Chubb CEO Sees ‘Outstanding’ Q1 and Lots of Options for Growth Without Hartford

Chubb reported sizable net income of $2.30 billion in the first quarter of 2021 versus $252 million for the prior year’s first quarter as the global insurer’s commercial property/casualty businesses continued to capitalize on favorable underwriting conditions with double-digit premium rate hikes.

Growth of its consumer business slowed as the pandemic continued to have effects.

Evan Greenberg, chairman and chief executive, said overall the quarter was an “outstanding” start to the new year and he sees even better results ahead.

P/C net premiums written of $8 billion were up 9.7% globally, with 15.6% positive growth in commercial P/C lines. Consumer lines reported 2.5% negative growth, attributable to the pandemic’s effects on travel and other business and consumer-related activity.

“Virtually all of our commercial P/C lines of business continued to achieve rates that exceed loss cost and so margin continued to improve,” Greenberg told analysts. “We’re off to an outstanding start to the year. My colleagues and I are confident in our ability to grow our business and continue to expand margins. And I expect as the year progresses, our sizable consumer business will return to growth.”

He called the harder firming market for commercial P/C in most of the world a “rational and necessary response to years of industry underpricing and a more uncertain risk environment today driven by climate change, litigation, environment and cyber-related exposures.”

M&A Approach

Greenberg downplayed his failed bid to acquire The Hartford, which he said was made from a “position of strength.” He stressed that Chubb has lots of options and The Hartford episode will not distract the company from continuing to grow.

He said his company looks at “lots of deals every year, different sizes, small to large, different geographies and product areas” and it pulls the trigger infrequently.

“We have made 17 acquisitions over the past 15 years and have an excellent track record of advancing the company’s capabilities, while creating shareholder value. Our approach is steady and consistent. We are extremely patient, disciplined and the money is not burning a hole in our pocket,” he told analysts.

It was an active quarter for natural disasters. Pre-tax P/C catastrophe losses were $700 million compared with $237 million in 2020’s first quarter. The current quarter included $657 million of storm losses in the U.S., largely due to winter storms in Texas.

But even with the 9.1 points from the catastrophe losses, the P/C combined ratio was 91.8% compared with 89.1% prior year.

P/C current accident year underwriting income excluding catastrophe losses was up 26.1%, leading to a P/C current accident year combined ratio excluding catastrophe losses of 85.2% compared with 87.5% prior year.

In North America commercial P/C business, the current accident year combined ratio excluding catastrophe losses decreased 2.3 percentage points, including a 0.8 percentage point decrease in the loss ratio and a 1.5 percentage point decrease in the expense ratio.

CEO Greenberg noted that commercial lines rates continued to increase and varied by line, averaging about 14.5% globally. “From what we can see, I am confident these market conditions will endure,” he commented, adding that “Chubb was built in all aspects over years to capitalize on these conditions.”

Pre-tax net investment income was $863 million compared with $861 million prior year.

Consumer Lines

As for consumer lines still affected by the pandemic, he said there are “early signs of recovery” and personal lines division globally actually reported modest growth in the quarter. “We expect growth to improve as the year goes along,” Greenberg said, while adding that it is difficult to predict the continued impact of the pandemic in Asia, Latin America and Europe.

The CEO said Chubb is taking steps to reduce its wildfire exposure in parts of California that will have an impact on its growth rate.

Additional Q1 2020 results:

• Global P/C net premiums written (excluding agriculture) jumped almost 8 percent year-over year. Broken down, commercial P/C net premiums written grew by 13.8 percent, but consumer P/C net premiums written dipped by almost 4 percent.
• Chubb’s biggest North America commercial P/C rate hikes came from Major Accounts Retail and E&S Wholesale, with a17.4 percent year-over-year increase. But middle market and small commercial saw rates soar more than 11 percent higher. Accident and health, however, experienced a rate decline of 18.5 percent.

Source: Chubb