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Chubb Limited
Bärengasse 32
CH—8001 Zurich
Switzerland
chubb.com
Chubb Limited
Annual Report
2020
002CSNB930
Financial Summary
Chairman and CEO Letter to Shareholders
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
22
34
36
38
39
40
Financial Summary
In millions of U.S. dollars
except per share data and ratios
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
Percentage
Change
Gross premiums written
$41,261
$40,124
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
Core operating return on tangible equity
33,820
33,117
96.1%
86.7%
3,533
3,313
7.79
7.31
32,275
31,290
90.6%
89.2%
4,454
4,641
9.71
10.11
118,669
109,234
190,774
176,943
59,441
131.88
87.69
6.2%
6.2%
9.8%
55,331
122.42
78.14
8.4%
9.0%
14.6%
2.8%
4.8%
5.8%
NM
NM
–20.7%
–28.6%
–19.8%
–27.7%
8.6%
7.8%
7.4%
7.7%
12.2%
NM
NM
NM
This document contains non–GAAP financial measures. Refer to
pages 40–42 for reconciliations to the most directly comparable
GAAP measures.
NM—not meaningful
Percentage
Change
Constant
Dollars
3.4%
5.5%
6.5%
1
Evan G. Greenberg
Chairman and Chief Executive Officer
Chubb Group
2
To My Fellow Shareholders
This was an unprecedented year. Over
the last 12 months, Chubb withstood
a global pandemic, a recession and a
record run of natural catastrophes.
Our 31,000–strong workforce in 54
countries performed substantially as
normal despite working from home for
much of the year. We never stopped
writing insurance contracts, paying
claims, offering risk engineering and
protection services, and marketing
our capabilities. I am proud of my
colleagues: because of their efforts
we concluded the year stronger than
we started, with momentum, earning
power and optimism for the future.
COVID–19 impacted us financially
and operationally. We kept moving
forward though, even as others pulled
back. Our fundamentals are very
strong, and we continued to invest
and advance our strategy. Our digital
transformation accelerated, both
because of the substantial investments
we have made over the years and the
way shelter–in–place orders forced our
employees to work digitally from home.
We capitalized on improved market
conditions in our commercial insurance
businesses, propelling revenue
growth and expanding margins. Our
global footprint expanded, notably
in Asia. We ended the year with a
stronger balance sheet than we began.
And we distinguished ourselves as
industry leaders, both in our response
to commercial insurance market
conditions and on the issues impacting
our industry caused by the pandemic.
I want to use this year’s shareholder
letter to explain why 2020 renewed
my optimism about Chubb’s future,
despite the challenges of COVID.
I also want to reflect on the many
other challenges we faced that remain
across the commercial, social and
geopolitical landscape. The last
year has been difficult in all parts
of the world. The United States has
faced particular upheavals having
mishandled the healthcare response
to the pandemic. We have watched
widespread protests on our streets,
drawing attention to problems of racial
justice. Most shocking was the display
of demagoguery in our nation’s capital
in January, scenes the likes of which
we have not witnessed in our 240–year
history. They left our country shaken
and our international image tarnished.
Make no mistake: I remain optimistic
about the future of our country. But
nothing is guaranteed if the U.S. does
not step up its game.
We will continue to feel the health,
economic and social impact of the
pandemic — perhaps endemic is now
a better description — despite vaccines
and therapeutics. COVID is accelerating
many global trends, from our reliance
on new technologies to rising income
inequality and political populism.
Inside and outside our borders, support
for economic globalization remained
under pressure, with trade facing
multiple headwinds. Relations between
the U.S. and China sank to their lowest
ebb in decades. And extreme weather
showed the climate crisis looming more
urgently than ever. The environment
faced by a global company like Chubb
is ever–more complex, and there are
important lessons to draw from the
last 12 months, both for our business
and our country, as we move forward
confidently into a new period of
shareholder wealth creation.
Strong financial performance in
the face of adversity
Chubb is a leading global insurance
company and the world’s largest
publicly traded property and casualty
(P&C) insurer, providing a wide range
of products and services to individuals,
families and businesses of all sizes. This
year’s pandemic hit our industry hard.
Our company’s published results were
impacted both by the pandemic and
how we chose prudently to recognize
our ultimate exposures to it, as well
as natural catastrophes. But Chubb’s
underlying financial results were very
strong. I would draw your attention to
four points in particular.
First, we produced core operating
income of $3.3 billion, or $7.31 per
share, down 28%, a noteworthy
performance in the context of a
quarter of earnings lost due to COVID.
Our total net catastrophe losses for
the year, which included our sizable
COVID charge, were $6.12 per share,
compared to $2.11 in the prior year
and our five–year average of $3.51. But
no handwringing: We are in the risk
business, and we are paid to accept
volatility.
Second, we delivered an underwriting
profit, despite the year’s events. Our
published P&C combined ratio was
96.1%, a result that for many insurers
would represent a normal or even good
year. But hardly for us — our combined
ratio has averaged 91.2% over the last 10
years, outperforming our competitors
by nearly 7.7 percentage points. Our
underlying combined ratio last year,
which excludes CAT losses, told a
very positive story that speaks to our
earning power — more on that later.
3
insurance, though we expect these
businesses to bounce back as the
pandemic begins to recede and
economies recover.
Due to pandemic–related exposures,
we took a sizable charge in the
second quarter. We estimated that
our ultimate COVID–related losses
would approximate $1.4 billion. Our
decision to reserve as closely as we
could to ultimate means we have now
accounted for emerging pandemic–
related losses, rather than taking the
pay– or recognize–as–you–go approach
many seem to be adopting — a mark of
confidence in our risk management. On
the other side of the coin, we have also
been extremely cautious in recognizing
the reduction in frequency of losses
because of the economic shutdown.
We ended the year with a strong capital
and liquidity position as measured
by some $75 billion in total capital,
$59 billion in equity, and record
cash flow of $9.8 billion. Our AA
ratings by S&P and A++ by AM Best
are solid. We continue to maintain
capital flexibility and we will keep
investing in critical areas like our digital
transformation and international
expansion. We entered ’21 in a stronger
position financially, operationally
and strategically, and this gives me
confidence about our ability to manage
the future.
Understanding the pandemic
and our response
The ongoing pandemic is a unique
catastrophe for insurers. Unlike a
wildfire or a hurricane, which occurs
in a specific place and then stops, the
pandemic has no geographic boundary
and no time limit. The COVID health
crisis was exacerbated by shelter–
in–place and travel restrictions,
and consequent broad economic
shutdowns. Simply to illustrate the
magnitude, my guess is that, taken
together, this combined health and
economic crisis is likely over time to
produce an industry insured loss in the
region of $80 billion globally.
Our and the industry’s COVID–related
claims come from a broad range
of exposures, principally in four
areas. The first occurred as people
suffered from ill health or death,
from front–line workers to ordinary
employees, affecting everything from
life and health insurance to workers
compensation. The second source of
exposures come from liability–related
insurance, including employment
practices, directors and officers (D&O)
and medical malpractice. Next are
business interruption losses, from
businesses that had coverage and
were shut down during the pandemic.
And finally, there are credit–related
exposures, such as surety and trade
credit.
Each year Chubb undertakes a
catastrophe–type risk scenario
planning exercise related to our risk
management practices. To help us
assess possible future claims, we
modeled a global pandemic using
the 1918 Spanish Flu as our template.
We got the scale of financial impact
on our business about right. But we
missed two important points. First,
we got wrong where the impact
would be felt. We assumed most
claims would come from health and
loss–of–life exposures. In reality, more
will come from the other exposures.
Second, our operational disaster
management process contemplated
single geographic events with local or
regional impacts, like an earthquake
Third, considering global economic
conditions, Chubb produced strong
top–line premium revenue growth.
P&C net premiums written were $31.3
billion, up 5.4% in constant dollars.
Within that our commercial lines grew
over 9%, benefiting from improved
underwriting conditions, while our
consumer lines were down 2.5%,
impacted by the pandemic’s effects
on economic activity. I’ll go into more
detail on that later, too.
Finally, Chubb is a balance sheet
business. Our book and tangible book
value grew, respectively, by 7.7% and
12.2% on a per share basis. At the same
time, the strength of our loss reserves,
the most important part of the balance
sheet, improved throughout the year.
Growth and underlying profitability
improved in most of our commercial
P&C insurance businesses as a result of
hardening markets globally. Chubb has
long shown underwriting discipline and
a willingness to trade market share for
underwriting profitability. With nearly
70% of our portfolio in commercial
lines, these favorable conditions
represent a major opportunity for
further growth. Our geographic
presence, broad product portfolio,
disciplined underwriting and expense
management, consistency of risk
appetite and strong financial position
are all helping us push forward, despite
the pandemic — increasing premium
revenues and margins across our
commercial businesses.
COVID–19 meant our consumer
businesses faced more challenging
times, particularly our sizable global
personal accident and supplemental
health (A&H) business and our
international personal lines business
that insures, for example, autos and
household contents. Shutdowns
reduced demand for personal
4
or a hurricane. In the future such
exercises will be conducted on a global
basis as well.
Chubb’s revenues were also impacted.
Reduced business activity and closures
decreased the premiums our insureds
pay us, restrictions on travel meant
less need for travel insurance, while
recessions lead to fewer consumer
purchases of everything from homes
to cars.
Our initial COVID response focused
on continuing to operate and keeping
our people safe. We learned from our
operations in China and around Asia,
helping us prepare for when COVID
arrived in the Western hemisphere.
Our investments in technology paid
dividends, allowing us to function
almost normally when our global staff
shifted to working at home — and we
didn’t miss a beat. We endeavored to
help relieve our customers’ suffering,
providing premium discounts and
extending payment terms, especially
for many smaller businesses that
needed breathing space. We took care
of our workers, instituting a no–layoff
policy during the acute phase of the
lockdown. We also committed millions
to pandemic relief efforts globally, in
particular to feed people who have
been going hungry in the tens of
millions.
We moved quickly from playing
defense to playing offense. We kept
investing in digital innovations and
foundational technologies, in people
and in our businesses. We pushed
ahead globally. Finally, we introduced
important management changes,
creating new leadership roles that
reflected organizational priorities and
recognized excellent performance.
In short, the pandemic did little to
hinder our current performance as well
as transformations underway in our
company that will prove beneficial for
years to come.
Industry conditions: a hard market
Property and casualty insurance is a
cyclical business driven by supply and
demand. Many of our competitors
chase volume at the expense of good
underwriting, underpricing risks and
providing overly broad coverage to win
business. Many also do not have good
data, or do not use their data well, so
they lack insight into a changing risk
environment. Eventually those who
undercharge get found out, paying the
price in rising losses and disappearing
margins. They become more risk averse
or simply exit markets altogether. After
years of underpricing, conditions began
to improve two or three years ago, and
accelerated in ’20 — meaning the rates
we are paid are rising and terms of
cover are becoming more sensible.
At the same time, insurers face a more
hostile loss environment. The average
amount paid for a given claim in most
classes of insurance is rising each year.
The frequency of claims, meaning
the number of claims per unit of
exposure, is also rising in many classes
of insurance, driven in part by rising
costs from natural catastrophes and
excessive litigation — trends that are
likely to endure. This means loss costs
have been rising while prices, until
recently, have not kept pace. These
rising costs also mean more insurers
have been pulling back from risk.
Chubb, with our culture of excellent
underwriting and risk management,
has not. And then to complete the
picture, record low interest rates limit
the ability of insurers to earn income
from our invested assets.
“ We moved quickly
from playing defense
to playing offense.
We kept investing in
digital innovations
and foundational
technologies, in people
and in our businesses.
We pushed ahead
globally.”
5
This is our kind of underwriting
market. Chubb is increasing risk
exposure because we can earn an
improved risk–adjusted return. We are
growing revenue and expanding our
underwriting margins. You can see this
emerging in our results. The current
accident year combined ratio excluding
catastrophes is a measure preferred by
industry investors because it is a gauge
of the underlying health of an insurer’s
current business, without the volatility
of catastrophe losses. Last year, ours
was 86.7%, compared with 89.2% prior
year, an improvement of 2.5 points; 1.6
points of the margin improvement were
loss ratio–related, with the balance
expense ratio–related. If we were to
include anticipated or expected CAT
losses, which I believe is a still better
measure, our combined ratio last year
was 90.3% compared with 92.6% prior
year. All things being equal — and we
are in the risk business — I expect
underwriting margins will continue to
expand while our growth improves.
Chubb’s growth priorities
We are a company of builders and we
are relentless, even while in work–
from–home mode. Let me highlight the
growth engines of our company as well
as the investments and innovations we
are making to build on our capabilities.
Our commercial P&C businesses
globally benefited from what I would
describe as a flight to capability,
predictability, consistency and
professionalism that altogether
equals quality. We offer clients our
broad range of products and services,
predictability in terms of capacity and
underwriting approach, and rational
and transparent pricing, terms and
conditions. We have been consistent
in our strategy. In previous soft market
years, we shrank major businesses to
maintain underwriting discipline. Now,
as conditions allow for a reasonable
return, we are increasing our exposure
and winning market share. The result
of this strategy is plain to see across
our company’s $21.8 billion global
commercial lines, which grew 9.3%
last year and had strong performance
in a number of our multibillion–dollar
commercial P&C divisions.
Our $21.2 billion North America
Insurance franchise is Chubb’s largest
division with substantial presence
in the United States, Canada and
Bermuda. Its portfolio balance is
74% commercial lines, which grew
9.6% excluding agriculture, and 26%
consumer lines, which grew 0.4%.
Chubb is the leading commercial P&C
insurer in the United States, focused
on large, medium and smaller business
clients. Our $8.7 billion Major Accounts
and Specialty division grew commercial
lines premiums by 12%. In the U.S.,
Chubb serves 94% of the Fortune 1000
— an impressive market penetration.
Yet, we have plenty of room for growth
with those blue–chip clients, many of
which place only a fraction of their
insurance with us. We have two excess
and surplus lines (E&S) businesses
in North America: Westchester, our
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%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1 Includes AIG, Allianz, AXA, CNA, HIG,
QBE, RSA, TRV, Zurich.
Source: SNL and company disclosures
Averages:
1 year
3 year
5 year
10 year
Peers1
Chubb
98.9%
98.0%
98.5%
98.4%
96.1%
92.4%
92.1%
91.2%
6
“ Our commercial P&C
businesses globally
benefited from what
I would describe as
a flight to capability,
predictability,
consistency and
professionalism that
altogether equals
quality.”
U.S. wholesale business, and Chubb
Bermuda, which specializes in high
excess, low frequency coverage for
casualty, property, financial lines
and political risks. Growth began to
accelerate in 2019, and really took off
last year — propelling Chubb to become
the fourth largest E&S writer in the
market, when Westchester and Chubb
Bermuda are combined. Net premiums
grew nearly 18% last year.
growth in years, with net premiums
written up over 12%. Driven by the hard
market, as well as the same business
strengths I mentioned earlier, our
European group is serving businesses
of all sizes, from large domestic and
multinational corporations to mid–size
and small commercial businesses. I
expect the current favorable market
conditions to continue to benefit this
large part of our company.
Our $5.7 billion North America
middle–market and small commercial
division also prospered in ’20 as market
conditions improved, but also because
of the deep strength of our distribution
network, with nearly 50 branches
serving over 4,500 independent
agents, making us the number three
middle–market insurer. Net premiums
written for commercial coverages grew
6.6%, the fastest since the ACE–Chubb
merger in 2016. Against the backdrop
of the pandemic, performance was
boosted in particular by the breadth
of our product range and industry
specialization. While some sectors we
serve struggled — entertainment and
aerospace, for instance — demand
in others was stronger, such as
pharmaceuticals and healthcare.
Outside North America, our $9.3 billion
Overseas General Insurance division
operates in 51 global markets split into
five international regions: Europe,
Middle East & Africa, Asia Pacific,
Latin America and Far East ( Japan).
Our portfolio balance is about 60%
commercial lines, which grew 10.8%
last year, and 40% consumer lines,
which shrank 6.4%.
Last year, our $2 billion retail
commercial P&C business in the United
Kingdom, Ireland and Continental
Europe, collectively called the Chubb
European Group, experienced its best
Elsewhere, some of our best
commercial P&C results in 2020 came
from international territories like
Australia and a number of emerging
markets. Our international retail
commercial P&C business is benefiting
from the same insurance market trends
that boosted our North American
performance. Even better were the
results of our $940 million London
market–based E&S wholesale business,
which has a presence on the Lloyd’s
trading floor. Called Chubb Global
Markets, this unit produced the single–
fastest growth in the company last year
with net premiums up 22%.
Our $9.5 billion global consumer P&C
operations, which represents about
30% of the company, were heavily
affected by the pandemic, shrinking
2.5% during the year. Our consumer
franchise includes our $4.9 billion U.S.
high net worth division, where we
are the clear market leader; our $2.7
billion global A&H business; and our
$1.9 billion international personal lines
division.
As I have explained, the pandemic
limited the kind of consumer activities
that lead to insurance purchases. For
example, sales activity in our North
America–based Combined Insurance
agency business, which specializes in
face–to–face selling, slowed to a crawl,
as did our worksite marketing business,
where insurance is sold to employees
at their place of work. Our travel
insurance business outside the U.S. was
7
grounded, while our automobile and
cell–phone insurance lines also slowed.
Response rates in our direct marketing
operations in Asia and Latin America,
such as telemarketing personal
accident and health insurance to
financial institutions’ customers, were
severely curtailed. Many consumer
purchases simply declined so our
consumer businesses everywhere — in
Asia, Latin America, Europe and the
United States — suffered.
were relatively less affected by the
pandemic, and they were more likely
to turn to a provider with a trusted,
quality reputation. As a result, our
business continued to expand. True
high net worth clients, whom we call
our Premier and Signature clients, are
a major focus because they appreciate
the coverages and services we provide.
These segments grew 7.7%, whereas
our mass affluent segment, which is
more influenced by price, shrank 5.2%.
Our North America high net worth
business, Chubb Personal Risk Services,
which serves the insurance needs of
affluent individuals and families in
the U.S. and Canada, was one notable
exception. High net worth consumers
Our Asia–focused life insurance
business was another exception.
Operating in eight Asian countries,
the business grew net premiums and
deposits 11.4% to $2.8 billion. Segment
income was up almost 10% year–on–
year, triple what it was just three
years ago. We also have life insurance
operations in various South American
countries led by Chile, where we
recently completed the acquisition of
Banco de Chile’s life operations. Our
life business continues to grow steadily,
helped in part by Asia’s relatively
stronger recovery from the pandemic,
and its earnings contribution to the
company is becoming meaningful.
While their growth may have been
subdued last year, our international
consumer P&C businesses have been
and remain critical engines of our
growth, where they are well placed
to serve the rising middle classes of
developing Asia and Latin America.
We continued to invest last year in
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
Pro it
Book Value Growth
Average Return on
Equity & Return
on Tangible Equity
Valuation
Net Premiums
Written
(’10–’20)
Operating
Earnings
(’10–’20)1
P&C Combined
Ratio
(’11–’20 Avg.)
Book Value
per Share
(12/10–12/20)2
Tangible Book
Value per Share
(12/10–12/20)2
Average Return
on Equity
(’11–’20)
Average Return
on Tangible
Equity
(’11–’20)
Market Cap
Growth
(12/10–12/20)3
Chubb
147%
25%
91.2%
93%
62%
10.0%
13.9%
233%
Avg
Peers4
6%
11%
98.9%
50%
62%
9.0%
11.3%
58%
1 AIG excluded due to negative earnings in 2010
2 AIG adjusted for U.S. Treasury Equity Investment
3 AIG excluded due to impact from government intervention
4 Peers include AIG, Allianz, AXA, CNA, Hartford, Travelers, Zurich
Annual metrics through full year 2020 actuals: Net Premiums Written, Operating Earnings,
P&C Combined Ratio, Average Return on Equity and Average Return on Tangible Equity; Point–in–time metrics
through December 2020 actuals: Book Value per Share, Tangible Book Value per Share and Market Cap
8
expanding their capabilities in terms
of products, technology and, most
importantly, distribution partnerships.
We will see them return to growth once
the pandemic subsides.
the start of the year. With every year
that passes, the amount we expect to
pay out from a given set of exposures
increases, a reality of climate change.
Chubb signed an impressive 21 new
distribution partnerships last year
with a range of partners, including
airlines, consumer finance companies
and digital platforms. Digital channels
are yielding exciting results as we
sell simple personal accident, life,
supplemental health and personal lines
insurance products via e–commerce
companies, digital banks and digitally
native players seeking to add insurance
to their services, as well as through
traditional channels like banks and
agents as they digitize. These new
products and partnerships only serve
to enhance our growth capabilities
when demand returns. They are the
seeds we plant for future growth.
The changing specter of risk
Our industry is managing two powerful
forces that are changing the nature
of risk — climate change and the legal
environment. Again, both are enduring
trends. Sizable weather–related loss
events are more common, from
a record U.S. hurricane season to
wildfires in California, Australia and
Greece, as well as flooding in areas like
China’s Yangtze River. The industry’s
global insured natural catastrophe
losses came in at $76 billion, up from
$54 billion prior year and one of the
costliest on record.
As a result, Chubb posted pre–tax net
losses of $1.7 billion last year from
natural catastrophes, compared to
$1.2 billion in 2019. This was $648
million more than we planned when
calculating our expected CAT losses at
Given our business of assuming risk, it
is our job to better understand evolving
exposures that emanate from climate
change. Flood models and evaluation
tools are improving to consider factors
like elevation and flood defense.
Wildfire modeling now includes
factors like topography, vegetation,
drought conditions and wind patterns
— allowing us to assess more accurately
the risks faced by an individual or a
business, as well as aggregations of risk
in a given geography. These tools are
far from perfect — they don’t represent
absolute truth — but they continue to
advance and provide us with greater
insight. Chubb is investing a lot of time
and money to improve our risk–based
analytics, not just in climate but in
many areas of risk.
The worsening legal environment
is systemic and, for clarity, coming
from two principal sources. The first
is litigation as a business, in which
lawyers drive up insurance costs with
excessive or abusive claims. Litigation
that should provide fair redress has
metastasized into a huge money–
making system. This abuse of late is
partially fueled by increased litigation
funding, a speculative new asset class
that is more akin to horse racing. Rising
legal costs are unnecessarily costly for
society and a tax on business.
The Boy Scouts of America litigation
is a case in point. When the group
filed for bankruptcy in 2020, it faced
about 1,700 claims alleging sexual
abuse by scout leaders. That number
grew 55 fold to 95,000 claims, driven
by what The Wall Street Journal
described as “a sophisticated new tort
machine” that raises investment to
fund speculative litigation and push
“ Our industry is managing
two powerful forces
that are changing the
nature of risk — climate
change and the legal
environment. Both are
enduring trends.”
9
new claims on a massive scale, often
by recruiting claimants via misleading
mass advertising and social media
campaigns. Tens of thousands of the
claims upon preliminary inspection
appear to be invalid or fraudulent. We
deeply sympathize with the victims of
sexual abuse, but justice is not served
by the filing of specious claims.
defend the sanctity of our contracts.
We argued that these measures were
unconstitutional, not to mention that
they would bankrupt the industry and
do huge damage to the financial system
as a whole. The industry, supported by
regulators, managed to blunt this threat
— although attempts to enact legislation
continue at the state level.
The second force behind our worsening
legal environment is “social inflation,”
meaning the populist notion that if
something goes wrong in modern
society, someone must also be at fault.
Set against a backdrop of rising anti–
corporate sentiment, this phenomenon
has been driven by a range of factors,
from changing definitions of legal
liability to more costly jury awards.
The overall result has been a severe
and ultimately unsustainable inflation
in legal awards and legal costs
that translates to higher costs of
insurance. To highlight the problem,
the total expense of legal costs and
compensation paid in the U.S. tort
system in 2019 amounted to $510
billion, or 2.3 percent of GDP. The U.S.
needs litigation reform at both the state
and federal level to combat the abusive
power of the trial bar and address out–
of–control awards. Working with the
wider industry, this remains a Chubb
priority.
The challenging environment was
exemplified writ large during the
pandemic over the issue of business
interruption. Our industry first came
under attack from some in the political
establishment, who considered
federal and state legislation to force
insurers retroactively to pay out on
risks not covered in our policies.
Chubb became involved early on,
assuming a public profile and helping
to lead an industrywide effort to
Then came the trial bar, which initiated
a spree of litigation that attempts
to twist the intent of contracts and
reinterpret insurance contract language
to force pay–outs in situations that in
most cases insurers never intended
to cover, and in which no premium
was charged for the risk, specifically
when city and state governments
mandated pandemic–related business
closures. This litigation relied on
implausible arguments that COVID
causes direct physical loss or damage
to a business’s property, in the same
way as a fire. The industry has been
pushing back successfully in the courts,
for now at least. But there are still
some 1,500 lawsuits in the U.S. against
insurance companies on this business
interruption issue.
Investing in a “lower for longer”
world
Chubb’s earnings come from both
sides of the balance sheet: on the
liability side we generate underwriting
income from the exposures we
take for customers; on the asset
side we generate income from our
investment portfolio, which is mostly
investment–grade bonds. We invest
conservatively because we have a
fiduciary responsibility: those funds
represent policyholder claim reserves
and shareholder capital. The pandemic
has affected our investment returns,
driven substantially by the emergency
fiscal and monetary responses to the
pandemic.
Governments around the world
were right to support individuals
and business. Fiscal responses in
large economies like the U.S. have
been sizable and successful. Without
additional stimulus, the U.S. was likely
to grow in the range of 5% to 6% during
2021, with unemployment hovering
below 5%. With the additional $1.9
trillion stimulus passed by Congress
in early ’21, which in my judgment is
excessive and not well directed, there
is a risk of overheating with a rising
specter of inflation. U.S. debt levels
have already ballooned above 100%
of GDP, with over 80% of government
tax revenue going to debt service and
entitlement programs. The federal
budget deficit topped more than $3
trillion during 2020, or 15% of GDP —
the highest since World War II — and
that is before the additional $1.9 trillion.
Our deficits have the potential to crowd
out future private sector and real public
investments. Respectable economists
now often say “deficits don’t matter,”
mostly because borrowing costs are
so low. But this won’t last. Rates will
rise, pressuring our fiscal position and
potentially the dollar’s status as the
reserve currency, as history shows.
As the pandemic struck, central
banks throughout developed
economies launched massive asset
purchases, which pushed up money
supplies and drove global yields to
zero. These actions were historic.
While these policies were justified
to bridge a potential economic and
financial market chasm, the Fed, in
my opinion, has overstayed its “easy
money” mandate. These policies
distort markets, push investors into
riskier assets and inflate financial
valuations, as witnessed by the
recent extraordinary rise in global
equity markets. Excessive monetary
10
easing also exacerbates inequality,
benefiting the wealthy who have
exposure to financial markets while the
unemployment rate remains elevated.
In my judgment, the Fed’s zero–rate
policy does little to sustain economic
activity. In fact, higher short–term rates
and phasing out asset purchases would
alleviate market distortions, discourage
speculative investor behavior and have
little impact on investment in the real
economic sector.
With all that said, for the next
several years investors face the
prospect of a “lower for longer” yield
environment and will be challenged
to earn reasonable rates of return. In
response, Chubb has systematically
diversified a greater percentage of
its portfolio out of traditional fixed
income into asset classes that offer
higher prospective total returns.
Similar to our underwriting discipline,
we only invest where we can earn
adequate risk–adjusted returns. This
strategy is difficult to deploy given the
current lack of investor discipline and
excessive liquidity that has flooded
global financial markets, but we are
patient. While our strong operating
cash flow helped to mitigate the impact
of low rates, in 2020 we earned pre–tax
adjusted net investment income of $3.6
billion, down 1.8% from the prior year.
Our invested assets stood at $119 billion
as of December 31 and generated a
book yield of 3.4% versus average new
money rates of 2.3%.
Delivering for shareholders
Tangible book value growth is our
ultimate measure of shareholder
wealth creation. Chubb is a growth
company, measured as growth in book
and tangible book value over time. The
difference between these two measures
is goodwill, which is an income–
producing asset when an investor buys
wisely. We have grown shareholder
wealth consistently over the years, and
faster than our competitors (see chart
on page 8). Last year, book value grew
7.4%, while tangible book value grew
11.9%, both supported by our results as
well as by Fed actions that have created
significant asset inflation. Excluding
unrealized appreciation, our tangible
book value grew 6.3%.
Our 2020 core operating ROE was
6.2%, again impacted by the COVID and
other CAT losses. Our 10–year average
core operating ROE, for comparison, is
10.0%. As a growth company in the risk
business, we retain surplus capital and
this dilutes our ROE by about 200 basis
points. This policy has been consistent
and has served shareholders well by
growing tangible book and book value
per share, predominantly by growing
the company. As I have explained on
other occasions, at current interest rate
levels, we expect to achieve a 12% to
15% ROE on deployed capital, which
excludes surplus capital, over the
medium term. It is worth noting that
when interest rates rise, every hundred
basis points of additional yield in our
investment portfolio produces about
150 basis points of ROE.
Beyond what we need for risk and
growth, we return surplus capital
to shareholders. For more than two
decades, we have raised our dividend,
earning us a place in the “dividend
aristocrats” club. We aim for a target
dividend pay–out ratio over time
of approximately 30%, which will
vary depending on our earnings in
a given year. In total, we returned
$1.9 billion this year, comprising $1.4
billion in dividends and $516 million
in repurchases, for a total pay–out of
58% of our earnings. We repurchased
our shares at an average price of $144,
which equals a price–to–book of 1.1 — a
“Respectable economists
now often say ‘deficits
don’t matter,’ mostly
because borrowing costs
are so low. But this
won’t last.”
11
price that is an absolute bargain. Our
share price ended the year at $153.92,
down 1.1% for the year with a positive
total return of 1.4%.
A big shove for our digital
transformation
Chubb is building a company to thrive
in the digital age. For a number of
years, we have invested in technology
and talent, building new tools,
developing new skillsets and ways of
doing business — and we continue to
do so with considerable progress and
momentum. Last year shelter–in–place
gave a big shove to this transition.
When we went into lockdown, our
ways of working changed as we
leveraged capabilities already in place.
But our organizational consciousness
and habits changed too, as employees
and customers embraced digital
technologies. To give one simple
example, our teams held 2.3 million
Webex meetings last year, adding up to
nearly half a billion minutes.
Chubb’s historic investments mean
modern foundational technologies
are now in place in many areas. From
this base we are developing further
innovations and scaling them across
the company. Robotics and straight–
through processing are fully automating
transactions. Deep learning augments
underwriting insights. Internet of things
(IoT) applications prevent losses from
happening to our insureds. Machine
learning and sophisticated algorithms
Geographic Sources
of Premium
2020 gross premiums written
Latin America 7%
Asia 11%
Europe, Middle East
& Africa 14%
Bermuda/Canada 6%
United States 62%
Premium Growth by Geography
North America
Asia
Latin America
Europe, Middle
East & Africa
Total for
all regions
Percentage change in P&C net
premiums written in 2020 versus
2019 in constant dollars
Overall growth
Commercial businesses
Consumer businesses
Data includes all sources of insurance and
reinsurance P&C net premiums written
by geography
12
9.0%
6.7%
9.4%
13.3%
10.9%
9.3%
5.2%
5.4%
0.5%
0.2%
–2.0%
–2.5%
–6.7%
–11.1%
–11.1%
automate everything from risk analysis
to fraud detection and more. Analytics
and lots of internal and external data
are improving underwriting, claims
and customer insights. New tools are
improving the experience of customers
and distribution partners, particularly
consumers and small businesses
in Asia, Latin America and the U.S.
For example, Chubb StudioSM, our
global “insurance in a box” platform,
streamlines our connectivity to
partners’ digital channels and embeds
what we do into what they do.
In sum, we are changing the way
insurance operates enterprisewide
at Chubb — from the customer
experience, to underwriting and
pricing risk, to servicing and paying
claims, to innovating new products.
Digital then offers the chance to
simplify products and the process of
buying insurance. Last year in our
North American small commercial
business, we launched a powerful
capability that streamlines the
customer experience, using external
data, web scraping and other AI
capabilities to fill out insurance
details for a customer or their agent
— reducing the average time spent
completing an application by 65%.
Similarly, digital helps us to pay
claims more quickly. Using automated
decision rules and AI capabilities for
simple accident and health claims in
both Mexico and Singapore, we are
learning how to reach the goal of near–
instant payments. This will spread to
more coverages and geographies in the
future.
Technology innovations help our
clients in other ways. IoT–enabled
sensors monitor, detect and prevent
losses in both commercial and
consumer environments. Adoption
of IoT services accelerated in several
commercial and consumer sectors
in 2020. By remotely monitoring
hospitals, college campuses and
even private wine collections, Chubb
technology prevented costly water or
temperature damage through early
detection, saving clients millions in
potential losses.
Our ultimate aim remains to use digital
technology to modernize and reinvent
the business of insurance. Some view
insurtech start–ups as pioneers in this
area. While these companies mix good
customer experiences with clever
marketing, most are not picking off
better insurance risks and selecting
against traditional insurers. Nor
are they reinventing insurance and
risk–taking. By contrast, digitization
enabled us to process over $3.4 billion
in business last year without human
interaction between the agent and
Chubb. In 2021, more than $200 million
of premium will be delivered through
direct digital channels, representing
40% compound annual growth from
2018, with an estimated 10 million
policies sold. The results: a better
customer experience, considerable
efficiency savings for the company and,
importantly, an underwriting profit
from the actual business — something
many high–flying insurtechs will not
achieve for years, if ever.
Chubb’s investment journey
in China
Our investment in China’s Huatai
Insurance Group is one further
example of Chubb’s long–term
approach to global growth. China
is the world’s second–largest and
fastest–growing major economy,
whose growth paused only briefly
as it managed to avoid a crunching
post–COVID recession. Its financial
“ We are changing the
way insurance operates
enterprisewide at
Chubb — from the
customer experience,
to underwriting and
pricing risk, to servicing
and paying claims,
to innovating new
products.”
13
services industry, including insurance,
is evolving and developing — just like its
economy as a whole. China has opened
its door wider to investment by proven
foreign financial services companies to
aid in the development of the sector.
Our investment is not without its risks,
given both the evolving geopolitical
relationship between the U.S. and
China, and the realities of the local
environment that must be managed
by any major foreign investors in the
Chinese market. But in our judgment
these risks are worth taking.
I have been doing business in China for
30 years, while for two decades our
company has been a long–term, patient
investor in Huatai, a medium–sized
financial services holding company
with P&C, life insurance and asset
management subsidiaries, as well
as more than 17 million customers
and 600 offices. We now stand at
an important threshold. In 2019 we
were given the green light to increase
our ownership, which meant Huatai
became the first domestic financial
services holding company to convert
to a Sino–foreign joint venture. We
currently own 47%, which makes
Chubb the controlling shareholder
under Chinese law.
We have plans to increase our stake
further to achieve full majority
ownership, subject to Chinese
regulatory and shareholder approvals.
Our Chinese growth plans embody
the mix of patience in strategy and
impatience in execution that stands
as a hallmark of our company. For
Chubb’s shareholders, the upsides
in the coming years are significant,
as they can be for China’s economic
development as a whole.
Running our global race better
For decades, the U.S. held an
unchallenged position of global
leadership, which benefited our nation
economically, socially and politically.
It achieved peace and prosperity for
our people. This position was not free,
but its benefits clearly outweighed
the costs. Today the U.S. is in a new
leadership contest with China — and we
clearly need to run our own race better
and with confidence.
China is a rising regional and global
power seeking greater economic,
geopolitical and security influence.
We are destined to compete in many
areas. At the same time, we want to
co–exist productively and cooperate
where it serves our mutual interests,
for instance on climate, terrorism, the
pandemic and economic recovery. A
new U.S. administration provides a
chance to move past the emotions that
dominated the last few years.
One need not admire China’s autocratic
system to recognize their competence
and determination. As a nation, we
have long failed to address perennial
problems. We focus huge attention,
and rightly so in many instances, on
domestic social issues, but we too
often do so without relating back to
our competitive profile. And while
important, it leads us too often to
look inward and lose perspective of
ourselves and our place in the world
— a world we depend on. Meanwhile,
a competitor like China focuses
on nation–building and economic
prosperity with discipline and a sense
of individual sacrifice.
The U.S. has great advantages, and I
would never bet against us. We are
bordered by two friendly neighbors
and protected by two oceans. Our
natural resources are abundant.
We have a huge private sector and
an innovation culture with world–
leading technology. Our government
institutions have underlying strengths,
despite the challenges of the last year.
Our civil society, rule of law and system
of market capitalism foster great
economic dynamism while attracting
talented people from all around the
world. We are at our core inclusive: to
be an American is an idea; you don’t
have to be born here to be one of us. All
of this gives me confidence in America’s
future — but only if we act now to
protect what is good in our system,
address our weaknesses and reassert
our position of leadership.
Running a better race starts at home.
Two decades of globalization produced
great prosperity but left too many
facing inequalities of wealth and
opportunity. Too many workers lack
the education and skills required to
compete in our digital economy. Too
few Americans feel globalization’s
benefits in their income, turning
instead to protectionism in an attempt
to look after their own. With so many
of our fellow citizens unable to succeed
in our free market system, is it any
wonder they turn to those who say the
system is rigged?
We should lead a new phase of
globalization, recognizing that we
are doing too little to democratize
its benefits, and focus urgently on
renewing our national competitive
profile. Rebuilding domestic
competitiveness requires investments
in people and infrastructure as well
as dependability of supply chains
for critical and strategic items. For
example, we can raise workforce
skills at scale by retooling community
colleges that deliver practical training.
R&D and physical infrastructure can
be improved with investment in 5G
networks and cutting–edge artificial
14
intelligence systems, as well as by
repairing and upgrading rail networks,
ports and highways. Investment in
modernizing our military and security
is a major priority. Foundational
technologies matter, from quantum
computing and biotechnology to
advanced manufacturing and smart
batteries. Finally, we should open our
borders with a large–scale migration
strategy for both skilled and non–skilled
working age people. After all, if we
want to grow our economy faster, grow
the labor force.
Reasserting U.S. global leadership
requires us to work harder abroad,
too, and especially in Asia. We should
be working with friends and allies to
enhance the liberal rules–based trading
system. We can still call out problems
when we see them, as with the World
Trade Organization, an organization
that borders on irrelevance and is in
need of reform. But we should also
take back our leading role rewriting
the rules of global commerce and
trade. The U.S. was the architect of
the Asia–focused Comprehensive and
Progressive Agreement for Trans–
Pacific Partnership agreement. We
should rejoin that agreement. Just as
important is that we begin to develop
more ambitious next–generation digital
and data technology agreements,
bringing together the advanced
industrial democracies of Asia, Europe
and North America.
China lacks America’s strong
innovation culture but it has advantages
in the new digital and data economy
with its huge population and limited
data privacy rules. Countries like the
U.S. have fewer people and stronger
privacy protections, limiting the flows
of data that fuel AI–driven industries.
To maintain leadership requires
working together with our allies with
the aim of developing new rules of
the road for exchanging, investing,
protecting and standard–setting in
the areas of technology and data,
from IP protection to the governance
of advanced technologies like AI —
allowing us to compete at scale.
We can and should defend U.S.
interests against predatory behavior
while advancing our view of a renewed
liberal world order based on our
values, while leaving the door open for
China to participate. As an objective,
we cannot and should not want to hold
China down. Nor should we assume
we can pressure Beijing to change its
behavior. Let China decide what is best
for them.
Chubb is a global company. We have
benefited from economic globalization
over recent decades, a system built on
the bedrock of Western leadership.
If that leadership is not renewed, our
world risks sliding into an era marked
by rising protectionism and divided
by geopolitical conflict. But if the U.S.
steps up once again to reinvigorate our
competitive profile and wealth–creating
capability, there is no reason why our
country and our global system should
not continue to prosper in the future.
Renewing American democracy
In the short–term, the U.S. is suffering
three interlinked crises. We are
enduring a health crisis, a pandemic–
driven economic recession, and a
political and social crisis made worse
by COVID. The crisis of democracy,
whose severity was made more clear
since our election, culminating in what
happened in our Capitol building in
January, is not going away. It should act
as a wake–up call to all of us who love
our country.
“ If the U.S. steps up once
again to reinvigorate
our competitive profile
and wealth–creating
capability, there is no
reason why our country
and our global system
should not continue to
prosper in the future.”
15
The roots of this crisis have long been
clear in the rise of populist extremes
on both the right and left, driven by
leaders who promote conspiracy
theories, division and polarization.
January’s events follow logically from
a situation in which a third or more of
our fellow citizens still believe voter
fraud swayed our election. The sight
of members of Congress attempting
to subvert the will of the people and
stand in the way of what is largely a
ceremonial affirmation of the electoral
college vote was unacceptable. So were
the displays of symbols of hate, bigotry,
violence and anti–Semitism in our
Capitol building.
At the end of the day, the facts are
the facts — there was no widespread
election fraud. Just because you don’t
like the political outcome doesn’t give
you the right to subvert our democracy
and the rule of law. But the private
sector shares responsibility here, too,
given the way social media has left
many citizens in parallel realities, in
which falsehoods spread and truth is
discarded. Rebutting these lies and
reeducating those who have come to
believe them will be a complex task —
but they are crucial to rebuilding the
foundations of our democratic system.
Here a sense of balance and perspective
is needed. There is much to be proud
of in our nation. The 2020 election
was among the safest and fairest in
our history. More than two thirds of
eligible Americans voted, more than
in any election for a century. Those
polls were well managed, county by
county and town by town, by public–
spirited fellow citizens. Our legal and
government institutions — the bedrock
of our democratic system — did their
jobs and continued to enforce the rule
of law. But we also should be in no
doubt of the deep damage polarization
on the right and the left has and is
doing to our political system, our image
in the world, and our ability to get
our own house in order and address
our perennial problems. We look to
elected leaders from both parties to
set an example by their respect for our
democratic norms and processes. And
we require leaders of good character
to put self–interest aside, govern in the
interest of the nation and address the
many pressing problems we face.
Combating COVID and future
pandemics
Many nations were ill–prepared for
COVID–19. But we should now focus
on managing the coming stages of
this pandemic and preparing for the
next. Our country struggled to manage
COVID but deserves great credit for
our scientific and technology prowess
that enabled the development of
multiple vaccines at record pace.
This virus is going to be with us for
a long time, and COVID–19 will not
be our last pandemic. We live in a
globalized world. Throughout history
pandemics have been tied to trade
and people movement. We require
better preparations to manage future
outbreaks when they arrive.
For starters this means improved
pandemic management, beginning
with new global healthcare intelligence
that allows data to be shared before
pathogens cross borders. This is an
area where the U.S. and China could
cooperate more closely, no matter
how difficult that process is. Those
that tackled the pandemic well, most
of which are in Asia, can act as models
for others. Countries like Taiwan and
South Korea reacted quickly, from
closing borders to introducing social
distancing rules. Masks were widely
worn while policymakers developed
rapid testing and digital contact tracing
systems.
Premium Distribution
by Product
2020 net premiums written
Global Reinsurance 2%
Agriculture 6%
Global A&H and Life 16%
Personal Lines 20%
16
Large Corporate
Commercial P&C 20%
Middle–Market/
Small Commercial
P&C 25%
Wholesale Specialty
Commercial P&C 11%
Similar measures in the U.S. could help
ensure future outbreaks are controlled
and widespread lockdowns avoided
or minimized, while also avoiding
situations in which businesses are
forced to stay fully or partially closed
for prolonged periods. And let’s face it:
We also need to find ways to reconcile
our commitments to privacy and the
demands of a public health emergency.
Well–meaning rules designed to
protect personal data limit our ability
to manage a future pandemic. Severe
moments of crisis often require
temporary sacrifice of individual
freedoms for the greater good, be that
to ensure face masks are widely worn
or contact tracing data is easily but
securely shared.
On pandemic costs, we at Chubb
proposed a public–private partnership
to manage the expense of business
interruption. Under this proposal the
Federal Government would cover
“tail risk,” meaning the financial risk
of an infrequent event of catastrophic
size. Our industry is limited in our
wherewithal to take risk by our capital
and surplus. U.S. insurers hold around
$800 billion, which we use to meet not
just COVID claims but also everything
else. We cannot meet trillions in costs
for pandemic–related shutdowns.
But by providing a backstop against
potentially huge losses, the government
would enable insurers to provide
business interruption coverage for
pandemics.
There is precedent for this model
in the reforms that insure against
catastrophic terrorism after 9/11.
Under Chubb’s model, the government
would mostly cover losses from
smaller businesses. Medium and larger
businesses would buy commercial
insurance at actuarially sound rates.
The government gets paid for the
use of its balance sheet — we seek no
handouts. This model also need not
be overly expensive, if we improve
pandemic management to contain
future outbreaks, reducing the need for
widespread and prolonged shutdowns.
If the Federal Government doesn’t
work with insurers, the next pandemic
will remain uninsurable for business
interruption coverage. But if a new
partnership is possible, in combination
with other pandemic measures, we can
greatly limit both its damage and cost.
“ Far more must be done
to tackle bigotry and
racism in the U.S.,
particularly as faced by
Black people. We are
focused on what we can
do at Chubb, and we
are dead serious about
playing our part.”
Our journey toward racial equity
The past year has been marked by
further social upheavals centered on
the historical injustices of racism. The
causes of these events are complex,
dating back to our nation’s imperfect
birth. But far more must be done to
tackle bigotry and racism in the U.S.,
particularly as faced by Black people.
We are focused on what we can do at
Chubb, and we are dead serious about
playing our part.
We started by striving to enhance
our understanding of racism and
that journey continues. Internally we
have been conducting an ongoing
listening program and we completed
a professional assessment to help
us learn about the Black employee
experience in America, as well as
the impact our existing policies,
practices and behaviors have on
our workforce. We are now turning
these insights into a practical plan to
improve racial equity in recruitment
and career development. We aim to
promote a greater sense of belonging
for Black colleagues, by improving
communication and support.
We will do more over the coming
years. We recognize the role of leaders
and are mobilizing the commitment
of all employees in building a more
17
inclusive culture, where all feel equally
equipped to contribute and succeed,
as well as recognized and promoted.
We aim to increase the racial mix of
our workforce, in part by requiring
racial diversity on candidate slates
and including more Black talent on
interview panels. We have set targets to
improve rates of hiring and promotion.
We are building a racially diverse
pipeline of early career talent in the
industry. And we are setting up new
processes to identify and mitigate
unconscious bias in hiring, promotions
and performance assessments. All of
this won’t be easy, and it will take time.
Our philanthropy and external
citizenship programs can help
advance these goals, too. The Chubb
Charitable Foundation is investing in
education and skills–based training,
with emphasis on Black people.
This includes funding scholarships
supporting people of color from
underrepresented communities,
providing internships to help recipients
gain experience with Chubb and
potentially enter our talent pipeline.
The Chubb Rule of Law Fund is
addressing issues of racial justice, for
instance, via support for Equal Justice
USA, an organization working to reform
the justice system with programs that
increase empathy and understanding
between community residents and
police officers.
Ultimately Chubb aspires to create a
culture of anti–racism, moving beyond
simply not being racist. It means no
innocent bystanders. It is not enough to
say that you yourself are not racist. We
all need to act to stop racist behavior.
Chubb’s success relies on our ability
to attract, develop and retain the most
talented people. We believe there
18
is rarely a contradiction between
pursuing profit and supporting society
in areas like racial justice. My role as
chief executive is to build and sustain
a thriving enterprise that provides
a valuable service to society. And
it is only by serving society that we
maximize returns over the long term
for our shareholders. The community
is where we operate. If my customers
and employees aren’t happy, then we
will not be able to provide the service
society needs. All of this is part of what
we call good corporate citizenship.
A critical year for climate change
Chubb recognizes the reality of climate
change and the substantial impact
of human activity on our planet. As
insurers we have a front row seat
to the catastrophes climate change
brings. Our first responsibility is to
use our risk management expertise
to provide products and services that
protect individuals, businesses and
communities. But we have a further
role to play through price signals.
Insurers transmit what we know about
climate risks to clients. We charge
higher prices if data tells us an area is
likely to be hit by hurricanes, flooding
or wildfire. This helps contribute to
decisions as to where to live or where
to invest as a business. We also use
data and knowledge to promote new
coverages and take risk, or demonstrate
new ways to mitigate exposures. For
example, this year we launched a
demonstration project working with
The Nature Conservancy and the city of
Miami to restore a historic waterfront
park that will use nature–based
solutions such as mangroves to reduce
storm surge, and hence flooding.
Climate change also creates
opportunities to serve new markets
and develop new products. We are
already a leader in providing insurance
to renewable energy and clean tech
companies. Last year we appointed a
new climate sustainability manager to
identify and implement climate–related
products including more mitigation
services. In the end, only governments
and the private sector together can
create the kind of wholesale change
that will hold warming to 1.5°C above
preindustrial levels. Chubb can and will
play our part.
The risks of a cyber catastrophe
After the last year we should all think
anew about global and national–level
catastrophic risks, especially the risk
of a catastrophic cyber–attack. Chubb
is a major insurer of cyber risks. As
the world digitizes, we see that the
frequency, severity and sophistication
of cyber–attacks are growing, both
from government and non–government
actors. Our vulnerability is increasing
because of greater interconnectedness,
creating systemic risks that are
large, growing and not easy to detect
and control.
The risk to our economy and critical
national infrastructure is grave, as we
saw in late 2020 when state–sponsored
hackers penetrated a number of
major U.S. government and corporate
institutions. There have been myriad
further major data breaches over the
recent years. The U.S. and its industrial
world allies are investing heavily in
cybersecurity capabilities, but our
systems are not superior to those
that seek to attack us. In fact, recent
events show we are continuously
playing catch–up. Cyber–attacks and
cyber–terrorism should concern
us in particular because they share
many characteristics with pandemics,
given they can cause catastrophes
that are limited neither by time nor
geography. Hackers can cripple digital
infrastructure, from power grids to
telecoms systems. Such attacks could
end up costing many trillions of
dollars and exceed the balance sheet
wherewithal of insurers in the process.
Much as with the pandemic, this
requires the government and private
sector to work together, backed by
clearer legal frameworks nationally
and internationally. We need new
tools, new safeguards and new ways of
sharing information. For example, the
government should outlaw ransomware
payments to remove the financial
incentive of this criminal activity. The
U.S. and like–minded nations need
to work together quickly to develop
new forms of collective cybersecurity,
including deterrence and joint
punishments against cyber criminals
and malign state actors.
Conclusion: Chubb’s coming year
of opportunity
I want to end by thanking so many
of our people for their resilience and
leadership. Our employees responded
magnificently to the challenges they
faced. This was not without sacrifice:
the pandemic took a tragic toll on
Chubb in human terms, leading to the
untimely deaths of a number of our
valued colleagues, alongside hundreds
of others who fell ill and thankfully
recovered. I want to commend all
those who worked to help our clients
and partners with urgency and care.
Our technology group rose to the
challenge of rapid virtual operations.
Our operations and IT teams helped
us work normally, keeping our people
safe while moving forward with
business priorities. Our underwriting
organization delivered extraordinary
performance. In a record year for
natural catastrophes, our claims
professionals and engineering groups
helped us deliver on the promises we
make to everyone we insure. Finally, I
would like to thank our knowledgeable
and committed board of directors:
their support helped give all of us the
confidence to do our jobs well over the
last year.
I want to pay particular credit to
three senior colleagues who took
new roles this past year. In December
I appointed John Keogh as President
and Chief Operating Officer — a title
that reflects his achievements and
importance to our company, and
his substantial leadership over his 14
years as my colleague. A few months
earlier I appointed two other trusted
partners: John Lupica as Vice Chairman
and President of our North America
Insurance operations, and Paul Krump
to the position of Vice Chairman,
Global Underwriting and Claims. All
three are great leaders and managers.
They are highly knowledgeable,
hands–on and execution–oriented.
They are citizens of our culture, and
their behaviors exemplify it. They are
all builders — and I can pay no higher
tribute than that.
Our company will return to a more
normal style of working during ’21. We
know our future workplace will not
look like the past. There will be more
opportunities to work from home, and
we expect travel to be lower, too. That
said, Chubb remains a “work from
office” company. I believe you can’t
build a corporate culture remotely,
nor can you plan, innovate and train
effectively, and generate sustained
energy and vitality, if your workers
are not in one place much of the time.
As the pandemic recedes, Chubb is
coming back to the workplace — and
we will stay back at work.
Many of you will remember this
year because of COVID–19. But to me
what mattered was not simply how
quickly Chubb came to grips with the
pandemic, but how we then began
pushing forward to seize strategic
opportunities. We got back onto the
front foot quickly. Indeed, we barely
came off the front foot. We started the
year in good shape, and by the end we
were in even better condition, with
strong growth and earnings generation
possibilities and a reinforced balance
sheet, with capital ready to be
deployed. Given the difficulties we
encountered last year, that was a huge
achievement.
We have the capabilities to deliver
sustainable profitable growth. We will
take further advantage of hardening
commercial markets and press
on toward the moment when our
consumer operations bounce back. We
have the best people in the business,
as well as the culture, leadership,
command and control structures, and
technology we need to prosper. We
are a disciplined culture of builders
and risk–takers. We pride ourselves
on execution excellence. All of this
adds up to capitalizing on opportunity
globally.
This is the underlying story of our
resilience over the last year, and the
basis of my future optimism. We
have entered a new period of wealth
creation for our company. I have never
been more optimistic about the future,
or about the benefits that you, our
shareholders, will continue to receive.
Sincerely,
Evan G. Greenberg
Chairman and Chief Executive Officer
19
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.
20
Chubb Senior Operating Leaders
Juan Luis Ortega
Paul J. Krump
John Keogh
Executive Vice President,
Chubb Group;
President,
Overseas General
Insurance
Vice Chairman,
Chubb Group;
Global Underwriting
and Claims
President and
Chief Operating Officer,
Chubb Group
John Lupica
Vice Chairman,
Chubb Group;
President,
North America
Insurance
Chubb’s senior operating leadership includes the company’s
President and Chief Operating Officer, the presidents of North
America and Overseas General insurance operations, and the
leader for global underwriting and claims.
21
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 property and casualty insurers
operating in North America, 2020
was anything but a typical year, with
the unprecedented number of natural
catastrophes, civil unrest claims
and activity related to the COVID–19
pandemic. At the same time, the
commercial P&C market continued to
firm, creating opportunity for Chubb to
bring its capabilities to more clients at
more reasonable terms, conditions
and rates.
“In 2020, we traded in one of the
best insurance markets we’ve seen in
two decades. But we also faced the
challenges of the pandemic and the
large number of catastrophes. How
Chubb performed in this market was
exceptional,” said John Lupica, Vice
Chairman, Chubb Group and President,
North America Insurance. “Insurance
was classified as an essential service,
and Chubb was on the job 24/7. We
consistently served our customers and
delivered our products and services
in extraordinary situations without
missing a beat.”
Paul Krump, Vice Chairman,
Chubb Group, Global Underwriting
and Claims, spoke about how the
company’s strengths in underwriting
and claims create opportunities
in this kind of a market. “In a firm
market, we have to be on our front
foot. When pricing moves, there
inevitably is a flight to quality. With
our strong balance sheet, global
reach, underwriting expertise and
stable presence in the market, it has
been a great time to build or deepen a
relationship with Chubb. Interwoven
with the quality of our brand is our
claims reputation. We’re problem
solvers, we’re empathetic and we see
claims as delivering on our promise.”
“The hurdles of 2020 were a true
test of every part of our company in
every part of the world, including our
businesses in North America,” said John
Keogh, President and Chief Operating
Officer of Chubb Group. “We often
use words like resilience, nimbleness
and adaptability to describe Chubb.
In large part, we demonstrated those
to be true in this challenging year. By
many measures, the efforts of our team
distinguished Chubb and burnished our
leadership position in the industry.”
Total net premiums written for
the company’s North America P&C
insurance businesses were $21.2 billion,
up 6.4% from 2019. Chubb reported a
combined ratio of 92.9% for its North
American P&C insurance operations.
Excluding catastrophe losses, the
current accident year combined ratio
was 84.2%.
North America Commercial
P&C Insurance
Chubb is the largest commercial
lines insurer 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
8.2% from 2019. The combined ratio
for the segment was 93.7%. The current
accident year combined ratio excluding
catastrophe losses was 85.3%.
Underwriting income was $887 million,
and segment income was $2.9 billion.
Major Accounts, Chubb’s P&C
business unit that serves large
corporations, is recognized for the
breadth and depth of its product
and service offerings, technical
underwriting experience, superior
client service, and global platform built
Key Financial Results
Dollars in millions
Total North America
P&C Insurance
2020
Gross premiums written
Net premiums written
Combined ratio
Current accident year
combined ratio excluding
catastrophe losses
$26,321
$21,240
92.9%
84.2%
North America Commercial
P&C Insurance
2020
Gross premiums written
Net premiums written
Combined ratio
Current accident year
combined ratio excluding
catastrophe losses
Segment income
North America Personal
P&C Insurance
2020
Gross premiums written
Net premiums written
Combined ratio
Current accident year
combined ratio excluding
catastrophe losses
Segment income
$18,233
$14,474
93.7%
85.3%
$2,925
$5,572
$4,920
91.1%
78.7%
$679
North America Agricultural
Insurance
2020
Gross premiums written
Net premiums written
Combined ratio
Current accident year
combined ratio excluding
catastrophe losses
Segment income
$2,516
$1,846
92.0%
90.5%
$148
22
Chubb’s North America
Insurance Business Units
Major Accounts
Commercial P&C insurance products
for the large corporate market sold
by retail brokers
Commercial
Insurance
Personal Risk
Services
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
Westchester
Commercial P&C excess and surplus
lines sold through wholesale brokers
Chubb Bermuda
Excess liability, financial lines, property
and political risk coverages sold by large
international brokers
Agriculture
Crop insurance from Rain and Hail
and farm and other P&C coverages
sold by agents and brokers
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.
In 2020, the division’s retention
rate was nearly 90%, all while
achieving more adequate rates, terms
and conditions. Chubb was also
distinguished by its proactive approach
to engaging virtually with brokers and
clients during the pandemic.
“We stayed in constant communication
with our distribution partners and
our clients during the work–from–
home conditions of the pandemic
and converted all of our traditional
marketing programs to virtual, from
our participation in industry events
such as RIMS and CIAB to Chubb’s
own Client Advisory Boards,” said
Mr. Lupica. “Listening and staying
connected were more important
than ever.”
In the excess and surplus (E&S) lines
market, Westchester specializes in
hard–to–place casualty, property and
specialty lines for middle–market and
small businesses. Westchester serves
wholesale brokers who 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 small business and
programs divisions.
For several years, Westchester had
shrunk net premiums written in the
face of a soft market. The market
dynamic shifted in 2019, a trend that
accelerated in 2020. Westchester’s
broad product set and investments
in talent and digital technology
positioned it to seize opportunities in
this changing market. For the year, the
business grew 13.4%. “Conditions in
23
“ Insurance was classified
as an essential service,
and Chubb was on
the job 24/7. We
consistently served
our customers and
delivered our products
and services in
extraordinary situations
without missing a beat.”
— John Lupica
the E&S market became much more
favorable and Westchester responded,”
said Mr. Lupica.
A similar story played out in Chubb
Bermuda, which provides excess
coverage in four product lines: casualty,
property, financial lines and political
risk. Chubb Bermuda operates with a
high severity/low frequency business
model and offers broad coverage and
sizable capacity to clients and brokers
around the world.
“We had watched this business
shrink as it became less needed
through the softest part of the cycle.
But we retained our people and our
operations,” said Mr. Lupica. “In
2020, Chubb Bermuda reasserted its
relevance in a major way, becoming
a go–to market for clients looking for
excess capacity.”
Commercial Insurance is Chubb’s
division that provides P&C coverage to
small and medium–sized companies
with revenues up to $1 billion. In 2020,
net premiums written in the division
grew 6.4%.
24
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.
Pandemic–related lockdowns and other
restrictions created opportunities
for Chubb to stand out. Chubb risk
engineers, who bring technical
expertise to help clients anticipate and
minimize costly exposures, quickly
shifted from conducting in–person
site visits and ergonomic surveys to
offering these services virtually. As
manufacturing clients retooled their
operations to produce ventilators,
personal protective equipment (PPE)
and other essential products to fight the
pandemic, Chubb supported them by
re–underwriting in–force policies. With
its large life sciences industry practice,
the company played a meaningful role
in providing insurance coverage for
companies racing to develop vaccines
and therapeutics to fight COVID–19.
The pandemic, which left many
commercial buildings vacant or
underutilized, also brought new
urgency to embrace loss prevention
solutions that can detect and prevent
property damage. During 2020,
Chubb ramped up its program to
install Internet of Things (IoT) devices
that can detect water leaks, changes
in temperature or humidity, and
vibrations that cause damage to critical
infrastructure and valuable assets.
Through this innovative initiative,
Chubb is helping commercial property
managers monitor and identify
threats to property before damage
occurs. With IoT devices, Chubb has
already helped hospitals, research
labs, universities, libraries and other
commercial property clients avoid
millions of dollars of damages and
disruptive, time–consuming repairs.
In the small business segment, which
Chubb entered only five years ago, the
company earned the highest customer
satisfaction rating in the J.D. Power
2020 U.S. Small Commercial Insurance
Study, which profiles the experiences
of small business insurance customers
with 50 or fewer employees. Chubb
was recognized for its performance
in five customer satisfaction factors:
claims, interaction, billing and
payment, policy offerings and pricing.
Throughout 2020, Chubb continued
to invest in digital technology and data
and analytics capabilities that make
it easier for customers and agents to
do business with the company while
driving superior risk selection across
the portfolio. New products, including
personal accident and supplemental
health coverage, were added to Chubb’s
award–winning digital platform,
Marketplace, which enables agents to
quote, issue and service their small
and middle–market business accounts.
Chubb cut average quote times and
reduced the number of underwriting
questions. In 2020, two–question
underwriting went live for select
classes of business, proving our ability
to sufficiently underwrite select risks
utilizing web–scraping technology to
obtain answers to other important
questions. Two–question underwriting
will be expanded in 2021.
When the pandemic hit, small
businesses faced extraordinary
financial burdens. To provide support
to its clients, Chubb suspended
cancellation and non–renewal of
coverage for non–payment and offered
discounts and credits for reduced
exposures for commercial policies.
Chubb also purchased $1 million in
gift cards from small business clients
around the country, which were
donated to healthcare workers and
other first responders on the front lines
of the pandemic in their communities.
North America Agricultural
Insurance
Chubb’s Rain and Hail subsidiary is the
leading crop insurer in North America.
The business serves approximately
125,000 farmers, insuring more than
100 different crops on 80 million acres.
Chubb’s North America agriculture
segment includes Chubb Agribusiness,
which is focused on P&C offerings
that provide commercial agricultural
coverages for manufacturers,
processors and distributors. Chubb also
offers property insurance for farms
and ranches, including hobby farms,
complex corporate farms and equine
services.
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, such as the severe derecho
that damaged crops in the Midwest in
August. Despite the storm’s magnitude,
it was on balance a nearly average year
for crop insurance, with improved
growing conditions over the prior year.
In 2020, Chubb increased its policy
count and continued to distinguish
itself by delivering superior service and
getting claims payments into the hands
of farmers quickly. During the year,
Chubb also acquired the renewal rights
to the farm and agriculture business of
Allianz Global Corporate & Specialty
North America. For the year, the
segment produced a combined ratio
of 92.0%. Segment income was $148
million. Net premiums written were
$1.8 billion.
North America Personal P&C
Insurance
Chubb is the leading provider of
personal lines insurance for affluent
and high net worth individuals and
families in the U.S. and Canada. Chubb
Personal Risk Services is known for its
broad product offering, superior claims
and risk consulting services, and access
to Chubb’s extensive branch network
in the U.S. and Canada. Chubb clients
also benefit from the company’s global
presence, which offers protection for
their assets around the world.
While personal lines results globally
were negatively impacted by the
pandemic, Chubb’s business was an
exception given the customer segment
it serves, with net premiums written
for the North America Personal P&C
Insurance segment up 2.8% to $4.9
billion. The combined ratio was 91.1%.
The current accident year combined
ratio excluding catastrophe losses
was 78.7%. Segment income was $679
million.
Investments in digital capabilities
in recent years, including its mobile
app and web portal, helped prepare
Personal Risk Services to serve clients
during the pandemic. With hurricanes
and wildfires on the rise in 2020,
a growing number of clients used
the portal to sign up for automated
updates. During the year, Chubb
proactively sent out approximately
700,000 email and text alerts to clients.
During the lockdown, Chubb teams
also conducted more than 30,000
virtual claims adjusting and risk
consulting visits. When it was necessary
for adjusters to go onsite, they did so
safely for themselves and their clients.
Chubb continues to offer 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. Examples include Chubb
Property ManagerSM, which provides
policyholders with assistance for
second homes that suffer damage from
hurricane–force winds, and Wildfire
Defense Services, which monitors and
protects homes threatened by wildfire.
In 2020, Chubb began to roll out an IoT
monitoring program for homes with
wine collections. The devices can alert
private collectors via a smartphone
app to fluctuations in temperature,
humidity and other conditions in their
wine storage that can significantly alter
the quality of the wine.
Chubb also joined with HODINKEE, a
preeminent resource for modern and
vintage wristwatch enthusiasts, to make
it easy to obtain insurance coverage for
watches. With HODINKEE Insurance,
underwritten by Chubb, watch owners
can obtain insurance via the app or
online in just a few steps, streamlining
the process and eliminating paperwork.
“Across all of our businesses, we focus
on delivering our culture. We call it One
Chubb,” said Mr. Lupica. “It’s about
unifying the organization to deliver
an experience for our distribution
partners and clients that feels like
you’re dealing with a small company,
even as you have access to Chubb’s
complete expertise in underwriting,
claims and risk engineering along with
our product breadth, branch network
and global reach. We strive to deliver
that organization every day.”
25
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 E&S lines business in the
London wholesale market and a
presence at Lloyd’s.
The firming market for commercial
P&C insurance was evident in several
regions and markets around the
world in 2020, most strongly in
the United Kingdom, Continental
Europe, Australia and Hong Kong, to
name a few, as well as Chubb Global
Markets, the company’s London
market wholesale E&S business.
Consumer businesses, including A&H
and personal lines, particularly travel
insurance, were severely curtailed by
reduced economic activity related to
the pandemic.
Overall, Overseas General Insurance
generated net premiums written of $9.3
billion in 2020, up 2.9% in constant
dollars. Commercial P&C businesses
grew 10.8% while net premiums written
in consumer businesses decreased
6.4%. The combined ratio for the year
was 95.4%. The current accident year
combined ratio excluding catastrophe
losses was 89.4%, and segment income
was $904 million.
“In all of our businesses, we continued
to focus on executing our strategies,”
said Juan Luis Ortega, Executive Vice
President, Chubb Group and President,
Overseas General Insurance. “In retail
commercial P&C, that means further
segmenting our client base, focusing on
customized, specialized products and
services for large corporate accounts,
a hands–on approach to meet the
needs of middle–market businesses,
and enhancing the digital technology
and platforms to deliver for our small
business customers. At the same time,
we made further progress expanding
our distribution capabilities, through
independent agents and brokers as
well as our growing array of affinity
partnerships. This focus contributed
to the strong performance of our
commercial P&C businesses in 2020,
and positions our consumer businesses
well as economies reopen.”
“Among the many things that 2020
taught us is the power and importance
of the diversity of our operations and
businesses around the world,” said Mr.
Keogh. “We have invested over many
years to build our local operations
globally. The results of our international
general insurance business were strong
given the unprecedented impact of the
pandemic, and are a testament to the
strength of the Chubb franchise.”
“It was incredibly rewarding to see
our local overseas claim teams handle
the myriad of unique COVID–19 issues
that arose,” said Mr. Krump. “The
leaders were out–front ensuring their
teams delivered practical solutions,
while never compromising quality or
integrity.”
The Europe region posted the
strongest growth internationally,
reflecting both the firm market and
the region’s mix of business, which
includes a higher share of commercial
P&C than Chubb’s other regions.
Europe, which encompasses 20
Key Financial Results
Dollars in millions
Overseas General Insurance
2020
Gross premiums written
Net premiums written
Combined ratio
Current accident year
combined ratio excluding
catastrophe losses
Segment income
$11,449
$9,335
95.4%
89.4%
$904
“ Our continued focus
on executing our
strategies contributed
to the strong
performance of our
commercial P&C
businesses in 2020,
and positions our
consumer businesses
well as economies
reopen.”
— Juan Luis Ortega
26
Chubb’s Overseas General
Insurance Business Units
International
Commercial P&C, A&H and traditional
and specialty personal lines sold by
retail brokers, agents and other channels
in five regions:
Europe
Operations in 20 countries comprised of
P&C commercial lines and consumer lines,
including A&H and specialty personal lines
Asia Pacific
Operations in 14 countries and territories
serving commercial customers
and consumers with P&C, A&H and
personal lines
Latin America
Operations in nine countries serving
commercial customers with P&C
products and consumers through A&H
and personal lines
Far East
Operations in Japan serving commercial
customers with P&C products
and consumers through A&H and
personal lines
Middle East
& Africa
Operations in seven countries serving
commercial customers with P&C products
and consumers through A&H and
personal lines
Chubb Global Markets
Commercial P&C excess and surplus
lines and A&H sold by wholesale
brokers in the London market and
through Lloyd’s
countries, produced $3.2 billion of net
premiums written, with significant
growth in Major Accounts, Chubb’s
P&C business unit that serves large
corporations. In a firming market,
Chubb’s capabilities and strengths —
best–in–class service, underwriting
expertise, an extensive product
offering, and a broker– and client–
centric culture, among others —
enabled the business to benefit from
a flight to quality.
“Major Accounts is an exceptional
franchise,” said Mr. Ortega. “As the
overall market struggled to get capacity,
Chubb’s consistency, reliability and
risk appetite enabled us to grow in a
substantial way with major brokers and
multinational clients. In addition, the
actions and preparations by Chubb in
advance of Brexit ensured a seamless
experience for our distribution
partners and clients.”
Chubb’s Asia Pacific region generated
net premiums written of $2.4 billion,
down 2.2% from prior year in constant
dollars. The strong performance in
commercial P&C, including double–
digit growth in the small commercial
portfolio in Australia, was offset by the
pandemic–related impact on A&H and
personal lines businesses.
China, the largest economy in Asia
and the second–largest in the world,
continues to be an important long–
term opportunity for Chubb. In 2020,
the company increased its ownership
stake in Huatai Insurance Group, a
holding company with P&C, life and
asset management subsidiaries, to
27
Worldwide, Chubb has hundreds of
distribution partnerships with banks,
retailers, airlines, mobile network
operators and gig economy companies,
among other industries.
“Our ever–expanding digital
capabilities, coupled with our product
breadth and claims service, have made
Chubb the distribution partner of
choice for companies that want to add
digital insurance options to their
own product and service offerings,”
said Mr. Ortega.
In 2020, the company launched
Chubb StudioSM, a global platform
that simplifies and streamlines
the distribution of the company’s
consumer and small business insurance
products through its partners’ digital
channels around the world. The
platform has proved particularly
popular in Southeast Asia and Latin
America, already integrating 10
products with 25 partners across
these regions. One of these was with
Nubank, Brazil’s largest digital bank,
which launched a fully digital life
insurance offering. Nubank Vida,
underwritten by Chubb, entered the
Brazilian insurance market with a fast,
seamless and personalized capability
available to its 30 million customers.
The new, simple life insurance product,
which is available on the bank’s mobile
app, requires only three questions,
and quotes, bill payment, account
management and claims are all
transacted digitally.
Chubb’s Far East region, which
encompasses Japan, celebrated in 2020
its 100th anniversary operating in the
nation. Net premiums written were
flat from 2019 in constant dollars, as
double–digit growth in property and
financial lines offset the impact of the
pandemic on the consumer travel
insurance business. The region also
continued to develop its offerings for
middle–market and small companies,
expanding its industry practices
and adding cyber insurance to the
product offering.
Chubb Global Markets, which
provides global access to specialist
underwriters in aviation, energy,
financial lines, marine, political risk
and credit, property and A&H, had a
year of exceptionally strong growth.
Like Chubb Bermuda and Westchester
in North America, Chubb Global
Markets stands as an example of the
company’s underwriting discipline,
patience and ability to shift from
defense to offense. As competitors
began to cut capacity or withdraw from
the market, Chubb was able to bring
its capabilities and risk appetite to
bear. In 2020, growth in net premiums
written exceeded 20% for the second
consecutive year.
Continuing to diversify and expand
Chubb’s distribution capabilities
remained a priority in 2020. In its
international general insurance
operations, the company’s products
and services are offered through
23,000 independent agents and
brokers and directly to the customers
of affinity partners and sponsor
organizations through telemarketing
and digital and mobile channels.
“ It was incredibly
rewarding to see our
local overseas claim
teams handle the
myriad of unique
COVID–19 issues
that arose.”
— Paul J. Krump
47.1%. When pending agreements are
completed, Chubb is expected to own
a majority. The group’s insurance
operations have over 600 branches and
17 million customers.
Chubb’s Latin America region
generated net premiums written of
$1.9 billion, down 6.2% from 2019 in
constant dollars. While no region was
spared from the health and economic
consequences of the pandemic, the
toll was particularly severe in Latin
America, which impacted Chubb’s
personal lines auto insurance business
in Mexico as well as A&H across the
region. On the positive side, the region
produced growth in middle–market
commercial P&C and signed numerous
distribution partnerships that will
provide future growth opportunity.
28
“ Our global capabilities
have taken years to
build and they are
not easy to replicate.
They are a sustainable
competitive advantage
for Chubb.”
— John Keogh
Chubb’s “insurance in a box” platform
also created opportunities to think
about new health products — and bring
them to market quickly. When there
was an outbreak of dengue fever in
Singapore, Chubb’s partner DBS, the
largest banking group in Southeast
Asia, wanted to offer its customers
insurance coverage. The capabilities
of Chubb Studio enabled the team to
quickly develop and deploy Mozzie
Protect, a custom product that provides
financial protection for DBS customers
affected by the disease. When the
pandemic hit, nearly 1 million bank
customers signed up for Chubb’s
free 30–day coverage for COVID–19.
Chubb expanded its partnership with
Grab, the Singapore–based technology
company that offers ride–hailing
transport services, food delivery
and payment solutions, offering
their customers on–demand per–day
personal global travel insurance. Grab
also moved swiftly to offer its drivers
and delivery partners coverage that
provided a lump sum payment upon
diagnosis of COVID–19.
In Latin America, Chubb secured
15 new distribution partnerships in
2020 with both traditional partners
as well as digital natives. Initiatives
with existing distribution partners
included the launch of multi–channel
campaigns for residential, personal
lines and commercial P&C coverages
with Banco de Chile. Chubb doubled
the number of products and services
offered digitally through its exclusive
long–term relationship with Mexico’s
Citibanamex.
In France, Chubb and Aon launched
in early 2021 a new digital platform
for small and medium–sized
businesses. The new Aon platform,
which is powered by CoverWallet, an
Aon company, offers more than 10
insurance products from Chubb, and
reduces the time it takes for a business
owner to get insurance from days to
minutes.
“Our long–term investments in agent–
and broker–facing digital platforms
have opened up a whole new market
opportunity for us in small commercial.
In Europe, Australia and Latin America,
we are processing submissions on a
straight–through basis that requires no
human intervention,” said Mr. Ortega.
While digital technology is streamlining
and enhancing products, services
and processes, Chubb knows that
relationships and staying engaged with
clients and distribution partners are
essential. “Throughout the organization
— from junior underwriters up
through the ranks — there was
great connectivity, engagement and
communication with our partners
and customers, even as we operated
remotely,” said Mr. Ortega. “Chubb was
proactive, we stood out, and it made
a difference.”
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.
“Our global capabilities have taken
years to build and they are not easy
to replicate. They are a sustainable
competitive advantage for Chubb,”
said Mr. Keogh. “We don’t take them
for granted and we continue to invest
in them to make them increasingly
relevant to our customers across
the globe.”
29
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 and
deposits of $2.5 billion, up 5.1%, or 5.6%
in constant dollars, from prior year.
Segment income was $401 million,
up 9.8%.
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, Myanmar, Taiwan,
Thailand and Vietnam. 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 540 offices, more than
4,500 employees and approximately
100,000 agents.
While digital distribution is a growing
channel for Chubb Life, face–to–face
contact remains an important way the
business engages with consumers —
through captive agents, independent
agents and at the branches of
bancassurance partners. The arrival
of COVID–19, and the associated
lockdowns and restrictions, created
challenges that impacted the business,
particularly in the second and third
quarters. And while Chubb Life has
focused on protection–oriented
products in recent years due to the low
interest rate environment, consumers
who bought savings and investment
products tended to save less in the
uncertain market created by the
pandemic.
In 2020, despite the challenges,
earnings were up 9.4% to $166 million.
International life insurance net
premiums written were up 22.1% year
over year.
“We quickly moved from a face–to–face
to a digital environment for selling and
handling transactions,” said Russell
Bundschuh, Senior Vice President,
Chubb Group and President of Chubb
Life. “In Vietnam, for example, the
investments we made in technology
enabled us to shift practically overnight
to virtual sales meetings and straight–
through processing of applications.”
An important milestone was achieved
in September, when Chubb Life
surpassed 100,000 captive agents in
China and the rest of Asia for the first
time. “We got very creative in how we
approached digital recruiting,” said Mr.
Bundschuh. “Our recruiting was strong
throughout 2020 and will position
us well as economies open up and
consumer activity resumes.”
Early in 2020, Chubb Life launched a
health and well–being initiative called
Chubb LifeBalance, which is a virtual
coach that offers policyholders real–
time feedback on their level of activity,
eating habits, sleeping patterns, and
mental and emotional well–being.
Chubb LifeBalance can track and
recognize more than 115 activities,
from walking, running, swimming and
Key Financial Results
Dollars in millions
Life Insurance
2020
Net premiums written
Segment income
Total international life
insurance net premiums
written and deposits
International life insurance
segment income
$2,514
$401
$2,757
$166
“ We met the challenges
of 2020, and continued
to make progress
introducing and
enhancing digitally
enabled products,
making it easier for
agents and distribution
partners to interact
with us and serve
customers.”
— Russell Bundschuh
30
basketball, to table tennis and yoga
through a connection with a tracking
app or wearable fitness device. By the
end of 2020, Chubb LifeBalance was
available in Hong Kong, Thailand
and Korea.
Following its entry into Myanmar
in late 2019, Chubb Life last year
introduced its first products in the
nation, including an education life
insurance plan combined with life
protection and savings features, as
well as several affordable coverages for
illness, accident and hospitalization.
For existing policyholders, Chubb Life
provided COVID–19 coverage for no
additional premium through March
2021. Following the military coup
in early 2021, Chubb Life remains
available to serve its customers
in Myanmar.
Across the markets where it operates,
Chubb Life added pandemic–related
features to policies and rolled out
new riders to address consumers’
emerging concerns. In many countries,
for example, coverage related to
hospitalization and disability due
specifically to COVID–19 was enhanced
and various exclusions were waived.
While Chubb Life is focused on Asia,
it has operations in other parts of the
world. In 2020, Chubb Life completed
the integration of the operations of
Banchile Seguros de Vida (Banchile
Life), a Santiago, Chile–based life
insurance company with a long–
standing insurance relationship with
Banco de Chile, the largest bank
based in Chile. Banchile Life offers a
broad range of life, personal accident
and supplemental health insurance
products. Also in Latin America, Chubb
and Nubank, the largest independent
digital bank in Brazil, launched a fully
digital life insurance offering in Brazil,
Nubank Vida, giving Chubb access to
the bank’s 30 million customers.
“Life insurance is a long–term business,
and we have been pursuing a consistent
and deliberate strategy to build Chubb
Life,” said Mr. Bundschuh. “We met
the challenges of 2020, and continued
to make progress introducing and
enhancing digitally enabled products,
making it easier for agents and
distribution partners to interact with
us and serve customers. We are well
positioned as we look to the future.”
Combined Insurance
For much of Combined Insurance’s
99–year history, the relationship
between agent and insured was forged
in living rooms and over kitchen
tables. In recent years, Combined
Insurance has made investments to
diversify distribution of its personal
accident, life and supplemental health
insurance coverages, as well as the
market segments it serves. It’s been
five years since the launch of 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.
“In recent years we’ve focused on
diversifying away from individual,
face–to–face sales, growing commercial
sales, and doing more digitally. When
the pandemic arrived, we accelerated
our plans to transform the company,”
said Joe Vasquez, Senior Vice President,
Chubb Group, Global Accident & Health
and President of Combined Insurance.
“While COVID–19 significantly impacted
both our traditional sales channel
and Chubb Workplace Benefits, we
managed expenses effectively, took
actions to enhance the customer
service experience, and made
progress on our digital initiatives.
Combined Insurance executed well in a
challenging year.”
With the lockdowns, Combined
Insurance agents pivoted to telephone
sales. The company supported agents
through this transition with training
and enhanced digital capabilities,
including electronic signature
capabilities. For its Chubb Workplace
Benefits business, the company
continues to make investments to
enhance customer–facing and back–
office systems.
Combined Insurance is also leveraging
its product breadth and capabilities
to serve Chubb commercial clients of
all sizes — large, middle–market and
small businesses. For example, the
new Chubb WorkInsightSM solution,
which was introduced in early 2021
and integrates and streamlines absence
management and workplace benefits
for mid–size to large employers,
is made available through Chubb
Workplace Benefits. The February 2021
launch of BLINKSM by Chubb®, a brand
focused on delivering easy, effortless
and affordable insurance products
for digitally savvy consumers, is also
creating opportunities for Combined
Insurance to adapt its supplemental
health products for a new digital
distribution channel.
Combined Insurance was again named
the nation’s number one Military
Friendly® Employer for 2021 by
VIQTORY in the $1 billion to $5 billion
revenue category. This is the company’s
10th consecutive year on the top 10
employer list and seventh consecutive
year in the top five.
31
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.
For reinsurers, 2020 was marked by
the challenges of the pandemic and
heightened catastrophe losses, as well
as the pressures of operating in a low
interest environment. Reinsurers,
along with primary carriers, are
benefiting from a firming market with
improving rates and better terms and
conditions on the primary business.
More opportunities are developing
where Chubb Tempest Re can allocate
capacity at acceptable risk–adjusted
returns. However, the reinsurance
marketplace remains competitive
with only marginal improvement in
reinsurance terms.
“Capital is abundant, interest rates
remain low and there is greater
volatility experienced from both
modeled and unmodeled catastrophe
risks,” said James Wixtead, Senior Vice
President, Chubb Group and President,
Chubb Tempest Re Group. “While
there is improvement in underlying
margins, there remains a competitive
marketplace where reinsurance terms
are relatively flat and, in some cases,
improving for buyers.”
Chubb Tempest Re’s perspective of the
market and risk appetite is defined by
its status as a subsidiary of a leading
global P&C insurer. The business can be
patient and deploy capital only when
there are opportunities to achieve rate
adequacy. “Chubb has optionality of
how and where to deploy capacity,”
said Mr. Wixtead. “Our targets for an
acceptable combined ratio and return
on equity are sometimes higher than
other market participants for which
reinsurance is their only business. At
Chubb, our capital can be put to work
where we can get the best return — and
that flexibility is a great strength of the
organization.”
In 2020, Chubb’s Global Reinsurance
segment posted net premiums
written of $731 million, up 12.6% from
prior year. The combined ratio was
92.5%, and the current accident year
combined ratio excluding catastrophe
losses was 80.1% — underwriting
results that outperformed the market.
Segment income was $357 million.
Chubb Tempest Re offers global
capabilities, security and financial
stability. The team of managers and
underwriters has been very consistent
and stable over many years.
“People know who we are and what
we are,” said Mr. Wixtead. “When we
can get a reasonable risk–adjusted
rate for the risk we assume, we are
in the market wholeheartedly. 2020
was a transitional year where market
conditions continued to firm. While
we applaud the current actions,
there is still need for further margin
enhancement. As opportunities
continue to develop, we will be ready.”
Key Financial Results
Dollars in millions
Global Reinsurance
2020
Gross premiums written
Net premiums written
Combined ratio
Current accident year
combined ratio excluding
catastrophe losses
Segment income
$832
$731
92.5%
80.1%
$357
“ At Chubb, our capital
can be put to work
where we can get the
best return — and
that flexibility is a
great strength of the
organization.”
— James Wixtead
32
Chubb Corporate and Global Functional Leaders
Joseph Wayland
Executive Vice President, Chubb Group;
General Counsel
Julie Dillman
Senior Vice President, Chubb Group;
Global Head of Operations
Philip Bancroft
Executive Vice President, Chubb Group;
Chief Financial Officer
Timothy Boroughs
Executive Vice President, Chubb Group;
Chief Investment Officer
Jo Ann Rabitz
Global Human Resources Officer,
Chubb Group
33
Citizenship at Chubb
Our Mission
Protecting the Present and Building a Better Future
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.
34
Philanthropy
The Chubb Charitable Foundation
believes that meaningful contributions
that support our communities globally
provide lasting benefits to society,
to Chubb and to Chubb employees.
Through philanthropy, global
partnerships and company–sponsored
volunteer activities focused on giving
the gift of time and donations, the
foundation supports clearly defined
projects that solve problems with
measurable and sustainable outcomes,
helping people in the countries where
we live and work build productive and
healthy lives.
Our philanthropy is funded principally
through the Chubb Charitable
Foundation and the Chubb Rule of Law
Fund. Our commitment to assist those
less fortunate and to be stewards of
the planet is focused on the areas of
education, poverty and health, and the
environment. In the last decade, Chubb
has contributed more than $100 million
to the foundation.
For example, the Chubb Charitable
Foundation has supported the
International Rescue Committee.
Through partnerships with The Nature
Conservancy, Rainforest Trust and
other conservation organizations, the
foundation supports programs to save
endangered wildlife, protect threatened
lands and waters, and promote
resiliency. Additionally, the foundation
serves as a major partner for Teach for
America and Teach for All programs in
the U.S. and globally. In 2020, Chubb
committed $10 million to pandemic
relief efforts globally.
As part of our commitments to expand
and enhance our broader diversity,
equity and inclusion agenda, we are
working through the Chubb Charitable
Foundation and the Chubb Rule of Law
Fund to support a range of programs to
address inequality and promote social,
economic and racial justice.
Environment
Diversity, Equity & Inclusion
Chubb Rule of Law Fund
Chubb recognizes the reality of climate
change and the substantial impact
of human activity on our planet.
We realize our commitment to be a
steward of the earth in a number of
ways: recognizing and responding to
the reality of climate change across our
businesses; managing environmental
risk for our customers with innovative
products and risk engineering
solutions; supporting environmental
resiliency projects throughout the
world; protecting biodiversity and
saving land through our philanthropy;
and reducing the environmental
footprint of our own operations.
Chubb develops insurance products
and risk management services that
facilitate market–based solutions to
current and pending environmental
and climate–related issues.
The Chubb Charitable Foundation and
the company’s employees support a
range of environmental philanthropies,
as well as volunteer activities in local
communities 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 the end of 2019,
the company achieved its first goal to
reduce absolute GHG emissions by 20%
and is committed to its long–term goal
of reducing absolute GHG emissions
40% by 2035.
Chubb operates within a dynamic and
changing global environment where
marketplaces and customers are
culturally diverse and broad. Meeting
diverse customer needs requires the
best minds collaborating in a rewarding
and supportive environment. We
recognize our responsibility to
ensure opportunity within our own
organization by creating an atmosphere
where all colleagues, regardless of who
they are, feel comfortable bringing
their best to the table. Our strategy for
diversity, equity and inclusion (DE&I)
is designed to support Chubb’s ability
to attract, develop and retain the best
talent — regardless of background.
Chubb’s culture holds true to the
principles of accountability and
ownership and requires collective and
individual responsibility. Making and
sustaining progress requires holding
leadership accountable; developing and
advancing diverse talent; increasing
gender and multicultural leadership
diversity; and deploying inclusive
recruitment, development and
promotional practices.
In 2020, Chubb committed to take
specific actions related to racial equity
in recruitment, career development
and advancement opportunities;
promoting a greater sense of belonging
for Black colleagues; and increasing the
knowledge and understanding of the
Black employee experience through
open two–way dialogue and education.
These actions support our goal of
becoming an anti–racist company.
Other DE&I initiatives include
mentorships and affinity groups,
such as Business Roundtables and
Regional Inclusion Councils, which
promote dynamic networking across
the business and engage hundreds of
employees in constructive dialogue.
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 62 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 events that unfolded across
the U.S. in 2020 focused Chubb’s
attention on the persistent challenges
arising from bigotry, racism and racial
injustice in society, particularly for
Black people. The fund has recently
committed to supporting seven projects
aimed at alleviating inequities in the
administration of justice, including
inequities arising from existing and
historic racism. Among them are
initiatives to improve trust and fairness
in community policing, address racial
disparities in the criminal justice
system, build an international refugee
legal regime for the 21st century and
provide important training for judges
in Guatemala to help promote greater
independence and integrity in the
judicial process.
The Chubb Rule of Law Fund is funded
by the Chubb Charitable Foundation
and contributions from 15 of Chubb’s
partner law firms.
35
Officers and Executives
Officers and Executives
Chubb Group Corporate Officers
Evan G. Greenberg*
Chairman and Chief Executive Officer, Chubb Group
John Keogh*
President and Chief Operating Officer, Chubb Group
John Lupica**
Vice Chairman, Chubb Group;
President, North America Insurance
Paul J. Krump**
Vice Chairman, Chubb Group;
Global Underwriting and Claims
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
Peter Enns
Executive Vice President, Chubb Group;
Finance
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;
Chief Operating Officer, Chubb Life
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, Europe, Middle East and Africa
Marcos Gunn
Senior Vice President, Chubb Group;
Regional President, Latin America
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
Matthew Merna
Senior Vice President, Chubb Group;
Division President, North America Major Accounts
Scott A. Meyer
Senior Vice President, Chubb Group;
Division President, Westchester
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
James E. Wixtead
Senior Vice President, Chubb Group;
President, Chubb Tempest Re Group
*Chubb Limited Executive Management and Executive Officer for SEC reporting purposes
**Executive Officer for SEC reporting purposes
36
Scott Arnold
Vice President, Chubb Group;
Division President, Chubb Agriculture;
President, Rain and Hail
Ross Bertossi
Vice President, Chubb Group;
Global Underwriting
Sean Corridon
Vice President, Chubb Group;
Deputy Chief Investment Officer
Steven Goldman
Vice President, Chubb Group;
Division President, North America Financial Lines
Judy Gonsalves
Vice President, Chubb Group;
Division President, Chubb Bermuda
Annmarie Hagan
Vice President, Chubb Group;
Chief Accounting Officer
Stephen M. Haney
Vice President, Chubb Group;
Division President, North America Surety;
Chief Underwriting Officer, Global Surety
Michael Kessler
Vice President, Chubb Group;
Division President, Global Cyber Risk
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
Jeffrey Updyke
Vice President, Chubb Group;
Division President, North America Small Business
Other Executives
Adam Clifford
Division President, Continental Europe, Middle East & North Africa
Samantha Froud
Chief Administration Officer, Bermuda Operations
Mark Hammond
Treasurer, Chubb Group
Jason Keen
Division President, Chubb Global Markets
Jeremiah Konz
Chief Reinsurance Officer, Chubb Group
Ivy Kusinga
Chief Culture Officer, Chubb Group
Eric Larson
Chief Compliance Officer, Chubb Group
David Lupica
Chief Operating & Distribution Management Officer
Westchester
Chris Martin
Division President, North America Accident and Health
Sara Mitchell
Division President, U.K. & Ireland and South Africa
Michael O’Donnell
Division President, Chubb Tempest Re USA
George Ohsiek
Chief Auditor, Chubb Group
Sam Peters
Division President, Chubb Tempest Re Bermuda
Jo Ann Rabitz
Global Human Resources Officer, Chubb Group
Steve Roberts
Division President, Chubb Tempest Re International
Diego Sosa
Regional President, Far East
John Thompson
Division President, International Accident & Health
Overseas General Insurance
37
Board Committees
Audit Committee
Robert W. Scully, Chair
James I. Cash
Robert J. Hugin
Theodore E. Shasta
David H. Sidwell
Compensation Committee
Michael P. Connors, Chair
Mary Cirillo
John A. Edwardson
Frances F. Townsend
Nominating & Governance
Committee
Mary Cirillo, Chair
Michael P. Connors
John A. Edwardson
Risk & Finance Committee
Olivier Steimer, Chair
Michael G. Atieh
Sheila P. Burke
Eugene B. Shanks, Jr.
Frances F. Townsend
Executive Committee
Evan G. Greenberg, Chair
Mary Cirillo
Michael P. Connors
Robert W. Scully
Olivier Steimer
Chubb Limited Board of Directors
Evan G. Greenberg
Chairman and
Chief Executive Officer
Chubb Limited
Robert J. Hugin
Former Chairman and
Chief Executive Officer
Celgene Corporation
Michael G. Atieh
Retired Chief Financial
and Business Officer
Ophthotech Corporation
Robert W. Scully
Retired Co–President
Morgan Stanley
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
Lead Director
Chubb Limited
Chairman and
Chief Executive Officer
Information Services
Group, Inc.
John A. Edwardson
Retired Chairman and
Chief Executive Officer
CDW Corporation
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
Frances F. Townsend
Executive Vice President
for Corporate Affairs
Activision Blizzard
38
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
2001 Market Street, 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
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.
39
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:
Full Year
2020
$3,533
Full Year
2019
$4,454
(95)
(140)
17
–
–
26
(23)
4
Adjusted realized gains (losses)(1)
(499)
(522)
Net realized gains (losses) related to
unconsolidated entities(2)
Tax (expense) benefit on adjusted
net realized gains (losses)
Core operating income
821
(24)
$3,313
483
(15)
$4,641
Denominator
453,441,512
458,914,663
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
$7.79
$9.71
(0.17)
(0.25)
–
(0.04)
0.65
$7.31
–27.7%
(0.11)
$10.11
(1) Excludes realized gains (losses) on crop derivatives of $1 million and $(8) million for 2020
and 2019, 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).
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 Corporation (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. Adjusted net realized gains (losses), net of
tax, includes net realized gains (losses) and net realized
gains (losses) recorded in other income (expense) related
to unconsolidated subsidiaries, and excludes realized gains
and losses on crop derivatives. 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.
40
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
2020
Full Year
2019
$3,533
$3,313
$4,454
$4,641
Equity — beginning of period as reported (1)
$55,259
$50,300
Less: unrealized gains (losses) on
investments, net of deferred tax
2,543
(545)
Equity — beginning of period, as adjusted
$52,716
$50,845
Less: goodwill and other intangible assets,
net of tax
$20,012
$20,054
Equity — beginning of period, as
adjusted, excluding goodwill and other
intangible assets
$32,704
$30,791
Equity — end of period, as reported
$59,441
$55,331
Less: unrealized gains (losses) on
investments, net of deferred tax
4,673
2,543
Equity — end of period, as adjusted
$54,768
$52,788
Less: goodwill and other intangible assets,
net of tax
$19,916
$20,012
Equity — end of period, as
adjusted, excluding goodwill and other
intangible assets
$34,852
$32,776
Weighted average equity, as reported
$57,350
$52,816
Weighted average equity, as adjusted
$53,742
$51,817
Weighted average equity, as adjusted,
excluding goodwill and other intangible assets
$33,778
$31,784
Combined ratio measures the underwriting profitability of
our property & casualty business. P&C combined ratio
and CAY P&C combined ratio excluding Catastrophe
losses (CATs) are non-GAAP financial measures. Refer to the
Non-GAAP Reconciliation section in the 2020 Form 10-K, on
pages 63-66 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).
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
CAY P&C combined ratio with expected
level of CATs
Full Year
2020
Full Year
2019
96.1%
90.6%
0.0%
96.1%
10.6%
–1.2%
86.7%
3.6%
0.0%
90.6%
4.1%
–2.7%
89.2%
3.4%
90.3%
92.6%
The following table presents the reconciliation of
Catastrophe losses, pre-tax, to Natural catastrophe losses
above expected level, pre-tax:
(in millions of U.S. dollars)
COVID–19 catastrophe losses
Natural catastrophe losses
Other catastrophe losses
Catastrophe losses, pre-tax
ROE
Core operating ROE
Core operating ROTE
6.2%
6.2%
9.8%
8.4%
9.0%
14.6%
Natural catastrophe losses
Less: Expected level of Catastrophe losses
Natural catastrophe losses above expected
level, pre–tax
(1) January 1, 2020 included a $72 million after-tax reduction to beginning equity principally
related to the adoption of the current expected credit loss accounting guidance.
Full Year
2020
$1,396
1,742
145
$3,283
$1,742
1,094
$648
41
Non–GAAP Financial Measures (continued)
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. Tangible book value excluding unrealized
appreciation on investments is adjusted to exclude
unrealized gains (losses) on investments, net of tax.
We exclude unrealized investment gains (losses) because
the amount of these gains (losses) is heavily influenced
by changes in market conditions, including interest
rate changes.
(in millions of U.S. dollars,
except share and
per share data)
Shareholders’ equity
Less: goodwill and
other intangible
assets, net of tax
Numerator for tangible
book value per share
Less: unrealized
appreciation on
investments, net of tax
Tangible book value
excluding unrealized
appreciation on
investments
December 31
2020
December 31
2019
% Change
$59,441
$55,331
7.4%
19,916
20,012
$39,525
$35,319
11.9%
4,673
2,543
$34,852
$32,776
6.3%
Shares outstanding
450,732,625
451,971,567
Book value per
common share
Tangible book value
per common share
Tangible book
value ex unrealized
appreciation on
investments per share
$131.88
$122.42
7.7%
$87.69
$78.14
12.2%
$77.32
$72.52
6.6%
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
2020
Full Year
2019
$1,198
1,559
$981
1,463
$2,757
$2,444
(1) Excludes Combined North America and Life reinsurance businesses.
Adjusted net investment income is net investment income
excluding the amortization of the fair value adjustment on
acquired invested assets from the acquisition of Chubb Corp
and including investment income from partially owned
investment companies (private equity partnerships) where
our ownership interest is in excess of three percent that are
accounted for under the equity method. The mark-to-market
movement on these private equity partnerships are included
in adjusted net realized gains (losses). 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.
(in millions of U.S. dollars)
Net investment income
Less: Amortization expense of fair
value adjustment on acquired
invested assets
Add: Other income from private equity
partnerships
Full Year
2020
Full Year
2019
$3,375
$3,426
(116)
(161)
115
86
Adjusted net investment income
$3,606
$3,673
% Change from prior year
–1.8%
42
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☑
☐
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
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
Trading Symbol(s)
CB
CB/24A
CB/27
CB/28
CB/29A
CB/31
CB/38A
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
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 ☐ No ☑
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 ☑ No ☐
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 ☑ No ☐
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.
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 has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of voting stock held by non-affiliates as of June 30, 2020 (the last business day of the registrant's most recently
completed second fiscal quarter), was approximately $57 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 11, 2021, there were 450,224,906 Common Shares par value CHF 24.15 of the registrant outstanding.
Documents Incorporated by Reference
Certain portions of the registrant's definitive proxy statement relating to its 2021 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
Legal Proceedings
ITEM 3.
ITEM 4. Mine Safety Disclosures
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
ITEM 6.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
ITEM 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9.
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
33
34
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87
87
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87
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88
88
88
88
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96
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, 2020, we had total assets of $191 billion and shareholders’ equity of $59 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.
During 2020, we completed the purchase of an additional 16.2 percent ownership interest in Huatai Insurance Group Co., Ltd.
(Huatai Group) bringing our aggregate ownership interest from 30.9 percent to 47.1 percent as of December 31, 2020. On
December 30, 2019, we acquired Banchile Seguros de Vida, an insurance company providing both life and property and
casualty coverages in Chile. The results of Huatai Group and Banchile Seguros de Vida are included in the Overseas General
Insurance and Life Insurance segments as appropriate, determined by the type of policy written. Refer to Note 2 to the
Consolidated Financial Statements for additional information.
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
provide 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.
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
2
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.
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.
Human Capital Management
Our employees are critical to our mission to protect the present and build a better future, by providing our customers with the
security from risk that allows people and businesses to grow and prosper. To accomplish this mission, we seek to attract and
retain the very best insurance professionals and to provide an inclusive and supportive culture that allows all of our employees
to reach their full potential as we deliver insurance solutions and claims service for individuals, families and businesses of all
sizes. Our highly collaborative, inclusive approach helps us drive better business outcomes. We track and report internally on
key talent metrics including employee demographics, critical role succession planning, diversity data, and employee retention
and engagement. This information is regularly reported to senior management as well as the Chubb Board of Directors. At
December 31, 2020, we employed approximately 31,000 people in 54 countries and territories around the world, including 53
percent in North America, 12 percent in Europe, Eurasia and Africa, 19 percent in Asia, and 16 percent in Latin America. We
believe that employee relations are good.
Diversity and inclusion
Diversity and inclusion are integral to Chubb’s culture. We recognize our responsibility to provide opportunity within our own
organization, where we aim to foster a diverse and inclusive meritocracy. Our extensive efforts in this area include mentorships,
affinity groups, diversity awareness training, and education, open dialogue on race and racism, management development
programs, and considering a diverse pool of candidates in recruiting and promotion.
Examples of initiatives include Business Roundtables (our employee affinity groups) and Regional Inclusion Councils, which
promote dynamic networking across the business and engage hundreds of employees in constructive dialogue. These circles of
support focus on employee onboarding, development and retention and help us build stronger relationships with, and gain
deeper insights into, our varied customer and distribution partner communities. Other programs include Chubb Start, which
supports the continuous professional development of women who are early in their careers, and Chubb Signatures, a global and
regional lecture series for successful senior women, diverse men and inclusion champions to share their unique backgrounds,
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experiences and hard-earned lessons in business. In addition, we remain attuned to demographic shifts within our workforce
and society to evaluate and update employee policies, procedures and systems that reflect this commitment. We depend on our
culture of leadership accountability to continue progress in diversity and inclusion at Chubb.
Attraction, Development, and Retention
The foundation to Chubb’s long-term success is our disciplined approach to attracting, developing and retaining the next
generation of insurance professional and leaders. We strive to be an inclusive meritocracy, where all employees regardless of
race, gender or background can thrive. Learning and professional development are central to the Chubb culture, and we are
committed to providing opportunities to evolve professionally. Our talent development efforts are for all employee levels and we
expect our employees to own and drive their development by availing themselves of the structured and unstructured learning we
offer, including on-the-job training, through personal interaction and involvement, or via online and classroom learning. Chubb
has made substantial investments for a robust technical and leadership development environment and, where appropriate, fills
open positions with internal sourcing of talent.
Compensation and Benefits
Chubb is committed to delivering competitive compensation and benefits to its employees worldwide as a means to attract and
retain a highly qualified, experienced, talented and motivated workforce. We vary and adjust our offerings to support the human
resources requirements of our business in markets around the world in which we operate. Additionally, we structure our
compensation programs for leaders to include a mix of short- and long-term awards, with a focus on linking pay to Chubb's
performance and the enhancement of shareholder value over the medium- and long-term.
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 2020,
consolidated net premiums earned was $33.1 billion. 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 (42 percent of 2020 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
•
• Westchester and Chubb Bermuda, our wholesale and specialty divisions
Commercial Insurance, which includes the retail division focused on middle market customers and small businesses
Products and Distribution
Major Accounts provides a broad array of commercial lines of products and services, including traditional and specialty P&C,
and risk management, as well as consumer A&H products 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.
The Major Accounts operations, which represented approximately 41 percent of North America Commercial P&C Insurance’s net
premiums earned in 2020, 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, 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
•
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•
•
•
•
•
•
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 2020. 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.
Wholesale and Specialty, which represented approximately 19 percent of North America Commercial P&C Insurance’s net
premiums earned in 2020, 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
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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 2020 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 2020.
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.
North America Agricultural Insurance (6 percent of 2020 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.
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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 2020 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 £550 million for the Lloyd’s 2021 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
commercial P&C lines, including specialty coverages and services, and consumer lines, including A&H and personal lines
insurance products. 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 branded products are also offered via digital-commerce platforms,
allowing agents and brokers to quote, bind, and issue policies at their convenience. 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, cyber, surety, aviation, political
risk, and specialty personal lines products. Chubb International personal lines operations provide a wide range of consumer lines
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products to meet the needs of specific target markets around the world. Products include high net worth homes, traditional
homeowners, automobile, and specialty products that cover smart phones, spectacles and personal cyber risk.
Chubb International’s presence in China also includes its 47.1 percent ownership interest in Huatai Group. Huatai Group wholly
owns Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C). Therefore, Chubb owns an approximately 47.1 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, and political risk.
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 2020 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.
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. Global Reinsurance’s diversified portfolio is produced
through reinsurance intermediaries.
Chubb Tempest Re Bermuda principally provides property catastrophe reinsurance 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
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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 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 and casualty reinsurance. Chubb Tempest Re USA underwrites reinsurance
on both a proportional and excess of loss basis.
Chubb Tempest Re International provides traditional and specialty P&C reinsurance to insurance companies worldwide, with
emphasis on non-U.S. and non-Canadian risks. Chubb Tempest Re International writes all lines of traditional and specialty
reinsurance including property, property catastrophe, casualty, marine, and specialty through our London- and Zurich-based
offices. 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, property catastrophe, surety, and crop hail. Chubb Tempest Re Canada provides coverage through
its Canadian company platform. 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 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 Chubb's strong capital position, analytical capabilities, experienced underwriting team 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 (7 percent of 2020 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, Vietnam, and Myanmar; throughout Latin America; selectively in Europe; Egypt; and in China through our
direct and indirect investments in Huatai Group and Huatai Life Insurance Co., Ltd. (Huatai Life). 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. 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, 2020, Chubb had a 57.5 percent direct and indirect
ownership interest in Huatai Life, comprising a 20 percent direct ownership interest as well as a 37.5 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. We also have an indirect investment in
Huatai Asset Management, a third-party investment management firm, through our direct ownership in Huatai Group.
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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 net income 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.
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 exposures are priced appropriately and
resulting 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.
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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.
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 $68 million at December 31, 2020.
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
11
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, 2020. 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.
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.
12
Regulation
Our insurance and reinsurance subsidiaries conduct business globally, including in all 50 states of the United States, the District
of Columbia and all U.S. Territories. 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). 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 primarily in-person, with the most recent College convened in September
2020, albeit virtually. In July 2017, the College convened its first interim regulators-only 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. Given the virtual nature of the September 2020 College, another in-person College is
tentatively scheduled for September 2021 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.
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 U.S.
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 our U.S. insurers. 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 our U.S. insurers.
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.
13
We are also required to file annually with the Department a disclosure report that identifies our corporate governance practices
and a report 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
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 requires licensed insurance entities to comply
with detailed information security requirements. The NAIC model law is similar in many respects to the NYDFS Cybersecurity
Regulation.
14
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. The GAAP 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, each year, the Bermuda
domiciled insurers are required to file with the BMA a capital and solvency return along with an annual statutory financial
return. The prescribed form of capital and solvency return is comprised of the BMA’s risk based capital model, termed the
Bermuda Solvency Capital Requirement (BSCR) or an approved internal capital model in lieu thereof; a statutory economic
balance sheet; the approved actuary’s opinion; and several prescribed schedules. The BSCR is 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 BMA’s powers to set standards on public disclosure under the Insurance Act, 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.
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 statutory balance sheet, unless at
least seven days before payment of the dividends, it files with the BMA an affidavit signed by at least two directors of the
relevant Chubb Bermuda domiciled subsidiary (one of whom must be a director resident in Bermuda) and by the relevant Chubb
Bermuda domiciled subsidiary’s principal representative, that it will continue 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.
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's financial statements, by 15 percent or more.
15
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 such as the General Data Protection Regulation (GDPR), 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.
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;
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 (such as 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:
◦
◦ monitor exposure accumulations relative to established guidelines; and
◦
establish and coordinate risk guidelines that reflect the corporate appetite for risk;
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.
16
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 the entire landscape of insurance,
financial, strategic, and operational risks. 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 which, in addition to the Chair, includes the Chief Executive
Officer, the President and 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. The first relates to external information that provides insight to the RUC
on existing or emerging risks that might significantly impact Chubb's key objectives while the second involves 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 with the Risk & Finance Committee at least annually in order to exercise its duties under New
York Stock Exchange Rules.
Others within the overall 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.
Information about our Executive Officers
Name
Age
Position
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
66
56
61
55
63
58
71
61
46
Chairman, Chief Executive Officer, and Director
President and Chief Operating Officer
Executive Vice President and Chief Financial Officer
Vice Chairman; President, North America Insurance
Executive Vice President and General Counsel
Executive Vice President, Chief Digital Officer, and Chief Risk Officer
Executive Vice President and Chief Investment Officer
Vice Chairman, Global Underwriting and Claims
Executive Vice President; President, Overseas General Insurance
17
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 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. Mr. Greenberg was a director of The Coca-Cola Company from February 2011 until October 2016.
John W. Keogh was appointed President of Chubb in December 2020, and has served as Chief Operating Officer since July
2011. Mr. Keogh joined Chubb in 2006 as Chairman, Insurance – Overseas General. Mr. Keogh was appointed Vice Chairman
in 2010 and Executive Vice Chairman in 2015. Before joining Chubb, Mr. Keogh held a range of positions with increasing
responsibility during a 20-year career with American International Group (AIG), including Senior Vice President, Domestic
General Insurance, and President and Chief Executive Officer of National Union Fire Insurance Company of Pittsburgh, an AIG
member company. He began his insurance career as an underwriter with AIG in 1986.
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. Mr. Bancroft plans to retire
on July 1, 2021.
John J. Lupica was appointed President, North America Insurance in September 2020, and has served as Vice Chairman of
Chubb Limited and Chubb Group Holdings since November 2013. Prior to his current role, Mr. Lupica served as President,
North America Major Accounts and Specialty Insurance since January 2016. Mr. Lupica was appointed 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.
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 Vice Chairman, Global Underwriting and Claims in September 2020. Prior to his current role, Mr.
Krump served as Executive Vice President, Chubb Group and President North America Commercial and Personal Insurance
since January 2016. Before 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.
18
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.
COVID-19 pandemic, the effects of global actions taken to contain its spread, and its economic and societal impact could
adversely impact our businesses, invested assets, financial condition, and results of operations.
COVID-19 pandemic (the “virus” or the “pandemic”) is causing significant disruption to public health, the global economy,
financial markets, and commercial, social and community activity generally. The pandemic has had a significant effect on our
company’s business operations and, depending on the course of the pandemic and government responses, may have a
significant effect on current and future financial results. We may experience higher levels of loss and, claims activity in certain
lines of business in excess of losses we have already recognized, and our premiums could also be adversely affected by any
further suppression of global commercial activity that results in a reduction in insurable assets and other exposure. Financial
conditions resulting from the pandemic may also have a negative effect on the value and quality of our portfolio of invested
assets, thereby adversely affecting our investment returns and increasing our credit and related risk. Certain lines of our
business, such as our variable annuity life reinsurance business, may require additional forms of collateral in the event of a
decline in the securities and benchmarks to which those repayment mechanisms are linked.
To protect our employees and in response to the global and regional restrictions on interpersonal contact and travel because of
the pandemic, much of our work force may be working remotely, either for extended periods or intermittently, in response to
changing health and regulatory conditions, placing increased demands on our IT systems. While we have continued to conduct
our business effectively throughout the pandemic, there is no assurance that our ability to continue to function in this
environment will not be adversely affected by an extended disruption in the telecommunications and internet infrastructures that
support our remote work capability.
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.
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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, 2020, gross A&E liabilities represented
approximately 2.8 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,
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
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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, 2020, we had $15.8 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, 2020, the aggregate reinsurance balances ceded by our
active subsidiaries to Century were approximately $1.6 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 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 the change in the
reserve calculated in connection with the reinsurance of GMDB liability and 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. Additionally, the fair value of GLB liabilities is impacted by
market conditions. 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.
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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, a deposit paid in connection with our
agreement to acquire additional shares of Huatai Group exposes us to risk if the transaction is 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 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. Our investment performance is highly sensitive to many factors, including
interest rates, inflation, monetary and fiscal policies, and domestic and international political conditions. 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.
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As stated, our fixed income portfolio is primarily invested in high quality, investment-grade securities. However, a smaller
portion of the portfolio, approximately 18 percent at December 31, 2020, 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 current expected credit losses for all
held-to-maturity securities and evaluate expected credit losses for available-for-sale securities when fair value is below amortized
cost, which considers reasonable and supportable forecasts of future economic conditions in addition to information about past
events and current conditions. This analysis requires a high degree of judgment. Financial assets with similar risk characteristics
and relevant historical loss information are included in the development of an estimate of expected lifetime losses. Declines in
relevant stock and other financial markets and other factors impacting the value of our investments could result in an adverse
effect on 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
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
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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, 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 euro, British pound, Canadian dollar, Chinese yuan, Australian dollar,
Mexican peso, Brazilian real, Korean won, Japanese yen, Thai baht, and Hong Kong dollar. At December 31, 2020,
approximately 21.4 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
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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 continue to work 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 is developing an international capital standard for such IAIGs. The details of this global
capital standard and its applicability to Chubb are evolving and 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. The impact to Chubb of these
developments remains uncertain, although currently we do not 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
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, 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. A number of states have
enacted it into law, and it is not yet known whether or not, and to what extent, additional states will enact it. 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”) 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), the California Privacy Rights Act (CPRA), and Brazil’s Lei Geral de Protecao de Dados (LGPD), 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.
Economic uncertainty in either or both of the United Kingdom ("U.K.") and the European Union ("EU"), and/or operational
uncertainty between them, may have an adverse effect on our business, our liquidity and financial condition, and our stock
price.
The U.K. ceased to be a member of the EU on January 31, 2020 ("Brexit"). Economic relations between the U.K. and the EU
are now governed by a Trade and Cooperation Agreement which is limited in scope to primarily the trade of goods, transport,
energy links and fishing. Uncertainties remain relating to certain aspects of the U.K.'s future economic, trading and legal
relationships with the EU and with other countries, including with respect to financial services industries such as ours.
Moreover, free movement of persons, services and capital between the U.K. and the EU ended on January 1, 2021, which has
meant the loss to U.K./EU service sectors of the automatic right to offer such services across the EU and U.K. The overall
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macroeconomic impact of Brexit - an impact which inevitably affects the volume of business we transact in Europe - is not yet
clear. Throughout both the EU and U.K., we have significant investments in both financial and human resources, as well as a
large portfolio of commercial and consumer insurance business. On an operational level, we have already redomiciled our
primary European carriers from the U.K. to France although we will continue to have a substantial presence in London and
elsewhere in the U.K.
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
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
26
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
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).
27
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.
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. Since enactment, the IRS and U.S. Treasury Department have continued to issue rulings, notices,
and proposed and final regulations to assist taxpayers in understanding and implementing the new provisions. Some of this
guidance remains subject to comment or in proposed form; thus, there are many uncertainties relating to its ultimate application
and effects on our company.
The Biden Administration and several members of the U.S. Congress have suggested enacting legislation intended to modify
aspects of the 2017 Tax Act. This legislation may include increases to the corporate income tax rate, as well as modifications to
the GILTI provisions. It is possible that such legislation or other legislation could be enacted in the future and could have an
adverse impact on us or our shareholders.
28
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 2021 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
sometime in 2021 or later which could be adopted by OECD countries in 2022 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 also published an action plan several years ago 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.
29
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-
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. It is our practice 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
30
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.
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 recent final and 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. The final regulations are effective for tax years beginning
after January 15, 2021 and would not apply to us until 2022. Any shareholder electing to apply certain provisions of the newly
finalized or proposed PFIC regulations prior to the effective date 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 2020 and 2019, 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 11, 2021 was 6,598. 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, 2020
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
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan (2)
Approximate Dollar
Value of Shares that
May Yet be
Purchased Under
Publicly Announced
Plans (3)
144,550 $
886,702 $
296,858 $
1,328,110 $
131.11
143.52
152.73
144.23
140,000 $
1.11 billion
883,000 $
2.48 billion
295,000 $
1.50 billion
1,318,000
(1)
(2)
(3)
This column 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 to cover the cost of the exercise of options by employees through stock swaps.
The aggregate value of shares purchased in the three months ended December 31, 2020 as part of the publicly announced plan was $190 million.
In November 2020, the Board authorized the repurchase of up to $1.5 billion of Chubb's Common Shares from November 19, 2020 through December 31, 2021.
Subsequently, in February 2021, the Board approved an increase to the November 2020 share repurchase program of $1.0 billion to a total of $2.5 billion, effective
through December 31, 2021. The $1.5 billion November 2019 Board authorization remained effective through December 31, 2020. Repurchases through December 31,
2020 were made under this authorization. For the period January 1, 2021 through February 24, 2021, we repurchased 1,971,000 Common Shares for a total of $327
million in a series of open market transactions under the share repurchase program authorized in November 2020. As of February 24, 2021, $2.17 billion in share
repurchase authorization remained through December 31, 2021. Refer to Note 11 to the Consolidated Financial Statements for more information on the Chubb Limited
securities repurchase authorizations.
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, 2015, through December 31, 2020, 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, 2016, 2017,
2018, 2019, and 2020, of a $100 investment made on December 31, 2015, with all dividends reinvested.
Chubb Limited
S&P 500 Index
S&P 500 P&C Index
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
$100
$100
$100
$116
$112
$116
$130
$136
$142
$118
$130
$135
$145
$171
$170
$147
$203
$182
ITEM 6. Selected Financial Data
Not required.
33
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our financial condition and results of operations for the years ended December 31, 2020 and
2019 and comparisons between 2020 and 2019. This discussion should be read in conjunction with the Consolidated
Financial Statements and related Notes, under Item 8 of this Form 10-K. Comparisons between 2019 and 2018 have been
omitted from this Form 10-K, but can be found in "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 of our Form 10-K for the year ended December 31, 2019.
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.
Page
35
36
37
38
48
53
61
63
67
67
68
72
73
74
74
75
76
79
80
81
82
MD&A Index
Forward-Looking Statements
Overview
Financial Highlights
Critical Accounting Estimates
Consolidated Operating Results
Segment Operating Results
Net Realized and Unrealized Gains (Losses)
Non-GAAP Reconciliation
Net Investment Income
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
34
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. The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,”
“intend,” “hope,” “feel,” “foresee,” “will likely result,” “will continue,” and variations thereof and similar expressions, identify
forward-looking statements. 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, and elsewhere herein and in
other documents we file with the U.S. Securities and Exchange Commission (SEC), include but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
actual amount of new and renewal business, premium rates, underwriting margins, market acceptance of our products, and
risks associated with the introduction of new products and services and entering new markets; 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;
losses arising out of natural or man-made catastrophes; 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;
infection rates and severity of COVID-19 and related risks, and their effects on our business operations and claims activity,
and any adverse impact to our insureds, brokers, agents, and employees; actual claims may exceed our best estimate of
ultimate insurance losses incurred through December 31, 2020 which could change including as a result of, among other
things, the impact of legislative or regulatory actions taken in response to COVID-19;
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
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;
uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and
treaties; judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms; the effects of data
privacy or cyber laws or regulation; global political conditions and possible business disruption or economic contraction that
may result from such events;
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; changing rates of inflation; and other general economic and business
conditions, including the depth and duration of potential recession;
the availability of borrowings and letters of credit under our credit facilities; the adequacy of collateral supporting funded
high deductible programs; the amount of dividends received from subsidiaries;
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;
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 effects of public company bankruptcies and accounting restatements, as well as disclosures by and investigations of
public companies relating to possible accounting irregularities, and other corporate governance issues;
acquisitions made 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 Co., Ltd. (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; share repurchase plans and share cancellations;
loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time frame;
35
•
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).
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.
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. Refer to Note 2 to the Consolidated Financial Statements for our most recent acquisitions.
Our product and geographic diversification differentiate 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.
36
Financial Highlights for the Year Ended December 31, 2020
• Net income was $3.5 billion compared with $4.5 billion in 2019, including after-tax catastrophe losses of $2.8 billion
compared with $966 million in 2019.
•
The COVID-19 global pandemic and related economic conditions adversely impacted our results of operations and growth in
2020, including:
• Net catastrophe losses included a COVID-19 charge of $1,396 million pre-tax ($1,193 million after-tax), generated
primarily from entertainment and commercial property-related business interruption, liability insurance products, and
workers’ compensation. These COVID-19 losses added 4.5 percentage points to the P&C combined ratio.
• Net premiums written in consumer lines globally declined by 1.9 percent, or 0.9 percent on a constant-dollar basis,
principally reflecting the impact of COVID-19. A&H lines experienced negative growth globally and were down 10.6
percent for the year. Partially offsetting the decline was our U.S. high net worth personal lines business, which grew
2.8 percent in 2020.
• Net premiums written were $33.8 billion, up 4.8 percent, or 5.5 percent on a constant-dollar basis with 9.3 percent
growth in commercial lines and a decline of 0.9 percent in consumer lines. Refer to page 49 for more detail.
• Net premiums earned were $33.1 billion, up 5.8 percent, or 6.5 percent on a constant-dollar basis with growth in
commercial lines of 8.9 percent and consumer lines of 2.5 percent.
•
•
•
P&C combined ratio was 96.1 percent compared with 90.6 percent in 2019. P&C current accident year combined ratio
excluding catastrophe losses was 86.7 percent compared with 89.2 percent in 2019.
Total pre-tax and after-tax catastrophe losses, including reinstatement premiums, were $3.3 billion and $2.8 billion,
respectively, compared with $1.2 billion and $966 million, respectively, in 2019. 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 $395 million (1.2 percentage points of the combined
ratio) and $357 million, respectively, compared with $792 million (2.7 percentage points of the combined ratio) and $624
million, respectively, in 2019.
• Operating cash flow was $9.8 billion compared with $6.3 billion in 2019, an increase of $3.4 billion primarily due to
higher premiums collected and reduced payment activity due to the economic slowdown related to COVID-19 pandemic.
Refer to the Liquidity section for additional information on our cash flows.
• Net investment income was $3,375 million compared with $3,426 million in 2019.
•
•
Share repurchases totaled $516 million, or approximately 3.6 million shares for the year, at an average purchase price of
$143.91 per share.
Shareholders’ equity increased 7.4 percent during the year, principally reflecting strong underlying growth and realized and
unrealized gains in our investment portfolio.
Outlook
Our premium growth in 2020 reflected increases in commercial P&C lines globally from new business, positive rate increases
and higher renewal retention. This growth was tempered by decreases in consumer lines, primarily from outside North America,
reflecting the adverse impact of the economic contraction resulting from the COVID-19 pandemic.
Looking forward, we are off to a good start to the year in the first quarter with both growth and the level of commercial P&C rate
increases resembling the underwriting conditions of the fourth quarter. We expect the current market condition to continue
which will allow us to continue to grow revenue and expand underwriting margins in our commercial lines. For consumer lines,
growth globally in the fourth quarter of 2020 continued to be impacted by the pandemic's effects on consumer-related activities.
Our international personal lines business and our global A&H business together shrank eight percent. We expect growth to
return in these businesses as the year progresses.
In 2019, Chubb entered into agreements to acquire an additional 22.4 percent ownership interest in Huatai Group through two
separate purchases. The first purchase, which was for a 15.3 percent interest, was completed in July 2020. We expect that the
second purchase, which was for a 7.1 percent interest, will be completed in the future, contingent upon important conditions.
Separately, in November 2020, we completed the purchase of an incremental 0.9 percent ownership interest in Huatai Group,
bringing Chubb’s aggregate ownership interest to 47.1 percent as of December 31, 2020. We continue to apply equity method
accounting until we complete the 7.1 percent purchase, which will result in majority ownership at which point we expect to
apply consolidation accounting.
37
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 valuation allowance for uncollectible reinsurance;
the valuation of our investment portfolio and assessment of valuation allowance for expected credit losses;
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, and Net Realized and Unrealized Gains (Losses).
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, 2020, our gross unpaid loss and loss
expense reserves were $67.8 billion and our net unpaid loss and loss expense reserves were $53.2 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 $68 million and $74
million at December 31, 2020 and 2019, 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 valuation allowance for uncollectible reinsurance.
December 31, 2020
December 31, 2019
Gross
Losses
Reinsurance
Recoverable(1) Net Losses
Gross
Losses
Reinsurance
Recoverable(1) Net Losses
$ 62,690 $
14,181 $ 48,509 $ 62,960 $
14,689 $ 48,271
26,711
5,001
21,710
23,657
4,927
18,730
(22,053)
(4,619)
(17,434)
(23,911)
(5,438)
(18,473)
463
84
379
(16)
3
(19)
$ 67,811 $
14,647 $ 53,164 $ 62,690 $
14,181 $ 48,509
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
38
claims (loss expenses). Our loss reserves comprise approximately 78 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
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, 2020, 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 - Workers' Compensation
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 percentage point change
in the tail factor (i.e., 1.04 changed to either 1.05 or 1.03) would cause a change of approximately $910 million, either
positive or negative, for the projected net loss and loss expense reserves. This represents an impact of about 9.5 percent relative
to recorded net loss and loss expense reserves of approximately $9.6 billion.
39
North America Commercial P&C Insurance – Liability
As is the case for Workers’ Compensation above, given the long reporting and paid development patterns, 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, for our main U.S. Excess/Umbrella portfolios, a five
percentage point change in the tail factor (e.g., 1.10 changed to either 1.15 or 1.05) would cause a change of approximately
$546 million, either positive or negative, for the projected net loss and loss expense reserves. This represents an impact of
about 19.7 percent relative to recorded net loss and loss expense reserves of approximately $2.8 billion for these portfolios.
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 (approximately 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 59 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.
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 2018 and prior by approximately $590
million. This represents an impact of 15.4 percent relative to recorded net loss and loss expense reserves of approximately
$3.8 billion.
Global Reinsurance
At December 31, 2020, net unpaid losses and loss expenses for the Global Reinsurance segment aggregated to $1.5 billion,
consisting of $772 million of case reserves and $740 million of IBNR. In comparison, 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.
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
40
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
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, 2020, the case reserves, net of retrocessions,
reported to us by our ceding companies were $762 million, compared with the $772 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.
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 $245 million. This represents an impact of
37 percent relative to recorded net loss and loss expense reserves of approximately $655 million.
Corporate
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.
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.
41
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. For
traditional long-duration contracts, these assumptions also include a provision for adverse deviation (PAD), and 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; while for non-traditional long-duration contracts, the
assumptions do not include a PAD and are unlocked at each reporting date. 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
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.
42
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.
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 valuation allowance for uncollectible reinsurance. The valuation allowance 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 valuation allowance that reduces
the reinsurance recoverable asset and, in turn, shareholders' equity. Changes in the valuation allowance for uncollectible
reinsurance are reflected in net income.
43
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 valuation allowance 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 valuation allowance 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 forward looking default factors used to estimate the
probability that the reinsurer may be unable to meet its future obligations in full. In 2020, we adopted new guidance on the
accounting for expected credit losses of reinsurance recoverable. For additional information, refer to Note 1 s) to the
Consolidated Financial Statements under Item 8. 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 valuation allowance
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;
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 valuation allowance 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
valuation allowance 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 valuation allowance for uncollectible reinsurance by establishing a default
factor pursuant to information received; and
•
For captives and other recoverables, management determines the valuation allowance for uncollectible reinsurance based
on the specific facts and circumstances.
44
The following table summarizes reinsurance recoverables and the valuation allowance for uncollectible reinsurance for each type
of recoverable balance at December 31, 2020:
(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)
Valuation Allowance
for Uncollectible
Reinsurance (1)
$
12,479 $
10,814 $
290
64
2,107
966
154
60
372
965
$
15,906 $
12,365 $
179
57
35
11
32
314
(1) The valuation allowance for uncollectible reinsurance is based on a default analysis applied to gross reinsurance recoverables, net of approximately $3.5 billion of collateral
at December 31, 2020.
At December 31, 2020, the use of different assumptions within our approach could have a material effect on the valuation
allowance for uncollectible reinsurance. To the extent the creditworthiness of our reinsurers was 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 valuation allowance 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 valuation allowance, we cannot precisely quantify the effect a specific industry event may have on the valuation
allowance for uncollectible reinsurance. However, based on the composition (particularly the average credit quality) of the
reinsurance recoverable balance at December 31, 2020, 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 valuation allowance for uncollectible reinsurance by
approximately $81 million or approximately 0.5 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 valuation allowance 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.
Assessment of investment portfolio credit losses
Each quarter, we evaluate current expected credit losses (CECL) for fixed maturity securities classified as held to maturity and
expected credit losses (ECL) for fixed maturity securities classified as available for sale. Because our investment portfolio is the
largest component of consolidated assets, CECL and ECL could be material to our financial condition and results of operations.
Refer to Notes 1 e) and 3 to the Consolidated Financial Statements for more information.
Deferred income taxes
At December 31, 2020, our net deferred tax liability was $892 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.
45
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, 2020, the valuation allowance of $83 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 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. 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.
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.
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.
Determination of 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 performance of the GMDB 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, 2020, management determined
that no change to the benefit ratio was warranted.
46
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 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
liability of $17 million and $13 million at December 31, 2020 and 2019, 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 of December
31, 2020, 93 percent of the policies we reinsure reached the end of their “waiting periods”.
Collateral
Chubb maintains collateral, including letters of credit (LOC), 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. Refer to "Credit Facilities" for a discussion of the LOC related to our
variable annuity program.
Goodwill impairment assessment
Goodwill, which represents the excess of acquisition cost over the estimated fair value of net assets acquired, was $15.4 billion
and $15.3 billion at December 31, 2020 and 2019, respectively. 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 2020, we determined no impairment was required and none of our reporting units was at risk for
impairment.
47
Consolidated Operating Results – Years Ended December 31, 2020, 2019, and 2018
(in millions of U.S. dollars, except for percentages)
Net premiums written
Net premiums written - constant dollars (1)
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
Net income
NM – not meaningful
2020 vs.
2019
% Change
2019 vs.
2018
2020
2019
2018
$ 33,820 $ 32,275 $ 30,579
33,117
31,290
30,064
3,375
3,426
3,305
(498)
(530)
(652)
35,994
21,710
784
6,547
2,979
516
34,186
18,730
740
6,153
3,030
552
(994)
(596)
290
—
305
23
32,717
18,067
590
5,912
2,886
641
(434)
339
59
31,832
28,937
28,060
4,162
629
5,249
795
4,657
695
4.8 %
5.5 %
5.8 %
(1.5) %
(6.1) %
5.3 %
15.9 %
5.9 %
6.4 %
(1.7) %
(6.4) %
66.8 %
(4.9) %
NM
10.0 %
(20.7) %
(20.8) %
$
3,533 $
4,454 $
3,962
(20.7) %
5.5 %
7.0 %
4.1 %
3.6 %
(18.8) %
4.5 %
3.7 %
25.5 %
4.1 %
5.0 %
(13.9) %
37.2 %
(10.2) %
(61.7) %
3.1 %
12.7 %
14.3 %
12.4 %
(1)
On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency exchange rates as the comparable current period.
48
Net Premiums Written
(in millions of U.S. dollars, except for percentages)
Commercial casualty
Workers' compensation
Professional liability
Surety
Commercial multiple peril (1)
Property and other short-tail lines
% Change
2020 vs.
2019
2019 vs.
2018
C$ 2020 vs.
2019
2020
2019
2018
$
6,177 $
5,654 $
5,204
2,015
4,201
531
1,047
5,231
2,098
3,697
639
983
2,094
3,527
635
910
9.2 %
(4.0) %
13.6 %
(16.9) %
6.6 %
8.7 %
0.1 %
4.8 %
0.6 %
8.0 %
4,468
4,016
17.1 %
11.3 %
9.3 %
(4.0) %
14.0 %
(14.5) %
6.6 %
18.3 %
10.0 %
Total Commercial P&C
19,202
17,539
16,386
9.5 %
7.0 %
Agriculture
Personal automobile
Personal homeowners
Personal other
Total Personal lines
Total Property and Casualty lines
Global A&H lines (2)
Reinsurance lines
Life
Total consolidated
1,846
1,810
1,577
2.0 %
14.8 %
2.0 %
1,550
3,627
1,656
6,833
1,786
3,513
1,514
6,813
1,695
3,391
1,508
6,594
27,881
26,162
24,557
(13.2) %
3.2 %
9.4 %
0.3 %
6.6 %
3,859
731
1,349
4,315
649
1,149
4,277
(10.6) %
671
1,074
12.6 %
17.4 %
4.8 %
$ 33,820 $ 32,275 $ 30,579
5.4 %
3.6 %
0.3 %
3.3 %
6.5 %
0.9 %
(3.2) %
7.0 %
5.5 %
(10.0) %
3.5 %
9.8 %
1.5 %
7.2 %
(9.7) %
12.1 %
18.4 %
5.5 %
(1)
(2)
Commercial multiple peril represents retail package business (property and general liability).
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 2020 principally reflects positive growth in commercial P&C lines globally, partially
offset by negative growth in consumer P&C lines primarily from outside North America. The increase in net premiums written
principally reflected new business, positive rate increases and higher renewal retention. This growth was tempered by the
adverse impact of the economic contraction resulting from the COVID-19 pandemic, principally in consumer P&C lines.
•
The growth in commercial casualty was due to new business, positive rate increases and growth in North America, Asia and
Europe, partially offset by the adverse impact of the COVID-19 pandemic, including $58 million of exposure adjustments on
in-force policies which depressed growth by 1.1 percentage points.
• Workers' compensation was adversely impacted by market conditions and by the adverse impact of the economic
contraction resulting from the COVID-19 pandemic. The decrease included $121 million of exposure adjustments on in-
force policies which depressed growth by 5.8 percentage points.
•
•
•
•
•
The increase in professional liability was due to new business and positive rate increases primarily in North America, Asia
and Europe.
Surety decreased in North America and Latin America due to market conditions and the adverse impact of the economic
contraction resulting from the COVID-19 pandemic.
Commercial multiple peril increased due to strong renewal retention and positive rate increases in North America. The
increase was partially offset by the adverse impact of the economic contraction resulting from the COVID-19 pandemic.
Property and other short-tail lines increased due to new business and positive rate increases primarily in North America and
Europe.
Personal lines increased primarily due to positive rate increases and strong renewal retention in homeowners business in
North America, as well as growth in Europe. In addition, North America benefited from the favorable year-over-year impact
of reinstatement premiums. The increase was partially offset by the impact of the COVID-19 pandemic, which caused
declines in automobile business in Latin America and North America.
• Global A&H lines decreased in all regions, principally from less travel volume due to the COVID-19 pandemic.
•
The increase in Life was primarily driven by growth in Latin America, principally driven by our expanded presence in Chile,
and in the Asian international life operations.
For additional information on net premiums written, refer to the segment results discussions.
49
Net Premiums Earned
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 $1.8 billion, or $2.0 billion on a constant-dollar basis in 2020, comprising 8.9 percent positive growth in commercial
P&C lines and 2.5 percent positive growth in consumer lines on a constant-dollar basis.
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.
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 losses and
affects a significant number of insureds. For events outside of the U.S. and Canada, we generally use a similar definition. We
also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. 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.
North
America
Commercial
P&C
Insurance
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Total
excluding
RIPs
RIPs
collected
(expensed)
Total
including
RIPs
Catastrophe Loss Charge by Event For Full Year 2020
$
925 $
— $
— $ 421 $
10 $
24 $ 1,380 $
(16) $ 1,396
429
132
295
61
111
3
37
—
7
191
162
2
6
38
—
2
1
25
1
—
—
8
—
—
79
9
5
17
67
—
66
26
86
11
1
—
15
1
—
(1)
—
—
—
—
—
—
—
—
727
531
230
130
91
84
66
34
$ 1,868 $
533 $
35 $ 690 $
123 $
24 $ 3,273
(3)
(1)
(1)
(15)
10
$ 1,871 $
534 $
36 $ 705 $
113 $
—
24
7
720
534
230
130
89
84
66
34
(3)
—
—
2
—
—
—
(10)
$ 3,283
506
$ 2,777
(in millions of U.S. dollars)
Net losses
COVID-19
U.S. hurricanes/tropical
storms
U.S. flooding, hail,
tornadoes, and wind events
U.S. wildfires
Civil unrest
International weather-related
events
Midwest derecho
Australia storms
Other
Total
RIPs collected (expensed)
Total before income tax
Income tax benefit
Total after income tax
50
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 For Full Year 2019
(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
Other
Total
$
220 $ 202 $
7 $ — $
9 $
438 $
— $
55
74
26
11
—
—
1
34
145
110
30
45
—
—
2
9
—
1
—
—
—
—
—
—
—
6
10
—
20
33
30
53
2
2
8
—
17
—
—
13
202
193
74
56
37
33
33
109
$
421 $ 543 $
8 $ 152 $
51 $
1,175
RIPs collected (expensed)
—
(11)
—
(4)
Total before income tax
$
421 $ 554 $
8 $ 156 $
3
48
Income tax benefit
Total after income tax
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 For Full Year 2018
$
187 $
16 $
6 $
6 $
85 $
300 $
15 $
285
(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
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
RIPs collected (expensed)
—
(26)
—
—
Total before income tax
$
579 $ 637 $
21 $ 206 $
22
183
Income tax benefit
Total after income tax
(1)
This grouping comprised of 34 separate events, principally impacting the southern and northeastern regions of the U.S.
438
213
193
73
56
36
37
33
108
(11)
—
1
—
1
(4)
—
1
(12)
$
1,187
221
966
$
332
165
195
173
125
73
211
67
—
—
(23)
1
—
—
2
1
(4)
$
1,626
272
$
1,354
51
Prior Period Development
(in millions of U.S. dollars)
Favorable prior period development
2020
2019
$
395 $
792 $
2018
896
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 2020 was $395 million, which included adverse development
of $259 million for U.S. child molestation claims, predominately reviver statute-related, and $106 million adverse development
related to legacy asbestos and environmental liabilities. The remaining favorable development of $760 million principally
comprises 89 percent long-tail lines, principally from accident years 2016 and prior, and 11 percent short-tail lines.
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.
Refer to the Prior Period Development section in Note 7 to the Consolidated Financial Statements for additional information.
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
CAY loss ratio excluding catastrophe losses
Catastrophe losses
Favorable prior period development
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
P&C Combined ratio
2020
2019
2018
59.2 %
10.6 %
(1.3) %
68.5 %
18.9 %
8.7 %
96.1 %
60.8 %
4.1 %
(2.8) %
62.1 %
19.1 %
9.4 %
90.6 %
59.6 %
5.8 %
(3.3) %
62.1 %
19.2 %
9.3 %
90.6 %
The loss and loss expense ratio increased 6.4 percentage points in 2020 principally due to higher catastrophe losses and lower
favorable prior period development.
The CAY loss ratio excluding catastrophe losses decreased 1.6 percentage points in 2020 principally due to a decrease in the
underlying loss ratio reflecting earned rate increases exceeding loss cost trends, better underlying claims experience, and a more
average crop loss year in 2020.
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. The policy acquisition cost ratio decreased 0.2 percentage points in 2020
due to a change in the mix of business, including less premiums earned from A&H lines that have a lower acquisition cost ratio,
reflecting the impact of the COVID-19 pandemic.
The administrative expense ratio decreased 0.7 percentage points in 2020 primarily due to lower business expenses from
continued expense management control, including during the COVID-19 pandemic, lower employee benefit-related expenses
and the favorable impact of higher net premiums earned.
52
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 $784 million, $740 million and $590 million in 2020, 2019 and 2018, respectively, which included
separate account liabilities (gains) losses of $58 million, $44 million and $(38) 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 $726 million in 2020 compared with $696 million, principally from new
business from our expanded presence in Chile and growth in Asia.
Refer to the respective sections that follow for a discussion of Net investment income, Other (income) expense, Net realized
gains (losses), Amortization of purchased intangibles, and Income tax expense.
Segment Operating Results – Years Ended December 31, 2020, 2019, and 2018
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) and
accident & health (A&H) 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)
2020
2019
2018
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:
CAY loss ratio excluding catastrophe losses
Catastrophe losses
Prior period development
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
2020 vs.
2019
8.2 %
8.1 %
23.4 %
6.1 %
(2.2) %
$ 14,474
$ 13,375
$ 12,485
13,964
12,922
12,402
10,129
8,206
8,000
1,942
1,831
1,829
1,006
1,028
966
887
1,857
1,607
(52.2) %
2,061
2,109
2,061
23
24
3
(2.3) %
(4.2) %
$ 2,925
$ 3,942
$ 3,665
(25.8) %
% Change
2019 vs.
2018
7.1 %
4.2 %
2.6 %
0.2 %
6.4 %
15.5 %
2.3 %
NM
7.5 %
64.2 %
13.4 %
(5.1) %
72.5 %
14.0 %
7.2 %
65.3 %
64.9 % (1.1)
pts 0.4
3.3 %
(5.1) %
63.5 %
14.2 %
7.9 %
4.7 % 10.1
pts (1.4)
(5.1) % —
pts —
64.5 % 9.0
pts (1.0)
14.7 % (0.2)
pts (0.5)
7.8 % (0.7)
pts 0.1
93.7 %
85.6 %
87.0 % 8.1
pts (1.4)
pts
pts
pts
pt
pts
pts
pts
53
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2020
2019
$ 1,868 $
421 $
$
702 $
649 $
2018
579
610
Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for
detail on prior period development.
Premiums
Net premiums written increased $1,099 million, or 8.2 percent in 2020, comprising positive growth of 9.6 percent in
commercial P&C lines and negative growth of 13.8 percent in consumer lines. The growth in commercial P&C lines reflects
positive rate increases, strong renewal retention and new business written across a number of retail and wholesale lines,
including property, financial lines, excess casualty, large risk casualty, and commercial multiple peril. Net premiums written in
2020 was depressed by economic contraction resulting from the COVID-19 pandemic including $160 million of exposure
adjustments on in-force policies, and lower renewal exposures and new business market limitations that impacted several lines
of business, including A&H, surety, entertainment, hospitality, retail, and construction.
Net premiums earned increased $1,042 million, or 8.1 percent in 2020, due to the growth in net premiums written described
above. The increase in net premiums earned was adversely impacted by the COVID-19 pandemic, including $154 million of
exposure adjustments on in-force policies in 2020.
Combined Ratio
The loss and loss expense ratio increased 9.0 percentage points in 2020 due principally to higher catastrophe losses, including
losses related to COVID-19 pandemic claims. The CAY loss ratio excluding catastrophe losses decreased 1.1 percentage points
in 2020 primarily due to margin improvements coming from earned rate exceeding loss cost trends.
The administrative expense ratio decreased 0.7 percentage points in 2020 primarily due to lower business expenses from
continued expense management control, including during the COVID-19 pandemic, lower employee benefit-related expenses,
and the favorable impact of higher net premiums earned.
54
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)
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
Loss and loss expense ratio:
2020
2019
2018
$ 4,920
$ 4,787
$ 4,674
4,866
4,694
4,593
3,187
3,043
3,229
974
948
939
270
286
269
435
417
156
260
258
236
5
11
3
12
1
13
$ 679
$ 660
$ 378
2020 vs.
2019
2.8 %
3.7 %
4.7 %
2.7 %
(5.4) %
4.6 %
0.5 %
% Change
2019 vs.
2018
2.4 %
2.2 %
(5.8) %
1.0 %
6.0 %
167.2 %
9.2 %
75.8 %
117.1 %
(5.0) %
2.8 %
(11.1) %
74.7 %
CAY loss ratio excluding catastrophe losses
53.1 %
55.1 %
55.8 % (2.0)
pts (0.7)
Catastrophe losses
Prior period development
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
11.0 %
11.6 %
13.6 % (0.6)
pts (2.0)
1.4 %
(1.9) %
0.9 % 3.3
pts (2.8)
65.5 %
64.8 %
70.3 % 0.7
pts (5.5)
20.0 %
20.2 %
20.4 % (0.2)
pts (0.2)
5.6 %
6.1 %
5.9 % (0.5)
pts 0.2
91.1 %
91.1 %
96.6 % —
pts (5.5)
pts
pts
pts
pts
pts
pts
pts
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable (unfavorable) prior period development
2020
2019
2018
533 $
543 $
611
(63) $
95 $
(41)
$
$
Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for
detail on prior period development.
Premiums
Net premiums written increased $133 million, or 2.8 percent for 2020, primarily due to rate increases and strong account
retention across most lines. In addition, net premiums written also increased due to the favorable year-over-year impact of
reinstatement premiums of $24 million. Growth was partially offset by $29 million in lower automobile premiums as a result of
reduced exposures related to the conditions caused by the COVID-19 pandemic.
Net premiums earned increased $172 million, or 3.7 percent for 2020, reflecting the growth in net premiums written described
above.
55
Combined Ratio
The loss and loss expense ratio increased 0.7 percentage points in 2020, primarily due to unfavorable prior period development
in the current year compared to favorable prior period development in the prior year. The CAY loss ratio excluding catastrophe
losses decreased 2.0 percentage points in 2020 due to better underlying claims experience reflecting indirect COVID-19
benefits and lower than expected claims frequency of weather and water losses in our homeowners line.
The administrative expense ratio decreased 0.5 percentage points in 2020 primarily due to lower employee benefit-related
expenses and lower business expenses from continued expense management control, including during the COVID-19 pandemic,
partially offset by normal inflationary increases.
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)
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
Loss and loss expense ratio:
2020
2019
2018
$ 1,846
$ 1,810
$ 1,577
1,822
1,795
1,569
1,544
1,616
1,114
123
9
146
30
1
27
$ 148
$
84
6
89
30
1
28
90
79
(9)
385
28
2
28
$ 383
2020 vs.
2019
% Change
2019 vs.
2018
2.0 %
1.5 %
(4.5) %
45.7 %
67.2 %
65.3 %
—
—
(2.1) %
65.1 %
14.8 %
14.4 %
45.1 %
6.8 %
NM
(77.0) %
5.0 %
(33.6) %
(2.0) %
(76.6) %
CAY loss ratio excluding catastrophe losses
83.7 %
93.5 %
76.7 %
(9.8)
pts 16.8
Catastrophe losses
Prior period development
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
2.0 %
0.5 %
1.3 % 1.5
pts
(0.8)
(1.0) %
(3.9) %
(7.0) % 2.9
pts 3.1
84.7 %
90.1 %
71.0 %
(5.4)
pts 19.1
6.8 %
0.5 %
4.7 %
0.3 %
5.0 % 2.1
pts
(0.3)
(0.5) % 0.2
pts 0.8
92.0 %
95.1 %
75.5 %
(3.1)
pts 19.6
pts
pts
pts
pts
pts
pts
pts
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2020
2019
2018
$
$
35 $
8 $
21
10 $
80 $
110
Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for
detail on prior period development.
56
For 2020, prior period development included $19 million of favorable incurred losses, partially offset by $6 million of higher
acquisition costs due to lower than expected MPCI losses for the 2019 crop year and a $3 million decrease in net premiums
earned related to the MPCI profit and loss calculation formula. For 2019, prior period development 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.
Premiums
Net premiums written increased $36 million, or 2.0 percent in 2020, primarily due to growth in our Chubb Agribusiness unit,
principally farm and specialty P&C, partly offset by a decrease in MPCI premiums. Net premiums earned increased $27 million,
or 1.5 percent in 2020 reflecting the growth in net premiums written described above.
Combined Ratio
The loss and loss expense ratio decreased 5.4 percentage points in 2020, reflecting a more average crop loss year in 2020. In
addition, the current year had lower underlying losses in our Chubb Agribusiness unit, partially offset by lower favorable prior
period development. The CAY loss ratio excluding catastrophe losses decreased 9.8 percentage points in 2020 reflecting the
factors described above.
The policy acquisition cost ratio increased 2.1 percentage points in 2020, primarily due to higher agent profit sharing
commission in the current year as a result of higher underwriting margin.
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)
2020
2019
2018
Net premiums written
Net premiums written - constant dollars
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
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses
Catastrophe losses
Prior period development
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
$ 9,335
$ 9,262
$ 8,902
9,285
8,882
8,612
5,255
4,606
4,429
2,568
2,501
2,346
1,034
1,033
1,014
428
534
13
45
742
588
12
45
823
622
3
41
2020 vs.
2019
0.8 %
2.9 %
4.5 %
14.1 %
2.7 %
0.1 %
(42.4) %
(9.2) %
4.5 %
—
% Change
2019 vs.
2018
4.0 %
8.4 %
3.1 %
4.0 %
6.6 %
1.9 %
(9.8) %
(5.3) %
NM
8.3 %
(9.2) %
$ 904
$ 1,273
$ 1,401
(29.0) %
50.7 %
51.2 %
51.5 % (0.5)
7.5 %
1.8 %
2.4 %
5.7
(1.6) %
(1.1) %
(2.5) % (0.5)
56.6 %
51.9 %
51.4 %
4.7
27.7 %
28.1 %
27.2 % (0.4)
11.1 %
11.6 %
11.8 % (0.5)
95.4 %
91.6 %
90.4 %
3.8
pts
pts
pts
pts
pts
pts
pts
(0.3)
(0.6)
1.4
0.5
0.9
(0.2)
1.2
pts
pts
pts
pts
pts
pts
pts
57
Catastrophe Losses and Prior Period Development
(in millions of U.S. dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2020
2019
2018
$
$
690 $
152 $
150 $
92 $
206
212
Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for
detail on prior period development.
Net Premiums Written by Region
(in millions of U.S. dollars, except for percentages)
Region
Europe
Latin America
Asia
Other (1)
Net premiums written
2020
2019
2018
C$
2019
2020 vs.
2019
2020 vs.
2019
2019 vs.
2018
% Change
C$
$ 4,099
$ 3,631
$ 3,508
$ 3,655
12.9 %
12.1 %
1,928
2,277
2,181
2,965
3,021
2,884
343
333
329
2,066
3,022
329
$ 9,335
$ 9,262
$ 8,902
$ 9,072
(15.3) %
(1.9) %
3.2 %
0.8 %
(6.7) %
(1.9) %
4.2 %
2.9 %
3.5 %
4.4 %
4.7 %
1.1 %
4.0 %
Region
Europe
Latin America
Asia
Other (1)
Net premiums written
2020
% of Total
2019
% of Total
2018
% of Total
43 %
21 %
32 %
4 %
38 %
25 %
33 %
4 %
39 %
25 %
32 %
4 %
100 %
100 %
100 %
(1)
Comprises Combined International, Eurasia and Africa region, and other international.
Premiums
Net premiums written increased $73 million in 2020, or $263 million on a constant-dollar basis, reflecting growth in
commercial P&C lines of 10.8 percent across all regions resulting from new business, retention, and positive rate increases,
partially offset by a decline in consumer lines of 6.4 percent. Net premiums written in 2020 were depressed by economic
contraction resulting from the COVID-19 pandemic including $24 million of exposure adjustments on in-force policies, and
lower premiums in several lines, mainly in consumer lines in Latin America, primarily automobile, and A&H in Asia, resulting
from less travel volume and lower exposures.
Net premiums earned increased $403 million in 2020, or $575 million on a constant-dollar basis, reflecting the increase in net
premiums written as described above and in 2019.
Combined Ratio
The loss and loss expense ratio increased 4.7 percentage points in 2020 due to higher catastrophe losses, primarily related to
the COVID-19 pandemic. The CAY loss ratio excluding catastrophe losses decreased 0.5 percentage points in 2020 primarily
due to a decrease in the underlying loss ratio from earned rate changes modestly above loss cost trends and a benefit from lower
current accident year losses resulting from a decrease in exposures due to the COVID-19 pandemic, partially offset by lower
premiums earned from A&H lines in Latin America and Asia, which have a lower loss ratio.
The policy acquisition cost ratio decreased 0.4 percentage points in 2020 primarily due to a change in the mix of business,
including less premiums earned from A&H lines that have a lower acquisition cost ratio, reflecting the impact of the COVID-19
pandemic.
The administrative expense ratio decreased 0.5 percentage points in 2020 primarily due to lower business expenses from
continued expense management control, including during the COVID-19 pandemic, and the favorable impact of higher net
premiums earned in the current year.
58
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)
2020
2019
2018
Net premiums written
Net premiums written - constant dollars
Net premiums earned
Losses and loss expenses
Policy acquisition costs
Administrative expenses
Underwriting income (loss)
Net investment income
Other (income) expense
Segment income
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses
Catastrophe losses
Prior period development
Loss and loss expense ratio
Policy acquisition cost ratio
Administrative expense ratio
Combined ratio
NM – not meaningful
$ 731
$ 649
$ 671
698
435
174
37
52
307
2
654
352
169
35
98
279
1
670
479
162
41
(12)
289
—
$ 357
$ 376
$ 277
2020 vs.
2019
12.6 %
12.1 %
6.7 %
23.5 %
3.0 %
5.2 %
(46.8) %
10.1 %
NM
(5.0) %
% Change
2019 vs.
2018
(3.2) %
(1.7) %
(2.3) %
(26.5) %
4.2 %
(12.7) %
NM
(3.7) %
NM
35.7 %
49.1 %
17.0 %
50.6 %
50.5 % (1.5)
pts 0.1
7.6 %
29.2 % 9.4
pts (21.6)
(3.8) %
(4.3) %
(8.1) % 0.5
pts 3.8
62.3 %
24.9 %
53.9 %
71.6 %
8.4
25.7 %
24.2 % (0.8)
5.3 %
5.4 %
6.0 % (0.1)
92.5 %
85.0 %
101.8 %
7.5
pts
pts
pts
pts
(17.7)
1.5
(0.6)
(16.8)
pts
pts
pts
pts
pts
pts
pts
Catastrophe Losses and Prior Period Development
(in millions of U.S dollars)
Catastrophe losses (excludes reinstatement premiums)
Favorable prior period development
2020
2019
2018
$
$
123 $
51 $
205
29 $
29 $
50
Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for
detail on prior period development.
Premiums
Net premiums written increased $82 million in 2020 primarily from new business in casualty lines, rate increases in property
catastrophe lines and favorable premium adjustments. Net premiums earned increased $44 million in 2020 reflecting the
increase in net premiums written described above.
Combined Ratio
The loss and loss expense ratio increased 8.4 percentage points in 2020 primarily due to higher catastrophe losses.
The CAY loss ratio excluding catastrophe losses decreased 1.5 percentage points in 2020 primarily from a shift in mix of
business towards catastrophe lines which have a lower loss ratio.
The policy acquisition cost ratio decreased 0.8 percentage points in 2020 primarily due to a shift in mix of business towards
lines which have lower acquisition costs and favorable expense adjustments on prior period development.
59
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. We assess the performance of our life business
based on Life Insurance underwriting income, which includes Net investment income and (Gains) losses from fair value changes
in separate account assets that do not qualify for separate account reporting under GAAP.
(in millions of U.S. dollars, except for percentages)
Net premiums written
Net premiums written - constant dollars
Net premiums earned
Losses and loss expenses
Policy benefits
Policy acquisition costs
Administrative expenses
Net investment income
Life Insurance underwriting income
Other (income) expense
Amortization of purchased intangibles
Segment income
NM – not meaningful
% Change
2020 vs.
2019
2019 vs.
2018
2020
2019
2018
$ 2,514 $ 2,392 $ 2,270
2,482
2,343
2,218
724
726
766
320
385
331
757
696
620
323
373
320
766
628
557
310
341
298
5.1 %
5.6 %
5.9 %
(4.4) %
4.3 %
23.6 %
(1.0) %
3.3 %
3.6 %
(74)
(48)
(12)
53.1 %
4
2
2
100.0 %
$
401 $
366 $
308
9.8 %
18.6 %
5.3 %
6.4 %
5.6 %
(1.1) %
10.8 %
11.2 %
4.5 %
9.2 %
6.9 %
NM
—
Premiums
Net premiums written increased $122 million in 2020, or $134 million on a constant-dollar basis, primarily reflecting growth in
our international life operations of 23.4 percent, principally driven by our expanded presence in Chile and growth in Asia,
partially offset by a decline in our North America Combined Insurance business of 6.1 percent.
Deposits
The following table presents deposits collected on universal life and investment contracts:
(in millions of U.S. dollars, except for percentages)
2020
2019
2018
% Change
2020 vs.
2019
C$ 2020
vs. 2019
2019 vs.
2018
Deposits collected on universal life and investment
contracts
$ 1,559 $ 1,463 $ 1,538
6.5 %
3.7 %
(4.9) %
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 increased $96 million, or $56 million on a constant-dollar basis, in 2020, due to growth in Taiwan that more
than offset the declines in other Asian markets, principally Hong Kong and Korea, as a result of competitive market conditions
and the impact of the COVID-19 pandemic.
Life Insurance underwriting income and Segment income
Life Insurance underwriting income increased $11 million in 2020, primarily due to a favorable reserve development in the
current year which more than offset COVID-19 related losses of $24 million. Segment income increased $35 million primarily
due to higher life insurance underwriting income and $26 million of higher other income, principally due to our share of net
income from our investment in Huatai Life, our partially-owned life insurance entity in China.
60
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.
(in millions of U.S. dollars, except for percentages)
2020
2019
2018
Losses and loss expenses
Administrative expenses
Underwriting loss
Net investment income (loss)
Interest expense
Net realized gains (losses)
Other (income) expense
Amortization of purchased intangibles
Chubb integration expenses
Income tax expense
Net loss
NM – not meaningful
(87)
(125)
(209)
(30.8) %
(40.5) %
$
435 $
158 $
303
738
319
477
53
295
348
516
(499)
(791)
203
—
629
552
(522)
(459)
218
23
795
641
(649)
(406)
255
59
695
$
(1,881) $
(2,253) $
(2,450)
(16.5) %
% Change
2020 vs.
2019
2019 vs.
2018
176.4 %
203.0 %
(5.0) %
54.8 %
8.1 %
36.6 %
(6.4) %
(4.6) %
(13.9) %
(19.7) %
72.7 %
12.6 %
(6.9) %
(14.3) %
NM
(61.7) %
(20.8) %
14.4 %
(8.1) %
Losses and loss expenses 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. Losses and loss expenses in 2020 included unfavorable prior period development of $254 million
for U.S. child molestation claims, predominantly reviver statute-related. Refer to Note 7 of the Consolidated Financial
Statements for further information.
Administrative expenses decreased $16 million in 2020, primarily due to lower employee benefit-related expenses, and lower
travel-related costs relating to the COVID-19 pandemic.
Refer to the respective sections that follow for a discussion of Net realized gains (losses), Net investment income, Other
(income) expense, Amortization of purchased intangibles, and Income tax expense.
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, net of
valuation allowance.
The effect of market movements on our fixed maturities portfolio impacts Net income (through Net realized gains (losses)) when
securities are sold, when we write down an asset, or when we record a change to the valuation allowance for expected credit
losses. For a further discussion related to how we assess the valuation allowance for expected credit losses and the related
impact on Net income, refer to Note 1 e) to the Consolidated Financial Statements. Additionally, Net income is impacted
through the reporting of changes in the fair value of equity securities, private equity funds 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 in Shareholders’ equity in the Consolidated balance sheets.
61
The following table presents our net realized and unrealized gains (losses):
(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
Total investment portfolio
Variable annuity reinsurance derivative
transactions, net of applicable hedges
Other derivatives
Foreign exchange
Other (1)
Net gains (losses), pre-tax
Year Ended December 31
Net
Realized
Gains
(Losses)
Net
Unrealized
Gains
(Losses)
2020
Net
Impact
Net
Realized
Gains
(Losses)
Net
Unrealized
Gains
(Losses)
2019
Net
Impact
2018
Net
Realized
Gains
(Losses)
$
(281) $ 2,604 $ 2,323 $
(31) $ 3,738 $ 3,707 $
(302)
81
455
131
—
(32)
—
—
—
—
—
81
(435)
—
(435)
(75)
455
131
58
46
—
(5)
(32)
(15)
—
—
—
—
58
46
70
(129)
(5)
121
(15)
(126)
354
2,604
2,958
(382)
3,738
3,356
(441)
(310)
1
—
—
(310)
(142)
1
(8)
(483)
306
(177)
7
—
—
13
(142)
(252)
(8)
20
(3)
131
(87)
(60)
(244)
(304)
(5)
(79)
(84)
$
(498) $ 2,666 $ 2,168 $
(530) $ 3,672 $ 3,142 $
(652)
(1) Net unrealized gains (losses) includes our postretirement programs of $(232) million, $(76) million, and $(321) million for the years ended December 31, 2020, 2019,
and 2018, respectively.
The $2,958 million gain in our investment portfolio was principally a result of narrowing of credit spreads in our corporate bond
portfolio and a decline in interest rates, partially offset by $170 million of impairments for securities we intended to sell, and
securities written to market entering default.
The realized losses relating to the variable annuity reinsurance derivative transactions in 2020 and 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, partially offset by higher global equity markets. Included in the realized loss are derivative instruments that decrease in
fair value when the S&P 500 index increases. During the years ended December 31, 2020 and 2019, we experienced realized
losses of $108 million and $138 million respectively, related to these derivative instruments.
Effective income tax rate
Our effective income tax rate was 15.1 percent in both 2020 and 2019 and 14.9 percent in 2018. Our effective income tax
rate reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between U.S. GAAP
and local tax laws, and the impact of discrete items. A change in the geographic mix of earnings could impact our effective tax
rate. The effective income tax rate in 2020 was impacted by the higher level of catastrophe losses, principally COVID-19, and
lower realized losses compared to the prior year.
The 2017 Tax Cuts and Jobs Act (2017 Tax Act) included provisions for Global Intangible Low-Taxed Income (GILTI) under
which taxes may be imposed on income of U.S.-owned foreign subsidiaries and for a Base Erosion and Anti-Abuse Tax (BEAT)
under which our U.S. companies could be subject to additional tax as a result, among other things, of certain payments to
affiliated non-U.S. 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.
62
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).
Book value per common share, is shareholders’ equity divided by the shares outstanding. 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. The calculation of tangible book value per share does not
consider the embedded goodwill attributable to our investments in partially-owned insurance companies until we attain majority
ownership and consolidate.
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.
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.
P&C combined ratio is the sum of the loss and loss expense ratio, policy 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.
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:
63
For the Year Ended
December 31, 2020
(in millions of U.S. dollars except for ratios)
Numerator
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
Losses and loss expenses
A $ 10,129
$ 3,187
$ 1,544
$ 5,255
$
435
$
435 $ 20,985
Catastrophe losses and related adjustments
Catastrophe losses, net of related adjustments
(1,871)
(534)
(36)
(705)
(113)
Reinstatement premiums collected (expensed) on
catastrophe losses
(3)
(1)
Catastrophe losses, gross of related adjustments
(1,868)
(533)
(1)
(35)
(15)
(690)
10
(123)
—
—
—
(3,259)
(10)
(3,249)
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)
702
(63)
10
150
29
(433)
395
32
(1)
—
733
—
—
(18)
(81)
3
6
—
19
—
—
—
—
(2)
(1)
—
—
—
35
3
(19)
150
26
(433)
414
CAY loss and loss expense ex CATs
B $ 8,994
$ 2,573
$ 1,528
$ 4,715
$
338
$
2 $ 18,150
Policy acquisition costs and administrative
expenses
Policy acquisition costs and administrative
expenses
C $ 2,948
$ 1,244
$
132
$ 3,602
$
211
$
303 $ 8,440
Expense adjustments - favorable (unfavorable)
1
—
(6)
—
2
—
(3)
Policy acquisition costs and administrative expenses,
adjusted
D $ 2,949
$ 1,244
$
126
$ 3,602
$
213
$
303 $ 8,437
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 $ 13,964
$ 4,866
$ 1,822
$ 9,285
$
698
$ 30,635
3
32
—
1
—
(18)
1
3
—
15
—
—
(10)
—
(1)
10
35
(19)
Net premiums earned excluding adjustments
F $ 13,999
$ 4,849
$ 1,826
$ 9,300
$
687
$ 30,661
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
P&C Combined ratio
72.5 %
65.5 %
84.7 %
56.6 %
62.3 %
21.2 %
25.6 %
7.3 %
38.8 %
30.2 %
93.7 %
91.1 %
92.0 %
95.4 %
92.5 %
64.2 %
53.1 %
83.7 %
50.7 %
49.1 %
21.1 %
85.3 %
25.6 %
78.7 %
6.8 %
38.7 %
90.5 %
89.4 %
31.0 %
80.1 %
68.5 %
27.6 %
96.1 %
59.2 %
27.5 %
86.7 %
96.1 %
—
96.1 %
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.
64
For the Year Ended
December 31, 2019
(in millions of U.S. dollars except for ratios)
Numerator
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
Losses and loss expenses
A $ 8,206
$ 3,043
$ 1,616
$ 4,606
$
352
$
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
—
(421)
(11)
(543)
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)
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
$
205
$
319 $ 8,257
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 $ 12,922
$ 4,694
$ 1,795
$ 8,882
$
654
$ 28,947
—
38
11
—
(1)
(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
A/E
63.5 %
64.8 %
90.1 %
51.9 %
53.9 %
Policy acquisition cost and administrative expense
ratio
P&C Combined ratio
CAY P&C Combined ratio ex CATs
C/E
22.1 %
26.3 %
5.0 %
39.7 %
85.6 %
91.1 %
95.1 %
91.6 %
31.1 %
85.0 %
Loss and loss expense ratio, adjusted
B/F
65.3 %
55.1 %
93.5 %
51.2 %
50.6 %
Policy acquisition cost and administrative expense
ratio, adjusted
D/F
22.1 %
26.3 %
5.6 %
39.7 %
CAY P&C Combined ratio ex CATs
87.4 %
81.4 %
99.1 %
90.9 %
31.5 %
82.1 %
Combined ratio
Combined ratio
Add: impact of gains and losses on crop derivatives
P&C Combined ratio
62.1 %
28.5 %
90.6 %
60.8 %
28.4 %
89.2 %
90.6 %
—
90.6 %
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.
65
For the Year Ended
December 31, 2018
(in millions of U.S. dollars except for ratios)
Numerator
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
Losses and loss expenses
A $ 8,000
$ 3,229
$ 1,114
$ 4,429
$
479
$
53 $ 17,304
Catastrophe losses and related adjustments
Catastrophe losses, net of related adjustments
(579)
(637)
(21)
(206)
(183)
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)
—
(206)
22
(205)
610
(41)
110
212
29
7
7
—
—
1
40
(10)
—
—
—
4
653
(40)
140
216
50
8
(1)
—
57
—
—
—
(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
$
204
$
295 $ 7,935
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
$
670
$ 27,846
—
29
7
26
—
1
—
40
—
—
—
4
(22)
8
—
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
A/E
C/E
B/F
D/F
64.5 %
70.3 %
71.0 %
51.4 %
71.6 %
22.5 %
26.3 %
4.5 %
39.0 %
30.2 %
87.0 %
96.6 %
75.5 %
90.4 %
101.8 %
64.9 %
55.8 %
76.7 %
51.5 %
50.5 %
22.4 %
26.1 %
4.9 %
39.0 %
31.1 %
81.6 %
CAY P&C Combined ratio ex CATs
87.3 %
81.9 %
81.6 %
90.5 %
Combined ratio
Combined ratio
Add: impact of gains and losses on crop derivatives
P&C Combined ratio
62.1 %
28.5 %
90.6 %
59.6 %
28.4 %
88.0 %
90.6 %
—
90.6 %
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.
66
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
2020
2019
2018
$ 109,766
$ 104,074
$ 101,453
$
3,375
$
3,426
$
3,305
3.1 %
1.7 %
3.3 %
2.7 %
3.3 %
3.7 %
(1)
Includes $116 million, $161 million and $248 million of amortization expense related to the fair value adjustment of acquired invested assets related to the Chubb Corp
acquisition in 2020, 2019 and 2018, 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 decreased 1.5 percent in 2020
compared with 2019, primarily due to lower reinvestment rates on new and reinvested assets, partially offset by higher average
invested assets, higher dividends on public equities, and an increase in income from corporate bonds called before maturity.
Refer to Note 1 e) 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
2020
2019
2018
$
714 $
449 $
298
Amortization of Purchased Intangibles and Other Amortization
Amortization expense related to purchased intangibles was $290 million, $305 million, and $339 million for the years ended
December 31, 2020, 2019, and 2018, respectively, and principally relates to the Chubb Corp acquisition. The amortization of
purchased intangibles expense in 2021 is expected to be $286 million, or approximately $72 million each quarter. Refer to
Note 6 to the Consolidated Financial Statements under Item 8 for more information.
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, 2020, the deferred tax liability associated with the Other intangible assets (excluding the fair value adjustment
on Unpaid losses and loss expenses) was $1,295 million.
The following table presents at December 31, 2020, 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)
Reduction to deferred tax
liability associated with
intangible assets
2021
2022
2023
2024
2025
Total
$
$
68
67
61
56
52
304
67
Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt
The following table presents at December 31, 2020, 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 fair value adjustment
on assumed long-term debt for the next five years:
For the Years Ending December 31
(in millions of U.S. dollars)
2021
2022
2023
2024
2025
Total
Amortization (expense) benefit of the fair value
adjustment on
Acquired invested
assets (1)
Assumed long-term
debt (2)
$
(110) $
(103)
—
—
—
$
(213) $
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.
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 4.0 years and 3.8 years at
December 31, 2020 and 2019, respectively. We estimate that a 100 basis point (bps) increase in interest rates would reduce
the valuation of our fixed income portfolio by approximately $4.3 billion at December 31, 2020.
We established credit loss valuation allowances as a result of our adoption of guidance on Financial Instruments - Credit Losses:
Measurement of Credit Losses on Financial Instruments (CECL) on January 1, 2020. The COVID-19 global pandemic and
related economic conditions adversely impacted our investment portfolio in the first half of the year. This adverse impact was
mitigated by the overall high credit quality of the portfolio and the stabilization of the valuation of securities due to measures
announced by the U.S. Federal Reserve, including programs to support corporate and asset backed securities. Overall, the
valuation allowance decreased in 2020. Refer to Notes 1 and 3 to the Consolidated Financial Statements for additional
information on expected credit losses.
68
The following table shows the fair value and cost/amortized cost, net of valuation allowance, of our invested assets:
(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, 2020
Cost/
Amortized
Cost, Net
Fair
Value
December 31, 2019
Cost/
Amortized
Cost
Fair
Value
$
90,699 $
85,168 $
85,488 $
82,580
12,510
4,345
11,653
4,349
13,005
4,291
107,554
101,170
102,784
4,027
7,945
4,027
7,945
812
6,062
12,581
4,291
99,452
812
6,062
$ 119,526 $ 113,142 $ 109,658 $ 106,326
The fair value of our total investments increased $9.9 billion during the year ended December 31, 2020, primarily due to the
investing of operating cash flow and unrealized appreciation. This increase was partially offset by the payment of $1.6 billion,
including collateralized deposits, to acquire additional ownership interest in Huatai Group, the payments of dividends on our
Common Shares, and share repurchases.
The following tables present the fair value of our fixed maturities and short-term investments at December 31, 2020 and 2019.
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)
U.S. Treasury / Agency
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
Non-U.S.
Short-term investments
Total
AAA
AA
A
BBB
BB
B
Other
Total
December 31, 2020
December 31, 2019
Fair Value
% of Total
Fair Value
% of Total
$
4,122
4 % $
4,630
38,769
20,616
11,943
27,759
4,345
36 %
34,259
19 %
21,588
11 %
12,824
26 %
25,192
4 %
4,291
5 %
33 %
21 %
12 %
25 %
4 %
$ 107,554
100 % $ 102,784
100 %
$
15,622
15 % $
15,714
36,125
19,712
17,542
9,699
8,267
587
33 %
37,504
18 %
19,236
16 %
13,650
9 %
8 %
1 %
9,474
6,897
309
15 %
37 %
19 %
13 %
9 %
7 %
—
$ 107,554
100 % $ 102,784
100 %
69
Corporate and asset-backed securities
The following table presents our 10 largest global exposures to corporate bonds by fair value at December 31, 2020:
(in millions of U.S. dollars)
Wells Fargo & Co
Bank of America Corp
JP Morgan Chase & Co
Comcast Corp
Morgan Stanley
Citigroup Inc
Verizon Communications Inc
AT&T Inc
Goldman Sachs Group Inc
HSBC Holdings Plc
Mortgage-backed securities
$
Fair Value
764
689
646
528
466
443
418
415
405
387
The following table shows the fair value and amortized cost, net of valuation allowance, of our mortgage-backed securities:
December 31, 2020
(in millions of U.S. dollars)
AAA
AA
A
BBB
BB and
below
Total
Total
Agency residential mortgage-backed (RMBS)
$
126 $ 16,886 $
— $
— $
— $ 17,012 $ 16,032
Non-agency RMBS
Commercial mortgage-backed securities
Total mortgage-backed securities
123
2,878
39
284
84
151
20
12
10
3
276
272
3,328
3,151
$ 3,127 $ 17,209 $
235 $
32 $
13 $ 20,616 $ 19,455
S&P Credit Rating
Fair
Value
Amortized
Cost, Net
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 48 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.
70
The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income
portfolio by country/sovereign for non-U.S. government securities at December 31, 2020:
(in millions of U.S. dollars)
Republic of Korea
Canada
United Kingdom
Province of Ontario
Kingdom of Thailand
United Mexican States
Province of Quebec
Federative Republic of Brazil
Commonwealth of Australia
Socialist Republic of Vietnam
Other Non-U.S. Government Securities
Total
Fair Value
Amortized Cost, Net
$
1,085 $
992
907
728
637
558
530
509
471
394
5,744
$
12,555 $
976
950
870
686
544
534
493
496
423
267
5,335
11,574
The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income
portfolio by country/sovereign for non-U.S. corporate securities at December 31, 2020:
(in millions of U.S. dollars)
Fair Value
Amortized Cost, Net
United Kingdom
Canada
United States (1)
France
Australia
Netherlands
Germany
Japan
Switzerland
China
Other Non-U.S. Corporate Securities
Total
$
2,422 $
1,834
1,240
1,183
916
634
625
602
560
459
4,729
$
15,204 $
2,274
1,723
1,172
1,109
857
593
589
576
514
435
4,460
14,302
(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.
71
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, 2020, our corporate fixed income investment portfolio included below-
investment grade and non-rated securities which, in total, comprised approximately 15 percent of our fixed income portfolio.
Our below-investment grade and non-rated portfolio includes over 1,400 issuers, with the greatest single exposure being $176
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. Fourteen 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)
2019
2020
Environmental (by account)
2019
2020
1,724
192
193
1,723
1,838
173
287
1,724
1,217
130
113
1,234
1,361
140
284
1,217
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 5.9 years and 6.3 years,
respectively. The 3-year survival ratios for gross and net Environmental loss and ALAE reserves were 4.9 years and 25.5 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 6.0 years and 5.2 years, respectively. 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.
72
Catastrophe Management
We actively monitor and manage our catastrophe risk accumulation around the world, including 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, 2020, for Worldwide, U.S. hurricane and California
earthquake events, based on our in-force portfolio at October 1, 2020 and reflecting the April 1, 2020 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 $2,725 million (or 4.6 percent of our total shareholders’
equity at December 31, 2020). 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)
Annual Aggregate
California Earthquake (3)
Single Occurrence
(in millions of U.S. dollars,
except for percentages)
Chubb
% of Total
Shareholders’
Equity
Chubb
% of Total
Shareholders’
Equity
Chubb
% of Total
Shareholders’
Equity
1-in-10
1-in-100
1-in-250
$
$
$
1,880
3,982
6,604
3.2 % $
6.7 % $
11.1 % $
1,099
2,725
4,918
1.8 % $
4.6 % $
8.3 % $
142
1,302
1,475
0.2 %
2.2 %
2.5 %
(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;
The potential effects of climate change add to modeling complexity; and
Changing climate conditions could impact our exposure to natural catastrophe risks, including U.S. hurricane. Published
studies by leading government, academic and professional organizations predict an increase in the expected annual
frequency of Atlantic-basin hurricanes and sea level rise through the end of the century over observed historical averages.
These studies contemplate expected multi-decadal impacts of climate change on sea surface temperatures, sea levels and
other factors contributing to the frequency and intensity of hurricanes. Based on preliminary stress tests conducted against
the Chubb portfolio, the impacts of climate change are not expected to materially impact our reported U.S. hurricane PML
over the next 12 months. These tests reflect current exposures only and excludes potential mitigating factors, such as
changes to building codes, public or private risk mitigation, regulation and public policy.
73
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, 2020 through March 31, 2021, with no material changes 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, 2020 through March 31, 2021 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.
Loss Location
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
Layer of Loss
$0 million –
$1.0 billion
$1.0 billion –
$1.15 billion
$1.15 billion –
$2.15 billion
$2.15 billion –
$3.5 billion
$0 million –
$175 million
$175 million –
$1.175 billion
$1.175 billion –
$2.525 billion
Comments
Notes
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.
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 Bermuda based 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, New York, Los Angeles and Washington, D.C.
74
Our political risk insurance products provide protection to commercial lenders against defaults on cross border loans, covers
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 cover their equity investments against financial losses, such as expropriatory events, inability to repatriate
dividends, and physical damage to their operations caused by covered political risk events. Our export contracts product
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.
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 such as 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 mitigate losses and to agree on recovery strategies if a
claim does materialize. We have the option to pay claims over the original loan repayment 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 insurance contracts, not financial guarantees, and
claims are only paid after conditions and warranties are fulfilled. Political risk and credit insurance policies 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 quota share and excess of loss 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
75
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 2021 SRA covers the 2021 reinsurance
year from July 1, 2020 through June 30, 2021). There were no significant changes in the terms and conditions from the 2020
SRA and therefore, the new SRA does not impact Chubb's outlook on the crop program relative to 2021.
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.
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
76
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, 2020, the
average duration of our fixed maturities (4.0 years) is less than the average expected duration of our insurance liabilities (4.7
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
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 2020, 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 $1.9 billion and $200 million from its Bermuda subsidiaries in 2020 and 2019, respectively. Chubb Limited also
received cash dividends of $110 million and non-cash dividends of $734 million from a Swiss subsidiary in 2020. There were
no dividends received in 2019.
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 2020 and 2019.
The U.S. insurance subsidiaries of Chubb INA Holdings Inc. (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 2020 and 2019. 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 $1.2 billion and $3.7 billion from its subsidiaries in 2020 and
2019, respectively. At December 31, 2020, the amount of dividends available to be paid to Chubb INA in 2021 from its
subsidiaries without prior approval of insurance regulatory authorities totals $2.7 billion.
77
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 2020, 2019, and 2018.
Operating cash flows reflect Net income for each period, adjusted for non-cash items and changes in working capital.
Operating cash flows were $9.8 billion in 2020, compared to $6.3 billion and $5.5 billion in 2019 and 2018, respectively.
Operating cash flow increased $3.5 billion in 2020 compared to 2019, principally reflecting higher premiums collected and
reduced payment activity due to the economic slowdown related to COVID-19 pandemic.
Cash used for investing was $7.5 billion in 2020, compared to $5.9 billion and $2.9 billion in 2019 and 2018, respectively.
The current year included payment, including a deposit, of $1.6 billion for the purchase of an additional 16.2 percent
ownership in Huatai Group. This compares to the prior year purchase of an additional 10.9 percent ownership interest in Huatai
Group for $580 million. Refer to Note 2 to the Consolidated Financial Statements for additional information. In addition, the
current year included higher private equity contributions, net of distributions received, of $1.1 billion.
Cash used for financing was $2.1 billion in 2020, compared to $151 million and $2.0 billion in 2019 and 2018, respectively.
Cash used for financing was higher by $1.9 billion in 2020 compared to 2019 primarily due to lower net proceeds from the
issuance of long-term debt (net of repayments) of $2.6 billion, partially offset by fewer shares repurchased in the current year.
Refer to Note 11 to the Consolidated Financial Statements for additional information on share repurchases.
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, 2020, there were $1.4 billion in repurchase
agreements outstanding with various maturities over the next eight 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.
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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
2020
December 31
2019
$
—
$
1,299
14,948
14,948
308
59,441
13,559
14,858
308
55,331
$
74,697
$
70,497
20.0 %
20.4 %
21.1 %
21.5 %
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.
On September 17, 2020, Chubb INA issued $1.0 billion of 1.375 percent senior notes due September 2030. Chubb INA's
$1.3 billion of 2.3 percent senior notes due November 2020 was paid upon maturity. 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.
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 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
$1.5 billion of Chubb Common Shares from November 19, 2020 through December 31, 2021
Subsequently, in February 2021, the Board approved an increase to the November 2020 share repurchase program of $1.0
billion to a total of $2.5 billion, effective through December 31, 2021.
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 2020, 2019, and 2018 we repurchased $516 million, $1.53 billion,
and $1.02 billion, respectively, of Common Shares in a series of open market transactions under the Board share repurchase
authorizations. On April 22, 2020, we suspended share repurchases, given the economic environment and to preserve capital
for both risk and opportunity. Subsequently we announced and then resumed share repurchases on October 29, 2020. The
$1.5 billion November 2019 authorization remained effective through December 31, 2020. Repurchases through December
31, 2020 were made under this authorization. For the period January 1 through February 24, 2021, we repurchased
1,971,000 Common Shares for a total of $327 million in a series of open market transactions under the share repurchase
program authorized in November 2020. At February 24, 2021, $2.17 billion in share repurchase authorization remained
through December 31, 2021.
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Common Shares
Our Common Shares had a par value of CHF 24.15 each at December 31, 2020.
As of December 31, 2020, there were 26,872,639 Common Shares in treasury with a weighted average cost of $135.58 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 2019 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.00
per share, which was paid in four quarterly installments of $0.75 per share at dates determined by the Board after the annual
general meeting by way of distribution from capital contribution reserves, transferred to free reserves for payment.
At our May 2020 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.12
per share, expected to be paid in four quarterly installments of $0.78 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 2021 annual general meeting, and is authorized
to abstain from distributing a dividend at its discretion. The first three quarterly installments each of $0.78 per share, have been
distributed by the Board as expected.
Dividend distributions on Common Shares amounted to CHF 2.89 ($3.09) per share for the year ended December 31, 2020.
Refer to Note 11 to the Consolidated Financial Statements for additional information on our dividends.
Contractual Obligations and Commitments
The following table presents our future payments due by period under contractual obligations at December 31, 2020:
(in millions of U.S. dollars)
Payment amounts determinable from the respective contracts
Deposit liabilities (1)
Purchase obligations (2)
Investments, including Limited Partnerships (3)
Operating leases
Repurchase agreements
Long-term debt (4)
Trust preferred securities
Interest on debt obligations (4)
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 and GLB
Total contractual obligations and commitments
Payments Due By Period
2022
2024
Total
2021
and 2023 and 2025 Thereafter
$
2,323 $
34 $
104 $
148 $ 2,037
470
240
230
3,805
1,429
1,713
550
150
1,405
1,405
219
—
—
459
106
—
—
204
75
—
14,705
309
5,925
—
—
468
1,475
2,346
10,884
—
902
—
804
309
3,751
29,492
3,726
4,643
3,863
17,260
67,851
19,587
18,599
9,439
20,226
22,006
1,034
2,183
1,653
17,136
$ 119,349 $ 24,347 $ 25,425 $ 14,955 $ 54,622
(1)
(2)
(3)
(4)
Refer to Note 1 k) to the Consolidated Financial Statements.
Primarily comprises agreements with vendors to purchase system software administration and maintenance services, and audit fees.
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.
Subject to foreign exchange fluctuations on interest expense and principal.
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The contractual obligations and commitments 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 $76 million at December 31, 2020. At December 31, 2020, we had accrued $16 million in liabilities for
income tax-related interest and penalties in our Consolidated balance sheet. Other than settlement of a liability in January
2021 for $23 million, including interest, we are unable to make a reliable estimate for the timing of cash settlement of
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.
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, 2020, 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.
Should the need arise, we generally have access to capital markets and to credit facilities with letter of credit capacity of $4.0
billion with a sub-limit of $1.9 billion for revolving credit. At December 31, 2020, our usage under these facilities was $1.7
billion in LOCs, of which $1.1 billion related to our variable annuity reinsurance program. Our access to credit under these
facilities is dependent on the ability of the banks that are a party to the facilities to meet their funding commitments. Should the
existing credit providers on these facilities 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 facilities or establishing additional facilities when needed.
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In the event we are required to provide alternative security to clients, the security 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 facilities noted above require that we maintain certain financial covenants, all of which have been met at December 31,
2020. 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, 2020, (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 $56.6 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 0.20 to 1, which is below the maximum debt to total capitalization ratio of 0.35 to 1 as
described in (ii) above.
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.
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, 2020, 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.
82
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 fixed maturities portfolio impacts Net
income (through Net realized gains (losses)) when securities are sold, when we write down an asset, or when we record a
change to the allowance for expected credit losses. 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, 2020 and 2019, our notional exposure to derivative instruments was $5.3 billion and $4.9 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, from
time to time 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.
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, 2020. Our policies to address these risks in
2020 were not materially different from 2019. 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, 2020 and 2019, 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
2020
2019
$ 107.6
$ 102.8
$
4.3
$
3.9
4.0 %
3.8 %
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.
83
The following table presents the impact at December 31, 2020 and 2019, 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
2020
2019
$ 19,365
$ 18,238
$ 1,673
$ 1,570
8.6 %
8.6 %
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 (liabilities) in non-U.S. currencies at December 31, 2020 and 2019:
(in millions of U.S. dollars, except for percentages)
Value of
net assets
(liabilities)
2020
Exchange
rate
per USD
Value of
net assets
(liabilities)
2019
Exchange
rate
per USD
2020 vs. 2019
% change in
exchange rate
per USD
$
2,853
0.1532 $
1,539
Chinese yuan renminbi (CNY)
Canadian dollar (CAD)
British pound sterling (GBP)
Australian dollar (AUD)
Mexican peso (MXN)
Korean won (KRW) (x100)
Brazilian real (BRL)
Japanese yen (JPY)
Thai baht (THB)
Euro (EUR) (1)
Other foreign currencies
Value of net assets denominated in foreign
currencies (2)
As a percentage of total net assets
2,613
2,492
1,347
877
781
747
617
565
(3,162)
3,016
$ 12,746
21.4 %
0.7858
1.3670
0.7694
0.0502
0.0920
0.1926
0.0097
0.0334
2,220
2,024
1,100
942
788
990
432
606
1.2216
(3,129)
various
2,845
$ 10,357
18.7 %
$
942
0.1436
0.7698
1.3257
0.7021
0.0528
0.0865
0.2485
0.0092
0.0337
1.1213
various
6.7 %
2.1 %
3.1 %
9.6 %
(5.0) %
6.4 %
(22.5) %
5.2 %
(0.8) %
8.9 %
NM
Pre-tax decrease to Shareholders' equity of a
hypothetical 10 percent strengthening of the USD $
1,159
NM – not meaningful
(1) Comprised Euro denominated debt of $5.2 billion, partially offset by net assets of $2.1 billion at December 31, 2020 and Euro denominated debt of $4.8 billion, partially
offset by net assets of $1.7 billion at December 31, 2019.
(2) At December 31, 2020, net assets denominated in foreign currencies comprised approximately 46 percent goodwill and other intangible assets.
84
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 realized gains (losses) and net income for GLB and both Life Insurance
underwriting income and net income for GMDB. 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.
For the GMDB reinsurance business, net income is directly impacted by changes in future policy benefit reserves. For the GLB
reinsurance business, 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 calculation is 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, 2020 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:
•
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), 15 percent
—25 percent medium-term rates (maturing between 5 years and 10 years, inclusive), and 65 percent—75 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, 2020 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 fluctuations in short-
term market movements.
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 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 FVL as “timing effect”. The unfavorable impact of timing effect on our 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 FVL in
the first quarter 2021 to various changes, it is necessary to assume an additional $5 million to $45 million increase in FVL
and realized losses. Note that both the timing effect and the quarterly run rate impact to net income change over time as
the book ages.
85
Sensitivities to equity and interest rate movements
(in millions of U.S. dollars)
Interest Rate Shock
+100 bps
Worldwide Equity Shock
+10 %
Flat
-10 %
-20 %
-30 %
-40 %
(Increase)/decrease in FVL
$ 416
$
277 $ 113
$
(81)
$ (315)
$
(603)
Increase/(decrease) in hedge value
(73)
—
73
145
218
290
Flat
Increase/(decrease) in net income
$ 343
(Increase)/decrease in FVL
$ 160
Increase/(decrease) in hedge value
Increase/(decrease) in net income
-100 bps
(Increase)/decrease in FVL
$
$
(73)
87
(111)
$
$
$
$
277 $ 186
$
64
$
(97)
— $ (188)
$ (408)
$ (672)
$
$
(313)
(995)
—
73
145
218
290
— $ (115)
$ (263)
$ (454)
$
(705)
(291) $ (501)
$ (749)
$ (1,050)
$ (1,412)
Increase/(decrease) in hedge value
(73)
—
73
145
218
290
Increase/(decrease) in net income
$
(184)
$
(291) $ (428)
$ (604)
$ (832)
$ (1,122)
Sensitivities to Other Economic Variables
(in millions of U.S. dollars)
(Increase)/decrease in FVL
Increase/(decrease) in net income
Sensitivities to Actuarial Assumptions
(in millions of U.S. dollars)
(Increase)/decrease in FVL
Increase/(decrease) in net income
(in millions of U.S. dollars)
(Increase)/decrease in FVL
Increase/(decrease) in net income
(in millions of U.S. dollars)
(Increase)/decrease in FVL
Increase/(decrease) in net income
AA-rated Credit Spreads
Interest Rate Volatility
Equity Volatility
+100 bps
-100 bps
+2 %
-2 %
+2 %
$
$
86
86
$
$
(97) $ —
$ —
(97) $ —
$ —
$
$
(13)
(13)
$
$
Mortality
+20 %
+10 %
-10 %
$
$
24
24
$
$
12
12
$
$
(12)
(12)
$
$
-2 %
13
13
-20 %
(25)
(25)
Lapses
+50 %
+25 %
-25 %
-50 %
$ 139
$ 139
$
$
73
73
$
$
(81)
(81)
$
$
(170)
(170)
Annuitization
+50 %
+25 %
-25 %
-50 %
$ (492)
$ (263)
$ 302
$ (492)
$ (263)
$ 302
$
$
636
636
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, 2020 following
an immediate change in equity market levels, assuming all global equity markets are impacted equally.
a) Reinsurance covering the GMDB risk only
(in millions of U.S. dollars)
GMDB net amount at risk
+20 %
Flat
-20 %
-40 %
-60 %
-80 %
$ 272
$
257 $
328
$
699
$
815
$
703
Claims at 100% immediate mortality
157
166
179
166
147
128
Equity Shock
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).
86
b) Reinsurance covering the GLB risk only
(in millions of U.S. dollars)
GLB net amount at risk
+20 %
Flat
-20 %
-40 %
-60 %
-80 %
$ 871
$ 1,249 $ 1,811
$ 2,415
$ 2,906
$ 3,266
Equity Shock
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 %
$
37
$
45 $
55
$
67
$
79
$
89
309
36
409
35
542
35
704
35
873
35
982
35
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 increase 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, 2020. 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.
There have been no changes in Chubb's internal controls over financial reporting during the three months ended December 31,
2020 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.
87
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 2021 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 2021 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
This item is incorporated by reference to the sections entitled "Information About Our Share Ownership" and "Agenda Item 9 -
Approval of the Chubb Limited 2016 Long-Term Incentive Plan, as Amended and Restated - Explanation - Authorized Securities
under Equity Compensation Plans" of the definitive proxy statement for the 2021 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 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 2021 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 2021 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.
88
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, 2020 and 2019
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31,
2020, 2019, and 2018
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2020, 2019, and
2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Page
F-3
F-4
F-7
F-8
F-9
F-10
F-11
Schedule I - Summary of Investments - Other Than Investments in Related Parties at December 31, 2020
F-104
Schedule II - Condensed Financial Information of Registrant (Parent Company Only) at December 31,
2020 and 2019 and for the years ended December 31, 2020, 2019, and 2018
Schedule IV - Supplemental Information Concerning Reinsurance for the years ended December 31, 2020,
2019, and 2018
Schedule VI - Supplementary Information Concerning Property and Casualty Operations as of and for the
years ended December 31, 2020, 2019, and 2018
F-105
F-107
F-108
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
Incorporated by Reference
Form
Original
Number
Date Filed
Filed
Herewith
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
Articles of Association of the Company, as amended and restated
8-K
3.1
August 4, 2020
Organizational Regulations of the Company as amended
8-K
3.1
November 21, 2016
Articles of Association of the Company, as amended and restated
8-K
4.1
August 4, 2020
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
8-K
8-K
8-K
S-3
ASR
3.1
November 21, 2016
4.3
4.1
July 18, 2008
March 22, 2002
4.4
December 10, 2014
Indenture, dated November 30, 1999, among ACE INA Holdings,
Inc. and Bank One Trust Company, N.A., as trustee
10-K
10.38
March 29, 2000
89
Exhibit
Number
4.7
4.8
4.9
Exhibit Description
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
Date Filed
Filed
Herewith
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
4.10
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 2.875 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)
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)
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
4.2
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
January 15, 2016
8-K
4.2
January 15, 2016
S-3
4(a)
October 27, 1989
8-K
4.1
March 30, 2007
8-K
4.2
March 30, 2007
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
90
Exhibit Description
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
Form
S-3
Original
Number
Date Filed
Filed
Herewith
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
Form of Officer's Certificate related to the 1.550% Senior Notes
due 2028 and 2.500% Senior Notes due 2038
4.30
Form of Global Note for the 1.550% Senior Notes due 2028
4.31
Form of Global Note for the 2.500% Senior Notes due 2038
4.32
Form of Officer's Certificate related to the 0.875% Senior Notes
due 2027 and 1.400% Senior Notes due 2031
4.33
Form of Global Note for the 0.875% Senior Notes due 2027
4.34
Form of Global Note for the 1.400% Senior Notes due 2031
4.35
Form of Officer’s Certificate related to the 0.300% Senior Notes
due 2024 and 0.875% Senior Notes due 2029
4.36
Form of Global Note for the 0.300% Senior Notes due 2024
4.37
Form of Global Note for the 0.875% Senior Notes due 2029
4.38
Form of Officer's Certificate related to the 1.375% Senior Notes
due 2030
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
4.2
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
4.1
September 17, 2020
4.39
Form of Global Note for the 1.375% Senior Notes due 2030
8-K
4.2
September 17, 2020
4.40
Description of the Registrant's Securities
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
X
91
Exhibit
Number
10.2
10.3*
10.4*
10.5*
10.6*
10.7*
Exhibit Description
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
Incorporated by Reference
Form
10-K
Original
Number
Date Filed
Filed
Herewith
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
10-K
10.11
February 27, 2020
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
10.20*
Amendments to the ACE Limited Supplemental Retirement Plan
and the ACE Limited Elective Deferred Compensation Plan
10-K
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
92
Exhibit
Number
10.22*
Exhibit Description
ACE Limited Elective Deferred Compensation Plan (as amended
and restated effective January 1, 2011)
Incorporated by Reference
Original
Number
Date Filed
Filed
Herewith
10.5
October 30, 2013
Form
10-Q
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 2004 Long-Term Incentive Plan (as amended
through the Fifth Amendment)
10.33*
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
10.34*
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
10.35*
Director Restricted Stock Award Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-Q
10.1
November 9, 2009
10.36*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
8-K
10.4
September 13, 2004
10.37*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-Q
10.4
May 8, 2008
10.38*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-K
10.63
February 27, 2009
10.39*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan
10-Q
10.3
October 30, 2013
10.40*
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan
8-K
10.5
September 13, 2004
10.41*
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan
10-Q
10.3
May 8, 2008
93
Exhibit
Number
10.42*
Exhibit Description
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan
Incorporated by Reference
Form
10-Q
Original
Number
Date Filed
Filed
Herewith
10.4
October 30, 2013
10.43*
Form of Restricted Stock Unit Award Terms (for outside directors)
under the ACE Limited 2004 Long-Term Incentive Plan
10-Q
10.2
November 7, 2007
10.44*
Form of Restricted Stock Unit Award Terms (for outside directors)
under the ACE Limited 2004 Long-Term Incentive Plan
10-Q
10.2
August 7, 2009
10.45*
10.46*
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
10-Q
10.1
August 4, 2011
10-Q
10.2
August 4, 2011
10.47*
ACE Limited Employee Stock Purchase Plan, as amended
8-K
10.1
May 22, 2012
10.48*
Form of Incentive Stock Option Terms under the ACE Limited
2004 Long-Term Incentive Plan for Swiss Executive Management
10-K
10.71
February 27, 2015
10.49*
Form of Non-Qualified Stock Option Terms under the ACE
Limited 2004 Long-Term Incentive Plan for Swiss Executive
Management
10-K
10.72
February 27, 2015
10.50*
Form of Executive Management Non-Competition Agreement
8-K
10.1
May 22, 2015
10.51
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
10.52*
Chubb Limited 2016 Long-Term Incentive Plan
S-8
4.4
May 26, 2016
10.53*
Form of Incentive Stock Option Terms under the Chubb Limited
2016 Long-Term Incentive Plan
10-Q
10.2
August 5, 2016
10.54*
Form of Restricted Stock Award Terms under the Chubb Limited
2016 Long-Term Incentive Plan
10-Q
10.3
August 5, 2016
10.55*
Form of Restricted Stock Unit Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan
10-Q
10.4
August 5, 2016
10.56*
Form of Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan
10-Q
10.5
August 5, 2016
10.57*
Form of Incentive Stock Option Terms under the Chubb Limited
2016 Long-Term Incentive Plan for Swiss Executive Management
10-Q
10.6
August 5, 2016
10.58*
Form of Restricted Stock Award Terms under the Chubb Limited
2016 Long-Term Incentive Plan for Swiss Executive Management
10-Q
10.7
August 5, 2016
10.59*
Form of Restricted Stock Unit Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
10-Q
10.8
August 5, 2016
94
Exhibit
Number
10.60*
10.61*
10.62*
10.63
10.64*
10.65*
10.66*
10.67*
10.68*
10.69*
Exhibit Description
Form of Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
Incorporated by Reference
Form
10-Q
Original
Number
Date Filed
Filed
Herewith
10.9
August 5, 2016
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 Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Executive Officers
10-K
10.92
February 23, 2018
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
10-K
10.94
February 23, 2018
Form of Non-Qualified Stock Option Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
10-K
10.95
February 23, 2018
10.70*
Form of Restricted Stock Award Terms under the Chubb Limited
2016 Long-Term Incentive Plan for Swiss Executive Management
10-K
10.96
February 23, 2018
10.71*
Form of Restricted Stock Unit Award Terms under the Chubb
Limited 2016 Long-Term Incentive Plan for Swiss Executive
Management
10-K
10.97
February 23, 2018
10.72*
Chubb Limited Clawback Policy
10-K
10.99
February 23, 2018
10.73*
10.74*
10.75*
10.76*
The Chubb Corporation Key Employee Deferred Compensation
Plan (2005)
Amendment One to The Chubb Corporation Key Employee
Deferred Compensation Plan (2005)
Amendment No. 2 to The Chubb Corporation Key Employee
Deferred Compensation Plan (2005)
Amendment No. 3 to The Chubb Corporation Key Employee
Deferred Compensation Plan (2005)
10.77*
Pension Excess Benefit Plan of The Chubb Corporation
10.78*
10.79*
Amendment No. 2 to the Pension Excess Benefit Plan of The
Chubb Corporation
Amendment No. 3 to the Pension Excess Benefit Plan of The
Chubb Corporation
8-K
8-K
10.9
March 9, 2005
10.1
September 12, 2005
10-K
10.20
March 2, 2009
10-K
10.32
February 28, 2013
X
X
X
95
Incorporated by Reference
Form
Original
Number
Date Filed
Filed
Herewith
X
X
X
X
X
X
X
X
X
X
X
X
Exhibit
Number
10.80*
10.81*
10.82*
10.83*
21.1
22.1
23.1
31.1
31.2
32.1
32.2
101
Exhibit Description
Amendment No. 4 to the Pension Excess Benefit Plan of The
Chubb Corporation
Amendments to the Chubb U.S. Supplemental Employee
Retirement Plan, the Chubb U.S. Deferred Compensation Plan,
and Pension Excess Benefit Plan of The Chubb Corporation
Form of Performance Based Restricted Stock 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 Executive
Officers
Subsidiaries of the Company
Guaranteed Securities
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, 2020,
formatted in Inline XBRL: (i) Consolidated Balance Sheets at
December 31, 2020 and 2019; (ii) Consolidated Statements of
Operations and Comprehensive Income for the years ended
December 31, 2020, 2019, and 2018; (iii) Consolidated
Statements of Shareholders' Equity for the years ended December
31, 2020, 2019, and 2018; (iv) Consolidated Statements of
Cash Flows for the years ended December 31, 2020, 2019, and
2018; 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.
96
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 25, 2021
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, Chief Executive Officer, and Director
February 25, 2021
Evan G. Greenberg
/s/ Philip V. Bancroft
Executive Vice President and Chief Financial Officer
February 25, 2021
Philip V. Bancroft
(Principal Financial Officer)
/s/ Annmarie T. Hagan
Chief Accounting Officer
Annmarie T. Hagan
(Principal Accounting Officer)
February 25, 2021
/s/ Michael G. Atieh
Director
February 25, 2021
Michael G. Atieh
/s/ Sheila P. Burke
Director
February 25, 2021
Sheila P. Burke
/s/ James I. Cash
Director
February 25, 2021
James I. Cash
/s/ Mary A. Cirillo
Director
February 25, 2021
Mary A. Cirillo
/s/ Michael P. Connors
Director
February 25, 2021
Michael P. Connors
97
Signature
Title
Date
/s/ John A. Edwardson
Director
February 25, 2021
John A. Edwardson
/s/ Robert J. Hugin
Director
February 25, 2021
Robert J. Hugin
/s/ Robert W. Scully
Director
February 25, 2021
Robert W. Scully
/s/ Eugene B. Shanks, Jr.
Director
February 25, 2021
Eugene B. Shanks, Jr.
/s/ Theodore E. Shasta
Director
February 25, 2021
Theodore E. Shasta
/s/ David H. Sidwell
Director
February 25, 2021
David H. Sidwell
/s/ Olivier Steimer
Director
February 25, 2021
Olivier Steimer
/s/ Frances F. Townsend
Director
February 25, 2021
Frances F. Townsend
98
CHUBB LIMITED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020
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.
Note 10.
Note 11.
Note 12.
Note 13.
Note 14.
Note 15.
Summary of significant accounting policies
Acquisitions
Investments
Fair value measurements
Reinsurance
Goodwill and Other intangible assets
Unpaid losses and loss expenses
Taxation
Debt
Commitments, contingencies, and guarantees
Shareholders' equity
Share-based compensation
Postretirement benefits
Other income and expense
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
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
Page
F-3
F-4
F-7
F-8
F-9
F-10
F-11
F-22
F-23
F-30
F-37
F-39
F-40
F-66
F-70
F-71
F-76
F-78
F-82
F-88
F-88
F-94
F-94
F-95
F-97
F-104
F-105
F-107
F-108
F-2
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, 2020, 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, 2020.
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, 2020. The report, which expresses an unqualified opinion on the effectiveness of
Chubb's internal control over financial reporting as of December 31, 2020, 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 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, 2020 and 2019, 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, 2020, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2020 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, 2020, 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, 2020, the Company’s liability for unpaid
losses and loss expenses, net of reinsurance, was approximately $53 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) the
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) the significant audit 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, 2020, the Company had total assets
measured at fair value of approximately $106 billion, of which approximately $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
F-5
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 critical audit matter are (i) the 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 prices for a sample of securities and comparing management’s estimate to the independently developed ranges.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, PA
February 25, 2021
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
December 31
2020
2019
Fixed maturities available for sale, at fair value, net of valuation allowance – $20
at December 31, 2020 (amortized cost – $85,188 and $82,580)
Fixed maturities held to maturity, at amortized cost, net of valuation allowance – $44
at December 31, 2020 (fair value – $12,510 and $13,005)
$
Equity securities, at fair value
Short-term investments, at fair value (amortized cost – $4,349 and $4,291)
Other investments, at fair value
Total investments
Cash
Restricted cash
Securities lending collateral
Accrued investment income
Insurance and reinsurance balances receivable, net of valuation allowance – $44 and $44
Reinsurance recoverable on losses and loss expenses, net of valuation allowance – $314 and $316
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
90,699 $
85,488
11,653
12,581
4,027
4,345
7,945
812
4,291
6,062
118,669
109,234
1,747
89
1,844
867
10,480
15,592
206
5,402
263
1,537
109
994
867
10,357
15,181
197
5,242
306
15,400
15,296
5,811
2,769
2,813
8,822
6,063
2,647
1,332
7,581
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; 477,605,264 and 479,783,864 shares
issued; 450,732,625 and 451,971,567 shares outstanding)
Common Shares in treasury (26,872,639 and 27,812,297 shares)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (AOCI)
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes to the Consolidated Financial Statements
$
190,774 $
176,943
$
67,811 $
17,652
5,713
6,708
1,844
62,690
16,771
5,373
6,184
994
14,052
12,214
892
1,405
—
804
1,416
1,299
14,948
13,559
308
308
131,333
121,612
11,064
(3,644)
9,815
39,337
2,869
59,441
11,121
(3,754)
11,203
36,142
619
55,331
$
190,774 $
176,943
F-7
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Chubb Limited and Subsidiaries
For the years ended December 31, 2020, 2019, and 2018
(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 $(281), $(31), and $(302) 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 (includes benefit of $(36), nil, and $(41) on unrealized gains
and losses reclassified from AOCI)
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
2020
2019
2018
$
33,820 $
32,275 $
30,579
(703)
(985)
(515)
33,117
31,290
30,064
3,375
3,426
3,305
—
—
—
(90)
32
(58)
(498)
(472)
(52)
3
(49)
(603)
(498)
(530)
(652)
35,994
34,186
32,717
21,710
18,730
18,067
784
6,547
2,979
516
740
6,153
3,030
552
(994)
(596)
290
—
305
23
590
5,912
2,886
641
(434)
339
59
31,832
28,937
28,060
4,162
5,249
4,657
629
795
695
$
3,533 $
4,454 $
3,962
$
2,311 $
3,704 $
(2,298)
281
2,592
31
302
3,735
(1,996)
306
(232)
13
(76)
(802)
(321)
2,666
3,672
(3,119)
(416)
(605)
399
2,250
3,067
(2,720)
$
5,783 $
7,521 $
1,242
$
$
7.82 $
9.77 $
7.79 $
9.71 $
8.55
8.49
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Chubb Limited and Subsidiaries
For the years ended December 31, 2020, 2019, and 2018
(in millions of U.S. dollars)
Common Shares
Balance – beginning of year
Cancellation of treasury shares
Balance – end of year
Common Shares in treasury
Balance – beginning of year
Common Shares repurchased
Cancellation of treasury shares
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
Cancellation of treasury shares
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
$(426), $(647), and $338
Amounts reclassified from AOCI, net of income tax (expense) of $(36), nil, and $(41)
Change in year, net of income tax (expense) benefit of $(462), $(647), and $297
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 (expense) benefit of $(4), $24, and $35
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 $50, $18, and $67
Balance – end of year
Accumulated other comprehensive income (loss)
Total shareholders’ equity
See accompanying notes to the Consolidated Financial Statements
2020
2019
2018
$
11,121 $
(57)
11,064
11,121 $
—
11,121
11,121
—
11,121
(3,754)
(516)
323
303
(3,644)
11,203
(195)
(50)
255
(1,398)
9,815
(2,618)
(1,531)
—
395
(3,754)
12,557
(178)
(82)
266
(1,360)
11,203
36,142
31,700
(72)
36,070
3,533
(266)
1,398
(1,398)
39,337
(12)
31,688
4,454
—
1,360
(1,360)
36,142
2,543
—
2,543
1,885
245
2,130
4,673
(1,939)
—
(1,939)
302
(1,637)
15
—
15
(182)
(167)
2,869
$
59,441 $
(545)
—
(545)
3,057
31
3,088
2,543
(1,976)
—
(1,976)
37
(1,939)
73
—
73
(58)
15
619
55,331 $
(1,944)
(1,021)
—
347
(2,618)
13,978
(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)
(1,187)
(22)
(1,209)
(767)
(1,976)
280
47
327
(254)
73
(2,448)
50,312
F-9
CONSOLIDATED STATEMENTS OF CASH FLOWS
Chubb Limited and Subsidiaries
For the years ended December 31, 2020, 2019, and 2018
(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
2020
2019
2018
$
3,533 $
4,454 $
3,962
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 nil, $45, nil)
Payment, including deposit, for Huatai Group interest
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 and other
Policyholder contract withdrawals and other
Other
Net cash flows used for financing activities
Effect of foreign currency rate changes on cash and restricted cash
Net increase 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
498
367
290
(333)
4,664
846
236
535
(98)
46
(114)
(336)
(89)
(260)
9,785
530
395
305
(97)
(257)
1,051
215
(302)
(207)
(7)
(270)
838
(344)
38
6,342
(26,298)
(25,846)
—
(202)
(6,419)
11,377
—
3,880
12,450
995
(81)
(113)
(1,924)
907
—
(1,623)
(470)
(7,521)
(1,388)
(523)
988
2,354
(1,301)
(2,354)
145
470
(386)
(87)
(2,082)
8
190
1,646
1,836 $
—
(229)
(531)
13,110
6
611
9,039
946
(1,117)
(703)
(1,315)
1,390
(29)
(580)
(657)
(5,905)
(1,354)
(1,530)
2,828
2,817
(510)
(2,817)
204
514
(303)
—
(151)
20
306
1,340
1,646 $
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
453
(358)
—
(1,991)
(65)
489
851
1,340
902 $
524 $
912 $
512 $
503
621
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 valuation allowance for uncollectible reinsurance;
the assessment of risk transfer for certain structured insurance and reinsurance contracts;
the valuation of the investment portfolio and assessment of valuation allowance for expected credit losses;
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 $226 million and
$246 million at December 31, 2020 and 2019, respectively. Amortization expense for deferred marketing costs was $99
million, $109 million, and $114 million for the years ended December 31, 2020, 2019, and 2018, 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 valuation allowance for uncollectible reinsurance determined based upon a review
of the financial condition of reinsurers and other factors. The valuation allowance 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 allowance 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. Changes in the valuation allowance for uncollectible reinsurance recoverables are recorded in Losses and loss
expenses in the Consolidated statements of operations. Our methodology to calculate the valuation allowance was consistent
with the new expected credit loss guidance adopted on January 1, 2020. Therefore, there was no change to the valuation
allowance upon adoption. 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 valuation allowance 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 valuation
allowance 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 valuation allowance for uncollectible reinsurance by establishing a default factor pursuant
to information received; and
•
For other recoverables, management determines the valuation allowance for uncollectible reinsurance based on the specific
facts and circumstances.
The methods used to determine the reinsurance recoverable balance and related valuation allowance 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 valuation allowance for uncollectible high deductible recoverable amounts and valuation
allowance for insurance and reinsurance balances receivable are similar to the processes used to determine the valuation
allowance for uncollectible reinsurance recoverable. For information on high deductible policies, refer to section h) 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.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The value of reinsurance business assumed is the deferred gain or loss related to loss portfolio transfers assumed and is
calculated as the difference between the estimated ultimate value of the liabilities assumed under retroactive reinsurance
contracts over consideration received. The gain or loss is amortized and recorded to Losses and loss expenses based on the
payment pattern of the losses assumed. The unamortized value is reviewed regularly to determine if it is recoverable based upon
the terms of the contract, estimated losses and loss expenses, and anticipated investment income. Unrecoverable amounts are
expensed in the period identified. The value of reinsurance business assumed at December 31, 2020 and 2019 were
immaterial.
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, net of a valuation allowance for credit losses, 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, net of a valuation allowance for credit losses.
Equity securities are reported at fair value with changes in fair value recorded in net realized gains (losses) on the Consolidated
statement of operations.
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, 2020, the remaining
balance of this fair value adjustment was $213 million which is expected to amortize over the next two 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.
Valuation allowance for fixed income securities
Management evaluates current expected credit losses (CECL) for all HTM securities each quarter. U.S. treasury and agency
securities and U.S. government agency mortgage-backed securities are assumed to have no risk of non-payment and therefore
are excluded from the CECL evaluation. The remaining HTM securities are evaluated for potential credit loss on a collective pool
basis. We elected to pool HTM securities by 1) external credit rating and 2) time to maturity (duration). These characteristics
are the most representative of similar risk characteristics within our portfolio. Chubb pools HTM securities and calculates an
expected credit loss for each pool using Moody’s corporate bond default average, corporate bond recovery rate, and an economic
cycle multiplier. The multiplier is based on the leading economic index and will adjust the average default frequency for a
forward-looking economic outlook. Management monitors the credit quality of HTM securities through the review of external
credit ratings on a quarterly basis.
Management evaluates expected credit losses (ECL) for AFS securities when fair value is below amortized cost. AFS securities
are evaluated for potential credit loss on an individual security level but the evaluation may use assumptions consistent with
expectations of credit losses for a group of similar securities. If management has the intent to sell or will be required to sell the
security before recovery, the entire impairment loss will be recorded through income to net realized gains and losses. If
management does not have the intent to sell or will not be required to sell the security before recovery, an allowance for credit
losses is established and is recorded through income to net realized gains and losses, and the non-credit loss portion is recorded
through other comprehensive income.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Examples of criteria that are collectively evaluated to determine if a credit loss has occurred include the following:
•
•
The extent to which the fair value is less than amortized cost;
Adverse conditions related to the security, industry, or geographic area;
• Downgrades in the security's credit rating by a rating agency; and
•
Failure of the issuer to make scheduled principal or interest payments
AFS securities that meet any one of the criteria included above will be subject to a discounted cash flow analysis by comparing
the present value of expected future cash flows with the amortized cost basis. Projected cash flows are driven primarily by
assumptions regarding probability of default and the timing and amount of recoveries associated with defaults. Chubb developed
the projected cash flows using market data, issuer-specific information, and credit ratings. In combination with contractual cash
flows and the use of historical default and recovery data by Moody's Investors Service (Moody's) rating category we generate
expected cash flows using the average cumulative issuer-weighted global default rates by letter rating.
If the present value of expected future cash flows is less than the amortized cost, a credit loss exists and an allowance for credit
losses will be recognized. If the present value of expected future cash flows is equal to or greater than the amortized cost basis,
management will conclude an expected credit loss does not exist.
Management reviews credit losses and the valuation allowance for expected credit losses each quarter. When all or a portion of
a fixed maturity security is identified to be uncollectible and written off, the valuation allowance for expected credit losses is
reduced by the same amount. In general, a security is considered uncollectible no later than when all efforts to collect
contractual cash flows have been exhausted. Below are considerations for when a security may be deemed uncollectible:
• We have sufficient information to determine that the issuer of the security is insolvent;
• We receive notice that the issuer of the security has filed for bankruptcy, and the collectability is expected to be adversely
impacted by the bankruptcy;
The issuer of a security has violated multiple debt covenants;
Amounts have been past due for a specified period of time with no response from the issuer;
A significant deterioration in the value of the collateral has occurred;
•
•
•
• We have received correspondence from the issuer of the security indicating that it doesn’t intend to pay the contractual
principal and interest.
We elected to not measure an allowance for accrued investment income as uncollectible balances are written off in a timely
manner, typically 30 to 45 days after uncollected balances are due.
Prior to January 1, 2020, fixed income securities were evaluated individually for other-than-temporary impairment (OTTI) and a
realized loss was recognized once certain criteria were met.
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.
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-15
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. This category principally comprised our GLB contracts; 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-16
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
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.
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
December 31
2020
2019
2018
$
1,747 $
1,537 $
1,247
89
109
93
Total cash and restricted cash shown in the Consolidated statements of cash flows
$
1,836 $
1,646 $
1,340
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 with an average original useful life of 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.
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.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 income 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 unpaid loss and loss expense reserves of $26 million, net of discount, held at December 31, 2020, representing
certain structured settlements for which the timing and amount of future claim payments are reliably determinable and $42
million, net of discount, of certain reserves for unsettled claims, Chubb does not discount its P&C loss reserves. This compares
with reserves of $31 million for certain structured settlements and $43 million of certain reserves for unsettled claims at
December 31, 2019. 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, 2020, the liability due to claimants was $548 million, net of discount, and reinsurance recoverables due from
the life insurance companies was $522 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,
2020 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 $110 million and $145 million at December
31, 2020 and 2019, 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
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 include a margin for
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
adverse deviation. Interest rates used in calculating reserves range from less than 1.0 percent to 9.0 percent at December 31,
2020 compared to less than 1.0 percent to 11.0 percent at December 31, 2019. 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. 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 Note 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 $107 million and $93 million at December 31, 2020 and 2019, respectively, are reflected in Other assets in
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 $86 million and $88 million and contract holder deposit funds of
$2.2 billion and $2.0 billion at December 31, 2020 and 2019, 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
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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, 2020, property and equipment totaled $2.0 billion,
consisting principally of capitalized software costs of $1.3 billion incurred to develop or obtain computer software for internal
use and company-owned facilities of $260 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, 2019, property and
equipment totaled $1.9 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 $18 million, $47 million, and $49 million for the years ended December 31, 2020, 2019,
and 2018, 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 that are determined to be 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 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) 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.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
r) Chubb integration expenses
Direct costs related to the Chubb Corp acquisition were expensed as incurred. Chubb integration expenses were nil, $23 million,
and $59 million for the years ended December 31, 2020, 2019 and 2018, 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.
s) New accounting pronouncements
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, and reinsurance recoverables,
by applying an approach based on the current expected credit losses (CECL). The estimate of expected credit losses considers
historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments.
In addition, the guidance also replaced the current available for sale (AFS) 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 its 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
previous practice of writing down the asset.
In 2020, we recognized a cumulative effect adjustment and decreased beginning retained earnings by $79 million pre-tax, or
$72 million after-tax, principally related to the valuation allowance for credit losses. We also adopted the required disclosures
within Note 3 Investments and Note 5 Reinsurance. Results for reporting periods prior to January 1, 2020 are presented in
accordance with the previous guidance.
Adopted in 2021
Income Taxes - Simplifying the Accounting for Income Taxes
Effective January 1, 2021, we adopted guidance which is intended to simplify the accounting for income taxes by removing
several exceptions contained in existing guidance and amending other guidance. The adoption of the new guidance did not have
a material effect on our results of operations or financial condition.
Accounting guidance not yet adopted
Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying GAAP to
investments, derivatives, or other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference
rate expected to be discontinued because of reference rate reform. Along with the optional expedients, the amendments include
a general principle that permits an entity to consider contract modifications due to reference reform to be an event that does not
require contract re-measurement at the modification date or reassessment of a previous accounting determination. Additionally,
a company may make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity
that reference a rate affected by reference rate reform and that were classified as held to maturity before January 1, 2020. This
standard may be elected over time through December 31, 2022 as reference rate reform activities occur. Our exposure to
LIBOR is limited and, accordingly, we do not expect reference rate reform to have a material impact on our Consolidated
Financial Statements.
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 in the first quarter of 2023 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.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
2. Acquisitions
Huatai Group
Chubb maintains a direct investment in Huatai Insurance Group Co., Ltd. (Huatai Group). Huatai Group is the parent company
of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C), approximately 80 percent of Huatai
Life Insurance Co., Ltd. (Huatai Life), and approximately 82 percent of Huatai Asset Management Co., Ltd. (collectively,
Huatai). Huatai Group's insurance operations have more than 600 branches and 11 million customers in China.
In 2019, Chubb entered into agreements to acquire an additional 22.4 percent ownership in Huatai Group 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. On July 13, 2020, we completed the 15.3 percent purchase. The purchase of the additional 7.1
percent ownership interest is contingent upon important conditions.
In connection with these purchase agreements, we paid $1.6 billion, including a collateralized deposit for the 7.1 percent
tranche, in 2020. These transactions are recorded within investing activities on the Consolidated statement of cash flows.
Separately, in November 2020, we completed the purchase of an incremental 0.9 percent ownership interest in Huatai Group
for approximately $65 million.
As of December 31, 2020, Chubb's aggregate ownership interest in Huatai Group was approximately 47.1 percent. Chubb
applies 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.
Upon completion of the 7.1 percent purchase, which will result in majority ownership of Huatai Group, Chubb is expected to
obtain control of Huatai. At that time, Chubb is expected to apply consolidation accounting and discontinue the application of
the equity method of accounting.
Prior year acquisition
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 $74 million in cash. The results of this acquisition are included in the Overseas General
Insurance and Life Insurance segments as appropriate, determined by the type of policy written.
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
3. Investments
a) Fixed maturities
Effective January 1, 2020, we adopted new accounting guidance that requires a valuation allowance for credit losses to be
established for fixed maturity securities classified as held to maturity (HTM) or available for sale (AFS).
December 31, 2020
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
Amortized
Cost
Valuation
Allowance
Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair Value
$
2,471 $
— $
199 $
— $
2,670
24,594
34,095
17,456
6,572
(6)
(14)
—
—
1,808
2,322
1,022
304
(42)
26,354
(72)
36,331
(8)
(2)
18,470
6,874
$
85,188 $
(20) $
5,655 $
Amortized
Cost
Valuation
Allowance
Net Carrying
Value
(124) $
Gross
Unrealized
Appreciation
90,699
Gross
Unrealized
Depreciation
Fair
Value
Held to maturity
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
December 31, 2019
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
Held to maturity
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
$
1,392 $
— $
1,392 $
60 $
— $
1,452
1,295
2,185
2,000
4,825
(7)
(35)
(1)
(1)
1,288
2,150
1,999
4,824
118
288
148
245
(1)
1,405
—
2,438
(1)
2,146
—
5,069
$
11,697 $
(44) $
11,653 $
859 $
(2) $ 12,510
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)
23,707
(78)
31,791
(14)
19,192
(11)
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 $
—
—
—
—
—
—
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents the amortized cost of our HTM securities according to S&P rating:
December 31, 2020
(in millions of U.S. dollars)
AAA
AA
A
BBB
BB
Other
Total
The following table presents fixed maturities by contractual maturity:
Amortized cost
% of Total
$
2,511
6,193
2,138
826
28
1
22 %
53 %
18 %
7 %
— %
— %
$
11,697
100 %
(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
2020
December 31
2019
Net Carrying
Value
Fair Value
Amortized Cost
Fair Value
$
4,760 $
4,760 $
3,951 $
$
$
26,227
27,232
14,010
72,229
18,470
26,227
27,232
14,010
72,229
18,470
27,142
23,901
8,874
63,868
18,712
90,699 $
90,699 $
82,580 $
1,231 $
1,240 $
478 $
3,592
3,029
1,802
9,654
1,999
3,760
3,228
2,136
10,364
2,146
3,869
3,756
2,147
10,250
2,331
3,973
27,720
24,874
9,729
66,296
19,192
85,488
479
3,940
3,883
2,307
10,609
2,396
$
11,653 $
12,510 $
12,581 $
13,005
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.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
b) Gross unrealized loss
Fixed maturities in an unrealized loss position at December 31, 2020, 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.
The following table presents, for AFS fixed maturities in an unrealized loss position (including securities on loan) that are not
deemed to have credit losses, the aggregate fair value and gross unrealized loss by length of time the security has continuously
been in an unrealized loss position:
December 31, 2020
(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
Non-U.S.
Corporate and asset-backed
securities
Mortgage-backed securities
Municipal
$
1,628 $
(35) $
114 $
(5) $
1,742 $
2,212
875
40
(33)
(6)
(1)
593
35
16
(14)
2,805
(2)
(1)
910
56
Total AFS fixed maturities
$
4,755 $
(75) $
758 $
(22) $
5,513 $
(40)
(47)
(8)
(2)
(97)
The following table presents, 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)
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed
securities
Mortgage-backed securities
Municipal
Total fixed maturities
0 – 12 Months
Over 12 Months
Fair Value
Gross
Unrealized
Loss
Fair Value
Gross
Unrealized
Loss
Fair Value
$
234 $
(1) $
339 $
— $
573 $
1,846
2,121
1,174
188
(34)
(40)
(6)
—
802
988
932
276
(28)
2,648
(40)
(8)
(12)
3,109
2,106
464
Total
Gross
Unrealized
Loss
(1)
(62)
(80)
(14)
(12)
$
5,563 $
(81) $
3,337 $
(88) $
8,900 $
(169)
c) Net realized gains (losses)
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)
Year Ended December 31
2019
2018
Balance of credit losses related to securities still held – beginning of year
$
34 $
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
$
33
4
(41)
30 $
22
20
5
(13)
34
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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
Recovery of expected credit losses
Impairment (1)
Total fixed maturities
Equity securities
Other investments
Foreign exchange gains (losses)
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
Other
Income tax (expense) benefit
Change in net unrealized appreciation (depreciation) on investments (after-tax)
(1)
Relates to certain securities we intended to sell and securities written to market entering default.
Year Ended December 31
2020
2019
2018
$
— $
(90) $
—
—
244
32
(58)
203
(366)
(176)
11
(170)
(281)
586
(32)
(483)
81
(202)
(108)
1
(60)
—
—
(31)
104
(20)
7
(435)
(4)
(138)
(8)
(5)
$
(498) $
(530) $
(52)
3
(49)
334
(587)
—
—
(302)
(59)
(5)
131
(75)
(248)
(4)
(3)
(87)
(652)
$
2,628 $
3,769 $
(1,958)
(24)
(12)
(31)
(3)
(462)
(647)
(38)
—
297
$
2,130 $
3,088 $
(1,699)
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)
Net gains (losses) recognized
during the period
Less: Net gains (losses)
recognized from sales of
securities
Unrealized gains (losses)
recognized for securities still
held at reporting date
Year Ended December 31, 2020
Year Ended December 31, 2019
Year Ended December 31, 2018
Equity
Securities
Other
Investments
Total
Equity
Securities
Other
Investments
Total
Equity
Securities
Other
Investments
Total
$
586 $
(32) $ 554 $
104 $
(20) $
84 $
(59) $
(5) $
(64)
455
—
455
58
(5)
53
70
121
191
$
131 $
(32) $
99 $
46 $
(15) $
31 $
(129) $
(126) $ (255)
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents a roll-forward of valuation allowance for expected credit losses on fixed maturities:
(in millions of U.S. dollars)
Available for sale
Valuation allowance for expected credit losses - beginning of period
Impact of adoption of new accounting guidance
Provision for expected credit loss
Initial allowance for purchased securities with credit deterioration
Write-offs charged against the expected credit loss
Recovery of expected credit loss
Valuation allowance for expected credit losses - end of period
Held to maturity
Valuation allowance for expected credit losses - beginning of period
Impact of adoption of new accounting guidance
Provision for expected credit loss
Recovery of expected credit loss
Valuation allowance for expected credit losses - end of period
Year Ended
December 31
2020
—
25
188
5
(5)
(193)
20
—
44
9
(9)
44
$
$
$
$
Purchased Credit Deterioration (PCD) Securities
During the year ended December 31, 2020, we purchased $108 million of securities with credit deterioration, categorized as
available for sale, and assessed an allowance for expected credit losses of $5 million at acquisition. These PCD securities had a
par value at acquisition of $144 million.
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
2020
December 31
2019
$
5,969 $
547
254
6,770
438
233
316
188
4,142
508
271
4,921
377
247
283
234
$
7,945 $
6,062
(1)
Non-qualified separate account assets are comprised of mutual funds, supported by assets that do not qualify for separate account reporting under GAAP.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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
2020
Maximum
Future Funding
Commitments
December 31
2019
Maximum
Future Funding
Commitments
Fair Value
2 to 10 Years $
673 $
237 $
611 $
2 to 11 Years
2 to 8 Years
3 to 8 Years
805
358
88
598
970
270
712
263
104
329
422
80
272
2 to 14 Years
4,519
1,125
2,844
2,160
1 to 2 Years
Not Applicable
73
254
—
—
116
271
—
—
$
6,770 $
3,200 $
4,921 $
3,263
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.
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 130 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 are up to 270 days. Chubb can redeem its investment funds
without consent from the investment fund managers.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
e) Investments in partially-owned insurance companies
The following table presents Investments in partially-owned insurance companies:
December 31, 2020
December 31, 2019
(in millions of U.S. dollars, except for
percentages)
Carrying Value
Goodwill
Direct
Ownership
Percentage
Carrying Value
Goodwill
Huatai Group
$
2,461 $
1,313
47 % $
1,053 $
460
Huatai Life Insurance Company
Freisenbruch-Meyer
Chubb Arabia Cooperative Insurance
Company
Russian Reinsurance Company
ABR Reinsurance Ltd.
201
10
23
4
114
69
3
—
—
—
20 %
40 %
30 %
23 %
16 %
147
10
20
2
100
64
3
—
—
—
Total
$
2,813 $
1,385
$
1,332 $
527
Direct
Ownership
Percentage
31 %
20 %
40 %
Domicile
China
China
Bermuda
30 % Saudi Arabia
23 %
12 %
Russia
Bermuda
Chubb’s aggregate direct and indirect ownership in Huatai Life is approximately 57.5 percent, comprising 20 percent direct and
37.5 percent indirect ownership interest.
The table above excludes the 7.1 percent of additional ownership commitment in Huatai Group that is contingent upon
important conditions. Refer to Note 2 for additional information.
f) Net investment income
(in millions of U.S. dollars)
Fixed maturities (1)
Short-term investments
Other interest income
Equity securities
Other investments
Gross investment income (1)
Investment expenses
Net investment income (1)
(1) Includes amortization expense related to fair value adjustment of acquired invested assets
related to the Chubb Corp acquisition
Year Ended December 31
2020
2019
2018
$
3,321 $
3,385 $
3,128
48
19
81
82
84
25
26
78
90
118
33
104
3,551
3,598
3,473
(176)
(172)
(168)
$
3,375 $
3,426 $
3,305
$
(116) $
(161) $
(248)
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 $19.6 billion and $21.0 billion, and cash of $89 million and $109 million, at
December 31, 2020 and 2019, respectively.
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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
4. Fair value measurements
December 31
December 31
2020
2019
$
12,305 $
14,004
2,438
2,905
1,462
584
2,466
2,709
1,464
490
$
19,694 $
21,133
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 or pricing models, 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) and may
require the use of models to be priced. The lack of market based inputs 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
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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.
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 future policy benefit reserves for our
guaranteed minimum death benefits (GMDB) and an increase in the fair value liability for our 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.
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 in the Consolidated balance sheets. Prior to 2020, a portion of the GLB liability that represented
expected losses allocated to premiums received was recorded as incurred losses within Future policy benefits, with changes in
these estimates recorded in Future policy benefits. We reclassified $441 million, $409 million, and $346 million of GLB
liability as of December 31, 2019, 2018, and 2017, respectively, to Accounts payable, accrued expenses, and other liabilities
in the Consolidated balance sheets to conform with the new presentation. 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.
Financial instruments measured at fair value on a recurring basis, by valuation hierarchy
December 31, 2020
(in millions of U.S. dollars)
Assets:
Fixed maturities available for sale
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
Equity securities
Short-term investments
Other investments (1)
Securities lending collateral
Investment 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
$
2,148 $
522 $
— $
—
—
—
—
2,148
3,954
2,866
434
—
35
4,264
25,808
34,758
18,410
6,874
86,372
—
1,474
438
1,844
—
124
546
1,573
60
—
2,179
73
5
10
—
—
—
2,670
26,354
36,331
18,470
6,874
90,699
4,027
4,345
882
1,844
35
4,388
$
$
$
13,701 $
90,252 $
2,267 $
106,220
52 $
— $
— $
17
—
—
—
—
1,089
69 $
— $
1,089 $
52
17
1,089
1,158
(1)
(2)
Excluded from the table above are partially-owned investments, investment funds, and limited partnerships of $6,770 million, policy loans of $233 million and other
investments of $60 million at December 31, 2020 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.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
December 31, 2019
(in millions of U.S. dollars)
Assets:
Fixed maturities available for sale
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
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
—
—
—
—
3,283
23,707
31,791
19,192
7,515
85,488
812
4,291
799
994
24
2
3,573
$
$
$
10,070 $
83,868 $
2,045 $
95,983
93 $
— $
— $
13
—
—
—
—
897
106 $
— $
897 $
93
13
897
1,003
(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.
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
2020
Valuation
Technique
Significant
Unobservable
Inputs
Ranges
GLB (1)
$
1,089
Actuarial model
Lapse rate
3% - 34%
Annuitization rate
0% - 100%
Weighted
Average (1)
4.7 %
3.6 %
(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 2020, we completed a review of policyholder behavior related to annuitizations, partial
withdrawals, lapses, and mortality for our variable annuity reinsurance business. As a result, we refined our policyholder
behavior assumptions (mainly those relating to annuitizations and partial withdrawals), which had an insignificant impact on net
income. During the year ended December 31, 2020, we also made routine model refinements to the internal valuation model
which had an insignificant impact on net income.
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
Corporate
and asset-
backed
securities
Non-U.S.
MBS
Equity
securities
Short-term
investments
Other
investments
GLB (1)
$
449 $
1,451 $
60 $
69 $
6 $
10 $
897
Assets
Liabilities
—
134
(16)
(73)
19
(1)
274
(122)
(57)
—
(8)
(30)
708
(186)
(423)
—
—
(1)
—
—
2
—
(1)
—
—
(3)
—
1
23
(17)
—
—
—
—
—
(1)
14
(2)
(12)
—
—
—
—
—
—
—
—
—
—
—
—
202
—
—
—
(10)
Year Ended December 31, 2020
(in millions of U.S. dollars)
Balance, beginning of year
Transfers into Level 3
Transfers out of Level 3
Change in Net Unrealized
Gains/Losses in OCI
Net Realized Gains/Losses
Purchases
Sales
Settlements
Other
Balance, end of year
$
546 $
1,573 $
60 $
73 $
5 $
10 $
1,089
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
$
$
— $
(5) $
— $
4 $
— $
— $
202
16 $
(6) $
— $
— $
— $
— $
—
(1)
Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value.
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Available-for-Sale Debt Securities
Corporate
and asset-
backed
securities
Non-U.S.
MBS
Equity
securities
Short-term
investments
Other
investments
GLB (1)
$
345 $
1,299 $
61 $
57 $
1 $
11 $
861
Assets
Liabilities
11
(24)
13
(1)
228
(70)
(53)
—
23
(38)
(2)
(4)
577
(125)
(279)
—
—
(16)
—
—
19
(1)
(3)
—
—
—
1
(2)
34
(21)
—
—
—
—
—
—
6
—
—
—
—
—
—
—
(1)
—
(1)
—
$
449 $
1,451 $
60 $
69 $
6 $
10 $
—
—
—
4
—
—
—
32
897
Year Ended December 31, 2019
(in millions of U.S. dollars)
Balance, beginning of year
Transfers into Level 3
Transfers out of Level 3
Change in Net Unrealized
Gains/Losses in OCI
Net Realized Gains/Losses
Purchases
Sales
Settlements
Other
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
$
$
— $
(2) $
— $
(3) $
— $
— $
4
7 $
(8) $
— $
— $
— $
— $
—
(1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value.
Assets
Liabilities
Available-for-Sale Debt Securities
Year Ended December 31, 2018
(in millions of U.S. dollars)
Non-U.S.
Corporate and
asset-backed
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 $
550
Transfers into Level 3
Transfers out of Level 3
Change in Net Unrealized
Gains/Losses in OCI
Net Realized Gains/Losses
Purchases
Sales
Settlements
Other
13
(2)
(12)
(3)
334
(69)
(9)
—
24
1
(31)
(3)
—
—
(4)
(5)
672
(164)
—
—
5
—
(230)
(20)
—
—
(2)
6
37
(28)
—
—
5
—
—
—
9
—
—
(252)
(2)
1
50
—
(13)
(49)
—
—
—
—
—
—
—
—
(2)
248
—
—
—
—
—
—
—
63
Balance, end of year
$
345 $
1,299 $
61 $
57 $
1 $
11 $
— $
861
Net Realized Gains/Losses
Attributable to Changes in
Fair Value at the Balance
Sheet Date
$
(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.
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, 2020
(in millions of U.S. dollars)
Assets:
Fixed maturities held to maturity
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
Total assets
Liabilities:
Repurchase agreements
Short-term debt
Long-term debt
Trust preferred securities
Total liabilities
December 31, 2019
(in millions of U.S. dollars)
Assets:
Fixed maturities held to maturity
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
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
Net Carrying
Value
$
1,395 $
57 $
— $
1,452 $
—
—
—
—
1,405
2,438
2,146
5,069
—
—
—
—
1,405
2,438
2,146
5,069
1,392
1,288
2,150
1,999
4,824
$
$
1,395 $
11,115 $
— $
12,510 $
11,653
— $
1,405 $
— $
1,405 $
1,405
—
—
—
—
17,487
473
—
—
—
—
—
17,487
14,948
473
308
$
— $
19,365 $
— $
19,365 $
16,661
Level 1
Level 2
Level 3
Total
Carrying Value
Fair Value
$
1,292 $
55 $
— $
1,347 $
—
—
—
—
1,485
2,436
2,396
5,309
—
32
—
—
1,485
2,468
2,396
5,309
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
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
2020
2019
2018
$
37,749 $
36,848 $
34,782
$
$
3,512
3,276
(7,441)
(7,849)
3,186
(7,389)
33,820 $
32,275 $
30,579
37,037 $
35,876 $
34,108
3,323
3,107
(7,243)
(7,693)
3,175
(7,219)
$
33,117 $
31,290 $
30,064
Ceded losses and loss expenses incurred were $5.0 billion, $4.9 billion, and $5.6 billion for the years ended December 31,
2020, 2019, and 2018, respectively.
b) Reinsurance recoverable on ceded reinsurance
(in millions of U.S. dollars)
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 valuation allowance for uncollectible reinsurance.
December 31, 2020
December 31, 2019
Net Reinsurance
Recoverable (1)
Valuation
allowance
Net Reinsurance
Recoverable (1)
Valuation
allowance
$
$
$
14,647 $
257 $
14,181 $
945
57
1,000
15,592 $
314 $
15,181 $
206 $
5 $
197 $
240
76
316
4
The increase in reinsurance recoverable on losses and loss expenses in 2020 was primarily due to catastrophe losses, partially
offset by crop activity and prior period development.
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 valuation allowance 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 a valuation allowance for amounts estimated to be uncollectible on both unpaid and paid losses as well as future
policy benefits. Refer to Note 1 d) for a discussion of the valuation allowance methodology.
The following table presents a roll-forward of valuation allowance for uncollectible reinsurance related to Reinsurance
recoverable on loss and loss expenses:
(in millions of U.S. dollars)
Year Ended December 31, 2020
Valuation allowance for uncollectible reinsurance - beginning of period
Provision for uncollectible reinsurance
Write-offs charged against the valuation allowance
Foreign exchange revaluation
Valuation allowance for uncollectible reinsurance - end of period
$
$
316
21
(25)
2
314
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following tables present a listing, at December 31, 2020, of the categories of Chubb's reinsurers:
December 31, 2020
(in millions of U.S. dollars, except for percentages)
Categories
Largest reinsurers
Other reinsurers rated A- or better
Other reinsurers rated lower than A- or not rated
Pools
Structured settlements
Captives
Other
Total
Gross Reinsurance
Recoverable on
Loss and Loss
Expenses
Valuation
allowance for
Uncollectible
Reinsurance
% of Gross
Reinsurance
Recoverable
$
7,267 $
4,901
466
366
521
2,107
278
88
58
64
14
11
11
68
$
15,906 $
314
1.2 %
1.2 %
13.7 %
3.8 %
2.1 %
0.5 %
24.5 %
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
Comprises:
Largest reinsurers
• All groups of reinsurers or captives where the gross recoverable exceeds one percent
of Chubb's total shareholders' equity.
Other reinsurers rated A- or
better
Other reinsurers rated lower than
A- or not rated
Pools
Structured settlements
Captives
• 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.
Other
• Amounts recoverable that are in dispute or are from companies that are in
supervision, rehabilitation, or liquidation.
The valuation allowance for uncollectible reinsurance is principally based on an analysis of the credit quality of the reinsurer and
collateral balances. We establish the valuation allowance 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.
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
6. Goodwill and Other intangible assets
Goodwill
The following table presents a roll-forward of Goodwill by segment:
(in millions of U.S. dollars)
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
Balance at December 31, 2018
$
6,946 $
2,230 $
134 $
4,770 $
371 $
820 $
15,271
Foreign exchange revaluation and other
9
4
—
15
—
(3)
25
Balance at December 31, 2019
$
6,955 $
2,234 $
134 $
4,785 $
371 $
817 $
15,296
Acquisition of Banchile Seguros de Vida
Foreign exchange revaluation and other
—
17
—
6
—
—
16
35
—
—
28
2
44
60
Balance at December 31, 2020
$
6,972 $
2,240 $
134 $
4,836 $
371 $
847 $
15,400
Other intangible assets
Other intangible assets at December 31, 2020 and 2019 were $5,811 million and $6,063 million, respectively, principally
acquired from the Chubb Corp acquisition. Other intangible assets in 2020 and 2019 comprised $2,846 million and $3,114
million, respectively, that are subject to amortization, principally agency distribution relationships and renewal rights, and
$2,965 million and $2,949 million, respectively, that are not subject to amortization, principally trademarks. Amortization
expense related to purchased intangibles was $290 million, $305 million, and $339 million for the years ended December 31,
2020, 2019, and 2018, principally related to agency distribution relationships and renewal rights.
The following table presents, as of December 31, 2020, the expected estimated pre-tax amortization expense (benefit) of
purchased intangibles, at current foreign currency exchange rates, for the next five years:
Associated with the Chubb Corp Acquisition
2021
2022
2023
2024
2025
Total
For the Years Ending
December 31
(in millions of U.S. dollars)
Agency
distribution
relationships and
renewal rights
Fair value
adjustment on
Unpaid losses and
loss expense (1)
$
217 $
197
178
160
145
(20) $
(14)
(7)
(6)
(6)
Other intangible
assets
Total Amortization
of purchased
intangibles
89 $
101
96
90
89
286
284
267
244
228
Total
197 $
183
171
154
139
$
897 $
(53) $
844 $
465 $
1,309
(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 $110 million and
$145 million at December 31, 2020 and 2019, respectively. Refer to Note 1(h) for additional information.
VOBA
The following table presents a roll-forward of VOBA:
(in millions of U.S. dollars)
Balance, beginning of year
Amortization of VOBA (1)
Foreign exchange revaluation and other
Balance, end of year
(1)
Recognized in Policy acquisition costs in the Consolidated statements of operations.
2020
2019
$
306 $
295 $
(27)
(16)
(24)
35
$
263 $
306 $
2018
326
(25)
(6)
295
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following table presents, as of December 31, 2020, the expected estimated pre-tax amortization expense related to VOBA
for the next five years at current foreign exchange rates:
For the Years Ending December 31
(in millions of U.S. dollars)
2021
2022
2023
2024
2025
Total
7. Unpaid losses and loss expenses
VOBA
22
21
19
17
16
95
$
$
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, 2020 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)
Year Ended December 31
2020
2019
2018
$
62,690 $
62,960 $
63,179
(14,181)
(14,689)
(14,014)
48,509
48,271
49,165
22,124
19,575
19,048
(414)
(845)
(981)
21,710
18,730
18,067
7,782
9,652
17,434
379
53,164
14,647
7,894
10,579
18,473
7,544
10,796
18,340
(19)
(621)
48,509
14,181
48,271
14,689
Gross unpaid losses and loss expenses, end of year
$
67,811 $
62,690 $
62,960
(1) Net of valuation allowance 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 $19 million, $53 million, and $85 million for 2020, 2019, and 2018, respectively.
The increase in gross and net unpaid losses and loss expense in 2020 was driven by catastrophe losses incurred, principally
from the COVID-19 pandemic. 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.
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The loss development tables under section c) below, present Chubb’s historical incurred and paid claims development by broad
product line through December 31, 2020, net of reinsurance, as well as the cumulative number of reported claims, IBNR
balances, and other supplementary information.
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, 2020
9,600
17,441
2,124
2,491
3,025
6,832
2,725
1,200
312
4,742
50,492
1,461
5,743
564
1,380
141
2,426
1,686
29
104
1,153
14,687
1,109
1,523
67,811
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Business excluded from the loss development tables
“Other” shown in the reconciliation table comprises businesses excluded from the loss development tables:
• 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, 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 loss development tables 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 loss 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 Insurance 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; and
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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
nature and complexity of underlying coverage provided and net limits of exposure provided;
segmentation of data to provide sufficient homogeneity and credibility for loss projection methods;
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;
reported and projected loss trends;
extent of emerged loss experience relative to the remaining expected period of loss emergence;
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
nature and extent of underlying assumptions.
F-42
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-43
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 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.
•
•
The nature and complexity of underlying coverage provided and net limits of exposure provided;
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:
•
• 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, 2011 to December 31, 2019 and average historical claim
duration as of December 31, 2020, are presented as supplementary information.
• 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, 2020.
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
• 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. In our North
America segments, we generally consider a reported claim to be one claim per coverage per claimant. For our North America
segments, we refined our claim count methodology in 2020 for our U.S. operations. For workers' compensation, we moved from
including losses below the deductible in our reported claims to excluding them. This reduction in reported claims aligns claim
counts to the portion of the claims to which Chubb has incurred losses, which we view as a more meaningful presentation. For
non-casualty, personal and liability, we aligned our claim count methodology to reflect a reported claim per claimant, per
coverage basis, and including all reported claims with either an indemnity or expense transaction. These changes resulted in
fewer reported claims in non-casualty and additional reported claims in personal and liability. In our Overseas General Insurance
segment, we generally consider a reported claim to be on a per occurrence basis. Global Reinsurance segment’s portfolio
comprises a mix of proportional and non-proportional treaties. The proportional treaties are reported on a bulk basis and do not
lend themselves to meaningful claim count data. As such, we do not provide claim count information for our Global Reinsurance
segment.
We exclude claims closed without payment. Claims are counted on a direct basis without consideration of ceded reinsurance.
Use of the presented claim counts in analysis of company experience has significant limitations, including:
•
•
•
Claims for certain events and/or product lines, such as portions of our A&H business, are not reported on an individual
basis, but rather in bulk and thus not available for inclusion in this disclosure.
Each segment typically has a mixture of primary and excess experience which has shifted over time.
Captive business, especially in Workers' Compensation and Liability, largely represents fronted business where our net
exposure to loss is minimal; however, since the claim count is based on direct claims, there is a mismatch between direct
claims and net loss dollars, the extent of which varies by accident year.
Reported claim counts include open claims which have case reserves but exclude claims that have been incurred but not
reported. As such the reported claims are not consistent with the incurred losses in the triangle, which include incurred but not
reported losses. One can calculate reported losses by subtracting incurred but not reported losses from incurred losses in the
triangle. Reported claim counts are also inconsistent with losses in the paid loss triangle, since reported counts would include
claims with case reserves but no payments to date.
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-58.
F-45
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
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
2015
$ 1,037 $ 1,030 $ 1,046 $ 1,049 $ 1,053 $ 1,022 $ 1,012 $ 1,009 $ 988 $
2016
2018
2017
2019
2014
2013
2012
2020
973 $
1,050
1,011
1,030
1,040
1,011
989
986
977
953
1,109
1,108
1,122
1,127
1,086
1,073
1,037
1,014
1,207
1,201
1,217
1,215
1,163
1,100
1,073
1,282
1,259
1,276
1,279
1,217
1,154
1,367
1,361
1,383
1,378
1,269
1,413
1,380
1,399
1,393
1,359
1,361
1,379
1,391
1,384
234
280
347
419
530
723
709
767
1,367
1,086
$ 11,959
As of December 31
2020
Net
IBNR
Reserves
208
Reported
Claims (in
thousands)
45
44
43
45
50
51
50
51
47
24
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
119 $
$
2012
294 $
111
2013
411 $
271
107
2014
484 $
365
286
113
2015
533 $
436
422
295
116
2016
567 $
486
506
410
301
122
2017
595 $
532
553
484
418
326
120
2018
616 $
574
587
532
501
452
313
130
2019
640 $
592
616
566
564
529
437
329
143
2020
654
612
633
599
606
584
516
451
341
111
$ 5,107
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
December 31, 2020
2,748
6,852
9,600
December 31, 2020
(94)
(256)
(350)
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
2
3
10 %
16 %
10 %
4
7 %
5
5 %
6
4 %
7
3 %
8
2 %
9
10
2 %
1 %
F-46
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
2020
(in millions of U.S. dollars)
Unaudited
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$ 3,500 $ 3,586 $ 3,630 $ 3,665 $ 3,593 $ 3,498 $ 3,384 $ 3,316 $ 3,193 $ 3,143 $
3,552
3,628
3,547
3,613
3,542
3,535
3,565
3,543
3,586
3,560
3,524
3,533
3,674
3,709
3,534
3,426
3,430
3,717
3,819
3,595
3,322
3,331
3,216
3,656
3,976
3,692
3,499
3,375
3,235
3,122
3,470
3,943
3,805
3,581
3,494
3,452
3,235
2,964
3,346
3,736
3,799
3,631
3,696
3,628
4,098
$ 35,276
Net
IBNR
Reserves
226
353
317
572
855
962
1,475
1,737
2,381
3,695
Reported
Claims (in
thousands)
25
25
25
25
27
27
27
28
28
24
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$
160 $
652 $ 1,209 $ 1,805 $ 2,214 $ 2,477 $ 2,659 $ 2,741 $ 2,827 $ 2,863
166
656
130
1,172
548
164
1,680
1,192
679
138
2,092
1,597
1,250
605
171
2,326
2,007
1,804
1,206
663
161
2,502
2,232
2,202
1,856
1,336
617
190
2,619
2,374
2,442
2,291
1,975
1,162
754
176
2,688
2,465
2,584
2,533
2,334
1,701
1,303
671
152
$ 19,294
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Liability — Long-tail (continued)
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
December 31, 2020
$
$
1,459
15,982
17,441
December 31, 2020
$
$
(176)
(117)
(293)
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
5 %
2
3
4
5
14 %
17 %
16 %
12 %
6
7 %
7
5 %
8
3 %
9
10
2 %
1 %
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.
Net Incurred Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
As of December 31
2020
Net IBNR
Reserves
Reported
Claims (in
thousands)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$ 581 $ 590 $ 581 $ 549 $ 533 $ 525 $ 517 $ 511 $ 513 $ 503 $
634
606
577
561
520
519
509
507
527
531
523
516
469
462
462
595
583
581
597
555
539
487
470
502
515
458
504
502
527
524
532
566
577
536
564
606
505
458
539
455
481
616
575
637
646
$ 5,415
13
2
21
25
35
61
118
198
284
517
16
16
18
17
15
16
17
17
16
9
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Other-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
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$
86 $
235 $
341 $
400 $
437 $
461 $
466 $
480 $
486 $
69
223
69
320
197
80
387
271
220
47
435
348
318
137
52
470
385
391
215
146
66
487
411
455
305
246
175
74
493
419
474
371
323
313
169
70
486
502
426
501
395
374
381
270
190
53
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
$ 3,578
December 31, 2020
$
$
287
1,837
2,124
December 31, 2020
$
$
23
19
42
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
2
3
4
5
12 %
23 %
19 %
14 %
10 %
6
5 %
7
3 %
8
2 %
9
1 %
10
— %
F-49
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
2020
(in millions of U.S. dollars)
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$ 1,960 $ 1,934 $ 1,877 $ 1,856 $ 1,835 $ 1,840 $ 1,835 $ 1,835 $ 1,835 $ 1,833 $
2,033
1,916
1,883
1,864
1,859
1,847
1,844
1,850
1,844
1,434
1,424
1,337
1,360
1,340
1,340
1,338
1,344
1,643
1,661
1,579
1,559
1,549
1,550
1,558
1,736
1,745
1,650
1,638
1,605
1,589
1,911
1,890
1,799
1,782
1,818
2,704
2,608
2,505
2,522
2,053
2,240
2,175
2,052
2,037
3,150
$ 19,870
Net
IBNR
Reserves
4
(8)
7
10
(1)
32
51
71
166
1,061
Reported
Claims (in
thousands)
416
426
455
483
545
650
763
901
1,036
927
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
$
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
715
2013
2012
2015
2016
2018
2019
2017
2014
1,577
651
1,698
1,138
820
2020
2011
939 $ 1,574 $ 1,718 $ 1,777 $ 1,787 $ 1,811 $ 1,816 $ 1,821 $ 1,825 $ 1,830
1,844
1,335
1,554
1,574
1,761
2,394
2,018
1,677
1,396
$ 17,383
1,842
1,333
1,546
1,572
1,733
2,303
1,825
1,030
1,816
1,324
1,532
1,556
1,656
2,087
1,027
1,822
1,311
1,506
1,488
1,504
979
1,795
1,285
1,484
1,343
846
1,767
1,238
1,374
727
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
F-50
December 31, 2020
4
2,487
2,491
$
$
December 31, 2020
$
$
2
(37)
(35)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Commercial P&C Insurance — Non-Casualty — Short-tail (continued)
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
2
46 %
38 %
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
2020
(in millions of U.S. dollars)
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$ 2,208 $ 2,210 $ 2,185 $ 2,173 $ 2,164 $ 2,161 $ 2,160 $ 2,158 $ 2,159 $ 2,157 $
Net IBNR
Reserves
7
2,185
2,183
2,183
2,191
2,186
2,186
2,189
2,194
1,860
1,888
1,897
1,900
1,924
1,937
1,945
2,205
2,206
2,192
2,146
2,160
2,147
2,494
2,550
2,561
2,544
2,563
2,440
2,535
2,545
2,482
3,035
3,069
3,002
3,010
3,037
2,957
2,190
1,948
2,141
2,570
2,471
2,998
3,103
2,993
2,931
$ 25,502
18
26
14
21
45
96
244
329
1,119
Reported
Claims (in
thousands)
179
188
132
144
148
154
163
169
155
100
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2012
2013
2011
2015
2016
2014
2019
2017
2018
1,177
1,806
1,043
1,957
1,504
1,310
2020
$ 1,360 $ 1,835 $ 1,972 $ 2,052 $ 2,105 $ 2,129 $ 2,139 $ 2,146 $ 2,148 $ 2,149
2,165
1,917
2,116
2,508
2,370
2,799
2,706
2,437
1,334
$ 22,501
2,163
1,895
2,106
2,478
2,314
2,668
2,549
1,668
2,164
1,885
2,080
2,392
2,211
2,520
1,926
2,149
1,843
2,035
2,271
2,052
1,698
2,117
1,787
1,926
2,084
1,453
2,063
1,688
1,765
1,499
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Personal P&C Insurance — Short-tail (continued)
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
December 31, 2020
24
3,001
3,025
December 31, 2020
(1)
85
84
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
57 %
2
24 %
8
— %
9
— %
5
3 %
6
1 %
4
5 %
7
1 %
3
7 %
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.
Net Incurred Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$ 1,255 $ 1,262 $ 1,254 $ 1,244 $ 1,158 $ 1,090 $ 1,079 $ 1,027 $ 1,023 $ 1,025 $
1,290
1,261
1,326
1,346
1,343
1,337
1,315
1,304
1,272
1,281
1,279
1,276
1,322
1,276
1,242
1,182
1,148
1,279
1,352
1,362
1,378
1,293
1,206
1,165
1,196
1,296
1,328
1,351
1,326
1,265
1,232
1,337
1,407
1,437
1,425
1,227
1,332
1,381
1,433
1,330
1,383
1,447
1,409
1,480
87
86
151
199
341
384
671
809
1,810
1,493
$ 13,470
As of December 31
2020
Net
IBNR
Reserves
31
Reported
Claims (in
thousands)
37
38
39
39
41
43
43
43
40
28
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Overseas General Insurance — 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
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
$
86 $
2012
243 $
75
2013
393 $
252
85
2014
528 $
441
267
111
2015
631 $
597
428
293
86
2016
713 $
713
579
473
287
127
2017
789 $
857
725
608
497
324
98
2018
842 $
929
829
725
679
534
323
112
2019
876 $
973
899
811
802
687
535
334
126
2020
901
1,040
952
876
884
815
702
503
341
110
$ 7,124
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
December 31, 2020
486
6,346
6,832
December 31, 2020
(59)
9
(50)
$
$
$
$
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
8 %
2
3
4
5
15 %
15 %
12 %
10 %
6
8 %
7
6 %
8
4 %
9
10
4 %
3 %
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 2011, 2017, and 2018 accident years. Latin America and Europe each make up about 30 percent of the Chubb
Overseas General non-casualty book.
F-53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Overseas General Insurance — Non-Casualty — Short-tail (continued)
Net Incurred Loss and Allocated Loss Adjustment Expenses
Years Ended December 31
As of December 31
2020
(in millions of U.S. dollars)
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$ 1,908 $ 1,995 $ 1,938 $ 1,898 $ 1,879 $ 1,867 $ 1,859 $ 1,849 $ 1,844 $ 1,843 $
1,712
1,702
1,661
1,605
1,599
1,590
1,575
1,570
1,562
1,787
1,780
1,714
1,665
1,660
1,633
1,620
1,610
1,863
1,932
1,875
1,864
1,828
1,817
1,810
1,963
2,083
2,062
2,030
2,011
2,003
2,070
2,071
2,058
2,036
2,040
2,222
2,264
2,245
2,225
2,186
2,276
2,237
2,208
2,228
2,571
$ 20,129
13
19
7
24
22
18
48
94
804
Net
IBNR
Reserves
6
Reported
Claims (in
thousands)
543
555
573
548
571
581
589
624
640
518
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
$
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
679
2013
2012
2017
2018
2016
2019
2015
2014
1,237
696
1,425
1,284
758
2020
2011
765 $ 1,486 $ 1,694 $ 1,750 $ 1,780 $ 1,795 $ 1,804 $ 1,808 $ 1,807 $ 1,806
1,532
1,578
1,774
1,927
1,981
2,106
1,962
1,747
1,085
$ 17,498
1,532
1,575
1,759
1,897
1,954
2,029
1,753
1,050
1,530
1,567
1,746
1,875
1,881
1,848
1,006
1,518
1,549
1,715
1,793
1,679
1,051
1,508
1,512
1,651
1,560
1,013
1,485
1,480
1,438
857
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
December 31, 2020
$
$
94
2,631
2,725
December 31, 2020
$
$
(8)
(69)
(77)
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
2
3
45 %
35 %
11 %
4
3 %
5
2 %
6
1 %
7
1 %
8
— %
9
— %
10
— %
F-54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 and workers' compensation, 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
2020
(in millions of U.S. dollars)
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$ 408 $ 415 $ 430 $ 433 $ 428 $ 418 $ 415 $ 409 $ 402 $ 389 $
387
384
321
392
327
334
395
330
335
285
379
331
340
290
224
373
332
343
300
228
215
372
324
345
301
236
217
246
374
317
348
309
236
221
249
239
379
311
331
306
245
218
256
248
247
$ 2,930
Net
IBNR
Reserves
15
11
13
16
22
27
28
48
90
153
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
2011
$
70 $
2012
146 $
78
2013
195 $
168
65
2014
236 $
223
143
92
2015
267 $
262
186
185
90
2016
292 $
293
222
218
159
58
2017
312 $
309
242
249
192
113
47
2018
325 $
324
260
265
217
143
100
42
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2019
332 $
336
269
277
233
159
122
96
40
2020
338
342
272
287
250
175
140
126
90
41
$ 2,061
F-55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Global Reinsurance — Casualty — Long-tail (continued)
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
December 31, 2020
$
$
331
869
1,200
December 31, 2020
$
$
(10)
(12)
(22)
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
2
3
4
21 %
23 %
12 %
10 %
5
7 %
6
5 %
7
4 %
8
3 %
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 77 percent of loss on proportional treaties in treaty year 2011 and after. This
percentage has increased over time with the proportion being approximately 59 percent for treaty years 2011 to 2012 growing
to an average of 82 percent for treaty years 2013 to 2020, with the remainder being written on an excess of loss basis.
Net Incurred Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
As of December 31
2020
2013
2012
2014
2011
2015
$ 277 $ 279 $ 276 $ 266 $ 267 $ 268 $ 267 $ 268 $ 267 $
192
148
182
147
202
160
167
211
162
2018
2019
2016
2017
233
191
143
183
155
184
188
144
186
162
189
397
186
141
184
162
192
424
288
186
141
183
155
194
454
300
143
2020
269 $
184
140
182
161
190
451
303
141
212
$ 2,233
Net
IBNR
Reserves
1
1
—
3
4
5
10
(8)
29
110
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
F-56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Global Reinsurance — Non-Casualty — Short-tail (continued)
Net Cumulative Paid Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Years Ended December 31
Unaudited
Accident
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
2011
$
87 $
2012
179 $
45
2013
210 $
130
46
2014
236 $
157
103
66
2015
254 $
167
121
131
56
2016
259 $
173
131
154
104
57
2017
262 $
178
134
165
133
133
191
2018
263 $
180
137
171
143
161
322
94
2019
264 $
181
137
173
147
172
402
258
35
2020
265
180
139
175
153
178
415
277
86
63
$ 1,931
Net Liabilities for Loss and Allocated Loss Adjustment Expenses
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
Supplementary Information: (Favorable)/ Adverse Prior Period Development
(in millions of U.S. dollars)
Accident years prior to 2011
Accident years 2011 - 2020 from tables above
All Accident years
December 31, 2020
$
$
10
302
312
December 31, 2020
$
$
—
(2)
(2)
Supplementary Information: Average Annual Percentage Payout of Net Incurred Claims by Age, as of December 31, 2020 (Unaudited)
Age in Years
Percentage
1
2
3
33 %
38 %
14 %
4
6 %
5
4 %
6
2 %
7
1 %
8
1 %
9
10
— %
— %
F-57
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, 2020
(in millions of U.S. dollars)
(favorable)/unfavorable
Accident
years prior
to 2011
2011 - 2019
accident years
(implied PPD
per loss
triangles)
Components of PPD
RIPs,
Expense
adjustments,
and earned
premiums
Total
Other (1)
PPD on loss
reserves
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
$
(354) $
(247) $
(102)
$
(703) $
(37)
2
5
(391)
(245)
(97) (2)
(30)
(733)
31
—
31 (3)
$
(672)
(30)
(702)
85
(1)
(3)
81
(18)
63
9
(59)
1
(69)
(8)
(24)
(60)
(67)
(23) (4)
(12)
(2)
(14)
(10)
—
(10)
(1)
(1)
(2)
$
(380) $
(323) $
(125)
(49)
(101)
(150)
(23)
(3)
(26)
—
—
—
(2)
(1)
(3)
(49)
(101)
(150)
(25)
(4)
(29)
$
$
$
(828) $
10
$
(818)
(19) $
433
(414) $
9
—
19
$
(10)
433
$
(395)
(1) Other includes the impact of foreign exchange.
(2)
Includes favorable development of $80 million related to our Alternative Risk Solutions business (U.S. and Bermuda) and an adjustment to exclude $15 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)
(4)
Includes premium returns associated with our Alternative Risk Solutions business, which is excluded from the triangles.
Includes favorable development of $22 million related to International A&H business; the remaining difference relates to a number of other items, none of which are
individually material.
F-58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Prior Period Development
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. 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 PPD by segment:
Years Ended December 31
(in millions of U.S. dollars, except for percentages)
2020
North America Commercial P&C Insurance
North America Personal P&C Insurance
North America Agricultural Insurance
Overseas General Insurance
Global Reinsurance
Corporate
Total
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
Long-tail
Short-tail
Total
% of beginning
net unpaid
reserves (1)
$
(672) $
(30) $
(702)
$
$
$
$
—
—
(49)
(25)
433
63
(10)
(101)
(4)
—
(313) $
(82) $
63
(10)
(150)
(29)
433
(395)
(668) $
19 $
(649)
—
—
(68)
(59)
153
(95)
(80)
(24)
30
—
(642) $
(150) $
(395) $
(215) $
—
—
(67)
(69)
45
41
(110)
(145)
19
—
(95)
(80)
(92)
(29)
153
(792)
(610)
41
(110)
(212)
(50)
45
$
(486) $
(410) $
(896)
1.4 %
0.1 %
— %
0.3 %
0.1 %
0.9 %
0.8 %
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) Calculated based on the beginning of period consolidated net unpaid losses and loss expenses.
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
2020
North America Commercial P&C Insurance experienced net favorable PPD of $702 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 $672 million in long-tail business, primarily from:
• Net favorable development of $363 million in workers’ compensation lines. The majority of the favorable development
related to accident years 2016 and prior, driven by lower than expected loss emergence and related updates to loss
development factors. In addition, we experienced favorable development of $62 million related to our annual
assessment of multi-claimant events, including industrial accidents, in the 2019 accident year. Consistent with prior
F-59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or
identification of significant losses. This favorable development in accident year 2019 was partially offset by some
higher than expected activity from other claims;
• Net favorable development of $231 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 2019 accident years, mainly due to higher than expected claim severity in our Directors and Officers
(D&O) portfolios;
• Net favorable development of $83 million in commercial excess and umbrella portfolios, mainly in accident years 2014
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, partially offset by adverse development in more recent accident years,
due to higher than expected loss activity;
• Net favorable development of $67 million in professional liability (errors & omissions and cyber risk), driven by accident
years 2016 and prior, which experienced lower than expected loss emergence;
• Net favorable development of $43 million in voluntary environmental lines, in accident years 2016 and prior, due to
lower than expected loss emergence and a related update to loss development factors;
• Net favorable development of $41 million on large multi-line prospective deals in the 2016 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 $26 million tied to the
loss performance of the particular deals;
• Net favorable development of $40 million in foreign casualty businesses, mainly in accident year 2016, due to lower
than expected reported loss activity, partially offset by adverse development on a large loss in accident year 2017;
• Net adverse development of $48 million in general liability coverages, driven by higher than expected reported loss
activity in accident years 2017 through 2019, partially offset by favorable development in older accident years;
• Net adverse development of $64 million in medical liability businesses, mainly impacting accident years 2016 through
2019, primarily due to higher than expected reported loss emergence and associated changes to loss development
factors and loss expectations; and
• Net adverse development of $77 million in commercial automobile liability, mainly in high deductible and excess
portfolios, driven by adverse paid and reported loss emergence and related updates to loss development factors, mainly
in accident years 2015 through 2019.
• Net favorable development of $30 million in short-tail business primarily from:
• Net favorable development of $37 million, in accident & health, mainly in accident years 2018 and 2019, driven by
lower than expected paid loss emergence;
• Net favorable development of $31 million in surety businesses, driven by accident year 2018, where loss emergence
was lower than expected; and
• Net adverse development of $21 million in our marine portfolios, mainly impacting the 2019 accident year, driven by
higher than expected non-catastrophe loss development.
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
F-60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
offset by some higher than expected activity from other claims and from involuntary pools. The remaining overall
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.
2018
North America Commercial P&C Insurance experienced net favorable PPD of $610 million, representing 1.2 percent of the
beginning consolidated net unpaid losses and loss expense reserves.
F-61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North America Personal P&C Insurance
2020
North America Personal P&C Insurance incurred net adverse PPD of $63 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 $84 million in the homeowners product line, including valuables, mainly in accident years
2017 through 2019 due to higher than expected non-catastrophe loss emergence and adverse development arising from
natural catastrophes in accident years 2017 and 2018; and
• Net favorable development of $22 million in the personal excess line, driven by favorable development mainly in the 2017
accident year, partially offset by adverse development in accident year 2019.
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; 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, 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 $10 million, $80 million, and $110 million in 2020,
2019, and 2018, 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., 2020 results based on
crop yield results at year-end 2019).
Overseas General Insurance
2020
Overseas General Insurance experienced net favorable PPD of $150 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 $49 million in long-tail business, primarily from:
• Net favorable development of $94 million in casualty lines, including favorable development of $143 million in
accident years 2016 and prior, due to lower than expected loss emergence across primary and excess lines in
Continental Europe, U.K., and Asia Pacific, partially offset by adverse development of $49 million in accident years
2017 through 2019, primarily due to adverse large loss experience in U.K. and Asia Pacific;
• Net favorable development of $22 million in political risk, driven by lower than expected loss emergence in accident
years 2018 and 2019; and
• Net adverse development of $80 million in financial lines, with favorable development of $61 million in accident years
2015 and prior, primarily from favorable case-specific settlements within Continental Europe and Asia Pacific financial
institutions, which was more than offset by adverse development of $141 million in accident years 2016 through
2019, primarily due to adverse large loss experience in D&O portfolios in the U.K. and Asia Pacific.
• Net favorable development of $101 million in short-tail business, primarily from:
F-62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
• Net favorable development of $69 million in marine, driven by favorable loss emergence and claim-specific loss
settlements across all regions in accident years 2012 through 2019; and
• Net favorable development of $21 million in A&H, driven by favorable development across Continental Europe, U.K.
and Latin America primarily in accident years 2018 and 2019.
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.
• 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, representing 0.4 percent of the beginning
consolidated net unpaid losses and loss expense reserves.
Global Reinsurance
2020
Global Reinsurance experienced net favorable PPD of $29 million, which was the net result of several underlying favorable and
adverse movements, none of which is significant individually or in the aggregate.
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.
F-63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
2018
Global Reinsurance experienced net favorable PPD of $50 million, representing 0.1 percent of the beginning consolidated net
unpaid losses and loss expense reserves.
Corporate
2020
Corporate incurred adverse development of $433 million in long-tail lines, driven by the following principal changes:
•
•
•
Adverse development of $254 million for U.S. child molestation claims, predominantly reviver statute-related;
Adverse development of $106 million associated with asbestos and environmental liabilities, generally attributable to
certain case specific incurred activity and higher than expected indemnity, expenses and defense costs on a limited
number of accounts;
Adverse development of $38 million on unallocated loss adjustment expenses due to run-off operating expenses paid
and incurred in 2020 and $27 million from an increase in the provision for uncollectible reinsurance.
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 PPD of $45 million, representing 0.1 percent of the beginning consolidated net unpaid losses and
loss expense reserves.
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 valuation allowance for uncollectible paid and
unpaid reinsurance recoverables:
(in millions of U.S. dollars)
Balance at December 31, 2017
Incurred activity
Paid activity
Balance at December 31, 2018
Incurred activity
Paid activity
Balance at December 31, 2019
Incurred activity
Paid activity
Asbestos
Environmental
Gross
Net
Gross
Net
Gross
Total
Net
$ 1,621 $ 1,051 $
607 $
476 $ 2,228 $ 1,527
136
75
101
(97)
237
(22) (1)
(265)
(162)
(83)
1,492
129
964
70
625
46
104
483
28
(348)
(58)
2,117
1,447
175
98 (1)
(162)
(118)
(142)
(101)
(304)
(219)
1,459
150
916
90
529
79
410
41
1,988
1,326
229
131 (1)
(258)
(133)
(91)
(72)
(349)
(205)
Balance at December 31, 2020
$ 1,351 $
873 $
517 $
379 $ 1,868 $ 1,252
(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).
F-64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The A&E net loss reserves including allocated loss expense reserves and valuation allowance for uncollectible reinsurance at
December 31, 2020 and 2019 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
2020
$
736 $
103
333
80
December 31
2019
754
117
381
74
$
1,252 $
1,326
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.
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 2020, 2019, 2018, 2011 and 2010, $250 million, $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 required 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 2020 and 2019, capital contributions of $302 million and $64
million were made, respectively, from the Dividend Retention Fund to Century. 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, 2020 was $25 million
and $573 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
F-65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 December 31, 2020 and
2019, the aggregate reinsurance recoverables owed by Century to certain active Chubb companies were approximately $1.6
billion and $1.5 billion, respectively, 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, 2020 and 2019,
Century's carried gross reserves (including reserves assumed from the active Chubb companies) were $2.1 billion and $1.8
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, 2020, the remaining unused incurred limit under the Westchester NICO agreement
was $372 million.
8. Taxation
Under Swiss law through December 31, 2020, 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. Furthermore, participation relief (i.e., tax relief) is granted to Chubb Limited at the
federal, cantonal, and communal level for qualifying dividend income and capital gains related to the sale of qualifying
participations (i.e., subsidiaries). 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 income taxes. Lloyd's is required to
pay U.S. income tax on U.S. connected 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 this 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
F-66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 insurance 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. As
a result of Swiss tax reform legislation effective in 2020, the Swiss tax rate increased from 7.83 percent in years 2018 and
2019 to 21.2 percent in 2020.
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)
Provision for income taxes
$
$
$
Year Ended December 31
2020
2019
2018
350 $
440 $
3,812
4,809
4,162 $
5,249 $
950
3,707
4,657
52 $
29 $
876
928
2
(301)
(299)
879
908
11
(124)
(113)
89
563
652
3
40
43
$
629 $
795 $
695
The most significant jurisdictions contributing to the overall taxation of Chubb are calculated using the following rates in 2020:
Switzerland 21.2 percent, U.S. 21.0 percent, U.K. 19.0 percent, and Bermuda 0.0 percent.
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
Share-based compensation
Impact of 2017 Tax Act
Other
Year Ended December 31
2020
2019
$
880 $
411 $
(337)
(41)
67
(10)
—
70
376
(49)
40
(12)
—
29
2018
365
372
(75)
33
(19)
(25)
44
Provision for income taxes
$
629 $
795 $
695
F-67
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
Investments
Lease liability
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
2020
December 31
2019
$
884 $
496
222
46
123
69
281
120
75
121
2,437
522
1,425
77
—
957
123
111
31
3,246
83
$
(892) $
826
519
247
37
143
74
261
33
—
140
2,280
588
1,468
73
40
470
157
129
45
2,970
114
(804)
The valuation allowance of $83 million and $114 million at December 31, 2020 and 2019, respectively, 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 non-U.S. 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, 2020, Chubb has net operating loss carry-forwards of $407 million which, if unused, will expire starting in
2021, and a foreign tax credit carry-forward in the amount of $222 million which, if unused, will expire starting in 2026.
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 the lapse of the applicable statutes of limitations
Balance, end of year
December 31
2020
December 31
2019
$
47 $
5
24
—
$
76 $
14
12
23
(2)
47
At December 31, 2020 and 2019, the gross unrecognized tax benefits of $76 million and $47 million, respectively, can be
reduced by $31 million and $19 million, respectively, associated with foreign tax credits. The net amounts of $45 million and
$28 million at December 31, 2020 and 2019, respectively, if recognized, would favorably affect the effective tax rate. We
F-68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
made a settlement of a liability in January 2021 for $23 million, including interest. It is reasonably possible that over the next
twelve months, that the amount of unrecognized tax benefits may change further 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 and penalties reported in the Consolidated statements of
operations were $8 million at December 31, 2020, $5 million at December 31, 2019, and were immaterial for 2018.
Liabilities for tax-related interest and penalties in our Consolidated balance sheets were $16 million and $8 million at December
31, 2020 and 2019, respectively.
In March 2017, the IRS commenced its field examination of Chubb Group Holdings’ U.S. Federal income tax returns for 2014
and 2015. The Chubb Group Holdings examination for 2014 and 2015 tax years is still ongoing with no material adjustments
proposed to date. In July 2020, the IRS commenced its field examination of Chubb Group Holdings' U.S. Federal income tax
returns for 2016, 2017 and 2018. 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, 2020
Australia
Canada
France
Germany
Italy
Mexico
Spain
Switzerland
United Kingdom
United States
2014 - 2020
2012 - 2020
2018 - 2020
2015 - 2020
2010 - 2020
2014 - 2020
2012 - 2020
2016 - 2020
2015 - 2020
2014 - 2020
F-69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
9. Debt
(in millions of U.S. dollars)
2020
2019
Early Redemption Option
Repurchase agreements (weighted average interest rate of
0.3% in 2020 and 2.2% in 2019)
$
1,405 $
1,416
None
December 31
December 31
Short-term debt
Chubb INA:
$1,300 million 2.3% due November 2020
Other short-term debt 2.75% due September 2020
Total short-term debt
Long-term debt
Chubb INA:
$
$
— $
1,298
Make-whole premium plus 15 bps
—
1
— $
1,299
None
$1,000 million 2.875% senior notes due November 2022 $
998 $
997
Make-whole premium plus 20 bps
$475 million 2.7% senior notes due March 2023
$700 million 3.35% senior notes due May 2024
€700 million 0.3% senior notes due December 2024
$800 million 3.15% senior notes due March 2025
$1,500 million 3.35% senior notes due May 2026
€575 million 0.875% senior notes due June 2027
€900 million 1.55% senior notes due March 2028
$100 million 8.875% debentures due August 2029
€700 million 0.875% senior notes due December 2029
$1,000 million 1.375% senior notes due September 2030
€575 million 1.4% senior notes due June 2031
$200 million 6.8% debentures due November 2031
$300 million 6.7% senior notes due May 2036
$800 million 6.0% senior notes due May 2037
€900 million 2.5% senior notes due March 2038
$600 million 6.5% senior notes due May 2038
$475 million 4.15% senior notes due March 2043
$1,500 million 4.35% senior notes due November 2045
474
698
841
797
1,493
691
1,079
100
840
991
687
242
298
945
1,077
743
470
1,484
473
697
776
796
Make-whole premium plus 10 bps
Make-whole premium plus 15 bps
Make-whole premium plus 15 bps
Make-whole premium plus 15 bps
1,492
Make-whole premium plus 20 bps
635
993
100
775
—
633
246
297
953
992
751
470
Make-whole premium plus 20 bps
Make-whole premium plus 15 bps
None
Make-whole premium plus 20 bps
Make-whole premium plus 15 bps
Make-whole premium plus 25 bps
Make-whole premium plus 25 bps
Make-whole premium plus 20 bps
Make-whole premium plus 20 bps
Make-whole premium plus 25 bps
Make-whole premium plus 30 bps
Make-whole premium plus 15 bps
1,483
Make-whole premium plus 25 bps
Total long-term debt
Trust preferred securities
$
14,948
$
13,559
Chubb INA capital securities due April 2030
$
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.
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.
F-70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 and are reflected in the table above. Chubb INA Holdings Inc.'s (Chubb INA)
$1,300 million of 2.3 percent senior notes due November 2020 was paid upon maturity.
c) Long-term debt
The $100 million of 8.875 percent debentures due August 2029 do not have an early redemption option. The remaining Chubb
INA senior notes and debentures, including the $1,000 million of 1.375 percent senior notes issued September 2020, 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. These debt securities are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax
law.
The senior notes and debentures do not have the benefit of any sinking fund and 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.
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.
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.
F-71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 and 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
Options/Futures contracts on notes,
bonds, and equities
Convertible securities (1)
Other derivative instruments:
Futures contracts on equities (2)
Other
GLB (3)
December 31, 2020
December 31, 2019
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) $
22 $
(49) $ 2,807
$
11 $
(78) $ 2,579
OA / (AP)
FM AFS / ES
13
9
(3)
1,749
—
11
13
4
(15)
1,615
—
5
$
44 $
(52) $ 4,567
$
28 $
(93) $ 4,199
OA / (AP) $
— $
(17) $
709
$
— $
(13) $
613
OA / (AP)
—
—
16
2
—
63
$
— $
(17) $
725
(AP) $
— $ (1,089) $ 1,658
$
$
2 $
(13) $
676
— $
(897) $ 1,510
(1)
(2)
(3)
Includes fair value of embedded derivatives.
Related to GMDB and GLB book of business.
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.
At December 31, 2020 and 2019, net derivative liabilities of $30 million and $75 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 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 future policy benefit reserves for GMDB and an increase in the fair
value liability for GLB reinsurance business.
F-72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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.
(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. The GLB is accounted for as a derivative and is
recorded at fair value. 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
F-73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Equity securities
Gross amount of recognized liability for securities lending payable
Remaining contractual maturity
December 31, 2020
December 31, 2019
Overnight and Continuous
$
551 $
148
1,032
30
4
79
$
$
1,844 $
1,844 $
346
6
595
5
18
24
994
994
At December 31, 2020 and 2019, our repurchase agreement obligations of $1,405 million and $1,416 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.
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 / Agency
Mortgage-backed securities
Gross amount of recognized liabilities for
repurchase agreements
Difference (1)
Remaining contractual maturity
December 31, 2020
Greater
than 90
Days
Total
30-90
Days
Up to 30
Days
30-90
Days
December 31, 2019
Greater
than 90
Days
Total
$
— $
4 $
4 $
2 $
— $
— $
—
481
106
871
106
1,352
107
399
—
476
—
480
2
107
1,355
$
481 $
981 $ 1,462 $
508 $
476 $
480 $ 1,464
$ 1,405
$
57
$ 1,416
$
48
(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
F-74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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:
(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
Futures contracts on equities (2)
Other
Total GLB and other derivative instruments
(1)
(2)
Includes embedded derivatives.
Related to GMDB and GLB book of business.
2020
Year Ended December 31
2018
2019
$
65 $
(79) $
—
16
—
(270)
(88)
2
81 $
(435) $
3
(115)
39
(2)
(75)
(202) $
(108)
1
(309) $
(228) $
(4) $
(248)
(138)
(8)
(150) $
(585) $
(4)
(3)
(255)
(330)
$
$
$
$
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, 2020, were Wells Fargo & Co., Bank of America
Corp, and JP Morgan Chase & Co. Our largest exposure by industry at December 31, 2020 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, 2020, 2019 and
2018, approximately 12 percent, 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, 2020. No other broker or one insured accounted for more than 10 percent of our
gross premiums written for these years.
e) Fixed maturities
At December 31, 2020, we have commitments to purchase fixed income securities of $605 million over the next several years.
f) Other investments
At December 31, 2020, included in Other investments in the Consolidated balance sheet are investments in limited
partnerships and partially-owned investment companies with a carrying value of $6.5 billion. In connection with these
investments, we have commitments that may require funding of up to $3.2 billion over the next several years. At December 31,
2019, these investments had a carrying value of $4.7 billion with a commitment that may require funding of up to $3.3 billion.
g) Letters of credit
We have access to capital markets and to credit facilities with letter of credit capacity of $4.0 billion with a sub-limit of $1.9
billion for revolving credit. Our existing credit facilities have remaining terms expiring through October 2022. At December 31,
2020, our LOC usage was $1.7 billion.
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
F-75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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.
i) Lease commitments
At December 31, 2020 and 2019, the right-of-use asset was $473 million and $551 million, respectively, recorded within
Other assets on the Consolidated balance sheets, and the lease liability was $517 million and $603 million, respectively, which
was recorded within Accounts payable, accrued expenses, and other liabilities on the Consolidated balance sheets. 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, 2020, the weighted average remaining lease term and weighted average discount
rate for the operating leases was 4.9 years and 2.6 percent, respectively. Rent expense was $152 million, $171 million, and
$169 million for the years ended December 31, 2020, 2019, and 2018, 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:
2021
2022
2023
2024
2025
Thereafter
Total undiscounted lease payments
Less: Present value adjustment
Net lease liabilities reported as of December 31, 2020
11. Shareholders’ equity
$
$
$
150
123
96
68
38
75
550
33
517
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 2019 and 2018 annual general meetings, our shareholders approved annual dividends for the following year of up
to $3.00 per share and $2.92 per share, respectively, which were paid in four quarterly installments of $0.75 per share and
$0.73 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 2020 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.12
per share, expected to be paid in four quarterly installments of $0.78 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 2021 annual general meeting, and is authorized
to abstain from distributing a dividend at its discretion. The first three quarterly installments each of $0.78 per share, have been
distributed by the Board as expected.
F-76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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.
The following table presents dividend distributions per Common Share in Swiss francs (CHF) and U.S. dollars (USD):
2020
USD
2019
USD
CHF
2018
USD
CHF
CHF
Year Ended December 31
Total dividend distributions per common share
2.89 $
3.09
2.94 $
2.98
2.84 $
2.90
b) Shares issued, outstanding, authorized, and conditional
2020
Year Ended December 31
2019
2018
Common Shares authorized and issued, beginning of year
479,783,864
479,783,864
479,783,864
Cancellation of treasury shares
(2,178,600)
—
—
Common Shares authorized and issued, end of year
477,605,264
479,783,864
479,783,864
Common Shares in treasury, beginning of year (at cost)
(27,812,297)
(20,580,486)
(15,950,685)
Net shares issued under employee share-based compensation plans
2,345,208
3,210,427
3,089,234
Shares repurchased
Cancellation of treasury shares
Common Shares in treasury, end of year (at cost)
Common Shares outstanding, end of year
(3,584,150)
(10,442,238)
(7,719,035)
2,178,600
—
—
(26,872,639)
(27,812,297)
(20,580,486)
450,732,625
451,971,567
459,203,378
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, purchases under the Employee Stock Purchase Plan (ESPP), and share cancellations. At our May 2020 annual general
meeting, our shareholders approved the cancellation of 2,178,600 shares purchased under our share repurchase program
during the period beginning September 23, 2019 and ending December 31, 2019. The capital reduction by cancellation of
shares was subject to publication requirements and a two-month waiting period in accordance with Swiss law and became
effective August 3, 2020.
Authorized share capital for general purposes under Swiss law
In accordance with Swiss law, the Board has shareholder-approved authority as set forth in the Articles of Association to
increase Chubb's share capital from time to time until May 20, 2022, by the issuance for general purposes 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. Any such increases would be subject to Swiss rules and procedure.
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, 2020) 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, 2020) in connection with the exercise of option rights granted to any employee
of Chubb, director or other person providing services to Chubb.
F-77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 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
$1.5 billion of Chubb Common Shares from November 19, 2020 through December 31, 2021
Subsequently, in February 2021, the Board approved an increase to the November 2020 share repurchase program of
$1.0 billion to a total of $2.5 billion, effective through December 31, 2021.
Share repurchases may be in the open market, in privately negotiated transactions, block trades, accelerated repurchases and
through option or other forward transactions.
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)
2020
2019
2018
February 24, 2021
Number of shares repurchased
Cost of shares repurchased (1)
3,584,150
10,442,238
7,719,035
$
516 $
1,531 $
1,021 $
1,971,000
327
(1)
On April 22, 2020, we suspended share repurchases, given the economic environment and to preserve capital for both risk and opportunity. Subsequently, we announced
and then resumed share repurchases on October 29, 2020.
Year Ended December 31
January 1, 2021 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
F-78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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, 2020, a total of 7,576,239 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, 2020, a
total of 1,402,017 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
Common Shares in treasury.
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 (1)
Year Ended December 31
2020
2019
2018
$
$
$
$
45 $
38 $
42 $
39 $
210 $
164 $
224 $
180 $
50
40
235
178
(1)
The windfall tax benefit recorded to Income tax expense in the Consolidated statement of operations was $10 million, $12 million, and $19 million for the years ended
December 31, 2020, 2019, and 2018, 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 $199 million at December 31, 2020 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 2020 share-based compensation expense includes a portion of the cost related to the 2017 through 2020 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
2020
2.1 %
18.0 %
1.2 %
Year Ended December 31
2019
2.2 %
16.0 %
2.6 %
2018
2.0 %
23.2 %
2.7 %
5.7 years
5.7 years
5.7 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 years 2020 and
2019, expected volatility is calculated as a blend of (a) historical volatility based on daily closing prices over a period equal to
F-79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
the expected life assumption and (b) implied volatility derived from Chubb's publicly traded options. For year 2018, 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.
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, 2017
10,433,316 $
99.20
Granted
Exercised
Forfeited and expired
Options outstanding, December 31, 2018
Granted
Exercised
Forfeited and expired
Options outstanding, December 31, 2019
Granted
Exercised
Forfeited and expired
Options outstanding, December 31, 2020
Options exercisable, December 31, 2020
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 $
84.13
136.87
116.79
1,958,279 $
150.10 $
19.89
(1,158,633) $
(206,720) $
11,478,183 $
7,792,343 $
86.90
138.77
125.09
116.35
$
71
$
122
$
$
$
76
331
293
The weighted-average remaining contractual term was 6.0 years for stock options outstanding and 4.8 years for stock options
exercisable at December 31, 2020. Cash received from the exercise of stock options for the year ended December 31, 2020
was $100 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 2020 share-based compensation expense includes a portion of the cost related to the restricted stock granted in the
years 2016 through 2020.
F-80
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 27,679
restricted stock awards, 19,019 restricted stock awards, and 20,784 restricted stock awards that were granted to non-
management directors during the years ended December 31, 2020, 2019, and 2018, respectively:
Unvested restricted stock, December 31, 2017
Granted
Vested
Forfeited
Unvested restricted stock, December 31, 2018
Granted
Vested
Forfeited
Unvested restricted stock, December 31, 2019
Granted
Vested
Forfeited
Unvested restricted stock, December 31, 2020
Service-based
Restricted Stock Awards
and Restricted Stock Units
Performance-based
Restricted Stock Awards
and Restricted Stock Units
Weighted-Average
Grant-Date Fair
Number of Shares
Value Number of Shares
Weighted-Average
Grant-Date Fair
Value
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 $
1,425,667 $
(1,304,308) $
(152,074) $
3,263,295 $
121.16
142.76
114.83
131.06
134.17
134.38
129.18
135.98
136.20
148.56
134.02
140.72
142.32
975,497 $
180,065 $
(244,332) $
— $
911,230 $
212,059 $
(196,640) $
(50,437) $
876,212 $
186,291 $
(490,185) $
— $
118.28
143.07
103.03
—
127.27
133.90
115.62
132.36
131.16
151.14
125.66
—
572,318 $
142.38
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, 2020, there were 166,624 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, 2020, 2019, and 2018, employees paid $45 million, $41 million, and
$37 million to purchase 383,751 shares, 321,800 shares, and 347,116 shares, respectively.
F-81
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 $211 million, $171 million, and
$171 million for the years ended December 31, 2020, 2019, and 2018, 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, 2020, 2019, and 2018, $79 million, $79 million, and $80 million, respectively, were amortized as a reduction to
expense. At December 31, 2020, the remaining curtailment benefit balance was $26 million which will be amortized as a
reduction to expense through June 2021.
F-82
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, 2020 and 2019 was as follows:
(in millions of U.S. dollars)
U.S. Plans
Pension Benefit Plans
Other Postretirement
Benefit Plans
2019
2020
2019
U.S. Plans
Non-U.S.
Plans
2020
Non-U.S.
Plans
Benefit obligation, beginning of year
$
3,569 $
1,042 $
3,092 $
942
$
103 $
113
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
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
—
99
441
4
22
135
49
118
443
(127)
(31)
(121)
—
(15)
—
(2)
—
—
29
(12)
—
11
27
124
(39)
(4)
(61)
42
$
$
$
$
3,967 $
1,199 $
3,569 $
1,042
3,301 $
1,141 $
2,784 $
1,008
563
17
126
19
636
14
(127)
(31)
(121)
(15)
—
—
29
(12)
—
169
16
(39)
(61)
48
3,739 $
1,284 $
3,301 $
1,141
(228) $
85 $
(268) $
99
$
$
$
$
1
2
1
—
4
3
(20)
(17)
—
—
(1)
86 $
152 $
6
1
(39)
—
—
120 $
34 $
—
—
—
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
$
$
78 $
163 $
(21) $
110
$
(5) $
(3)
—
9
—
10
(31)
(114)
78 $
172 $
(21) $
120
$
(36) $
(117)
For the U.S. pension plans, the $441 million and $443 million actuarial loss experienced in 2020 and 2019, respectively, was
principally driven by the decrease in the discount rate from the respective prior year.
The accumulated benefit obligation for the pension benefit plans was $5.1 billion and $4.6 billion at December 31, 2020 and
2019, 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-83
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, 2020 and 2019:
(in millions of U.S. dollars)
Plans with projected benefit obligation in excess of plan assets:
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
2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
$
3,967 $
629 $
3,569 $
3,739
568
3,301
(228) $
(61) $
(268) $
3,967 $
593 $
3,569 $
3,739 $
565 $
3,301 $
$
$
$
2019
Non-U.S.
Plans
236
175
(61)
173
140
For other postretirement benefit plans with an accumulated benefit obligation in excess of plan assets, the accumulated benefit
obligation was $23 million and $25 million at December 31, 2020 and 2019, respectively. These plans have no plan assets.
At December 31, 2020, we estimate that we will contribute $20 million to the pension plans and $1 million to the other
postretirement benefits plan in 2021. The estimate is subject to change due to contribution decisions that are affected by
various factors including our liquidity, market performance and management discretion.
At December 31, 2020, our estimated expected future benefit payments are as follows:
For the years ending December 31
(in millions of U.S. dollars)
2021
2022
2023
2024
2025
2026-2030
Pension Benefit Plans
U.S.
Plans
Non-U.S.
Plans
Other
Postretirement
Benefit Plans
$
159 $
30 $
166
171
175
180
947
28
30
32
32
185
19
20
16
12
7
5
The weighted-average assumptions used to determine the projected benefit obligation were as follows:
Pension Benefit Plans
U.S.
Plans
Non-U.S.
Plans
Other
Postretirement
Benefit Plans
2.32 %
N/A
4.10 %
3.20 %
N/A
4.10 %
1.80 %
3.24 %
1.36 %
N/A
2.39 %
3.26 %
2.70 %
N/A
December 31, 2020
Discount rate
Rate of compensation increase (1)
Interest crediting rate
December 31, 2019
Discount rate
Rate of compensation increase (1)
Interest crediting rate
(1) For the U.S. Pension Plans, benefit accruals were frozen as of December 31, 2019.
F-84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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.
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
2020
2019
2018
2020
2019
2018
2020
2019
2018
$ — $ 49 $ 57 $
4 $ 11 $ 12 $
1 $ — $
1
99
118
105
22
27
27
2
4
(224)
(189)
(212)
(41)
(45)
(50)
(5)
(4)
—
—
—
2
3
1
—
—
3
(5)
—
—
—
—
—
—
—
(83)
(84)
(85)
—
—
—
(1)
(1) —
—
—
3
2
2
—
1
3
—
—
(2)
—
(122)
(69)
(105)
(18)
(15)
(19)
(86)
(84)
(89)
$ (122) $
(20) $
(48) $
(14) $
(4) $
(7) $
(85) $
(84) $
(88)
$ 102 $
(4) $ 214 $ 56 $
6 $ 34 $
(2) $
(2) $
(11)
—
—
—
—
1
3
—
—
—
—
—
(2)
(3)
(1) —
—
—
—
—
(1) —
—
83
84
—
—
—
(1)
(3) —
—
—
(3)
(2)
(2) —
(1)
(3) —
—
—
(1)
85
3
—
$ 99 $
(6) $ 212 $ 52 $ — $ 33 $ 81 $ 82 $
76
The line items in which the service and non-service cost components of net periodic (benefit) cost are included 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
2020
2019
2018
2020
2019
2018
$
— $
6 $
7 $
— $
— $
4
4
54
60
62
69
1
1
—
—
(12)
(128)
(140)
(7)
(10)
(77)
(114)
(84)
(124)
(9)
(77)
(86)
(8)
(76)
(84)
$
(136) $
(24) $
(55) $
(85) $
(84) $
—
1
1
(9)
(80)
(89)
(88)
F-85
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
2020
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
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
Pension Benefit Plans
U.S.
Plans
Non-U.S.
Plans
Other
Postretirement
Benefit Plans
N/A
2.85 %
N/A
7.00 %
4.10 %
4.23 %
3.94 %
4.00 %
7.00 %
4.10 %
3.62 %
3.27 %
4.00 %
7.00 %
4.10 %
6.04 %
2.24 %
3.26 %
3.83 %
N/A
4.48 %
2.88 %
3.37 %
4.40 %
N/A
3.97 %
2.55 %
3.46 %
4.32 %
N/A
3.00 %
2.64 %
N/A
3.00 %
N/A
4.04 %
3.69 %
N/A
3.00 %
N/A
2.84 %
2.62 %
N/A
2.59 %
N/A
F-86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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)
U.S. Plans
Non-U.S. Plans
2020
2019
2018
2020
2019
2018
5.96 %
6.32 %
6.68 %
5.04 %
5.24 %
6.29 %
4.50 %
4.50 %
4.50 %
4.00 %
4.00 %
4.50 %
Year that the rate reaches the ultimate trend rate
2038
2038
2038
2040
2040
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 U.S. 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. The target allocation of non-U.S. plans varies by country, but the plan
assets are principally 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.
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, 2020
(in millions of U.S. dollars)
U.S. Plans:
Short-term investments
U.S. Treasury / Agency
Non-U.S. and corporate bonds
Municipal
Equity securities
Total U.S. Plan assets (1)
Non-U.S. Plans:
Short-term investments
Non-U.S. and corporate bonds
Equity securities
Total Non-U.S. Plan assets (1)
Level 1
Level 2
Level 3
Total
Pension Benefit Plans
$
59 $
— $
— $
250
—
—
1,818
186
793
2
—
—
—
—
—
2,127 $
981 $
— $
5 $
— $
— $
—
127
609
388
—
—
$
$
59
436
793
2
1,818
3,108
5
609
515
$
132 $
997 $
— $
1,129
(1)
Excluded from the table above are $543 million and $147 million of other investments related to the U.S. Plans and Non-U.S. Plans, respectively, limited partnerships of
$74 million and $8 million in U.S. Plans and Non-U.S. Plans, respectively, measured using NAV as a practical expedient, and $14 million in cash related to the U.S. Plans.
F-87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
December 31, 2019
(in millions of U.S. dollars)
U.S. Plans:
Short-term investments
U.S. Treasury / Agency
Non-U.S. and corporate bonds
Municipal
Equity securities
Total U.S. Plan assets (1)
Non-U.S. Plans:
Short-term investments
Non-U.S. 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 related to the U.S. Plans and Non-U.S. Plans, respectively, and limited partnerships
of $4 million in Non-U.S. Plans, measured using NAV as a practical expedient.
The other postretirement benefit plan had $120 million and $152 million of other investments measured using NAV as a
practical expedient at December 31, 2020 and 2019, respectively.
14. Other income and expense
(in millions of U.S. dollars)
Equity in net income of partially-owned entities (1)
Gains (losses) from fair value changes in separate account assets (2)
Federal excise and capital taxes
Other
Total
Year Ended December 31
2020
2019
$
1,019 $
617 $
58
(22)
(61)
44
(23)
(42)
$
994 $
596 $
2018
514
(38)
(12)
(30)
434
(1)
(2)
Equity in net income of partially-owned entities includes $167 million, $74 million, and $43 million attributable to our investments in Huatai (Huatai Group, Huatai P&C,
and Huatai Life) for the years ended December 31, 2020, 2019, and 2018, 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, both underlying operating income and mark-to-market movement, 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 provides both commercial and consumer P&C products and
services. This 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
F-88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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.
The Overseas General Insurance segment includes the business written by two Chubb divisions that provides both
commercial and consumer 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 international life operations written by Chubb Life and 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, run-off Brandywine business,
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 The Chubb Corporation (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, Chubb integration expenses and income taxes are reported within
Corporate. In addition, the amortization expense of purchased intangibles, amortization of the fair value adjustment on acquired
invested assets and assumed long-term debt as part of the Chubb Corp acquisition are considered Corporate costs as these are
incurred by the overall company. 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).
Management uses underwriting income (loss) as the basis for 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. Segment income (loss) includes 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
insurance companies and miscellaneous income and expense items for which the segments are held accountable. Our main
measure of segment performance is Segment income (loss), which also includes amortization of purchased intangibles acquired
by the segment. 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. To calculate Segment income (loss), include Net investment income (loss), Other (income)
expense, and Amortization expense of purchased intangibles. Certain items are presented in a different manner for segment
reporting purposes than in the Consolidated Financial Statements. These items are reconciled to the consolidated presentation
in the Segment measure reclass column below and include:
F-89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
• Losses and loss expenses include realized gains and losses on 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, and therefore, realized gains (losses) from these derivatives are reclassified to losses and loss expenses.
• Policy benefits include gains and losses from fair value changes in separate account assets, as well as the offsetting
movement in separate account liabilities. 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 policy benefits.
• Net investment income includes investment income reclassified from Other (income) expense related to partially-owned
investment companies (private equity partnerships) where our ownership interest is in excess of three percent. We view
investment income from these equity-method private equity partnerships as net investment income.
F-90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
The following tables present the Statement of Operations by segment:
North
America
For the Year Ended
Commercial
December 31, 2020
P&C
(in millions of U.S. dollars)
Insurance
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
10,129
13,964
2,061
1,942
1,006
887
23
—
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Corporate
Segment
Measure
Reclass
Chubb
Consolidated
$ 14,474 $ 4,920 $ 1,846 $ 9,335 $
731 $ 2,514 $ — $ — $ 33,820
4,866
1,822
9,285
698
2,482
3,187
1,544
5,255
—
974
270
435
260
5
—
—
123
2,568
9
1,034
146
30
1
428
534
13
435
—
174
37
52
307
2
—
435
—
—
303
—
33,117
1
21,710
58
—
—
784
6,547
2,979
724
726
766
320
(54)
(738)
(59)
1,097
385
(87)
(115)
3,375
(74)
(791)
(173)
(994)
Amortization expense of
purchased intangibles
—
11
27
45
—
4
203
—
290
$ 2,925 $ 679 $
Segment income (loss)
Net realized gains (losses)
Interest expense
Income tax expense
Net income (loss)
148 $ 904 $
357 $ 401 $
(237) $
(1) $ 5,176
(499)
516
629
1
—
—
(498)
516
629
$ (1,881) $ — $ 3,533
North
America
For the Year Ended
Commercial
December 31, 2019
P&C
(in millions of U.S. dollars)
Insurance
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
12,922
8,206
1,831
1,028
1,857
2,109
24
—
Amortization expense of
purchased intangibles
Segment income (loss)
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Corporate
Segment
Measure
Reclass
Chubb
Consolidated
$ 13,375 $ 4,787 $ 1,810 $ 9,262 $
649 $ 2,392 $ — $ — $ 32,275
4,694
1,795
8,882
654
2,343
3,043
1,616
4,606
—
158
—
—
319
—
31,290
(8)
18,730
44
—
—
740
6,153
3,030
757
696
620
323
(53)
(477)
(36)
2,637
373
(125)
(86)
3,426
(48)
(459)
(130)
(596)
352
—
169
35
98
279
1
—
948
286
417
258
3
—
—
84
2,501
6
1,033
742
588
12
89
30
1
28
—
12
45
—
2
218
—
305
$ 3,942 $ 660 $
90 $ 1,273 $
376 $ 366 $
(361) $
8 $
6,354
Net realized gains (losses)
including OTTI
Interest expense
Chubb integration expenses
Income tax expense
Net income (loss)
(522)
(8)
(530)
552
23
795
—
—
—
552
23
795
$ (2,253) $ — $
4,454
F-91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
North
America
For the Year Ended
Commercial
December 31, 2018
P&C
(in millions of U.S. dollars)
Insurance
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
12,402
1,829
1,607
8,000
2,061
966
—
3
North
America
Personal
P&C
Insurance
North
America
Agricultural
Insurance
Overseas
General
Insurance
Global
Reinsurance
Life
Insurance
Corporate
Segment
Measure
Reclass
Chubb
Consolidated
$ 12,485 $ 4,674 $ 1,577 $ 8,902 $
671 $ 2,270 $ — $ — $ 30,579
4,593
1,569
8,612
670
2,218
3,229
1,114
4,429
—
939
269
156
236
1
—
—
79
2,346
(9) 1,014
385
28
2
823
622
3
479
—
162
41
766
628
557
310
—
53
—
—
295
—
30,064
(3)
18,067
(38)
590
—
—
41
5,912
2,886
2,609
(12)
(43)
(348)
289
—
341
(209)
(63)
3,305
(12)
(406)
(25)
(434)
Amortization expense of
purchased intangibles
Segment income (loss)
—
13
28
41
—
2
255
—
339
$ 3,665 $ 378 $
383 $ 1,401 $
277 $ 308 $
(406) $
3 $
6,009
Net realized gains (losses)
including OTTI
Interest expense
Chubb integration expenses
Income tax expense
Net income (loss)
(649)
(3)
(652)
641
59
695
—
—
—
641
59
695
$ (2,450) $ — $
3,962
Underwriting assets are reviewed in total by management for purposes of decision-making. Other than Unpaid losses and loss
expenses, Future policy benefits, Reinsurance recoverables, Goodwill and Other intangible assets, Chubb does not allocate
assets to its segments.
F-92
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
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
2020
2019
2018
$
2,423 $
1,987 $
10,812
10,136
729
799
1,861
9,773
768
13,964
12,922
12,402
822
3,327
717
4,866
1,822
2,468
2,738
1,981
2,098
9,285
104
173
421
698
1,317
1,165
2,482
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
$
33,117 $
31,290 $
30,064
The following table presents net premiums earned by geographic region. Allocations have been made on the basis of location of
risk:
2020
2019
2018
(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-93
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)
2020
2019
2018
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
$
3,533 $
4,454 $
3,962
451,602,820
455,910,463
463,629,203
1,838,692
3,004,200
3,173,145
453,441,512
458,914,663
466,802,348
$
$
7.82 $
7.79 $
9.77 $
9.71 $
8.55
8.49
6,811,966
2,410,337
3,543,188
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 agreement, 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 quota share reinsurance agreements.
The agency agreement also contains 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. 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
Consolidated balance sheets
Reinsurance recoverable on losses and loss expenses
Ceded reinsurance premium payable
F-94
Year Ended December 31
2020
2019
2018
507 $
253 $
97 $
59 $
394 $
207 $
77 $
46 $
170 $
185 $
411
188
84
42
188
432 $
80 $
440
56
$
$
$
$
$
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
ABR Re
We own 15.6 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
18. Statutory financial information
Year Ended December 31
2020
2019
2018
350 $
100 $
321 $
92 $
329
96
806 $
67 $
674
62
$
$
$
$
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 2020 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 2021 without prior approval totals $6.4 billion.
The statutory capital and surplus of our insurance subsidiaries met regulatory requirements for 2020, 2019, and 2018. The
minimum amounts of statutory capital and surplus necessary to satisfy regulatory requirements was $29.4 billion and
$26.7 billion for December 31, 2020 and 2019, 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.
F-95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and 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
2019
2020
$
$
45,964 $
43,077
1,641 $
1,573
2020
Year Ended December 31
2018
2019
$
$
4,294 $
6,046 $
7,521
(247) $
(210) $
(102)
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 $140
million and $147 million at December 31, 2020 and 2019, 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, 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 $55 million and $54 million at December
31, 2020 and 2019, 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-96
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, 2020 and 2019, and for the years
ended December 31, 2020, 2019, and 2018 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, 2020
(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
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
$
— $
197 $
118,472 $
— $
118,669
84
—
—
—
—
—
—
1
—
—
—
—
—
—
56,148
3,522
10
55,231
—
463
1,934
89
(272)
—
1,747
89
13,926
(3,446)
10,480
25,217
(9,625)
15,592
299
263
21,211
—
171
23,921
(93)
—
—
(111,379)
(3,693)
(1,877)
206
263
21,211
—
—
22,517
$
$
59,764 $
55,892 $
205,503 $
(130,385) $
190,774
— $
— $
77,180 $
(9,369) $
67,811
—
—
—
—
—
—
—
323
323
59,441
—
—
3,008
272
—
14,948
308
1,418
19,954
35,938
18,853
5,806
685
—
1,405
—
—
26,133
130,062
(1,201)
17,652
(93)
5,713
(3,693)
(272)
—
—
—
—
—
1,405
14,948
308
(4,378)
23,496
(19,006)
131,333
75,441
(111,379)
59,441
Total liabilities and shareholders’ equity
$
59,764 $
55,892 $
205,503 $
(130,385) $
190,774
(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, 2020, the cash
balance of one or more entities was negative; however, the overall Pool balances were positive.
F-97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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
—
—
(95)
—
—
(102,929)
(4,776)
197
306
21,359
—
—
20,072
(1,829)
18,663
55,643 $
53,939 $
189,152 $
(121,791) $
176,943
— $
— $
71,916 $
(9,226) $
62,690
—
—
—
—
—
—
—
312
312
55,331
—
—
4,446
—
1,298
13,559
308
1,649
21,260
32,679
17,978
(1,207)
16,771
5,468
330
1,416
1
—
—
(95)
5,373
(4,776)
—
—
—
—
—
1,416
1,299
13,559
308
21,793
118,902
(3,558)
20,196
(18,862)
121,612
70,250
(102,929)
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.
F-98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Statements of Operations and Comprehensive Income
For the Year Ended December 31, 2020
(in millions of U.S. dollars)
Net premiums written
Net premiums earned
Net investment income
Equity in earnings of subsidiaries
Net realized gains (losses)
Losses and loss expenses
Policy benefits
Policy acquisition costs and administrative
expenses
Interest (income) expense
Other (income) expense
Amortization of purchased intangibles
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
— $
—
(1)
— $
33,820 $
— $
33,820
—
6
33,117
3,370
—
—
3,457
2,052
—
(5,509)
20
—
—
94
(136)
(39)
—
24
(397)
(121)
—
—
21,710
784
(130)
9,562
596
(24)
—
(181)
56
(931)
290
786
—
—
—
—
—
—
—
—
3,533 $
1,400 $
4,109 $
(5,509) $
5,783 $
3,236 $
6,512 $
(9,748) $
33,117
3,375
—
(498)
21,710
784
9,526
516
(994)
290
629
3,533
5,783
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 $
— $
32,275
—
1
—
(15)
31,290
3,440
—
—
4,307
3,022
—
(7,329)
(17)
(31)
(482)
—
—
92
(243)
(27)
—
1
14
—
—
18,730
740
(26)
9,117
705
6
—
2
(175)
90
(575)
305
20
956
—
—
—
—
—
—
—
—
—
$
$
4,454 $
2,464 $
4,865 $
(7,329) $
7,521 $
4,988 $
7,922 $
(12,910) $
31,290
3,426
—
(530)
18,730
740
9,183
552
(596)
305
23
795
4,454
7,521
F-99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
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 $
— $
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) $
30,064
3,305
—
(652)
18,067
590
8,798
641
(434)
339
59
695
3,962
1,242
F-100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chubb Limited and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2020
(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
$
1,933 $
274 $
10,788 $
(3,210) $
9,785
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
Payment, including deposit, for Huatai Group
interest
Capital contribution
Other
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 proceeds from affiliated notional cash pooling
programs(1)
Policyholder contract deposits and other
Policyholder contract withdrawals and other
Other
(49)
(26,249)
(202)
(6,419)
11,368
3,880
12,400
995
(853)
(168)
(1,924)
907
(1,623)
—
(472)
—
—
—
—
—
—
—
—
—
—
—
—
1,272
—
(26,298)
(202)
(6,419)
11,377
3,880
12,450
995
(81)
(113)
(1,924)
907
(1,623)
—
(470)
—
—
—
—
—
—
—
—
—
—
—
—
(1,388)
(523)
—
—
—
—
—
—
—
9
—
50
—
772
55
—
—
—
4
769
—
—
988
—
(1,301)
—
—
(1,200)
(72)
(2)
—
—
—
2,354
—
(2,354)
145
173
—
—
—
—
—
—
—
—
1,265
(1,438)
—
—
—
—
—
—
—
—
272
—
—
—
(3,210)
3,210
1,272
(1,272)
—
470
(386)
(87)
(272)
—
—
—
(1,388)
(523)
988
2,354
(1,301)
(2,354)
145
—
—
—
—
470
(386)
(87)
Net cash flows from (used for) investing activities
(1,202)
(8,360)
1,272
(7,521)
Net cash flows used for financing activities
(646)
(1,479)
(1,623)
1,666
(2,082)
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)
(3)
82
2
(5)
(441)
442
16
821
1,202
—
(272)
—
Cash and restricted cash – end of year (1)
$
84 $
1 $
2,023 $
(272) $
8
190
1,646
1,836
(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, 2020, 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 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
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
Acquisition of subsidiaries (net of cash acquired of
$45)
Payment, including deposit, for Huatai Group interest
Other
—
—
—
—
—
—
—
—
—
—
—
(21)
(25,825)
—
—
1
—
41
—
(808)
(74)
—
—
(229)
(531)
13,115
611
8,998
946
(309)
(629)
(1,315)
1,390
—
—
—
—
—
—
—
—
—
—
—
(1,000)
(110)
—
1,110
—
—
—
—
—
(4)
(29)
(580)
(653)
—
—
—
(25,846)
(229)
(531)
13,116
611
9,039
946
(1,117)
(703)
(1,315)
1,390
—
(29)
(580)
(657)
Net cash flows used for investing activities
(1,000)
(975)
(5,040)
1,110
(5,905)
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
(1,354)
(327)
—
—
—
—
—
—
—
2,828
—
—
(1,203)
—
2,817
(500)
(10)
(2,817)
204
922
—
—
—
—
—
—
—
—
2,301
(3,223)
—
—
—
—
(3,874)
3,874
1,110
(1,110)
—
—
—
—
(1,354)
(1,530)
2,828
2,817
(510)
(2,817)
204
—
—
—
—
514
(303)
(151)
20
306
1,340
1,646
Net proceeds payments to affiliated notional cash
pooling programs(1)
(35)
(617)
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)
—
—
585
4
1
1
—
514
(303)
652
—
—
(1,512)
(2,640)
3,416
1
440
2
15
(787)
—
652
1,989
(652)
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-102
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)
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
$
256 $
4,654 $
5,878 $
(5,308) $
5,480
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
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(38)
(24,697)
—
—
11
—
17
—
3
(7)
—
—
(456)
(207)
14,019
315
7,335
1,124
513
23
(1,337)
980
—
—
—
2,171
—
—
(1,044)
—
2,029
(2,000)
(1)
—
—
(2,019)
115
—
—
—
—
—
—
—
—
—
—
—
5,025
—
—
—
—
—
—
—
—
—
2,519
(1,744)
(775)
—
—
35
—
—
—
—
502
—
—
(5,308)
5,308
5,025
(5,025)
—
453
(358)
(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)
Net cash flows used for investing activities
(1,475)
(3,582)
(2,903)
5,025
Cash flows from financing activities
Dividends paid on Common Shares
(1,337)
(1,475)
(3,550)
—
(18)
(515)
Net cash flows from (used for) financing activities
1,217
(1,071)
(1,883)
(254)
(1,991)
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
(65)
—
1,027
962
(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-103
SCHEDULE I
Chubb Limited and Subsidiaries
SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2020
(in millions of U.S. dollars)
Fixed maturities available for sale
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
Total fixed maturities available for sale
Fixed maturities held to maturity
U.S. Treasury / Agency
Non-U.S.
Corporate and asset-backed securities
Mortgage-backed securities
Municipal
Cost or
Amortized Cost,
Net (1)
Fair Value
Amount at Which
Shown in the
Balance Sheet
$
2,471 $
2,670 $
24,588
34,081
17,456
6,572
85,168
1,392
1,288
2,150
1,999
4,824
26,354
36,331
18,470
6,874
90,699
1,452
1,405
2,438
2,146
5,069
2,670
26,354
36,331
18,470
6,874
90,699
1,392
1,288
2,150
1,999
4,824
Total fixed maturities held to maturity
11,653
12,510
11,653
Equity securities
Industrial, miscellaneous, and all other
Short-term investments
Other investments (2)
4,027
4,349
7,826
4,027
4,345
7,826
4,027
4,345
7,826
Total investments - other than investments in related parties
$
113,023 $
119,407 $
118,550
(1) Net of valuation allowance for expected credit losses.
(2)
Excludes $119 million of related party investments.
F-104
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
2020
2019
Investments in subsidiaries and affiliates on equity basis
$
56,148 $
Total investments
Cash
Due from subsidiaries and affiliates, net
Other assets
Total assets
Liabilities
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
Total shareholders' equity
Total liabilities and shareholders' equity
56,148
84
3,522
10
50,853
50,853
2
4,776
12
$
$
59,764 $
55,643
323 $
323
312
312
11,064
(3,644)
9,815
39,337
2,869
59,441
$
59,764 $
11,121
(3,754)
11,203
36,142
619
55,331
55,643
The condensed financial information should be read in conjunction with the Consolidated Financial Statements and notes thereto.
F-105
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
2020
2019
2018
$
155 $
227 $
3,457
3,612
55
—
24
79
4,307
4,534
65
1
14
80
305
3,753
4,058
63
14
19
96
3,962
1,242
Net income
Comprehensive income
$
$
3,533 $
5,783 $
4,454 $
7,521 $
(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
Other
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
2020
2019
$
1,933 $
412 $
2018
256
(1,200)
(1,000)
(1,475)
(2)
—
—
(1,202)
(1,000)
(1,475)
(1,388)
(523)
1,265
—
(646)
(3)
82
2
(1,354)
(327)
2,301
(35)
585
4
1
1
$
84 $
2 $
(1,337)
—
2,519
35
1,217
—
(2)
3
1
(1) Includes cash dividends received from subsidiaries of $2.0 billion, $200 million, and $75 million in 2020, 2019, and 2018, respectively.
(2) 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-106
SCHEDULE IV
Chubb Limited and Subsidiaries
SUPPLEMENTAL INFORMATION CONCERNING REINSURANCE
Premiums Earned
For the years ended December 31, 2020, 2019, and 2018 (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
2020
Property and Casualty
Accident and Health
Life
Total
2019
Property and Casualty
Accident and Health
Life
Total
2018
Property and Casualty
Accident and Health
Life
Total
$
31,546 $
6,782 $
3,044 $
27,808
4,249
1,242
368
93
111
168
3,992
1,317
$
37,037 $
7,243 $
3,323 $
33,117
$
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
11 %
3 %
13 %
10 %
11 %
3 %
17 %
10 %
11 %
4 %
20 %
11 %
F-107
SCHEDULE VI
Chubb Limited and Subsidiaries
SUPPLEMENTARY INFORMATION CONCERNING PROPERTY AND CASUALTY OPERATIONS
As of and for the years ended December 31, 2020, 2019, and 2018 (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
2020
2019
2018
$
$
$
4,244 $
53,164 $ 17,652 $ 31,800 $
3,074 $ 22,124 $
(414) $
6,076 $
17,434 $ 32,471
4,161 $
48,509 $ 16,771 $ 30,189 $
3,141 $ 19,575 $
(845) $
5,831 $
18,473 $ 31,126
3,926 $
48,271 $ 15,532 $ 29,042 $
3,047 $ 19,048 $
(981) $
5,630 $
18,340 $ 29,505
F-108
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 accompanying consolidated financial statements of Chubb Limited and its subsidiaries
(the Company), which comprise the consolidated balance sheet as of December 31, 2020, 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-103).
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, 2020, 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-109
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
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.
As described in Note 7 to the consolidated financial
statements, as of December 31, 2020, the Company's liability
for unpaid losses and loss expenses, net of reinsurance, was
approximately $53 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) the 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) the significant audit 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-110
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
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 prices 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, 2020, the Company had total
assets measured at fair value of approximately $106 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) the 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 25, 2021
/s/ Nicolas Juillerat
Nicolas Juillerat
Audit expert
F-111
CHUBB LIMITED
SWISS STATUTORY FINANCIAL STATEMENTS
December 31, 2020
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
December 31
2020
2019
75
2
234
311
33,242
2,934
8
36,184
36,495
28
498
316
2
844
844
25
6
74
105
31,391
4,485
7
35,883
35,988
69
567
334
—
970
970
11,534
11,587
9,458
1,171
3,046
(486)
8,507
2,421
35,651
36,495
10,841
1,092
3,346
(334)
8,151
335
35,018
35,988
S-2
SWISS STATUTORY STATEMENTS OF INCOME (Unconsolidated)
Chubb Limited
For the years ended December 31, 2020 and 2019
(in millions of Swiss francs)
Dividend income
Interest income from subsidiaries
Debt guarantee fee income
Interest expense to subsidiaries
Administrative and other expenses
Foreign exchange gains/(losses)
Operating results
Interest (expense) 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
2020
2,497
128
39
—
(88)
15
2,591
(1)
(144)
2,446
(25)
2,421
2019
199
249
36
(7)
(102)
(17)
358
1
(10)
349
(14)
335
S-3
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
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 266 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 (where approximatively accurate), otherwise at transaction date 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
3. Commitments, contingencies, and guarantees
a) Letters of credit (LOC)
Chubb has access to capital markets and credit facilities with a letter of credit capacity of CHF 3.5 billion ($4.0 billion) with a
sub-limit of CHF $1.7 billion ($1.9 billion) for revolving credit. Chubb's existing credit facilities have remaining terms expiring
through October 2022. Chubb's LOC usage was CHF 1.5 billion ($1.7 billion) and CHF 548 million ($567 million) for the years
ended December 31, 2020 and 2019, respectively. The letter of credit facility required that Chubb maintains certain financial
covenants, all of which were met at December 31, 2020.
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, 2020.
Year ending December 31
(in millions of Swiss francs)
2021
2022
2023
Thereafter
Total minimum future lease commitments
1.5
1.5
1.1
—
4.1
At December 31, 2019, the total minimum future lease commitments were CHF 5.6 million.
c) Guarantee of debt
Chubb fully and unconditionally guarantees certain subsidiary debt totaling CHF 13.5 billion ($15.3 billion) and CHF 14.7
billion ($15.2 billion) at December 31, 2020 and 2019, 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, 2020 and 2019.
Amounts are expressed in whole U.S. dollars or Swiss francs.
Holdings as of December 31, 2020 and 2019
Chubb Group Holdings, Inc.
Chubb INA Holdings, Inc.
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
11
1
Holding company
Holding company
CHF 100,000,000
Insurance company
CHF 44,000,000 Reinsurance company
USD
100
Holding company
b) Investments in subsidiaries:
The following table presents information regarding investments in subsidiaries at both December 31, 2020 and 2019.
Investments in subsidiaries increased CHF 1.9 billion ($1.9 billion) in 2020 due to capital contributions primarily to fund
investments and other subsidiary holding company obligations.
(in millions of Swiss francs)
Chubb Group Holdings, Inc.
Chubb INA Holdings, Inc.
Chubb Group Management Holdings Ltd.
Chubb Insurance (Switzerland) Limited
Chubb Reinsurance (Switzerland) Limited
Balance - end of year
S-5
2020
17,004
2,043
13,768
185
242
33,242
2019
17,004
2,043
11,916
185
242
31,391
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, 2020 and 2019, 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 (3)
Sheila P. Burke
James Cash
Mary A. Cirillo
Michael P. Connors
John A. Edwardson
Robert M. Hernandez
Robert J. Hugin (4)
Kimberly A. Ross
Robert W. Scully (5)
Eugene B. Shanks, Jr.
Theodore E. Shasta
David H. Sidwell
Olivier Steimer
Frances F. Townsend
Total
Common
Shares
Beneficially
Owned
3,501
1,727
3,954
3,027
3,756
2,829
23,740
22,067
12,989
12,062
10,014
8,444
—
63,292
10,335
—
—
7,807
40,364
28,864
10,079
9,152
14,017
11,139
9,860
8,933
17,649
16,498
—
—
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Restricted
Stock
Units (1)
36,115
35,269
39,598
39,346
19,465
19,385
15,038
14,685
—
—
—
—
—
25,771
—
—
—
—
—
—
—
—
—
—
—
—
3,643
3,558
—
—
Restricted
Common
Stock (2)
1,721
1,236
1,721
1,236
1,721
1,236
3,107
2,231
1,721
1,236
2,916
2,094
—
1,236
2,916
—
—
1,236
3,251
2,334
1,721
1,236
1,721
1,236
1,721
1,236
1,721
1,236
1,721
—
2020
160,258
2019
195,841
113,859
138,014
27,679
19,019
(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 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)
Common Shares beneficially owned includes 847 shares held by a family foundation. Mr. Atieh has no pecuniary interest in these shares.
(4)
Includes 335 shares held by Mr. Hugin's sons, of which Mr. Hugin disclaims beneficial ownership.
(5)
Includes 2,775 shares held by Mr. Scully's daughter, of which Mr. Scully disclaims beneficial ownership.
S-6
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
b) Group Executives
The following table presents information, at December 31, 2020 and 2019, 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
Year
Common
Shares
Subject to
Options (1)
Weighted
Average
Option
Exercise Price
in CHF
2020
761,463
819,566
2019
675,056
865,583
2020
197,471
111,264
2019
172,465
96,832
2020
166,136
221,635
2019
118,958
213,551
2020
37,263
2019
23,232
72,018
59,350
2020 1,162,333
1,224,483
2019
989,711
1,235,316
103.26
98.83
115.11
117.18
112.15
110.38
119.31
123.14
Option
Exercise
Years
4.37
4.33
5.48
5.89
5.21
5.32
5.90
6.41
Restricted
Common
Stock (2)
148,653
193,616
24,930
33,791
67,309
86,865
24,148
30,519
265,040
344,791
(1)
Represents Common Shares that the individual has the right to acquire within 60 days of December 31, 2020 and 2019, 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 72,085 and 97,528 of the Common Shares listed at December 31, 2020 and 2019,
respectively.
(4)
Mr. Greenberg pledged 240,000 Common Shares Beneficially Owned in connection with a margin account at December 31, 2020 and 2019.
(5)
Mr. Bancroft pledged 41,000 Common Shares Beneficially Owned in connection with a margin account at December 31, 2020 and 2019.
(6)
Mr. Keogh shares with other persons the power to vote and/or dispose of 7,978 of the Common Shares listed at December 31, 2020 and 2019.
6. Shareholders' equity
The following table presents issued, authorized, and conditional share capital, at December 31, 2020 and 2019. Treasury
shares held by Chubb which are issued, but not outstanding totaled 3,606,053 and 2,200,503 shares for the periods ending
December 31, 2020 and 2019, respectively. In addition to the treasury shares held by Chubb, subsidiaries of Chubb held
23,266,586 treasury shares at a cost of CHF 3.0 billion ($3.1 billion) and 25,611,794 treasury shares at a cost of CHF 3.3
billion ($3.4 billion), for the periods ending December 31, 2020 and 2019, 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
2020
2019
477,605,264
479,783,864
200,000,000
200,000,000
33,000,000
33,000,000
25,410,929
25,410,929
S-7
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
a) Shares authorized and issued
All Common Shares are authorized under Swiss Corporate law. Chubb's share capital consisted of 477,605,264 and
479,783,864 Common Shares, with a par value of CHF 24.15 per share for the period ending December 31, 2020 and 2019,
respectively. 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 20, 2022, 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, 2020 and 2019, 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, 2020 and 2019, 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 2019 annual general meetings, 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 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 2020 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.12
per share, expected to be paid in four quarterly installments of $0.78 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 2021 annual general meeting, and is authorized
to abstain from distributing a dividend at its discretion. The first three quarterly installments each of $0.78 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, 2020 and 2019:
Dividends - distributed from Capital contribution reserves
Total dividend distributions per common share
CHF
2.89 $
2.89 $
2020
USD
3.09
3.09
CHF
2.94 $
2.94 $
2019
USD
2.98
2.98
S-8
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. At our May 2020 annual general meeting, our shareholders approved the
cancellation of 2,178,600 shares purchased under our share repurchase program during the period beginning September 23,
2019 and ending December 31, 2019. The capital reduction by cancellation of shares was subject to publication requirements
and a two-month waiting period in accordance with Swiss law and became effective August 3, 2020. The following table
presents a roll-forward of treasury shares held by Chubb for the years ended December 31, 2020 and 2019:
(cost in millions of Swiss francs)
Balance – beginning of year
Repurchase of shares
Cancellation of shares
Balance – end of year
Number of
Shares
2,200,503
3,584,150
2020
Cost
334
Number of
Shares
21,902
484
2,178,601
(2,178,600)
(332)
—
3,606,053
486
2,200,503
2019
Cost
2
332
—
334
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, 2020 and 2019:
(cost in millions of Swiss francs)
Balance – beginning of year
Purchase of shares
Number of
Shares
2020
Cost
Number of
Shares
25,611,794
3,346
20,558,584
—
—
8,263,637
Additions related to share-based compensation plans
814,043
104
744,405
Redeemed under share-based compensation plans
(3,159,251)
(405) (3,954,832)
2019
Cost
2,538
1,189
101
(482)
Balance – end of year
23,266,586
3,046
25,611,794
3,346
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 / release reserve for treasury shares
Cancellation of treasury shares
Profit for the year
Balance – end of year
Year ended December 31
2020
8,486
301
(280)
2,421
10,928
2019
8,959
(808)
—
335
8,486
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:
•
•
•
$1.5 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
$1.5 billion of Chubb Common Shares from November 19, 2020 through December 31, 2021
S-9
NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS (continued)
Chubb Limited
Subsequently, in February 2021, the Board approved an increase to the November 2020 share repurchase program of $1.0
billion to a total of $2.5 billion, effective through December 31, 2021.
Share repurchases may be in the open market, in privately negotiated transactions, block trades, accelerated repurchases and/or
through option or other forward transactions.
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
2020
2019
3,584,150
10,442,238
484
1,521
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, 2020 and December 31, 2019.
Name of Beneficial Owner
Vanguard Group, Inc.
BlackRock, Inc.
Wellington Management Group, LLP
T. Rowe Price Associates, Inc.
Capital International Investors
* Represented less than five percent
8. Other disclosures required by Swiss law
2020
2019
Number of Shares
Beneficially
Owned
Percent of
Class
Number of Shares
Beneficially Owned
Percent of
Class
35,934,796
7.97 %
37,653,064
29,455,172
6.53 %
32,602,335
27,670,712
6.14 %
27,825,114
23,852,906
5.29 %
23,375,803
23,360,900
5.18 %
*
8.30 %
7.20 %
6.14 %
5.10 %
*
a) Expenses
Total personnel expenses amounted to CHF 9.7 million and CHF 10.1 million for the years ended December 31, 2020 and
2019, respectively. The number of full-time positions on an annual average was no more than 50 for years ended December
31, 2020 and 2019.
Total amortization expense related to tangible property amounted to CHF 0.1 million and less than CHF 0.1 million for the years
ended December 31, 2020 and 2019, respectively.
b) Fees paid to auditors
Fees paid to auditors by Chubb Limited totaled CHF 3.7 million and CHF 4.5 million for the years ended December 31, 2020
and 2019, 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 3.5 million and CHF 4.1 million for the years ended December 31, 2020 and 2019,
respectively. Tax fees totaled CHF 0.2 million and CHF 0.3 million for the years ended December 31, 2020 and 2019,
respectively.
S-10
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, 2020 and 2019. Loans to Chubb
Group Holdings decreased CHF 1.7 billion primarily due to principal repayments in 2020.
(in millions of Swiss francs)
Loans to Chubb Group Holdings, Inc.
Loans to INA Holdings, Inc.
Loans to Chubb INA International Holdings Ltd., Agencia en Chile
Total loans to subsidiaries
2020
2,522
137
275
2,934
d) Receivables from subsidiaries
The following table presents information regarding receivables from subsidiaries at December 31, 2020 and 2019.
(in millions of Swiss francs)
Receivables from Chubb Group Holdings, Inc.
Receivables from Chubb Group Management and Holdings, Ltd.
Total receivables from subsidiaries
2020
53
181
234
2019
4,203
—
282
4,485
2019
73
1
74
e) Payable to subsidiaries
The following table presents information regarding payables to subsidiaries at December 31, 2020 and 2019, 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
2020
391
—
105
2
498
2019
393
78
96
—
567
S-11
PROPOSED APPROPRIATION OF
Chubb Limited
AVAILABLE
AVAILABLE
EARNINGS
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, 2020.
(in millions of Swiss francs)
Balance brought forward
Profit for the year
Cancellation of treasury shares
Attribution to reserve for treasury shares
Balance carried forward
2020
8,486
2,421
(280)
301
10,928
2019
8,959
335
—
(808)
8,486
In order to pay dividends, our Board of Directors proposes that an aggregate amount equal to CHF 2.2 billion be released from
the capital contribution reserves account in 2021 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 $3.20 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 2022 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 $0.80 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, 2020, 450,732,625 of the Company's Common Shares were eligible for dividends.
At the 2020 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 2020 totaling $3.12 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 $0.78. The installments were subject to a dividend cap expressed in
CHF which was not reached for 2020.
S-12
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON THE
(SWISS STATUTORY) FINANCIAL STATEMENTS
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the accompanying financial statements of Chubb Limited, which comprise the balance
sheet as at December 31, 2020, the statement of income and notes (pages S-2 to S-12) for the year then ended.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of
Swiss law and the company's articles of association. This responsibility includes designing, implementing and maintaining an
internal control system relevant to the preparation of 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 these financial statements based on our audit. We conducted our audit in
accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the
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 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 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 financial statements for the year ended December 31, 2020 comply with Swiss law and the company's
articles of association.
S-13
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON THE
(SWISS STATUTORY) 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.
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,
2020 with a total book value of CHF 33.2 billion,
representing 91% 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.
Tje
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.
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 financial statements according to the instructions of the Board of
Directors.
S-14
REPORT OF THE STATUTORY AUDITOR TO THE GENERAL MEETING OF CHUBB LIMITED, ZURICH ON THE
(SWISS STATUTORY) FINANCIAL STATEMENTS (continued)
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, March 1, 2021
/s/ Nicolas Juillerat
Nicolas Juillerat
Audit expert
S-15
CHUBB LIMITED
SWISS STATUTORY COMPENSATION REPORT
December 31, 2020
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 2020 and 2019 consisted
of Evan G. Greenberg, Chairman and Chief Executive Officer; Philip V. Bancroft, Chief Financial Officer; John W. Keogh,
President 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 in connection with our 2021 annual general meeting of shareholders. 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, 2020 and 2019, 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, 2020 and 2019 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 0.93808 in 2020
and 0.99365 in 2019.
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. Effective May 2020,
the Board approved an increase in the Risk & Finance Committee chair fee from $20,000 to $25,000. No other changes were
made to our Outside Directors Compensation Parameters in 2020. The Board had previously approved other 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. The compensation
of the Board for the financial years 2020 and 2019 set forth in Table 1 is therefore composed of compensation under the
respective prior parameters from January 1 to the date of our 2020 and 2019 annual general meetings, respectively, and
compensation under the revised parameters from such date through the end of the applicable financial year.
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. Restricted stock awards vest at the following year's annual general meeting. The remaining portion of
the annual fee is paid to non-management directors in cash quarterly, although directors may elect to receive up to all of their
compensation, other than compensation for special meetings, in the form of restricted stock awards.
SC-2
SWISS STATUTORY COMPENSATION REPORT (continued)
The Lead Director received a fee of $50,000 (CHF 46,904) in 2020. Committee chair fees were received as follows:
Audit Committee - $35,000 (CHF 32,833)
Compensation Committee - $25,000 (CHF 23,452)
Nominating & Governance Committee - $20,000 (CHF 18,762)
Risk & Finance Committee - $25,000 (CHF 23,452) (fee increased from $20,000 to $25,000 in May 2020)
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 2020 or 2019.
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, 2020 and 2019. During the years ended December 31, 2020 and 2019, 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 2020 or 2019. At each of
December 31, 2020 and 2019, 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
eligible registered charities, churches, and other places of worship or schools up to a maximum of $20,000 per year. In 2020,
in line with Chubb's commitment to COVID-19 pandemic relief efforts globally, Chubb also matched director contributions up to
an additional $20,000 to eligible non-profit organizations delivering pandemic relief support. For Swiss law purposes, some of
these matching contributions during the years ended December 31, 2020 and 2019 qualified as related party transactions
because our directors or members of their immediate family were directors or officers of the organization. Chubb matched a total
of $124,500 (CHF 116,791) in contributions to seven such organizations in 2020 and $78,000 (CHF 77,505) in
contributions to seven such organizations in 2019.
The following table presents information concerning director compensation paid or, in the case of restricted stock awards,
earned in the years ended December 31, 2020 and 2019. 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
2020
2019
2020
2019
2020
2019
2020
2019
Michael P. Connors
2020
John A. Edwardson
2019
2020
2019
Member
Member
Member
Member
Member
Chair - Nominating &
Governance
Member
Chair - Nominating &
Governance
Lead Director
Chair - Compensation
Member
Chair - Compensation
Member
Member
Robert M. Hernandez
2020
Lead Director (Retired)
Robert J. Hugin (3)
Kimberly A. Ross
Robert W. Scully
2019
2020
2020
2019
2020
2019
Eugene B. Shanks, Jr. 2020
Theodore E. Shasta
David H. Sidwell
Olivier Steimer
2019
2020
2019
2020
2019
2020
2019
Frances F. Townsend
2020
James M. Zimmerman 2020
Total (4)
2019
2020
2019
Lead Director
Member
Member (Retired)
Member
Member
Chair - Audit
Member
Chair - Audit
Member
Member
Member
Member
Member
Member
Member
Chair - Risk & Finance
Member
Chair - Risk & Finance
Member
Retired
Member (Retired)
Board Function
Fees
Earned or Paid
Stock Awards (1)
All Other (2)
Total in USD
Total in CHF
Member $
Member $
125,000 $
123,750 $
180,000 $ 108,843 $
176,250 $ 103,097 $
180,000
176,250
180,000
176,250
32,431
30,720
10,290
9,748
413,843
403,097
337,431
330,720
315,290
309,748
CHF 388,219
CHF 400,540
316,538
328,622
295,768
307,783
325,000
45,320
370,320
347,390
319,375
42,930
362,305
360,007
125,000
123,750
125,000
123,750
—
—
187,500
180,000
148,750
176,250
—
—
43,750
173,750
—
31,250
123,750
—
—
125,000
123,750
125,000
123,750
125,000
123,750
305,000
299,375
67,500
176,250
190,625
67,500
176,250
340,000
334,375
180,000
176,250
180,000
176,250
180,000
176,250
—
—
—
—
66,445
75,704
—
3,500
—
—
—
—
—
—
—
—
—
367,500
344,745
325,000
322,938
305,000
299,375
177,695
425,704
190,625
102,250
300,000
340,000
334,375
305,000
300,000
305,000
300,000
305,000
300,000
286,115
297,476
166,692
423,003
178,822
95,919
298,097
318,948
332,254
286,115
298,097
286,115
298,097
286,115
298,097
148,750
180,000
10,979
339,729
318,694
143,750
176,250
10,399
330,399
328,303
93,750
112,500
—
—
—
206,250
—
63,750
2,510
96,260
—
30,000
193,479
—
95,649
$ 1,255,000 $
2,848,125 $ 277,808 $ 4,380,933
CHF 4,109,674
$ 1,362,500 $
2,779,375 $ 275,108 $ 4,416,983
CHF 4,388,963
(1)
The Stock Awards column reflects restricted stock awards earned during 2020 and 2019. These stock awards were granted at fair value in May 2020 and May 2019,
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)
Prior to his election to the Board in May 2020, Mr. Robert J. Hugin served a consultant to the Board. For such service, which terminated prior to his election to the Board,
Mr. Hugin received consultant fees in 2020 of $31,250 (CHF 29,315), none of which relating to service as a director.
(4)
Total director compensation in 2020 reflects (i) one less director for a portion of the year compared to 2019 as a result of the retirement of James M. Zimmerman as of the
date of the May 2019 annual general meeting of shareholders, and (ii) the retirement from the Board of Kimberly A. Ross and Robert M. Hernandez as of the date of the May
2020 annual general meeting of shareholders.
SC-4
SWISS STATUTORY COMPENSATION REPORT (continued)
Compensation of Executive Management
The following table presents information concerning Executive Management’s 2020 and 2019 compensation.
Table 2 - audited
Name and
Principal Position
Evan G.
Greenberg
Chairman 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
2020
$ 1,400,000 $ 5,700,000 $ 10,125,007 $ 2,996,944 $
1,185,811 $ 21,407,762
CHF 20,082,234
2019
$ 1,400,000 $ 6,700,000 $ 10,125,070 $ 1,917,286 $
1,267,971 $ 21,410,327
CHF 21,274,500
2020
$ 2,690,769 $ 4,576,800 $ 7,030,402 $ 2,080,895 $
1,301,790 $ 17,680,656
CHF 16,585,903
2019
$ 2,583,135 $ 5,159,400 $ 7,211,734 $ 1,365,545 $
1,267,109 $ 17,586,923
CHF 17,475,352
Total
2020
$ 4,090,769 $ 10,276,800 $ 17,155,409 $ 5,077,839 $
2,487,601 $ 39,088,418
CHF 36,668,137
2019
$ 3,983,135 $ 11,859,400 $ 17,336,804 $ 3,282,831 $
2,535,080 $ 38,997,250
CHF 38,749,852
(1)
The Stock Awards column discloses the fair value of the restricted stock awards granted on February 25, 2021 for 2020 and February 27, 2020 for 2019, 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 25, 2021 for 2020 and February 27, 2020 for 2019, 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 $972,000 (CHF 911,816) in 2020 and $900,000 (CHF 894,290) in 2019, personal use of corporate aircraft of
$164,043 (CHF 153,886) in 2020 and $329,683 (CHF 327,591) in 2019, and miscellaneous other benefits of $49,768 (CHF 46,686) in 2020 and $38,288 (CHF
38,045) in 2019, 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 2020 and 2019, 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 2020 and 2019 totaled $1.78 million (CHF 1.67 million) and $1.65 million (CHF 1.64 million), respectively. These consist of
discretionary and non-discretionary employer contributions. The discretionary employer contributions for 2020 have been calculated and are expected to be paid in April
2021.
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, 2020 and 2019. Additionally, no
current or former member of Executive Management or any related party thereto received benefits in kind or waivers of claims
during 2020 or 2019 other than as described in the footnotes to Table 2.
At each of December 31, 2020 and 2019, 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, 2020. 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, 2020 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, 2021
/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 2019, Chubb announced companywide goals to reduce GHG emissions globally 20% on an absolute basis by 2025 and 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). Chubb achieved its first goal of reducing emissions by 20% in 2019. Chubb is now pursuing its longer-
term 40% emissions reduction goal. While 2020 resulted in emissions reduction of 41% off the 2016 baseline, emissions in 2020
were an anomaly because of the global COVID-19 pandemic and do not indicate achievement of Chubb’s medium-term GHG reduction
goal. Chubb’s 2020 emissions reduction build on earlier progress. In 2007, the company, then named ACE, 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 September 2014, the company announced a second GHG reduction target 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%.
Chubb 2020 GHG Inventory Data
Global Absolute Emissions (CO2-eq.)
2020
51,701
The data above represent 16,313 metric tons of CO2-eq. of Scope 1 emissions from fossil fuel combustion; 38,827 metric tons of CO2-
eq. of location-based Scope 2 emissions; and 35,388 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 2020 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 2020, Chubb’s
response to the questionnaire resulted in a score of B.
Chubb's global GHG management plan partly consists of 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; London, U.K.; and Monterrey, Mexico.
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.
In July 2011, the company’s Bermuda office building was awarded LEED Gold certification and became the first building in Bermuda
to be awarded the designation. Energy efficiency projects done in the course of pursuing the certification 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.
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.
Chubb’s global GHG management plan also includes purchase of renewable electricity for many of the company’s largest offices.
Chubb’s U.K. locations are 100% powered by renewable energy. As of July 2020, Chubb’s locations in Pennsylvania, Delaware, and
Illinois are powered by renewable energy. Locations in New Jersey and Connecticut will follow in July 2021.
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/
environment.
E-1
VERIFICATION OPINION DECLARATION
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, 2020 to December 31, 2020. This Verification Opinion
Declaration 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: 16,313
Scope 2 Emissions (Location-Based): 38,827
Scope 2 Emissions (Market-Based): 35,388
Scope 3 Emissions (Business Travel - Air): 4,636
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, 2020 to December 31, 2020
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)
GHG Verification Protocols used to conduct the verification:
•
ISO 14064-3: Greenhouse gases -- Part 3: Specification with
guidance for the verification and validation of greenhouse gas
assertions
Level of Assurance and Qualifications:
Limited
•
• Materiality Threshold: ±5%
Verification Methodology:
•
Interviews with relevant personnel of Chubb;
• 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 materially correct;
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
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.
Attestation:
Mary E. Armstrong-Friberg, Lead Verifier
Principal Consultant
Sustainability and Climate Change Services
Apex Companies, LLC
March 12, 2021
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 or publication of this statement by Chubb in order to satisfy its ESG disclosure requirements and objectives, but
without accepting or assuming any responsibility or liability on our part to any party who may have access to this statement.
APEX Companies, LLC
E-2
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Chubb Limited
Bärengasse 32
CH—8001 Zurich
Switzerland
chubb.com