Chubb Limited (NYSE:CB) Q2 2019 Earnings Conference Call - Final Transcript

Jul 24, 2019 • 08:30 am ET


Chubb Limited (NYSE:CB) Q2 2019 Earnings Conference Call - Final Transcript


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Philip V. Bancroft

for the quarter was $902 million pretax, which was higher than our estimated range and benefited from a one-off accrual adjustment of $9 million and increased corporate bond for all activities. During the quarter, interest rates continued to decline as financial markets anticipated a shift in Fed policy towards monetary easing.

This favorably impacted our portfolio of mark-to-market, resulting in an after-tax unrealized gain of $1 billion. Although market yields have declined significantly in recent months, we will remain conservative in our investment strategy and do not contemplate any significant shift in asset allocation.

Our investment income going forward will continue to benefit from growth in our invested assets and will be impacted by the level of market interest rates. Despite the negative impact of lower rates, we expect net investment income to grow moderately due to our growth in invested assets and strong cash flow. We now expect our quarterly adjusted net investment income run rate to be in the range of $890 million to $900 million going forward.

Adjusted interest expense was $145 million pretax in the quarter. Factoring in the debt that matured and the new Euro debt issued in June, we expect our quarterly adjusted interest expense to remain the same for the balance of the year. Pretax catastrophe losses for the quarter were $275 million, principally from U.S. weather-related events. We had favorable prior period development in the quarter of $188 million pretax or $152 million after-tax.

This included $48 million of pretax adverse development on prior year catastrophe losses, principally brought for Hurricane Irma and Typhoon Jebi, primarily in our assumed reinsurance operation, and $25 million pretax adverse development related to our runoff, non-A&E casualty exposures. The remaining favorable development of $261 million is split approximately 90% from long-tail lines, principally from accident years 2015 and prior, and 10% from short-tail lines.

Foreign currency movement adversely impacted core operating income by $23 million in the quarter. On a constant dollar basis, net loss reserves increased $831 million, reflecting catastrophe losses in the quarter and the seasonal increase in our crop reserve, offset by favorable prior period development. The paid-to-incurred ratio was 87%. Our core operating effective tax rate for the quarter was 15.3%, which is in line with our annual expected range of 14% to 16%. Through 6 months, our core operating effective tax rate was 15%.

I'll turn the call back to Karen.

Karen L. Beyer

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