Chubb Limited
Bärengasse 32
CH—8001 Zurich
Switzerland
chubb.com
Chubb Limited
Annual Report
2019
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002CSNA958
Financial Summary
Chairman and CEO Letter to Shareholders
Elevating the Customer Experience
Review of Operations
Citizenship at Chubb
Chubb Group Corporate Officers and Other Executives
Chubb Limited Board of Directors
Shareholder Information
Non–GAAP Financial Measures
Form 10–K
Swiss Statutory Financial Statements
Swiss Statutory Compensation Report
Environmental Statement
1
2
20
24
44
46
48
49
50
Financial Summary
In millions of U.S. dollars
except per share data and ratios
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
Percentage
Change
Gross premiums written
$40,124
$37,968
Net premiums written
Net premiums earned
P&C combined ratio
Current accident year P&C combined ratio
excluding catastrophe losses
Net income
Core operating income
Diluted earnings per share — net income
Diluted earnings per share — core operating income
Total investments
Total assets
Shareholders’ equity
Book value per share
Tangible book value per share
Return on equity
Core operating return on equity
32,275
30,579
31,290
30,064
90.6%
90.6%
89.2%
4,454
4,641
9.71
10.11
88.0%
3,962
4,407
8.49
9.44
109,234
100,968
176,943
167,771
55,331
122.42
78.14
8.4%
9.0%
50,312
109.56
65.89
7.8%
8.7%
Core operating return on tangible equity
14.6%
14.6%
5.7%
5.5%
4.1%
NM
NM
12.4%
5.3%
14.4%
7.1%
8.2%
5.5%
10.0%
11.7%
18.6%
NM
NM
NM
This document contains non–GAAP financial measures. Refer to pages 50–52 for
reconciliations to the most directly comparable GAAP measures.
NM—not meaningful
Percentage
Change
Constant
Dollars
7.0%
7.0%
5.5%
6.8%
8.6%
1
Evan G. Greenberg
Chairman and Chief Executive Officer
Chubb Group
2
To My Fellow Shareholders
As this letter goes to press, the U.S. and many other nations of the world are shutting down much of their
social and economic activity in response to the spread and threat of the coronavirus. We simply don’t
know at this time how fast or far it will spread, or how effective we will be in slowing the spread, treating
victims and dealing with the consequences. For Chubb, we are clear about our priorities and resolute in
our response: To the extent possible, we will take care of our people and keep them safe; we will remain
consistent in how we take care of our customers and business partners, doing everything in our power to
serve their needs with minimal disruption; and we will be a responsible citizen in our community, heeding
the advice of government and health authorities, and as a solid contributor to recovery.
Chubb had a very good year in 2019.
We produced strong financial results,
including per share growth in earnings,
book value and tangible book value. We
capitalized on opportunity, benefiting
from improved commercial property
and casualty (P&C) pricing and
underwriting conditions globally and
generating our best organic premium
revenue growth in over five years. We
achieved another year of excellent
underwriting profitability — a direct
result of our time–tested discipline
in underwriting and managing risk.
Driven by growth in our invested
assets, we generated record investment
income despite low interest rates.
Throughout the year, Chubb
professionals distinguished themselves
through their actions serving customers
and business partners, contributing
to our admired brand and reputation
for quality service. We made progress
in our efforts to advance our many
longer–term strategies that will position
us for future growth, including our
presence in China with an increased
ownership stake in Huatai Insurance
Group. We demonstrated leadership
in environmental sustainability
by announcing a progressive policy
curtailing our underwriting and
investments in coal. We concluded the
year in excellent financial, operational
and competitive shape and have real
momentum going into ’20 for future
growth and profitability.
In my judgment, all successful
companies have a clearly articulated
view of who they are and why they
exist, so let me begin by describing in
a few words our unique and distinctive
company. Chubb is the largest publicly
traded P&C insurer and the fifth largest
insurer in the world as measured by
market capitalization. (Fifteen years
ago, we were #5 and #26, respectively —
we are patient and persistent.) We are a
truly global commercial and consumer
insurer — one of only a few in the
world. With substantial local operations
in 54 countries and territories, we
compete for local business while
serving the needs of multinationals.
We have an enviable long–term track
record of financial performance
including growth in earnings, book
and tangible book value and
market capitalization, underpinned
by distinguished underwriting
performance.
In the United States, which represents
about 30% of the global insurance
market, we are a top–two commercial
P&C insurer that serves all sizes of
companies — from global to middle
market to small businesses — with
hundreds of traditional and specialty
coverages, including a leading position
in the wholesale market for excess
and surplus (E&S) or difficult to
place risks, and we are the #1 crop
insurer. On the consumer side, Chubb
is by far the leading personal lines
insurer protecting America’s affluent
individuals and families. Our Combined
Insurance affiliate serves middle–
income households with a variety of
personal accident and supplemental
health insurance products.
About 40% of our business originates
outside the United States and it’s
growing faster than our U.S. business.
Our extensive local operations
throughout Europe and the United
Kingdom, which represent about half
of our international portfolio, in 2019
had their best growth in a decade. The
balance is equally split between the
developed and developing markets
of Asia and Latin America, both of
which are growing at high–single or
double–digit rates. Our international
insurance businesses are essentially
split 50/50 in terms of their commercial
and consumer focus. In addition to
our retail commercial P&C businesses
present in just about every major
market around the globe, we also
have significant E&S wholesale market
operations in London and Bermuda.
We serve consumers in international
markets through our large global
accident and health (A&H) business,
which writes personal accident and
3
supplemental health insurance,
and our international personal
lines business, which underwrites
everything from cell phones to autos
to homes and their contents.
As the first company to convert a
domestic Chinese financial services
holding company to a foreign–invested
joint venture, we are on a path,
subject to regulatory and shareholder
approvals, to achieve majority
ownership of China’s Huatai Insurance
Group, the holding company of P&C,
life and asset management subsidiaries
with over 600 offices. We also have
a growing Asia–based life insurance
business that is becoming a more
important contributor to earnings.
Taken together, Chubb has a
thoughtfully constructed and managed
global portfolio of simply outstanding
businesses. Most are top–performing
multibillion–dollar businesses, with
substantial scale and scope for growth,
and the envy of the industry. We have
a well–balanced mix of business — 66%
commercial lines, 34% consumer
lines — and our product breadth and
balance are a real strength. We sell our
products globally through an extensive
range of distribution channels: over
50,000 brokers and independent
agents, more than 85,000 exclusive
life and health agents, and hundreds
of direct–to–consumer partnerships
that give us access to tens of millions
of potential customers through digital,
phone and face–to–face marketing tools
and techniques — another strength. At
the same time, in aggregate, we are not
overly dependent on any one channel.
For the year, total gross premiums
written for the company were $40.1
billion while net premiums written,
which are the premiums we retain on
our balance sheet, were $32.3 billion,
both up 7% before the impact of
foreign exchange. Our balance sheet is
exceptionally strong, with $70 billion
in total capital and over $55 billion
in equity at December 31, and our
company is rated AA by S&P and A++
by AM Best. With a good balance of
underwriting and investment income,
last year we produced core operating
income of $4.6 billion, or $10.11 per
share, up 7.1% on a per share basis
from 2018.
The macro environment in 2019
I would have characterized the external
operating environment in ’19 and as we
began to move into ’20 as marked by
great opportunity, risk and complexity.
That is until the coronavirus outbreak,
which began in China and subsequently
spread to the rest of the world. Now,
with the specter of a true pandemic
upon us, and the substantial damage
to be inflicted on society, economies
and commerce alike, markets are
severely stressed and signaling global
recession. As of this writing, to what
degree and how long it will last is
simply unknowable — it depends on
the rate and severity of infection. We
lack visibility. However, the coronavirus
has already had a real impact on China
economically and politically, as well as
the global economy, including the U.S.
Beneath the shadow of the coronavirus,
U.S. economic performance has
remained the strongest in the world
among large economies, while the
global economy has slowed from trade–
related headwinds, poor government
policy in many countries, and
geopolitical events. Business thrives
in an environment of certainty, and
business confidence has suffered, and
that has impacted business investment.
2019 concluded on a more encouraging
note with the signing of the USMCA
trade agreement and a phase one
U.S.–China trade pact, both a net
positive given where we were, as
well as increased political certainty
surrounding Brexit. By themselves,
these developments may provide
moderately improved business
confidence and, in turn, increased
investment, although we still face
considerable uncertainty:
• Tariffs with China remain in place,
as do tariffs with others at year–end.
Manufacturing globally is in recession.
The phase one agreement, while a
good start, doesn’t address many of
the fundamental trade issues with
China — in that regard, it kicks the can
down the road.
• More broadly, protectionist
sentiments persist. The rules–based
trading system is under attack from the
world’s two largest economies with the
U.S. unilateral approach using tariffs
and a strong–arm approach (and by
the way the EU is on deck later this
year) and China, with its predatory
behavior, gaming the global system to
its advantage. We are evolving from
a unipolar to a multipolar world —
China is emerging and the U.S. is more
unilateral and inward–looking, both
sources of increased tension.
• U.S.–China relations are headed in
the wrong direction, marked by lack of
trust and cooperation, and increasing
confrontation.
• We have numerous geopolitical hot
spots including North Korea and Iran.
4
Industry conditions last year:
improving commercial P&C pricing
The insurance industry is experiencing
improved commercial P&C
underwriting conditions in the U.S.
and a number of major international
locations. After years of slower growth
and shrinking some of our important
businesses as we maintained discipline
around inadequate terms, market
conditions have improved and are
spreading to more classes of risk and
more countries, which means a time
for growth. We built our company to
capitalize on conditions such as these
and have patiently waited. Today we
are achieving rate above loss cost
trend in many lines and territories,
particularly in those classes where
margins have been under pressure.
Given the current environment and our
longer–term secular growth strategies,
this bodes well for future growth in
revenue and earnings. I expect the
positive market conditions to continue
throughout ’20 and beyond, and Chubb
will benefit.
For perspective, prices in a number
of important classes continue to
remain below what is adequate to
earn a reasonable return for the risk
taken. Prices in others have achieved
sufficiency, and in those cases we are
growing. P&C insurance is a cyclical
business. Generally speaking, with
few exceptions, loss costs rise every
year, and when rates don’t keep pace,
margins naturally decline, disappear
or worse. Companies that in the past
pursued market share at inadequate
pricing and terms are suffering and
will experience margin and potentially
reserve pressure. Many in the industry
are not earning their cost of capital.
On top of that, there is volatility in the
loss environment in certain casualty–
and property–related classes. It’s no
surprise, therefore, that we have seen
a pull–back and retrenchment by
those insurers that took on too much
underpriced and poorly underwritten
exposures. That’s what creates cycles.
The industry’s insured natural
catastrophe (CAT) losses last year are
estimated at $50 billion to $55 billion,
down substantially from the previous
two years. We continued to observe
a rise in weather–related volatility,
including increased frequency of large
events ($1 billion or greater in losses);
more extreme conditions linked to
temperature and moisture producing
bigger tornadoes, larger floods,
wildfires and hurricanes with more
moisture; and changing seasonality.
This volatility, which is driven by
climate change and urbanization
resulting in a greater concentration
of exposures in coastal and inland
locations, we expect to continue. For
Chubb, pre–tax net CAT losses were
$1.2 billion, down from $1.6 billion in
2018 — an improvement but about $220
million more than we planned for when
calculating our “expected” CATs for
the year.
Given its concentration of risk exposed
to temperature and moisture, crop
insurance is a business with CAT–
like features. There is a fair degree
of volatility and season–to–season
variability to growing conditions and
commodity prices. Adverse weather
in parts of the United States last year
impacted growing conditions. After
three exceptional years from ’16 to ’18,
last year was below–average. Even so,
we recorded a calendar year combined
ratio of 95.1%. Crop insurance has
been a very good business for Chubb.
We are the national leader with the
most experienced people and deepest
knowledge based on decades of data
on over 3 million farm fields, which
improves risk selection. Notably, both
the CAT and crop losses in 2019 were
“ Taken together, Chubb
has a thoughtfully
constructed and
managed global portfolio
of simply outstanding
businesses. Most are top–
performing multibillion–
dollar businesses, with
substantial scale and
scope for growth, and
the envy of the industry.”
5
comfortably within our risk tolerance.
We purposely take these risks and have
no regrets as long as our underwriting
is good and we are properly paid.
Craftsmanship: the art and
science of underwriting
Chubb is an underwriting company —
everything starts with underwriting
and assuming risk is at the heart of
our business. Our company is led
by underwriters and our culture is
centered on the art and science of
taking risk. We practice our craft
better than any company of size and
we have an enduring track record of
outperformance to prove it. Over the
past 15 years, Chubb’s P&C combined
ratio has outperformed our peers by
an average of seven percentage points
over any time period. Last year we
produced $2.7 billion of pre–tax P&C
underwriting income, an increase of
nearly 7% in constant dollars, and a
2019 calendar year P&C combined ratio
of 90.6%, which was flat with prior
year. Our underwriting performance
for the results of the current in–force
business is measured by the current
accident year combined ratio excluding
catastrophe losses, a preferred industry
measure, which was 89.2% compared
with 88.0% prior year, and including
anticipated or expected CAT losses,
which I believe is a better measure, it
was 92.6% compared with 91.4%.
At Chubb, accountability for
underwriting discipline starts at the top
— management owns it and is deeply
engaged at every level and in all parts of
the organization around the world. We
have operationalized our underwriting
culture with a balance between local
capability and autonomy and global
command and control, which enables
us to move nimbly between offense and
defense, conditions depending. When
we see market opportunity, we strive
to quickly seize it. On the other hand,
our willingness to trade market share
for underwriting profitability, along
with relentless expense management
and efficiency, contributes to our
competitive profile. By the way,
expense discipline doesn’t mean failing
to invest in our people and technology
— these are investments.
As I have observed to you previously,
generally speaking, loss costs rise
every year. For our company, loss costs
in aggregate across all P&C lines of
business rose 4.5% last year. If pricing
doesn’t rise at the same rate, all things
being equal, loss ratios rise. In our
industry, rates have not kept pace with
rising loss costs for a number of years
now. Separately, the loss trend for
certain casualty and property–related
lines has worsened due to a changing
loss environment, both weather and
man–made related. This has stressed
insurers’ margins and created greater
volatility and uncertainty that together
have impacted their confidence in
taking risk.
In the U.S. and a few international
locations, severity and frequency
in “first–dollar” layers for casualty
classes of business have been relatively
steady. However, in the excess layers
of certain classes, overall frequency
and frequency of severity of large
individual claims have been increasing
and putting pressure on results for a
number of reasons. The most benign
reason is casualty attachment points
(the level of loss where coverage
P&C Combined Ratio
versus Peers
The company’s underwriting results
have outperformed the average of
its peers over the last 10 years.
105%
100%
95%
90%
85%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
1 Includes AIG, Allianz, AXA, CNA, HIG, QBE, RSA,
TRV, XL, Zurich. XL’s 2018 and 2019 results are for
the AXA–XL division of AXA.
Source: SNL and company disclosures
Peers1
Chubb
Averages:
1 year
3 year
5 year
10 year
97.4%
99.3%
98.5%
98.3%
90.6%
92.0%
90.4%
90.7%
6
begins) have not moved for years — a
$1 million attachment point for casualty
excess 10 years ago is worth a fraction
of the amount today.
highest recorded level since 2012 and
was 25% higher than the median for
the previous three years.
Contributing to frequency and
frequency of severity is so–called
social inflation, resulting in increased
litigation activity and size of awards
primarily driven by (a) increased
litigation financing — a new asset class;
(b) populist sentiment, including
growing distrust of large corporations,
expressed in jury attitudes; (c) growing
jury insensitivities to large dollar
verdicts; (d) erosion of previous
tort reform remedies; (e) changing
definition or interpretation of
corporate responsibility (if something
went wrong, someone is strictly liable);
and (f ) changing social norms in terms
of tolerance and definition of gender
bias and sexual abuse. This increased
litigation is apparent in class actions
from securities and anti–trust related
cases to science–based: chemical,
pharma and physical trauma–related.
One–off casualty CAT–type events
reflecting society’s increasing
abhorrence and zero–tolerance with
sexual abuse and harassment are
leading to legislative actions such as
reviver statutes, where it’s simply
too early to know the ultimate
financial impact.
One class of business where costs
continue to rise is coverage for
directors and officers, or D&O, as the
frequency and severity of litigation
from securities class actions and M&A
objections have worsened. Last year
was no exception. Securities class
action filings remained at an all–time
high — the third consecutive year with
more than 400 cases filed and 9% of
U.S. publicly traded companies the
target of a class action. Meanwhile,
severity, as measured by the median
settlement value, climbed to the
Litigation is a necessary process to
decide disputes that cannot otherwise
be resolved, and the legal profession is
a profit–making industry like any other.
But our inefficient system benefits
lawyers at the expense of shareholders.
Excessive litigation is a tax on society
and business, enriching the trial bar
with little benefit in most cases going
to the supposed aggrieved. According
to a NERA Economic Consulting study,
more than two–thirds of the cases in
2019 resolved in favor of the defendant
with no payment made to plaintiffs but
plenty to their lawyers. Nearly 90%
of M&A objection suits are dismissed.
Based on our data, in the last seven
years, about half of the money paid
in securities claims, including legal
expenses and settlements, has gone to
the lawyers, both plaintiff and defense,
and in the case of M&A objections, it’s
over 70%. Federal and state legislation
will be required to remedy abuses.
Reforms should include requiring
fees paid to plaintiffs’ attorneys be
proportional, barring fees for frivolous
disclosure suits, and requiring
disclosure of all relationships between
plaintiffs and their lawyers and third–
party funders.
Litigation funding is a new investment
asset class in which investors who have
suffered no harm pay litigation costs
for the sole purpose of sharing in the
proceeds of a favorable judgment or
settlement. This is a growing problem
in the U.S. and a number of other
countries, including the U.K. and
Australia. It is linked to approximately
75% of all class actions and, in the
U.S., more than $7 billion of funding
“ Our company is led
by underwriters and
our culture is centered
on the art and science
of taking risk. We
practice our craft better
than any company of
size and we have an
enduring track record
of outperformance to
prove it.”
7
is waiting to be invested in lawsuits.
Enriching a few, litigation funding
is an investment activity that in the
main hardly benefits society. Working
with the U.S. Chamber of Commerce’s
Institute for Legal Reform and other
organizations, we are educating
regulators and members of the
judiciary in the U.S. and abroad about
the consequences of unrestricted
financial speculation in our civil justice
system and the need for adequate
disclosure and other reasonable
regulation. We continue to seek like–
minded allies who want to join
our coalition.
Growth in invested assets supports
growth in investment income
The other source of our earnings
is investment income, and in 2019
we generated pre–tax adjusted net
investment income of $3.6 billion, up
only 1%. During the year, in response
to a slowing global economy and trade–
related headwinds, the U.S. Federal
Reserve reversed course and lowered
interest rates again to historically low
levels. Our strong operating cash flow
of $6.3 billion helped to mitigate the
impact and will continue to support
investment income as we grow our
invested assets, which stood at $109
billion at December 31. Nevertheless,
growth in investment income will
remain relatively low as long as interest
rates remain so. We will continue to
maintain a conservative approach to
the management of our invested assets
by seeking adequate risk–adjusted
returns and not reaching for yield.
For the year, the portfolio generated
an average book yield of 3.5% versus
average new money rates of about 3%.
We expect the current low interest
rate environment will continue for
the foreseeable future, especially
Long–Term Operational & Financial Outperformance (10 Years)
Chubb has delivered on its financial goals
and outperformed its peers across most metrics
Long–Term Operational & Financial Outperformance (10 Years)
Chubb has delivered on its financial goals
and outperformed its peers across most metrics
Premium &
Earnings Growth
Under–
writing
Profit
Book Value
Growth
Average Return
on Equity & Return
on Tangible Equity
Valua–
tion
Outperformance
Since Merger
3 Years
Post Merger
Outperformance
Since Merger
3 Years
Post Merger
Valua–
Average Return
tion
on Equity & Return
on Tangible Equity
Book Value
Growth
Under–
writing
Profit
Premium &
Earnings Growth
Net
Premiums
Written
(’09–’19)
Operating
Earnings
(’09–’19)1
P&C
Combined
Ratio
(’10–’19 Avg.)
Book Value
per Share
(12/09–12/19)2
Tangible
Book Value
per Share
(12/09–12/19)2
Average
Return on
Equity
(’10–’19)
Average
Return on
Tangible
Equity
(’10–’19)
Market Cap
Growth
(12/09–
12/19)3
Tangible
Book Value
per Share
(12/16–12/19)
Average
Return on
Tangible
Equity
(’17–’19)
Average
Return on
Tangible
Equity
(’17–’19)
Book Value
per Share
(12/16–12/19)
Growth
(12/09–
12/19)3
Average
Return on
Tangible
Equity
(’10–’19)
Tangible
Market Cap
Average
Tangible
Book Value
Return on
Book Value
per Share
Combined
Equity
(’10–’19)
(12/09–12/19)2
per Share
(12/09–12/19)2
(’10–’19 Avg.)
P&C
Ratio
Operating
Earnings
(’09–’19)1
Net
Premiums
Written
(’09–’19)
143%
68%
90.7%
109%
67%
10.6% 14.6% 315%
29%
14.2%
14.2%
29%
10.6%14.6%315%
67%
109%
90.7%
68%
143%
1%
40%
98.9%
42%
53%
8.9%
11.3%
77%
6%
11.7%
11.7%
6%
77%
11.3%
8.9%
53%
42%
89.9%
40%
1%
Chubb
Avg.
Peers4
Chubb
Avg.
Peers4
1 AIG excluded due to negative earnings in 2009
2 AIG adjusted for U.S. Treasury Equity Investment in 2009
3 AIG excluded due to impact from government intervention
4 Peers include AIG, Allianz, AXA, CNA, Hartford, Travelers, Zurich
Annual metrics through full year 2019 actuals: Net premiums written, Operating earnings,
P&C combined ratio, Average return on equity and Average return on tangible equity. Point-in-time metrics
(Book value per share, Tangible book value per share and Market Cap) through December 2019 actuals
8
1 AIG excluded due to negative earnings in 2009
2 AIG adjusted for U.S. Treasury Equity Investment in 2009
3 AIG excluded due to impact from government intervention
4 Peers include AIG, Allianz, AXA, CNA, Hartford, Travelers, Zurich
Annual metrics through full year 2019 actuals: Net premiums written, Operating earnings,
P&C combined ratio, Average return on equity and Average return on tangible equity. Point-in-time metrics
(Book value per share, Tangible book value per share and Market Cap) through December 2019 actuals
given the potential consequences of
the coronavirus. The combination
of generally sluggish global growth
and low inflation encourages
exceptionally accommodative central
bank monetary policies. These have
become a poor substitute for better
government economic and fiscal
policies. Approximately $15 trillion
globally is now invested at negative
yields and some political leaders think
that’s acceptable. However, in my
judgment, these conditions won’t last.
Overreliance on monetary policy is
misguided — it hurts savers of all kinds,
including pension funds and insurers,
and encourages overly aggressive
investment behavior that inflates
asset values while failing to materially
stimulate growth. Many investors are
chasing absolute yield instead of risk–
adjusted returns, and that never ends
well. Given inflated balance sheets and
exceptionally low interest rates, central
banks have limited room to move in the
next economic downturn.
Book and tangible book
value growth
Chubb is a growth company. We
define that as growth in book and
tangible book value over time. Our
priority is to grow shareholder value
by first growing our company, both
revenue and earnings, while deploying
capital efficiently. As the chart nearby
illustrates, we grew our company faster
than the average of our peers over the
past 10 years. Premiums increased 143%
and core operating income grew 68%.
Book value growth of 181% followed,
with per share book value up 109%.
As a result of our performance, our
market capitalization is up over 300%.
The second–highest of our peers rose
145% during that period, and most were
below 100%. The scale we have today
is a strategic advantage for future
value creation.
For investor clarity, let me share my
thoughts regarding two important
metrics — return on equity (ROE) and
return on tangible equity (ROTE).
ROE is an accounting concept and an
inexact measure of returns. If all of the
capital we used to acquire The Chubb
Corporation in 2016 was used instead
to repurchase shares, the denominator
of the ROE equation would be reduced,
resulting in a higher ROE. But would
that have increased the franchise
value of our company, and would the
returns on deployed capital be higher
and more sustainable than they are for
Chubb today? Hardly — and what would
our future value creation look like if
we had done so?
Our core operating ROE currently
stands at 9%, well in excess of our
cost of equity of approximately 7%.
The ROE is impacted by goodwill,
which we incurred as a result of
acquiring several excellent businesses,
Chubb in particular. In my judgment,
goodwill is an income producer and an
appreciating — not depreciating — asset
over time. Look at what that goodwill
has created: It has helped transform
our company into the franchise that
we are today — a leading brand with
substantial scale, a portfolio of market–
leading businesses and earning power
and, critically important, optionality
for future growth globally. Our ROE will
increase over time as we continue to
grow the company and further leverage
the scale and capabilities we have
built. The goodwill has opened a path
for us that we could not have pursued
without it.
We are in the risk business. We are
a balance sheet business. The most
important value–creating measures, in
my judgment, are growth in tangible
book value and core operating return
on tangible equity, or ROTE, which was
14.6% last year. Tangible equity is the
most constraining measure to value
creation. It is the most fundamental
measure that governs our ability to take
“ We are in the risk
business. We are a
balance sheet business.
The most important
value–creating measures,
in my judgment, are
growth in tangible book
value and core operating
return on tangible
equity, or ROTE, which
was 14.6% last year.”
9
risk and to grow the company, and it
shows how our underlying business
intrinsically performs. Everything we
do is measured against it: We can only
pay claims from tangible; premium
growth is governed by tangible because
exposure is leveraged against tangible;
and M&A and debt leverage are
dependent on tangible equity.
us membership in the rare “dividend
aristocrats” club — and a target payout
ratio of approximately 30%. In 2019,
we returned to shareholders about $1.4
billion in dividends and over $1.5 billion
in share repurchases. We repurchased
our shares at an average price of $147,
which equals a price–to–book of
1.2 — cheap.
Strategic growth priorities:
cyclical and secular
We are builders at Chubb, executing on
multi–year plans that take advantage of
both cyclical and longer–term secular
growth trends taking place around the
world. Earlier I said capitalizing on
the current commercial P&C market
conditions is a major strategic priority
right now for a growing number of our
businesses. About 45% of our portfolio,
representing many short– and long–tail
classes, is now benefiting from the
improved market conditions — and I
expect that percentage to increase.
Beyond the cyclical, our company is
focused on important long–term secular
trends. There is so much opportunity
in so many places, not least in the
U.S., which remains a major growth
market given its vibrant economy and
its wellspring of entrepreneurial spirit,
risk–taking and innovation. Here are
four others:
• The growth of small and mid–sized
businesses in many parts of the globe,
particularly Asia and Latin America.
As nations in these regions develop,
economic growth comes predominantly
from small and mid–sized business
creation. We have an extensive range
of commercial insurance offerings and
distribution channels to serve them.
Our average ROTE over the 10–year
period is 14.6%, with growth in tangible
book value of 124%. Both are quite
strong, but ROTE was impacted by
the 2016 Chubb acquisition. We paid
a price to build this franchise, and
that dilution impacted both tangible
book value per share and average
ROTE. It took us approximately 3.5
years to recover the dilution, which
speaks to the franchise earning power.
By the way, when measured over
the three–year period following the
Chubb acquisition, our average ROTE
is over 14%, which is top class, and our
tangible book value per share growth
leads all peers at 29%.
Our stock price increased 21% last year
and produced a total return of 23%, a
decent performance but not superior to
the S&P 500’s 32% or our peers, some
of which benefited from a steeper rise
from lower price–to–book valuations.
The Chubb share price remains a
bargain in my judgment. Insurance is a
long–term business and attractive long–
term shareholder returns are simply
a derivative of doing our job well. In
that regard, our 10–year total return
is 288% and compares well to the S&P
500 (257%) and the S&P 500/Financials
(218%) and is equal to the S&P 500/P&C
Insurance (289%).
Beyond what we need for risk and
growth including M&A, we return
surplus capital to shareholders.
We have a 25+ year track record of
annual dividend increases — earning
10
• The rising middle class in many of the
developing economies of Asia and Latin
America. We have significant future
growth opportunity serving these
consumers, who need the basic savings
and protection products our company
provides.
• China looms large as a potential
long–term growth opportunity, and our
presence there is expanding.
• Digitization is sweeping through
society globally, including the business
of insurance, offering ways to improve
or transform so much of what we do.
Let me take a little time and describe
these cyclical and secular growth
opportunities in the context of our
businesses and tell you how they
performed last year and how they are
positioned for future growth.
Chubb’s North America Commercial
P&C Insurance operation, excluding
agriculture, produced good growth in
2019 with net premiums written overall
increasing over 7%. Momentum built
steadily as the year progressed with
first half growth of 5.6%, second half
growth of 8.6%, and fourth quarter
accelerating to 9.4%. Our $8 billion
Major Accounts division serves the
insurance needs of large domestic
and multinational corporations, and
Chubb is the leader not only in terms
of size but capability, presence and
know–how. Even though 90% of the
Fortune 1000 are clients, there’s still
billions of dollars of opportunity
available by writing more coverage for
each customer. For instance, out of a
universe of approximately 5,000 of the
largest companies in the U.S., there are
about 2,000 accounts where we write
fewer than three lines of coverage. This
business is benefiting from favorable
underwriting conditions and a flight to
quality, and it grew over 5% last year
and is currently growing even faster.
Our North America middle–market
and small business commercial P&C
franchise, at $6 billion, is next in size.
This business addresses an incredibly
large segment of the U.S. economy.
With an extensive field organization
and the broadest array of traditional
and specialty products, we provide
coverage and service to businesses
ranging from multinational publicly
traded mid–sized organizations to
single–location private companies.
Our two dozen industry practices
advise and provide coverage to
industries ranging from life sciences
and healthcare to CleanTech and
advanced manufacturing. Our fast–
growing small business division offers
a highly automated digital experience
— nearly 85% of the more than 50,000
submissions we receive each quarter
are not touched by human hands after
they leave the agent’s office. We have
4,500 agencies in the U.S. using our
Chubb Marketplace platform to digitally
quote and issue policies and service
their clients. Our middle–market and
small commercial division benefited
from more favorable underwriting
conditions as the year progressed,
growing 5.5% in the first half and 6.6%
in the second. We expect the positive
growth trend to continue in ’20.
Westchester is our E&S wholesale
business in the United States and writes
about $2.8 billion in gross premiums.
E&S insurers specialize in hard–to–
place or unusual risks that require
tailored coverages standard companies
cannot or won’t write. We have a
broad product line–up — from specialty
property and liability offerings to
product recall and railroad liability,
as examples. After years of shrinking
due to soft underwriting conditions,
Westchester took advantage of a rapidly
improving marketplace in 2019 and
grew over 9%. Chubb Bermuda, our
original insurance company founded
in 1985, is our other E&S business
in North America and specializes in
high excess, low frequency coverage
for casualty, property, financial lines
and political risks. This business
experienced some of the fastest price
and terms improvement as the year
progressed, leading to growth of over
30%. For both Westchester and Chubb
Bermuda, good growth should continue
in ’20 as more E&S risks move toward
adequate pricing.
Chubb Personal Risk Services serves
the personal lines insurance needs of
affluent individuals and families in the
U.S. and Canada. We lead this sector
with an estimated market share of
nearly 60%. In 2019, we more tightly
focused the portfolio of this $5.5
billion business on clients who value
the richness of Chubb’s coverage and
service and are willing to pay the price
for it. We are constantly adding new
coverages and services to respond to
the risk management needs of these
discerning customers. We continue
to refine our risk selection and
pricing capabilities through improved
analytics and our wealth of data. In
this business, customer experience is
truly the product and we continued
to distinguish ourselves with the
industry’s most admired claims service
while enhancing our clients’ digital
experience with us. Our clients truly
love Chubb — we retain 90% of our
customers and 97% of the premium
annually — and so it’s no wonder that
this business is a wellhead of our
brand in America. As for growth, net
premiums written were up about 2.5%
for the year, but 4.6% in the fourth
quarter on an adjusted basis.
Chubb Overseas General is our $11.3
billion international P&C business.
We have operations in 51 countries
and territories outside North America
including significant presence and
“ We are builders at
Chubb, executing on
multi–year plans that
take advantage of both
cyclical and longer–term
secular growth trends
taking place around
the world.”
11
capabilities in Europe, Asia Pacific and
Latin America. This division serves
large corporates, middle–market and
small commercial companies, or SMEs,
and individual consumers with a wide
range of products and services. We
experienced some of our best growth
last year, with net premiums up more
than 8.5% in constant dollars. Over
the years we have built extraordinary
local capabilities around the globe to
take advantage of local opportunity,
including cyclical market conditions
wherever they happen. For example,
after years of shrinking our Lloyd’s
London–based wholesale division by
almost half when the pricing for risk
was inadequate, we experienced four
consecutive quarters of serious double–
digit growth ranging from 15% to 29%.
In Australia, after years of relatively
low growth due to overly competitive
conditions, our quarterly premium
revenue growth hasn’t dipped below
16% for the last two years.
A key driver of future growth for Chubb
in both the U.S. and internationally is
our consumer lines operations, which
consists of two large businesses: our
global accident and health division
and our international personal lines
division. Together, this $7 billion
operation grew about 5.5% in 2019 in
constant dollars and employs multiple
distribution methods including
telemarketing, agency, broker and
digital partners. For example, in North
America, Chubb Workplace Benefits,
which we built from scratch in our
Combined Insurance affiliate, provides
voluntary employee benefits for mid–
to–large companies in North America.
The business leverages our nationwide
P&C broker and agent relationships and
sales were up 40% last year. In Europe,
our cell phone replacement insurance
product is offered by 23 mobile
network operators in 13 countries. In
Mexico, where we now insure almost
2 million consumers, our auto and
residential products business grew
22% last year.
Distribution partnerships enable us to
reach tens of millions of potential new
customers, both individual consumers
and businesses. We have more than
150 of these partnerships with banks,
retailers, airlines and mobile network
operators. In Mexico, for example,
after our first year of an exclusive long–
term relationship with Citibanamex,
we are selling more than 30,000 new
policies per month to their 12 million
customers through branches, telesales
and digital platforms. In Chile, we
are selling nearly 50,000 policies
each month with Banco de Chile,
which generated about $400 million
in insurance revenue in 2018 with
other insurers before becoming our
exclusive distribution partner. On the
other side of the world, through our
partnership with DBS, the largest and
most respected bank in Southeast Asia,
we are selling a variety of products
— from travel insurance online to
Geographic Sources
of Premium
2019 gross premiums written
Latin America 7%
Asia 11%
Europe/Eurasia & Africa 13%
Bermuda/Canada 6%
United States 63%
Premium Growth by Geography
Percentage change in gross premiums
written in 2019 versus 2018 in
constant dollars
United States 5.6%
Latin America 10.1%
Europe/Eurasia & Africa 7.3%
Bermuda/Canada 13.5%
Asia 9.2%
12
home contents coverage to business
insurance for SMEs — to more than
11 million of their customers
in five countries and revenue is
growing briskly.
China: on the path to increased
ownership of Huatai Group
Early in 2019, we received support
from the Chinese government to
increase our ownership in Huatai
Insurance Group, which has life, P&C
and asset management subsidiaries,
and more than 600 branches and 11
million customers. We were granted
permission to convert Huatai from a
domestic Chinese financial services
holding company to a Sino–foreign
joint venture — an historic first. The
change of status created a path to
increased ownership. Later in the year,
we announced agreements to make
significant additional purchases which,
if approved, will take our ownership
position to over 50%.
Our investment in Huatai, which we
have worked on over the course of
20 years, is another great example of
Chubb as a long–term builder. China
is currently the world’s second–largest
economy and is on its way to becoming
the largest. Its financial services
industry, including insurance, remains
underdeveloped. China represents a
significant opportunity for Chubb to
build an important Chinese insurance
and asset management company that
will meet the growing savings and
protection needs of its consumers and
businesses. The country’s continued
growth and influence will also impact
the growth of Asia and enhance other
opportunities for Chubb across the
region. Over the coming decade or
so, I can imagine Huatai becoming a
major contributor to Chubb’s revenue
and earnings, but it’s not without risk.
Nothing is guaranteed.
Our Asia–focused life insurance
business, which has 49,000 captive
agents in six countries, now generates
$2.4 billion in premium and deposits.
International life revenue grew 13%
last year in constant dollars and we
earned over $150 million of income,
up from about $25 million three years
ago. These numbers exclude Huatai
Life, which we do not consolidate. We
expect Huatai Life, which has 35,000
agents, to become over time the
centerpiece of our life operation. Life
insurance is today a relatively modest
business for Chubb, but it has a lot of
long–term potential.
Digital begins with the
customer experience
Chubb must be vital and compelling
in a digital age if we want to remain
relevant. This is central to both our
short– and long–term strategies, and
we are making good progress. Digital
begins with the customer experience
and cuts across our distribution
channels with both our traditional
and non–traditional partners. At
the same time, we are redefining or
modernizing what insurance does and
how it does it. Through the use of data
and analytics, robotics and machine
learning, digital is improving our risk
selection and pricing, our underwriting
and ability to service and pay claims,
our customer experience and our
efficiency. It represents a sea change for
our business.
Our digital strategy from a customer
perspective is focused primarily but
not exclusively on consumers and
small businesses. The strategy is global
in scale, with particular emphasis on
the U.S., Asia and Latin America. We
“ Distribution partnerships
enable us to reach tens
of millions of potential
new customers, both
individual consumers
and businesses. We
have more than 150 of
these partnerships with
banks, retailers, airlines
and mobile network
operators.”
13
are creating new products, enhancing
service response and experience, and
forming new distribution partnerships
with digitally native platforms and
financial institutions. We are now
generating revenue that wouldn’t have
been possible without our growing
digital capability.
and manage risk using analysis that is
data–driven and apolitical. Applying
this approach to the perils of climate
change, we recognize a growing
global risk that requires action from
government, the private sector and,
in fact, society at large to manage and
mitigate the growing threat.
New technologies are beginning to
help us engineer the risk environment
in a real way so clients can manage
their exposures. Deploying Internet of
Things technologies helps us to predict
and prevent losses for both commercial
and consumer insureds. For example,
we are monitoring temperature,
water/humidity and vibration in
environments that are vulnerable to
loss — from helping hospitals keep safe
their high–value medical equipment
and supplies to ensuring the proper
storage of a family wine collection.
Digital offers us significant potential
to reduce our cost structure. Straight–
through processing, robotics and
machine learning are eliminating low–
value activities to reduce expense and
enhance efficiencies. We’re digitizing
and improving the effectiveness and
efficiency of our traditional agent and
broker distribution channels to help
our business partners remain relevant
in a digital age.
Climate change and sustainability:
reality and responsibility
We and our industry have an
opportunity and responsibility to do
our part to support society in managing
a risk environment that is both volatile
and changing due to global climate
change. Our response is guided by our
core business competencies and values,
and our perspective begins with the
obvious: We are an insurance company
and our job as underwriters is to assess
14
As an insurer, our first responsibility
is to use our expertise in risk
management to provide products
and services that protect individuals,
businesses and communities against
the effects of climate change. We
manage risk — that’s our business. We
employ sophisticated modeling and
have considerable data that identify
the physical and economic impact of
climate–related risk on individuals,
businesses and communities, and this
is reflected in the prices we charge for
insurance protection. We essentially
serve as a market signal of the rising
costs of climate change — as the risk
increases, insurance prices increase, or
availability becomes more limited.
Importantly, climate change is a long–
dated risk but for insurers, such as
Chubb, it’s generally a short–dated
liability. Our insurance contracts are
typically limited to a single year, and
we can quickly respond to changes
we see in the risk environment by
adjusting our pricing or by restricting
our exposure (e.g., limiting our
property risk exposure in coastal
regions). As modeling and data around
specific perils, i.e., flood and wildfire,
get better, we have the ability to take
more risk, particularly for clients
that adapt to changing conditions by
mitigating their risk. Lastly, as we do
with all other risks, we can only assume
climate–related risk to the extent of our
balance sheet wherewithal.
Chubb is a leading provider of
insurance for renewable energy project
construction and operation, and clean
tech companies that are creating new
technology to reduce CO2 emissions.
Complementing our insurance
coverage, Chubb risk engineers work
with our commercial and consumer
clients to moderate the risks from
climate change perils and make them
more resilient. We bring deep technical
knowledge to this work, from providing
guidance on construction standards,
wildfire land management and coastal
protection to the development of
lithium battery storage systems.
On the investment side, we apply
the same risk management rigor
to our broadly diversified fixed
income portfolio. For example, asset
concentrations are carefully managed
in hurricane– and flood–exposed
areas. The impact of climate risk on
underlying credits will naturally be
an increased factor in our investment
decision–making over time given the
future impact on certain long–dated
asset classes, such as mortgages and
municipal bonds. Our portfolio is
relatively short–dated with an average
duration of less than four years.
We are realistic about what a single
company can achieve in limiting
the effects of global warming and
advancing sustainability goals. At the
same time, it is hard to be optimistic
about the likelihood of timely and
effective government action. Most
governments are focused on the short–
term, both political and economic.
Despite a plethora of multilateral
organizations, we live in a nation–
state world generally incapable of
addressing a global problem due to
the nature of nation–state self–interest.
Yet, only government can raise the
cost of carbon use by putting a price
on carbon, through tax, cap and
trade or other measures. Measures
should recognize the cost to the planet
of carbon and provide economic
incentives to move to less carbon–
intensive fuels as well as carbon–free
alternative sources of energy. Last
year, Chubb implemented a new policy
restricting our underwriting of thermal
coal businesses and precluding our
investment in companies that generate
more than 30% of their revenues
from coal–related mining or energy
production.
Finally, as part of good corporate
citizenship, we have a responsibility
to take actions to reduce Chubb’s
environmental footprint and, through
our philanthropy and public advocacy,
to support efforts that strengthen the
resilience of communities and protect
biodiversity against the effects of
climate change. Most recently, we made
a commitment in 2019 to reduce our
GHG emissions on an absolute basis by
another 20% in five years — a goal we
already achieved by year–end — and
40% by 2035. These science–based
goals are aligned with the two–degree
Celsius limit outlined in the Paris
Climate Agreement.
While we can’t push back sea level
rise, we are engaged in projects such
as with The Nature Conservancy to
support a resilience project in Miami
to increase flood protection and
serve as a model for replication in
other threatened coastal cities. And
while we can’t stop storm surge, we
supported the expansion of a reef
restoration project on Mexico’s Yucatan
Peninsula that included transplanting
10,000 new coral colonies as a natural
barrier to help protect the critical
tourist economy — a great example
of the sustainable economy. We
have supported for many years the
Conservation Fund’s efforts to enhance
and protect biodiversity through the
preservation of more than 8 million
acres of threatened land and water
habitats, as well as extensive forest
restoration projects across the U.S.
and Canada.
As our work and philanthropy
demonstrate, we are serious about
understanding and responding to
climate change. We are committed
to undertaking responsible actions
to do our part to provide insurance
protection for people, businesses
and society from the impact of global
temperature increases, develop
effective mitigation strategies and
support the collective action necessary
to address this existential threat.
The case for America and the
democratization of capitalism
In America today, the media and many
in the political establishment dwell
endlessly on what’s wrong with our
country. For sure, as a nation, we have
many challenges:
• A civil society where behavior is
now more tribal, less inclusive and no
longer so civil;
• A deeply polarized political system
incapable of solving tough problems,
particularly at the federal level,
including insufficient education and
skills training, issues of healthcare
access and affordability for many, and
aging or obsolete infrastructure;
• Senior political leadership that fails to
lead with the values and principles that
have defined American exceptionalism;
• Rising populism, born in part from
the financial crisis, fueled by inequality
of wealth and opportunity;
• Growing distrust in our basic
institutions including big business
and government, with an increasing
number of younger people questioning
the efficacy of democracy and
capitalism; and
“ Our open society and
values make America
a magnet for talented
individuals all over the
world. But to secure our
future and maintain our
leadership position, we
must recognize and lead
with our advantages
and strengths while
correcting things that
hold us back. We need to
run a better race.”
15
• Insecurity and anger from the feeling
that our way of life, our communities
and our well–being are somehow
threatened by “foreigners,” particularly
those south of the border.
Our failure to address problems makes
them begin to appear intractable, and
because we focus predominantly on
what’s wrong, we lose perspective and
that causes us to lose confidence in our
country and what has made us great.
As Americans, we have many reasons
to be optimistic. Just look at everything
we have: basic natural resource
security such as food, energy and
water; physical security from two
oceans and two neighbors bordering
us that are our allies; a society built
on values that protect the sanctity of
the individual and private property;
a democracy supported by an active
civil society, the rule of law and
independent institutions to safeguard
and administer them; an economic
and political system with the flexibility
and tolerance to embrace creative
destruction, a basis for the fostering of
innovation and economic dynamism;
finally, the English language is the
global lingua franca of business, science
and diplomacy around the world. Our
open society and values make America
a magnet for talented individuals all
over the world. I have confidence in
America. But to secure our future
and maintain our leadership position,
we must recognize and lead with
our advantages and strengths while
correcting things that hold us back.
We need to run a better race.
Our global system of alliances is a
force multiplier. Size matters on the
world stage. Just add the number of
citizens and economic output of our
long–term allies to our own influence
and strength and you have over a
billion people and tens of trillions in
GDP aligned around common value and
goals. All alliances require trade–offs
and are bound by national self–interest
— you give to get. Our brand of America
First nationalism, however, fails to
account for this trade–off. We should
be working together with our allies to
defend and improve the rules–based,
market–oriented trading system that
has contributed enormously to our
mutual prosperity. America has been
and should remain the model for other
nations to follow. After all, the liberal
world order that we constructed and
have supported for over 70 years was
built around this. In this regard, we
were the motivating force behind
globalization. Through our alliances,
we should share the burden of global
security. With a clearer sense of our
own national security interests and
priorities, while recognizing the limits
of our own resources, we should
strengthen our security alliances,
leading efforts in some cases and
supporting in others. For example, our
government is giving increasing priority
to developments in Asia Pacific. After
nearly 20 years of war in the Middle
East, and supported by our own
energy self–sufficiency, we can now
concentrate our national focus on
other priorities.
We should double down on
capitalism. No other system on the
planet is more efficient at allocating
resources than an open market–
oriented system. Governments cannot
solve all of our problems and they
create distortions. No other system
has improved the quality of life for the
largest and broadest number of people
in history than capitalism. However, it
is not perfect. We should do a better
job spreading its benefits to all by
further democratizing capitalism and
creating greater equality of opportunity
and access to capital. Our frontier
nation was created by bold and driven
explorers and entrepreneurs willing
Premium Distribution
by Product
2019 net premiums written
Global Reinsurance 2%
Agriculture 5%
Global A&H and Life 17%
Personal Lines 21%
16
Large Corporate
Commercial P&C 19%
Middle-Market/
Small Commercial
P&C 26%
Wholesale Specialty
Commercial P&C 10%
to take risks to build something out of
nothing. We need to focus on creating
the conditions for more builders to
flourish in our country while, at the
same time, care for the millions who
are marginalized or displaced by
technological advancements or by
globalization. Closing the opportunity
gap will require massive investment
in people. For this, the private and
the public sectors must develop
partnerships at scale for skills–based
training. We must work together to
reform our education system to be able
to prepare and accompany individuals
from early childhood to career or
late career. The business community
needs to do a better job of telling
leaders of our community colleges and
universities what skills we will need and
what jobs will be available in the future.
Colleges and universities will adapt
their educational programs if they
receive stronger and clearer market
signals from the business world.
We need immigration at scale.
In order to remain competitive,
we need to increase the size of our
population. If we want to grow the
size of our economy, and grow much
faster, we need many millions more
of young people working and paying
taxes. For this, we need a pragmatic
immigration policy that satisfies
America’s economic needs while, at the
same time, recognizes and preserves
the fundamental values of our society
and secures our borders. We need
to attract the best and brightest by
the millions from all over the world.
And we welcome those who want to
improve their lives and can contribute
in productive ways at all levels of our
society. In the process they strengthen
our culture and values of personal
opportunity, responsibility and
hard work.
We should borrow to invest in our
future. Our public debt exceeds 18
trillion dollars and represents 80%
of our GDP. Moreover, nearly 70% of
government spending is committed
to debt service and entitlements. This
level of indebtedness and the health of
our public finances put us at risk. The
rest of the world will not endlessly lend
to us at current low rates. And, we need
to reform our entitlement programs,
especially Social Security and Medicare.
More young migrants will lower
the average population age and will
translate into a bigger workforce. That
will improve worker–retiree ratios and
reduce the pressure of entitlements on
our government finances. As a nation,
we should basically borrow to invest
in our future prosperity — to improve
our competitiveness — and in our
security. Otherwise, we are mortgaging
the future of our kids. With more
fiscal discipline and more revenue,
the government will be able to invest
in people, infrastructure, security and
R&D. It will also be able to support
and nurture key industries that will
be crucial to sustain our economic
and military preeminence in the
21st century.
In sum, America is the most
productive, creative and innovative
nation on the planet, and we should be
more optimistic but more disciplined
about our future. If we run a better race
and have more confidence in ourselves,
we will have more strategic patience in
imagining and guiding the geopolitical
future, including our relationship with
a rising China.
The U.S.–China relationship
Without a doubt, the U.S.–China
relationship is the most important
bilateral relationship in the world.
However, over the last decade, we have
seen it deteriorate. Our relationship
is marked by increasing tension and
“ We strive to be an
inclusive meritocracy,
where all employees
regardless of gender or
background can thrive,
and we develop citizens
of our culture with our
values, work ethic and
discipline.”
17
a growing distrust. We have a clash of
national interests, values and political
systems. We are in strategic drift,
failing to define a strategic vision that
recognizes each of our priorities and
current realities. We need a framework
for cooperation in key areas, and rules
or understandings for competition and
rivalry in others. Today, constituents
in both countries see each other
as a threat or even as an enemy.
Many advocate for disengagement
or economic and technological
decoupling, and this may form an
element of our strategy to defend,
but it’s hardly the entire answer. In
the absence of strategic purpose and
sustained diplomatic engagement, we
will continue to move in the wrong
direction and increase the risk
of conflict.
The relationship is broad with many
issues of mutual interest and concern.
These include, but are not limited to,
global warming, terrorism, nuclear
proliferation and protection of the
commons. We should work together
in areas where our interests are
aligned and create a framework for
dialogue and hopefully clear rules of
engagement in the areas where we
compete or are at odds. Technology
and cybersecurity come to mind.
China is an old civilization with highly
talented people, an admirable work
ethic and an ambition to be number
one in the world. New technologies
are seen as their opportunity to reach
economic and military primacy. While
it is true they have the advantage of size
and scale (which is important when
it comes to economic and political
influence), they are not a juggernaut —
and we should not view them as such.
influence. We should recognize this
fact. If we run our own race well, and
have confidence in who we are and our
ability, we will sustain our leadership
advantages.
Attracting, developing and
retaining top talent
Foundational to Chubb’s long–term
success is our disciplined approach to
attracting, developing and retaining
the next generation of insurance
professionals and leaders. We strive
to be an inclusive meritocracy, where
all employees regardless of gender
or background can thrive, and we
develop citizens of our culture with our
values, work ethic and discipline. We
recognize and reward responsibility,
ambition and results with opportunity
for individuals to achieve their full
potential and advance through our
organization. We offer colleagues
opportunities to continuously learn,
gain valuable new experiences
and prove themselves — to grow as
individuals. We strive to get to know
our people, and we are constantly on
the lookout for top performers and
those who have the aspiration and
commitment to succeed.
We begin by attracting and nurturing
early career talent. Hundreds of college
grads join us every year on a two–
year development journey primarily
in the basic core competencies of
underwriting and claims, IT and other
functional areas. We have been doing
this for years now and our success rate
has been quite good, with high levels
of engagement and rates of promotion.
Our talent development efforts are
for all employee levels, including
China, too, has many weaknesses
and vulnerabilities. First of all, and
as opposed to America, they are not
resource self–sufficient. They depend
on other countries to supply the
natural resources they need to survive
and grow. They do not have enough
food, raw materials or energy, and
they are surrounded by distrustful or
hostile neighbors, a number of which
are nuclear–armed. Their political
system is a one–party–controlled
techno–authoritarian state that values
social stability above all else — a system
less conducive to innovation. China’s
centrally directed economy allocates
capital inefficiently, led by Chinese
state–owned enterprises (SOEs) whose
return on capital is in the low single
digits. China substantially lacks the rule
of law and the independent institutions
to administer it, and this creates
uncertainty. Private entrepreneurs are
slowing investment as the uncertainty
about the future of China’s market
economy rises. And the Chinese
language and a more–closed society
are less conducive to attracting outside
talent and ideas.
The trade agreement announced at the
end of 2019, although modest, created
a temporary floor under our trade
relationship. The American business
community does not support tariffs
as a strategy. However, we advocate
for fair rules–based competition and a
level playing field. We need agreements
that address China’s predatory policies
and practices intended to dominate
markets and technologies. We need
the same level of access to their
markets and opportunities as they find
abroad. China is a huge beneficiary
of the global trading system, yet their
markets remain closed and protected in
important ways.
Make no mistake, China is and will be
a formidable rival and, in the future,
we will share global leadership and
18
mid–career and senior managers. Our
Craftsmanship curriculum includes
on–the–job and formal training, and
opportunities to continuously broaden
skills, achieve technical proficiency
and hone leadership effectiveness. We
give talented employees opportunity to
experience a new country and culture,
and to bring their skills and knowledge
from one market to another, which is
so important for a global company. For
more seasoned employees, we provide
education on new technologies and
new areas of insurance. All employees
have access to a mix of traditional
and virtual classes and team–based
projects, which we encourage in their
individual development plans.
The development of our leadership
and talent pipelines is a focus of
senior management, starting with
me. We spend several days each
year on succession plans including
development priorities, talent gaps and
ways to further strengthen our bench.
In 2019, we promoted from within to
fill 100% of all senior executive roles
that became open due to retirement or
resignations. This resulted in seamless
transitions and continuity of service
that benefited both Chubb and our
customers and business partners. Just
as we measure results in other areas
of our business, we set clear goals for
ourselves concerning our people and
we track our progress. Our retention
of employees at all levels is at or above
external benchmarks and we are
achieving improved representation
of employees as measured by
gender, nationality and experience,
including at middle and senior levels
of management. We can continue to
improve our ability to attract, develop,
recognize and retain our employees as
we strive to create a company where
all who choose to achieve their full
potential can do so. As the company
grows bigger and we compete for
talent, it’s mission critical.
A decade of growth and
accomplishment
I have many to thank for a gratifying
2019 and a decade of tremendous
growth and accomplishment for our
company, beginning with my fellow
employees and senior management
team. I’m surrounded by dedicated,
engaged and supportive professionals
— amazing people who care so
much about our company and their
customers. We are a company of
builders, and builders want to win.
Without their personal and collective
sacrifice, our achievements, and the
mission we are on to create greatness,
simply would not have been possible.
I also want to thank Chubb’s active and
supportive board of directors, whose
commitment and counsel have been
essential to our company’s success.
This year marks the retirement of our
lead director, Robert Hernandez. Bob
was here at the beginning — he joined
the board of ACE when the company
was founded in 1985, and for over
three and a half decades he actively
supported and helped govern the
company. As lead director he helped
to lead the board in independent
governance and deliberation. Bob has
been a partner to me for over 15 years.
Always supportive yet independent,
he exemplifies model governance
and represented the interests of
shareholders while counseling
management — a clear example why
rigid term limits are an unnecessary
crutch. Bob is a model of wisdom, duty
of care and loyalty, and I will miss him.
Bob’s successor as lead director will
be Michael Connors, who has been on
our board since 2011. I and my fellow
directors look forward to working with
Mike and benefiting from his years of
experience and counsel in this critical
role. Lastly, I want to thank Kimberly
Ross, who served as a director from
2014 to 2019, for her contributions
and service.
Chubb is a compelling long–term
shareholder value creation story. We
have a unique, highly competitive
global franchise featuring a well–
diversified portfolio of market–
leading businesses with substantial
capabilities, including presence and
scale, backed by a world–class service
quality reputation and a sterling
brand. We have clarity of strategy,
purpose and opportunity. Our product
and distribution capabilities are well
integrated with a disciplined, well–
tested execution–oriented culture. Add
to that our balance sheet strength and
long–term revenue growth and earning
power. As we close out one decade and
enter an exciting new one with great
anticipation, we are confident that our
best days are in front of us, and that we
will outperform and deliver exceptional
value to you, our shareholders, long
into the future.
On behalf of the entire organization,
thank you for your investment and
trust in us.
Sincerely,
Evan G. Greenberg
Chairman and Chief Executive Officer
19
Elevating the Customer Experience
Consumer and commercial customers have long recognized Chubb for its finely crafted coverage and superior
service. We also aspire to create a truly differentiated customer experience. This begins with empathy, is fueled
by inspiration and innovation, and brought to life through commitment and resources. We’re focused on
meeting the insurance needs of customers in ways that provide greater value, ease, speed, convenience and
peace of mind. Elevating the customer experience means being there during the moments that matter with
relevant capabilities and products that match each customer’s lifestyle and life stage.
Using digital technology
to enhance the customer
experience
In Mexico, where Chubb is the third–largest
auto insurer, the company uses technology to
get customers back on the road faster after an
accident. To expedite the claims process and
accelerate car repairs, Chubb insureds use an
app to take photos of their damaged auto and
digitally select a body
shop while a remote
adjuster evaluates
the claim instantly.
When a field
adjuster is needed,
in–app technology
uses a geospatial
algorithm to locate
the closest adjusters
and automatically dispatches one of them for
assistance. In most cases — more than 75% of
the time in 2019 — a Chubb adjuster arrives
at the scene of an accident within 15 minutes
of notification, drastically reducing the
customer’s on–site wait time after an accident.
In the U.S., Chubb Personal Risk Services
customers can use Chubb at the Wheel, a
new mobile app for family members such as
teen drivers and their parents who choose to
improve driving safety through monitoring
and education. When a teen logs into the
app, it records their driving habits, including
acceleration and braking, and distracting
behaviors, such as texting or calling. The app
compiles data to provide a driving score at
the end of each ride. New and inexperienced
drivers can use app feedback to hone their
driving skills. Parents and teens both feel safer
knowing that roadside assistance and vehicle
location are easily accessible, providing a
sense of security in the event of an accident.
20
Moving from “repair
and replace” to “predict
and prevent”
For policyholders, the experience that matters
most is what happens when they have a claim.
But what is the value of an insurer — armed
with risk engineering expertise, technology,
data and analytics — that can prevent a claim
from happening in the first place?
Chubb is helping to answer that question by
installing sensors that alert consumer and
commercial customers to risks from water,
failing equipment and other exposures that
can damage property and displace people
from their home or workplace for weeks or
even months.
For homeowners, sensors installed in wine
cellars track temperature and humidity data
to diagnose issues before they can cause
spoilage of a valuable collection. Chubb–
installed sensors can help ensure a stable
cellar environment, allowing customers to
know their collection is safe.
For commercial customers, Chubb is installing
sensors that monitor water, temperature and
humidity changes in hospitals and other large,
complex properties. Chubb has the expertise
to know where large
interior water loss
damage is likely to
occur, and places
sensors in the right
locations. Avoiding
a loss provides real
value beyond just the
claim payment. It’s
about avoiding the
disruption to the customer that comes with
getting damaged assets repaired or replaced.
When the experience
is the product
Making it easier to do
business with Chubb
Insurance companies often talk about the
coverages they offer as “products.” As
digital capabilities
advance, and
opportunities to
create tailored
and frictionless
experiences for
customers increase,
the experience itself
— fast, customized,
simple and mobile
— can be the product. That vision stands
behind a growing number of innovations
at Chubb featuring a digital service and
experience.
Through its exclusive distribution partnership
with Grab, the leading ride–hailing and
mobile payments company in Southeast Asia,
Chubb offers Singapore–based customers an
affordable daily travel product, called Travel
Cover. Using the Grab app, customers get an
instant quote to purchase travel insurance
right up to the time of departure. Available
for travel to any destination globally, the per
day cost begins at less than $2. Customers can
also save their travel profiles on the Grab app,
making future purchases easy and convenient.
Beginning in 2019, travel insurance customers
in Singapore benefited from a completely
automated experience for certain frequent
travel-related claims, including overseas
medical expense reimbursement, and baggage
and travel inconvenience claims. Using their
smart phone, computer or tablet, customers
complete the claims process in minutes and
without the need to download an app or
create an account.
A decade ago, Chubb introduced Worldview®,
an award–winning web–based application that
provides real–time access to Chubb’s systems
and expertise in one application. Worldview®
transformed program management for the
complex insurance needs of multinational
clients and their brokers, and it remains the
most powerful, effective and transparent tool
of its kind in the industry. Today, more than
10,000 Chubb clients and brokers utilize
the system.
The application has been expanded to include
additional product lines and capabilities,
including a seamless user experience
bolstered by an interactive dashboard. With
Worldview®, clients and brokers can also
request and upload translations of policies
from a local language to English. Adoption
and use of Worldview continues to grow,
with the number of active users increasing
14% in 2019.
A growing number of small business owners
in the U.S. and
globally are using the
Chubb Commercial
Client Center, an
intuitive self–service
platform that
allows insureds to
view their billing
history and recent
statements, pay
bills, submit claims, access policy documents
and request an endorsement or a certificate
of insurance (COI). In addition to bringing
greater convenience to customers, Client
Center reduces administrative overhead for
independent agents. Chubb’s investments in
the Client Center customer experience are
paying off: since its launch, an average of
1,000 new users per month have been added.
21
A Global Leader in Property and Casualty Insurance
Argentina
Australia
Austria
Belgium
Bermuda
Brazil
Canada
Chile
China
Colombia
Czech
Republic
Denmark
Ecuador
Egypt
Finland
France
Germany
Gibraltar
Japan
Korea
Pakistan
Panama
Macau SAR
Peru
Hong Kong SAR
Malaysia
Philippines
Hungary
Mexico
Indonesia
Myanmar
Poland
Portugal
Ireland
Italy
Netherlands
Puerto Rico
New Zealand
Russia
Norway
Saudi Arabia
Singapore
South Africa
Spain
Sweden
Switzerland
Taiwan
Thailand
Tunisia
Turkey
United Arab
Emirates
United
Kingdom
United States
Vietnam
A local presence in 54 countries and territories around the world
Chubb has operations in the countries and territories listed here
and can help clients manage their risks anywhere in the world.
22
Chubb Senior Operating Leaders
John Lupica
John Keogh
Paul J. Krump
Juan Luis Ortega
Vice Chairman,
Chubb Group;
President, North America
Major Accounts and
Specialty Insurance
Executive Vice Chairman,
Chubb Group;
Chief Operating Officer
Executive Vice President,
Chubb Group;
President, North America
Commercial and
Personal Insurance
Executive Vice President,
Chubb Group;
President, Overseas
General Insurance
Chubb’s senior operating leadership includes the company’s
Chief Operating Officer and the leaders of North America
and Overseas General insurance operations.
23
North America Insurance
Chubb’s insurance businesses in North
America serve clients ranging from the
largest multinationals, middle–market
companies and small businesses to
successful individuals and families, and
the agriculture community.
For commercial property and casualty
insurers in North America, the major
theme of 2019 was the improving
operating environment. For Chubb,
a market with firming pricing and
conditions created an opportunity
to bring the company’s signature
capabilities to more clients in more
lines of business at risk–adjusted rates
in line with rising loss costs.
“The quality of Chubb stood out in
2019,” said John Keogh, Executive
Vice Chairman, Chubb Group and
Chief Operating Officer. “In a market
that was sometimes chaotic, Chubb
demonstrated that we are professional,
stable, consistent and a reliable
partner. As a result, we further
burnished the Chubb brand and
reinforced our industry leadership.”
Three North American businesses
— Major Accounts, Westchester
and Chubb Bermuda — were best
positioned to benefit as headwinds
were replaced by tailwinds. The
operating environment for Chubb’s
Commercial Insurance retail P&C
business serving middle–market
companies began to turn bullish
mid–year and accelerated in the
second half. Chubb core strengths,
along with its investments in people
and digital technology, have also
positioned the company’s other North
American businesses for secular
growth opportunities, including the
Commercial Insurance segment serving
small businesses, Chubb Personal
Risk Services and the company’s
agricultural insurance business.
Total net premiums written for
the company’s North America P&C
insurance businesses were $20.0
billion, up 6.6% from 2018. Chubb
reported a world–class combined
ratio of 87.8% for its North American
P&C insurance operations. Excluding
catastrophe losses, the current accident
year combined ratio was 87.1%.
“Our combination of products,
claims and risk engineering services,
expertise and underwriting excellence
is a powerful differentiator for Chubb,
particularly in a firming P&C market
cycle,” said Paul Krump, Executive
Vice President, Chubb Group and
President, North America Commercial
and Personal Insurance. “When others
are reducing capacity and appetite,
Chubb’s consistency and quality
make us a go–to source for agents and
brokers to serve their customers.”
John Lupica, Vice Chairman of Chubb
Group and President, North America
Major Accounts & Specialty Insurance,
pointed to another Chubb strength:
the North American field operation
with 49 branches across the U.S. and
Canada. “The field plays a critical
role in managing the flow of business,
cross–sell opportunities and the
Key Financial Results
Dollars in millions
Total North America
P&C Insurance
2019
Gross premiums written
Net premiums written
Combined ratio
P&C current accident year
combined ratio excluding
catastrophe losses
$25,480
$19,972
87.8%
87.1%
North America Commercial
P&C Insurance
2019
Gross premiums written
Net premiums written
Combined ratio
P&C current accident year
combined ratio excluding
catastrophe losses
Segment income
$17,604
$13,375
85.6%
87.4%
$3,942
North America Personal
P&C Insurance
2019
Gross premiums written
Net premiums written
Combined ratio
P&C current accident year
combined ratio excluding
catastrophe losses
Segment income
$5,461
$4,787
91.1%
81.4%
$660
North America Agricultural
Insurance
2019
Gross premiums written
Net premiums written
Combined ratio
P&C current accident year
combined ratio excluding
catastrophe losses
Segment income
$2,415
$1,810
95.1%
99.1%
$90
24
Chubb’s North America Insurance Business Units
Commercial P&C insurance products
Major Accounts
Major Accounts
for the large corporate market sold
by retail brokers
Commercial P&C insurance products
for middle market and small businesses
sold by independent agents and
retail brokers
Personal lines coverage, including
home, auto, valuables, umbrella and
recreational marine insurance, for
successful individuals and families
sold by independent agents and brokers
Commercial P&C excess and surplus
lines sold through wholesale brokers
coverage and captive programs sold
by large international brokers
Crop insurance from Rain and Hail
and farm and other P&C coverages
sold by agents and brokers
Commercial
Insurance
Personal Risk
Services
Commercial
Insurance
Personal Risk
Services
Westchester
Westchester
Liability, property, political risk
Chubb Bermuda
Chubb Bermuda
Agriculture
Agriculture
Commercial P&C insurance products
for the large corporate market sold
by retail brokers
Commercial P&C insurance products
for middle market and small businesses
sold by independent agents and
retail brokers
Personal lines coverage, including
home, auto, valuables, umbrella and
recreational marine insurance, for
successful individuals and families
sold by independent agents and brokers
Commercial P&C excess and surplus
lines sold through wholesale brokers
Liability, property, political risk
coverage and captive programs sold
by large international brokers
Crop insurance from Rain and Hail
and farm and other P&C coverages
sold by agents and brokers
introduction of new products,” he
said. “The market environment in 2019
really put a spotlight on the strength
and value of our field operation. With
our local presence, agents know we’re
there for them and, at the same time,
we can educate clients on the need for
adequate pricing.”
North America Commercial P&C
Insurance
Chubb is one of the largest commercial
P&C insurers in the U.S., offering a
full range of traditional and specialty
products for businesses of all sizes. Net
premiums written for North America
Commercial P&C Insurance increased
7.1% from 2018. The combined ratio for
the segment was 85.6%. Underwriting
income was $1.9 billion, and segment
income was $3.9 billion.
Major Accounts, Chubb’s P&C
business unit that serves large
companies, is recognized for the
breadth and depth of its product
and service offerings, technical
underwriting experience, superior
client service, and a global platform
built to service complex, bespoke
insurance programs in many countries
around the world. It’s a high–touch
business where Chubb, with its strong
client– and broker–centric culture,
has developed long–term, enduring
relationships. Chubb serves more than
90% of the Fortune 1000.
25
North America Insurance
“ In a market that was
sometimes chaotic,
Chubb demonstrated
that we are professional,
stable, consistent and
a reliable partner.
As a result, we
further burnished
the Chubb brand and
reinforced our industry
leadership.”
— John Keogh
26
“Over the past two decades we’ve built
a franchise that is second to none and
very difficult to replicate,” said Mr.
Lupica. “With our proven reputation
as a thoughtful underwriter and a
partner known for service excellence,
we were able to benefit from the
‘flight to quality’ in 2019. We knew
it was important to lead the market
by communicating with clients and
brokers, expressing the need for rate
adequacy in lines where premiums
have not kept up with loss costs. A
healthier market, where insurers are
able to be paid more appropriately for
the risk they assume, is good for Chubb
because clients value our consistency,
services and the relationships we have
built over time.”
In 2019, the retention rate for Major
Accounts was more than 95%, a record.
Cross–selling services to existing
customers accounted for more than
81% of new business.
Among Major Accounts’ distinguishing
capabilities are its industry practices,
including transportation, private
equity, real estate and construction.
Multiline clients also have access to a
Global Client Executive, who knows the
insured and serves as a single point of
contact to navigate the Chubb network
across the globe. For claims handling,
customers also have access to a Claims
Client Executive. Worldview®, Chubb’s
award–winning proprietary portal,
enables client risk managers and
brokers to manage and track all aspects
of their insurance program in real time.
More than 10,000 clients and brokers
utilize the system.
For the year, Major Accounts and the
excess and surplus (E&S) wholesale
businesses generated 7.9% growth in
net written premiums.
In the E&S lines market, Westchester
specializes in hard–to–place casualty,
property catastrophe and specialty
lines for large corporate, middle–
market and small businesses.
Wholesale brokers distribute these
products, including specialty classes
such as financial lines, product
recall and cyber. Traditional
brokerage accounts for about 60%
of Westchester’s premiums, with
the balance from its binding and
programs divisions.
In recent years, Chubb has pointed
to Westchester as a proof point for
the underwriting discipline that
defines the entire company: We will
trade market share for profitability.
From 2015 to 2018, Westchester’s net
premiums written shrunk an average
of 2.6% per year. Yet over the past
13 years, the business produced an
average combined ratio of 92.8%. In
the current environment, Westchester
demonstrates Chubb’s ability to
react quickly to market changes,
and outperform the broader market,
which began to turn in late 2018 and
accelerated throughout 2019. For the
year, the business grew 9.1%.
Westchester’s ability to seize
opportunities in a changing market is
due to investments made to broaden
the product set, retain experienced
talent, develop the next generation
of underwriters, reward experienced
underwriters for remaining disciplined,
and deploy technology that enables
the business to scale efficiently.
Investments in digital capabilities, for
example, allowed Westchester to make
a record number of API connections
with E&S agents in the binding division.
North American Business Unit Leaders
(From left)
Scott Arnold
Vice President,
Chubb Group;
Division President,
Chubb Agriculture;
President,
Rain and Hail
Judy Gonsalves
Vice President,
Chubb Group;
Division President,
Chubb Bermuda
Christopher A. Maleno
Senior Vice President,
Chubb Group;
Division President,
North America
Field Operations
Bruce L. Kessler
Senior Vice President,
Chubb Group;
Division President,
Westchester
Chubb Bermuda provides excess
coverage in three product areas:
casualty, property and financial lines.
It also houses the company’s political
risk group. Operating with a high
severity/low frequency business model
and offering broad coverage and sizable
capacity to clients and brokers around
the world, the business produced
strong results across all products
in 2019.
“Our property business produced
record results for the year. Because
brokers have been trading with our
property team for years — or even
decades — they knew where to find
access to quality capacity at the right
price,” said Mr. Lupica.
Commercial Insurance is Chubb’s
division that provides P&C coverages
to middle–market companies with
revenues up to $1 billion and small
businesses. In the middle–market
segment, Chubb is distinguished by
its more than 25 industry practices,
each handled by teams of experienced
underwriting, claims and risk
engineering professionals who
understand the particular exposures
of that industry. The business’s core
package product is complemented
by the industry’s largest offering of
standard and specialty coverages,
including auto, workers compensation,
marine, cyber, environmental,
multinational, directors and officers
(D&O) and errors and omissions
(E&O) coverages.
Chubb’s commercial P&C offering
for small businesses includes a
core package product as well as an
expanding range of specialty products.
This segment is growing rapidly,
drawing strength from the company’s
middle–market expertise as well as
capabilities from Marketplace, Chubb’s
fully automated digital platform that
makes it easy for agents to quote, issue
and service all of their small business
accounts. In 2019, net premiums
written in Chubb’s middle market and
small business division grew 6.1%.
Together, the addressable market
for Commercial Insurance includes
businesses from sole proprietorships,
27
North America Insurance
“ A healthier market,
where insurers are
able to be paid more
appropriately for the
risk they assume, is
good for Chubb because
clients value our
consistency, services
and the relationships we
have built over time.”
— John Lupica
28
In 2019, Chubb’s middle–market
business continued to deepen its
product offering, developing and
launching 15 enhancements to its
package coverage, including expanded
flood and earthquake coverage.
Chubb has invested in the success
of its agents, including developing
online resource centers and providing
research and marketing and
prospecting resources to help them
fuel their own business growth. In
2019, Chubb introduced The Cyber
COPE Insurance CertificationSM
program, an eight–month program
for Chubb brokers and agents to
learn best practices in cybersecurity
risk management, governance
and operations.
Chubb also sponsors the National
Center for the Middle Market (NCMM)
at The Ohio State University. Along with
NCMM, Chubb is publishing the Middle
Market Indicator, a quarterly survey of
1,000 C–suite middle market company
executives across all industries.
For Chubb’s small business segment,
which had its beginnings just four years
ago, 2019 was a year of strong growth
and progress. Net written premiums
were up 35%, with new business
growth approaching 35%. Transactions
on Marketplace were up 55% from 2018.
The business unit ended 2019 with an
annual run rate of $400 million of gross
written premium.
family businesses and single–location
private companies to publicly traded
entities with a multinational footprint.
Chubb’s commercial P&C business has
the expertise and appetite to address
about 85% of this important growth
sector of the economy.
“In the middle market we were able
to capitalize on the market shift and
seek more opportunities,” said Mr.
Krump. “This was a direct result of
our continued focus on underwriting
discipline, delivering exceptional
service to our customers and
producers, and writing new business in
the industries where we have distinct
expertise and appetite.”
Chubb’s North American middle–
market and small commercial
businesses are at the nexus of several
important company initiatives. They
serve as the model for Chubb to export
and expand its ability to serve these
market segments in other regions
of the world. The growing technical
capabilities of the Marketplace
platform, which originally focused
on small businesses, are increasingly
relevant to companies at the lower
end of the middle market. The branch
network is also a key channel to
distribute Chubb’s specialty insurance
products to middle–market customers.
Cross–selling is an important part of
the Chubb middle–market story. In
2019, nearly 50% of new business
written was sold to existing clients.
“For mid–market companies, we are
an account solution. Our account
retention is high — 92% in 2019 — and
our average time on a risk is 15 years,”
said Mr. Krump. “We grow with clients,
and work with them to manage through
market cycles.”
North American Business Unit Leaders
(From left)
Matthew Merna
Senior Vice President,
Chubb Group;
Division President,
North America
Major Accounts
Frances D. O’Brien
Senior Vice President,
Chubb Group;
Division President,
North America
Personal Risk Services
Benjamin Rockwell
Vice President,
Chubb Group;
Division President,
North America
Middle Market
James Williamson
Vice President,
Chubb Group;
Division President,
North America
Small Business
Adoption of Marketplace continued to
grow. By year–end 2019, the platform
was deployed to more than 40,000
users at more than 4,500 agencies.
Each day, an average of 1,000 agents
log in to the platform to transact
business. Nearly 85% of submissions for
the core package product are processed
on a “straight–through” basis, where
the agent receives a fast answer from
the system without having to interact
with an underwriter.
In this high–volume, low–touch
segment, the ability to offer a digital
experience for agents is paramount.
Marketplace was built to scale, and
Chubb regularly adds new products,
industry segments and services to
better serve small businesses as they
grow and move into the lower
middle market. In 2020, Marketplace
is on track to begin offering personal
accident and supplemental health
products from Chubb’s North American
A&H business.
Chubb is making other investments to
make it easier for customers and agents
to do business with the company while
driving superior risk selection across
the portfolio. By harnessing data and
analytics, Chubb is on a path to reduce
average quote times for less complex
risks to less than three minutes, predict
risk classification for the majority of
submissions and, ultimately, reduce the
number of underwriting questions that
must be asked to just two.
Digital investments are also
strengthening the company’s ability
to serve affinity group partners. For
example, in 2019 Chubb announced
a partnership with the National
Association of Women Business Owners
(NAWBO), an organization representing
nearly 12 million women–owned
businesses. NAWBO members now
have access to an industry–leading
resource for small business insurance
needs and education along with access
to insurance products and services
generally reserved for the larger
corporations, including Chubb’s cyber
enterprise risk management policy.
“We’re positioned in a way to bring
more product to more types of
insurance through our agents than
anybody else. It’s happening now,”
said Mr. Krump.
29
North America Insurance
“ Our combination
of products, claims
and risk engineering
services, expertise
and underwriting
excellence is a powerful
differentiator for Chubb,
particularly in a firming
P&C market cycle.”
— Paul Krump
30
North America Agricultural
Insurance
Chubb’s Rain and Hail subsidiary is
the leading crop insurance managing
general agency in North America.
The business serves approximately
125,000 farmers, insuring more than
100 different crops on 80 million
acres. With distribution through 5,600
independent agents, Rain and Hail has
the largest agency footprint in this
sector. In addition, Chubb’s North
America agriculture segment includes
farm, ranch and P&C commercial
agriculture coverages.
Crop insurance is a public–private
partnership that operates with a proven
model. While the results of the business
are not typically correlated with the
P&C insurance market cycle, crop
insurance is a business with CAT–like
risks. In 2019, poor growing conditions
in agricultural regions in the U.S. led
to crop yield shortfalls and elevated
prevented planting claims. For the year,
the segment produced a combined
ratio of 95.1%. Segment income was
$90 million on net written premiums
of $1.8 billion.
In a challenging year for farmers,
Chubb distinguished itself by delivering
superior service and getting claims
payments into the hands of farmers
quickly.
“Chubb is committed to the crop
insurance business, and it’s in times of
stress that Rain and Hail’s service and
claims–handling capabilities make a
real difference,” said Mr. Lupica. “We
saw it in 2012, a year of record drought.
We saw it again in 2019, when the peril
was excessive rain. We responded when
our customers needed us, paying all
prevented planting claims in record
time. Rain and Hail shined in 2019,
making it a year when we extended the
value of the brand.”
North America Personal P&C
Insurance
Chubb is the leading provider of
personal lines insurance for successful
individuals and families in the U.S.
and Canada. It’s been 40 years
since Chubb pioneered insurance
solutions crafted for this discerning
market segment. Over the years, the
company has built and maintained
its leadership by continuing to raise
the bar for the coverage and services
it offers customers, including a broad
product offering, superior claims and
risk consulting services, and access to
Chubb’s extensive branch network in
the U.S. and Canada. Clients of Chubb
Personal Risk Services also benefit from
the company’s global presence, which
offers protection for their assets around
the world.
Net premiums written for the North
America Personal P&C Insurance
segment were $4.8 billion. The 2019
combined ratio was 91.1%. The current
accident year combined ratio excluding
catastrophe losses was 81.4%. Segment
income was $660 million.
As the risk environment evolves, Chubb
continues to find innovative ways to
help protect clients from the everyday
risks of owning a home and automobile
as well as the unique risks that come
with achieving considerable success in
their lives and professions.
“Our clients are becoming increasingly
aware of the risks they may be facing
from severe weather events, distracted
drivers texting and using social media,
social movements like #MeToo, and
the need to protect their data and
their privacy,” said Mr. Krump. “As a
result, customers want to engage with
us at a much higher level in order
to understand what they can do to
mitigate their potential for a loss.”
Chubb’s investments in digital
capabilities are making it easier for
customers, agents and brokers to
interact with us on their preferred
terms, from the web and mobile app
to phone and in–person. Two years
ago, Chubb Personal Risk Services
significantly expanded the capabilities
of its web portal. By the end of 2019,
more than half of all customers were
actively using it. Adoption of the
mobile app, with features that include
biometric login, voice commands, text
and email alerts, has been accelerating:
An average of 3,000 clients per
month downloaded the app in 2019.
Customers are using the web portal
and app to quickly access their auto
identification information, file a first
notice of loss digitally or to find a
trusted service provider, such as
a fine–art transit service or home
alarm company.
Chubb Personal Risk Services has
continued to expand and deepen the
services available to clients. In 2019,
the company introduced a first–of–
its–kind solution to protect personally
identifiable information when an auto
is totaled. Chubb’s service, available
at no additional cost to auto clients
who experience an insured total loss,
will wipe all sensitive information
stored on the vehicle’s electronics
system, such as mobile contacts, text
messages, GPS data and garage and
gate opening codes.
Chubb Property ManagerSM provides
policyholders with assistance for
second homes that suffer damage from
hurricane–force winds. Once an area is
safely accessible, Chubb will dispatch
a representative to inspect the home
and provide a detailed report on
its condition.
For policyholders in states prone to
wildfires, Chubb offers Wildfire Defense
Services to monitor and protect homes
threatened by this peril. Wildfire
Defense Services will take actions such
as clearing of hazardous objects and
material around the home to create
a more defensible space, installing
sprinklers, addressing hot spots
and, as a last line of defense in home
protection, applying fire retardant
gel to the home. Tens of thousands of
policyholders in 18 states are enrolled
in this complimentary service.
Chubb also engages with clients to raise
awareness about risks such as flooding
and internal water leaks. Water damage
from burst pipes, frayed hoses and
other plumbing failures remains the
number one loss a homeowner is
likely to face. Through awareness
and education campaigns directed at
both customers and agents, Chubb
encourages policyholders to install
water leak detection devices or to turn
off their main water valve when they
leave their home for extended periods
of time.
In 2019, Chubb Personal Risk Services
launched a pilot program for clients
with wine collections to install sensors
to monitor temperature and humidity.
When a change that could lead to
damage is detected, the homeowner is
alerted via an app to take preventative
action before damage or a claim
occurs. Chubb’s risk consultants also
visit customers’ homes to identify
potential exposures and advise clients
on actions that could prevent a loss.
Thermographic scans, for example, can
detect moisture and hot spots behind
walls that could indicate threats from
water damage or electrical fires.
Benefiting from decades of experience,
a broad dataset and increasingly
sophisticated analytics capabilities,
Chubb identifies clients that have a
higher propensity for a loss, and is
working with them and their agents
proactively to mitigate or prevent a loss
from happening in the first place.
“We’re very optimistic about the
opportunities for Personal Risk
Services,” said Mr. Krump. “With clients
increasingly aware of the risks they
face, they are looking for a company
that can provide products and services
to help them manage those risks. With
our deep history and capabilities across
the Chubb organization, we have so
much to offer them.”
“Chubb is well positioned to serve our
customers and distribution partners
across all of our North American
businesses because of the investments
we’ve made in technology, product
and distribution,” said Mr. Keogh. “But
our most important investments are in
our people — training, developing and
growing the men and women who are
the future of this company.”
31
Overseas General Insurance
Chubb’s international general insurance
operation is comprised of two main
businesses: one with retail operations
in five regions of the world and the
other an excess and surplus (E&S) lines
operation in the London wholesale
market and a presence at Lloyd’s.
As in North America, the major theme
in 2019 for Chubb’s international
general insurance operations was the
operating environment. When the
year began, firming conditions were
already underway in a few select
locations including the London
wholesale market and the commercial
P&C market in Australia. The trend
gained momentum during the year, and
extended to the U.K. retail market and
Continental Europe.
“The market momentum in 2019 was
notable, but it is only part of the story,”
said Juan Luis Ortega, Executive Vice
President, Chubb Group and President,
Overseas General Insurance. “Our
progress and performance also reflect
the investments we have made in
recent years to advance our market
segmentation strategies for commercial
P&C, digital initiatives to enhance the
customer experience, and distribution
partnerships that give us access to
millions of customers for both our
consumer and commercial product
offerings.”
“Chubb’s capabilities — our diversity in
geography, products and distribution
— have taken years to build,” said
Mr. Keogh. “They are a sustainable
competitive advantage that is getting
stronger by the day.”
Overseas General Insurance generated
net premiums written of $9.3 billion in
2019, up 8.4% in constant dollars. The
combined ratio for the year was 91.6%.
The current accident year combined
ratio excluding catastrophe losses was
90.9%, and segment income was
$1.3 billion.
Commercial P&C insurance represents
about 60% of Chubb’s international
business. In 2019, Chubb’s retail
commercial P&C segments — Major
Accounts and middle market and small
businesses — benefited from a more
favorable operating environment as
well as initiatives to further build out
the company’s capabilities. Highlights
for Major Accounts included strong
growth across Asia Pacific, the U.K. and
Ireland, as well as Continental Europe.
In the middle market, Chubb’s focus
on key markets and on expanding
industry practices helped to drive
results. Double–digit growth in the
small commercial segment was
highlighted by strong results in
Australia. By the end of 2019,
small commercial represented 21%
of international commercial
P&C premiums.
Alongside P&C insurance, Chubb offers
accident and health and personal
lines coverage globally. These two
businesses meet the protection needs
of consumers against accidents,
hospitalization, critical illness and
protect things that consumers own,
such as their home, car and even
their phone.
Chubb’s ever–expanding digital
capabilities, along with product
breadth and claims service, have
positioned the company as the
distribution partner of choice for
banks, retailers, airlines and mobile
network operators that want to be able
to offer best–in–class protection to their
customers. Four major partnerships
established in the past two years alone
— with Citibanamex, Banco de Chile,
DBS and Grab — provide access to over
60 million customers. Worldwide,
Chubb has more than 150 distribution
partnerships.
Key Financial Results
Dollars in millions
Overseas General Insurance
2019
Gross premiums written
Net premiums written
Combined ratio
P&C current accident year
combined ratio excluding
catastrophe losses
Segment income
$11,408
$9,262
91.6%
90.9%
$1,273
“ Chubb is able to
transport best practices
from one strategic
distribution partnership
to another, enabling
us to create unique
customer experiences
that match our
partners’ digital assets.”
— Juan Luis Ortega
32
Chubb’s Overseas General Insurance Business Units
International
International
International
Operations in the U.K. and 18 other
Europe
Europe
Europe
Operations in 14 countries and territories
Asia Pacific
Asia Pacific
Asia Pacific
Operations in nine countries serving
Latin America
Latin America
Latin America
Operations in Japan serving commercial
Far East
Far East
Far East
Operations in eight countries serving
Eurasia & Africa
Eurasia & Africa
Eurasia & Africa
Commercial P&C excess and surplus
Chubb Global Markets
Chubb Global Markets
Chubb Global Markets
Commercial P&C, A&H and traditional
and specialty personal lines sold by
retail brokers, agents and other channels
in five regions:
countries comprised of P&C commercial
lines and consumer lines, including
A&H and specialty personal lines
serving commercial customers
and consumers with P&C, A&H and
personal lines
commercial customers with P&C
products and consumers through A&H
and personal lines
customers with P&C products
and consumers through A&H and
personal lines
commercial customers with P&C
products and consumers through A&H
and personal lines
lines and A&H sold by wholesale
brokers in the London market and
through Lloyd’s
Commercial P&C, A&H and traditional
Commercial P&C, A&H and traditional
and specialty personal lines sold by
and specialty personal lines sold by
retail brokers, agents and other channels
retail brokers, agents and other channels
in five regions:
in five regions:
Operations in the U.K. and 18 other
Operations in the U.K. and 18 other
countries comprised of P&C commercial
countries comprised of P&C commercial
lines and consumer lines, including
lines and consumer lines, including
A&H and specialty personal lines
A&H and specialty personal lines
Operations in 14 countries and territories
Operations in 14 countries and territories
serving commercial customers
serving commercial customers
and consumers with P&C, A&H and
and consumers with P&C, A&H and
personal lines
personal lines
Operations in nine countries serving
Operations in nine countries serving
commercial customers with P&C
commercial customers with P&C
products and consumers through A&H
products and consumers through A&H
and personal lines
and personal lines
Operations in Japan serving commercial
Operations in Japan serving commercial
customers with P&C products
customers with P&C products
and consumers through A&H and
and consumers through A&H and
personal lines
personal lines
Operations in eight countries serving
Operations in eight countries serving
commercial customers with P&C
commercial customers with P&C
products and consumers through A&H
products and consumers through A&H
and personal lines
and personal lines
Commercial P&C excess and surplus
Commercial P&C excess and surplus
lines and A&H sold by wholesale
lines and A&H sold by wholesale
brokers in the London market and
brokers in the London market and
through Lloyd’s
through Lloyd’s
“With our consistency in local
delivery, Chubb is able to transport
best practices from one strategic
distribution partnership to another,
enabling us to create unique customer
experiences that match our partners’
digital assets,” said Mr. Ortega. “In
2019, we gained real traction on digital
distribution of consumer insurance
across Asia and Latin America.”
In Chubb’s core direct marketing
business, Korea was a standout,
achieving a new milestone of 2 million
policyholders. During the year, Chubb
closed 20 new direct marketing
sponsorships. In Chubb’s travel
insurance business, a new partnership
with Aeromexico announced in early
2020 was one of 25 new relationships
secured in the past year. Other
highlights in Chubb’s international A&H
insurance business include Europe
and Japan, which both generated the
highest growth in several years.
Personal lines generated strong growth
in 2019, particularly in the emerging
markets of Asia and Latin America.
Highlights included the company’s
motor insurance business in Mexico,
which is recognized for its top–tier
sales and service capabilities. Another
highlight is specialty personal lines,
where Chubb has a market–leading
position in the distribution of cell
phone insurance to customers of
mobile network operators across
Europe. This business, which had a
strong year in 2019, is a showcase for
the company’s claims handling and
service — customers want their phones
fixed or replaced quickly — as well as
evolving digital capabilities. Today,
most cell phone replacement claims
are handled with straight–through
processing without any human
intervention.
33
Overseas General Insurance
Chubb’s international general insurance
operations benefit from the movement
of people within the organization.
One of the principal ways the company
develops talent is by promoting
intra– and inter–regional mobility that
exposes employees to different markets
and cultures. In the past three years,
nearly 300 colleagues have undertaken
international assignments. Every
year, more than 1,200 colleagues are
promoted into a new job or granted
expanded responsibilities. These career
progression opportunities recognize
the performance of colleagues and
create an environment for continuous
learning.
Chubb’s Asia Pacific region generated
gross premiums written of $2.9 billion,
up 9% in constant dollars from prior
year, which represents 7% of the
company total.
In its partnership with Grab, the
leading ride–hailing and mobile
payments company in Southeast Asia,
Chubb introduced an affordable daily
travel product, called Travel Cover,
which offers a simple and convenient
way for Singapore–based customers to
purchase travel insurance on the Grab
app right up to the time of departure.
Six other new products were launched
in 2019 on Grab’s passenger and driver
apps in Singapore and Malaysia.
Premium growth from Chubb’s
partnership with DBS, the largest
financial services group in Southeast
Asia, was driven by A&H products for
retail customers in Singapore and by
P&C coverages for businesses in Hong
Kong. Chubb was also a partner in the
2019 launch of DBS Travel Marketplace,
the first one–stop integrated travel
34
marketplace in Singapore. Through this
platform, consumers can find airfares
and hotel rates for more than 25,000
global destinations, as well as free
travel insurance coverage underwritten
by Chubb.
small commercial customer segment.
The platform leverages the capabilities
of Marketplace, which was introduced
in North America in 2017. In Australia,
the initial product focus is business
package and cyber ERM products.
In China, the largest economy in
Asia and the second–largest in the
world, Chubb focused on building and
deepening its presence. The company
has a significant and increasing
ownership stake in Huatai Insurance
Group, a holding company with P&C,
life and asset management subsidiaries.
When pending transactions and
agreements are completed, Chubb
is expected to own a majority of
Huatai Insurance Group. The group’s
insurance operations have more than
600 branches and 11 million customers.
Chubb also operates a fully licensed,
100% Chubb–owned subsidiary with
branch offices in Shanghai, Beijing,
Jiangsu and Guangdong. Chubb China
offers one of the largest commercial
P&C product portfolios in the Chinese
insurance market. It also offers a series
of protection products such as personal
accident, homeowners, travel and
personal devices insurance via the
rapidly growing internet channel to
Chinese families and individuals across
the country.
Chubb’s Latin America region
generated gross premiums written
of $2.9 billion, up 11% in constant
dollars from 2018, representing 7%
of the company total. Continuing
execution of its growth strategies
contributed to strong premium revenue
in the company’s personal lines and
commercial P&C businesses.
Digital capabilities, including API
technology, are enabling these and
other partnerships, which offer
consumers and businesses innovative
products and an enhanced customer
experience. Chubb’s partnership with
Grab, for example, has produced
the first end–to–end API–integrated
insurance product that covers policy
issuance, administration and claims
investigation in a single app.
The growth of the A&H business in
Korea reflects several Chubb strengths
in direct marketing, including a
sponsor base comprised of every major
credit card issuer in the country; a
diverse range of products; multiple
distribution channels, including
outbound telemarketing and home
shopping; and advanced data and
analytical capabilities.
In retail commercial P&C, Chubb
continued to develop its Major
Accounts practice serving large
corporations in Asia, Australia and
New Zealand, including establishing
Client Advisory Boards in each sub–
region of Asia Pacific. Another major
focus in Australia was navigating
customers through market disruptions
stemming from the operating
environment for property and directors
and officers insurance.
Chubb’s middle–market and small
business segments in Australia
generated double–digit premium
growth. During the year, Chubb
launched an online broker platform
in this market that is designed to
improve efficiency in the quote, bind
and policy fulfillment process for the
Overseas General Business Unit Leaders
(From left)
Darryl Page
Vice President,
Chubb Group;
Division President,
Personal Insurance
John Thompson
Division President,
International
Accident & Health
Timothy O’Donnell
Vice President,
Chubb Group;
Division President,
Commercial Property
and Casualty
Chubb’s business across Latin America
is well balanced. In Brazil, the company
has the second–largest commercial
P&C business, which is distinguished
by its track record of superior technical
ability and multiple affinity distribution
partnerships. In Mexico, the company
is a leading provider of personal lines
insurance, large corporate P&C, as
well as surety. Chubb also has a strong
presence in the Andean region —
Colombia, Ecuador, Peru, Argentina
and Chile — that accounts for about
30% of the total region, and where
the company operates in all segments
of commercial P&C through brokers
and affinity partners. In the Caribbean
and Central America, Chubb operates
through wholly owned subsidiaries
in Puerto Rico and Panama as well
as corporate P&C insurance and
bancassurance partnerships in other
locations.
Like Asia, Latin America has favorable
long–term growth characteristics,
including GDP, a growing middle class
and new small business creation.
Through its strategies, investments and
local presence, Chubb is positioned
to further grow in these developing
markets. A decade ago, Asia and Latin
America represented about one–third
of Chubb’s international general
insurance premium revenue. Today,
those regions account for more than
half of premium revenue.
In 2019, Chubb made good progress
developing its distribution partnerships
with leading banks in Mexico and Chile.
With Banco de Chile, a major focus
was building out the product offering.
During the year, the team launched
dedicated campaigns for residential,
personal lines and commercial
P&C coverages across multiple
channels, including branches, ATMs,
telemarketing and digital.
With Citibanamex in Mexico, Chubb
introduced a dozen new products
in 2019 and has plans to introduce a
dozen more in 2020. These market–
driven products are designed in part
based on an analysis of purchasing
behavior. By the end of 2019, Chubb
was selling more than 30,000 policies
per month through digital platforms,
branches and telesales.
Other highlights in the region included
another year of strong results in
Mexico personal lines, driven by the
auto insurance business. In A&H lines,
Chubb’s partnership with LATAM
airlines contributed to strong premium
growth in travel insurance. Chubb has
long–term distribution agreements
with many of the top airlines based in
the region.
35
Overseas General Insurance
Europe is Chubb’s second largest
region behind North America,
operating in 19 countries, with $3.7
billion of gross premiums written,
representing 9% of the company
total. In 2019, Chubb achieved its best
growth in many years and underwriting
profitability in an improving operating
environment.
Chubb European Group’s first order
of business in 2019 was completing
the redomicile of its EU business
from London to Paris as planned on
January 1 related to Brexit. Throughout
the year, the business remained
focused on delivering clarity, continuity
of service and certainty for customers,
brokers and other partners to ensure
continuous, uninterrupted service as
Brexit deadlines approached.
Highlights included growth in Major
Accounts across the U.K., Ireland and
Continental Europe. In Germany and
the Netherlands, the upper middle–
market segment also performed well.
Chubb’s global presence, servicing
capability, broad product range,
financial strength and underwriting
leadership contributed to this success.
Other 2019 initiatives included the
launch of a new media industry
practice for the U.K. and Ireland. The
practice offers a range of bespoke
coverages for media liability, cyber,
property and casualty as well as
personal accident and travel coverages
for middle market and multinational
advertising, public relations, branding
and publishing companies. This
industry practice also provides value–
added services, including a free
legal advice helpline staffed by senior
media lawyers.
36
Beginning in 2019, commercial
customers of all sizes across Europe
had access to Chubb’s Environmental
Incident Alert, a free service that helps
clients identify qualified incident–
response contractors, monitor clean–up
costs and mitigate potential liabilities
associated with environmental releases.
The Environmental Incident Alert
service uses customized alerts via email
and/or text message and also provides
response coordination assistance and
incident documentation. It is available
24/7 and is now operational in more
than 50 countries.
In Germany, the company launched a
new digital partnership, called Quick
Cargo Insurance, with Hapag–Lloyd
AG, one of the world’s largest cargo
container carriers. The partnership
is facilitated through a bespoke
online system that quotes and binds
single–shipment coverage for small
commercial clients of Hapag–Lloyd
when they place business orders for
marine cargo online. This capability
embodies Chubb’s drive to offer a
superior customer experience by
engaging directly with partners and
delivering an offering that benefits
the partner, their client and Chubb.
During the year, Chubb also launched
Easy Solutions Vin in France, which
includes a range of property and
casualty insurance coverages for
wine producers.
Chubb’s international A&H business
introduced an extended range of
new eLearning modules as part
of its Chubb Travel Smart app for
business travelers, including pre–travel
eLearning, direct access to medical and
security assistance and live location–
based alerts to help avoid trouble
and stay safe. Chubb Travel Smart is
the company’s duty of care solution
designed specifically for employers to
help manage and mitigate travel risks
of their employees.
In specialty personal lines, Chubb
entered into several large relationships
with European mobile network
operators, strengthening its leadership
in this market.
Chubb’s Far East region, which
encompasses Japan, had a record
year, with growth in premium revenue
significantly outpacing the overall
market. The business benefited
from both an improving operating
environment and continued focus on
executing its growth strategies. All
product lines and distribution channels
contributed to the strong results.
Highlights included double–digit
growth in property, casualty,
financial lines and surety. In the large
commercial segment, Chubb’s strong
underwriting and risk engineering
capabilities were strengths in a firming
market. For small and middle–market
businesses, the company expanded
its industry practices, including
entertainment, infotech and life
sciences.
A&H remains a significant growth
engine in Japan with Chubb further
building out its multi–channel
distribution with agents, brokers,
direct marketing and online. Chubb
is focused on adding direct marketing
partners through customer–segmented
campaigns as well as new online travel
partners by seamlessly integrating
insurance products into their
digital purchase path. Relevant and
flexible products, such as personal
accident and trip cancellation
coverages, helped to differentiate
Chubb in the marketplace. Each
channel is supported by continuous
enhancements to product offerings
within personal accident, supplemental
medical and travel categories.
Overseas General Regional Leaders
(From left)
David Furby
Senior Vice President,
Chubb Group;
Regional President,
European Group
Paul McNamee
Senior Vice President,
Chubb Group;
Regional President,
Asia Pacific
Marcos Gunn
Senior Vice President,
Chubb Group;
Regional President,
Latin America
In 2020, Chubb celebrates a century of
doing business in Japan.
Eurasia and Africa also experienced
a changing market environment in
2019, with pricing moving closer to
the realities of risk in the region,
especially in energy and financial lines.
The region generated strong premium
revenue growth and posted solid
underwriting results, recording
a combined ratio of 88%. Investment
in new IT infrastructure and
refinements of the operating model
again contributed to an improved
expense ratio and will enable future
efficiencies.
Chubb Global Markets
Chubb Global Markets, the company’s
London market wholesale and
international excess and surplus
business, provides global access to
specialist underwriters in aviation,
energy, financial lines, marine, political
risk and credit, property, and accident
and health.
For several years, pricing for risk in the
P&C E&S insurance too often failed to
meet the company’s targets to maintain
an adequate underwriting profit. In
response, Chubb shrank the business.
The overall London market, however,
continued to grow, even as Chubb’s
share of it fell.
The rate environment began to change
in 2018, and accelerated throughout
2019, as many carriers narrowed their
risk appetites or withdrew from certain
classes. The stress was most evident
in property and marine lines, but
increasingly moved into casualty and
professional lines.
“Because we had kept our powder dry,
we had the ability to deploy capacity
when pricing became adequate again,”
said Mr. Ortega. “That time came in
2019, and our patience and discipline
were rewarded with four consecutive
quarters of double–digit growth.”
“Overseas General is a big and
important contributor to Chubb’s
success, and our company has
never been better positioned to take
advantage of the vast opportunities
outside North America,” said Mr.
Keogh. “It’s an expanding and
profitable organization with plenty of
runway for future growth in the years
ahead. We will continue to be on our
front foot to meet the evolving needs
of our customers and distribution
partners while creating opportunities
for our employees.”
37
Life Insurance
Chubb’s Life Insurance segment
comprises two businesses. Chubb Life
is an international life insurer, primarily
focused on Asia, that provides
protection and savings–oriented life
insurance products to individuals and
groups. Combined Insurance provides
personal accident and supplemental
health insurance coverages to
consumers in North America.
For the year, the Life segment
generated net premiums written of $2.4
billion, up 5.3%, or 6.4% in constant
dollars, from prior year. Segment
income was $366 million, up 18.6%.
Chubb Life
Chubb Life serves the needs of
consumers through a variety of
distribution channels including
primarily captive agents, but also
through banks, retailers, brokers,
independent agents and direct
marketing. Chubb Life has operations
in seven Asian markets — Hong Kong,
Indonesia, Korea, Taiwan, Thailand,
Vietnam and, beginning in 2019,
Myanmar. In China, the company is
also a joint venture partner in Huatai
Life, a fast–growing life insurer that
serves more than 1.3 million customers
with a broad portfolio of savings
and protection products. Together,
Chubb Life and Huatai Life have nearly
630 offices, 5,000 employees and
85,000 agents.
Life insurance is a long–term business,
and Chubb has been pursuing a
consistent strategy to build Chubb Life
primarily through organic growth. With
its growing scale, Chubb’s international
life business has begun to emerge
as a meaningful contributor to the
company’s growth and profitability.
In 2018, international life earnings
reached $100 million for the first time.
In 2019, earnings rose 48% to $152
million. International life insurance net
premiums written were up 12.6% in
constant dollars.
“In 2019, we continued to diversify
and expand our captive agency force
across several countries, opened new
offices and looked for ways to do more
for our external distribution partners,
including banks and affinity groups,”
said Russell Bundschuh, Senior Vice
President, Chubb Group and President
of Chubb Life. “We made good progress
advancing our digital initiatives
focused on enhancing the customer
experience, launching new digitally
enabled products and making it easier
for agents and distribution partners to
interact with us and serve customers.”
In an environment of continuing low
interest rates, the business kept its
sales focus on protection–oriented
products. At the same time, Chubb Life
increased its emphasis on developing
and launching health and wellness
products.
One of the business’s milestones in
2019 was establishing a 100% owned
life insurance subsidiary in Myanmar,
a nation of more than 54 million
people. Following a competitive
review process, Chubb was one of five
foreign companies awarded a license
for a wholly owned life insurance
business by the Myanmar Ministry
of Planning and Finance. Chubb
is committed to working with the
Myanmar government, regulators and
local organizations to help build and
strengthen the nation’s life insurance
sector. The headquarters in Yangon is
up and running, and the business has
already recruited hundreds of agents.
Key Financial Results
Dollars in millions
Life Insurance
2019
Net premiums written
Segment income
International life insurance
segment income
$2,392
$366
$152
“ The progress we have
made building this
business in recent years
is gaining momentum.
We are well positioned
to continue to build
the breadth and depth
of our life business
across Asia.”
— Russell Bundschuh
38
Global A&H, Life Insurance and Reinsurance Business Unit Leaders
(From left)
Joe Vasquez
Senior Vice President,
Chubb Group;
Global Accident & Health;
President,
Combined Insurance
Russell Bundschuh
Senior Vice President,
Chubb Group;
President,
Chubb Life
James E. Wixtead
Senior Vice President,
Chubb Group;
President,
Chubb Tempest Re Group
Cunqiang Li
Chief Operating Officer,
Chubb Life
In 2019, Chubb Life Thailand
experienced double–digit growth
in total premium. The agency
business benefited from its focus on
productivity, supported by new health
and critical illness riders launched
with whole life. In the group business,
growth was driven by expanding
existing client relationships as well as
the addition of two new partners.
Vietnam also delivered double–digit
growth with an agency force that has
now surpassed 40,000 agents. In early
2019, Chubb Life Vietnam launched
an e–submission app that enables
agents to prepare and submit insurance
applications online via their tablet or
laptop. By the end of 2019, 94% of all
insurance applications submitted to
the company were via the new app.
Vietnam plans to eliminate the use of
printed insurance application forms
in 2020.
In Hong Kong SAR, Chubb Life
introduced a new digital platform for
agents to engage with and serve their
customers. With Chubb LinkSM, each
agent has a unique URL, enabling
them to highlight their own individual
experience, product knowledge, and
professional awards and achievements.
Customers can contact individual
agents directly through the hub as well
as find news and information about
promotions and products. Currently,
nearly two–thirds of agents are using
the new tool.
While protests in Hong Kong SAR in
2019 made it more challenging for
agents to meet with their clients, the
broker channel continued to perform
well. Across the region, Chubb Life has
been developing strategies to expand
sales through brokers, an effective
channel to market protection–oriented
products, as well as banks. In 2019,
Chubb Life forged 44 new brokerage
partnerships.
In China, Huatai Life had a strong year
in 2019, with its rate of growth again
outpacing the overall market. Huatai
Life now operates in 20 provinces
and has approximately 35,000 agents.
Chubb has a significant and increasing
ownership stake in Huatai Life’s
parent, Huatai Insurance Group, a
financial services holding company
that has property and casualty, asset
management and other subsidiaries.
In Korea, Chubb Life launched a new
initiative offering life products to
non–life customers by leveraging the
multi–product telemarketing sales
channel of the company’s international
A&H business. This approach
generates synergies coupled with a
superior product value proposition
and enhanced customer purchase
experience. Term life and new critical
illness products were launched.
39
Life Insurance
Early in 2020, the business launched a
new health and well–being initiative in
the form of a new mobile app, called
Chubb LifeBalance, in Hong Kong
SAR and Thailand. Chubb LifeBalance
better engages customers by providing
support and guidance to live a
healthier, more balanced life. It gives
personalized AI–powered coaching
following a 360–degree approach to a
user’s health and well–being.
While Chubb Life is focused on
Asia, it has operations in other parts
of the world. In 2019, Chubb Life
expanded its presence in Chile with
the acquisition of Banchile Seguros de
Vida (Banchile Life), a Santiago–based
life insurance company with a long–
standing insurance relationship with
Banco de Chile, the largest bank based
in Chile. Banchile Life, which offers a
broad range of life, personal accident
and supplemental health insurance
products, generated over $200 million
of gross premiums written in 2018.
The addition of Banchile Life, along
with Chubb’s exclusive distribution
partnership with Banco de Chile for
P&C and A&H products, significantly
extends Chubb’s distribution and
presence in Chile, enabling the
company to reach and serve millions of
new customers, including in digitally
advanced ways.
“The progress we have made building
this business in recent years is gaining
momentum,” said Mr. Bundschuh.
“We are well positioned to continue to
build the breadth and depth of our life
business across Asia.”
40
Combined Insurance
Combined Insurance generated solid
results in 2019, driven by double–digit
growth in Chubb Workplace Benefits,
which serves large and middle–market
companies by partnering with benefit
brokers, agents and consultants to
offer a line of supplemental insurance
products, including accident, critical
illness, hospital indemnity, life and
disability income. Chubb has been
investing in this business, which brings
together the strengths of Combined
Insurance’s workplace products,
Chubb’s extensive branch network and
the company’s substantial relationships
with national and regional insurance
brokerage firms.
Combined Insurance is focused on
building out its capabilities, sales
organization and distribution to be
fully aligned with Chubb’s North
American field organization, and to
better serve commercial clients of all
sizes — large, middle market and small
businesses. As enrollment in voluntary
benefits programs has moved online,
the company is making investments to
enhance customer–facing and back–
office systems as the business grows.
“Since it was launched in 2016,
Chubb Workplace Benefits has made
significant progress, and we’re
committed to building this business
with the people, products, technology
and capabilities to keep pace with
our growth,” said Joe Vasquez, Senior
Vice President, Chubb Group, Global
Accident & Health and President of
Combined Insurance. “The continued
expansion of our workplace benefits
business shows the breadth of our A&H
offerings as well as the power of the
Chubb branch network in the U.S.”
The Combined Insurance core agency
force — which now numbers more
than 3,300 agents in the U.S. and
Canada — has historically focused on
distributing personal accident, life
and supplemental health insurance
coverages directly to consumers.
Now, Combined Insurance is putting
more emphasis on tapping the small
commercial market. Proprietors and
employers of Main Street businesses,
as well as the individuals who work
for them, fit the customer profile
for the company’s affordable A&H
products. Combined Insurance is
supporting this initiative with learning
and development programs to help
agents adapt to selling in a small
business workplace instead of over a
kitchen table.
In building its agency force, Combined
Insurance continues to focus on
Spanish–speaking agents, who bring
the company’s insurance offering to the
underserved Latino market in the U.S.,
as well as build on its signature success
recruiting veterans looking to re–enter
the workforce.
In 2019, Combined Insurance again
was recognized for its military–
friendly hiring practices. For example,
VIQTORY named the company the
number one Military Friendly®
Employer in the over $1 billion revenue
category — the eighth consecutive year
on the top 10 list and fifth consecutive
year in the top five.
“We truly value the service veterans
have provided to our country, and in
return, we give them the tools they
need to help them be successful in their
career here,” Mr. Vasquez said.
Key Financial Results
Dollars in millions
Global Reinsurance
2019
Gross premiums written
Net premiums written
Combined ratio
P&C current accident year
combined ratio excluding
catastrophe losses
Segment income
$719
$649
85.0%
82.1%
$376
“ The market took a
turn in 2019, making
it an interesting year.
We quoted a lot more
business in 2019 than
we had in recent years.”
— James Wixtead
Global Reinsurance
Chubb’s reinsurance business, which
operates under the Chubb Tempest Re
brand, offers a broad range of products
to a diverse group of primary property
and casualty insurers worldwide.
Doing business globally with offices in
Bermuda, Stamford, London, Montreal
and Zurich, the business has deep
underwriting, actuarial and claims
expertise. Chubb Tempest Re’s position
as a subsidiary of a leading global P&C
insurer sets it apart from many other
reinsurance companies: The business
can be patient and deploy capital
only when there are opportunities to
achieve rate adequacy.
Reinsurance is a cyclical business,
and the operating environment for
reinsurers has been challenging.
Chubb Tempest Re has consistently
demonstrated underwriting discipline,
which has enabled it to perform
in the top quartile of reinsurers in
terms of profitability as measured
by combined ratio. In 2019, Chubb’s
Global Reinsurance segment posted
net written premiums of $649 million,
down 3.2% from prior year. The
combined ratio was 85.0%, and the
current accident year combined ratio
excluding catastrophe losses was 82.1%.
Segment income was $376 million, up
35.7% from 2018.
In 2019, there were signs that the
market was transitioning and the
trading environment becoming more
attractive. The shift could be seen in
reduced limits and increases in pricing
in many lines and jurisdictions that
accelerated throughout the year.
“The market took a turn in 2019,
making it an interesting year. We
quoted a lot more business in 2019 than
we had in recent years,” said James
Wixtead, Senior Vice President, Chubb
Group and President of Chubb Tempest
Re Group. “But while improving, the
market needs to move a bit more
in order to match our appetite for
deploying significantly more capital.”
As the market continues to transition,
Chubb Tempest Re will be looking for
more opportunities, including more
emphasis on higher–margin long–tail
lines, a part of the overall portfolio
that was significantly reduced in
recent years.
“Our view of risk is very consistent,”
said Mr. Wixtead. “Many members
of our team have been with us for 20
years or more. They understand how
we fit into the Chubb organization,
and where we can add value to our
client and broker partners. This team,
along with our systems, infrastructure
and the financial strength of Chubb,
position us well as we look to the
trading environment for Chubb
Tempest Re to improve in 2020.”
41
Corporate and Global Functional Leaders
42
(From left)
Joseph Wayland
Executive Vice President,
Chubb Group;
General Counsel
Ivy Kusinga
Chief Culture Officer,
Chubb Group
Sean Ringsted
Executive Vice President,
Chubb Group;
Chief Risk Officer and Chief
Digital Officer
Michael W. Smith
Senior Vice President,
Chubb Group;
Global Claims Officer
(From left)
Timothy Boroughs
Executive Vice President,
Chubb Group;
Chief Investment Officer
Philip Bancroft
Executive Vice President,
Chubb Group;
Chief Financial Officer
Paul Medini
Senior Vice President,
Chubb Group;
Chief Accounting Officer
Julie Dillman
Senior Vice President,
Chubb Group;
Global Head of Operations
(From left)
Paul O’Connell
Senior Vice President,
Chubb Group;
Chief Actuary
Rainer Kirchgaessner
Executive Vice President,
Chubb Group;
Global Corporate
Development Officer
Jo Ann Rabitz
Global Human Resources
Officer,
Chubb Group
43
Citizenship at Chubb
Our Mission
Protecting the Present and Building a Better Future
Philanthropy
Chubb recognizes its responsibility
to assist less fortunate individuals
and communities in achieving and
sustaining productive and healthy lives
in geographic areas where the company
operates. The company’s philanthropy
is funded principally through the
Chubb Charitable Foundation and the
Chubb Rule of Law Fund.
The Chubb Charitable Foundation
addresses actionable problems and
contributes to helping alleviate
poverty, improve the health of at–
risk populations, provide access to
quality education and protect the
environment. In the last 10 years, the
company has contributed more than
$100 million to the Foundation.
For many years, for example, the
Foundation has supported the
International Rescue Committee,
including its efforts to help refugees
get settled and establish productive
lives. The Foundation has helped build
schools in China and Vietnam, fund
micro–finance projects in Mexico and
Colombia, and serve as a major partner
for Teach for America and Teach for
All programs in the United States and
around the globe.
Good corporate citizenship lies at our core — how
we practice our craft of insurance, how we work
together to serve our customers, how we treat each
other, and how we work to help make a better world
for our communities and our planet. Citizenship
is about responsibility — and we express that
responsibility in a way that reflects our core values
and our mission to protect the present and build
a better future.
We accomplish our mission by providing the security
from risk that allows people and businesses to grow
and prosper. Our mission is realized by sustaining a
culture that values and rewards excellence, integrity,
inclusion and opportunity; by working to protect our
planet and assisting less fortunate individuals and
communities in achieving and sustaining productive
and healthy lives; and by promoting the rule of law.
From our roots in 18th century Philadelphia, we
have built Chubb to be a dynamic, forward–looking
global enterprise with a commitment to responsible
citizenship. We act on this promise of responsibility
through a wide range of activities that include our
contributions of time and money.
44
Environment
Diversity and Inclusion
Chubb Rule of Law Fund
Chubb recognizes the reality of climate
change and the substantial impact of
human activity on our planet. Our
environmental initiatives reflect our
desire to take actions that reduce
Chubb’s environmental footprint and,
through our philanthropy, strengthen
the resilience of communities and
protect biodiversity against the effects
of climate change.
At Chubb, we recognize our
responsibility to ensure opportunity
within our own organization, where
we foster a diverse and inclusive
meritocracy. We can’t succeed unless
we give everyone the opportunity to
thrive and advance in our company,
and we hold our leaders accountable
for achieving a diverse mix of talent,
regardless of creed or background.
The company’s extensive efforts in
this area include mentorships, affinity
groups, diversity awareness training,
management development programs,
and mandating diverse slates in
recruiting and promotion.
Examples of initiatives include the
company’s Business Roundtables and
Regional Inclusion Councils, which
promote dynamic networking across
the business and engage hundreds of
employees in constructive dialogue.
Other initiatives include Chubb Start,
a program that supports the continuous
professional development of early
career women, and Chubb Signatures,
a global and regional lecture series
for successful senior women, diverse
men and inclusion champions to share
their unique backgrounds, experiences
and hard–earned lessons in business.
The Chubb Charitable Foundation
and the company’s employees
support a range of environmental
philanthropies, including The Nature
Conservancy and the Conservation
Fund, as well as volunteer activities
in local communities around the
world. Chubb Charitable Foundation
grants have helped preserve sensitive
lands and habitats, finance green
business entrepreneurs, and support
educational programs that promote a
healthy and sustainable environment in
the U.S. and around the world.
In 2019, Chubb adopted a new policy
concerning coal-related underwriting
and investment and established new
science–based greenhouse gas (GHG)
emissions reduction goals using 2016 as
the baseline. By year-end, the company
achieved its first goal to reduce absolute
GHG emissions by 20%. These goals are
being achieved through a combination
of real estate portfolio optimization,
energy efficiency projects and the
purchase of renewable electricity.
In 2019, the company earned a score
of B on the CDP’s climate change
program ranking.
As a corporate citizen, Chubb
recognizes the rule of law as the
foundation of a liberal world order that
the company embraces as essential to
the proper functioning of markets and
the protection of personal freedoms.
Through the Chubb Rule of Law
Fund, a unique corporate initiative,
we support projects around the world
that promote the preservation and
advancement of the rule of law.
Since it was founded in 2008, the Fund
has supported 55 projects in countries
around the world focused on improving
access to justice, strengthening courts,
fighting corruption and creating the
conditions of security and freedom in
which our customers, employees and
fellow citizens can thrive.
The Chubb Rule of Law Fund is funded
by the Chubb Charitable Foundation
and contributions from 15 of Chubb’s
partner law firms. In 2019, 10 new
projects were funded. Among them
were initiatives to strengthen the
independence of the judiciary in
Guatemala; litigation support for
juveniles facing life imprisonment
without parole in the U.S.; supporting
administrative law in Vietnam; and
protecting the rights of children in
mental health units in England
and Wales.
45
Officers and Executives
Chubb Group Corporate Officers
Evan G. Greenberg*
Chairman and Chief Executive Officer, Chubb Group
John Keogh*
Executive Vice Chairman, Chubb Group;
Chief Operating Officer
John Lupica**
Vice Chairman, Chubb Group;
President, North America Major Accounts and Specialty Insurance
Paul J. Krump**
Executive Vice President, Chubb Group;
President, North America Commercial and Personal Insurance
Juan Luis Ortega**
Executive Vice President, Chubb Group;
President, Overseas General Insurance
Philip Bancroft*
Executive Vice President, Chubb Group;
Chief Financial Officer
Timothy Boroughs**
Executive Vice President, Chubb Group;
Chief Investment Officer
Rainer Kirchgaessner
Executive Vice President, Chubb Group;
Global Corporate Development Officer
Sean Ringsted**
Executive Vice President, Chubb Group;
Chief Risk Officer and Chief Digital Officer
Joseph Wayland*
Executive Vice President, Chubb Group;
General Counsel
Brad Bennett
Senior Vice President, Chubb Group;
Regional President, Far East
Russell Bundschuh
Senior Vice President, Chubb Group;
President, Chubb Life
Julie Dillman
Senior Vice President, Chubb Group;
Global Head of Operations
David Furby
Senior Vice President, Chubb Group;
Regional President, European Group
Marcos Gunn
Senior Vice President, Chubb Group;
Regional President, Latin America
Bruce L. Kessler
Senior Vice President, Chubb Group;
Division President, Westchester
Ken Koreyva
Senior Vice President, Chubb Group;
Finance
Christopher A. Maleno
Senior Vice President, Chubb Group;
Division President, North America Field Operations
Patrick McGovern
Senior Vice President, Chubb Group;
Chief Communications Officer
Paul McNamee
Senior Vice President, Chubb Group;
Regional President, Asia Pacific
Paul Medini
Senior Vice President, Chubb Group;
Chief Accounting Officer
Matthew Merna
Senior Vice President, Chubb Group;
Division President, North America Major Accounts
Scott A. Meyer
Senior Vice President, Chubb Group;
Division President, North America Financial Lines
Frances D. O’Brien
Senior Vice President, Chubb Group;
Division President, North America Personal Risk Services
Paul O’Connell
Senior Vice President, Chubb Group;
Chief Actuary
Michael W. Smith
Senior Vice President, Chubb Group;
Global Claims Officer
Derek Talbott
Senior Vice President, Chubb Group;
Division President, North America Property
Joe Vasquez
Senior Vice President, Chubb Group;
Global Accident & Health;
President, Combined Insurance
*Chubb Limited Executive Management and Executive Officer for SEC reporting purposes
**Executive Officer for SEC reporting purposes
46
James E. Wixtead
Senior Vice President, Chubb Group;
President, Chubb Tempest Re Group
Scott Arnold
Vice President, Chubb Group;
Division President, Chubb Agriculture;
President, Rain and Hail
Ross Bertossi
Vice President, Chubb Group;
Global Underwriting
Joseph S. Clabby
Vice President, Chubb Group;
Chairman, Chubb Bermuda;
Executive Vice President, North America Field Operations
Sean Corridon
Vice President, Chubb Group;
Deputy Chief Investment Officer
Judy Gonsalves
Vice President, Chubb Group;
Division President, Chubb Bermuda
Stephen M. Haney
Vice President, Chubb Group;
Division President, North America Surety;
Chief Underwriting Officer, Global Surety
Michael Kessler
Vice President, Chubb Group;
Chief Reinsurance Officer
Timothy O’Donnell
Vice President, Chubb Group;
Division President, Commercial Property and Casualty
Overseas General Insurance
Darryl Page
Vice President, Chubb Group;
Division President, Personal Insurance
Overseas General Insurance
Benjamin Rockwell
Vice President, Chubb Group;
Division President, North America Middle Market
James Williamson
Vice President, Chubb Group;
Division President, North America Small Business
Other Executives
Adam Clifford
Division President, Continental Europe
Samantha Froud
Chief Administration Officer, Bermuda Operations
Mark Hammond
Treasurer, Chubb Group
Jason Keen
Division President, Chubb Global Markets
Ivy Kusinga
Chief Culture Officer, Chubb Group
Eric Larson
Chief Compliance Officer, Chubb Group
Cunqiang Li
Chief Operating Officer, Chubb Life
David Lupica
Chief Operating & Distribution Management Officer
Westchester
Timothy Mardon
Division President, Chubb Tempest Re Bermuda
Sara Mitchell
Division President, U.K and Ireland
Michael O’Donnell
Division President, Chubb Tempest Re USA
George Ohsiek
Chief Auditor, Chubb Group
Jo Ann Rabitz
Global Human Resources Officer, Chubb Group
Steve Roberts
Division President, Chubb Tempest Re International
John Thompson
Division President, International Accident & Health
Overseas General Insurance
Giles Ward
Regional President, Eurasia & Africa
47
Chubb Limited Board of Directors
Evan G. Greenberg
Chairman and
Chief Executive Officer
Chubb Limited
Michael G. Atieh
Retired Chief Financial
and Business Officer
Ophthotech Corporation
Sheila P. Burke
Faculty Research Fellow
John F. Kennedy School
of Government
Harvard University
James I. Cash
Emeritus Professor of
Business Administration
Harvard University
Mary Cirillo
Retired Executive
Vice President and
Managing Director
Deutsche Bank
Michael P. Connors
Chairman and
Chief Executive Officer
Information Services
Group, Inc.
John A. Edwardson
Retired Chairman and
Chief Executive Officer
CDW Corporation
Board Committees
Audit Committee
Robert W. Scully, Chair
James I. Cash
Kimberly A. Ross
Theodore E. Shasta
David H. Sidwell
Compensation Committee
Michael P. Connors, Chair
Mary Cirillo
John A. Edwardson
Robert M. Hernandez
Nominating & Governance
Committee
Mary Cirillo, Chair
Michael P. Connors
John A. Edwardson
Robert M. Hernandez
Risk & Finance Committee
Olivier Steimer, Chair
Michael G. Atieh
Sheila P. Burke
Eugene B. Shanks, Jr.
Executive Committee
Evan G. Greenberg, Chair
Mary Cirillo
Michael P. Connors
Robert M. Hernandez
Robert W. Scully
Olivier Steimer
Robert M. Hernandez
Lead Director
Chubb Limited
Retired Vice Chairman
and Chief Financial Officer
USX Corporation
Kimberly A. Ross
Chief Financial Officer
WeWork
Robert W. Scully
Retired Co–President
Morgan Stanley
Eugene B. Shanks, Jr.
Retired President
Bankers Trust Company
Theodore E. Shasta
Retired Partner
Wellington Management
Company
David H. Sidwell
Retired Chief
Financial Officer
Morgan Stanley
Olivier Steimer
Former Chairman
Banque Cantonale
Vaudoise
48
Shareholder Information
Visit investors.chubb.com,
write to the Investor Relations
Department at Chubb Limited or
e–mail investorrelations@chubb.com
for copies of the company’s reports
to the Securities and Exchange
Commission on Form 10–K,
Form 10–Q or Form 8–K, all of which
are available without charge.
Address Investor Relations Inquiries to:
Investor Relations
Chubb Limited
1133 Avenue of the Americas
11th Floor
New York, NY 10036
Tel: 212 827 4445
E–mail: investorrelations@chubb.com
Transfer Agent & Registrar
Independent Auditors
PricewaterhouseCoopers AG
Birchstrasse 160
8050 Zurich
Switzerland
Tel: 41 58 792 44 00
PricewaterhouseCoopers LLP
Two Commerce Square, Suite 1800
Philadelphia, PA 19103 USA
Tel: 267 330 3000
New York Stock Exchange Symbol
CB
Chubb Common Shares CUSIP Number
H1467J 104
Computershare
462 South 4th Street
Louisville, KY 40202 USA
U.S.: 877 522 3752
Outside the U.S.: 201 680 6898
Address Shareholder Inquiries to:
By regular mail:
Computershare
P.O. Box 505000
Louisville, KY 40233–5000 USA
By overnight delivery:
Computershare
462 South 4th Street
Louisville, KY 40202 USA
Website:
www–us.computershare.com/Investor
Send Certificates for Transfer and
Address Changes to:
Computershare
P.O. Box 505000
Louisville, KY 40233–5000 USA
Price Range of Common Shares and Dividends
As of February 13, 2020, the company had 451,907,796 Common Shares outstanding with 6,902 registered holders of Common Shares.
The accompanying table sets forth the cash dividends and the high/low closing sales prices of the company’s Common Shares, as reported
on the NYSE Composite Tape for the periods indicated. We have paid dividends each quarter since we became a public company in 1993.
The method of payment of our dividend approved at our May 2019 and May 2018 annual general meetings was a distribution from capital
contribution reserves (additional paid–in capital).
2019
2018
Dividends
Dividends
Quarter Ending
High
Low
USD
CHF
High
Low
USD
CHF
March 31
$140.08
$124.67
$0.73
0.72
$156.15
$134.57
$0.71
0.66
June 30
$150.94
$136.57
$0.75
0.75
$138.29
$124.57
$0.73
0.73
September 30
$161.44
$146.74
$0.75
0.73
$140.12
$126.81
$0.73
0.72
December 31
$162.06
$147.72
$0.75
0.74
$136.59
$120.19
$0.73
0.73
This annual report contains trademarks, trade names and service marks owned by Chubb Limited and its subsidiaries, including Chubb®, Chubb logo®,
Chubb. Insured®. and Craftsmanship®. In addition, this report contains trademarks, trade names or service marks of companies other than Chubb, which belong
to their respective owners.
This report is printed on paper containing 10% post–consumer recycled content. These papers are certified to the international standards of the Forest
Stewardship Council (FSC), which promotes responsible management of the world’s forests.
49
Non–GAAP Financial Measures
Non–GAAP Financial Measures
This document contains non–GAAP financial measures. The below
non–GAAP financial measures, which may be defined differently
by other companies, are important for an understanding of our
overall results of operations and financial condition. However,
these measures should not be viewed as a substitute for measures
determined in accordance with generally accepted accounting
principles (GAAP).
We provide certain financial measures on a constant–dollar basis
(i.e., excluding the impact of foreign exchange). We believe it is
useful to evaluate the trends in our results exclusive of the effect
of fluctuations in exchange rates between the U.S. dollar and the
currencies in which our international business is transacted, as these
exchange rates could fluctuate significantly between periods and
distort the analysis of trends. The impact is determined by assuming
constant foreign exchange rates between periods by translating prior
period results using the same local currency exchange rates as the
comparable current period.
Core operating income, net of tax, excludes from net income
the after–tax impact of adjusted net realized gains (losses), Chubb
integration expenses, and the amortization of fair value adjustment
of acquired invested assets and long–term debt related to the
Chubb Corp acquisition. We believe this presentation enhances
the understanding of our results of operations by highlighting the
underlying profitability of our insurance business. We exclude
adjusted net realized gains (losses) because the amount of these
gains (losses) are heavily influenced by, and fluctuate in part
according to, the availability of market opportunities. We exclude
the amortization of the fair value adjustments related to purchased
invested assets and long–term debt and Chubb integration expenses
due to the size and complexity of this acquisition. These integration
expenses are distortive to our results and are not indicative of our
underlying profitability. We believe that excluding these integration
expenses facilitates the comparison of our financial results to our
historical operating results. References to core operating income
measures mean net of tax, whether or not noted.
50
The following table presents the reconciliation of Net income
to Core operating income:
(in millions of U.S. dollars except share
and per share data)
Net income, as reported
Amortization of fair value adjustment
of acquired invested assets and
long–term debt, pre–tax
Tax benefit on amortization
adjustment
Chubb integration expenses, pre–tax
Tax benefit on Chubb integration
expenses
Adjusted realized gains (losses),
pre–tax(1)
Net realized gains (losses) related to
unconsolidated entities, pre–tax(2)
Tax (expense) benefit on adjusted
net realized gains (losses)
Full Year
2019
$4,454
Full Year
2018
$3,962
(140)
(215)
26
(23)
4
40
(59)
12
(522)
(649)
483
(15)
431
(5)
Core operating income
$4,641
$4,407
Denominator
458,914,663
466,802,348
Diluted earnings per share
Net income
Amortization of fair value adjustment
of acquired invested assets and long–
term debt, net of tax
Chubb integration expenses,
net of tax
Adjusted net realized gains (losses),
net of tax
Core operating income
% Change from prior year
$9.71
$8.49
(0.25)
(0.37)
(0.04)
(0.10)
(0.11)
$10.11
7.1%
(0.48)
$9.44
(1) Excludes realized losses on crop derivatives of $8 million and $3 million for 2019 and 2018,
respectively.
(2) Realized gains (losses) on partially owned entities, which are investments where we hold
more than an insignificant percentage of the investee’s shares. The net income or loss is
included in other income (expense).
Core operating return on equity (ROE) and Core operating
return on tangible equity (ROTE) are annualized non–GAAP
financial measures. The numerator includes core operating income,
net of tax. The denominator includes the average shareholders’
equity for the period adjusted to exclude unrealized gains (losses) on
investments, net of tax. For the ROTE calculation, the denominator
is also adjusted to exclude goodwill and other intangible assets, net
of tax. These measures enhance the understanding of the return
on shareholders’ equity by highlighting the underlying profitability
relative to shareholders’ equity and tangible equity excluding the
effect of unrealized gains and losses on our investments.
(in millions of U.S. dollars except ratios)
Net income
Core operating income
Full Year
2019
Full Year
2018
$4,454
$4,641
$3,962
$4,407
Equity — beginning of period as reported (1)
$50,300
$51,172
Less: unrealized gains (losses) on
investments, net of deferred tax
(545)
1,154
Equity — beginning of period, as adjusted
$50,845
$50,018
Combined ratio
Add: impact of gains and losses
on crop derivatives
P&C combined ratio
Less: Catastrophe losses
Less: Prior period development
CAY P&C combined ratio excluding CATs
Add: Expected level of CATs
Less: goodwill and other intangible assets,
net of tax
$20,054
$20,621
CAY P&C combined ratio with expected
level of CATs
Full Year
2019
Full Year
2018
90.6%
90.6%
0.0%
90.6%
4.1%
–2.7%
89.2%
3.4%
0.0%
90.6%
5.9%
–3.3%
88.0%
3.4%
92.6%
91.4%
Equity — beginning of period, as
adjusted, excluding goodwill and other
intangible assets
$30,791
$29,397
The following table presents the reconciliation of Catastrophe losses,
pre–tax, to Catastrophe losses above expected levels, pre–tax:
Equity — end of period, as reported
$55,331
$50,312
(in millions of U.S. dollars)
Less: unrealized gains (losses) on
investments, net of deferred tax
2,543
(545)
Catastrophe losses, pre–tax
Less: Expected levels of CATs, pre–tax
Catastrophe losses above expected levels,
pre–tax
Full Year
2019
$1,187
969
$218
Equity — beginning of period, as adjusted
$52,788
$50,857
Less: goodwill and other intangible assets,
net of tax
$20,012
$20,054
Equity — end of period, as
adjusted, excluding goodwill and other
intangible assets
$32,776
$30,803
Weighted average equity, as reported
$52,816
$50,742
Weighted average equity, as adjusted
$51,817
$50,438
Weighted average equity, as adjusted,
excluding goodwill and other intangible assets
$31,784
$30,100
Tangible book value per common share is shareholders’ equity
less goodwill and other intangible assets, net of tax, divided by the
shares outstanding. We believe that goodwill and other intangible
assets are not indicative of our underlying insurance results or
trends and make book value comparisons to less acquisitive peer
companies less meaningful.
(in millions of U.S. dollars,
except share and
per share data)
December 31
2019
December 31
2018
% Change
$55,331
$50,312
20,012
20,054
ROE
Core operating ROE
Core operating ROTE
8.4%
9.0%
14.6%
7.8%
8.7%
14.6%
Shareholders’ equity
Less: goodwill and
other intangible
assets, net of tax
(1) January 1, 2019 included a $12 million after–tax reduction to beginning equity related to
the adoption of new accounting guidance on premium amortization of purchased callable
debt securities.
Numerator for tangible
book value per share
$35,319
$30,258
Shares outstanding
451,971,567
459,203,378
Book value per
common share
Tangible book value
per common share
$122.42
$109.56
11.7%
$78.14
$65.89
18.6%
Combined ratio measures the underwriting profitability of our
property and casualty business. P&C combined ratio and Current
accident year (CAY) P&C combined ratio excluding catastrophe
losses (CATs) are non–GAAP financial measures. Refer to the
Non–GAAP Reconciliation section in the 2019 Form 10–K, on pages
70–73 for the definition of these non–GAAP financial measures and
reconciliation to the Combined ratio.
CAY P&C combined ratio with expected level of CATs is a
non–GAAP financial measure which excludes CATs above or below
managements’ view of expected CATs for that period. For this
purpose, the normalized level of CATs, or expected level of CATs,
is not intended to represent a probability weighted expectation for
the company but rather to represent management’s view of what
might be more typical for a given period based on various factors,
including historical experience, seasonal patterns, and consideration
of both modeled CATs (e.g., windstorm and earthquake) as well as
non–modeled CATs (e.g., wildfires, floods and freeze).
51
Adjusted net investment income is net investment income
excluding the amortization of the fair value adjustment on acquired
invested assets. We believe this measure is meaningful as it
highlights the underlying performance of our invested assets and
portfolio management in support of our lines of business.
The following table presents a reconciliation of net investment
income to adjusted net investment income:
(in millions of U.S. dollars)
Net investment income
Less: Amortization expense of fair
value adjustment on acquired
invested assets
Full Year
2019
Full Year
2018
$3,426
$3,305
(161)
(248)
Adjusted net investment income
$3,587
$3,553
% Change from prior year
1.0%
Net premiums written on an adjusted basis is net premiums
written in the company’s North America Personal P&C Insurance
segment adjusted to exclude the year–over–year net impact for the
quarter of additional reinsurance and reinstatement premiums.
We believe this measure is meaningful to evaluate trends in the
underlying business on a comparable basis.
The following table presents a reconciliation of North America
Personal P&C Insurance net premiums written change versus prior
year to change versus prior year on an adjusted basis:
Net premiums written
Net premiums written adjustments
Net premiums written on an adjusted basis
% Change
4Q-19 vs.
4Q-18
9.2%
-4.6%
4.6%
Non–GAAP Financial Measures (continued)
P&C underwriting income is a non–GAAP financial measure which
excludes the Life Insurance segment. P&C underwriting income is
used to monitor results of operations without the impact of certain
factors as detailed below. We believe that P&C underwriting income
is a useful measure as it enhances the understanding of our results
of operations by highlighting the underlying profitability of our P&C
insurance business.
The following table presents a reconciliation of Net income to P&C
underwriting income:
(In millions of U.S. dollars)
Net income
Less: Income tax (expense) benefit
Chubb integration expenses
Amortization expense of purchased
intangibles
Other income (expense)
Interest expense
Net investment income
Net realized gains (losses)
Life Insurance underwriting loss (1)
Add: Realized losses on crop derivatives
Full Year
2019
Full Year
2018
$4,454
$3,962
(795)
(23)
(305)
596
(552)
3,426
(530)
(97)
(8)
(695)
(59)
(339)
434
(641)
3,305
(652)
(5)
(3)
P&C underwriting income
$2,726
$2,611
(1) Excludes gains (losses) from fair value changes in separate account assets of $44 million in
2019 and $(38) million in 2018 and Life Insurance net investment income of $373 million in
2019 and $341 million in 2018.
International life insurance net premiums written and
deposits is a non–GAAP financial measure which includes
International life insurance net premiums written and deposits
collected on universal life and investment contracts. Deposits
collected on universal life and investment contracts (life deposits)
are not reflected as revenues in our consolidated statements of
operations in accordance with GAAP. However, new life deposits
are an important component of production and key to our efforts to
grow our business.
(in millions of U.S. dollars)
International life insurance net premiums
written
International life insurance deposits
Total international life insurance net
premiums written and deposits (1)
Full Year
2019
$981
1,463
$2,444
(1) Excludes Combined North America and Life reinsurance businesses.
52
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File No. 1-11778
CHUBB LIMITED
(Exact name of registrant as specified in its charter)
Switzerland
(State or other jurisdiction of incorporation or organization)
98-0091805
(I.R.S. Employer Identification No.)
Baerengasse 32
Zurich, Switzerland CH-8001
(Address of principal executive offices) (Zip Code)
+41 (0)43 456 76 00
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Common Shares, par value CHF 24.15 per share
Guarantee of Chubb INA Holdings Inc. 0.30% Senior Notes due 2024
Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2027
Guarantee of Chubb INA Holdings Inc. 1.55% Senior Notes due 2028
Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2029
Guarantee of Chubb INA Holdings Inc. 1.40% Senior Notes due 2031
Guarantee of Chubb INA Holdings Inc. 2.50% Senior Notes due 2038
CB
CB/24A
CB/27
CB/28
CB/29A
CB/31
CB/38A
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange
on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” "smaller reporting
company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.
No
No
No
No
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of voting stock held by non-affiliates as of June 28, 2019 (the last business day of the registrant's most recently
completed second fiscal quarter), was approximately $67 billion. For the purposes of this computation, shares held by directors and officers
of the registrant have been excluded. Such exclusion is not intended, nor shall it be deemed, to be an admission that such persons are
affiliates of the registrant.
As of February 13, 2020 there were 451,907,796 Common Shares par value CHF 24.15 of the registrant outstanding.
No
Documents Incorporated by Reference
Certain portions of the registrant's definitive proxy statement relating to its 2020 Annual General Meeting of Shareholders are incorporated
by reference into Part III of this report.
CHUBB LIMITED INDEX TO 10-K
PART I
ITEM 1. Business
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
Properties
ITEM 3.
Legal Proceedings
ITEM 4. Mine Safety Disclosures
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
ITEM 6.
of Equity Securities
Selected Financial Data
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 8.
Financial Statements and Supplementary Data
ITEM 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
ITEM 14. Principal Accounting Fees and Services
PART IV
ITEM 15. Exhibits, Financial Statements Schedules
ITEM 16. Form 10-K Summary
Page
2
19
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31
31
31
32
34
35
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95
95
95
95
96
96
96
97
97
98
106
1
PART I
ITEM 1. Business
General
Chubb Limited is the Swiss-incorporated holding company of the Chubb Group of Companies. Chubb Limited, which is
headquartered in Zurich, Switzerland, and its direct and indirect subsidiaries (collectively, the Chubb Group of Companies,
Chubb, we, us, or our) are a global insurance and reinsurance organization, serving the needs of a diverse group of clients
worldwide. At December 31, 2019, we had total assets of $177 billion and shareholders’ equity of $55 billion. Chubb was
incorporated in 1985 at which time it opened its first business office in Bermuda and continues to maintain operations in
Bermuda. We have grown our business through increased premium volume, expansion of product offerings and geographic
reach, and the acquisition of other companies to become a global property and casualty (P&C) leader.
With operations in 54 countries and territories, Chubb provides commercial and personal property and casualty insurance,
personal accident and supplemental health insurance (A&H), reinsurance, and life insurance to a diverse group of clients. We
offer commercial insurance products and service offerings such as risk management programs, loss control, and engineering
and complex claims management. We provide specialized insurance products ranging from Directors & Officers (D&O) and
professional liability to various specialty-casualty and umbrella and excess casualty lines to niche areas such as aviation and
energy. We also offer personal lines insurance coverage including homeowners, automobile, valuables, umbrella liability, and
recreational marine products. In addition, we supply personal accident, supplemental health, and life insurance to individuals in
select countries.
We serve multinational corporations, mid-size and small businesses with property and casualty insurance and risk engineering
services; affluent and high net worth individuals with substantial assets to protect; individuals purchasing life, personal
accident, supplemental health, homeowners, automobile, and specialty personal insurance coverage; companies and affinity
groups providing or offering accident and health insurance programs and life insurance to their employees or members; and
insurers managing exposures with reinsurance coverage.
At December 31, 2019, we employed approximately 33,000 people. We believe that employee relations are satisfactory.
We make available free of charge through our website (investors.chubb.com, under Financials) our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, if any, filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they have been electronically
filed with or furnished to the U.S. Securities and Exchange Commission (SEC). Also available through our website (under
Investor Relations / Corporate Governance) are our Corporate Governance Guidelines, Code of Conduct, and Charters for the
Committees of the Board of Directors (the Board). Printed documents are available by contacting our Investor Relations
Department (Telephone: +1 (212) 827-4445, E-mail: investorrelations@chubb.com).
We also use our website as a means of disclosing material, non-public information and for complying with our disclosure
obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Investor Relations portion of
our website, in addition to following our press releases, SEC filings, and public conference calls and webcasts. The information
contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this
report. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other
information regarding issuers that file with the SEC.
Customers
For most commercial and personal lines of business we offer, insureds typically use the services of an insurance broker or agent.
An insurance broker acts as an agent for the insureds, offering advice on the types and amount of insurance to purchase, and
assists in the negotiation of price and terms and conditions. We obtain business from the local and major international
insurance brokers and typically pay a commission to brokers for any business accepted and bound. Loss of all or a substantial
portion of the business provided by one or more of these brokers could have a material adverse effect on our business. In our
opinion, no material part of our business is dependent upon a single insured or group of insureds. We do not believe that the
loss of any one insured would have a material adverse effect on our financial condition or results of operations, and no one
insured or group of affiliated insureds account for as much as 10 percent of our total revenues.
2
Competition
Competition in the insurance and reinsurance marketplace is substantial. We compete on an international and regional basis
with major U.S., Bermuda, European, and other international insurers and reinsurers and with underwriting syndicates, some of
which have greater financial, technological, marketing, distribution and management resources than we do. In addition, capital
market participants have created alternative products that are intended to compete with reinsurance products. We also compete
with new companies and existing companies that move into the insurance and reinsurance markets. Competitors include other
stock companies, mutual companies, alternative risk sharing groups (such as group captives and catastrophe pools), and other
underwriting organizations. Competitors sell through various distribution channels and business models, across a broad array of
product lines, and with a high level of variation regarding geographic, marketing, and customer segmentation. We compete for
business not only on the basis of price but also on the basis of availability of coverage desired by customers and quality of
service.
The insurance industry is changing rapidly. Our ability to compete is dependent on a number of factors, particularly our ability to
maintain the appropriate financial strength ratings as assigned by independent rating agencies and effectively utilize new
technology in our business. Our broad market capabilities in personal, commercial, specialty, and A&H lines made available by
our underwriting expertise, business infrastructure, and global presence, help define our competitive advantage. Our strong
balance sheet is attractive to businesses, and our strong capital position and global platform affords us opportunities for growth
not available to smaller, less diversified insurance companies. Refer to “Segment Information” for competitive environment by
segment.
Trademarks and Trade Names
Various trademarks and trade names we use protect names of certain products and services we offer and are important to the
extent they provide goodwill and name recognition in the insurance industry. We use commercially reasonable efforts to protect
these proprietary rights, including various trade secret and trademark laws. We intend to retain material trademark rights in
perpetuity, so long as it satisfies the use and registration requirements of applicable countries. One or more of the trademarks
and trade names could be material to our ability to sell our products and services. We have taken appropriate steps to protect
our ownership of key names, and we believe it is unlikely that anyone would be able to prevent us from using names in places
or circumstances material to our operations.
Segment Information
Chubb operates through six business segments: North America Commercial P&C Insurance, North America Personal P&C
Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance.
In 2019, consolidated net premiums earned was $31,290 million. Additional financial information about our segments,
including net premiums earned by geographic region, is included in Note 15 to the Consolidated Financial Statements.
North America Commercial P&C Insurance (41 percent of 2019 Consolidated NPE)
Overview
The North America Commercial P&C Insurance segment comprises operations that provide P&C insurance and services to large,
middle market, and small commercial businesses in the U.S., Canada, and Bermuda. This segment includes:
• Major Accounts, the retail division focused on large institutional organizations and corporate companies
• Commercial Insurance, which includes the retail division focused on middle market customers and small businesses
• Westchester and Chubb Bermuda, our wholesale and specialty divisions
Products and Distribution
Major Accounts provides a broad array of traditional and specialty P&C, A&H, and risk management products and services to
large U.S. and Canadian-based institutional organizations and corporate companies. Major Accounts distributes its insurance
products primarily through a limited number of retail brokers. In addition to using brokers, certain products are also distributed
through general agents, independent agents, managing general agents (MGA), managing general underwriters, alliances, affinity
groups, and direct marketing operations. Products and services offered include property, professional liability, cyber risk, excess
casualty, workers’ compensation, general liability, automobile liability, commercial marine, surety, environmental, construction,
medical risk, inland marine, A&H coverages, as well as claims and risk management products and services.
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The Major Accounts operations, which represented approximately 40 percent of North America Commercial P&C Insurance’s net
premiums earned in 2019, are organized into the following distinct business units, each offering specialized products and
services targeted at specific markets:
• Chubb Global Casualty offers a range of customized risk management primary casualty products designed to help large
insureds, including national accounts, address the significant costs of financing and managing risk for workers’
compensation, general liability and automobile liability coverages as well as offering casualty insurance solutions for
commercial real estate. Chubb Global Casualty also provides products which insure specific global operating risks of U.S.-
based multinational companies and include deductible programs, captive programs, and paid or incurred loss retrospective
plans. Within Chubb Global Casualty, Chubb Alternative Risk Solutions Group underwrites contractual indemnification
policies which provides prospective coverage for loss events within the insured’s policy retention levels and underwrites
assumed loss portfolio transfer (LPT) contracts in which insured loss events have occurred prior to the inception of the
contract.
• Property provides products and services including primary, quota share and excess all-risk insurance, risk management
programs and services, commercial, inland marine, and aerospace products.
• Casualty Risk provides coverages including umbrella and excess liability, environmental risk, casualty programs for
commercial construction related projects for companies and institutions, and medical risk specialty liability products for the
healthcare industry.
• Surety offers a wide variety of surety products and specializes in underwriting both commercial and contract bonds and has
the capacity for bond issuance on an international basis.
• Accident & Health (A&H) products include employee benefit plans, occupational accident, student accident, and worldwide
travel accident and global medical programs. With respect to products that include supplemental medical and hospital
indemnity coverages, we typically pay fixed amounts for claims and are therefore insulated from rising healthcare costs.
A&H also provides specialty personal lines products, including credit card enhancement programs (identity theft, rental car
collision damage waiver, trip travel, and purchase protection benefits) distributed through affinity groups.
• Financial Lines provides management liability and professional liability (D&O and E&O), transactional risk and cyber risk
products to public companies as well as to private and not for profit organizations.
• ESIS Inc. (ESIS) is an in-house third-party claims administrator that performs claims management and risk control services
for domestic and international organizations as well as for the North America Commercial P&C Insurance segment. ESIS
services include comprehensive medical managed care; integrated disability services; pre-loss control and risk
management; health, safety and environmental consulting; salvage and subrogation; and healthcare recovery services. The
net results for ESIS are included in North America Commercial P&C Insurance’s administrative expenses.
The Commercial Insurance operations, which include Small Commercial, represented approximately 40 percent of North
America Commercial P&C Insurance’s net premiums earned in 2019. Commercial Insurance provides a broad range of P&C,
financial lines, and A&H products targeted to U.S and Canadian-based middle market customers in a variety of industries, while
the Small Commercial operations provide a broad range of property and casualty, workers' compensation, small commercial
management and professional liability for small businesses based in the U.S.
• Commercial Insurance products and services offered include traditional property and casualty lines of business, including
Package, which combines property and general liability, workers' compensation, automobile, umbrella; financial lines of
business, including professional liability, management liability and cyber risk coverage; and other lines including
environmental, A&H, and international coverages. Commercial Insurance distributes its insurance products through a North
American network of independent retail agents, and regional, multinational and digital brokers. Generally, our customers
purchase insurance through a single retail agent or broker, do not employ a risk management department, and do not retain
significant risk through self-insured retentions. The majority of our customers purchase a Package product or a portfolio of
products, which is a collection of insurance offerings designed to cover various needs.
• Small Commercial Insurance products and services offered include property and casualty lines of business, including a
business owner policy which contains property and general liability; financial lines, including professional liability,
management liability, cyber risk; and other lines including workers’ compensation, automobile liability, and international
coverages. Products are generally offered through a North American network of independent agents and brokers, as well as
eTraditional, which are digital platforms where we electronically quote, bind, and issue for agents and brokers. An example
of this is the Chubb Marketplace.
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Wholesale and Specialty, which represented approximately 20 percent of North America Commercial P&C Insurance’s net
premiums earned in 2019, comprises Westchester and Chubb Bermuda.
• Westchester serves the market for business risks that tend to be hard to place or not easily covered by traditional policies
due to unique or complex exposures and provides specialty products for property, casualty, environmental, professional
liability, inland marine, product recall, small business, binding and program coverages in the U.S., Canada, and Bermuda.
Products are offered through the wholesale distribution channel.
• Chubb Bermuda provides commercial insurance products on an excess basis including excess liability, D&O, professional
liability, property, and political risk, the latter being written by Sovereign Risk Insurance Ltd., a wholly-owned managing
agent. Chubb Bermuda focuses on Fortune 1000 companies and targets risks that are generally low in frequency and high
in severity. Products are offered primarily through the Bermuda offices of major, internationally recognized insurance
brokers.
Competitive Environment
Major Accounts competes against a number of large, global carriers as well as regional competitors and other entities offering
risk alternatives such as self-insured retentions and captive programs. The markets in which we compete are subject to
significant cycles of fluctuating capacity and wide disparities in price adequacy. We pursue a specialist strategy and focus on
market opportunities where we can compete effectively based on service levels and product design, while still achieving an
adequate level of profitability. We also achieve a competitive advantage through Major Accounts’ innovative product offerings
and our ability to provide multiple products to a single client due to our nationwide local presence. In addition, all our domestic
commercial units are able to deliver global products and coverage to customers in concert with our Overseas General Insurance
segment.
The Commercial Insurance operations compete against numerous insurance companies ranging from large national carriers to
small and mid-size insurers who provide specialty coverages and standard P&C products. Recent competitive developments
include the growth of new digital-based distribution models.
Westchester competes against a number of large, national carriers as well as regional competitors and other entities offering risk
alternatives such as self-insured retentions and captive programs. Chubb Bermuda competes against international commercial
carriers writing business on an excess of loss basis.
North America Personal P&C Insurance (15 percent of 2019 Consolidated NPE)
Overview
The North America Personal P&C Insurance segment includes the business written by Chubb Personal Risk Services division,
which includes high net worth personal lines business, with operations in the U.S. and Canada. This segment provides affluent
and high net worth individuals and families with homeowners, automobile and collector cars, valuable articles (including fine
arts), personal and excess liability, travel insurance, and recreational marine insurance and services. Our homeowners business,
including valuable articles, represented 68 percent of North America Personal P&C Insurance’s net premiums earned in 2019.
Products and Distribution
Chubb Personal Risk Services offers comprehensive personal insurance products and services to meet the evolving needs of high
net worth families and individuals. Our seamless customer experience and superior coverage protect not only our clients’ most
valuable possessions, but also their standard of living. Our target customers consist of high net worth consumers with insurance
needs that typically extend beyond what mass market carriers can offer. These coverages are offered solely through independent
regional agents and brokers.
Competitive Environment
Chubb Personal Risk Services competes against insurance companies of varying sizes that sell personal lines products through
various distribution channels, including retail agents as well as online distribution channels. We achieve a competitive
advantage through our ability to address the specific needs of high net worth families and individuals, to provide superior
service to our customers, and to develop and deploy digital production and processes.
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North America Agricultural Insurance (6 percent of 2019 Consolidated NPE)
Overview
The North America Agricultural Insurance segment comprises our U.S. and Canadian-based businesses that provide a variety of
coverages including crop insurance, primarily Multiple Peril Crop Insurance (MPCI) and crop-hail insurance through Rain and
Hail Insurance Service, Inc. (Rain and Hail) as well as farm and ranch and specialty P&C commercial insurance products and
services through our Chubb Agribusiness unit.
Products and Distribution
Rain and Hail provides comprehensive MPCI and crop-hail insurance coverages.
• MPCI is federally subsidized crop protection from numerous causes of loss, including drought, excessive moisture, freeze,
disease and more. The MPCI program is offered in conjunction with the U.S. Department of Agriculture. MPCI products
include revenue protection (defined as providing both commodity price and yield coverages), yield protection, margin
protection, prevented planting coverage and replant coverage. For additional information on our MPCI program, refer to
“Crop Insurance” under Item 7.
• Crop-Hail coverage provides crop protection from damage caused by hail and/or fire, with options in some markets for other
perils such as wind or theft. Coverage is provided on an acre-by-acre basis and is available in the U.S. and in some parts of
Canada. Crop-Hail can be used in conjunction with MPCI or other comprehensive coverages to offset the deductible and
provide protection up to the actual cash value of the crop.
Chubb Agribusiness comprises Commercial Agribusiness and Farm and Ranch Agribusiness.
• Commercial Agribusiness offers specialty P&C coverages for commercial companies that manufacture, process and
distribute agricultural products. Commercial products and services include property, general liability for premises/operations
and product liability, commercial automobile, workers' compensation, employment practices liability coverage, built-in
coverage for premises pollution, cyber and information security, and product withdrawal.
• Farm and Ranch Agribusiness offers an extensive line of coverages for farming operations from Hobby/Gentleman farms to
complex corporate farms and equine services including personal use, boarding, and training. Coverages include farm and
ranch structures, machinery and other equipment, automobile and other vehicle coverages, and livestock.
Competitive Environment
Rain and Hail primarily operates in a federally regulated program where all approved providers offer the same product forms and
rates through independent and/or captive agents. We seek a competitive advantage through our ability to provide superior
service to our customers, including the development of digital solutions. Chubb Agribusiness competes against both national
and regional competitors offering specialty P&C insurance coverages to companies that manufacture, process, and distribute
agricultural products.
Overseas General Insurance (28 percent of 2019 Consolidated NPE)
Overview
The Overseas General Insurance segment comprises Chubb International and Chubb Global Markets (CGM). CGM, our London-
based international specialty and excess and surplus lines business, includes Lloyd's of London (Lloyd's) Syndicate 2488, a
wholly-owned Chubb syndicate supported by funds at Lloyd’s provided by Chubb Corporate Members. Syndicate 2488 has an
underwriting capacity of £480 million for the Lloyd’s 2020 account year. The syndicate is managed by Chubb’s Lloyd’s
managing agency, Chubb Underwriting Agencies Limited.
Products and Distribution
Chubb International maintains a presence in every major insurance market in the world and is organized geographically along
product lines as follows: Europe, Asia Pacific and Far East, Eurasia and Africa, and Latin America. Products offered include
P&C, A&H, specialty coverages, and personal lines insurance products and services. Chubb International's P&C business is
generally written, on both a direct and assumed basis, through major international, regional, and local brokers and agents.
Certain European branded products are also offered via an eTraditional digital-commerce platform, Chubb Online, that allows
brokers to quote, bind, and issue specialty policies online. Asia Pacific also utilizes similar eTraditional platforms to quote, bind,
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and issue policies. Property insurance products include traditional commercial fire coverage as well as energy industry-related,
marine, construction, and other technical coverages. Principal casualty products are commercial primary and excess casualty,
environmental, and general liability. A&H and other consumer lines products are distributed through brokers, agents, direct
marketing programs, including thousands of telemarketers, and sponsor relationships. The A&H operations primarily offer
personal accident and supplemental medical coverages including accidental death, business/holiday travel, specified disease,
disability, medical and hospital indemnity, and income protection. We are not in the primary healthcare business. With respect
to our supplemental medical and hospital indemnity products, we typically pay fixed amounts for claims and are therefore
largely insulated from the direct impact of rising healthcare costs. Chubb International specialty coverages include D&O,
professional indemnity, energy, aviation, political risk, and specialty personal lines products. Chubb International's personal lines
operations provide specialty products and services designed to meet the needs of specific target markets and include property
damage, automobile, homeowners, and personal liability.
Chubb International’s presence in China also includes its 30.9 percent ownership interest in Huatai Insurance Group Company
Limited (Huatai Group). Huatai Group wholly owns Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C). Therefore,
Chubb owns an approximately 30.9 percent indirect ownership interest in Huatai P&C, which provides a range of commercial
and personal P&C products in China, including property, professional liability, product liability, employer liability, business
interruption, marine cargo, personal accident and specialty risk. These products are marketed through a variety of distribution
channels including over 200 licensed sales locations in 28 Chinese provinces. Chubb is in the process of increasing its
ownership interest in Huatai Group.
CGM offers products through its parallel distribution network via two legal entities, Chubb European Group SE (CEG) and Chubb
Underwriting Agencies Limited, managing agent of Syndicate 2488. CGM uses the Syndicate to underwrite P&C business on a
global basis through Lloyd's worldwide licenses. CGM uses CEG to underwrite similar classes of business through its network of
U.K. and European licenses, and in the U.S. where it is eligible to write excess and surplus lines business. Factors influencing
the decision to place business with the Syndicate or CEG include licensing eligibilities, capitalization requirements, and client/
broker preference. All business underwritten by CGM is accessed through registered brokers. The main lines of business include
aviation, property, energy, professional lines, marine, financial lines, political risk, and A&H.
Competitive Environment
Chubb International's primary competitors include U.S.-based companies with global operations, as well as non-U.S. global
carriers and indigenous companies in regional and local markets. For the A&H lines of business, locally based competitors also
include financial institutions and bank owned insurance subsidiaries. Our international operations have the distinct advantage of
being part of one of the few international insurance groups with a global network of licensed companies able to write policies on
a locally admitted basis. The principal competitive factors that affect the international operations are underwriting expertise and
pricing, relative operating efficiency, product differentiation, producer relations, and the quality of policyholder services. A
competitive strength of our international operations is our global network and breadth of insurance programs, which assist
individuals and business organizations to meet their risk management objectives, while also having a significant presence in all
of the countries in which we operate, giving us the advantage of accessing local technical expertise and regulatory
environments, understanding local markets and culture, accomplishing a spread of risk, and offering a global network to service
multinational accounts.
CGM is one of the preeminent international specialty insurers in London and is an established lead underwriter on a significant
portion of the risks it underwrites for all lines of business. All lines of business face competition, depending on the business
class, from Lloyd's syndicates, the London market, and other major international insurers and reinsurers. Competition for
international risks is also seen from domestic insurers in the country of origin of the insured. CGM differentiates itself from
competitors through long standing experience in its product lines, its multiple insurance entities (Syndicate 2488 and CEG), and
the quality of its underwriting and claims service.
Global Reinsurance (2 percent of 2019 Consolidated NPE)
Overview
The Global Reinsurance segment represents Chubb's reinsurance operations comprising Chubb Tempest Re Bermuda, Chubb
Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada. Global Reinsurance markets reinsurance
products worldwide under the Chubb Tempest Re brand name and provides solutions for small to mid-sized clients and
multinational ceding companies. Global Re offers a broad array of traditional and non-traditional (e.g., loss portfolio transfer)
property and casualty products.
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Products and Distribution
Global Reinsurance services clients globally through its major units. Major international brokers submit business to one or more
of these units' underwriting teams who have built strong relationships with both key brokers and clients by providing a
responsive, client-focused approach to risk assessment and pricing.
Chubb Tempest Re Bermuda principally provides property catastrophe reinsurance globally to insurers of commercial and
personal property. Property catastrophe reinsurance is on an occurrence or aggregate basis and protects a ceding company
against an accumulation of losses covered by its issued insurance policies, arising from a common event or occurrence. Chubb
Tempest Re Bermuda underwrites reinsurance principally on an excess of loss basis, meaning that its exposure only arises after
the ceding company's accumulated losses have exceeded the attachment point of the reinsurance policy. Chubb Tempest Re
Bermuda also writes other types of reinsurance on a limited basis for selected clients. Chubb Tempest Re Bermuda's business is
produced through reinsurance intermediaries.
Chubb Tempest Re USA writes all lines of traditional and specialty P&C reinsurance for the North American market, principally
on a treaty basis, with a focus on writing property per risk and casualty reinsurance. Chubb Tempest Re USA underwrites
reinsurance on both a proportional and excess of loss basis. This unit's diversified portfolio is produced through reinsurance
intermediaries.
Chubb Tempest Re International provides traditional and specialty P&C reinsurance to insurance companies worldwide, with
emphasis on non-U.S. and Canadian risks. Chubb Tempest Re International writes all lines of traditional and specialty
reinsurance including property risk, property catastrophe, casualty, marine, aviation, and specialty through our London- and
Zurich-based offices. The London-based office of Chubb Tempest Re International focuses on the development of business
sourced through London market brokers. The Zurich-based office focuses on providing reinsurance to continental European
insurers via continental European brokers while also serving Asian and Latin American markets. The London- and Zurich-based
offices write a diverse book of international business using Syndicate 2488, CEG, and Chubb Insurance (Switzerland) Limited.
Chubb Tempest Re International underwrites reinsurance on both a proportional and excess of loss basis.
Chubb Tempest Re Canada offers a full array of traditional and specialty P&C, and reinsurance to the Canadian market,
including casualty, property risk, property catastrophe, surety, and crop hail. Chubb Tempest Re Canada provides coverage
through its Canadian company platform and also offers clients access to Syndicate 2488. Chubb Tempest Re Canada
underwrites reinsurance on both a proportional and excess of loss basis.
Competitive Environment
The Global Reinsurance segment competes worldwide with major U.S. and non-U.S. reinsurers as well as reinsurance
departments of numerous multi-line insurance organizations. In addition, capital markets participants have developed
alternative capital sources intended to compete with traditional reinsurance. Additionally, government sponsored or backed
catastrophe funds can affect demand for reinsurance. Global Reinsurance is considered a lead reinsurer and is typically involved
in the negotiation and quotation of the terms and conditions of the majority of the contracts in which it participates. Global
Reinsurance competes effectively in P&C markets worldwide because of its strong capital position, analytical capabilities and
quality customer service. The key competitors in our markets vary by geographic region and product line. An advantage of our
international platform is that we can change our mix of business in response to changes in competitive conditions in the
territories in which we operate. Our geographic reach is also sought by multinational ceding companies since our offices, except
for Bermuda, provide local reinsurance license capabilities which benefit our clients in dealing with country regulators.
Life Insurance (8 percent of 2019 Consolidated NPE)
Overview
The Life Insurance segment comprises Chubb's international life operations (Chubb Life), Chubb Tempest Life Re (Chubb Life
Re), and the North American supplemental A&H and life business of Combined Insurance.
Products and Distribution
Chubb Life provides individual life and group benefit insurance primarily in Asia, including Hong Kong, Indonesia, South Korea,
Taiwan, Thailand, and Vietnam; throughout Latin America; selectively in Europe; Egypt; and in China through a non-
consolidated joint venture insurance company. Chubb Life offers a broad portfolio of protection and savings products including
whole life, endowment plans, individual term life, group term life, medical and health, personal accident, credit life, universal
life, Group Employee benefits, unit linked contracts, and credit protection insurance for automobile, motorcycle and home loans.
8
The policies written by Chubb Life generally provide funds to beneficiaries of insureds after death and/or protection and/or
savings benefits while the contract owner is living. Chubb Life sells to consumers through a variety of distribution channels
including captive and independent agencies, bancassurance, worksite marketing, retailers, brokers, telemarketing,
mobilassurance, and direct to consumer marketing. We continue to expand Chubb Life with a focus on opportunities in
developing markets that we believe will result in strong and sustainable operating profits as well as a favorable return on capital
commitments over time. Our dedicated captive agency distribution channel, whereby agents sell Chubb Life products
exclusively, enables us to maintain direct contact with the individual consumer, promote quality sales practices, and exercise
greater control over the future of the business. We have developed a substantial sales force of agents principally located in our
Asia-Pacific countries. As of December 31, 2019, Chubb had a 45 percent direct and indirect ownership interest in Huatai Life
Insurance Co., Ltd. (Huatai Life), comprising a 20 percent direct ownership interest as well as a 25 percent indirect ownership
interest through Huatai Group, the parent company of Huatai Life. Huatai Life commenced operations in 2005 and has since
grown to become one of the larger life insurance foreign joint ventures in China. Huatai Life offers a broad portfolio of insurance
products including whole life, universal life, medical and health, personal accident and disability. These products are marketed
through a variety of distribution channels including approximately 454 licensed sales locations in 20 Chinese provinces. Chubb
is in the process of increasing its ownership interest in Huatai Group.
Chubb Life Re's core business is a Bermuda-based operation which provides reinsurance to primary life insurers, focusing on
guarantees included in certain variable annuity products and also on more traditional mortality reinsurance protection. Chubb
Life Re's U.S.-based traditional life reinsurance operation was discontinued for new business in January 2010. Since 2007,
Chubb Life Re has not quoted on new opportunities in the variable annuity reinsurance marketplace and our focus has been on
managing the current portfolio of risk, both in the aggregate and on a contract basis. This business is managed with a long-term
perspective and short-term earnings volatility is expected.
Combined Insurance distributes specialty supplemental A&H and life insurance products targeted to middle income consumers
and businesses in the U.S. and Canada. Combined Insurance's substantial North American sales force distributes a wide range
of supplemental accident and sickness insurance products, including personal accident, short-term disability, critical illness,
Medicare supplement products, and hospital confinement/recovery. Most of these products are primarily fixed-indemnity benefit
obligations and are not directly subject to escalating medical cost inflation.
Competitive Environment
Chubb Life's competition differs by location but generally includes multinational insurers, and in some locations, local insurers,
joint ventures, or state-owned insurers. Chubb's financial strength and reputation as an entrepreneurial organization with a
global presence gives Chubb Life a strong base from which to compete. While Chubb Life Re is not currently quoting on new
opportunities in the variable annuity reinsurance marketplace, we continue to monitor developments in this market. Combined
Insurance competes for A&H business in the U.S. against numerous A&H and life insurance companies across various industry
segments.
Corporate
Corporate results primarily include results of all run-off asbestos and environmental (A&E) exposures, the results of our run-off
Brandywine business, the results of Westchester specialty operations for 1996 and prior years, certain other run-off exposures,
and income and expenses not attributable to reportable segments and the results of our non-insurance companies. The run-off
operations do not actively sell insurance products, but are responsible for the management of existing policies and settlement of
related claims.
Our exposure to A&E claims principally arises out of liabilities acquired when we purchased Westchester Specialty in 1998, CIGNA’s
P&C business in 1999, and The Chubb Corporation in 2016. The A&E liabilities principally relate to claims arising from bodily-
injury claims related to asbestos products and remediation costs associated with hazardous waste sites.
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Underwriting
Chubb is an underwriting company and we strive to emphasize quality of underwriting rather than volume of business or market
share. Our underwriting strategy is to manage risk by employing consistent, disciplined pricing and risk selection. This, coupled
with writing a number of less cyclical product lines, has helped us develop flexibility and stability of our business, and has
allowed us to maintain a profitable book of business throughout market cycles. Clearly defined underwriting authorities,
standards, and guidelines coupled with a strong underwriting audit function are in place in each of our local operations and
global profit centers. Global product boards ensure consistency of approach and the establishment of best practices throughout
the world. Our priority is to help ensure adherence to criteria for risk selection by maintaining high levels of experience and
expertise in our underwriting staff. In addition, we employ a business review structure that helps ensure control of risk quality
and appropriate use of policy limits and terms and conditions. Underwriting discipline is at the heart of our operating
philosophy.
Actuaries in each region work closely with the underwriting teams to provide additional expertise in the underwriting process.
We use internal and external data together with sophisticated analytical, catastrophe loss and risk modeling techniques to
ensure an appropriate understanding of risk, including diversification and correlation effects, across different product lines and
territories. We recognize that climate changes and weather patterns are integral to our underwriting process and we continually
adjust our process to address these changes. This is intended to help ensure that losses are contained within our risk tolerance
and appetite for individual product lines, businesses, and Chubb as a whole. Our use of such tools and data also reflects an
understanding of their inherent limitations and uncertainties.
We also purchase protection from third parties, including, but not limited to, reinsurance as a tool to diversify risk and limit the
net loss potential of catastrophes and large or unusually hazardous risks. For additional information refer to "Risk Factors" under
Item 1A, “Reinsurance Protection”, below, “Catastrophe Management” and “Natural Catastrophe Property Reinsurance
Program”, under Item 7, and Note 5 to the Consolidated Financial Statements, under Item 8.
Reinsurance Protection
As part of our risk management strategy, we purchase reinsurance protection to mitigate our exposure to losses, including
certain catastrophes, to a level consistent with our risk appetite. Although reinsurance agreements contractually obligate our
reinsurers to reimburse us for an agreed-upon portion of our gross paid losses, reinsurance does not discharge our primary
liability to our insureds and, thus, we ultimately remain liable for the gross direct losses. In certain countries, reinsurer selection
is limited by local laws or regulations. In most countries there is more freedom of choice, and the counterparty is selected based
upon its financial strength, claims settlement record, management, line of business expertise, and its price for assuming the risk
transferred. In support of this process, we maintain a Chubb authorized reinsurer list that stratifies these authorized reinsurers
by classes of business and acceptable limits. This list is maintained by our Reinsurance Security Committee (RSC), a committee
comprising senior management personnel and a dedicated reinsurer security team. Changes to the list are authorized by the
RSC and recommended to the Chair of the Risk and Underwriting Committee. The reinsurers on the authorized list and potential
new markets are regularly reviewed and the list may be modified following these reviews. In addition to the authorized list, there
is a formal exception process that allows authorized reinsurance buyers to use reinsurers already on the authorized list for higher
limits or different lines of business, for example, or other reinsurers not on the authorized list if their use is supported by
compelling business reasons for a particular reinsurance program.
A separate policy and process exists for captive reinsurance companies. Generally, these reinsurance companies are established
by our clients or our clients have an interest in them. It is generally our policy to obtain collateral equal to the expected losses
that may be ceded to the captive. Where appropriate, exceptions to the collateral requirement are granted but only after senior
management review. Specific collateral guidelines and an exception process are in place for the North America Commercial P&C
Insurance, North America Personal P&C Insurance, and Overseas General Insurance segments, all of which have credit
management units evaluating the captive's credit quality and that of their parent company. The credit management units,
working with actuaries, determine reasonable exposure estimates (collateral calculations), ensure receipt of collateral in an
acceptable form, and coordinate collateral adjustments as and when needed. Financial reviews and expected loss evaluations
are performed annually for active captive accounts and as needed for run-off exposures. In addition to collateral, parental
guarantees are often used to enhance the credit quality of the captive.
In general, we seek to place our reinsurance with highly rated companies with which we have a strong trading relationship. For
additional information refer to “Catastrophe Management” and “Natural Catastrophe Property Reinsurance Program” under Item
7, and Note 5 to the Consolidated Financial Statements, under Item 8.
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Unpaid Losses and Loss Expenses
We establish reserves for unpaid losses and loss expenses, which are estimates of future payments on reported and unreported
claims for losses and related expenses, with respect to insured events that have occurred. These reserves are recorded in
Unpaid losses and loss expenses in the Consolidated balance sheets. The process of establishing loss and loss expense reserves
for P&C claims can be complex and is subject to considerable uncertainty as it requires the use of informed estimates and
judgments based on circumstances known at the date of accrual. These estimates and judgments are based on numerous
factors, and may be revised as additional experience and other data become available and are reviewed, as new or improved
methodologies are developed, or as laws change. Internal actuaries regularly analyze the levels of loss and loss expense
reserves, taking into consideration factors that may impact the ultimate settlement value of the unpaid losses and loss
expenses. These analyses could result in future changes in the estimates of loss and loss expense reserves or reinsurance
recoverables and any such changes would be reflected in our results of operations in the period in which the estimates are
changed. Losses and loss expenses are charged to income as incurred. The reserve for unpaid losses and loss expenses
represents the estimated ultimate losses and loss expenses less paid losses and loss expenses, and comprises case reserves and
incurred but not reported (IBNR) reserves. With the exception of certain structured settlements, for which the timing and
amount of future claim payments are reliably determinable, and certain reserves for unsettled claims, our loss reserves are not
discounted for the time value of money. In connection with such structured settlements and certain reserves for unsettled
claims, we carried net discounted reserves of $74 million at December 31, 2019.
For each product line, management, after consultation with internal actuaries, develops a “best estimate” of the ultimate
settlement value of the unpaid losses and loss expenses that it believes provides a reasonable estimate of the required reserve.
We evaluate our estimates of reserves quarterly in light of developing information. While we are unable at this time to determine
whether additional reserves may be necessary in the future, we believe that our reserves for unpaid losses and loss expenses are
adequate at December 31, 2019. Future additions to reserves, if needed, could have a material adverse effect on our financial
condition, results of operations, and cash flows. For additional information refer to “Critical Accounting Estimates – Unpaid
losses and loss expenses”, under Item 7, and Note 7 to the Consolidated Financial Statements, under Item 8.
Investments
Our objective is to maximize investment income and total return while ensuring an appropriate level of liquidity, investment
quality, and diversification. As such, Chubb's investment portfolio is invested primarily in investment-grade fixed-income
securities as measured by the major rating agencies. We do not allow leverage in our investment portfolio.
The critical aspects of the investment process are controlled by Chubb Asset Management, an indirect wholly-owned subsidiary
of Chubb. These aspects include asset allocation, portfolio and guideline design, risk management, and oversight of external
asset managers. In this regard, Chubb Asset Management:
•
conducts formal asset allocation modeling for each of the Chubb subsidiaries, providing formal recommendations for the
portfolio's structure;
• establishes recommended investment guidelines that are appropriate to the prescribed asset allocation targets;
• provides the analysis, evaluation, and selection of our external investment advisors;
• establishes and develops investment-related analytics to enhance portfolio engineering and risk control;
• monitors and aggregates the correlated risk of the overall investment portfolio; and
• provides governance over the investment process for each of our operating companies to ensure consistency of approach
and adherence to investment guidelines.
Under our guidance and direction, external asset managers conduct security and sector selection and transaction execution. Use
of multiple managers benefits Chubb in several ways – it provides us with operational and cost efficiencies, diversity of styles
and approaches, innovations in investment research and credit and risk management, all of which enhance the risk adjusted
returns of our portfolios.
Chubb Asset Management determines the investment portfolio's allowable, targeted asset allocation and ranges for each of the
segments. These asset allocation targets are derived from sophisticated asset and liability modeling that measures correlated
histories of returns and volatility of returns. Allowable investment classes are further refined through analysis of our operating
environment including expected volatility of cash flows, potential impact on our capital position, and regulatory and rating
agency considerations.
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The Board has established a Risk & Finance Committee which helps execute the Board's supervisory responsibilities pertaining
to enterprise risk management including investment risk. Under the overall supervision of the Risk & Finance Committee,
Chubb's governance over investment management is rigorous and ongoing. Among its responsibilities, the Risk & Finance
Committee of the Board:
•
•
•
reviews and approves asset allocation targets and investment policy to ensure that it is consistent with our overall goals,
strategies, and objectives;
reviews and approves investment guidelines to ensure that appropriate levels of portfolio liquidity, credit quality,
diversification, and volatility are maintained; and
systematically reviews the portfolio's exposures including any potential violations of investment guidelines.
We have long-standing global credit limits for our entire portfolio across the organization and for individual obligors. Exposures
are aggregated, monitored, and actively managed by our Global Credit Committee, comprising senior executives, including our
Chief Financial Officer, our Chief Risk Officer, our Chief Investment Officer, and our Treasurer.
Within the guidelines and asset allocation parameters established by the Risk & Finance Committee, individual investment
committees of the segments determine tactical asset allocation. Additionally, these committees review all investment-related
activity that affects their operating company, including the selection of outside investment advisors, proposed asset allocation
changes, and the systematic review of investment guidelines.
For additional information regarding the investment portfolio, including breakdowns of the sector and maturity distributions,
refer to Note 3 to the Consolidated Financial Statements under Item 8.
Regulation
Our insurance and reinsurance subsidiaries conduct business globally, including in all 50 states of the United States and the
District of Columbia. Our business is subject to varying degrees of regulation and supervision in each of the jurisdictions in
which our insurance and reinsurance subsidiaries are domiciled and on a group basis. The laws and regulations of the
jurisdictions in which our insurance and reinsurance subsidiaries are domiciled require among other things that these
subsidiaries maintain minimum levels of statutory capital, surplus, and liquidity, meet solvency standards, and submit to
periodic examinations of their financial condition. The complex regulatory environments in which Chubb operates are subject to
change and are regularly monitored.
Group Supervision
In 2012, the Pennsylvania Insurance Department (Department), in consultation with other insurance regulatory bodies that
oversee Chubb's insurance activities, convened the first Chubb Supervisory College (College). Regulators from approximately ten
jurisdictions attended the College in Philadelphia, Pennsylvania, during which the supervisors reviewed information on
Chubb. The Department, in cooperation with the other supervisory college regulators, published a notice of its determination
that it is the appropriate group-wide supervisor for Chubb.
Since 2012, the College has convened bi-annually in-person; and, in July 2017, the College convened its first interim College
teleconference, with the most recent teleconference held in September 2019. During these meetings, the College reviewed
extensive information about Chubb, without material adverse comment. The next in-person College is scheduled for September
2020 in Philadelphia, Pennsylvania.
The following is an overview of regulations for our operations in Switzerland, the U.S., Bermuda, and other international
locations.
Swiss Operations
The Swiss Financial Market Supervisory Authority (FINMA) has the discretion to supervise Chubb on a group-wide basis.
However, FINMA acknowledges the Department's assumption of group supervision over us.
In 2008, we formed Chubb Insurance (Switzerland) Limited which offers property and casualty insurance to Swiss companies,
A&H insurance for individuals of Swiss Corporations as well as reinsurance predominantly in Continental Europe. We have also
formed a reinsurance subsidiary named Chubb Reinsurance (Switzerland) Limited, which we operate as primarily a provider of
reinsurance to Chubb entities. Both companies are licensed and governed by FINMA.
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U.S. Operations
Our U.S. insurance subsidiaries are subject to extensive regulation and supervision by the states in which they do business. The
laws of the various states establish departments of insurance with broad authority to regulate, among other things: the
standards of solvency that must be met and maintained, the licensing of insurers and their producers, approval of policy forms
and rates, the nature of and limitations on investments, restrictions on the size of the risks which may be insured under a single
policy, deposits of securities for the benefit of policyholders, requirements for the acceptability of reinsurers, periodic
examinations of the affairs of insurance companies, the form and content of reports of financial condition required to be filed,
and the adequacy of reserves for unearned premiums, losses, and other exposures.
Our U.S. insurance subsidiaries are required to file detailed annual and quarterly reports with state insurance regulators. In
addition, our U.S. insurance subsidiaries' operations and financial records are subject to examination at regular intervals by state
regulators.
All states have enacted legislation that regulates insurance holding companies. This legislation provides that each insurance
company in the insurance holding company system (system) is required to register with the insurance department of its state of
domicile and furnish information concerning the operations of companies within the system that may materially affect the
operations, management, or financial condition of the insurers within the system. We are required to file an annual enterprise
risk report with the Department, identifying the material risks within our system that could pose enterprise risk to the insurance
subsidiaries in the system. All transactions within a system must be fair and equitable. Notice to the insurance departments is
required prior to the consummation of transactions affecting the ownership or control of an insurer and of certain material
transactions between an insurer and an entity in its system. In addition, certain transactions may not be consummated without
the department's prior approval.
We are also required to file an annual report with the Department, reflecting our internal assessment of material risks associated
with our current business plan and the sufficiency of our capital resources to support those risks.
Statutory surplus is an important measure used by the regulators and rating agencies to assess our U.S. insurance subsidiaries'
ability to support business operations and provide dividend capacity. Our U.S. insurance subsidiaries are subject to various state
statutory and regulatory restrictions that limit the amount of dividends that may be paid without prior approval from regulatory
authorities. These restrictions differ by state, but are generally based on calculations incorporating statutory surplus, statutory
net income, and/or investment income.
The National Association of Insurance Commissioners (NAIC) has a risk-based capital requirement for P&C insurance
companies. This risk-based capital formula is used by many state regulatory authorities to identify insurance companies that
may be undercapitalized and which merit further regulatory attention. These requirements are designed to monitor capital
adequacy using a formula that prescribes a series of risk measurements to determine a minimum capital amount for an
insurance company, based on the profile of the individual company. The ratio of a company's actual policyholder surplus to its
minimum capital requirement will determine whether any state regulatory action is required. There are progressive risk-based
capital failure levels that trigger more stringent regulatory action. If an insurer's policyholders' surplus falls below the Mandatory
Control Level (70 percent of the Authorized Control Level, as defined by the NAIC), the relevant insurance commissioner is
required to place the insurer under regulatory control.
However, an insurance regulator may allow a P&C company operating below the Mandatory Control Level that is writing no
business and is running off its existing business to continue its run-off. Brandywine is running off its liabilities consistent with
the terms of an order issued by the Insurance Commissioner of Pennsylvania. This includes periodic reporting obligations to the
Department.
Government intervention continued in the insurance and reinsurance markets in relation to terrorism coverage in the U.S. (and
through industry initiatives in other countries). The U.S. Terrorism Risk Insurance Act (TRIA), which was enacted in 2002 to
ensure the availability of insurance coverage for certain types of terrorist acts in the U.S., was extended in December 2019
through December 31, 2027, and applies to certain of our operations.
From time to time, Chubb and its subsidiaries and affiliates receive inquiries from state agencies and attorneys general, with
which we generally comply, seeking information concerning business practices, such as underwriting and non-traditional or loss
mitigation insurance products. Moreover, many recent factors, such as consequences of and reactions to industry and economic
conditions and focus on domestic issues, have contributed to the potential for change in the legal and regulatory framework
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applicable to Chubb's U.S. operations and businesses. We cannot assure that changes in laws or investigative or enforcement
activities in the various states in the U.S. will not have a material adverse impact on our financial condition, results of
operations, or business practices.
We are subject to numerous U.S. federal and state laws governing the protection of personal and confidential information of our
clients or employees. These laws and regulations are increasing in complexity, and the requirements are extensive and detailed.
Numerous states require us to certify our compliance with their data protection laws.
We are subject to the New York Department of Financial Services’ Cybersecurity Regulation (the NYDFS Cybersecurity
Regulation) which mandates detailed cybersecurity standards for all institutions, including insurance entities, authorized by the
NYDFS to operate in New York. Among the requirements are the maintenance of a cybersecurity program with governance
controls, risk-based minimum data security standards for technology systems, cyber breach preparedness and response
requirements, including reporting obligations, vendor oversight, training, and program record keeping and certification
obligations. Because our North America systems are integrated, our companies domiciled in other states may also be impacted
by this requirement.
Additionally, the NAIC adopted an Insurance Data Security Model Law, which require licensed insurance entities to comply with
detailed information security requirements. The NAIC model law is similar in many respects to the NYDFS Cybersecurity
Regulation.
Bermuda Operations
The Insurance Act 1978 of Bermuda and related regulations, as amended (the Insurance Act), regulates the insurance business
of our Bermuda domiciled (re)insurance subsidiaries (Bermuda domiciled subsidiaries) and provides that no person may carry
on any insurance business in or from within Bermuda unless registered as an insurer by the Bermuda Monetary Authority
(BMA). The Insurance Act imposes solvency and liquidity standards and auditing and reporting requirements on Bermuda
insurance companies and grants the BMA powers to supervise, investigate, and intervene in the affairs of insurance companies.
Bermuda domiciled subsidiaries must prepare and file with the BMA, audited annual statutory financial statements and audited
annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. (GAAP),
International Financial Reporting Standards (IFRS), or any such other generally accepted accounting principles as the BMA may
recognize. These audited financial statements are made public by the BMA. The Insurance Act prescribes rules for the
preparation and content of the statutory financial statements that require Bermuda domiciled subsidiaries to give detailed
information and analyses regarding premiums, claims, reinsurance, and investments. In addition, the Bermuda domiciled
subsidiaries are required to prepare and publish a Financial Condition Report (FCR). The FCR provides details of measures
governing the business operations, corporate governance framework, solvency and financial performance. The FCR must be filed
with the BMA and requires Bermuda insurance companies to make the FCR publicly available.
Bermuda’s regulatory regime provides a risk-based capital model, termed the Bermuda Solvency Capital Requirement (BSCR),
as a tool to assist the BMA both in measuring risk and in determining appropriate levels of capitalization. The BSCR employs a
standard mathematical model that correlates the risk underwritten by Bermuda insurers to their capital. The BSCR framework
applies a standard measurement format to the risk associated with an insurer's assets, liabilities, and premiums, including a
formula to take into account catastrophe risk exposure.
The BMA established risk-based regulatory capital adequacy and solvency margin requirements for Bermuda insurers that
mandate that a Bermuda domiciled subsidiary’s Enhanced Capital Requirement (ECR) be calculated by either (a) BSCR, or (b)
an internal capital model which the BMA has approved for use for this purpose. The Bermuda domiciled subsidiaries use the
BSCR in calculating their solvency requirements. Bermuda statutory reporting rules include an Economic Balance Sheet (EBS)
framework. The EBS framework is embedded as part of the BSCR and forms the basis of our ECR.
In order to minimize the risk of a shortfall in capital arising from an unexpected adverse deviation and in moving towards the
implementation of a risk based capital approach, the BMA has established a threshold capital level, (termed the Target Capital
Level (TCL)), set at 120 percent of ECR, that serves as an early warning tool for the BMA. Failure to maintain statutory capital
at least equal to the TCL would likely result in increased BMA regulatory oversight.
Under the Insurance Act, Chubb's Bermuda domiciled subsidiaries are prohibited from declaring or paying any dividends of
more than 25 percent of total statutory capital and surplus, as shown in its previous financial year unconsolidated statutory
balance sheet, unless at least seven days before payment of the dividends, it files with the BMA an affidavit that it will continue
14
to meet its required solvency margins. Furthermore, Bermuda domiciled subsidiaries may only declare and pay a dividend from
retained earnings and a dividend or distribution from contributed surplus if it has no reasonable grounds for believing that it is,
or would after the payment be, unable to pay its liabilities as they become due, or if the realizable value of its assets would be
less than the aggregate of its liabilities and its issued share capital and share premium accounts.
In addition, Chubb's Bermuda domiciled subsidiaries must obtain the BMA's prior approval before reducing total statutory
capital, as shown in its previous financial year statutory balance sheet, by 15 percent or more.
Other International Operations
The extent of insurance regulation varies significantly among the countries in which non-U.S. Chubb operations conduct
business. While each country imposes licensing, solvency, auditing, and financial reporting requirements, the type and extent of
the requirements differ substantially. For example:
•
•
in some countries, insurers are required to prepare and file monthly and/or quarterly financial reports, and in others, only
annual reports;
some regulators require intermediaries to be involved in the sale of insurance products, whereas other regulators permit
direct sales contact between the insurer and the customer;
•
the extent of restrictions imposed upon an insurer's use of local and offshore reinsurance vary;
• policy form filing and rate regulation vary by country;
•
•
the frequency of contact and periodic on-site examinations by insurance authorities differ by country; and
regulatory requirements relating to insurer dividend policies vary by country.
Significant variations can also be found in the size, structure, and resources of the local regulatory departments that oversee
insurance activities. Certain regulators prefer close relationships with all subject insurers and others operate a risk-based
approach.
Chubb operates in some countries through subsidiaries and in some countries through branches of subsidiaries. Local capital
requirements applicable to a subsidiary generally include its branches. Certain Chubb companies are jointly owned with local
companies to comply with legal requirements for local ownership. Other legal requirements include discretionary licensing
procedures, compulsory cessions of reinsurance, local retention of funds and records, data privacy and protection program
requirements, and foreign exchange controls. Chubb's international companies are also subject to multinational application of
certain U.S. laws.
There are various regulatory bodies and initiatives that impact Chubb in multiple international jurisdictions and the potential for
significant impact on Chubb could be heightened as a result of recent industry and economic developments.
In 2016, the United Kingdom (UK) voted in a national referendum to withdraw from the EU. In anticipation of the UK leaving
the EU, effective January 1, 2019, we redomiciled the headquarters of our European carriers to Paris, France, which is also the
principal office for our Continental European operations. Chubb continues to have a substantial presence in London in addition
to its offices and operations across the UK and EU.
In 2018, the EU’s General Data Protection Regulation (GDPR) came into effect. The GDPR is a privacy regulation with
protection for the personal data of EU residents on a global basis.
Enterprise Risk Management
As an insurer, Chubb is in the business of profitably managing risk for its customers. Since risk management must permeate an
organization conducting a global insurance business, we have an established Enterprise Risk Management (ERM) framework
that is integrated into management of our businesses and is led by Chubb's senior management. As a result, ERM is a part of
the day-to-day management of Chubb and its operations.
Our global ERM framework is broadly multi-disciplinary and its strategic objectives include:
• External Risks: identify, analyze, quantify, and where possible, mitigate significant external risks that could materially hamper
the financial condition of Chubb and/or the achievement of corporate business objectives over the next 36 months;
15
• Exposure Accumulations: identify and quantify the accumulation of exposure to individual counterparties, products or industry
sectors, particularly those that materially extend across or correlate between business units or divisions and/or the balance
sheet;
• Risk Modeling: develop and use various data-sets, analytical tools, metrics and processes (including economic capital models
and advanced analytics, including catastrophe models to quantify natural catastrophe risk for product pricing, risk management,
capital allocation and to simulate and estimate hurricane losses) that help business and corporate leaders make informed
underwriting, portfolio management and risk management decisions within a consistent risk/reward framework;
• Governance:
establish and coordinate risk guidelines that reflect the corporate appetite for risk;
monitor exposure accumulations relative to established guidelines; and
ensure effective internal risk management communication up to management and the Board, (including our Risk &
Finance Committee and our Nominating & Governance Committee), down to the various business units and legal
entities, and across the firm; and
• Disclosure: develop protocols and processes for risk-related disclosure internally as well as externally to rating agencies,
regulators, shareholders and analysts.
Chubb Group's Risk and Underwriting Committee (RUC) reports to and assists the Chief Executive Officer in the oversight and
review of the ERM framework which covers the processes and guidelines used to manage insurance risk, financial risk, strategic
risk, and operational risk. The RUC is chaired by Chubb Group’s Chief Risk Officer. The RUC meets at least monthly, and is
comprised of Chubb Group's most senior executives, in addition to the Chair, including the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, Chief Investment Officer, Chief Actuary, Chief Claims Officer, General Counsel,
President – North America Commercial and Personal Insurance, President – North America Major Accounts and Specialty
Insurance, President – Overseas General Insurance, and Chief Underwriting Officer.
The RUC is assisted in its activities by Chubb's Enterprise Risk Unit (ERU) and Product Boards. The ERU is responsible for the
collation and analysis of risk insight in two key areas. First, external information that provides insight to the RUC on existing or
emerging risks that might significantly impact Chubb's key objectives and second, internal risk aggregations arising from Chubb's
business writings and other activities such as investments and operations. The ERU is independent of the operating units and
reports to our Chief Risk Officer. The Product Boards exist to provide oversight for products that we offer globally. A Product
Board currently exists for each of Chubb's major product areas. Each Product Board is responsible for ensuring consistency in
underwriting and pricing standards, identification of emerging issues, and guidelines for relevant accumulations.
Chubb's Chief Risk Officer also reports to the Board's Risk & Finance Committee, which helps execute the Board's supervisory
responsibilities pertaining to ERM. The role of the Risk & Finance Committee includes evaluation of the integrity and
effectiveness of our ERM procedures, systems, and information; governance on major policy decisions pertaining to risk
aggregation and minimization; and assessment of our major decisions and preparedness levels pertaining to perceived material
risks. The Audit Committee meets annually and on an as-needed basis with the Risk & Finance Committee in order to exercise
its duties under New York Stock Exchange Rules.
Others within the ERM structure contribute toward accomplishing Chubb's ERM objectives, including regional management,
Corporate Underwriting, Internal Audit, Compliance, external consultants, and managers of our internal control processes and
procedures.
Tax Matters
Refer to “Risk Factors”, under Item 1A and Note 1 o) and Note 8 to the Consolidated Financial Statements, under Item 8.
16
Information about our Executive Officers
Name
Evan G. Greenberg
John W. Keogh
Philip V. Bancroft
John J. Lupica
Joseph F. Wayland
Sean Ringsted
Timothy A. Boroughs
Paul J. Krump
Juan Luis Ortega
Age
65
55
60
54
62
57
70
60
45
Position
Chairman, President, Chief Executive Officer, and Director
Executive Vice Chairman and Chief Operating Officer
Executive Vice President and Chief Financial Officer
Vice Chairman; President, North America Major Accounts & Specialty Insurance
Executive Vice President and General Counsel
Executive Vice President, Chief Digital Officer, and Chief Risk Officer
Executive Vice President and Chief Investment Officer
Executive Vice President; President, North America Commercial and Personal Insurance
Executive Vice President; President, Overseas General Insurance
Evan G. Greenberg has been a director of Chubb Limited since August 2002. Mr. Greenberg was elected Chairman of the Board
of Directors in May 2007. Mr. Greenberg was a director of The Coca-Cola Company from February 2011 until his resignation in
October 2016. Mr. Greenberg was appointed to the position of President and Chief Executive Officer of Chubb Limited in May
2004, and in June 2003, was appointed President and Chief Operating Officer of Chubb Limited. Mr. Greenberg was appointed
to the position of Chief Executive Officer of Chubb Overseas General in April 2002. He joined Chubb as Vice Chairman, Chubb
Limited, and Chief Executive Officer of Chubb Tempest Re in November 2001. Prior to joining Chubb, Mr. Greenberg was most
recently President and Chief Operating Officer of American International Group (AIG), a position he held from 1997 until 2000.
John W. Keogh was appointed Executive Vice Chairman of Chubb Limited in November 2015. Mr. Keogh has served as Chief
Operating Officer of Chubb Limited since July 2011 and Vice Chairman of Chubb Limited and Chubb Group Holdings since
August 2010. Mr. Keogh joined Chubb as Chief Executive Officer of Overseas General Insurance in April 2006 and became
Chairman of Overseas General Insurance in August 2010. Prior to joining Chubb, Mr. Keogh served as Senior Vice President,
Domestic General Insurance of AIG, and President and Chief Executive Officer of National Union Fire Insurance Company, AIG's
member company that specializes in D&O and fiduciary liability coverages. Mr. Keogh joined AIG in 1986. He served in a
number of other senior positions there including as Executive Vice President of AIG's Domestic Brokerage Group and as
President and Chief Operating Officer of AIG's Lexington Insurance Company unit.
Philip V. Bancroft was appointed Chief Financial Officer of Chubb Limited in January 2002. For nearly 20 years, Mr. Bancroft
worked for PricewaterhouseCoopers LLP. Prior to joining Chubb, he served as partner-in-charge of the New York Regional
Insurance Practice. Mr. Bancroft had been a partner with PricewaterhouseCoopers LLP for ten years.
John J. Lupica was appointed President, North America Major Accounts & Specialty Insurance in January 2016, Vice Chairman
of Chubb Limited and Chubb Group Holdings in November 2013 and Chairman, Insurance - North America, in July 2011. Mr.
Lupica had been Chief Operating Officer, Insurance - North America, since 2010 and President of ACE USA since 2006. He
also previously served as Division President of U.S. Professional Risk business and U.S. Regional Operations. Mr. Lupica joined
Chubb as Executive Vice President of Professional Risk in 2000. Prior to joining Chubb, he served as Senior Vice President for
Munich-American Risk Partners, Inc. He also held various management positions at AIG.
Joseph F. Wayland was appointed Executive Vice President of Chubb Limited in January 2016, General Counsel and Secretary
of Chubb Limited in July 2013. Mr. Wayland joined Chubb from the law firm of Simpson Thacher & Bartlett LLP, where he was
a partner since 1994. From 2010 to 2012, he served in the United States Department of Justice, first as Deputy Assistant
Attorney General of the Antitrust Division, and was later appointed as the Acting Assistant Attorney General in charge of that
division.
Sean Ringsted was appointed Executive Vice President and Chief Digital Officer in February 2017 and Chief Risk Officer in
November 2008. Mr. Ringsted previously served as Chief Actuary of Chubb Limited from November 2008 to January 2017. Mr.
Ringsted’s previous roles at Chubb also include Chief Actuary for Chubb Group from 2004 to 2008, Executive Vice President
and Chief Risk Officer for Chubb Tempest Re from 2002 to 2004, and Senior Vice President and Chief Actuary for Chubb
Tempest Re from 1998 to 2002. Prior to joining Chubb, Mr. Ringsted was a consultant at Tillinghast-Towers Perrin.
17
Timothy A. Boroughs was appointed Executive Vice President and Chief Investment Officer of Chubb Group in June 2000. Prior
to joining Chubb, Mr. Boroughs was Director of Fixed Income at Tudor Investment Corporation from 1997 to 2000, and
Managing Partner and Director of Global Leveraged Investment Activity at Fischer Francis Trees & Watts from 1976 to 1997.
Paul J. Krump was appointed Executive Vice President, Chubb Group and President North America Commercial and Personal
Insurance in January 2016. Prior to Chubb Limited’s January 2016 acquisition of The Chubb Corporation, Mr. Krump was Chief
Operating Officer of The Chubb Corporation, responsible for the company’s Commercial, Specialty, Personal and Accident &
Health insurance lines; Claims; Global Field Operations; Information Technology; Human Resources; Communications; and
External Affairs. Mr. Krump joined The Chubb Corporation in 1982 as a commercial underwriting trainee in the Minneapolis
office. He held numerous headquarters and field positions in the United States and Europe, including President of Personal
Lines and Claims and President of Commercial and Specialty Lines.
Juan Luis Ortega was appointed Executive Vice President, Chubb Group and President, Overseas General Insurance in August
2019. Mr. Ortega previously served as Senior Vice President, Chubb Group and Regional President of Latin America since 2016
and Regional President of Asia Pacific from 2013 to 2016. Mr. Ortega's previous roles at Chubb also include Senior Vice
President, Accident & Health, for the Asia Pacific region from 2011 to 2013 and Senior Vice President and Regional Head of
Accident & Health for the Latin America region from 2008 to 2010. Mr. Ortega joined Chubb in 1999 and advanced through a
series of accident and health and credit insurance management positions in Miami, Puerto Rico and Mexico, before being
named Country President of Chile in 2005.
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ITEM 1A. Risk Factors
Factors that could have a material impact on our results of operations or financial condition are outlined below. Additional risks
not presently known to us or that we currently deem insignificant may also impair our business or results of operations as they
become known or as facts and circumstances change. Any of the risks described below could result in a material adverse effect
on our results of operations or financial condition.
Insurance
Our results of operations or financial condition could be adversely affected by the occurrence of natural and man-made
disasters.
We have substantial exposure to losses resulting from natural disasters, man-made catastrophes such as terrorism or cyber-
attack, and other catastrophic events, including pandemics. This could impact a variety of our businesses, including our
commercial and personal lines, and life and accident and health (A&H) products. Catastrophes can be caused by various
events, including hurricanes, typhoons, earthquakes, hailstorms, droughts, explosions, severe winter weather, fires, war, acts of
terrorism, nuclear accidents, political instability, and other natural or man-made disasters, including a global or other wide-
impact pandemic or a significant cyber-attack. The incidence and severity of catastrophes are inherently unpredictable and our
losses from catastrophes could be substantial. In addition, climate change and resulting changes in global temperatures,
weather patterns, and sea levels may both increase the frequency and severity of natural catastrophes and the resulting losses
in the future and impact our risk modeling assumptions. We cannot predict the impact that changing climate conditions, if any,
may have on our results of operations or our financial condition. Additionally, we cannot predict how legal, regulatory and/or
social responses to concerns around global climate change may impact our business. The occurrence of claims from
catastrophic events could result in substantial volatility in our results of operations or financial condition for any fiscal quarter or
year. Although we attempt to manage our exposure to such events through the use of underwriting controls, risk models, and
the purchase of third-party reinsurance, catastrophic events are inherently unpredictable and the actual nature of such events
when they occur could be more frequent or severe than contemplated in our pricing and risk management expectations. As a
result, the occurrence of one or more catastrophic events could have an adverse effect on our results of operations and financial
condition.
If actual claims exceed our loss reserves, our financial results could be adversely affected.
Our results of operations and financial condition depend upon our ability to accurately assess the potential losses associated
with the risks that we insure and reinsure. We establish reserves for unpaid losses and loss expenses, which are estimates of
future payments of reported and unreported claims for losses and related expenses, with respect to insured events that have
occurred at or prior to the balance sheet date. The process of establishing reserves can be highly complex and is subject to
considerable variability as it requires the use of informed estimates and judgments.
Actuarial staff in each of our segments regularly evaluates the levels of loss reserves. Any such evaluation could result in future
changes in estimates of losses or reinsurance recoverables and would be reflected in our results of operations in the period in
which the estimates are changed. Losses and loss expenses are charged to income as incurred. During the loss settlement
period, which can be many years in duration for some of our lines of business, additional facts regarding individual claims and
trends often will become known which may result in a change in overall reserves. In addition, application of statistical and
actuarial methods may require the adjustment of overall reserves upward or downward from time to time.
Included in our loss reserves are liabilities for latent claims such as asbestos and environmental (A&E), which are principally
related to claims arising from remediation costs associated with hazardous waste sites and bodily-injury claims related to
exposure to asbestos products and environmental hazards. At December 31, 2019, gross A&E liabilities represented
approximately 3.2 percent of our gross loss reserves. The estimation of these liabilities is subject to many complex variables
including: the current legal environment; specific settlements that may be used as precedents to settle future claims;
assumptions regarding trends with respect to claim severity and the frequency of higher severity claims; assumptions regarding
the ability to allocate liability among defendants (including bankruptcy trusts) and other insurers; the ability of a claimant to
bring a claim in a state in which it has no residency or exposure; the ability of a policyholder to claim the right to non-products
coverage; whether high-level excess policies have the potential to be accessed given the policyholder's claim trends and liability
situation; payments to unimpaired claimants; and the potential liability of peripheral defendants. Accordingly, the ultimate
settlement of losses, arising from either latent or non-latent causes, may be significantly greater or less than the loss and loss
expense reserves held at the balance sheet date. In addition, the amount and timing of the settlement of our P&C liabilities are
uncertain and our actual payments could be higher than contemplated in our loss reserves owing to the impact of insurance,
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judicial decisions, and/or social inflation. If our loss reserves are determined to be inadequate, we may be required to increase
loss reserves at the time of the determination and our net income and capital may be reduced.
The effects of emerging claim and coverage issues on our business are uncertain.
As industry practices and legislative, regulatory, judicial, social, financial, technological and other environmental conditions
change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect our
business by either extending coverage beyond our underwriting intent or by increasing the frequency and severity of claims. In
some instances, these changes may not become apparent until after we have issued insurance or reinsurance contracts that are
affected by the changes. For example, recently enacted "reviver" legislation in certain states does allow civil claims relating to
molestation and abuse to be asserted against policyholders that would otherwise be barred by statutes of limitations. As a
result, the full extent of liability under our insurance or reinsurance contracts may not be known for many years after issuance.
The failure of any of the loss limitation methods we use could have an adverse effect on our results of operations and
financial condition.
We seek to manage our loss exposure by maintaining a disciplined underwriting process throughout our insurance operations.
We also look to limit our loss exposure by writing a number of our insurance and reinsurance contracts on an excess of loss
basis. Excess of loss insurance and reinsurance indemnifies the insured against losses in excess of a specified amount. In
addition, we limit program size for each client and purchase third-party reinsurance for our own account. In the case of our
assumed proportional reinsurance treaties, we seek per occurrence limitations or loss and loss expense ratio caps to limit the
impact of losses ceded by the client. In proportional reinsurance, the reinsurer shares a proportional part of the premiums and
losses of the reinsured. We also seek to limit our loss exposure by geographic diversification. Geographic zone limitations
involve significant underwriting judgments, including the determination of the area of the zones and the inclusion of a particular
policy within a particular zone's limits.
However, there are inherent limitations in all of these tactics and no assurance can be given against the possibility of an event
or series of events that could result in loss levels that could have an adverse effect on our financial condition or results of
operations. It is also possible that losses could manifest themselves in ways that we do not anticipate and that our risk
mitigation strategies are not designed to address. Additionally, various provisions of our policies, such as limitations or
exclusions from coverage or choice of forum negotiated to limit our risks, may not be enforceable in the manner we intend. As a
result, one or more natural catastrophes and/or terrorism or other events could result in claims that substantially exceed our
expectations, which could have an adverse effect on our results of operations and financial condition.
We may be unable to purchase reinsurance, and/or if we successfully purchase reinsurance, we are subject to the possibility
of non-payment.
We purchase protection from third parties including, but not limited to, reinsurance to protect against catastrophes and other
sources of volatility, to increase the amount of protection we can provide our clients, and as part of our overall risk management
strategy. Our reinsurance business also purchases retrocessional protection which allows a reinsurer to cede to another
company all or part of the reinsurance originally assumed by the reinsurer. A reinsurer's or retrocessionaire's insolvency or
inability or unwillingness to make timely payments under the terms of its reinsurance agreement with us could have an adverse
effect on us because we remain liable to the insured. From time to time, market conditions have limited, and in some cases
have prevented, insurers and reinsurers from obtaining the types and amounts of reinsurance or retrocessional reinsurance that
they consider adequate for their business needs.
There is no guarantee our desired amounts of reinsurance or retrocessional reinsurance will be available in the marketplace in
the future. In addition to capacity risk, the remaining capacity may not be on terms we deem appropriate or acceptable or with
companies with whom we want to do business. Finally, we face some degree of counterparty risk whenever we purchase
reinsurance or retrocessional reinsurance. Consequently, the insolvency of these counterparties, or the inability, or unwillingness
of any of our present or future reinsurers to make timely payments to us under the terms of our reinsurance or retrocessional
agreements could have an adverse effect on us. At December 31, 2019, we had $15.4 billion of reinsurance recoverables, net
of reserves for uncollectible recoverables.
Certain active Chubb companies are primarily liable for A&E and other exposures they have reinsured to our inactive run-off
company Century Indemnity Company (Century). At December 31, 2019, the aggregate reinsurance balances ceded by our
active subsidiaries to Century were approximately $1.5 billion. Should Century's loss reserves experience adverse development
in the future and should Century be placed into rehabilitation or liquidation, the reinsurance recoverables due from Century to
its affiliates would be payable only after the payment in full of third-party expenses and liabilities, including administrative
expenses and direct policy liabilities. Thus, the intercompany reinsurance recoverables would be at risk to the extent of the
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shortage of assets remaining to pay these recoverables. While we believe the intercompany reinsurance recoverables from
Century are not impaired at this time, we cannot assure that adverse development with respect to Century's loss reserves, if
manifested, will not result in Century's insolvency, which could result in our recognizing a loss to the extent of any uncollectible
reinsurance from Century. This could have an adverse effect on our results of operations and financial condition.
Our net income may be volatile because certain products sold by our Life Insurance business expose us to reserve and fair
value liability changes that are directly affected by market and other factors and assumptions.
Our pricing, establishment of reserves for future policy benefits and valuation of life insurance and annuity products, including
reinsurance programs, are based upon various assumptions, including but not limited to equity market changes, interest rates,
mortality rates, morbidity rates, and policyholder behavior. The process of establishing reserves for future policy benefits relies
on our ability to accurately estimate insured events that have not yet occurred but that are expected to occur in future periods.
Significant deviations in actual experience from assumptions used for pricing and for reserves for future policy benefits could
have an adverse effect on the profitability of our products and our business.
Under reinsurance programs covering variable annuity guarantees, we assumed the risk of guaranteed minimum death benefits
(GMDB) and guaranteed living benefits (GLB), principally guaranteed minimum income benefits (GMIB), associated with
variable annuity contracts. We ceased writing this business in 2007. Our net income is directly impacted by changes in the
reserves calculated in connection with the reinsurance of GMDB and GLB liabilities. In addition, our net income is directly
impacted by the change in the fair value of the GLB liability. Reported liabilities for both GMDB and GLB reinsurance are
determined using internal valuation models which require considerable judgment and are subject to significant uncertainty.
Refer to the “Critical Accounting Estimates – Guaranteed living benefits (GLB) derivatives” under Item 7 and “Quantitative and
Qualitative Disclosures about Market Risk – Reinsurance of GMDB and GLB guarantees” under Item 7A for additional
information on the assumptions used in this program. We view our variable annuity reinsurance business as having a similar
risk profile to that of catastrophe reinsurance, with the probability of long-term economic loss relatively small at the time of
pricing. Adverse changes in market factors and policyholder behavior will have an impact on both Life Insurance underwriting
income and consolidated net income.
Payment of obligations under surety bonds could have an adverse effect on our results of operations.
The surety business tends to be characterized by infrequent but potentially high severity losses. The majority of our surety
obligations are intended to be performance-based guarantees. When losses occur, they may be mitigated, at times, by recovery
rights to the customer’s assets, contract payments, and collateral and bankruptcy recoveries. We have substantial commercial
and construction surety exposure for current and prior customers. In that regard, we have exposures related to surety bonds
issued on behalf of companies that have experienced or may experience deterioration in creditworthiness. If the financial
condition of these companies were adversely affected by the economy or otherwise, we may experience an increase in filed
claims and may incur high severity losses, which could have an adverse effect on our results of operations.
Our exposure to various commercial and contractual counterparties, our reliance on brokers, and certain of our policies may
subject us to credit risk.
We have exposure to counterparties through a variety of commercial transactions and arrangements, including reinsurance
transactions; agreements with banks, hedge funds and other investment vehicles; and derivative transactions, that expose us to
credit risk in the event our counterparty fails to perform its obligations. This includes exposure to financial institutions in the
form of secured and unsecured debt instruments and equity securities. Moreover, we paid deposits in connection with our
pending acquisition of additional shares of Huatai Insurance Group Company Limited (Huatai Group), which exposes us to risk
if the transactions are not completed.
In accordance with industry practice, we generally pay amounts owed on claims to brokers who, in turn, remit these amounts to
the insured or ceding insurer. Although the law is unsettled and depends upon the facts and circumstances of the particular
case, in some jurisdictions, if a broker fails to make such a payment, we might remain liable to the insured or ceding insurer for
the deficiency. Conversely, in certain jurisdictions, if a broker does not remit premiums paid for these policies over to us, these
premiums might be considered to have been paid and the insured or ceding insurer will no longer be liable to us for those
amounts, whether or not we have actually received the premiums from the broker. Consequently, we assume a degree of credit
risk associated with a broker with whom we transact business. However, due to the unsettled and fact-specific nature of the
law, we are unable to quantify our exposure to this risk. To date, we have not experienced any material losses related to this
credit risk.
Under the terms of certain high-deductible policies which we offer, such as workers’ compensation and general liability, our
customers are responsible to reimburse us for an agreed-upon dollar amount per claim. In nearly all cases we are required
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under such policies to pay covered claims first, and then seek reimbursement for amounts within the applicable deductible from
our customers. This obligation subjects us to credit risk from these customers. While we generally seek to mitigate this risk
through collateral agreements and maintain a provision for uncollectible accounts associated with this credit exposure, an
increased inability of customers to reimburse us in this context could have an adverse effect on our financial condition and
results of operations. In addition, a lack of credit available to our customers could impact our ability to collateralize this risk to
our satisfaction, which in turn, could reduce the amount of high-deductible policies we could offer.
Since we depend on a few distribution and bancassurance partners for a large portion of our revenues, loss of business
provided by any one of them could adversely affect us.
We market our insurance and reinsurance worldwide primarily through independent insurance agents, insurance and
reinsurance brokers, and bancassurance relationships. Accordingly, our business is dependent on the willingness of these agents
and brokers to recommend our products to their customers, who may also promote and distribute the products of our
competitors. Deterioration in relationships with our agent and broker distribution network or their increased promotion and
distribution of our competitors' products could adversely affect our ability to sell our products. Loss of all or a substantial portion
of the business provided by one or more of these agents and brokers could have an adverse effect on our business.
Financial
Our investment performance may affect our financial results and our ability to conduct business.
Our investment assets are invested by professional investment management firms under the direction of our management team
in accordance with investment guidelines approved by the Risk & Finance Committee of the Board of Directors. Although our
investment guidelines stress diversification of risks and conservation of principal and liquidity, our investments are subject to
market risks and risks inherent in individual securities. Interest rates are highly sensitive to many factors, including inflation,
monetary and fiscal policies, and domestic and international political conditions. Given the risk that London Interbank Offered
Rate (LIBOR) will no longer be available, we are monitoring industry efforts via our external investment managers to transition
away from LIBOR by the end of 2021. The volatility of our losses may force us to liquidate securities, which may cause us to
incur capital losses. Realized and unrealized losses in our investment portfolio would reduce our book value, and if significant,
can affect our ability to conduct business.
Volatility in interest rates could impact the performance of our investment portfolio which could have an adverse effect on our
investment income and operating results. Although we take measures to manage the risks of investing in a changing interest
rate environment, we may not be able to effectively mitigate interest rate sensitivity. Our mitigation efforts include maintaining a
high quality portfolio of primarily fixed income investments with a relatively short duration to reduce the effect of interest rate
changes on book value. A significant increase in interest rates would generally have an adverse effect on our book value. Our life
insurance investments typically focus on longer duration bonds to better match the obligations of this business. For the life
insurance business, policyholder behavior may be influenced by changing interest rate conditions and require a re-balancing of
duration to effectively manage our asset/liability position.
As stated, our fixed income portfolio is primarily invested in high quality, investment-grade securities. However, a smaller
portion of the portfolio, approximately 16 percent at December 31, 2019, is invested in below investment-grade securities.
These securities, which pay a higher rate of interest, also have a higher degree of credit or default risk and may also be less
liquid in times of economic weakness or market disruptions. While we have put in place procedures to monitor the credit risk
and liquidity of our invested assets, it is possible that, in periods of economic weakness (such as recession), we may experience
credit or default losses in our portfolio, which could adversely affect our results of operations and financial condition.
As a part of our ongoing analysis of our investment portfolio, we are required to assess whether the fixed maturities we hold for
which we have recorded an unrealized loss have been “other-than-temporarily impaired” under GAAP, which implies an inability
to recover the full economic benefits of these securities. Refer to Note 2 to the Consolidated Financial Statements for additional
information. This analysis requires a high degree of judgment and requires us to make certain assessments about the potential
for recovery of the assets we hold. Declines in relevant stock and other financial markets, and other factors impacting the value
of our investments, could result in impairments and could adversely affect our net income and other financial results.
We may require additional capital or financing sources in the future, which may not be available or may be available only on
unfavorable terms.
Our future capital and financing requirements depend on many factors, including our ability to write new business successfully
and to establish premium rates and reserves at levels sufficient to cover losses, as well as our investment performance and
capital expenditure obligations, including with respect to acquisitions. We may need to raise additional funds through financings
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or access funds through existing or new credit facilities or through short-term repurchase agreements. We also from time to time
seek to refinance debt or credit as amounts become due or commitments expire. Any equity or debt financing or refinancing, if
available at all, may be on terms that are not favorable to us. In the case of equity financings, dilution to our shareholders could
result, and in any case, such securities may have rights, preferences, and privileges that are senior to those of our Common
Shares. Our access to funds under existing credit facilities is dependent on the ability of the banks that are parties to the
facilities to meet their funding commitments. Under Swiss law we would be prohibited from selling shares in an equity financing
at a purchase price below our then-current par value. If we cannot obtain adequate capital or sources of credit on favorable
terms, or at all, we could be forced to use assets otherwise available for our business operations, and our business, results of
operations, and financial condition could be adversely affected.
We may be required to post additional collateral because of changes in our reinsurance liabilities to regulated insurance
companies, or because of regulatory changes that affect our companies.
If our reinsurance liabilities increase, including in our property & casualty and variable annuity reinsurance businesses, we may
be required to post additional collateral for insurance company clients. In addition, regulatory changes sometimes affect our
obligations to post collateral. The need to post this additional collateral, if significant enough, may require us to sell investments
at a loss in order to provide securities of suitable credit quality or otherwise secure adequate capital at an unattractive cost. This
could adversely impact our net income and liquidity and capital resources.
U.S. and global economic and financial industry events and their consequences could harm our business, our liquidity and
financial condition, and our stock price.
The consequences of adverse global or regional market and economic conditions may affect (among other aspects of our
business) the demand for and claims made under our products, the ability of customers, counterparties, and others to establish
or maintain their relationships with us, our ability to access and efficiently use internal and external capital resources, the
availability of reinsurance protection, the risks we assume under reinsurance programs covering variable annuity guarantees,
and our investment performance. The increasing impact of climate change could affect our cost of claims, loss ratios, and
financial results. Volatility in the U.S. and other securities markets may adversely affect our stock price.
A decline in our financial strength ratings could affect our standing among distribution partners and customers and cause our
premiums and earnings to decrease. A decline in our debt ratings could increase our borrowing costs and impact our ability
to access capital markets.
Ratings are an important factor in establishing the competitive position of insurance and reinsurance companies. The objective
of these rating systems is to provide an opinion of an insurer's financial strength and ability to meet ongoing obligations to its
policyholders. A ratings downgrade could result in a substantial loss of business as insureds, ceding companies, and brokers
move to other insurers and reinsurers with higher ratings. If one or more of our debt ratings were downgraded, we could also
incur higher borrowing costs, and our ability to access the capital markets could be impacted. Additionally, we could be
required to post collateral or be faced with the cancellation of policies and resulting premium in certain circumstances. We
cannot give any assurance regarding whether or to what extent any of the rating agencies might downgrade our ratings in the
future.
Our ability to pay dividends and/or to make payments on indebtedness may be constrained by our holding company
structure.
Chubb Limited is a holding company that owns shares of its operating insurance and reinsurance subsidiaries along with several
loans receivable from affiliates. Beyond this it does not itself have any significant operations or liquid assets. Repayment of
loans receivable, guarantee fees and dividends and other permitted distributions from our insurance subsidiaries are its primary
sources of funds to meet ongoing cash requirements, including any future debt service payments, other expenses, repurchases
of its shares, and to pay dividends to our shareholders. Some of our insurance subsidiaries are subject to significant regulatory
restrictions limiting their ability to declare and pay dividends. The inability of our insurance subsidiaries to pay dividends (or
other intercompany amounts due, such as intercompany debt obligations) in an amount sufficient to enable us to meet our cash
requirements at the holding company level could have an adverse effect on our operations and our ability to repurchase shares
and pay dividends to our shareholders.
Swiss law imposes certain restrictions on our ability to repurchase our shares.
Swiss law imposes certain withholding tax and other restrictions on a Swiss company’s ability to return earnings or capital to its
shareholders, including through the repurchase of its own shares. We may only repurchase shares to the extent that sufficient
freely distributable reserves are available. In addition, Swiss law requires that the total par value of Chubb's acquisition of
treasury shares must not be in excess of 10 percent of its total share capital. As a result, in order to maintain our share
repurchase program, our shareholders must periodically authorize, through ballot item approval at our annual general meeting,
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a reduction in our share capital through the cancellation of designated blocks of repurchased shares held in treasury. If our
shareholders do not approve the cancellation of previously repurchased shares, we may be unable to return capital to
shareholders through share repurchases in the future. Furthermore, our current repurchase program relies on a Swiss tax ruling.
Any future revocation or loss of our Swiss tax ruling or the inability to conduct repurchases in accordance with the ruling could
also jeopardize our ability to continue repurchasing our shares.
Our operating results and shareholders' equity may be adversely affected by currency fluctuations.
Our reporting currency is the U.S. dollar. In general, we match assets and liabilities in local currencies. Where possible, capital
levels in local currencies are limited to satisfy minimum regulatory requirements and to support local insurance operations. The
principal currencies creating foreign exchange risk are the British pound sterling, the euro, the Mexican peso, the Brazilian real,
the Korean won, the Canadian dollar, the Japanese yen, the Thai baht, the Australian dollar, and the Hong Kong dollar. At
December 31, 2019, approximately 16.6 percent of our net assets were denominated in foreign currencies. We may experience
losses resulting from fluctuations in the values of non-U.S. currencies, which could adversely impact our results of operations
and financial condition.
Operational
The regulatory and political regimes under which we operate, and their volatility, could have an adverse effect on our
business.
We may from time to time face challenges resulting from changes in applicable law and regulations in particular jurisdictions, or
changes in approach to oversight of our business from insurance or other regulators.
Our insurance and reinsurance subsidiaries conduct business globally. Our businesses in each jurisdiction are subject to varying
degrees of regulation and supervision. The laws and regulations of the jurisdictions in which our insurance and reinsurance
subsidiaries are domiciled require, among other things, maintenance of minimum levels of statutory capital, surplus, and
liquidity; various solvency standards; and periodic examinations of subsidiaries' financial condition. In some jurisdictions, laws
and regulations also restrict payments of dividends and reductions of capital. Applicable statutes, regulations, and policies may
also restrict the ability of these subsidiaries to write insurance and reinsurance policies, to make certain investments, and to
distribute funds. The purpose of insurance laws and regulations generally is to protect policyholders and ceding insurance
companies, not our shareholders. For example, some jurisdictions have enacted various consumer protection laws that make it
more burdensome for insurance companies to sell policies and interact with customers in personal lines businesses. Failure to
comply with such regulations can lead to significant penalties and reputational injury.
The foreign and U.S. federal and state laws and regulations that are applicable to our operations are complex and may increase
the costs of regulatory compliance or subject our business to the possibility of regulatory actions or proceedings. Laws and
regulations not specifically related to the insurance industry include trade sanctions that relate to certain countries, anti-money
laundering laws, and anti-corruption laws. The insurance industry is also affected by political, judicial, and legal developments
that may create new and expanded regulations and theories of liability. The current economic and financial climates present
additional uncertainties and risks relating to increased regulation and the potential for increased involvement of the U.S. and
other governments in the financial services industry.
Regulators in countries where we have operations are working with the International Association of Insurance Supervisors (IAIS)
to consider changes to insurance company supervision, including with respect to group supervision and solvency requirements.
The IAIS has developed a Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame)
which is focused on the effective group-wide supervision of international active insurance groups (IAIGs), such as Chubb. As
part of ComFrame, the IAIS has announced plans to develop an international capital standard for insurance groups. The details
of ComFrame including this global capital standard and its applicability to Chubb are uncertain at this time. In addition, Chubb
businesses across the EU are subject to Solvency II, a capital and risk management regime and our Bermuda businesses are
subject to an equivalent of the EU's Solvency II regime. Also applicable to Chubb businesses are the requirements of the Swiss
Financial Market Supervisory Authority (FINMA) whose regulations include Swiss Solvency Tests. There are also Risk Based
Capital (RBC) requirements in the U.S. which are also subject to revision in response to global developments. While it is not
certain how or if these actions will impact Chubb, we do not currently expect that our capital management strategies, results of
operations and financial condition will be materially affected by these regulatory changes.
Evolving privacy and data security regulations could adversely affect our business.
We are subject to numerous U.S. federal and state laws and non-U.S. regulations governing the protection of personal and
confidential information of our clients and employees, including in relation to medical records, credit card data and financial
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information. These laws and regulations are increasing in complexity and number, change frequently, sometimes conflict, and
could expose Chubb to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one
or more jurisdictions.
We are subject to the New York Department of Financial Services’ Cybersecurity Regulation (the NYDFS Cybersecurity
Regulation) which mandates detailed cybersecurity standards for all institutions, including insurance entities, authorized by the
NYDFS to operate in New York. The NYDFS Cybersecurity Regulation has increased our compliance costs and could increase
the risk of noncompliance and subject us to regulatory enforcement actions and penalties, as well as reputation risk.
Additionally, in 2017, the National Association of Insurance Commissioners (NAIC) adopted an Insurance Data Security Model
Law, which requires licensed insurance entities to comply with detailed information security requirements. It is not yet known
whether or not, and to what extent, states legislatures or insurance regulators where we operate will enact the Insurance Data
Security Model Law in whole or in part, or in a modified form. Such enactments, especially if inconsistent between states or
with existing laws and regulations could raise compliance costs or increase the risk of noncompliance, with the attendant risk of
being subject to regulatory enforcement actions and penalties, as well as reputational harm.
The EU General Data Protection Regulation (the “GDPR”), which became effective in 2018, is a comprehensive regulation
applying across all EU member states. All our business units (regardless of whether they are located in the EU) may be subject
to the GDPR when personal data is processed in relation to the offer of goods and services to individuals within the EU. Our
failure to comply with GDPR and other countries’ privacy or data security-related laws, rules or regulations could result in
significant penalties imposed by regulators, which could have an adverse effect on our business, financial condition and results
of operations.
Significant other comprehensive privacy laws have been enacted by other jurisdictions, most notably the California Consumer
Privacy Act (CCPA) and Brazil’s Lei Geral de Protecao de Dados, which may affect our use of data and could affect our
operations and subject us to fines and actions for noncompliance. In the U.S., several other states are considering similar
legislation, and there are ongoing discussions regarding a National Privacy Law. New laws similar to the GDPR and the CCPA
are expected to be enacted in coming years in various countries and jurisdictions in which we operate.
Political uncertainty in the United Kingdom and the European Union may lead to volatility and/or have an adverse effect on
our business, our liquidity and financial condition, and our stock price.
On June 23, 2016, the United Kingdom (U.K.) voted in a national referendum to withdraw from the European Union (EU). On
March 29, 2017, the U.K. government gave notice to the EU, under Article 50(2) of the Treaty on EU, of the U.K.’s intention to
withdraw from the EU. The U.K. ratified the withdrawal agreement and ceased to be a Member State of the EU (Brexit) on
January 31, 2020.
We have significant operations in the U.K. and other EU member states that, operationally, have been affected by Brexit. In
anticipation of Brexit, we redomiciled the headquarters of our European carriers to France effective January 1, 2019. Paris is
the principal office for our Continental European operations. We have a significant investment there in both financial and human
resources, as well as a large portfolio of commercial and consumer insurance business throughout France. Following Brexit,
Chubb will continue to have a substantial presence in London, in addition to its offices and operations across the U.K. and the
EU.
Prior to Brexit, the rules governing the EU Single Market (which is made up of the 27 other EU member states and to some
extent, Iceland, Liechtenstein, and Norway (together, the European Economic Area or EEA)) permitted U.K. insurers (as well as
EEA insurers operating as passported branches in the U.K., such as our French companies Chubb European Group SE and ACE
Europe Life SE), to underwrite risks from the U.K. into EEA member states via a “passport” prior to Brexit.
The withdrawal agreement between the U.K. and the EU includes, following Brexit, a transition or implementation period to
avoid a "cliff edge" Brexit, meaning that the U.K. remains subject to, and has the benefit of, all EU legislation, including
passporting rights, until December 31, 2020. This period is intended to enable the EU and the U.K. to negotiate a trade
agreement for the post-Brexit relationship between the U.K. and the EU and can, pursuant to the withdrawal agreement, be
extended beyond the end of 2020 with the consent of both the U.K. and the EU. However, the U.K. government included a
section in the European Union (United Kingdom Withdrawal Agreement) Act 2020 that has made it illegal for the U.K.
Parliament to seek an extension of the transition or implementation period from the EU. To the extent, therefore, that it proves
impossible to negotiate a trade agreement between the U.K. and the EU by December 31, 2020, there remains a risk that a
"cliff edge" Brexit may nevertheless arise, including the benefits of passporting rights.
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Even if a free trade agreement is concluded between the U.K. and the EU prior to the end of the transition or implementation
period, such free trade agreement may not maintain the passporting rights of U.K. insurers, nor deem relevant U.K. regulations
to be equivalent to those of the EU. In the event that, following the end of the transition or implementation period, U.K. insurers
are unable to access the EU Single Market via a passporting arrangement, a regulatory equivalence regime or other similar
arrangement, such insurers may not be able to underwrite risks into EEA member states except through local branches
incorporated in the EEA. Such branches might require local authorization, regulatory and prudential supervision, and capital to
be deposited.
Our worldwide operations, particularly in developing nations, expose us to global geopolitical developments that could have
an adverse effect on our business, liquidity, results of operations, and financial condition.
With operations in 54 countries and territories, we provide insurance and reinsurance products and services to a diverse group
of clients worldwide, including operations in various developing nations. Both current and future foreign operations could be
adversely affected by unfavorable geopolitical developments including law changes; tax changes; changes in trade policies;
changes to visa or immigration policies; regulatory restrictions; government leadership changes; political events and upheaval;
sociopolitical instability; social, political or economic instability resulting from climate change; and nationalization of our
operations without compensation. Adverse activity in any one country could negatively impact operations, increase our loss
exposure under certain of our insurance products, and could, otherwise, have an adverse effect on our business, liquidity,
results of operations, and financial condition depending on the magnitude of the events and our net financial exposure at that
time in that country.
A failure in our operational systems or infrastructure or those of third parties, including due to security breaches or cyber-
attacks, could disrupt business, damage our reputation, and cause losses.
Our operations rely on the secure processing, storage, and transmission of confidential and other information and assets,
including in our computer systems and networks and those of third-party service providers. Our business depends on effective
information security and systems and the integrity and timeliness of the data our information systems use to run our business.
Our ability to adequately price products and services, to establish reserves, to provide effective, efficient and secure service to
our customers, to value our investments and to timely and accurately report our financial results also depends significantly on
the integrity and availability of the data we maintain, including that within our information systems, as well as data in and
assets held through third-party service providers and systems. Although we have implemented administrative and technical
controls and have taken protective actions to reduce the risk of cyber incidents and to protect our information technology and
assets, and although we additionally endeavor to modify such procedures as circumstances warrant and negotiate agreements
with third-party providers to protect our assets, such measures may be insufficient to prevent unauthorized access, computer
viruses, malware or other malicious code or cyber-attack, business compromise attacks, catastrophic events, system failures
and disruptions, employee errors or malfeasance, third party (including outsourced service providers) errors or malfeasance, loss
of assets and other events that could have security consequences (each, a Security Event). As the breadth and complexity of our
security infrastructure continues to grow, the potential risk of a Security Event increases. Such an event or events may
jeopardize Chubb's or its clients' or counterparties' confidential and other information processed and stored within Chubb, and
transmitted through its computer systems and networks, or otherwise cause interruptions, delays, or malfunctions in Chubb's,
its clients', its counterparties', or third parties' operations, or result in data loss or loss of assets which could result in significant
losses, reputational damage or an adverse effect on our operations and critical business functions. Chubb may be required to
expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other
exposures and to pursue recovery of lost data or assets and we may be subject to litigation and financial losses that are either
not insured against or not fully covered by insurance maintained.
Despite the contingency plans and facilities we have in place and our efforts to observe the regulatory requirements surrounding
information security, our ability to conduct business may be adversely affected by a disruption of the infrastructure that supports
our business in the communities in which we are located, or of outsourced services or functions. This may include a disruption
involving electrical, communications, transportation, or other services used by Chubb. If a disruption occurs in one location and
Chubb employees in that location are unable to occupy our offices and conduct business or communicate with or travel to other
locations, our ability to service and interact with clients may suffer and we may not be able to successfully implement
contingency plans that depend on communication or travel.
We use analytical models to assist our decision making in key areas such as underwriting, claims, reserving, and catastrophe
risks but actual results could differ materially from the model outputs and related analyses.
We use various modeling techniques (e.g., scenarios, predictive, stochastic and/or forecasting) and data analytics to analyze
and estimate exposures, loss trends and other risks associated with our assets and liabilities. We use the modeled outputs and
26
related analyses to assist us in decision-making (e.g., underwriting, pricing, claims, reserving, reinsurance, and catastrophe
risk) and to maintain competitive advantage. The modeled outputs and related analyses are subject to various assumptions,
uncertainties, model errors and the inherent limitations of any statistical analysis, including the use of historical internal and
industry data. In addition, the modeled outputs and related analyses may from time to time contain inaccuracies, perhaps in
material respects, including as a result of inaccurate inputs or applications thereof. Climate change may make modeled
outcomes less certain or produce new, non-modeled risks. Consequently, actual results may differ materially from our modeled
results. If, based upon these models or other factors, we misprice our products or underestimate the frequency and/or severity of
loss events, or overestimate the risks we are exposed to, new business growth and retention of our existing business may be
adversely affected which could have an adverse effect on our results of operations and financial condition.
We could be adversely affected by the loss of one or more key executives or by an inability to attract and retain qualified
personnel.
Our success depends on our ability to retain the services of our existing key executives and to attract and retain additional
qualified personnel in the future. The loss of the services of any of our key executives or the inability to hire and retain other
highly qualified personnel in the future could adversely affect our ability to conduct or grow our business. This risk may be
particularly acute for us relative to some of our competitors because some of our senior executives work in countries where they
are not citizens and work permit and immigration issues could adversely affect the ability to retain or hire key persons. We do
not maintain key person life insurance policies with respect to our employees.
Employee error and misconduct may be difficult to detect and prevent and could adversely affect our business, results of
operations, and financial condition.
Losses may result from, among other things, fraud, errors, failure to document transactions properly, failure to obtain proper
internal authorization, failure to comply with underwriting or other internal guidelines, or failure to comply with regulatory
requirements. It is not always possible to deter or prevent employee misconduct and the precautions that we take to prevent
and detect this activity may not be effective in all cases. Resultant losses could adversely affect our business, results of
operations, and financial condition.
Strategic
The continually changing landscape, including competition, technology and products, and existing and new market entrants
could reduce our margins and adversely impact our business and results of operations.
Insurance and reinsurance markets are highly competitive. We compete on an international and regional basis with major U.S.,
Bermuda, European, and other international insurers and reinsurers and with underwriting syndicates, some of which have
greater financial, technological, marketing, distribution and/or management resources than we do. In addition, capital market
participants have created alternative products that are intended to compete with reinsurance products. We also compete with
new companies and existing companies that move into the insurance and reinsurance markets. If competition, or technological
or other changes to the insurance markets in which we operate, limits our ability to retain existing business or write new
business at adequate rates or on appropriate terms, our business and results of operations could be materially and adversely
affected. Increased competition could also result in fewer submissions, lower premium rates, and less favorable policy terms
and conditions, which could reduce our profit margins and adversely impact our net income and shareholders' equity.
Recent technological advancements in the insurance industry and information technology industry present new and fast-
evolving competitive risks as participants seek to increase transaction speeds, lower costs and create new opportunities.
Advancements in technology are occurring in underwriting, claims, distribution and operations at a pace that may quicken,
including as companies increase use of data analytics and technology as part of their business strategy. We will be at a
competitive disadvantage if, over time, our competitors are more effective than us in their utilization of technology and evolving
data analytics. If we do not anticipate or keep pace with these technological and other changes impacting the insurance
industry, it could also limit our ability to compete in desired markets.
Insurance and reinsurance markets are historically cyclical, and we expect to experience periods with excess underwriting
capacity and unfavorable premium rates.
The insurance and reinsurance markets have historically been cyclical, characterized by periods of intense price competition due
to excessive underwriting capacity as well as periods when shortages of capacity permitted favorable premium levels. An
increase in premium levels is often offset by an increasing supply of insurance and reinsurance capacity, either by capital
provided by new entrants or by the commitment of additional capital by existing insurers or reinsurers, which may cause prices
to decrease. Any of these factors could lead to a significant reduction in premium rates, less favorable policy terms, and fewer
submissions for our underwriting services. In addition to these considerations, changes in the frequency and severity of losses
27
suffered by insureds and insurers may affect the cycles of the insurance and reinsurance markets significantly, as could periods
of economic weakness (such as recession).
The integration of acquired companies may not be as successful as we anticipate.
Acquisitions involve numerous operational, strategic, financial, accounting, legal, tax, and other risks; potential liabilities
associated with the acquired businesses; and uncertainties related to design, operation and integration of acquired businesses’
internal controls over financial reporting. Difficulties in integrating an acquired company, along with its personnel, may result in
the acquired company performing differently than we expected, in operational challenges or in our failure to realize anticipated
expense-related efficiencies. This may also apply to companies in which we acquire majority ownership. Our existing businesses
could also be negatively impacted by acquisitions. In addition, goodwill and intangible assets recorded in connection with
insurance company acquisitions may be impaired if premium growth, underwriting profitability, agency retention and policy
persistency, among other factors, differ from expectations.
There is also the potential that proposed acquisitions that have been publicly announced will not be consummated, even if a
definitive agreement has been signed by the parties. If an agreement is terminated before closing, the result would be that our
proposed acquisition would not occur, which could, among other things, expose us to damages or liability and adversely impact
our stock price and future operations.
We may be subject to U.S. tax and Bermuda tax which may have an adverse effect on our results of operations and
shareholder investment.
Chubb Limited and our non-U.S. subsidiaries operate in a manner so that none of these companies should be subject to U.S.
tax (other than U.S. excise tax on insurance and reinsurance premium income attributable to insuring or reinsuring U.S. risks
and U.S. withholding tax on some types of U.S. source investment income), because none of these companies should be
treated as engaged in a trade or business within the U.S. However, because there is considerable uncertainty as to the activities
that constitute being engaged in a trade or business within the U.S., we cannot be certain that the Internal Revenue Service
(IRS) will not contend successfully that Chubb Limited or its non-U.S. subsidiaries are engaged in a trade or business in the
U.S. If Chubb Limited or any of its non-U.S. subsidiaries were considered to be engaged in a trade or business in the U.S., such
entity could be subject to U.S. corporate income and branch profits taxes on the portion of its earnings effectively connected to
such U.S. business, in which case our results of operations and our shareholders' investments could be adversely affected.
The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended, has
given Chubb Limited and its Bermuda insurance subsidiaries a written assurance that if any legislation is enacted in Bermuda
that would impose tax computed on profits or income, or computed on any capital asset, gain, or appreciation, or any tax in the
nature of estate duty or inheritance tax, then the imposition of any such tax would not be applicable to those companies or any
of their respective operations, shares, debentures, or other obligations until March 31, 2035, except insofar as such tax would
apply to persons ordinarily resident in Bermuda or is payable by us in respect of real property owned or leased by us in
Bermuda. We cannot be certain that we will not be subject to any Bermuda tax after March 31, 2035.
We could be adversely affected by certain features of the 2017 U.S. tax reform legislation.
New tax legislation known as the Tax Cuts and Jobs Act (2017 Tax Act) was enacted in the U.S. on December 22, 2017. In
addition to reducing the U.S. corporate income tax rate from 35 percent to 21 percent, it fundamentally changed many
elements of the pre-2017 Tax Act U.S. tax law and introduced several new concepts to tax multinational corporations such as
us. Among the most notable new rules are the Base Erosion and Anti-Abuse Tax (commonly called BEAT), which may apply as
a result of payments by U.S. taxpayers to non-U.S. affiliates, and the Global Intangible Low Taxed Income (GILTI) addition to
Subpart F income, which for insurance groups potentially expands U.S. taxation on the earnings of foreign subsidiaries. The
2017 Tax Act also included a one-time reduced-rate transition tax in 2017 on previously untaxed post-1986 earnings of foreign
subsidiaries of U.S. corporations. The 2017 Tax Act, which was generally effective in 2018, is a complex law with many
significant new provisions. During 2018 and 2019, the IRS and U.S. Treasury Department issued notices, proposed, and final
regulations to assist taxpayers in understanding and implementing the new provisions. There may be changes between this
guidance and final regulations to be issued in 2020. Thus, there are many uncertainties relating to its ultimate application and
effects on our company.
The Organization for Economic Cooperation and Development (OECD) and the European Union (EU) are considering
measures that might change long standing tax principles that could increase our taxes.
The OECD has published a framework for taxation that in many respects is different than long standing international tax
principles. This framework is a proposal that we expect to develop further in 2020 as it is designed by the OECD Secretariat.
This framework is an alternative to digital services taxes that several countries have enacted or are considering. These changes
could redefine what income is taxed in which country and institute a global minimum tax. These proposals may be completed
28
by the end of 2020 which could be adopted by OECD countries in 2021 or later years. As countries unilaterally amend their tax
laws to adopt certain parts of the OECD framework, this may increase the company’s income taxes and cause uncertainties
related to our income taxes.
The OECD has also published an action plan to address base erosion and profit shifting (BEPS) impacting its member countries
and other jurisdictions. It is possible that jurisdictions in which we do business could continue to react to the BEPS initiative or
their own concerns by enacting tax legislation that could adversely affect us or our shareholders.
Several multilateral organizations, including the EU and the OECD have, in recent years, expressed concern about some
countries not participating in adequate tax information exchange arrangements and have threatened those that do not agree to
cooperate with punitive sanctions by member countries. It is still unclear what all these sanctions might be, which countries
might adopt them, and when or if they might be imposed. We cannot assure, however, that the Tax Information Exchange
Agreements (TIEAs) that have been entered into by Switzerland and Bermuda will be sufficient to preclude all of the sanctions
described above, which, if ultimately adopted, could adversely affect us or our shareholders.
Shareholders
There are provisions in our charter documents that may reduce the voting rights and diminish the value of our Common
Shares.
Our Articles of Association generally provide that shareholders have one vote for each Common Share held by them and are
entitled to vote at all meetings of shareholders. However, the voting rights exercisable by a shareholder may be limited so that
certain persons or groups are not deemed to hold 10 percent or more of the voting power conferred by our Common Shares.
Moreover, these provisions could have the effect of reducing the voting power of some shareholders who would not otherwise be
subject to the limitation by virtue of their direct share ownership. The Board of Directors may refuse to register holders of shares
as shareholders with voting rights based on certain grounds, including if the holder would, directly or indirectly, formally,
constructively or beneficially own (as described in Articles 8 and 14 of our Articles of Association) or otherwise control voting
rights with respect to 10 percent or more of the registered share capital recorded in the commercial register. In addition, the
Board of Directors shall reject entry of holders of registered shares as shareholders with voting rights in the share register or
shall decide on their deregistration when the acquirer or shareholder upon request does not expressly state that she/he has
acquired or holds the shares in her/his own name and for her/his account.
Applicable laws may make it difficult to effect a change of control of our company.
Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance
commissioner of the state where the domestic insurer is domiciled. Prior to granting approval of an application to acquire
control of a domestic insurer, the state insurance commissioner will consider such factors as the financial strength of the
applicant, the integrity and management of the applicant's Board of Directors and executive officers, the acquirer's plans for the
future operations of the domestic insurer, and any anti-competitive results that may arise from the consummation of the
acquisition of control. Generally, state statutes provide that control over a domestic insurer is presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10 percent or more of the
voting securities of the domestic insurer. Because a person acquiring 10 percent or more of our Common Shares would
indirectly control the same percentage of the stock of our U.S. insurance subsidiaries, the insurance change of control laws of
various U.S. jurisdictions would likely apply to such a transaction. Laws of other jurisdictions in which one or more of our
existing subsidiaries are, or a future subsidiary may be, organized or domiciled may contain similar restrictions on the
acquisition of control of Chubb.
While our Articles of Association limit the voting power of any shareholder to less than 10 percent, we cannot assure that the
applicable regulatory body would agree that a shareholder who owned 10 percent or more of our Common Shares did not,
because of the limitation on the voting power of such shares, control the applicable insurance subsidiary.
These laws may discourage potential acquisition proposals and may delay, deter, or prevent a change of control of Chubb,
including transactions that some or all of our shareholders might consider to be desirable.
Shareholder voting requirements under Swiss law may limit our flexibility with respect to certain aspects of capital
management.
Swiss law allows our shareholders to authorize share capital which can be issued by the Board of Directors without shareholder
approval but this authorization must be renewed by the shareholders every two years. Swiss law also does not provide as much
flexibility in the various terms that can attach to different classes of stock as permitted in other jurisdictions. Swiss law also
reserves for approval by shareholders many corporate actions over which the Board of Directors had authority prior to our re-
29
domestication to Switzerland. For example, dividends must be approved by shareholders. While we do not believe that Swiss
law requirements relating to our capital management will have an adverse effect on Chubb, we cannot assure that situations
will not arise where such flexibility would have provided substantial benefits to our shareholders.
Chubb Limited is a Swiss company; it may be difficult to enforce judgments against it or its directors and executive officers.
Chubb Limited is incorporated pursuant to the laws of Switzerland. In addition, certain of our directors and officers reside
outside the U.S. and all or a substantial portion of our assets and the assets of such persons are located in jurisdictions outside
the U.S. As such, it may be difficult or impossible to effect service of process within the U.S. upon those persons or to recover
against us or them on judgments of U.S. courts, including judgments predicated upon civil liability provisions of the U.S. federal
securities laws.
Chubb has been advised by its Swiss counsel that there is doubt as to whether the courts in Switzerland would enforce:
•
judgments of U.S. courts based upon the civil liability provisions of the U.S. federal securities laws obtained in actions
against it or its directors and officers, who reside outside the U.S.; or
• original actions brought in Switzerland against these persons or Chubb predicated solely upon U.S. federal securities laws.
Chubb has also been advised by its Swiss counsel that there is no treaty in effect between the U.S. and Switzerland providing
for this enforcement and there are grounds upon which Swiss courts may not enforce judgments of U.S. courts. Some remedies
available under the laws of U.S. jurisdictions, including some remedies available under the U.S. federal securities laws, would
not be allowed in Swiss courts as contrary to that nation's public policy.
Shareholders may be subject to Swiss withholding taxes on the payment of dividends.
Our dividends are generally subject to a Swiss withholding tax at a rate of 35 percent; however, payment of a dividend in the
form of a par value reduction or qualifying capital contribution reserve reduction is not subject to Swiss withholding tax. We
have previously obtained shareholder approval for dividends to be paid in such form. We currently intend to recommend to
shareholders that they annually approve the payment of dividends in such form but we cannot assure that our shareholders will
continue to approve a reduction in such form each year or that we will be able to meet the other legal requirements for a
reduction in par value, or that Swiss withholding tax rules will not be changed in the future. We estimate we would be able to
pay dividends in such form, and thus exempt from Swiss withholding tax until 2028–2033. This range may vary depending
upon changes in annual dividends, special dividends, certain share repurchases, fluctuations in U.S. dollar/Swiss franc
exchange rate, changes in par value or qualifying capital contribution reserves or changes or new interpretations to Swiss
corporate or tax law or regulations.
Under certain circumstances, U.S. shareholders may be subject to adverse U.S. federal income tax consequences.
Under certain circumstances, a U.S. person who owns or is deemed to own 10 percent or more of the voting power or value of
a foreign corporation that is a “controlled foreign corporation” (CFC) (a foreign corporation in which 10 percent U.S.
shareholders own or are deemed to own more than 50 percent of the voting power or value of the stock of a foreign corporation
or more than 25 percent of certain foreign insurance corporations) for any period during a taxable year must include in gross
income for U.S. federal income tax purposes a pro rata share of the CFC's "subpart F income". We believe that because of the
dispersion of our share ownership it is unlikely that any U.S. person who acquires shares of Chubb Limited directly or indirectly
through one or more foreign entities should be required to include any subpart F income in income under the CFC rules of U.S.
tax law.
Separately, any U.S. persons who hold shares may be subject to U.S. federal income taxation at ordinary income tax rates on
their proportionate share of our Related Person Insurance Income (RPII). If the RPII of any of our non-U.S. insurance
subsidiaries (each a "Non-U.S. Insurance Subsidiary") were to equal or exceed 20 percent of that company's gross insurance
income in any taxable year and direct or indirect insureds (and persons related to those insureds) own directly or indirectly
through foreign entities 20 percent or more of the voting power or value of Chubb Limited, then a U.S. person who owns any
shares of Chubb Limited (directly or indirectly through foreign entities) on the last day of the taxable year would be required to
include in his or her income for U.S. federal income tax purposes such person's pro rata share of such company's RPII for the
taxable year. In addition, any RPII that is includible in the income of a U.S. tax-exempt organization may be treated as
unrelated business taxable income. We believe that the gross RPII of each Non-U.S. Insurance Subsidiary did not in prior years
of operation and is not expected in the foreseeable future to equal or exceed 20 percent of each such company's gross insurance
income. Likewise, we do not expect the direct or indirect insureds of each Non-U.S. Insurance Subsidiary (and persons related
to such insureds) to directly or indirectly own 20 percent or more of either the voting power or value of our shares. However, we
cannot be certain that this will be the case because some of the factors which determine the extent of RPII may be beyond our
control. If these thresholds are met or exceeded, any U.S. person’s investment in Chubb Limited could be adversely affected.
30
A U.S. tax-exempt organization may recognize unrelated business taxable income if a portion of our insurance income is
allocated to the organization. This generally would be the case if either (i) Chubb Limited is considered a CFC and the tax-
exempt shareholder is a 10 percent U.S. shareholder or (ii) there is RPII, certain exceptions do not apply, and the tax-exempt
organization, directly (or indirectly through foreign entities) owns any shares of Chubb Limited. Although we do not believe that
any U.S. tax-exempt organization should be allocated such insurance income, we cannot be certain that this will be the case.
Potential U.S. tax-exempt investors are advised to consult their tax advisors.
U.S. persons who hold shares will be subject to adverse tax consequences if we are considered to be a Passive Foreign
Investment Company (PFIC) for U.S. federal income tax purposes.
If Chubb Limited is considered a PFIC for U.S. federal income tax purposes, a U.S. person who holds Chubb Limited shares will
be subject to adverse U.S. federal income tax consequences in which case their investment could be adversely affected. In
addition, if Chubb Limited were considered a PFIC, upon the death of any U.S. individual owning shares, such individual's heirs
or estate would not be entitled to a "step-up" in the basis of the shares which might otherwise be available under U.S. federal
income tax laws. We believe that we are not, have not been, and currently do not expect to become, a PFIC for U.S. federal
income tax purposes. We cannot assure, however, that we will not be deemed a PFIC by the IRS. Recently enacted U.S. federal
tax law and recently proposed regulations issued by the IRS and U.S. Treasury Department contain new rules that may affect
the application of the PFIC provisions to an insurance company. Final regulations or pronouncements interpreting or clarifying
these rules may be forthcoming. We cannot predict what impact, if any, such guidance would have on an investor that is
subject to U.S. federal income taxation. Any shareholder electing to apply the newly proposed PFIC regulations could be
adversely affected by an investment in us. Shareholders are advised to consult their tax advisors.
ITEM 1B. Unresolved Staff Comments
There are currently no unresolved SEC staff comments regarding our periodic or current reports.
ITEM 2. Properties
We maintain office facilities around the world including in North America, Europe (including our principal executive offices in
Switzerland), Bermuda, Latin America, Asia Pacific, and the Far East. Most of our office facilities are leased, although we own
major facilities in Hamilton, Bermuda, and in the U.S., including in Philadelphia, Pennsylvania; Wilmington, Delaware;
Whitehouse Station, New Jersey; and Simsbury, Connecticut. Management considers its office facilities suitable and adequate
for the current level of operations.
ITEM 3. Legal Proceedings
The information required with respect to Item 3 is included in Note 10 h) to the Consolidated Financial Statements, which is
hereby incorporated herein by reference.
ITEM 4. Mine Safety Disclosures
Item not applicable.
31
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Common Shares have been listed on the New York Stock Exchange since March 25, 1993, with a current par value of CHF
24.15 per share. The trading symbol for our Common Shares is "CB."
We have paid dividends each quarter since we became a public company in 1993. In 2019 and 2018, our annual dividends
were paid by way of a distribution from capital contribution reserves (Additional paid-in capital) through the transfer of
dividends from Additional paid-in capital to Retained earnings (free reserves) as approved by our shareholders.
Chubb Limited is a holding company whose principal sources of income are dividends and investment income from its operating
subsidiaries. The ability of the operating subsidiaries to pay dividends to us and our ability to pay dividends to our shareholders
are each subject to legal and regulatory restrictions. The recommendation and payment of future dividends will be based on the
determination of the Board of Directors (Board) and will be dependent upon shareholder approval, profits and financial
requirements of Chubb and other factors, including legal restrictions on the payment of dividends and other such factors as the
Board deems relevant. Refer to Part I, Item 1A and Part II, Item 7 for additional information.
The number of record holders of Common Shares as of February 13, 2020 was 6,902. This is not the actual number of
beneficial owners of Chubb's Common Shares since most of our shareholders hold their shares through a stockbroker, bank or
other nominee rather than directly in their own names.
Refer to Part III, Item 12 for information relating to compensation plans under which equity securities are authorized for
issuance.
Issuer's Repurchases of Equity Securities for the Three Months Ended December 31, 2019
Period
October 1 through October 31
November 1 through November 30
December 1 through December 31
Total
Total Number of
Shares Purchased (1)
Average Price
Paid per Share
703,138
677,640
654,352
2,035,130
$
$
$
$
153.65
151.41
153.84
152.97
Approximate Dollar
Value of Shares that
May Yet be
Purchased Under
Publicly Announced
Plans (3)
151 million
$
$
$
1.55 billion
1.45 billion
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans (2)
700,900
670,000
653,500
2,024,400
This represents open market share repurchases and the surrender to Chubb of Common Shares to satisfy tax withholding obligations in connection with the vesting of
restricted stock issued to employees and the exercise of options by employees.
The aggregate value of shares purchased in the three months ended December 31, 2019 as part of the publicly announced plans was $310 million.
Refer to Note 11 to the Consolidated Financial Statements for more information on the Chubb Limited securities repurchase authorizations. In November 2019, the Board
authorized the repurchase of up to $1.5 billion of Chubb's Common Shares from November 21, 2019 through December 31, 2020. The $1.5 billion December 2018
Board authorization remained effective through December 31, 2019, and was used in advance of the $1.5 billion share repurchase authorized in November 2019. For the
period January 1, 2020 through February 26, 2020, we repurchased 947,400 Common Shares for a total of $151 million in a series of open market transactions. As of
February 26, 2020, $1.30 billion in share repurchase authorization remained through December 31, 2020.
(1)
(2)
(3)
32
Performance Graph
Set forth below is a line graph comparing the dollar change in the cumulative total shareholder return on Chubb's Common
Shares from December 31, 2014, through December 31, 2019, as compared to the cumulative total return of the Standard &
Poor's 500 Stock Index and the cumulative total return of the Standard & Poor's Property-Casualty Insurance Index. The
cumulative total shareholder return is a concept used to compare the performance of a company's stock over time and is the
ratio of the stock price change plus the cumulative amount of dividends over the specified time period (assuming dividend
reinvestment), to the stock price at the beginning of the time period. The chart depicts the value on December 31, 2015,
2016, 2017, 2018, and 2019, of a $100 investment made on December 31, 2014, with all dividends reinvested.
Chubb Limited
S&P 500 Index
S&P 500 P&C Index
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
$100
$100
$100
$104
$101
$110
$120
$114
$127
$136
$138
$155
$123
$132
$148
$151
$174
$186
33
ITEM 6. Selected Financial Data
On January 14, 2016, we completed the acquisition of The Chubb Corporation (Chubb Corp). The results of operations of
Chubb Corp are included in our results from the acquisition date forward (i.e., after January 14, 2016 and only in the 2016,
2017, 2018 and 2019 columns) within the table below.
(in millions of U.S. dollars, except per share data and ratios)
2019
2018
2017
2016
2015
Operations data:
Net premiums earned – excluding Life Insurance segment
$ 28,947
$ 27,846
$ 26,933
$ 26,694
$ 15,266
Net premiums earned – Life Insurance segment
Total net premiums earned
Net investment income
Losses and loss expenses
Policy benefits
Policy acquisition costs and administrative expenses
Net income
Weighted-average shares outstanding – diluted
Diluted earnings per share
Balance sheet data (at end of period):
Total investments
Total assets
Net unpaid losses and loss expenses
Net future policy benefits
Long-term debt
Trust preferred securities
Total liabilities
Shareholders' equity
Book value per share
Selected data:
Loss and loss expense ratio (1)
Underwriting and administrative expense ratio (2)
Combined ratio (3)
Cash dividends per share
2,343
31,290
3,426
18,730
740
9,183
4,454
459
2,218
30,064
3,305
18,067
590
8,798
3,962
467
2,101
29,034
3,125
18,454
676
8,614
3,861
471
2,055
28,749
2,865
16,052
588
8,985
4,135
466
$
9.71
$
8.49
$
8.19
$
8.87
$
1,947
17,213
2,194
9,484
543
5,211
2,834
329
8.62
$ 109,234
$ 100,968
$ 102,444
$ 99,094
$ 66,251
176,943
167,771
167,022
159,786
102,306
48,509
5,617
13,559
308
48,271
5,304
12,087
308
49,165
5,137
11,556
308
47,832
4,854
12,610
308
121,612
117,459
115,850
111,511
55,331
50,312
51,172
48,275
26,562
4,620
9,389
307
73,171
29,135
$ 122.42
$ 109.56
$ 110.32
$ 103.60
$
89.77
62.1%
28.5%
90.6%
62.1%
28.5%
90.6%
65.8%
28.9%
94.7%
57.7%
30.6%
88.3%
58.1%
29.2%
87.3%
$
2.98
$
2.90
$
2.82
$
2.74
$
2.66
The Loss and loss expense ratio is calculated by dividing losses and loss expenses, excluding the Life Insurance segment, by Net premiums earned – excluding Life
Insurance segment. Losses and loss expenses for the Life Insurance segment were $757 million, $766 million, $739 million, $663 million, and $601 million for the years
ended December 31, 2019, 2018, 2017, 2016, and 2015, respectively.
The Underwriting and administrative expense ratio is calculated by dividing the policy acquisition costs and administrative expenses, excluding the Life Insurance segment,
by Net premiums earned – excluding Life Insurance segment. Policy acquisition costs and administrative expenses for the Life Insurance segment were $943 million, $867
million, $833 million, $816 million, and $767 million for the years ended December 31, 2019, 2018, 2017, 2016, and 2015, respectively.
The combined ratio is the sum of Loss and loss expense ratio and the Underwriting and administrative expense ratio.
(1)
(2)
(3)
34
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for
the year ended December 31, 2019. This discussion should be read in conjunction with the consolidated financial
statements and related Notes, under Item 8 of this Form 10-K.
All comparisons in this discussion are to the corresponding prior year unless otherwise indicated. All dollar amounts are
rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded
dollars may differ.
MD&A Index
Forward-Looking Statements
Overview
Financial Highlights
Critical Accounting Estimates
Consolidated Operating Results
Segment Operating Results
Net Investment Income
Interest Expense
Net Realized and Unrealized Gains (Losses)
Amortization of Purchased Intangibles and Other Amortization
Investments
Asbestos and Environmental (A&E)
Catastrophe Management
Natural Catastrophe Property Reinsurance Program
Political Risk and Credit Insurance
Crop Insurance
Liquidity
Capital Resources
Contractual Obligations and Commitments
Credit Facilities
Ratings
Page
36
38
38
39
50
57
74
74
75
76
77
80
81
81
82
83
84
86
88
89
90
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Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Any written or
oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect
to future events and financial performance. These forward-looking statements are subject to certain risks, uncertainties, and
other factors that could, should potential events occur, cause actual results to differ materially from such statements. These
risks, uncertainties, and other factors, which are described in more detail under Part I, Item 1A, under Risk Factors, starting on
page 19 and elsewhere herein and in other documents we file with the U.S. Securities and Exchange Commission (SEC),
include but are not limited to:
•
losses arising out of natural or man-made catastrophes such as hurricanes, typhoons, earthquakes, floods, climate change
(including effects on weather patterns; greenhouse gases; sea, land and air temperatures; sea levels; and rain and snow),
nuclear accidents, or terrorism which could be affected by:
•
•
•
•
•
the number of insureds and ceding companies affected;
the amount and timing of losses actually incurred and reported by insureds;
the impact of these losses on our reinsurers and the amount and timing of reinsurance recoverable actually received;
the cost of building materials and labor to reconstruct properties or to perform environmental remediation following a
catastrophic event; and
complex coverage and regulatory issues such as whether losses occurred from storm surge or flooding and related
lawsuits;
• actions that rating agencies may take from time to time, such as financial strength or credit ratings downgrades or placing
these ratings on credit watch negative or the equivalent;
•
the ability to collect reinsurance recoverable, credit developments of reinsurers, and any delays with respect thereto and
changes in the cost, quality, or availability of reinsurance;
• actual loss experience from insured or reinsured events and the timing of claim payments;
•
•
the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing
environmental damage and asbestos-related latent injuries, the impact of aggregate-policy-coverage limits, the impact of
bankruptcy protection sought by various asbestos producers and other related businesses, and the timing of loss payments;
changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell,
available for sale fixed maturity investments before their anticipated recovery;
•
infection rates and severity of pandemics and their effects on our business operations and claims activity;
• developments in global financial markets, including changes in interest rates, stock markets, and other financial markets,
increased government involvement or intervention in the financial services industry, the cost and availability of financing,
and foreign currency exchange rate fluctuations (which we refer to in this report as foreign exchange and foreign currency
exchange), which could affect our statement of operations, investment portfolio, financial condition, and financing plans;
• general economic and business conditions resulting from volatility in the stock and credit markets and the depth and
duration of potential recession;
• global political conditions, the occurrence of any terrorist attacks, including any nuclear, radiological, biological, or chemical
events, or the outbreak and effects of war, and possible business disruption or economic contraction that may result from
such events;
•
the potential impact of the United Kingdom’s vote to withdraw from the European Union, including political, regulatory,
social, and economic uncertainty and market and exchange rate volatility;
•
judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms;
36
•
the effects of public company bankruptcies and/or accounting restatements, as well as disclosures by and investigations of
public companies relating to possible accounting irregularities, and other corporate governance issues, including the effects
of such events on:
•
•
•
the capital markets;
the markets for directors and officers (D&O) and errors and omissions (E&O) insurance; and
claims and litigation arising out of such disclosures or practices by other companies;
• uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and
treaties, which, among other things, could subject us to insurance regulation or taxation in additional jurisdictions or affect
our current operations;
•
•
•
the effects of data privacy or cyber laws or regulation on our current or future business;
the actual amount of new and renewal business, market acceptance of our products, and risks associated with the
introduction of new products and services and entering new markets, including regulatory constraints on exit strategies;
the competitive environment in which we operate, including trends in pricing or in policy terms and conditions, which may
differ from our projections and changes in market conditions that could render our business strategies ineffective or
obsolete;
• acquisitions made by us performing differently than expected, our failure to realize anticipated expense-related efficiencies
or growth from acquisitions, the impact of acquisitions on our pre-existing organization, or announced acquisitions not
closing;
•
•
•
•
•
•
risks and uncertainties relating to our planned purchases of additional interests in Huatai Insurance Group Company
Limited (Huatai Group), including our ability to receive Chinese insurance regulatory approval and complete the purchases;
risks associated with being a Swiss corporation, including reduced flexibility with respect to certain aspects of capital
management and the potential for additional regulatory burdens;
the potential impact from government-mandated insurance coverage for acts of terrorism;
the availability of borrowings and letters of credit under our credit facilities;
the adequacy of collateral supporting funded high deductible programs;
changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers;
• material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;
•
•
•
•
•
•
the effects of investigations into market practices in the property and casualty (P&C) industry;
changing rates of inflation and other economic conditions, for example, recession;
the amount of dividends received from subsidiaries;
loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time
frame;
the ability of our technology resources, including information systems and security, to perform as anticipated such as with
respect to preventing material information technology failures or third-party infiltrations or hacking resulting in
consequences adverse to Chubb or its customers or partners;
the ability of our company to increase use of data analytics and technology as part of our business strategy and adapt to
new technologies; and
• management’s response to these factors and actual events (including, but not limited to, those described above).
The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,” “intend,” “hope,” “feel,” “foresee,” “will
likely result,” or “will continue,” and variations thereof and similar expressions, identify forward-looking statements. You are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We
undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information,
future events or otherwise.
37
Overview
We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance,
North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more
information on our segments refer to “Segment Information” under Item 1.
We have grown our business through increased premium volume, expansion of product offerings and geographic reach, and
acquisitions of other companies.
Our product and geographic diversification differentiates us from the vast majority of our competitors and has been a source of
stability during periods of industry volatility. Our long-term business strategy focuses on sustained growth in book value
achieved through a combination of underwriting and investment income. By doing so, we provide value to our clients and
shareholders through use of our substantial capital base in the insurance and reinsurance markets.
We are organized along a profit center structure by line of business and territory that does not necessarily correspond to
corporate legal entities. Profit centers can access various legal entities subject to licensing and other regulatory rules. Profit
centers are expected to generate underwriting income and appropriate risk-adjusted returns. Our corporate structure has
facilitated the development of management talent by giving each profit center's senior management team the necessary
autonomy within underwriting authorities to make operating decisions and create products and coverages needed by its target
customer base. We are focused on delivering underwriting profit by only writing policies which we believe adequately
compensate us for the risk we accept.
Our insurance and reinsurance operations generate gross revenues from two principal sources: premiums and investment
income. Cash flow is generated from premiums collected and investment income received less paid losses and loss expenses,
policy acquisition costs, and administrative expenses. Invested assets are substantially held in liquid, investment grade fixed
income securities of relatively short duration. Claims payments in any short-term period are highly unpredictable due to the
random nature of loss events and the timing of claims awards or settlements. The value of investments held to pay future
claims is subject to market forces such as the level of interest rates, stock market volatility, and credit events such as corporate
defaults. The actual cost of claims is also volatile based on loss trends, inflation rates, court awards, and catastrophes. We
believe that our cash balance, our highly liquid investments, credit facilities, and reinsurance protection provide sufficient
liquidity to meet unforeseen claim demands that might occur in the year ahead. Refer to “Liquidity” and “Capital Resources” for
additional information.
Financial Highlights for the Year Ended December 31, 2019
• Net income was $4,454 million compared with $3,962 million in 2018.
• Net premiums written were $32.3 billion, up 5.5 percent, or 7.0 percent on a constant-dollar basis.
• The North America Agricultural Insurance segment combined ratio was 95.1 percent compared with 75.5 percent in
2018, or a decline of $296 million in underwriting income, principally due to the downward revision in the 2019 crop
year margin estimate reflecting preventive planting claims due to the impact of wet weather conditions and crop yield
shortfalls resulting from poor growing conditions.
• P&C combined ratio was 90.6 percent in both 2019 and 2018. P&C current accident year combined ratio excluding
catastrophe losses was 89.2 percent compared with 88.0 percent in 2018, reflecting the increase in the North America
Agricultural Insurance segment combined ratio noted above.
• Total pre-tax and after-tax catastrophe losses, including reinstatement premiums, were $1,187 million (4.1 percentage
points of the combined ratio) and $966 million, respectively, compared with $1,626 million (5.9 percentage points of
the combined ratio) and $1,354 million, respectively, in 2018. Refer to the Consolidated Operating Results section for
additional information on our catastrophe losses.
• Total pre-tax and after-tax favorable prior period development were $792 million (2.7 percentage points of the combined
ratio) and $624 million, respectively, compared with $896 million (3.3 percentage points of the combined ratio) and
$706 million, respectively, in 2018. Pre-tax favorable prior period development in 2018 included favorable reinsurance
settlements of $205 million related to legacy run-off exposures.
38
• Operating cash flow was $6,342 million compared with $5,480 million in 2018, an increase of $862 million
primarily due to higher underwriting cash flow. Refer to the Liquidity section for additional information on our cash
flows.
• Net investment income was $3,426 million compared with $3,305 million in 2018.
• Share repurchases totaled $1,531 million, or approximately 10.4 million shares for the year, at an average purchase
price of $146.61 per share.
Outlook
We completed 2019 with net premiums written growth of 5.5 percent, or 7.0 percent on a constant-dollar basis. Premium
growth accelerated globally with the current pricing and underwriting environment, which has continued to improve in more
lines of business and more territories. We plan to use our global presence to capitalize on these market conditions in the year
ahead, while continuing to focus on our long-term strategic growth initiatives.
Our net investment income increased 3.6 percent in 2019, reflecting strong operating cash flow and a higher invested asset
base. There are several factors that impact the variability in investment income, including interest rates and private equity
distributions. Nevertheless, we expect our quarterly pre-tax net investment income in 2020 to be in the range of $852 million
to $862 million, including the expected amortization of the fair value adjustment on acquired invested assets, at current
exchange rates, of approximately $33 million per quarter. Excluding the amortization of the fair value adjustment on acquired
invested assets, we expect quarterly pre-tax adjusted net investment income in 2020 to be in the range of $885 million to
$895 million. The estimate of amortization expense of the fair value adjustment on acquired invested assets could vary
materially based on current market conditions, bond calls, overall duration of the acquired investment portfolio, and foreign
exchange.
During 2019, Chubb increased its ownership interest in Huatai Group and is committed to acquire additional interests with
the goal of majority and beyond ownership. To that end, Chubb entered into agreements to purchase an additional 22.4
percent ownership in Huatai Group through separate purchases of 15.3 percent and 7.1 percent, respectively, each
contingent upon regulatory approvals and other important conditions. At the completion of the 7.1 percent purchase, which is
expected by the end of 2021, Chubb is expected to apply consolidation accounting.
Critical Accounting Estimates
Our consolidated financial statements include amounts that, either by their nature or due to requirements of generally accepted
accounting principles in the U.S. (GAAP), are determined using best estimates and assumptions. While we believe that the
amounts included in our consolidated financial statements reflect our best judgment, actual amounts could ultimately materially
differ from those currently presented. We believe the items that require the most subjective and complex estimates are:
• unpaid loss and loss expense reserves, including long-tail asbestos and environmental (A&E) reserves and non-A&E casualty
exposures;
future policy benefits reserves;
the valuation of value of business acquired (VOBA) and amortization of deferred policy acquisition costs and VOBA;
the assessment of risk transfer for certain structured insurance and reinsurance contracts;
reinsurance recoverable, including a provision for uncollectible reinsurance;
the valuation of our investment portfolio and assessment of other-than-temporary impairments (OTTI);
the valuation of deferred income taxes;
the valuation of derivative instruments related to guaranteed living benefits (GLB); and
the assessment of goodwill for impairment.
•
•
•
•
•
•
•
•
We believe our accounting policies for these items are of critical importance to our consolidated financial statements. The
following discussion provides more information regarding the estimates and assumptions required to arrive at these amounts
and should be read in conjunction with the sections entitled: Prior Period Development, Asbestos and Environmental (A&E),
Reinsurance Recoverable on Ceded Reinsurance, Investments, Net Realized and Unrealized Gains (Losses), and Other Income
and Expense Items.
39
Unpaid losses and loss expenses
As an insurance and reinsurance company, we are required by applicable laws and regulations and GAAP to establish loss and
loss expense reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of
our policies and agreements with our insured and reinsured customers. At December 31, 2019, our gross unpaid loss and loss
expense reserves were $62.7 billion and our net unpaid loss and loss expense reserves were $48.5 billion. With the exception
of certain structured settlements, for which the timing and amount of future claim payments are reliably determinable, and
certain reserves for unsettled claims, our loss reserves are not discounted for the time value of money. In connection with such
structured settlements and certain reserves for unsettled claims, we carried net discounted reserves of $74 million and $73
million at December 31, 2019 and 2018, respectively.
The following table presents a roll-forward of our unpaid losses and loss expenses:
(in millions of U.S. dollars)
Balance, beginning of year
Losses and loss expenses incurred
Losses and loss expenses paid
Other (including foreign exchange translation)
Balance, end of year
(1)
Net of provision for uncollectible reinsurance.
December 31, 2019
December 31, 2018
Gross
Losses
Reinsurance
Recoverable(1) Net Losses
Gross
Losses
Reinsurance
Recoverable(1) Net Losses
$
62,960 $
14,689 $ 48,271 $
63,179 $
14,014 $ 49,165
23,657
(23,911)
(16)
4,927
18,730
23,645
5,578
18,067
(5,438)
(18,473)
(23,079)
(4,739)
(18,340)
3
(19)
(785)
(164)
(621)
$
62,690 $
14,181 $ 48,509 $
62,960 $
14,689 $ 48,271
The estimate of the liabilities includes provisions for claims that have been reported but are unpaid at the balance sheet date
(case reserves) and for obligations on claims that have been incurred but not reported (IBNR) at the balance sheet date. IBNR
may also include provisions to account for the possibility that reported claims may settle for amounts that differ from the
established case reserves. Loss reserves also include an estimate of expenses associated with processing and settling unpaid
claims (loss expenses). Our loss reserves comprise approximately 80 percent casualty-related business, which typically
encompasses long-tail risks, and other risks where a high degree of judgment is required.
The process of establishing loss reserves for property and casualty claims can be complex and is subject to considerable
uncertainty as it requires the use of informed estimates and judgments based on circumstances underlying the insured losses
known at the date of accrual. For example, the reserves established for high excess casualty claims, asbestos and
environmental claims, claims from major catastrophic events, or for our various product lines each require different assumptions
and judgments to be made. Necessary judgments are based on numerous factors and may be revised as additional experience
and other data become available and are reviewed, as new or improved methods are developed, or as laws change. Hence,
ultimate loss payments may differ from the estimate of the ultimate liabilities made at the balance sheet date. Changes to our
previous estimates of prior period loss reserves impact the reported calendar year underwriting results adversely if our estimates
increase or favorably if our estimates decrease. The potential for variation in loss reserve estimates is impacted by numerous
factors. Reserve estimates for casualty lines are particularly uncertain given the lengthy reporting patterns and corresponding
need for IBNR.
Case reserves for those claims reported by insureds or ceding companies to us prior to the balance sheet date and where we
have sufficient information are determined by our claims personnel as appropriate based on the circumstances of the claim(s),
standard claim handling practices, and professional judgment. Furthermore, for our Brandywine run-off operations and our
assumed reinsurance operation, Global Reinsurance, we may adjust the case reserves as notified by the ceding company if the
judgment of our respective claims department differs from that of the cedant.
With respect to IBNR reserves and those claims that have been incurred but not reported prior to the balance sheet date, there
is, by definition, limited actual information to form the case reserve estimate and reliance is placed upon historical loss
experience and actuarial methods to estimate the ultimate loss obligations and the corresponding amount of IBNR. IBNR
reserve estimates are generally calculated by first projecting the ultimate amount of losses for a product line and subtracting
paid losses and case reserves for reported claims. The judgments involved in projecting the ultimate losses may pertain to the
use and interpretation of various standard actuarial reserving methods that place reliance on the extrapolation of actual
historical data, loss development patterns, industry data, and other benchmarks as appropriate. The estimate of the required
IBNR reserve also requires judgment by actuaries and management to reflect the impact of more contemporary and subjective
factors, both qualitative and quantitative. Among some of these factors that might be considered are changes in business mix or
40
volume, changes in ceded reinsurance structures, changes in claims handling practices, reported and projected loss trends,
inflation, the legal environment, and the terms and conditions of the contracts sold to our insured parties.
Determining management's best estimate
Our recorded reserves represent management's best estimate of the provision for unpaid claims as of the balance sheet date,
and establishing them involves a process that includes collaboration with various relevant parties in the company. For
information on our reserving process, refer to Note 7 to the Consolidated Financial Statements.
Sensitivity to underlying assumptions
While we believe that our reserve for unpaid losses and loss expenses at December 31, 2019, is adequate, new
information or emerging trends that differ from our assumptions may lead to future development of losses and loss
expenses that is significantly greater or less than the recorded reserve, which could have a material effect on future
operating results. As noted previously, our best estimate of required loss reserves for most portfolios is judgmentally
selected for each origin year after considering the results from a number of reserving methods and is not a purely
mechanical process. Therefore, it is difficult to convey, in a simple and quantitative manner, the impact that a change to a
single assumption will have on our best estimate. In the examples below, we attempt to give an indication of the potential
impact by isolating a single change for a specific reserving method that would be pertinent in establishing the best
estimate for the product line described. We consider each of the following sensitivity analyses to represent a reasonably
likely deviation in the underlying assumption.
North America Commercial P&C Insurance
Given the long reporting and paid development patterns for workers' compensation business, the development factors used to
project actual current losses to ultimate losses for our current exposure require considerable judgment that could be material to
consolidated loss and loss expense reserves. Specifically, adjusting ground up ultimate losses by a one percent change in the
tail factor (i.e., 1.04 changed to either 1.05 or 1.03) would cause a change of approximately $823 million, either positive or
negative, for the projected net loss and loss expense reserves. This represents an impact of about 8.8 percent relative to
recorded net loss and loss expense reserves of approximately $9.4 billion.
The reserve portfolio for our Chubb Bermuda operations contains exposure to predominantly high excess liability coverage on
an occurrence-first-reported basis (typically with attachment points in excess of $325 million and gross limits of up to $150
million) and D&O and other professional liability coverage on a claims-made basis (typically with attachment points in excess
of $125 million and gross limits of up to $75 million). Due to the layer of exposure covered, the expected frequency for this
book is very low. As a result of the low frequency/high severity nature of the book, a small difference in the actual vs. expected
claim frequency, either positive or negative, could result in a material change to the projected ultimate loss if such change in
claim frequency was related to a policy where close to maximum limits were deployed.
North America Personal P&C Insurance
Due to the relatively short-tailed nature of many of the coverages involved (e.g., homeowners property damage), most of the
incurred losses in Personal Lines are resolved within a few years of occurrence. As shown in our loss triangle disclosure, the
vast majority (over 95 percent) of Personal Lines net ultimate losses and allocated loss adjustment expenses are typically paid
within five years of the accident date and over 80 percent within two years. Even though there are significant reserves
associated with some liability exposures such as personal excess/umbrella liability, our incurred loss triangle also shows a
roughly consistent pattern of only relatively minor movements in incurred estimates over time by accident year especially after
twenty-four months of maturity. While the liability exposures are subject to additional uncertainties from more protracted
resolution times, the main drivers of volatility in the Personal Lines business are relatively short-term in nature and relate to
things like natural catastrophes, non-catastrophe weather events, man-made risks, and individual large loss volatility from other
fortuitous claim events.
North America Agricultural Insurance
Approximately 66 percent of the reserves for this segment are from the crop related lines, which all have short payout
patterns, with the majority of the liabilities expected to be resolved in the ensuing twelve months. Claim reserves for our
Multiple Peril Crop Insurance (MPCI) product are set on a case-by-case basis and our aggregate exposure is subject to state
level risk sharing formulae as well as third-party reinsurance. The majority of the development risk arises out of the accuracy
of case reserve estimates and the time needed for final crop conditions to be assessed. We do not view our Agriculture
reserves as substantially influenced by the general assumptions and risks underlying more typical P&C reserve estimates.
41
Overseas General Insurance
Certain long-tail lines, such as casualty and professional lines, are particularly susceptible to changes in loss trend and claim
inflation. Heightened perceptions of tort and settlement awards around the world can increase the demand for these products
as well as contributing to the uncertainty in the reserving estimates. Our reserving methods rely on loss development patterns
estimated from historical data and while we attempt to adjust such factors for known changes in the current tort environment,
it is possible that such factors may not entirely reflect all recent trends in tort environments. For example, when applying the
reported loss development method, the lengthening of our selected loss development patterns by six months would increase
reserve estimates on long-tail casualty and professional lines for accident years 2017 and prior by approximately $525
million. This represents an impact of 14.4 percent relative to recorded net loss and loss expense reserves of approximately
$3.6 billion.
Global Reinsurance
Typically, there is inherent uncertainty around the length of paid and reported development patterns, especially for certain
casualty lines such as excess workers' compensation or general liability, which may take decades to fully develop. This
uncertainty is accentuated by the need to supplement client development patterns with industry development patterns due to
the sometimes low statistical credibility of the data. The underlying source and selection of the final development patterns can
thus have a significant impact on the selected ultimate net losses and loss expenses. For example, a 20 percent shortening or
lengthening of the development patterns used for U.S. long-tail lines would cause the loss reserve estimate derived by the
reported Bornhuetter-Ferguson method for these lines to change by approximately $285 million. This represents an impact of
43 percent relative to recorded net loss and loss expense reserves of approximately $670 million.
Assumed reinsurance
At December 31, 2019, net unpaid losses and loss expenses for the Global Reinsurance segment aggregated to $1.4 billion,
consisting of $769 million of case reserves and $664 million of IBNR. In comparison, at December 31, 2018, net unpaid
losses and loss expenses for the Global Reinsurance segment aggregated to $1.6 billion, consisting of $807 million of case
reserves and $807 million of IBNR.
For our catastrophe business, we principally estimate unpaid losses and loss expenses on an event basis by considering various
sources of information, including specific loss estimates reported by our cedants, ceding company and overall industry loss
estimates reported by our brokers, and our internal data regarding reinsured exposures related to the geographical location of
the event. Our internal data analysis enables us to establish catastrophe reserves for known events with more certainty at an
earlier date than would be the case if we solely relied on reports from third parties to determine carried reserves.
For our casualty reinsurance business, we generally rely on ceding companies to report claims and then use that data as a key
input to estimate unpaid losses and loss expenses. Due to the reliance on claims information reported by ceding companies, as
well as other factors, the estimation of unpaid losses and loss expenses for assumed reinsurance includes certain risks and
uncertainties that are unique relative to our direct insurance business. These include, but are not necessarily limited to, the
following:
• The reported claims information could be inaccurate;
• Typically, a lag exists between the reporting of a loss event to a ceding company and its reporting to us as a reinsurance
claim. The use of a broker to transmit financial information from a ceding company to us increases the reporting lag.
Because most of our reinsurance business is produced by brokers, ceding companies generally first submit claim and other
financial information to brokers, who then report the proportionate share of such information to each reinsurer of a
particular treaty. The reporting lag generally results in a longer period of time between the date a claim is incurred and the
date a claim is reported compared with direct insurance operations. Therefore, the risk of delayed recognition of loss
reserve development is higher for assumed reinsurance than for direct insurance lines; and
• The historical claims data for a particular reinsurance contract can be limited relative to our insurance business in that
there may be less historical information available. Further, for certain coverages or products, such as excess of loss
contracts, there may be relatively few expected claims in a particular year so the actual number of claims may be
susceptible to significant variability. In such cases, the actuary often relies on industry data from several recognized
sources.
We mitigate the above risks in several ways. In addition to routine analytical reviews of ceding company reports to ensure
reported claims information appears reasonable, we perform regular underwriting and claims audits of certain ceding companies
to ensure reported claims information is accurate, complete, and timely. As appropriate, audit findings are used to adjust claims
42
in the reserving process. We also use our knowledge of the historical development of losses from individual ceding companies to
adjust the level of adequacy we believe exists in the reported ceded losses.
On occasion, there will be differences between our carried loss reserves and unearned premium reserves and the amount of loss
reserves and unearned premium reserves reported by the ceding companies. This is due to the fact that we receive consistent
and timely information from ceding companies only with respect to case reserves. For IBNR, we use historical experience and
other statistical information, depending on the type of business, to estimate the ultimate loss. We estimate our unearned
premium reserve by applying estimated earning patterns to net premiums written for each treaty based upon that treaty's
coverage basis (i.e., risks attaching or losses occurring). At December 31, 2019, the case reserves reported to us by our ceding
companies were $758 million, compared with the $769 million we recorded. Our policy is to post additional case reserves in
addition to the amounts reported by our cedants when our evaluation of the ultimate value of a reported claim is different than
the evaluation of that claim by our cedant.
Within Corporate, we also have exposure to certain liability reinsurance lines that have been in run-off since 1994. Unpaid
losses and loss expenses relating to this run-off reinsurance business resides within the Brandywine Division reported within
Corporate. Most of the remaining unpaid loss and loss expense reserves for the run-off reinsurance business relate to A&E
claims. Refer to the “Asbestos and Environmental (A&E)” section for additional information.
Asbestos and environmental reserves
Included in our liabilities for losses and loss expenses are amounts for A&E (A&E liabilities). The A&E liabilities principally relate
to claims arising from bodily-injury claims related to asbestos products and remediation costs associated with hazardous waste
sites. The estimation of our A&E liabilities is particularly sensitive to future changes in the legal, social, and economic
environment. We have not assumed any such future changes in setting the value of our A&E liabilities, which include provisions
for both reported and IBNR claims.
There are many complex variables that we consider when estimating the reserves for our inventory of asbestos accounts and
these variables may directly impact the predicted outcome. We believe the most significant variables relating to our A&E
liabilities include the current legal environment; specific settlements that may be used as precedents to settle future claims;
assumptions regarding trends with respect to claim severity and the frequency of higher severity claims; assumptions regarding
the ability to allocate liability among defendants (including bankruptcy trusts) and other insurers; the ability of a claimant to
bring a claim in a state in which they have no residency or exposure; the ability of a policyholder to claim the right to
unaggregated coverage; whether high-level excess policies have the potential to be accessed given the policyholder's claim
trends and liability situation; payments to unimpaired claimants; and, the potential liability of peripheral defendants. Based on
the policies, the facts, the law, and a careful analysis of the impact that these factors will likely have on any given account, we
estimate the potential liability for indemnity, policyholder defense costs, and coverage litigation expense.
The results in asbestos cases announced by other carriers or defendants may well have little or no relevance to us because
coverage exposures are highly dependent upon the specific facts of individual coverage and resolution status of disputes among
carriers, policyholders, and claimants.
For additional information refer to the “Asbestos and Environmental (A&E)” section and to Note 7 to the Consolidated Financial
Statements.
Future policy benefits reserves
We issue contracts in our Overseas General Insurance and Life Insurance segments that are classified as long-duration. These
contracts generally include accident and supplemental health products, term and whole life products, endowment products, and
annuities. In accordance with GAAP, we establish reserves for contracts determined to be long-duration based on approved
actuarial methods that include assumptions related to expenses, mortality, morbidity, persistency, and investment yields with a
factor for adverse deviation. These assumptions are “locked in” at the inception of the contract, meaning we use our original
assumptions throughout the life of the policy and do not subsequently modify them unless we deem the reserves to be
inadequate. The future policy benefits reserves balance is regularly evaluated for a premium deficiency. If experience is less
favorable than assumptions, additional liabilities may be required, resulting in a charge to policyholder benefits and claims.
Valuation of value of business acquired (VOBA), and amortization of deferred policy acquisition costs and VOBA
As part of the acquisition of businesses that sell long-duration contracts, such as life products, we established an intangible
asset related to VOBA, which represented the fair value of the future profits of the in-force contracts. The valuation of VOBA at
the time of acquisition is derived from similar assumptions to those used to establish the associated future policy benefits
43
reserves. The most significant input in this calculation is the discount rate used to arrive at the present value of the net cash
flows. We amortize deferred policy acquisition costs associated with long-duration contracts and VOBA (collectively policy
acquisition costs) over the estimated life of the contracts, generally in proportion to premium revenue recognized based upon
the same assumptions used in estimating the liability for future policy benefits. For non-traditional long-duration contracts, we
amortize policy acquisition costs over the expected life of the contracts in proportion to estimates of expected gross profits. The
estimated life is established at the inception of the contracts or upon acquisition and is based on current persistency
assumptions. Policy acquisition costs, which consist of commissions, premium taxes, and certain underwriting costs related
directly to the successful acquisition of a new or renewal insurance contract, are reviewed to determine if they are recoverable
from future income, including investment income. Unrecoverable costs are expensed in the period identified.
Risk transfer
In the ordinary course of business, we both purchase (or cede) and sell (or assume) reinsurance protection. We discontinued the
purchase of all finite risk reinsurance contracts, as a matter of policy, in 2002. For both ceded and assumed reinsurance, risk
transfer requirements must be met in order to use reinsurance accounting, principally resulting in the recognition of cash flows
under the contract as premiums and losses. If risk transfer requirements are not met, a contract is to be accounted for as a
deposit, typically resulting in the recognition of cash flows under the contract through a deposit asset or liability and not as
revenue or expense. To meet risk transfer requirements, a reinsurance contract must include both insurance risk, consisting of
underwriting and timing risk, and a reasonable possibility of a significant loss for the assuming entity. We also apply similar risk
transfer requirements to determine whether certain commercial insurance contracts should be accounted for as insurance or a
deposit. Contracts that include fixed premium (i.e., premium not subject to adjustment based on loss experience under the
contract) for fixed coverage generally transfer risk and do not require judgment.
Reinsurance and insurance contracts that include both significant risk sharing provisions, such as adjustments to premiums or
loss coverage based on loss experience, and relatively low policy limits, as evidenced by a high proportion of maximum
premium assessments to loss limits, can require considerable judgment to determine whether or not risk transfer requirements
are met. For such contracts, often referred to as finite or structured products, we require that risk transfer be specifically
assessed for each contract by developing expected cash flow analyses at contract inception. To support risk transfer, the cash
flow analyses must demonstrate that a significant loss is reasonably possible, such as a scenario in which the ratio of the net
present value of losses divided by the net present value of premiums equals or exceeds 110 percent. For purposes of cash flow
analyses, we generally use a risk-free rate of return consistent with the expected average duration of loss payments. In
addition, to support insurance risk, we must prove the reinsurer's risk of loss varies with that of the reinsured and/or support
various scenarios under which the assuming entity can recognize a significant loss.
To ensure risk transfer requirements are routinely assessed, qualitative and quantitative risk transfer analyses and memoranda
supporting risk transfer are developed by underwriters for all structured products. We have established protocols for structured
products that include criteria triggering an accounting review of the contract prior to quoting. If any criterion is triggered, a
contract must be reviewed by a committee established by each of our segments with reporting oversight, including peer review,
from our global Structured Transaction Review Committee.
With respect to ceded reinsurance, we entered into a few multi-year excess of loss retrospectively-rated contracts, principally in
2002. These contracts primarily provided severity protection for specific product divisions. Because traditional one-year
reinsurance coverage had become relatively costly, these contracts were generally entered into in order to secure a more cost-
effective reinsurance program. All of these contracts transferred risk and were accounted for as reinsurance. In addition, we
maintain a few aggregate excess of loss reinsurance contracts that were principally entered into prior to 2003, such as the
National Indemnity Company (NICO) contracts referred to in the section entitled, “Asbestos and Environmental (A&E)”. We have
not purchased any other retroactive ceded reinsurance contracts since 1999.
With respect to assumed reinsurance and insurance contracts, products giving rise to judgments regarding risk transfer were
primarily sold by our financial solutions business. Although we have significantly curtailed writing financial solutions business,
several contracts remain in-force and principally include multi-year retrospectively-rated contracts and loss portfolio transfers.
Because transfer of insurance risk is generally a primary client motivation for purchasing these products, relatively few
insurance and reinsurance contracts have historically been written for which we concluded that risk transfer criteria had not
been met. For certain insurance contracts that have been reported as deposits, the insured desired to self-insure a risk but was
required, legally or otherwise, to purchase insurance so that claimants would be protected by a licensed insurance company in
the event of non-payment from the insured.
44
Reinsurance recoverable
Reinsurance recoverable includes balances due to us from reinsurance companies for paid and unpaid losses and loss expenses
and is presented net of a provision for uncollectible reinsurance. The provision for uncollectible reinsurance is determined based
upon a review of the financial condition of the reinsurers and other factors. Ceded reinsurance contracts do not relieve our
primary obligation to our policyholders. Consequently, an exposure exists with respect to reinsurance recoverable to the extent
that any reinsurer is unable or unwilling to meet its obligations or disputes the liabilities assumed under the reinsurance
contracts. We determine the reinsurance recoverable on unpaid losses and loss expenses using actuarial estimates as well as a
determination of our ability to cede unpaid losses and loss expenses under existing reinsurance contracts.
The recognition of a reinsurance recoverable asset requires two key judgments. The first judgment involves our estimation based
on the amount of gross reserves and the percentage of that amount which may be ceded to reinsurers. Ceded IBNR, which is a
major component of the reinsurance recoverable on unpaid losses and loss expenses, is generally developed as part of our loss
reserving process and, consequently, its estimation is subject to similar risks and uncertainties as the estimation of gross IBNR
(refer to “Critical Accounting Estimates – Unpaid losses and loss expenses”). The second judgment involves our estimate of the
amount of the reinsurance recoverable balance that we may ultimately be unable to recover from reinsurers due to insolvency,
contractual dispute, or for other reasons. Estimated uncollectible amounts are reflected in a provision that reduces the
reinsurance recoverable asset and, in turn, shareholders' equity. Changes in the provision for uncollectible reinsurance are
reflected in net income.
Although the obligation of individual reinsurers to pay their reinsurance obligations is based on specific contract provisions, the
collectability of such amounts requires estimation by management. The majority of the recoverable balance will not be due for
collection until sometime in the future, and the duration of our recoverables may be longer than the duration of our direct
exposures. Over this period of time, economic conditions and operational performance of a particular reinsurer may impact their
ability to meet these obligations and while they may continue to acknowledge their contractual obligation to do so, they may not
have the financial resources or willingness to fully meet their obligation to us.
To estimate the provision for uncollectible reinsurance, the reinsurance recoverable must first be determined for each reinsurer.
This determination is based on a process rather than an estimate, although an element of judgment must be applied. As part of
the process, ceded IBNR is allocated to reinsurance contracts because ceded IBNR is not generally calculated on a contract by
contract basis. The allocations are generally based on premiums ceded under reinsurance contracts, adjusted for actual loss
experience and historical relationships between gross and ceded losses. If actual premium and loss experience vary materially
from historical experience, the allocation of reinsurance recoverable by reinsurer will be reviewed and may change. While such
change is unlikely to result in a large percentage change in the provision for uncollectible reinsurance, it could, nevertheless,
have a material effect on our net income in the period recorded.
Generally, we use a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are
reinsurance recoverable balances by reinsurer, net of collateral, and default factors used to estimate the probability that the
reinsurer may be unable to meet its future obligations in full. The definition of collateral for this purpose requires some
judgment and is generally limited to assets held in a Chubb-only beneficiary trust, letters of credit, and liabilities held by us
with the same legal entity for which we believe there is a right of offset. We do not currently include multi-beneficiary trusts.
However, we have several reinsurers that have established multi-beneficiary trusts for which certain of our companies are
beneficiaries. The determination of the default factor is principally based on the financial strength rating of the reinsurer and a
corresponding default factor applicable to the financial strength rating. Default factors require considerable judgment and are
determined using the current financial strength rating, or rating equivalent, of each reinsurer as well as other key considerations
and assumptions. Significant considerations and assumptions include, but are not necessarily limited to, the following:
• For reinsurers that maintain a financial strength rating from a major rating agency, and for which recoverable balances are
considered representative of the larger population (i.e., default probabilities are consistent with similarly rated reinsurers
and payment durations conform to averages), the judgment exercised by management to determine the provision for
uncollectible reinsurance of each reinsurer is typically limited because the financial rating is based on a published source
and the default factor we apply is based on a historical default factor of a major rating agency applicable to the particular
rating class. Default factors applied for financial ratings of AAA, AA, A, BBB, BB, B, and CCC, are 0.8 percent, 1.2
percent, 1.7 percent, 4.9 percent, 19.6 percent, 34.0 percent, and 62.2 percent, respectively. Because our model is
predicated on the historical default factors of a major rating agency, we do not generally consider alternative factors.
However, when a recoverable is expected to be paid in a brief period of time by a highly-rated reinsurer, such as certain
property catastrophe claims, a default factor may not be applied;
45
• For balances recoverable from reinsurers that are both unrated by a major rating agency and for which management is
unable to determine a credible rating equivalent based on a parent or affiliated company, we may determine a rating
equivalent based on our analysis of the reinsurer that considers an assessment of the creditworthiness of the particular
entity, industry benchmarks, or other factors as considered appropriate. We then apply the applicable default factor for that
rating class. For balances recoverable from unrated reinsurers for which our ceded reserve is below a certain threshold, we
generally apply a default factor of 34.0 percent;
• For balances recoverable from reinsurers that are either insolvent or under regulatory supervision, we establish a default
factor and resulting provision for uncollectible reinsurance based on specific facts and circumstances surrounding each
company. Upon initial notification of an insolvency, we generally recognize expense for a substantial portion of all balances
outstanding, net of collateral, through a combination of write-offs of recoverable balances and increases to the provision for
uncollectible reinsurance. When regulatory action is taken on a reinsurer, we generally recognize a default factor by
estimating an expected recovery on all balances outstanding, net of collateral. When sufficient credible information
becomes available, we adjust the provision for uncollectible reinsurance by establishing a default factor pursuant to
information received; and
• For captives and other recoverables, management determines the provision for uncollectible reinsurance based on the
specific facts and circumstances.
The following table summarizes reinsurance recoverables and the provision for uncollectible reinsurance for each type of
recoverable balance at December 31, 2019:
(in millions of U.S. dollars)
Type
Reinsurers with credit ratings
Reinsurers not rated
Reinsurers under supervision and insolvent reinsurers
Captives
Other - structured settlements and pools
Total
Gross Reinsurance
Recoverables on
Losses and Loss
Expenses
Recoverables
(net of Usable
Collateral)
Provision for
Uncollectible
Reinsurance (1)
$
11,460 $
10,043 $
156
321
81
2,647
988
190
79
378
978
66
37
20
37
$
15,497 $
11,668 $
316
(1) The provision for uncollectible reinsurance is based on a default analysis applied to gross reinsurance recoverables, net of approximately $3.8 billion of collateral at
December 31, 2019.
At December 31, 2019, the use of different assumptions within our approach could have a material effect on the provision for
uncollectible reinsurance. To the extent the creditworthiness of our reinsurers were to deteriorate due to an adverse event
affecting the reinsurance industry, such as a large number of major catastrophes, actual uncollectible amounts could be
significantly greater than our provision for uncollectible reinsurance. Such an event could have a material adverse effect on our
financial condition, results of operations, and our liquidity. Given the various considerations used to estimate our uncollectible
provision, we cannot precisely quantify the effect a specific industry event may have on the provision for uncollectible
reinsurance. However, based on the composition (particularly the average credit quality) of the reinsurance recoverable balance
at December 31, 2019, we estimate that a ratings downgrade of one notch for all rated reinsurers (e.g., from A to A- or A- to
BBB+) could increase our provision for uncollectible reinsurance by approximately $66 million or approximately 0.4 percent of
the gross reinsurance recoverable balance, assuming no other changes relevant to the calculation. While a ratings downgrade
would result in an increase in our provision for uncollectible reinsurance and a charge to earnings in that period, a downgrade in
and of itself does not imply that we will be unable to collect all of the ceded reinsurance recoverable from the reinsurers in
question. Refer to Note 5 to the Consolidated Financial Statements for additional information.
Fair value measurements
Accounting guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction
between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair
value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to
unobservable data (Level 3 inputs). Level 2 includes inputs, other than quoted prices within Level 1, that are observable for
assets or liabilities either directly or indirectly. Refer to Note 4 and Note 13 to the Consolidated Financial Statements for
information on our fair value measurements.
46
Other-than-temporary impairments (OTTI)
Each quarter, we review securities in an unrealized loss position (impaired securities), including fixed maturities and securities
lending collateral to identify impaired securities to be specifically evaluated for a potential OTTI. Because our investment
portfolio is the largest component of consolidated assets, OTTI could be material to our financial condition and results of
operations. Refer to Note 3 c) to the Consolidated Financial Statements for a description of the OTTI process.
Deferred income taxes
At December 31, 2019, our net deferred tax liability was $804 million. Our deferred tax assets and liabilities primarily result
from temporary differences between the amounts recorded in our consolidated financial statements and the tax basis of our
assets and liabilities. We determine deferred tax assets and liabilities separately for each tax-paying component (an individual
entity or group of entities that is consolidated for tax purposes) in each tax jurisdiction. The realization of deferred tax assets
depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the
applicable tax jurisdiction. There may be changes in tax laws in a number of countries where we transact business that impact
our deferred tax assets and liabilities.
At each balance sheet date, management assesses the need to establish a valuation allowance that reduces deferred tax assets
when it is more likely than not that all, or some portion, of the deferred tax assets will not be realized. The determination of the
need for a valuation allowance is based on all available information including projections of future taxable income, principally
derived from business plans and where appropriate available tax planning strategies. Projections of future taxable income
incorporate assumptions of future business and operations that are apt to differ from actual experience. If our assumptions and
estimates that resulted in our forecast of future taxable income prove to be incorrect, an additional valuation allowance could
become necessary, which could have a material adverse effect on our financial condition, results of operations, and liquidity. At
December 31, 2019, the valuation allowance of $114 million reflects management's assessment that it is more likely than not
that a portion of the deferred tax assets will not be realized due to the inability of certain foreign subsidiaries to generate
sufficient taxable income.
Assumed reinsurance programs involving minimum benefit guarantees under variable annuity contracts
Chubb reinsures various death and living benefit guarantees associated with variable annuities issued primarily in the United
States. We ceased writing this business in 2007. Guarantees which are payable on death are referred to as guaranteed
minimum death benefits (GMDB). Guarantees on living benefits (GLB) consist mainly of guaranteed minimum income benefits
(GMIB). For further description of this product and related accounting treatment, refer to Note 1 j) to the Consolidated Financial
Statements.
Guaranteed living benefits (GLB) derivatives
Our GLB reinsurance is classified as a derivative for accounting purposes and therefore carried at fair value. We believe that the
most meaningful presentation of these GLB derivatives is as follows:
• Estimates of the average modeled value of future cash outflows is recorded as incurred losses (i.e., benefit reserves). Cash
inflows or revenue are reported as net premiums earned and changes in the benefit reserves are reflected as Policy benefits
expense in the Consolidated statements of operations, which is included in underwriting income.
• The incremental difference between the fair value of GLB reinsurance contracts and benefit reserves is reflected in Accounts
payable, accrued expenses, and other liabilities in the Consolidated balance sheets and related changes in fair value are
reflected in Net realized gains (losses) in the Consolidated statements of operations.
Determination of GLB fair value
The fair value of GLB reinsurance is estimated using an internal valuation model, which includes current market information
and estimates of policyholder behavior from the perspective of a theoretical market participant that would assume these
liabilities. All of our treaties contain claim limits, which are factored into the valuation model. The fair value depends on a
number of factors, including interest rates, equity markets, credit risk, current account value, market volatility, expected
annuitization rates and other policyholder behavior, and changes in policyholder mortality. The model and related assumptions
are regularly re-evaluated by management and enhanced, as appropriate, based upon additional experience obtained related to
policyholder behavior and availability of more timely market information. Due to the inherent uncertainties of the assumptions
used in the valuation models to determine the fair value of these derivative products, actual experience may differ materially
from the estimates reflected in our Consolidated Financial Statements.
47
We intend to hold these derivative contracts to maturity (i.e., the expiration of the underlying liabilities through lapse,
annuitization, death, or expiration of the reinsurance contract). To partially offset the risk of changes in the fair value of GLB
reinsurance contracts, we invest in derivative hedge instruments. At maturity, the cumulative realized gains and losses
(excluding cumulative hedge gains or losses) from fair value changes of GLB reinsurance contracts will net to zero because, over
time, the insurance liability will be increased or decreased to equal our obligation.
Determination of GLB and GMDB benefit reserves
Management established benefit reserves based on a long-term benefit ratio (or loss ratio) calculated using assumptions
reflecting management’s best estimate of the future short-term and long-term performance of the variable annuity line of
business. Despite the long-term nature of the risk, the benefit ratio calculation is impacted by short-term market movements
that may be judged by management to be transient. Management regularly examines both qualitative and quantitative analysis,
including a review of the differential between the benefit ratio used at the most recent valuation date and the benefit ratio
calculated on subsequent dates. Management regularly evaluates its estimates and uses judgment to determine the extent to
which assumptions underlying the benefit ratio calculation should be adjusted. For the year ended December 31, 2019,
management determined that no change to the benefit ratio was warranted.
For further information on the estimates and assumptions used in determining the fair value of GLB reinsurance, refer to Note 4
to the Consolidated Financial Statements. For a sensitivity discussion of the effect of changes in interest rates, equity indices,
and other assumptions on the fair value of GLBs, and the estimated resulting impact on our net income, refer to Item 7A.
Risk Management
We employ a strategy to manage the financial market and policyholder behavior risks embedded in the reinsurance of variable
annuity (VA) guarantees. Risk management begins with underwriting a prospective client and guarantee design, with particular
focus on protecting our position from policyholder options that, because of anti-selective behavior, could adversely impact our
obligation.
A second layer of risk management is the structure of the reinsurance contracts. All VA guarantee reinsurance contracts include
some form of annual or aggregate claim limit(s) primarily designed to reduce our exposure to severe equity market and/or
interest rate declines (which would cause an increase in expected claims).
A third layer of risk management is the hedging strategy which looks to mitigate both long-term economic loss over time as well
as dampen income statement volatility. We owned financial market instruments as part of the hedging strategy with a fair value
asset (liability) of $(13) million and $23 million at December 31, 2019 and 2018, respectively. The instruments are
substantially collateralized on a daily basis.
We also limit the aggregate amount of variable annuity reinsurance guarantee risk we are willing to assume. The last
substantive transactions were quoted in late 2007. The aggregate number of policyholders is currently decreasing through
policyholder withdrawals, annuitizations, and deaths at a rate of 5 percent to 15 percent per annum.
Note that GLB claims cannot occur for any reinsured policy until it has reached the end of its “waiting period”. As shown in the
table below, 92 percent of the policies we reinsure reached the end of their “waiting periods” in 2019 and prior.
Year of first payment eligibility
2019 and prior
2020
2021
2022
2023
2024 and after
Total
48
Percent of living benefit
account values
92%
1%
2%
—%
1%
4%
100%
The following table presents the historical cash flows under these policies for the periods indicated. The amounts represent
accrued past premium received and claims paid, split by benefit type.
(in millions of U.S. dollars)
GMDB
GLB
2019
Total
GMDB
GLB
2018
Total
GMDB
GLB
Premium received
Less paid claims
Net cash received
$
$
40 $
91 $
131 $
47 $
96 $
143 $
49 $
110 $
34
91
125
32
49
81
31
54
6 $
— $
6 $
15 $
47 $
62 $
18 $
56 $
2017
Total
159
85
74
Collateral
Chubb holds collateral on behalf of most of its clients in the form of qualified assets in trust or letters of credit, typically in an
amount sufficient for the client to obtain statutory reserve credit for the reinsurance. The timing of the calculation and amount
of the collateral varies by client according to the particulars of the reinsurance treaty and the statutory reserve guidelines of the
client's domicile.
Goodwill impairment assessment
Goodwill, which represents the excess of acquisition cost over the estimated fair value of net assets acquired, was $15.3 billion
at both December 31, 2019 and 2018. Goodwill is assigned to applicable reporting units of acquired entities at the time of
acquisition. Our reporting units are the same as our reportable segments. For goodwill balances by reporting units, refer to Note
6 to the Consolidated Financial Statements.
Goodwill is not amortized but is subject to a periodic evaluation for impairment at least annually, or earlier if there are any
indications of possible impairment. Impairment is tested at the reporting unit level. The impairment evaluation first uses a
qualitative assessment to determine whether it is more likely than not (i.e., more than a 50 percent probability) that the fair
value of a reporting unit is greater than its carrying amount. If a reporting unit fails this qualitative assessment, a single
quantitative analysis is used to measure and record the amount of the impairment.
In assessing the fair value of a reporting unit, we make assumptions and estimates about the profitability attributable to our
reporting units, including:
short-term and long-term growth rates; and
•
• estimated cost of equity and changes in long-term risk-free interest rates.
If our assumptions and estimates made in assessing the fair value of acquired entities change, we could be required to write-
down the carrying value of goodwill which could be material to our results of operations in the period the charge is taken. Based
on our impairment testing for 2019, we determined no impairment was required and none of our reporting units was at risk for
impairment.
49
Consolidated Operating Results – Years Ended December 31, 2019, 2018, and 2017
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
Net premiums written
Net premiums earned
Net investment income
Net realized gains (losses)
Total revenues
Losses and loss expenses
Policy benefits
Policy acquisition costs
Administrative expenses
Interest expense
Other (income) expense
Amortization of purchased intangibles
Chubb integration expenses
Total expenses
Income before income tax
Income tax expense (benefit)
Net income
Net premiums written - constant dollars (1)
Net premiums earned - constant dollars (1)
NM – not meaningful
(530)
(652)
84
(18.8)%
$
32,275 $
30,579 $
29,244
31,290
3,426
30,064
3,305
29,034
3,125
34,186
18,730
740
6,153
3,030
552
(596)
305
23
32,717
18,067
590
5,912
2,886
641
(434)
339
59
28,937
28,060
5,249
795
4,657
695
32,243
18,454
676
5,781
2,833
607
(400)
260
310
28,521
3,722
(139)
$
4,454 $
3,962 $
3,861
2019 vs.
2018
5.5 %
4.1 %
3.6 %
4.5 %
3.7 %
% Change
2018 vs.
2017
4.6 %
3.5 %
5.8 %
NM
1.5 %
(2.1)%
25.5 %
(12.7)%
4.1 %
5.0 %
(13.9)%
37.2 %
(10.2)%
(61.7)%
3.1 %
12.7 %
14.3 %
12.4 %
7.0 %
5.5 %
2.3 %
1.9 %
5.6 %
8.5 %
30.4 %
(81.0)%
(1.6)%
25.1 %
NM
2.6 %
4.1 %
3.1 %
(1) On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.
Net Premiums Written
2019 vs. 2018
Net premiums written reflect the premiums we retain after purchasing reinsurance protection. Consolidated net premiums
written increased $1.7 billion in 2019, or $2.1 billion on a constant-dollar basis, reflecting growth across most segments.
• Net premiums written in our North America Commercial P&C Insurance segment increased $890 million (7.1 percent) in
2019, reflecting positive rate increases, new business written and strong retention across most retail lines, including
property, financial lines, excess casualty, risk management, and commercial package, as well as in our wholesale and high
excess Bermuda lines, and in our small commercial businesses.
• Net premiums written in our North America Personal P&C Insurance segment increased $113 million (2.4 percent) in
2019, primarily due to strong retention and rate and exposure increases across most lines, partially offset by a $44 million
benefit in 2018 related to the harmonization of our legacy premium registration systems, which unfavorably impacted
growth by approximately 0.9 percentage points.
• Net premiums written in our North America Agricultural Insurance segment increased $233 million (14.8 percent) in
2019, primarily due to growth in our MPCI business and growth in our Chubb Agribusiness. Growth in our MPCI premium
was driven primarily by higher retention as a result of the premium sharing formulas under the U.S. government, as well as
the non-renewal of a quota-share treaty effective with the current crop year and an increase in current year production.
Under the MPCI premium sharing formula under the U.S. government, we cede additional premiums to the government
during profitable years. In 2018, the program was more profitable which resulted in higher cessions compared to 2019.
• Net premiums written in our Overseas General Insurance segment increased $360 million (4.0 percent) in 2019, or $722
million (8.4 percent) on a constant-dollar basis, reflecting growth across all regions and most lines of business. P&C lines
growth was across all regions and was principally due to positive rate increases and new business in property, casualty, and
financial lines. Personal lines growth was driven by new business principally in Latin America and Europe. Accident and
health (A&H) lines growth was principally in Asia and Latin America driven by new business.
50
• Net premiums written in our Global Reinsurance segment decreased $22 million (3.2 percent) in 2019, or $12 million
(1.7 percent) on a constant-dollar basis, as an increase in new business written in property and marine lines was more
than offset by an increase in ceded retrocessions, reductions in the international motor line, and higher reinstatement
premiums collected in the prior year.
• Net premiums written in our Life Insurance segment increased $122 million (5.3 percent) in 2019, or $143 million (6.4
percent) on a constant-dollar basis, primarily reflecting growth in our Asian and Latin American international life operations
and North American Combined Insurance supplemental A&H program, partially offset by our life reinsurance business,
which continues to decline as no new life reinsurance business is being written.
2018 vs. 2017
Consolidated net premiums written increased $1.3 billion in 2018, or $1.2 billion (4.1 percent) on a constant-dollar basis,
reflecting growth across most segments.
• Net premiums written in our North America Commercial P&C Insurance segment increased $466 million (3.9 percent) in
2018 reflecting positive rate increases, new business written, and strong renewals across a number of lines. Retail casualty
and risk management, A&H, retail property, and continued growth in our small commercial business represented $339
million of the $466 million increase. In addition, the year-over-year increase in large structured transactions was $195
million. This growth was partially offset by merger-related underwriting actions of $123 million and premium reductions
from planned portfolio management in our retail and wholesale brokerage financial lines ($62 million).
• Net premiums written in our North America Personal P&C Insurance segment increased $141 million (3.1 percent) for
2018, primarily due to strong retention and new business growth in homeowners and complementary products such as
automobiles and valuables. In addition, the non-renewal of a quota share treaty in the second quarter of 2017 covering the
acquired Fireman's Fund homeowners and automobile businesses added $47 million of additional net premiums written in
2018. These increases were partially offset by the addition of California to the homeowners quota share reinsurance treaty,
effective October 1, 2018 ($47 million), which included a non-recurring unearned premium reserves (UPR) transfer of $32
million.
• Net premiums written in our North America Agricultural Insurance segment increased $61 million (4.0 percent) in 2018,
primarily due to growth in our MPCI business and growth in our Chubb Agribusiness. The growth in MPCI premium was
driven by policy count growth and the year-over-year impact of the premium sharing formulas under the U.S. government.
In 2017, the program was more profitable which resulted in higher cessions compared to 2018. The increase was partially
offset by lower volatility factors, which are a component of the policy pricing that measures the likelihood the commodity
price will fluctuate over the crop year and reduces the premium we charge.
• Net premiums written in our Overseas General Insurance segment increased $552 million (6.6 percent) in 2018, or $448
million (5.3 percent) on a constant-dollar basis, reflecting growth across most regions and lines of business. P&C lines
growth was across all regions, principally in small commercial property and general casualty lines reflecting new business,
and in middle market driven by new business and rate increases. Personal lines growth was principally in our automobile
line in Mexico driven by new business, as well as in our specialty lines in Asia. A&H lines growth was principally in Asia
driven by new business.
• Net premiums written in our Global Reinsurance segment decreased $14 million (2.1 percent) in 2018, or $22 million
(3.3 percent) on a constant-dollar basis, primarily due to higher reinstatement premiums collected in the prior year
principally relating to the 2017 natural catastrophes ($15 million year-over-year decrease) and lower renewals, which is
reflective of competitive market conditions primarily in catastrophe and catastrophe exposed lines of business, partially
offset by new business written in the casualty line of business.
• Net premiums written in our Life Insurance segment increased $129 million (6.1 percent) in 2018, or $123 million (5.7
percent) on a constant-dollar basis, primarily due to growth in our North American Combined Insurance supplemental A&H
program business, and Asian and Latin American international life operations, partially offset by our life reinsurance
business, which continues to decline as no new life reinsurance business is being written.
51
Net Premiums Written By Line of Business
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
% Change
C$ (1)
2018
C$ (1) 2019
vs. 2018
Commercial casualty
Workers' compensation
Professional liability
Surety
Commercial multiple peril (2)
Property and other short-tail lines
Total Commercial P&C (3)
Agriculture
Personal automobile
Personal homeowners
Personal other
Total Personal lines
Total Property and Casualty lines
Global A&H lines (4)
Reinsurance lines
Life
Total consolidated
$
5,654 $
5,204 $
4,721 $
5,154
2,098
3,697
639
983
2,094
3,527
635
910
2,067
3,547
627
879
2,094
3,479
622
910
4,468
4,016
3,819
3,930
17,539
16,386
15,660
16,189
9.7 %
0.1 %
6.3 %
2.7 %
8.0 %
13.7 %
8.3 %
1,810
1,577
1,516
1,577
14.8 %
1,786
3,513
1,514
6,813
1,695
3,391
1,508
6,594
1,563
3,302
1,441
6,306
1,685
3,383
1,454
6,522
26,162
24,557
23,482
24,288
4,315
649
1,149
4,277
671
1,074
4,056
685
1,021
4,157
661
1,059
$ 32,275 $ 30,579 $ 29,244 $ 30,165
6.0 %
3.9 %
4.0 %
4.4 %
7.7 %
3.8 %
(1.7)%
8.5 %
7.0 %
(1)
(2)
(3)
(4)
On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.
Commercial multiple peril represents retail package business (property and general liability).
2018 included a reclassification of $56 million from Workers’ compensation and $1 million from Commercial multiple peril to Commercial casualty ($48 million) and
Property and other short-tail lines ($9 million) to better align the reporting with current year. There is no impact to total Commercial P&C.
For purposes of this schedule only, A&H results from our Combined North America and International businesses, normally included in the Life Insurance and Overseas
General Insurance segments, respectively, as well as the A&H results of our North America Commercial P&C segment, are included in Global A&H lines above.
The increase in net premiums written in 2019 reflects growth across most lines of business.
• The growth in commercial casualty was due to new business and rate improvement in North America. In addition,
commercial casualty grew internationally due to positive rate increases and new business across Europe, as well as growth
in Australia.
• Growth in workers' compensation was adversely impacted by competitive market conditions in North America.
• The increase in professional liability was due to growth in North America and new business in Australia and Europe.
Professional liability also had positive rate increases and retention in Australia.
• Surety increased due to new business in North America.
• Commercial multiple peril increased due to new business and higher renewal business in North America.
• Property and other short-tail lines increased due to growth in North America. In addition, property and other short-tail lines
increased internationally, primarily due to new business in Australia and across Europe, as well as positive rate increases
internationally.
• Our personal lines increased due to strong retention and rate and exposure increases in North America. Personal lines also
increased due to growth in Latin America and Europe.
• Global A&H lines increased due to growth in our North American Combined Insurance supplemental A&H program, along
with new business in Asia and Latin America.
• The increase in Life was primarily driven by growth in our Asian and Latin American international life operations.
For additional information on net premiums written, refer to the segment results discussions.
52
Net Premiums Earned
2019 vs. 2018
Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written
that were recorded as revenues for the period as the exposure periods expire. Net premiums earned for long-duration contracts,
typically traditional life contracts, generally are recognized as earned when due from policyholders. Net premiums earned
increased $1.2 billion, or $1.6 billion on a constant-dollar basis in 2019, reflecting the growth in net premiums written
described above, including the impact of premiums that were fully earned when written (e.g., large structured transactions and
audit and retrospective premium adjustments).
2018 vs. 2017
Net premiums earned increased $1.0 billion, or $912 million on a constant-dollar basis in 2018, primarily due to the same
factors driving the increase in net premiums written as described above. Net premiums earned were favorably impacted by the
year-over-year increase in large structured transactions ($163 million), a number of which were earned immediately when
written. These retroactive transactions did not impact premiums earned in 2019 as they were fully earned in 2018.
P&C Combined Ratio
In evaluating our segments excluding Life Insurance financial performance, we use the P&C combined ratio, the loss and loss
expense ratio, the policy acquisition cost ratio, and the administrative expense ratio. We calculate these ratios by dividing the
respective expense amounts by net premiums earned. We do not calculate these ratios for the Life Insurance segment as we do
not use these measures to monitor or manage that segment. The P&C combined ratio is determined by adding the loss and loss
expense ratio, the policy acquisition cost ratio, and the administrative expense ratio. A P&C combined ratio under 100 percent
indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting loss.
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
P&C Combined ratio
2019
62.1%
19.1%
9.4%
90.6%
2018
62.1%
19.2%
9.3%
90.6%
2017
65.8%
19.5%
9.4%
94.7%
The loss and loss expense ratio decreased 3.7 percentage points in 2018 principally due to the following:
• Lower catastrophe losses;
•
Integration-related claims handling expense savings;
• Partially offset by increased frequency and severity of homeowners losses in our North America Personal P&C Insurance
segment, primarily non-catastrophe water related events and large fire losses which are trending above our expectations,
and higher non-catastrophe large losses in our North America Commercial P&C Insurance segment.
Policy acquisition costs consist of commissions, premium taxes, and certain underwriting costs directly related to the successful
acquisition of a new or renewal insurance contract. Our policy acquisition cost ratio decreased 0.3 percentage points in 2018
principally due to increased cessions under certain reinsurance agreements that resulted in higher ceded acquisition costs
benefits than in the prior year.
Catastrophe Losses and Prior Period Development
Catastrophe losses exclude reinstatement premiums which are additional premiums paid on certain reinsurance agreements in
order to reinstate coverage that had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro
rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted. Prior period
development is net of related adjustments which typically relate to either profit commission reserves or policyholder dividend
reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the
prior period loss development on these same policies. Refer to the Non-GAAP Reconciliation section for further information on
reinstatement premiums on catastrophe losses and adjustments to prior period development.
53
(in millions of U.S dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2019
2018
$
$
1,175 $
1,622 $
792 $
896 $
2017
2,753
829
We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in the
U.S. and Canada. PCS defines a catastrophe as an event that causes damage of $25 million or more in insured property losses
and affects a significant number of insureds. For events outside of the U.S. and Canada, we generally use a similar definition.
The tables below represent catastrophe loss estimates for events that occurred in the related calendar year only. Changes in
catastrophe loss estimates in the current calendar year that relate to loss events that occurred in previous calendar years are
considered prior period development and are excluded from the tables below.
The following table presents catastrophe losses and reinstatement premiums (RIPs) collected (expensed) in 2019:
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Total
excluding
RIPs
RIPs
collected
(expensed)
Total
including
RIPs
Catastrophe Loss Charge by Event
$
220 $
202 $
7 $ — $
9 $
438 $
— $
55
74
26
11
—
—
1
26
—
—
3
—
5
145
110
30
45
—
—
2
4
—
—
4
—
1
—
1
—
—
—
—
—
—
—
—
—
—
—
—
6
10
—
20
33
30
—
27
15
—
5
6
2
2
8
—
17
—
—
1
1
10
—
—
1
202
193
74
56
37
33
33
31
28
25
7
5
13
$
$
421 $
543 $
8 $ 152 $
51 $
1,175
—
(11)
—
(4)
421 $
554 $
8 $ 156 $
3
48
(11)
—
1
—
1
(4)
—
—
—
1
—
—
—
(12)
438
213
193
73
56
36
37
33
31
28
24
7
5
13
$
$
1,187
221
966
(in millions of U.S. dollars)
Net losses
U.S. flooding, hail, tornadoes,
and wind events
Tornado in Dallas, Texas
Winter-related storms
Hurricane Dorian
California wildfires
Typhoon Hagibis
Civil unrest in Hong Kong and
Chile
International weather-related
events
Tropical Storm Imelda
Australia storms
Typhoon Faxai
Hurricane Barry
Australia wildfires
Other
Total
RIPs collected (expensed)
Total before income tax
Income tax benefit
Total after income tax
54
The following table presents catastrophe losses and reinstatement premiums (RIPs) collected (expensed) in 2018:
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Total
excluding
RIPs
RIPs
collected
(expensed)
Total
including
RIPs
Catastrophe Loss Charge by Event
$
187 $
16 $
6 $
6 $
85 $
300 $
15 $
162
43
51
109
4
7
—
16
157
117
61
29
120
65
—
46
7
—
1
7
—
—
—
—
—
—
1
15
1
1
182
—
6
5
58
14
—
—
31
6
332
165
172
174
125
73
213
68
$
$
579 $
611 $
21 $
206 $
205 $
1,622
—
(26)
—
—
579 $
637 $
21 $
206 $
22
183
—
—
(23)
1
—
—
2
1
(4)
(1)
This grouping comprised of 34 separate events, principally impacting the southern and northeastern regions of the U.S.
The following table presents catastrophe losses and reinstatement premiums (RIPs) collected (expensed) in 2017:
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Total
excluding
RIPs
RIPs
collected
(expensed)
Total
including
RIPs
Catastrophe Loss Charge by Event
$
61 $
151 $
— $
2 $
42 $
256 $
(21) $
23
391
464
50
—
231
134
175
206
—
—
205
—
1
2
—
—
15
—
40
79
89
25
96
—
48
159
55
—
9
157
655
910
194
25
556
$
1,220 $
871 $
18 $
331 $
313 $
2,753
(4)
(22)
—
(4)
$
1,224 $
893 $
18 $
335 $
37
276
—
5
30
(7)
—
—
7
(in millions of U.S. dollars)
Net losses
Hurricane Michael
U.S. flooding, hail, tornadoes,
and wind events (1)
Northeast winter storms
California wildfires
Hurricane Florence
California mudslides
Colorado rain and hail storm
International weather-related
events
Other
Total
RIPs collected (expensed)
Total before income tax
Income tax benefit
Total after income tax
(in millions of U.S. dollars)
Net losses
N. California wildfires
S. California wildfires
Hurricane Harvey
Hurricane Irma
Hurricane Maria
Mexico Earthquakes
Other
Total
RIPs collected (expensed)
Total before income tax
Income tax benefit
Total after income tax
$
$
1,626
272
1,354
285
332
165
195
173
125
73
211
67
277
157
650
880
201
25
556
$
$
2,746
575
2,171
55
Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events
that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from
previous accident years.
Pre-tax net favorable prior period development for the year ended 2019 was $792 million, which included favorable
development of $80 million in our crop insurance business and adverse development of $116 million related to legacy run-off
exposures, principally asbestos and environmental liabilities. The remaining favorable development of $828 million comprised
92 percent long-tail lines, principally from accident years 2015 and prior, and 8 percent short-tail lines.
Net favorable prior period development for the year ended 2018 was $896 million, which included favorable reinsurance
settlements of $205 million related to legacy run-off exposures, $197 million favorable development related to the 2017
catastrophe events, and favorable development of $110 million in our crop insurance business. There were $216 million of
adverse development related to legacy run-off exposures, principally asbestos and environmental liabilities. The remaining
favorable development of $600 million comprised 82 percent long-tail lines, principally for the 2014 and prior accident years,
and 18 percent short-tail lines.
Refer to the Prior Period Development section in Note 7 to the Consolidated Financial Statements for additional information.
Current Accident Year (CAY) Loss Ratio excluding Catastrophe Losses (CATs)
The following table presents the impact of catastrophe losses and prior period development on our loss and loss expense ratio.
Refer to the Non-GAAP Reconciliation section for additional information.
Loss and loss expense ratio
Catastrophe losses
Favorable prior period development
CAY loss ratio excluding catastrophe losses
2019
2018
2017
62.1 %
62.1 %
(4.1)%
2.8 %
(5.8)%
3.3 %
60.8 %
59.6 %
65.8 %
(10.2)%
3.2 %
58.8 %
2019 vs. 2018
The CAY loss ratio excluding catastrophe losses increased 1.2 percentage points in 2019 principally due to the following:
• Downward revision in the 2019 crop year margin estimate reflecting preventive planting claims due to the impact of wet
weather conditions and crop yield shortfalls resulting from poor growing conditions;
• Change in mix of business and earned price changes modestly below loss trends in certain classes of our business;
• Partially offset by the adverse impact of elevated homeowners losses in the prior year.
2018 vs. 2017
The CAY loss ratio excluding catastrophe losses increased 0.8 percentage points in 2018 principally due to the following:
•
Increased frequency and severity of homeowners losses in our North America Personal P&C Insurance segment, primarily
non-catastrophe water related events and large fire losses;
• Higher non-catastrophe large losses in our North America Commercial P&C Insurance segment;
• Partially offset by integration-related claims handling expense savings realized.
CAY P&C Combined Ratio excluding CATs
CAY Loss and loss expense ratio ex CATs
CAY Policy acquisition cost ratio ex CATs
CAY Administrative expense ratio ex CATs
CAY P&C combined ratio ex CATs
56
2019
60.8%
19.1%
9.3%
89.2%
2018
59.6%
19.2%
9.2%
88.0%
2017
58.8%
19.4%
9.4%
87.6%
Policy benefits
Policy benefits represent losses on contracts classified as long-duration and generally include accident and supplemental health
products, term and whole life products, endowment products, and annuities. Refer to the Life Insurance segment operating
results section for further discussion.
Policy benefits were $740 million, $590 million and $676 million in 2019, 2018 and 2017, respectively, which included
separate account liabilities (gains) losses of $44 million, $(38) million and $97 million, respectively. The offsetting movements
of these liabilities are recorded in Other (income) expense on the Consolidated statements of operations. Excluding the separate
account gains and losses, Policy benefits were $696 million in 2019, compared with $628 million and $579 million in 2018
and 2017, respectively.
Refer to the respective sections that follow for a discussion of Net investment income, Interest expense, Other (income) expense,
Net realized gains and losses, Amortization of purchased intangibles, and Income tax expense.
Segment Operating Results – Years Ended December 31, 2019, 2018, and 2017
We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance,
North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. In addition, the
results of our run-off Brandywine business, including all run-off asbestos and environmental (A&E) exposures, and the results of
Westchester specialty operations for 1996 and prior years are presented within Corporate.
North America Commercial P&C Insurance
The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C)
insurance and services to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda. This
segment includes our North America Major Accounts and Specialty Insurance division (large corporate accounts and wholesale
business), and the North America Commercial Insurance division (principally middle market and small commercial accounts).
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
Net premiums written
Net premiums earned
Losses and loss expenses
Policy acquisition costs
Administrative expenses
Underwriting income
Net investment income
Other (income) expense
Segment income
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
$ 13,375
$ 12,485
$ 12,019
12,922
12,402
12,191
8,206
1,831
1,028
1,857
2,082
8,000
1,829
966
1,607
2,033
(3)
(25)
8,287
1,873
981
1,050
1,961
1
$ 3,942
$ 3,665
$ 3,010
2019 vs.
2018
7.1 %
4.2 %
2.6 %
0.2 %
6.4 %
15.5 %
2.4 %
(86.5)%
7.5 %
% Change
2018 vs.
2017
3.9 %
1.7 %
(3.5)%
(2.3)%
(1.5)%
53.0 %
3.7 %
NM
21.8 %
63.5%
14.2%
7.9%
85.6%
64.5%
14.7%
7.8%
87.0%
68.0% (1.0)
15.4% (0.5)
8.0%
0.1
91.4% (1.4)
pt
pts
pts
pts
(3.5)
(0.7)
(0.2)
(4.4)
pts
pts
pts
pts
Premiums
The table below shows the impact of large structured transactions as well as other transactions that are fully earned when
written (e.g., audit and retrospective premium adjustments).
(in millions of U.S. dollars)
Net premiums fully earned when written
2019
2018
$
391 $
342 $
2017
160
57
2019 vs. 2018
Net premiums written increased $890 million, or 7.1 percent in 2019, reflecting positive rate increases, new business written
and strong retention across most retail lines, including property, financial lines, excess casualty, risk management, and
commercial package, as well as in our wholesale and high excess Bermuda lines, and in our small commercial businesses.
Net premiums earned increased $520 million, or 4.2 percent in 2019, due to the growth in net premiums written described
above.
2018 vs. 2017
Net premiums written increased $466 million, or 3.9 percent in 2018 reflecting positive rate increases, new business written,
and strong renewals across a number of lines. Retail casualty and risk management, A&H, retail property, and continued growth
in our small commercial business represented $339 million of the $466 million increase. In addition, the year-over-year
increase in large structured transactions was $195 million. This growth was partially offset by merger-related underwriting
actions of $123 million and premium reductions from planned portfolio management in our retail and wholesale brokerage
financial lines ($62 million).
Net premiums earned increased $211 million, or 1.7 percent in 2018 principally reflecting the net premiums written increases
described above and the year-over-year increase in large structured transactions ($163 million), a number of which were earned
immediately when written as they were retroactive covers.
Combined Ratio
2019 vs. 2018
The loss and loss expense ratio decreased 1.0 percentage point in 2019, primarily due to lower catastrophe losses, partially
offset by a change in mix of business and earned price changes modestly below loss trends in certain classes of our business.
The policy acquisition cost ratio decreased 0.5 percentage points in 2019, due to a change in mix of business towards lower
acquisition cost ratio lines and increased cessions under certain reinsurance agreements that resulted in higher ceded
acquisition cost benefits than in the prior year.
2018 vs. 2017
The loss and loss expense ratio decreased 3.5 percentage points in 2018, primarily due to lower catastrophe losses and
integration-related claims handling expense savings realized, partially offset by lower favorable prior period development, higher
non-catastrophe losses (0.4 percentage points), and a less favorable adjustment to our claims handling reserve in the current
year relative to 2017.
The policy acquisition cost ratio decreased 0.7 percentage points in 2018, due to increased cessions under certain reinsurance
agreements that resulted in higher ceded acquisition costs benefits than in the prior year.
The administrative expense ratio decreased 0.2 percentage points in 2018, primarily due to integration-related expense savings
realized, higher net profit from our third-party claims administration business, ESIS, and the net favorable impact of one-time
expense accrual releases.
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2019
2018
$
$
421 $
649 $
579 $
610 $
2017
1,220
746
Catastrophe losses were primarily from the following events (refer to the table on page 54):
• 2019: Winter-related storms and other severe weather-related events in the U.S., including tornadoes in Texas,
Hurricane Dorian, and Tropical Storm Imelda
• 2018: Hurricanes Florence and Michael, and severe weather-related events in the U.S., including California wildfires
• 2017: Hurricanes Harvey, Irma and Maria and severe weather-related events in the U.S., including California wildfires
58
CAY Loss Ratio excluding Catastrophe Losses
Loss and loss expense ratio
Catastrophe losses
Favorable prior period development
CAY loss ratio excluding catastrophe losses
2019
63.5 %
(3.3)%
5.1 %
65.3 %
2018
64.5 %
(4.7)%
5.1 %
64.9 %
2017
68.0 %
(10.0)%
6.3 %
64.3 %
2019 vs. 2018
The CAY loss ratio excluding catastrophe losses increased 0.4 percentage points for 2019 due to a change in mix of business
and earned price changes modestly below loss trends in certain classes of our business.
2018 vs. 2017
The CAY loss ratio excluding catastrophe losses increased 0.6 percentage points for 2018, due to higher year-over-year large
loss activity and a less favorable adjustment to our claims handling reserve in the current year relative to 2017, partially offset
by integration-related claims handling expense savings realized.
North America Personal P&C Insurance
The North America Personal P&C Insurance segment comprises operations that provide high net worth personal lines products,
including homeowners and complementary products such as valuable articles, excess liability, automobile, and recreational
marine insurance and services in the U.S. and Canada.
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
Net premiums written
Net premiums earned
Losses and loss expenses
Policy acquisition costs
Administrative expenses
Underwriting income (loss)
Net investment income
Other (income) expense
Amortization of purchased intangibles
Segment income
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
$ 4,787
$ 4,674
$ 4,533
4,694
3,043
4,593
3,229
4,399
3,265
948
286
417
258
3
12
939
269
156
236
1
13
899
264
(29)
226
4
16
$
660
$
378
$
177
2019 vs.
2018
2.4 %
2.2 %
(5.8)%
1.0 %
6.0 %
167.2 %
9.2 %
117.1 %
(11.1)%
74.7 %
% Change
2018 vs.
2017
3.1 %
4.4 %
(1.1)%
4.4 %
1.9 %
NM
4.4 %
(75.0)%
(18.8)%
113.6 %
64.8%
20.2%
6.1%
91.1%
70.3%
20.4%
5.9%
96.6%
74.2% (5.5)
20.4% (0.2)
6.1%
0.2
100.7% (5.5)
pts
pts
pts
pts
(3.9)
pts
—
(0.2)
(4.1)
pts
pts
Premiums
2019 vs. 2018
Net premiums written increased $113 million, or 2.4 percent for 2019, primarily due to strong retention and rate and exposure
increases across most lines, partially offset by a $44 million benefit in 2018 related to the harmonization of our legacy
premium registration systems, which unfavorably impacted growth by approximately 0.9 percentage points.
Net premiums earned increased $101 million, or 2.2 percent for 2019, reflecting the growth in net premiums written described
above.
59
2018 vs. 2017
Net premiums written increased $141 million, or 3.1 percent for 2018, primarily due to strong retention and new business
growth in homeowners and complementary products such as automobiles and valuables. In addition, the non-renewal of a
quota share treaty in the second quarter of 2017 covering the acquired Fireman's Fund homeowners and automobile businesses
added $47 million of additional net premiums written in 2018. These increases were partially offset by the addition of
California to the homeowners quota share reinsurance treaty, effective October 1, 2018 ($47 million), which included a non-
recurring unearned premium reserves (UPR) transfer of $32 million.
Net premiums earned increased $194 million, or 4.4 percent for 2018, primarily due to the factors described above.
Combined Ratio
2019 vs. 2018
The loss and loss expense ratio decreased 5.5 percentage points in 2019, primarily due to lower catastrophe losses and
favorable prior period development in the current year compared to unfavorable prior period development in the prior year.
Additionally, the prior year underlying loss ratio was elevated principally due to increased frequency and severity, primarily non-
catastrophe water and fire losses in our homeowners business.
The policy acquisition cost ratio decreased 0.2 percentage points in 2019, primarily due to higher ceded commission benefits.
2018 vs. 2017
The loss and loss expense ratio decreased 3.9 percentage points in 2018, primarily due to lower catastrophe losses (6.5
percentage points), lower unfavorable prior period development (0.6 percentage points), and integration-related claims handling
expense savings realized. These decreases were offset by increased frequency and severity of homeowners losses primarily non-
catastrophe water related events and large fire losses which are trending above our expectations (3.3 percentage points).
The policy acquisition cost ratio remained flat in 2018. The administrative expense ratio decreased 0.2 percentage points in
2018, primarily due to integration-related expense savings realized that exceeded normal merit and inflation.
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable (unfavorable) prior period development
2019
2018
$
$
543 $
95 $
611 $
(41) $
2017
871
(69)
Catastrophe losses were primarily from the following events (refer to the table on page 54):
• 2019: Winter-related storms and other severe weather-related events in the U.S., including tornadoes in Texas, California
wildfires and Hurricane Dorian
• 2018: Colorado rain and hailstorms, Hurricanes Florence and Michael, California mudslides, and other severe weather-
related events in the U.S., including California wildfires
• 2017: Hurricanes Harvey and Irma and severe weather-related events in the U.S., including California wildfires
CAY Loss Ratio excluding Catastrophe Losses
Loss and loss expense ratio
Catastrophe losses
Favorable (unfavorable) prior period development
CAY loss ratio excluding catastrophe losses
2019
64.8 %
(11.6)%
1.9 %
55.1 %
2018
70.3 %
(13.6)%
(0.9)%
55.8 %
2017
74.2 %
(20.1)%
(1.5)%
52.6 %
2019 vs. 2018
The CAY loss ratio excluding catastrophe losses decreased 0.7 percentage points in 2019. The prior year underlying loss ratio
was elevated, principally due to increased frequency and severity, primarily non-catastrophe water and fire losses in our
homeowners business.
60
2018 vs. 2017
The CAY loss ratio excluding catastrophe losses increased 3.2 percentage points in 2018, due to increased frequency and
severity of homeowners losses primarily non-catastrophe water related events and large fire losses.
North America Agricultural Insurance
The North America Agricultural Insurance segment comprises our North American based businesses that provide a variety of
coverages in the U.S. and Canada including crop insurance, primarily Multiple Peril Crop Insurance (MPCI) and crop-hail
through Rain and Hail Insurance Service, Inc. (Rain and Hail) as well as farm and ranch and specialty P&C commercial
insurance products and services through our Chubb Agribusiness unit.
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
Net premiums written
Net premiums earned
Adjusted losses and loss expenses
Policy acquisition costs
Administrative expenses
Underwriting income
Net investment income
Other (income) expense
Amortization of purchased intangibles
Segment income
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
$ 1,810
$ 1,577
$ 1,516
1,795
1,616
1,569
1,114
1,508
1,043
84
6
89
30
1
28
90
$
79
(9)
385
28
2
28
81
(8)
392
25
2
29
$
383
$
386
2019 vs.
2018
14.8 %
14.4 %
45.1 %
6.8 %
NM
(77.0)%
5.0 %
(33.6)%
(2.0)%
(76.6)%
% Change
2018 vs.
2017
4.0 %
4.1 %
6.8 %
(2.5)%
12.5 %
(1.8)%
12.0 %
—
(3.4)%
(0.8)%
90.1%
71.0 %
69.2 % 19.1
4.7%
0.3%
5.0 %
(0.5)%
5.4 %
(0.3)
(0.6)%
0.8
95.1%
75.5 %
74.0 % 19.6
pts
pts
pts
pts
1.8
(0.4)
0.1
1.5
pts
pts
pts
pts
Premiums
2019 vs. 2018
Net premiums written increased $233 million, or 14.8 percent in 2019, primarily due to growth in our MPCI business and
growth in our Chubb Agribusiness. Growth in our MPCI premium was driven primarily by higher retention as a result of the
premium sharing formulas under the U.S. government, as well as the non-renewal of a quota-share treaty effective with the
current crop year and an increase in current year production. Under the MPCI premium sharing formula under the U.S.
government, we cede additional premiums to the government during profitable years. In 2018, the program was more profitable
which resulted in higher cessions compared to 2019.
Net premiums earned increased $226 million, or 14.4 percent in 2019, reflecting the growth in net premiums written
described above.
2018 vs. 2017
Net premiums written increased $61 million, or 4.0 percent in 2018, primarily due to growth in our MPCI business and growth
in our Chubb Agribusiness. The growth in MPCI premium was driven by policy count growth and the year-over-year impact of
the premium sharing formulas under the U.S. government. In 2017, the program was more profitable which resulted in higher
cessions compared to 2018. The increase was partially offset by lower volatility factors, which are a component of the policy
pricing that measures the likelihood the commodity price will fluctuate over the crop year and reduces the premium we charge.
Net premiums earned increased $61 million, or 4.1 percent in 2018, due to the factors described above.
61
Combined Ratio
2019 vs. 2018
The loss and loss expense ratio increased 19.1 percentage points in 2019, principally due to lower favorable prior period
development and the downward revision in the 2019 crop year margin estimate reflecting preventive planting claims due to the
impact of wet weather conditions and crop yield shortfalls resulting from poor growing conditions. The increase in the loss ratio
was partially offset by lower catastrophe losses.
The policy acquisition cost ratio decreased 0.3 percentage points in 2019, primarily due to lower agent profit sharing
commission.
The administrative expense ratio increased 0.8 percentage points in 2019, primarily due to a reduction in the current year
Administrative and Operating (A&O) reimbursements on the MPCI business we received under the government program and
normal operating expense and inflationary increases.
2018 vs. 2017
The loss and loss expense ratio increased 1.8 percentage points in 2018 due to higher catastrophe losses and lower favorable
prior period development.
The policy acquisition cost ratio decreased 0.4 percentage points in 2018 due to lower MPCI reinsurance cessions in the
current year.
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2019
2018
$
$
8 $
80 $
21 $
110 $
2017
18
119
Catastrophe losses in 2019, 2018, and 2017 were primarily from severe weather-related events in the U.S. in our farm, ranch
and specialty P&C businesses. Refer to the table on page 54.
Net favorable prior period development was $80 million, $110 million, and $119 million in 2019, 2018, and 2017,
respectively. For 2019, the prior period development amount included $103 million of favorable incurred losses and $13
million of lower acquisition costs due to lower than expected MPCI losses for the 2018 crop year, partially offset by a $36
million decrease in net premiums earned related to the MPCI profit and loss calculation formula. For 2018, the prior period
development amount included $140 million of favorable incurred losses and $10 million of lower acquisition costs due to lower
than expected MPCI losses for the 2017 crop year, partially offset by a $40 million decrease in net premiums earned related to
the MPCI profit and loss calculation formula.
CAY Loss Ratio excluding Catastrophe Losses
Loss and loss expense ratio
Catastrophe losses
Favorable prior period development
CAY loss ratio excluding catastrophe losses
2019
90.1 %
(0.5)%
3.9 %
93.5 %
2018
71.0 %
(1.3)%
7.0 %
76.7 %
2017
69.2 %
(1.2)%
8.2 %
76.2 %
2019 vs. 2018
The CAY loss ratio excluding catastrophe losses increased 16.8 percentage points in 2019, principally due to the downward
revision in the 2019 crop year margin estimate reflecting preventive planting claims due to the impact of wet weather
conditions and crop yield shortfalls resulting from poor growing conditions.
2018 vs. 2017
The CAY loss ratio excluding catastrophe losses increased 0.5 percentage points in 2018, primarily due to a less favorable crop
margin in the current year versus 2017, partially offset by lower underlying losses in our Chubb Agribusiness unit.
62
Overseas General Insurance
Overseas General Insurance segment comprises Chubb International and Chubb Global Markets (CGM). Chubb International
comprises our international commercial P&C traditional and specialty lines serving large corporations, middle market and small
customers; A&H and traditional and specialty personal lines business serving local territories outside the U.S., Bermuda, and
Canada. CGM, our London-based international commercial P&C excess and surplus lines business, includes Lloyd's of London
(Lloyd's) Syndicate 2488. Chubb provides funds at Lloyd's to support underwriting by Syndicate 2488 which is managed by
Chubb Underwriting Agencies Limited.
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
Net premiums written
Net premiums earned
Losses and loss expenses
Policy acquisition costs
Administrative expenses
Underwriting income
Net investment income
Other (income) expense
Amortization of purchased intangibles
Segment income
Net premiums written - constant dollars (1)
Net premiums earned - constant dollars (1)
Underwriting income - constant dollars (1)
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
Net Premiums Written by Region
$ 9,262
$ 8,902
$ 8,350
8,882
4,606
2,501
1,033
742
588
12
45
8,612
4,429
2,346
1,014
823
619
—
41
8,131
4,281
2,221
982
647
610
(4)
45
$ 1,273
$ 1,401
$ 1,216
2019 vs.
2018
% Change
2018 vs.
2017
4.0 %
3.1 %
4.0 %
6.6 %
1.9 %
(9.8)%
(5.1)%
NM
8.3 %
(9.2)%
8.4 %
7.6 %
(3.7)%
6.6 %
5.9 %
3.5 %
5.6 %
3.3 %
27.2 %
1.5 %
NM
(8.9)%
15.2 %
5.3 %
4.7 %
24.1 %
51.9%
28.1%
11.6%
91.6%
51.4%
27.2%
11.8%
90.4%
52.6%
27.3%
0.5
0.9
12.1% (0.2)
92.0%
1.2
pts
pts
pts
pts
(1.2)
(0.1)
(0.3)
(1.6)
pts
pts
pts
pts
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
C$ (1)
2018
2019 vs.
2018
C$ (1)
2019 vs.
2018
% Change
2018 vs.
2017
Region
Europe
Latin America
Asia
Other (2)
Net premiums written
Region
Europe
Latin America
Asia
Other (2)
$ 3,631
$ 3,508
$ 3,281
$ 3,357
2,277
3,021
333
2,181
2,884
329
2,108
2,596
365
2,059
2,806
318
$ 9,262
$ 8,902
$ 8,350
$ 8,540
2019
% of Total
2018
% of Total
2017
% of Total
3.5 %
4.4 %
4.7 %
1.1 %
4.0 %
8.2%
10.6%
7.6%
4.8%
8.4%
6.9 %
3.5 %
11.1 %
(9.9)%
6.6 %
38%
25%
33%
4%
39%
25%
32%
4%
40%
25%
31%
4%
Net premiums written
(1) On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.
(2)
100%
100%
100%
Comprises Combined International, Eurasia and Africa region, and other international.
63
Premiums
2019 vs. 2018
Net premiums written increased $360 million in 2019, or $722 million on a constant-dollar basis, reflecting growth across all
regions and most lines of business. P&C lines growth was across all regions and was principally due to positive rate increases
and new business in property, casualty, and financial lines. Personal lines growth was driven by new business principally in
Latin America and Europe. Accident and health (A&H) lines growth was principally in Asia and Latin America driven by new
business.
Net premiums earned increased $270 million in 2019, or $629 million on a constant-dollar basis, reflecting the increase in net
premiums written.
2018 vs. 2017
Net premiums written increased $552 million in 2018, or $448 million on a constant-dollar basis, reflecting growth across
most regions and lines of business. P&C lines growth was across all regions, principally in small commercial property and
general casualty lines reflecting new business, and in middle market driven by new business and rate increases. Personal lines
growth was principally in our automobile line in Mexico driven by new business, as well as in our specialty lines in Asia. A&H
lines growth was principally in Asia driven by new business.
Net premiums earned increased $481 million in 2018, or $384 million on a constant-dollar basis, due to the factors described
above.
Combined Ratio
2019 vs. 2018
The loss and loss expense ratio increased 0.5 percentage points in 2019 due to lower favorable prior period development,
partially offset by lower catastrophe losses, earned price changes modestly above loss trends, favorable loss experience in
certain personal lines, and a change in mix of business towards products and regions that have a lower loss and loss expense
ratio and a higher policy acquisition cost ratio.
The policy acquisition cost ratio increased 0.9 percentage points in 2019 due to a change in mix of business towards products
and regions that have a higher policy acquisition cost ratio and lower loss and loss expense ratio as noted above, higher
underwriting costs resulting from the successful acquisition of business, and higher commissions paid on certain personal lines
due to favorable loss experience.
2018 vs. 2017
The loss and loss expense ratio decreased 1.2 percentage points in 2018, reflecting lower catastrophe losses (1.6 percentage
points) and a change in the mix of business towards consumer and property and casualty lines in countries that have a lower
loss ratio and a higher acquisition cost ratio (0.3 percentage points), partially offset by lower favorable prior period development
in 2018 (0.6 percentage points).
The policy acquisition cost ratio was relatively flat in 2018.
The administrative expense ratio decreased 0.3 percentage points in 2018, primarily driven by integration-expense savings
realized (0.3 percentage points).
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2019
2018
$
$
152 $
92 $
206 $
212 $
2017
331
252
64
Catastrophe losses were primarily from the following events (refer to the table on page 54):
• 2019: Typhoons Faxai and Hagibis; Hurricane Dorian; storms in Australia; civil unrest in Hong Kong and Chile; and other
international weather-related events
• 2018: Typhoons Jebi, Mangkhut and Trami; Hurricane Florence and storms in Australia
• 2017: Hurricanes Harvey, Irma and Maria; Earthquakes in Mexico, Cyclone Debbie in Australia, and flooding in Latin
America
CAY Loss Ratio excluding Catastrophe Losses
Loss and loss expense ratio
Catastrophe losses
Favorable prior period development
CAY loss ratio excluding catastrophe losses
2019
51.9 %
(1.8)%
1.1 %
51.2 %
2018
51.4 %
(2.4)%
2.5 %
51.5 %
2017
52.6 %
(4.0)%
3.1 %
51.7 %
2019 vs. 2018
The CAY loss ratio excluding catastrophe losses decreased 0.3 percentage points in 2019 primarily due to earned price changes
modestly above loss trends, favorable loss experience in certain personal lines, and a change in mix of business towards
products and regions that have a lower loss and loss expense ratio and a higher policy acquisition cost ratio.
2018 vs. 2017
The CAY loss ratio excluding catastrophe losses decreased 0.2 percentage points in 2018 primarily due to a change in the mix
of business towards consumer and property and casualty lines in countries that have a lower loss ratio and a higher acquisition
cost ratio.
Global Reinsurance
The Global Reinsurance segment represents our reinsurance operations comprising Chubb Tempest Re Bermuda, Chubb
Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada. Global Reinsurance markets its reinsurance
products worldwide primarily through reinsurance brokers under the Chubb Tempest Re brand name and provides a broad range
of traditional and non-traditional reinsurance coverage to a diverse array of primary P&C companies.
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
Net premiums written
Net premiums earned
Losses and loss expenses
Policy acquisition costs
Administrative expenses
Underwriting income (loss)
Net investment income
Other (income) expense
Segment income
Net premiums written - constant dollars (1)
Net premiums earned - constant dollars (1)
Underwriting income - constant dollars (1)
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
(1)
$
$
649
654
352
169
35
98
220
(58)
$
671
670
479
162
41
(12)
257
(32)
685
704
561
177
44
(78)
273
(1)
$
376
$
277
$
196
53.9%
25.7%
5.4%
71.6%
24.2%
6.0%
79.8% (17.7)
25.1%
1.5
6.3% (0.6)
85.0%
101.8%
111.2% (16.8)
NM
pts
pts
pts
pts
2019 vs.
2018
(3.2)%
(2.3)%
(26.5)%
4.2 %
(12.7)%
NM
(14.4)%
80.6 %
35.7 %
(1.7)%
(0.8)%
% Change
2018 vs.
2017
(2.1)%
(4.9)%
(14.7)%
(8.4)%
(8.4)%
84.8 %
(6.1)%
NM
41.3 %
(3.3)%
(6.0)%
84.0 %
(8.2)
(0.9)
(0.3)
(9.4)
pts
pts
pts
pts
65
On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.
Premiums
2019 vs. 2018
Net premiums written decreased $22 million in 2019, or $12 million on a constant-dollar basis, as an increase in new
business written in property and marine lines was more than offset by an increase in ceded retrocessions, reductions in the
international motor line, and higher reinstatement premiums collected in the prior year.
Net premiums earned decreased $16 million in 2019, or $5 million on a constant-dollar basis, reflecting the decrease in net
premiums written described above.
2018 vs. 2017
Net premiums written decreased $14 million in 2018, or $22 million on a constant-dollar basis, primarily due to higher
reinstatement premiums collected in the prior year principally relating to the 2017 natural catastrophes ($15 million year-over-
year decrease) and lower renewals, which is reflective of competitive market conditions primarily in catastrophe and catastrophe
exposed lines of business, partially offset by new business written in the casualty line of business.
Net premiums earned decreased $34 million in 2018, or $42 million on a constant-dollar basis, reflecting the decrease in net
premiums written. The decrease was also due to $14 million of short-term treaties (less than one year in duration) earned in the
prior year that were written in 2016 and 2017.
Combined Ratio
2019 vs. 2018
The loss and loss expense ratio decreased 17.7 percentage points in 2019 primarily due to lower catastrophe losses, partially
offset by lower favorable prior period development.
The policy acquisition cost ratio increased 1.5 percentage points in 2019 primarily due to higher commissions paid on property
and motor lines treaties with adjustable commission features, and higher reinstatement premiums collected in the prior year
which have a lower acquisition cost.
The administrative expense ratio decreased 0.6 percentage points in 2019 primarily driven by lower variable costs.
2018 vs. 2017
The loss and loss expense ratio decreased 8.2 percentage points in 2018 principally due to lower catastrophe losses partially
offset by lower favorable prior period development and a shift in the mix of business from property catastrophe business towards
casualty business, which generally has a higher loss ratio.
The policy acquisition cost ratio decreased 0.9 percentage points in 2018 primarily due to lower acquisition expenses from
proportional business sold.
The administrative expense ratio decreased 0.3 percentage points in 2018 primarily due to continued expense management.
Catastrophe Losses and Prior Period Development
(in millions of U.S dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2019
2018
$
$
51 $
29 $
205 $
50 $
2017
313
59
Catastrophe losses were primarily from the following events (refer to the table on page 54):
• 2019: Typhoons Hagibis and Faxai; Hurricane Dorian, and other severe weather-related events primarily in the U.S.
• 2018: Hurricanes Florence and Michael; Typhoons Jebi and Trami; Windstorm Friederike, California Wildfires, and severe
weather-related events in the U.S., Canada and Japan
• 2017: Hurricanes Harvey, Irma and Maria; Northern California Wildfires, and severe weather-related events in the U.S.
66
CAY Loss Ratio excluding Catastrophe Losses
Loss and loss expense ratio
Catastrophe losses
Favorable prior period development
CAY loss ratio excluding catastrophe losses
2019
53.9 %
(7.6)%
4.3 %
50.6 %
2018
71.6 %
(29.2)%
8.1 %
50.5 %
2017
79.8 %
(42.4)%
8.6 %
46.0 %
The CAY loss ratio excluding catastrophe losses remained relatively flat in 2019. The CAY loss ratio excluding catastrophe losses
increased 4.5 percentage points in 2018 primarily due to a shift in the mix of business from property catastrophe business
towards casualty business which generally has a higher loss ratio and higher losses in our U.S. property lines.
Life Insurance
The Life Insurance segment comprises Chubb's international life operations, Chubb Tempest Life Re (Chubb Life Re), and the
North American supplemental A&H and life business of Combined Insurance.
(in millions of U.S. dollars, except for percentages)
Net premiums written
Net premiums earned
Losses and loss expenses
Adjusted policy benefits
Policy acquisition costs
Administrative expenses
Net investment income
Life Insurance underwriting income
Other (income) expense
Amortization of purchased intangibles
Segment income
Net premiums written - constant dollars (1)
Net premiums earned - constant dollars (1)
Life Insurance underwriting income - constant dollars (1)
NM – not meaningful
(1)
2019
2018
2017
$ 2,392 $ 2,270 $ 2,141
2,343
2,218
2,101
757
696
620
323
373
320
(48)
2
766
628
557
310
341
298
(12)
2
739
579
530
303
313
263
13
2
% Change
2019 vs.
2018
2018 vs.
2017
5.3 %
5.6 %
(1.1)%
10.8 %
11.2 %
4.5 %
9.2 %
6.9 %
NM
—
6.1%
5.6%
3.7%
8.5%
5.1%
2.3%
8.9%
13.3%
NM
—
$
366 $
308 $
248
18.6 %
24.2%
6.4 %
6.6 %
8.1 %
5.7%
5.3%
13.9%
On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.
Premiums
2019 vs. 2018
Net premiums written increased $122 million in 2019, or $143 million on a constant-dollar basis, primarily reflecting growth
in our Asian and Latin American international life operations and North American Combined Insurance supplemental A&H
program, partially offset by our life reinsurance business, which continues to decline as no new life reinsurance business is
being written.
2018 vs. 2017
Net premiums written increased $129 million in 2018, or $123 million on a constant-dollar basis, primarily due to growth in
our North American Combined Insurance supplemental A&H program business, and Asian and Latin American international life
operations, partially offset by our life reinsurance business, which continues to decline as no new life reinsurance business is
being written.
67
Deposits
The following table presents deposits collected on universal life and investment contracts:
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
% Change
2019 vs.
2018
C$ (1)
2019 vs.
2018
2018 vs.
2017
Deposits collected on universal life and investment
contracts
$ 1,463 $ 1,538 $ 1,436
(4.9)%
(2.3)%
7.1%
(1) On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.
Deposits collected on universal life and investment contracts (life deposits) are not reflected as revenues in our Consolidated
statements of operations in accordance with GAAP. New life deposits are an important component of production, and although
they do not significantly affect current period income from operations they are key to our efforts to grow our business. Life
deposits collected decreased in 2019 due to declines in Taiwan, driven by competitive market conditions, and Hong Kong, due
to the civil unrest negatively impacting growth in the second half of the year, partially offset by growth in Vietnam. Foreign
exchange unfavorably impacted growth by $40 million in 2019.
Life deposits collected increased in 2018 due to growth in Korea, Taiwan, and Vietnam. Foreign exchange favorably impacted
growth by $14 million in 2018.
Life Insurance underwriting income and Segment income
2019 vs. 2018
Life Insurance underwriting income increased $22 million in 2019 compared to 2018, principally reflecting an increase in net
investment income, partially offset by a favorable reserve development in the prior year. Additionally, segment income benefited
from other income of $48 million in 2019 compared to $12 million in 2018, principally due to our share of net income from
Huatai Life, our partially-owned life insurance entity in China.
2018 vs. 2017
Life Insurance underwriting income increased $35 million in 2018 compared to 2017 primarily due to an increase in net
investment income as well as growth as described above.
68
Corporate
Corporate results primarily include the results of our non-insurance companies, income and expenses not attributable to
reportable segments and loss and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-
off exposures.
Our exposure to A&E claims principally arises out of liabilities acquired when we purchased Westchester Specialty in 1998,
CIGNA’s P&C business in 1999, and legacy Chubb Corp A&E claims in 2016. Corporate staff expenses and net investment
income of Chubb Limited, including the amortization of the fair value adjustment on acquired invested assets and debt, interest
expense, amortization of purchased intangibles related to the Chubb Corp acquisition, and Chubb integration expenses are
reported within Corporate.
(in millions of U.S. dollars, except for percentages)
2019
2018
2017
Losses and loss expenses
Administrative expenses
Underwriting loss
Net investment income (loss)
Interest expense
Adjusted net realized gains (losses)
Other (income) expense
Amortization of purchased intangibles
Chubb integration expenses
Income tax expense (benefit)
Net loss
NM – not meaningful
$
158 $
53 $
319
477
(125)
552
(522)
(459)
218
23
795
295
348
(209)
641
(649)
(406)
255
59
695
$
(2,253) $
(2,450) $
(1,372)
2019 vs.
2018
% Change
2018 vs.
2017
203.0 %
(81.4)%
285
267
552
8.1 %
36.6 %
(283)
(40.5)%
607
91
(13.9)%
(19.7)%
(318)
12.6 %
168
310
(139)
(14.3)%
(61.7)%
14.4 %
(8.1)%
10.5 %
(37.0)%
(26.1)%
5.6 %
NM
27.7 %
51.8 %
(81.0)%
NM
78.6 %
Losses and loss expenses in 2019, 2018, and 2017 were primarily from adverse development relating to our Brandywine
asbestos and environmental exposures, non-A&E run-off casualty exposure, including workers' compensation, and unallocated
loss adjustment expenses of the A&E claims operations. In addition, 2018 included favorable reinsurance settlements of $205
million. Refer to Note 7 of the Consolidated Financial Statements for further information.
Administrative expenses increased $24 million and $28 million in 2019 and 2018, respectively, primarily due to higher global
advertising expenses.
Chubb integration expenses are one-time in nature and are not related to the on-going business activities of the segments. The
Chief Executive Officer does not manage segment results or allocate resources to segments when considering these costs and
they are therefore excluded from our definition of segment income. Chubb integration expenses in 2019 principally consisted of
small residual items related to the Chubb acquisition. Chubb integration expenses for 2018 were $59 million and principally
consisted of personnel-related expenses ($18 million) and rebranding ($14 million).
Refer to the respective sections that follow for a discussion of Net investment income, Interest expense, Other (income) expense,
Net realized gains and losses, Amortization of purchased intangibles, and Income tax expense.
Effective income tax rate
Our effective income tax rate reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent
differences between US GAAP and local tax laws, and the timing of recording discrete items. A change in the geographic mix of
earnings could impact our effective tax rate.
In 2019, 2018, and 2017, our effective income tax rate was 15.1 percent, 14.9 percent, and (3.7) percent, respectively. The
effective income tax rate in 2018 was favorably impacted by an increase to the provisional benefit recorded related to the
impact of the 2017 Tax Act. The effective income tax rate in 2017 included the favorable income tax benefit of $450 million,
69
which represented our best estimate of the impact of the 2017 Tax Act. In addition, the income tax benefit in 2017 reflected
the significant catastrophe losses in the year.
The 2017 Tax Act included provisions for Global Intangible Low-Taxed Income (GILTI) under which taxes may be imposed on
income of foreign subsidiaries and for a Base Erosion and Anti-Abuse Tax (BEAT) under which taxes may be imposed on certain
payments to affiliated foreign companies. There remain substantial uncertainties in the interpretation of GILTI and BEAT and
portions of the formal guidance issued to date are still in part in proposed form. Finalization of the proposed guidance, and
changes to the interpretations and assumptions related to these provisions may impact amounts recorded with respect to the
international provisions of the 2017 Tax Act, which may be material in the period the adjustment is recorded. Refer to Note 8 to
the Consolidated Financial Statements for additional information on the 2017 Tax Act.
Our effective income tax rate reflects the lower corporate tax rates that prevailed outside the United States on income attributed
to certain foreign operations, including 7.83 percent in Switzerland and 0.0 percent in Bermuda. During 2019, approximately
42 percent of our total pre-tax income was tax effected based on these lower rates compared with 49 percent and 62 percent in
2018 and 2017, respectively.
Non-GAAP Reconciliation
In presenting our results, we included and discussed certain non-GAAP measures. These non-GAAP measures, which may be
defined differently by other companies, are important for an understanding of our overall results of operations and financial
condition. However, they should not be viewed as a substitute for measures determined in accordance with generally accepted
accounting principles (GAAP).
Adjusted interest expense and adjusted net investment income are non-GAAP financial measures which exclude amortization of
the fair value adjustment on assumed long-term debt and acquired invested assets, respectively, related to the Chubb Corp
acquisition due to the size and complexity of this acquisition. Refer to the Interest Expense section for a reconciliation of interest
expense to adjusted interest expense.
We provide financial measures, including net premiums written, net premiums earned, and underwriting income on a constant-
dollar basis. We believe it is useful to evaluate the trends in our results exclusive of the effect of fluctuations in exchange rates
between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could
fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign
exchange rates between periods by translating prior period results using the same local currency exchange rates as the
comparable current period.
Adjusted policy benefits include gains and losses from fair value changes in separate account assets, as well as the offsetting
movement in separate account liabilities, for purposes of reporting Life Insurance underwriting income. The gains and losses
from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP have been
reclassified from Other (income) expense. We view gains and losses from fair value changes in both separate account assets and
liabilities as part of the results of our underwriting operations, and therefore these gains and losses are reclassified to adjusted
policy benefits.
The following table presents a reconciliation of Policy benefits to Adjusted policy benefits:
(in millions of U.S. dollars)
Policy benefits
Add: (Gains) losses from fair value changes in separate account assets
Adjusted policy benefits
Year Ended December 31
2019
2018
740 $
590 $
(44)
38
696 $
628 $
2017
676
(97)
579
$
$
P&C performance metrics comprise consolidated operating results (including Corporate) and exclude the operating results of the
Life Insurance segment. We believe that these measures are useful and meaningful to investors as they are used by
management to assess the company’s P&C operations which are the most economically similar. We exclude the Life Insurance
segment because the results of this business do not always correlate with the results of our P&C operations.
70
P&C combined ratio is the sum of the loss and loss expense ratio, acquisition cost ratio and the administrative expense ratio
excluding the life business and including the realized gains and losses on the crop derivatives. These derivatives were purchased
to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity
pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting
operations.
CAY P&C combined ratio excluding catastrophe losses (CATs) excludes CATs and prior period development (PPD) from the P&C
combined ratio. We exclude CATs as they are not predictable as to timing and amount and PPD as these unexpected loss
developments on historical reserves are not indicative of our current underwriting performance. The combined ratio numerator is
adjusted to exclude CATs, net premiums earned adjustments on PPD, prior period expense adjustments and reinstatement
premiums on PPD, and the denominator is adjusted to exclude net premiums earned adjustments on PPD and reinstatement
premiums on CATs and PPD. In periods where there are adjustments on loss sensitive policies, these adjustments are excluded
from PPD and net premiums earned when calculating the ratios. We believe this measure provides a better evaluation of our
underwriting performance and enhances the understanding of the trends in our P&C business that may be obscured by these
items. This measure is commonly reported among our peer companies and allows for a better comparison.
Reinstatement premiums are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that
had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro rata portion of the original ceded
premium paid based on how much of the reinsurance limit had been exhausted.
Net premiums earned adjustments within PPD are adjustments to the initial premium earned on retrospectively rated policies
based on actual claim experience that develops after the policy period ends. The premium adjustments correlate to the prior
period loss development on these same policies and are fully earned in the period the adjustments are recorded.
Prior period expense adjustments typically relate to adjustable commission reserves or policyholder dividend reserves based on
actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss
development on these same policies.
For this disclosure purpose, the normalized level of CATs, or expected level of CATs, is not intended to represent a probability
weighted expectation for the company but rather to represent management's view of what might be more typical for a given
period based on various factors, including historical experience, seasonal patterns, and consideration of both modeled CATs
(e.g., windstorm and earthquake) as well as non-modeled CATs (e.g., wildfires, floods and freeze).
The following table presents CATs above (below) expected level and the impact on the combined ratio:
(in millions of U.S. dollars, except for percentage points)
Actual level of CATs - pre-tax
Less: Expected level of CATs - pre-tax
CATs above expected level - pre-tax
Adverse impact of CATs above an expected level on combined ratio
Year Ended December 31
2019
2018
2017
$ 1,187
$ 1,626
$ 2,746
969
218
$
937
689
908
$ 1,838
$
0.7%
2.5%
6.8%
71
The following tables present the calculation of combined ratio, as reported for each segment to P&C combined ratio, adjusted
for catastrophe losses (CATs) and PPD:
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Corporate
Total P&C
For the Year Ended
December 31, 2019
(in millions of U.S. dollars except for ratios)
Numerator
Losses and loss expenses
Losses and loss expenses
Realized (gains) losses on crop derivatives
—
—
8
—
Adjusted losses and loss expenses
A $
8,206
$ 3,043
$ 1,616
$ 4,606
$
8,206
$ 3,043
$ 1,608
$ 4,606
$
$
352
—
352
$
$
158
$ 17,973
—
8
158
$ 17,981
Catastrophe losses and related adjustments
Catastrophe losses, net of related adjustments
(421)
(554)
Reinstatement premiums collected (expensed) on
catastrophe losses
Catastrophe losses, gross of related adjustments
PPD and related adjustments
PPD, net of related adjustments - favorable
(unfavorable)
Net premiums earned adjustments on PPD -
unfavorable (favorable)
Expense adjustments - unfavorable (favorable)
PPD reinstatement premiums - unfavorable
(favorable)
PPD, gross of related adjustments - favorable
(unfavorable)
—
(421)
(11)
(543)
649
38
(3)
(1)
683
95
—
—
(4)
91
(8)
—
(8)
80
36
(13)
—
103
(156)
(4)
(152)
92
—
—
1
93
(48)
3
(51)
—
—
—
(1,187)
(12)
(1,175)
29
(153)
792
1
(1)
(1)
—
—
—
75
(17)
(5)
28
(153)
845
CAY loss and loss expense ex CATs
B $
8,468
$ 2,591
$ 1,711
$ 4,547
$
329
$
5
$ 17,651
Policy acquisition costs and administrative
expenses
Policy acquisition costs and administrative
expenses
C $
2,859
$ 1,234
$
Expense adjustments - favorable (unfavorable)
3
—
90
13
$ 3,534
$
204
$
319
$
8,240
—
1
—
17
Policy acquisition costs and administrative expenses,
adjusted
D $
2,862
$ 1,234
$
103
$ 3,534
E $ 12,922
$ 4,694
$ 1,795
$ 8,882
$
$
205
$
319
$
8,257
654
$ 28,947
Denominator
Net premiums earned
Reinstatement premiums (collected) expensed on
catastrophe losses
Net premiums earned adjustments on PPD -
unfavorable (favorable)
PPD reinstatement premiums - unfavorable
(favorable)
—
38
(1)
11
—
(4)
—
36
—
4
—
1
(3)
1
(1)
12
75
(5)
Net premiums earned excluding adjustments
F $ 12,959
$ 4,701
$ 1,831
$ 8,887
$
651
$ 29,029
P&C Combined ratio
Loss and loss expense ratio
Policy acquisition cost and administrative expense
ratio
P&C Combined ratio
CAY P&C Combined ratio ex CATs
Loss and loss expense ratio, adjusted
Policy acquisition cost and administrative expense
ratio, adjusted
CAY P&C Combined ratio ex CATs
A/E
C/E
B/F
D/F
Combined ratio
Combined ratio
Add: impact of gains and losses on crop derivatives
63.5%
64.8%
90.1%
51.9%
53.9%
22.1%
85.6%
26.3%
91.1%
5.0%
95.1%
39.7%
91.6%
31.1%
85.0%
65.3%
55.1%
93.5%
51.2%
50.6%
22.1%
87.4%
26.3%
81.4%
5.6%
99.1%
39.7%
90.9%
31.5%
82.1%
62.1%
28.5%
90.6%
60.8%
28.4%
89.2%
90.6%
—
P&C Combined ratio
Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E and F included in the table are
references for calculating the ratios above.
90.6%
72
For the Year Ended
December 31, 2018
(in millions of U.S. dollars except for ratios)
Numerator
Losses and loss expenses
Losses and loss expenses
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Corporate
Total P&C
Realized (gains) losses on crop derivatives
—
—
3
—
Adjusted losses and loss expenses
A $
8,000
$ 3,229
$
1,114
$ 4,429
$
8,000
$ 3,229
$
1,111
$ 4,429
Catastrophe losses and related adjustments
Catastrophe losses, net of related adjustments
(579)
(637)
Reinstatement premiums collected (expensed) on
catastrophe losses
Catastrophe losses, gross of related adjustments
PPD and related adjustments
PPD, net of related adjustments - favorable
(unfavorable)
Net premiums earned adjustments on PPD -
unfavorable (favorable)
Expense adjustments - unfavorable (favorable)
PPD reinstatement premiums - unfavorable
(favorable)
PPD, gross of related adjustments - favorable
(unfavorable)
—
(579)
(26)
(611)
(21)
—
(21)
(206)
—
(206)
610
(41)
110
212
29
7
7
—
—
1
40
(10)
—
—
—
4
653
(40)
140
216
$
$
479
—
479
$
$
(183)
22
(205)
50
8
(1)
—
57
53
—
53
—
—
—
$ 17,301
3
$ 17,304
(1,626)
(4)
(1,622)
(45)
896
—
—
—
77
(4)
12
(45)
981
CAY loss and loss expense ex CATs
B $
8,074
$ 2,578
$
1,233
$ 4,439
$
331
$
8
$ 16,663
Policy acquisition costs and administrative
expenses
Policy acquisition costs and administrative
expenses
C $
2,795
$ 1,208
$
Expense adjustments - favorable (unfavorable)
(7)
—
70
10
$ 3,360
$
203
$
295
$
7,931
—
1
—
4
Policy acquisition costs and administrative expenses,
adjusted
D $
2,788
$ 1,208
$
80
$ 3,360
Denominator
Net premiums earned
Reinstatement premiums (collected) expensed on
catastrophe losses
Net premiums earned adjustments on PPD -
unfavorable (favorable)
PPD reinstatement premiums - unfavorable
(favorable)
E $ 12,402
$ 4,593
$
1,569
$ 8,612
—
29
7
26
—
1
—
40
—
—
—
4
$
$
204
$
295
$
7,935
670
(22)
8
—
$ 27,846
4
77
12
Net premiums earned excluding adjustments
F $ 12,438
$ 4,620
$
1,609
$ 8,616
$
656
$ 27,939
P&C Combined ratio
Loss and loss expense ratio
Policy acquisition cost and administrative expense
ratio
P&C Combined ratio
CAY P&C Combined ratio ex CATs
Loss and loss expense ratio, adjusted
Policy acquisition cost and administrative expense
ratio, adjusted
CAY P&C Combined ratio ex CATs
A/E
C/E
B/F
D/F
Combined ratio
Combined ratio
Add: impact of gains and losses on crop derivatives
64.5%
70.3%
71.0%
51.4%
71.6%
22.5%
87.0%
26.3%
96.6%
4.5%
75.5%
39.0%
90.4%
30.2%
101.8%
64.9%
55.8%
76.7%
51.5%
50.5%
22.4%
87.3%
26.1%
81.9%
4.9%
81.6%
39.0%
90.5%
31.1%
81.6%
62.1%
28.5%
90.6%
59.6%
28.4%
88.0%
90.6%
—
P&C Combined ratio
Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E and F included in the table are
references for calculating the ratios above.
90.6%
73
Net Investment Income
(in millions of U.S. dollars, except for percentages)
Average invested assets
Net investment income (1)
Yield on average invested assets
Market yield on fixed maturities
2019
2018
$
$
104,074
3,426
$
$
101,453
3,305
$
$
3.3%
2.7%
3.3%
3.7%
2017
99,675
3,125
3.1%
2.9%
(1)
Includes $161 million, $248 million and $332 million of amortization expense related to the fair value adjustment of acquired invested assets related to the Chubb Corp
acquisition in 2019, 2018 and 2017, respectively.
Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash
flows, the level of interest rates, and changes in overall asset allocation. Net investment income increased 3.6 percent in 2019
compared with 2018, primarily due to higher average invested assets, partially offset by a reduction in the usage of notional
cash pooling programs and unfavorable foreign exchange. Net investment income increased 5.8 percent in 2018 compared with
2017, primarily due to higher reinvestment rates offset by lower private equity distributions. Refer to Note 3 g) to the
Consolidated Financial Statements for additional information.
For private equities where we own less than three percent, investment income is included within Net investment income in the
table above. For private equities where we own more than three percent, investment income is included within Other income
(expense) in the Consolidated statements of operations. Excluded from Net investment income is the mark-to-market movement
for private equities, which is recorded within either Other income (expense) or Net realized gains (losses) based on our
percentage of ownership. The total mark-to-market movement for private equities excluded from Net investment income was as
follows:
(in millions of U.S. dollars)
Total mark-to-market gain on private equity, pre-tax
2019
$
449 $
2018
298
Interest Expense
The following table presents our pre-tax interest expense for the years ended December 31, 2019 and 2018. Also presented
below is our estimated pre-tax interest expense for the year ended December 31, 2020 based on our existing debt obligations
as well as fees based on our expected usage of certain facilities, including letters of credit, collateral fees, and repurchase
agreements.
(in millions of U.S. dollars)
Fixed interest expense based on
outstanding debt
Variable interest expense based on
expected usage
Adjusted interest expense
$
$
Amortization of the fair value of
debt assumed in the Chubb Corp
acquisition
Total interest expense, including
amortization of the fair value of debt $
Estimated Interest Expense
Actual Interest Expense
First
Quarter
2020
Second
Quarter
2020
Third
Quarter
2020
Fourth
Quarter
2020
Full Year
Full Year
Full Year
2020
2019
2018
123 $
123 $
122 $
118 $
486 $
488 $
520
18
18
18
18
72
85
141 $
141 $
140 $
136 $
558 $
573 $
154
674
(5)
(5)
(5)
(6)
(21)
(21)
(33)
136 $
136 $
135 $
130 $
537 $
552 $
641
Estimated 2020 fixed interest expense assumes that the $1.3 billion 2.3 percent senior notes is fully paid in November 2020
at the maturity date. Estimated variable interest expense is based on expected usage and current interest rates and may
fluctuate.
74
Net Realized and Unrealized Gains (Losses)
We take a long-term view with our investment strategy, and our investment managers manage our investment portfolio to
maximize total return within certain specific guidelines designed to minimize risk. The majority of our investment portfolio is
available for sale and reported at fair value. Our held to maturity investment portfolio is reported at amortized cost.
The effect of market movements on our fixed maturities portfolio impacts Net income (through Net realized gains (losses)) when
securities are sold or when we record an Other-than-temporary impairment (OTTI) charge. For a further discussion related to
how we assess OTTI for our fixed maturities, including credit-related OTTI, and the related impact on Net income, refer to Note
3 c) to the Consolidated Financial Statements. Additionally, Net income is impacted through the reporting of changes in the fair
value of equity securities and private equity securities where we own less than three percent, and derivatives, including financial
futures, options, swaps, and GLB reinsurance. Changes in unrealized appreciation and depreciation on available for sale
securities resulting from the revaluation of securities held, changes in cumulative foreign currency translation adjustment, and
unrealized postretirement benefit obligations liability adjustment, are reported as separate components of Accumulated other
comprehensive income (loss) in Shareholders’ equity in the Consolidated balance sheets. The following table presents our net
realized and unrealized gains (losses):
Total investment portfolio
(382)
3,738
3,356
(in millions of U.S. dollars)
Fixed maturities
Fixed income and equity derivatives
Public equity
Sales
Mark-to-market
Private equity (less than 3 percent ownership)
Sales
Mark-to-market
Variable annuity reinsurance derivative
transactions, net of applicable hedges
Other derivatives
Foreign exchange
Other (1)
Net gains (losses), pre-tax
Net
Realized
Gains
(Losses)
Net
Unrealized
Gains
(Losses)
2019
Net
Impact
Year Ended December 31
2018
2017
Net
Realized
Gains
(Losses)
Net
Unrealized
Gains
(Losses)
Net
Impact
Net
Realized
Gains
(Losses)
(31)
$
(31) $
3,738 $ 3,707 $
(302) $ (1,996) $ (2,298) $
(435)
(75)
(75)
(11)
(435)
58
46
(5)
(15)
—
—
—
—
—
58
46
(5)
(15)
70
(129)
121
(126)
(441)
(142)
(8)
7
(5)
—
—
13
(79)
(142)
(252)
(8)
20
(84)
(3)
131
(87)
—
—
—
—
—
70
(129)
121
(126)
(1,996)
(2,437)
—
—
(802)
(321)
(252)
(3)
(671)
(408)
16
—
(11)
—
(37)
103
(5)
36
(13)
84
$
(530) $
3,672 $ 3,142 $
(652) $ (3,119) $ (3,771) $
(1) Net unrealized gains (losses) includes our postretirement programs of $(76) million, $(321) million, and $(16) million for the years ended December 31, 2019, 2018, and
2017, respectively.
For the years ended December 31, 2019 and 2018, other-than-temporary impairments in Net realized gains (losses) include
$58 million and $49 million, respectively, for fixed maturities.
The variable annuity reinsurance derivative transactions resulted in realized gains (losses), due to the (increase) decrease in the
fair value of GLB liabilities of $(4) million, $(248) million, and $364 million for the years ended December 31, 2019, 2018,
and 2017, respectively. The realized losses in 2019 reflected an increase in the fair value of GLB liabilities due to lower interest
rates and changes made to our valuation model relating to policyholder behavior which was partially offset by higher global
equity market levels. The realized losses in 2018 reflected an increase in the fair value of GLB liabilities due to lower global
equity market levels, the impact of discounting future claims for one less year and changes made to our valuation model relating
to policyholder behavior. In addition, we maintain positions in derivative instruments that decrease in fair value when the S&P
500 index increases. During the years ended December 31, 2019, 2018, and 2017, we experienced realized losses of $138
million, $4 million, and $261 million, respectively, related to these derivative instruments.
75
Amortization of Purchased Intangibles and Other Amortization
Amortization expense related to purchased intangibles were $305 million, $339 million, and $260 million for the years ended
December 31, 2019, 2018, and 2017, respectively, and principally relates to the Chubb Corp acquisition. The decrease in
amortization expense of purchased intangibles in 2019 compared to 2018 primarily reflects lower intangible amortization
expense related to agency distribution relationships and renewal rights. The increase in 2018 compared to 2017 primarily
reflects a lower amortization benefit from the fair value adjustment on unpaid losses and loss expenses. The amortization of
purchased intangibles expense in 2020 is expected to be $290 million, or approximately $73 million each quarter.
Reduction of deferred tax liability associated with intangible assets related to Other intangible assets (excluding the fair value
adjustment on Unpaid losses and loss expense)
At December 31, 2019, the deferred tax liability associated with the Other intangible assets (excluding the fair value
adjustment on Unpaid losses and loss expenses) was $1,347 million.
The following table presents at December 31, 2019, the expected reduction to the deferred tax liability associated with Other
intangible assets (which reduces as agency distribution relationships and renewal rights, and other intangible assets amortize),
at current foreign currency exchange rates for the next five years:
For the Years Ending December 31
(in millions of U.S. dollars)
2020
2021
2022
2023
2024
Total
Reduction to deferred tax
liability associated with
intangible assets
$
$
72
67
64
60
55
318
Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt
The following table presents at December 31, 2019, the expected amortization expense of the fair value adjustment on
acquired invested assets, at current foreign currency exchange rates, and the expected amortization benefit from the
amortization of the fair value adjustment on assumed long-term debt for the next five years as follows:
For the Years Ending December 31
(in millions of U.S. dollars)
2020
2021
2022
2023
2024
Total
Amortization (expense) benefit of the fair value
adjustment on
Acquired invested
assets (1)
Assumed long-term
debt (2)
$
$
(130) $
(110)
(92)
—
—
(332) $
21
21
21
21
21
105
(1)
Recorded as a reduction to Net investment income in the Consolidated statements of operations.
(2) Recorded as a reduction to Interest expense in the Consolidated statements of operations.
The estimate of amortization expense of the fair value adjustment on acquired invested assets could vary materially based on
current market conditions, bond calls, overall duration of the acquired investment portfolio, and foreign exchange.
76
Investments
Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average
credit quality of A/Aa as rated by the independent investment rating services Standard and Poor’s (S&P)/ Moody’s Investors
Service (Moody’s). The portfolio is externally managed by independent, professional investment managers and is broadly
diversified across geographies, sectors, and issuers. Other investments principally comprise direct investments, investment
funds, and limited partnerships. We hold no collateralized debt obligations in our investment portfolio, and we provide no credit
default protection. We have long-standing global credit limits for our entire portfolio across the organization. Exposures are
aggregated, monitored, and actively managed by our Global Credit Committee, comprising senior executives, including our Chief
Financial Officer, our Chief Risk Officer, our Chief Investment Officer, and our Treasurer. We also have well-established, strict
contractual investment rules requiring managers to maintain highly diversified exposures to individual issuers and closely
monitor investment manager compliance with portfolio guidelines. The average duration of our fixed income securities, including
the effect of options and swaps, was 3.8 years and 3.7 years at December 31, 2019 and 2018, respectively. We estimate that
a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately
$3.9 billion at December 31, 2019.
(in millions of U.S. dollars)
Fixed maturities available for sale
Fixed maturities held to maturity
Short-term investments
Equity securities
Other investments
Total investments
December 31, 2019
December 31, 2018
Fair
Value
$
85,488 $
Cost/
Amortized
Cost
82,580 $
Fair
Value
78,470 $
Cost/
Amortized
Cost
79,323
13,005
4,291
102,784
812
6,062
12,581
4,291
99,452
812
6,062
13,259
3,016
94,745
770
5,277
13,435
3,016
95,774
770
5,277
$
109,658 $
106,326 $
100,792 $
101,821
The fair value of our total investments increased $8.9 billion during the year ended December 31, 2019, primarily due to
unrealized appreciation driven by declining interest rates and the investing of both operating cash flows and net proceeds from
debt issuance. This increase was partially offset by the payment of dividends on our Common Shares and share repurchases.
The following tables present the market value of our fixed maturities and short-term investments at December 31, 2019 and
2018. The first table lists investments according to type and the second according to S&P credit rating:
(in millions of U.S. dollars, except for percentages)
Market Value
% of Total Market Value
% of Total
December 31, 2019
December 31, 2018
Treasury / Agency
Corporate and asset-backed
Mortgage-backed
Municipal
Non-U.S.
Short-term investments
Total
AAA
AA
A
BBB
BB
B
Other
Total
$
4,630
5% $
5,327
34,259
21,588
12,824
25,192
4,291
33%
21%
12%
25%
4%
29,091
18,026
16,327
22,958
3,016
6%
31%
19%
17%
24%
3%
$
$
102,784
100% $
94,745
100%
15,714
37,504
19,236
13,650
9,474
6,897
309
15% $
14,571
37%
19%
13%
9%
7%
—
36,715
17,253
12,035
8,363
5,596
212
15%
39%
18%
13%
9%
6%
—
$
102,784
100% $
94,745
100%
77
Corporate and asset-backed securities
The following table presents our 10 largest global exposures to corporate bonds by market value at December 31, 2019:
(in millions of U.S. dollars)
Wells Fargo & Co
Bank of America Corp
JP Morgan Chase & Co
Comcast Corp
HSBC Holdings Plc
AT&T Inc
Citigroup Inc
Verizon Communications Inc
Goldman Sachs Group Inc
Morgan Stanley
Mortgage-backed securities
$
Market Value
637
575
568
461
396
392
392
381
369
358
December 31, 2019
(in millions of U.S. dollars)
AAA
AA
A
BBB
BB and
below
Total
Total
Agency residential mortgage-backed (RMBS)
$
187 $ 17,722 $
— $
— $
— $ 17,909 $ 17,436
Non-agency RMBS
Commercial mortgage-backed
Total mortgage-backed securities
184
2,946
32
272
75
136
18
6
10
—
319
317
3,360
3,290
$ 3,317 $ 18,026 $
211 $
24 $
10 $ 21,588 $ 21,043
S&P Credit Rating
Market
Value
Amortized
Cost
Municipal
As part of our overall investment strategy, we may invest in states, municipalities, and other political subdivisions fixed maturity
securities (Municipal). We apply the same investment selection process described previously to our Municipal investments. The
portfolio is highly diversified primarily in state general obligation bonds and essential service revenue bonds including education
and utilities (water, power, and sewers).
Non-U.S.
Our exposure to the Euro results primarily from Chubb European Group SE which is headquartered in France and offers a broad
range of coverages throughout the European Union, Central, and Eastern Europe. Chubb primarily invests in Euro denominated
investments to support its local currency insurance obligations and required capital levels. Chubb’s local currency investment
portfolios have strict contractual investment guidelines requiring managers to maintain a high quality and diversified portfolio to
both sector and individual issuers. Investment portfolios are monitored daily to ensure investment manager compliance with
portfolio guidelines.
Our non-U.S. investment grade fixed income portfolios are currency-matched with the insurance liabilities of our non-U.S.
operations. The average credit quality of our non-U.S. fixed income securities is A and 49 percent of our holdings are rated AAA
or guaranteed by governments or quasi-government agencies. Within the context of these investment portfolios, our government
and corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating
(AA—two percent, A—one percent, BBB—0.5 percent of the total portfolio) and are monitored daily via an internal compliance
system. We manage our indirect exposure using the same credit rating based investment approach. Accordingly, we do not
believe our indirect exposure is material.
78
The following table summarizes the market value and amortized cost of our non-U.S. fixed income portfolio by country/
sovereign for non-U.S. government securities at December 31, 2019:
(in millions of U.S. dollars)
Republic of Korea
United Kingdom
Canada
Federative Republic of Brazil
Kingdom of Thailand
Province of Ontario
United Mexican States
Province of Quebec
Commonwealth of Australia
Socialist Republic of Vietnam
Other Non-U.S. Government Securities
Total
Market Value
Amortized Cost
$
1,032 $
924
835
688
652
644
567
496
365
362
920
903
830
669
558
634
554
484
324
277
4,890
4,706
$
11,455 $
10,859
The following table summarizes the market value and amortized cost of our non-U.S. fixed income portfolio by country/
sovereign for non-U.S. corporate securities at December 31, 2019:
(in millions of U.S. dollars)
United Kingdom
Canada
United States (1)
France
Australia
Netherlands
Japan
Germany
Switzerland
China
Market Value
Amortized Cost
$
2,316 $
1,781
1,156
1,136
813
685
587
560
511
371
2,224
1,735
1,111
1,088
781
656
576
538
490
362
Other Non-U.S. Corporate Securities
Total
3,821
3,673
$
13,737 $
13,234
(1)
The countries that are listed in the non-U.S. corporate fixed income portfolio above represent the ultimate parent company's country of risk. Non-U.S. corporate securities
could be issued by foreign subsidiaries of U.S. corporations.
79
Below-investment grade corporate fixed income portfolio
Below-investment grade securities have different characteristics than investment grade corporate debt securities. Risk of loss
from default by the borrower is greater with below-investment grade securities. Below-investment grade securities are generally
unsecured and are often subordinated to other creditors of the issuer. Also, issuers of below-investment grade securities usually
have higher levels of debt and are more sensitive to adverse economic conditions, such as recession or increasing interest rates,
than investment grade issuers. At December 31, 2019, our corporate fixed income investment portfolio included below-
investment grade and non-rated securities which, in total, comprised approximately 14 percent of our fixed income portfolio.
Our below-investment grade and non-rated portfolio includes over 1,300 issuers, with the greatest single exposure being $149
million.
We manage high-yield bonds as a distinct and separate asset class from investment grade bonds. The allocation to high-yield
bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our
minimum rating for initial purchase is BB/B. Twelve external investment managers are responsible for high-yield security
selection and portfolio construction. Our high-yield managers have a conservative approach to credit selection and very low
historical default experience. Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit
as a percentage of high-yield allocation. We monitor position limits daily through an internal compliance system. Derivative and
structured securities (e.g., credit default swaps and collateralized loan obligations) are not permitted in the high-yield portfolio.
Asbestos and Environmental (A&E)
Asbestos and environmental (A&E) reserving considerations
For asbestos, Chubb faces claims relating to policies issued to manufacturers, distributors, installers, and other parties in the
chain of commerce for asbestos and products containing asbestos. Claimants will generally allege damages across an extended
time period which may coincide with multiple policies covering a wide range of time periods for a single insured.
Environmental claims present exposure for remediation and defense costs associated with the contamination of property as a
result of pollution.
The following table presents count information for asbestos claims by causative agent and environmental claims by account, for
direct policies only:
Open at beginning of year
Newly reported/reopened
Closed or otherwise disposed
Open at end of year
Asbestos (by causative agent)
Environmental (by account)
2019
1,838
173
287
1,724
2018
1,789
188
139
1,838
2019
1,361
140
284
1,217
2018
1,349
149
137
1,361
Survival ratios are calculated by dividing the asbestos or environmental loss and allocated loss adjustment expense (ALAE)
reserves by the average asbestos or environmental loss and ALAE payments for the three most recent calendar years (3-year
survival ratio). The 3-year survival ratios for gross and net Asbestos loss and ALAE reserves were 5.8 years and 6.0 years,
respectively. The 3-year survival ratios for gross and net Environmental loss and ALAE reserves were 4.0 years and 12.1 years,
respectively. The net 3-year survival ratios were impacted by favorable reinsurance settlements in 2018. Excluding the
settlements, the 3-year survival ratio for net Asbestos loss and ALAE reserves and net Environmental loss and ALAE reserves
were 5.7 years and 4.5 years, respectively. Refer to the PPD section in Note 7 to the consolidated financial statements for
additional information on the settlements. The survival ratios provide only a very rough depiction of reserves and are
significantly impacted by a number of factors such as aggressive settlement practices, variations in gross to ceded relationships
within the asbestos or environmental claims, and levels of coverage provided. Therefore, we urge caution in using these very
simplistic ratios to gauge reserve adequacy.
80
Catastrophe Management
We actively monitor and manage our catastrophe risk accumulation around the world such as setting risk limits based on
probable maximum loss (PML) and purchasing catastrophe reinsurance. The table below presents our modeled pre-tax
estimates of natural catastrophe PML, net of reinsurance, at December 31, 2019, for Worldwide, U.S. hurricane and California
earthquake events, based on our in-force portfolio at October 1, 2019 and reflecting the April 1, 2019 reinsurance program
(see Natural Catastrophe Property Reinsurance Program section) as well as inuring reinsurance protection coverages. According
to the model, for the 1-in-100 return period scenario, there is a one percent chance that our pre-tax annual aggregate losses
incurred in any year from U.S. hurricane events could be in excess of $2,685 million (or 4.9 percent of our total shareholders’
equity at December 31, 2019). These estimates assume that reinsurance recoverable is fully collectible.
Worldwide (1)
Annual Aggregate
Modeled Net Probable Maximum Loss (PML) Pre-tax
U.S. Hurricane (2)
California Earthquake (3)
Annual Aggregate
Single Occurrence
(in millions of U.S. dollars,
except for percentages)
Chubb
% of Total
Shareholders’
Equity
1-in-10
1-in-100
1-in-250
$
$
$
1,873
3,804
6,227
3.4% $
6.9% $
11.3% $
Chubb
1,089
2,685
4,698
% of Total
Shareholders’
Equity
2.0% $
4.9% $
8.5% $
Chubb
129
1,338
1,513
% of Total
Shareholders’
Equity
0.2%
2.4%
2.7%
(1) Worldwide losses are comprised of losses arising only from hurricanes, typhoons, convective storms and earthquakes and do not include “non-modeled” perils such as
wildfire and flood.
(2) U.S. Hurricane losses include losses from wind and storm-surge and exclude rainfall.
(3) California earthquakes include fire-following perils.
The above estimates of Chubb’s loss profile are inherently uncertain for many reasons, including the following:
• While the use of third-party catastrophe modeling packages to simulate potential hurricane and earthquake losses is
prevalent within the insurance industry, the models are reliant upon significant meteorology, seismology, and engineering
assumptions to estimate catastrophe losses. In particular, modeled catastrophe events are not always a representation of
actual events and ensuing additional loss potential;
• There is no universal standard in the preparation of insured data for use in the models, the running of the modeling
software and interpretation of loss output. These loss estimates do not represent our potential maximum exposures and it is
highly likely that our actual incurred losses would vary materially from the modeled estimates; and
• The potential effects of climate change add to modeling complexity.
Natural Catastrophe Property Reinsurance Program
Chubb’s core property catastrophe reinsurance program provides protection against natural catastrophes impacting its primary
property operations (i.e., excluding our Global Reinsurance and Life Insurance segments).
We regularly review our reinsurance protection and corresponding property catastrophe exposures. This may or may not lead to
the purchase of additional reinsurance prior to a program’s renewal date. In addition, prior to each renewal date, we consider
how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various
factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and
various other structuring considerations.
Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations
effective April 1, 2019 through March 31, 2020, with modest enhancements in coverage from the expiring program. The
program consists of three layers in excess of losses retained by Chubb on a per occurrence basis. In addition, Chubb also
renewed its terrorism coverage (excluding nuclear, biological, chemical and radiation coverage, with an inclusion of coverage for
biological and chemical coverage for personal lines) for the United States from April 1, 2019 through March 31, 2020 with the
same limits and retention and percentage placed except that the majority of terrorism coverage is on an aggregate basis above
our retentions without a reinstatement.
81
Natural Catastrophe Property Reinsurance Program
Loss Location
Layer of Loss
Comments
Notes
United States
(excluding Alaska and Hawaii)
United States
(excluding Alaska and Hawaii)
United States
(excluding Alaska and Hawaii)
United States
(excluding Alaska and Hawaii)
International
(including Alaska and Hawaii)
International
(including Alaska and Hawaii)
Alaska, Hawaii, and Canada
$0 million –
$1.0 billion
$1.0 billion –
$1.2 billion
$1.2 billion –
$2.2 billion
$2.2 billion –
$3.5 billion
$0 million –
$175 million
$175 million –
$1.175 billion
$1.175 billion–
$2.475 billion
Losses retained by Chubb
All natural perils and terrorism
All natural perils and terrorism
All natural perils and terrorism
Losses retained by Chubb
All natural perils and terrorism
All natural perils and terrorism
(a)
(b)
(c)
(d)
(a)
(c)
(d)
(a)
(b)
(c)
(d)
Ultimate retention will depend upon the nature of the loss and the interplay between the underlying per risk programs and certain other catastrophe programs purchased by
individual business units. These other catastrophe programs have the potential to reduce our effective retention below the stated levels.
These coverages are partially placed with Reinsurers.
These coverages are both part of the same Second layer within the Global Catastrophe Program and are fully placed with Reinsurers.
These coverages are both part of the same Third layer within the Global Catastrophe Program and are fully placed with Reinsurers.
Chubb also has a property catastrophe bond in place that offers additional natural catastrophe protection for certain parts of the
portfolio. The geographic scope of this coverage is from Virginia through Maine. The East Lane VI 2015 bond currently provides
$250 million of coverage as part of a $427 million layer in excess of $2.0 billion retention through March 13, 2020.
Political Risk and Credit Insurance
Political risk insurance is a specialized coverage that provides clients with protection against unexpected, catastrophic political
or macroeconomic events, primarily in emerging markets. We participate in this market through our wholly-owned subsidiary
Sovereign Risk Insurance Ltd. (Sovereign), and through a unit of our London-based CGM operation. Chubb is one of the world's
leading underwriters of political risk and credit insurance, has a global portfolio spread across more than 150 countries and is
also a member of the Berne Union. Our clients include financial institutions, national export credit agencies, leading multilateral
agencies, private equity firms and multinational corporations. CGM writes political risk and credit insurance business out of
underwriting offices in London, United Kingdom; Hamburg, Germany; Sao Paulo, Brazil; Singapore; Tokyo, Japan; and in the
U.S. in the following locations: Chicago, Illinois; New York, New York; Los Angeles, California; and Washington, D.C.
Our political risk insurance provides protection to commercial lenders against defaults on cross border loans, insulates investors
against equity losses, and protects exporters against defaults on contracts. Commercial lenders, our largest client segment, are
covered for missed scheduled loan repayments due to acts of confiscation, expropriation or nationalization by the host
government, currency inconvertibility or exchange transfer restrictions, or war or other acts of political violence. In addition, in
the case of loans to government-owned entities or loans that have a government guarantee, political risk policies cover
scheduled payments against risks of non-payment or non-honoring of government guarantees. Private equity investors and
corporations receive similar coverage to that of lenders, except their equity is protected against financial losses, inability to
repatriate dividends, and physical damage to their operations caused by covered events. Our export contracts protection
provides coverage for both exporters and their financing banks against the risk of contract frustration due to government actions,
including non-payment by governmental entities.
CGM's credit insurance businesses cover losses due to insolvency, protracted default, and political risk perils including export
and license cancellation. Our credit insurance product provides coverage to larger companies that have sophisticated credit risk
management systems, with exposure to multiple customers and that have the ability to self-insure losses up to a certain level
through excess of loss coverage. It also provides coverage to trade finance banks, exporters, and trading companies, with
exposure to trade-related financing instruments. CGM also has limited capacity for Specialist Credit insurance products which
provide coverage for project finance and working capital loans for large corporations and banks.
82
We have implemented structural features in our policies in order to control potential losses within the political risk and credit
insurance businesses. These include basic loss sharing features that include co-insurance and deductibles, and in the case of
trade credit, the use of non-qualifying losses that drop smaller exposures deemed too difficult to assess. Ultimate loss severity is
also limited by using waiting periods to enable the insurer and insured to agree on recovery strategies, and the subrogation of
the rights of the lender/exporter to the insurer following a claim. We have the option to pay claims over the original loan
payment schedule, rather than in a lump sum in order to provide insureds and the insurer additional time to remedy problems
and work towards full recoveries. It is important to note that political risk and credit policies are named peril conditional
contracts, not financial guarantees, and claims are only paid after conditions and warranties are fulfilled. Political risk and credit
insurance do not cover currency devaluations, bond defaults, movements in overseas equity markets, transactions deemed
illegal, situations where corruption or misrepresentation has occurred, or debt that is not legally enforceable. In addition to
assessing and mitigating potential exposure on a policy-by-policy basis, we also have specific risk management measures in
place to manage overall exposure and risk. These measures include placing country, credit, and individual transaction limits
based on country risk and credit ratings, combined single loss limits on multi-country policies, the use of reinsurance protection
as well as quarterly modeling and stress-testing of the portfolio. We have a dedicated Country and Credit Risk management
team that are responsible for the portfolio.
Crop Insurance
We are, and have been since the 1980s, one of the leading writers of crop insurance in the U.S. and have conducted that
business through a managing general agent subsidiary of Rain and Hail. We provide protection throughout the U.S. on a variety
of crops and are therefore geographically diversified, which reduces the risk of exposure to a single event or a heavy
accumulation of losses in any one region. Our crop insurance business comprises two components - Multiple Peril Crop
Insurance (MPCI) and crop-hail insurance.
The MPCI program, offered in conjunction with the U.S. Department of Agriculture’s Risk Management Agency (RMA), is a
federal subsidized insurance program that covers revenue shortfalls or production losses due to natural causes such as drought,
excessive moisture, hail, wind, freeze, insects, and disease. These Revenue Products are defined as providing both commodity
price and yield coverages. Policies are available for various crops in different areas of the U.S. and generally have deductibles
generally ranging from 10 percent to 50 percent of the insured's risk. The USDA's Risk Management Agency (RMA) sets the
policy terms and conditions, rates and forms, and is also responsible for setting compliance standards. As a participant in the
MPCI program, we report all details of policies to the RMA and are party to a Standard Reinsurance Agreement (SRA). The SRA
sets out the relationship between private insurance companies and the Federal Crop Insurance Corporation (FCIC) concerning
the terms and conditions regarding the risks each will bear including the pro-rata and state stop-loss provisions, which allows
companies to limit the exposure of any one state or group of states on their underwriting results. In addition to the pro-rata and
excess of loss reinsurance protections inherent in the SRA, we also purchase third-party proportional and stop-loss reinsurance
for our MPCI business to reduce our exposure. We may also enter into crop derivative contracts to further manage our risk
exposure.
Each year the RMA issues a final SRA for the subsequent reinsurance year (i.e., the 2020 SRA covers the 2020 reinsurance
year from July 1, 2019 through June 30, 2020). There were no significant changes in the terms and conditions from the 2019
SRA and therefore, the new SRA does not impact Chubb's outlook on the crop program relative to 2020.
We recognize net premiums written as soon as estimable on our MPCI business, which is generally when we receive acreage
reports from the policyholders on the various crops throughout the U.S. This allows us to best determine the premium
associated with the liability that is being planted. The MPCI program has specific timeframes as to when producers must report
acreage to us and in certain cases, the reporting occurs after the close of the respective reinsurance year. Once the net premium
written has been recorded, the premium is then earned over the growing season for the crops. A majority of the crops that are
covered in the program are typically subject to the SRA in effect at the beginning of the year. Given the major crops covered in
the program, we typically see a substantial written and earned premium impact in the second and third quarters.
The pricing of MPCI premium is determined using a number of factors including commodity prices and related volatility (i.e.,
both impact the amount of premium we can charge to the policyholder). For example, in most states, the pricing for the MPCI
Revenue Product for corn (i.e., insurance coverage for lower than expected crop revenue in a given season) includes a factor
based on the average commodity price in February. If corn commodity prices are higher in February, compared to the February
price in the prior year, and all other factors are the same, the increase in price will increase the corn premium year-over-year.
83
Pricing is also impacted by volatility factors, which measure the likelihood commodity prices will fluctuate over the crop year.
For example, if volatility is set at a higher rate compared to the prior year, and all other factors are the same, the premium
charged to the policyholder will be higher year-over-year for the same level of coverage.
Losses incurred on the MPCI business are determined using both commodity price and crop yield. With respect to commodity
price, there are two important periods on a large portion of the business: The month of February when the initial premium base
is set, and the month of October when the final harvest price is set. If the price declines from February to October, with yield
remaining at normal levels, the policyholder may be eligible to recover on the policy. However, in most cases there are
deductibles on these policies, therefore, the impact of a decline in price would have to exceed the deductible before a
policyholder would be eligible to recover.
We evaluate our MPCI business at an aggregate level and the combination of all of our insured crops (both winter and summer)
go into our underwriting gain or loss estimate in any given year. Typically, we do not have enough information on the harvest
prices or crop yield outputs to quantify the preliminary estimated impact to our underwriting results until the fourth quarter.
Our crop-hail program is a private offering. Premium is earned on the crop-hail program over the coverage period of the policy.
Given the very short nature of the growing season, most crop-hail business is typically written in the second and third quarters
and the recognition of earned premium is also more heavily concentrated during this timeframe. We use industry data to
develop our own rates and forms for the coverage offered. The policy primarily protects farmers against yield reduction caused
by hail and/or fire, and related costs such as transit to storage. We offer various deductibles to allow the grower to partially self-
insure for a reduced premium cost. We limit our crop-hail exposures through the use of township liability limits and third-party
reinsurance on our net retained hail business.
Liquidity
Liquidity is a measure of a company's ability to generate cash flows sufficient to meet short-term and long-term cash
requirements. As a holding company, Chubb Limited possesses assets that consist primarily of the stock of its subsidiaries and
other investments. In addition to net investment income, Chubb Limited's cash flows depend primarily on dividends and other
statutorily permissible payments. Historically, dividends and other statutorily permitted payments have come primarily from
Chubb's Bermuda-based operating subsidiaries, which we refer to as our Bermuda subsidiaries. Our consolidated sources of
funds consist primarily of net premiums written, fees, net investment income, and proceeds from sales and maturities of
investments. Funds are used at our various companies primarily to pay claims, operating expenses, and dividends; to service
debt; to purchase investments; and to fund acquisitions.
We anticipate that positive cash flows from operations (underwriting activities and investment income) should be sufficient to
cover cash outflows under most loss scenarios for the near term. Should the need arise, we generally have access to capital
markets and available credit facilities. Refer to “Credit Facilities” below for additional information. Our access to funds under the
existing credit facility is dependent on the ability of the bank that is a party to the facility to meet its funding commitments.
Should our existing credit provider experience financial difficulty, we may be required to replace credit sources, possibly in a
difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our
business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty
accessing our credit facility.
To further ensure the sufficiency of funds to settle unforeseen claims, we hold certain invested assets in cash and short-term
investments. In addition, for certain insurance, reinsurance, or deposit contracts that tend to have relatively large and
reasonably predictable cash outflows, we attempt to establish dedicated portfolios of assets that are duration-matched with the
related liabilities. With respect to the duration of our overall investment portfolio, we manage asset durations to both maximize
return given current market conditions and provide sufficient liquidity to cover future loss payments. At December 31, 2019,
the average duration of our fixed maturities (3.8 years) is less than the average expected duration of our insurance liabilities
(4.3 years).
Despite our safeguards, if paid losses accelerate beyond our ability to fund such paid losses from current operating cash flows,
we might need to either liquidate a portion of our investment portfolio or arrange for financing. Potential events causing such a
liquidity strain could include several significant catastrophes occurring in a relatively short period of time, large uncollectible
reinsurance recoverables on paid losses (as a result of coverage disputes, reinsurers' credit problems, or decreases in the value
of collateral supporting reinsurance recoverables) or increases in collateral postings under our variable annuity reinsurance
business. Because each subsidiary focuses on a more limited number of specific product lines than is collectively available from
84
the Chubb Group of Companies, the mix of business tends to be less diverse at the subsidiary level. As a result, the probability
of a liquidity strain, as described above, may be greater for individual subsidiaries than when liquidity is assessed on a
consolidated basis. If such a liquidity strain were to occur in a subsidiary, we could be required to liquidate a portion of our
investments, potentially at distressed prices, as well as be required to contribute capital to the particular subsidiary and/or
curtail dividends from the subsidiary to support holding company operations.
The payment of dividends or other statutorily permissible distributions from our operating companies are subject to the laws
and regulations applicable to each jurisdiction, as well as the need to maintain capital levels adequate to support the insurance
and reinsurance operations, including financial strength ratings issued by independent rating agencies. During 2019, we were
able to meet all our obligations, including the payments of dividends on our Common Shares, with our net cash flows.
We assess which subsidiaries to draw dividends from based on a number of factors. Considerations such as regulatory and legal
restrictions as well as the subsidiary's financial condition are paramount to the dividend decision. Chubb Limited received
dividends of $200 million and $75 million from its Bermuda subsidiaries in 2019 and 2018, respectively.
The payment of any dividends from CGM or its subsidiaries is subject to applicable U.K. insurance laws and regulations. In
addition, the release of funds by Syndicate 2488 to subsidiaries of CGM is subject to regulations promulgated by the Society of
Lloyd's. Chubb Limited received no dividends from CGM in 2019 and 2018.
The U.S. insurance subsidiaries of Chubb INA may pay dividends, without prior regulatory approval, subject to restrictions set
out in state law of the subsidiary's domicile (or, if applicable, commercial domicile). Chubb INA's international subsidiaries are
also subject to insurance laws and regulations particular to the countries in which the subsidiaries operate. These laws and
regulations sometimes include restrictions that limit the amount of dividends payable without prior approval of regulatory
insurance authorities. Chubb Limited received no dividends from Chubb INA in 2019 and 2018. Debt issued by Chubb INA is
serviced by statutorily permissible distributions by Chubb INA's insurance subsidiaries to Chubb INA as well as other group
resources. Chubb INA received dividends of $3.7 billion and $5.2 billion from its subsidiaries in 2019 and 2018, respectively.
At December 31, 2019, the amount of dividends available to be paid to Chubb INA in 2019 from its subsidiaries without prior
approval of insurance regulatory authorities totals $3.1 billion.
In January 2020, Chubb INA Holdings Inc. paid $1.5 billion towards the series of intercompany loans involving its parents,
Chubb Group Holdings Inc. and Chubb Limited. Additionally, Chubb Limited contributed $1.2 billion to a Bermuda subsidiary.
Cash Flows
Our insurance and reinsurance operations provide liquidity in that premiums are received in advance, sometimes substantially in
advance, of the time claims are paid. Generally, cash flows are affected by claim payments that, due to the nature of our
operations, may comprise large loss payments on a limited number of claims and which can fluctuate significantly from period
to period. The irregular timing of these loss payments can create significant variations in cash flows from operations between
periods. Refer to “Contractual Obligations and Commitments” for our estimate of future claim payments by period. Sources of
liquidity include cash from operations, routine sales of investments, and financing arrangements. The following is a discussion
of our cash flows for 2019, 2018, and 2017.
Operating cash flows reflect Net income for each period, adjusted for non-cash items and changes in working capital.
Operating cash flows were $6.3 billion in 2019, compared to $5.5 billion and $4.5 billion in 2018 and 2017, respectively.
Operating cash flow was higher in 2019 compared to 2018, primarily due to higher underwriting cash flow, partially offset by
higher taxes paid compared to 2018 principally due to the timing of tax payments. The increase in operating cash flows of
$977 million in 2018 compared to 2017 was primarily due to higher premiums collected, net of higher catastrophe loss
payments related to the 2017 catastrophe events, and lower taxes paid principally due to the timing of tax payments.
Cash used for investing was $5.9 billion in 2019, compared to $2.9 billion and $2.4 billion in 2018 and 2017, respectively.
The increase in cash used for investing of $3.0 billion in 2019 was primarily due to net purchases of short-term investments of
$1.1 billion in 2019 compared to net proceeds of $516 million in 2018. Additionally, the increase in 2019 was due to the
purchase of an additional 10.9 percent ownership interest in Huatai Group for $580 million. Cash used for investing in 2018
was higher compared to 2017, due to higher net private equity contributions, net of distributions received, of $793 million.
Cash used for financing was $151 million in 2019, compared to $2.0 billion and $2.3 billion in 2018 and 2017, respectively.
Cash used for financing was lower by $1.8 billion in 2019 compared to 2018 primarily due to higher net proceeds from the
85
issuance of long-term debt (net of repayments) of $2.1 billion offset by higher share repurchases of $486 million. Cash used for
financing in 2018 was lower by $328 million, primarily due to higher net repayments of long-term debt in 2017.
Both internal and external forces influence our financial condition, results of operations, and cash flows. Claim settlements,
premium levels, and investment returns may be impacted by changing rates of inflation and other economic conditions. In many
cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the
reporting of the loss to us, and the settlement of the liability for that loss.
We use repurchase agreements as a low-cost funding alternative. At December 31, 2019, there were $1.4 billion in repurchase
agreements outstanding with various maturities over the next five months.
In addition to cash from operations, routine sales of investments, and financing arrangements, we have agreements with a third-
party bank provider which implemented two international multi-currency notional cash pooling programs to enhance cash
management efficiency during periods of short-term timing mismatches between expected inflows and outflows of cash by
currency. The programs allow us to optimize investment income by avoiding portfolio disruption. In each program, participating
Chubb entities establish deposit accounts in different currencies with the bank provider. Each day the credit or debit balances in
every account are notionally translated into a single currency (U.S. dollars) and then notionally pooled. The bank extends
overdraft credit to all participating Chubb entities as needed, provided that the overall notionally pooled balance of all accounts
in each pool at the end of each day is at least zero. Actual cash balances are not physically converted and are not commingled
between legal entities. Chubb entities may incur overdraft balances as a means to address short-term liquidity needs. Any
overdraft balances incurred under this program by a Chubb entity would be guaranteed by Chubb Limited (up to $300 million
in the aggregate). Our syndicated letter of credit facility allows for same day drawings to fund a net pool overdraft should
participating Chubb entities withdraw contributed funds from the pool.
Capital Resources
Capital resources consist of funds deployed or available to be deployed to support our business operations.
(in millions of U.S. dollars, except for percentages)
Short-term debt
Long-term debt
Total financial debt
Trust preferred securities
Total shareholders’ equity
Total capitalization
Ratio of financial debt to total capitalization
Ratio of financial debt plus trust preferred securities to total capitalization
December 31
2019
$
1,299
$
December 31
2018
509
13,559
14,858
308
55,331
$
70,497
$
21.1%
21.5%
12,087
12,596
308
50,312
63,216
19.9%
20.4%
Repurchase agreements are excluded from the table above and are disclosed separately from short-term debt in the
Consolidated balance sheets. The repurchase agreements are collateralized borrowings where we maintain the right and ability
to redeem the collateral on short notice, unlike short-term debt which comprises the current maturities of our long-term debt
instruments.
Refer to Note 9 to the Consolidated Financial Statements for details about the debt issued and debt redeemed.
We believe our financial strength provides us with the flexibility and capacity to obtain available funds externally through debt or
equity financing on both a short-term and long-term basis. Our ability to access the capital markets is dependent on, among
other things, market conditions and our perceived financial strength. We have accessed both the debt and equity markets from
time to time. We generally maintain the ability to issue certain classes of debt and equity securities via an unlimited Securities
and Exchange Commission (SEC) shelf registration which is renewed every three years. This allows us capital market access for
refinancing as well as for unforeseen or opportunistic capital needs. In October 2018, we filed an unlimited shelf registration
which allows us to issue certain classes of debt and equity. This shelf registration expires in October 2021.
86
Securities Repurchases
From time to time, we repurchase shares as part of our capital management program. The Board of Directors (Board) has authorized
share repurchase programs as follows:
• $1.0 billion of Chubb Common Shares from November 17, 2016 through December 31, 2017
• $1.0 billion of Chubb Common Shares from January 1, 2018 through December 31, 2018
• $1.5 billion of Chubb Common Shares from December 1, 2018 through December 31, 2019
• $1.5 billion of Chubb Common Shares from November 21, 2019 through December 31, 2020
Share repurchases may be made in the open market, in privately negotiated transactions, block trades, accelerated repurchases
and/or through option or other forward transactions. In 2017, 2018 and 2019, we repurchased $830 million, $1.02 billion
and $1.53 billion, respectively, of Common Shares in a series of open market transactions under the Board share repurchase
authorizations. The $1.5 billion December 2018 Board authorization remained effective through December 31, 2019, and was
used in advance of the $1.5 billion share repurchase authorized in November 2019. For the period January 1 through February
26, 2020, we repurchased 947,400 Common Shares for a total of $151 million in a series of open market transactions. At
February 26, 2020, $1.30 billion in share repurchase authorization remained through December 31, 2020.
Common Shares
Our Common Shares had a par value of CHF 24.15 each at December 31, 2019.
As of December 31, 2019, there were 27,812,297 Common Shares in treasury with a weighted average cost of $134.98 per
share.
Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by Chubb in U.S. dollars.
At our May 2018 annual general meeting, our shareholders approved an annual dividend for the following year of up to $2.92
per share, which was paid in four quarterly installments of $0.73 per share at dates determined by the Board after the annual
general meeting by way of a distribution from capital contribution reserves, transferred to free reserves for payment.
At our May 2019 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.00
per share, expected to be paid in four quarterly installments of $0.75 per share after the annual general meeting by way of
distribution from capital contribution reserves, transferred to free reserves for payment. The Board will determine the record and
payment dates at which the annual dividend may be paid until the date of the 2020 annual general meeting, and is authorized
to abstain from distributing a dividend at its discretion. The first three quarterly installments each of $0.75 per share, have
been distributed by the Board as expected.
Dividend distributions on Common Shares amounted to CHF 2.94 ($2.98) per share for the year ended December 31, 2019.
Refer to Note 11 to the Consolidated Financial Statements for additional information on our dividends.
87
Contractual Obligations and Commitments
The following table presents our future payments due by period under contractual obligations at December 31, 2019:
(in millions of U.S. dollars)
Payment amounts determinable from the respective contracts
Deposit liabilities (1)
Purchase obligations (2)
Investments, including Limited Partnerships (3)
Huatai share acquisition deposits (4)
Operating leases
Repurchase agreements
Short-term debt
Long-term debt (5)
Trust preferred securities
Interest on debt obligations (5)
Total obligations in which payment amounts are determinable from
the respective contracts
Payment amounts not determinable from the respective contracts
Estimated gross loss payments under insurance and reinsurance
contracts
Estimated payments for future policy benefits
Total contractual obligations and commitments
Payments Due By Period
2021
and 2022
2023
and 2024
Thereafter
Total
2020
$
2,092 $
21 $
51 $
131 $ 1,889
411
3,994
1,550
660
1,416
1,301
13,292
309
6,199
159
1,328
1,550
158
1,416
1,301
—
—
479
223
1,721
—
243
—
—
29
895
—
154
—
—
—
50
—
105
—
—
1,000
1,954
10,338
—
898
—
810
309
4,012
31,224
6,412
4,136
3,973
16,703
62,713
17,601
17,200
20,645
916
1,885
8,731
1,541
19,181
16,303
$ 114,582 $ 24,929 $ 23,221 $ 14,245 $ 52,187
(1)
(2)
(3)
(4)
(5)
Refer to Note 1 k) to the Consolidated Financial Statements.
Primarily comprises audit fees and agreements with vendors to purchase system software administration and maintenance services.
Funding commitment primarily related to limited partnerships. The timing of the payments of these commitments is uncertain and may differ from the estimated timing in
the table.
Chubb entered into agreements to purchase incremental ownership interests in Huatai Insurance Group Company Limited through two separate purchases, a 15.3 percent
ownership interest for approximately $1.1 billion and a 7.1 percent ownership interest for approximately $493 million. The purchases are contingent upon obtaining
regulatory approvals and other important conditions, which are expected to be obtained by the end of 2021. The 7.1 percent purchase is also contingent upon receipt of
Chinese insurance regulatory approval of the 15.3 percent purchase. In connection with these purchase agreements, in January 2020, we paid collateralized deposits
totaling $1.550 billion to the selling shareholders, which are accounted for as loans.
Subject to foreign exchange fluctuations on interest expense and principal.
The above table excludes the following items:
• Pension obligations: Minimum funding requirements for our pension obligations are immaterial. Subsequent funding
commitments are apt to vary due to many factors and are difficult to estimate at this time. Refer to Note 13 to the
Consolidated Financial Statements for additional information.
• Liabilities for unrecognized tax benefits: The liability for unrecognized tax benefits, excluding interest and offsetting tax
credits, was $47 million at December 31, 2019. At December 31, 2019, we had accrued $8 million in liabilities for
income tax-related interest and penalties in our Consolidated balance sheet. We are unable to make a reasonably reliable
estimate for the timing of cash settlement with respect to these liabilities. Refer to Note 8 to the Consolidated Financial
Statements for additional information.
We have no other significant contractual obligations or commitments not reflected in the table above. We do not have any off-
balance sheet arrangements that are reasonably likely to have a material effect on our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures, or capital resources.
88
Estimated gross loss payments under insurance and reinsurance contracts
We are obligated to pay claims under insurance and reinsurance contracts for specified loss events covered under those
contracts. Such loss payments represent our most significant future payment obligation as a P&C insurance and reinsurance
company. In contrast to other contractual obligations, cash payments are not determinable from the terms specified within the
contract. For example, we do not ultimately make a payment to our counterparty for many insurance and reinsurance contracts
(i.e., when a loss event has not occurred) and if a payment is to be made, the amount and timing cannot be determined from
the contract. In the table above, we estimate payments by period relating to our gross liability for unpaid losses and loss
expenses included in the Consolidated balance sheet at December 31, 2019, and do not take into account reinsurance
recoverable. These estimated loss payments are inherently uncertain and the amount and timing of actual loss payments are
likely to differ from these estimates and the differences could be material. Given the numerous factors and assumptions involved
in both estimates of loss and loss expense reserves and related estimates as to the timing of future loss and loss expense
payments in the table above, differences between actual and estimated loss payments will not necessarily indicate a
commensurate change in ultimate loss estimates. The liability for Unpaid losses and loss expenses presented in our balance
sheet is discounted for certain structured settlements, for which the timing and amount of future claim payments are reliably
determinable, and certain reserves for unsettled claims. Our loss reserves are not discounted for the time value of money.
Accordingly, the estimated amounts in the table exceed the liability for Unpaid losses and loss expenses presented in our
balance sheet. Refer to Note 1 h) to the Consolidated Financial Statements for additional information.
Estimated payments for future policy benefits
We establish reserves for future policy benefits for life, long-term health, and annuity contracts. The amounts in the table are
gross of fees or premiums due from the underlying contracts. The liability for Future policy benefits for life, long-term health,
and annuity contracts presented in our balance sheet is discounted and reflected net of fees or premiums due from the
underlying contracts. Accordingly, the estimated amounts in the table exceed the liability for Future policy benefits presented in
our balance sheet. Payment amounts related to these reserves must be estimated and are not determinable from the
contract. Due to the uncertainty with respect to the timing and amount of these payments, actual results could materially differ
from the estimates in the table.
Credit Facilities
As our Bermuda subsidiaries are non-admitted insurers and reinsurers in the U.S., the terms of certain U.S. insurance and
reinsurance contracts require them to provide collateral, which can be in the form of letters of credit (LOCs). LOCs may also be
used for general corporate purposes.
On October 25, 2017, we entered into a credit facility that provides for up to $1.0 billion of availability, all of which may be
used for the issuance of LOC and for revolving loans. We have the ability to increase the capacity to $2.0 billion under certain
conditions, but any such increase would not raise the sub-limit for revolving loans above $1.0 billion. Our existing credit facility
has a remaining term expiring in October 2022. At December 31, 2019, our LOC usage was $567 million.
Our access to funds under an existing credit facility is dependent on the ability of the banks that are a party to the facility to
meet their funding commitments. In the event that such credit support is insufficient, we could be required to provide
alternative security to clients. This could take the form of additional insurance trusts supported by our investment portfolio or
funds withheld using our cash resources. The value of LOCs required is driven by, among other things, statutory liabilities
reported by variable annuity guarantee reinsurance clients, loss development of existing reserves, the payment pattern of such
reserves, the expansion of business, and loss experience of such business.
The facility noted above requires that we maintain certain covenants, all of which have been met at December 31, 2019.
These covenants include:
(i) a minimum consolidated net worth of not less than $34.985 billion; and
(ii) a ratio of consolidated debt to total capitalization of not greater than 0.35 to 1.
At December 31, 2019, (a) the minimum consolidated net worth requirement under the covenant described in (i) above was
$34.985 billion and our actual consolidated net worth as calculated under that covenant was $54.7 billion and (b) our ratio of
debt to total capitalization, as calculated under the covenant which excludes the fair value adjustment of debt acquired through
the Chubb Corp acquisition, was 0.21 to 1, which is below the maximum debt to total capitalization ratio of 0.35 to 1 as
described in (ii) above.
89
Our failure to comply with the covenants under any credit facility would, subject to grace periods in the case of certain
covenants, result in an event of default. This could require us to repay any outstanding borrowings or to cash collateralize LOCs
under such facility. Our failure to repay material financial obligations, as well as our failure with respect to certain other events
expressly identified, would result in an event of default under the facility.
Should our existing credit provider experience financial difficulty, we may be required to replace credit sources, possibly in a
difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our
business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty
accessing our credit facility.
Ratings
Chubb Limited and its subsidiaries are assigned credit and financial strength (insurance) ratings from internationally recognized
rating agencies, including S&P, A.M. Best, Moody's, and Fitch. The ratings issued on our companies by these agencies are
announced publicly and are available directly from the agencies. Our Internet site (investors.chubb.com, under Shareholder
Resources/Rating Agency Ratings) also contains some information about our ratings, but such information on our website is not
incorporated by reference into this report.
Financial strength ratings reflect the rating agencies' opinions of a company's claims paying ability. Independent ratings are one
of the important factors that establish our competitive position in the insurance markets. The rating agencies consider many
factors in determining the financial strength rating of an insurance company, including the relative level of statutory surplus
necessary to support the business operations of the company. These ratings are based upon factors relevant to policyholders,
agents, and intermediaries and are not directed toward the protection of investors. Such ratings are not recommendations to
buy, sell, or hold securities.
Credit ratings assess a company's ability to make timely payments of principal and interest on its debt. It is possible that, in the
future, one or more of the rating agencies may reduce our existing ratings. If one or more of our ratings were downgraded, we could
incur higher borrowing costs, and our ability to access the capital markets could be impacted. In addition, our insurance and
reinsurance operations could be adversely impacted by a downgrade in our financial strength ratings, including a possible reduction
in demand for our products in certain markets. Also, we have insurance and reinsurance contracts which contain rating triggers.
In the event the S&P or A.M. Best financial strength ratings of Chubb fall, we may be faced with the cancellation of premium or
be required to post collateral on our underlying obligation associated with this premium. We estimate that at December 31, 2019,
a one-notch downgrade of our S&P or A.M. Best financial strength ratings would result in an immaterial loss of premium or
requirement for collateral to be posted.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Market Sensitive Instruments and Risk Management
Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments. We are exposed to
potential losses from various market risks including changes in interest rates, equity prices, and foreign currency exchange rates.
Further, through writing the GLB and GMDB products, we are exposed to volatility in the equity and credit markets, as well as
interest rates. Our investment portfolio consists primarily of fixed income securities, denominated in both U.S. dollars and
foreign currencies, which are sensitive to changes in interest rates and foreign currency exchange rates. The majority of our fixed
income portfolio is classified as available for sale. The effect of market movements on our available for sale investment portfolio
impacts Net income (through Net realized gains (losses)) when securities are sold or when we record an OTTI charge in Net
income. Changes in interest rates and foreign currency exchange rates will have an immediate effect on Shareholders' equity and
Comprehensive income and in certain instances, Net income. From time to time, we also use derivative instruments such as
futures, options, swaps, and foreign currency forward contracts to manage the duration of our investment portfolio and foreign
currency exposures and also to obtain exposure to a particular financial market. At December 31, 2019 and 2018, our notional
exposure to derivative instruments was $4.9 billion and $9.1 billion, respectively. These instruments are recognized as assets or
liabilities in our consolidated financial statements and are sensitive to changes in interest rates, foreign currency exchange rates,
and equity security prices. As part of our investing activities, we purchase to be announced mortgage backed securities (TBAs).
Changes in the fair value of TBAs are included in Net realized gains (losses) and therefore, have an immediate effect on both
our Net income and Shareholders' equity.
90
We seek to mitigate market risk using a number of techniques, including maintaining and managing the assets and liabilities of
our international operations consistent with the foreign currencies of the underlying insurance and reinsurance businesses,
thereby limiting exchange rate risk to net assets denominated in foreign currencies.
The following is a discussion of our primary market risk exposures at December 31, 2019. Our policies to address these risks in
2019 were not materially different from 2018. We do not currently anticipate significant changes in our primary market risk
exposures or in how those exposures are managed in future reporting periods based upon what is known or expected to be in
effect in future reporting periods.
Interest rate risk – fixed income portfolio and debt obligations
Our fixed income portfolio and debt obligations have exposure to interest rate risk. Changes in investment values attributable to
interest rate changes are mitigated by corresponding and partially offsetting changes in the economic value of our insurance
reserves and debt obligations. We monitor this exposure through periodic reviews of our asset and liability positions.
The following table presents the impact at December 31, 2019 and 2018, on the fair value of our fixed income portfolio of a
hypothetical increase in interest rates of 100 bps applied instantly across the U.S. yield curve (an immediate time horizon was
used as this presents the worst case scenario):
(in billions of U.S. dollars, except for percentages)
Fair value of fixed income portfolio
Pre-tax impact of 100 bps increase in interest rates:
Decrease in dollars
As a percentage of total fixed income portfolio at fair value
$
$
2019
102.8
3.9
3.8%
$
$
2018
94.7
3.5
3.7%
Changes in interest rates will have an immediate effect on Comprehensive income and Shareholders' equity but will not
ordinarily have an immediate effect on Net income. Variations in market interest rates could produce significant changes in the
timing of prepayments due to available prepayment options. For these reasons, actual results could differ from those reflected in
the tables.
Although our debt and trust preferred securities (collectively referred to as debt obligations) are reported at amortized cost and
not adjusted for fair value changes, changes in interest rates could have a material impact on their fair value, albeit there would
be no impact on our consolidated financial statements.
The following table presents the impact at December 31, 2019 and 2018, on the fair value of our debt obligations of a
hypothetical decrease in interest rates of 100 bps applied instantly across the U.S. yield curve (an immediate time horizon was
used as this presents the worst case scenario):
(in millions of U.S. dollars, except for percentages)
Fair value of debt obligations, including repurchase agreements
Pre-tax impact of 100 bps decrease in interest rates:
Increase in dollars
As a percentage of total debt obligations at fair value
2019
2018
$ 18,238
$
14,524
$
1,570
$
1,201
8.6%
8.3%
91
Foreign currency management
As a global company, Chubb entities transact business in multiple currencies. Our policy is to generally match assets, liabilities
and required capital for each individual jurisdiction in local currency, which would include the use of derivatives. We do not
hedge our net asset non-U.S. dollar capital positions; however, we do consider hedging for planned cross border transactions.
The following table summarizes the net assets in non-U.S. currencies at December 31, 2019 and 2018:
(in millions of U.S. dollars, except for percentages)
Value of
Net Assets
Canadian dollar (CAD)
British pound sterling (GBP)
Euro (EUR)
Australian dollar (AUD)
Brazilian real (BRL)
Mexican peso (MXN)
Korean won (KRW) (x100)
Hong Kong dollar (HKD)
Thai baht (THB)
Chilean peso (CLP) (x100)
Euro denominated debt (1)
Other foreign currencies
$
2,220
2,024
1,675
1,100
990
942
788
653
606
489
(4,804)
2,474
2019
Exchange
rate
per USD
0.7698 $
1.3257
1.1213
0.7021
0.2485
0.0528
0.0865
0.1284
0.0337
0.1328
1.1213
various
2018
Exchange
rate
per USD
2019 vs. 2018
% change in
exchange rate
per USD
Value of
Net Assets
2,114
1,901
1,896
1,149
938
729
726
362
459
28
(2,016)
2,106
0.7333
1.2754
1.1467
0.7049
0.2577
0.0509
0.0900
0.1277
0.0309
0.1441
1.1467
various
5.0 %
3.9 %
(2.2)%
(0.4)%
(3.6)%
3.7 %
(3.9)%
0.5 %
9.1 %
(7.8)%
(2.2)%
NM
Value of net assets denominated in foreign
currencies (2)
As a percentage of total net assets
$
9,157
$
10,392
16.6%
20.7%
Pre-tax decrease to Shareholders' equity of a
hypothetical 10 percent strengthening of the
U.S. dollar
NM – not meaningful
(1) Refer to Note 9 to the Consolidated Financial Statements for additional information.
(2) At December 31, 2019, net assets denominated in foreign currencies comprised approximately 6 percent tangible assets and 94 percent intangible assets, primarily
832
945
$
$
goodwill.
Effective July 1, 2018, Argentina was designated as a highly inflationary economy and therefore we changed the functional
currency for our Argentine operations from the Argentine Peso to the U.S. dollar. Our net assets denominated in the Argentine
Peso represented less than 0.1 percent of consolidated shareholders’ equity. Therefore, this change in the functional currency of
our Argentine operations did not have a material impact on our financial condition or results of operations.
92
Reinsurance of GMDB and GLB guarantees
Chubb views its variable annuity reinsurance business as having a similar risk profile to that of catastrophe reinsurance with the
probability of long-term economic loss relatively small, at the time of pricing. Adverse changes in market factors and
policyholder behavior will have an impact on both Life Insurance underwriting income and net income. When evaluating these
risks, we expect to be compensated for taking both the risk of a cumulative long-term economic net loss, as well as the short-
term accounting variations caused by these market movements. Therefore, we evaluate this business in terms of its long-term
economic risk and reward.
Net income is directly impacted by changes in benefit reserves calculated in connection with reinsurance of variable annuity
guarantees. In addition, net income is directly impacted by changes in the fair value of the GLB liability (FVL), which is
classified as a derivative for accounting purposes. The FVL established for a GLB reinsurance contract represents the difference
between the fair value of the contract and the benefit reserves. Benefit reserves and FVL calculations are directly affected by
market factors, including equity levels, interest rate levels, credit risk, and implied volatilities, as well as policyholder behaviors,
such as annuitization and lapse rates, and policyholder mortality.
The tables below are estimates of the sensitivities to instantaneous changes in economic inputs (e.g., equity shock, interest rate
shock, etc.) or actuarial assumptions at December 31, 2019 of the FVL and of the fair value of specific derivative instruments
held (hedge value) to partially offset the risk in the variable annuity guarantee reinsurance portfolio. The following assumptions
should be considered when using the below tables:
• No changes to the benefit ratio used to establish benefit reserves at December 31, 2019.
• Equity shocks impact all global equity markets equally
• Our liabilities are sensitive to global equity markets in the following proportions: 75 percent—85 percent U.S. equity,
and 15 percent—25 percent international equity.
• Our current hedge portfolio is sensitive only to U.S. equity markets.
• We would suggest using the S&P 500 index as a proxy for U.S. equity, and the MSCI EAFE index as a proxy for
international equity.
•
Interest rate shocks assume a parallel shift in the U.S. yield curve
• Our liabilities are also sensitive to global interest rates at various points on the yield curve, mainly the U.S. Treasury
curve in the following proportions: 5 percent—15 percent short-term rates (maturing in less than 5 years), 25 percent
—35 percent medium-term rates (maturing between 5 years and 10 years, inclusive), and 55 percent—65 percent
long-term rates (maturing beyond 10 years).
• A change in AA-rated credit spreads impacts the rate used to discount cash flows in the fair value model. AA-rated
credit spreads are a proxy for both our own credit spreads and the credit spreads of the ceding insurers.
• The hedge sensitivity is from December 31, 2019 market levels and only applicable to the equity and interest rate
sensitivities table below.
•
• The sensitivities are not directly additive because changes in one factor will affect the sensitivity to changes in other factors.
The sensitivities do not scale linearly and may be proportionally greater for larger movements in the market factors. The
sensitivities may also vary due to foreign exchange rate fluctuations. The calculation of the FVL is based on internal models
that include assumptions regarding future policyholder behavior, including lapse, annuitization, and asset allocation. These
assumptions impact both the absolute level of the FVL as well as the sensitivities to changes in market factors shown
below. Actual sensitivity of our net income may differ from those disclosed in the tables below due to differences between
short-term market movements and management judgment regarding the long-term assumptions implicit in our benefit
ratios.
In addition, the tables below do not reflect the expected quarterly run rate of net income generated by the variable annuity
guarantee reinsurance portfolio if markets remain unchanged during the period. All else equal, if markets remain unchanged
during the period, the Gross FVL will increase, resulting in a realized loss. This realized loss occurs primarily because the
guarantees provided in the underlying contracts continue to become more valuable even when markets remain unchanged.
We refer to this increase in Gross FVL as “timing effect”. The unfavorable impact of timing effect on our Gross FVL in a
quarter is not reflected in the sensitivity tables below. For this reason, when using the tables below to estimate the
sensitivity of Gross FVL in the first quarter 2020 to various changes, it is necessary to assume an additional $5 million to
$45 million increase in Gross FVL and realized losses. The impact to Net income is partially mitigated because this realized
loss is partially offset by the positive quarterly run rate of Life Insurance underwriting income generated by the variable
annuity guarantee reinsurance portfolio if markets remain unchanged during the period. Note that both the timing effect and
the quarterly run rate of Life Insurance underwriting income change over time as the book ages.
93
Sensitivities to equity and interest rate movements
(in millions of U.S. dollars)
Worldwide Equity Shock
Interest Rate Shock
+10%
Flat
-10%
-20%
-30%
-40%
+100 bps
(Increase)/decrease in Gross FVL
Increase/(decrease) in hedge value
Increase/(decrease) in net income
Flat
(Increase)/decrease in Gross FVL
Increase/(decrease) in hedge value
Increase/(decrease) in net income
-100 bps
(Increase)/decrease in Gross FVL
Increase/(decrease) in hedge value
$
$
$
$
$
$
$
$
$
$
343
(63)
280
156
(63)
93
(74)
(63)
207
—
207
$
$
49
63
112
— $
(182)
—
63
— $
(119)
(249)
$
(451)
—
63
$
(138)
$
(357)
$
(604)
$
$
$
$
125
(13)
(394)
125
(269)
(681)
125
$
$
$
$
188
(169)
(636)
188
$
$
250
(354)
(904)
250
(448)
$
(654)
(936)
$ (1,215)
188
250
Increase/(decrease) in net income
$
(137)
$
(249)
$
(388)
$
(556)
$
(748)
$
(965)
Sensitivities to Other Economic Variables
(in millions of U.S. dollars)
(Increase)/decrease in Gross FVL
Increase/(decrease) in net income
Sensitivities to Actuarial Assumptions
(in millions of U.S. dollars)
(Increase)/decrease in Gross FVL
Increase/(decrease) in net income
(in millions of U.S. dollars)
(Increase)/decrease in Gross FVL
Increase/(decrease) in net income
(in millions of U.S. dollars)
(Increase)/decrease in Gross FVL
Increase/(decrease) in net income
AA-rated Credit Spreads
Interest Rate Volatility
Equity Volatility
+100 bps
-100 bps
+2%
-2%
+2%
-2%
$
$
73
73
$
$
(81)
(81)
$
$
$
$
$
$
$
$
— $
— $
1
1
$
$
(9)
(9)
Mortality
+20%
+10%
-10%
18
18
+50%
101
101
+50%
(498)
(498)
$
$
$
$
$
$
(9)
(9)
9
9
$
$
Lapses
+25%
52
52
$
$
-25%
(57)
(57)
Annuitization
+25%
(264)
(264)
$
$
-25%
298
298
$
$
$
$
$
$
$
$
9
9
-20%
(19)
(19)
-50%
(120)
(120)
-50%
585
585
Variable Annuity Net Amount at Risk
All our VA reinsurance treaties include annual or aggregate claim limits and many include an aggregate deductible which limit
the net amount at risk under these programs. The tables below present the net amount at risk at December 31, 2019 following
an immediate change in equity market levels, assuming all global equity markets are impacted equally. For further information
on the net amount at risk, refer to Note 5 c) to the Consolidated Financial Statements.
a) Reinsurance covering the GMDB risk only
(in millions of U.S. dollars)
GMDB net amount at risk
Claims at 100% immediate mortality
Equity Shock
+20%
Flat
-20%
-40%
-60%
-80%
$
271
160
$
256 $
167
442
166
$
797
156
$
817
138
$
696
122
The treaty claim limits function as a ceiling as equity markets fall. As the shocks in the table above become incrementally more
negative, the impact on the NAR and claims at 100 percent mortality begin to drop due to the specific nature of these claim
limits, many of which are annual claim limits calculated as a percentage of the reinsured account value. There is also some
impact due to a small portion of the GMDB reinsurance under which claims are positively correlated to equity markets (claims
decrease as equity markets fall).
94
b) Reinsurance covering the GLB risk only
(in millions of U.S. dollars)
GLB net amount at risk
Equity Shock
+20%
Flat
-20%
-40%
-60%
-80%
$
724
$
1,095 $ 1,738
$ 2,516
$ 3,021
$ 3,387
The treaty claim limits cause the net amount at risk to increase at a declining rate as equity markets fall.
c) Reinsurance covering both the GMDB and GLB risks on the same underlying policyholders
(in millions of U.S. dollars)
GMDB net amount at risk
GLB net amount at risk
Claims at 100% immediate mortality
Equity Shock
+20%
Flat
-20%
-40%
-60%
-80%
$
76
$
91 $
305
16
415
16
105
560
17
$
117
723
17
$
123
888
17
$
123
985
17
The treaty limits control the increase in the GMDB net amount at risk as equity markets fall. The GMDB net amount at risk
continues to grow as equity markets fall because most of these reinsurance treaties do not have annual claim limits calculated
as a percentage of the underlying account value. The treaty limits cause the GLB net amount at risk to increase at a declining
rate as equity markets fall.
ITEM 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are included in this Form 10-K commencing on page F-1.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Chubb’s management, with the participation of Chubb’s Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of Chubb’s disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the
Securities Exchange Act of 1934 as of December 31, 2019. Based upon that evaluation, Chubb’s Chief Executive Officer and
Chief Financial Officer concluded that Chubb’s disclosure controls and procedures are effective in allowing information required
to be disclosed in reports filed under the Securities Exchange Act of 1934 to be recorded, processed, summarized, and reported
within time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to
Chubb’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
In 2016, Chubb completed the acquisition of The Chubb Corporation. For the year ended December 31, 2019, we continued to
integrate the information technology environments of the two companies.
There were no other changes to Chubb's internal controls over financial reporting for the year ended December 31, 2019 that
have materially affected, or are reasonably likely to materially affect, Chubb's internal controls over financial reporting. Chubb's
management report on internal control over financial reporting is included on page F-3 and PricewaterhouseCoopers LLP's audit
report is included on pages F-4, F-5, and F-6.
ITEM 9B. Other Information
Item not applicable.
95
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
Information pertaining to this item is incorporated by reference to the sections entitled “Agenda Item 5 - Election of the Board of
Directors”, “Corporate Governance - The Board of Directors - Director Nomination Process”, and “Corporate Governance - The
Committees of the Board - Audit Committee” of the definitive proxy statement for the 2020 Annual General Meeting of
Shareholders which will be filed with the SEC not later than 120 days after the close of the fiscal year pursuant to Regulation
14A. Also incorporated herein by reference is the text under the caption “Information about our Executive Officers” appearing at
the end of Part I Item 1 of the Annual Report on Form 10-K.
Code of Ethics
Chubb has adopted a Code of Conduct, which sets forth standards by which all Chubb employees, officers, and directors must
abide as they work for Chubb. Chubb has posted this Code of Conduct on its Internet site (investors.chubb.com, under
Corporate Governance/Highlights and Governance Documents/The Chubb Code of Conduct). Chubb intends to disclose on its
Internet site any amendments to, or waivers from, its Code of Conduct that are required to be publicly disclosed pursuant to the
rules of the SEC or the New York Stock Exchange.
ITEM 11. Executive Compensation
This item is incorporated by reference to the sections entitled “Executive Compensation”, “Compensation Committee Report”
and “Director Compensation” of the definitive proxy statement for the 2020 Annual General Meeting of Shareholders which will
be filed with the SEC not later than 120 days after the close of the fiscal year pursuant to Regulation 14A.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Plan category
Equity compensation plans approved by security holders (1)
Equity compensation plans not approved by security holders (2)
Number of securities
to be issued upon
exercise of
outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding options,
warrants, and rights (3)
Number of securities
remaining available for
future issuance under
equity compensation
plans
11,801,420 $
116.79
12,575,263
27,914
(1) These totals include securities available for future issuance under the following plans:
(i) Chubb Limited 2016 Long-Term Incentive Plan (LTIP). A total of 19,500,000 shares are authorized to be issued pursuant to
awards made as options, stock appreciation rights, stock units, performance shares, performance units, restricted stock, and
restricted stock units. The maximum number of shares that may be delivered to participants and their beneficiaries under the LTIP
shall be equal to the sum of: (x) 19,500,000 shares of stock; and (y) any shares of stock that have not been delivered pursuant to
the ACE LTIP (as defined in clause (ii) of this footnote (1) below) and remain available for grant pursuant to the ACE LTIP, including
shares of stock represented by awards granted under the ACE LTIP that are forfeited, expire or are canceled after the effective date of
the LTIP without delivery of shares of stock or which result in the forfeiture of the shares of stock back to the Company to the extent
that such shares would have been added back to the reserve under the terms of the ACE LTIP. As of December 31, 2019, a total of
5,288,553 option awards and 706,535 restricted stock unit awards are outstanding, and 10,789,285 shares remain available for
future issuance under this plan.
(ii) ACE Limited 2004 Long-Term Incentive Plan (ACE LTIP). As of December 31, 2019, a total of 5,496,523 option awards and
72,075 restricted stock unit awards are outstanding. No additional grants will be made pursuant to the ACE LTIP.
(iii) The Chubb Corporation Long-Term Incentive Plan (2014) (Chubb Corp. LTIP). As of December 31, 2019, a total of
99,759 option awards, 3,433 restricted stock unit awards, nil performance unit awards (representing 100% of the
aggregate target in accordance with the Chubb Corp. merger agreement) and 83,173 deferred stock unit awards are
outstanding. No additional grants will be made pursuant to the Chubb Corp. LTIP.
(iv) ESPP. A total of 6,500,000 shares have been authorized for purchase at a discount. As of December 31, 2019,
1,785,978 shares remain available for future issuance under this plan.
96
(2) These plans are the Chubb Corp. CCAP Excess Benefit Plan (CCAP Excess Benefit Plan) and the Chubb Corp. Deferred
Compensation Plan for Directors, under which no Common Shares are available for future issuance other than with respect to
outstanding rewards. The CCAP Excess Benefit Plan is a nonqualified, defined contribution plan and covers those participants
in the Capital Accumulation Plan of The Chubb Corporation (CCAP) (Chubb Corp.’s legacy 401(k) plan) and Chubb Corp.’s
legacy employee stock ownership plan (ESOP) whose total benefits under those plans are limited by certain provisions of the
Internal Revenue Code. A participant in the CCAP Excess Benefit Plan is entitled to a benefit equaling the difference between
the participant’s benefits under the CCAP and the ESOP, without considering the applicable limitations of the Code, and the
participant’s actual benefits under such plans. A participant’s excess ESOP benefit is expressed as Common Shares.
Payments under the CCAP Excess Benefit Plan are generally made: (i) for excess benefits related to the CCAP, in cash
annually as soon as practical after the amount of excess benefit can be determined; and (ii) for excess benefits related to the
ESOP, in Common Shares as soon as practicable after the participant’s termination of employment. Allocations under the
ESOP ceased in 2004. Accordingly, other than dividends, no new contributions are made to the ESOP or the CCAP Excess
Benefit Plan with respect to excess ESOP benefits.
(3) Weighted average exercise price excludes shares issuable under performance unit awards and restricted stock unit awards.
ITEM 13. Certain Relationships and Related Transactions and Director Independence
This item is incorporated by reference to the sections entitled “Corporate Governance - What Is Our Related Party Transactions
Approval Policy And What Procedures Do We Use To Implement It?”, “Corporate Governance - What Related Party Transactions
Do We Have?”, and “Corporate Governance - The Board of Directors - Director Independence” of the definitive proxy statement
for the 2020 Annual General Meeting of Shareholders which will be filed with the SEC not later than 120 days after the close of
the fiscal year pursuant to Regulation 14A.
ITEM 14. Principal Accounting Fees and Services
This item is incorporated by reference to the section entitled “Agenda Item 4 – Election of Auditors – 4.2 – Ratification of
appointment of PricewaterhouseCoopers LLP (United States) as independent registered public accounting firm for purposes of
U.S. securities law reporting” of the definitive proxy statement for the 2020 Annual General Meeting of Shareholders which will
be filed with the SEC not later than 120 days after the close of the fiscal year pursuant to Regulation 14A.
97
Part IV
ITEM 15. Exhibits, Financial Statement Schedules
(a)
Financial Statements, Schedules, and Exhibits
1.
Consolidated Financial Statements
Management's Responsibility for Financial Statements and Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2019 and 2018
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2019, 2018,
and 2017
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules
Schedule I - Summary of Investments - Other Than Investments in Related Parties at December 31, 2019
Schedule II - Condensed Financial Information of Registrant (Parent Company Only) at December 31, 2019 and
2018 and for the years ended December 31, 2019, 2018, and 2017
Schedule IV - Supplemental Information Concerning Reinsurance for the years ended December 31, 2019, 2018,
and 2017
Schedule VI - Supplementary Information Concerning Property and Casualty Operations as of and for the years ended
December 31, 2019, 2018, and 2017
Page
F-3
F-4
F-7
F-8
F-9
F-10
F-11
F-108
F-109
F-111
F-112
Other schedules have been omitted as they are not applicable to Chubb, or the required information has been included in
the Consolidated Financial Statements and related notes.
3.
Exhibits
Exhibit
Number
Exhibit Description
Articles of Association of the Company, as amended and
restated
Organizational Regulations of the Company as amended
Articles of Association of the Company, as amended and
restated
Organizational Regulations of the Company as amended
Specimen share certificate representing Common Shares
Indenture, dated March 15, 2002, between ACE Limited and
Bank One Trust Company, N.A.
Senior Indenture, dated August 1, 1999, among ACE INA
Holdings, Inc., ACE Limited and Bank of New York Mellon
Trust Company, N.A. (as successor), as trustee
3.1
3.2
4.1
4.2
4.3
4.4
4.5
98
Incorporated by Reference
Original
Number
3.1
3.1
4.1
3.1
4.3
4.1
Date Filed
May 18, 2018
Filed
Herewith
November 21, 2016
May 18, 2018
November 21, 2016
July 18, 2008
March 22, 2002
4.4
December 10, 2014
Form
8-K
8-K
8-K
8-K
8-K
8-K
S-3
ASR
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
Exhibit
Number
Exhibit Description
Indenture, dated November 30, 1999, among ACE INA
Holdings, Inc. and Bank One Trust Company, N.A., as trustee
Indenture, dated December 1, 1999, among ACE INA
Holdings, Inc., ACE Limited and Bank One Trust Company,
National Association, as trustee
Amended and Restated Trust Agreement, dated March 31,
2000, among ACE INA Holdings, Inc., Bank One Trust
Company, National Association, as property trustee, Bank One
Delaware Inc., as Delaware trustee and the administrative
trustees named therein
Incorporated by Reference
Form
10-K
Original
Number
10.38
Date Filed
Filed
Herewith
March 29, 2000
10-K
10.41
March 29, 2000
10-K
4.17
March 16, 2006
Common Securities Guarantee Agreement, dated March 31,
2000
10-K
4.18
March 16, 2006
Capital Securities Guarantee Agreement, dated March 31,
2000
10-K
4.19
March 16, 2006
Form of 2.70 percent Senior Notes due 2023
Form of 4.15 percent Senior Notes due 2043
First Supplemental Indenture dated as of March 13, 2013 to
the Indenture dated as of August 1, 1999 among ACE INA
Holdings, Inc., as Issuer, ACE Limited, as Guarantor, and The
Bank of New York Mellon Trust Company, N.A., as Successor
Trustee
Form of 3.35 percent Senior Notes due 2024
Form of 3.150 percent Senior Notes due 2025
Form of 2.30 percent Senior Notes due 2020
Form of 2.875 percent Senior Notes due 2022
Form of 3.35 percent Senior Notes due 2026
Form of 4.35 percent Senior Notes due 2045
First Supplemental Indenture to the Chubb Corp Senior
Indenture dated as of January 15, 2016 to the Indenture
dated as of October 25, 1989 among ACE INA Holdings, Inc.,
as Successor Issuer, ACE Limited, as Guarantor, and The Bank
of New York Mellon Trust Company, N.A., as Trustee
Second Supplemental Indenture to the Chubb Corp Junior
Subordinated Indenture dated as of January 15, 2016 to the
Indenture dated as of March 29, 2007 among ACE INA
Holdings, Inc., as Successor Issuer, ACE Limited, as
Guarantor, and The Bank of New York Mellon Trust Company,
N.A., as Trustee
Chubb Corp Senior Indenture (incorporated by reference to
Exhibit 4(a) to Chubb Corp's Registration Statement on Form
S-3 filed on October 27, 1989) (File No. 33-31796)
Chubb Corp Junior Subordinated Indenture (incorporated by
reference to Exhibit 4.1 to Chubb Corp's Current Report on
Form 8-K filed on March 30, 2007) (File No. 001-08661)
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
4.1
4.2
4.3
4.1
4.1
4.1
4.2
4.3
4.4
4.1
March 13, 2013
March 13, 2013
March 13, 2013
May 27, 2014
March 16, 2015
November 3, 2015
November 3, 2015
November 3, 2015
November 3, 2015
January 15, 2016
8-K
4.2
January 15, 2016
S-3
4(a)
October 27, 1989
8-K
4.1
March 30, 2007
99
Exhibit Description
First Supplemental Indenture to the Chubb Corp Junior
Subordinated Indenture dated as of March 29, 2007 between
the Chubb Corporation and The Bank of New York Trust
Company, N.A., as Trustee (incorporated by reference to
Exhibit 4.2 to Chubb Corp's Current Report on Form 8-K filed
on March 30, 2007) (File No. 001-08661)
Form of 5.75 percent Chubb Corp Senior Notes due 2018
(incorporated by reference to Exhibit 4.1 to Chubb Corp's
Current Report on Form 8-K filed on May 6, 2008) (File No.
001-08661)
Form of 6.60 percent Chubb Corp Debentures due 2018
(incorporated by reference to Exhibit 4(a) to Chubb Corp's
Registration Statement on Form S-3 filed on October 27,
1989) (File No. 33-31796)
Form of 6.80 percent Chubb Corp Debentures due 2031
(incorporated by reference to Exhibit 4(a) to Chubb Corp's
Registration Statement on Form S-3 filed on October 27,
1989) (File No. 33-31796)
Form of 6.00 percent Chubb Corp Senior Notes due 2037
(incorporated by reference to Exhibit 4.1 to Chubb Corp's
Current Report on Form 8-K filed on May 11, 2007) (File No.
001-08661)
Form of 6.50 percent Chubb Corp Senior Notes due 2038
(incorporated by reference to Exhibit 4.2 to Chubb Corp's
Current Report on Form 8-K filed on May 6, 2008) (File No.
001-08661)
Form of debenture for the 6.375 percent Chubb Corp DISCs
(incorporated by reference to Exhibit 4.3 to Chubb Corp's
Current Report on Form 8-K filed on March 30, 2007) (File
No. 001-08661)
Incorporated by Reference
Original
Number
Date Filed
Filed
Herewith
4.2
March 30, 2007
Form
8-K
8-K
4.1
May 6, 2008
S-3
4(a)
October 27, 1989
S-3
4(a)
October 27, 1989
8-K
4.1
May 11, 2007
8-K
4.2
May 6, 2008
8-K
4.3
March 30, 2007
Procedures regarding the registration of shareholders in the
share register of Chubb Limited
10-K
4.32
February 28, 2017
Exhibit
Number
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
Form of Officer's Certificate related to the 1.550% Senior
Notes due 2028 and 2.500% Senior Notes due 2038
4.33
Form of Global Note for the 1.550% Senior Notes due 2028
4.34
Form of Global Note for the 2.500% Senior Notes due 2038
4.35
Form of Officer's Certificate related to the 0.875% Senior
Notes due 2027 and 1.400% Senior Notes due 2031
4.36
Form of Global Note for the 0.875% Senior Notes due 2027
4.37
Form of Global Note for the 1.400% Senior Notes due 2031
4.38
Form of Officer’s Certificate related to the 0.300% Senior
Notes due 2024 and 0.875% Senior Notes due 2029
4.39
Form of Global Note for the 0.300% Senior Notes due 2024
4.40
Form of Global Note for the 0.875% Senior Notes due 2029
100
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
4.1
4.2
4.3
4.1
4.2
4.3
4.1
4.2
4.3
March 6, 2018
March 6, 2018
March 6, 2018
June 17, 2019
June 17, 2019
June 17, 2019
December 5, 2019
December 5, 2019
December 5, 2019
Exhibit
Number
Exhibit Description
4.41
Description of the Registrant's Securities
Incorporated by Reference
Form
Original
Number
Date Filed
Filed
Herewith
X
10.1*
Form of Indemnification Agreement between the Company and
the directors of the Company, dated August 13, 2015
10-K
10.1
February 26, 2016
10.2
10.3*
10.4*
10.5*
10.6*
10.7*
Credit Agreement for $1,000,000,000 Senior Unsecured
Letter of Credit Facility, dated as of November 6, 2012,
among ACE Limited, and certain subsidiaries and Wells Fargo
Bank, National Association as Administrative Agent, the
Swingline Bank and an Issuing Bank
10-K
10.13
February 28, 2013
Employment Terms dated October 29, 2001, between ACE
Limited and Evan Greenberg
10-K
10.64
March 27, 2003
Employment Terms dated November 2, 2001, between ACE
Limited and Philip V. Bancroft
10-K
10.65
March 27, 2003
Executive Severance Agreement between ACE Limited and
Philip Bancroft, effective January 2, 2002
10-Q
10.1
May 10, 2004
Letter Regarding Executive Severance between ACE Limited
and Philip V. Bancroft
10-K
10.17
February 25, 2011
Employment Terms dated April 10, 2006, between ACE and
John Keogh
10-K
10.29
February 29, 2008
10.8*
Executive Severance Agreement between ACE and John Keogh
10-K
10.30
February 29, 2008
10.9*
ACE Limited Executive Severance Plan as amended effective
May 18, 2011
10-K
10.21
February 24, 2012
10.10*
Form of employment agreement between the Company (or
subsidiaries of the Company) and executive officers of the
Company to allocate a percentage of aggregate salary to the
Company (or subsidiaries of the Company)
8-K
10.1
July 16, 2008
10.11*
Outside Directors Compensation Parameters
X
10.12*
ACE Limited Elective Deferred Compensation Plan (as
amended and restated effective January 1, 2005)
10-K
10.24
March 16, 2006
10.13*
ACE USA Officer Deferred Compensation Plan (as amended
through January 1, 2001)
10-K
10.25
March 16, 2006
10.14*
ACE USA Officer Deferred Compensation Plan (as amended
and restated effective January 1, 2011)
10-Q
10.7
October 30, 2013
10.15*
ACE USA Officer Deferred Compensation Plan (as amended
and restated effective January 1, 2009)
10-K
10.36
February 27, 2009
10.16*
First Amendment to the Amended and Restated ACE USA
Officers Deferred Compensation Plan
10-K
10.28
February 25, 2010
10.17*
Form of Swiss Mandatory Retirement Benefit Agreement (for
Swiss-employed named executive officers)
10-Q
10.2
May 7, 2010
10.18*
ACE Limited Supplemental Retirement Plan (as amended and
restated effective July 1, 2001)
10-Q
10.1
November 14, 2001
10.19*
ACE Limited Supplemental Retirement Plan (as amended and
restated effective January 1, 2011)
10-Q
10.6
October 30, 2013
101
Exhibit
Number
10.20*
Exhibit Description
Amendments to the ACE Limited Supplemental Retirement
Plan and the ACE Limited Elective Deferred Compensation
Plan
Incorporated by Reference
Form
10-K
Original
Number
Date Filed
Filed
Herewith
10.38
February 29, 2008
10.21*
ACE Limited Elective Deferred Compensation Plan (as
amended and restated effective January 1, 2009)
10-K
10.39
February 27, 2009
10.22*
ACE Limited Elective Deferred Compensation Plan (as
amended and restated effective January 1, 2011)
10-Q
10.5
October 30, 2013
10.23*
Deferred Compensation Plan amendments, effective January
1, 2009
10-K
10.40
February 27, 2009
10.24*
Amendment to the ACE Limited Supplemental Retirement
Plan
10-K
10.39
February 29, 2008
10.25*
Amendment and restated ACE Limited Supplemental
Retirement Plan, effective January 1, 2009
10-K
10.42
February 27, 2009
10.26*
ACE USA Supplemental Employee Retirement Savings Plan
(see exhibit 10.6 to Form 10-Q filed with the SEC on May 15,
2000)
10-Q
10.6
May 15, 2000
10.27*
ACE USA Supplemental Employee Retirement Savings Plan
(as amended through the Second Amendment)
10-K
10.30
March 1, 2007
10.28*
ACE USA Supplemental Employee Retirement Savings Plan
(as amended through the Third Amendment)
10-K
10.31
March 1, 2007
10.29*
ACE USA Supplemental Employee Retirement Savings Plan
(as amended and restated)
10-K
10.46
February 27, 2009
10.30*
First Amendment to the Amended and Restated ACE USA
Supplemental Employee Retirement Savings Plan
10-K
10.39
February 25, 2010
10.31*
The ACE Limited 1995 Outside Directors Plan (as amended
through the Seventh Amendment)
10-Q
10.1
August 14, 2003
10.32*
ACE Limited 1998 Long-Term Incentive Plan (as amended
through the Fourth Amendment)
10-K
10.34
March 1, 2007
10.33*
ACE Limited 2004 Long-Term Incentive Plan (as amended
through the Fifth Amendment)
10.34*
ACE Limited 2004 Long-Term Incentive Plan (as amended
through the Sixth Amendment)
8-K
8-K
10
May 21, 2010
10.1
May 20, 2013
10.35*
ACE Limited Rules of the Approved U.K. Stock Option
Program (see exhibit 10.2 to Form 10-Q filed with the SEC on
February 13, 1998)
10-Q
10.2
February 13, 1998
10.36*
Form of Restricted Stock Award Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-K
10.54
February 27, 2009
10.37*
Form of Restricted Stock Award Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-K
10.55
February 27, 2009
10.38*
Director Restricted Stock Award Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-Q
10.1
November 9, 2009
10.39*
Form of Restricted Stock Unit Award Terms under the ACE
Limited 2004 Long-Term Incentive Plan
10-Q
10.1
May 8, 2008
102
Exhibit
Number
10.40*
Exhibit Description
Form of Restricted Stock Unit Award Terms under the ACE
Limited 2004 Long-Term Incentive Plan
Incorporated by Reference
Original
Number
Date Filed
Filed
Herewith
10.2
May 8, 2008
Form
10-Q
10.41*
Form of Restricted Stock Unit Award Terms under the ACE
Limited 2004 Long-Term Incentive Plan
10-K
10.60
February 27, 2009
10.42*
Form of Restricted Stock Unit Award Terms under the ACE
Limited 2004 Long-Term Incentive Plan
10-Q
10.2
October 30, 2013
10.43*
Form of Restricted Stock Unit Award Terms under the ACE
Limited 2004 Long-Term Incentive Plan for Chief Executive
Officer, Chief Financial Officer and the General Counsel
10-K
10.56
February 28, 2014
10.44*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
8-K
10.4
September 13, 2004
10.45*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-Q
10.4
May 8, 2008
10.46*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-K
10.63
February 27, 2009
10.47*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-Q
10.3
October 30, 2013
10.48*
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan
8-K
10.5
September 13, 2004
10.49*
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan
10-Q
10.3
May 8, 2008
10.50*
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan
10-Q
10.4
October 30, 2013
10.51*
Form of Performance Based Restricted Stock Award Terms
under the ACE Limited 2004 Long-Term Incentive Plan, as
updated through May 4, 2006
10-Q
10.3
May 5, 2006
10.52*
Revised Form of Performance Based Restricted Stock Award
Terms under the ACE Limited 2004 Long-Term Incentive Plan
10-Q
10.2
November 8, 2006
10.53*
Revised Form of Performance Based Restricted Stock Award
Terms under The ACE Limited 2004 Long-Term Incentive Plan
10-K
10.65
February 25, 2011
10.54*
Form of Performance Based Restricted Stock Award Terms
under the ACE Limited 2004 Long-Term Incentive Plan
10-K
10.67
February 28, 2014
10.55*
10.56*
10.57*
Form of Performance Based Restricted Stock Award Terms
under the ACE Limited 2004 Long-Term Incentive Plan for
Chief Executive Officer, Chief Financial Officer and the General
Counsel
Form of Restricted Stock Unit Award Terms (for outside
directors) under the ACE Limited 2004 Long-Term Incentive
Plan
Form of Restricted Stock Unit Award Terms (for outside
directors) under the ACE Limited 2004 Long-Term Incentive
Plan
10-K
10.68
February 28, 2014
10-Q
10.2
November 7, 2007
10-Q
10.2
August 7, 2009
103
Exhibit
Number
10.58*
10.59*
10.60*
Exhibit Description
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan for Messrs. Greenberg and
Cusumano
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan for Messrs. Greenberg
and Cusumano
Form of Restricted Stock Award Terms under the ACE Limited
2004 Long-Term Incentive Plan for Messrs. Greenberg and
Cusumano
10.61*
ACE Limited Employee Stock Purchase Plan, as amended
10.62*
10.63*
10.64*
10.65*
10.66*
10.67*
Form of Performance Based Restricted Stock Award Terms
under the ACE Limited 2004 Long-Term Incentive Plan for
Messrs. Greenberg and Cusumano
Form of Restricted Stock Award Terms under the ACE Limited
2004 Long-Term Incentive Plan for Swiss Executive
Management
Form of Performance Based Restricted Stock Award Terms
under the ACE Limited 2004 Long-Term Incentive Plan for
Swiss Executive Management
Form of Restricted Stock Unit Award Terms under the ACE
Limited 2004 Long-Term Incentive Plan for Swiss Executive
Management
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan for Swiss Executive
Management
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan for Swiss Executive
Management
Incorporated by Reference
Form
10-Q
Original
Number
10.1
Date Filed
August 4, 2011
Filed
Herewith
10-Q
10.2
August 4, 2011
10-Q
10.3
August 4, 2011
8-K
10-K
10.1
May 22, 2012
10.72
February 24, 2012
10-K
10.68
February 27, 2015
10-K
10.69
February 27, 2015
10-K
10.70
February 27, 2015
10-K
10.71
February 27, 2015
10-K
10.72
February 27, 2015
10.68*
Form of Executive Management Non-Competition Agreement
8-K
10.1
May 22, 2015
10.69
Commitment Increase Agreement to increase the credit
capacity under the Credit Agreement originally entered into on
November 6, 2012 to $1,500,000,000 under the Senior
Unsecured Letter of Credit Facility, dated as of December 11,
2015, among ACE Limited, and certain subsidiaries, and
Wells Fargo Bank, National Association as Administrative
Agent, the Swingline Bank and an Issuing Bank
10-K
10.72
February 26, 2016
10.70*
Form of Performance Based Restricted Stock Award Terms
under the ACE Limited 2004 Long-Term Incentive Plan
10-K
10.73
February 26, 2016
10.71*
Form of Performance Based Restricted Stock Award Terms
under the ACE Limited 2004 Long-Term Incentive Plan for
Special Award for Messrs. Greenberg and Keogh
10-K
10.74
February 26, 2016
10.72*
Chubb Limited 2016 Long-Term Incentive Plan
S-8
4.4
May 26, 2016
10.73*
Form of Incentive Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan
10-Q
10.2
August 5, 2016
10.74*
Form of Restricted Stock Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan
10-Q
10.3
August 5, 2016
104
Exhibit
Number
10.75*
Exhibit Description
Form of Restricted Stock Unit Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan
Incorporated by Reference
Form
10-Q
Original
Number
10.4
Date Filed
August 5, 2016
Filed
Herewith
10.76*
Form of Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan
10-Q
10.5
August 5, 2016
10.77*
10.78*
10.79*
10.80*
10.81*
Form of Incentive Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Form of Restricted Stock Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Form of Restricted Stock Unit Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Form of Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Form of Performance Based Restricted Stock Award Terms
under the Chubb Limited 2016 Long-Term Incentive Plan for
Swiss Executive Management
10-Q
10.6
August 5, 2016
10-Q
10.7
August 5, 2016
10-Q
10.8
August 5, 2016
10-Q
10.9
August 5, 2016
10-K
10.84
February 28, 2017
10.82*
Form of Performance Based Restricted Stock Award Terms
under the Chubb Limited 2016 Long-Term Incentive Plan
10-K
10.85
February 28, 2017
10.83*
10.84*
10.85
10.86*
10.87*
10.88*
Chubb Limited Employee Stock Purchase Plan, as amended
and restated
S-8
4.4
May 25, 2017
Director Restricted Stock Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan
10-Q
10.1
August 3, 2017
Amended and Restated Credit Agreement for $1,000,000
Senior Unsecured Letter of Credit Facility, dated as of October
25, 2017, among Chubb Limited, and certain subsidiaries
and Wells Fargo Bank, National Association as Administrative
Agent, the Swingline Bank and an Issuing Bank
10-K
10.88
February 23, 2018
Form of Incentive Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Executive Officers
10-K
10.89
February 23, 2018
Form of Restricted Stock Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Executive Officers
10-K
10.90
February 23, 2018
Form of Performance Based Restricted Stock Award Terms
under the Chubb Limited 2016 Long-Term Incentive Plan for
Executive Officers
10-K
10.91
February 23, 2018
10.89*
Form of Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Executive Officers
10-K
10.92
February 23, 2018
10.90*
10.91*
10.92*
Form of Restricted Stock Unit Award Terms under the Chubb
Limited 2016 Long-Term Plan for Executive Officers
10-K
10.93
February 23, 2018
Form of Incentive Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Form of Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
10-K
10.94
February 23, 2018
10-K
10.95
February 23, 2018
105
Exhibit
Number
10.93*
10.94*
10.95*
Exhibit Description
Form of Restricted Stock Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Form of Restricted Stock Unit Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Form of Performance Based Restricted Stock Award Terms
under the Chubb Limited 2016 Long-Term Incentive Plan for
Swiss Executive Management
Incorporated by Reference
Form
10-K
Original
Number
Date Filed
Filed
Herewith
10.96
February 23, 2018
10-K
10.97
February 23, 2018
10-K
10.98
February 23, 2018
10.96*
Chubb Limited Clawback Policy
10-K
10.99
February 23, 2018
X
X
X
X
X
X
X
21.1
23.1
31.1
31.2
32.1
32.2
101
Subsidiaries of the Company
Consent of Independent Registered Public Accounting Firm
Certification Pursuant to Section 302 of The Sarbanes-Oxley
Act of 2002
Certification Pursuant to Section 302 of The Sarbanes-Oxley
Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002
The following financial information from Chubb Limited's
Annual Report on Form 10-K for the year ended December
31, 2019, formatted in Inline XBRL: (i) Consolidated Balance
Sheets at December 31, 2019 and 2018; (ii) Consolidated
Statements of Operations and Comprehensive Income for the
years ended December 31, 2019, 2018, and 2017;
(iii) Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2019, 2018, and 2017;
(iv) Consolidated Statements of Cash Flows for the years
ended December 31, 2019, 2018, and 2017; and (v) Notes
to the Consolidated Financial Statements
104
The Cover Page Interactive Data File formatted in Inline XBRL
(The cover page XBRL tags are embedded in the Inline XBRL
document and included in Exhibit 101)
* Management contract, compensatory plan or arrangement
ITEM 16. Form 10-K Summary
None.
106
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHUBB LIMITED
By:
/s/ Philip V. Bancroft
Philip V. Bancroft
Executive Vice President and Chief Financial Officer
February 27, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Evan G. Greenberg
Chairman, President, Chief Executive Officer, and Director
February 27, 2020
Evan G. Greenberg
/s/ Philip V. Bancroft
Executive Vice President and Chief Financial Officer
February 27, 2020
Philip V. Bancroft
(Principal Financial Officer)
/s/ Paul B. Medini
Chief Accounting Officer
February 27, 2020
Paul B. Medini
(Principal Accounting Officer)
/s/ Michael G. Atieh
Director
Michael G. Atieh
/s/ Sheila P. Burke
Director
Sheila P. Burke
/s/ James I. Cash
Director
James I. Cash
/s/ Mary A. Cirillo
Director
Mary A. Cirillo
/s/ Michael P. Connors
Director
Michael P. Connors
February 27, 2020
February 27, 2020
February 27, 2020
February 27, 2020
February 27, 2020
107
Signature
Title
Date
February 27, 2020
February 27, 2020
February 27, 2020
February 27, 2020
February 27, 2020
February 27, 2020
February 27, 2020
February 27, 2020
/s/ John Edwardson
Director
John Edwardson
/s/ Robert M. Hernandez
Director
Robert M. Hernandez
/s/ Kimberly Ross
Director
Kimberly Ross
/s/ Robert W. Scully
Director
Robert W. Scully
/s/ Eugene B. Shanks, Jr.
Director
Eugene B. Shanks, Jr.
/s/ Theodore E. Shasta
Director
Theodore E. Shasta
/s/ David Sidwell
Director
David Sidwell
/s/ Olivier Steimer
Director
Olivier Steimer
108
CHUBB LIMITED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
F-1
Chubb Limited
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Management's Responsibility for Financial Statements and Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Summary of significant accounting policies
Acquisitions
Investments
Fair value measurements
Reinsurance
Goodwill and Other intangible assets
Unpaid losses and loss expenses
Taxation
Debt
Note 10.
Commitments, contingencies, and guarantees
Note 11.
Shareholders' equity
Note 12.
Share-based compensation
Note 13.
Postretirement benefits
Note 14.
Other income and expense
Note 15.
Segment information
Note 16.
Earnings per share
Note 17.
Related party transactions
Note 18.
Statutory financial information
Note 19.
Information provided in connection with outstanding debt of subsidiaries
Note 20.
Condensed unaudited quarterly financial data
Financial Statement Schedules
Schedule I
Summary of Investments - Other Than Investments in Related Parties
Schedule II
Condensed Financial Information of Registrant
Schedule IV Supplemental Information Concerning Reinsurance
Schedule VI Supplementary Information Concerning Property and Casualty Operations
F-2
Page
F-3
F-4
F-7
F-8
F-9
F-10
F-11
F-21
F-22
F-30
F-37
F-40
F-42
F-69
F-73
F-75
F-80
F-82
F-86
F-92
F-92
F-97
F-97
F-99
F-100
F-107
F-108
F-109
F-111
F-112
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS AND
INTERNAL CONTROL OVER FINANCIAL REPORTING
Financial Statements
The consolidated financial statements of Chubb Limited (Chubb) were prepared by management, which is responsible for their
reliability and objectivity. The statements have been prepared in conformity with accounting principles generally accepted in
the United States of America and, as such, include amounts based on informed estimates and judgments of management.
Financial information elsewhere in this annual report is consistent with that in the consolidated financial statements.
The Board of Directors (Board), operating through its Audit Committee, which is composed entirely of directors who are not
officers or employees of Chubb, provides oversight of the financial reporting process and safeguarding of assets against
unauthorized acquisition, use or disposition. The Audit Committee annually recommends the appointment of an independent
registered public accounting firm and submits its recommendation to the Board for approval.
The Audit Committee meets with management, the independent registered public accountants and the internal auditor;
approves the overall scope of audit work and related fee arrangements; and reviews audit reports and findings. In addition, the
independent registered public accountants and the internal auditor meet separately with the Audit Committee, without
management representatives present, to discuss the results of their audits; the adequacy of Chubb's internal control; the quality
of its financial reporting; and the safeguarding of assets against unauthorized acquisition, use or disposition.
The consolidated financial statements have been audited by an independent registered public accounting firm,
PricewaterhouseCoopers LLP, which has been given access to all financial records and related data, including minutes of all
meetings of the Board and committees of the Board. Chubb believes that all representations made to our independent
registered public accountants during their audits were valid and appropriate.
Management's Report on Internal Control over Financial Reporting
The management of Chubb is responsible for establishing and maintaining adequate internal control over financial reporting.
Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a
process designed by, or under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of America.
As of December 31, 2019, management has evaluated the effectiveness of Chubb's internal control over financial reporting
based on the criteria for effective internal control over financial reporting established in “Internal Control - Integrated
Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this
evaluation, we have concluded that Chubb's internal control over financial reporting was effective as of December 31, 2019.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the consolidated financial
statements of Chubb included in this Annual Report, has issued a report on the effectiveness of Chubb's internal controls over
financial reporting as of December 31, 2019. The report, which expresses an unqualified opinion on the effectiveness of
Chubb's internal control over financial reporting as of December 31, 2019, is included in this Item under “Report of
Independent Registered Public Accounting Firm” and follows this statement.
/s/ Evan G. Greenberg
Evan G. Greenberg
/s/ Philip V. Bancroft
Philip V. Bancroft
Chairman, President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Chubb Limited
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Chubb Limited and its subsidiaries (the "Company") as of
December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive income, of
shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related
notes and financial statement schedules listed in the index appearing under Item 15(a)(2) (collectively referred to as the
“consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on
the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all
material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
F-4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Unpaid Losses and Loss Expenses, Net of Reinsurance
As described in Note 7 to the consolidated financial statements, as of December 31, 2019, the Company’s liability for unpaid
losses and loss expenses, net of reinsurance, was approximately $48.5 billion. The majority of the Company’s net unpaid losses
and loss expenses arise from the Company’s long-tail casualty business (such as general liability and professional liability), U.S.
sourced workers’ compensation, asbestos-related, environmental pollution and other exposures with high estimation uncertainty.
The process of establishing loss reserves requires the use of estimates and judgments based on circumstances underlying the
insured loss at the date of accrual. The judgments involved in projecting the ultimate losses include the use and interpretation of
various standard actuarial reserving methods that place reliance on the extrapolation of actual historical data, loss development
patterns, industry data, and other benchmarks as appropriate. The reserves for the various product lines each require different
qualitative and quantitative assumptions and judgments, including changes in business mix or volume, changes in ceded
reinsurance structures, changes in claims handling practices, reported and projected loss trends, inflation, the legal
environment, and the terms and conditions of the contracts sold to the Company’s insured parties.
The principal considerations for our determination that performing procedures relating to the valuation of unpaid losses and loss
expenses, net of reinsurance, from the long-tail and other exposures as described above, is a critical audit matter are (i) there
was significant judgment by management in determining the reserve liability which in turn led to a high degree of auditor
subjectivity and judgment in performing procedures relating to the valuation; (ii) there was significant auditor effort and
judgment in evaluating the audit evidence relating to the actuarial reserving methods and assumptions related to extrapolation
of actual historical data, loss development patterns, industry data, other benchmarks, and the impact of qualitative and
quantitative subjective factors; and (iii) the audit effort included the involvement of professionals with specialized skill and
knowledge to assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
Company’s valuation of unpaid losses and loss expenses, net of reinsurance, including controls over the selection of actuarial
methodologies and development of significant assumptions. These procedures also included, among others, the involvement of
professionals with specialized skill and knowledge to assist in performing one or a combination of procedures, including (i)
independently estimating reserves on a sample basis using actual historical data and loss development patterns, as well as
industry data and other benchmarks, to develop an independent estimate and comparing the independent estimate to
management’s actuarially determined reserves; and (ii) evaluating management’s actuarial reserving methodologies and
aforementioned assumptions, as well as assessing qualitative adjustments to carried reserves and the consistency of
management’s approach period-over-period. Performing these procedures involved testing the completeness and accuracy of
data provided by management.
Valuation of Level 3 Investments in the Valuation Hierarchy
As described in Note 4 to the consolidated financial statements, as of December 31, 2019, the Company had total assets
measured at fair value of approximately $96 billion, of which $2 billion were categorized as level 3 in the valuation hierarchy.
The level 3 investments are measured at fair value using inputs that are unobservable and reflect management’s judgments
about assumptions that market participants would use in pricing or, for certain of the investments, management obtains and
evaluates a single broker quote, which is typically from a market maker. As described by management, the valuation is more
subjective when markets are less liquid due to the lack of market based inputs (i.e., stale pricing), which may increase the
potential that an investment's estimated fair value is not reflective of the price at which an actual transaction would occur.
F-5
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The principal considerations for our determination that performing procedures relating to the valuation of level 3 investments in
the valuation hierarchy is a critical audit matter are (i) there was significant judgment by management in determining the fair
value of these investments as they are measured using inputs that are unobservable and are likely to be priced using models or
inputs other than quoted prices which in turn led to a high degree of auditor subjectivity and judgment in performing procedures
relating to the estimate; and (ii) the audit effort included the involvement of professionals with specialized skill and knowledge
to assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of the controls relating to
the valuation of level 3 investments. These procedures also included, among others, obtaining pricing from sources other than
those used by management for a sample of securities and comparing management’s estimate to the prices independently
obtained, and the involvement of professionals with specialized skill and knowledge to assist in developing an independent
range of estimates for a sample of securities and comparing management’s estimate to the independently developed ranges.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, PA
February 27, 2020
We have served as the Company’s auditor since 1985, which includes periods before the Company became subject to SEC
reporting requirements.
F-6
CONSOLIDATED BALANCE SHEETS
Chubb Limited and Subsidiaries
(in millions of U.S. dollars, except share and per share data)
Assets
Investments
December 31
2019
December 31
2018
Fixed maturities available for sale, at fair value (amortized cost – $82,580 and $79,323)
$
85,488 $
78,470
Fixed maturities held to maturity, at amortized cost (fair value – $13,005 and $13,259)
Equity securities, at fair value
Short-term investments, at fair value and amortized cost
Other investments, at fair value
Total investments
Cash
Restricted cash
Securities lending collateral
Accrued investment income
Insurance and reinsurance balances receivable
Reinsurance recoverable on losses and loss expenses
Reinsurance recoverable on policy benefits
Deferred policy acquisition costs
Value of business acquired
Goodwill
Other intangible assets
Prepaid reinsurance premiums
Investments in partially-owned insurance companies
Other assets
Total assets
Liabilities
Unpaid losses and loss expenses
Unearned premiums
Future policy benefits
Insurance and reinsurance balances payable
Securities lending payable
Accounts payable, accrued expenses, and other liabilities
Deferred tax liabilities
Repurchase agreements
Short-term debt
Long-term debt
Trust preferred securities
Total liabilities
Commitments and contingencies (refer to Note 10)
Shareholders’ equity
Common Shares (CHF 24.15 par value; 479,783,864 shares issued; 451,971,567 and
459,203,378 shares outstanding)
Common Shares in treasury (27,812,297 and 20,580,486 shares)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss) (AOCI)
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes to the consolidated financial statements
12,581
812
4,291
6,062
109,234
1,537
109
994
867
10,357
15,181
197
5,242
306
15,296
6,063
2,647
1,332
7,581
13,435
770
3,016
5,277
100,968
1,247
93
1,926
883
10,075
15,993
202
4,922
295
15,271
6,143
2,544
678
6,531
$
$
176,943 $
167,771
62,690 $
16,771
5,814
6,184
994
11,773
804
1,416
1,299
13,559
308
62,960
15,532
5,506
6,437
1,926
10,472
304
1,418
509
12,087
308
121,612
117,459
11,121
(3,754)
11,203
36,142
619
55,331
11,121
(2,618)
12,557
31,700
(2,448)
50,312
$
176,943 $
167,771
F-7
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Chubb Limited and Subsidiaries
For the years ended December 31, 2019, 2018, and 2017
(in millions of U.S. dollars, except per share data)
Revenues
Net premiums written
Increase in unearned premiums
Net premiums earned
Net investment income
Net realized gains (losses):
Other-than-temporary impairment (OTTI) losses gross
Portion of OTTI losses recognized in other comprehensive income (OCI)
Net OTTI losses recognized in income
Net realized gains (losses) excluding OTTI losses
Total net realized gains (losses) (includes $(31), $(302), and $(15) reclassified
from AOCI)
Total revenues
Expenses
Losses and loss expenses
Policy benefits
Policy acquisition costs
Administrative expenses
Interest expense
Other (income) expense
Amortization of purchased intangibles
Chubb integration expenses
Total expenses
Income before income tax
Income tax expense (benefit) (includes nil, $(41), and $(13) on reclassified
unrealized gains and losses)
Net income
Other comprehensive income (loss)
Unrealized appreciation (depreciation)
Reclassification adjustment for net realized (gains) losses included in net income
Change in:
Cumulative foreign currency translation adjustment
Postretirement benefit liability adjustment
Other comprehensive income (loss), before income tax
Income tax (expense) benefit related to OCI items
Other comprehensive income (loss)
Comprehensive income
Earnings per share
Basic earnings per share
Diluted earnings per share
See accompanying notes to the consolidated financial statements
F-8
$
$
$
$
$
2019
2018
2017
$
32,275 $
30,579 $
29,244
(985)
(515)
(210)
31,290
3,426
30,064
3,305
29,034
3,125
(90)
32
(58)
(472)
(52)
3
(49)
(603)
(46)
1
(45)
129
(530)
(652)
84
34,186
32,717
32,243
18,730
18,067
18,454
740
6,153
3,030
552
(596)
305
23
590
5,912
2,886
641
(434)
339
59
676
5,781
2,833
607
(400)
260
310
28,937
5,249
28,060
4,657
28,521
3,722
795
695
(139)
4,454 $
3,962 $
3,861
31
3,735
13
(76)
3,672
(605)
3,067
3,704 $
(2,298) $
302
(1,996)
(802)
(321)
618
15
633
471
(16)
(3,119)
1,088
399
(2,720)
(231)
857
7,521 $
1,242 $
4,718
9.77 $
9.71 $
8.55 $
8.49 $
8.26
8.19
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Chubb Limited and Subsidiaries
For the years ended December 31, 2019, 2018, and 2017
(in millions of U.S. dollars)
Common Shares
Balance – beginning and end of year
Common Shares in treasury
Balance – beginning of year
Common Shares repurchased
Net shares issued under employee share-based compensation plans
Balance – end of year
Additional paid-in capital
Balance – beginning of year
Net shares issued under employee share-based compensation plans
Exercise of stock options
Share-based compensation expense
Funding of dividends declared to Retained earnings
Balance – end of year
Retained earnings
Balance – beginning of year
Cumulative effect of adoption of accounting standards (refer to Note 1)
Balance – beginning of year, as adjusted
Net income
Funding of dividends declared from Additional paid-in capital
Dividends declared on Common Shares
Balance – end of year
Accumulated other comprehensive income (loss)
Net unrealized appreciation (depreciation) on investments
Balance – beginning of year
Cumulative effect of adoption of accounting standards
Balance – beginning of year, as adjusted
Change in year, before reclassification from AOCI, net of income tax (expense) benefit of
$(647), $338, and $(228)
Amounts reclassified from AOCI, net of income tax (expense) benefit of nil, $(41), and $(13)
Change in year, net of income tax (expense) benefit of $(647), $297, and $(241)
Balance – end of year
Cumulative foreign currency translation adjustment
Balance – beginning of year
Cumulative effect of adoption of accounting standards
Balance – beginning of year, as adjusted
Change in year, net of income tax benefit of $24, $35, and $5
Balance – end of year
Postretirement benefit liability adjustment
Balance – beginning of year
Cumulative effect of adoption of accounting standards
Balance – beginning of year, as adjusted
Change in year, net of income tax benefit of $18, $67, and $5
Balance – end of year
Accumulated other comprehensive income (loss)
Total shareholders’ equity
See accompanying notes to the consolidated financial statements
2019
2018
2017
$
11,121 $
11,121 $
11,121
(2,618)
(1,531)
395
(1,944)
(1,021)
347
(1,480)
(830)
366
(3,754)
(2,618)
(1,944)
12,557
13,978
15,335
(178)
(82)
266
(1,360)
11,203
31,700
(12)
31,688
4,454
1,360
(1,360)
36,142
(545)
—
(545)
3,057
31
3,088
2,543
(313)
(49)
285
(1,344)
12,557
27,474
264
27,738
3,962
1,344
(1,344)
31,700
1,450
(296)
1,154
(1,960)
261
(1,699)
(545)
(313)
(58)
331
(1,317)
13,978
23,613
—
23,613
3,861
1,317
(1,317)
27,474
1,058
—
1,058
390
2
392
1,450
(1,976)
(1,187)
(1,663)
—
(1,976)
37
(1,939)
73
—
73
(58)
15
619
(22)
(1,209)
(767)
(1,976)
280
47
327
(254)
73
(2,448)
—
(1,663)
476
(1,187)
291
—
291
(11)
280
543
$
55,331 $
50,312 $
51,172
F-9
CONSOLIDATED STATEMENTS OF CASH FLOWS
Chubb Limited and Subsidiaries
For the years ended December 31, 2019, 2018, and 2017
(in millions of U.S. dollars)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash flows from operating activities
2019
2018
2017
$
4,454 $
3,962 $
3,861
Net realized (gains) losses
Amortization of premiums/discounts on fixed maturities
Amortization of purchased intangibles
Deferred income taxes
Unpaid losses and loss expenses
Unearned premiums
Future policy benefits
Insurance and reinsurance balances payable
Accounts payable, accrued expenses, and other liabilities
Income taxes payable
Insurance and reinsurance balances receivable
Reinsurance recoverable
Deferred policy acquisition costs
Other
Net cash flows from operating activities
Cash flows from investing activities
Purchases of fixed maturities available for sale
Purchases of to be announced mortgage-backed securities
Purchases of fixed maturities held to maturity
Purchases of equity securities
Sales of fixed maturities available for sale
Sales of to be announced mortgage-backed securities
Sales of equity securities
Maturities and redemptions of fixed maturities available for sale
Maturities and redemptions of fixed maturities held to maturity
Net change in short-term investments
Net derivative instruments settlements
Private equity contributions
Private equity distributions
Acquisition of subsidiaries (net of cash acquired of $45, nil, and nil)
Other
Net cash flows used for investing activities
Cash flows from financing activities
Dividends paid on Common Shares
Common Shares repurchased
Proceeds from issuance of long-term debt
Proceeds from issuance of repurchase agreements
Repayment of long-term debt
Repayment of repurchase agreements
Proceeds from share-based compensation plans
Policyholder contract deposits
Policyholder contract withdrawals
Net cash flows used for financing activities
Effect of foreign currency rate changes on cash and restricted cash
Net increase (decrease) in cash and restricted cash
Cash and restricted cash – beginning of year
Cash and restricted cash – end of year
Supplemental cash flow information
Taxes paid
Interest paid
See accompanying notes to the consolidated financial statements
$
$
$
F-10
530
395
305
(97)
(257)
1,051
215
(302)
(207)
(7)
(270)
838
(344)
38
6,342
(25,846)
—
(229)
(531)
13,110
6
611
9,039
946
(1,117)
(703)
(1,315)
1,390
(29)
(1,237)
(5,905)
(1,354)
(1,530)
2,828
2,817
(510)
(2,817)
204
652
592
339
16
570
654
235
722
375
161
(981)
(1,165)
(301)
(351)
5,480
(24,700)
(35)
(456)
(207)
14,001
29
315
7,352
1,124
516
16
(1,337)
980
—
(533)
(2,935)
(1,337)
(1,044)
2,171
2,029
(2,001)
(2,019)
115
514
(303)
(151)
20
306
1,340
1,646 $
453
(358)
(1,991)
(65)
489
851
1,340 $
(84)
694
260
(527)
2,137
264
217
271
(517)
(365)
(243)
(1,248)
(317)
100
4,503
(25,720)
(27)
(352)
(173)
13,228
27
187
10,425
879
(537)
(265)
(648)
1,084
—
(530)
(2,422)
(1,308)
(801)
—
2,353
(501)
(2,348)
151
442
(307)
(2,319)
1
(237)
1,088
851
912 $
512 $
503 $
621 $
736
644
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Chubb Limited and Subsidiaries
1. Summary of significant accounting policies
a) Basis of presentation
Chubb Limited is a holding company incorporated in Zurich, Switzerland. Chubb Limited, through its subsidiaries, provides a
broad range of insurance and reinsurance products to insureds worldwide. Our results are reported through the following
business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America
Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. Refer to Note 15 for additional
information.
The accompanying consolidated financial statements, which include the accounts of Chubb Limited and its subsidiaries
(collectively, Chubb, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP) and, in the opinion of management, reflect all adjustments necessary for a fair statement of
the results and financial position for such periods. All significant intercompany accounts and transactions, including internal
reinsurance transactions, have been eliminated.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Amounts included in the
Consolidated financial statements reflect our best estimates and assumptions; actual amounts could differ materially from these
estimates. Chubb's principal estimates include:
• unpaid loss and loss expense reserves, including long-tail asbestos and environmental (A&E) reserves and non-A&E casualty
exposures;
•
future policy benefits reserves;
• amortization of deferred policy acquisition costs and value of business acquired (VOBA);
•
•
•
•
•
•
•
reinsurance recoverable, including a provision for uncollectible reinsurance;
the assessment of risk transfer for certain structured insurance and reinsurance contracts;
the valuation of the investment portfolio and assessment of other than temporary impairment (OTTI);
the valuation of deferred income taxes;
the valuation of derivative instruments related to guaranteed living benefits (GLB);
the valuation and amortization of purchased intangibles; and
the assessment of goodwill for impairment.
b) Premiums
Premiums are generally recorded as written upon inception of the policy. For multi-year policies for which premiums written are
payable in annual installments, only the current annual premium is included as written at policy inception due to the ability of
the insured/reinsured to commute or cancel coverage within the policy term. The remaining annual premiums are recorded as
written at each successive anniversary date within the multi-year term.
For property and casualty (P&C) insurance and reinsurance products, premiums written are primarily earned on a pro-rata basis
over the policy terms to which they relate. Unearned premiums represent the portion of premiums written applicable to the
unexpired portion of the policies in force. For retrospectively-rated policies, written premiums are adjusted to reflect expected
ultimate premiums consistent with changes to incurred losses, or other measures of exposure as stated in the policy, and earned
over the policy coverage period.
Mandatory reinstatement premiums assessed on reinsurance policies are earned in the period of the loss event that gave rise to
the reinstatement premiums. All remaining unearned premiums are recognized over the remaining coverage period.
Premiums from long-duration contracts such as certain traditional term life, whole life, endowment, and long-duration personal
accident and health (A&H) policies are generally recognized as revenue when due from policyholders. Traditional life policies
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
include those contracts with fixed and guaranteed premiums and benefits. Benefits and expenses are matched with income to
result in the recognition of profit over the life of the contracts.
Retroactive loss portfolio transfer (LPT) contracts in which the insured loss events occurred prior to contract inception are
evaluated to determine whether they meet criteria for reinsurance accounting. If reinsurance accounting is appropriate, written
premiums are fully earned and corresponding losses and loss expenses recognized at contract inception. These contracts can
cause significant variances in gross premiums written, net premiums written, net premiums earned, and net incurred losses in
the years in which they are written. Reinsurance contracts sold not meeting the criteria for reinsurance accounting are recorded
using the deposit method as described below in Note 1 k).
Reinsurance premiums assumed are based on information provided by ceding companies supplemented by our own estimates
of premium when we have not received ceding company reports. Estimates are reviewed and adjustments are recorded in the
period in which they are determined. Premiums are earned over the coverage terms of the related reinsurance contracts and
range from one to three years.
c) Deferred policy acquisition costs and value of business acquired
Policy acquisition costs consist of commissions (direct and ceded), premium taxes, and certain underwriting costs related
directly to the successful acquisition of new or renewal insurance contracts. A VOBA intangible asset is established upon the
acquisition of blocks of long-duration contracts in a business combination and represents the present value of estimated net
cash flows for the contracts in force at the acquisition date. Acquisition costs and VOBA, collectively policy acquisition costs,
are deferred and amortized. Amortization is recorded in Policy acquisition costs in the Consolidated statements of operations.
Policy acquisition costs on P&C contracts are generally amortized ratably over the period in which premiums are earned. Policy
acquisition costs on traditional long-duration contracts are amortized over the estimated life of the contracts, generally in
proportion to premium revenue recognized based upon the same assumptions used in estimating the liability for future policy
benefits. For non-traditional long-duration contracts, we amortize policy acquisition costs over the expected life of the contracts
in proportion to expected gross profits. The effect of changes in estimates of expected gross profits is reflected in the period the
estimates are revised. Policy acquisition costs are reviewed to determine if they are recoverable from future income, including
investment income. Unrecoverable policy acquisition costs are expensed in the period identified.
Advertising costs are expensed as incurred except for direct-response campaigns that qualify for cost deferral, principally related
to long-duration A&H business produced by the Overseas General Insurance segment, which are deferred and recognized as a
component of Policy acquisition costs. For individual direct-response marketing campaigns that we can demonstrate have
specifically resulted in incremental sales to customers and such sales have probable future economic benefits, incremental costs
directly related to the marketing campaigns are capitalized as Deferred policy acquisition costs. Deferred policy acquisition
costs, including deferred marketing costs, are reviewed regularly for recoverability from future income, including investment
income, and amortized in proportion to premium revenue recognized, primarily over a ten-year period, the expected economic
future benefit period based upon the same assumptions used in estimating the liability for future policy benefits. The expected
future benefit period is evaluated periodically based on historical results and adjusted prospectively. The amount of deferred
marketing costs reported in Deferred policy acquisition costs in the Consolidated balance sheets was $246 million and
$255 million at December 31, 2019 and 2018, respectively. Amortization expense for deferred marketing costs was $109
million, $114 million, and $116 million for the years ended December 31, 2019, 2018, and 2017, respectively.
d) Reinsurance
Chubb assumes and cedes reinsurance with other insurance companies to provide greater diversification of business and
minimize the net loss potential arising from large risks. Ceded reinsurance contracts do not relieve Chubb of its primary
obligation to policyholders.
For both ceded and assumed reinsurance, risk transfer requirements must be met in order to account for a contract as
reinsurance, principally resulting in the recognition of cash flows under the contract as premiums and losses. To meet risk
transfer requirements, a reinsurance contract must include insurance risk, consisting of both underwriting and timing risk, and a
reasonable possibility of a significant loss for the assuming entity. To assess risk transfer for certain contracts, Chubb generally
develops expected discounted cash flow analyses at contract inception. Deposit accounting is used for contracts that do not
meet risk transfer requirements. Deposit accounting requires that consideration received or paid be recorded in the balance
sheet as opposed to recording premiums written or losses incurred in the statement of operations. Non-refundable fees on
deposit contracts are earned based on the terms of the contract described below in Note 1 k).
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Reinsurance recoverable includes balances due from reinsurance companies for paid and unpaid losses and loss expenses and
future policy benefits that will be recovered from reinsurers, based on contracts in force. The method for determining the
reinsurance recoverable on unpaid losses and loss expenses incurred but not reported (IBNR) involves actuarial estimates
consistent with those used to establish the associated liability for unpaid losses and loss expenses as well as a determination of
Chubb's ability to cede unpaid losses and loss expenses under the terms of the reinsurance agreement.
Reinsurance recoverable is presented net of a provision for uncollectible reinsurance determined based upon a review of the
financial condition of reinsurers and other factors. The provision for uncollectible reinsurance is based on an estimate of the
reinsurance recoverable balance that will ultimately be unrecoverable due to reinsurer insolvency, a contractual dispute, or any
other reason. The valuation of this provision includes several judgments including certain aspects of the allocation of reinsurance
recoverable on IBNR claims by reinsurer and a default analysis to estimate uncollectible reinsurance. The primary components
of the default analysis are reinsurance recoverable balances by reinsurer, net of collateral, and default factors used to determine
the portion of a reinsurer's balance deemed uncollectible. The definition of collateral for this purpose requires some judgment
and is generally limited to assets held in a Chubb-only beneficiary trust, letters of credit, and liabilities held with the same legal
entity for which Chubb believes there is a contractual right of offset. The determination of the default factor is principally based
on the financial strength rating of the reinsurer. Default factors require considerable judgment and are determined using the
current financial strength rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions. The
more significant considerations include, but are not necessarily limited to, the following:
• For reinsurers that maintain a financial strength rating from a major rating agency, and for which recoverable balances are
considered representative of the larger population (i.e., default probabilities are consistent with similarly rated reinsurers
and payment durations conform to averages), the financial rating is based on a published source and the default factor is
based on published default statistics of a major rating agency applicable to the reinsurer's particular rating class. When a
recoverable is expected to be paid in a brief period of time by a highly rated reinsurer, such as certain property catastrophe
claims, a default factor may not be applied;
• For balances recoverable from reinsurers that are both unrated by a major rating agency and for which management is
unable to determine a credible rating equivalent based on a parent, affiliate, or peer company, we determine a rating
equivalent based on an analysis of the reinsurer that considers an assessment of the creditworthiness of the particular
entity, industry benchmarks, or other factors as considered appropriate. We then apply the applicable default factor for that
rating class. For balances recoverable from unrated reinsurers for which the ceded reserve is below a certain threshold, we
generally apply a default factor of 34 percent, consistent with published statistics of a major rating agency;
• For balances recoverable from reinsurers that are either insolvent or under regulatory supervision, we establish a default
factor and resulting provision for uncollectible reinsurance based on reinsurer-specific facts and circumstances. Upon initial
notification of an insolvency, we generally recognize an expense for a substantial portion of all balances outstanding, net of
collateral, through a combination of write-offs of recoverable balances and increases to the provision for uncollectible
reinsurance. When regulatory action is taken on a reinsurer, we generally recognize a default factor by estimating an
expected recovery on all balances outstanding, net of collateral. When sufficient credible information becomes available, we
adjust the provision for uncollectible reinsurance by establishing a default factor pursuant to information received; and
• For other recoverables, management determines the provision for uncollectible reinsurance based on the specific facts and
circumstances.
The methods used to determine the reinsurance recoverable balance and related provision for uncollectible reinsurance are
regularly reviewed and updated, and any resulting adjustments are reflected in earnings in the period identified.
The methods used to determine the provision for uncollectible high deductible recoverable amounts are similar to the processes
used to determine the provision for uncollectible reinsurance recoverable. For additional information on high deductible policies,
refer to section k) Unpaid losses and loss expenses, below.
Prepaid reinsurance premiums represent the portion of premiums ceded to reinsurers applicable to the unexpired coverage
terms of the reinsurance contracts in-force.
The value of reinsurance business assumed of $6 million and $14 million at December 31, 2019 and 2018, respectively,
included in Other assets in the accompanying Consolidated balance sheets, represents the excess of estimated ultimate value of
the liabilities assumed under retroactive reinsurance contracts over consideration received. The value of reinsurance business
assumed is amortized and recorded to Losses and loss expenses based on the payment pattern of the losses assumed and
ranges between 9 and 40 years. The unamortized value is reviewed regularly to determine if it is recoverable based upon the
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
terms of the contract, estimated losses and loss expenses, and anticipated investment income. Unrecoverable amounts are
expensed in the period identified.
e) Investments
Fixed maturities, equity securities, and short-term investments
Fixed maturities are classified as either available for sale or held to maturity.
• Available for sale (AFS) portfolio is reported at fair value with changes in fair value recorded as a separate component of
AOCI in Shareholders' equity.
• Held to maturity (HTM) portfolio includes securities for which we have the ability and intent to hold to maturity or
redemption and is reported at amortized cost.
Equity securities are reported at fair value with changes in fair value recorded in net realized gains (losses) on the Consolidated
statement of operations. Prior to January 1, 2018, changes in fair value were recorded as a separate component of AOCI in
Shareholders' equity.
Short-term investments comprise securities due to mature within one year of the date of purchase and are recorded at fair value
which typically approximates cost.
Interest, dividend income, and amortization of fixed maturity market premiums and discounts, related to these securities are
recorded in Net investment income, net of investment management and custody fees, in the Consolidated statement of
operations.
In addition, net investment income includes the amortization of the fair value adjustment related to the acquired invested assets
of The Chubb Corporation (Chubb Corp). An adjustment of $1,652 million related to the fair value of Chubb Corp’s fixed
maturities securities was recorded (fair value adjustment) at the date of acquisition. At December 31, 2019, the remaining
balance of this fair value adjustment was $332 million which is expected to amortize over the next three years; however, the
estimate could vary materially based on current market conditions, bond calls, and the duration of the acquired investment
portfolio. In addition, sales of these acquired fixed maturities would also reduce the fair value adjustment balance. For
mortgage-backed securities and any other holdings for which there is a prepayment risk, prepayment assumptions are evaluated
and revised as necessary. Any adjustments required due to the resultant change in effective yields and maturities are recognized
prospectively. Prepayment fees or call premiums that are only payable when a security is called prior to its maturity are earned
when received and reflected in Net investment income.
We regularly review our fixed maturities for other than temporary impairment (OTTI). Refer to Note 3 for additional information.
With respect to fixed maturities where the decline in value is determined to be temporary and is not written down, a subsequent
decision may be made to sell that security and realize a loss. Subsequent decisions on fixed maturities sales are the result of
changing or unforeseen facts and circumstances (i.e., arising from a large insured loss such as a catastrophe), deterioration of
the creditworthiness of the issuer or its industry, or changes in regulatory requirements. We believe that subsequent decisions to
sell such securities are consistent with the classification of the majority of the portfolio as available for sale.
Other investments
Other investments principally comprise investment funds, limited partnerships, partially-owned investment companies, life
insurance policies, policy loans, and non-qualified separate account assets.
Investment funds and limited partnerships
Investment funds, limited partnerships, and all other investments over which Chubb cannot exercise significant influence are
accounted for as follows. Generally, we own less than three percent of the investee’s shares.
•
Income and expenses from these funds are reported within Net investment income.
• These funds are carried at net asset value, which approximates fair value with changes in fair value recorded in net realized
gains (losses) on the Consolidated statement of operations. Refer to Note 4 for a further discussion on net asset value. Prior
to January 1, 2018, changes in fair value were recorded as a separate component of AOCI in Shareholders' equity.
• As a result of the timing of the receipt of valuation data from the investment managers, these investments are generally
reported on a three-month lag.
• Sales of these investments are reported within Net realized gains (losses).
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Partially-owned investment companies
Partially-owned investment companies where our ownership interest is in excess of three percent are accounted for under the
equity method because Chubb exerts significant influence. These investments apply investment company accounting to
determine operating results, and Chubb retains the investment company accounting in applying the equity method.
• This means that investment income, realized gains or losses, and unrealized gains or losses are included in the portion of
equity earnings reflected in Other (income) expense.
• As a result of the timing of the receipt of valuation data from the investment managers, these investments are generally
reported on a three-month lag.
Other
• Policy loans are carried at outstanding balance and interest income is reflected in Net investment income.
• Life insurance policies are carried at policy cash surrender value and income is reflected in Other (income) expense.
• Non-qualified separate account assets are supported by assets that do not qualify for separate accounting reporting under
GAAP. The underlying securities are recorded on a trade date basis and carried at fair value. Unrealized gains and losses on
non-qualified separate account assets are reflected in Other (income) expense.
Investments in partially-owned insurance companies
Investments in partially-owned insurance companies primarily represent direct investments in which Chubb has significant
influence and as such, meet the requirements for equity accounting. Generally, we own twenty percent or more of the investee’s
shares. We report our share of the net income or loss of the partially-owned insurance companies in Other (income) expense.
Derivative instruments
Chubb recognizes all derivatives at fair value in the Consolidated balance sheets in either Accounts payable, accrued expenses,
and other liabilities or Other assets. Changes in fair value are included in Net realized gains (losses) in the Consolidated
statements of operations. We did not designate any derivatives as accounting hedges. We participate in derivative instruments in
two principal ways:
(i) To sell protection to customers as an insurance or reinsurance contract that meets the definition of a derivative for
accounting purposes. The reinsurance of GLBs was our primary product falling into this category; and
(ii) To mitigate financial risks and manage certain investment portfolio risks and exposures, including assets and liabilities held
in foreign currencies. We use derivative instruments including futures, options, swaps, and foreign currency forward
contracts. Refer to Note 10 for additional information.
Securities lending program
Chubb participates in a securities lending program operated by a third-party banking institution whereby certain assets are
loaned to qualified borrowers and from which we earn an incremental return which is recorded within Net investment income in
the Consolidated statement of operations.
Borrowers provide collateral, in the form of either cash or approved securities, at a minimum of 102 percent of the fair value of
the loaned securities. Each security loan is deemed to be an overnight transaction. Cash collateral is invested in a collateral pool
which is managed by the banking institution. The collateral pool is subject to written investment guidelines with key objectives
which include the safeguard of principal and adequate liquidity to meet anticipated redemptions. The fair value of the loaned
securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned securities
changes. The collateral is held by the third-party banking institution, and the collateral can only be accessed in the event that
the institution borrowing the securities is in default under the lending agreement. As a result of these restrictions, we consider
our securities lending activities to be non-cash investing and financing activities. An indemnification agreement with the lending
agent protects us in the event a borrower becomes insolvent or fails to return any of the securities on loan.
The fair value of the securities on loan is included in fixed maturities and equity securities in the Consolidated balance sheets.
The securities lending collateral is reported as a separate line in the Consolidated balance sheets with a related liability
reflecting our obligation to return the collateral plus interest.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Repurchase agreements
Similar to securities lending arrangements, securities sold under repurchase agreements, whereby Chubb sells securities and
repurchases them at a future date for a predetermined price, are accounted for as collateralized investments and borrowings and
are recorded at the contractual repurchase amounts plus accrued interest. Assets to be repurchased are the same or
substantially the same as the assets transferred, and the transferor, through right of substitution, maintains the right and ability
to redeem the collateral on short notice. The fair value of the underlying securities is included in fixed maturities and equity
securities. In contrast to securities lending programs, the use of cash received is not restricted. We report the obligation to return
the cash as Repurchase agreements in the Consolidated balance sheets and record the fees under these repurchase agreements
within Interest expense on the Consolidated statement of operations.
Refer to Note 4 for a discussion on the determination of fair value for Chubb's various investment securities.
f) Cash
Cash includes cash on hand and deposits with an original maturity of three months or less at time of purchase.
We have agreements with a third-party bank provider which implemented two international multi-currency notional cash pooling
programs. In each program, participating Chubb entities establish deposit accounts in different currencies with the bank
provider and each day the credit or debit balances in every account are notionally translated into a single currency (U.S. dollars)
and then notionally pooled. The bank extends overdraft credit to any participating Chubb entity as needed, provided that the
overall notionally-pooled balance of all accounts in each pool at the end of each day is at least zero. Actual cash balances are
not physically converted and are not commingled between legal entities. Any overdraft balances incurred under this program by
a Chubb entity would be guaranteed by Chubb Limited (up to $300 million in the aggregate). Our syndicated letter of credit
facility allows for same day drawings to fund a net pool overdraft should participating Chubb entities overdraw contributed funds
from the pool.
Restricted cash
Restricted cash in the Consolidated balance sheets represents amounts held for the benefit of third parties and is legally or
contractually restricted as to withdrawal or usage. Amounts include deposits with U.S. and non-U.S. regulatory authorities, trust
funds set up for the benefit of ceding companies, and amounts pledged as collateral to meet financing arrangements.
Effective January 1, 2018, we retrospectively adopted guidance on "Restricted Cash" that clarified the presentation of restricted
cash on the Consolidated statement of cash flows. As a result, we revised the Consolidated statement of cash flows for the year
ended December 31, 2017 to include restricted cash in the beginning and ending cash balances.
The following table provides a reconciliation of cash and restricted cash reported within the Consolidated balance sheets that
total to the amounts shown in the Consolidated statements of cash flows:
(in millions of U.S. dollars)
Cash
Restricted cash
Total cash and restricted cash shown in the Consolidated statements of cash flows
$
$
2019
1,537 $
109
1,646 $
2018
1,247 $
93
1,340 $
December 31
2017
728
123
851
g) Goodwill and Other intangible assets
Goodwill represents the excess of the cost of acquisitions over the fair value of net assets acquired and is not amortized.
Goodwill is assigned at acquisition to the applicable reporting unit of the acquired entities giving rise to the goodwill. Goodwill
impairment tests are performed annually or more frequently if circumstances indicate a possible impairment. For goodwill
impairment testing, we use a qualitative assessment to determine whether it is more likely than not (i.e., more than a 50
percent probability) that the fair value of a reporting unit is greater than its carrying amount. If our assessment indicates less
than a 50 percent probability that fair value exceeds carrying value, we quantitatively estimate a reporting unit's fair value.
Goodwill recorded in connection with investments in partially-owned insurance companies is recorded in Investments in
partially-owned insurance companies and is also measured for impairment annually.
Indefinite lived intangible assets are not subject to amortization. Finite lived intangible assets are amortized over their useful
lives, generally ranging from 1 to 25 years. Intangible assets are regularly reviewed for indicators of impairment. Impairment is
recognized if the carrying amount is not recoverable from its undiscounted cash flows and is measured as the difference
between the carrying amount and fair value.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
h) Unpaid losses and loss expenses
A liability is established for the estimated unpaid losses and loss expenses under the terms of, and with respect to, Chubb's
policies and agreements. Similar to premiums that are recognized as revenues over the coverage period of the policy, a liability
for unpaid losses and loss expenses is recognized as expense when insured events occur over the coverage period of the policy.
This liability includes a provision for both reported claims (case reserves) and incurred but not reported claims (IBNR reserves).
IBNR reserve estimates are generally calculated by first projecting the ultimate cost of all losses that have occurred (expected
losses), and then subtracting paid losses, case reserves, and loss expenses. The methods of determining such estimates and
establishing the resulting liability are reviewed regularly and any adjustments are reflected in operations in the period in which
they become known. Future developments may result in losses and loss expenses materially greater or less than recorded
amounts.
Except for net loss and loss expense reserves of $31 million, net of discount, held at December 31, 2019, representing certain
structured settlements for which the timing and amount of future claim payments are reliably determinable and $43 million, net
of discount, of certain reserves for unsettled claims, Chubb does not discount its P&C loss reserves. This compares with
reserves of $33 million for certain structured settlements and $40 million of certain reserves for unsettled claims at December
31, 2018. Structured settlements represent contracts purchased from life insurance companies primarily to settle workers'
compensation claims, where payments to the claimant by the life insurance company are expected to be made in the form of an
annuity. Chubb retains the liability to the claimant in the event that the life insurance company fails to pay. At December 31,
2019, the liability due to claimants was $567 million, net of discount, and reinsurance recoverables due from the life insurance
companies was $536 million, net of discount. For structured settlement contracts where payments are guaranteed regardless of
claimant life expectancy, the amounts recoverable from the life insurance companies at December 31, 2019 are included in
Other assets in the Consolidated balance sheets, as they do not meet the requirements for reinsurance accounting.
Included in Unpaid losses and loss expenses are liabilities for asbestos and environmental (A&E) claims and expenses. These
unpaid losses and loss expenses are principally related to claims arising from remediation costs associated with hazardous
waste sites and bodily-injury claims related to asbestos products and environmental hazards. The estimation of these liabilities
is particularly sensitive to changes in the legal environment including specific settlements that may be used as precedents to
settle future claims. However, Chubb does not anticipate future changes in laws and regulations in setting its A&E reserve levels.
Also included in Unpaid losses and loss expenses is the fair value adjustment of $145 million and $207 million at December
31, 2019 and December 31, 2018, respectively, related to Chubb Corp’s historical unpaid losses and loss expenses. The
estimated fair value consists of the present value of the expected net unpaid loss and loss adjustment expense payments
adjusted for an estimated risk margin. The estimated cash flows are discounted at a risk free rate. The estimated risk margin
varies based on the inherent risks associated with each type of reserve. The fair value is amortized through Amortization of
purchased intangibles on the consolidated statements of operations through the year 2032, based on the estimated payout
patterns of unpaid loss and loss expenses at the acquisition date.
Our loss reserves are presented net of contractual deductible recoverable amounts due from policyholders. Under the terms of
certain high deductible policies which we offer, such as workers’ compensation and general liability, our customers are
responsible to reimburse us for an agreed-upon dollar amount per claim. In nearly all cases we are required under such policies
to pay covered claims first, and then seek reimbursement for amounts within the applicable deductible from our customers. We
generally seek to mitigate this risk through collateral agreements.
Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves first
reported in previous calendar years and excludes the effect of losses from the development of earned premiums from previous
accident years.
For purposes of analysis and disclosure, management views prior period development to be changes in the nominal value of loss
estimates from period to period, net of premium and profit commission adjustments on loss sensitive contracts. Prior period
development generally excludes changes in loss estimates that do not arise from the emergence of claims, such as those related
to uncollectible reinsurance, interest, unallocated loss adjustment expenses, or foreign currency. Accordingly, specific items
excluded from prior period development include the following: gains/losses related to foreign currency remeasurement; losses
recognized from the early termination or commutation of reinsurance agreements that principally relate to the time value of
money; changes in the value of reinsurance business assumed reflected in losses incurred but principally related to the time
value of money; and losses that arise from changes in estimates of earned premiums from prior accident years. Except for
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
foreign currency remeasurement, which is included in Net realized gains (losses), these items are included in current year
losses.
i) Future policy benefits
The valuation of long-duration contract reserves requires management to make estimates and assumptions regarding expenses,
mortality, persistency, and investment yields. Estimates are primarily based on historical experience and information provided by
ceding companies and include a margin for adverse deviation. Interest rates used in calculating reserves range from less than
1.0 percent to 11.0 percent at both December 31, 2019 and 2018. Actual results could differ materially from these estimates.
Management monitors actual experience and where circumstances warrant, will revise assumptions and the related reserve
estimates. Revisions are recorded in the period they are determined.
Certain of our long-duration contracts are supported by assets that do not qualify for separate account reporting under GAAP.
These assets are classified as non-qualified separate account assets and reported in Other investments and the offsetting
liabilities are reported in Future policy benefits in the Consolidated balance sheets. Changes in the fair value of separate account
assets that do not qualify for separate account reporting under GAAP are reported in Other income (expense) and the offsetting
movements in the liabilities are included in Policy benefits in the Consolidated statements of operations.
j) Assumed reinsurance programs involving minimum benefit guarantees under variable annuity contracts
Chubb reinsures various death and living benefit guarantees associated with variable annuities issued primarily in the United
States. We generally receive a monthly premium during the accumulation phase of the covered annuities (in-force) based on a
percentage of either the underlying accumulated account values or the underlying accumulated guaranteed values. Depending
on an annuitant's age, the accumulation phase can last many years. To limit our exposure under these programs, all reinsurance
treaties include annual or aggregate claim limits and many include an aggregate deductible.
The guarantees which are payable on death, referred to as guaranteed minimum death benefits (GMDB), principally cover
shortfalls between accumulated account value at the time of an annuitant's death and either i) an annuitant's total deposits; ii)
an annuitant's total deposits plus a minimum annual return; or iii) the highest accumulated account value attained at any policy
anniversary date. In addition, a death benefit may be based on a formula specified in the variable annuity contract that uses a
percentage of the growth of the underlying contract value. Liabilities for GMDBs are based on cumulative assessments or
premiums to date multiplied by a benefit ratio that is determined by estimating the present value of benefit payments and
related adjustment expenses divided by the present value of cumulative assessment or expected premiums during the contract
period.
Under reinsurance programs covering GLBs, we assume the risk of guaranteed minimum income benefits (GMIB) associated
with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated
account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed
minimum level of monthly income. We also assume the risk of guaranteed minimum accumulation benefits (GMAB). However,
at December 31, 2019, the risks related to our GMAB programs are minimal given that the majority of these policies are no
longer in force. Our GLB reinsurance products meet the definition of a derivative for accounting purposes and are carried at fair
value with changes in fair value recognized in Realized gains (losses) in the Consolidated statement of operations. Refer to
Notes 5 c) and 10 a) for additional information.
k) Deposit assets and liabilities
Deposit assets arise from ceded reinsurance contracts purchased that do not transfer significant underwriting or timing risk.
Deposit liabilities include reinsurance deposit liabilities and contract holder deposit funds. The reinsurance deposit liabilities
arise from contracts sold for which there is not a significant transfer of risk. Contract holder deposit funds represent a liability for
investment contracts sold that do not meet the definition of an insurance contract, and certain of these contracts are sold with a
guaranteed rate of return. Under deposit accounting, consideration received or paid is recorded as a deposit asset or liability in
the balance sheet as opposed to recording premiums and losses in the statement of operations.
Interest income on deposit assets, representing the consideration received or to be received in excess of cash payments related
to the deposit contract, is earned based on an effective yield calculation. The calculation of the effective yield is based on the
amount and timing of actual cash flows at the balance sheet date and the estimated amount and timing of future cash flows.
The effective yield is recalculated periodically to reflect revised estimates of cash flows. When a change in the actual or
estimated cash flows occurs, the resulting change to the carrying amount of the deposit asset is reported as income or expense.
Deposit assets of $93 million and $97 million at December 31, 2019 and 2018, respectively, are reflected in Other assets in
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
the Consolidated balance sheets and the accretion of deposit assets related to interest pursuant to the effective yield calculation
is reflected in Net investment income in the Consolidated statements of operations.
Deposit liabilities include reinsurance deposit liabilities of $88 million and $97 million and contract holder deposit funds of
$2.0 billion and $1.8 billion at December 31, 2019 and 2018, respectively. Deposit liabilities are reflected in Accounts
payable, accrued expenses, and other liabilities in the Consolidated balance sheets. At contract inception, the deposit liability
equals net cash received. An accretion rate is established based on actuarial estimates whereby the deposit liability is increased
to the estimated amount payable over the contract term. The deposit accretion rate is the rate of return required to fund
expected future payment obligations. We periodically reassess the estimated ultimate liability and related expected rate of
return. Changes to the deposit liability are generally reflected through Interest expense to reflect the cumulative effect of the
period the contract has been in force, and by an adjustment to the future accretion rate of the liability over the remaining
estimated contract term.
The liability for contract holder deposit funds equals accumulated policy account values, which consist of the deposit payments
plus credited interest less withdrawals and amounts assessed through the end of the period.
l) Property and Equipment
Property and equipment used in operations are capitalized and carried at cost less accumulated depreciation and are reported
within Other assets in the Consolidated balance sheets. At December 31, 2019, property and equipment totaled $1.9 billion,
consisting principally of capitalized software costs of $1.1 billion incurred to develop or obtain computer software for internal
use and company-owned facilities of $270 million. Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets. For capitalized software, the estimated useful life is generally three to five years, but can be as long as
15 years and for company-owned facilities the estimated useful life is 40 years. At December 31, 2018, property and
equipment totaled $1.7 billion.
m) Foreign currency remeasurement and translation
The functional currency for each of our foreign operations is generally the currency of the local operating environment.
Transactions in currencies other than a foreign operation's functional currency are remeasured into the functional currency, and
the resulting foreign exchange gains and losses are reflected in Net realized gains (losses) in the Consolidated statements of
operations. Functional currency assets and liabilities are translated into the reporting currency, U.S. dollars, using period end
exchange rates and the related translation adjustments are recorded as a separate component of AOCI in Shareholders' equity.
Functional statement of operations amounts expressed in functional currencies are translated using average exchange rates.
n) Administrative expenses
Administrative expenses generally include all operating costs other than policy acquisition costs. The North America Commercial
P&C Insurance segment manages and uses an in-house third-party claims administrator, ESIS Inc. (ESIS). ESIS performs claims
management and risk control services for domestic and international organizations that self-insure P&C exposures as well as
internal P&C exposures. The net operating income of ESIS is included within Administrative expenses in the Consolidated
statements of operations and were $47 million, $49 million, and $38 million for the years ended December 31, 2019, 2018,
and 2017, respectively.
o) Income taxes
Income taxes have been recorded related to those operations subject to income tax. Deferred tax assets and liabilities result
from temporary differences between the amounts recorded in the consolidated financial statements and the tax basis of our
assets and liabilities. The effect on deferred tax assets and liabilities of a change in tax law or rates is recognized in the period
that includes the enactment date. A valuation allowance against deferred tax assets is recorded if it is more likely than not that
all, or some portion, of the benefits related to these deferred tax assets will not be realized. The valuation allowance assessment
considers tax planning strategies, where appropriate.
We recognize uncertain tax positions deemed more likely than not of being sustained upon examination. Recognized income tax
positions are measured at the largest amount that has a greater than 50 percent likelihood of being realized. Changes in
recognition or measurement are reflected in the period in which the change in judgment occurs.
p) Earnings per share
Basic earnings per share is calculated using the weighted-average shares outstanding, including participating securities with
non-forfeitable rights to dividends such as unvested restricted stock. All potentially dilutive securities, including stock options
are excluded from the basic earnings per share calculation. In calculating diluted earnings per share, the weighted-average
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
shares outstanding is increased to include all potentially dilutive securities. Basic and diluted earnings per share are calculated
by dividing net income by the applicable weighted-average number of shares outstanding during the year.
q) Cash flow information
Premiums received and losses paid associated with the GLB reinsurance products, which as discussed previously, meet the
definition of a derivative instrument for accounting purposes, are included within Cash flows from operating activities. Cash
flows, such as settlements and collateral requirements, associated with GLB and all other derivative instruments, are included
on a net basis within Cash flows from investing activities. Purchases, sales, and maturities of short-term investments are
recorded on a net basis within Cash flows from investing activities.
r) Share-based compensation
Chubb measures and records compensation cost for all share-based payment awards at grant-date fair value. Compensation
costs are recognized for vesting of share-based payment awards with only service conditions on a straight-line basis over the
requisite service period for each separately vesting portion of the award as if the award were, in substance, multiple awards. For
retirement-eligible participants, compensation costs for certain share-based payment awards are recognized immediately at the
date of grant. Refer to Note 12 for additional information.
s) Chubb integration expenses
Direct costs related to the Chubb Corp acquisition were expensed as incurred. Chubb integration expenses were $23 million,
$59 million, and $310 million for the years ended December 31, 2019, 2018 and 2017, respectively, and include all internal
and external costs directly related to the integration activities of the Chubb Corp acquisition. These expenses principally
consisted of personnel-related expenses, consulting fees, and rebranding.
t) New accounting pronouncements
Adopted in 2019
Premium Amortization on Purchased Callable Debt Securities
Effective January 1, 2019, we adopted new guidance on accounting for premium amortization on purchased callable debt
securities for bonds held at a premium on a modified retrospective basis. The guidance requires the premium to be amortized to
the earliest call date. As a result, we recorded a cumulative effect adjustment to decrease beginning retained earnings by $12
million after-tax ($15 million pre-tax). Securities held at a discount did not require an accounting change.
Lease Accounting
Effective January 1, 2019, we adopted new lease accounting guidance and elected to utilize a modified retrospective approach
which allowed us to initially apply the new lease standard at the adoption date and recognize a cumulative effect adjustment to
the opening balance of retained earnings for 2019, with no adjustment to prior periods presented. The cumulative effect
adjustment to the opening balance of retained earnings was zero. Our leases consist principally of real estate operating leases
that are amortized on a straight-line basis over the term of the lease. The adoption of the updated guidance resulted in
recognizing a right-of-use asset, which was recorded within Other assets, and a lease liability, which was recorded within
Accounts payable, accrued expenses, and other liabilities on the Consolidated balance sheet as well as de-recognizing the
liability for deferred rent that was required under the previous guidance. The adoption of the new guidance did not have a
material effect on our results of operations, financial condition or liquidity. Refer to Note 10 i) for additional information on
leases.
Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued amendments to modify the disclosure requirements on fair value measurements. The
amendments allow for the removal of: (i) the amount and reasons for transfer between Level 1 and Level 2 of the fair value
hierarchy; (ii) the policy for timing of transfers between levels; and (iii) the valuation processes for Level 3 fair value
measurements. This update also requires additional disclosure including an expanded discussion on unobservable inputs that
are significant to the fair value measurement. We early adopted the amendments that allow the removal of certain disclosures in
2018 and added the expanded discussion on unobservable inputs in the fourth quarter of 2019, as permitted. The guidance
changes disclosure only and did not have an impact on our financial condition or results of operations.
Adopted in 2020
Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments
Effective January 1, 2020, we adopted, on a modified retrospective basis, new guidance on the accounting for credit losses of
financial instruments that are measured at amortized cost, including held to maturity securities, reinsurance recoverables, and
high deductible receivables, by applying an approach based on the current expected credit losses (CECL). The estimate of
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts,
including estimates of prepayments. In addition, the guidance also amended the current available for sale (AFS) debt security
other-than-temporary impairment model by requiring an estimate of the expected credit loss (ECL) only when the fair value is
below the amortized cost of the asset. The length of time the fair value of an AFS security has been below the amortized cost no
longer impacts the determination of whether a potential credit loss exists. The AFS security model also requires the use of a
valuation allowance as compared to the current practice of writing down the asset.
During the first quarter of 2020, we established a valuation allowance for credit losses and recognized a cumulative effect
adjustment and decreased beginning retained earnings by approximately $70 million pre-tax, or $64 million after-tax.
Accounting guidance not yet adopted
Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation, and disclosure
requirements for long-duration contracts issued by an insurance entity. The amendments in this update require more frequent
updating of assumptions and a standardized discount rate for the future policy benefit liability, a requirement to use the fair
value measurement model for policies with market risk benefits, simplified amortization of deferred acquisition costs, and
enhanced disclosures. This standard will be effective for us in the first quarter of 2022 with early adoption permitted. We are
currently assessing the effect of adopting this guidance on our financial condition and results of operations. We will be better
able to quantify the effect of adopting this standard as we progress in our implementation process and draw nearer to the date
of adoption.
Income Taxes - Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued updated guidance for the accounting for income taxes. The updated guidance is intended
to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other
existing guidance to simplify several other income tax accounting matters. The updated guidance is effective for us in the first
quarter of 2021 with early adoption permitted. We are currently evaluating the impact of this guidance on our financial
condition and results of operations; however, it is not expected to have a material impact at the date of adoption.
2. Acquisitions
Huatai Group
Chubb maintains a direct investment in Huatai Insurance Group Company Limited (Huatai Group). Huatai Group is the parent
company of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C) and approximately 80
percent of Huatai Life Insurance Co., Ltd. (Huatai Life). Huatai Group's insurance operations have more than 600 branches and
11 million customers in China. In 2019, Chubb increased its aggregate ownership interest in Huatai Group from 20 percent to
30.9 percent, with purchases of 6.2 percent for approximately $329 million in May 2019 and 4.7 percent for approximately
$251 million in December 2019. Chubb continues to apply the equity method of accounting to its investment in Huatai Group
by recording its share of net income or loss in Other (income) expense in the Consolidated statements of operations. Refer to
Note 14 for additional information. The Consolidated statements of operations include the equity income from the additional
ownership interests as of each respective closing date.
During 2019, Chubb also entered into agreements to acquire an additional 22.4 percent ownership in Huatai Group for
approximately $1.6 billion through two separate purchases, a 15.3 percent ownership interest for approximately $1.1 billion
and a 7.1 percent ownership interest for approximately $493 million. These purchases are contingent upon Chinese insurance
regulatory approval and other important conditions that are expected to be completed by the end of 2021. The purchase of the
7.1 percent ownership stake is also contingent upon the receipt of Chinese insurance regulatory approval of the 15.3 percent
purchase.
Upon completion of the 7.1 percent purchase, which will result in majority ownership of Huatai Group at 53.3 percent, Chubb
is expected to obtain control of Huatai Group, Huatai P&C and Huatai Life. At that time, Chubb is expected to apply
consolidation accounting and discontinue the application of the equity method of accounting.
Banchile Seguros de Vida
On December 30, 2019, we acquired Banchile Seguros de Vida, an insurance company providing both life and property and
casualty coverages in Chile, for approximately $80 million in cash. The consolidated financial statements will include results of
this acquisition within the Chubb Overseas General and Life Insurance segment results.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
3. Investments
a) Fixed maturities
December 31, 2019
(in millions of U.S. dollars)
Available for sale
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Held to maturity
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
December 31, 2018
(in millions of U.S. dollars)
Available for sale
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Held to maturity
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Amortized
Cost
Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
OTTI
Recognized
in AOCI
$
3,188 $
96 $
(1) $
3,283 $
22,670
30,689
18,712
7,321
1,099
1,180
494
205
(62)
(78)
(14)
(11)
23,707
31,791
19,192
7,515
—
(25)
(5)
—
—
82,580 $
3,074 $
(166) $
85,488 $
(30)
1,318 $
29 $
— $
1,347 $
1,423
2,349
2,331
5,160
62
121
65
150
—
(2)
—
(1)
1,485
2,468
2,396
5,309
$
12,581 $
427 $
(3) $
13,005 $
—
—
—
—
—
—
$
$
Amortized
Cost
Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
OTTI
Recognized
in AOCI
$
4,158 $
30 $
(43) $
4,145 $
$
$
21,370
27,183
15,758
10,854
395
150
66
49
(349)
(750)
(284)
(117)
21,416
26,583
15,540
10,786
79,323 $
690 $
(1,543) $
78,470 $
1,185 $
8 $
(11) $
1,182 $
1,549
2,601
2,524
5,576
11
11
5
16
(18)
(104)
(43)
(51)
1,542
2,508
2,486
5,541
$
13,435 $
51 $
(227) $
13,259 $
—
—
(6)
(1)
—
(7)
—
—
—
—
—
—
As discussed in Note 3 c), if a credit loss is incurred on an impaired fixed maturity, an OTTI is considered to have occurred and
the portion of the impairment not related to credit losses (non-credit OTTI) is recognized in OCI. Included in the “OTTI
Recognized in AOCI” columns above are the cumulative amounts of non-credit OTTI recognized in OCI adjusted for subsequent
sales, maturities, and redemptions. OTTI recognized in AOCI does not include the impact of subsequent changes in fair value of
the related securities. In periods subsequent to a recognition of OTTI in OCI, changes in the fair value of the related fixed
maturities are reflected in Net unrealized appreciation on investments in the Consolidated statements of shareholders' equity.
For the years ended December 31, 2019 and 2018, $3 million of net unrealized appreciation and $4 million of net unrealized
depreciation, respectively, related to such securities are included in OCI. At December 31, 2019 and 2018, AOCI included
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
cumulative net unrealized depreciation of $18 million and net unrealized appreciation of $1 million, respectively, related to
securities remaining in the investment portfolio for which a non-credit OTTI was recognized.
Mortgage-backed securities (MBS) issued by U.S. government agencies are combined with all other to be announced mortgage-
backed securities held (refer to Note 10 b) (iv)) and are included in the category, “Mortgage-backed securities”. Approximately
83 percent and 81 percent of the total mortgage-backed securities at December 31, 2019 and 2018, respectively, are
represented by investments in U.S. government agency bonds. The remainder of the mortgage exposure consists of
collateralized mortgage obligations and non-government mortgage-backed securities, the majority of which provide a planned
structure for principal and interest payments and carry a rating of AAA by the major credit rating agencies.
The following table presents fixed maturities by contractual maturity:
(in millions of U.S. dollars)
Available for sale
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Mortgage-backed securities
Held to maturity
Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years
Mortgage-backed securities
December 31
2019
December 31
2018
Amortized Cost
Fair Value
Amortized Cost
Fair Value
$
3,951 $
3,973 $
3,569 $
$
$
27,142
23,901
8,874
63,868
18,712
27,720
24,874
9,729
66,296
19,192
27,134
24,095
8,767
63,565
15,758
82,580 $
85,488 $
79,323 $
478 $
479 $
536 $
3,869
3,756
2,147
10,250
2,331
3,940
3,883
2,307
10,609
2,396
3,122
4,468
2,785
10,911
2,524
$
12,581 $
13,005 $
13,435 $
3,568
27,005
23,543
8,814
62,930
15,540
78,470
537
3,106
4,407
2,723
10,773
2,486
13,259
Expected maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations,
with or without call or prepayment penalties.
b) Gross unrealized loss
At December 31, 2019, there were 4,091 fixed maturities out of a total of 31,203 fixed maturities in an unrealized loss
position. The largest single unrealized loss in the fixed maturities was $6 million. Fixed maturities in an unrealized loss position
at December 31, 2019, comprised both investment grade and below investment grade securities for which fair value declined
primarily due to widening credit spreads since the date of purchase.
F-23
(1)
(62)
(80)
(14)
(12)
(169)
Total
Gross
Unrealized
Loss
(54)
(367)
(854)
(327)
(168)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following tables present, for all securities in an unrealized loss position (including securities on loan), the aggregate fair
value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
December 31, 2019
(in millions of U.S. dollars)
Fair Value
0 – 12 Months
Over 12 Months
Gross
Unrealized
Loss
Fair Value
Gross
Unrealized
Loss
Fair Value
Total
Gross
Unrealized
Loss
U.S. Treasury and agency
$
234 $
(1) $
339 $
— $
573 $
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and
political subdivisions
Total fixed maturities
1,846
2,121
1,174
188
(34)
(40)
(6)
—
802
988
932
276
(28)
(40)
(8)
(12)
2,648
3,109
2,106
464
$
5,563 $
(81) $
3,337 $
(88) $
8,900 $
December 31, 2018
(in millions of U.S. dollars)
Fair Value
Gross
Unrealized
Loss
Fair Value
Gross
Unrealized
Loss
Fair Value
U.S. Treasury and agency
$
523 $
(4) $
2,859 $
(50) $
3,382 $
0 – 12 Months
Over 12 Months
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political
subdivisions
Total fixed maturities
c) Net realized gains (losses)
6,764
16,538
6,103
(208)
(599)
(98)
5,349
4,873
6,913
(159)
(255)
(229)
12,113
21,411
13,016
5,024
(44)
7,768
(124)
12,792
$
34,952 $
(953) $
27,762 $
(817) $
62,714 $
(1,770)
OTTI related to fixed maturities
In accordance with guidance related to the recognition and presentation of OTTI, when an impairment related to a fixed
maturity has occurred, OTTI is required to be recorded in Net income if management has the intent to sell the security or it is
more likely than not that we will be required to sell the security before the recovery of its amortized cost. Further, in cases
where we do not intend to sell the security and it is more likely than not that we will not be required to sell the security, we
must evaluate the security to determine the portion of the impairment, if any, related to credit losses. If a credit loss is incurred,
an OTTI is considered to have occurred and any portion of the OTTI related to credit losses must be reflected in Net income
while the portion of OTTI related to all other factors is recognized in OCI. For fixed maturities held to maturity, OTTI recognized
in OCI is accreted from AOCI to the amortized cost of the fixed maturity prospectively over the remaining term of the securities.
Each quarter, securities in an unrealized loss position (impaired securities), including fixed maturities and securities lending
collateral are reviewed to identify impaired securities to be specifically evaluated for a potential OTTI.
Evaluation of potential credit losses related to fixed maturities
We review each fixed maturity in an unrealized loss position to assess whether the security is a candidate for credit loss.
Specifically, we consider credit rating, market price, and issuer-specific financial information, among other factors, to assess the
likelihood of collection of all principal and interest as contractually due. Securities, for which we determine that credit loss is
likely, are subjected to further analysis to estimate the credit loss recognized in Net income, if any. In general, credit loss
recognized in Net income equals the difference between the security’s amortized cost and the net present value of its projected
future cash flows discounted at the effective interest rate implicit in the debt security. All significant assumptions used in
determining credit losses are subject to change as market conditions evolve.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
U.S. Treasury and agency obligations (including agency mortgage-backed securities); foreign government obligations; and states,
municipalities, and political subdivisions obligations
U.S. Treasury and agency obligations (including agency mortgage-backed securities); foreign government obligations; and
states, municipalities, and political subdivisions obligations represent $61 million of gross unrealized loss at December 31,
2019. These securities were evaluated for credit loss primarily using qualitative assessments of the likelihood of credit loss
considering credit rating of the issuers and level of credit enhancement, if any. We concluded that the high level of
creditworthiness of the issuers coupled with credit enhancement, where applicable, supports recognizing no credit loss in Net
income.
Corporate and foreign securities
Projected cash flows for corporate and foreign securities (principally senior unsecured bonds) are driven primarily by
assumptions regarding probability of default and the timing and amount of recoveries associated with defaults. Chubb
developed projected cash flows for corporate and foreign securities using market observable data, issuer-specific information,
and credit ratings. We use historical default data by Moody’s Investors Service (Moody’s) rating category to calculate a 1-in-100
year probability of default, which results in a default assumption in excess of the historical mean default rate. Consistent with
management's approach, Chubb assumed a 32 percent recovery rate (the par value of a defaulted security that will be
recovered) across all rating categories, rather than using Moody's historical mean recovery rate of 42 percent. We believe that
use of a default assumption, in excess of the historical mean is conservative. The following table presents default assumptions
by Moody's rating category (historical mean default rate provided for comparison):
1-in-100 Year Default Rate
Historical Mean Default Rate
Investment Grade
Below Investment Grade
Aaa-Baa
0.0 - 1.3%
0.0 - 0.3%
Ba
4.8%
1.0%
B
12.0%
3.1%
Caa-C
36.3%
10.4%
Application of the methodology and assumptions described above resulted in pre-tax credit losses recognized in Net income for
corporate and foreign securities of $37 million, $25 million, and $5 million for the years ended December 31, 2019, 2018,
and 2017, respectively.
Mortgage-backed securities
For mortgage-backed securities, credit impairment is assessed using a cash flow model that estimates the cash flows on the
underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the
underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction
structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual
cash flows on the mortgage-backed securities through the current period and then projects the remaining cash flows using a
number of assumptions, including default rates, prepayment rates, and loss severity rates (the par value of a defaulted security
that will not be recovered) on foreclosed properties.
We develop specific assumptions using market data, where available, and include internal estimates as well as estimates published
by rating agencies and other third-party sources. We project default rates by mortgage sector considering current underlying
mortgage loan performance, generally assuming lower loss severity for Prime sector bonds versus ALT-A and Sub-prime bonds.
These estimates are extrapolated along a default timing curve to estimate the total lifetime pool default rate. Other assumptions
used contemplate the actual collateral attributes, including geographic concentrations, rating agency loss projections, rating
actions, and current market prices. If cash flow projections indicate that losses will exceed the credit enhancement for a given
tranche, then we do not expect to recover our amortized cost basis, and we recognize an estimated credit loss in Net income.
For the years ended December 31, 2019, 2018, and 2017 there were no credit losses recognized in Net income for mortgage-
backed securities.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents a roll-forward of pre-tax credit losses related to fixed maturities for which a portion of OTTI was
recognized in OCI:
(in millions of U.S. dollars)
Balance of credit losses related to securities still held – beginning of year
Additions where no OTTI was previously recorded
Additions where an OTTI was previously recorded
Reductions for securities sold during the period
Balance of credit losses related to securities still held – end of year
Year Ended December 31
2019
2018
2017
$
$
34 $
22 $
33
4
(41)
20
5
(13)
30 $
34 $
35
4
2
(19)
22
The following table presents the components of Net realized gains (losses) and the change in net unrealized appreciation
(depreciation) of investments:
(in millions of U.S. dollars)
Fixed maturities:
OTTI on fixed maturities, gross
OTTI on fixed maturities recognized in OCI (pre-tax)
OTTI on fixed maturities, net
Gross realized gains excluding OTTI
Gross realized losses excluding OTTI
Total fixed maturities
Equity securities (1)
OTTI on other investments
Other investments
Foreign exchange gains
Investment and embedded derivative instruments
Fair value adjustments on insurance derivative
S&P futures
Other derivative instruments
Other
Net realized gains (losses) (pre-tax)
Change in net unrealized appreciation (depreciation) on investments (pre-tax):
Fixed maturities available for sale
Fixed maturities held to maturity
Equity securities
Other
Income tax (expense) benefit
Change in net unrealized appreciation (depreciation) on investments (after-tax)
Year Ended December 31
2019
2018
2017
$
(90) $
(52) $
32
(58)
203
(176)
(31)
104
—
(20)
7
(435)
(4)
(138)
(8)
(5)
3
(49)
334
(587)
(302)
(59)
—
(5)
131
(75)
(248)
(4)
(3)
(87)
$
$
(530) $
(652) $
3,769 $
(1,958) $
(31)
—
(3)
(647)
(38)
—
—
297
$
3,088 $
(1,699) $
(24)
1
(23)
149
(157)
(31)
16
(12)
—
36
(11)
364
(261)
(5)
(12)
84
519
18
88
8
(241)
392
(1)
2017 included gross realized gains of $28 million and gross realized losses of $2 million on sales, and OTTI of $10 million.
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Realized gains and losses from Equity securities and Other investments from the table above include sales of securities and
unrealized gains and losses from fair value changes as follows:
(in millions of U.S. dollars)
Year Ended December 31, 2019
Year Ended December 31, 2018
Equity
Securities
Other
Investments
Total
Equity
Securities
Other
Investments
Total
Net gains (losses) recognized during the period
$
104 $
(20) $
84 $
(59) $
(5) $
(64)
Less: Net gains (losses) recognized from sales of
securities
Unrealized gains (losses) recognized for securities still
held at reporting date
58
(5)
53
70
121
191
$
46 $
(15) $
31 $
(129) $
(126) $ (255)
d) Other investments
(in millions of U.S. dollars)
Alternative investments:
Partially-owned investment companies
Limited partnerships
Investment funds
Alternative investments
Life insurance policies
Policy loans
Non-qualified separate account assets (1)
Other
Total
December 31
2019
2018
$
4,142 $
3,623
508
271
4,921
377
247
283
234
538
83
4,244
304
243
252
234
$
6,062 $
5,277
(1)
Non-qualified separate account assets are comprised of mutual funds, supported by assets that do not qualify for separate account reporting under GAAP.
Alternative investments
Alternative investments include partially-owned investment companies, investment funds, and limited partnerships measured at
fair value using net asset value (NAV) as a practical expedient. The following table presents, by investment category, the
expected liquidation period, fair value, and maximum future funding commitments of alternative investments:
(in millions of U.S. dollars)
Financial
Real Assets
Distressed
Private Credit
Traditional
Vintage
Investment funds
Expected Liquidation
Period of
Underlying Assets
Fair Value
December 31
2019
Maximum
Future Funding
Commitments
December 31
2018
Maximum
Future Funding
Commitments
Fair Value
2 to 10 Years $
611 $
329 $
596 $
2 to 11 Years
2 to 7 Years
3 to 8 Years
712
263
104
422
80
272
704
296
147
193
362
105
310
2 to 14 Years
2,844
2,160
2,362
2,735
1 to 2 Years
Not Applicable
116
271
—
—
56
83
—
—
$
4,921 $
3,263 $
4,244 $
3,705
Included in all categories in the above table, except for Investment funds, are investments for which Chubb will never have the
contractual option to redeem but receives distributions based on the liquidation of the underlying assets. Further, for all
categories except for Investment funds, Chubb does not have the ability to sell or transfer the investments without the consent
from the general partner of individual funds.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Investment Category
Consists of investments in private equity funds:
Financial
Real Assets
Distressed
Private Credit
Traditional
Vintage
targeting financial services companies, such as financial institutions and insurance services
worldwide
targeting investments related to hard physical assets, such as real estate, infrastructure and natural
resources
targeting distressed corporate debt/credit and equity opportunities in the U.S.
targeting privately originated corporate debt investments, including senior secured loans and
subordinated bonds
employing traditional private equity investment strategies such as buyout and growth equity globally
funds where the initial fund term has expired
Included in partially-owned investment companies and limited partnerships are 131 individual limited partnerships covering a
broad range of investment strategies including large cap buyouts, specialist buyouts, growth capital, distressed, mezzanine, real
estate, and co-investments. The underlying portfolio consists of various public and private debt and equity securities of publicly
traded and privately held companies and real estate assets. The underlying investments across various partnerships,
geographies, industries, asset types, and investment strategies provide risk diversification within the limited partnership
portfolio and the overall investment portfolio.
Investment funds employ various investment strategies such as long/short equity and arbitrage/distressed. Included in this
category are investments for which Chubb has the option to redeem at agreed upon value as described in each investment
fund’s subscription agreement. Depending on the terms of the various subscription agreements, investment fund investments
may be redeemed monthly, quarterly, semi-annually, or annually. If Chubb wishes to redeem an investment fund investment, it
must first determine if the investment fund is still in a lock-up period (a time when Chubb cannot redeem its investment so that
the investment fund manager has time to build the portfolio). If the investment fund is no longer in its lock-up period, Chubb
must then notify the investment fund manager of its intention to redeem by the notification date prescribed by the subscription
agreement. Subsequent to notification, the investment fund can redeem Chubb’s investment within several months of the
notification. Notice periods for redemption of the investment funds range between 5 and 120 days. Chubb can redeem its
investment funds without consent from the investment fund managers.
e) Investments in partially-owned insurance companies
The following table presents Investments in partially-owned insurance companies:
(in millions of U.S. dollars, except for percentages)
Carrying Value
Direct
Ownership
Percentage
Carrying Value
Direct
Ownership
Percentage
December 31, 2019
December 31, 2018
Huatai Group
Huatai Life Insurance Company
Freisenbruch-Meyer
Chubb Arabia Cooperative Insurance Company
Russian Reinsurance Company
ABR Reinsurance Ltd.
Total
$
1,053
31% $
147
10
20
2
100
20%
40%
30%
23%
12%
452
106
9
18
2
91
$
1,332
$
678
Domicile
China
China
Bermuda
20%
20%
40%
30% Saudi Arabia
23%
12%
Russia
Bermuda
Huatai Group has a 100 percent ownership interest in Huatai P&C and an approximately 80 percent ownership interest in
Huatai Life. At December 31, 2019, through its investment in Huatai Group, Chubb has a 30.9 percent indirect ownership in
Huatai P&C and a 25 percent indirect ownership in Huatai Life. Chubb has a 20 percent direct ownership interest in Huatai
Life. Therefore, Chubb’s aggregate direct and indirect ownership in Huatai Life is approximately 45 percent, comprising 20
percent direct and 25 percent indirect ownership interest.
The table above excludes the 15.3 percent and 7.1 percent of additional ownership commitments in Huatai Group that are
pending regulatory approvals and other important conditions. Refer to Note 2 for additional information.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
f) Net investment income
(in millions of U.S. dollars)
Fixed maturities
Short-term investments
Other interest income
Equity securities
Other investments
Gross investment income (1)
Investment expenses
Year Ended December 31
2019
2018
2017
$
3,385 $
3,128 $
2,987
84
25
26
78
90
118
33
104
3,598
(172)
3,473
(168)
56
75
38
133
3,289
(164)
3,426 $
3,305 $
3,125
(161) $
(248) $
(332)
Net investment income (1)
(1) Includes amortization expense related to fair value adjustment of acquired invested assets
related to the Chubb Corp acquisition
$
$
g) Restricted assets
Chubb is required to maintain assets on deposit with various regulatory authorities to support its insurance and reinsurance
operations. These requirements are generally promulgated in the statutory regulations of the individual jurisdictions. The assets
on deposit are available to settle insurance and reinsurance liabilities. Chubb is also required to restrict assets pledged under
repurchase agreements, which represent Chubb's agreement to sell securities and repurchase them at a future date for a
predetermined price. We use trust funds in certain large reinsurance transactions where the trust funds are set up for the benefit
of the ceding companies and generally take the place of letter of credit (LOC) requirements. We have investments in segregated
portfolios primarily to provide collateral or guarantees for LOC and derivative transactions. Included in restricted assets are
investments, primarily fixed maturities, totaling $21.0 billion, at both December 31, 2019 and 2018, and cash of $109
million and $93 million, respectively.
The following table presents the components of restricted assets:
(in millions of U.S. dollars)
Trust funds
Deposits with U.S. regulatory authorities
Deposits with non-U.S. regulatory authorities
Assets pledged under repurchase agreements
Other pledged assets
Total
December 31
December 31
2019
2018
$
14,004 $
13,988
2,466
2,709
1,464
490
2,405
2,531
1,468
692
$
21,133 $
21,084
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
4. Fair value measurements
a) Fair value hierarchy
Fair value of financial assets and financial liabilities is estimated based on the framework established in the fair value
accounting guidance. The guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an
orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the
inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to
unobservable data.
The three levels of the hierarchy are as follows:
• Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;
• Level 2 – Includes, among other items, inputs other than quoted prices that are observable for the asset or liability such as
interest rates and yield curves, quoted prices for similar assets and liabilities in active markets, and quoted prices
for identical or similar assets and liabilities in markets that are not active; and
• Level 3 – Inputs that are unobservable and reflect management’s judgments about assumptions that market participants
would use in pricing an asset or liability.
We categorize financial instruments within the valuation hierarchy at the balance sheet date based upon the lowest level of
inputs that are significant to the fair value measurement.
We use pricing services to obtain fair value measurements for the majority of our investment securities. Based on management’s
understanding of the methodologies used, these pricing services only produce an estimate of fair value if there is observable
market information that would allow them to make a fair value estimate. Based on our understanding of the market inputs used
by the pricing services, all applicable investments have been valued in accordance with GAAP. We do not adjust prices obtained
from pricing services. The following is a description of the valuation techniques and inputs used to determine fair values for
financial instruments carried at fair value, as well as the general classification of such financial instruments pursuant to the
valuation hierarchy.
Fixed maturities
We use pricing services to estimate fair value measurements for the majority of our fixed maturities. The pricing services use
market quotations for fixed maturities that have quoted prices in active markets; such securities are classified within Level 1.
For fixed maturities other than U.S. Treasury securities that generally do not trade on a daily basis, the pricing services prepare
estimates of fair value measurements using their pricing applications, which include available relevant market information,
benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Additional valuation factors that can
be taken into account are nominal spreads, dollar basis, and liquidity adjustments. The pricing services evaluate each asset
class based on relevant market and credit information, perceived market movements, and sector news. The market inputs used
in the pricing evaluation, listed in the approximate order of priority include: benchmark yields, reported trades, broker/dealer
quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic
events. The extent of the use of each input is dependent on the asset class and the market conditions. Given the asset class,
the priority of the use of inputs may change, or some market inputs may not be relevant. Additionally, fixed maturities valuation
is more subjective when markets are less liquid due to the lack of market based inputs (i.e., stale pricing), which may increase
the potential that an investment's estimated fair value is not reflective of the price at which an actual transaction would occur.
The overwhelming majority of fixed maturities are classified within Level 2 because the most significant inputs used in the
pricing techniques are observable. For a small number of fixed maturities, we obtain a single broker quote (typically from a
market maker). Due to the disclaimers on the quotes that indicate that the price is indicative only, we include these fair value
estimates in Level 3.
Equity securities
Equity securities with active markets are classified within Level 1 as fair values are based on quoted market prices. For equity
securities in markets which are less active, fair values are based on market valuations and are classified within Level 2. Equity
securities for which pricing is unobservable are classified within Level 3.
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Short-term investments
Short-term investments, which comprise securities due to mature within one year of the date of purchase that are traded in
active markets, are classified within Level 1 as fair values are based on quoted market prices. Securities such as commercial
paper and discount notes are classified within Level 2 because these securities are typically not actively traded due to their
approaching maturity, and as such, their cost approximates fair value. Short-term investments for which pricing is unobservable
are classified within Level 3.
Other investments
Fair values for the majority of Other investments including investments in partially-owned investment companies, investment
funds, and limited partnerships are based on their respective net asset values or equivalent (NAV) and are excluded from the
fair value hierarchy table below. Certain of our long-duration contracts are supported by assets that do not qualify for separate
account reporting under GAAP. These assets comprise mutual funds, classified within Level 1 in the valuation hierarchy on the
same basis as other equity securities traded in active markets. Other investments also include equity securities, classified within
Level 1 and fixed maturities, classified within Level 2, held in rabbi trusts maintained by Chubb for deferred compensation
plans and supplemental retirement plans and are classified within the valuation hierarchy on the same basis as other equity
securities and fixed maturities. Other investments for which pricing is unobservable are classified within Level 3.
Securities lending collateral
The underlying assets included in Securities lending collateral in the Consolidated balance sheets are fixed maturities which are
classified in the valuation hierarchy on the same basis as other fixed maturities. Excluded from the valuation hierarchy is the
corresponding liability related to Chubb’s obligation to return the collateral plus interest as it is reported at contract value and
not fair value in the Consolidated balance sheets.
Investment derivative instruments
Actively traded investment derivative instruments, including futures, options, and forward contracts are classified within Level 1
as fair values are based on quoted market prices. The fair value of cross-currency swaps and interest rate swaps is based on
market valuations and is classified within Level 2. Investment derivative instruments are recorded in either Other assets or
Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets.
Other derivative instruments
We maintain positions in exchange-traded equity futures contracts designed to limit exposure to a severe equity market decline,
which would cause an increase in expected claims and, therefore, an increase in reserves for our guaranteed minimum death
benefits (GMDB) and guaranteed living benefits (GLB) reinsurance business. Our positions in exchange-traded equity futures
contracts are classified within Level 1. The fair value of the majority of the remaining positions in other derivative instruments is
based on significant observable inputs including equity security and interest rate indices. Accordingly, these are classified within
Level 2. Other derivative instruments based on unobservable inputs are classified within Level 3. Other derivative instruments
are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance
sheets.
Separate account assets
Separate account assets represent segregated funds where investment risks are borne by the customers, except to the extent of
certain guarantees made by Chubb. Separate account assets comprise mutual funds classified within Level 1 in the valuation
hierarchy on the same basis as other equity securities traded in active markets. Separate account assets also include fixed
maturities classified within Level 2 because the most significant inputs used in the pricing techniques are observable. Excluded
from the valuation hierarchy are the corresponding liabilities as they are reported at contract value and not fair value in the
Consolidated balance sheets. Separate account assets are recorded in Other assets in the Consolidated balance sheets.
Guaranteed living benefits
The GLB arises from life reinsurance programs covering living benefit guarantees whereby we assume the risk of guaranteed
minimum income benefits (GMIB) associated with variable annuity contracts. GLB’s are recorded in Accounts payable, accrued
expenses, and other liabilities and Future policy benefits in the Consolidated balance sheets. For GLB reinsurance, Chubb
estimates fair value using an internal valuation model which includes current market information and estimates of policyholder
behavior. All of the treaties contain claim limits, which are factored into the valuation model. The fair value depends on a
number of factors, including interest rates, equity markets, credit risk, current account value, market volatility, expected
annuitization rates and other policyholder behavior, and changes in policyholder mortality. Because of the significant use of
unobservable inputs including policyholder behavior, GLB reinsurance is classified within Level 3.
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Financial instruments measured at fair value on a recurring basis, by valuation hierarchy
December 31, 2019
(in millions of U.S. dollars)
Assets:
Fixed maturities available for sale
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Equity securities
Short-term investments
Other investments (1)
Securities lending collateral
Investment derivative instruments
Other derivative instruments
Separate account assets
Total assets measured at fair value (1)
Liabilities:
Investment derivative instruments
Other derivative instruments
GLB (2)
Total liabilities measured at fair value
Level 1
Level 2
Level 3
Total
$
2,664 $
619 $
— $
—
—
—
—
2,664
728
2,803
412
—
24
2
3,437
23,258
30,340
19,132
7,515
80,864
15
1,482
377
994
—
—
136
449
1,451
60
—
1,960
69
6
10
—
—
—
—
$
$
$
10,070 $
83,868 $
2,045 $
93 $
— $
— $
13
—
—
—
—
456
106 $
— $
456 $
3,283
23,707
31,791
19,192
7,515
85,488
812
4,291
799
994
24
2
3,573
95,983
93
13
456
562
(1)
(2)
Excluded from the table above are partially-owned investments, investment funds, and limited partnerships of $4,921 million and other investments of $95 million at
December 31, 2019 measured using NAV as a practical expedient.
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above
is the portion of the GLB derivative liability classified as Future policy benefits in the Consolidated balance sheets. Refer to Note 5 c) for additional information.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
December 31, 2018
(in millions of U.S. dollars)
Assets:
Fixed maturities available for sale
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Equity securities
Short-term investments
Other investments (1)
Securities lending collateral
Investment derivative instruments
Other derivative instruments
Separate account assets
Total assets measured at fair value (1)
Liabilities:
Investment derivative instruments
GLB (2)
Total liabilities measured at fair value
Level 1
Level 2
Level 3
Total
$
3,400 $
745 $
— $
—
—
—
—
3,400
713
1,575
381
—
28
25
2,686
21,071
25,284
15,479
10,786
73,365
—
1,440
303
1,926
—
—
137
345
1,299
61
—
1,705
57
1
11
—
—
—
—
$
$
$
8,808 $
77,171 $
1,774 $
38 $
—
38 $
115 $
—
115 $
— $
452
452 $
4,145
21,416
26,583
15,540
10,786
78,470
770
3,016
695
1,926
28
25
2,823
87,753
153
452
605
(1)
(2)
Excluded from the table above are partially-owned investments, investment funds, and limited partnerships of $4,244 million and other investments of $95 million at
December 31, 2018 measured using NAV as a practical expedient.
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above
is the portion of the GLB derivative liability classified as Future policy benefits in the Consolidated balance sheets. Refer to Note 5 c) for additional information.
Level 3 financial instruments
The following table presents the significant unobservable inputs used in the Level 3 liability valuations. Excluded from the table
below are inputs used to determine the fair value of Level 3 assets which are based on single broker quotes and contain no
quantitative unobservable inputs developed by management. The majority of our fixed maturities classified as Level 3 used
external pricing when markets are less liquid due to the lack of market inputs (i.e., stale pricing, broker quotes).
(in millions of U.S. dollars, except for percentages)
Fair Value at
December 31
2019
Valuation
Technique
Significant
Unobservable
Inputs
Ranges
Weighted
Average (1)
GLB (1)
$
456
Actuarial model
Lapse rate
3% – 34%
Annuitization rate
0% – 52%
4.3%
3.2%
(1)
The weighted average lapse and annuitization rates are determined by weighting each treaty's rates by the GLB contracts fair value.
The most significant policyholder behavior assumptions include lapse rates and the GMIB annuitization rates. Assumptions
regarding lapse rates and GMIB annuitization rates differ by treaty, but the underlying methodologies to determine rates applied
to each treaty are comparable.
A lapse rate is the percentage of in-force policies surrendered in a given calendar year. All else equal, as lapse rates increase,
ultimate claim payments will decrease. In general, the base lapse function assumes low lapse rates during the surrender charge
period of the GMIB contract, followed by a “spike” lapse rate in the year immediately following the surrender charge period, and
then reverting to an ultimate lapse rate, typically over a 2-year period. This base rate is adjusted downward for policies with
more valuable guarantees (policies with guaranteed values far in excess of their account values). Partial withdrawals and the
impact of older policyholders with tax-qualified contracts (due to required minimum distributions) are also reflected in our
modeling.
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The GMIB annuitization rate is the percentage of policies for which the policyholder will elect to annuitize using the guaranteed
benefit provided under the GMIB. All else equal, as GMIB annuitization rates increase, ultimate claim payments will increase,
subject to treaty claim limits. All GMIB reinsurance treaties include claim limits to protect Chubb in the event that actual
annuitization behavior is significantly higher than expected. In general, Chubb assumes that GMIB annuitization rates will be
higher for policies with more valuable guarantees (policies with guaranteed values far in excess of their account values). Chubb
also assumes that GMIB annuitization rates increase as policyholders get older. In addition, we also assume that GMIB
annuitization rates are higher in the first year immediately following the waiting period (the first year the policies are eligible to
annuitize using the GMIB) in comparison to all subsequent years. We do not yet have fully credible annuitization experience for
all clients.
The effect of changes in key market factors on assumed lapse and annuitization rates reflect emerging trends using data
available from cedants. For treaties with limited experience, rates are established in line with data received from other ceding
companies adjusted, as appropriate, with industry estimates. The model and related assumptions are regularly re-evaluated by
management and enhanced, as appropriate, based upon additional experience obtained related to policyholder behavior and
availability of updated information such as market conditions, market participant assumptions, and demographics of in-force
annuities. In the fourth quarter of 2019, we completed a review of policyholder behavior related to annuitizations, partial
withdrawals, lapses, and mortality for our variable annuity reinsurance business.
• As annuitization experience continued to emerge, we refined our annuitization assumptions including age-based behavior.
Additionally, for policies with highly valuable guarantees we increased our annuitization assumptions to reflect recent
trends. These refinements resulted in a net increase to the fair value of GLB liabilities generating a realized loss of
approximately $91 million.
• We refined our mortality assumptions based on additional emerging experience. We also updated our reference mortality
table to a more recent industry table. The updated mortality rates increased the fair value of GLB liabilities generating a
realized loss of approximately $11 million.
• Lapse and partial withdrawal assumptions were also refined based on additional emerging experience. The change in lapse
and partial withdrawal assumptions had an insignificant impact on the fair value of GLB liabilities.
During the year ended December 31, 2019, we also made routine model refinements to the internal valuation model which
resulted in a net increase in the fair value of GLB liabilities generating a realized loss of approximately $25 million.
The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair
value using significant unobservable inputs (Level 3):
Available-for-Sale Debt Securities
Assets
Liabilities
Year Ended December 31, 2019
(in millions of U.S. dollars)
Foreign
Corporate
securities
MBS
Equity
securities
Short-term
investments
Other
investments
GLB (1)
Balance, beginning of year
$
345 $
1,299 $
61 $
57 $
1 $
11 $
452
Transfers into Level 3
Transfers out of Level 3
Change in Net Unrealized
Gains/Losses in OCI
Net Realized Gains/Losses
Purchases
Sales
Settlements
Balance, end of year
Net Realized Gains/Losses
Attributable to Changes in Fair
Value at the Balance Sheet
Date
Change in Net Unrealized Gains/
Losses included in OCI at the
Balance Sheet Date
$
$
$
11
(24)
13
(1)
228
(70)
(53)
23
(38)
(2)
(4)
577
(125)
(279)
—
(16)
—
—
19
(1)
(3)
—
—
1
(2)
34
(21)
—
449 $
1,451 $
60 $
69 $
—
—
—
—
6
—
(1)
6 $
—
—
—
—
—
—
(1)
—
—
—
4
—
—
—
10 $
456
— $
(2) $
— $
(3) $
— $
— $
7 $
(8) $
— $
— $
— $
— $
4
—
(1)
Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits. Refer to Note 5 c) for additional information.
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Available-for-Sale Debt Securities
Year Ended December 31, 2018
(in millions of U.S. dollars)
Foreign
Corporate
securities
MBS
Equity
securities
Short-term
investments
Other
investments
Other
derivative
instruments
GLB (1)
Balance, beginning of year $
93 $
1,037 $
78 $
44 $
— $
263 $
2 $
204
Assets
Liabilities
Transfers into Level 3
Transfers out of Level 3
Change in Net Unrealized
Gains/Losses in OCI
Net Realized Gains/Losses
Purchases
Sales
Settlements
Balance, end of year
Net Realized Gains/Losses
Attributable to Changes in
Fair Value at the Balance
Sheet Date
13
(2)
(12)
(3)
334
(69)
(9)
24
(31)
(4)
(5)
672
(164)
(230)
1
(3)
—
—
5
—
(20)
—
—
(2)
6
37
(28)
—
5
—
—
—
9
—
(13)
—
(252)
(2)
1
50
—
(49)
—
—
—
(2)
—
—
—
—
—
—
248
—
—
—
$
345 $
1,299 $
61 $
57 $
1 $
11 $
— $
452
$
(1) $
(7) $
— $
(1) $
— $
1 $
— $
248
(1)
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above
is the portion of the GLB derivative liability classified as Future policy benefits in the Consolidated balance sheets. The liability for GLB reinsurance was $861 million at
December 31, 2018 and $550 million at December 31, 2017, which includes a fair value derivative adjustment of $452 million and $204 million, respectively.
Available-for-Sale Debt Securities
Year Ended December 31, 2017
(in millions of U.S. dollars)
Foreign
Corporate
securities (1)
MBS
Equity
securities
Short-term
investments
Other
investments
Other
derivative
instruments
GLB (2)
Balance, beginning of year $
74 $
681 $
45 $
41 $
25 $
225 $
13 $
559
Assets
Liabilities
Transfers into Level 3
Transfers out of Level 3
Change in Net Unrealized
Gains/Losses in OCI
Net Realized Gains/Losses
Purchases
Sales
Settlements
Balance, end of year
Net Realized Gains/Losses
Attributable to Changes in
Fair Value at the Balance
Sheet Date
$
$
—
(3)
3
—
84
(59)
(6)
231
(93)
(12)
—
521
(111)
(180)
50
—
—
—
8
(1)
(24)
—
—
(1)
2
24
(22)
—
—
—
—
—
16
—
—
—
6
—
56
—
(41)
(24)
—
(9)
—
(2)
—
—
—
9
—
—
(364)
—
—
—
93 $
1,037 $
78 $
44 $
— $
263 $
2 $
204
(1) $
(2) $
— $
(1) $
— $
— $
(2) $
(364)
(1)
(2)
Transfers into and Purchases in Level 3 primarily consist of privately-placed fixed income securities.
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above
is the portion of the GLB derivative liability classified as Future policy benefits in the Consolidated balance sheets. The liability for GLB reinsurance was $550 million at
December 31, 2017 and $853 million at December 31, 2016, which includes a fair value derivative adjustment of $204 million and $559 million, respectively.
b) Financial instruments disclosed, but not measured, at fair value
Chubb uses various financial instruments in the normal course of its business. Our insurance contracts are excluded from fair
value of financial instruments accounting guidance, and therefore, are not included in the amounts discussed below.
The carrying values of cash, other assets, other liabilities, and other financial instruments not included below approximated
their fair values.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Investments in partially-owned insurance companies
Fair values for investments in partially-owned insurance companies are based on Chubb’s share of the net assets based on the
financial statements provided by those companies and are excluded from the valuation hierarchy tables below.
Short- and long-term debt, repurchase agreements, and trust preferred securities
Where practical, fair values for short-term debt, long-term debt, repurchase agreements, and trust preferred securities are
estimated using discounted cash flow calculations based principally on observable inputs including incremental borrowing rates,
which reflect Chubb’s credit rating, for similar types of borrowings with maturities consistent with those remaining for the debt
being valued.
The following tables present fair value, by valuation hierarchy, and carrying value of the financial instruments not measured at
fair value:
December 31, 2019
(in millions of U.S. dollars)
Assets:
Fixed maturities held to maturity
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Total assets
Liabilities:
Repurchase agreements
Short-term debt
Long-term debt
Trust preferred securities
Total liabilities
December 31, 2018
(in millions of U.S. dollars)
Assets:
Fixed maturities held to maturity
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Total assets
Liabilities:
Repurchase agreements
Short-term debt
Long-term debt
Trust preferred securities
Total liabilities
F-36
Level 1
Level 2
Level 3
Total
Fair Value
$
1,292 $
55 $
— $
1,347 $
—
—
—
—
1,485
2,436
2,396
5,309
—
32
—
—
1,485
2,468
2,396
5,309
Carrying
Value
1,318
1,423
2,349
2,331
5,160
$
$
$
1,292 $
11,681 $
32 $
13,005 $
12,581
— $
1,416 $
— $
1,416 $
—
—
—
1,307
15,048
467
—
—
—
1,307
15,048
467
1,416
1,299
13,559
308
— $
18,238 $
— $
18,238 $
16,582
Level 1
Level 2
Level 3
Total
Fair Value
$
1,128 $
54 $
— $
1,182 $
—
—
—
—
1,542
2,477
2,486
5,541
—
31
—
—
1,542
2,508
2,486
5,541
Carrying
Value
1,185
1,549
2,601
2,524
5,576
$
$
$
1,128 $
12,100 $
31 $
13,259 $
13,435
— $
1,418 $
— $
1,418 $
1,418
—
—
—
516
12,181
409
—
—
—
516
12,181
409
509
12,087
308
— $
14,524 $
— $
14,524 $
14,322
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
5. Reinsurance
a) Consolidated reinsurance
Chubb purchases reinsurance to manage various exposures including catastrophe risks. Although reinsurance agreements
contractually obligate Chubb's reinsurers to reimburse it for the agreed-upon portion of its gross paid losses, they do not
discharge Chubb's primary liability. The amounts for net premiums written and net premiums earned in the Consolidated
statements of operations are net of reinsurance. The following table presents direct, assumed, and ceded premiums:
(in millions of U.S. dollars)
Premiums written
Direct
Assumed
Ceded
Net
Premiums earned
Direct
Assumed
Ceded
Net
Year Ended December 31
2019
2018
2017
$
$
$
$
36,848 $
34,782 $
3,276
(7,849)
3,186
(7,389)
32,275 $
30,579 $
35,876 $
34,108 $
3,107
(7,693)
3,175
(7,219)
31,290 $
30,064 $
33,137
3,239
(7,132)
29,244
32,782
3,332
(7,080)
29,034
Ceded losses and loss expenses incurred were $4.9 billion, $5.6 billion, and $5.5 billion for the years ended December 31,
2019, 2018, and 2017, respectively.
b) Reinsurance recoverable on ceded reinsurance
(in millions of U.S. dollars)
December 31, 2019
December 31, 2018
Net Reinsurance
Recoverable (1)
Provision for
Uncollectible
Net Reinsurance
Recoverable (1)
Provision for
Uncollectible
Reinsurance recoverable on unpaid losses and loss expenses
Reinsurance recoverable on paid losses and loss expenses
Reinsurance recoverable on losses and loss expenses
Reinsurance recoverable on policy benefits
(1) Net of provision for uncollectible reinsurance.
$
$
$
14,181 $
240 $
14,689 $
1,000
76
1,304
15,181 $
316 $
15,993 $
197 $
4 $
202 $
251
72
323
4
The decrease in reinsurance recoverable on losses and loss expenses in 2019 was primarily due to collections, principally on
catastrophe losses.
We evaluate the financial condition of our reinsurers and potential reinsurers on a regular basis and also monitor concentrations
of credit risk with reinsurers. The provision for uncollectible reinsurance is required principally due to the potential failure of
reinsurers to indemnify Chubb, primarily because of disputes under reinsurance contracts and insolvencies. We have
established provisions for amounts estimated to be uncollectible on both unpaid and paid losses as well as future policy
benefits.
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following tables present a listing, at December 31, 2019, of the categories of Chubb's reinsurers:
December 31, 2019
(in millions of U.S. dollars, except for percentages)
Categories
Largest reinsurers
Other reinsurers rated A- or better
Other reinsurers with ratings lower than A- or not rated
Pools
Structured settlements
Captives
Other
Total
Gross Reinsurance
Recoverable on
Loss and Loss
Expenses
Provision for
Uncollectible
Reinsurance
% of Gross
Reinsurance
Recoverable
$
6,594 $
4,624
478
379
535
2,647
240
72
55
70
15
15
20
69
$
15,497 $
316
1.1%
1.2%
14.6%
4.0%
2.8%
0.8%
28.8%
2.0%
Largest Reinsurers
ABR Reinsurance Capital Holdings
Berkshire Hathaway Insurance Group
HDI Group (Hannover Re)
Lloyd's of London
Munich Re Group
Partner Re Group
Swiss Re Group
Categories of Chubb's reinsurers
Largest reinsurers
Other reinsurers rated A- or
better
Other reinsurers rated lower
than A- or not rated
Pools
Structured settlements
Captives
Other
Comprises:
• All groups of reinsurers or captives where the gross recoverable exceeds one percent
of Chubb's total shareholders' equity.
• All reinsurers rated A- or better that were not included in the largest reinsurer
category.
• All reinsurers rated lower than A- or not rated that were not included in the largest
reinsurer category.
• Related to Chubb's voluntary pool participation and Chubb's mandatory pool
participation required by law in certain states.
• Annuities purchased from life insurance companies to settle claims. Since we retain
ultimate liability in the event that the life company fails to pay, we reflect the
amounts as both a liability and a recoverable/receivable for GAAP purposes.
• Companies established and owned by our insurance clients to assume a significant
portion of their direct insurance risk from Chubb; structured to allow clients to self-
insure a portion of their reinsurance risk. It generally is our policy to obtain
collateral equal to expected losses. Where appropriate, exceptions are granted but
only with review and approval at a senior officer level. Excludes captives included
in the largest reinsurer category.
• Amounts recoverable that are in dispute or are from companies that are in
supervision, rehabilitation, or liquidation.
The provision for uncollectible reinsurance is principally based on an analysis of the credit quality of the reinsurer and collateral
balances. We establish the provision for uncollectible reinsurance for the Other category based on a case-by-case analysis of
individual situations including the merits of the underlying matter, credit and collateral analysis, and consideration of our
collection experience in similar situations.
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
c) Assumed life reinsurance programs involving minimum benefit guarantees under variable annuity contracts
The following table presents income and expenses relating to GMDB and GLB reinsurance. GLBs include GMIBs.
(in millions of U.S. dollars)
GMDB
Net premiums earned
Policy benefits and other reserve adjustments
GLB
Net premiums earned
Policy benefits and other reserve adjustments
Net realized gains (losses)
Gain (loss) recognized in Net income
Net cash received and other
Net decrease (increase) in liability
Year Ended December 31
2019
2018
2017
$
$
$
$
$
41 $
— $
47 $
20 $
92 $
96 $
122
(6)
110
(250)
(36) $
(264) $
—
47
(36) $
(311) $
49
40
110
105
363
368
65
303
Net realized gains (losses) in the table above include gains (losses) related to foreign exchange and fair value adjustments on
insurance derivatives and exclude gains (losses) on S&P futures used to partially offset the risk in the GLB reinsurance portfolio.
Refer to Note 10 for additional information.
At December 31, 2019 and 2018, the reported liability for GMDB reinsurance was $83 million and $117 million, respectively.
At December 31, 2019 and 2018, the reported liability for GLB reinsurance was $897 million and $861 million, respectively,
which includes a fair value derivative adjustment of $456 million and $452 million, respectively. Reported liabilities for both
GMDB and GLB reinsurance are determined using internal valuation models. Such valuations require considerable judgment
and are subject to significant uncertainty. The valuation of these products is subject to fluctuations arising from, among other
factors, changes in interest rates, changes in equity markets, changes in credit markets, changes in the allocation of the
investments underlying annuitants’ account values, and assumptions regarding future policyholder behavior. These models and
the related assumptions are regularly reviewed by management and enhanced, as appropriate, based upon improvements in
modeling assumptions and availability of updated information, such as market conditions and demographics of in-force
annuities.
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Variable Annuity Net Amount at Risk
The net amount at risk is defined as the present value of future claim payments assuming policy account values and guaranteed
values are fixed at the valuation date (December 31, 2019 and 2018, respectively) and reinsurance coverage ends at the
earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty. In addition, the following assumptions
were used:
(in millions of U.S. dollars,
except for percentages)
Net amount at risk
December 31
2019
December 31
2018
2019
Future claims
discount rate Other assumptions
Total claims at
100% mortality at
December 31, 2019(1)
Reinsurance covering
GMDB Risk Only
GLB Risk Only
$
$
256 $
408
3.8% - 4.0% No lapses or withdrawals
$
1,095 $
1,233
4.0% - 4.3% No deaths, lapses or withdrawals
Mortality according to 100% of
the Annuity 2000 mortality table
Annuitization at a frequency most
disadvantageous to Chubb(2)
Claim calculated using interest
rates in line with rates used to
calculate reserve
Both Risks: (3)
GMDB $
91 $
103
4.0% - 4.3% No lapses or withdrawals
$
GLB
$
415 $
517
4.0% - 4.3% Annuitization at a frequency most
disadvantageous to Chubb(2)
Mortality according to 100% of
the Annuity 2000 mortality table
Claim calculated using interest
rates in line with rates used to
calculate reserve
Takes into account all applicable reinsurance treaty claim limits.
(1)
(2) Annuitization at a level that maximizes claims taking into account the treaty limits.
(3) Covering both the GMDB and GLB risks on the same underlying policyholders.
167
N/A
16
N/A
The average attained age of all policyholders for all risk categories above, weighted by the guaranteed value of each reinsured
policy, is approximately 72 years.
6. Goodwill and Other intangible assets
At both December 31, 2019 and 2018, Goodwill was $15.3 billion and Other intangible assets were $6.1 billion. The majority
of the Other intangible assets balance at both December 31, 2019 and 2018 relates to the Chubb Corp acquisition and
comprises of $3.2 billion that are subject to amortization, principally agency distribution relationships and renewal rights, and
$2.9 billion that are not subject to amortization, principally trademarks.
a) Goodwill
The following table presents a roll-forward of Goodwill by segment:
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Chubb
Consolidated
$
$
$
6,976 $
2,240 $
134 $
5,004 $
365 $
822 $
15,541
(30)
(10)
—
(234)
6
(2)
(270)
6,946 $
2,230 $
134 $
4,770 $
371 $
820 $
15,271
9
4
—
15
—
(3)
25
6,955 $
2,234 $
134 $
4,785 $
371 $
817 $
15,296
(in millions of U.S. dollars)
Balance at December 31, 2017
Foreign exchange revaluation and other
Balance at December 31, 2018
Foreign exchange revaluation and other
Balance at December 31, 2019
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
b) Other intangible assets
Amortization expense related to purchased intangibles were $305 million, $339 million, and $260 million for the years ended
December 31, 2019, 2018, and 2017, principally related to agency distribution relationships and renewal rights.
The following table presents, as of December 31, 2019, the expected estimated pre-tax amortization expense (benefit) of
purchased intangibles, at current foreign currency exchange rates, for the next five years:
For the Years Ending
December 31
(in millions of U.S. dollars)
2020
2021
2022
2023
2024
Total
Associated with the Chubb Corp Acquisition
Agency
distribution
relationships and
renewal rights
Fair value
adjustment on
Unpaid losses and
loss expense (1)
239 $
(35) $
216
196
177
159
(20)
(14)
(7)
(5)
Other
intangible assets
Total Amortization
of purchased
intangibles
86 $
84
93
91
85
290
280
275
261
239
Total
204 $
196
182
170
154
987 $
(81) $
906 $
439 $
1,345
$
$
(1)
In connection with the Chubb Corp acquisition, we recorded an increase to Unpaid losses and loss expenses acquired to adjust the carrying value of Chubb Corp's historical
Unpaid losses and loss expenses to fair value as of the acquisition date. This fair value adjustment amortizes through Amortization of purchased intangibles on the
Consolidated statements of operations through the year 2032. The balance of the fair value adjustment on Unpaid losses and loss expense was $145 million and
$207 million at December 31, 2019 and 2018, respectively. Refer to Note 1(h) for additional information.
c) VOBA
The following table presents a roll-forward of VOBA:
(in millions of U.S. dollars)
Balance, beginning of year
Acquisition of Banchile Seguros de Vida
Amortization of VOBA (1)
Foreign exchange revaluation
Balance, end of year
(1)
Recognized in Policy acquisition costs in the Consolidated statements of operations.
2019
2018
2017
$
295 $
326 $
35
(24)
—
—
(25)
(6)
$
306 $
295 $
355
—
(35)
6
326
The following table presents, as of December 31, 2019, the expected estimated pre-tax amortization expense related to VOBA for
the next five years:
For the Year Ending December 31
(in millions of U.S. dollars)
2020
2021
2022
2023
2024
Total
$
VOBA
26
24
22
21
19
$
112
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
7. Unpaid losses and loss expenses
Chubb establishes reserves for the estimated unpaid ultimate liability for losses and loss expenses under the terms of its policies
and agreements. Reserves include estimates for both claims that have been reported and for IBNR claims, and include
estimates of expenses associated with processing and settling these claims. Reserves are recorded in Unpaid losses and loss
expenses in the consolidated balance sheets. While we believe that our reserves for unpaid losses and loss expenses at
December 31, 2019 are adequate, new information or trends may lead to future developments in incurred loss and loss
expenses significantly greater or less than the reserves provided. Any such revisions could result in future changes in estimates
of losses or reinsurance recoverable and would be reflected in our results of operations in the period in which the estimates are
changed.
The following table presents a reconciliation of beginning and ending Unpaid losses and loss expenses:
(in millions of U.S. dollars)
Gross unpaid losses and loss expenses, beginning of year
Reinsurance recoverable on unpaid losses (1)
Net unpaid losses and loss expenses, beginning of year
Net losses and loss expenses incurred in respect of losses occurring in:
Current year
Prior years (2)
Total
Net losses and loss expenses paid in respect of losses occurring in:
Current year
Prior years
Total
Foreign currency revaluation and other
Net unpaid losses and loss expenses, end of year
Reinsurance recoverable on unpaid losses (1)
Gross unpaid losses and loss expenses, end of year
Year Ended December 31
2019
2018
2017
$
62,960 $
63,179 $
60,540
(14,689)
48,271
(14,014)
49,165
(12,708)
47,832
19,575
(845)
18,730
7,894
10,579
18,473
(19)
48,509
14,181
19,048
(981)
18,067
7,544
10,796
18,340
(621)
48,271
14,689
$
62,690 $
62,960 $
19,391
(937)
18,454
6,575
10,873
17,448
327
49,165
14,014
63,179
(1) Net of provision for uncollectible reinsurance.
(2)
Relates to prior period loss reserve development only and excludes prior period development related to reinstatement premiums, expense adjustments and earned premiums
totaling $53 million, $85 million and $108 million for 2019, 2018, and 2017, respectively.
The increase in net unpaid losses and loss expense in 2019 reflected an increase in underlying reserves, offset by favorable
prior period development and payments related to catastrophic events. The decrease in gross and net unpaid losses and loss
expenses in 2018 was primarily driven by payments related to the 2017 catastrophic events, favorable prior period
development and foreign exchange movement, partially offset by catastrophic events in 2018.
The loss development tables under section c) below, present Chubb’s historical incurred and paid claims development by broad
product line through December 31, 2019, net of reinsurance, as well as the cumulative number of reported claims, IBNR
balances, and other supplementary information.
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents a reconciliation of the loss development tables to the liability for unpaid losses and loss expenses in
the consolidated balance sheet:
Reconciliation of Reserve Balances to Liability for Unpaid Loss and Loss Expenses
(in millions of U.S. dollars)
Presented in the loss development tables:
North America Commercial P&C Insurance — Workers' Compensation
North America Commercial P&C Insurance — Liability
North America Commercial P&C Insurance — Other Casualty
North America Commercial P&C Insurance — Non-Casualty
North America Personal P&C Insurance
Overseas General Insurance — Casualty
Overseas General Insurance — Non-Casualty
Global Reinsurance — Casualty
Global Reinsurance — Non-Casualty
Excluded from the loss development tables:
Other
Net unpaid loss and allocated loss adjustment expense
Ceded unpaid loss and allocated loss adjustment expense:
North America Commercial P&C Insurance — Workers' Compensation
North America Commercial P&C Insurance — Liability
North America Commercial P&C Insurance — Other Casualty
North America Commercial P&C Insurance — Non-Casualty
North America Personal P&C Insurance
Overseas General Insurance — Casualty
Overseas General Insurance — Non-Casualty
Global Reinsurance — Casualty
Global Reinsurance — Non-Casualty
Other
Ceded unpaid loss and allocated loss adjustment expense
Unpaid loss and loss expense on other than short-duration contracts (1)
Unpaid unallocated loss adjustment expenses
Unpaid losses and loss expenses
(1) Primarily includes the claims reserve of our International A&H business and Life Insurance segment reserves.
$
$
$
December 31, 2019
9,414
16,447
1,913
1,759
2,525
5,977
2,377
1,177
255
4,218
46,062
1,657
5,400
546
1,150
603
2,113
1,263
35
107
1,457
14,331
873
1,424
62,690
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Business excluded from the loss development tables
“Other” shown in the reconciliation table above comprises businesses excluded from the loss development tables below:
• North America Agricultural Insurance segment business, which is short-tailed with the majority of the liabilities expected to
be resolved in the ensuing twelve months;
• Corporate segment business, which includes run-off liabilities such as asbestos and environmental and other mass tort
exposures and which impact accident years older than those shown in the exhibits below;
• Life Insurance segment business, which is generally written using long-duration contracts; and
• Certain subsets of our business due to data limitations or unsuitability to the development table presentation, including:
We underwrite loss portfolio transfers at various times; by convention, all premium and losses associated with
these transactions are recorded to the policy period of the transaction, even though the accident dates of the
claims covered may be a decade or more in the past. We also underwrite certain high attachment, high limit,
multiple-line and excess of aggregate coverages for large commercial clients. Changes in incurred loss and cash
flow patterns are volatile and sufficiently different from those of typical insureds. This category includes the loss
portfolio transfer of Fireman’s Fund personal lines run-off liabilities and Alternative Risk Solutions business within
the North America Commercial P&C segment;
2015 and prior paid history on a subset of previously acquired international businesses, within the Overseas
General Insurance segment, due to limitations on the data prior to the acquisition;
Reinsurance recoverable bad debt;
Purchase accounting adjustments related to unpaid losses and loss expenses for Chubb Corp.
a) Description of Reserving Methodologies
Our recorded reserves represent management's best estimate of the provision for unpaid claims as of the balance sheet date.
The process of establishing loss and loss expense reserves can be complex and is subject to considerable uncertainty as it
requires the use of estimates and judgments based on circumstances underlying the insured loss at the date of accrual. The
reserves for our various product lines each require different qualitative and quantitative assumptions and judgments to be made.
Management's best estimate is developed after collaboration with actuarial, underwriting, claims, legal, and finance
departments and culminates with the input of reserve committees. Each business unit reserve committee includes the
participation of the relevant parties from actuarial, finance, claims, and unit senior management and has the responsibility for
finalizing, recommending and approving the estimate to be used as management's best estimate. Reserves are further reviewed
by Chubb's Chief Actuary and senior management. The objective of such a process is to determine a single estimate that we
believe represents a better estimate than any other and which is viewed by management to be the best estimate of ultimate loss
settlements.
This estimate is based on a combination of exposure and experience-based actuarial methods (described below) and other
considerations such as claims reviews, reinsurance recovery assumptions and/or input from other knowledgeable parties such as
underwriting. Exposure-based methods are most commonly used on relatively immature origin years (i.e., the year in which the
losses were incurred — “accident year” or “report year”), while experience-based methods provide a view based on the
projection of loss experience that has emerged as of the valuation date. Greater reliance is placed upon experience-based
methods as the pool of emerging loss experience grows and where it is deemed sufficiently credible and reliable as the basis for
the estimate. In comparing the held reserve for any given origin year to the actuarial projections, judgment is required as to the
credibility, uncertainty and inherent limitations of applying actuarial techniques to historical data to project future loss
experience. Examples of factors that impact such judgments include, but are not limited to, the following:
reported and projected loss trends;
segmentation of data to provide sufficient homogeneity and credibility for loss projection methods;
• nature and complexity of underlying coverage provided and net limits of exposure provided;
•
• extent of credible internal historical loss data and reliance upon industry information as required;
• historical variability of actual loss emergence compared with expected loss emergence;
•
• extent of emerged loss experience relative to the remaining expected period of loss emergence;
•
•
•
•
•
•
•
• nature and extent of underlying assumptions.
rate monitor information for new and renewal business;
changes in claims handling practice;
inflation;
the legal environment;
facts and circumstances of large claims;
terms and conditions of the contracts sold to our insured parties;
impact of applicable reinsurance recoveries; and
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
We have actuarial staff within each of our business units who analyze loss reserves (including loss expenses) and regularly
project estimates of ultimate losses and the corresponding indications of the required IBNR reserve. Our reserving approach is a
comprehensive ground-up process using data at a detailed level that reflects the specific types and coverages of the diverse
products written by our various operations. The data presented in this disclosure was prepared on a more aggregated basis and
with a focus on changes in incurred loss estimates over time as well as associated cash flows. We note that data prepared on
this basis may not demonstrate the full spectrum of characteristics that are evident in the more detailed level studied internally.
We perform an actuarial reserve review for each product line at least once a year. For most product lines, one or more standard
actuarial reserving methods may be used to determine estimates of ultimate losses and loss expenses, and from these
estimates, a single actuarial central estimate is selected. The actuarial central estimate is an input to the reserve committee
process described above. For the few product lines that do not lend themselves to standard actuarial reserving methods,
appropriate techniques are applied to produce the actuarial central estimates. For example, run-off asbestos and environmental
liability estimates are better suited to the application of account-specific exposure-based analyses to best evaluate their
associated aggregate reserve levels.
b) Standard actuarial reserving methods
The judgments involved in projecting the ultimate losses include the use and interpretation of various standard actuarial
reserving methods that place reliance on the extrapolation of actual historical data, loss development patterns, industry data,
and other benchmarks as appropriate.
Standard actuarial reserving methods include, but are not limited to, expected loss ratio, paid and reported loss development,
and Bornhuetter-Ferguson methods. A general description of these methods is provided below. In addition to these standard
methods, depending upon the product line characteristics and available data, we may use other recognized actuarial methods
and approaches. Implicit in the standard actuarial methods that we generally utilize is the need for two fundamental
assumptions: first, the pattern by which losses are expected to emerge over time for each origin year, and second the expected
loss ratio for each origin year.
The expected loss ratio for any particular origin year is selected after consideration of a number of factors, including historical
loss ratios adjusted for rate changes, premium and loss trends, industry benchmarks, the results of policy level loss modeling at
the time of underwriting, and/or other more subjective considerations for the product line (e.g., terms and conditions) and
external environment as noted above. The expected loss ratio for a given origin year is initially established at the start of the
origin year as part of the planning process. This analysis is performed in conjunction with underwriters and management. The
expected loss ratio method arrives at an ultimate loss estimate by multiplying the expected ultimate loss ratio by the
corresponding premium base. This method is most commonly used as the basis for the actuarial central estimate for immature
origin periods on product lines where the actual paid or reported loss experience is not yet deemed sufficiently credible to serve
as the principal basis for the selection of ultimate losses. The expected loss ratio for a given origin year may be modified over
time if the underlying assumptions differ from the original assumptions (e.g., the assessment of prior year loss ratios, loss trend,
rate changes, actual claims, or other information).
Our selected paid and reported development patterns provide a benchmark against which the actual emerging loss experience
can be monitored. Where possible, development patterns are selected based on historical loss emergence by origin year. For
product lines where the historical data is viewed to have low statistical credibility, the selected development patterns also reflect
relevant industry benchmarks and/or experience from similar product lines written elsewhere within Chubb. This most
commonly occurs for relatively new product lines that have limited historical data or for high severity/low frequency portfolios
where our historical experience exhibits considerable volatility and/or lacks credibility. The paid and reported loss development
methods convert the selected loss emergence pattern to a set of multiplicative factors which are then applied to actual paid or
reported losses to arrive at an estimate of ultimate losses for each period. Due to their multiplicative nature, the paid and
reported loss development methods will leverage differences between actual and expected loss emergence. These methods tend
to be utilized for more mature origin periods and for those portfolios where the loss emergence has been relatively consistent
over time.
The Bornhuetter-Ferguson method is a combination of the expected loss ratio method and the loss development method, where
the loss development method is given more weight as the origin year matures. This approach allows a logical transition between
the expected loss ratio method which is generally utilized at earlier maturities and the loss development methods which are
typically utilized at later maturities. We usually apply this method using reported loss data although paid data may also be
used.
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Short-tail business
Short-tail business generally describes product lines for which losses are typically known and paid shortly after the loss actually
occurs. This would include, for example, most property, personal accident, and automobile physical damage policies that we
write. Due to the short reporting and development pattern for these product lines, the uncertainty associated with our estimate
of ultimate losses for any particular accident period diminishes relatively quickly as actual loss experience emerges. We typically
assign credibility to methods that incorporate actual loss emergence, such as the paid and reported loss development and
Bornhuetter-Ferguson methods, sooner than would be the case for long-tail lines at a similar stage of development for a given
origin year. The reserving process for short-tail losses arising from catastrophic events typically involves an assessment by the
claims department, in conjunction with underwriters and actuaries, of our exposure and estimated losses immediately following
an event and then subsequent revisions of the estimated losses as our insureds provide updated actual loss information.
Long-tail business
Long-tail business describes lines of business for which specific losses may not be known/reported for some period and for
which claims can take significant time to settle/close. This includes most casualty lines such as general liability, D&O, and
workers' compensation. There are various factors contributing to the uncertainty and volatility of long-tail business. Among these
are:
• The nature and complexity of underlying coverage provided and net limits of exposure provided;
• Our historical loss data and experience is sometimes too immature and lacking in credibility to rely upon for reserving
purposes. Where this is the case, in our reserve analysis we may utilize industry loss ratios or industry benchmark
development patterns that we believe reflect the nature and coverage of the underwritten business and its future
development, where available. For such product lines, actual loss experience may differ from industry loss statistics as well
as loss experience for previous underwriting years;
• The difficulty in estimating loss trends, claims inflation (e.g., medical and judicial) and underlying economic conditions;
• The need for professional judgment to estimate loss development patterns beyond that represented by historical data using
supplemental internal or industry data, extrapolation, or a blend of both;
• The need to address shifts in business mix or volume over time when applying historical paid and reported loss
development patterns from older origin years to more recent origin years. For example, changes over time in the processes
and procedures for establishing case reserves can distort reported loss development patterns or changes in ceded
reinsurance structures by origin year can alter the development of paid and reported losses;
• Loss reserve analyses typically require loss or other data be grouped by common characteristics in some manner. If data
from two combined lines of business exhibit different characteristics, such as loss payment patterns, the credibility of the
reserve estimate could be affected. Additionally, since casualty lines of business can have significant intricacies in the terms
and conditions afforded to the insured, there is an inherent risk as to the homogeneity of the underlying data used in
performing reserve analyses; and
• The applicability of the price change data used to estimate ultimate loss ratios for most recent origin years.
As described above, various factors are considered when determining appropriate data, assumptions, and methods used to
establish the loss reserve estimates for long-tail product lines. These factors may also vary by origin year for given product lines.
The derivation of loss development patterns from data and the selection of a tail factor to project ultimate losses from actual
loss emergence require considerable judgment, particularly with respect to the extent to which historical loss experience is relied
upon to support changes in key reserving assumptions.
c) Loss Development Tables
The tables were designed to present business with similar risk characteristics which exhibit like development patterns and
generally similar trends, in order to provide insight into the nature, amount, timing and uncertainty of cash flows related to our
claims liabilities.
Each table follows a similar format and reflects the following:
• The incurred loss triangle includes both reported case reserves and IBNR liabilities.
• Both the incurred and paid loss triangles include allocated loss adjustment expense (i.e., defense and investigative costs
particular to individual claims) but exclude unallocated loss adjustment expense (i.e., the costs associated with internal
claims staff and third-party administrators).
• The amounts in both triangles for the years ended December 31, 2010, to December 31, 2018 and average historical claim
duration as of December 31, 2019, are presented as supplementary information.
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
• All data presented in the triangles is net of reinsurance recoverables.
• The IBNR reserves shown to the right of each incurred loss development exhibit reflect the net IBNR recorded as of
December 31, 2019.
• The tables are presented retrospectively with respect to acquisitions where these are material and doing so is practicable.
Most notably, the Chubb Corp acquisition is presented retrospectively. The unaudited consolidated data is presented solely
for informational purposes and is not necessarily indicative of the consolidated data that might have been observed had the
transactions been completed prior to the date indicated.
Historical dollar amounts are presented in this footnote on a constant-dollar basis, which is achieved by assuming constant
foreign exchange rates for all periods in the loss triangles, translating prior period amounts using the same local currency
exchange rates as the current year end. The impact of this conversion is to show the change between periods exclusive of the
effect of fluctuations in exchange rates, which would otherwise distort the change in incurred loss and cash flow patterns
shown. The change in incurred loss shown will differ from other GAAP disclosures of incurred prior period reserve development
amounts, which include the effect of fluctuations in exchanges rates.
We provided guidance above on key assumptions that should be considered when reviewing this disclosure and information
relating to how loss reserve estimates are developed. We believe the information provided in the “Loss Development Tables”
section of the disclosure is of limited use for independent analysis or application of standard actuarial estimations.
Cumulative Number of Reported Claims
Reported claim counts, on a cumulative basis, are provided to the far right of each incurred loss development table. We generally
consider a reported claim to be one claim per coverage per claimant. We exclude claims closed without payment. Use of the
presented claim counts in analysis of company experience has significant limitations, including:
• High deductible workers' compensation claim counts include claims below the applicable policy deductible.
• Professional liability and certain other lines have a high proportion of claims reported which will be closed without any
payment; shifts in total reported counts may not meaningfully impact reported and ultimate loss experience.
• Claims for certain events and/or product lines, such as portions of assumed reinsurance and A&H business, are not reported
on an individual basis, but rather in bulk and thus not available for inclusion in this disclosure.
• Each of the segments below typically has a mixture of primary and excess experience which has shifted over time.
Reported claim counts include open claims which have case reserves and exclude claims that have been incurred but not reported.
As such the reported claims are consistent with reported losses, which can be calculated by subtracting incurred but not reported
losses from incurred losses. Reported claim counts are inconsistent with losses in the incurred loss triangle, which include incurred
but not reported losses, and are also inconsistent with losses in the paid loss triangle, which exclude case reserves.
North America Commercial P&C Insurance — Workers' Compensation — Long-tail
This product line has a substantial geographic spread and a broad mix across industries. Types of coverage include risk management
business predominantly with high deductible policies, loss sensitive business (i.e., retrospectively-rated policies), business fronted
for captives, as well as excess and primary guaranteed cost coverages.
The triangle below shows all loss and allocated expense development for the workers' compensation product line. In our prior
period development disclosure, we exclude any loss development where there is a directly related premium adjustment. For
workers' compensation, changes in the exposure base due to payroll audits will drive changes in ultimate losses. In addition, we
record involuntary pool assumptions (premiums and losses) on a lagged basis. Both of these items will influence the
development in the triangle, particularly the first prior accident year, and are included in the reconciliation table presented on
page F-60.
F-47
As of December 31
2019
Net
IBNR
Reserves
Reported
Claims (in
thousands)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Workers' Compensation — Long-tail (continued)
Net Incurred Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 1,049 $ 1,037 $ 1,050 $ 1,065 $ 1,064 $ 1,052 $1,028 $1,020 $ 1,018 $
999 $
1,037
1,030
1,046
1,049
1,053
1,022
1,012
1,009
1,050
1,011
1,030
1,040
1,011
989
986
1,109
1,108
1,207
1,122
1,201
1,282
1,127
1,217
1,259
1,366
1,086
1,215
1,276
1,361
1,412
1,073
1,163
1,279
1,383
1,380
1,359
988
977
1,037
1,100
1,217
1,378
1,399
1,360
1,391
$ 11,846
223
233
275
309
395
500
673
783
788
997
303
286
287
299
336
334
304
339
362
246
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
123 $
300 $
411 $
493 $
551 $
592 $
617 $
641 $
666 $
119
294
111
411
271
107
484
365
286
113
533
436
422
295
116
567
486
506
410
301
122
595
532
553
484
418
326
120
616
574
587
532
501
452
313
130
684
640
592
616
566
564
529
437
329
143
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
$ 5,100
December 31, 2019
2,668
9,414
December 31, 2019
(93)
(288)
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
F-48
1
2
3
10%
16%
10%
4
7%
5
5%
6
4%
7
3%
8
2%
9
2%
10
2%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Liability — Long-tail
This line consists of primary and excess liability exposures, including medical liability and professional lines, including directors
and officers (D&O) liability, errors and omissions (E&O) liability, employment practices liability (EPL), fidelity bonds, and
fiduciary liability.
The primary and excess liability business represents the largest part of these exposures. The former includes both monoline and
commercial package liability. The latter includes a substantial proportion of commercial umbrella, excess and high excess
business, where loss activity can produce significant volatility in the loss triangles at later ages within an accident year (and
sometimes across years) due to the size of the limits afforded and the complex nature of the underlying losses.
This line includes management and professional liability products provided to a wide variety of clients, from national accounts to
small firms along with private and not-for-profit organizations, distributed through brokers, agents, wholesalers and MGAs.
Many of these coverages, particularly D&O and E&O, are typically written on a claims-made form. While most of the coverages
are underwritten on a primary basis, there are significant amounts of excess exposure with large policy limits.
Net Incurred Loss and Allocated Loss Adjustment Expenses
Years Ended December 31
As of December 31
2019
(in millions of U.S. dollars)
Unaudited
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net
IBNR
Reserves
Reported
Claims (in
thousands)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$3,574 $3,579 $3,597 $3,556 $3,416 $3,247 $3,125 $3,105 $2,993 $ 2,983 $
3,496
3,582
3,548
3,626
3,624
3,543
3,660
3,609
3,538
3,532
3,590
3,560
3,538
3,582
3,556
3,494
3,520
3,528
3,671
3,705
3,530
3,380
3,422
3,426
3,713
3,814
3,591
3,319
3,312
3,326
3,212
3,652
3,971
3,688
3,495
3,371
3,190
3,231
3,118
3,467
3,939
3,801
3,577
3,490
3,449
$34,245
202
299
430
500
792
1,232
1,279
1,818
2,170
3,005
18
18
18
17
17
19
20
21
24
25
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Liability — Long-tail (continued)
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
126 $
611 $ 1,108 $ 1,558 $ 1,892 $ 2,257 $ 2,424 $ 2,525 $ 2,659 $ 2,716
160
651
166
1,208
655
130
1,803
1,171
547
164
2,212
1,678
1,191
679
138
2,474
2,090
1,595
1,249
605
171
2,657
2,324
2,005
1,802
1,205
662
161
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
2,738
2,499
2,230
2,200
1,854
1,335
616
189
2,824
2,615
2,371
2,440
2,289
1,974
1,161
754
176
$ 19,320
December 31, 2019
$
$
1,522
16,447
December 31, 2019
$
$
(49)
(273)
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
5%
2
3
4
5
14%
17%
16%
12%
6
8%
7
5%
8
3%
9
4%
10
2%
North America Commercial P&C Insurance — Other Casualty — Long-tail
This product line consists of the remaining commercial casualty coverages such as automobile liability and aviation. There is
also a small portion of commercial multi-peril (CMP) business in accident years 2014 and prior. The paid and reported data are
impacted by some catastrophe loss activity primarily on the CMP exposures just noted.
F-50
As of December 31
2019
Net IBNR
Reserves
Reported
Claims (in
thousands)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Other-Casualty — Long-tail (continued)
Net Incurred Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 613 $ 607 $ 601 $ 546 $ 506 $ 478 $ 480 $ 493 $ 484 $ 481 $
580
589
633
581
605
526
548
577
530
594
533
560
522
583
486
524
520
515
581
470
504
516
519
468
596
501
502
531
510
508
462
555
515
527
566
535
512
507
461
538
458
524
577
563
606
$ 5,227
16
24
3
29
45
51
136
174
298
428
15
15
15
17
17
15
15
16
15
14
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
97 $
236 $
322 $
363 $
392 $
433 $
443 $
449 $
453 $
86
235
69
341
222
69
400
319
197
80
437
386
270
220
47
461
435
348
317
137
52
466
470
385
391
214
145
66
480
486
411
454
304
246
175
74
452
486
493
418
473
370
323
312
169
70
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
$ 3,566
December 31, 2019
252
1,913
December 31, 2019
5
(36)
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
2
3
4
14%
24%
19%
14%
5
9%
6
6%
7
2%
8
2%
9
1%
10
— %
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Non-Casualty — Short-tail
This product line represents first party commercial product lines that are short-tailed in nature, such as property, inland marine,
ocean marine, surety and A&H. There is a wide diversity of products, primary and excess coverages, and policy sizes. During
this ten-year period, this product line was also impacted by natural catastrophes mainly in the 2012, 2017, and 2018 accident
years.
Net Incurred Loss and Allocated Loss Adjustment Expenses
Years Ended December 31
As of December 31
2019
(in millions of U.S. dollars)
Unaudited
Net
IBNR
Reserves
Reported
Claims (in
thousands)
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 1,501 $ 1,537 $ 1,461 $ 1,424 $ 1,422 $ 1,415 $ 1,410 $ 1,404 $ 1,394 $ 1,394 $
1,958
1,932
2,030
1,875
1,913
1,430
1,853
1,880
1,420
1,642
1,833
1,861
1,333
1,658
1,733
1,837
1,856
1,356
1,576
1,742
1,907
1,832
1,844
1,337
1,555
1,647
1,887
2,701
1,832
1,841
1,337
1,546
1,635
1,797
2,605
2,050
1,833
1,847
1,334
1,547
1,602
1,778
2,503
2,237
2,049
$ 18,124
1
10
3
3
7
17
16
71
182
587
1,057
1,051
1,035
1,072
1,100
1,170
1,291
1,374
1,551
1,446
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
723 $ 1,222 $ 1,320 $ 1,357 $ 1,382 $ 1,391 $ 1,394 $ 1,395 $ 1,391 $ 1,391
938
1,571
713
1,715
1,575
649
1,775
1,696
1,135
818
1,785
1,764
1,234
1,370
725
1,808
1,792
1,282
1,481
1,341
845
1,813
1,819
1,308
1,502
1,486
1,502
978
1,819
1,813
1,321
1,528
1,554
1,653
2,085
1,026
1,822
1,839
1,329
1,543
1,570
1,729
2,301
1,823
1,029
$ 16,376
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Non-Casualty — Short-tail (continued)
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
December 31, 2019
$
$
11
1,759
December 31, 2019
$
$
(6)
32
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
2
47%
39%
3
8%
4
3%
5
1%
6
1%
7
—%
8
1%
9
— %
10
—%
North America Personal P&C Insurance — Short-tail
Chubb provides personal lines coverages for high-net-worth individuals and families in North America including homeowners,
automobile, valuable articles (including fine art), umbrella liability, and recreational marine insurance offered through
independent regional agents and brokers. A portfolio acquired from Fireman’s Fund is presented on a prospective basis
beginning in May of accident year 2015. Reserves associated with prior accident periods were acquired through a loss portfolio
transfer, which does not allow for a retrospective presentation. During this ten-year period, this segment was also impacted by
natural catastrophes, mainly in 2012, 2017 and 2018 accident years.
Net Incurred Loss and Allocated Loss Adjustment Expenses
Years Ended December 31
As of December 31
2019
(in millions of U.S. dollars)
Unaudited
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net IBNR
Reserves
Reported
Claims (in
thousands)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$1,868 $1,876 $1,853 $1,835 $1,832 $1,828 $ 1,823 $ 1,820 $ 1,821 $
1,820 $
2,205
2,207
2,183
2,182
2,181
1,854
2,170
2,181
1,882
2,202
2,162
2,189
1,890
2,203
2,491
2,158
2,183
1,894
2,189
2,546
2,436
2,157
2,184
1,918
2,142
2,557
2,532
3,031
2,156
2,186
1,931
2,156
2,540
2,541
3,066
3,006
2,156
2,192
1,938
2,143
2,559
2,479
2,998
3,033
2,953
$ 24,271
6
8
20
26
19
30
78
171
295
725
146
166
170
122
132
135
138
142
148
116
F-53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Personal P&C Insurance — Short-tail (continued)
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 1,151 $ 1,521 $ 1,668 $ 1,727 $ 1,770 $ 1,791 $ 1,803 $ 1,809 $ 1,810 $ 1,812
1,358
1,833
1,175
1,969
1,804
1,040
2,049
1,955
1,499
1,308
2,103
2,061
1,682
1,762
1,497
2,126
2,115
1,781
1,922
2,081
1,451
2,136
2,147
1,837
2,031
2,267
2,049
1,696
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
59%
2
23%
3
7%
4
4%
5
3%
6
1%
7
1%
8
—%
9
—%
10
—%
Overseas General Insurance — Casualty — Long-tail
This product line is comprised of D&O liability, E&O liability, financial institutions (including crime/fidelity coverages), and non-
U.S. general liability as well as aviation and political risk. Exposures are located around the world, including Europe, Latin
America, and Asia. Approximately 45 percent of Chubb Overseas General business is generated by European accounts,
exclusive of Lloyd's market. There is some U.S. exposure in Casualty from multinational accounts and in financial lines for
Lloyd's market. The financial lines coverages are typically written on a claims-made form, while general liability coverages are
typically on an occurrence basis and comprised of a mix of primary and excess businesses.
F-54
2,143
2,161
1,879
2,076
2,388
2,208
2,517
1,924
2,146
2,161
1,890
2,103
2,475
2,311
2,664
2,545
1,666
$ 21,773
December 31, 2019
27
2,525
December 31, 2019
(1)
(86)
$
$
$
$
As of December 31
2019
Net
IBNR
Reserves
Reported
Claims (in
thousands)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Overseas General Insurance — Casualty — Long-tail (continued)
Net Incurred Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 1,183 $ 1,263 $ 1,308 $ 1,379 $ 1,316 $ 1,265 $ 1,141 $ 1,136 $ 1,142 $ 1,149 $
1,211
1,218
1,246
1,210
1,217
1,237
1,200
1,279
1,233
1,238
1,117
1,297
1,229
1,308
1,164
1,054
1,294
1,272
1,317
1,259
1,191
1,042
1,285
1,226
1,333
1,288
1,291
1,185
991
1,265
1,193
1,249
1,311
1,357
1,286
1,283
988
1,255
1,136
1,167
1,286
1,385
1,335
1,333
1,346
$12,380
68
35
137
139
208
287
428
495
789
1,011
37
37
38
38
39
41
42
41
40
32
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
102 $
265 $
462 $
605 $
712 $
801 $
850 $
903 $
946 $
87
240
74
384
245
85
513
428
261
111
612
577
414
287
86
691
689
558
461
281
123
764
826
699
591
484
316
96
815
897
798
704
661
520
314
109
983
848
939
865
786
780
667
520
325
122
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
$ 6,835
December 31, 2019
432
5,977
December 31, 2019
(18)
(61)
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
8%
2
3
4
5
15%
15%
12%
10%
6
9%
7
6%
8
4%
9
4%
10
3%
F-55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Overseas General Insurance — Non-Casualty — Short-tail
This product line is comprised of commercial fire, marine (predominantly cargo), surety, personal automobile (in Latin America,
Asia Pacific and Japan), personal cell phones, personal residential (including high net worth), energy and construction. In
general, these lines have relatively stable payment and reporting patterns although they are impacted by natural catastrophes
mainly in the 2010, 2011, 2017, and 2018 accident years. Latin America and Europe each make up about 30 percent of the
Chubb Overseas General non-casualty book.
Net Incurred Loss and Allocated Loss Adjustment Expenses
Years Ended December 31
As of December 31
2019
(in millions of U.S. dollars)
Unaudited
Net
IBNR
Reserves
Reported
Claims (in
thousands)
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 1,647 $ 1,669 $ 1,643 $ 1,632 $ 1,626 $ 1,612 $ 1,599 $ 1,582 $ 1,584 $ 1,582 $
1,871
1,956
1,696
1,900
1,686
1,778
1,861
1,646
1,770
1,852
1,843
1,591
1,703
1,920
1,952
1,832
1,585
1,656
1,862
2,075
2,050
1,824
1,577
1,651
1,851
2,051
2,052
2,198
1,814
1,561
1,621
1,814
2,017
2,040
2,238
2,153
1,810
1,556
1,609
1,804
1,999
2,018
2,220
2,244
2,181
$19,023
6
3
14
27
15
38
17
46
124
376
518
544
556
574
549
571
567
577
622
608
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
671 $ 1,226 $ 1,424 $ 1,486 $ 1,524 $ 1,537 $ 1,544 $ 1,545 $ 1,550 $ 1,562
758
1,460
681
1,660
1,226
698
1,716
1,412
1,273
758
1,746
1,470
1,466
1,423
852
1,761
1,493
1,497
1,632
1,546
1,015
1,769
1,502
1,534
1,696
1,778
1,670
1,046
1,773
1,515
1,553
1,727
1,858
1,865
1,830
994
1,773
1,517
1,562
1,741
1,881
1,938
2,005
1,726
1,038
$ 16,743
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
F-56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Overseas General Insurance — Non-Casualty — Short-tail (continued)
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
December 31, 2019
97
2,377
December 31, 2019
1
1
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
45%
2
35%
3
11%
4
3%
5
2%
6
1%
7
1%
8
—%
9
—%
10
1%
Global Reinsurance
Chubb analyzes its Global Reinsurance business on a treaty year basis rather than on an accident year basis. Treaty year data
was converted to an accident year basis for the purposes of this disclosure. Mix shifts are an important consideration in these
product line groupings. As proportional business and excess of loss business have different earning and loss reporting and
payment patterns, this change in mix will affect the cash flow patterns across the accident years. In addition, the shift from
excess to proportional business over time will make the cash flow patterns of older and more recent years difficult to compare.
In general, the proportional business will pay out more quickly than the excess of loss business, as such, using older years
development patterns may overstate the ultimate loss estimates in more recent years.
Global Reinsurance — Casualty — Long-tail
This product line includes proportional and excess coverages in general, automobile liability, professional liability, medical
malpractice, workers' compensation and aviation, with exposures located around the world. In general, reinsurance exhibits less
stable development patterns than primary business. In particular, general casualty reinsurance and excess coverages are long-
tailed and can be very volatile.
Net Incurred Loss and Allocated Loss Adjustment Expenses
Years Ended December 31
As of December 31
2019
(in millions of U.S. dollars)
Unaudited
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net
IBNR
Reserves
Reported
Claims (in
thousands)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 399 $ 419 $ 430 $ 441 $ 430 $ 424 $ 414 $ 400 $ 387 $
373 $
407
414
385
428
382
320
432
390
326
332
427
393
328
333
284
417
378
329
338
288
222
413
371
330
341
299
226
213
407
370
323
343
300
234
214
244
401
372
316
346
308
233
219
246
238
$ 3,052
23
27
10
20
39
33
30
45
65
130
0.802
0.659
0.457
0.341
0.382
0.298
0.341
0.529
0.589
0.219
F-57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Global Reinsurance — Casualty — Long-tail (continued)
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
56 $
125 $
179 $
220 $
249 $
274 $
291 $
306 $
315 $
70
146
77
195
167
65
236
221
143
91
267
260
186
184
90
291
292
222
217
159
57
311
307
241
248
191
113
46
324
322
259
264
217
142
100
41
320
331
334
268
276
232
159
122
96
40
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
$ 2,178
December 31, 2019
303
1,177
December 31, 2019
(50)
(58)
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
21%
2
23%
3
12%
4
10%
5
7%
6
5%
7
4%
8
4%
9
2%
10
2%
Global Reinsurance — Non-Casualty — Short-tail
This product line includes property, property catastrophe, marine, credit/surety, A&H and energy. This product line is impacted
by natural catastrophes, particularly in the 2011, 2017 and 2018 accident years. Of the non-catastrophe book, the mixture of
business varies by year with approximately 73 percent of loss on proportional treaties in treaty year 2010 and after. This
percentage has increased over time with the proportion being approximately 58 percent for treaty years 2010 to 2012 growing
to an average of 80 percent for treaty years 2013 to 2019, with the remainder being written on an excess of loss basis.
F-58
As of December 31
2019
Net IBNR
Reserves
Reported
Claims (in
thousands)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Global Reinsurance — Non-Casualty — Short-tail (continued)
Net Incurred Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$ 194 $ 228 $ 218 $ 212 $ 216 $ 218 $ 218 $ 219 $ 218 $
217 $
269
270
230
268
210
161
258
200
159
164
258
191
147
180
146
260
189
142
180
154
180
259
187
143
183
161
186
396
259
184
140
181
161
188
423
285
259
184
140
180
153
190
453
297
141
$ 2,214
—
1
1
—
3
3
12
10
(6)
73
0.102
0.132
0.113
0.121
0.101
0.115
0.182
0.309
0.212
0.032
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
55 $
156 $
182 $
193 $
199 $
209 $
207 $
210 $
210 $
85
174
45
204
130
46
228
156
102
65
246
166
120
129
56
251
172
129
152
103
56
253
177
132
163
132
131
191
254
179
135
169
142
158
322
94
214
256
180
135
171
146
169
402
257
35
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Accident
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2010
All Accident years
$ 1,965
December 31, 2019
6
255
December 31, 2019
(4)
30
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2019 (Unaudited)
Age in Years
Percentage
1
2
3
33%
36%
15%
4
6%
5
3%
6
2%
7
1%
8
1%
9
—%
10
—%
F-59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Prior Period Development — Supplementary Information
The following table presents a reconciliation of the loss development triangles above to prior period development:
Year Ended December 31, 2019
(in millions of U.S. dollars)
(favorable)/unfavorable
North America Commercial P&C Insurance
Long-tail
Short-tail
North America Personal P&C Insurance
(Short-tail)
Overseas General Insurance
Long-tail
Short-tail
Global Reinsurance
Long-tail
Short-tail
Subtotal
North America Agricultural Insurance
(Short-tail)
Corporate (Long-tail)
Consolidated PPD
2010 - 2018
accident
years
(implied PPD
per loss
triangles)
Accident
years prior
to 2010
Other (1)
Components of PPD
RIPs,
Expense
adjustments,
and earned
premiums
PPD on
loss
reserves
Total
$
(460) $
(137) $
(110)
$
(707) $
39 $
(668)
38
(6)
(8)
(422)
(143)
(118) (2)
(85)
(1)
(43)
—
(43)
(8)
34
26
(18)
1
(17)
(50)
(4)
(54)
(5)
(7)
(26)
(33) (3)
(1)
1
—
24
(683)
(91)
(68)
(25)
(93)
(59)
31
(28)
(5)
34
(4)
—
1
1
—
(1)
(1)
19
(649)
(95)
(68)
(24)
(92)
(59)
30
(29)
$
(524) $
(215) $
(156)
$
$
$
(895) $
30 $
(865)
(103) $
23 $
153
—
(80)
153
(845) $
53 $
(792)
(1) Other includes the impact of foreign exchange.
(2)
Includes favorable development of $82 million related to our Alternative Risk Solutions business (U.S. and Bermuda) and an adjustment to exclude $22 million in
unfavorable development in the workers' compensation line, associated with an increase in exposure for which additional premiums were collected; the remaining difference
relates to a number of other items, none of which are individually material.
(3)
Includes favorable development of $37 million related to International A&H business; the remaining difference relates to a number of other items, none of which are
individually material.
F-60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Prior Period Development
Prior period development arises from changes to loss estimates recognized in the current year that relate to loss events that
occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous
accident years. Long-tail lines include lines such as workers' compensation, general liability, and professional liability; while
short-tail lines include lines such as most property lines, energy, personal accident, and agriculture. The following table
summarizes (favorable) and adverse prior period development (PPD) by segment:
Years Ended December 31
(in millions of U.S. dollars, except for percentages)
Long-tail
Short-tail
Total
% of beginning
net unpaid
reserves (1)
$
$
2019
North America Commercial P&C Insurance
North America Personal P&C Insurance
North America Agricultural Insurance
Overseas General Insurance
Global Reinsurance
Corporate
Total
2018
North America Commercial P&C Insurance
North America Personal P&C Insurance
North America Agricultural Insurance
Overseas General Insurance
Global Reinsurance
Corporate
Total
2017
North America Commercial P&C Insurance
North America Personal P&C Insurance
North America Agricultural Insurance
Overseas General Insurance
Global Reinsurance
Corporate
Total
(1) Calculated based on the beginning of period consolidated net unpaid losses and loss expenses.
$
$
$
$
(668) $
19 $
(649)
—
—
(68)
(59)
153
(95)
(80)
(24)
30
—
(642) $
(150) $
(395) $
(215) $
—
—
(67)
(69)
45
41
(110)
(145)
19
—
(486) $
(410) $
(562) $
(184) $
—
—
(71)
(68)
278
69
(119)
(181)
9
—
(423) $
(406) $
(95)
(80)
(92)
(29)
153
(792)
(610)
41
(110)
(212)
(50)
45
(896)
(746)
69
(119)
(252)
(59)
278
(829)
1.3%
0.2%
0.2%
0.2%
0.1%
0.3%
1.6%
1.2%
0.1%
0.2%
0.4%
0.1%
0.1%
1.8%
1.6%
0.1%
0.2%
0.5%
0.1%
0.6%
1.7%
Significant prior period movements by segment, principally driven by reserve reviews completed during each respective period,
are discussed in more detail below. The remaining net development for long-tail lines and short-tail business for each segment
and Corporate comprises numerous favorable and adverse movements across a number of lines and accident years, none of
which is significant individually or in the aggregate.
North America Commercial P&C Insurance
2019
North America Commercial P&C Insurance experienced net favorable PPD of $649 million, which was the net result of several
underlying favorable and adverse movements, and was driven by the following principal changes:
• Net favorable development of $668 million in long-tail business, primarily from:
• Net favorable development of $303 million in workers’ compensation lines. This included favorable development of
$61 million related to our annual assessment of multi-claimant events including industrial accidents, in the 2018
accident year. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to
allow for late reporting or identification of significant losses. This development in accident year 2018 was partially
offset by some higher than expected activity from other claims and from involuntary pools. The remaining overall
F-61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
favorable development was mainly in accident years 2015 and prior, generally driven by lower than expected loss
experience and related updates to loss development factors;
• Net favorable development of $217 million in management liability portfolios, favorably impacting accident years 2015
and prior where paid and reported loss activity was lower than expected, partially offset by adverse development in the
2016 through 2018 accident years, mostly as a result of higher severity claim costs compared to prior expectations in
certain lines or coverages, particularly in our Directors and Officers (D&O) portfolios;
• Net favorable development of $60 million in professional liability (errors & omissions and cyber), mainly in the 2015
and prior accident years where case activity was less than expected, partially offset by adverse development in the
2016 accident year, which was driven by several large adverse claim developments;
• Net favorable development of $41 million in commercial excess and umbrella portfolios, mainly in accident years 2013
and prior, driven by lower paid and reported loss activity relative to prior expectations as well as an increase in
weighting towards experience-based methods, partly offset by modestly adverse development in more recent accident
years, mainly in 2017 and 2018, due to higher than expected large loss activity;
• Net favorable development of $39 million in foreign casualty business, impacting accident years 2015 and prior, driven
by reported loss activity that was generally lower than expected;
• Net favorable development of $36 million on large multi-line prospective deals in the 2015 and prior accident years,
due to lower than expected reported loss activity. These structured deals typically cover large clients for multiple
product lines and with varying loss limitations; this development is net of premium returns of $34 million tied to the
loss performance of the particular deals;
• Net favorable development of $24 million in medical and life sciences businesses, mainly impacting accident years
2015 and prior, primarily due to favorable reported experience and an increase in weighting towards experience-based
methods;
• Favorable development of $23 million in political risk and trade credit portfolios, mainly impacting the 2015 accident
year, primarily due to favorable reported experience and an increase in weighting towards experience-based methods;
• Net adverse development of $26 million mainly in products and general liability portfolios, including adverse
movements within construction, partly offset by commercial-multi peril (CMP) liability, with older accident years
generally experiencing favorable run-off, while more recent accident years developing adversely; and
• Net adverse development of $38 million in automobile liability, driven by adverse paid and reported loss experience
mainly in accident years 2014 through 2018.
• Net adverse development of $19 million in short-tail business, primarily from:
• Net adverse development, excluding catastrophes, of $108 million in property and marine portfolios with adverse
development of $152 million across our retail, wholesale, and program distribution channels in accident year 2018,
primarily due to a higher than expected severity of non-catastrophe claims, partly offset by favorable development of
$44 million in 2017 and prior accident years on non-catastrophe claims;
• Net favorable catastrophe development in property and marine portfolios of $36 million. There was $41 million of
favorable development on the 2017 and 2018 natural catastrophes, mostly in 2017, partly offset by some adverse
development on older catastrophe events; and
• Favorable development of $49 million in surety businesses, mainly in accident year 2017, driven by lower than
expected reported loss activity.
F-62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
2018
North America Commercial P&C Insurance experienced net favorable PPD of $610 million, which was the net result of several
underlying favorable and adverse movements, and was driven by the following principal changes:
• Net favorable development of $395 million in long-tail business, primarily from:
• Net favorable development of $199 million in our management liability portfolios, favorably impacting accident years
2013 and prior where paid and reported loss activity was lower than expected, partially offset by adverse development
in the 2014 through 2017 accident years, mostly as a result of higher severity claim costs compared to prior
expectations in certain lines or coverages, particularly in our Directors and Officers (D&O) portfolio;
• Net favorable development of $194 million in workers’ compensation lines with favorable development of $56 million
in the 2017 accident year mainly related to our annual assessment of multi-claimant events including industrial
accidents. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to
allow for late reporting or identification of significant losses. The net remaining favorable development of $138 million
was principally due to lower than expected loss experience, mainly impacting accident years 2014 and prior;
• Net favorable development of $100 million in our commercial excess and umbrella portfolios, primarily in accident
years 2012 and prior. This was driven by lower than expected reported loss activity, and an increase in weighting
towards experience-based methods, partly offset by higher than expected claim activity in the 2014, 2015 and 2017
accident years which led to reserve strengthening in those years;
• Favorable development of $33 million in a runoff professional liability portfolio, impacting accident years 2002 and
prior, owing mainly to the favorable disposition of a specific claim;
• Net favorable development of $28 million in our foreign casualty lines, primarily impacting accident years 2014 and
prior, driven by reported loss activity that was generally lower than expected;
• Favorable development of $23 million in our political risk and trade credit portfolios, mainly impacting the 2014
accident year, primarily due to favorable reported experience and an increased in weighting towards experience-based
methods;
• Net adverse development of $91 million in our medical portfolios, mainly impacting accident years 2015, 2016 and
2017. The increase was driven by a combination of several large claims and generally higher than expected paid and
reported case incurred activity; and
• Net adverse development of $109 million, mainly in our automobile liability, commercial-multi peril (CMP) liability,
products and general liability lines, driven by adverse paid and reported loss activity relative to prior expectations in
accident years 2015 through 2017, partly offset by favorable emergence in older accident years.
• Net favorable development of $215 million in short-tail business, primarily from:
• Net favorable development of $155 million in our commercial property and marine businesses due to favorable claim
development, including $129 million net favorable development on the 2017 natural catastrophes; and
• Net favorable development of $60 million in other short-tail business, including $19 million in surety and also
including several smaller net favorable movements from lower than expected case activity in other classes, such as
accident and commercial automobile physical damage, none of which were significant individually or in the aggregate.
2017
North America Commercial P&C Insurance experienced net favorable PPD of $746 million, representing 1.6 percent of the
beginning consolidated net unpaid losses and loss expense reserves.
F-63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Personal P&C Insurance
2019
North America Personal P&C Insurance incurred net favorable PPD of $95 million, which was the net result of several
underlying favorable and adverse movements, and was driven by the following principal changes:
• Net favorable claim development of $132 million on the 2017 and 2018 natural catastrophes for all lines;
• Net favorable development of $26 million in our personal excess lines primarily impacting the 2016 accident year, due to
lower than expected loss emergence and an increase in weighting towards experience-based methods, partly offset by
adverse emergence in accident year 2015;
• Net favorable development of $16 million, which was the net result of several underlying favorable and adverse movements
predominantly in the automobile and recreational marine lines; and
• Net adverse development of $82 million in our homeowners lines, including valuables, arising from non-catastrophe loss
emergence, mainly in the 2018 accident year.
2018
North America Personal P&C Insurance incurred net adverse PPD of $41 million, which was the net result of several underlying
favorable and adverse movements, and was driven by the following principal changes:
• Net adverse development of $63 million in our homeowners and valuables lines, primarily impacting the 2017 accident
year. Overall, non-catastrophe losses were $136 million higher than expected, partially offset by favorable claim
development of $73 million on the 2017 natural catastrophes. The higher than expected non-catastrophe homeowners
losses were primarily severity driven and included water-related claims, large fire losses, and non-catastrophe weather
claims; and
• Net favorable development of $24 million in our personal excess lines primarily impacting the 2015 accident year, due to
lower than expected loss emergence and an increase in weighting towards experience-based methods.
2017
North America Personal P&C Insurance incurred net adverse PPD of $69 million, representing 0.1 percent of the beginning
consolidated net unpaid losses and loss expense reserves.
North America Agricultural Insurance
North America Agricultural Insurance experienced net favorable PPD of $80 million, $110 million, and $119 million in 2019,
2018, and 2017, respectively. Actual claim development mainly relates to our Multiple Peril Crop Insurance business and was
favorable due to better than expected crop yield results in certain states at the prior year-end period (i.e., 2019 results based on
crop yield results at year-end 2018).
Overseas General Insurance
2019
Overseas General Insurance experienced net favorable PPD of $92 million, which was the net result of several underlying
favorable and adverse movements, and was driven by the following principal changes:
• Net favorable development of $68 million in long-tail business, primarily from:
• Net favorable development of $101 million in casualty lines, including favorable development of $123 million in
accident years 2015 and prior, due to lower than expected loss emergence mainly across primary lines in Continental
Europe, U.K., and Asia Pacific, partially offset by adverse development of $22 million in accident years 2016 through
2018, primarily due to adverse attritional and large loss experience in Continental Europe; and
• Net adverse development of $52 million in financial lines, including adverse development of $127 million in accident
years 2016 through 2018, primarily due to adverse large loss experience in D&O in the U.K. and Asia Pacific, offset by
favorable development of $75 million in accident years 2015 and prior, due to lower than expected loss emergence
across most regions in D&O and Professional Indemnity.
F-64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
• Net favorable of $24 million in short-tail business, primarily from:
• Net favorable development of $45 million in A&H, driven by favorable development across Continental Europe, Latin
America and Asia Pacific primarily in accident years 2017 and 2018;
• Net favorable development of $36 million in marine, driven by favorable loss emergence and claim-specific loss
settlements across most regions and several accident years, including favorable liability emergence and litigation
settlements in accident years 2016 and prior;
• Net adverse development of $23 million in construction, driven by adverse large loss experience in accident year 2018
for U.K. and Asia Pacific; and
• Net adverse development of $27 million in Surety, driven by adverse large loss experience across Continental Europe
and Latin America in accident years 2017 and 2018.
2018
Overseas General Insurance experienced net favorable PPD of $212 million, which was the net result of several underlying
favorable and adverse movements, and was driven by the following principal changes:
• Net favorable development of $67 million in long-tail business, primarily from:
• Net favorable development of $70 million in casualty lines, with net favorable development of $107 million in accident
years 2014 and prior, resulting from lower than expected loss emergence across primary and excess lines, partially
offset by adverse development of $38 million in accident years 2015 through 2017, primarily due to large loss
experience in U.K. excess lines and wholesale business;
• Favorable development of $32 million, primarily including $12 million in political risks, $10 million in aviation and
$10 million in environmental; and
• Net adverse development of $38 million in financial lines, with net favorable development of $93 million in accident
years 2014 and prior, resulting from lower than expected loss emergence including favorable development due to
specific large claim reductions in Asia financial institutions including wholesale bankers D&O and bankers professional
indemnity, and adverse development of $131 million in accident years 2015 through 2017, primarily due to adverse
large loss experience in specific D&O and financial institutions portfolios in Australia, Continental Europe and the U.K.
• Net favorable development of $145 million in short-tail business, primarily from:
• Net favorable development of $99 million in property and marine (excluding technical lines), primarily in accident years
2013 through 2016, driven mainly by favorable loss emergence across all regions, including favorable claim-specific
loss settlements and salvage/subrogation recoveries;
• Net favorable development of $33 million in A&H, primarily in accident years 2015 through 2017, driven by favorable
development across Asia Pacific direct marketing and Continental Europe corporate lines.
2017
Overseas General Insurance experienced net favorable PPD of $252 million, representing 0.5 percent of the beginning
consolidated net unpaid losses and loss expense reserves.
F-65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Global Reinsurance
2019
Global Reinsurance experienced net favorable PPD of $29 million, which was the net result of several underlying favorable and
adverse movements, and was driven by the following principal changes:
• Net favorable development of $59 million in long-tail business, primarily in our auto, casualty, professional liability, medical
malpractice, and workers’ compensation lines primarily from treaty years 2013 and prior principally due to lower than
expected loss emergence; and
• Net adverse development of $30 million in short-tail business, which included $44 million of adverse development on
2017 and 2018 natural catastrophe events.
2018
Global Reinsurance experienced net favorable PPD of $50 million, which was the net result of several underlying favorable and
adverse movements, and was driven by the following principal changes:
• Net favorable development of $69 million in long-tail business, primarily in our casualty, professional liability, medical
malpractice, and workers' compensation lines primarily from treaty years 2013 and prior principally resulting from lower
than expected loss emergence; and
• Net adverse development of $19 million in short-tail business, which included $18 million of net adverse claim
development on the 2017 natural catastrophes.
2017
Global Reinsurance experienced net favorable PPD of $59 million, representing 0.1 percent of the beginning consolidated net
unpaid losses and loss expense reserves.
Corporate
2019
Corporate incurred adverse development of $153 million in long-tail lines, driven by the following principal changes:
• Adverse development of $116 million driven principally by adverse development in asbestos and environmental liabilities
due to the emergence of a limited number of excess accounts and somewhat greater than expected defense and indemnity
costs (generally impacting larger modeled accounts); and
• Adverse development of $37 million on unallocated loss adjustment expenses due to run-off operating expenses paid and
incurred in 2019.
2018
Corporate incurred adverse development of $45 million in long-tail lines, driven by the following principal changes:
• Adverse development of $216 million in run-off liabilities, driven primarily by increased exposure on a limited number of
direct asbestos claims and environmental sites, somewhat greater than expected defense cost spending and increases in
reported claims and settlements with respect to molestation exposures;
• Adverse development of $35 million on unallocated loss adjustment expenses due to run-off operating expenses paid and
incurred in 2018; and
• Favorable development of $205 million as a result of the settlements of certain previously disputed reinsurance balances.
2017
Corporate incurred adverse PPD of $278 million, representing 0.6 percent of the beginning consolidated net unpaid losses and
loss expense reserves.
F-66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Asbestos and environmental (A&E)
Chubb's exposure to A&E claims principally arises out of liabilities acquired when it purchased Westchester Specialty in 1998,
CIGNA's P&C business in 1999, and Chubb Corp in 2016. The following table presents a roll-forward of consolidated A&E loss
reserves including allocated loss expense reserves for A&E exposures, and the provision for uncollectible paid and unpaid
reinsurance recoverables:
(in millions of U.S. dollars)
Balance at December 31, 2016
Incurred activity
Paid activity
Balance at December 31, 2017
Incurred activity
Paid activity
Balance at December 31, 2018
Incurred activity
Paid activity
Asbestos
Environmental
Gross
Net
Gross
Net
Gross
Total
Net
$ 1,726 $ 1,119 $
577 $
490 $ 2,303 $ 1,609
228
(333)
104
(172)
1,621
1,051
136
(265)
1,492
129
(162)
75
(162)
964
70
199
(169)
607
101
(83)
625
46
113
(127)
476
(97)
104
483
28
427
(502)
217 (1)
(299)
2,228
1,527
237
(348)
(22) (1)
(58)
2,117
1,447
175
(304)
98 (1)
(219)
(118)
(142)
(101)
Balance at December 31, 2019
$ 1,459 $
916 $
529 $
410 $ 1,988 $ 1,326
(1) Excludes unallocated loss expenses and the net activity reflects third-party reinsurance other than the aggregate excess of loss reinsurance provided by National Indemnity
Company (NICO) to Westchester Specialty (see Westchester Specialty section below).
The A&E net loss reserves including allocated loss expense reserves and provision for uncollectible reinsurance at December 31,
2019 and 2018 shown in the table above is comprised of:
(in millions of U.S. dollars)
Brandywine operations
Westchester Specialty
Chubb Corp
Other, mainly Overseas General Insurance
Total
December 31
2019
2018
$
754 $
117
381
74
807
120
442
78
$
1,326 $
1,447
Brandywine Run-off entities – The Restructuring Plan and uncertainties relating to Chubb's ultimate Brandywine exposure
In 1996, the Pennsylvania Insurance Commissioner approved a plan to restructure INA Financial Corporation and its
subsidiaries (the Restructuring) which included the division of Insurance Company of North America (INA) into two separate
corporations:
(1) An active insurance company that retained the INA name and continued to write P&C business; and
(2) An inactive run-off company, now called Century Indemnity Company (Century).
As a result of the division, predominantly all A&E and certain other liabilities of INA were ascribed to Century and extinguished,
as a matter of Pennsylvania law, as liabilities of INA.
As part of the Restructuring, most A&E liabilities of various U.S. affiliates of INA were reinsured to Century. Century and certain
other run-off companies having A&E and other liabilities were contributed to Brandywine Holdings.
The U.S.-based Chubb INA companies assumed two contractual obligations in respect of the Brandywine operations in
connection with the Restructuring: a surplus maintenance obligation in the form of the excess of loss (XOL) agreement and a
dividend retention fund obligation.
F-67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
XOL Agreement
In 1996, in connection with the Restructuring, a Chubb INA insurance subsidiary provided reinsurance coverage to Century in
the amount of $800 million under an Aggregate Excess of Loss Reinsurance Agreement (XOL Agreement), triggerable if the
statutory capital and surplus of Century falls below $25 million or if Century lacks liquid assets with which to pay claims as
they become due.
Dividend Retention Fund
INA Financial Corporation established and funded a dividend retention fund (the Dividend Retention Fund) consisting of $50
million plus investment earnings. The full balance of the Dividend Retention Fund was contributed to Century as of
December 31, 2002. Under the Restructuring Order, while any obligation to maintain the Dividend Retention Fund is in effect,
to the extent dividends are paid by INA Holdings Corporation to its parent, INA Financial Corporation, and to the extent INA
Financial Corporation then pays such dividends to INA Corporation, a portion of those dividends must be withheld to replenish
the principal of the Dividend Retention Fund to $50 million. During 2019, 2018, 2011 and 2010, $90 million, $50 million,
$35 million and $15 million, respectively, were withheld from such dividends and deposited into the Dividend Retention Fund
as a result of dividends paid up to the INA Corporation. Pursuant to a 2011 amendment to the Restructuring Order, capital
contributions from the Dividend Retention Fund to Century are not required until the XOL Agreement has less than $200 million
of capacity remaining on an incurred basis for statutory reporting purposes. The amount of the capital contribution shall be the
lesser of the amount necessary to restore the XOL Agreement remaining capacity to $200 million or the Dividend Retention
Fund balance. In 2019 and 2018, the Pennsylvania Department of Insurance approved a capital contribution of $64 million
and $39 million, respectively, from the Dividend Retention Fund to Century in order to restore the XOL capacity to $200
million. The Dividend Retention Fund may not be terminated without prior written approval from the Pennsylvania Insurance
Commissioner.
Effective December 31, 2004, Chubb INA contributed $100 million to Century in exchange for a surplus note. After giving
effect to the contribution and issuance of the surplus note, the statutory surplus of Century at December 31, 2019 was $25
million and $622 million in statutory-basis losses have been ceded to the XOL Agreement on an inception-to-date basis.
Century reports the amount ceded under the XOL Agreement in accordance with statutory accounting principles, which differ
from GAAP by, among other things, allowing Century to discount its liabilities, including certain asbestos related and
environmental pollution liabilities and Century's reinsurance payable to active companies. For GAAP reporting purposes,
intercompany reinsurance recoverables related to the XOL are eliminated upon consolidation.
While Chubb believes it has no legal obligation to fund Century losses above the XOL limit of coverage, Chubb's consolidated
results would nevertheless continue to include any losses above the limit of coverage for so long as the Brandywine companies
remain consolidated subsidiaries of Chubb.
Certain active Chubb companies are primarily liable for asbestos, environmental, and other exposures that they have reinsured
to Century. Accordingly, if Century were to become insolvent and placed into rehabilitation or liquidation, some or all of the
recoverables due to these active Chubb companies from Century could become uncollectible. At both December 31, 2019 and
2018, the aggregate reinsurance recoverables owed by Century to certain active Chubb companies were approximately $1.5
billion, on an undiscounted basis. Chubb believes the active company intercompany reinsurance recoverables, which relate to
direct liabilities payable over many years, are not impaired. At December 31, 2019 and 2018, Century's carried gross reserves
(including reserves assumed from the active Chubb companies) were $1.8 billion and $2.0 billion, respectively. Should
Century's loss reserves experience adverse development in the future and should Century be placed into rehabilitation or
liquidation, the reinsurance recoverables due from Century to certain active Chubb companies would be payable only after the
payment in full of certain expenses and liabilities, including administrative expenses and direct policy liabilities. Thus, the
intercompany reinsurance recoverables would be at risk to the extent of the shortage of assets remaining to pay these
recoverables.
Westchester Specialty – impact of NICO contracts on Chubb’s run-off entities
As part of the Westchester Specialty acquisition in 1998, NICO provided a 75 percent pro-rata share of $1.0 billion of
reinsurance protection on losses and loss adjustment expenses incurred on or before December 31, 1996, in excess of a
retention of $721 million. At December 31, 2019, the remaining unused incurred limit under the Westchester NICO agreement
was $384 million.
F-68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
8. Taxation
Under Swiss law through December 31, 2019, a resident company is subject to income tax at the federal, cantonal, and
communal levels that is levied on net worldwide income. Income attributable to permanent establishments or real estate located
abroad is excluded from the Swiss tax base. Chubb Limited is a holding company and, therefore, is exempt from cantonal and
communal income tax. As a result, Chubb Limited is subject to Swiss income tax only at the federal level. Furthermore,
participation relief (i.e., tax relief) is granted to Chubb Limited at the federal level for qualifying dividend income and capital
gains related to the sale of qualifying participations (i.e., subsidiaries). It is expected that the participation relief will result in a
full exemption of participation income from federal income tax. Chubb Limited is subject to an annual cantonal and communal
capital tax on the taxable equity of Chubb Limited in Switzerland.
Chubb has two Swiss operating subsidiaries, an insurance company, Chubb Insurance (Switzerland) Limited and a reinsurance
company, Chubb Reinsurance (Switzerland) Limited. Both are subject to federal, cantonal, and communal income tax and to
annual cantonal and communal capital tax.
Under current Bermuda law, Chubb Limited and its Bermuda subsidiaries are not required to pay any taxes on income or capital
gains. If a Bermuda law were enacted that would impose taxes on income or capital gains, Chubb Limited and the Bermuda
subsidiaries have received an undertaking from the Minister of Finance in Bermuda that would exempt such companies from
Bermudian taxation until March 2035.
Income from Chubb's operations at Lloyd's is subject to United Kingdom (U.K.) corporation taxes. Lloyd's is required to pay U.S.
income tax on U.S. connected income (U.S. income) written by Lloyd's syndicates. Lloyd's has a closing agreement with the
Internal Revenue Service (IRS) whereby the amount of tax due on this business is calculated by Lloyd's and remitted directly to
the IRS. These amounts are then charged to the accounts of Chubb's Corporate Members in proportion to their participation in
the relevant syndicates. Chubb's Corporate Members are subject to this arrangement but, as U.K. domiciled companies, will
receive U.K. corporation tax credits for any U.S. income tax incurred up to the value of the equivalent U.K. corporation income
tax charge on the U.S. income.
Chubb Group Holdings and its respective subsidiaries are subject to income taxes imposed by U.S. authorities and file a
consolidated U.S. Federal income tax return. Should Chubb Group Holdings pay a dividend to Chubb Limited, withholding taxes
would apply. Currently, however, no withholding taxes are accrued with respect to such un-remitted earnings as management
has no intention of remitting these earnings. Similarly, no taxes have been provided on the un-remitted earnings of certain
foreign subsidiaries (Hong Kong and Korea life companies) as management has no intention of remitting these earnings. The
cumulative amount that would be subject to withholding tax, if distributed, as well as the determination of the associated tax
liability are not practicable to compute; however, such amount would be material.
Certain international operations of Chubb are also subject to income taxes imposed by the jurisdictions in which they operate.
Chubb's domestic operations are in Switzerland, the jurisdiction where we are legally organized, incorporated, and registered.
F-69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents pre-tax income and the related provision for income taxes:
(in millions of U.S. dollars)
Pre-tax income:
Switzerland
Outside Switzerland
Total pre-tax income
Provision for income taxes
Current tax expense:
Switzerland
Outside Switzerland
Total current tax expense
Deferred tax expense (benefit):
Switzerland
Outside Switzerland
Total deferred tax expense (benefit)
$
$
$
Year Ended December 31
2019
2018
2017
440 $
950 $
4,809
3,707
5,249 $
4,657 $
527
3,195
3,722
29 $
89 $
879
908
11
(124)
(113)
563
652
3
40
43
46
313
359
2
(500)
(498)
Provision for income taxes
The most significant jurisdictions contributing to the overall taxation of Chubb are calculated using the following rates in 2019:
Switzerland 7.83 percent, Bermuda 0.0 percent, U.S. 21.0 percent, and U.K. 19.0 percent.
795 $
695 $
(139)
$
The following table presents a reconciliation of the difference between the provision for income taxes and the expected tax
provision at the Swiss statutory income tax rate:
(in millions of U.S. dollars)
Expected tax provision at Swiss statutory tax rate
Permanent differences:
Taxes on earnings subject to rate other than Swiss statutory rate
Tax-exempt interest and dividends received deduction, net of proration
Net withholding taxes
Excess tax benefit on share-based compensation
Impact of 2017 Tax Act
Corporate owned life insurance
Other
Provision for income taxes
Year Ended December 31
2019
2018
$
411 $
365 $
376
(49)
40
(12)
—
(13)
42
372
(75)
33
(19)
(25)
2
42
$
795 $
695 $
2017
291
263
(199)
30
(48)
(450)
(37)
11
(139)
The 2017 Tax Act, enacted in December 2017, among other things, reduced the U.S. Federal income tax rate from 35 percent to
21 percent effective in 2018. In the fourth quarter of 2017, we recorded a $450 million income tax benefit on a provisional basis,
and an additional $25 million in 2018, principally reflecting this reduction in the U.S. corporate tax rate from 35 percent to 21
percent. Our final $475 million income tax benefit was comprised of a $743 million reduction in the deferred tax liabilities principally
related to certain intangible assets, a $250 million reduction in net deferred tax assets related to other net assets, a net charge of
$18 million related to the impact of excess foreign tax credits, withholding taxes associated with unremitted earnings and the
impact of the reduced rate on our foreign branches. The 2018 change reflected the favorable impact of changes to certain tax only
accounting methods offset by updates to provisional amounts recorded related to foreign tax credits and withholding taxes as a
result of additional guidance issued during 2018.
F-70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents the components of net deferred tax assets and liabilities:
(in millions of U.S. dollars)
Deferred tax assets:
Loss reserve discount
Unearned premiums reserve
Foreign tax credits
Provision for uncollectible balances
Loss carry-forwards
Debt related amounts
Compensation related amounts
Cumulative translation adjustments
Unrealized depreciation on investments
Lease liability
Other, net
Total deferred tax assets
Deferred tax liabilities:
Deferred policy acquisition costs
Other intangible assets, including VOBA
Un-remitted foreign earnings
Investments
Unrealized appreciation on investments
Depreciation
Lease right-of-use asset
Other, net
Total deferred tax liabilities
Valuation allowance
Net deferred tax liabilities
December 31
2019
December 31
2018
$
826 $
519
247
37
143
74
261
33
—
140
—
584
471
262
37
137
71
263
43
102
—
95
2,280
2,065
588
1,468
73
40
470
157
129
45
2,970
114
621
1,440
47
59
—
123
—
—
2,290
79
$
(804) $
(304)
The 2017 Tax Act also included provisions for Global Intangible Low-Taxed Income (GILTI) under which taxes may be imposed on
income of foreign subsidiaries and for a Base Erosion and Anti-Abuse Tax (BEAT) under which taxes may be imposed on certain
payments to affiliated foreign companies. We have evaluated the accounting policy election required with regard to the GILTI and
BEAT provisions, and have concluded we will treat both as a period cost. As a result, we have recorded no related deferred taxes.
The valuation allowance of $114 million at December 31, 2019, and $79 million at December 31, 2018, reflects
management's assessment, based on available information, that it is more likely than not that a portion of the deferred tax
assets will not be realized due to the inability of certain foreign subsidiaries to generate sufficient taxable income. Adjustments
to the valuation allowance are made when there is a change in management's assessment of the amount of deferred tax assets
that are realizable.
At December 31, 2019, Chubb has net operating loss carry-forwards of $496 million which, if unused, will expire starting in
2020, and a foreign tax credit carry-forward in the amount of $247 million which, if unused, will expire starting in 2026.
F-71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents a reconciliation of the beginning and ending amount of gross unrecognized tax benefits:
(in millions of U.S. dollars)
Balance, beginning of year
Additions based on tax positions related to the current year
Additions based on tax positions related to prior years
Reductions for tax positions of prior years
Reductions for the lapse of the applicable statutes of limitations
Balance, end of year
December 31
2019
December 31
2018
13
14 $
12
23
—
(2)
47 $
1
—
—
—
14
$
$
At December 31, 2019 and 2018, the gross unrecognized tax benefits of $47 million and $14 million, respectively, can be
reduced by $19 million and nil, respectively, associated with foreign tax credits. The net amounts of $28 million and $14
million at December 31, 2019 and 2018, respectively, if recognized, would favorably affect the effective tax rate. It is
reasonably possible that over the next twelve months, that the amount of unrecognized tax benefits may change resulting from
the re-evaluation of unrecognized tax benefits arising from examinations by taxing authorities and the lapses of statutes of
limitations.
Chubb recognizes accruals for interest and penalties, if any, related to unrecognized tax benefits in income tax expense in the
Consolidated statements of operations. Tax-related interest expense (income) and penalties reported in the Consolidated
statements of operations were $5 million at December 31, 2019, and were immaterial for 2018, and 2017. Liabilities for tax-
related interest and penalties in our Consolidated balance sheets were $8 million and $3 million at December 31, 2019 and
2018, respectively.
In March 2017, the IRS commenced its field examination of Chubb Group Holdings’ U.S. Federal income tax returns for 2014
and 2015 and Chubb Corp’s U.S. Federal income tax return for 2014. The Chubb Group Holdings examination for 2014 and
2015 tax years is still ongoing with no material adjustments proposed to date. In February 2019, the IRS completed its
examinations of Chubb Corp's 2014 return with no material adjustments. Chubb Corp's U.S. Federal income tax returns for
2015 and the short period return for 2016 were not examined by the IRS and the statute of limitations for those years closed
during 2019. In September 2019, we were notified by the IRS of its intention to examine the 2016 and 2017 tax returns of
Chubb Group Holdings. That examination is yet to begin. As a multinational company, we also have examinations under way in
several foreign jurisdictions. With few exceptions, Chubb is no longer subject to income tax examinations for years prior to
2010.
The following table summarizes tax years open for examination by major income tax jurisdiction:
At December 31, 2019
Australia
Canada
France
Germany
Italy
Mexico
Spain
Switzerland
United Kingdom
United States
F-72
2014 - 2019
2012 - 2019
2017 - 2019
2015 - 2019
2010 - 2019
2014 - 2019
2012 - 2019
2015 - 2019
2015 - 2019
2014 - 2019
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
9. Debt
(in millions of U.S. dollars)
2019
2018
Early Redemption Option
Repurchase agreements (weighted average interest rate
of 2.2% in 2019 and 2.5% in 2018)
$
1,416 $
1,418
None
December 31
December 31
Short-term debt
Chubb INA senior notes:
$500 million 5.9% due June 2019
$
— $
500 Make-whole premium plus 0.40%
$1,300 million 2.3% due November 2020
1,298
— Make-whole premium plus 0.15%
Other short-term debt (2.75% to 7.1% due December 2019 to
September 2020)
Total short-term debt
Long-term debt
Chubb INA senior notes:
1
$
1,299 $
9
509
None
$1,300 million 2.3% due November 2020
$
— $
1,297 Make-whole premium plus 0.15%
$1,000 million 2.875% due November 2022
$475 million 2.7% due March 2023
$700 million 3.35% due May 2024
€700 million 0.3% due December 2024
$800 million 3.15% due March 2025
$1,500 million 3.35% due May 2026
€575 million 0.875% due June 2027
€900 million 1.55% due March 2028
$100 million 8.875% due August 2029
€700 million 0.875% due December 2029
€575 million 1.4% due June 2031
$200 million 6.8% due November 2031
$300 million 6.7% due May 2036
$800 million 6.0% due May 2037
€900 million 2.5% due March 2038
$600 million 6.5% due May 2038
$475 million 4.15% due March 2043
997
473
697
776
796
996 Make-whole premium plus 0.20%
473 Make-whole premium plus 0.10%
696 Make-whole premium plus 0.15%
— Make-whole premium plus 0.15%
796 Make-whole premium plus 0.15%
1,492
1,491 Make-whole premium plus 0.20%
635
993
100
775
633
246
297
953
992
751
470
— Make-whole premium plus 0.20%
1,008 Make-whole premium plus 0.15%
100
None
— Make-whole premium plus 0.20%
— Make-whole premium plus 0.25%
250 Make-whole premium plus 0.25%
297 Make-whole premium plus 0.20%
962 Make-whole premium plus 0.20%
1,008 Make-whole premium plus 0.25%
759 Make-whole premium plus 0.30%
470 Make-whole premium plus 0.15%
$1,500 million 4.35% due November 2045
Other long-term debt (2.75% due September 2020)
1,483
—
1,483 Make-whole premium plus 0.25%
1
None
Total long-term debt
Trust preferred securities
Chubb INA capital securities due April 2030
$
$
13,559 $
12,087
308 $
308
Redemption prices(1)
(1)
Redemption prices are equal to accrued and unpaid interest to the redemption date plus the greater of (i) 100 percent of the principal amount thereof, or (ii) sum of present
value of scheduled payments of principal and interest on the capital securities from the redemption date to April 1, 2030.
F-73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
a) Repurchase agreements
Chubb has executed repurchase agreements with certain counterparties under which Chubb agreed to sell securities and
repurchase them at a future date for a predetermined price.
b) Short-term debt
Short-term debt comprises the current maturities of our long-term debt instruments described below. These short-term debt
instruments were reclassified from long-term debt during 2019 and are reflected in the table above. Chubb INA Holdings Inc.'s
(Chubb INA) $500 million of 5.9 percent senior notes due June 2019 was paid upon maturity.
c) Long-term debt
Certain of Chubb INA's senior notes and capital securities are redeemable at any time at Chubb INA's option subject to the
provisions described in the table above. A "make-whole" premium is the present value of the remaining principal and interest
discounted at the applicable U.S. Treasury rate. The senior notes and capital securities are also redeemable at par plus accrued
and unpaid interest in the event of certain changes in tax law.
The senior notes do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by
Chubb Limited and they rank equally with all of Chubb's other senior obligations. They also contain customary limitations on
lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of
such senior debt.
In June 2019, Chubb INA issued €575 million ($650 million based on the foreign exchange rate at the date of issuance) of
0.875 percent Euro denominated senior notes due June 2027 and €575 million ($650 million based on the foreign exchange
rate at the date of issuance) of 1.4 percent Euro denominated senior notes due June 2031.
In December 2019, Chubb INA issued €700 million ($779 million based on the foreign exchange rate at the date of issuance)
of 0.30 percent Euro denominated senior notes due December 2024 and €700 million ($779 million based on the foreign
exchange rate at the date of issuance) of 0.875 percent Euro denominated senior notes due December 2029.
These senior notes are redeemable at any time at Chubb INA's option subject to a “make-whole” premium (the present value of
the remaining principal and interest discounted at the applicable comparable government bond rate plus 15 basis points for the
senior notes due 2024, 20 basis points for the senior notes due 2027 and 2029 and 25 basis points for the senior notes due
2031). The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. These
notes do not have the benefit of any sinking fund. These senior unsecured notes are guaranteed on a senior basis by Chubb and
they rank equally with all of Chubb's other senior obligations. They also contain customary limitations on lien provisions as well
as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.
d) Trust preferred securities
In March 2000, ACE Capital Trust II, a Delaware statutory business trust, publicly issued $300 million of 9.7 percent Capital
Securities (the Capital Securities) due to mature in April 2030. At the same time, Chubb INA purchased $9.2 million of
common securities of ACE Capital Trust II. The sole assets of ACE Capital Trust II consist of $309 million principal amount of
9.7 percent Junior Subordinated Deferrable Interest Debentures (the Subordinated Debentures) issued by Chubb INA due to
mature in April 2030.
Distributions on the Capital Securities are payable semi-annually and may be deferred for up to ten consecutive semi-annual
periods (but no later than April 1, 2030). Any deferred payments would accrue interest compounded semi-annually if Chubb
INA defers interest on the Subordinated Debentures. Interest on the Subordinated Debentures is payable semi-annually. Chubb
INA may defer such interest payments (but no later than April 1, 2030), with such deferred payments accruing interest
compounded semi-annually. The Capital Securities and the ACE Capital Trust II Common Securities will be redeemed upon
repayment of the Subordinated Debentures.
Chubb Limited has guaranteed, on a subordinated basis, Chubb INA's obligations under the Subordinated Debentures, and
distributions and other payments due on the Capital Securities. These guarantees, when taken together with Chubb's obligations
under expense agreements entered into with ACE Capital Trust II, provide a full and unconditional guarantee of amounts due on
the Capital Securities.
F-74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
10. Commitments, contingencies, and guarantees
a) Derivative instruments
Foreign currency management
As a global company, Chubb entities transact business in multiple currencies. Our policy is to generally match assets, liabilities,
and required capital for each individual jurisdiction in local currency, which would include the use of derivatives discussed
below. We do not hedge our net asset non-U.S. dollar capital positions; however, we do consider economic hedging for planned
cross border transactions.
Derivative instruments employed
Chubb maintains positions in derivative instruments such as futures, options, swaps, and foreign currency forward contracts for
which the primary purposes are to manage duration and foreign currency exposure, yield enhancement, or to obtain an
exposure to a particular financial market. Chubb also maintains positions in convertible securities that contain embedded
derivatives. Investment derivative instruments are recorded in either Other assets (OA) or Accounts payable, accrued expenses,
and other liabilities (AP), convertible bonds are recorded in Fixed maturities available for sale (FM AFS), and convertible equity
securities are recorded in Equity securities (ES) in the Consolidated balance sheets. These are the most numerous and frequent
derivative transactions. In addition, Chubb purchases to be announced mortgage-backed securities (TBAs) as part of its
investing activities.
Under reinsurance programs covering GLBs, Chubb assumes the risk of GLBs, (principally GMIB) associated with variable
annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value
to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed minimum
level of monthly income. The GLB reinsurance product meets the definition of a derivative instrument. Benefit reserves in
respect of GLBs are classified as Future policy benefits (FPB) while the fair value derivative adjustment is classified within AP.
Chubb also generally maintains positions in exchange-traded equity futures contracts on equity market indices to limit equity
exposure in the GMDB and GLB book of business. All derivative instruments are carried at fair value with changes in fair value
recorded in Net realized gains (losses) in the Consolidated statements of operations. None of the derivative instruments are
designated as hedges for accounting purposes. The following table presents the balance sheet locations, fair values of derivative
instruments in an asset or (liability) position, and notional values/payment provisions of our derivative instruments:
(in millions of U.S. dollars)
Investment and embedded derivative
instruments:
Foreign currency forward contracts
Cross-currency swaps
Interest rate swaps
Options/Futures contracts on notes,
bonds, and equities
Convertible securities (1)
TBAs
Other derivative instruments:
Futures contracts on equities (2)
Other
GLB (3)
December 31, 2019
December 31, 2018
Consolidated
Balance
Sheet
Location
Fair Value
Derivative
Asset
Derivative
(Liability)
Notional
Value/
Payment
Provision
Fair Value
Derivative
Asset
Derivative
(Liability)
Notional
Value/
Payment
Provision
OA / (AP) $
11 $
(78) $
2,579
$
15 $
(19) $
2,185
OA / (AP)
OA / (AP)
OA / (AP)
FM AFS / ES
FM AFS
—
—
13
4
—
—
—
—
—
(15)
1,615
—
—
5
—
$
28 $
(93) $
4,199
OA / (AP) $
— $
(13) $
OA / (AP)
2
—
$
2 $
(13) $
613
63
676
(AP) / (FPB) $
— $
(897) $
1,510
—
—
13
9
6
—
45
(115)
5,250
(19)
1,046
—
—
11
6
$
$
$
$
43 $
(153) $
8,543
23 $
— $
2
—
25 $
— $
507
74
581
— $
(861) $
1,750
(1)
(2)
(3)
Includes fair value of embedded derivatives.
Related to GMDB and GLB book of business.
Includes both future policy benefits reserves of $441 million and $409 million and fair value derivative adjustment of $456 million and $452 million at December 31,
2019 and 2018, respectively. Refer to Note 5 c) for additional information. Note that the payment provision related to GLB is the net amount at risk. The concept of a
notional value does not apply to the GLB reinsurance contracts.
F-75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
At December 31, 2019 and 2018, derivative liabilities of $75 million and $95 million, respectively, included in the table above
were subject to a master netting agreement. The remaining derivatives included in the table above were not subject to a master
netting agreement.
b) Derivative instrument objectives
(i) Foreign currency exposure management
A foreign currency forward contract (forward) is an agreement between participants to exchange specific foreign currencies at a
future date. Chubb uses forwards to minimize the effect of fluctuating foreign currencies as discussed above.
(ii) Duration management and market exposure
Futures
Futures contracts give the holder the right and obligation to participate in market movements, determined by the index or
underlying security on which the futures contract is based. Settlement is made daily in cash by an amount equal to the change
in value of the futures contract times a multiplier that scales the size of the contract. Exchange-traded futures contracts on
money market instruments, notes and bonds are used in fixed maturity portfolios to more efficiently manage duration, as
substitutes for ownership of the money market instruments, bonds and notes without significantly increasing the risk in the
portfolio. Investments in futures contracts may be made only to the extent that there are assets under management not
otherwise committed.
Exchange-traded equity futures contracts are used to limit exposure to a severe equity market decline, which would cause an
increase in expected claims and therefore, an increase in reserves for GMDB and GLB reinsurance business.
Options
An option contract conveys to the holder the right, but not the obligation, to purchase or sell a specified amount or value of an
underlying security at a fixed price. Option contracts are used in our investment portfolio as protection against unexpected shifts
in interest rates, which would affect the duration of the fixed maturity portfolio. By using options in the portfolio, the overall
interest rate sensitivity of the portfolio can be reduced. Option contracts may also be used as an alternative to futures contracts
in the synthetic strategy as described above.
The price of an option is influenced by the underlying security, expected volatility, time to expiration, and supply and demand.
The credit risk associated with the above derivative financial instruments relates to the potential for non-performance by
counterparties. Although non-performance is not anticipated, in order to minimize the risk of loss, management monitors the
creditworthiness of its counterparties and obtains collateral. The performance of exchange-traded instruments is guaranteed by
the exchange on which they trade. For non-exchange-traded instruments, the counterparties are principally banks which must
meet certain criteria according to our investment guidelines.
Interest rate swaps
An interest rate swap is a contract between two counterparties in which interest payments are made based on a notional
principal amount, which itself is never paid or received. Under the terms of an interest rate swap, one counterparty makes
interest payments based on a fixed interest rate and the other counterparty’s payments are based on a floating rate. Interest rate
swap contracts are used occasionally in our investment portfolio as protection against unexpected shifts in interest rates, which
would affect the fair value of the fixed maturity portfolio. By using interest rate swaps in the portfolio, the overall duration or
interest rate sensitivity of the portfolio can be impacted.
Cross-currency swaps
Cross-currency swaps are agreements under which two counterparties exchange interest payments and principal denominated
in different currencies at a future date. We use cross-currency swaps to reduce the foreign currency and interest rate risk by
converting cash flows back into local currency. We invest in foreign currency denominated investments to improve credit
diversification and also to obtain better duration matching to our liabilities that is limited in the local currency market.
Other
Included within Other are derivatives intended to reduce potential losses which may arise from certain exposures in our
insurance business. The economic benefit provided by these derivatives is similar to purchased reinsurance. For example,
Chubb may enter into crop derivative contracts to protect underwriting results in the event of a significant decline in commodity
prices.
F-76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
(iii) Convertible security investments
A convertible security is a debt instrument or preferred stock that can be converted into a predetermined amount of the issuer’s
equity. The convertible option is an embedded derivative within the host instruments which are classified in the investment
portfolio as either available for sale or as an equity security. Chubb purchases convertible securities for their total return and not
specifically for the conversion feature.
(iv) TBA
By acquiring TBAs, we make a commitment to purchase a future issuance of mortgage-backed securities. For the period
between purchase of the TBAs and issuance of the underlying security, we account for our position as a derivative in the
consolidated financial statements. Chubb purchases TBAs both for their total return and for the flexibility they provide related to
our mortgage-backed security strategy.
(v) GLB
Under the GLB program, as the assuming entity, Chubb is obligated to provide coverage until the expiration or maturity of the
underlying deferred annuity contracts or the expiry of the reinsurance treaty. Premiums received under the reinsurance treaties
are classified as premium. Expected losses allocated to premiums received are classified as Future policy benefits and valued
similar to GMDB reinsurance. Other changes in fair value arise principally from changes in expected losses allocated to
expected future premiums. Fair value represents management’s estimate of an exit price and thus, includes a risk margin. We
may recognize a realized loss for other changes in fair value due to adverse changes in the capital markets (e.g., declining
interest rates and/or declining U.S. and/or international equity markets) and changes in actual or estimated future policyholder
behavior (e.g., increased annuitization or decreased lapse rates) although we expect the business to be profitable.
To mitigate adverse changes in the capital markets, we maintain positions in exchange-traded equity futures contracts, as noted
under section "(ii) Futures" above. These futures increase in fair value when the S&P 500 index decreases (and decrease in fair
value when the S&P 500 index increases). The net impact of gains or losses related to changes in fair value of the GLB liability
and the exchange-traded equity futures are included in Net realized gains (losses).
c) Securities lending and secured borrowings
Chubb participates in a securities lending program operated by a third-party banking institution whereby certain assets are
loaned to qualified borrowers and from which we earn an incremental return. The securities lending collateral can only be
drawn down by Chubb in the event that the institution borrowing the securities is in default under the lending agreement. An
indemnification agreement with the lending agent protects us in the event a borrower becomes insolvent or fails to return any of
the securities on loan. The collateral is recorded in Securities lending collateral and the liability is recorded in Securities lending
payable in the Consolidated balance sheets. The following table presents the carrying value of collateral held under securities
lending agreements by investment category and remaining contractual maturity of the underlying agreements:
(in millions of U.S. dollars)
Collateral held under securities lending agreements:
Cash
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
Equity securities
Gross amount of recognized liability for securities lending payable
Remaining contractual maturity
December 31, 2019
December 31, 2018
Overnight and Continuous
$
$
$
346 $
6
595
5
18
24
994 $
994 $
756
64
795
15
45
251
1,926
1,926
At December 31, 2019 and 2018, our repurchase agreement obligations of $1,416 million and $1,418 million, respectively,
were fully collateralized. In contrast to securities lending programs, the use of cash received is not restricted for the repurchase
obligations. The fair value of the underlying securities sold remains in Fixed maturities available for sale, and the repurchase
agreement obligation is recorded in Repurchase agreements in the Consolidated balance sheets.
F-77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents the carrying value of collateral pledged under repurchase agreements by investment category and
remaining contractual maturity of the underlying agreements:
(in millions of U.S. dollars)
Collateral pledged under repurchase agreements:
Cash
U.S. Treasury and agency
Mortgage-backed securities
Gross amount of recognized liabilities for repurchase
agreements
Difference (1)
Remaining contractual maturity
December 31, 2019
December 31, 2018
Up to
30
Days
30-90
Days
Greater
than 90
Days
Total
30-90
Days
Greater
than 90
Days
Total
$
2 $ — $ — $
2 $ — $ — $ —
107
399
—
476
—
107
480
1,355
—
496
259
713
259
1,209
$ 508 $ 476 $ 480 $ 1,464 $ 496 $ 972 $ 1,468
$ 1,416
$
48
$ 1,418
$
50
(1)
Per the repurchase agreements, the amount of collateral posted is required to exceed the amount of gross liability.
Potential risks exist in our secured borrowing transactions due to market conditions and counterparty exposure. With collateral
that we pledge, there is a risk that the collateral may not be returned at the expiration of the agreement. If the counterparty fails
to return the collateral, Chubb will have free use of the borrowed funds until our collateral is returned. In addition, we may
encounter the risk that Chubb may not be able to renew outstanding borrowings with a new term or with an existing
counterparty due to market conditions including a decrease in demand as well as more restrictive terms from banks due to
increased regulatory and capital constraints. Should this condition occur, Chubb may seek alternative borrowing sources or
reduce borrowings. Additionally, increased margins and collateral requirements due to market conditions would increase our
restricted assets as we are required to provide additional collateral to support the transaction.
The following table presents net realized gains (losses) related to derivative instrument activity in the Consolidated statements of
operations:
2019
Year Ended December 31
2017
2018
$
$
$
$
$
(79) $
3 $
(270)
(88)
2
(115)
39
(2)
(435) $
(75) $
(4) $
(248) $
(138)
(8)
(150) $
(585) $
(4)
(3)
(255) $
(330) $
9
—
(21)
1
(11)
364
(261)
(5)
98
87
(in millions of U.S. dollars)
Investment and embedded derivative instruments:
Foreign currency forward contracts
Interest rate swaps
All other futures contracts, options, and equities
Convertible securities (1)
Total investment and embedded derivative instruments
GLB and other derivative instruments:
GLB (2)
Futures contracts on equities (3)
Other
Total GLB and other derivative instruments
(1)
(2)
(3)
Includes embedded derivatives.
Excludes foreign exchange gains (losses) related to GLB.
Related to GMDB and GLB book of business.
F-78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
d) Concentrations of credit risk
Our investment portfolio is managed following prudent standards of diversification. Specific provisions limit the allowable
holdings of a single issue and issuer. We believe that there are no significant concentrations of credit risk associated with our
investments. Our three largest corporate exposures by issuer at December 31, 2019, were Wells Fargo & Co., Bank of America
Corp, and JP Morgan Chase & Co. Our largest exposure by industry at December 31, 2019 was financial services.
We market our insurance and reinsurance worldwide primarily through insurance and reinsurance brokers. We assume a degree
of credit risk associated with brokers with whom we transact business. For the years ended December 31, 2019 and 2018,
approximately 12 percent and 10 percent, respectively, of our gross premiums written was generated from or placed by Marsh
& McLennan Companies, Inc. This entity is a large, well-established company, and there are no indications that it is financially
troubled at December 31, 2019. No broker or one insured accounted for more than 10 percent of our gross premiums written
for the year ended December 31, 2017.
As discussed in Note 2, we committed to purchase an additional 22.4 percent interest in Huatai Group. In connection with
these purchase agreements, in January 2020, we paid collateralized deposits totaling $1.550 billion to the selling
shareholders, which are accounted for as loans. There is credit exposure with the current selling shareholders until the
obligations under the purchase agreements are satisfied, which is expected by the end of 2021.
e) Fixed maturities
At December 31, 2019, we have commitments to purchase fixed income securities of $731 million over the next several years.
f) Other investments
At December 31, 2019, included in Other investments in the Consolidated balance sheet are investments in limited
partnerships and partially-owned investment companies with a carrying value of $4.7 billion. In connection with these
investments, we have commitments that may require funding of up to $3.3 billion over the next several years.
g) Letters of credit
On October 25, 2017, we entered into a credit facility that provides for up to $1.0 billion of availability, all of which may be
used for the issuance of letters of credit and for revolving loans. We have the ability to increase the capacity under our existing
credit facility to $2.0 billion under certain conditions, but any such increase would not raise the sub-limit for revolving loans
above $1.0 billion. Our existing credit facility has a remaining term expiring in October 2022. At December 31, 2019, our LOC
usage was $567 million.
h) Legal proceedings
Our insurance subsidiaries are subject to claims litigation involving disputed interpretations of policy coverages and, in some
jurisdictions, direct actions by allegedly-injured persons seeking damages from policyholders. These lawsuits, involving claims
on policies issued by our subsidiaries which are typical to the insurance industry in general and in the normal course of
business, are considered in our loss and loss expense reserves. In addition to claims litigation, we are subject to lawsuits and
regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance policies. This
category of business litigation typically involves, among other things, allegations of underwriting errors or misconduct,
employment claims, regulatory activity, or disputes arising from our business ventures. In the opinion of management, our
ultimate liability for these matters could be, but we believe is not likely to be, material to our consolidated financial condition
and results of operations.
F-79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
i) Lease commitments
At December 31, 2019, the right-of-use asset was $551 million recorded within Other assets, and the lease liability was
$603 million, which was recorded within Accounts payable, accrued expenses, and other liabilities on the Consolidated balance
sheet. These leases consist principally of real estate operating leases that are amortized on a straight-line basis over the term of
the lease, which expire at various dates. As of December 31, 2019, the weighted average remaining lease term and weighted
average discount rate for the operating leases was 5.4 years and 2.7 percent, respectively. Rent expense was $171 million,
$169 million, and $211 million for the years ended December 31, 2019, 2018, and 2017, respectively.
Future minimum lease payments under the operating leases are expected to be as follows:
For the years ending December 31
(in millions of U.S. dollars)
Undiscounted cash flows:
2020
2021
2022
2023
2024
Thereafter
Total undiscounted lease payments
Less: Present value adjustment
Net lease liabilities reported as of December 31, 2019
11. Shareholders’ equity
$
$
$
158
136
107
88
66
105
660
57
603
a) Common Shares
All of Chubb’s Common Shares are authorized under Swiss corporate law. Though the par value of Common Shares is stated in
Swiss francs, Chubb continues to use U.S. dollars as its reporting currency for preparing the consolidated financial statements.
Under Swiss corporate law, we are generally prohibited from issuing Common Shares below their par value. If there were a need
to raise common equity at a time when the trading price of Chubb's Common Shares is below par value, we would need in
advance to obtain shareholder approval to decrease the par value of the Common Shares.
Dividend approval
At our May 2018 and 2017 annual general meetings, our shareholders approved an annual dividend for the following year of
up to $2.92 per share and $2.84 per share, respectively, which was paid in four quarterly installments of $0.73 per share and
$0.71 per share, respectively, at dates determined by the Board of Directors (Board) after the annual general meeting by way of
a distribution from capital contribution reserves, transferred to free reserves for payment.
At our May 2019 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.00
per share, expected to be paid in four quarterly installments of $0.75 per share after the annual general meeting by way of
distribution from capital contribution reserves, transferred to free reserves for payment. The Board will determine the record and
payment dates at which the annual dividend may be paid until the date of the 2020 annual general meeting, and is authorized
to abstain from distributing a dividend at its discretion. The first three quarterly installments each of $0.75 per share, have
been distributed by the Board as expected.
Dividend distributions
Under Swiss corporate law, dividends must be stated in Swiss francs though dividend payments are made by Chubb in U.S.
dollars. We issue dividends without subjecting them to withholding tax by way of distributions from capital contribution reserves
and payment out of free reserves.
F-80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents dividend distributions per Common Share in Swiss francs (CHF) and U.S. dollars (USD):
Total dividend distributions per common share
b) Shares issued, outstanding, authorized, and conditional
Shares issued, beginning and end of year
Year Ended December 31
CHF
2.94 $
2019
USD
2.98
CHF
2.84 $
2018
USD
2.90
CHF
2.76 $
2017
USD
2.82
Year Ended December 31
2019
2018
2017
479,783,864
479,783,864
479,783,864
Common Shares in treasury, beginning of year (at cost)
(20,580,486)
(15,950,685)
(13,815,148)
Net shares issued under employee share-based compensation plans
3,210,427
3,089,234
3,731,075
Shares repurchased
Common Shares in treasury, end of year (at cost)
Shares issued and outstanding, end of year
(10,442,238)
(7,719,035)
(5,866,612)
(27,812,297)
(20,580,486)
(15,950,685)
451,971,567
459,203,378
463,833,179
Increases in Common Shares in treasury are due to open market repurchases of Common Shares and the surrender of Common
Shares to satisfy tax withholding obligations in connection with the vesting of restricted stock and the forfeiture of unvested
restricted stock. Decreases in Common Shares in treasury are principally due to grants of restricted stock, exercises of stock
options, and purchases under the Employee Stock Purchase Plan (ESPP).
Authorized share capital for general purposes
The Board has shareholder-approved authority as set forth in the Articles of Association to increase for general purposes Chubb's
share capital from time to time until May 17, 2020, by the issuance of up to 200,000,000 fully paid up Common Shares, with
a par value equal to the par value of Chubb's Common Shares as set forth in the Articles of Association at the time of any such
issuance.
Conditional share capital for bonds and similar debt instruments
Chubb's share capital may be increased through the issuance of a maximum of 33,000,000 fully paid up Common Shares (with
a par value of CHF 24.15 as of December 31, 2019) through the exercise of conversion and/or option or warrant rights granted
in connection with bonds, notes, or similar instruments, issued or to be issued by Chubb, including convertible debt
instruments.
Conditional share capital for employee benefit plans
Chubb's share capital may be increased through the issuance of a maximum of 25,410,929 fully paid up Common Shares (with
a par value of CHF 24.15 as of December 31, 2019) in connection with the exercise of option rights granted to any employee
of Chubb, director or other person providing services to Chubb.
c) Chubb Limited securities repurchases
From time to time, we repurchase shares as part of our capital management program and to partially offset potential dilution
from the exercise of stock options and the granting of restricted stock under share-based compensation plans. The Board of
Directors has authorized share repurchase programs as follows:
• $1.0 billion of Chubb Common Shares from November 17, 2016 through December 31, 2017
• $1.0 billion of Chubb Common Shares from January 1, 2018 through December 31, 2018
• $1.5 billion of Chubb Common Shares from December 1, 2018 through December 31, 2019
• $1.5 billion of Chubb Common Shares from November 21, 2019 through December 31, 2020
Share repurchases may be in the open market, in privately negotiated transactions, block trades, accelerated repurchases and/or
through option or other forward transactions.
F-81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents repurchases of Chubb's Common Shares conducted in a series of open market transactions under
the Board authorizations:
(in millions of U.S. dollars, except share data)
Number of shares repurchased
Cost of shares repurchased
2019
2018
2017
February 26, 2020
10,442,238
7,719,035
5,866,612
$
1,531 $
1,021 $
830 $
947,400
151
Year Ended December 31 January 1, 2020 through
d) General restrictions
The holders of the Common Shares are entitled to receive dividends as approved by the shareholders. Holders of Common
Shares are allowed one vote per share provided that, if the controlled shares of any shareholder constitute ten percent or more
of the outstanding Common Shares of Chubb, only a fraction of the vote will be allowed so as not to exceed ten percent in
aggregate. Entry of acquirers of Common Shares as shareholders with voting rights in the share register may be refused if it
would confer voting rights with respect to ten percent or more of the registered share capital recorded in the commercial
register.
12. Share-based compensation
Chubb has share-based compensation plans which currently provide the Board the ability to grant awards of stock options,
restricted stock, and restricted stock units to its employees and members of the Board.
In May 2016, our shareholders approved the Chubb Limited 2016 Long-Term Incentive Plan (the 2016 LTIP), which replaced
both the ACE Limited 2004 LTIP (the 2004 LTIP) and The Chubb Corporation Long-Term Incentive Plan (2014). The 2016
LTIP is substantially similar to the 2004 LTIP in its operation and the types of awards that may be granted. Under the 2016
LTIP, Common Shares of Chubb were authorized to be issued pursuant to awards made as stock options, stock appreciation
rights, performance shares, performance units, restricted stock, and restricted stock units.
Chubb principally issues restricted stock grants and stock options on a graded vesting schedule, with equal percentages of the
award subject to vesting over a number of years (typically three or four). Chubb recognizes compensation cost for vesting of
restricted stock and stock option grants with only service conditions on a straight-line basis over the requisite service period for
each separately vesting portion of the award as if the award were, in-substance, multiple awards. We incorporate an estimate
of future forfeitures in determining compensation cost for both grants of restricted stock and stock options.
In addition, Chubb grants performance-based restricted stock to certain executives that vest based on certain performance
criteria as compared to a defined group of peer companies. Performance-based stock awards comprise target awards and
premium awards that cliff vest at the end of a 3-year performance period based on both our tangible book value (shareholders'
equity less goodwill and intangible assets, net of tax) per share growth and P&C combined ratio compared to our peer group.
Premium awards are subject to an additional vesting provision based on total shareholder return (TSR) compared to our peer
group. Shares representing target awards and premium awards are issued when the awards are approved and are subject to
forfeiture, if applicable performance criteria are not met at the end of the 3-year performance period. Prior to January 2017,
performance-based restricted stock awards had a 4-year vesting period with the potential to vest as to a portion each year, and
excluded the P&C combined ratio and TSR additional vesting criteria.
Under the 2016 LTIP, 19,500,000 Common Shares are authorized to be issued. This is in addition to any shares that have not
been delivered pursuant to the 2004 LTIP and remain available for grant pursuant to the 2004 LTIP and includes any shares
covered by awards granted under the 2004 LTIP that have forfeited, expired or canceled after the effective date of the 2016
LTIP. At December 31, 2019, a total of 10,789,285 shares remain available for future issuance under the 2016 LTIP, which
includes shares canceled or forfeited from the 2004 LTIP, in addition to common shares that were previously registered and
authorized to be issued.
Under the Employee Stock Purchase Plan (ESPP), 6,500,000 shares are authorized to be issued. At December 31, 2019, a
total of 1,785,978 shares remain available for issuance under the ESPP.
Chubb generally issues Common Shares for the exercise of stock options, restricted stock, and purchases under the ESPP from
un-issued reserved shares (conditional share capital) and Common Shares in treasury.
F-82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents pre-tax and after-tax share-based compensation expense:
(in millions of U.S. dollars)
Stock options and shares issued under ESPP:
Pre-tax
After-tax (1)
Restricted stock:
Pre-tax
After-tax
Year Ended December 31
2019
2018
2017
$
$
$
$
42 $
39 $
224 $
180 $
50 $
40 $
235 $
178 $
41
26
259
151
(1)
The windfall tax benefit recorded to Income tax expense in the Consolidated statement of operations was $12 million, $19 million, and $48 million for the years ended
December 31, 2019, 2018, and 2017, respectively.
Unrecognized compensation expense related to the unvested portion of Chubb's employee share-based awards of restricted
stock, restricted stock units, and stock options was $205 million at December 31, 2019 and is expected to be recognized over
a weighted-average period of approximately 1 year.
Stock options
Both incentive and non-qualified stock options are principally granted at an option price per share equal to the grant date fair
value of Chubb's Common Shares. Stock options are generally granted with a 3-year vesting period and a 10-year term. Stock
options vest in equal annual installments over the respective vesting period, which is also the requisite service period.
Chubb's 2019 share-based compensation expense includes a portion of the cost related to the 2016 through 2019 stock option
grants. Stock option fair value was estimated on the grant date using the Black-Scholes option-pricing model that uses the
weighted-average assumptions noted below:
Dividend yield
Expected volatility
Risk-free interest rate
Expected life
2019
2.2%
16.0%
2.6%
Year Ended December 31
2018
2.0%
23.2%
2.7%
2017
2.0%
19.7%
2.0%
5.7 years
5.7 years
5.8 years
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life (estimated
period of time from grant to exercise date) is estimated using the historical exercise behavior of employees. For year 2019,
expected volatility is calculated as a blend of (a) historical volatility based on daily closing prices over a period equal to the
expected life assumption and (b) implied volatility derived from Chubb's publicly traded options. For years 2018 and 2017,
expected volatility was calculated as a blend of (a) historical volatility based on daily closing prices over a period equal to the
expected life assumption, (b) long-term historical volatility based on daily closing prices over the period from Chubb's initial
public trading date through the most recent quarter, and (c) implied volatility derived from Chubb's publicly traded options.
F-83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents a roll-forward of Chubb's stock options:
(Intrinsic Value in millions of U.S. dollars)
Number of
Options
Weighted-Average
Exercise Price
Weighted-Average
Fair Value
Total Intrinsic
Value
Options outstanding, December 31, 2016
10,180,720 $
87.29
Granted
Exercised
Forfeited
Options outstanding, December 31, 2017
Granted
Exercised
Forfeited
Options outstanding, December 31, 2018
Granted
Exercised
Forfeited
Options outstanding, December 31, 2019
Options exercisable, December 31, 2019
2,079,522 $
139.00 $
22.97
(1,632,629) $
(194,297) $
10,433,316 $
73.53
119.44
99.20
1,842,690 $
143.07 $
29.71
(1,065,384) $
(202,900) $
11,007,722 $
73.57
133.92
108.25
2,073,940 $
133.90 $
18.76
(1,944,604) $
(251,801) $
10,885,257 $
7,213,685 $
84.13
136.87
116.79
106.26
$
$
$
$
$
111
71
122
423
356
The weighted-average remaining contractual term was 6.1 years for stock options outstanding and 4.8 years for stock options
exercisable at December 31, 2019. Cash received from the exercise of stock options for the year ended December 31, 2019
was $163 million.
Restricted stock and restricted stock units
Grants of restricted stock and restricted stock units awarded under both the 2004 LTIP and 2016 LTIP typically have a 4-year
vesting period, subject to vesting as to one-quarter of the award each anniversary of grant. Restricted stock and restricted stock
units are granted at market close price on the day of grant. Each restricted stock unit represents our obligation to deliver to the
holder one Common Share upon vesting.
Chubb also grants restricted stock awards to non-management directors which vest at the following year's annual general
meeting.
Chubb's 2019 share-based compensation expense includes a portion of the cost related to the restricted stock granted in the
years 2015 through 2019.
F-84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents a roll-forward of our restricted stock awards. Included in the roll-forward below are 19,019
restricted stock awards, 20,784 restricted stock awards, and 22,013 restricted stock awards that were granted to non-
management directors during the years ended December 31, 2019, 2018, and 2017, respectively:
Unvested restricted stock, December 31, 2016
Granted
Vested
Forfeited
Unvested restricted stock, December 31, 2017
Granted
Vested
Forfeited
Unvested restricted stock, December 31, 2018
Granted
Vested
Forfeited
Unvested restricted stock, December 31, 2019
Service-based
Restricted Stock Awards
and Restricted Stock Units
Performance-based
Restricted Stock Awards
and Restricted Stock Units
Number of Shares
Value Number of Shares
Weighted-Average
Grant-Date Fair
Weighted-Average
Grant-Date Fair
Value
5,805,126 $
1,707,094 $
(2,646,084) $
(156,694) $
4,709,442 $
1,326,979 $
(2,545,090) $
(196,482) $
3,294,849 $
1,492,900 $
(1,292,864) $
(200,875) $
3,294,010 $
109.39
139.18
107.73
114.54
121.16
142.76
114.83
131.06
134.17
134.38
129.18
135.98
136.20
931,169 $
267,282 $
(222,954) $
— $
975,497 $
180,065 $
(244,332) $
— $
911,230 $
212,059 $
(196,640) $
(50,437) $
876,212 $
111.17
138.90
113.30
—
118.28
143.07
103.03
—
127.27
133.90
115.62
132.36
131.16
Prior to 2009, legacy ACE granted restricted stock units with a 1-year vesting period to non-management directors. Delivery of
Common Shares on account of these restricted stock units to non-management directors is deferred until after the date of the
non-management directors' termination from the Board. Legacy Chubb Corp historically allowed directors and certain key
employees of Chubb Corp and its subsidiaries to defer a portion of their compensation earned with respect to services
performed in the form of deferred stock units. In addition, legacy Chubb Corp provided supplemental retirement benefits for
certain employees through its Defined Contribution Excess Benefit Plan in the form of deferred shares of stock. The minimum
vesting period under these legacy Chubb Corp deferred plans was 1-year and the maximum was 3-years. Employees and
directors had the option to elect to receive their awards at a future specified date or upon their termination of service with
Chubb. At December 31, 2019, there were 201,666 deferred restricted stock units.
ESPP
The ESPP gives participating employees the right to purchase Common Shares through payroll deductions during consecutive
subscription periods at a purchase price of 85 percent of the fair value of a Common Share on the exercise date (Purchase
Price). Annual purchases by participants are limited to the number of whole shares that can be purchased by an amount equal
to ten percent of the participant's compensation or $25,000, whichever is less. The ESPP has two six-month subscription
periods each year, the first of which runs between January 1 and June 30 and the second of which runs between July 1 and
December 31. The amounts collected from participants during a subscription period are used on the exercise date to purchase
full shares of Common Shares. An exercise date is generally the last trading day of a subscription period. The number of shares
purchased is equal to the total amount, at the exercise date, collected from the participants through payroll deductions for that
subscription period, divided by the Purchase Price, rounded down to the next full share. Participants may withdraw from an
offering before the exercise date and obtain a refund of amounts withheld through payroll deductions. Pursuant to the provisions
of the ESPP, during the years ended December 31, 2019, 2018, and 2017, employees paid $41 million, $37 million, and
$34 million to purchase 321,800 shares, 347,116 shares, and 271,185 shares, respectively.
F-85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
13. Postretirement benefits
Chubb provides postretirement benefits to eligible employees and their dependents through various defined contribution plans
sponsored by Chubb. In addition, for certain employees, Chubb sponsors other postretirement benefit plans, and prior to 2020,
Chubb sponsored defined benefit pension plans.
Defined contribution plans (including 401(k))
Under these plans, employees' contributions may be supplemented by Chubb matching contributions based on the level of
employee contribution. These contributions are invested at the election of each employee in one or more of several investment
portfolios offered by a third-party investment advisor. Expenses for these plans totaled $171 million, $171 million, and
$166 million for the years ended December 31, 2019, 2018, and 2017, respectively.
Defined benefit pension plans
We maintain non-contributory defined benefit pension plans that cover certain employees located in the U.S., U.K., Canada,
and various other statutorily required countries. We account for pension benefits using the accrual method. Benefits under these
plans are based on employees' years of service and compensation during final years of service. All underlying plans are subject
to periodic actuarial valuations by qualified actuarial firms using actuarial models to calculate the expense and liability for each
plan. We use December 31 as the measurement date for our defined benefit pension plans.
Under the Chubb Corp plans, prior to 2001, benefits were generally based on an employee’s years of service and average
compensation during the last five years of employment. Effective January 1, 2001, the formula for providing pension benefits
was changed from the final average pay formula to a cash balance formula. Under the cash balance formula, a notional account
is established for each employee, which is credited semi-annually with an amount equal to a percentage of eligible
compensation based on age and years of service plus interest based on the account balance. Chubb Corp employees hired prior
to 2001 will generally be eligible to receive vested benefits based on the higher of the final average pay or cash balance
formulas.
Other postretirement benefit plans
Our assumption of Chubb Corp's other postretirement benefit plans, principally healthcare and life insurance, covers retired
employees, their beneficiaries, and covered dependents. Healthcare coverage is contributory. Retiree contributions vary based
upon the retiree’s age, type of coverage, and years of service requirements. Life insurance coverage is non-contributory. Chubb
funds a portion of the healthcare benefits obligation where such funding can be accomplished on a tax-effective basis. Benefits
are paid as covered expenses are incurred.
Amendments to U.S. qualified and excess pension plans and U.S. retiree healthcare plan
On October 31, 2016, we harmonized and amended several of our U.S. retirement programs to create a unified retirement
savings program. In 2020, we transitioned from a traditional defined benefit pension program that had been in effect for certain
employees to a defined contribution program. Additionally, after 2025, we plan to eliminate a subsidized U.S. retiree healthcare
and life insurance plan that had been in place for certain employees. Both amendments required a remeasurement of the plan
assets and benefit obligations with updated assumptions, including discount rates and the expected return on assets. The
amendment of the retiree healthcare plan resulted in a reduction in the obligation of $383 million, of which $410 million will
be amortized as a reduction to expense through 2021 as it relates to benefits already accrued. For the years ended December
31, 2019, 2018, and 2017, $79 million, $80 million, and $89 million, respectively, were amortized as a reduction to
expense. At December 31, 2019, the remaining curtailment benefit balance was $105 million which will be amortized as a
reduction to expense over the next 1.5 years.
F-86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Obligations and funded status
The funded status of the pension and other postretirement benefit plans as well as the amounts recognized in Accumulated
other comprehensive income at December 31, 2019 and 2018 was as follows:
Pension Benefit Plans
2019
Non-U.S.
Plans
U.S. Plans
2018
Non-U.S.
Plans
U.S. Plans
Other Postretirement
Benefit Plans
2019
2018
$
3,092 $
942 $
3,285 $
1,077
$
113 $
137
(in millions of U.S. dollars)
Benefit obligation, beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Amendments
Curtailments
Settlements
Foreign currency revaluation and other
Benefit obligation, end of year
Plan assets at fair value, beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Settlements
Foreign currency revaluation and other
Plan assets at fair value, end of year
Funded status at end of year
$
$
$
$
49
118
443
(121)
—
—
(12)
—
11
27
124
(39)
—
(4)
(61)
42
57
105
(214)
(108)
—
—
(33)
—
3,569 $
1,042 $
3,092 $
12
27
(71)
(26)
4
—
(27)
(54)
942
2,784 $
1,008 $
3,109 $
1,172
636
14
(121)
(12)
—
169
16
(39)
(61)
48
(218)
34
(108)
(33)
—
(63)
14
(26)
(27)
(62)
3,301 $
1,141 $
2,784 $
1,008
(268) $
99 $
(308) $
66
$
$
$
$
—
4
3
(17)
—
—
—
—
103 $
143 $
9
—
—
—
—
152 $
49 $
Amounts recognized in Accumulated other comprehensive
income, not yet recognized in net periodic cost (benefit):
Net actuarial loss (gain)
Prior service cost (benefit)
Total
$
$
(21) $
110 $
(15) $
112
$
(3) $
—
10
—
9
(114)
(21) $
120 $
(15) $
121
$
(117) $
1
3
(20)
(15)
—
—
—
7
113
157
1
—
(15)
—
—
143
30
—
(200)
(200)
For the U.S. pension plans, the $443 million actuarial loss experienced in 2019 was principally driven by the decrease in the
discount rate from 2018 that was used to determine the projected benefit obligation at December 31, 2019. The $214 million
actuarial gain experienced in 2018 was largely driven by the increase in the discount rate from 2017 that was used to
determine the projected benefit obligation at December 31, 2018.
The accumulated benefit obligation for the pension benefit plans was $4.6 billion and $4.0 billion at December 31, 2019 and
2018, respectively. The accumulated benefit obligation is the present value of pension benefits earned as of the measurement
date based on employee service and compensation prior to that date. It differs from the pension (projected) benefit obligation in
the table above in that the accumulated benefit obligation includes no assumptions regarding future compensation levels.
The net components of the funded status of the pension and other postretirement benefit plans are included in Accounts
payable, accrued expenses, and other liabilities in the Consolidated balance sheets.
Chubb’s funding policy is to contribute amounts that meet regulatory requirements plus additional amounts determined based
on actuarial valuations, market conditions and other factors. All benefit plans satisfy minimum funding requirements of the
Employee Retirement Income Security Act of 1974 (ERISA).
F-87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table provides information on pension plans where the benefit obligation is in excess of plan assets at December
31, 2019 and 2018:
(in millions of U.S. dollars)
U.S. Plans
Plans with projected benefit obligation in excess of plan assets:
2019
Non-U.S.
Plans
U.S. Plans
2018
Non-U.S.
Plans
Projected benefit obligation
Fair value of plan assets
Net funded status
Plans with accumulated benefit obligation in excess of plan assets:
Accumulated benefit obligation
Fair value of plan assets
$
$
$
$
3,569 $
236 $
3,092 $
3,301
175
2,784
(268) $
(61) $
(308) $
3,569 $
3,301 $
173 $
3,066 $
140 $
2,784 $
222
170
(52)
115
86
For other postretirement benefit plans with an accumulated benefit obligation in excess of plan assets, the accumulated benefit
obligation was $25 million and $23 million at December 31, 2019 and 2018, respectively. These plans have no plan assets.
At December 31, 2019, we estimate that we will contribute $23 million to the pension plans and $1 million to the other
postretirement benefits plan in 2020. The estimate is subject to change due to contribution decisions that are affected by
various factors including our liquidity, market performance and management discretion.
The weighted-average assumptions used to determine the projected benefit obligation were as follows:
December 31, 2019
Discount rate
Rate of compensation increase (1)
Interest crediting rate
December 31, 2018
Discount rate
Rate of compensation increase
Interest crediting rate
Pension Benefit Plans
U.S.
Plans
Non-U.S.
Plans
Other
Postretirement
Benefit Plans
3.20%
N/A
4.10%
4.20%
4.00%
4.10%
2.39%
3.26%
2.70%
N/A
3.10%
3.37%
3.78%
N/A
(1) For the U.S. Pension Plans, benefit accruals were frozen as of December 31, 2019.
The projected benefit cash flows were discounted using the corresponding spot rates derived from a yield curve, which resulted
in a single discount rate that would produce the same liability at the respective measurement dates. The same process was
applied to service cost cash flows to determine the discount rate associated with the service cost. In general, the discount rates
for the non-U.S. plans were developed using a similar methodology by using country-specific yield curves.
F-88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The components of net pension and other postretirement benefit costs reflected in Net income and other changes in plan assets
and benefit obligations recognized in other comprehensive income were as follows:
Year Ended December 31
(in millions of U.S. dollars)
Costs reflected in Net income:
Service cost
Non-service cost:
Interest cost
Expected return on plan assets
Amortization of net actuarial loss
Amortization of prior service cost
Curtailments
Settlements
Total non-service benefit
Net periodic benefit
Changes in plan assets and benefit
obligations recognized in other
comprehensive income
Net actuarial loss (gain)
Prior service cost (benefit)
Amortization of net actuarial loss
Amortization of prior service cost
Curtailments
Settlements
Total decrease (increase) in other
comprehensive income
Pension Benefit Plans
U.S. Plans
Non-U.S. Plans
Other Postretirement
Benefit Plans
2019
2018
2017
2019
2018
2017
2019
2018
2017
$
49 $ 57
$ 63
$ 11
$ 12
$ 17
$ — $
1
3
(5)
—
(85)
(2)
—
$
2
4
(5)
—
(89)
(37)
—
118
105
105
(189)
(212)
(189)
—
—
—
2
—
—
—
2
—
—
—
—
27
(45)
3
—
(1)
1
27
(50)
1
—
—
3
(69)
(105)
(84)
(15)
(19)
27
(42)
3
—
(27)
—
(39)
4
(4)
—
(84)
—
—
(84)
(89)
(127)
$ (20) $ (48)
$ (21)
$ (4)
$ (7)
$ (22)
$ (84)
$ (88)
$ (125)
$
(4) $ 214
$ (21)
$
—
—
—
—
—
—
—
—
(2)
(2)
—
—
—
—
1
6
1
(3)
—
(3)
(1)
$ 34
$ (57)
$ (2)
$ (11)
$
(3)
3
(1)
—
—
(3)
—
(3)
—
(6)
—
—
—
84
—
—
—
(1)
85
3
—
(23)
—
89
39
—
$
(6) $ 212
$ (20)
$ — $ 33
$ (66)
$ 82
$ 76
$ 102
The service and non-service cost components of net periodic (benefit) cost reflected in the Consolidated statements of
operations were as follows:
Year Ended December 31
(in millions of U.S. dollars)
Service Cost:
Losses and loss expenses
Administrative expenses
Total service cost
Non-Service Cost:
Losses and loss expenses
Administrative expenses
Total non-service benefit
Net periodic benefit
Pension Benefit Plans
Other Postretirement Benefit Plans
2019
2018
2017
2019
2018
2017
$
6 $
7 $
7 $
— $
— $
54
60
(7)
(77)
(84)
62
69
(10)
(114)
(124)
73
80
(8)
(115)
(123)
—
—
(8)
(76)
(84)
1
1
(9)
(80)
(89)
—
2
2
(13)
(114)
(127)
$
(24) $
(55) $
(43) $
(84) $
(88) $
(125)
F-89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The weighted-average assumptions used to determine the net periodic pension and other postretirement benefit costs were as
follows:
Year Ended December 31
2019
Discount rate in effect for determining service cost
Discount rate in effect for determining interest cost
Rate of compensation increase
Expected long-term rate of return on plan assets
Interest crediting rate
2018
Discount rate in effect for determining service cost
Discount rate in effect for determining interest cost
Rate of compensation increase
Expected long-term rate of return on plan assets
Interest crediting rate
2017
Discount rate in effect for determining service cost
Discount rate in effect for determining interest cost
Rate of compensation increase
Expected long-term rate of return on plan assets
Interest crediting rate
Pension Benefit Plans
U.S.
Plans
Non-U.S.
Plans
Other
Postretirement
Benefit Plans
4.23%
3.94%
4.00%
7.00%
4.10%
3.62%
3.27%
4.00%
7.00%
4.10%
4.20%
3.53%
4.00%
7.00%
4.10%
4.48%
2.88%
3.37%
4.40%
N/A
3.97%
2.55%
3.46%
4.32%
N/A
3.55%
2.61%
3.57%
4.23%
N/A
4.04%
3.69%
N/A
3.00%
N/A
2.84%
2.62%
N/A
2.59%
N/A
2.84%
2.44%
N/A
3.00%
N/A
The weighted-average healthcare cost trend rate assumptions used to measure the expected cost of healthcare benefits were as
follows:
Healthcare cost trend rate
Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
U.S. Plans
Non-U.S. Plans
2019
2018
2017
2019
2018
2017
6.32%
6.68%
7.01%
5.24%
6.29%
6.61%
4.50%
4.50%
4.50%
4.00%
4.50%
4.50%
2038
2038
2038
2040
2029
2029
Plan Assets
The long term objective of the pension plan is to provide sufficient funding to cover expected benefit obligations, while assuming
a prudent level of portfolio risk. The assets of the pension plan are invested, either directly or through pooled funds, in a
diversified portfolio of predominately equity securities and fixed maturities. We seek to obtain a rate of return that over time
equals or exceeds the returns of the broad markets in which the plan assets are invested. The target allocation of plan assets is
55 percent to 65 percent invested in equity securities (including certain other investments measured using NAV), with the
remainder primarily invested in fixed maturities. We rebalance our pension assets to the target allocation as market conditions
permit. We determined the expected long term rate of return assumption for each asset class based on an analysis of the
historical returns and the expectations for future returns. The expected long term rate of return for the portfolio is a weighted
aggregation of the expected returns for each asset class.
In order to minimize risk, the Plan maintains a listing of permissible and prohibited investments. In addition, the Plan has
certain concentration limits and investment quality requirements imposed on permissible investments options. Investment risk
is measured and monitored on an ongoing basis.
F-90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following tables present the fair values of the pension plan assets, by valuation hierarchy. For additional information on how
we classify these assets within the valuation hierarchy, refer to Note 4 to the Consolidated financial statements.
December 31, 2019
(in millions of U.S. dollars)
U.S. Plans:
Short-term investments
U.S. Treasury and agency
Foreign and corporate bonds
States, municipalities, and political subdivisions
Equity securities
Total U.S. Plan assets (1)
Non-U.S. Plans:
Short-term investments
Foreign and corporate bonds
Equity securities
Total Non-U.S. Plan assets (1)
Level 1
Level 2
Level 3
Total
Pension Benefit Plans
$
$
$
$
18 $
37 $
— $
466
—
—
1,467
134
749
2
—
—
—
—
—
1,951 $
922 $
— $
2 $
— $
— $
—
112
598
318
—
—
55
600
749
2
1,467
2,873
2
598
430
114 $
916 $
— $
1,030
(1)
Excluded from the table above are $428 million and $107 million of other investments measured using NAV as a practical expedient related to the U.S. Plans and Non-
U.S. Plans, respectively, and limited partnerships of $4 million in Non-U.S. Plans.
December 31, 2018
(in millions of U.S. dollars)
U.S. Plans:
Short-term investments
U.S. Treasury and agency
Foreign and corporate bonds
Equity securities
Total U.S. Plan assets (1)
Non-U.S. Plans:
Short-term investments
Foreign and corporate bonds
Equity securities
Total Non-U.S. Plan assets (1)
Pension Benefit Plans
Level 1
Level 2
Level 3
10 $
74 $
— $
433
—
1,050
82
641
—
—
—
—
1,493 $
797 $
— $
7 $
— $
— $
—
103
418
371
—
—
110 $
789 $
— $
$
$
$
$
Total
84
515
641
1,050
2,290
7
418
474
899
(1)
Excluded from the table above are $494 million and $109 million of other investments measured using NAV as a practical expedient related to the U.S. Plans and Non-
U.S. Plans, respectively.
The other postretirement benefit plan had $152 million and $143 million of other investments measured using NAV as a
practical expedient at December 31, 2019 and 2018, respectively. Expected future benefit payments are as follows:
For the years ending December 31
(in millions of U.S. dollars)
2020
2021
2022
2023
2024
2025-2029
Pension Benefit Plans
U.S.
Plans
Non-U.S.
Plans
Other
Postretirement
Benefit Plans
$
151 $
27 $
157
164
169
174
931
28
27
29
29
171
19
21
22
18
13
11
F-91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
14. Other income and expense
(in millions of U.S. dollars)
Year Ended December 31
2019
2018
2017
Equity in net income of partially-owned entities (1)
$
617 $
514 $
Gains (losses) from fair value changes in separate account assets (2)
One-time contribution to the Chubb Charitable Foundation
Federal excise and capital taxes
Other
Total
44
—
(23)
(42)
(38)
—
(12)
(30)
$
596 $
434 $
418
97
(50)
(35)
(30)
400
(1)
(2)
Equity in net income of partially-owned entities includes $74 million, $43 million, and $3 million attributable to our investments in Huatai (Huatai Group, Huatai P&C, and
Huatai Life) for the years ended December 31, 2019, 2018, and 2017, respectively.
Related to gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.
Other income and expense includes equity in net income of partially-owned entities, which includes our share of net income or
loss related to partially-owned investment companies (private equity) and partially-owned insurance companies. Also included
in Other income and expense are gains (losses) from fair value changes in separate account assets that do not qualify for
separate account reporting under GAAP. The offsetting movement in the separate account liabilities is included in Policy benefits
in the Consolidated statements of operations. Certain federal excise and capital taxes incurred as a result of capital management
initiatives are included in Other income and expense as these are considered capital transactions and are excluded from
underwriting results.
15. Segment information
Chubb operates through six business segments: North America Commercial P&C Insurance, North America Personal P&C
Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. These
segments distribute their products through various forms of brokers, agencies, and direct marketing programs. All business
segments have established relationships with reinsurance intermediaries.
• The North America Commercial P&C Insurance segment includes the business written by Chubb divisions that provide
property and casualty (P&C) insurance and services to large, middle market and small commercial businesses in the U.S.,
Canada, and Bermuda. This segment includes our retail divisions: Major Accounts, Commercial Insurance, including Small
Commercial Insurance; and our wholesale and specialty divisions: Westchester and Chubb Bermuda. These divisions write
a variety of coverages, including property, casualty, workers’ compensation, package policies, risk management, financial
lines, marine, construction, environmental, medical risk, cyber risk, surety, and excess casualty; as well as group accident
and health (A&H) insurance.
• The North America Personal P&C Insurance segment includes the business written by Chubb Personal Risk Services
division, which includes high net worth personal lines business, with operations in the U.S. and Canada. This segment
provides affluent and high net worth individuals and families with homeowners, automobile and collector cars, valuable
articles (including fine arts), personal and excess liability, travel insurance, and recreational marine insurance and services.
• The North America Agricultural Insurance segment includes the business written by Rain and Hail Insurance Service, Inc.
in the U.S. and Canada, which provides comprehensive multiple peril crop insurance (MPCI) and crop-hail insurance, and
Chubb Agribusiness, which offers farm and ranch property as well as specialty P&C coverages, including commercial
agriculture products.
F-92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
• The Overseas General Insurance segment includes the business written by two Chubb divisions that provide P&C insurance
and services in the 51 countries and territories outside of North America where the company operates. Chubb International
provides commercial P&C, A&H and traditional and specialty personal lines for large corporations, middle markets and
small customers through retail brokers, agents and other channels locally around the world. Chubb Global Markets (CGM)
provides commercial P&C excess and surplus lines and A&H through wholesale brokers in the London market and through
Lloyd’s. These divisions write a variety of coverages, including traditional commercial P&C, specialty categories such as
financial lines, marine, energy, aviation, political risk and construction, as well as group A&H and traditional and specialty
personal lines.
• The Global Reinsurance segment includes the reinsurance business written by Chubb Tempest Re, comprising Chubb
Tempest Re Bermuda, Chubb Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada. Chubb
Tempest Re provides a broad range of traditional and specialty reinsurance coverages to a diverse array of primary P&C
companies, including small, mid-sized, and multinational ceding companies.
• The Life Insurance segment includes Chubb's international life operations written by Chubb Life, Chubb Tempest Life Re
and the North American supplemental A&H and life business of Combined Insurance.
Corporate primarily includes the results of all run-off asbestos and environmental (A&E) exposures, our run-off Brandywine
business, and our Westchester specialty operations for 1996 and prior years, and certain other non-A&E run-off exposures. In
addition, Corporate includes the results of our non-insurance companies including Chubb Limited, Chubb Group Management
and Holdings Ltd., and Chubb INA Holdings Inc. Our exposure to A&E claims principally arises out of liabilities acquired when
we purchased Westchester Specialty in 1998, CIGNA’s P&C business in 1999, and Chubb Corp in 2016.
In addition, revenue and expenses managed at the corporate level, including realized gains and losses, interest expense, the
non-operating income of our partially-owned entities, and income taxes are reported within Corporate. Chubb integration
expenses are also reported within Corporate. Chubb integration expenses are one-time costs that are directly attributable to the
achievement of the annualized savings, including employee severance, third-party consulting fees, and systems integration
expenses. These items will not be allocated to the segment level as they are one-time in nature and are not related to the
ongoing business activities of the segment. The Chief Executive Officer does not manage segment results or allocate resources to
segments when considering these costs and they are therefore excluded from our definition of segment income (loss). Therefore,
segment income (loss) will only include underwriting income (loss), net investment income (loss), and other operating income
and expense items such as each segment's share of the operating income (loss) related to partially-owned entities and
miscellaneous income and expense items for which the segments are held accountable. Segment income (loss) also includes
amortization of purchased intangibles related to business combination intangible assets acquired by the segment and other
purchase accounting related intangible assets, including agency relationships, renewal rights, and client lists. The amortization
of intangible assets purchased as part of the Chubb Corp acquisition is considered a Corporate cost as these are incurred by the
overall company. We determined that this definition of segment income (loss) is appropriate and aligns with how the business is
managed. We continue to evaluate our segments as our business continues to evolve and may further refine our segments and
segment income (loss) measures.
For segment reporting purposes, certain items are presented in a different manner below than in the consolidated financial
statements. Management uses underwriting income (loss) as the main measures of segment performance. Chubb calculates
underwriting income (loss) by subtracting Losses and loss expenses, Policy benefits, Policy acquisition costs, and Administrative
expenses from Net premiums earned. To calculate Segment income (loss), include Net investment income (loss), Other
(income) expense, and Amortization expense of purchased intangibles. For the North America Agricultural Insurance segment,
management includes gains and losses on crop derivatives as a component of underwriting income (loss). For example, for the
year ended December 31, 2019, underwriting income in our North America Agricultural Insurance segment was $89 million.
This amount includes $8 million of realized losses related to crop derivatives which are reported in Net realized gains (losses)
including OTTI in the Corporate column below.
For the Life Insurance segment, management includes Net investment income (loss) and (Gains) losses from fair value changes
in separate account assets that do not qualify for separate account reporting under GAAP as components of Life Insurance
underwriting income (loss). For example, for the year ended December 31, 2019, Life Insurance underwriting income of $320
million includes Net investment income of $373 million and gains from fair value changes in separate account assets of $44
million. The gains from fair value changes in separate account assets are reported in Other (income) expense in the table below.
F-93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following tables present the Statement of Operations by segment:
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Corporate
Chubb
Consolidated
$ 13,375 $ 4,787 $ 1,810 $ 9,262 $
649 $ 2,392 $
— $
32,275
12,922
8,206
—
1,831
1,028
1,857
2,082
(3)
—
4,694
3,043
1,795
1,608
—
948
286
417
258
3
12
—
84
6
97
30
1
28
8,882
4,606
—
2,501
1,033
742
588
12
45
654
352
—
169
35
98
220
(58)
2,343
757
740
620
323
(97)
373
(92)
—
158
—
—
319
(477)
(125)
(459)
31,290
18,730
740
6,153
3,030
2,637
3,426
(596)
—
2
218
305
$
3,942 $
660 $
98 $ 1,273 $
376 $
366 $ (361) $
6,354
(530)
(530)
552
23
795
552
23
795
$ (2,261) $
4,454
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Corporate
Chubb
Consolidated
$ 12,485 $ 4,674 $ 1,577 $ 8,902 $
671 $ 2,270 $
— $ 30,579
12,402
8,000
4,593
3,229
1,569
1,111
—
1,829
966
1,607
2,033
(25)
—
939
269
156
236
1
—
13
—
79
(9)
388
28
2
28
8,612
4,429
—
2,346
1,014
823
619
—
41
670
479
—
162
41
(12)
257
(32)
2,218
766
590
557
310
(5)
341
26
—
53
—
—
295
(348)
(209)
(406)
30,064
18,067
590
5,912
2,886
2,609
3,305
(434)
—
2
255
339
$
3,665 $
378 $
386 $ 1,401 $
277 $
308 $ (406) $
6,009
(652)
(652)
641
59
695
641
59
695
$ (2,453) $
3,962
For the Year Ended
December 31, 2019
(in millions of U.S. dollars)
Net premiums written
Net premiums earned
Losses and loss expenses
Policy benefits
Policy acquisition costs
Administrative expenses
Underwriting income (loss)
Net investment income (loss)
Other (income) expense
Amortization expense of
purchased intangibles
Segment income (loss)
Net realized gains (losses)
including OTTI
Interest expense
Chubb integration expenses
Income tax expense
Net income (loss)
For the Year Ended
December 31, 2018
(in millions of U.S. dollars)
Net premiums written
Net premiums earned
Losses and loss expenses
Policy benefits
Policy acquisition costs
Administrative expenses
Underwriting income (loss)
Net investment income (loss)
Other (income) expense
Amortization expense of
purchased intangibles
Segment income (loss)
Net realized gains (losses)
including OTTI
Interest expense
Chubb integration expenses
Income tax expense
Net income (loss)
F-94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
For the Year Ended
December 31, 2017
(in millions of U.S. dollars)
Net premiums written
Net premiums earned
Losses and loss expenses
Policy benefits
Policy acquisition costs
Administrative expenses
Underwriting income (loss)
Net investment income (loss)
Other (income) expense
Amortization expense of
purchased intangibles
Segment income (loss)
Net realized gains (losses)
including OTTI
Interest expense
Chubb integration expenses
Income tax benefit
Net income (loss)
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Corporate
Chubb
Consolidated
$ 12,019 $ 4,533 $ 1,516 $ 8,350 $
685 $ 2,141 $
— $
29,244
12,191
8,287
—
1,873
981
1,050
1,961
1
—
4,399
3,265
1,508
1,036
—
899
264
(29)
226
4
16
—
81
(8)
399
25
2
29
8,131
4,281
—
2,221
982
647
610
(4)
45
704
561
—
177
44
(78)
273
(1)
2,101
739
676
530
303
(147)
313
(84)
—
285
—
—
267
(552)
(283)
(318)
29,034
18,454
676
5,781
2,833
1,290
3,125
(400)
—
2
168
260
$
3,010 $
177 $
393 $ 1,216 $
196 $
248 $ (685) $
4,555
84
607
310
84
607
310
(139)
(139)
$ (1,379) $
3,861
Underwriting assets are reviewed in total by management for purposes of decision-making. Other than Unpaid losses and loss
expenses, Reinsurance recoverables, Goodwill and Other intangible assets, Chubb does not allocate assets to its segments.
F-95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents net premiums earned for each segment by line of business:
(in millions of U.S. dollars)
North America Commercial P&C Insurance
Property & other short-tail lines
Casualty & all other
A&H
Total North America Commercial P&C Insurance
North America Personal P&C Insurance
Personal automobile
Personal homeowners
Personal other
Total North America Personal P&C Insurance
North America Agricultural Insurance
Overseas General Insurance
Property & other short-tail lines
Casualty & all other
Personal lines
A&H
Total Overseas General Insurance
Global Reinsurance
Property & other short-tail lines
Property catastrophe
Casualty & all other
Total Global Reinsurance
Life Insurance
Life
A&H
Total Life Insurance
Total net premiums earned
For the Year Ended December 31
2019
2018
2017
$
1,987 $
1,861 $
10,136
799
12,922
9,773
768
12,402
829
3,183
682
4,694
1,795
2,244
2,494
1,896
2,248
8,882
131
142
381
654
1,101
1,242
2,343
803
3,127
663
4,593
1,569
2,134
2,429
1,784
2,265
8,612
123
170
377
670
1,022
1,196
2,218
1,899
9,554
738
12,191
742
3,014
643
4,399
1,508
2,076
2,266
1,609
2,180
8,131
132
198
374
704
980
1,121
2,101
$
31,290 $
30,064 $
29,034
The following table presents net premiums earned by geographic region. Allocations have been made on the basis of location of
risk:
2019
2018
2017
(1)
Europe includes Eurasia and Africa regions.
North America
Europe (1)
Asia Pacific /
Far East
Latin America
70%
70%
70%
11%
11%
11%
12%
12%
12%
7%
7%
7%
F-96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
16. Earnings per share
(in millions of U.S. dollars, except share and per share data)
2019
2018
2017
Year Ended December 31
Numerator:
Net income
Denominator:
Denominator for basic earnings per share:
Weighted-average shares outstanding
Denominator for diluted earnings per share:
Share-based compensation plans
Weighted-average shares outstanding
and assumed conversions
Basic earnings per share
Diluted earnings per share
Potential anti-dilutive share conversions
$
4,454 $
3,962 $
3,861
455,910,463
463,629,203
467,145,716
3,004,200
3,173,145
4,051,185
458,914,663
466,802,348
471,196,901
$
$
9.77 $
9.71 $
8.55 $
8.49 $
8.26
8.19
2,410,337
3,543,188
1,776,025
Excluded from weighted-average shares outstanding and assumed conversions is the impact of securities that would have been
anti-dilutive during the respective years.
17. Related party transactions
Starr Indemnity & Liability Company and its affiliates (collectively, Starr)
We have a number of agency and reinsurance agreements with Starr, the Chairman of which is related to a member of our
senior management team. The Board has reviewed and approved our arrangements with Starr. We have agency, claims services
and underwriting services agreements with various Starr subsidiaries. Under the agency agreements, we secure the ability to
sell our insurance policies through Starr as one of our non-exclusive agents for writing policies, contracts, binders, or
agreements of insurance or reinsurance. Under the claims services agreements, Starr adjusts the claims under policies and
arranges for third party treaty and facultative agreements covering such policies. Under the underwriting services agreements,
Starr underwrites insurance policies on our behalf and we agree to reinsure such policies to Starr under one or more quota
reinsurance agreements.
Certain agency agreements also contain a profit-sharing arrangement based on loss ratios, triggered if Starr underwrites a
minimum of $20 million of annual program business net premiums written on our behalf. No profit share commission has been
payable yet under this arrangement. Another agency agreement contains a profit-sharing arrangement based on the earned
premiums for the business underwritten by Starr (excluding workers’ compensation) and the reinsurance recoveries associated
with excess of loss reinsurance agreements placed by Starr for the business underwritten. No profit share commission under
this arrangement has been payable yet. Transactions generated under Starr agreements were as follows:
(in millions of U.S. dollars)
Consolidated statement of operations
Gross premiums written
Ceded premiums written
Commissions paid
Commissions received
Losses and loss expenses incurred
Consolidated balance sheets
Reinsurance recoverable on losses and loss expenses
Ceded reinsurance premium payable
Year Ended December 31
2019
2018
2017
$
$
$
$
$
$
$
394 $
207 $
77 $
46 $
411 $
188 $
84 $
42 $
185 $
188 $
440 $
56 $
514
75
464
175
101
37
438
F-97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
ABR Re
We own 12.2 percent of the common equity of ABR Reinsurance Capital Holdings Ltd. and warrants to acquire 0.5 percent of
additional equity. ABR Reinsurance Capital Holdings Ltd., is the parent company of ABR Reinsurance Ltd. (ABR Re), an
independent reinsurance company. Through long-term arrangements, Chubb will be the sole source of reinsurance risks ceded
to ABR Re, and BlackRock, Inc. will be ABR Re’s exclusive investment management service provider. As an investor, Chubb is
expected to benefit from underwriting profit generated by ABR Re’s reinsuring a wide range of Chubb’s primary insurance
business and the income and capital appreciation BlackRock, Inc. seeks to deliver through its investment management services.
In addition, Chubb has entered into an arrangement with BlackRock, Inc. under which both Chubb and BlackRock, Inc. will be
entitled to an equal share of the aggregate amount of certain fees, including underwriting and investment management
performance related fees, in connection with their respective reinsurance and investment management arrangements with ABR
Re.
ABR Re is a variable interest entity; however, Chubb is not the primary beneficiary and does not consolidate ABR Re because
Chubb does not have the power to control and direct ABR Re’s most significant activities, including investing and underwriting.
Our minority ownership interest is accounted for under the equity method of accounting. Chubb cedes premiums to ABR Re and
recognizes the associated commissions.
Transactions generated under ABR Re agreements were as follows:
(in millions of U.S. dollars)
Consolidated statement of operations
Ceded premiums written
Commissions received
Consolidated balance sheets
Reinsurance recoverable on losses and loss expenses
Ceded reinsurance premium payable
Year Ended December 31
2019
2018
2017
$
$
$
$
321 $
92 $
674 $
62 $
329 $
96 $
342
94
557
47
F-98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
18. Statutory financial information
Our subsidiaries file financial statements prepared in accordance with statutory accounting practices prescribed or permitted by
insurance regulators. Statutory accounting differs from GAAP in the reporting of certain reinsurance contracts, investments,
subsidiaries, acquisition expenses, fixed assets, deferred income taxes, and certain other items. Some jurisdictions impose
complex regulatory requirements on insurance companies while other jurisdictions impose fewer requirements. In some
jurisdictions, we must obtain licenses issued by governmental authorities to conduct local insurance business. These licenses
may be subject to reserves and minimum capital and solvency tests. Jurisdictions may impose fines, censure, and/or criminal
sanctions for violation of regulatory requirements. The 2019 amounts below are based on estimates.
Chubb's insurance and reinsurance subsidiaries are subject to insurance laws and regulations in the jurisdictions in which they
operate. These regulations include restrictions that limit the amount of dividends or other distributions, such as loans or cash
advances, available to shareholders without prior approval of the local insurance regulatory authorities. The amount of dividends
available to be paid in 2020 without prior approval totals $6.5 billion.
The statutory capital and surplus of our insurance subsidiaries met regulatory requirements for 2019, 2018, and 2017. The
minimum amounts of statutory capital and surplus necessary to satisfy regulatory requirements was $26.3 billion and
$24.2 billion for December 31, 2019 and 2018, respectively. These minimum regulatory capital requirements were
significantly lower than the corresponding amounts required by the rating agencies which review Chubb’s insurance and
reinsurance subsidiaries.
The following tables present the combined statutory capital and surplus and statutory net income (loss) of our Property and
casualty and Life subsidiaries:
(in millions of U.S. dollars)
Statutory capital and surplus
Property and casualty
Life
(in millions of U.S. dollars)
Statutory net income (loss)
Property and casualty
Life
December 31
2018
2019
$
$
43,684 $
40,780
1,900 $
1,279
2019
Year Ended December 31
2017
2018
$
$
5,931 $
7,521 $
8,178
(227) $
(102) $
49
Several insurance subsidiaries follow accounting practices prescribed or permitted by the jurisdiction of domicile that differ from
the applicable local statutory practice. The application of prescribed or permitted accounting practices does not have a material
impact on Chubb's statutory surplus and income. As prescribed by the Restructuring discussed previously in Note 7, certain of
our U.S. subsidiaries discount certain A&E liabilities, which increased statutory capital and surplus by approximately $147
million and $160 million at December 31, 2019 and 2018, respectively.
Federal Insurance Company (Federal), a direct subsidiary of Chubb INA Holdings Inc., has a permitted practice granted by the
Indiana Department of Insurance that relates to its investments in foreign subsidiaries and affiliates. Under Statement of
Statutory Accounting Principles No. 97, Investments in Subsidiary, Controlled and Affiliated Entities, A Replacement of SSAP
No. 88, in order for a reporting entity to admit its investments in foreign subsidiaries and affiliates, audited financial statements
of the subsidiary or affiliate must be obtained to support the carrying value. Such financial statements must be prepared in
accordance with U.S. GAAP, or alternatively, in accordance with the local statutory requirements in the subsidiary’s or affiliate’s
country of domicile, with an audited footnote reconciliation of net income and shareholder’s equity as reported to a U.S. GAAP
basis. With the explicit permission of the Indiana Department of Insurance, Federal obtains audited financial statements for its
admitted foreign subsidiaries and affiliates, which had an aggregate carrying value of approximately $54 million and $178
million at December 31, 2019 and 2018, respectively, prepared in accordance with their respective local statutory
requirements and supplemented with a separate unaudited reconciliation of shareholder’s equity as reported to a U.S. GAAP
basis.
F-99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
19. Information provided in connection with outstanding debt of subsidiaries
The following tables present condensed consolidating financial information at December 31, 2019 and December 31, 2018,
and for the years ended December 31, 2019, 2018, and 2017 for Chubb Limited (Parent Guarantor) and Chubb INA Holdings
Inc. (Subsidiary Issuer). The Subsidiary Issuer is an indirect 100 percent-owned subsidiary of the Parent Guarantor. The Parent
Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer. Condensed consolidating financial
information of the Parent Guarantor and Subsidiary Issuer are presented on the equity method of accounting. The revenues and
expenses and cash flows of the subsidiaries of the Subsidiary Issuer are presented in the Other Chubb Limited Subsidiaries
column on a combined basis.
Condensed Consolidating Balance Sheet at December 31, 2019
(in millions of U.S. dollars)
Assets
Investments
Cash (1)
Restricted Cash
Insurance and reinsurance balances
receivable
Reinsurance recoverable on losses and loss
expenses
Reinsurance recoverable on policy benefits
Value of business acquired
Goodwill and other intangible assets
Investments in subsidiaries
Due from subsidiaries and affiliates, net
Other assets
Total assets
Liabilities
Unpaid losses and loss expenses
Unearned premiums
Future policy benefits
Due to subsidiaries and affiliates, net
Repurchase agreements
Short-term debt
Long-term debt
Trust preferred securities
Other liabilities
Total liabilities
Total shareholders’ equity
Chubb Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments and
Eliminations
Chubb Limited
Consolidated
$
— $
1,013 $
108,221 $
— $
109,234
2
—
—
—
—
—
—
442
—
—
—
—
—
—
50,853
4,776
12
52,076
—
408
1,093
109
—
—
1,537
109
12,920
(2,563)
10,357
24,780
(9,599)
15,181
292
306
21,359
—
—
20,072
(95)
—
—
(102,929)
(4,776)
(1,829)
197
306
21,359
—
—
18,663
55,643 $
53,939 $
189,152 $
(121,791) $
176,943
— $
— $
71,916 $
(9,226) $
—
—
—
—
—
—
—
312
312
55,331
—
—
4,446
—
1,298
13,559
308
1,649
21,260
32,679
17,978
5,909
330
1,416
1
—
—
21,352
118,902
70,250
(1,207)
(95)
(4,776)
—
—
—
—
(3,558)
(18,862)
(102,929)
62,690
16,771
5,814
—
1,416
1,299
13,559
308
19,755
121,612
55,331
$
$
Total liabilities and shareholders’ equity
$
55,643 $
53,939 $
189,152 $
(121,791) $
176,943
(1)
Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information.
Subsequent Events
In January 2020, Chubb INA Holdings Inc. paid $1.5 billion towards the series of intercompany loans involving its parents,
Chubb Group Holdings Inc. and Chubb Limited. Additionally, Chubb Limited contributed $1.2 billion to a subsidiary included in
Other Chubb Limited Subsidiaries.
F-100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Balance Sheet at December 31, 2018
(in millions of U.S. dollars)
Assets
Investments
Cash (1)
Restricted Cash
Insurance and reinsurance balances
receivable
Reinsurance recoverable on losses and
loss expenses
Reinsurance recoverable on policy benefits
Value of business acquired
Goodwill and other intangible assets
Investments in subsidiaries
Due from subsidiaries and affiliates, net
Other assets
Total assets
Liabilities
Unpaid losses and loss expenses
Unearned premiums
Future policy benefits
Due to subsidiaries and affiliates, net
Affiliated notional cash pooling programs (1)
Repurchase agreements
Short-term debt
Long-term debt
Trust preferred securities
Other liabilities
Total liabilities
Total shareholders’ equity
Chubb Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments and
Eliminations
Chubb Limited
Consolidated
$
— $
214 $
100,754 $
— $
100,968
1
—
—
—
—
—
—
2
—
—
—
—
—
—
43,531
7,074
3
50,209
—
1,007
1,896
93
(652)
—
1,247
93
11,861
(1,786)
10,075
26,422
(10,429)
15,993
306
295
21,414
—
598
18,102
(104)
—
—
(93,740)
(7,672)
(1,628)
202
295
21,414
—
—
17,484
$
$
50,609 $
51,432 $
181,741 $
(116,011) $
167,771
— $
— $
72,857 $
(9,897) $
—
—
—
35
—
—
—
—
262
297
50,312
—
—
7,672
617
—
500
12,086
308
2,545
23,728
27,704
16,611
5,610
—
—
1,418
9
1
—
19,199
115,705
66,036
(1,079)
(104)
(7,672)
(652)
—
—
—
—
(2,867)
(22,271)
(93,740)
62,960
15,532
5,506
—
—
1,418
509
12,087
308
19,139
117,459
50,312
Total liabilities and shareholders’ equity
$
50,609 $
51,432 $
181,741 $
(116,011) $
167,771
(1)
Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2018, the cash
balance of one or more entities was negative; however, the overall Pool balances were positive.
F-101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Statements of Operations and Comprehensive Income
For the Year Ended December 31, 2019
(in millions of U.S. dollars)
Net premiums written
Net premiums earned
Net investment income
Equity in earnings of subsidiaries
Net realized gains (losses) including OTTI
Losses and loss expenses
Policy benefits
Policy acquisition costs and administrative
expenses
Interest (income) expense
Other (income) expense
Amortization of purchased intangibles
Chubb integration expenses
Income tax expense (benefit)
Net income
Comprehensive income
Chubb Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments and
Eliminations
Chubb Limited
Consolidated
$
— $
— $
32,275 $
— $
—
1
4,307
(17)
—
—
92
(243)
(27)
—
1
14
—
(15)
3,022
(31)
—
—
(26)
705
6
—
2
(175)
31,290
3,440
—
(482)
18,730
740
9,117
90
(575)
305
20
956
—
—
(7,329)
—
—
—
—
—
—
—
—
—
$
$
4,454 $
2,464 $
4,865 $
(7,329) $
7,521 $
4,988 $
7,922 $
(12,910) $
32,275
31,290
3,426
—
(530)
18,730
740
9,183
552
(596)
305
23
795
4,454
7,521
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the Year Ended December 31, 2018
(in millions of U.S. dollars)
Net premiums written
Net premiums earned
Net investment income
Equity in earnings of subsidiaries
Net realized gains (losses) including OTTI
Losses and loss expenses
Policy benefits
Policy acquisition costs and administrative
expenses
Interest (income) expense
Other (income) expense
Amortization of purchased intangibles
Chubb integration expenses
Income tax expense (benefit)
Net income
Comprehensive income (loss)
Chubb Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments and
Eliminations
Chubb Limited
Consolidated
$
— $
— $
30,579 $
— $
—
6
3,753
—
—
—
87
(299)
(24)
—
14
19
—
13
2,578
117
—
—
(58)
806
26
—
1
(148)
30,064
3,286
—
(769)
18,067
590
8,769
134
(436)
339
44
824
—
—
(6,331)
—
—
—
—
—
—
—
—
—
$
$
3,962 $
2,081 $
4,250 $
(6,331) $
1,242 $
(27) $
1,808 $
(1,781) $
30,579
30,064
3,305
—
(652)
18,067
590
8,798
641
(434)
339
59
695
3,962
1,242
F-102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Statements of Operations and Comprehensive Income
Equity in earnings of subsidiaries
3,640
2,424
For the Year Ended December 31, 2017
(in millions of U.S. dollars)
Net premiums written
Net premiums earned
Net investment income
Net realized gains (losses) including OTTI
Losses and loss expenses
Policy benefits
Policy acquisition costs and administrative
expenses
Interest (income) expense
Other (income) expense
Amortization of purchased intangibles
Chubb integration expenses
Income tax expense (benefit)
Net income
Comprehensive income
Chubb Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments and
Eliminations
Chubb Limited
Consolidated
$
— $
— $
29,244 $
— $
—
4
—
14
—
—
—
75
(332)
(12)
—
32
20
(25)
—
—
40
847
93
—
69
(742)
29,034
3,107
—
109
18,454
676
8,499
92
(481)
260
209
583
—
—
(6,064)
—
—
—
—
—
—
—
—
—
$
$
3,861 $
2,106 $
3,958 $
(6,064) $
4,718 $
3,075 $
4,430 $
(7,505) $
29,244
29,034
3,125
—
84
18,454
676
8,614
607
(400)
260
310
(139)
3,861
4,718
F-103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2019
(in millions of U.S. dollars)
Chubb Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments
and
Eliminations
Chubb Limited
Consolidated
Net cash flows from operating activities
$
412 $
2,926 $
6,878 $
(3,874) $
6,342
(21)
(25,825)
—
—
1
—
41
—
(808)
(74)
—
—
(110)
—
(4)
(975)
—
—
2,828
—
(500)
—
—
Cash flows from investing activities
Purchases of fixed maturities available for sale
Purchases of fixed maturities held to maturity
Purchases of equity securities
Sales of fixed maturities available for sale
Sales of equity securities
Maturities and redemptions of fixed maturities
available for sale
Maturities and redemptions of fixed maturities
held to maturity
Net change in short-term investments
Net derivative instruments settlements
Private equity contribution
Private equity distribution
Capital contribution
Acquisition of subsidiaries (net of cash acquired of
$45)
Other
—
—
—
—
—
—
—
—
—
—
—
(1,000)
—
—
Net cash flows used for investing activities
(1,000)
Cash flows from financing activities
Dividends paid on Common Shares
Common Shares repurchased
Proceeds from issuance of long-term debt
Proceeds from issuance of repurchase agreements
Repayment of long-term debt
Repayment of repurchase agreements
Proceeds from share-based compensation plans
Advances (to) from affiliates
Dividends to parent company
Capital contribution
Net payments to affiliated notional cash pooling
programs(1)
Policyholder contract deposits
Policyholder contract withdrawals
Net cash flows from (used for) financing activities
Effect of foreign currency rate changes on cash and
restricted cash
Net increase (decrease) in cash and restricted cash
Cash and restricted cash – beginning of year (1)
(1,354)
(327)
—
—
—
—
—
2,301
(3,223)
—
—
(35)
—
—
585
4
1
1
—
—
(617)
—
—
(1,512)
1
440
2
(229)
(531)
13,115
611
8,998
946
(309)
(629)
(1,315)
1,390
—
(29)
(1,233)
(5,040)
—
(1,203)
—
2,817
(10)
(2,817)
204
922
(3,874)
1,110
—
514
(303)
(2,640)
15
(787)
1,989
—
—
—
—
—
—
—
—
—
—
—
1,110
—
—
1,110
—
—
—
—
—
—
—
—
3,874
(1,110)
652
—
—
3,416
—
652
(652)
(25,846)
(229)
(531)
13,116
611
9,039
946
(1,117)
(703)
(1,315)
1,390
—
(29)
(1,237)
(5,905)
(1,354)
(1,530)
2,828
2,817
(510)
(2,817)
204
—
—
—
—
514
(303)
(151)
20
306
1,340
1,646
Cash and restricted cash – end of year (1)
$
2 $
442 $
1,202 $
— $
(1)
Chubb maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2018, the cash
balance of one or more entities was negative; however, the overall Pool balances were positive.
F-104
Chubb
Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments
and
Eliminations
Chubb
Limited
Consolidated
$
256 $
4,654 $
5,878 $
(5,308) $
5,480
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2018
(in millions of U.S. dollars)
Net cash flows from operating activities
Cash flows from investing activities
Purchases of fixed maturities available for sale
Purchases of fixed maturities held to maturity
Purchases of equity securities
Sales of fixed maturities available for sale
Sales of equity securities
Maturities and redemptions of fixed maturities
available for sale
Maturities and redemptions of fixed maturities
held to maturity
Net change in short-term investments
Net derivative instruments settlements
Private equity contributions
Private equity distributions
Capital contribution
Other
—
—
—
—
—
—
—
—
—
—
—
(38)
(24,697)
—
—
11
—
17
—
3
(7)
—
—
(456)
(207)
14,019
315
7,335
1,124
513
23
(1,337)
980
—
(515)
(1,475)
(3,550)
—
(18)
Net cash flows used for investing activities
(1,475)
(3,582)
(2,903)
Cash flows from financing activities
Dividends paid on Common Shares
Common Shares repurchased
Proceeds from issuance of long-term debt
Proceeds from issuance of repurchase agreements
Repayment of long-term debt
Repayment of repurchase agreements
Proceeds from share-based compensation plans
Advances (to) from affiliates
Dividends to parent company
Capital contribution
Net payments to affiliated notional cash pooling
programs(1)
Policyholder contract deposits
Policyholder contract withdrawals
(1,337)
—
—
—
—
—
—
—
—
2,171
—
(2,000)
—
—
2,519
(1,744)
—
—
35
—
—
—
—
502
—
—
Net cash flows from (used for) financing activities
1,217
(1,071)
Effect of foreign currency rate changes on cash and
restricted cash
Net increase (decrease) in cash and restricted cash
Cash and restricted cash – beginning of year (1)
—
(2)
3
—
1
1
—
(1,044)
—
2,029
(1)
(2,019)
115
(775)
(5,308)
5,025
—
453
(358)
(1,883)
(65)
1,027
962
—
—
—
—
—
—
—
—
—
—
—
5,025
—
5,025
—
—
—
—
—
—
—
—
5,308
(5,025)
(537)
—
—
(24,735)
(456)
(207)
14,030
315
7,352
1,124
516
16
(1,337)
980
—
(533)
(2,935)
(1,337)
(1,044)
2,171
2,029
(2,001)
(2,019)
115
—
—
—
—
453
(358)
(254)
(1,991)
—
(537)
(115)
(65)
489
851
Cash and restricted cash – end of year (1)
$
1 $
2 $
1,989 $
(652) $
1,340
(1)
Chubb maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2018 and 2017,
the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
F-105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2017
(in millions of U.S. dollars)
Net cash flows from operating activities
Cash flows from investing activities
Purchases of fixed maturities available for sale
Purchases of fixed maturities held to maturity
Purchases of equity securities
Sales of fixed maturities available for sale
Sales of equity securities
Maturities and redemptions of fixed maturities
available for sale
Maturities and redemptions of fixed maturities
held to maturity
Net change in short-term investments
Net derivative instruments settlements
Private equity contributions
Private equity distributions
Other
Net cash flows from (used for) investing activities
Cash flows from financing activities
—
—
—
—
—
—
—
—
—
—
—
—
—
Dividends paid on Common Shares
(1,308)
Common Shares repurchased
Proceeds from issuance of long-term debt
Proceeds from issuance of repurchase agreements
Repayment of long-term debt
Repayment of repurchase agreements
Proceeds from share-based compensation plans
Advances (to) from affiliates
Dividends to parent company
Net payments to affiliated notional cash pooling
programs(1)
Policyholder contract deposits
Policyholder contract withdrawals
—
—
—
—
—
—
892
—
(363)
—
—
Chubb
Limited
(Parent
Guarantor)
Chubb INA
Holdings Inc.
(Subsidiary
Issuer)
Other Chubb
Limited
Subsidiaries
Consolidating
Adjustments
and
Eliminations
Chubb
Limited
Consolidated
$
781 $
1,648 $
4,598 $
(2,524) $
4,503
(9)
(25,738)
—
—
99
—
29
—
189
(15)
—
—
(10)
283
—
—
—
—
(500)
—
—
(927)
—
(504)
—
—
(352)
(173)
13,156
187
10,396
879
(726)
(250)
(648)
1,084
(520)
(2,705)
—
(801)
—
2,353
(1)
(2,348)
151
35
—
442
(307)
(3,000)
1
(1,106)
2,068
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
867
—
—
—
867
(982)
(25,747)
(352)
(173)
13,255
187
10,425
879
(537)
(265)
(648)
1,084
(530)
(2,422)
(1,308)
(801)
—
2,353
(501)
(2,348)
151
—
—
—
442
(307)
1
(237)
1,088
851
(2,524)
2,524
3,391
(2,319)
Net cash flows used for financing activities
(779)
(1,931)
Effect of foreign currency rate changes on cash and
restricted cash
Net increase (decrease) in cash and restricted cash
Cash and restricted cash – beginning of year (1)
—
2
1
—
—
1
Cash and restricted cash – end of year (1)
$
3 $
1 $
962 $
(115) $
(1)
Chubb maintains two notional multi-currency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information. At December 31, 2017 and 2016,
the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
F-106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
20. Condensed unaudited quarterly financial data
March 31
June 30
September 30
December 31
Three Months Ended
(in millions of U.S. dollars, except per share data)
2019
2019
2019
Net premiums earned
Net investment income
Net realized gains (losses) including OTTI losses
Total revenues
Losses and loss expenses
Policy benefits
Net income
Basic earnings per share
Diluted earnings per share
(in millions of U.S. dollars, except per share data)
Net premiums earned
Net investment income
Net realized gains (losses) including OTTI losses
Total revenues
Losses and loss expenses
Policy benefits
Net income
Basic earnings per share
Diluted earnings per share
$
$
$
$
$
$
$
$
$
$
$
$
$
$
7,137 $
7,891 $
8,327 $
836
(97)
7,876 $
4,098 $
196 $
859
(223)
8,527 $
4,715 $
161 $
873
(155)
9,045 $
5,052 $
158 $
1,040 $
1,150 $
1,091 $
2.27 $
2.25 $
2.52 $
2.50 $
2.40 $
2.38 $
2019
7,935
858
(55)
8,738
4,865
225
1,173
2.59
2.57
March 31
June 30
September 30
December 31
Three Months Ended
2018
2018
2018
7,027 $
7,664 $
7,908 $
806
(2)
7,831 $
4,102 $
151 $
828
18
8,510 $
4,487 $
150 $
823
19
8,750 $
4,868 $
127 $
1,082 $
1,294 $
1,231 $
2.32 $
2.30 $
2.78 $
2.76 $
2.66 $
2.64 $
2018
7,465
848
(687)
7,626
4,610
162
355
0.77
0.76
Net income for the three months ended December 31, 2018 included after-tax catastrophe losses of $506 million.
F-107
SCHEDULE I
Chubb Limited and Subsidiaries
SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2019
(in millions of U.S. dollars)
Fixed maturities available for sale
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Total fixed maturities available for sale
Fixed maturities held to maturity
U.S. Treasury and agency
Foreign
Corporate securities
Mortgage-backed securities
States, municipalities, and political subdivisions
Total fixed maturities held to maturity
Equity securities
Industrial, miscellaneous, and all other
Short-term investments
Other investments (1)
Cost or
Amortized Cost
Fair Value
Amount at Which
Shown in the
Balance Sheet
$
3,188 $
3,283 $
22,670
30,689
18,712
7,321
82,580
1,318
1,423
2,349
2,331
5,160
23,707
31,791
19,192
7,515
85,488
1,347
1,485
2,468
2,396
5,309
3,283
23,707
31,791
19,192
7,515
85,488
1,318
1,423
2,349
2,331
5,160
12,581
13,005
12,581
812
4,291
5,915
812
4,291
5,915
812
4,291
5,915
Total investments - other than investments in related parties
$
106,179 $
109,511 $
109,087
(1)
Excludes $147 million of related party investments.
F-108
SCHEDULE II
Chubb Limited and Subsidiaries
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS (Parent Company Only)
(in millions of U.S. dollars)
Assets
December 31
December 31
2019
2018
Investments in subsidiaries and affiliates on equity basis
$
50,853 $
Total investments
Cash
Due from subsidiaries and affiliates, net
Other assets
Total assets
Liabilities
Affiliated notional cash pooling programs (1)
Accounts payable, accrued expenses, and other liabilities
Total liabilities
Shareholders' equity
Common Shares
Common Shares in treasury
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders' equity
Total liabilities and shareholders' equity
(1) Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information.
The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.
$
55,643 $
55,643 $
50,609
$
$
50,853
2
4,776
12
— $
312
312
11,121
(3,754)
11,203
36,142
619
55,331
43,531
43,531
1
7,074
3
35
262
297
11,121
(2,618)
12,557
31,700
(2,448)
50,312
50,609
F-109
SCHEDULE II (continued)
Chubb Limited and Subsidiaries
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS (Parent Company Only)
(in millions of U.S. dollars)
Revenues
Investment income (1)
Equity in net income of subsidiaries and affiliates
Expenses
Administrative and other (income) expense
Chubb integration expenses
Income tax expense
Year Ended December 31
2019
2018
2017
$
227 $
305 $
4,307
4,534
65
1
14
80
3,753
4,058
63
14
19
96
336
3,640
3,976
63
32
20
115
3,861
4,718
Net income
Comprehensive income
$
$
4,454 $
7,521 $
3,962 $
1,242 $
(1)
Includes net investment income, interest income, and net realized gains (losses).
The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.
STATEMENTS OF CASH FLOWS (Parent Company Only)
(in millions of U.S. dollars)
Net cash flows from operating activities (1)
Cash flows from investing activities
Capital contribution
Net cash flows used for investing activities
Cash flows from financing activities
Dividends paid on Common Shares
Common Shares repurchased
Advances from affiliates
Net proceeds from (payments to) affiliated notional cash pooling
programs (2)
Net cash flows from (used for) financing activities
Effect of foreign currency rate changes on cash and restricted cash
Net increase (decrease) in cash and restricted cash
Cash and restricted cash – beginning of year
Cash and restricted cash – end of year
Year Ended December 31
2019
$
412 $
2018
256 $
(1,000)
(1,000)
(1,354)
(327)
2,301
(35)
585
4
1
1
(1,475)
(1,475)
(1,337)
—
2,519
35
1,217
—
(2)
3
$
2 $
1 $
2017
781
—
—
(1,308)
—
892
(363)
(779)
—
2
1
3
(1)
(2)
Includes cash dividends received from subsidiaries of $200 million, $75 million, and $450 million in 2019, 2018, and 2017, respectively.
Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Refer to Note 1 f) for additional information.
The condensed financial information should be read in conjunction with the consolidated financial statements and notes thereto.
F-110
SCHEDULE IV
Chubb Limited and Subsidiaries
SUPPLEMENTAL INFORMATION CONCERNING REINSURANCE
Premiums Earned
For the years ended December 31, 2019, 2018, and 2017
(in millions of U.S. dollars, except for percentages)
Direct
Amount
Ceded To
Other
Companies
Assumed
From Other
Companies
Net Amount
Percentage
of Amount
Assumed to
Net
2019
Property and Casualty
Accident and Health
Life
Total
2018
Property and Casualty
Accident and Health
Life
Total
2017
Property and Casualty
Accident and Health
Life
Total
$
30,339 $
7,236 $
2,797 $
25,900
$
$
$
$
4,546
991
376
81
119
191
4,289
1,101
35,876 $
7,693 $
3,107 $
31,290
28,793 $
6,792 $
2,812 $
24,813
4,409
906
342
85
162
201
4,229
1,022
34,108 $
7,219 $
3,175 $
30,064
27,774 $
6,650 $
2,891 $
24,015
4,167
841
349
81
221
220
4,039
980
$
32,782 $
7,080 $
3,332 $
29,034
11%
3%
17%
10%
11%
4%
20%
11%
12%
5%
22%
11%
F-111
SCHEDULE VI
Chubb Limited and Subsidiaries
SUPPLEMENTARY INFORMATION CONCERNING PROPERTY AND CASUALTY OPERATIONS
As of and for the years ended December 31, 2019, 2018, and 2017
(in millions of U.S. dollars)
Deferred
Policy
Acquisition
Costs
Net Reserves
for Unpaid
Losses and
Loss
Expenses
Unearned
Premiums
Net
Premiums
Earned
Net
Investment
Income
Net Losses and Loss
Expenses Incurred
Related to
Current
Year
Prior
Year
Amortization
of Deferred
Policy
Acquisition
Costs
Net Paid
Losses and
Loss Expenses
Net
Premiums
Written
2019
2018
2017
$
$
$
4,161 $
48,509 $ 16,771 $ 30,189 $
3,141 $ 19,575 $ (845) $
5,831 $
18,473 $ 31,126
3,926
3,805
$
$
48,271
$ 15,532
$ 29,042
49,165
$ 15,216
$ 28,054
$
$
3,047
$ 19,048
$ (981) $
2,890
$ 19,391
$ (937) $
5,630
5,519
$
$
18,340
$ 29,505
17,448
$ 28,225
F-112
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON
THE (US GAAP) CONSOLIDATED FINANCIAL STATEMENTS
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the consolidated financial statements of Chubb Limited and its subsidiaries (the
Company), which comprise the consolidated balance sheet as of December 31, 2019, and the consolidated statement of
operations and comprehensive income, consolidated statement of shareholders’ equity, and consolidated statement of cash
flows for the year then ended, and the related notes to the consolidated financial statements (pages F-7 to F-107).
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America (US GAAP) and the requirements of Swiss law. This responsibility
includes designing, implementing and maintaining an internal control system relevant to the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further
responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in
the circumstances.
Auditor's responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit
in accordance with Swiss law, Swiss Auditing Standards and auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers the internal control system relevant to the entity’s preparation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2019, and, the results of its operations and its cash flows for the year then ended in accordance
with US GAAP and comply with Swiss law.
F-113
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON
THE (US GAAP) CONSOLIDATED FINANCIAL STATEMENTS (continued)
Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Valuation of unpaid losses and loss expenses, net of reinsurance
Key audit matter
How our audit addressed the key audit matter
Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our over-
all opinion on the consolidated financial statements. These
procedures included testing the effectiveness of controls
relating to the Company’s valuation of unpaid losses and loss
expenses, net of reinsurance, including controls over the
selection of actuarial methodologies and development of
significant assumptions. These procedures also included,
among others, the involvement of professionals with
specialized skill and knowledge to assist in performing one or
a combination of procedures, including (i) independently
estimating reserves on a sample basis using actual historical
data and loss development patterns, as well as industry data
and other benchmarks, to develop an independent estimate
and comparing the independent estimate to management’s
actuarially determined reserves; and (ii) evaluating
management’s actuarial reserving methodologies and
aforementioned assumptions, as well as assessing qualitative
adjustments to carried reserves and the consistency of
management’s approach period-over-period. Performing these
procedures involved testing the completeness and accuracy of
data provided by management.
As described in Note 7 to the consolidated financial
statements, as of December 31, 2019, the Company's liability
for unpaid losses and loss expenses, net of reinsurance, was
approximately $48.6 billion. The majority of the Company's
net unpaid losses and loss expenses arise from the Company's
long-tail casualty business (such as general liability and
professional liability), U.S. sourced workers' compensation,
asbestos-related, environmental pollution and other exposures
with high estimation uncertainty. The process of establishing
loss reserves requires the use of estimates and judgments
based on circumstances underlying the insured loss at the
date of accrual. The judgments involved in projecting the
ultimate losses include the use and interpretation of various
standard actuarial reserving methods that place reliance on
the extrapolation of actual historical data, loss development
patterns, industry data, and other benchmarks as appropriate.
The reserves for the various product lines each require
different qualitative and quantitative assumptions and
judgments, including changes in business mix or volume,
changes in ceded reinsurance structures, changes in claims
handling practices, reported and projected loss trends,
inflation, the legal environment, and the terms and conditions
of the contracts sold to the Company's insured parties.
The principal considerations for our determination that
performing procedures relating to the valuation of unpaid
losses and loss expenses, net of reinsurance, from the long-tail
and other exposures as described above, is a key audit matter
are (i) there was significant judgment by management in
determining the reserve liability which in turn led to a high
degree of auditor subjectivity and judgment in performing
procedures relating to the valuation; (ii) there was significant
auditor effort and judgment in evaluating the audit evidence
relating to the actuarial reserving methods and assumptions
related to extrapolation of actual historical data, loss
development patterns, industry data, other benchmarks, and
the impact of qualitative and quantitative subjective factors;
and (iii) the audit effort included the involvement of
professionals with specialized skill and knowledge to assist in
performing these procedures and evaluating the audit
evidence obtained.
F-114
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON
THE (US GAAP) CONSOLIDATED FINANCIAL STATEMENTS (continued)
Valuation of level 3 investments in the valuation hierarchy
Key audit matter
How our audit addressed the key audit matter
Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our over-
all opinion on the consolidated financial statements. These
procedures included testing the effectiveness of the controls
relating to the valuation of level 3 investments. These
procedures also included, among others, obtaining pricing
from sources other than those used by management for a
sample of securities and comparing management’s estimate to
the prices independently obtained, and the involvement of
professionals with specialized skill and knowledge to assist in
developing an independent range of estimate for a sample of
securities and comparing management’s estimate to the
independently developed ranges.
As described in Note 4 to the consolidated financial
statements, as of December 31, 2019, the Company had
total assets measured at fair value of approximately $96
billion, of which $2 billion were categorized as level 3 in the
valuation hierarchy. The level 3 investments are measured at
fair value using inputs that are unobservable and reflect
management’s judgments about assumptions that market
participants would use in pricing or, for certain of the
investments, management obtains and evaluates a single
broker quote, which is typically from a market maker. As
described by management, the valuation is more subjective
when markets are less liquid due to the lack of market based
inputs (i.e., stale pricing), which may increase the potential
that an investment's estimated fair value is not reflective of the
price at which an actual transaction would occur.
The principal considerations for our determination that
performing procedures relating to the valuation of level 3
investments in the valuation hierarchy is a key audit matter
are (i) there was significant judgment by management in
determining the fair value of these investments as they are
measured using inputs that are unobservable and are likely to
be priced using models or inputs other than quoted prices,
which in turn led to a high degree of auditor subjectivity and
judgment in performing procedures relating to the estimate;
and (ii) the audit effort included the involvement of
professionals with specialized skill and knowledge to assist in
performing these procedures and evaluating the audit
evidence obtained.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence
(article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control
system exists which has been designed for the preparation of consolidated financial statements according to the instructions of
the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers AG
/s/ Peter Eberli
Peter Eberli
Audit expert
Auditor in charge
Zurich, February 27, 2020
/s/ Nicolas Juillerat
Nicolas Juillerat
Audit expert
F-115
CHUBB LIMITED
SWISS STATUTORY FINANCIAL STATEMENTS
December 31, 2019
S-1
SWISS STATUTORY BALANCE SHEETS (Unconsolidated)
Chubb Limited
(in millions of Swiss francs)
Assets
Cash and cash equivalents
Prepaid expenses and other assets
Receivable from subsidiaries
Total current assets
Investments in subsidiaries
Loans to subsidiaries
Other assets
Total non-current assets
Total assets
Liabilities
Accounts payable
Payable to subsidiaries
Capital distribution payable
Deferred unrealized exchange gain
Total short-term liabilities
Total liabilities
Shareholders' equity
Share capital
Statutory capital reserves:
Capital contribution reserves
Reserve for dividends from capital contributions
Reserves for treasury shares
Treasury shares
Statutory retained earnings:
Retained earnings
Profit for the period
Total shareholders' equity
Total liabilities and shareholders' equity
The accompanying notes form an integral part of these statutory financial statements
December 31
2019
December 31
2018
25
6
74
105
31,391
4,485
7
35,883
35,988
69
567
334
—
970
970
1
1
128
130
30,402
7,217
9
37,628
37,758
74
949
342
40
1,405
1,405
11,587
11,587
10,841
1,092
3,346
(334)
8,151
335
35,018
35,988
12,226
1,045
2,538
(2)
8,679
280
36,353
37,758
S-2
SWISS STATUTORY STATEMENTS OF INCOME (Unconsolidated)
Chubb Limited
For the years ended December 31, 2019 and 2018
(in millions of Swiss francs)
2019
2018
Dividend income
Interest income from subsidiaries
Interest expense to subsidiaries
Debt guarantee fee income
Administrative and other expenses
Foreign exchange losses
Operating results
Interest income third party only
Foreign exchange translation losses
Earnings before taxes
Tax expense
Profit for the year
The accompanying notes form an integral part of these statutory financial statements
199
249
(7)
36
(102)
(17)
358
1
(10)
349
(14)
335
74
312
(16)
33
(107)
—
296
2
—
298
(18)
280
S-3
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS
Chubb Limited
1. Basis of presentation
Chubb Limited (Chubb), domiciled in Zurich, Switzerland, is the holding company of Chubb Group (Group) with a listing on the
New York Stock Exchange (NYSE). Chubb's principal activity is the holding of subsidiaries. Revenues consist mainly of dividend
and interest income. The accompanying financial statements comply with Swiss Law. The financial statements present the
financial position of the holding company on a standalone basis and do not represent the consolidated financial position of the
holding company and its subsidiaries.
The financial statements have been prepared in accordance with the provisions of commercial accounting as set out in the
Swiss Code of Obligations (Art. 957 to 963b CO, effective since January 1, 2013).
All amounts in the notes are shown in millions of Swiss francs unless otherwise stated.
2. Significant accounting policies
a) Cash and cash equivalents
Cash and cash equivalents includes cash on hand and deposits with an original maturity of three months or less at time of
purchase.
Chubb and certain of its subsidiaries (participating entities) have agreements with a third-party bank provider which
implemented two international multi-currency notional cash pooling programs. In each program, participating entities establish
deposit accounts in different currencies with the bank provider and each day the credit or debit balances in every account are
notionally translated into a single currency (U.S. dollars) and then notionally pooled. Participants of the notional pool either pay
or receive interest from the third-party bank provider. The bank extends overdraft credit to any participating entity as needed,
provided that the overall notionally-pooled balance of all accounts in each pool at the end of each day is at least zero. Actual
cash balances are not physically converted and are not commingled between legal entities. Any overdraft balances incurred
under this program by a participating entity would be guaranteed by Chubb up to CHF 290 million ($300 million) in the
aggregate. Our syndicated letter of credit facility allows for same day drawings to fund a net pool overdraft should participating
entities withdraw contributed funds from the pool.
b) Investments in subsidiaries
Investments in subsidiaries are equity interests, which are held on a long-term basis for the purpose of the holding company's
business activities. They are carried at a value no higher than their cost less adjustments for impairment. An impairment
analysis of the investments in subsidiaries is performed on an annual basis.
c) Translation of foreign currencies
The financial statements are translated from U.S. dollar into Swiss francs using the following exchange rates:
• Investments in subsidiaries at historical exchange rates;
• Other assets and liabilities at period end exchange rates;
• Treasury shares and shareholders' equity at historical exchange rates; and
• Revenues and expenses at average exchange rates.
Exchange losses are recorded in the statement of income and unrealized exchange gains are recorded on the balance sheet and
deferred until realized.
d) Dividend income
Chubb collects dividend income from its direct subsidiaries.
e) Interest income (expense) from subsidiaries
Chubb collects interest income from loans issued to its subsidiaries which are reflected within operating income. Additionally,
Chubb either collects or pays interest related to a reciprocal line of credit with one of its subsidiaries.
f) Debt guarantee fee income
Chubb collects a fee for Chubb's guarantee of the debt issued by one of its subsidiaries.
S-4
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
g) Integration expenses
As part of the January 14, 2016 acquisition of The Chubb Corporation (Chubb Corp), direct costs related to the Chubb Corp
acquisition are expensed as incurred and are reported within Administrative and other expenses. Chubb integration expenses
were CHF 1 million ($1 million) and CHF 14 million ($14 million) for the years ended December 31, 2019 and 2018,
respectively, and include one-time rebranding costs directly attributable to the merger.
3. Commitments, contingencies, and guarantees
a) Letters of credit (LOC)
On October 25, 2017, Chubb entered into a credit facility that provides for up to $1.0 billion of availability, all of which may be
used for the issuance of letters of credit and for revolving loans. Chubb has the ability to increase the capacity under the
existing credit facility to $2.0 billion under certain conditions, but any such increase would not raise the sub-limit for revolving
loans above $1.0 billion. Chubb's existing credit facility has a remaining term expiring in October 2022. Chubb's LOC usage
was CHF 548 million ($567 million) and CHF 391 million ($398 million) for the years ended December 31, 2019 and 2018,
respectively.
The letter of credit facility required that Chubb maintains certain financial covenants, all of which were met at December 31,
2019.
b) Lease commitments
Chubb leases property under an operating lease which expires in 2023. The following table presents future annual minimum lease
payments as of December 31, 2019.
Year ending December 31
(in millions of Swiss francs)
2020
2021
2022
2023
Thereafter
Total minimum future lease commitments
1.5
1.5
1.5
1.1
—
5.6
At December 31, 2018, the total minimum future lease commitments were CHF 7.1 million.
c) Guarantee of debt
Chubb fully and unconditionally guarantees certain subsidiary debt totaling CHF 14.7 billion ($15.2 billion) and CHF 12.7 billion
($12.9 billion) at December 31, 2019 and 2018, respectively, and receives a fee.
4. Significant investments
a) Share capital:
The following table presents information regarding share capital held of subsidiaries at both December 31, 2019 and 2018.
Amounts are expressed in whole U.S. dollars or Swiss francs.
Holdings as of December 31, 2019 and 2018
Chubb Group Holdings, Inc.
Chubb INA Holdings
Chubb Insurance (Switzerland) Limited
Chubb Reinsurance (Switzerland) Limited
Chubb Group Management and Holdings Ltd.
Country
U.S.A.
U.S.A.
Switzerland
Switzerland
Bermuda
% of
Possession
100%
20%
100%
100%
100%
Currency
Share Capital
Purpose
USD
USD
CHF
CHF
USD
11
1
Holding company
Holding company
100,000,000
Insurance company
44,000,000 Reinsurance company
100
Holding company
S-5
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
b) Investments in subsidiaries:
The following table presents information regarding investments in subsidiaries at both December 31, 2019 and 2018.
Investments in subsidiaries increased CHF 989 million ($1.0 billion) in 2019 due to capital contributions primarily to fund the
Chubb share repurchase program executed by Chubb Group Management Holdings Ltd.
(in millions of Swiss francs)
Chubb Group Holdings, Inc.
Chubb INA Holdings
Chubb Group Management Holdings Ltd.
Chubb Insurance (Switzerland) Limited
Chubb Reinsurance (Switzerland) Limited
Balance - end of year
2019
17,004
2,043
11,916
185
242
31,391
2018
17,004
2,043
10,928
185
242
30,402
S-6
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
5. Common Share ownership of the Board of Directors and Group Executives
a) Board of Directors
The following table presents information, at December 31, 2019 and 2018, with respect to the ownership of Common Shares
by each member of the Board of Directors. Unless otherwise indicated, the named individual has sole voting and investment
power over the Common Shares listed in the Common Shares Beneficially Owned column. Common Share ownership of Evan G.
Greenberg, the Chairman of the Board, is included in Note 5 b) below.
Name of Beneficial Owner
Michael G. Atieh
Sheila P. Burke
James Cash
Mary A. Cirillo
Michael P. Connors
John A. Edwardson
Robert M. Hernandez
Kimberly A. Ross
Robert W. Scully (3)
Eugene B. Shanks, Jr.
Theodore E. Shasta
David H. Sidwell
Olivier Steimer
James Zimmerman (4)
Total
Common
Shares
Restricted
Stock
Units (1)
Restricted
Common
Stock (2)
1,727
4,279
3,027
2,079
2,829
1,881
22,067
20,338
12,062
11,114
8,444
6,827
63,292
62,344
7,807
6,859
28,864
27,052
9,152
8,204
11,139
10,191
8,933
7,985
16,498
15,320
—
5,152
195,841
189,625
35,269
34,547
39,346
39,130
19,385
19,317
14,685
14,385
—
—
—
—
25,771
25,244
—
—
—
—
—
—
—
—
—
—
3,558
3,485
—
17,078
138,014
153,186
1,236
1,264
1,236
1,264
1,236
1,264
2,231
2,306
1,236
1,264
2,094
2,157
1,236
1,264
1,236
1,264
2,334
2,417
1,236
1,264
1,236
1,264
1,236
1,264
1,236
1,264
—
1,264
19,019
20,784
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
(1) Represents Common Shares that will be issued to the director upon his or her separation from the Board. These Common Shares relate to stock units granted as director's
compensation granted prior to 2008 and associated dividend reinvestment accruals.
For Ms. Burke and Mr. Cash includes deferred stock units and market value units granted prior to the merger that will settle following separation from service. The market value
units include dividend reinvestment accruals.
(2) Represents Common Shares with respect to which the individual has the power to vote (but not to dispose of).
(3) Mr. Scully shares with other persons the power to vote and/or dispose of 2,775 of the Common Shares listed at December 31, 2019 and 2018.
(4) Mr. Zimmerman retired from the board in May 2019.
S-7
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
b) Group Executives
The following table presents information, at December 31, 2019 and 2018, with respect to the beneficial ownership of
Common Shares by each of the following Group Executives. Unless otherwise indicated, the named individual has sole voting
and investment power over the Common Shares listed in the Common Shares Beneficially Owned column.
Name of Beneficial Owner
Evan G. Greenberg (3) (4)
Philip V. Bancroft (5)
John W. Keogh (6)
Joseph Wayland
Total
Common
Shares
Beneficially
Owned
675,056
1,049,537
172,465
207,900
118,958
126,395
23,232
22,500
Common
Shares
Subject to
Options (1)
Weighted
Average
Option
Exercise Price
in CHF
865,583
941,594
96,832
82,377
213,551
183,149
59,350
46,805
98.83
85.46
117.18
108.73
110.38
104.20
123.14
117.40
989,711
1,235,316
1,406,332
1,253,925
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Option
Exercise
Years
4.33
4.25
5.89
6.21
5.32
5.85
6.41
6.93
Restricted
Common
Stock (2)
193,616
172,442
33,791
37,466
86,865
79,576
30,519
29,530
344,791
319,014
(1) Represents Common Shares that the individual has the right to acquire within 60 days of December 31, 2019 and 2018, through option exercises, both vested and unvested.
(2) Represents Common Shares with respect to which the individual has the power to vote (but not to dispose of).
(3) Mr. Greenberg shares with other persons the power to vote and/or dispose of 97,528 of the Common Shares listed at December 31, 2019 and 2018.
(4) Mr. Greenberg pledged 240,000 Common Shares in connection with a margin account at December 31, 2019 and 2018.
(5) Mr. Bancroft pledged 41,000 Common Shares in connection with a margin account at December 31, 2019 and 2018.
(6) Mr. Keogh shares with other persons the power to vote and/or dispose of 7,978 and 2,702 of the Common Shares listed at December 31, 2019 and 2018, respectively.
6. Shareholders' equity
The following table presents issued, authorized, and conditional share capital, at December 31, 2019 and 2018. Treasury
shares held by Chubb which are issued, but not outstanding totaled 2,200,503 and 21,902 shares for the periods ending
December 31, 2019 and 2018, respectively. In addition to the treasury shares held by Chubb, at December 31, 2019 and
2018, subsidiaries of Chubb held 25,611,794 treasury shares at a cost of CHF 3.3 billion ($3.4 billion) and 20,558,584
treasury shares at a cost of CHF 2.5 billion ($2.6 billion), respectively.
Shares Issued
Authorized share capital for general purposes
Conditional share capital for bonds and similar debt instruments
Conditional share capital for employee benefit plans
Year ended December 31
2019
2018
479,783,864
479,783,864
200,000,000
200,000,000
33,000,000
25,410,929
33,000,000
25,410,929
S-8
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
a) Shares authorized and issued
All Common Shares are authorized under Swiss Corporate law. At December 31, 2019 and 2018, Chubb's share capital
consisted of 479,783,864 Common Shares, with a par value of CHF 24.15 per share for both periods. The Board has
shareholder-approved authority as set forth in the Articles of Association to increase for general purposes Chubb's share capital
from time to time until May 17, 2020, by the issuance of up to 200,000,000 fully paid up Common Shares with a par value
equal to the par value of Chubb's Common Shares as set forth in the Articles of Association at the time of any such issuance.
b) Conditional share capital
(i) Conditional share capital for bonds and similar debt instruments
At both December 31, 2019 and 2018, the share capital of Chubb was authorized to be increased through the issuance of a
maximum of 33,000,000 fully paid up shares each with a par value of CHF 24.15 per share through the exercise of conversion
and/or option or warrant rights granted in connection with bonds, notes, or similar instruments, issued or to be issued by
Chubb, including convertible debt instruments.
(ii) Conditional share capital for employee benefit plans
At both December 31, 2019 and 2018, the share capital of Chubb was authorized to be increased through the issuance of a
maximum of 25,410,929 fully paid up shares each with a par value of CHF 24.15 per share in connection with the exercise of
option rights granted to any employee of Chubb or a subsidiary, and any consultant, director, or other person providing services
to Chubb or a subsidiary.
c) Capital contribution reserves
At our May 2018 annual general meetings, our shareholders approved an annual dividend for the following year of up to $2.92
per share, expected to be paid in four quarterly installments of $0.73 per share at dates determined by the Board of Directors
(Board) after the annual general meeting by way of a distribution from capital contribution reserves, transferred to free reserves
for payment.
At our May 2019 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.00
per share, expected to be paid in four quarterly installments of $0.75 per share after the annual general meeting by way of
distribution from capital contribution reserves, transferred to free reserves for payment. The Board will determine the record and
payment dates at which the annual dividend may be paid until the date of the 2020 annual general meeting, and is authorized
to abstain from distributing a dividend at its discretion. The first three quarterly installments each of $0.75 per share have been
distributed by the Board as expected.
The following table presents dividend distributions per Common Share in Swiss francs (CHF) and U.S. dollars (USD) for the
years ended December 31, 2019 and 2018:
Dividends - distributed from Capital contribution reserves
Total dividend distributions per common share
CHF
2.94 $
2.94 $
2019
USD
2.98
2.98
CHF
2.84 $
2.84 $
2018
USD
2.90
2.90
S-9
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
d) Treasury Shares - Reserve for Treasury shares
Treasury shares held by Chubb are carried at cost. The following table presents a roll-forward of treasury shares held by Chubb
for the years ended December 31, 2019 and 2018:
(cost in millions of Swiss francs)
Balance – beginning of year
Repurchase of shares
Balance – end of year
Number of
Shares
21,902
2,178,601
2,200,503
2019
Cost
2
332
334
Number of
Shares
21,902
—
21,902
2018
Cost
2
—
2
Treasury shares held by Chubb subsidiaries are carried cost. The following table presents a roll-forward of treasury shares held
by Chubb subsidiaries for the years ended December 31, 2019 and 2018:
(cost in millions of Swiss francs)
Balance – beginning of year
Repurchase of shares
Additions related to share-based compensation plans
Redeemed under share-based compensation plans
Balance – end of year
Number of
Shares
20,558,584
8,263,637
744,405
2019
Cost
2,538
1,189
Number of
Shares
15,928,783
7,719,035
101
1,121,923
(3,954,832)
(482)
(4,211,157)
25,611,794
3,346
20,558,584
2018
Cost
1,871
999
146
(478)
2,538
Decreases in treasury shares held by Chubb and its subsidiaries are principally due to issuances of shares upon the exercise of
employee stock options, grants of restricted stock, and purchases under the Employee Stock Purchase Plan (ESPP). Increases
in treasury shares are due to open market repurchases of shares and the surrender of shares to satisfy tax withholding
obligations in connection with the vesting of restricted stock and the forfeiture of unvested restricted stock.
e) Movements in Statutory Retained earnings
(in millions of Swiss francs)
Balance – beginning of year
Attribution to reserve for treasury shares
Profit for the year
Balance – end of year
Year ended December 31
2019
8,959
(808)
335
8,486
2018
9,344
(665)
280
8,959
f) Chubb securities repurchase authorization
From time to time, Chubb repurchases shares as part of our capital management program and to partially offset potential
dilution from the exercise of stock options and the granting of restricted stock under share-based compensation plans. Our
Board of Directors has authorized share repurchase programs as follows:
• $1.0 billion of Chubb Common Shares from January 1, 2018 through December 31, 2018
• $1.5 billion of Chubb Common Shares from December 1, 2018 through December 31, 2019
• $1.5 billion of Chubb Common Shares from November 21, 2019 through December 31, 2020
Share repurchases may be in the open market, in privately negotiated transactions, block trades, accelerated repurchases and/or
through option or other forward transactions.
S-10
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
The following table presents repurchases of Chubb's Common Shares conducted in a series of open market transactions under
the Board authorizations:
(in millions of Swiss francs)
Number of shares repurchased
Cost of shares repurchased
Year ended December 31
2018
2019
10,442,238
7,719,035
1,521
999
g) General restrictions
Holders of Common Shares are entitled to receive dividends as proposed by the Board and approved by the shareholders.
Holders of Common Shares are allowed one vote per share provided that, if the controlled shares of any shareholder constitute
ten percent or more of the outstanding Common Shares of Chubb, only a fraction of the vote will be allowed so as not to exceed
ten percent. Entry of acquirers of Common Shares as shareholders with voting rights in the share register may be refused if it
would confer voting rights with respect to ten percent or more of the registered share capital recorded in the commercial
register.
7. Significant shareholders
The following table presents information regarding each person, including corporate groups, known to Chubb to own beneficially
or of record more than five percent of Chubb's outstanding Common Shares at December 31, 2019 and December 31, 2018.
Name of Beneficial Owner
Vanguard Group, Inc.
BlackRock, Inc.
Wellington Management Group, LLP
T. Rowe Price Associates, Inc.
* Represented less than five percent
8. Other disclosures required by Swiss law
Number of Shares
Beneficially
Owned
37,653,064
32,602,335
27,825,114
23,375,803
2019
Percent of
Class
8.30%
7.20%
6.14%
5.10%
Number of Shares
Beneficially
Owned
38,234,960
31,252,910
31,405,197
*
2018
Percent of
Class
8.29%
6.80%
6.82%
*
a) Expenses
Total personnel expenses amounted to CHF 10.1 million and CHF 8.8 million for the years ended December 31, 2019 and
2018, respectively. The number of full-time positions on an annual average was no more than 50 for years ended December
31, 2019 and 2018.
Total amortization expense related to tangible property amounted to less than CHF 0.1 million and CHF 0.6 million for the
years ended December 31, 2019 and 2018, respectively.
b) Fees paid to auditors
Fees paid to auditors by Chubb Limited totaled CHF 4.5 million and CHF 4.2 million for the years ended December 31, 2019
and 2018, respectively. An allocation of audit fees for professional services rendered in connection with the integrated audit of
our consolidated financial statements and internal controls over financial reporting and audit fees for the standalone Swiss
statutory financial statements totaled CHF 4.1 million and CHF 3.9 million for the years ended December 31, 2019 and 2018,
respectively. Tax fees totaled CHF 0.3 million and CHF 0.3 million for the years ended December 31, 2019 and 2018,
respectively.
S-11
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
c) Loans to subsidiaries
The following table presents information regarding loans to subsidiaries at December 31, 2019 and 2018. Loans to Chubb
Group Holdings decreased CHF 3.0 billion due to principal repayments in 2019 which were subsequently used to fund capital
contributions to Chubb subsidiaries.
(in millions of Swiss francs)
Loans to Chubb Group Holdings, Inc.
Loans to CIIH Agencia en Chile
Total loans to subsidiaries
2019
4,203
282
4,485
d) Receivables from subsidiaries
The following table presents information regarding receivables from subsidiaries at December 31, 2019 and 2018.
(in millions of Swiss francs)
Receivables from Chubb Group Holdings, Inc.
Receivables from Chubb Group Management and Holdings, Ltd.
Total receivables from subsidiaries
2019
73
1
74
2018
7,217
—
7,217
2018
127
1
128
e) Payable to subsidiaries
The following table presents information regarding payables to subsidiaries at December 31, 2019 and 2018, respectively.
(in millions of Swiss francs)
Payable to Chubb Group Holdings, Inc.
Payable to INA Holdings, Inc.
Payable to Chubb Group Management and Holdings, Ltd.
Payable to Chubb Insurance (Switzerland) Ltd.
Total payable to subsidiaries
2019
393
78
96
—
567
2018
343
457
137
12
949
S-12
PROPOSED APPROPRIATION OF AVAILABLE EARNINGS
Chubb Limited
Proposed appropriation of available earnings
Our Board of Directors proposes to the Annual General Meeting that the Company's disposable profit (including the net income
and the other items as shown below) be carried forward. The following table shows the appropriation of available earnings as
proposed by the Board of Directors for the year ended December 31, 2019.
(in millions of Swiss francs)
Balance brought forward
Profit for the year
Attribution to reserve for treasury shares
Balance carried forward
2019
8,959
335
(808)
8,486
2018
9,344
280
(665)
8,959
In order to pay dividends, our Board of Directors proposes that an aggregate amount equal to CHF 2.15 billion be released from
the capital contribution reserves account in 2020 and allocated to a segregated reserve for dividends account (the "Dividend
Reserve"). The Board proposes to distribute a dividend to the shareholders up to an aggregate amount totaling $3.12 per
Common Share from, and limited at a maximum to the amount of, the Dividend Reserve in one or more installments, in such
amounts and on such record and payment dates as determined by the Board in its discretion. If the Board deems it advisable
for the Company, the Board shall be authorized to abstain (in whole or in part) from distributing a dividend in its discretion. The
authorization of the Board to distribute the installments from the Dividend Reserve will expire on the date of the 2021 annual
general meeting, on which date any balance remaining in the Dividend Reserve will be automatically reallocated to the capital
contribution reserves account.
If the Annual General Meeting approves this proposal, our Board currently intends to distribute the dividend in four equal
installments of $0.78 each, on record dates at about the end of June, September, December and March, respectively, with
payment dates about 21 days thereafter.
At December 31, 2019, 479,783,864 of the Company's Common Shares were eligible for dividends.
At the 2019 annual general meeting, the Company’s shareholders approved an aggregate annual dividend by way of a
distribution from Capital contribution reserves, transferred to free reserves at the time of payment in 2019 totaling $3.00 per
Common Share. The annual dividend was payable in four installments, each denominated in CHF but adjusted appropriately so
that the U.S. dollar value of the installment remained at $0.75. The installments were subject to a dividend cap expressed in
CHF which was not reached for 2019.
S-13
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON THE
(SWISS STATUTORY) FINANCIAL STATEMENTS
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Chubb Limited, which comprise the balance sheet as at December 31, 2019, the
statement of income and notes for the year then ended, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements (pages S-2 to S-12) as at December 31, 2019 comply with Swiss law
and the company’s articles of association.
Basis for opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions
and standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our
report.
We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit
profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Investments in subsidiaries
Key audit matter
How our audit addressed the key audit matter
As set out in the balance sheet and at footnote 4, the
Company owns five direct subsidiaries as at December 31,
2019 with a total book value of CHF 31.4 billion,
representing 87% of the Company’s total assets.
We obtained an understanding of management's process and
controls, and assessed and tested the design and operating
effectiveness of a selected key control over the recoverability
of the carrying value of investments in subsidiaries.
We focused on this area due to the size of the investments in
subsidiaries relative to the total assets, and the fact that there
is judgment involved in assessing whether the carrying values
of the investments in subsidiaries were impaired.
The Swiss accounting law generally requires an individual
impairment test at the investment or unit of account level.
In relation to the particular matters set out opposite, our
testing procedures included the following:
• We tested the Company’s impairment analyses performed
for the five direct subsidiaries. The assessment of
potential impairment indicators included as a first step
the comparison of the recorded Swiss statutory carrying
value with the net asset value of each subsidiary. In case
the net asset value was smaller than the carrying value, a
secondary, more judgmental, step was followed using
additional valuation techniques, such as a value-in-use
assessment, to assess whether there was any potential
need for impairment.
• Where a value-in-use metric was used, we challenged
management as to whether the input data and
assumptions to their model were reliable and reasonable.
The most important parameters were underwriting
income, investment income and operating expenses.
Based on the work performed we consider management's
impairment analyses including the assumptions used to
support the carrying value of investments in subsidiaries as
reasonable.
S-14
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON THE
(SWISS STATUTORY) FINANCIAL STATEMENTS (continued)
Responsibilities of the Board of Directors for the financial statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss
law and the company’s articles of association, and for such internal control as the Board of Directors determines is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do
so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made.
• Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the entity to cease to continue as a going concern.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
S-15
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON THE
(SWISS STATUTORY) FINANCIAL STATEMENTS (continued)
Report on other legal and regulatory requirements
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control
system exists which has been designed for the preparation of financial statements according to the instructions of the Board of
Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of
association. We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers AG
/s/ Peter Eberli
Peter Eberli
Audit expert
Auditor in charge
Zurich, February 26, 2020
/s/ Nicolas Juillerat
Nicolas Juillerat
Audit expert
S-16
CHUBB LIMITED
SWISS STATUTORY COMPENSATION REPORT
December 31, 2019
SC- 1
SWISS STATUTORY COMPENSATION REPORT (continued)
A. General
Under the Swiss ordinance against excessive compensation in stock exchange listed companies (the “Ordinance”) and our
Articles of Association, we are required to prepare a separate Swiss Statutory Compensation Report each year that contains
specific items in a presentation format determined by these regulations.
Our Executive Management (as defined under Swiss law) is appointed by our Board and for each of 2019 and 2018 consisted
of Evan G. Greenberg, Chairman, President and Chief Executive Officer; Philip V. Bancroft, Chief Financial Officer; John W.
Keogh, Executive Vice Chairman and Chief Operating Officer; and Joseph F. Wayland, General Counsel and Secretary.
For more detailed information about compensation for our Board of Directors and Executive Management, please review our
Proxy Statement. You may access this report on the Investor Information section of our website at http://investors.chubb.com/
investor-relations/shareholder-resources/shareholder-meeting-materials/default.aspx or by contacting Investor Relations by
telephone, email or mail at:
Telephone:
+1 (212) 827-4445
Email:
Mail:
investorrelations@chubb.com
Investor Relations, Chubb Limited, 1133 Avenue of the Americas, 11th Floor, New York, New York 10036
References in this report to “we,” “our” or “Chubb” are to Chubb Limited.
B. Compensation of the Board of Directors and Executive Management
Basis of Presentation
The following information sets forth the compensation for the years ended December 31, 2019 and 2018, of the members of
the Board and Executive Management for all of the functions that they have performed for Chubb. Compensation of the Board is
paid by Chubb. Compensation of Executive Management is paid by Chubb and the Chubb group entities where they are
employed. Compensation is paid as a combination of both U.S. dollars, our functional reporting currency, with translation of
certain amounts to whole Swiss francs. Where presented, 2019 and 2018 Swiss franc compensation figures have been
translated at the average exchange rates. Swiss franc-equivalent total compensation of the Board and Executive Management is
included in Tables 1 and 2 below. The average exchange rate we used for U.S. dollars into Swiss francs was 0.99365 in 2019
and 0.97804 in 2018.
This report is established in accordance with the provisions of the Ordinance.
Compensation of the Board of Directors
Our directors receive compensation in accordance with our Outside Directors Compensation Parameters. The Board approved
changes to the Outside Directors Compensation Parameters effective as of May 2019 based on, among other things, a
comparison of our compensation structure to that of our competitors and other insurance and similarly-sized companies, and
the determination that total director compensation was below the median of such companies. The modifications were an
increase in the cash retainer from $120,000 to $125,000, and an increase in the equity retainer from $170,000 to
$180,000. No changes were made to our Outside Directors Compensation Parameters in 2018. The compensation of the
Board for the financial year 2019 set forth in Table 1 is therefore composed of compensation under the prior parameters from
January 1 to the date of our 2019 annual general meeting and compensation under the revised parameters from such date and
thereafter.
The equity retainer noted above is in the form of restricted stock awards, based on the fair value of Chubb's Common Shares as
of the date of the award, with the remaining portion of the annual fee paid to non-management directors in cash quarterly.
SC- 2
SWISS STATUTORY COMPENSATION REPORT (continued)
The Lead Director received a fee of $50,000 (CHF 49,683) in 2019. Committee chairs received Committee chair fees as
follows:
Audit Committee - $35,000 (CHF 34,778)
Compensation Committee - $25,000 (CHF 24,841)
Nominating & Governance Committee - $20,000 (CHF 19,873)
Risk & Finance Committee - $20,000 (CHF 19,873)
Directors are not paid fees for attending regular Board or committee meetings but, at the discretion of the Chairman of the
Board and the Lead Director, Chubb may pay an additional $2,000 fee for each special meeting attended by telephone and
$3,000 for each special meeting attended in person. Such fees were not paid in 2019.
Directors may elect to receive up to all of their compensation, other than compensation for special meetings, in the form of
restricted stock awards. Restricted stock awards vest at the following year's annual general meeting.
Chubb’s Corporate Governance Guidelines specify director equity ownership requirements. Chubb awards independent directors
restricted stock awards and mandates minimum equity ownership of $600,000 for outside directors (based on the stock price
on the date of award). Each director has until the fifth anniversary of his or her initial election to the Board to achieve this
minimum. The previously granted restricted stock awards (whether or not vested) will be counted toward achieving this
minimum.
Once a director has achieved the minimum equity ownership, this requirement will remain satisfied going forward as long as he
or she retains the number of shares valued at the minimum amount based on the New York Stock Exchange closing price for
Chubb’s Common Shares as of the date the minimum threshold is initially met. Any vested shares held by a director in excess of
the minimum share equivalent specified above may be sold at the director's discretion after consultation with Chubb’s General
Counsel.
No compensation was paid to former directors nor did any former director receive any benefits in kind or waivers of claims
during the years ended December 31, 2019 and 2018. During the years ended December 31, 2019 and 2018, no current
directors received benefits in kind or waivers of claims and no compensation had been paid to any related party of current or
former directors, except as noted below with respect to our director charitable contributions program. Additionally, no related
party of current or former directors received any benefits in kind or waivers of claims during 2019 or 2018. At each of
December 31, 2019 and 2018, no current or former directors or any related party of current or former directors had
outstanding loans or credits from Chubb.
Chubb has a matching contribution program for directors under which Chubb will match director charitable contributions to
registered charities, churches, and other places of worship or schools up to a maximum of $20,000 per year. For Swiss law
purposes, some of these matching contributions during the years ended December 31, 2019 and 2018 qualified as related
party transactions because our directors or members of their immediate family were directors or officers of the organization.
Pursuant to this matching charitable contributions program, Chubb matched a total of $78,000 (CHF 77,505) in contributions
to seven such organizations in 2019 and $72,000 (CHF 70,419) in contributions to six such organizations in 2018.
The following table presents information concerning director compensation paid or, in the case of restricted stock awards,
earned in the years ended December 31, 2019 and 2018. Although Evan G. Greenberg is Chairman of the Board, Mr.
Greenberg received no compensation in respect of these duties. Details of Mr. Greenberg's compensation in his capacity as a
member of Executive Management are included in Table 2 below.
SC- 3
SWISS STATUTORY COMPENSATION REPORT (continued)
Table 1 - audited
Name
Michael G. Atieh
Sheila P. Burke
James I. Cash
Mary Cirillo
Year
2019
2018
2019
2018
2019
2018
2019
2018
Michael P. Connors
2019
John A. Edwardson
2018
2019
2018
Robert M. Hernandez
2019
Leo F. Mullin
Kimberly A. Ross
Robert W. Scully
2018
2019
2018
2019
2018
2019
2018
Eugene B. Shanks, Jr. 2019
Theodore E. Shasta
David H. Sidwell
Olivier Steimer
2018
2019
2018
2019
2018
2019
2018
Member
Member
Member
Member
Member
Member
Member
Chair - Nominating &
Governance
Member
Chair - Nominating &
Governance
Member
Chair - Compensation
Member
Chair - Compensation
Member
Member
Lead Director
Lead Director
Retired
Member (Retired)
Member
Member
Member
Chair - Audit
Member
Chair - Audit
Member
Member
Member
Member
Member
Member
Member
Chair - Risk & Finance
Member
Chair - Risk & Finance
123,750
120,000
123,750
120,000
—
—
—
—
173,750
170,000
—
30,000
123,750
90,000
—
—
123,750
120,000
123,750
120,000
123,750
120,000
143,750
Board Function
Fees
Earned or Paid
Stock Awards (1)
All Other (2)
Total in USD
Total in CHF
$
$
123,750 $
$
128,750
176,250 $
$
170,000
103,097 $
$
98,153
176,250
170,000
176,250
170,000
30,720
29,246
9,748
9,280
403,097
396,903
330,720
319,246
309,748
299,280
CHF 400,540
CHF 388,189
328,622
312,237
307,783
292,709
319,375
42,930
362,305
360,007
310,000
40,870
350,870
343,166
148,750
176,250
145,000
170,000
325,000
322,938
—
—
—
—
75,704
71,872
—
16,019
—
—
—
—
—
—
—
—
—
—
315,000
299,375
290,000
425,704
411,872
—
109,769
300,000
305,000
334,375
311,875
300,000
290,000
300,000
290,000
300,000
290,000
299,375
290,000
176,250
170,000
—
63,750
176,250
215,000
334,375
311,875
176,250
170,000
176,250
170,000
176,250
170,000
308,084
297,476
283,633
423,003
402,829
—
107,359
298,097
298,303
332,254
305,027
298,097
283,633
298,097
283,633
298,097
283,633
328,303
312,877
95,649
283,633
James M. Zimmerman 2019
Member (Retired)
Total (3)
2018
2019
2018
Member
$
$
176,250
10,399
330,399
140,000
170,000
30,000
120,000
63,750
170,000
9,901
2,510
—
319,901
96,260
290,000
1,362,500 $
2,779,375 $
275,108 $ 4,416,983
CHF 4,388,963
1,423,750
$
2,890,625
$
275,341
$ 4,589,716
CHF 4,488,945
(1) The Stock Awards column reflects restricted stock awards earned during 2019 and 2018. These stock awards were granted in May 2019 and May 2018, respectively, at the
annual general meetings and vest at the subsequent year's annual general meeting.
(2) The All Other column includes dividend equivalents on our deferred restricted stock units (which we stopped issuing in 2009) held by our longer-serving directors. We issue
stock units equivalent in value to the dividend payments that those directors would have received if they held stock.
Ms. Burke and Mr. Cash received deferred market value units from The Chubb Corporation prior to its acquisition by us in January 2016. Each unit has the equivalent value of
one share of our common stock. These units are credited with market value units equivalent in value to the dividend payments they would have received if they held stock.
(3) Total director compensation in 2019 reflects one less director for a portion of the year compared to 2018 as a result of the retirement of Leo F. Mullin as of the date of the May
2018 annual general meeting of shareholders. Mr. Zimmerman retired from the Board in May 2019.
SC- 4
SWISS STATUTORY COMPENSATION REPORT (continued)
Compensation of Executive Management
The following table presents information concerning Executive Management’s 2019 and 2018 compensation.
Table 2 - audited
Name and
Principal Position
Evan G.
Greenberg
Chairman,
President and
Chief Executive
Officer, Chubb
Limited (highest
paid executive)
All Other
Executive
Management
Year
Salary
Bonus
Stock
Awards (1)
Option
Awards (2)
All Other
Compensation (3)
Total in USD
Total in CHF
2019
$ 1,400,000 $ 6,700,000
$ 10,125,070 $ 1,917,286 $
1,267,971 $ 21,410,327
CHF 21,274,500
2018
$ 1,400,000
$ 6,100,000
$ 9,225,174
$ 1,881,925
$
1,246,474
$ 19,853,573
CHF 19,417,589
2019
$ 2,583,135 $ 5,159,400
$ 7,211,734 $ 1,365,545 $
1,267,109 $ 17,586,923
CHF 17,475,352
2018
$ 2,523,193
$ 4,634,800
$ 6,425,985
$ 1,280,174
$
1,229,301
$ 16,093,453
CHF 15,740,041
Total
2019
$ 3,983,135 $11,859,400 $ 17,336,804 $ 3,282,831 $
2,535,080 $ 38,997,250
CHF 38,749,852
2018
$ 3,923,193
$10,734,800
$ 15,651,159
$ 3,162,099
$
2,475,775
$ 35,947,026
CHF 35,157,629
(1) The Stock Awards column discloses the fair value of the restricted stock awards granted on February 27, 2020 for 2019 and February 28, 2019 for 2018, respectively. This
column includes time-based and performance-based restricted stock awards. In comparison, the Summary Compensation Table in the Company's annual proxy statement
(unaudited) discloses equity grants for a particular fiscal year based on the grants made during that fiscal year.
(2) The Option Awards column discloses the fair value of the stock options granted on February 27, 2020 for 2019 and February 28, 2019 for 2018, respectively. In comparison,
the Summary Compensation Table in the Company's annual proxy statement (unaudited) discloses equity grants for a particular fiscal year based on the grants made during that
fiscal year.
(3) All Other Compensation column includes perquisites and other personal benefits, consisting of the following:
For Mr. Greenberg, contributions to retirement plans of $900,000 (CHF 894,290) in 2019 and $828,000 (CHF 809,820) in 2018, personal use of corporate aircraft of
$329,683 (CHF 327,591) in 2019 and $378,929 (CHF 370,609) in 2018, and miscellaneous other benefits of $38,288 (CHF 38,045) in 2019 and $39,545 (CHF 38,677)
in 2018, including executive medical coverage and matching contributions made under our matching charitable contributions program. The Board required Mr. Greenberg to
use corporate aircraft for all travel whenever practicable for security reasons.
For the other members of Executive Management, contributions to retirement plans, personal use of corporate aircraft and corporate apartment, and miscellaneous other benefits,
including, as applicable, club memberships, financial planning, executive medical coverage, matching contributions made under our matching charitable contributions program,
car allowance or car lease and car maintenance allowance.
Personal use of the corporate aircraft was limited to space available on normally scheduled management business flights.
Other personal benefits including housing allowances and cost of living allowance.
In 2019 and 2018, housing allowances were provided to Mr. Bancroft because Chubb requires him to maintain a second residence in addition to maintaining his own personal
residence.
Contributions to retirement plans for 2019 and 2018 totaled $1.65 million (CHF 1.64 million) and $1.55 million (CHF 1.51 million), respectively. These consist of discretionary
and non-discretionary employer contributions. The discretionary employer contributions for 2019 have been calculated and are expected to be paid in April 2020.
No former member of Executive Management or any related party of current or former Executive Management received non-
market standard compensation from Chubb during each of the years ended December 31, 2019 and 2018. Additionally, no
current or former member of Executive Management or any related party thereto received benefits in kind or waivers of claims
during 2019 or 2018 other than as described in the footnotes to Table 2.
At each of December 31, 2019 and 2018, no current or former member of Executive Management or any related party of a
current or former member of Executive Management had outstanding loans or credits from Chubb.
SC- 5
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON
THE (SWISS STATUTORY) COMPENSATION REPORT
Report of the statutory auditor on the compensation report
We have audited the accompanying compensation report of Chubb Limited for the year ended December 31, 2019. The audit
was limited to the information according to articles 14-16 of the Ordinance against Excessive Compensation in Stock Exchange
Listed Companies (Ordinance) contained in the tables labeled "audited" on pages SC-4 to SC-5 of the compensation report.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the compensation report in accordance
with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The
Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.
Auditor’s responsibility
Our responsibility is to express an opinion on the accompanying compensation report. We conducted our audit in accordance
with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the compensation report complies with Swiss law and articles 14-16 of the
Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the compensation report with
regard to compensation, loans and credits in accordance with articles 14-16 of the Ordinance. The procedures selected depend
on the auditor’s judgment, including the assessment of the risks of material misstatements in the compensation report, whether
due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of
remuneration, as well as assessing the overall presentation of the compensation report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the compensation report of Chubb Limited for the year ended December 31, 2019 complies with Swiss law and
articles 14-16 of the Ordinance.
PricewaterhouseCoopers AG
/s/ Peter Eberli
Peter Eberli
Audit expert
Auditor in charge
Zurich, March 24, 2020
/s/ Nicolas Juillerat
Nicolas Juillerat
Audit expert
SC- 6
ENVIRONMENTAL STATEMENT
Chubb Greenhouse Gas Reduction Programs
As an insurance company, Chubb's environmental footprint is relatively modest, but through our corporate greenhouse gas inventory
program and corporate environmental strategy, we work to reduce it even further. Some of the primary objectives of our environmental
strategy are to measure, record and reduce Chubb's corporate GHG emissions.
In 2007, Chubb joined the voluntary U.S. Environmental Protection Agency (EPA)-sponsored Climate Leaders program, through which
the company was able to develop long-term, comprehensive climate change strategies, inventory its emissions and set a six-year GHG
reduction goal of 8% per employee. While the EPA program was discontinued in September 2011, Chubb’s corporate GHG inventory
program remains active using its methodology, which is based on the World Resources Institute and the World Business Council for
Sustainable Development (WRI/WBCSD) GHG Protocol for data collection and analysis. In 2012, Chubb successfully met its first-
generation GHG reduction goal with a 27% reduction in emissions per employee since 2006. In order to continue Chubb’s global
commitment to reducing its environmental footprint, a GHG reduction target was announced in September 2014 to reduce emissions
10% per employee by 2020 from a 2012 base year. From 2015 to 2018, Chubb reduced its global absolute GHG emissions by 21%.
In 2019, Chubb announced new companywide goals to reduce GHG emissions globally by 20% on an absolute basis by 2025 and by
40% by 2035. Both goals use 2016 emissions levels as the baseline and are aligned with the two-degree Celsius target outlined in the
Paris Climate Agreement, as well as the quantitatively supported science-based standards (SBTs) methodology of the United Nations
Environment Program (UNEP). By year-end, Chubb achieved its first goal of reducing emissions by 20%. Chubb is now pursuing its
longer-term 40% emissions reduction goal.
Chubb 2019 GHG Inventory Data
Global Absolute Emissions (CO2-eq.)
2019
68,852
The data above represent 26,332 metric tons of CO2-eq. of Scope 1 emissions from fossil fuel combustion; 44,293 metric tons of
CO2-eq. of location-based Scope 2 emissions; and 42,520 metric tons of CO2-eq. of market-based Scope 2 emissions from
purchased electricity. Chubb’s GHG emissions data are reviewed by a third-party on an annual basis. The company's most recent
2019 GHG inventory was reviewed by Apex Companies, LLC and the verification statement can be found on the following page.
In addition to tracking GHG emissions versus its goals, Chubb reports its GHG emissions data to the CDP, an organization that scores
carbon emissions information from thousands of corporations on behalf of the global investment community. In 2019, Chubb’s
response to the questionnaire resulted in a score of B.
Chubb's global GHG management plan concentrates primarily on reducing energy consumption at the facility level - specifically, in
owned buildings and larger, long-term leased spaces. Projects have been implemented at a number of major offices including:
Philadelphia, Pa.; Wilmington, Del.; Whitehouse Station, N.J.; Hamilton, Bermuda; Sydney, Australia; the Chubb Conference
Center, Lafayette Hill, Pa.; London, U.K.; and Monterrey, Mexico. The projects include installation of new HVAC equipment,
lighting upgrades and installation of a central building automation system (BAS) in order to improve operations within the building
and reduce energy consumption.
In Chubb's office building in Philadelphia, the company has reduced energy consumption by over 20% since 2006 through the installation
of new boilers and LED lighting, the use of variable speed drive HVAC equipment and installation of an exhaust energy recovery ventilator.
Through these steps, the company earned LEED Silver certification in 2009 and was awarded LEED Platinum certification in 2020. It
was also awarded Energy Star Certification by the U.S. EPA in 2016.
In July 2011, the company’s Bermuda office building was awarded LEED Gold certification - the first building in Bermuda to be
awarded the designation - due in large part to a re-lamping of office lights, applying a floating temperature set point and installing
motion sensors and timers on office equipment. These actions reduced electrical needs by approximately 500,000 kWh (358 metric
tons CO2e) per year. In 2014, the company engaged with the U.S. Green Building Council (USGBC) and the Bermuda facility became
one of the first buildings using LEED Dynamic Plaque, a tool that continuously monitors and encourages improvement of overall
building performance. The building was re-certified LEED Platinum in 2019, becoming the first building on the island to win the
designation.
In Chubb’s two office buildings in Whitehouse Station, N.J., the company has reduced energy consumption through the installation of
LED lighting, the use of variable speed drive HVAC equipment and careful management. The buildings were awarded LEED Gold
certification for the first time in 2020.
Information about Chubb's full range of environmental efforts, including insurance solutions to help customers manage their
environmental and climate change risks, corporate initiatives to control our own ecological impact and philanthropic actions in
support of environmental causes, can be found in the company's annual Environmental Report, which is available at
https://www.chubb.com/us-en/about-chubb/environment.aspx.
E-1
VERIFICATION STATEMENT
GREENHOUSE GAS EMISSIONS
VERIFICATION STATEMENT
GREENHOUSE GAS EMISSIONS
Apex Companies, LLC (Apex) was engaged
to provide Limited
Assurance and conduct an independent verification of the greenhouse
gas (GHG) emissions and energy consumption reported by Chubb from
January 1, 2019 to December 31, 2019. This Verification Statement
applies to the related information included within the scope of work
described below.
The determination of the GHG emissions is the sole responsibility of
Chubb. Apex was not involved in determining the GHG emissions. Our
sole responsibility was to provide independent verification on the
accuracy of the GHG emissions reported, and on the underlying systems
and processes used to collect, analyze and review the information.
Boundaries of the reporting company GHG emissions covered by
the verification:
• Operational Control
• Global
Emissions verified in Metric tonnes of CO2-equivalent (tCO2e):
•
•
•
•
Scope 1 Emissions: 26,332
Scope 2 Emissions (Location-Based): 44,293
Scope 2 Emissions (Market-Based): 42,520
Scope 3 Emissions (Business Travel - Air): 29,192
Data and information supporting the Scope 1 & Scope 2 GHG emissions
were historical in nature and in some cases estimated, based on
historical data for similar properties in similar locations. Data and
information supporting the Scope 3 GHG emissions assertion were in
some cases estimated rather than historical in nature.
Period covered by GHG emissions verification:
•
January 1, 2019 to December 31, 2019
Reporting Protocols against which verification was conducted:
• World Resources Institute (WRI)/World Business Council for
Sustainable Development (WBCSD) Greenhouse Gas
Protocol, Corporate Accounting and Reporting Standard
(Scope 1 & 2)
• WRI/WBCSD Corporate Value Chain (Scope 3) Accounting
and Reporting Standard (Scope 3)
• Review of documentary evidence produced by Chubb;
• Review of Chubb data and information systems and methodology
for collection, aggregation, analysis and review of information used
to determine GHG emissions;
•
Audit of samples of data used by Chubb to determine GHG
emissions.
Apex Companies, LLC (Apex) was engaged
Assurance and conduct an independent verification of the greenhouse
gas (GHG) emissions and energy consumption reported by Chubb from
January 1, 2019 to December 31, 2019. This Verification Statement
applies to the related information included within the scope of work
described below.
Assurance Opinion:
Based on the results of our verification process, Apex provides Limited
Assurance of the GHG emissions and energy assertion shown above,
and found no evidence that the assertion:
The determination of the GHG emissions is the sole responsibility of
Chubb. Apex was not involved in determining the GHG emissions. Our
sole responsibility was to provide independent verification on the
accuracy of the GHG emissions reported, and on the underlying systems
and processes used to collect, analyze and review the information.
•
•
•
is not materially correct;
Boundaries of the reporting company GHG emissions covered by
the verification:
is not materially correct;
is not a fair representation of the GHG emissions and energy
data and information; and
• Operational Control
is not prepared in accordance with the WRI/WBCSD GHG
Protocol Corporate Accounting and Reporting Standard.
• Global
Emissions verified in Metric tonnes of CO2-equivalent (tCO2e):
It is our opinion that Chubb has established appropriate systems for the
collection, aggregation and analysis of quantitative data for determination
of GHG emissions for the stated period and boundaries.
•
•
Scope 1 Emissions: 26,332
Scope 2 Emissions (Location-Based): 44,293
•
Scope 2 Emissions (Market-Based): 42,520
•
Scope 3 Emissions (Business Travel - Air): 29,192
Statement of independence, impartiality and competence
Apex has implemented a Code of Ethics across the business to maintain
their day-to-day business
high ethical standards among staff
activities. We are particularly vigilant in the prevention of conflicts of
interest.
in
No member of the verification team has a business relationship with
this
Chubb,
assignment. We conducted this verification independently and to our
knowledge there has been no conflict of interest.
its Directors or Managers beyond
that required of
The verification team has extensive experience in conducting assurance
over environmental, social, ethical and health and safety information,
systems and processes, has over 30 years combined experience in this
field and an excellent understanding of Apex standard methodology for
the verification of greenhouse gas emissions data.
Data and information supporting the Scope 1 & Scope 2 GHG emissions
were historical in nature and in some cases estimated, based on
historical data for similar properties in similar locations. Data and
information supporting the Scope 3 GHG emissions assertion were in
some cases estimated rather than historical in nature.
Period covered by GHG emissions verification:
•
January 1, 2019 to December 31, 2019
Reporting Protocols against which verification was conducted:
• World Resources Institute (WRI)/World Business Council for
Sustainable Development (WBCSD) Greenhouse Gas
Protocol, Corporate Accounting and Reporting Standard
(Scope 1 & 2)
Attestation:
to provide Limited
• Review of documentary evidence produced by Chubb;
• Review of Chubb data and information systems and methodology
for collection, aggregation, analysis and review of information used
to determine GHG emissions;
•
Audit of samples of data used by Chubb to determine GHG
emissions.
Assurance Opinion:
Based on the results of our verification process, Apex provides Limited
Assurance of the GHG emissions and energy assertion shown above,
and found no evidence that the assertion:
•
•
•
is not a fair representation of the GHG emissions and energy
data and information; and
is not prepared in accordance with the WRI/WBCSD GHG
Protocol Corporate Accounting and Reporting Standard.
It is our opinion that Chubb has established appropriate systems for the
collection, aggregation and analysis of quantitative data for determination
of GHG emissions for the stated period and boundaries.
Statement of independence, impartiality and competence
Apex has implemented a Code of Ethics across the business to maintain
high ethical standards among staff
in
their day-to-day business
activities. We are particularly vigilant in the prevention of conflicts of
interest.
No member of the verification team has a business relationship with
Chubb,
its Directors or Managers beyond
that required of
this
assignment. We conducted this verification independently and to our
knowledge there has been no conflict of interest.
The verification team has extensive experience in conducting assurance
over environmental, social, ethical and health and safety information,
systems and processes, has over 30 years combined experience in this
field and an excellent understanding of Apex standard methodology for
the verification of greenhouse gas emissions data.
Attestation:
GHG Verification Protocols used to conduct the verification:
•
ISO 14064-3: Greenhouse gases -- Part 3: Specification with
guidance for the validation and verification of greenhouse gas
assertions
Trevor A. Donaghu, Lead Verifier
Program Manager
Sustainability and Climate Change Services
Level of Assurance and Qualifications:
Limited
•
• Materiality Threshold: ±5%
Verification Methodology:
•
Interviews with relevant personnel of Chubb;
Apex Companies, LLC
March 13, 2020
• WRI/WBCSD Corporate Value Chain (Scope 3) Accounting
and Reporting Standard (Scope 3)
GHG Verification Protocols used to conduct the verification:
•
ISO 14064-3: Greenhouse gases -- Part 3: Specification with
guidance for the validation and verification of greenhouse gas
assertions
Level of Assurance and Qualifications:
Limited
•
• Materiality Threshold: ±5%
Verification Methodology:
•
Interviews with relevant personnel of Chubb;
Trevor A. Donaghu, Lead Verifier
Program Manager
Sustainability and Climate Change Services
Apex Companies, LLC
March 13, 2020
This verification statement, including the opinion expressed herein, is provided to Chubb and is solely for the benefit of Chubb in accordance with the terms of
our agreement. We consent to the release of this statement by you to the CDP in order to satisfy the terms of CDP disclosure requirements but without
accepting or assuming any responsibility or liability on our part to CDP or to any other party who may have access to this statement.
This verification statement, including the opinion expressed herein, is provided to Chubb and is solely for the benefit of Chubb in accordance with the terms of
our agreement. We consent to the release of this statement by you to the CDP in order to satisfy the terms of CDP disclosure requirements but without
accepting or assuming any responsibility or liability on our part to CDP or to any other party who may have access to this statement.
APEX Companies, LLC
E-2
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APEX Companies, LLC
E-2
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Financial Summary
Chairman and CEO Letter to Shareholders
Elevating the Customer Experience
Review of Operations
Citizenship at Chubb
Chubb Group Corporate Officers and Other Executives
Chubb Limited Board of Directors
Shareholder Information
Non–GAAP Financial Measures
Form 10–K
Swiss Statutory Financial Statements
Swiss Statutory Compensation Report
Environmental Statement
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Chubb Limited
Bärengasse 32
CH—8001 Zurich
Switzerland
chubb.com
Chubb Limited
Annual Report
2019
002CSNA958