Ladies and gentlemen, please stand by. Good day. Welcome to the Chubb Limited Fourth Quarter Year-End 2019 Earnings Conference Call. Today's conference is being recorded. If you would like to ask a question, please press star one on your telephone keypad. For opening remarks and introductions, I would like to turn the call over to Karen Beyer, Senior Vice President, Investor Relations. Please go ahead.
Thank you. Good morning, everyone. Welcome to Chubb's December 31st, 2019 fourth quarter year-end earnings conference call. Our report today will contain forward-looking statements, including statements relating to company performance and growth opportunities, pricing and business mix, and economic and market conditions, which are subject to risk and uncertainty, and actual results may differ materially. Please see our recent SEC filings, earnings release, and financial supplement, which are available on our website 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 it's my pleasure to introduce our speakers this morning. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Philip Bancroft, our Chief Financial Officer. We'll then take your questions.
Also with us to assist with your questions are several members of our management team. Now I will turn the call over to Evan.
Good morning. As you saw from the numbers, we reported core operating income in the fourth quarter of $2.28 per share, up 13% from prior year. The quarter was marked by excellent premium revenue growth globally, driven by an improved and improving pricing and underwriting environment that is spreading to more lines of business and more territories. Our organic growth in the commercial lines underwriting environment were the best in over five years. We also experienced a fairly active quarter globally for weather-related and man-made catastrophes, including the impact of weather on our U.S. agriculture business. Core operating income was just over $1 billion. Our published P&C combined ratio for the quarter was 92.7, about a half a point improvement over prior year, with P&C underwriting income up 12%. On the one hand, we benefited from lower year-over-year catastrophe losses.
You may have noticed that half of our total cat losses in the quarter was from one event, a tornado that destroyed a mile by a mile and a half affluent neighborhood in the suburbs of Dallas, where Chubb had significant market share. What are the odds? That's our business. On the other hand, as you saw from our pre-announcement, we reported an underwriting loss of $23 million for the quarter in our crop insurance business, attributable to yield shortfalls from difficult growing conditions, compared with an underwriting gain of $161 million in last year's fourth quarter. As I pointed out before, by its nature, crop insurance is a business with cat-like exposures. After all, it is about moisture and temperature, i.e., the weather. The risk reward for crop insurance has been favorable for Chubb over the long, short, and medium term.
After three exceptional years in 2016 to 2018, last year was below average. For the quarter, the global P&C combined ratio, which excludes agriculture, was 91.9 compared with 95.2 prior year. On a current accident year basis, excluding cats, it was an outstanding 88.6 versus 89.9 last year. To briefly recap the year, core operating earnings of $4.6 billion were up over 5%, with P&C underwriting income up 4.5%. Global P&C underwriting income, which again excludes ag, was up 18.5%. The global P&C combined ratios, both calendar and current accident year, were simply excellent. The calendar year was down from the year before, and the current accident year excluding cats was flat with prior year. Book and tangible book value per share were up 11.7% and 18.6% respectively for the year, driven by a combination of income and the mark from falling interest rates.
Phil will have more to say about the investment income, book value, cats, and prior period development. Turning to growth and the rate environment, P&C premium revenue in the quarter in constant dollars was excellent, and as I noted a moment ago, the strongest organic premium revenue growth in over five years. Net premiums grew 9.8% before foreign exchange, which had less than 1 point of negative impact. The pricing environment continued to improve quarter on quarter, with the rate of increase accelerating and spreading to more classes of business and risk types. Overall prices increased in North America Commercial, which includes both major accounts and specialty, as well as middle market and small commercial, by 8.3% on a written basis versus a current loss cost trend of about 4.5%. Renewal price change includes both rate of 9% and a slight decline in exposure of about a half a percent.
We continue to benefit from a flight to quality. More business continues to meet our underwriting standards, and new and existing customers choose Chubb. New business was up nearly 10% in the quarter, and renewal retention was excellent, 95.5 on a premium and 87% on a policy count basis. In major accounts in Specialty Commercial, excluding ag, premiums grew over 10.5%, with major accounts retail growth of 9% and E&S wholesale growth of 10%. In terms of rate increases, rates for major accounts were up 10.5%, with risk management up 5.5%, excess casualty up 27%, and property and short tail lines up 20%. Management liability rates increased 20%. In our Westchester E&S wholesale business, rates were up 15%, property up over 19%, casualty up 15%, and financial lines up nearly 12%, all well above third quarter's increases. Rates in our Chubb Bermuda business were up 33%.
Turning to our U.S. Middle Market and Small Commercial division, premiums grew over 7.5%, and excluding workers' comp, we grew 10%. Renewal retention in our middle market business was nearly 94%. Middle market pricing was up 5%, and excluding comp, it was up nearly 7%. Pricing for casualty ex comp was up about 6%, while comp pricing was down about 4.5%. Package was up 6%, property up 10.5%, and financial lines rates were up almost 8%. In our North America Personal Lines business, net premiums in the quarter were up over 9%, but adjusted for additional reinsurance items, which negatively impacted prior year growth, we grew 4.5%. Retention remains strong at 97.5% on a premium basis and over 89% on a policy basis. Homeowners' pricing was up nearly 13% in the quarter.
We are making great progress in reshaping the portfolio to more closely focus on clients who meet our risk profile. Turning to our international business, growth remains strong in our Overseas General Insurance operations, with premiums written up 9% in constant dollars, FX had a negative impact about two and a half percentage points. Net premiums for our London Market wholesale business were up 22%, while our retail division was up almost 8%, with growth broadly distributed across the globe. Growth in our international retail was led by continental Europe, up nearly 10.5% and the best growth in many years, followed by Latin America and Asia-Pac, up over 9% and 8% respectively, and the U.K. up over 5.5%. Overall rates in our international retail business were up 10%, property up 11%, casualty up 3%, and financial lines up 17%.
Rates in our London Market wholesale business were up 20%, property up 21%, financial lines up 16%, and aviation up 27%. Our Asia-focused international life insurance business had a strong quarter, with net premiums up over 14% in constant dollar and a contribution to earnings of $36 million, up over 12% from prior year. John Keogh, John Lupica, Paul Krump, Juan Luis Ortega can provide further color on the quarter, including current market conditions and pricing trends. In closing, it was a good quarter and year for Chubb. Premium revenue growth continued to accelerate as more business meets our underwriting standards and we achieve greater price adequacy in a rapidly improving underwriting environment. We have started the new year in excellent shape with a lot of momentum. Our organization was built on a global scale to capitalize on market conditions such as this.
We have patiently waited and remained disciplined and true to our culture and the craft of underwriting excellence. We are now capitalizing on greater opportunity. At the same time, we are not taking our eye off the execution of our many important long-term strategic initiatives that position us for future revenue and earnings growth, including our increasing ownership stake in Huatai Insurance Group, progress we are making with our digital efforts, our growing international consumer lines operation, and our growth strategies for middle market and Small Commercial around the globe. With that, I'll turn the call over to Phil, then we'll be back to take your questions.
Thank you, Evan. We completed the year with a very strong overall financial position. Businesses and investment performance produced positive cash flow of $1.4 billion for the quarter and $6.3 billion for the year. Our total capital grew to over $70 billion, and our cash and invested assets grew $8.6 billion for the year to $111 billion. In addition, as Evan mentioned, our book and tangible book value per share grew 11.7% and 18.6% respectively. For the year, excluding unrealized gains from declining interest rates, book and tangible book value per share grew 5.5% and 8.1% respectively. Among the capital related actions in the quarter, we returned $650 million to shareholders, including $340 million in dividends and $310 million in share repurchases.
For the year, we returned $2.9 billion to shareholders, including $1.4 billion in dividends and over $1.5 billion in share repurchases at an average price of $146.61 per share. In December, we issued $1.6 billion of five-year and 10-year debt in the European market at an average interest rate of 0.59%. For the year, we have issued EUR 2.8 billion of debt and paid off $500 million of debt that matured. This debt will be used to fund certain future debt maturities and other corporate uses. Our annualized core operating ROE for the year was 9%, and our core operating return on tangible equity was 14.6%. As previously announced, in December, we increased our ownership stake in Huatai Insurance Group to 30.9% and agreed to purchase another 22.4% in two separate transactions, contingent on certain approvals and other conditions.
We will hold a majority stake when we complete the second transaction. Until then, we continue to apply equity accounting to our Huatai ownership. Adjusted net investment income for the quarter was $893 million pre-tax, and $3.6 billion pre-tax for the year. The investment income in the quarter was slightly below our previous guidance due to lower than expected private equity distributions. While there are a number of factors that impact the variability in investment income, we now expect our quarterly run rate to be in the range of $885 million-$895 million. After-tax net realized and unrealized gains were $268 million for the quarter and $3 billion for the year, primarily from a decline in interest rates in the fixed income portfolio. Net catastrophe losses for the quarter were $430 million pre-tax, or $350 million after tax, as previously announced, and are further detailed in the financial supplement.
We had favorable prior period development in the quarter of $233 million pre-tax, or $199 million after tax. This is net of $74 million adverse development from our legacy runoff exposure, principally related to asbestos. The remaining favorable development of $307 million is split approximately 67% in long-tail lines, principally from accident years 2015 and prior, and 33% in short tail lines. The full year agriculture combined ratio was 95.1%, compared with 75.5% in the prior year, or a decline of $296 million in underwriting income from higher crop losses. Given this year's results, we do not expect the 2019 crop year to develop anywhere near as favorably in 2020 as the 2018 year developed in the first quarter of 2019. As a reminder, we had positive development of over $60 million in last year's first quarter.
On a constant dollar basis, net loss reserves decreased $118 million in the quarter, reflecting the impact of catastrophe loss payments, favorable prior period development, and crop insurance payments in the quarter. On a reported basis, the paid to incurred ratio was 106%. After adjusting for the items noted above, the paid to incurred ratio was 98%. For the year, net loss reserves increased $514 million on a constant dollar basis. On a reported basis, the paid to incurred ratio for the year was 99% and was 92% adjusted for the items noted above. Our core operating effective tax rate for the quarter was 14.2%, which is in line with our annual expected range, although it is at the lower end of the range given the impact of catastrophe losses in the quarter. For the year, our core operating effective tax rate was 14.9%.
For 2020, we expect our annual core operating effective tax rate to continue to be in the range of 14%-16%. I'll turn the call back to Karen. Sorry, Karen.
Thank you. At this point, we'll be happy to take your questions.
Ladies and gentlemen, if you would like to ask a question, you can signal by pressing star one on your telephone keypad. Just keep in mind, if you are using a speakerphone, make sure the mute function is released so that signals can reach our equipment. Once again, star one for questions. We will begin with Mike Phillips with Morgan Stanley.
Good morning. Thank you, everybody. Appreciate it. I guess first question, Evan, very high-level question. I apologize in advance. It's a generic question. I really want to get your thoughts on this. Look, the industry's reacting to, I guess, sins of the past, if you will, from pricing. It's reactionary nature of the industry. You seemingly don't have to do that as much because your prior year stuff is already strong. The question here is kind of more of how do you think about The answer is really your account-by-account detail of your underwriting, which you guys do phenomenally well.
At a high level, Evan, how do you steer the ship thinking about just the trade-off between, you have a cushion that you could maybe not really worry about margin expansion as much because you got such great ambitious margins. Think about the growth that you could possibly get even higher growth if you gave up a little bit more on the margin expansion. Just at high level, how do you think about that tug of war between the pricing that you want to get, the growth you want to get versus the margins that you get on that?
Yeah, I don't think about it that way. Not how an underwriting organization really thinks about it. Your question is, in a sense, too simplistic. We quote the rates and prices and underwriting terms that we require in each line of business to earn what we think is an adequate risk-adjusted return, as expressed by a combined ratio in that line of business. It all mixes together in portfolio, which you then see as an overall published average combined ratio. You can't, in the commercial P&C business, which runs higher than the average that you look at for the whole company, you then dig down by line. There are lines of business that we think are adequate now, or maybe a bit above adequate in some cases. There are lines of business that are below adequate. We'll continue to drive for rate.
Wherever we see adequacy and we like the risk reward, we're hardly holding back on growth. I think the question is a little ironic this quarter when you're asking it in the backdrop of fundamentally a 10% growth rate on an organization of this size. I hope that helps you.
Okay. Yeah, thanks. A little more detailed on the follow-up-
I think you had a second question.
I did, yeah. Thanks. This is more detailed. On Overseas General, a kind of nitpicky question here on your expense ratio. How do you think about that in 2020? It looks like it's ticked up a bit throughout 2019, more on the acquisition expense and what's behind anything delivered there, and how do you think of that for 2020? Thank you.
Yeah, it's pretty simple. About a third of it is of the increases related to one-time items last year that benefited last year's expense ratio. About a third of it is mix of business, where it's business that runs a lower loss ratio, higher expense ratio, and some of the partnerships we have will have that signature to them, because the mix of product is a lower loss ratio related. The third is investments we've been making in certain businesses, particularly in Asia and to a degree in Latin America, for future growth. We'll grow into our sleeves there and the expense ratio will ameliorate and improve.
Okay, thanks a lot.
You're welcome.
We'll now hear from Paul Newsome with Piper Sandler.
Good morning. Congratulations on the quarter and the year.
Thanks.
I wanted to ask about North American casualty, the loss trend that you mentioned, because that seems to be a big topic of just how much it might be accelerating. Could you talk a little about maybe what's going on there as well as, I would imagine, and tell me if I'm wrong, there are pieces in there with some pretty high loss trends, maybe D&O professional liability, and then where are the offsets?
Yeah. Without going into too much detail, just to give the shape of it a little bit. First of all, I don't agree with your last comment. It's not how we see it. D&O is an old story. We've been talking about it for a while. Frequency and severity both moved up, but that was a couple of years ago, and we've seen it pretty steady at that elevated level. We don't see that continuing to deteriorate overall, and that's all classes that we've mixed together in there. There are some classes, individual classes, subclasses that have an increasing frequency, but overall. In primary casualty, we're seeing severity stable. In the risk transfer primary casualty area, we haven't noticed a deterioration.
In workers' comp, in the risk transfer comp business, through the year, we've seen an increase of severity, particularly on the 2018 and 2019 years. By the way, all of our loss cost trends, we're comfortable with our picks. We're constantly looking at updated data, and the trends we see are reflected in our loss cost picks for the year, for the back years, and inform us as we go forward into the 2020 year. I hope that helps you.
No, that makes a ton of sense. Secondly, I just want to make sure, I think I have a good guess at this, but the Asian exposure to all this virus and just the economic turmoil that's resulting there, I would imagine, and tell me if I'm wrong, that you've got fairly minimal exposures from losses, but there might be some sales disruption just because people are not being able to get out. Is that a kind of a good way to think about it? Or is there something else I should be thinking about? I don't expect it's not a big deal for Chubb.
We're experienced, we're informed in our underwriting from past pandemics and/or potential pandemics. SARS was a good run at this. Given our underwriting position and how we think about supply chains and how we think about property and the perils we cover, et cetera, we see very minimal loss exposure from this. We have a very small, almost nonexistent accident health business in China. We imagine modest impact from everything we can tell from economic slowdown or economic activity. Time will tell in that regard. We don't know the true infection rate likely, and we don't know when this is going to peak, and so that's what I can give you based on what we know today.
Obviously, keep our fingers crossed there. Thank you very much.
You're welcome.
Elyse Greenspan with Wells Fargo has the next question.
Hi, thanks. Good morning. My first question, Evan, in your prepared remarks, you talked about strongest growth you guys have seen in five years. You also painted a picture of a lot of price going through your book that you said continued into 2020. As we think about 2020, do you see price and growth picking up as we move throughout the year? I guess how long do you have a line of sight in terms of how long do you think the upward pricing momentum might last?
Yeah. You're asking me a bunch of questions that you know I'm not going to answer much, Elyse, but I admire you for asking. Look, I'm not going to prognosticate the balance of the year. The only thing I'll tell you is I think growth, we ran about 7% in 2019, I think we'll be in the range if not better in the 2020 underwriting year is my sense of it. No guarantees, there's always a little volatility quarter to quarter given some seasonality and mix of business. You never see it in just some steady way. On pricing, I think it endures. The fundamentals speak to it. The environment we see is the environment I imagine will continue for some time. It's rational. There are many reasons for it, there's nothing that I see that tells me the momentum will slow.
If anything, it's picked up, it is spreading more broadly. Industry needs rate, needs it in quite a number of classes and across the globe. You're in a low-interest rate environment, you can hardly rely on investment income to bail you out. The industry needs rate because rate has just not kept pace with loss cost trend for quite a number of years. The math is so simple. People seem to over intellectualize this. On the other side of the coin, in the numerator, there are a few discrete classes where the loss environment is more hostile.
That is out there, that is understood, that is known, you either recognized it and reflected it in your reserves and in your loss picks and pricing in the past, or it's something that you're dealing with currently and is in front of you. I think that just varies by organization.
Okay, that's helpful. Secondly, we've heard a lot in the reinsurance market about prices going up at January 1, and I think there are some expectations we'll see that continuing throughout the year. Does Chubb have thoughts of changing their reinsurance program in a significant degree to what you had placed in 2019, your outbound program?
That is a treaty-by-treaty, book of business-by-book of business decision. We make rational decisions around all of that. I'm not going to make any general statements about that.
Okay, one last question. In the past, you guys have given us your excess capital in terms of the drag on your ROE. Could you let us know about where that will sit after you make the next investment within the Huatai, after you increase your stake over the next couple of deals?
Go ahead, Phil.
I would just say 5%-7% drag on the ROE.
I'm sorry, 5%-7%.
Oh, it's not a five, it's a half a percent.
I'm sorry.
50-70 basis points.
Yeah. 5-7.
Okay, great. Thank you very much.
Elyse, what we said is 50-75 basis points of drag on ROE.
Okay, great. Thanks. I appreciate the color.
You're welcome.
Our next question will come from Yaron Kinar with Goldman Sachs.
Good morning, everybody. Evan, I think in response to a previous question, you had said that you'd seen the D&O loss trends started to deteriorate at least two years ago or about two years ago. Just curious, what happened six months ago, four months ago, when rates started to really move up? Why was there a year-and-a-half lag there?
Yeah, sure. By the way, we saw it two or three years ago. It's three years we've been talking about it, because it was the 2017 year. 2017, 2018, 2019. Sorry, even longer. Look, you get notices of circumstance. You then get notices of claim. You get those turning into incurs, and then ultimately they move to cash flow. Those who have large books of this and play both the primary and the excess, and they play first layer excess, they see it earlier and have a sense of it, have the data, have the experience to know which cases are going to turn into what kind of loss, and what is a realistic loss amount around that case. They have the data and understanding to see a law firm behavior.
By the way, the nature of the type of claims that are changing and how they're being made. You get a sense of all of that early if you're in the position, which we are, and we're a market leader that way. We see it on a global basis. We could look at it early. There are others who just arrive at it late, and they arrive at it when it turns into incurred and paid losses. You get an education, but you pay a tuition for it.
Got it. That's helpful. Thank you. My second question, not really related. North America Personal, I think the delta between adjusted net premiums growth and net premiums growth had been positive for the last four quarters, and then this quarter it turned negative. Just trying to understand the dynamic there. I know that you guys had added a quota share reinsurance policy for California, but just trying to understand what happened in the quarter.
I'm sorry. Maybe we're looking at different numbers or you're confused. We grew, first of all, on a published basis at 9%. When you adjust for the California reinsurance which we placed last year, and it had a bigger impact last year than this year because we made a premium transfer to them of unearned premium, if you understand how that works. Therefore, the adjusted real growth rate is 4.5%. 4.5%, if you look back on previous quarters, is our best growth in premium terms in the year. It has a combination of rate and a reasonable level of retention as we also shape the portfolio, and there are areas where we're eliminating exposure, and by the way, we got 13 points of price change in the quarter.
Got it. That's very helpful. Thank you.
You're welcome.
Yes, it does. Thank you.
Mike Zaremski with Credit Suisse has the next question.
Good morning. First question, maybe sticking on personal lines. The pricing in personal lines seems to have accelerated. I know you've talked about reshaping the portfolio. I also believe in past quarters you've been cited as saying loss costs in personal lines is as high as the high single digits. Maybe you can kind of talk about why loss costs inflation is at that level. Some other of your competitors don't speak to it being that high. Maybe you can talk more broadly about the reshaping and where you are in that reshaping. Thanks.
Sure. First of all, I don't know who you're thinking of as a competitor. We don't write general market homeowners. We write only affluent. The share of market we have in there is, and our reach, our national reach on that business is just unrivaled. The loss cost in the homeowners business are running in that 8% range. They have been for some time. Cost of materials, cost of labor. There is a labor shortage. Materials, particularly at the high end, are very expensive. Business interruption. Homeowners out of their homes, interrupted. Extra living expense is up because there is more remediation work in a claim than there was in the past. More around mold and other conditions that people are more concerned about and that are focused on and get attention.
Frequency of loss has contributed, particularly in non-weather, water related, which we've talked about for some time, and others have the same issues. When you add all that up, those are the main contributing factors to loss cost trend. I don't see it ameliorating, by the way, not much.
Okay. That's very helpful. Lastly, thanks for the color on loss expense trend. I'm curious, when you talked about the trend in North America, does that take into account some of the state changes in terms of the statutes of limitations, some reviver statutes? Maybe you could comment on that. Thanks.
It takes into account everything we know in our portfolio. I'm not leaving anything out. However, on the reviver statute changes, there's notices, there's notice activity, and filing of claims. There's very little information at this moment to respond to, and that's going to be, in my judgment, quite a while developing. There's not much to respond to at this point. Take New York, for example. All of the cases are being consolidated with one court and judge who's going to just figure out how to move forward with these in a structured way. The rules and the process by which these will be adjudicated is yet to be determined. You can't take discovery, you can't get information, you can't do anything right now.
That's the plaintiff and the defendant, let alone then the insurer that is a derivative of all of this. It's going to evolve over a period of time. Right now, anything we know, where it can be estimated is in our numbers.
We'll now take a question from Ryan Tunis with Autonomous Research.
Thanks. Good morning. Evan, in North America Commercial, I was hoping you'd give us some color on how you'd characterize the accident year loss ratio improvement, 64 versus 66 a year ago, 1.5 of improvement sequentially. Is that mostly the earned premium in excess of trend? Was it benign attritional activity? I'm trying to think about what's going on from a margin standpoint there.
How would I characterize it? I characterize it as darn good. There you go, Ryan. Look, last year, we did take a reserve charge, you will recall. Think about it, for a short tail that did not repeat. We recognized a higher loss pick for that. The improvement is a combination of earned rate, underwriting which frankly, is more powerful than the earned rate and actions we take in that regard. That's about it, because we ain't seen a lot of change in the loss environment.
Got it. I'm going to add one for Phil and then one more for Evan. Phil, on the Huatai consolidation, how should we think about the impact that that might have on either on book value per share or tangible book value per share if you do go over that 50% threshold?
Yeah, it's way too early for that. We're evaluating it. We'll continue to evaluate it, but I'm not ready to give you an impact on tangible at this point.
Understood. Then, I guess keeping on these legacy issues, Evan, for Chubb and I guess the industry in general, how are you thinking about with the opioid litigation going on, how that might manifest as an insurance liability?
Yeah, I don't think of that as legacy. I think of that as current. It's like other mass tort that exists, I don't see legacy in that. When it comes to opioid, we don't cover, insurance doesn't cover financial loss. We cover a loss due to bodily injury, property damage, and you have to have that clear linkage in liability. You've got to prove liability, then you got to prove in liability that it resulted in bodily injury and/or property damage. The cases that are brought against pharma right now are brought for financial loss because the municipalities and society had a big financial penalty as a result of the overuse of opioids. That's what's alleged. Making the case to insurance. Well, you've got to leap the hurdle I just said in that regard.
You got to be able to demonstrate that you didn't know, that you weren't aware when you bought insurance, that these things were going on in their plan and other defenses. Right now, as far as coverage, and what exists, we look at our portfolio through that lens and through those eyes. To the degree that we see an estimated liability, we reflect it in our books and records and in therefore our reserves. Period.
I guess my one follow-up there would be, is this something that the insureds understand the difference between BI and financial? Is this the type of In other words, is this something you're able to sort out with your clients, or is this something that ultimately is going to have to be resolved, insurance-related disputes, policy wording, like that sort of thing?
You know what, Brian? Welcome to the insurance business. It varies by insured, A, both intellectually and their own character of do you understand the spirit and intent, then versus let's go torture the language and see what we can get. It's all over the lot. Always all over the lot.
Thanks.
We'll now hear from Meyer Shields with KBW.
Great, thanks. Good morning. Evan, in your opening comments, you noted that there was a small headwind to premium growth from exposure as opposed to last quarter's small increase, and I was wondering whether there's anything significant in that change.
No. What I gave you, Meyer, was simply, which is kind of an oversimplistic way of doing it, but what I said to you was that pricing was up 8.5% in North America, all the businesses rolled up. In that it was made up of 9% in rate and 0.5% in negative exposure. That exposure change is just we have businesses with positive exposure change and more in the middle market and small commercial, and then it jumps all over the lot in the large account business. It's got puts and calls in it. There's no general theme to read into that whatsoever.
Okay. Fantastic. Then in the 2 North America non-agriculture segments, there was a bigger year-over-year increase in admin expenses than we'd seen year to date through September, and I was hoping you could add some color to what's driving that.
In which one were you looking at North America?
Commercial and Personal. Right, the admin expenses.
I'm sorry?
The administrative expenses.
Did you say North America, though?
Oh, I'm sorry. Yes. North America Commercial, North America Personal.
North America Personal. There was nothing. Go ahead, Phil.
There were a couple of items in the prior year related to pension and other benefits that benefited us last year, and so it makes it look like an increase this year.
Pension adjustment expense.
Perfect. Thanks so much.
It can bounce around a little bit year by year. You don't know. It'll depend on interest rate levels and all that at the end of this year, how it'll look versus the year before.
Okay, fantastic. Thank you very much.
Our next question will come from Brian Meredith with UBS.
Yeah, thanks. Two here for you. Evan, just a quick follow-up on Meyer's question about the exposure. I'm just curious, are you guys picking up market share right now and kind of what is the unit kind of growth in North America Commercial as well as in Overseas? Or is this not the time for you guys to pick up market share?
Oh, I think we're picking up market share, but as far as unit, I think the numbers kind of demonstrate that. Unit growth, we don't have a unit growth number for you in terms of.
Okay.
Yeah.
I got you.
Yes. No, we're picking up market share.
You're picking up market share. I guess the question I guess Meyer was asking, the 8.5% pricing in North America, right? You said a little bit of exposure. I would've thought that would be even higher.
You're missing it. No, you're missing how to define exposure.
Okay.
We are growing. That's not how insurance companies when they say exposure growth, give it to you. We're growing exposure by writing more clients. That 0.5% that goes into pricing happens to do with how clients have a rate against exposure to determine their premium. That's their own payroll. That's their own receipts, et cetera. They then report that to you, and that goes into their actual premium price. See what I mean?
Right. Yeah. Absolutely. I get that.
That's very different than, is Chubb in its written premium growing exposure? Oh, we're growing exposure.
Okay. That's helpful. My second question, I'm just curious. On your global A&H business, growth has been fairly muted for a little while. Is that just a function of just economic activity globally, or is there something else to read into that?
No. Latin America is growing quite well. Europe grows at an unexciting sort of steady rate, low single digit. It is Asia Pac, where the underlying activity is very good and it is growing well, but we lost a client, Siam Commercial Bank, earlier in the year, and we talked about that. That has impacted that growth rate year-on-year. You will see as the year goes along that A&H growth will pick up.
Great. Thank you.
You are welcome.
Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We will now hear from David Motemaden from Evercore.
Hi. Thanks for taking the question. Just a quick numbers one for Evan and maybe Phil. Just on the civil unrest losses that we saw, the $33 million, is any of that spilling over into 1Q, especially in Chile, just given the protests are still going on there?
No, not that we see. De minimis.
Okay, great. Then, I saw in the December slides, Evan, you had laid out around 45% of your business is exposed to a hardening rate environment. Just wondering what that percentage is today, just given that it's spreading to other lines and other geographies.
That's up. It's up. It's not up dramatically. We haven't updated the number yet.
Okay, great. With the Huatai investment, or the increased stake, just wondering why you guys chose to increase your share there, as opposed to maybe applying to get a fully owned license there, like some of your peers have.
Well, we do. We have a fully owned, Chubb Insurance is a wholly owned, completely 100% foreign invested. If you want to go on that direction, that's the 100-year plan or more. We have with Huatai, 600 offices around the country. We have most all provinces. It's a life insurance company that foreigners have just been allowed to now own majority in life insurance. It has a life insurance company that we built and helped to build, that is doing closing on $1 billion in revenue. It's got P&C company doing about $1.5 billion or so. Got a retail mutual fund license. Good luck getting one of those. It's got so much capability that it gives us to build from.
If you go simply as a foreigner entering China de novo to build, it is very hostile, both the regulatory and the business environment, and very difficult to get it done. You have to do it province by province. You got to go city by city, not simply you get it at a national level. It's not how it works in China. This is a very precious asset if we execute well in recognizing the future value in that asset.
Yep, understood. I guess just thinking about in terms of the number of board seats you there, I guess how much control do you have over Flywire ? Obviously that will increase as you buy up your stake. Just some of those benefits that you had mentioned in terms of having the local expertise, which PruUK has mentioned as well with their relationship with CITIC. Do you see any risk once you guys go up to wholly ownership or maybe even up to 100%, that becomes a headwind?
No, I don't. I've been doing business there for almost 30 years, so I know something about the environment there, and approach it with my eyes open and from a perspective that's the perspective with which I'm going to give you the next comment. When we have majority, we have very clear control. Right now, we have substantial influence and control to do more things in there. Obviously with majority is when you have clear control. That will happen relatively near-term. Secondly, China is like doing business anywhere. If you're a builder of business versus an investor, then you understand that not in some sterile way, and that is that every territory, every country, China in particular, are complicated. They have risk around them. There's no guarantees. The opportunity, if you execute well, and the opportunity in China is simply dramatic.
It's a country of a lot of talented people. Our ability to source talent, our ability to recognize leadership, our ability to use talent that we have around the region and around the world, including Chinese, have those tools and those advantages. It's a country of relationships, and we have a lot of them. It is, again, not without risk, but given the reward and the potential, and that it is the largest and what will be the largest economy in the world, and it's the second largest now, well, I'll tell you what, it's not a hard decision to make that the long-term potential value creation for this organization. That's what it's about, long-term value creation.
Yeah. No, totally agree. Thanks for the thoughts. Appreciate it.
Looks like we have time for one more question, and that question will come from Greg Peters with Raymond James.
Great. Thank you for fitting me in. Evan, I just had one question. I guess it sort of dovetails with this long-term value creation comment you just made. If I look in your earnings press releases, you always include both core operating return on equity results, and then you include a core operating return on tangible equity results. I'm not trying to be argumentative, but could you remind me of the thought process behind the tangible reference? I assume the goodwill from Chubb and other acquisitions continues to be valuable, I'm just looking for clarification there.
Sure it is. First of all, I think tangible is your most constraining factor when you're in a balance sheet risk business. You can only pay claims against tangible. You can only grow your revenue and exposure to the extent of your tangible wherewithal. You can only borrow, and you can only make acquisition to the extent of tangible. It's your most constraining factor. Tangible is also the purest. Straight book has accounting, what I'd say is more accounting related within it. It's more subjective than objective. When I look at return on equity versus tangible return on equity, tangible is the one I have my eye on more for value creation. When I look at equity and return on equity, the Chubb, I look at it over long term, and you said it right to me.
It varies by company, and you have to be able to assess that. The goodwill, I think, is an appreciating asset in this company, hardly a depreciating or a stagnant. It opened the path to such future value creation of the organization that is occurring over time and will occur over time. The goodwill, you grow into that goodwill. Because it's an appreciating asset, the Chubb and ACE combination that created most of that, created that value that way. That's how we see it, and I think it's the right balance in how we think about value creation. Thanks for the question. I didn't take it as argumentative.
Thanks for fitting me in.
That will conclude our question and answer session. I will turn the call back to your host for closing remarks.
Thank you all for your time and attention this morning. We look forward to seeing you again next quarter. Thank you and have a good day.
With that, ladies and gentlemen, this does conclude your conference for today. We do thank you for your participation, and you may now disconnect.