Good day, and welcome to the Chubb Limited first quarter 2021 earnings call. Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Ms. Karen Beyer, Senior Vice President of Investor Relations. Please go ahead.
Thank you. Welcome, everyone, to our March 31, 2021 first quarter earnings conference call. Our report today will contain forward-looking statements, including statements relating to company performance, pricing, and business mix, growth opportunities, and economic and market conditions, which are subject to risks and uncertainties. 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 I'd like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Phil Bancroft, our Chief Financial Officer, and then we'll take questions.
Also with us to assist with your questions today are several members of our management team. Now it's my pleasure to turn the call over to Evan.
Good morning. We had a really good start to the year, highlighted by excellent premium revenue growth globally, powered by our commercial businesses, double-digit commercial P&C rate increases, and expanding underwriting margins, leading to record ex-CAT underwriting results and simply world-class margins. It was an active quarter for natural catastrophes due primarily to the winter storm losses in Texas, though even with that, we produced a really Good Calendar Year Combined Ratio, which speaks to our improved risk-adjusted underwriting returns. The Published P&C Combined Ratio was 91.8 and included catastrophe losses of 9.1 percentage points, compared with 3.3 last year. The Current Accident Year Combined without CATs was 85.2, compared to 87.5 in the prior year. The 2.3 percentage point improvement was made up of a point of Loss Ratio, with the balance related to the Expense Ratio.
Adjusted Net Investment Income in the quarter was $930 million, up about 1.5%. That excludes Private Equity gains, which most other companies include. On that basis, investment income grew 50%. In sum, Core Operating Income in the quarter of $2.52 per share was down $40 million from the prior year to $1.1 billion, while Net Income of $2.3 billion was up significantly over the prior year's $252 million. Phil Bancroft will have more to say about the Expense Ratio, CAT, Prior Period Development, Investment Income, and Book Value. Turning to growth and the rate environment. P&C premiums were up 9.7% globally, with commercial premiums up 15.6% and Consumer Lines down 2.5%. Foreign exchange had a positive impact on growth of 1.6 points. The Consumer Lines result included negative growth in Global A&H, flat revenue in international personal lines, and about 2.5% underlying growth in North America personal lines.
We continue to experience a very strong Commercial P&C Pricing Environment globally, and based on what we see today, I'm confident these conditions will endure. Chubb was built in all aspects over years to capitalize on these conditions. In North America, Commercial P&C premiums grew almost 15%. New Business was up 21.7%, and Renewal Retentions remained strong at 95% on a premium basis. In North America's Major Accounts and Specialty Business, Net Premiums Written grew about 17.5%, or about 15%, excluding year-over-year impact of large structured transactions. Our Middle Market and small commercial businesses grew over 11%. Overall rate increases in North America commercial were up by 14.5%, while Loss Costs are trending up about 5.5%, though it varies up or down depending upon line of business. Let me give you a better sense of the rate environment.
In Major Accounts, Risk Management -Related Primary Casualty rates were up almost 8%. General Casualty rates were up 34.5% and varied by category of casualty. Property rates were up 20%, and Financial Lines rates were up 21%. In our E&S Wholesale business, property was up 15.5%, and casualty and financial lines rates were up 25%. In our Middle Market business, rates for property were up 16%; casualty was up 12% excluding comp, with comp up 1%; and financial lines rates were up 18.5%. In our International General Insurance operations, commercial premiums grew 20% on a published basis or 15% in Constant Dollar. International Retail Commercial grew 17.5%, and our London Wholesale business grew 38.5%. Retail commercial growth varied by region, with premiums up 26.5% in Asia Pacific, 22.5% in Europe, with equally strong growth in both the U.K. and on the continent.
Our Latin America Commercial Lines business returned to growth in the quarter, with premiums up 4.7%. Internationally, like in the U.S., in those markets where we grew, we continued to achieve an improved rate- to- exposure across our commercial portfolio. In Overseas General, rates were up about 14.5% with a Loss Cost trend of 3%, though that varies by class of business and country. Rates were up 14% in our International Retail business and 20% in our London Wholesale business. Keep in mind, these outstanding commercial insurance growth rates in the U.S. and overseas were achieved in spite of the headwinds we face from negative exposure growth due to reduced business activity. On the other hand, Consumer Lines' growth globally in the quarter continued to be impacted by the pandemic's effects on consumer-related activities. During the quarter, there were signs of recovery beginning.
Breaking consumers down between A&H and Personal Lines, our International Personal Lines business produced modest growth of 1.2% on a published basis, fundamentally flat Constant Dollar. Our International A&H business shrank 3.7%. Travel globally, both business and consumer-related, remains depressed, and that hits A&H hard. Our Direct Marketing and Group Employee Benefits A&H business is beginning to pick up modestly. If we exclude the Travel business, our International A&H business grew almost 2% on a published basis. We expect growth to continue to improve as the year goes along, though predicting the continued impact of the pandemic in Asia, Latin America, and Europe is difficult. Net Premiums Written in our North America High
Net Worth Personal Lines business was up about 2.5%, excluding reinsurance reinstatements, auto renewal credits in California, and wildfire exposure-related cancellations. As I have said before, this outstanding franchise is about customers who choose Chubb for the service and richness of coverage and who are willing to pay for them. These client segments, which are at the heart of what we do, grew 8% in the quarter. Overall portfolio retention remains strong in high net worth at over 94%, and we achieved positive pricing, which includes rate and exposure of 11% in our homeowners portfolio.
Looking ahead, we have been and are taking continued action to shape this portfolio. To that point, we're taking ongoing action to reduce our wildfire exposure in parts of California as a consequence of our inability to achieve adequate rates and terms for the coverage. This will have an impact for the remainder of the year of about $50 million, or about a 1.25% impact on our growth rate.
Lastly, in our Asia-focused international life insurance business, Net Premiums Written plus deposits were up over 18.5% in the quarter. In sum, as I have said the past few quarters or longer, we are in a harder, firming market for commercial P&C in most of the world. The rate environment, in my judgment, is a rational and necessary response to years of industry underpricing and a more uncertain risk environment today, driven by climate change, the litigation environment, and cyber-related exposures. Given our years of data and analytics capabilities and underwriting know-how, we know what rate we need in order to achieve an adequate risk-adjusted rate of return from underwriting, and that is the objective. It is a relentless focus, though we're never perfect. Some lines are there; others have a way to go.
Virtually all of our commercial P&C lines of business continue to achieve rates that exceed Loss Cost, margins continue to improve. As you can see, we're off to an outstanding start to the year. My colleagues and I are confident in our ability to grow our business and continue to expand margins. As I said, I expect as the year progresses, our sizable consumer business will return to growth. Our organization is focused. It's mission-driven. The quality of Chubb service and consistency is a widely recognized differentiator. They are the wellhead of our reputation. We are leaning into the current favorable underwriting conditions and capitalizing wherever we can get paid adequately to assume risk and volatility. We are growing exposure.
Our people are energized and focused, and we have all of the capabilities in place to grow our company profitably while increasing shareholder value. In light of recent events concerning The Hartford, and for the sake of absolute clarity, I want to reiterate once again our enduring views concerning M&A and capital management. We look at lots of deals every year, different sizes, small to large, different geographies, and product areas. We pull the trigger infrequently with lots of optionality. We have made 17 acquisitions over the past 15 years and have an excellent track record of advancing the company's capabilities while creating shareholder value. Our approach is steady and consistent. We are extremely patient and disciplined, and the money is not burning a hole in our pocket.
If we believe a transaction will advance our strategy and further what we are building organically and is good for shareholders, we won't hesitate to pull the trigger. As regards surplus capital, we're again very consistent. We hold capital for risk and growth, both organic and non-organic. Beyond that, we return surplus capital to shareholders. We are highly confident about our future and wealth creation prospects, and we approach The Hartford from that position of strength. This was another opportunity to create additional value and would not distract us from capitalizing on organic growth opportunities. With that said, the purpose of today's call is to discuss our first quarter financials and our company's business. I'll now turn the call over to Phil, and then we're going to come back and take your questions.
Thank you, Evan. Our financial position remains exceptionally strong. Our balance sheet includes a $121 billion double -A-rated portfolio of cash and invested assets. We have over $74 billion in capital stemming from our superior operating and investing performance. Our Operating Cash Flow remains very strong and was $2.1 billion for the quarter. Among the capital-related actions in the quarter, we returned $871 million to shareholders, including $352 million in dividends and $519 million in share repurchases. Adjusted pre-tax investment income for the quarter of $930 million was higher than our estimated range and benefited from increased Corporate Bond Call Activities. While there are a number of factors that impact the variability in investment income, we expect our quarterly run rate to be approximately $900 million. Our Annualized Core Operating ROE and Core Operating Return on Tangible Equity were 8.2% and 12.8%, respectively, for the quarter.
Separately, as Evan mentioned, we continue to present the fair value mark on our private equity funds outside of core operating income as realized gains and losses instead of net investment income as other companies do. The gain from the fair value mark this quarter would have added 3.1 percentage points to core operating ROE. Book and tangible book value per share decreased by 0.4% and 0.6%, respectively, for the quarter due to unrealized losses of $1.9 billion after tax in our investment portfolio from rising interest rates. This loss was tempered by adjusted realized gains of $1.2 billion after tax, mainly from the mark-to-market gains in private and public equities and in our variable annuity reinsurance portfolio. At March 31st, our investment portfolio remains in an unrealized gain position of $2.8 billion after tax.
Our pre-tax P&C net catastrophe losses for the quarter were $700 million from severe weather-related events globally, including $657 million of losses from the storms in the U.S. We had favorable prior -period development in the quarter of $192 million pre-tax or $156 million after tax. The favorable development is split approximately 20% in long-tail lines, principally from accident years 2017 and prior, and 80% in short-tail lines. There was no change to the previously reported aggregate P&C COVID-19 losses, the majority of which remain as incurred but not reported. For the quarter, our net loss reserves increased by $1.1 billion, and our paid -to-incurred ratio was 77%. The P&C administrative expense ratio of 8.6% in the quarter improved by 70 basis points over the prior year, about half related to one-time items that we don't expect to repeat.
Our core operating effective tax rate was 15.5% for the quarter, which is within our expected range of 15%-17% for the year. I'll turn the call back over to Karen.
Thank you, Phil. At this point, we're happy to take your questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll go first to Michael Phillips with Morgan Stanley.
Thanks. Good morning, and congrats on a nice quarter again, Evan. I appreciate all the time here. I guess I want to focus first on—you sound still very bullish on Commercial Lines and exposure growth that you want to push for. You said last quarter, Commercial Lines lagged this quarter; you're confident the conditions will continue or endure. I guess, with your numbers that you gave on pricing and loss trends, there's still quite a bit of a gap there. That's good. A little bit narrower than what you said prior, I guess the two-part question is, how adequate are current rates across the board? It's hard to imagine they're not. I guess you did say you want to push for exposure growth still. Is Commercial Lines still the place to push given what might be a narrowing gap in the Rate versus Loss Trends?
It's funny how people think about rate right now. This obsession with our rate increases decelerating, the rate of increase decelerating, accelerating—where is it? What are you trying to achieve? You're trying to achieve Risk-Adjusted Return, which translates to a Combined Ratio that is at least adequate to return a Risk-Adjusted Return. let's call that 15%, or it depends on the line of business; let's call it 15%. As you approach that, as you achieve it, do you need to keep increasing rates? You ask yourself that question. You need rates to remain there; you have to achieve at least Loss Cost. We're achieving it.
We have more and more of our portfolio, and it's proprietary, so I will not go into what percentages of the portfolio are at a Risk-Adjusted Return in terms of Combined Ratios on a policy year and accident year basis. We measure both. With that, in total, look at the overall level of rate increase and look at the margin between the rate and Loss Cost trend. Now with that, let me go a step further for you because of this obsession about this. When I look at the third and fourth quarters last year, and I measure the first quarter against them right now, and I'm taking the time on this question because I know all of your colleagues, or most of them, have this question on their minds. When I look at the level of rate increase this quarter measured against the prior one. Okay.
Property in North America in aggregate got rate increases in the mid-teens, which is about two to three points lower than it was when I looked at the average of the third and fourth quarters last year. Property's been getting rate on rate on rate on rate. When I look at primary casualties, the rates are up. They're higher than they were on the average. When I look at excess and umbrella, the rate of increase is flat with the average of the quarters. When I look at financial lines, the rate of increase is flat with prior quarters. When I look at marine, it's up. When I look at aviation, it's flat to downhill. When I do this internationally, it's kind of the same trend. Property is down two to three points from what it was the other two quarters. Primary casualty is flat.
Excess and umbrella, the rate of increase is flat. Financial lines are up, and marine is down. No, sorry, marine is up, and aviation is down a little bit. You know what? I think that gives you guys as much color as I can give you. To answer that question from every angle I can that I know is on everyone's mind. You know what? The conditions are excellent. Thank you very much for the question, Mike.
No, thank you. That's helpful. Conditions are excellent. That leads to this one , frankly. I'm not even quite sure how to ask it, Evan, but I'm curious to hear what you can say. Not even asking about The Hartford specifically at all, but just in general, and clearly there was some capital to be deployed there. As you said, not putting a hole in our pocket. You're very infrequent. You pull the trigger infrequently. If something like that size is off the table and the conditions are still pretty ripe, I guess how should we think about where to go from here for maybe another capital deployment round of authorizations versus more organic, or just what can we expect, or what was possible to be used there, and how might it be used in the near term?
What you can imagine, Michael, is steady as she goes. We have clear minds. We are at rest. We upped our buybacks from $1.5 billion-$2.5 billion . We will actively resume that. We had to take a pause during this episode with The Hartford. Beyond that, steady as she goes. We got capital for risk and opportunity. We are patient people.
Okay. Thank you very much, Evan. Appreciate it. Congrats again.
Thank you very much.
We'll go next to Greg Peters with Raymond James.
Good morning. I don't want this to count as a question, but I believe, Phil, this is going to be your last earnings call, if I'm correct. Well, congratulations on your retirement.
Thank you so much. This was, by the way, number 78.
He's going over the wall, Greg.
Number 78. Not that you ... yeah. I knew you guys Yeah.
Thank you.
I knew that would be an issue.
Remember, every year with me is like dog years.
Oh, I wouldn't say that at all.
Okay.
You know how old he looks now?
Well, the rumors about working for you are epic, so I'm sure it's been a good time.
I don't know what they're talking about.
Greg, they're just rumors.
One of the areas that you've spent time in previous calls talking about is the expense ratio, because it showed improvement last year because of, in part, some COVID related T&E savings and things like that. Then, it still seems like it's on a general pathway of improvement. I was wondering perhaps if you can give us an updated view. When we look at these other companies that we follow, most of them try and map out between a 40-70 basis point operational improvement in their expense ratio year in, year out. I'm wondering if you can just give us an updated view on your expense ratio.
Most of them are bloated. Look at our expense ratio in absolute terms versus others, our operating expense ratio. North America is in the single digits and continuing to head marginally lower. It will be through efficiencies, which I have talked about numerous times, with technology and in all forms, so I won't go into it in great detail, but analytics, robotics, straight -through processing, et cetera—we are on track to continue to drive efficiencies in the operations. The same in Overseas General. The difference there is you're across 50 some odd countries, so by its nature, you have a different expense structure; it continues to improve. Look, we're growing our P&C business, the commercial business, at a rate far in excess of growing operating expense. Operating expense is up marginally. We're leveraging against that. Both exposure and policy count is up.
You also got the added benefit, which drives the ratio down of simply a price increase that feeds in there also. It runs a lower acquisition cost than does the Consumer Lines business, but it runs a higher loss ratio. That's just axiomatic and true of it. That business will continue to operate in the range that it's in, which you see right now. Up or down a couple of tenths of a percent, in my mind, as we look forward. The consumer businesses will come back, and as they come back, they have that higher acquisition cost. The operating expense, so the internal expense ratio will go down because you will have more volume returning against it. The acquisition ratio, which will remain steady within the line, will become a greater mix of our total, and so that'll go the other way. It's just natural.
That business then runs a lower loss ratio. The margins are excellent, as you know. Maybe that gives you the color you're looking for.
Indeed. Thanks. My follow-up question, boy, so many different areas I could go in, but I'm going to focus on operations. You said in your prepared remarks that Loss Cost trend was running around just above five points across the book, and then during your comments and in your response to the previous question, you talked about really some really robust rate actions being taken across certain lines of business like general casualty, financial lines, things like that. Should I think about the Loss Cost trend in those lines as running higher because of the rate you're able to achieve? Or is that just an industry Loss Cost trend that you're able to get the rate you're getting?
Let's see if I answer it this way for you. The marketplace, in terms of rate, is striving, the marketplace, because you operate within the marketplace, is striving for two things. That is you have those who have a hole to fill because they have a deficiency in lines of business. Remember, the industry operates like a giant retro. Then they also need a rate for adequacy today. That's the marketplace. If you have operated at adequacy along the way, you don't have that first part, that hole to fill. Achieving market rate, you're achieving better than adequate. That benefits you. We'll see we're certainly in an active Loss Cost period, when you remove the transient impact of COVID. We'll see how it all plays in terms of margin. We play things conservatively.
We are receiving a rate that ensures the portfolio will achieve adequacy in terms of risk-adjusted rate of return across the book. If we have more than that, well, that'll just speak for itself over time.
Got it. Thanks for the answers.
That's the best I can give you.
Understood.
We'll go next to David Motemaden with Evercore ISI.
Hi. Thanks. Good morning. Evan, I just wanted to follow up a little bit on the Loss Cost trend in North America Commercial. It sounds like that's ticked up a bit to 5.5%. Sounds like it's been ticking up. I guess it's obviously a minor detail given the amount of rate that you're getting and continuing to earn above trend. Wondering if you could just talk about what you're seeing that's driving that increase. I know there are a lot of moving pieces, mix, and everything else. Just sort of wondering if maybe you can just elaborate on what was driving the increase in the loss trend.
Yeah. My God, you're looking at about a half a point change, let's just keep it in perspective. You have a couple of things. In the short tail lines, you have non-modeled CAT loss that is on an accelerated trend. Everyone sees it. You know that. I'll move on from there. That finds its way into your, if you're prudent, into your expected Loss Cost. Secondly, on the casualty side, given the litigation environment and across different lines of business, you know we have watched and have talked about it endlessly : the Loss Cost environment is not benign. As we always relentlessly study our trends across each class, we reflect it over a period of time in how we view Loss Cost. We react very quickly, particularly if there's any bad news. We react very slowly to good news.
It's those two that are conspired between short and long term.
Got it. That's helpful. Was there anything in the quarter, or I guess some of the courts started to reopen, specifically in the litigation environment that you saw during the quarter? Or it's just more reflection?
No. David, no news in a quarter. We just do the study that we look at; we're looking at years past and trending forward. When you think about these things, you don't react . Loss Cost trends aren't based upon news of this or that in any given quarter. They're based on a more stable period of time and a much bigger data set, obviously.
Yep. Got it. That makes sense. Thanks for that. I wanted to switch gears to the International Life Business, another good quarter, with strong sales there, up 14% in constant currency. I was hoping maybe you could dive into the different regions between Asia and LATAM and what's driving success in each region. Maybe just stepping back a bit, just talk about the opportunity here, and if you think M&A is a lever that you're evaluating to maybe increase scale in any of these markets.
Great question. The business is overwhelmingly Asia. Latin America, think predominantly Chile and Banco de Chile and our partnership with them. Chile is a great market, but Chile has truly been suffering from COVID and the lockdown. While it's a very good business, it has some headwind in terms of growth related to that, but it's coming back, and that'll continue to do very well. It's bank distribution, both branch- and direct -marketing related. It's more credit related type products and short term than it is long term product. Though there is a mix of that in the portfolio. When you go to Asia, the growth is coming predominantly right now and in this quarter, Vietnam, Thailand, Hong Kong, Taiwan doing well, and our business in Korea getting better, but it's small. It'll take a while to cast a shadow.
What's not consolidated in those numbers but that we add as a line item because we don't have over 50% yet is the increase in Huatai, which is doing well. By the way, we are on our path. It's at a very sensitive moment, so I don't want to talk about it much, but that will consolidate. I'm confident we'll finish what we've got to get done to be able to consolidate Huatai. That life business is growing well. The organic growth, and those are agency-based businesses for the most part, with some direct marketing as well, particularly in Thailand, and bank distribution in Taiwan. If you look at Vietnam, Thailand, Hong Kong, and China, those are predominantly agency businesses where our agency force is growing. These are long-term products. Guarantees are extremely low, like in the 1%-2% range.
There's a healthy mix of savings and protection products. That business is, we built it from dust predominantly. It's cast in a shadow. It's a few billion dollars now. I see great growth potential for that. As regards M&A, I made the statement when I came to the end of my commentary; I said we have lots of optionality. We have optionality when we're looking at opportunity. What that means is across product lines, across geographies, and across customer segments, and that includes the life insurance business. If we found the right thing and it was accretive to our strategy and was good for shareholders, we wouldn't hesitate for a minute. Thanks for the question.
Thank you.
We'll go next to Elyse Greenspan with Wells Fargo.
Hi, thanks. Good morning. My first question is tying together some of the comments we've heard throughout the call, just in terms of market conditions. Evan, you still seem pretty positive there. As we think about the rest of this year, we'll have the economy continue to improve. Exposure growth should pick up. As we think about your commercial businesses, both within the U.S. and internationally, given the dynamics of maybe some stabilization to slight deceleration in pricing.
What's the question, Elyse?
I guess the question is, I'm trying to understand, as we think about premium growth within commercial, should we think about that being stable relative to the Q1 and perhaps even improving as we get the economic improvement picking up from here?
There's nothing on the horizon that I see that tells me we're going to really decelerate in the commercial area. It varies by business as we look at it, but we're feeling very good about it.
Okay, that's helpful. My second question, Evan, as I was reading your annual letter, you made mention of social inflation. I know throughout the call we've kind of brought it up in terms of just what we're seeing today. There's obviously been issues that the industry is dealing with that go back many, many decades. I was just hoping to get your updated view, kind of elaborate on some of what you mentioned in your annual report as you guys think about some of the looming issues that the industry, yourselves, and others are dealing with today.
Yeah. It's not a new issue to us. We've been on top of it for a while, the reviver statutes . They produce lots of notices. They then start to ripen, and you get facts, and you're able to match them up against coverages that were in force during a period of time. As they do, we recognize any liability we have been and continue to recognize liabilities that we have against those. That is all baked into our published loss ratios that you see. The reviver statutes have been open for a period of time. In most all jurisdictions, the reported notices of circumstances have decelerated tremendously from when they first opened up. There are some states that are continuing to consider opening up reviver statutes in theirs. This is an event that the industry deals with over time. These things evolve over time.
I might add, we're very sympathetic to those. It breaks your heart where you see the circumstances of children abused by adults sexually, and where they're for real. On the other side of the coin, the trial bar is a money-making machine. That, combined with new technologies of social media and litigation funding, they see it as another dog bowl to eat out of. There is also a lot of suspect and specious behavior that is involved here. Our job is to tease out what's real and defend against anything that we suspect is just for ill-gotten gain.
That's helpful. Thanks for the color, Evan, and I also just want to extend my congrats to Phil on his upcoming retirement.
Elyse, was that also because he went over the wall? Thank you, Elyse.
Thanks, Elyse.
Thank you. Thanks.
We'll go next to Yaron Kinar with Goldman Sachs.
Good morning, everybody. I'm a bit obsessive in my nature, so I hope you can indulge another question on rates.
Only if it's not asking me to be redundant, Yaron. Don't ask me to do that.
I'll try
Ask me something new.
I'll try. You've said market conditions endure. I think that we are seeing more lines achieving rate adequacy, as you pointed out, when third-year rates increase in excess of trends and interest rates have increased. Why wouldn't Chubb specifically or the industry more broadly be willing to give up more rate for volume as we look at the year ahead?
That doesn't make any sense to me at this point. Look at Combined Ratios of most; look at the loss environment, and I'll tell you what, I think the industry overall is not in a place where it has achieved adequate risk adjustment when you consider both things I talked about. By the way, we are driving. I can't speak about the industry, but I'll tell you what, Chubb is growing. Just look at it. Chubb is growing exposure. We're achieving rate, and we are growing a lot of business because it's at prices that we think are adequate to produce an Risk-Adjusted Return. our new business was up over 20%. Our renewal retentions are high. We're growing. We're growing market share because the pricing is right.
You're in a risky business, and pricing and adequacy are where you start. That's as good as I can give you, Yaron. Beyond that, you're overthinking it.
No, that's very helpful. Clearly you guys are growing off a very large base to begin with. Yeah, no other questions behind that one. I guess switching gears a little bit. We've heard some talk about potential tax reform. I realize these are very early days here, can you maybe share your views on corporate tax reform, its potential impact on Chubb, and Chubb's positioning?
You know what? I don't know enough. We have both the corporate and tax rates that could go up. They're talking 21 going to 25 or 28. We'll see how that plays. Secondly, you've got GILTI and BEAT. You've got the notion of a minimum global tax rate, a multilateral agreement with the OECD. All of these plates are spinning. The Green Book is not yet out. That would tell us any detail of what's in the tax increase; in fact, it's not a reform proposal. We don't even know what the administration is yet proposing other than in headlines. We really can't speculate at this point. We just don't know. When it comes out, we'll have a better sense, and then it's got to run the gauntlet in Congress. We'll see from there. I can't speculate at this point, Yaron.
Yeah. Fair enough. I appreciate the thoughts, Evan.
You're welcome.
We'll go next to Brian Meredith with UBS.
Yeah, thanks. A couple of them here quickly for you, Evan. The first one, if I look at the rate activity that you've been generating the last several quarters in North America Commercial, and then the 5.5% Loss Cost inflation. You do the math and you get a lot more underlying loss ratio improvement than you're booking right now. Is that because of your just conservatism with respect to potential social inflation trends, or is there something else that we're just not thinking about?
Brian, I don't know what you're thinking about. I don't know what you guys are thinking about. We have always operated the company conservatively, and I'm going to stop right there.
Okay. The second question.
I will say this to you. Let's see. We produced over two points of margin improvement. It was an accident year Combined Ratio of 85.2%. My God, world-class, huh?
Yep. No doubt. I completely agree. The second one is just sticking with North America Commercial. Written premium, net written premium growth, was really attractive in the quarter. Gross written premium growth also kind of increased; clearly, you're seeing some benefits from just lower ceded premium. Any change in kind of the reinsurance strategy as we head into 2021?
Not a change of strategy. Not a change of strategy. It varies by line of business. There's a mix within there, and then there is also within some lines of business we have increased our net appetite.
Gotcha. Makes sense. Thank you.
Our more exposure, we have better spread of risk.
Thank you.
You're welcome.
We'll go next to Ryan Tunis with Autonomous Research.
Hey, thanks. Good morning. My question was just on some of the language from the statement that you guys put out last week. Just looking for some clarification. There's a comment where you said, and this is involving The Hartford, the path to a transaction would've been engagement coming from The Hartford on the terms of our last proposal. I guess my question is that just a general comment about your desire to do friendly M&A, or are you trying to say something about that being your last proposal?
Look, the chapter with The Hartford is closed. We have moved along. Beyond that, Ryan, I'm not going to now engage and talk about past events.
Understood. That's fair. In terms of thinking about M&A now, I guess it's been five years since Chubb. Back then, I think the big gating item was that you didn't want to dilute tangible book value per share. I'm just trying to understand, as you think about M&A targets, has any of your thinking evolved in terms of what's most important financially? Is it earnings accretion? Is it still mainly an accretion of value into tangible book value per share?
First of all, Ryan, with all due respect, your comment about tangible books is a nonsense comment. It was dilutive to begin with to tangible, and then it powered its way out of it.
Almost 29% dilution.
I don't know how you're thinking about it. It's hard to do M&A that isn't dilutive to tangible assets. The question is, in the first moment, and then the question is how accretive is it and how quickly do you return? With all due respect, I don't think you're thinking clearly. Number two, I'm not going to go into Chubb's metrics of what's most important. That's not important here. By the way, every deal has its own signature. You want it to fit on a bumper sticker, and it doesn't work that way. I'm going to make one comment about M&A today. EPS accretion, when you use a lot of cash, is a midget's lift. That's really easy. I don't miss that one whatsoever. None of us do. That's the easiest metric.
That's not what it's about when you measure wealth creation value. Thank you very much for the question.
Thanks for the thoughts.
We'll take our last question from Meyer Shields, KBW.
Thanks. Two really quick ones, I think. One, Evan, should we infer anything significant about reinsurance pricing from the fact that gross written premiums were down year-over-year?
No.
Okay. Second question: I was hoping you could comment on non-travel accident and health pricing.
Accidental health pricing?
Yeah.
Which is non-travel.
Non-travel. Yeah. Meyer, remember, we don't do a lot of health insurance. It's supplemental health and accident business. It's fundamentally stable and actually up a few points. Rates have been moving up, particularly in the corporate travel area. The commercial business. In our direct marketing business, it's very steady.
Okay. That's perfect. Thank you.
You're welcome.
At this time, there are no further questions.
Thanks everyone for your time and attention this morning. We look forward to speaking with you again next quarter. Have a great day.
This just concludes today's conference. We thank you for your participation.