How much of Chubb's Q4 and full-year 2023 earnings came from the one-time tax benefit?

The one-time deferred tax benefit of $1.14 billion, or $2.76 per share, related to Bermuda's new income tax law was included in Q4 net income of $3.30 billion and core operating income of $3.41 billion. For the full year, the benefit was $1.14 billion, or $2.74 per share, lifting net income to $9.03 billion. Excluding it, full-year net income was $7.89 billion ($19.06/share) and core operating income was a record $8.20 billion ($19.80/share).

Is Chubb's underwriting performance improving?

Yes. The full-year P&C combined ratio was 86.5% versus 87.6% a year earlier, and the current accident year combined ratio excluding catastrophe losses improved to 83.9% from 84.2%. P&C underwriting income grew 19.9% to a record $5.46 billion. Catastrophe losses fell to $1.83 billion pre-tax (4.5 points of the combined ratio) from $2.18 billion in 2022.

What is the risk from North America Commercial growth slowing?

In Q4, North America Commercial net premiums written rose only 4.4%, with Major Accounts growing 3.9% and P&C lines up 6.3%. Management said planned corrective underwriting actions in primary and excess casualty reduced premium growth by 3.0 points, though they improve underwriting margins and management expects growth to return to more robust levels starting in Q1 2024.

Did the Huatai consolidation affect book value and capital metrics?

Yes. Chubb consolidated Huatai Group effective July 1, 2023, which added a $3.53 billion after-tax charge to tangible book value for goodwill and intangibles. The company also recorded $4.18 billion of noncontrolling interests in its balance sheet. Chubb's ownership reached approximately 79.5% after a January 2, 2024 closing, and core operating metrics include only Chubb's ownership share.

Are Chubb's reserves and investment income sustainable?

Management described loss reserves as exceptionally strong, as strong as they have ever been, and favorable prior period development totaled $773 million for 2023 (pre-tax), down from $876 million in 2022. Pre-tax net investment income rose to $4.94 billion, with adjusted net investment income of $5.34 billion, though part of the book value gain reflected mark-to-market benefits from declining interest rates, which can reverse.

CB 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 31, 2024. Cited figures are marked; the original filing is the authoritative source.

Chubb reported a record fourth quarter and full year 2023, with results heavily boosted by a one-time $1.14 billion^a deferred tax benefit tied to Bermuda's new income tax law.

Reported Q4 net income was $3.30 billion^b ($8.03 per share) and core operating income was $3.41 billion ($8.30 per share). Excluding the tax benefit, Q4 core operating income was $2.27 billion ($5.54 per share), up 35.8%, and full-year core operating income excluding the benefit was a record $8.20 billion ($19.80 per share), up 27.6%. Investors should focus on these ex-tax-benefit figures as the better gauge of underlying earnings power.

Underlying operations were strong. Consolidated net premiums written grew 13.5% for the year to $47.4 billion^c, with P&C up 9.9% and Life Insurance up 51.5%, reflecting the consolidation of Huatai. The P&C combined ratio was a record 86.5% for the year and 85.5% for Q4, and P&C underwriting income reached a record $5.46 billion.

Net investment income rose 31.9% to a record $4.94 billion^d, and management reiterated expectations for double-digit operating earnings growth. Commercial pricing remained firm, with North America pricing up 12.4% in the quarter, while North America Commercial growth was dampened by planned Major Accounts underwriting corrections. Balance sheet and capital returns also improved.

Book value per share rose 20.5% for the year to $146.83, and tangible book value per share rose 21.3% to $87.98, though both benefited from roughly $3.2 billion of after-tax investment gains driven by falling rates. Core operating ROE was 15.4% and core operating ROTE was 24.2% for the year.

Chubb returned $3.88 billion to shareholders in 2023 through $2.48 billion of buybacks and $1.40 billion of dividends. Tangible book value was reduced by the $3.53 billion after-tax goodwill and intangibles related to consolidating Huatai.

02—Key points

Key Highlights

Q4 2023 net income was a record $3.30B ($8.03/share), but included a one-time $1.14B ($2.76/share) Bermuda tax benefit; excluding it, net income was $2.16B ($5.27/share).
Q4 core operating income excluding the tax benefit was $2.27B ($5.54/share), up 35.8% year over year.
Full-year core operating income excluding the tax benefit was a record $8.20B ($19.80/share), up 27.6%; reported core operating income was $9.34B ($22.54/share).
Full-year consolidated net premiums written rose 13.5% to $47.4B, with P&C up 9.9% and Life up 51.5%.
P&C combined ratio hit a record 86.5% for the year (85.5% in Q4), producing record P&C underwriting income of $5.46B, up 19.9%.
Pre-tax net investment income reached a record $4.94B for the year, up 31.9%, supporting earnings growth.
Book value per share rose 20.5% to $146.83 and tangible book value per share rose 21.3% to $87.98, aided by $3.17B of after-tax investment gains; capital returns totaled $3.88B for 2023.

03—Questions

Frequently Asked Questions

How much of Chubb's Q4 and full-year 2023 earnings came from the one-time tax benefit?
The one-time deferred tax benefit of $1.14 billion, or $2.76 per share, related to Bermuda's new income tax law was included in Q4 net income of $3.30 billion and core operating income of $3.41 billion. For the full year, the benefit was $1.14 billion, or $2.74 per share, lifting net income to $9.03 billion. Excluding it, full-year net income was $7.89 billion ($19.06/share) and core operating income was a record $8.20 billion ($19.80/share).
Is Chubb's underwriting performance improving?
Yes. The full-year P&C combined ratio was 86.5% versus 87.6% a year earlier, and the current accident year combined ratio excluding catastrophe losses improved to 83.9% from 84.2%. P&C underwriting income grew 19.9% to a record $5.46 billion. Catastrophe losses fell to $1.83 billion pre-tax (4.5 points of the combined ratio) from $2.18 billion in 2022.
What is the risk from North America Commercial growth slowing?
In Q4, North America Commercial net premiums written rose only 4.4%, with Major Accounts growing 3.9% and P&C lines up 6.3%. Management said planned corrective underwriting actions in primary and excess casualty reduced premium growth by 3.0 points, though they improve underwriting margins and management expects growth to return to more robust levels starting in Q1 2024.
Did the Huatai consolidation affect book value and capital metrics?
Yes. Chubb consolidated Huatai Group effective July 1, 2023, which added a $3.53 billion after-tax charge to tangible book value for goodwill and intangibles. The company also recorded $4.18 billion of noncontrolling interests in its balance sheet. Chubb's ownership reached approximately 79.5% after a January 2, 2024 closing, and core operating metrics include only Chubb's ownership share.
Are Chubb's reserves and investment income sustainable?
Management described loss reserves as exceptionally strong, as strong as they have ever been, and favorable prior period development totaled $773 million for 2023 (pre-tax), down from $876 million in 2022. Pre-tax net investment income rose to $4.94 billion, with adjusted net investment income of $5.34 billion, though part of the book value gain reflected mark-to-market benefits from declining interest rates, which can reverse.

04—Continue

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