Earnings Call Transcript - CB Q4 2025

Operator, Operator

Thank you for being with us. My name is Jay, and I will be your conference operator today. I would like to welcome everyone to the Chubb Limited Fourth Quarter 2025 Earnings Call. I will now hand the conference over to Susan Spivak, Senior Vice President of Investor Relations. You may proceed.

Susan Spivak Bernstein, Senior Vice President, Investor Relations

Thank you, and welcome to our December 31, 2025 Fourth Quarter and Year-end 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. See our recent SEC filings, earnings release and financial supplement, which are all 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. Then we'll take your questions. Also with us today to assist with your questions are several members of our management team. And now it's my pleasure to turn the call over to Evan.

Evan G. Greenberg, Chairman and CEO

Good morning. We had an outstanding quarter, which contributed to another record year, demonstrating both the resilience and the broadly diversified nature of our company. We delivered excellent full-year results with strong contributions from virtually all of our businesses. We achieved record earnings for both the quarter and the year. For the quarter, very strong double-digit increases in underwriting and life income along with record investment income, led to core operating income of nearly $3 billion or $7.52 per share, up about 22% and 25%, respectively. Total company net premiums grew almost 9% with P&C up 7.7% and life up about 17%. In fact, our company's published growth this quarter was faster than the average for the full year. In the quarter, our underwriting performance was simply outstanding. P&C underwriting income was $2.2 billion, up 40% with a record low combined ratio of 81.2%. Our published underwriting results were supported, of course, by low cats and prior period reserve development, but importantly, very strong current accident year performance from our businesses across the board, including from our agriculture division, where we are the #1 crop insurer in America. Agriculture's outstanding results benefited the quarter's underlying current accident year combined ratio of 80.4%, which was nearly 2 points better than the prior year and a record low. Importantly, however, excluding agriculture, the global P&C current accident year combined ratio, reflecting the strength of our businesses from around the globe, was 80.9%, almost a full point better than the prior year and again, a record result. And we had an outstanding quarter on the investment side of our business. We generated record adjusted net investment income of $1.8 billion, up 7.3%. Our fixed income portfolio yield is 5.1%, and our current new money rate averages slightly above that. Our invested asset now stands at $169 billion, up from $151 billion a year ago. The more important time frame to me to discuss though is the full year, and what a year we had. We printed record operating income just shy of $10 billion or $24.79 per share, up about 9% and 11%, respectively, over prior. For perspective, over the past 3 and 5 years, core operating income has grown 55% and over 200%. All three major sources of income for our company produced record results last year. P&C underwriting income of $6.5 billion was up 11.6% with a record low combined ratio for the year of 85.7%. Adjusted net investment income rose 9% to almost $7 billion, and life insurance income of $1.2 billion was up over 13%. Our record underwriting results and earnings were achieved in spite of full-year cat losses that were, in fact, higher than the prior year, substantially driven by the California wildfires in the first quarter. Though U.S. and worldwide hurricane and typhoon seasons were unusually light this year. Annual industry cat losses still approached $129 billion. By its nature, cat exposure is volatile. Frequency and severity of losses are alive and well. Fire, flood, cyclonic and earthquake are all perils that contributed to industry cat losses. For the year, we grew total company premiums over 6.5%, with P&C up about 5.5% and life up over 15%. Per share tangible book value, our most important measure of wealth creation, grew 25.7% last year. Peter is going to have more to say about financial items. Again, our results for both the quarter and the year, top and bottom line, put a point on the broad-based, diversified nature of the company, by geography, by product, by commercial and consumer customer segment and distribution channel; it speaks to how well we are positioned both relatively and in absolute terms. Turning to growth pricing in the rate environment. P&C premium revenue again grew over 7.5% in the quarter, with consumer up almost 12% and commercial up over 6%. Our international P&C and U.S. agriculture business had a particularly strong growth quarter, with premiums up nearly 11% and over 45%, respectively. But we also had strong growth from our U.S. personal lines business and our commercial U.S. middle market and E&S businesses. In terms of the commercial P&C underwriting environment in the fourth quarter, as I said in the last few quarters, the market globally is in transition and growing incrementally more competitive quarter-by-quarter, particularly large account property admitted in E&S and upper middle market. Casualty pricing, overall, large account, E&S and middle market continues to firm in the areas that require rate. And in those that don't, price increases have slowed. Financial lines remained soft with some signs of firming in discrete classes. Let me give you some more color on the fourth quarter by division, and I'm going to begin with our international P&C business. Premiums in overseas general were up 10.8% or over 8% in constant dollar, a very good result. Premiums in our global retail, which operates in 53 countries and which is 90% of our overseas general division, were up 12.5%. With consumer premiums, both A&H and personal lines up 18.7%. And commercial lines, up almost 7.5%. Latin America grew 14.7%, with consumer up almost 18% and commercial up 10.5%. Asia grew 13%, with consumer up 25% and commercial flat, and Europe grew over 7%. In our international retail commercial business, P&C rates were down 3.6% and financial lines rates were down almost 9%. Loss costs remained steady. Premiums in our London wholesale business, which is 10% of our international P&C, were down about 1%. Given more competitive London open market conditions basically across the board, property, marine, aviation and professional lines. Turning to North America. Total P&C premiums were up over 6.5%. Agriculture, again, was up over 45%, predominantly due to the profit-sharing formula with the government. Excluding agriculture, premiums were up 4.7%, including more than 6% in personal lines and 4.3% in commercial, which is made up of middle market, small E&S and large account divisions. Breaking U.S. commercial growth down further, premiums in middle market and small commercial grew over 6%, with P&C up 7.5% and financial lines up 1.5%. New business for middle market and small was strong, up more than 17% versus the prior year. Premiums in major accounts and specialty grew 3%. With major or large account business, up 0.5% in Westchester, our E&S company, up over 7.5%. Major account and for that matter, Westchester growth, was impacted by property, obviously. And in major, we wrote fewer one-off LPT transactions than we did the prior year. Commercial pricing for property and casualty, excluding financial lines and comp, was up 4.3%, with rates up 2.5% and exposure change of 1.8%. Going a step further, property pricing was down 1.5% with rates down 4.6%, partially offset by exposure of 3.3%. Going further, property pricing was down over 13.5% in large account business and E&S, and it was up 3.7% in middle market and small commercial. Casualty pricing in North America was up 8.5%, with rates up 7.6% and exposure up 0.8%. Financial lines pricing was down 1.5%, and comp middle market pricing was down just under 1%. Large account risk management pricing was up 6.5%. In North America commercial, again, there was no change to our selected loss cost trends. Premiums in North America high net worth personal lines grew over 6%, and homeowners pricing was up over 8.5%. In our international life insurance business, which is fundamentally Asia, premiums were up almost 18% in constant dollar. And in North America, premiums in Chubb worksite benefits business were up over 16.5%. Our Life division produced $322 million of pre-tax income in the quarter, up just shy of 20%. So in summary, we had a great quarter and a great year, which again speaks to the broadly diversified and global nature of our company. We have many sources of opportunity on both the liability and asset side of the balance sheet. At the same time, we are continuing to invest to improve our competitive profile. While early, we're off to a good start in 2026, and we're confident in our ability to generate strong growth in operating earnings and double-digit growth in EPS and tangible book value through the three sources of income: P&C underwriting, investment income and life, though cats and FX aside. I'll turn the call over to Peter, and then we're going to come back and take your questions.

Peter Enns, Chief Financial Officer

Good morning. As you heard from Evan, we concluded the year with an outstanding quarter that produced full-year earnings records and all-time highs on our balance sheet, including cash and invested assets exceeding $171 billion and book value of nearly $74 billion. Our exceptional results were supported by $4.2 billion of adjusted operating cash flows in the quarter and $13.9 billion for the year. We returned $1.5 billion of capital to shareholders, which contributed to a total of $4.9 billion for the year or about half of our core operating income, including $3.4 billion in share repurchases at an average price of $282.57 per share and $1.5 billion in dividends. Book and tangible book value per share, excluding AOCI, grew 3.4% and 4.8%, respectively, for the quarter and 11% and 15.5%, respectively, for the year. Our core operating return on tangible equity and core operating ROE in the quarter were 23.5% and 15.9%. Pretax catastrophe losses were $365 million for the quarter, principally from weather-related events split 55% U.S. and 45% international and $2.9 billion for the year versus $2.4 billion in the prior year. Pretax prior period development in the quarter in our active companies was favorable $430 million, split 64% short tail lines and 36% long tail lines. Our corporate runoff portfolio had adverse development of $162 million primarily related to our asbestos review, which is completed each fourth quarter. Our paid-to-incurred ratio for the quarter and year was 105% and 91%, respectively. Excluding cats, PPD, and agriculture, our paid-to-incurred ratio for the quarter and year was 94% and 88%. Turning to investments. Our A-rated portfolio increased about $2.7 billion from the prior quarter and $18.1 billion from the prior year. The increase for the quarter and full year reflects strong operating cash flow and positive marks to market, while the year also includes favorable FX, partially offset by shareholder distributions. Adjusted net investment income of $1.81 billion was at the top end of our previously guided range, primarily due to strong growth in the invested asset base. For the year, adjusted net investment income grew 9% to $6.9 billion, which included approximately $6 billion or 9% growth from our public fixed income portfolio and $940 million or 8.5% growth from our private investments. We expect adjusted net investment income in the first quarter of 2026 to be between $1.81 billion to $1.84 billion. Our core operating effective tax rate was 18.7% for the quarter and 19.4% for the year, which was slightly below our previously guided range. We expect our annual core operating effective tax rate for 2026 to be in the range of 19.5% to 20%. I'll now turn the call back over to Susan.

Susan Spivak Bernstein, Senior Vice President, Investor Relations

Thank you, Peter. At this point, we're happy to take your questions. Operator, please queue up the questions.

Operator, Operator

Your first question comes from the line of Brian Meredith of UBS.

Brian Meredith, Analyst

Evan, first question, just looking at the U.S. commercial lines, North American commercial lines business. Your underlying margins have been incredibly consistent and excellent results over the last several years. I'm just wondering, given the current pricing environment, do you think you can sustain those here in 2026?

Evan G. Greenberg, Chairman and CEO

Brian. I don't give forward guidance, as you know. And on one hand, you have clearly lines of business where price is not keeping pace with loss cost. And the math naturally works in one direction. On the other hand, we have a very broad business, and mix of business changes mitigate on the other side. I'm very comfortable with the combined ratios we are publishing, and I do not prognosticate the future, but I do have confidence in underwriting income for this company, growth in underwriting income contributing to that growth in EPS.

Brian Meredith, Analyst

That's great. Now let’s turn our attention to the personal lines business. Once again, the combined ratios are impressive. There have been discussions in the media and among regulators regarding excess profit laws and their potential implementation. I would like to know your thoughts on this and its possible effects on Chubb and the profitability in that sector.

Evan G. Greenberg, Chairman and CEO

Yes. If you evaluate our personal lines business in the United States over a reasonable timeframe, such as 3, 5, or 10 years, it traditionally operates with combined ratios in the high 80s to low 90s, fluctuating due to catastrophe losses, particularly. I understand the concern around affordability in the United States, but caution is needed when politicians label insurance as a key issue. We facilitate the flow of money; we don't generate it. Currently, costs for job loss in homeowners are increasing by about 7.5% to 8%. Liability significantly contributes to this, with overall liability costs in the U.S. seeing an inflation rate of approximately 9%, which is much higher than the consumer price index. This reflects a litigation issue, not a problem within the insurance companies. Furthermore, regarding homeowners insurance, a substantial portion of pricing is influenced by catastrophes, which are assessed over a longer period. You might experience a two-year stretch with exceptionally high catastrophe events that result in losses, while a quieter period can reflect profits. It's essential to take a long-term view. For admitted homeowners, prices are filed and approved based on technical actuarial assessments. Therefore, politicizing the affordability issue in relation to homeowners insurance could lead to availability challenges, ultimately worsening affordability.

Operator, Operator

Your next question comes from the line of Bob Huang of Morgan Stanley.

Jian Huang, Analyst

I'm a sucker for overseas business, so I'd like to ask a question on that. Clearly, the growth in Latin America and in Asia are very strong. And in Latin America, Mexico has been consistently called out as very much a favorable environment. Maybe can you give us a little bit of color outside of Mexico in Latin America in terms of what is the opportunity there? And what is the growth momentum there?

Evan G. Greenberg, Chairman and CEO

Yes. The growth is primarily in our consumer business rather than in our commercial sector. For instance, Banco de Chile, which is the largest bank in Chile, is our long-term partner for distributing consumer-based insurances. In Brazil, we collaborate with Nubank for digitally distributed consumer insurance. In Ecuador, we work with Banco Guayaquil, one of the largest banks in the country, for consumer insurance distribution. In Argentina, we have a strong business that is expanding in both consumer and commercial areas. While we see commercial growth in Mexico, Brazil, and, to some extent, Chile and Colombia, the consumer sector has multiple distribution channels, including A&H specialty personal lines and automobile insurance, going direct-to-consumer through banks and other digital platforms, as well as brokers and agents. Our business in Mexico largely relies on agent-driven growth. Additionally, we are the exclusive insurance partner of Banamex, and with Citigroup's current sale of Banamex to local Mexican management, I anticipate this will create further growth opportunities. Overall, our presence is widespread across various countries, and we have been engaged in this for many years.

Jian Huang, Analyst

Really appreciate that. It sounds like a lot of opportunities without us worrying about pricing. Maybe the second point, staying on overseas, Asia business, clearly, another area of excitement, but can you maybe give us a little bit of the competitive dynamics there, right? You made an acquisition there this year. Just curious about how we should think about an area where everyone is excited about it. And clearly, everyone wants a piece of that pie, so to speak.

Evan G. Greenberg, Chairman and CEO

Yes. I want to emphasize that when considering Asia compared to Latin America, Asia significantly exceeds Latin America in size, scale, and opportunity. Both regions are developing and mature markets, which come with certain economic and political volatility. Asia consists of many countries with both small micro markets and large markets. However, there can be variability from one period to another. Overall, the trend for both regions is upward, especially in Asia. This quarter, growth in Asia primarily came from consumer lines, while commercial lines remained stable. This flat performance is mainly from the large account business in Australia, Singapore, and to some extent Hong Kong, where competition is intense. Our growth is seen in small and middle market commercial segments as well as in consumer lines across agency, digital, and direct-to-consumer channels. Competing in this market is challenging because each country has its unique culture and economic characteristics, and while many markets, like those in Southeast Asia, may be small individually, they contribute to a sizable region collectively. Building a presence requires significant effort; it’s not just about having one office and a couple of underwriters. Establishing a comprehensive capability throughout the country is essential to tap into small and mid-market opportunities. It takes years of dedicated effort to create local franchises in those areas. Moreover, leveraging our technology, data, and insights on a global scale enhances our competitive edge in these markets. We are committed to this effort, and our results reflect that. I remain optimistic about the long-term opportunities, regardless of short-term fluctuations.

Operator, Operator

Your next question comes from the line of David Motemaden of Evercore ISI.

David Motemaden, Analyst

Evan, could you provide some insight into the overseas general insurance business and the strong growth in consumer lines that we've seen over the last three quarters? It seems like you have a positive outlook on maintaining that momentum. Additionally, could you help us understand how this impacts margins? It appears to be margin-enhancing based on recent quarters, but there are some variables with the consumer business, such as a higher expense ratio and lower loss ratios. I would appreciate your thoughts on this.

Evan G. Greenberg, Chairman and CEO

Yes, I can't provide too much assistance since we're each facing our own challenges. We do not disclose margins by business or differentiate between international general consumer and commercial margins. However, I can share that our Accident & Health segment divides into A&H, auto, homeowners, and specialty personal lines, each with its own characteristics. Furthermore, depending on the distribution method, whether through digital means or agency brokerage, each has its unique acquisition costs and loss ratios. While these businesses are generally steady, auto is not as consistent as A&H. Our A&H segment is significant, with much of the risk coming from direct marketing, a capability we've developed over many years. We are recognized as the top direct marketer in Asia, primarily in the A&H sector, which yields a relatively stable and favorable underwriting margin. Overall, I have confidence in our business mix across large, middle, and small accounts, as well as our international consumer businesses. While our margins aren't predictable due to the nature of the risk business, they are solid, and we feel assured about them.

David Motemaden, Analyst

Got it. I appreciate that. And then maybe just...

Evan G. Greenberg, Chairman and CEO

I know you wanted more, but we just don't break it down that way.

David Motemaden, Analyst

I had to try. But I guess just maybe a bigger picture question. The December presentation showed about 150 basis points of combined ratio improvement from the digital transformation over the next 3 to 4 years? And I'm not asking for formal guidance here. But could you just share how you're thinking about the key drivers and execution priorities to deliver on that improvement even as the competition in some of the markets you operate in intensifies?

Evan G. Greenberg, Chairman and CEO

Yes. Most of it is related to expenses, specifically in operating expenses and cost of claims. There is a smaller portion projected in loss ratio, but we base our insights on facts. As we measure everything we can, our confidence in that area increases. It's assessed on a business-by-business and division-by-division basis. The focus is primarily on North America, the U.K., Europe, and our larger markets in Asia and Latin America. Currently, we are concentrating on about 9 or 10 specific projects that align all our businesses, with support from business leaders and our technical team in areas like technology, data, AI, and analytics. We collaborate closely with dedicated teams and business leaders on these transformation efforts, which span multiple regions. This will continue to evolve.

Operator, Operator

Your next question comes from the line of Greg Peters of Raymond James.

Charles Peters, Analyst

Good morning. I have two follow-up questions. One is regarding overseas operations. I'm interested in discussing foreign exchange, which I realize may also touch upon geopolitical factors affecting your growth. I've noticed the yen has been declining against the U.S. dollar over the past few weeks. I understand you are aligning your assets and liabilities in the same currency. However, considering the challenges of running a global business, how do you address foreign exchange volatility in terms of managing enterprise risk?

Evan G. Greenberg, Chairman and CEO

Yes. We do not hedge revenue or income. The only time we really hedge is around remittances when they're large. Our assets and liabilities are matched in currency, so they move together. Foreign exchange, if the U.S. dollar weakens relatively, that's a tailwind to us in terms of growth, and it obviously helps income in any business generating income. And then if the dollar strengthens, which has been its longer-term trend over a long period, we pay that price. And you can see it because we're transparent about it in terms of what we are in constant dollar in terms of growth versus published. And so, Greg, that is what it is. Right now, the prognostication is more towards the dollar at the moment, the dollar weakening as you look forward. But you know what, that sentiment bounces around and changes based upon financial conditions, economic, and as you said, geopolitical.

Charles Peters, Analyst

Okay. And then I wanted to follow up on...

Evan G. Greenberg, Chairman and CEO

When discussing projections for Chubb's future income or EPS growth, I emphasize that we set aside considerations like cats and foreign exchange. We operate in the risk sector, which means we can't control everything. However, we do have a better handle on most factors and can make forecasts. I cannot predict cats or foreign exchange fluctuations, nor can I control them, but this does not affect the inherent strength of our business.

Charles Peters, Analyst

Got it. I think you mentioned that despite the macro conditions, you spoke about your outlook for growth.

Evan G. Greenberg, Chairman and CEO

I said it broadly.

Charles Peters, Analyst

Correct. Can I go back to the other comments around Agentic AI and digital infrastructure? And I guess I want to come at it from a different angle. The large brokers are talking about the build-out of this infrastructure as being a big opportunity. I think Marsh used 2,000 to 3,000 data centers being built over the next couple of years. And so I guess I wanted to approach it from a couple of different angles. How do you see that evolving and Chubb's participation in that? And I guess there’s also an investment opportunity, too, that Chubb might be looking at. So I'm just looking for how you're looking at the different touch points of this emerging trend and how it's going to impact your organization?

Evan G. Greenberg, Chairman and CEO

Yes. We are fully engaged on the insurance side, actively writing policies for data centers, which is a global opportunity. Our capabilities are extensive, and we belong to a select group regarding our expertise. We handle builder's risk and property operations, offering primary property insurance and engineering services, supported by significant capacity. Typically, other parties share the risk behind us, and we can operate globally. We also cover marine risks and related exposures, surety, and liability, including professional lines for data center design. We stand out as one of the few insurers that address the wide range of global exposures faced by data center constructors. Recently, with the surge of investments in this sector, we have positioned ourselves as a key player in utility and energy writing, essential for major data centers, allowing us to provide comprehensive coverage seamlessly. Our organization has made significant investments to integrate our coverage, services, engineering, and teams to tackle this on a global scale. We play a crucial role when major brokers like Aon and Marsh are involved in data center development and placement. However, it's important to note that while many projects have been announced, the actual construction timelines and viability are uncertain. We face headwinds regarding the availability and affordability of energy for data centers, which is a growing challenge. The solutions to these issues can vary based on location. Additionally, we encounter concerns around labor availability for construction, supply chain issues, and rising costs. While there are many projects in the pipeline that we are closely monitoring, we advise caution and not to become overly enthusiastic about the potential. On the investment asset side, there is significant technological advancement for economic and societal benefits, with trillions of dollars being invested. While some investments are likely to yield good returns, others may not perform well, both in technology development and infrastructure like data centers. We remain cautious and strategic as investors, recognizing potential future opportunities in this space.

Operator, Operator

Your next question comes from the line of Ryan Tunis of Cantor Fitzgerald.

Ryan Tunis, Analyst

Evan, I would like to follow up on Greg's question. When considering growth opportunities within insurance, how do you see the correlation between GDP growth and your potential for expansion? A significant portion of the recent GDP growth has resulted from advancements in AI infrastructure. As you evaluate opportunities in property and casualty insurance, do you have a preference for the sources of this growth? Would you favor a more traditional approach, such as employment growth, over other avenues?

Evan G. Greenberg, Chairman and CEO

When GDP growth is overly concentrated, it becomes more vulnerable and potentially more volatile. In contrast, broader-based growth is inherently more stable and leads to greater overall prosperity, affecting both commercial and consumer sectors. As a businessman and a citizen, I want to emphasize that when it comes to Chubb's growth, I’m willing to pursue it from any source as long as we can achieve an adequate risk-adjusted return. That's why we are exploring opportunities in various directions.

Ryan Tunis, Analyst

Got you. And then just a follow-up, not looking for guidance, but the acquisition and expense ratio in North America commercial. It's kind of an uptick, I think, because of mix in middle market. Is that a trend that we should continue to see? Or do you feel like these levels are sort of steady state?

Evan G. Greenberg, Chairman and CEO

Be careful with it. In the quarter, part of the changes are due to fewer one-off transactions in the fourth quarter for our loss portfolio transfer business, which typically has a very low acquisition ratio and a slightly higher loss ratio. This can lead to fluctuations from quarter to quarter. Additionally, in North America, the commercial middle and small markets are growing faster than the major market, which influences the mix and can vary slightly from quarter to quarter. It's not a straightforward trend, but the direction is clear. The excess and surplus market has also been growing faster than the major market, and it generally operates with a higher acquisition ratio due to its wholesale nature.

Operator, Operator

Your next question comes from the line of Matthew Heimermann of Citi Research.

Matthew Heimermann, Analyst

My first question is regarding your comment about more favorable conditions on January 1 compared to expectations. I'm curious to know what you meant by that, whether it relates to growth, pricing, or geopolitical factors. I'd like to get a clearer understanding.

Evan G. Greenberg, Chairman and CEO

Yes. It wasn't geopolitical. January 1, and don't overread it. January 1 is an important date for certain businesses, particularly large account business. It's a very important date in Europe and the U.K. A large percentage of the business, particularly large account oriented, is on the continent and in the U.K. January 1. And so between the U.S. and Europe and the U.K. in particular, the large account business, it did better than we, it had a relatively good start because it did better than we had imagined ourselves. That's all. So it was a statement of confidence for that business that we're off to a good start.

Matthew Heimermann, Analyst

I appreciate it. Thank you for providing targets regarding the investments you're making in the digital area. I'm curious about the pace at which you're advancing in that regard. How much are you influenced by stakeholders such as distributors, customers, or service or technology providers?

Evan G. Greenberg, Chairman and CEO

Yes. I want to clarify that when I spoke at the investor dinner in December, my focus was on long-term intrinsic value creation and the competitive position of the company. This is a long-term perspective that I have shared over several years. It's not something that will be integrated into regular updates or worksheets; doing so misses the point. Occasionally, I will provide broader updates for long-term investors considering Chubb. To answer your question, the only significant limitation on our ability to implement or expand is in our digital business with digital partners. This is due to their focus on their core business priorities, which affects how quickly they can support us with connectivity, data, and analytics. This is the main area that comes to mind in terms of constraints.

Operator, Operator

Your next question comes from the line of Tracy Benguigui of Wolfe Research.

Tracy Benguigui, Analyst

On asset allocation, you're targeting to raise private from 12% of your investments to 15% over the medium term. I recognize that Schedule BA type of assets, at least for the private equity piece, consumes a lot of risk-based capital. Are you expecting to make that up with diversification credit like as you grow your life business, should I think about those two pieces moving together?

Evan G. Greenberg, Chairman and CEO

No. Go ahead, Peter. That's a worksheet question. I think we ought to take off-line, but I'm going to let Peter...

Peter Enns, Chief Financial Officer

Not specific to life. There is an allocation of private equity that goes into life and in particular, the Asian markets. But it's relatively modest to the overall footprint and what we intend to grow.

Evan G. Greenberg, Chairman and CEO

They are not something we considered together in terms of diversification. Additionally, we are very aware of how much capital each type of alternative investment requires, both from a statutory perspective and S&P view. We have indicated that this will be and is enhancing our return on equity now and will continue to do so in the future.

Tracy Benguigui, Analyst

Okay. I love seeing actual quantified metrics with respect to your AI digital agenda. So my question is actually more on the cultural side. I kind of think of insurance tends to be a tribal culture. What is the reception from your underwriting and claims folks with respect to reinventing how they do business like the transformation piece?

Evan G. Greenberg, Chairman and CEO

It's very interesting, Tracy. When I think about any business across different industries, a key characteristic of a well-run company is its culture. Culture consists of shared norms of behavior that everyone values, and that shapes the overall environment. At Chubb, part of our culture is our willingness to adapt and change; it’s a meritocracy where achievements are acknowledged. We operate as a highly disciplined organization with measurable objectives, emphasizing accountability at the individual level rather than relying on committees. When everything is combined, we foster a respectful culture where we value each other. It’s not just management valuing employees; we’re all colleagues. When we develop plans, we ensure that they are understood and communicated effectively, and most of us strive to achieve these goals with open minds and mutual support. For many employees, this transformation is crucial, and while we didn’t create the digital transformation that society is experiencing, Chubb has the potential to be a leader and remain relevant in this evolving landscape. However, it requires all of us to adapt, learn new skills, and be flexible. I have immense confidence in my colleagues, as I believe the majority globally will engage with this. That faith is a significant source of my confidence.

Operator, Operator

Your next question comes from the line of Andrew Kligerman of TD Cowen.

Andrew Kligerman, Analyst

Evan, your commentary around financial lines and workers' comp pricing trends didn't sound that compelling. So it was interesting to me that financial lines net written premium was up 5.4%, workers' comp was up 3.6%, an acceleration from the prior quarters. So I'm wondering what you might be seeing there? Do you think this trend can continue where Chubb is growing in those lines?

Evan G. Greenberg, Chairman and CEO

Well, first of all, it bounces around quarter-to-quarter. But I'm going to turn it over to John Keogh to answer that question.

John Keogh, President

Andrew, why don't we talk about the financial lines number. This one that I observed, I think you understand is, one, that's a global number. So we're offering financial lines in a number of markets around the globe, some of which are growing, some of which are shrinking. Financial lines also includes everything from public D&O to D&O for private companies, not-for-profits. It includes all sorts of professional lines for different trade groups and industries. It's employment practices; it's fiduciary coverages; it's fidelity coverages; it's cyber coverages. So in that number, you're seeing, I think, speaks to the diversity of our business and financial lines and the areas there where we were purposely growing that business because we think we're getting paid adequately for that particular product in that particular market. And there are other places, unfortunately, where we're shrinking where a product in a particular market around the globe does not meet our requirement. So that number is an aggregation of the diversity of those businesses. To your question in terms of trends, the one thing we did see in the fourth quarter in the financial lines is some green shoots in terms of some areas that do need rate. And I'd call out, particularly in North America, we saw for the first time in many quarters, a slight rate increase on our public D&O book. We saw in transaction liability, pricing terms and conditions, a lot more rational in the fourth quarter than we've seen in the last couple of years. And then employment practices in the U.S., we're pushing rate across the board because it needs it in that book of business.

Evan G. Greenberg, Chairman and CEO

In workers' compensation, the middle market and small commercial segments had a very strong quarter. I feel confident about our approach since we are not a generalist writer across all industries, classes, and comp. For many years, we've been selective about the industries and states we operate in. This quarter was particularly strong, and while I don't see it as a long-term trend, it was an opportunistic moment that yielded very good results.

Andrew Kligerman, Analyst

Got it. And then just shifting over to another outstanding prior period development favorable $268 million. Curious about the casualty piece, commercial auto excess liability. How did that develop? And maybe a little color on accident years, if you could.

Evan G. Greenberg, Chairman and CEO

Yes, we don't provide a breakdown in that way. The prior period reserve development in long-tail lines came from the portfolios we examined this quarter. Each quarter, we assess a different group of portfolios for our annual review. We conduct a provisional review of all portfolios every quarter, but we primarily respond to those findings, particularly in long-tail business, as part of our quarterly review. The long-tail portfolios we analyzed this quarter yielded favorable results. That's all I can share.

Operator, Operator

And that's all the time we have for our Q&A session. I will now turn the conference back over to Susan Spivak for closing remarks.

Susan Spivak Bernstein, Senior Vice President, Investor Relations

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

Operator, Operator

This concludes today's conference call. You may now disconnect.