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: Meghan Leonhardt

On Wednesday (October 9), Hurricane 'Milton' made landfall in Florida, USA, causing severe damage to Tampa and the surrounding areas. Two weeks ago, the area was hit by Hurricane 'Helene,' which then moved north to North Carolina and Tennessee.

These two hurricanes may distort October labor market data in the USA, suppress consumer spending and economic growth in the affected areas, and push up food prices.

Citigroup's Chief Economist Andrew Hollenhorst said, "October employment data may be significantly affected."

Before 'Milton' made landfall in Florida, employers in the area closed their doors. Orlando's Disney World, Universal Studios, SeaWorld Orlando, Busch Gardens, and the LEGO theme park all announced early closures on Wednesday. Meanwhile, in some areas of North Carolina severely affected by 'Helene,' many workers are still on leave. These factors could lead to an increase in the USA's October unemployment rate and issues such as constrained corporate hiring activities.

JPMorgan economist Abiel Reinhart estimates that the impact of 'Helene' on employment ranges from "very small" to causing "over 0.1 million job losses in October". The 2005 Atlantic hurricane season was one of the most severe in history, with initial figures released in September showing a national employment decline of 0.035 million. The October employment report for this year will be released on November 1, just a few days before the US presidential election day on November 5.

As of the week ending October 5, the initial claims for unemployment benefits will be released on Thursday (October 10) local time, providing an initial understanding of Hurricane's potential impact on the US labor market. Economists surveyed by FactSet predict the initial claims for unemployment benefits last week to be 0.225 million, unchanged from the previous week. Morgan Stanley's economic team forecasts it to be 0.235 million.

However, Ryan Sweet, Chief US Economist at Oxford Economics, believes that if the national employment statistics decline, it will only be a temporary phenomenon and not a reason to change the further interest rate cut plans at the Federal Reserve's policy meeting in November.

In addition to the impact on the labor market, Hurricane 'Milton' may also lead to price increases in commodities including food and energy. Chevron announced on Monday that the company has evacuated all personnel and closed facilities from the Blind Faith platform. Chevron's production at other oil drilling platforms in the Gulf of Mexico remains at normal levels.

Louis Navellier, the founder of Navellier & Associates, said, 'Due to unusually high sea temperatures, the Gulf of Mexico may continue to generate more hurricanes.'

Furthermore, fruit prices may also be affected, as citrus production in Florida accounts for 17% of the US total, with the central part of the state being the highest citrus-producing region.

Data from the US Department of Agriculture shows that when Hurricane 'Ian' hit the southwest of Florida in September 2022, estimated losses for citrus crops in the state ranged from $0.2 billion to $0.4 billion. The final estimated loss from 'Ian' was 42% of Florida's total production.

Joel Myers, Founder and Executive Chairman of AccuWeather, said, 'Over the next few weeks, prices of some vegetables and fruits will rise.'

Myers believes that 'Milton' will be 'one of the most destructive hurricanes the US has faced, causing some of the most serious losses'.

One of the reasons is the expected path of the hurricane. If Hurricane 'Milton' hits the densely populated Tampa metropolitan area, it could cause significant property and commercial losses, leading to reduced spending. If the economic losses caused by 'Milton' exceed $200 billion, according to Miles' calculations, these two hurricanes landing successively could have a negative impact on the US GDP.

Trends of the US GDP from the second quarter of 2021 to the second quarter of 2024

Oxford Economics Research Institute's Sweet pointed out that states contributing 2.8% to the US GDP are within the expected path of 'Milton'. Gregory Daco, Chief Economist of EY, believes that even if the wind level is lowered, 'Milton' will still 'cause severe damage along its path'. Daco estimated on Wednesday that the hurricane could lead to a decrease of 0.2 to 0.4 percentage points in the actual GDP growth rate in the US in the fourth quarter, and the GDP growth rate in Florida in the fourth quarter could decrease by 3 to 4 percentage points.

However, Sweet pointed out that GDP is not a perfect indicator for measuring the economic impact of hurricanes. The losses caused by 'Milton' are 'highly uncertain'.

The impact of severe tropical storms on the macroeconomy is usually relatively short-lived. The hurricane season in 2005 was the most serious hurricane season the US has experienced in recent years. 'Katrina' made landfall in late August that year, followed by 'Rita' and 'Wilma'. The US Economic Advisory Committee calculated that in the third quarter of 2005, these three hurricanes collectively caused a 0.7 percentage point decrease in the US GDP growth rate, and a 0.5 percentage point decrease in the fourth quarter. 'Katrina' also damaged the energy infrastructure, leading to a substantial increase in gasoline prices nationwide.

However, according to the Congressional Budget Office's estimation, driven by post-'Katrina' reconstruction activities, the US GDP growth rate increased by 0.5 percentage points in the first half of 2006. In addition, according to the analysis of the US National Bureau of Economic Research, residents affected by 'Katrina' recovered their income and employment quite quickly.

JPMorgan's Rhinehart estimates that Hurricane "Heleni" could lead to a 1% decrease in the GDP of affected states. The four states most severely affected by "Heleni" - Florida, Georgia, North Carolina, and South Carolina - account for nearly 13% of the US GDP, therefore, the impact of "Heleni" on the annualized growth rate of the US GDP is about 0.13 percentage points.

Oxford Economics' Sweet said, "The hurricane will have a certain negative impact on the US economy in the early fourth quarter, but the lost economic output will be offset by clean-up and rebuilding activities in the following months."

Editor / jayden