Source: Barron's Chinese Author: Nicholas Jaskinski Evan Greenberg, CEO of Chubb Ltd, has a highly influential fan - Warren Buffet, CEO of Berkshire Hathaway. Berkshire Hathaway disclosed last month that it held 6% of the shares in Chubb, one of the world's largest insurance companies, by the end of 2023. Berkshire itself is a major participant in the insurance industry, but it is not the only buyer. In the past year, Chubb's stock return, including dividends, was about 40%, surpassing the S&P 500 index's total return of 25%, and making the company's market capitalization reach $110 billion. This increase in market capitalization reflects Chubb's outstanding performance, which is attributed to its prudent underwriting practices and conservative management of its investment portfolio of about $140 billion. The company's earnings per share increased by 48% in 2023 and its book value per share increased by 21%. Greenberg is the son of Maurice "Hank" Greenberg, the former CEO of American International Group (AIG). Greenberg worked at AIG for 25 years, rising through the ranks. He left the insurance company in 2000 and took over Ace Limited in 2004. The company merged with Chubb in 2016, the largest M&A in the property and casualty insurance industry at the time. Today, Chubb is the largest commercial insurance provider in the United States, and the company is also known for its high-end homeowner insurance for the wealthy. However, about half of the company's premiums last year came from outside the United States. Asia has always been a growth area where the company is bullish: Although Asia accounts for 40% of global GDP, the insurance industry accounts for only 26% of the global insurance market share. This gap is expected to narrow over time. Greenberg sits on the board of several nonprofits that focus on international and Asian affairs. Barron's recently interviewed Greenberg about his underwriting philosophy, the challenges of dealing with increasingly frequent climate disasters, and US-China relations. Following are the edited excerpts of the conversation.
Author: Ian Salisbury

With less than a month to go until the US presidential election, polls show Trump and Harris are basically neck and neck. No one can say for sure who will win in the end, but looking at historical data, the election outcome may depend on the performance of the US stock market between now and election day.

A new report from stock research institution Leuthold Group suggests that it may play a decisive role. $Dow Jones Industrial Average (.DJI.US)$ This year, the Dow Jones Industrial Average has risen by nearly 12%. If it continues to rise, Vice President Harris may win the election, while if the Dow Jones falls, former President Trump may emerge victorious.

The long-standing rule of thumb indicates that if the US stock market rises in the three months before election day, the incumbent party's candidate usually wins. Leuthold Group points out that this method uses the S&P 500 Index as a measure of stock market performance and correctly predicted the results of 20 out of the past 24 presidential elections since 1928.

In order to find a better prediction tool, this time Leuthold Group adjusted its method, studying the performance of the Dow Jones Industrial Average instead of the S&P 500 index in the 11 weeks before the election day (instead of 12 weeks). After analyzing the data, Leuthold Group found that in the past 24 elections, the Dow Jones correctly predicted the outcome 22 times, meaning that this method has a 92% accuracy rate in predicting the winner. The two incorrect predictions were Dwight Eisenhower's re-election in 1956 and Richard Nixon's victory over Hubert Humphrey in 1968 during the Vietnam War election.

The probability of the Dow Jones correctly predicting the results of the US presidential election.

The trend of the Dow Jones in the 11 weeks before the election day is related to whether the incumbent party candidate has won the presidential election since 1968.

These statistics also have limitations. First, both methods rely on the stock market's performance before election day, so their predictive value is limited. The 11-week window studied by Leuthold Group started on August 13, and the Dow Jones has risen by 5.5% since August 13, which is a positive sign for Harris. However, anything can happen in the stock market between now and November 5, for example, on Monday (October 7), the Dow Jones fell by 0.9%.

Furthermore, while it is easy to see how the stock market's performance could affect the mood of voters, it is hard not to give the impression that the 11-week window is a result of data filtering. Leuthold Group also acknowledges this point.

However, Leuthold Group's prediction method also has some reference value. Last Friday (October 4), the Dow Jones hit a new high driven by a strong jobs report. Harris has maintained a slight but steady lead in polls, recent surveys show she has gained some support on economic issues, which have always been the most important issue in the US presidential election.

Voters may come to different conclusions when they see the same stock market data. Data from the Pew Research Center shows that only about 58% of American households hold stocks. Most voters are ultimately concerned not with the stock market, but with the economy. Although the stock market is typically a good indicator of overall economic health, experts have been discussing the disconnect between stock market performance and consumer confidence for several months.

In addition, voters' concern for other issues - from issues such as war and immigration to the candidates themselves - may outweigh their concern for stock market performance.

Therefore, it is difficult to ignore the case where the Dow Jones Industrial Average failed to correctly predict the election results last time. The 1968 election was characterized by serious voter division, with the incumbent President withdrawing after realizing he could not win, while the Vice President at the time was trying to take his place.

Research on stock market returns provides another data point for predicting the winner of the upcoming election, however, regardless of what the Dow Jones says, anyone could ultimately win.

Editor / jayden