CB
#Sure.
<UNK>, you see or you heard me say it, it was more large account than it was in the middle market area, though middle market new business was down about 4%.
Large account was down in around 30%.
January was a much tougher month in terms of new business than February and March was better and April was better than March, as we go forward.
So we know a combination of things as we look at it.
Definitely it was a more competitive environment in January.
And January is always a competitive month relative to other months.
As a matter of fact, I have to tell you, in the softer part of cycle, you are better off to try to write your new business in the off months of a quarter.
January is tough.
April can be tough, March-April, and June, July is like January, the way people go after it.
They have some growth objectives and they want to achieve, so there was some impact from that and we see that.
But in the fourth quarter, we had a lot of people ---+ we focused for six months very intensely on planning the merger.
And there was an 11th hour jitters of people as we come up to close and everybody is focused on to a degree of the integration and the structure and who am I working for and what is my job.
And then the integration itself, all the planning of that just takes time, and it's some time away from working on new business.
January, and to a degree, February, is impacted by your activities in the fourth quarter, which is November-December.
And then we close the middle of January so everybody then has to execute.
And there's just a mountain of execution when you take it by function, by area of business, by geography, all over the world.
I'm very proud about how we have executed because people have done it.
There has not been a lot of surprises.
Everybody has known what to do and it's gone very smoothly and then people have spent a lot of time getting to know each other and getting to know what the capabilities were and learning the products of each other before you can take it out to market.
And we could really begin to feel that start to take hold in February, move into March, and as it moves into April, it just keeps on building.
So maybe that gives you a little sense.
As is characteristic, I suppose, of our organization, and of me, I'm not going to do a lot of talking about something that we're building and planning.
I'm hardly going to stick a road map out there.
We let results and activities speak.
But we have all the parts and ingredients.
We have the sticks to rub together and make fire and we have the distribution.
We have the data and the know-how and we have the insight.
We have the focus.
We have the resource that we're putting attention to.
We have the road map for technology and we're coming.
We are building right now and focused on building.
We already had between the organizations, what I call a nascent small commercial business, very modest in size and specialty oriented.
And that continues, those efforts continue, and they have a reasonably aggressive plan in action, a set of actions to achieve results in 2016, but that is not the main event for us.
This is an $80 billion marketplace and we intend, over the next number of years, to grow, to be a meaningful player.
I might say, a little like I said about high net worth, it takes time to build capabilities, to build all the services and product know-how, to have the right insights into pricing and to execute, because it's work-intensive.
The average premium sizes are small.
It's high-transaction volume and you got to win over and wire up the distribution.
And we are focused on all of that, and so over the next few years I expect that to grow and be a meaningful contributor to our business.
And as it's appropriate, we'll update you more specifically
Don't look for much out of me in 2016.
Good morning
Yes.
So the brand change had no impact on our revenue growth in the quarter.
The growth is pretty broad-based.
It came from both specialty and traditional.
It came from a wide range of geographies, from Mexico, to Malaysia, to Europe where we do a lot of specialty.
So broad, you know, broad-based.
In Mexico, it's automobile and small commercial related, but automobile, in particular.
In Malaysia, it's auto and, again, specialty and small commercial-related.
We write cell phone insurance out in Asia, and that had nice growth.
In Europe we write cell phone related insurance and that had really nice growth.
So it isn't from one place nor one geography and it is not traditional versus specialty.
It's broad-based, but it's very ---+ when I say broad- based, we're very targeted and focused about where we choose to do Personal Lines and how we choose to do it.
It's easy to put on a lot of revenue in that business.
It's not easy to do it and make a decent margin.
You know, it's a focus.
Meaningful.
It's nothing like the US And it's not going to ---+ I don't think of it in terms of ---+ if I think of the US's high net worth as a meaningful business, I don't think of international high net worth that way.
I think of it as a good business and it's a very good business and a good opportunity, but it's really focused in a limited number of territories, UK, Australia, maybe a little bit on the continent.
That's the majority of it.
The balance is small pockets of high net worth and that's mostly serviced by us out of our London operation.
Yes, it is
Yes.
It would definitely be done net of tax.
Goodwill and other intangibles would be reflected net of tax in our calculation of what tangible book value represents.
It should not.
It would decrease in relation to the amortization of the intangibles
Yes.
I've talked about this a little bit in the past and so I'm going to ---+ I'll talk a little more about it.
The first thing I'll tell you is is it's a double-edged sword and you've got to be careful.
On one hand, as I said the last time, when there's a wounded animal loose, be careful.
Stay out of the way, and don't try to corner him.
On the other hand, look, we represent ---+ and that's what I tried to say in my commentary ---+ we represent a very attractive market and alternative for large accounts seeking a deep balance sheet, great underwriting expertise, as you know, great reputation for service, global capability, broad product offering and services.
And, by the way, which has become more and more the play in large account business, your technology, your ability to deliver in a way that the service standards are met, the service expectations are met.
And those standards of service have only risen ---+ the expectations have only risen over the last decade and the last five years and three years.
People expect great data, great information in a very rapid way, self-served way, where they can serve themselves.
We have that technology.
Very few have that.
Our ability to move money, our ability to service self-insureds, our ability to risk engineer, our ability to provide primary casualty coverages including professional lines all over the world and service claims, very few can do that.
And we have been stable in terms of our capacity offering and our approach to underwriting and our pricing.
Sometimes the market moves closer to us, when the market is more disciplined in terms of underwriting.
Sometimes the market moves further away from us because others are willing to sell something at a price we considered too cheap or at terms we considered too broad.
So on one hand, we're in a market where it's competitive and some things are being sold at prices that are below costs we think are reasonable.
On the other hand, there is this pull and desire for stability and certainty and familiarity and that is drawing more towards us.
So I can tell you we just came back from RIMS, all of us there.
I have not seen a reception towards our Company ---+ towards this Company.
I don't think I've ever seen the reception like I saw at RIMS.
We were really popular kids on campus.
We have no plans at this point for buybacks and we'll keep you posted as we go, as we see how our capital develops.
I'm hardly going there.
Yes.
And, <UNK>, on international, the profitability meets our hurdle rates and it meets our underwriting standards or we wouldn't be doing it.
But I'm hardly going to put a road map out to others.
On the domestic and margin, there's been questions to us of, well, now that you are so dominant in that business, we assume you're going to now, in a sense, be predatory, take advantage, raise prices, et cetera, increase margins.
I think there's a naivete about all of that and I think that's wrong.
Our approach is to earn an adequate risk-adjusted return in the business.
The business does that reasonably well today.
There is a lot of risk in the business.
The business is regulated.
You have to file your rates and they have to be just ---+ they have to be actuarially justified and we do that, and that adds a complexity but adds a stability as well.
Secondly, we want to win customers by offering a great service at a fair price and hardly do we want to try to push it where we make our money simply on ---+ try to make more money on the cohort we have.
I'd rather grow the cohort, if we're making an adequate risk adjustment.
With all of that, what I would say is we see stability as we look forward in the margins in the business.
And we don't consider that we're making excessive returns.
On a risk-adjusted basis, we are not.
We're making reasonable returns
There is not.
Agents are ---+ they are very efficient when it comes to acquisition costs, and they are a great market leveler and they are highly intelligent.
Today.
I think I just have gone on about that for the last 20 minutes.
And I think my commentary said it, so I can't ---+ if you are looking for a point estimate, a numeric estimate of what was specifically integration-related versus market-related, I can't give you that.
Nobody knows that.
But I can tell you that the market discipline, for those who are disciplined in underwriting, absolutely is having an impact on growth rate and you can see that as you look at players who have reported.
And that definitely has an impact on us.
And you know there are times, and I've said this, been very clear, that there are times that revenue is for vanity and revenue growth is for vanity, and it's best you take your eye off of that.
And there are pockets of the business, many pockets of the business, where I and my colleagues think it's not an overly attractive market and you better discriminate very carefully what you choose to write and how you choose to write it.
And if you want to maintain underwriting margins, and that's our first objective, so I will shed revenue without a tear in any class, in any line of business, where we can't make an underwriting profit, period, and you know that about us.
The retention rates were very high and that, to me, shows me the market reaction towards us, and the demand for business from Chubb, from doing business with Chubb by both distribution and customers and the good work of our people.
When I look at the pattern of new business, how it came in and where it came in and the timing of it, it's very clear to me that the integration ---+ and in discussions with our people, that the integration had an impact.
And when I look at how we're moving month to month, I can see that beginning to recede, and people really getting on without getting out there and driving for it.
So I see a combination of both impacting it.
I can't do anything about the market and that will be what it will be.
But I can tell you, getting the organization focused, that is something we can do something about, and we're all focused on that.
Everyone is out there.
We've been to many regions, to many offices, working with our people and helping them to get on the front foot and I feel really good about the energy level and the focus of the organization that is taking hold.
And to the extent that impacts revenue growth, you can look forward to improved results as we go forward.
The actual accounting saved in the first quarter was $29 million.
Let's see, let's call it $75 million on the low end of the range.
So $100 million translates into $75 million
Yes.
We'll have losses from the activity in Texas, from the earthquake in Latin America, from the earthquake in Japan.
From the two earthquakes, from what we know at the moment, our losses will be relatively modest, nothing out-sized.
From the losses in Texas, you know, normal spring losses.
You expect these kinds of losses in the springtime.
It's the volatility of weather, more tornado-related activities, severe storm related, flooding, hail, all occurs as we know, in the second quarter.
And so this kind of activity so far to date, what we're seeing is not producing losses beyond what we would imagine or expect.
Yes.
I expect it to ramp up and begin showing potentially.
You don't know with certainty but potentially, real premium revenue in 2017.
It is direct response marketing in all its forms, digital phone-based predominantly of simple accident, travel and credit-related products, maybe some small commercial, householders-type products, to serve the customer base of Suning that is approximately 130 million people that are active users of Suning.
Suning has both 1,500 ---+ thereabouts, I'm sure I have the number wrong, but thousands of stores throughout the country and then they have a very large, very active online business.
They serve financial needs of over 30 million customers and we'll be active ---+ and do it in a digital way and we'll be actively marketing to those.
The cooperation ---+ it's one thing to sign one of these.
It's another thing to actually operationalize and we're just beginning the operational phase.
And this is something that the real meaningful benefit will come over a few years, but Suning, in very early days, is showing to be a very active and cooperative partner and is giving us a lot of access to data, a lot of encouragement in terms of use of their distribution and is very welcoming with building the business and I'm grateful for that, for that effort.
We're cautiously optimistic that this could be a great venture
It's on our paper, it's on Chubb's.
We got 100% of this.
Perfect
So I'm going to answer, give you two answers.
First, you didn't define growth the way I defined growth and the way, therefore, we define a growth company for us.
A growth company, in this business, is growth in book value and tangible book value.
That's how you define growth in a risk business, not revenue growth which is an overly simplistic way.
Ultimately you have to gain revenue growth as well, so I reject that notion of what's a growth company.
Number two, we don't give guidance and so I'm not going to start giving guidance about revenue growth, but I will say this to you.
I firmly believe that whatever the growth rate was projected ---+ and at ACE we do long-term ---+ at ACE we did long-term, five-year plans we would roll forward every year.
And we had a projection of what we thought our growth rates would be over a coming five-year period.
I have a sense of what legacy Chubb would have thought of its growth potential over a two- to three-year period, and what they would have seen.
I do firmly believe that when you sum those two together, the two together will have greater growth than the two would ---+ the sum of the two separately would.
There is little doubt of that in my mind.
How significant.
We have ranges internally from what we think might be conservative to what we think might be more aggressive.
But when I pitch it up the middle, I think it will be meaningful.
And I did say that I thought that by the fifth year, it would come into the billions of dollars range and multiples of billions, and I believe that, from what it otherwise would be.
And while that's not what you wanted as an answer from me specifically, I hope that gives you some insight
Well, you know, maintaining margins is about underwriting.
And it's about underwriting selection and it's about your portfolio.
What I love is the balance of business in this Company by geography, when I look at opportunities through Asia, when I look at opportunities in Latin America, when I look at opportunities through the United States, and I just look geographically, I see ---+ and in Europe ---+ I see so much room to move where there are some territories and some lines of business that you know to maintain margin, you need to shrink.
I see other areas where we have the capabilities, we have the presence, and it's about execution to grow in those areas.
And when you have the data we have and the knowledge we have, putting that to work, it is a job of execution at that point.
When I look at our spread of business by type of business, by customer, from large segment where it's obviously, except for the dislocation of others that puts some wind at your back, it's obviously the more difficult area to grow.
And, in fact, you're going to go sideways or shrink in many areas of that business if you are going to maintain underwriting discipline.
But I then look on the other side of the coin at the middle market and the capabilities we have in that area and our reputation and our relationships and our ability to drive more product and grow that more quickly, that gives me a lot of optimism.
I look at our A&H business around the world.
I look at our personal lines business both in the United States and outside the US and the potential in that area.
I add it all up and there are areas where you apply the gas and areas where you apply the brake, and we know how to do that quite well.
As I said, I'll never get baited into revenue growth to maintain margins.
And when my guys are feeling a little bad because they have to shed business to maintain margin, I've got to tell you what, I suck it up and I cheerlead it because it's the right thing to do.
Thank you.
Good luck to you, too.
No.
We have not figured in ---+ that's not net of reinvestment.
And, <UNK>, you have a natural growth.
I am not going to give you any point estimate number.
I'll give you a way I think about it ---+ two ways.
One, you have a natural growth rate of expenses based on your invested base of businesses, and you can see that.
You see how ACE has been disciplined in expense and Chubb was disciplined in expense, so the overall organization is disciplined that way.
You then have some investments you make in new businesses, so small commercial as an example, or maybe you are expanding your cyber business or other businesses and those will take investments.
On the other side of the coin where if we talk about legacy Chubb as being starved in some ways, and I think that's right, on one hand it's technology.
And so you will invest in technology.
But there you have a cash spend but you then capitalize and amortize over many years, so that impact will not be, as you would imagine, sort of a dollar of expense and a dollar drops to the bottom, but you've got a cash flow and then you have an amortization of it.
Those are what draws away from expense saved, and from the direct ---+ coming directly all to the bottom.
You are welcome.
I didn't help you manage your worksheet that much better.
I got it.
But we each live in our own home.
What did you expect.
How did you do your number.
I thought so.
I'm sorry, I just had to ask how'd you do it.
Yes, the one thing I'm going to say and then I'm going to ask a colleague of mine to give you a little more insight into it.
There was not a change in reserving process.
The way of thinking about reserve at either legacy Chubb or legacy ACE could produce this.
There was consistency.
And I'm going to ask <UNK> <UNK> to now just give you a little more.
Good morning, <UNK>.
I think, just by way of background as we went into the integration and we found a lot of similarities between the Companies, right, as opposed to differences.
And the differences are very much in the margin.
Both Companies have robust processes.
We've got really good teams of actuaries and good control environments.
And the methods and the assumptions in the reserving methodology are pretty consistent across like products.
And I think, too, and you've heard <UNK> emphasize this on prior calls, right, we ---+ both legacy Companies have a conservative approach, especially to long-tail casualty lines.
But there are some differences.
I put those in the margin, clearly, how it's processed in terms of timing and frequency of studies would be different.
Our reserving platforms are different, but we are working to converge those processes and expect to have that done in 2017.
So I think you'll find far more similarities in the respective processes, and we're going to enjoy continuing those in the future.
It's in our interest expense in the corporate segment.
It is.
It's a complete number.
You know what I would do, though, I would do ---+ there's 14 days of the interest expense that we didn't put into operating income, so I would just gross that out by the one-sixth of the quarter that wasn't there (inaudible).
We've had extensive discussions with our outside managers who have a real deep expertise in asset allocation and municipal and corporate credit research.
And our analysis shows that we can restructure the portfolio within securities and sectors that enhance the yield and diversify the holdings.
And I just want to reemphasize that those actions are not going to alter the risk profile of the portfolio.
We'll keep the overall credit rating at AA.
I think, over time ---+ I think we can more actively manage the municipal portfolio, but that will take time as a lot of that is long-dated.
So we that's certainly a part of it, to change from a really high rated, long-term hold strategy to a more active management in the muni portfolio.
But not ---+ your question was as a percentage of the total portfolio.
We don't expect that to change.
Right.
