Q4 snap: weak premiums, good underwriting

CB delivered a slight underlying EPS miss in Q4 as weak premium growth and higher-than-expected catastrophes were largely offset by good quality underwriting and a lower expense ratio. Operating EPS of $2.28 (excluding the one-off tax boost) was just behind consensus at $2.29. Management commentary regarding current commercial pricing trends was very favourable, which is likely to be the main focus on the call. However, we see little evidence of that coming through in the Q4 numbers with written premiums in Global P&C actually down 1% YoY (excluding FX). In addition, BVPS (ex AOCI) growth of 4.7% remains lacklustre and the operating ROE (excluding the tax benefit) was 8.3%. Guidance for an operating effective tax rate of 13-15% in 2018 should be more or less in line with expecations.