Chubb 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Combined ratio sitting at a healthy 85.5

“Our combined ratio for the quarter was 85.5 compared to 111.2 in the fourth quarter of 2012. The impact of catastrophe losses in the 2013 fourth quarter was 2.1 points compared to 29.7 points in the fourth quarter a year ago due to Storm Sandy. On an x cat basis, our combined ratio was 83.4 compared to 81.5 in the fourth quarter of 2012.”

Seeing slightly more competition on rates. Increases to slow

“As our book approaches rate adequacy, we’d expect the size of rate increases to decline. That said, during the fourth quarter, we did see signs in the U.S. of increased competition in certain lines, most notably, large commercial property programs”

Sever winter weather classified as catastrophe

“To date, weather has resulted in 2 declared catastrophes related to the freezing and winter storms that occurred in 19 states between January 3 and January 8. Both cats entailed freezing, ice, snow and wind, with the majority of our losses related to water damage from frozen burst pipes”

14% ROE

“We generated annualized GAAP and operating ROE in the quarter of 14.4% and enjoyed very strong book value growth of 4% from the prior quarter.”

What constitutes a large client

“what we mean by large when we’re talking about accounts. And by that, we’re talking about premiums basically in excess of $1 million for the standard commercial lines. That portion of our portfolio is about 6% to 7%. Now that 6% to 7% includes for CCI property. It includes casualty, workers’ comp, umbrella/excess, et cetera.”

Really just a slight change in competitive environment

“when I said we saw a tad bit more competition and a bit of retention drop, it was just that. We’re talking just small incremental amounts. And yes, there’s been 1 or 2 new players that has entered that market. They brought in some additional capacity. I think that we have seen the prices go down on a magnitude of anywhere from, say 5% to 15% on the deals.”

A rational environment

“post-9/11, the type of increases that we were seeing, they were accelerating and they decelerated. This is a much different marketplace. People have very good metrics in their — our competitors are trying to be very rational. I don’t think reinsurance is driving it to the same degree that it had in the past. People’s primary carriers, our primary competitors, have very strong balance sheets. I think they’ve got a lot better analytics as we do today, and people are trying to find niches where they have competitive advantages and compete there.”

Low potential investment returns keeping everyone in check

“don’t forget, we are in a much different investment income and interest rate environment today as well. So that also comes into play.”