Chubb Limited 2024 Letter to Shareholders

This letter is an opportunity for me to come to account to shareholders about the company we own and to express my views about important issues that matter for our business. It’s where I explain who we are and what makes us distinctive and compelling, and share my thoughts about our results, strategies, leadership qualities, culture and the environment in which we operate.

I will begin with the basics. Chubb helps businesses, people and society manage risk by underwriting a broad, globally balanced portfolio of insurance products and risk-related services that help to prevent or mitigate misfortune. We are well diversified, which provides an important element of stability in the business of risk, while multiplying areas of opportunity for growth. Two-thirds of our insurance-related revenue and underwriting earnings come from commercial customers. We serve the smallest to largest companies globally. A little more than one-third of our business is insuring people – from the homes, autos, art and jewelry of high-net-worth individuals in the U.S., to the lives, health, electronics and pets of middle-income and emerging-middle-income households around the world. In short, we help people and businesses protect themselves and manage the risks they face. 

Chubb is a true multinational, well balanced and integrated, with a portfolio of high-performing businesses operating in 54 countries and territories. Approximately 43,000 employees operate out of more than 1,100 offices in North America, Europe, Asia, Latin America and other parts of the world. About 60% of our premiums are written in North America, with circa 40% spread across Asia, the U.K. and Europe, and Latin America. 

Our Asia operation, with more than 800 offices in 15 countries and territories, is the second largest region in the company after North America. It now produces about 20% of total company premiums. Korea is the second largest country for Chubb after the U.S. More than 75% of our business in Asia (and half of our Asia non-life premium) is consumer-focused – accident and health (A&H), life and personal lines – and these businesses as well as our commercial P&C business have a lot of opportunity for growth. Asia is vast, a collection of many distinct markets both large and small. It takes years of patient building to create the presence necessary to capitalize on the growth themes we observe. In my judgment, Asia and North America are the two regions with the greatest long-term wealth creation opportunity for Chubb – and for American business for that matter. We are well positioned and getting deeper in both.

Our scale and diversification of businesses position us to grow where we see opportunity. Diversification also applies to our distribution capabilities. It’s one thing to have capital and expertise to underwrite; it’s another to have the local presence and distribution depth and breadth to reach customers in the way they prefer to buy. From the smallest business to the largest, from lower-income consumers to high-net-worth clients, from developing markets like Vietnam to advanced economies such as the United States, Australia and the U.K., and the other 50 countries and territories where we do business in between – we are marketers with a strong capability in distribution. Our distribution network spans 50,000 independent brokers and agents, hundreds of thousands of exclusive life and health agents, and hundreds of direct-to-consumer partnerships that give us access to hundreds of millions of existing and potential customers through fully digital, phone and face-to-face sales. By example, we are the #1 or #2 insurer with 15 of the top 20 brokers in the U.S., yet the largest direct marketer of insurance in Asia.

Whether a business or a person, your reputation is your most precious asset: easy to say, hard to earn and easy to lose. Chubb’s is distinctive, and we don’t take it for granted. We have a reputation for quality of service and dependability. Our customers have confidence in us. In many instances, they are willing to pay more for Chubb, and we are committed to living up to that reputation. When disaster or misfortune strikes, it’s our job to provide an extraordinary level of support – a point I will return to shortly. 

Every successful company has a clear understanding of its purpose, and at our core we are an underwriting company, with a culture built and managed by underwriters. In a risk business, underwriters have the training, knowledge and instincts to conceptualize, structure, price and assume risk. We are obsessed with the art and science of underwriting, as well as the discipline, governance and culture of our craft. Our insurance portfolio has been carefully constructed over years and is balanced by product, customer, geography and distribution channel. When conditions support our expectation for adequate risk-adjusted returns, we grow exposure aggressively. On the other hand, we sacrifice top-line growth and shrink, even ruthlessly, to preserve an underwriting profit when conditions are inadequate.

The Chubb culture is unique, and it’s personal. The true citizens of our culture are personally invested and own it. Our ethos is one of builders with a clear vision. We are hungry, ambitious, results-focused and maniacally execution-oriented. We innovate and adapt. We are a well-integrated organization with a relatively flat management structure that enables rapid decision-making and oversight. When I say well-integrated, that means horizontally and vertically. Ideas and capabilities in our company move around the world while we maintain a strong command-and-control governance process. All of this is supported by advanced management information and maturing data capabilities to ensure insight, discipline and consistency without sacrificing our entrepreneurial nature. We are transforming to lead in a digital age.

We strive to be genuine regardless of how the political winds blow and have been steadfastly committed to the notion of creating a diverse and inclusive meritocracy. That means we strive to ensure an environment that attracts the best and the brightest – without regard to gender, color, race, age, religion or other distinctions – and recognizes and rewards our people for their contribution to results. In a word, that’s accountability. We want people at Chubb to be comfortable to do their best, and we mean to carry ourselves with humility, professionalism and earnestness. We are frank though respectful of each other. We don’t sweep problems under the rug or rationalize away mistakes. We’re frank because we want to get better quickly, and we are respectful because that is the way we expect others to treat us. 

The higher you go in this organization, the harder you work and the more you are held to these values. The sacrifices expected of leadership are an honor, not a burden. We develop our leaders thoughtfully over years. We made several important leadership changes last year, including at the top of our two largest business segments, North America and Overseas General, and in the Asia-Pacific and Latin America regions. In the first quarter of ’25, we made senior leadership changes in two other major businesses as well – our Europe region and our U.S. high-net-worth business. These changes were well planned and drew from a deep pool of long-tenured talent, the result of our decades-old succession and grooming process. 

To give you a sense of how this process works, every year our senior leadership team, led by me, takes two days to review our business and support units’ succession plans, depth of the technical and management bench, individual performance, strengths, weaknesses and development plans. We build a dynamic list of candidates for important roles around the globe – both near- and long-term. We know personally who they are, how many years they’ve been with us, their roles and paths for development. We have been doing this for 20 years. Last year we reviewed more than 300 of our most promising senior people and an additional 140 critical roles. As I noted earlier, our executives are patiently groomed over a long period and earn their appointments through the demonstration of results, hard work, skills, leadership, commitment to the organization, trustworthiness and character. They come from a deep, multi-generational bench that is of our culture, ensuring continuity of standards and knowledge. 

When it works well, that’s what an inclusive meritocracy looks like to my colleagues, to me and to John Keogh, my partner and our President and Chief Operating Officer. By the way, John is a leader who is the embodiment of our culture, and I’m beyond grateful for him. He is a role model to be emulated. I have my shortcomings; John’s strengths compensate for my weaknesses. We’re complementary in that way. I’ve worked with John for more than 30 years and sometimes would have made some pretty lousy decisions without his wise perspective and counsel.

From a shareholder perspective, we have a proven record of compounding wealth over a long period. A dollar invested in ACE 20 years ago would have been worth $9.83 on December 31, 2024, or $98,300 on a $10,000 investment. That same dollar would have earned you $7.18 if you had put it in the S&P 500. Chubb produced a total return to shareholders of 49.7% over the past three years, easily beating the S&P 500’s return of 29.3%.

Earnings accrete to our shareholders through growth in tangible book value, which is the most fundamental measure of wealth creation in a balance sheet business. Last year, our tangible book value grew 12.8%, or 14.1% on a per share basis. Tangible book value per share has grown 10.2% per year on average over three years. Over an even longer period, the last 10 and 20 years, per share tangible book value has grown by 38.2% and 342.2%, respectively, and that includes dilution from the numerous acquisitions we made. We deploy equity capital efficiently, and our operating return on tangible equity was 21.6% in 2024; our operating ROE was 13.9%. Both are well in excess of our cost of capital and an excellent risk-adjusted return. 

We are a leader in insurance for middle-market and small commercial companies, increasingly enabled by our digital capabilities. For middle-market companies, with annual revenues from $30 million to $1 billion, we offer the broadest portfolio of products to cover their needs, regardless of what industry they are in. That’s complemented with experts and risk engineering tailored to dozens of industries, from health care and construction to life sciences and technology. Local presence and distribution are important advantages for us. Insurance is local and conducted between people – and will be for a long time, except for simple products, given the arcane nature of what we do. Our middle-market business grew almost 7% last year, and we are making good progress in small commercial, which wrote about $1.3 billion. We see a lot of room to grow. 

Westchester is our North American E&S business, a $4.2 billion division that provides coverage for tough or difficult-to-write risks that admitted markets do not adequately address due to a lack of underwriting expertise or regulatory constraints. It was another success story in 2024, with almost 9.5% growth, especially in difficult areas of risk where traditional property and casualty industry capacity was harder to come by. Our E&S business is also home to niche programs such as pet insurance, where we have a growing business that covers 520,000 furry citizens. 

Personal Risk Services (PRS), a $7.5 billion business with 60% market share, is our storied North America high-net-worth personal lines franchise. Premiums grew 11% in 2024. Our PRS clients pay us to meet a high level of service, pre- and post-loss, and we strive to do just that. That’s our reputation. It’s about the richness of coverages, knowledge and capacity to take risk, underwriting and engineering capability, and quality and consistency in claims. We earned a 93% “highly satisfied” customer service rating in 2024 – the top honors – in the J.D. Power & Associates homeowners customer satisfaction rankings. For a sense of our scale, we write more than a million policies each year, and our risk consultants make more than 40,000 personalized client visits. 

Most individuals and businesses are in some way exposed to the risk of a changing climate, and our job is to offer more than financial coverage. Our risk consultants and engineers strive to help clients improve their resilience against risk of loss, and our claims team is there when it happens. If you are unfortunate enough to have a personal insurance loss, I hope you have Chubb.

The insurance industry incurred $140 billion in insured CAT losses globally last year, and it was a normal year. The cost of the new normal is increasing quickly. Over just 90 days or so in late 2024 and early 2025, a combination of two hurricanes and the California wildfires produced what’s probably about $90 billion to $100 billion in insured losses. And as the cost of catastrophes increases for the industry and society, it is naturally impacting the price and availability of insurance. 

The public needs greater certainty of insurance availability, and that begins with regulation that supports an adequate price for the risk. For Chubb, we want a 15% return on capital. Without an adequate return, the private sector can’t attract the capital necessary to cover growing exposures. The cost of catastrophes, and the associated cost of where people choose to live and work, is increasing. Climate change price signals are being broadcast directly through the rising cost of insurance.

The industry doesn’t run a printing press; we intermediate money. When state regulators deny insurers the ability to charge an adequate price and restrict our flexibility to tailor coverage, they drive away insurance availability and foolishly suppress economic price signals, which incentivizes the wrong decisions about where and how people choose to live and work. This ultimately creates a crisis. One outcome is the distortion of a state-funded insurer, meant to provide subsidized insurance for those of modest means and who can’t afford to move. Instead, it becomes the general insurer of first resort for too many. Who pays the bill when that insurer inevitably fails? The citizens of the state pay up front or after the fact; the cost can’t be avoided. This political and regulatory approach is not an economically viable model. Going a step further, attempts to suppress price signals disincentivizes most governments and communities from investing in infrastructure, resiliency and loss mitigation efforts. So many promote unwise zoning and land management practices. 

The recent wildfires in California are a tragic illustration of the problem. The state suppressed the industry’s ability to charge a fair price for wildfire-exposed coverage. As insurers reduced their exposures and withdrew private insurance capacity, citizens were offered cheap coverage through the state’s insurer-of-last-resort FAIR plan. Add the enormous time and costs associated with reconstruction post-event due to highly inflated state and local requirements as well as approval and permitting processes. It also doesn’t help that insurers are vilified by government and consumer advocacy groups who, for their own populist and political reasons, tell claimants not to trust their insurers and to lawyer up, which only adds more time and cost to claims settlement. Most insurers are striving to do the right thing and take care of their customers. Counter-productive.

Allowing insurers to adequately charge the right price is the starting point for increasing availability and building a sustainable model. Accounting and tax rules also can be improved to increase the industry’s capacity over time to cover disasters. Current accounting rules allow for insurers to post reserves for natural disasters only after a disaster has occurred. In years when CAT activity is lighter, revenue from insurance premiums collected to fund for larger, more infrequent catastrophes is released to income, and, in turn, the capital account on an after-tax basis. The revenue is treated as profit when, in fact, it’s meant to provision for larger, less frequent events. This isn’t in keeping with accounting practices for banks, which account for the risk of future loan losses when building reserves. The insurance industry should be encouraged to build long-term reserves for more severe CAT events. In simple terms, this change would grow the industry balance sheet – our wherewithal to take risk – and lower our cost of capital, which means damping price increases over time and increasing private sector capital available to cover events. While it isn’t a silver bullet, nor an instant answer, this is a long-term problem requiring longer-term solutions as well. 

Local, state and federal governments have a very important role to play: better wildlands management programs and zoning policies, and infrastructure investments that help to mitigate exposures and increase resiliency in our communities. We need permitting rules that don’t unnecessarily increase the cost of reconstruction and the time it takes to rebuild after an event. That would improve affordability, and it would also help people get back to their lives more quickly. State insurers of last resort can serve a need. They should be designed to subsidize insurance, if necessary, only for those most in need – people who live in high-risk areas, can’t afford private sector coverage and can’t afford to move. They are generally called insurers of last resort for a reason.

On the other side of the coin, Climate+ is innovating insurance coverages for many new and unproven alternative energy technologies that support a shift toward a carbon-neutral economy, including renewables, thermal energy, batteries, wind farms, solar, nuclear and more. By providing insurance to these projects, risk is reduced, which helps lower the cost of capital and encourages greater investment. Underwriting traditional energy sources as well as new and emerging ones is a growth opportunity globally. 

Our digital unit that serves international consumer, non-life and life, reached a cool milestone last year, surpassing more than $1 billion in premiums, and it generated an underwriting profit. We have rapidly expanded the products and services that we bring to the customers of 240 digital partners, including some of the world’s largest fintech and e-commerce businesses. We have built our native digital business from scratch in six years, and we have plans to grow exponentially in size and profitability. 

While early innings, I like the progress we made last year with Huatai Group in China. We have put in place new leadership, updated strategies for each division and made good tactical progress across the three businesses – property and casualty, life and asset management. We’re reshaping the business and strategy around product, distribution, technology, sales capability and expense efficiencies. The economic environment is difficult in China, yet, despite that, we are moving ahead, and each business saw solid growth last year.

We’ve been in the reinsurance business for more than 30 years and were one of the original pioneers of CAT reinsurance, a market that grew out of the aftereffects of Hurricane Andrew in 1992. Reinsurance is a small but important part of Chubb and a book value compounder. We keep it relatively small to limit volatility and concentration while we allocate the majority of our risk appetite to insurance. The leadership team under Jim Wixtead is a highly disciplined group of professionals who have made us money. Global Re had a very good year in terms of growth, with net premiums up 32% to $1.3 billion, as underwriting conditions in the reinsurance markets have become more favorable and have attracted our attention in certain targeted areas.