Chubb (CB) Q4 2024 earnings call transcript

(Operator Instructions) I'd now like to turn the call over to Karen Beyer, Senior Vice President, Investor Relations. You may begin. Karen Beyer - Chubb Ltd - Senior Vice President, Investor Relations Thank you, and welcome, everyone, to our December 31, 2024, 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. Please see our recent SEC filings, earnings release and financial supplement, which are available on our website site 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 to assist with your questions this morning are several members of our management team. It's my pleasure to turn the call over to Evan. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB.

N - Q4 2024 Chubb Ltd Earnings Call Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Good morning. Before I begin, I want to take a moment to speak about the terrible tragedy surrounding the California wildfires, the lives lost and tremendous loss of property, a major disaster still unfolding. Our job and the role we play in society is to support our policy holders. Our colleagues have been on the ground, supported by Chubb colleagues throughout the U. S. , endeavoring to assist those clients who have lost property, been displaced from their homes and businesses, and had their lives severely disrupted. While it doesn't erase the enormous difficulty they have and will continue to experience, we're doing all we can in small and big ways to ease their burden.

Our thoughts are with those who have suffered, and our gratitude goes to those firefighters and emergency workers who served tirelessly. From a financial perspective, our current estimate of the cost of supporting our customers and helping them recover and rebuild from this catastrophe is $1.5 billion net pre-tax and is a first quarter 2025 event.

Now, turning to our results for the fourth quarter '24, which you have all seen, we had a great quarter, which contributed to an outstanding year, in fact, the best in our company's history. For the quarter, record P&C underwriting income with a world-class combined ratio of 85.7%, together with another quarter of record investment income, led to core operating income of $2.5 billion. Operating earnings were up 9.4% on a pre-tax basis, or 10.5% per share, though after tax they were distorted by the one-time tax benefit we received last year. Looking through that, operating income was up over 7.5% after tax. Global P&C premium revenue, which excludes agriculture, grew 6.7% in the quarter, with good contributions from our P&C businesses globally, both North America and Overseas General.

Premiums in our Life Insurance division grew 8.5% in constant dollars. For the year, we generated operating income of $9.1 billion, up 11.5% adjusted for the one-time tax benefit and 13% on a per share basis. Looking more broadly, over the past three years, core operating income has grown over 65% and is nearly double the amount from pre-COVID 2019. All three major sources of income for our company produced record results last year: P&C underwriting income of $5.9 billion was up over 7% with a published combined ratio of 86.6%. Adjusted net investment income grew 19.3% to $6.4 billion. And life insurance income topped $1 billion. For the year, we grew global P&C premiums 9.9% and life premiums 18.5% in constant dollars.

Shareholder returns were strong. Our core operating ROE was about 14% and our return on tangible equity was 21.6%. Per share book and tangible book value grew 8.8% and 14.1%, respectively. Our results, top and bottom line, continue to demonstrate the broad and diversified nature of the company and the consistency of contributions from our businesses around the world -- North America, Asia, Europe, Latin America, both commercial and consumer. As we look forward to 2025, we have good momentum and are optimistic about the year ahead, both top and bottom line, CAT losses and FX notwithstanding. Returning to the quarter, our underwriting performance was outstanding while absorbing a more normal level of CAT losses. P&C underwriting income was $1.6 billion and the current accident year combined ratio, excluding CATs was 82.2%, more than 2 points better than prior year and also a record result.

Our prior year's reserve development in the quarter and for the year was $213 million and $856 million, respectively, and speaks to the strength of reserves and conservative nature of our loss reserving practices. On the asset side, we're investment managers, our other business, and we had another excellent quarter in terms of performance. Our invested asset now stands at $151 billion, and it will continue to grow. For the quarter, adjusted net investment income was a record $1.7 billion, up 13.7%. Our fixed income portfolio yield is 5% versus 4.8% a year ago, and our current new money rate is averaging 5.6%. Peter will have more to say about financial items.

Turning to growth, pricing, and the rate environment, again, Global P&C premiums increased 6.7% in the quarter, with commercial up 6.4% and consumer up 7.5%. All regions of the world contributed favorably. Life premiums grew 8.5%. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB. N - Q4 2024 Chubb Ltd Earnings Call In terms of the commercial P&C rate environment, market trends or themes were consistent with those in the previous quarter. Property has grown more competitive in large account shared and layered and E&S, while pricing is favorable.

Casualty is stable or firming, depending on the class, and overall pricing is ahead of loss cost trend. And financial lines, particularly D&O and employment practices liability insurance -- is where more competition is reaching for market share at the expense of current accident year underwriting margin. Overall market conditions are favorable, and we see good growth opportunity for over 80% of our Global P&C business, commercial and consumer, as well as for our life business. North America and Overseas General -- Asia, Europe, and Latin America, each with many areas of favorable growth opportunity. Our middle market and small commercial businesses globally, our US E&S business, our U. S. high-net-worth business, global A&H and life, international personal lines, our digital business, and specialty businesses such as our growing Climate+ business.

Now, returning to the quarter, let me give you some more color by division. Beginning with North America, premiums, excluding Agriculture, were up 6.3% and consisted of 10% growth in personal insurance and 5.1% growth in commercial, with P&C lines up 7.2% and financial lines down 2.9%. We had another strong quarter for new business, up over 22% versus prior year and our renewal retention on a policy count basis was 90.4%. These again speak to the reasonably disciplined tone of the market and our excellent operating performance. Premiums in our Major Account & Specialty division increased 4.6%, with P&C up 5.8% and financial lines down 1.7%. Within Major & Specialty, our Westchester E&S business grew 8%. Premiums in our middle market division increased 6.2%, with P&C up 10% and financial lines down 5%.

Pricing for property and casualty, excluding financial lines and comp, was up 9.9%, with rates up 8.2% and exposure change of 1.6%. Financial lines pricing was down 3.3%, with rates down 3.6%. In workers comp, which includes both primary comp and large account risk management, pricing was up 4.7%, with rates up 2.5% and exposure up 2.1%. Breaking down P&C pricing further, property pricing was up 6.9%, with rates up 3.5% and exposure change of 3.3%. Casualty pricing in North America was up 12.7%, with rates up 11.8% and exposure up 0.8%. Loss costs in North America remained stable -- no change -- and in line with what we contemplate in our loss picks. Our North America commercial lines business ran an amazing 83.9% published combined ratio for the year, again, an amazing result.

In agriculture, where we are the market leader, our crop underwriting results this quarter were excellent, and we finished the year with $354 million in underwriting profit. Premiums were down from prior year due to lower commodity prices and the formulas for risk sharing with the government. On the consumer side of North America, our high-net-worth personal lines business had another outstanding quarter, with premium growth of 10% including new business growth of 34%. Premiums in our true high-net-worth segments, the group that seeks our brand for the differentiated coverage and service we are known for, grew 17.6%. Our homeowners pricing was up over 12% in the quarter and ahead of loss cost trend, which remained steady. For the year, we ran an outstanding 83.6% combined ratio in our high-net-worth personal lines business.

Turning to our international general insurance operations, premiums in the quarter for our retail business were up 7.7%, with commercial lines up 10.3% and consumer up 4.7%. From a region of the world perspective, Asia-Pacific led the way with premiums up 12.2%. Europe grew 8.2%, including growth of 12% on the Continent. Latin America grew just 2.5% and was impacted by foreign exchange. If you adjust for that, Latin America was up 11.5% in constant dollars. In our international retail commercial business, P&C pricing was up 3.7% and financial lines pricing was down more than 6%. Premiums in our London wholesale business were essentially flat, up 1.1%, with prices down 4% as the London market continued to grow more competitive.

For the year, our Overseas General business ran an excellent 86.4% combined ratio. Our global reinsurance business had a strong quarter with premium growth of about 20% and finished the year with premiums up 32% and a combined ratio of 85.9%, reflecting a more disciplined reinsurance market both property and pockets of casualty. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB. N - Q4 2024 Chubb Ltd Earnings Call In our international life business, which is fundamentally Asia, premiums and deposits were up over 26% in constant dollars and Combined Insurance Company, our U. S. worksite business, grew 17.8%.

Our life division finished the year with pre-tax income of $1.1 billion, which was ahead of what we originally projected for the year. We have good momentum in our life business which continues to build.

In summary, we had a great quarter and a great year. While we're in the risk business and there's plenty of uncertainty in the world, we're confident in our ability to continue growing operating earnings and EPS at a double-digit rate, CATs and FX notwithstanding. Our earnings growth will come from three sources: P&C underwriting, investment income, and life income.

Now I'll turn the call back over to Peter.

Peter Enns - Chubb Ltd - Chief Financial Officer, Executive Vice President Thank you, Evan, and good morning. As you just heard, we concluded the year with another strong quarter, contributing to record full year results across our three primary sources of earnings. Our balance sheet finished the year in an exceptionally strong position with book value of $64 billion and total invested assets of $151 billion. The quarter and full year produced adjusted operating cash flow of $4.2 billion and a record $15.9 billion, respectively. It's also worth noting that during the quarter, AM Best affirmed our company's rating and stable outlook, and in January, S&P affirmed our rating and stable outlook. During the quarter we returned $1.1 billion of capital to shareholders, including $725 million in share repurchases and $367 million in dividends.

We returned $3.5 billion in total for the year, including $2.0billion in share repurchases and $1.5 billion in dividends, which represented approximately 38% of our full-year core operating earnings. The average share price on repurchases for the year was $269.23. Book value for the quarter and the year was adversely impacted by unrealized mark-to-market losses on our high-quality fixed income portfolio due to interest rate changes, which we expect to amortize back to par over time, as well as foreign exchange losses. Book and tangible book value per share excluding AOCI grew 2.9% and 4.3%, respectively, for the quarter, and 10.8% and 15.4%, respectively, for the year. Our core operating return on tangible equity for the quarter and year was 22.0% and 21.6%, respectively, while our core operating ROE for the quarter and year was 14.3% and 13.9%.

Turning to investments, our A-rated portfolio, which now has an average book yield of 5%, produced adjusted net investment income of $1.69 billion, which included approximately $25 million of higher-than-normal income from private equity. We expect our quarterly adjusted net investment income to have a run rate between $1.67 billion and $1.75 billion over the next six months.

Regarding underwriting results, the quarter included pre-tax catastrophe losses of $607 million, of which $309 million was from Hurricane Milton and $140 million from Hurricane Helene. The remaining balance was principally from weather-related events, split 31% in the US and 69% internationally. Prior period development in the quarter in our active companies was favorable $352 million pre-tax, with favorable development split 17% in long-tail lines, primarily from general casualty, and 83% in short-tail lines, primarily from property and agriculture. Our corporate runoff portfolio had adverse development of $139 million, primarily asbestos related. Our paid-to-incurred ratio for the year was 83%. Our core effective tax rate was 18.2% for the quarter and 17.5% for the year, which are below our previously guided range due to the shifts in mix of income.

We expect our annual core operating effective tax rate for 2025 to be in the range of 19% to 19.5%, including the transition cash tax benefit provided on the adoption of the new Bermuda income tax. I'll now turn the call back over to Karen. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB.

N - Q4 2024 Chubb Ltd Earnings Call Karen Beyer - Chubb Ltd - Senior Vice President, Investor Relations Thank you. And at this point, we'll be happy to take your questions.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Yeah. First of all, it's a ground-up number. It's our own losses. We don't go off of what we imagine as a total industry wildfire loss or the market share or any of that -- this is our number, that our adjusters on the ground have been able to estimate property by property. It does include an assessment for our projection of an assessment from the FAIR plan and we don't take credit in ours for subrogation.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer I love you, Brian. Yeah. I don't give -- we don't give guidance and forward looking. But your first statement, your logic sounds pretty decent to me. I didn't say it, you said it. And as for inorganic growth, money is not burning a hole in our pocket. And as you know, it's opportunistic and it's in support of our organic strategies and it's got to be the right thing at the right price. And so we're always looking.

N - Q4 2024 Chubb Ltd Earnings Call Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Well, I'm going to correct your mental model to begin with. Our casualty, we study different portfolios in casualty each quarter. Some casualty portfolios, we have taken reserve strengthening. Some portfolios, we've taken no action. Some portfolios, we've had reserve releases. And there has not been a consistency per quarter. Except the consistency is the portfolios we study each quarter. And so, the cohort of casualty we studied this quarter had favorable development given the reserve strength in that portfolio.

And then maybe -- obviously, strong results in North America commercial.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer You're saying on structured transaction, what's its impact in the quarter on loss ratio? David Motemaden - Evercore ISI - Analyst Yeah. Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Our structured transactions typically run off favorable. We don't break down the pieces and going to give you each -- the component of that exactly. What you should know is they run a higher loss ratio than the average portfolio does.

I mean, I guess you guys had given the 40 basis points just on the total combined ratio. I guess I can just use that sort of as like a placeholder for what sort of impact that may have had on the -- maybe a little bit bigger on the loss ratio, maybe up -- Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer I don't have it on hand but it's probably -- it's in the range, okay?

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Look, we're talking basis points, so it's easy for me to tell you you're in the range. I mean it could be 10 basis points up or down. But we'll take it offline with you and help you with that. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Don't mess it up, Greg.

You talked about the three buckets, P&C, investment income, and life insurance. So maybe you can, from a big picture perspective, unpack Life insurance and talk about where you see the growth coming next year or this year, I should say, '25, and how it might compare with how the growth came out for '24. Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Yeah. There was a lot of consolidation impact on the life income in the '23 year and a little bit of noise in '24. There was one-time stuff in '23. So to look through the underlying growth rate of that, it produced a really solid double-digit growth rate in income. When I look through it, it was in that 12% to 14% range.

When I look forward, I see that continuing and even strengthening a bit. We have good momentum, and it's obviously Asia. And it's both North Asia and it's Southeast Asia. Our business in Korea, while the revenue growth is not overly exciting, the margin of that business continues to expand, and our overall income is growing. It's a ballast of the business. It's supported by countries that are growing much more quickly, Hong Kong, Taiwan, China now growing more quickly for us. And each of those producing improved margin and, therefore, faster income growth. Southeast Asia with Vietnam and Thailand, they had slower growth this past year, and they are accelerating as we go forward. And finally, we have two other businesses in Indonesia and in New Zealand that are good businesses, picking up momentum.

It's in direct response marketing, it's in agency. And over 60% of the business, about 70% of it, is really Accident & Health and risk-based type products. And the rest is very conservatively structured savings-related products. Because people in Asia, you have two themes. You have an aging population in the north that requires a certain kind of savings and health-related products. And then you have people in Southeast Asia with a younger population, family oriented. There are no social safety nets, and so they rely on these kinds of products much more than they do in other parts of the world. And I'll remind you, unlike many regions of the world, these parts of Asia are growing, particularly Southeast Asia.

The economic growth is multiples of what we're seeing in the West. And that just means a rising middle class.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Yeah. It goes to my comment about 80% of the business growth and where you therefore see the pockets of competition. As a backdrop and in the way you think about cycles, and I've been thinking about this for a while, we're in a more inflationary period in the insurance industry, and it's a prolonged one than we have seen it in a very long time. We went through decades of really relatively low inflation. On the short-tail class side, virtually pretty flat. And on the long-tail side, there's always been pockets, but it was running at a lower level. We're in a period of sustained inflation.

So, to just stay in place, rates have to move. Doesn't mean margins improve if they just keep pace with loss cost. So a certain amount of industry growth is just to reflect inflation. The competition is increasing in shared and large account business. So first, large account will grow more slowly because you have a couple of lines of business where competition increases, property, shared and layered property, but it's well priced. And it doesn't mean that there's a decrease in margin. It means that to retain business, you become a bit more competitive, it's harder to grow, more want that business. So you're not going to see growth, but you're going to see good results from all, we're imagining, as we go forward.

E&S property, same thing. Financial lines in large account, same thing. And then primary casualty is not a real growth business, but it's a ballast that supports growth of many other lines of large account. So large account, not so much. In middle market and small commercial, growth opportunity. And it's a growth opportunity across many segments. And by the way, there's certain secular change taking place in that business. And by the way, it's not simply in the United States. It's global. And then the consumer lines business, from high-net-worth to personal lines outside the United States, to our accident and health businesses, particularly with middle class in Asia and in Latin America on both the life side and the non-life side.

When I add it all up, that -- anyway, does that give you a sense?

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer When you -- particularly in middle market in the United States, I'll take that as an example. With all of the change in climate and CAT activity, and with the change in the legal environment around the trial bar and social inflation, regional and mutuals have a harder time. They're not equipped with the data, with the balance sheet, with the depth of business in reinsurance relationships to be able to -- and with the technology, to be able to compete the same way. And that, over time, is shifting market share and it's shifting -- and it advantages a few larger players.

N - Q4 2024 Chubb Ltd Earnings Call Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer None.

Second, I don't know if this is significant -- Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Yeah, there's nothing to embellish.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer A little uptick in what in North America?

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer No, it's just -- oh my god, it's 0.1%. It's just noise.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer No, it's just -- nothing. It's just variability in the quarter. There's not a trend in that.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Our focus is on organic, SME, small and middle market, and it's organic. And that is our focus and has been our focus. On anything that's inorganic is simply opportunistic. And that's not our focus. It's opportunistic.

Peter Enns - Chubb Ltd - Chief Financial Officer, Executive Vice President Mike, it's Peter. First off, that specific $5 billion shift relates to us actually moving about $5 billion of investment-grade corporates into a fund for, call it, investment efficiency purposes between different entities. The underlying is still investment-grade fixed income, but because of GAAP, we have to show it as equity. So there's no underlying change in that. In terms of the going forward, we've spoken about our strategy, you'll see in the investor presentation. There will be a change in investment allocation, slight change, which we put out there in that investor deck.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer No, I said there's pockets of opportunity in reinsurance casualty. You have to be so very selective, and I'm not going to go into more detail than that. But let's be clear, we have not been significant, by any means, reinsurance casualty writers. And in fact, we shrank and shrank and shrank over quite a number of years because we didn't see the market producing an underwriting profit. You know the market is stressed in reinsurance casualty. And we see selective pockets, I'm not going to overstate it. Relative to Chubb, it's not big money. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved.

Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB.

And then with regard to the financial lines -- Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer And we have these opportunistic trades pipeline Andrew Kligerman - TD Cowen - Analyst Got it. And then with regard to financial lines, it looks like that's the area where you're seeing premiums decline across the board. It's been about three years now of continuous decline, particularly in public D&O. What is it that players like about it that they continue to go after it, and you just don't think it's good business in this -- at this point? Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Well, we love the business. It's the pricing.

And look, during the pandemic, there was a significant drop-off in securities class actions, and in other forms of loss, let's call it employment practices liability, during the financial crisis. And so those years are producing favorable results. And the head fake around it, which is why I use the words current accident year, is in terms of loss, the number of securities class actions, the frequency of loss, is reverting back to the mean. And in some areas, like employment practices, in fact, frequency of loss is increasing pretty quickly. Severity of loss continues to trend. And so I think what they don't see or they ignore is what's coming about current accident year margins and pressure. We know this.

We have a big book of this business, and Chubb is a leader in this business across classes. And so we're patient, and we know how to ebb and flow in that, period. So it doesn't -- it's not something you like looking at, but on the other hand, we've got plenty of other tables to play.

Thank you for that question. Look, California is a difficult market for insurance companies, and it has only become more difficult over time. The state, along with the pressure it receives from consumer advocacy groups, suppresses the ability to charge a fair price for the risk and tailor coverages to improve availability and affordability of insurance for the citizens of the state. Insurers are unable to generate a reasonable risk-adjusted return commensurate with the risk of ensuring natural perils, such as wildfire, and the cost in California associated with reconstruction following a disaster. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv.

'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB. N - Q4 2024 Chubb Ltd Earnings Call This suppression of pricing signals, which are rising, encourages more risk taking by individuals and businesses as to where they choose to live or work, and it encourages less risk management or loss mitigation activity. And their part as well, by federal, state and local governments, will all have a hand in loss mitigation activity that actually is occurring or not occurring. In a word, economics incent behaviors. And California is impacting those economic signals. As insurers have reduced their exposures in the state, the state is offered more underpriced coverage through its own insurer of last resort.

Frankly, it's an unsustainable model. And one way or the other, the citizens of the state paid a price for coverage. California is not alone in this regard, but it certainly stands out. We've been shrinking our exposure in California for some time. For example, in the area where the wildfires occurred, our exposure has been reduced by over 50%. We're not going to write insurance where we cannot achieve a reasonable risk-adjusted return for taking the risk.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer It's too early to tell. I don't know yet. As the magnitude of this loss emerges and grows, more of it begins to find its way to reinsurance balance sheets and to other balance sheets. And that's going to be the question, is what is the ultimate size of the loss and where does it end up? And that will give us -- that will determine whether it has a broader impact on overall property pricing, which, in my judgment, overall is adequate. And this is a reminder of why the industry needs to maintain pricing adequacy. Operator Elyse Greenspan, Wells Fargo.

Yeah. We haven't disclosed that in a while, Elyse. And again, how we're thinking about things, consistent with what we talked about in our investor presentation, is looking at our capital as also a source of investment as we gradually and incrementally increase our asset allocation towards alts. That's just starting. So I'll say right now, looking at the year behind us, it would be in a range similar to, call it, a year ago that we discussed and people backward computed. So it was in the range of ROE looking backwards of around 2% on ROE and 6% on ROTE.

Are you guys just assuming no change in the DTA structure of what was set up a year ago? Peter Enns - Chubb Ltd - Chief Financial Officer, Executive Vice President So yes, Elyse, from an accounting perspective, it's based on Bermuda law, and Bermuda law isn't expected to change. I mean if it changes, we'd have to look at it. OECD came out with some administrative guidance a couple of weeks ago that has to be reviewed and see how it applies. As you may have seen, the new administration has come through with saying they're not going to participate in the global minimum tax OECD and are advocating on that basis. So we have a sense of where -- we have a very clear sense of where we are for '25 and '26.

And one thing we know is, longer term, it's very uncertain, particularly with the new administration along with China, India and some other very large countries not being involved at all as well.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer And it involves Swiss law.

Peter Enns - Chubb Ltd - Chief Financial Officer, Executive Vice President And Swiss law, yes.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Yeah, it's messy.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer I think as losses emerge and renormalizes, that will be an ameliorating factor.

N - Q4 2024 Chubb Ltd Earnings Call Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer I'm not sure what your -- can you be more clear?

So your premium growth, gross premium growth, was 2%.

Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer I think you have to start with net premium growth, not gross premium growth. Yaron Kinar - Jefferies - Analyst Why would that be? Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Well, because gross premium growth has too many distortions of transactions that we do that, frankly, distort that number, large transactions, where it may be a self-insured program or it's a structured program. And so gross has puts and calls based on the premium flows with our clients. If you get to a middle market business, it's more steady. But when you have large account and then you have gross line, even in the E&S business, that's what makes a lot of noise and a lot of difference.

You're never going to get there. You have to start at net premiums. Now, I can just tell you that, and I'm giving you that as an explanation, not as -- this is nothing to debate.

And if we take the net premium growth, which was 5%, versus roughly 7% pricing? Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer Well, it's a mix -- there's a mix of business, there is a retention. It doesn't translate directly. It never does. I mean you start with a retention rate, you then have to add new business, you have to do it line by line, and the mix of it. And so you'll hear overall pricing. But now take overall pricing and you have to adjust for the mix of business. When you're trying to translate to revenue -- if you want offline, we will give you a simple math lesson of that and take you through it.

Yaron Kinar - Jefferies - Analyst Great. I'm always -- Evan Greenberg - Chubb Ltd - Chairman of the Board, Chief Executive Officer I don't mean a lesson in a bad way. I mean we'll take you through and give you some -- maybe another way to help you think about it. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 1:30PM, CB.

Always eager to learn. Thank you.

Karen Beyer - Chubb Ltd - Senior Vice President, Investor Relations 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. Thank you.