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: William Watts

The usd index measuring the changes in the exchange rates of six major currencies against the US dollar rose by 2.5% in October. The volatility within the year has turned from negative to positive. Analysts believe that one of the reasons for the strengthening of the US dollar is that investors are increasingly convinced that the Republican presidential candidate Trump will win the election on November 5th.

Thierry Wizman, forex and interest rate strategist at Macquarie, observed that in October, the USD strengthened against major currencies, while the market forecasts had already digested the increasing probability of Trump's victory.

From the amount of bets on the prediction market Polymarket (see figure above), the probability of Trump winning against Democratic presidential candidate Harris has increased from around 50% at the end of September to around 55%.

Wizman and Macquarie strategist Gareth Berry recently wrote in a report: "The phenomenon of the USD index rising along with Trump's increasing probability of winning is expected. We believe that Trump's policies (high tariffs, immigration restrictions, low taxes) will lead to inflation, therefore, the Fed's policy stance during 2025 to 2026 will become more 'hawkish'. Trump's policies are a 'strong USD policy'.

Wizman pointed out in an interview with MarketWatch after the report was released that during most of his first presidential term, Trump often complained that a strong USD weakened the competitiveness of the USA; therefore, implementing a 'strong USD policy' is a notable change.

Witzman said, Trump's shift to supporting a strong US dollar is "because he sees how the inflation issue puts his political opponents at a disadvantage," and he realizes that a soft US dollar would lead to inflation.

Witzman pointed out that Trump threatened last month to impose 100% tariffs on countries that "abandon the US dollar".

Hedge fund manager and senior economic adviser to Trump, Scott Bessent, recently said in an interview with the Financial Times of the United Kingdom that Trump's support for the US dollar as a reserve currency will not attempt to devalue the US dollar. And in an interview with Bloomberg Businessweek this summer, Trump said that the US dollar strengthening against other currencies is an issue, especially against the yen and the yuan.

However, setting aside these statements, Trump's policy trajectory and its potential impact on inflation remain the main driving force behind the recent rise in the US dollar.

Witzman pointed out that Trump's three core economic policies - raising tariffs, reducing immigration, and lowering taxes - both theoretically and practically, are more likely to lead to inflation than Harris's corresponding alternative solutions. Perhaps more importantly, if these policies are implemented, the Federal Reserve will have to deal with a situation where both real and nominal interest rates will rise.

Higher interest rates relative to other countries will increase the attractiveness of US assets, thereby driving the appreciation of the US dollar.

Of course, regardless of who ultimately wins the election, there is a possibility of being constrained by the rise in bond yields. Although the Federal Reserve cut interest rates by 50 basis points in September, concerns about the US fiscal outlook continue to drive up US bond yields.

As Trump's advantage in the prediction markets grows, the polls continue to show him and Harris neck and neck. Analysts point out that the gap between Harris and Trump in several key swing states is small, which may give participants in the prediction markets more confidence in the Republican Party winning the electoral college.

Witzman said that if Harris wins the election, or if the prediction market turns in her favor before the election day on November 5, the dollar is likely to give back most of its recent gains.

Witzman said, 'So it depends on who will win, but I think the dollar's rise in the past two weeks has already paid some down payment on the prospect of Trump winning.'

Editor/rice