quarter's $1.165 billion to between $1.2 billion and $1.22 billion next quarter, with further increases expected for the remainder of the year based on our positive cash flows, portfolio turnover, and the current reinvestment rate environment. Regarding our investment strategy amidst recent economic and market events, we continue to uphold a conservative approach, maintaining a high-quality portfolio with an average A rating. Our total exposure to banks is 8% of invested assets, with two-thirds of that in G-SIFIs. We have no exposure to Silicon Valley, Signature, or First Republic Banks, nor to Credit Suisse contingent capital securities, and we do not invest in Tier 1 bank Cocos as per our investment policy. Our exposure to regional banks is below 1% of our portfolio in high-quality names. Our total direct exposure to commercial real estate is 4% of invested assets, with 87% of that in investment-grade securities rated an average of AA. This portfolio focuses on multifamily and industrial sectors, with less than 20% related to commercial offices. High-yield credit currently constitutes 14% of our portfolio and targets the upper tier of the high-yield market, rated BB with a current average rating of B+, and is well-diversified with over 900 issuers and aimed at outperforming in down markets. Returning to our underwriting business, the quarter experienced pretax catastrophe losses of $458 million, with 76% occurring in the U.S. and 24% internationally. In the U.S., the losses were due to winter-related storms and other severe weather events, while internationally, results were largely affected by storms in New Zealand and Australia. The prior period development for the quarter was a favorable $196 million, which included an adverse development of $6 million tied to the 2022 accident year catastrophe losses, incorporating $119 million in adverse development from Winter Storm Elliott and $113 million in favorable development from Hurricane Ian. Excluding catastrophe-related developments, we had favorable development of $202 million across all lines, commercial and consumer, with $228 million favorable related to short-tail lines and an adverse development of $26 million in long-tail lines, of which $10 million was from corporate runoff lines. Our paid-to-incurred ratio for the quarter was 92%, adjusted to 82% after accounting for catastrophe-related prior period development and a significant payment relating to the Boy Scouts of America settlement. Our core operating effective tax rate was 18.1% for the quarter, at the low end of our expected annual range. It's important to note that the first quarter usually has a lower tax rate than the full year, and we expect our annual core operating effective tax rate for this year to fall between 18% and 19%. Lastly, concerning Wati, we closed on some of our outstanding shares during the quarter, increasing our ownership interest to 64%. We continue to apply equity accounting for the first quarter and will consolidate Wati once we exceed two-thirds ownership, which we anticipate will likely happen in the second quarter when we expect to surpass 80%. I will now turn the call back over to Karen.

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

Your first question comes from David Motemaden with Evercore ISI. Your line is open.

Good morning, David.

Good morning, Evan. So really encouraging to see the reacceleration in North America commercial pricing. It sounds like most of that was rate versus exposure. I guess I also heard that you said you expect a 7.6% sort of minimum growth in North America commercial throughout the course of the year. So wondering if you could just unpack how you see that progressing between both rate on existing policies as well as just growth in terms of adding new incremental units of exposure?

Yes. No. David, as you know, we don't give forward guidance really. And I gave you a little flash, but I'm not going to go further than that. I was pretty clear, I expect the trend you see in pricing, and I expect the trend you see in sort of pattern and growth to continue. And you got a sense of P&C lines growing and you got a sense of professional or financial lines. And beyond that, it's not simply about North America and look at the company globally, and frankly, look at the International P&C and I expect the pattern to continue, look at consumer lines, and I expect the pattern to continue. Look at life, and I expect the pattern to continue. Investment income, and I expect the pattern to continue.

Okay. Great. I appreciate that. And then as my follow-up, Evan, in your letter, you spoke about how Chubb enhanced its ability to collect and assess loss cost more quickly and accurately and then that helps you be more insightful in pricing and reserving. I was wondering if you could just elaborate on how you enhance the stability. And if that played in, I heard you may have ticked up the loss trend a little bit in North America commercial. Wondering what insight gave you to do or this enhanced ability to view loss trend data, how that played into potentially changing? How you're viewing trend going forward?

Yes, I've discussed this in the letter and during previous calls. Like many businesses, if we look at the bigger picture of insurance and other financial and non-financial companies, we are emerging from a prolonged period of very low inflation. The zero cost of money has been overshadowed by the abundance of liquidity. In a low inflation environment, you don't need to be as precise about loss costs at specific moments, as the time lag has less impact. While we always monitor this closely, you can afford to be a bit more relaxed about when data is received; older data is less critical. However, in an inflationary environment, which we began experiencing some time ago, this can be detrimental. For those who've dealt with inflation, timely values can greatly affect accuracy. As soon as we noticed the shift, we took immediate action to assess the time lag in data. It’s essential to understand the timing of inputs when considering inflation, whether it relates to the timing of repairs for vehicles or homes, or to liability developments. Staying attuned to these trends requires unpacking severity from frequency, especially with the impact of COVID on frequency. Additionally, the tools we possess for external data and our capability to effectively use both internal and external data are key. The combined capabilities of our claims, actuarial, and underwriting teams provide us with a competitive advantage, particularly in our reaction speed. This ability is crucial for any modern financial organization that aims to differentiate itself.

Great. Thank you.

You're welcome.

Your next question is from the line of Mike Zaremski with BMO. Your line is open.

Good morning. I have a question regarding reinsurance costs. Are there industries facing rising reinsurance costs, both in property and casualty, and is that not the case for Chubb? If I'm wrong, please let me know. Is Chubb considering any changes in its strategy, such as retentions, or is that still to be determined as things develop?

No, there has been no material change. As you can understand, I won't be discussing our specific reinsurance program as it is proprietary information. Our retainers have remained stable, and we have a strong balance sheet, taking on significant net risk. Our intent for purchasing reinsurance is not primarily for earnings protection but rather for balance sheet protection, influenced by the volatility of different lines of business. This has been a consistent policy for us, and we uphold it regardless of market cycles.

Got it. Following up on market conditions, you provided a lot of good insight. The acceleration in pure rate increased significantly more than I expected, and there may have been a slight increase in loss costs on the North America commercial side. Could you provide more insight on whether you think the markets are becoming more rational in adjusting to loss cost trends and higher reinsurance pricing? It seemed like you were optimistic that competitive conditions have improved from quarter to quarter. Thank you.

Yes. I believe the situation is somewhat mixed. The property sector and short-tail lines are definitely responding well. In larger accounts, the response is better than in the middle market, which shows a certain level of stability. This is primarily seen in P&C lines. In financial lines, there are specific areas where I feel positive about the trend. We're seeing a response in excess casualty, especially in larger commercial business. I expect that the middle market will eventually respond as well. Rates are indeed on the rise there. When I look at professional lines, it's important to differentiate within financial lines between professional liability and various classes in D&O, both private and public. The public D&O market has many players who lack data and experience, and they are often provided capacity by those who are not fully attentive. I believe this sector is overshooting its targets, and we tend to prioritize volume under appropriate underwriting conditions. However, there is notable risk, particularly looking forward with factors like recession, market volatility, climate change, and claims of greenwashing. So, this is a nuanced situation. Overall, the experience in compensation is good, exposure is increasing, but we need to be cautious as rising wages will affect indemnity, severity, and pricing. As I mentioned before, the market could inadvertently inflate costs. Therefore, caution is warranted. Overall, I see a positive trend in P&C lines, and I anticipate that this direction will continue.

Thank you.

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

Thank you. Good morning. My first question is about the North America commercial segment. Do you see the overall book?

But anyway, go ahead.

Well, I could do that, but I'm not sure we have enough time. With North America commercial, do you see the book overall as rate adequate today?

Yes.

You do. So with that in mind, I guess, why would we not see more acceleration of premiums given that rates are adequate and picking up, why wouldn't you lean into that a little more with greater exposure?

What you mentioned overall is noted. I'm pleased to answer your questions. I indicated a 10% growth in property and casualty lines, while financial lines, including professional lines, are down overall. In segments where we appreciate the pricing, you can observe business growth. I won’t elaborate further, as I believe I’ve provided what investors need to know.

Okay. And then my other question was on the G&A expense side. Seem to be a modest pickup in North America, both personal and commercial. Are there any specific platform investments you can call out? Or is it just wage inflation hiring?

No. The expense ratio increased due to pension expenses, which have risen with the increase in interest rates. This is something beyond our control and relates to accounting adjustments for future pension costs. We have a defined benefit pension plan that has been closed for many years, a legacy from Chubb, and that's the impact. That's all.

Got it. So is that a reasonable run rate to think of for the rest of the year?

Yes, reasonable. You'll note the pattern of expense ratio. It's usually a little higher this quarter than in future quarters when I look at it.

I think the pension will be consistent each quarter. And then there's other stuff around it.

Got it. Thanks so much.

You're welcome.

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

Excellent. Good morning, everyone. Evan, in your prepared comments, I think you mentioned a recent trip to Korea. You talked about the Life results. Maybe you can give us an update on the Cigna acquisition, how the integration is proceeding and if there's any update on sort of ROE targets related to Cigna now that it's in the Chubb family?

Yes. I'll address the last part first. As you know, the current situation is settled, so we won’t separate that out. However, I am excited about what I observe in Asia and the progress we are making. I will be conducting the third quarter earnings call from Singapore, as I plan to spend six or seven weeks there. The integration is proceeding exceptionally well, and we are energized by the capabilities of our combined organization. The integration has been highly successful, and all efficiencies are on target. Moreover, the growth and breadth of our capabilities in direct marketing are impressive. We are the largest direct marketers of insurance in Asia, utilizing telemarketing and digital channels for both life and non-life products. Our partnerships across organizations and the compelling nature of our offerings enhance our operations, which are well-coordinated. Our customer database, which numbers in the millions, allows us to cross-market and cross-sell effectively through various channels. Our agency organization is also expanding, with a notable increase in Korea through independent life agencies, as well as in Thailand and Vietnam with tens of thousands of growing agents. I see potential for growth in Korea, Thailand, Indonesia, Taiwan, and even Hong Kong. The combination of these markets is accelerating, and the partnerships we have established are promising. Overall, I feel very confident in our franchise, capabilities, and the potential for growth over time. Similarly, I am noticing encouraging features in Latin America, despite it being a smaller region economically. Additionally, I would like to point out that Europe reported a 10% growth this quarter, with 40% of their business being renewed within the year. This growth is broad-based, and I am pleased with the developments.

Yes, the Europe numbers are kind of surprising against the backdrop of the macros news that we read about here and there. I spent some time during the discussion talking about all the data resources, the analytics you have. And one of the topics that's become more popular and more recent is this ChatGPT. So maybe you can segue and talk about how you're deploying AI across your organization and the opportunity you have to drive further efficiencies as you utilize these types of tools?

Yes, I'll address that. ChatGPT represents generalized AI, focusing on text-based analytics and deep thinking. We also utilize other forms of AI, including deep learning, which are based on numerical and mathematical analysis. We've been exploring different types of AI across various sectors of our business, aiming to tackle specific opportunities, challenges, or enhancements, from underwriting and risk assessment to claims management, marketing, and customer service interactions. This experimentation has been ongoing for the last five years, yielding multiple successful use cases. We continually refine our approach, leveraging extensive amounts of data and integrating external data to enhance our insights. It’s not just about the AI tools; it's fundamentally tied to data and how we manage it. This makes our data infrastructure and engineering essential, as they provide the fuel that AI relies on for insights and effectiveness. In most cases, AI won't replace our highly skilled workers anytime soon, but it will certainly augment their abilities. I'm confident about job security, as these tools enhance our team's capabilities. We are now entering a phase where we can implement these tools on a larger scale. The projects we've developed and tested are gaining momentum and rolling out more widely, resulting in better insights, increased speed, improved accuracy, reduced costs, and heightened momentum. This transition will take years, not just months.

Great. Thank you for the answers.

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 is on the reinsurance market. You guys saw some growth in your reinsurance segment. But it sounds like from your commentary, you're seeing better opportunities. It sounds like on the primary property side than perhaps to write more property reinsurance business, but I was hoping you could just expand on that comment and correct me if I'm wrong.

Yes, you're correct. We have a limited balance sheet and cannot take on an unlimited amount of risk. We believe in the risk-reward ratio and the overall opportunities available. We are significantly more focused on the primary side than on the catastrophe REIT side. That being said, we are increasing our exposure not only with catastrophe REITs but also with our catastrophe risk, Canadian property excess, and property quota share business. However, when we evaluate the market and consider the risk-reward, our orientation remains more on the primary side.

Thanks. And then my second question, Peter, I know you said that you guys will consolidate the Wati ownership when it goes above 80%. I'm not sure if Chubb has disclosed like the earnings from Huatai historically? Or can you just give us a sense of the expected contribution once that is consolidated or any help you can provide there?

Yes. We typically have not disclosed Huatai's earnings specifically. We will provide more comments after it closes and we consolidate it. Historically, I have stated that it will not have a material impact on our net earnings.

What we say will be pretty neutral initially.

Okay. Thank you.

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

Good morning. A quick question. Do you manage your business more on net growth than growth? Or is that vice versa? I'm just thinking about capital consumption, if you're retaining more, could that dampen how much you want to grow growth premium?

No. We disclose our net to gross, and you can see that's pretty steady. We measure both and use gross and net for different reasons and purposes. When managing the balance sheet, I focus on net. For marketing and assessing our capacity, I look at growth. It's a more complicated question, but it involves both.

Okay. So I just wanted to make sure that I understood prior comments correctly. So the 4% growth in gross premium written we saw in North America commercial lines, which was lower than we've seen in prior quarters, that had to do more with business?

It has more volatility to it because of risk management business and certain kinds of businesses that have a gross line component to it. But in that case, I'm driven by ROI and all our discussion when we look at stick to the bones is on the net basis.

Got it. I am also curious to...

…companies talk net, not gross. But both are important to us as operators for different reasons.

Got it. I'm also curious, did you increase your loss picks from banking D&O claims activity this quarter? I noticed that your North America commercial lines underlying loss ratio improved both sequentially and year-over-year. So I'm wondering if that improvement would be in spite of any raise and off-peak?

No.

Thank you.

You're welcome.

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

Hi, good morning. First one I had was just to see if you could give us some context for where court reopening is that? And just sort of the timing of how the backlog is progressing? And maybe even how that's informing some of the analytics and things you're doing around loss costs?

The frequency of loss and casualty has increased since March, returning to levels seen before COVID-19. It differs across various lines of business; in some areas, loss frequency remains below pre-COVID levels, while in others, it has aligned with the pre-COVID patterns. Overall, frequency has been on the rise, indicating a trend that has persisted for some time. This situation has been somewhat predictable considering the courts have been operational for over a year, and attorneys are actively engaged.

Got it. And then maybe a little bit more of a housekeeping question for you. But on the Life Insurance segment, I mean, should we think about LDTI moving the run rate up or down at the margin, just a little difficult to tell from the outside because we only have a couple of quarters of Cigna and so not too long of track record to look at under the recasted financials.

Alex, the way I would think about it is, and you pointed out between Cigna coming online purchase gap and LDTI, there's been movement in the numbers. The first quarter of this year, things are settling and we think are representative of a run rate going forward.

Got it. Thank you.

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

Thanks. Can I just quickly clarify something? I get a bunch of questions on it. The 7.6% growth rate that you mentioned, that's premium growth for the remainder of your minimum premium growth you expect for the remainder of the year. Is that correct in North America commercial?

I provided you with an expectation for future performance that I believe will be at least that level. Additionally, I explained that the 7.6% growth comprised 11% in property and casualty lines, while it was negative in financial lines.

Yes, makes sense. So it's premium growth, great.

That was not radar trend or anything. That was premium.

That's what I thought. I just wanted to clarify. Sorry, I was going to get a bunch of questions on it. The second question, I'm just curious, I'm trying to kind of do some mental math here on this, and that can be dangerous, but looking at your 11% and change pricing in North America commercial versus the 7.6% premium growth, was there something going on with mix or something would cause pricing to be greater than the premium growth?

There's always something going on with mix.

So is it a mix issue or something going on?

I previously discussed the growth rates for property and casualty versus financial lines. I won’t delve into that further. I also provided information on rates, trends, and renewal retention rates, which you have. New business growth varied by region, but there’s not much more to add. Specifically regarding property, the rates reflect measurable changes in terms and conditions, such as adjustments to deductibles, which impact the rate. It's possible that the overall exposure could actually decline. If you follow the calculations, that might assist you in your understanding.

That's really, really helpful. And then can I just one follow-up. Cyber market. Can you just tell us kind of what your thoughts are there now in the cyber market? Is that an attractive market at this point from a pricing and what's happened with term condition in the last couple of years?

Yes. There is a lot of discussion regarding the terms and conditions, especially related to cat exposure and the definitions of war. I believe the term "war" is misleading; it's about hostile actions by nation-states. That shapes the current terms and conditions. On the other hand, the cyber loss environment is challenging. The frequency and severity of ransomware incidents are increasing after a temporary decline. Cyber pricing and underwriting have adjusted reasonably well to the external situation. If this discipline continues, I don't have concerns. I expect all cyber underwriters are aware of the loss environment we see. Overall, I believe underwriting and pricing are fairly disciplined.

Thank you.

You're welcome.

Your next question is from the line of Ryan Tunis with Autonomous Research. Your line is open.

Hi, good morning. I'm curious, over the past five years, could you share how your thought process has changed? It seems like after the Cigna deal, which I viewed as a financial acquisition, you’ve developed a stronger enthusiasm for this business. How has your perspective shifted to see it as a growth opportunity for Chubb?

Yes. First, I want to emphasize that Asia is a significant focus for us. It's not just our life business; half of our operations are in property and casualty, which is doing well. Asia represents around a $10 billion market for us, and it is a vast region with tremendous economic growth potential over the next couple of decades. Naturally, this comes with some volatility, especially in markets like India, China, and Southeast Asia, as well as in developed areas like Korea and Japan. We also consider Australia part of Asia. I see everything as one integrated organization, Chubb, and the collaboration between our teams is impressive. We started our life business over a decade ago, and I actively pursued a life license in Vietnam back in 2002 and 2003. Since then, we've been growing both organically and through acquisitions, with the Cigna deal really accelerating our efforts. In our non-life sector, we are expanding from very minimal beginnings, particularly in accident and health insurance, which has elements that could fit within a life or non-life business. Cigna mainly contributes to our accident and health segment. Our life offerings include agency distribution and direct marketing, with both life and non-life products reflecting a shift toward the future. Asia has unique characteristics in its traditional life products that offer strong return on equity, with low guarantees and significant risk components that appeal to us. The market includes various products such as dread disease coverage and hospital cash plans, primarily limited basic medical insurance. Customers are also focused on savings, thanks to high savings rates and a young, growing labor force in a family-oriented culture that emphasizes long-term savings. Given the low social safety net, private insurance holds more importance. All of this is beneficial for both life and non-life insurance. Additionally, I will be working from both Hong Kong and Singapore due to the vast opportunities there. I've traveled back and forth for years, but now I want to gain deeper insights into our strategy moving forward. Many of my colleagues will be doing the same as we continue to operate as a global company.

Thank you. And just quickly, I guess this is more nuance might be for Peter. But you mentioned some LPT activity in North America commercial. Just curious if that had any impact on the loss ratio year-over-year?

The impact of the loss ratio decreasing and the expense ratio increasing was very minor. You can quantify it at about 10%.

Thank you.

At this time, I would like to turn the 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 call. Enjoy the day. Thanks.

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