Newswires
CHUBB LTD – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our results of operations, financial condition,
and liquidity and capital resources as of and for the three and nine months
ended
All comparisons in this discussion are to the corresponding prior year period 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. Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. This discussion should be read in conjunction with our consolidated financial statements and related notes and our Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 (2020 Form 10-K). Other Information We routinely post important information for investors on our website (investors.chubb.com). We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations underSecurities and Exchange Commission (SEC) Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Investor Information portion of our website, in addition to following our press releases,SEC filings, 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. MD&A Index Page Forward-Looking Statements 43 Overview 44 Consolidated Operating Results 44 Segment Operating Results 50 Net Realized and Unrealized Gains (Losses) 60 Effective Income Tax Rate 62 Non-GAAP Reconciliation 62 Amortization of Purchased Intangibles and Other Amortization 68 Net Investment Income 69 Investments 70 Critical Accounting Estimates 74 Unpaid Losses and Loss Expenses 74 Asbestos and Environmental (A&E) 74 Fair Value Measurements 74 Catastrophe Management 75 Natural Catastrophe Property Reinsurance Program 76 Liquidity 77 Capital Resources 78 Information Provided In Connection With Outstanding Debt of Subsidiaries 79
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Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Any written or oral statements made by us or on
our behalf may include forward-looking statements that reflect our current views
with respect to future events and financial performance. 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 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 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;
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•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
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 September 30,
2021 , we had total assets of $199 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
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 in our
2020 Form 10-K.
Consolidated Operating Results - Three and Nine Months Ended September 30, 2021 and 2020
Three Months Ended Nine Months Ended
September 30 % Change September 30 % Change
(in millions of U.S. dollars, except for Q-21 vs.
percentages) 2021 2020 Q-20 2021 2020 YTD-21 vs. YTD-20
Net premiums written $ 10,510 $ 9,078 15.8 % $ 28,718 $ 25,410 13.0 %
Net premiums written - constant dollars
(1) 14.2 % 11.1 %
Net premiums earned 10,000 8,765 14.1 % 27,034 24,687 9.5 %
Net investment income 866 840 3.1 % 2,613 2,528 3.4 %
Net realized gains (losses) (21) (141) (85.2) % 833 (1,069) NM
Total revenues 10,845 9,464 14.6 % 30,480 26,146 16.6 %
Losses and loss expenses 6,629 5,835 13.6 % 16,688 16,897 (1.2) %
Policy benefits 151 198 (23.4) % 503 550 (8.6) %
Policy acquisition costs 1,778 1,645 8.1 % 5,141 4,853 5.9 %
Administrative expenses 806 733 9.9 % 2,325 2,201 5.7 %
Interest expense 122 130 (6.3) % 366 390 (6.3) %
Other (income) expense (763) (485) 57.3 % (2,030) (372) NM
Amortization of purchased intangibles 71 72 (1.4) % 216 217 (0.6) %
Total expenses 8,794 8,128 8.2 % 23,209 24,736 (6.2) %
Income before income tax 2,051 1,336 53.6 % 7,271 1,410 NM
Income tax expense 218 142 53.4 % 873 295 195.7 %
Net income $ 1,833 $ 1,194 53.5 % $ 6,398 $ 1,115 NM
NM - not meaningful
(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.
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Financial Highlights for the Three Months Ended
•Net income was$1.8 billion compared with$1.2 billion in the prior year period. Net income in the current quarter was driven by strong underwriting results, including growth in net premiums earned and improvements in our loss and loss expense ratios. Both commercial P&C and consumer lines grew globally, driven by positive rate increases, higher new business, increased exposure and strong renewal retention. Returns from our private equity investments contributed to the higher net income.
•Total pre-tax and after-tax catastrophe losses were
percentage points of the combined ratio) and
compared with
•Total pre-tax and after-tax favorable prior period development were$321 million (3.6 percentage points of the combined ratio) and$227 million , respectively, compared with favorable prior period development of$146 million (1.8 percentage points of the combined ratio) and$126 million , respectively, in the prior year period. •The P&C combined ratio was 93.4 percent compared with 95.2 percent in the prior year period. P&C current accident year combined ratio excluding catastrophe losses was 84.8 percent compared with 85.7 percent in the prior year period. The current year ratios decreased due to underlying loss ratio improvement and the favorable impact of higher net premiums earned on the expense ratio. The prior year loss ratio was favorably impacted by COVID-related reduced claim frequency primarily in the automobile portfolios inNorth America andLatin America of 1.0 percentage point. •Consolidated net premiums written were$10.5 billion , up 15.8 percent, or 14.2 percent in constant dollars, comprising positive growth in both commercial P&C lines and consumer lines of 22.0 percent and 3.1 percent, respectively. •Consolidated net premiums earned were$10.0 billion , up 14.1 percent, or 12.6 percent in constant dollars, comprising positive growth in both commercial P&C lines and consumer lines of 21.1 percent and 0.8 percent, respectively.
•Net investment income was
year period primarily due to higher income received from our private equity
partnerships and increased dividends on public equities.
•Shareholders' equity decreased by$744 million in the quarter, primarily reflecting total capital returned to shareholders in the quarter of$1.9 billion , including share repurchases of$1.5 billion , at an average purchase price of$180.23 per share, and dividends of$346 million , and net unrealized losses on investments of$456 million . Partially offsetting the decrease was net income of$1.8 billion . 45
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Three Months Ended Nine Months Ended %
Net Premiums Written September 30 % Change September 30 Change
C$ C$
(in millions of U.S. dollars, Q-21 vs. Q-21 vs. YTD-21 vs. YTD-21 vs.
except for percentages) 2021 2020 Q-20 Q-20 2021 2020 YTD-20 YTD-20
Commercial casualty $ 1,957 $ 1,722 13.6 % 12.7 % $ 5,215 $ 4,541 14.9 % 13.9 %
Workers' compensation 488 432 12.8 % 12.8 % 1,597 1,485 7.5 % 7.5 %
Professional liability 1,328 1,103 20.4 % 18.2 % 3,681 3,012 22.2 % 19.6 %
Surety 139 127 8.8 % 6.6 % 435 394 10.4 % 9.4 %
Commercial multiple peril (1) 310 270 14.8 % 14.8 % 889 778 14.2 % 14.2
%
Property and other short-tail lines 1,572 1,270 23.8 %
21.5 % 4,906 3,948 24.3 % 20.5
%
Total Commercial P&C lines 5,794 4,924 17.6 % 16.2 % 16,723 14,158 18.1 % 16.2 % Agriculture 1,415 986 43.6 % 43.6 % 2,110 1,604 31.6 % 31.6 % Personal automobile 383 380 0.9 % (3.4) % 1,134 1,174 (3.4) % (5.3) % Personal homeowners 978 955 2.5 % 2.3 % 2,778 2,708 2.6 % 2.1 % Personal other 454 417 9.0 % 5.4 % 1,386 1,237 12.1 % 7.5 % Total Personal lines 1,815 1,752 3.7 % 1.8 % 5,298 5,119 3.5 % 1.7 %
Total Property and Casualty lines 9,024 7,662 17.8 %
16.4 % 24,131 20,881 15.6 % 13.8
%
Global A&H lines (2) 922 913 0.9 % (1.4) % 2,855 2,931 (2.6) % (5.6) % Reinsurance lines 221 181 22.3 % 20.6 % 702 606 15.9 % 14.4 % Life 343 322 6.4 % 4.9 % 1,030 992 3.8 % 1.4 % Total consolidated$ 10,510 $ 9,078 15.8 % 14.2 %$ 28,718 $ 25,410 13.0 % 11.1 % (1)Commercial multiple peril represents retail package business (property and general liability). (2)For purposes of this schedule only, A&H results from ourCombined North America and International businesses, normally included in the Life Insurance andOverseas 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 consolidated net premiums written for the three and nine months endedSeptember 30, 2021 reflects growth across most lines of business, comprising commercial lines growth of 22.0 percent and consumer lines growth of 3.1 percent, driven by higher new business, positive rate increases, increased exposure, and strong renewal retention. •Commercial casualty grew globally, driven by higher new business and positive rate increases, primarily acrossNorth America ,Europe , andAsia . Additionally, there was increased exposure primarily on in-force policies following the adverse impact of prior year exposure adjustments resulting from the COVID-19 pandemic. •Workers' compensation growth was due to increased exposure primarily on in-force policies following the adverse impact of prior year exposure adjustments resulting from the COVID-19 pandemic. •Professional liability grew globally, reflecting higher new business, improved retention and positive rate increases inNorth America ,Asia , andEurope . •Commercial multiple peril increased due to higher new and renewal business, including exposure increases, inNorth America . •Property and other short-tail lines grew due to higher new business, improved retention and positive rate increases inAsia ,North America , andEurope . •Personal lines increased globally primarily reflecting new business and positive rate increases in homeowners' lines inNorth America andLatin America , and growth in specialty lines inEurope andAsia . Growth was partially offset by declines in automobile lines inNorth America primarily due to the unfavorable impact of automobile return premiums.Latin America also had declines in automobile lines for the nine months endedSeptember 30, 2021 as a result of continued reduced exposures from the impact of the COVID-19 pandemic, but began to experience modest growth for the three months endedSeptember 30, 2021 . •Global A&H lines began to experience modest growth for the three months endedSeptember 30, 2021 , but was unfavorably impacted from less travel volume and reduced consumer activity inAsia andLatin America for the nine
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Table of Contents months endedSeptember 30, 2021 . OurNorth American Combined Insurance supplemental A&H business decreased due to the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales. •Growth in our international life operations, principally from new business inAsia andLatin America , was partially offset by declines in our life reinsurance business that has not written new business since 2007. For additional information on net premiums written, refer to the segment results discussions. Net Premiums Earned Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written that was 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. For the three months endedSeptember 30, 2021 , net premiums earned increased$1,235 million , or 14.1 percent, comprising 21.1 percent positive growth in commercial P&C lines and 0.8 percent positive growth in consumer lines. For the nine months endedSeptember 30, 2021 , net premiums earned increased$2,347 million or 9.5 percent, comprising 15.0 percent positive growth in commercial P&C lines and 0.1 percent positive growth in consumer lines. Catastrophe Losses and PriorPeriod Development We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in theU.S. andCanada . 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 theU.S. andCanada , we generally use a similar definition. We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. Prior period development includes adjustments relating 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. Three Months Ended
Nine Months Ended
September 30 September 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 1,146 $ 925 $ 2,126 $ 2,969
Favorable prior period development $ 321 $ 146 $
781
Catastrophe losses throughSeptember 30, 2021 and 2020 were primarily from the following events: •2021: Hurricane Ida losses of$806 million , winter storm losses in theU.S. , flooding inEurope , and other severe weather-related events in theU.S. and internationally. •2020: COVID-19 pandemic claims of$1,378 million , severe weather-related events in theU.S. and internationally, and civil unrest-related losses in theU.S. 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 PPD for the three months endedSeptember 30, 2021 was$321 million , including adverse development of$33 million related to legacy environmental exposures. Excluding the adverse development, we had favorable development of$354 million with 30 percent in long-tail lines, principally from accident years 2017 and prior, and 70 percent in short-tail lines, primarily in homeowners and property lines. Pre-tax net favorable PPD for the nine months endedSeptember 30, 2021 was$781 million , including adverse development of$33 million related to legacy environmental exposures and$68 million for molestation claims. Excluding the adverse development, we had favorable development of$882 million with 27 percent in long-tail lines, principally from accident years 2017 and prior, and 73 percent in short-tail lines, primarily in homeowners, accident and health, property, and surety lines. Pre-tax net adverse PPD for the three months endedSeptember 30, 2020 was$146 million , including adverse development of$35 million related to legacy environmental exposures. The remaining favorable development of$181 million comprises$312 47
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million of favorable development from long-tail lines, principally from accident
years 2016 and prior, and adverse development of
lines.
Pre-tax net favorable prior period development for the nine months endedSeptember 30, 2020 was$189 million , including adverse development of$259 million forU.S. child molestation claims, predominately reviver statute-related and$35 million adverse development related to legacy environmental exposures. The remaining favorable development of$483 million principally comprises favorable development from long-tail lines, principally from accident years 2016 and prior.
Refer to the prior period development discussion in Note 6 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. We calculate this ratio by dividing the respective
expense amounts by net premiums earned. We do not calculate this ratio for the
Life Insurance segment as we do not use this measure to monitor or manage that
segment. A P&C combined ratio under 100 percent indicates underwriting income,
and a combined ratio exceeding 100 percent indicates underwriting loss.
Three Months Ended Nine Months Ended
September 30 September 30
2021 2020 2021 2020
Loss and loss expense ratio
CAY loss ratio excluding catastrophe losses 60.1 % 59.7 % 58.7 % 59.4 %
Catastrophe losses 12.2 % 11.3 % 8.4 % 12.9 %
Prior period development (3.7) % (1.8) % (3.2) % (0.8) %
Loss and loss expense ratio 68.6 % 69.2 % 63.9 % 71.5 %
Policy acquisition cost ratio 17.1 % 18.0 % 18.3 % 18.8 %
Administrative expense ratio 7.7 % 8.0 % 8.2 % 8.6 %
P&C Combined ratio 93.4 % 95.2 % 90.4 % 98.9 %
The decrease in the loss and loss expense ratio for the three and nine months
ended
development.
The CAY loss ratio excluding catastrophe losses increased 0.4 percentage points for the three months endedSeptember 30, 2021 . The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 1.0 percentage point primarily in the automobile portfolios inNorth America andLatin America . Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased 0.6 percentage points reflecting underlying loss ratio improvement. The CAY loss ratio excluding catastrophe losses decreased 0.7 percentage points for the nine months endedSeptember 30, 2021 reflecting underlying loss ratio improvement. The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 0.3 percentage point. Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased 1.0 percentage point reflecting underlying loss ratio improvement. The policy acquisition cost ratio decreased 0.9 percentage points and 0.5 percentage points for the three and nine months endedSeptember 30, 2021 , respectively, primarily due to a change in the mix of business, including less premiums earned from consumer A&H lines that have a higher acquisition cost ratio and higher premiums earned from commercial P&C lines that have a lower acquisition cost ratio.
The administrative expense ratio decreased 0.3 percentage points and 0.4
percentage points for the three and nine months ended
respectively, primarily due to the favorable impact of higher net premiums
earned.
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.
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Table of Contents For the three months endedSeptember 30, 2021 and 2020, Policy benefits were$151 million and$198 million , respectively, which included separate account liabilities (gains) losses of$(24) million and$24 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$175 million and$174 million for the three months endedSeptember 30, 2021 and 2020, respectively, reflecting growth in our International Life operations, offset by a decline in ourCombined Insurance North America supplemental accident and health business and our life reinsurance business.
For the nine months ended
(gains) losses of
separate account gains and losses, Policy benefits were
respectively, reflecting growth in our International Life operations, offset by
a decline in our
health business and our life reinsurance business.
Refer to the respective sections that follow for a discussion of Net investment
income, Other (income) expense, Net realized gains (losses), Amortization of
purchased intangibles, and Income tax expense.
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Segment Operating Results - Three and Nine Months Ended
We operate through six business segments:North America Commercial P&C Insurance ,North America Personal P&C Insurance ,North America Agricultural Insurance ,Overseas General Insurance , Global Reinsurance, and Life Insurance. For more information on our segments refer to "Segment Information" under Item 1 in our 2020 Form 10-K.
The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) and accident & health (A&H) insurance and services to large, middle market, and small commercial businesses in theU.S. ,Canada , andBermuda . This segment includes ourNorth America Major Accounts andSpecialty Insurance division (large corporate accounts and wholesale business), and theNorth America Commercial Insurance division (principally middle market and small commercial accounts). Three Months Ended Nine Months Ended September 30 % Change September 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 4,369 $ 3,778 15.6 %$ 12,318 $ 10,750 14.6 % Net premiums earned 3,954 3,456 14.4 % 11,431 10,427 9.6 % Losses and loss expenses 2,754 2,444 12.7 % 7,740 8,123 (4.7) % Policy acquisition costs 537 489 9.7 % 1,540 1,452 6.0 % Administrative expenses 273 243 11.8 % 772 751 2.7 % Underwriting income 390 280 39.9 % 1,379 101 NM Net investment income 507 510 (0.7) % 1,582 1,544 2.5 % Other (income) expense 8 7 17.6 % 24 19 31.9 % Segment income$ 889 $ 783 13.6 %$ 2,937 $ 1,626 80.6 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 62.3 % 63.8 % (1.5) pts 63.1 % 64.7 % (1.6) pts Catastrophe losses 11.9 % 12.9 % (1.0) pts 8.7 % 17.6 % (8.9) pts Prior period development (4.5) % (6.0) % 1.5 pts (4.1) % (4.4) % 0.3 pts Loss and loss expense ratio 69.7 % 70.7 % (1.0) pts 67.7 % 77.9 % (10.2) pts Policy acquisition cost ratio 13.5 % 14.2 % (0.7) pts 13.5 % 13.9 % (0.4) pts Administrative expense ratio 6.9 % 7.0 % (0.1) pts 6.7 % 7.2 % (0.5) pts Combined ratio 90.1 % 91.9 % (1.8) pts 87.9 % 99.0 % (11.1) pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Catastrophe losses$ 472 $ 447 $ 999 $ 1,838 Favorable prior period development$ 157 $ 200 $ 440 $ 451 50
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Table of Contents Catastrophe losses throughSeptember 30, 2021 and 2020 were primarily from the following events: •2021: Hurricane Ida losses of$391 million , winter storm losses and other severe weather-related events in theU.S. •2020: COVID-19 pandemic claims of$973 million , civil unrest in theU.S. , and natural catastrophes includingNashville, Tennessee tornado, Hurricane Laura, Hurricane Sally, Tropical Storm Isaias, Midwest derecho,U.S. wildfires, and other severe weather-related events in theU.S.
Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
Premiums
Net premiums written increased$591 million , or 15.6 percent, and$1,568 million , or 14.6 percent, for the three and nine months endedSeptember 30, 2021 , respectively, comprising: •Commercial P&C lines: Positive growth of 16.6 percent and 15.9 percent, respectively, reflecting strong new business written, positive rate increases, and strong premium retention across a number of retail and wholesale lines, including financial lines, primary and excess casualty, and property. •Consumer lines: Negative growth of 3.9 percent and 10.9 percent, respectively, principally from exposure declines in A&H.
Net premiums earned increased
or 9.6 percent for the three and nine months ended
respectively, reflecting the growth in net premiums written described above.
Combined Ratio The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased for the three and nine months endedSeptember 30, 2021 , due to underlying loss ratio improvement. The loss and loss expense ratio for the nine months endedSeptember 30, 2021 was also impacted by lower catastrophe losses compared to the prior year which included significant losses related to the COVID-19 pandemic and the favorable impact of lower year-over-year large structured transactions written.
The policy acquisition cost ratio decreased 0.7 percentage point and 0.4
percentage point for the three and nine months ended
respectively, reflecting lower commissions and a change in mix of business
towards lines that have a lower acquisition cost ratio. The decrease in the
policy acquisition ratio for the nine months ended,
partially offset by the impact of lower year-over-year structured transactions
noted above.
The administrative expense ratio decreased 0.1 percentage point and 0.5
percentage point for the three and nine months ended
respectively, primarily due to the favorable impact of higher net premiums
earned, partially offset by increased spending to support growth.
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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
Three Months Ended Nine Months Ended
September 30 % Change September 30 % Change
(in millions of U.S. dollars, except for
percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20
Net premiums written $ 1,300 $ 1,285 1.2 % $ 3,761 $ 3,719 1.1 %
Net premiums earned 1,244 1,231 1.0 % 3,652 3,623 0.8 %
Losses and loss expenses 846 961 (12.0) % 2,341 2,406 (2.7) %
Policy acquisition costs 254 248 2.3 % 746 724 3.1 %
Administrative expenses 73 65 11.7 % 200 199 0.2 %
Underwriting income 71 (43) NM 365 294 24.2 %
Net investment income 60 64 (7.9) % 189 195 (3.4) %
Other (income) expense 1 1 - (3) 4 NM
Amortization of purchased intangibles 2 2 - 8 8 -
Segment income $ 128 $ 18 NM $ 549 $ 477 15.1 %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 50.7 % 49.2 % 1.5 pts 52.5 % 53.0 % (0.5) pts
Catastrophe losses 31.9 % 24.7 % 7.2 pts 18.9 % 12.0 % 6.9 pts
Prior period development (14.6) % 4.2 % (18.8) pts (7.3) % 1.4 % (8.7) pts
Loss and loss expense ratio 68.0 % 78.1 % (10.1) pts 64.1 % 66.4 % (2.3) pts
Policy acquisition cost ratio 20.4 % 20.1 % 0.3 pts 20.4 % 20.0 % 0.4 pts
Administrative expense ratio 5.9 % 5.3 % 0.6 pts 5.5 % 5.5 % - pts
Combined ratio 94.3 % 103.5 % (9.2) pts 90.0 % 91.9 % (1.9) pts
NM - not meaningful
Catastrophe Losses and Prior Period Development Three Months Ended Nine Months Ended
September 30 September 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 397 $ 305 $ 698 $ 436
Favorable (unfavorable) prior period development $ 182
Catastrophe losses throughSeptember 30, 2021 and 2020 were primarily from the following events: •2021: Hurricane Ida losses of$281 million , winter storm losses and other severe weather-related events in theU.S. •2020:U.S. wildfires, Tropical Storm Isaias, Midwest derecho, Hurricane Sally, Hurricane Laura, and other severe weather-related events in theU.S.
Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
Premiums
Net premiums written increased$15 million , or 1.2 percent, and$42 million , or 1.1 percent for the three and nine months endedSeptember 30, 2021 , respectively, primarily driven by new business and strong renewal retention, from both rate and exposure increases in homeowners. Partially offsetting the increase were cancellations in parts ofCalifornia exposed to wildfires, and the unfavorable impact of automobile return premiums.
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Net premiums earned increased
0.8 percent for the three and nine months ended
respectively, reflecting the growth in net premiums written described above.
Combined Ratio The loss and loss expense ratio decreased for the three and nine months endedSeptember 30, 2021 , reflecting higher favorable prior period development, partially offset by higher catastrophe losses. The CAY loss ratio excluding catastrophe losses increased for the three months endedSeptember 30, 2021 and decreased for the nine months endedSeptember 30, 2021 . The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 3.3 percentage points and 1.1 percentage points, respectively, in the automobile portfolio. Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased reflecting underlying loss ratio improvement in homeowners.
The policy acquisition cost ratio increased 0.3 percentage point and 0.4
percentage point for the three and nine months ended
respectively, primarily due to lower ceded commissions. The nine months ended
adjustment in the prior year.
The administrative expense ratio increased 0.6 percentage point for the three months endedSeptember 30, 2021 primarily due to increased spending to support growth and was flat for the nine months endedSeptember 30, 2021 .
The North America Agricultural Insurance segment comprises our North American based businesses that provide a variety of coverages in theU.S. andCanada including crop insurance, primarilyMultiple Peril Crop Insurance (MPCI) and crop-hail throughRain 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. Three Months Ended Nine Months Ended September 30 % Change September 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 1,415 $ 986 43.6 %$ 2,110 $ 1,604 31.6 % Net premiums earned 1,338 971 37.9 % 1,858 1,441 29.0 % Losses and loss expenses 1,138 845 34.6 % 1,554 1,223 27.0 % Policy acquisition costs 61 56 9.1 % 100 96 4.5 % Administrative expenses 4 5 4.1 % 10 12 (11.9) % Underwriting income 135 65 107.3 % 194 110 76.0 % Net investment income 6 7 (0.8) % 21 23 (6.3) % Other (income) expense - - - - 1 NM Amortization of purchased intangibles 7 7 - 20 20 - Segment income$ 134 $ 65 107.5 %$ 195 $ 112 74.1 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 84.0 % 84.2 % (0.2) pts 82.3 % 83.0 % (0.7) pts Catastrophe losses 0.6 % 1.0 % (0.4) pts 1.1 % 1.7 % (0.6) pts Prior period development 0.4 % 1.9 % (1.5) pts 0.2 % 0.2 % - pts Loss and loss expense ratio 85.0 % 87.1 % (2.1) pts 83.6 % 84.9 % (1.3) pts Policy acquisition cost ratio 4.6 % 5.8 % (1.2) pts 5.4 % 6.6 % (1.2) pts Administrative expense ratio 0.3 % 0.4 % (0.1) pts 0.6 % 0.8 % (0.2) pts Combined ratio 89.9 % 93.3 % (3.4) pts 89.6 % 92.3 % (2.7) pts NM - not meaningful 53
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Catastrophe Losses and Prior Period Development Three Months Ended Nine Months Ended
September 30 September 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 8 $ 10 $ 20 $ 24
Unfavorable prior period development $ (7) $
(18)
Catastrophe losses through
winter storm losses and other severe weather-related events in the
Agribusiness.
Premiums
Net premiums written increased$429 million , or 43.6 percent, and$506 million , or 31.6 percent for the three and nine months endedSeptember 30, 2021 , respectively, due mainly to an increase inMPCI , reflecting higher commodity prices and volatility factors, both of which impact pricing, as well as higher reported acreage from policyholders and policy count growth. In addition, our Chubb Agribusiness unit contributed to the net premiums written increase with strong new business growth.
Net premiums earned increased
or 29.0 percent for the three and nine months ended
respectively, reflecting the growth in net premiums written described above.
Combined Ratio The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased for the three and nine months endedSeptember 30, 2021 , primarily due to higher net premiums earned fromMPCI , partially offset by the unfavorable impact of a commodity hedge loss in the current period. The policy acquisition cost ratio decreased 1.2 percentage points for both the three and nine months endedSeptember 30, 2021 , primarily due to the favorable impact of higher net premiums earned. The policy acquisition cost ratio for the nine months endedSeptember 30, 2021 also benefited from a lower year-over-year amount of supplemental commissions in our Chubb Agribusiness unit.
The administrative expense ratio decreased 0.1 percentage point and 0.2
percentage point for the three and nine months ended
respectively, primarily due to the favorable impact of higher net premiums
earned.
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Table of ContentsOverseas General Insurance Overseas General Insurance segment comprisesChubb 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 theU.S. ,Bermuda , andCanada . CGM, ourLondon -based international commercial P&C excess and surplus lines business, includesLloyd's of London (Lloyd's) Syndicate 2488. Chubb provides funds at Lloyd's to support underwriting by Syndicate 2488 which is managed byChubb Underwriting Agencies Limited . Three Months Ended Nine Months Ended September 30 % Change September 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 2,596 $ 2,238 15.9 %$ 7,983 $ 6,857 16.4 % Net premiums written - constant dollars 11.2 % 10.8 % Net premiums earned 2,664 2,337 13.9 % 7,721 6,838 12.9 % Losses and loss expenses 1,487 1,192 24.6 % 3,936 3,935 - Policy acquisition costs 703 637 10.2 % 2,070 1,903 8.7 % Administrative expenses 266 260 2.3 % 811 759 6.9 % Underwriting income 208 248 (15.9) % 904 241 275.5 % Net investment income 157 130 20.9 % 447 396 12.7 % Other (income) expense - 1 (100.0) % 3 10 (73.3) % Amortization of purchased intangibles 11 10 8.1 % 36 33 10.6 % Segment income$ 354 $ 367 (3.5) %$ 1,312 $ 594 120.8 %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 49.8 % 49.5 % 0.3 pts 50.1 % 50.6 % (0.5) pts Catastrophe losses 7.0 % 4.1 % 2.9 pts 3.6 % 8.5 % (4.9) pts Prior period development (1.0) % (2.6) % 1.6 pts (2.7) % (1.5) % (1.2) pts Loss and loss expense ratio 55.8 % 51.0 % 4.8 pts 51.0 % 57.6 % (6.6) pts Policy acquisition cost ratio 26.4 % 27.3 % (0.9) pts 26.8 % 27.8 % (1.0) pts Administrative expense ratio 10.0 % 11.1 % (1.1) pts 10.5 % 11.1 % (0.6) pts Combined ratio 92.2 % 89.4 % 2.8 pts 88.3 % 96.5 % (8.2) pts
Catastrophe Losses and Prior
Three Months Ended Nine Months Ended
September 30 September 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 188 $ 95 $ 278 $ 584
Favorable prior period development $ 28 $ 60 $ 209 $ 100
Catastrophe losses through September 30, 2021 and 2020 were primarily from the
following events:
•2021: Flooding in Europe , Hurricane Ida, winter storm losses and international
weather-related events
•2020: COVID-19 pandemic claims of $373 million , storms in Australia , Australia
wildfires, Hurricane Laura, Hurricane Sally, Tropical Storm Isaias, and other
international weather-related events
Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
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Table of Contents Net Premiums Written by Region Three months ended September 30 (in millions ofU.S. dollars, except for percentages) 2021 2020 C$ C$ Q-21 vs. Region 2021 % of Total 2020 % of Total 2020 Q-21 vs. Q-20 Q-20 Europe, Middle East and Africa$ 1,173 45 %$ 955 43 %$ 1,002 22.7 % 17.1 % Latin America 501 20 % 442 20 % 464 13.1 % 7.8 % Asia 862 33 % 794 35 % 819 8.5 % 5.1 % Other (1) 60 2 % 47 2 % 48 29.7 % 25.9 % Net premiums written$ 2,596 100 %$ 2,238 100 %$ 2,333 15.9 % 11.2 % Nine months ended September 30 (in millions ofU.S. dollars, except for percentages) 2021 2020 C$ C$Y-21 vs. Region 2021 % of Total 2020 % of Total 2020Y-21 vs.Y-20 Y-20 Europe, Middle East and Africa$ 3,912 49 %$ 3,111 45 %$ 3,309 25.7 % 18.2 % Latin America 1,489 18 % 1,414 21 % 1,439 5.3 % 3.5 % Asia 2,448 31 % 2,203 32 % 2,320 11.1 % 5.5 % Other (1) 134 2 % 129 2 % 135 4.2 % (0.8) % Net premiums written$ 7,983 100 %$ 6,857 100 %$ 7,203 16.4 % 10.8 %
(1) Includes the international supplemental A&H business of
and other international operations.
Premiums
Overall, net premiums written increased for the three and nine months endedSeptember 30, 2021 , reflecting growth in commercial P&C lines of 20.6. percent and 23.8 percent, or 16.0 percent and 17.8 percent on a constant-dollar basis, respectively, and growth in consumer lines of 9.2 percent and 6.4 percent, or 4.5 percent and 1.3 percent on a constant-dollar basis, respectively. Growth inEurope ,Middle East andAfrica of 17.1 percent and 18.2 percent on a constant-dollar basis for the three and nine months endedSeptember 30, 2021 , respectively, was primarily driven by higher new business, higher retention and positive rate increases in commercial P&C lines, including commercial casualty, professional liability and property.Latin America increased 7.8 percent on a constant-dollar basis for the three months endedSeptember 30, 2021 driven by higher new business in homeowners and A&H. The prior year included the adverse impact of restrictions resulting from the COVID-19 pandemic in automobile and A&H.Latin America increased 3.5 percent on a constant-dollar basis for the nine months endedSeptember 30, 2021 due to growth in commercial P&C lines.Asia growth of 5.1 percent and 5.5 percent on a constant-dollar basis for the three and nine months endedSeptember 30, 2021 , respectively, was primarily driven by higher new business, higher retention and positive rate increases in commercial P&C lines, including professional liability and property. Net premiums earned increased$327 million and$883 million , or$237 million and$542 million on a constant-dollar basis, for the three and nine months endedSeptember 30, 2021 , respectively, reflecting the increase in commercial P&C net premiums written described above. Combined Ratio The loss and loss expense ratio increased for the three months endedSeptember 30, 2021 , primarily due to higher catastrophe losses and lower favorable prior period development. The loss and loss expense ratio decreased for the nine months endedSeptember 30, 2021 , primarily from lower catastrophe losses and higher favorable prior period development. The CAY loss ratio excluding catastrophe losses increased for the three months endedSeptember 30, 2021 and decreased for the nine months endedSeptember 30, 2021 . The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 1.7 percentage points and 0.6 percentage point for the three and nine months endedSeptember 30, 2020 , respectively, primarily in the automobile portfolio inLatin America . Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased for the three and nine months endedSeptember 30, 2021 , reflecting underlying loss ratio improvement, partially offset by lower premiums earned from A&H lines which have a lower loss ratio.
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Table of Contents The policy acquisition cost ratio decreased 0.9 percentage point and 1.0 percentage point for the three and nine months endedSeptember 30, 2021 , respectively, primarily due to a change in the mix of business, including less premiums earned from A&H lines that have a higher acquisition cost ratio and higher premiums earned from commercial P&C lines that have a lower acquisition cost ratio.
The administrative expense ratio decreased 1.1 percentage points and 0.6
percentage point for the three and nine months ended
respectively, primarily due to the favorable impact of higher net premiums
earned.
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. Three Months Ended Nine Months Ended September 30 % Change September 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 221 $ 181 22.3 %$ 702 $ 606 15.9 % Net premiums written - constant dollars 20.6 % 14.4 % Net premiums earned 211 171 23.8 % 583 520 12.2 % Losses and loss expenses 192 154 26.0 % 422 314 34.7 % Policy acquisition costs 55 40 36.8 % 147 127 15.6 % Administrative expenses 9 9 - 27 28 (2.7) % Underwriting income (loss) (45) (32) 45.0 % (13) 51 NM Net investment income 99 85 17.6 % 250 214 17.1 % Other (income) expense - - - - 1 NM Segment income$ 54 $ 53 3.0 %$ 237 $ 264 (10.0) % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 52.0 % 49.7 % 2.3 pts 50.5 % 49.0 % 1.5 pts Catastrophe losses 41.7 % 42.0 % (0.3) pts 24.2 % 16.3 % 7.9 pts Prior period development (2.5) % (2.1) % (0.4) pts (2.3) % (5.0) % 2.7 pts Loss and loss expense ratio 91.2 % 89.6 % 1.6 pts 72.4 % 60.3 % 12.1 pts Policy acquisition cost ratio 26.0 % 23.5 % 2.5 pts 25.2 % 24.5 % 0.7 pts Administrative expense ratio 4.2 % 5.2 % (1.0) pts 4.6 % 5.3 % (0.7) pts Combined ratio 121.4 % 118.3 % 3.1 pts 102.2 % 90.1 % 12.1 pts NM - not meaningful 57
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Catastrophe Losses and Prior
Three Months Ended Nine Months Ended
September 30 September 30
(in millions of U.S dollars) 2021 2020 2021 2020
Catastrophe losses $ 81 $ 68 $ 131 $ 81
Favorable prior period development $ 4 $ 6
Catastrophe losses throughSeptember 30, 2021 and 2020 were primarily from the following events: •2021: Severe weather-related events in theU.S. andCanada , including Hurricane Ida and winter storms •2020: COVID-19 pandemic claims of$10 million , Hurricane Laura, Hurricane Sally, Tropical Storm Isaias, and other severe weather-related events inCanada and theU.S.
Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
Premiums
Net premiums written increased$40 million and$96 million for the three and nine months endedSeptember 30, 2021 , respectively, primarily from new business written and positive rate increases. Net premiums earned increased$40 million and$63 million for the three and nine months endedSeptember 30, 2021 , respectively, primarily reflecting the increase in net premiums written described above. Combined Ratio The loss and loss expense ratio increased 1.6 percentage points for the three months endedSeptember 30, 2021 , primarily due to a shift in the mix of business towards lines which have a higher loss ratio, and increased 12.1 percentage points for the nine months endedSeptember 30, 2021 , primarily due to higher catastrophe losses and lower favorable prior period development. The CAY loss ratio excluding catastrophe losses increased 2.3 percentage points and 1.5 percentage points, for the three and nine months endedSeptember 30, 2021 , respectively, also primarily due to a shift in the mix of business towards lines which have a higher loss ratio. The policy acquisition cost ratio increased 2.5 percentage points and 0.7 percentage points for the three and nine months endedSeptember 30, 2021 , respectively, primarily due to favorable expense adjustments in the prior year. Additionally, the increase for the three months endedSeptember 30, 2020 was also due to a shift in mix of business towards lines that have higher acquisition costs.
The administrative expense ratio decreased 1.0 percentage point and 0.7
percentage points for the three and nine months ended
respectively, primarily from the favorable impact of higher net premiums earned.
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Table of Contents Life InsuranceThe 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 ofCombined 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. Three Months Ended Nine Months Ended September 30 % Change September 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 609 $ 610 -$ 1,844 $ 1,874 (1.5) % Net premiums written - constant dollars (1.4) % (3.4) % Net premiums earned 589 599 (1.6) % 1,789 1,838 (2.6) % Losses and loss expenses 179 183 (1.8) % 562 556 1.5 % Policy benefits 175 174 0.4 % 508 542 (6.3) % Policy acquisition costs 168 175 (3.2) % 538 551 (2.2) % Administrative expenses 82 80 1.8 % 247 238 3.9 % Net investment income 102 95 7.2 % 301 285 5.7 % Life Insurance underwriting income 87 82 6.6 % 235 236 (0.2) % Other (income) expense (19) (23) (19.1) % (79) (52) 50.6 % Amortization of purchased intangibles 2 1 13.3 % 4 3 10.3 % Segment income$ 104 $ 104 -$ 310 $ 285 9.0 % Premiums Net premiums written was relatively flat and decreased slightly for the three and nine months endedSeptember 30, 2021 , respectively, including growth of 14.8 percent and 12.0 percent, respectively, in our International Life operations, principally inAsia , from new business inTaiwan ,Vietnam andThailand , and inLatin America . This growth was offset by a decline in ourNorth America Combined Insurance business of 7.3 percent and 7.5 percent for the three and nine months endedSeptember 30, 2021 , respectively, due to the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales, and a decline in our life reinsurance business which continues to decline as no new business is currently being written. Deposits The following table presents deposits collected on universal life and investment contracts: Three Months Ended Nine Months EndedSeptember 30 % ChangeSeptember 30 % Change C$ C$ (in millions ofU.S. dollars, Q-21 vs. Q-21 vs.Y-21 vs.Y-21 vs. except for percentages) 2021 2020 C$ 2020 Q-20 Q-20 2021 2020 C$ 2020Y-20 Y-20 Deposits collected on Universal life and investment contracts$ 658 $ 363 $ 380 81.3 % 73.0 %$ 1,814 $ 1,115 $ 1,173 62.7 % 54.5 % 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$295 million and$699 million for the three and nine months endedSeptember 30, 2021 , respectively, primarily due to successful sales in broker and bank channels inTaiwan .
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Table of Contents Life Insurance underwriting income and Segment income Life Insurance underwriting income increased$5 million for the three months endedSeptember 30, 2021 , primarily due to higher net investment income. Life Insurance underwriting income was relatively flat for the nine months endedSeptember 30, 2021 . Segment income was relatively flat for the three months endedSeptember 30, 2021 . Segment income increased$25 million for the nine months endedSeptember 30, 2021 , primarily due to our share of net income from our investment inHuatai , our partially-owned insurance entity inChina .
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.
Three Months Ended Nine Months Ended
September 30 % Change September 30 % Change
(in millions of U.S. dollars, except for
percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20
Losses and loss expenses $ 43 $ 55 (21.3) % $ 141 $ 342 (58.7) %
Administrative expenses 99 71 40.3 % 258 214 20.6 %
Underwriting loss 142 126 13.6 % 399 556 (28.1) %
Net investment income (loss) (10) (19) (47.6) % (42) (65) (35.0) %
Interest expense 122 130 (6.3) % 366 390 (6.3) %
Net realized gains (losses) (11) (142) (92.2) % 841 (1,067) NM
Other (income) expense (722) (415) 73.2 % (1,845) (283) NM
Amortization of purchased intangibles 49 52 (3.6) % 148 153 (3.0) %
Income tax expense 218 142 53.4 % 873 295 195.7 %
Net income (loss) $ 170 $ (196) NM $ 858 $ (2,243) NM
NM - not meaningful
Losses and loss expenses for the three months ended September 30, 2021 and 2020
were primarily from adverse development relating to our Brandywine environmental
exposures of $33 million and $35 million , respectively. Losses and loss expenses
for the nine months ended September 30, 2020 , also includes $254 million for
U.S. child molestation claims, predominantly reviver statute-related.
Administrative expenses increased
nine months ended
employee-related expenses and increased spending to support digital growth
initiatives.
Refer to the respective sections that follow for a discussion of Net realized
gains (losses), Net investment income (loss), Amortization of purchased
intangibles, and Income tax expense (benefit). Refer to Note 11 to the
Consolidated Financial Statements for additional information on Other (income)
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
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 in our 2020
Form 10-K. 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
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reported as separate components of Accumulated other comprehensive income in
Shareholders' equity in the Consolidated balance sheets.
The following tables presents our net realized and unrealized gains (losses):
Three Months Ended September 30
2021 2020
Net Net Net Net
Realized Unrealized Realized Unrealized
Gains Gains Net Gains Gains Net
(in millions of U.S. dollars) (Losses) (Losses) Impact (Losses) (Losses)
Impact
Fixed maturities$ (10) $ (554)
Fixed income and equity derivatives
(9) - (9) 9 - 9 Public equity Sales 19 - 19 34 - 34 Mark-to-market (61) - (61) (34) - (34) Private equity (less than 3 percent ownership) Mark-to-market 11 - 11 31 - 31 Total investment portfolio (50) (554) (604) 89 638 727 Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges (63) - (63) (6) - (6) Other derivatives (10) - (10) 1 - 1 Foreign exchange 106 (414) (308) (222) 246 24 Other (4) 4 - (3) (23) (26) Net gains (losses), pre-tax$ (21) $ (964) $ (985) $ (141) $ 861 $ 720 Nine Months Ended September 30 2021 2020 Net Net Net Net Realized Unrealized Realized Unrealized Gains Gains Net Gains Gains Net (in millions of U.S. dollars) (Losses) (Losses) Impact (Losses) (Losses) Impact Fixed maturities$ 26 $ (2,177)
Fixed income and equity derivatives
9 - 9 38 - 38 Public equity Sales 109 - 109 197 - 197 Mark-to-market 366 - 366 (78) - (78) Private equity (less than 3 percent ownership) Mark-to-market 111 - 111 (71) - (71) Total investment portfolio 621 (2,177) (1,556) (217) 1,759 1,542 Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges 140 - 140 (456) - (456) Other derivatives (8) - (8) (2) - (2) Foreign exchange 85 (84) 1 (351) (168) (519) Other (5) (33) (38) (43) (59) (102) Net gains (losses), pre-tax$ 833 $ (2,294)
$ (1,461) $ (1,069) $ 1,532 $ 463 61
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Table of Contents Pre-tax net losses of$604 million in our investment portfolio for the three months endedSeptember 30, 2021 were principally the result of an increase in interest rates. Pre-tax net losses of$1,556 million in our investment portfolio for the nine months endedSeptember 30, 2021 were principally the result of an increase in interest rates, partially offset by positive equity returns. The variable annuity reinsurance derivative transactions consist of changes in the fair value of GLB liabilities and gains or losses on other derivative instruments we maintain that decrease in fair value when the S&P 500 index increases. The variable annuity reinsurance derivative transactions resulted in realized losses of$63 million for the three months endedSeptember 30, 2021 , reflecting a net loss of$59 million , primarily from an increase in the fair value of the GLB liabilities due to underperformance in certain equity markets, partially offset by an increase in interests rates, and a net realized loss of$4 million related to these other derivatives. For the nine months endedSeptember 30, 2021 , the variable annuity reinsurance derivative transactions resulted in net realized gains of$140 million reflecting a net gain of$252 million , principally related to a decrease in the fair value of the GLB liabilities due to higher interest rates and higher global equity markets, partially offset by a net realized loss of$112 million related to these other derivatives. For the three months endedSeptember 30, 2020 , the variable annuity reinsurance derivative transactions resulted in realized losses of$6 million , reflecting a net decrease in the fair value of the GLB liabilities of$46 million due to higher equity markets, particularly in theU.S. , and a net realized loss of$52 million related to these other derivatives. For the nine months endedSeptember 30, 2020 , the variable annuity reinsurance derivative transactions resulted in realized losses of$456 million reflecting a net increase in the fair value of the GLB liabilities of$426 million due to lower interest rates and lower international equity markets and a net realized loss of$30 million related to these other derivatives. Effective Income Tax Rate Our effective tax rate (ETR) reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences betweenU.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. For the three and nine months endedSeptember 30, 2021 our ETR was 10.7 percent and 12.0 percent, respectively. This compares to an ETR of 10.7 percent and 20.9 percent for the three and nine months endedSeptember 30, 2020 , respectively. The ETR for each period in both years was impacted by our mix of earnings among various jurisdictions and discrete tax benefits. 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 theU.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.
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Table of Contents 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. Reference to the year-over-year improvement of 0.6 percentage point and 1.0 percentage point in the P&C CAY excluding catastrophe loss ratio for the three and nine months endedSeptember 30, 2021 , respectively, is calculated by adjusting the prior year ratio to exclude the COVID-related reduced claim frequency impact. We believe this information is meaningful to evaluate trends in the underlying business on a comparable basis. 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.
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The following tables present the calculation of combined ratio, as reported for
each segment to P&C combined ratio, adjusted for CATs and PPD:
Three Months Ended September 30, 2021 North America North America North America (in millions of U.S. dollars except Commercial P&C Personal P&C Agricultural Overseas General Global for ratios) Insurance Insurance Insurance Insurance Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 2,754 $ 846 $ 1,138 $ 1,487 $ 192 $ 43 $ 6,460 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (472) (397) (8) (188) (81) - (1,146) Reinstatement premiums collected (expensed) on catastrophe losses - - - - 12 - 12 Catastrophe losses, gross of related adjustments (472) (397) (8) (188) (93) - (1,158) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 157 182 (7) 28 4 (43) 321 Net premiums earned adjustments on PPD - unfavorable (favorable) 56 - - - - - 56 Expense adjustments - unfavorable (favorable) 3 - - - - - 3 PPD reinstatement premiums - unfavorable (favorable) - (2) - - 3 - 1 PPD, gross of related adjustments - favorable (unfavorable) 216 180 (7) 28 7 (43) 381 CAY loss and loss expense ex CATs B$ 2,498 $ 629 $ 1,123 $ 1,327 $ 106 $ -$ 5,683 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 810$ 327 $ 65$ 969 $ 64 $ 99 $ 2,334 Expense adjustments - favorable (unfavorable) (3) - - - - - (3) Policy acquisition costs and administrative expenses, adjusted D $ 807$ 327 $ 65$ 969 $ 64 $ 99 $ 2,331 Denominator Net premiums earned E$ 3,954 $ 1,244 $ 1,338 $ 2,664 $ 211 $ 9,411 Reinstatement premiums (collected) expensed on catastrophe losses - - - - (12) (12) Net premiums earned adjustments on PPD - unfavorable (favorable) 56 - - - - 56 PPD reinstatement premiums - unfavorable (favorable) - (2) - - 3 1 Net premiums earned excluding adjustments F$ 4,010 $ 1,242 $ 1,338 $ 2,664 $ 202 $ 9,456 P&C Combined ratio Loss and loss expense ratio A/E 69.7 % 68.0 % 85.0 % 55.8 % 91.2 % 68.6 % Policy acquisition cost and administrative expense ratio C/E 20.4 % 26.3 % 4.9 % 36.4 % 30.2 % 24.8 % P&C Combined ratio 90.1 % 94.3 % 89.9 % 92.2 % 121.4 % 93.4 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 62.3 % 50.7 % 84.0 % 49.8 % 52.0 % 60.1 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.1 % 26.3 % 4.9 % 36.4 % 31.5 % 24.7 % CAY P&C Combined ratio ex CATs 82.4 % 77.0 % 88.9 % 86.2 % 83.5 % 84.8 % Combined ratio Combined ratio 93.3 % Add: impact of gains and losses on crop derivatives 0.1 % P&C Combined ratio 93.4 %
Note: The ratios above are calculated using whole
calculating the ratios above.
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Table of Contents Three Months Ended September 30, 2020 North America North America (in millions of U.S. dollars Commercial P&C
Personal P&C North America Overseas General except for ratios) Insurance InsuranceAgricultural Insurance Insurance Global Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 2,444 $ 961 $ 845$ 1,192 $ 154$ 55 $ 5,651 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (447) (305) (10) (95) (68) - (925) Reinstatement premiums collected (expensed) on catastrophe losses - - - - 7 - 7 Catastrophe losses, gross of related adjustments (447) (305) (10) (95) (75) - (932) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 200 (48) (18) 60 6 (54) 146 Net premiums earned adjustments on PPD - unfavorable (favorable) 28 - - - - - 28 Expense adjustments - unfavorable (favorable) (1) - - - (2) - (3) PPD reinstatement premiums - unfavorable (favorable) - (8) - - - - (8) PPD, gross of related adjustments - favorable (unfavorable) 227 (56) (18) 60 4 (54) 163 CAY loss and loss expense ex CATs B$ 2,224 $ 600 $ 817$ 1,157 $ 83$ 1 $ 4,882 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 732$ 313 $ 61$ 897 $ 49$ 71 $ 2,123 Expense adjustments - favorable (unfavorable) 1 - - - 2 - 3 Policy acquisition costs and administrative expenses, adjusted D $ 733$ 313 $ 61$ 897 $ 51$ 71 $ 2,126 Denominator Net premiums earned E$ 3,456 $ 1,231 $ 971$ 2,337 $ 171$ 8,166 Reinstatement premiums (collected) expensed on catastrophe losses - - - - (7) (7) Net premiums earned adjustments on PPD - unfavorable (favorable) 28 - - - - 28 PPD reinstatement premiums - unfavorable (favorable) - (8) - - - (8) Net premiums earned excluding adjustments F$ 3,484 $ 1,223 $ 971$ 2,337 $ 164$ 8,179 P&C Combined ratio Loss and loss expense ratio A/E 70.7 % 78.1 % 87.1 % 51.0 % 89.6 % 69.2 % Policy acquisition cost and administrative expense ratioC/E 21.2 % 25.4 % 6.2 % 38.4 % 28.7 % 26.0 % P&C Combined ratio 91.9 % 103.5 % 93.3 % 89.4 % 118.3 % 95.2 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.8 % 49.2 % 84.2 % 49.5 % 49.7 % 59.7 % Policy acquisition cost and administrative expense ratio, adjusted D/F 21.1 % 25.6 % 6.2 % 38.4 % 31.1 % 26.0 % CAY P&C Combined ratio ex CATs 84.9 % 74.8 % 90.4 % 87.9 % 80.8 % 85.7 % Combined ratio Combined ratio 95.2 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 95.2 %
Note: The ratios above are calculated using whole
the ratios above.
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Table of Contents Nine Months Ended September 30, 2021 North America North America North America (in millions of U.S. dollars Commercial P&C Personal P&C Agricultural Overseas General except for ratios) Insurance Insurance Insurance Insurance Global Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 7,740 $ 2,341 $ 1,554 $ 3,936 $ 422$ 141 $ 16,134 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (999) (698) (20) (278) (131) - (2,126) Reinstatement premiums collected (expensed) on catastrophe losses - (16) - - 18 - 2 Catastrophe losses, gross of related adjustments (999) (682) (20) (278) (149) - (2,128) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 440 266 (5) 209 11 (140) 781 Net premiums earned adjustments on PPD - unfavorable (favorable) 67 - (2) - - - 65 Expense adjustments - unfavorable (favorable) 6 - - - - - 6 PPD reinstatement premiums - unfavorable (favorable) 6 (1) - 7 4 - 16 PPD, gross of related adjustments - favorable (unfavorable) 519 265 (7) 216 15 (140) 868 CAY loss and loss expense ex CATs B$ 7,260 $ 1,924 $ 1,527 $ 3,874 $ 288$ 1 $ 14,874 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C$ 2,312 $ 946 $ 110$ 2,881 $ 174$ 258 $ 6,681 Expense adjustments - favorable (unfavorable) (6) - - - - - (6) Policy acquisition costs and administrative expenses, adjusted D$ 2,306 $ 946 $ 110$ 2,881 $ 174$ 258 $ 6,675 Denominator Net premiums earned E$ 11,431 $ 3,652 $ 1,858 $ 7,721 $ 583$ 25,245 Reinstatement premiums (collected) expensed on catastrophe losses - 16 - - (18) (2) Net premiums earned adjustments on PPD - unfavorable (favorable) 67 - (2) - - 65 PPD reinstatement premiums - unfavorable (favorable) 6 (1) - 7 4 16 Net premiums earned excluding adjustments F$ 11,504 $ 3,667 $ 1,856 $ 7,728 $ 569$ 25,324 P&C Combined ratio Loss and loss expense ratio A/E 67.7 % 64.1 % 83.6 % 51.0 % 72.4 % 63.9 % Policy acquisition cost and administrative expense ratioC/E 20.2 % 25.9 % 6.0 % 37.3 % 29.8 % 26.5 % P&C Combined ratio 87.9 % 90.0 % 89.6 % 88.3 % 102.2 % 90.4 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.1 % 52.5 % 82.3 % 50.1 % 50.5 % 58.7 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.1 % 25.8 % 5.9 % 37.3 % 30.5 % 26.4 % CAY P&C Combined ratio ex CATs 83.2 % 78.3 % 88.2 % 87.4 % 81.0 % 85.1 % Combined ratio Combined ratio 90.4 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 90.4 %
Note: The ratios above are calculated using whole
calculating the ratios above.
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Table of Contents Nine Months Ended September 30, 2020 North America North America North America (in millions of U.S. dollars Commercial P&C Personal P&C Agricultural Overseas General except for ratios) Insurance Insurance Insurance Insurance Global Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 8,123 $ 2,406 $ 1,223 $ 3,935 $ 314$ 342 $ 16,343 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (1,838) (436) (24) (584) (81) - (2,963) Reinstatement premiums collected (expensed) on catastrophe losses (3) (1) - (16) 7 - (13) Catastrophe losses, gross of related adjustments (1,835) (435) (24) (568) (88) - (2,950) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 451 (48) (4) 100 29 (339) 189 Net premiums earned adjustments on PPD - unfavorable (favorable) 32 - 3 - - - 35 Expense adjustments - unfavorable (favorable) (1) - - - (2) - (3) PPD reinstatement premiums - unfavorable (favorable) - (8) - - (1) - (9) PPD, gross of related adjustments - favorable (unfavorable) 482 (56) (1) 100 26 (339) 212 CAY loss and loss expense ex CATs B$ 6,770 $ 1,915 $ 1,198 $ 3,467 $ 252$ 3 $ 13,605 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C$ 2,203 $ 923 $ 108$ 2,662 $ 155$ 214 $ 6,265 Expense adjustments - favorable (unfavorable) 1 - - - 2 - 3 Policy acquisition costs and administrative expenses, adjusted D$ 2,204 $ 923 $ 108$ 2,662 $ 157$ 214 $ 6,268 Denominator Net premiums earned E$ 10,427 $ 3,623 $ 1,441 $ 6,838 $ 520$ 22,849 Reinstatement premiums (collected) expensed on catastrophe losses 3 1 - 16 (7) 13 Net premiums earned adjustments on PPD - unfavorable (favorable) 32 - 3 - - 35 PPD reinstatement premiums - unfavorable (favorable) - (8) - - (1) (9) Net premiums earned excluding adjustments F$ 10,462 $ 3,616 $ 1,444 $ 6,854 $ 512$ 22,888 P&C Combined ratio Loss and loss expense ratio A/E 77.9 % 66.4 % 84.9 % 57.6 % 60.3 % 71.5 % Policy acquisition cost and administrative expense ratioC/E 21.1 % 25.5 % 7.4 % 38.9 % 29.8 % 27.4 % P&C Combined ratio 99.0 % 91.9 % 92.3 % 96.5 % 90.1 % 98.9 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 64.7 % 53.0 % 83.0 % 50.6 % 49.0 % 59.4 % Policy acquisition cost and administrative expense ratio, adjusted D/F 21.1 % 25.5 % 7.4 % 38.8 % 30.7 % 27.4 % CAY P&C Combined ratio ex CATs 85.8 % 78.5 % 90.4 % 89.4 % 79.7 % 86.8 % Combined ratio Combined ratio 98.9 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 98.9 %
Note: The ratios above are calculated using whole
calculating the ratios above.
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Amortization of purchased intangibles and Other amortization
Amortization expense of purchased intangibles was
for the three and nine months ended
principally relates to the
The following table presents, as ofSeptember 30, 2021 , the estimated pre-tax amortization expense (benefit) of purchased intangibles, at current foreign currency exchange rates, for the fourth quarter of 2021 and the next five years: Associated with the Chubb Corp Acquisition Fair value For the Years Ending Agency adjustment on Total December 31 distribution Unpaid losses Amortization of (in millions of U.S. relationships and and loss Other intangible purchased dollars) renewal rights expenses Total (1) assets (2) intangibles Fourth quarter of 2021 $ 54$ (5) $ 49 $ 22 $ 71 2022 197 (14) 183 101 284 2023 178 (7) 171 95 266 2024 160 (6) 154 90 244 2025 144 (6) 138 89 227 2026 132 (5) 127 87 214 Total $ 865$ (43) $ 822 $ 484 $ 1,306 (1)Recorded in Corporate. (2)Recorded in applicable segment(s) that acquired the intangible assets. 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) AtSeptember 30, 2021 , the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was$1,242 million . The following table presents, as ofSeptember 30, 2021 , the expected reduction of 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 fourth quarter of 2021 and for the next five years: Reduction to deferred tax liability For the Years Ending December 31 associated with (in millions of U.S. dollars) intangible assets Fourth quarter of 2021 $ 17 2022 66 2023 61 2024 56 2025 52 2026 48 Total $ 300 68
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Table of Contents Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt The following table presents atSeptember 30, 2021 , 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 fourth quarter of 2021 and for the next five years: Amortization
(expense) benefit of the fair
value adjustment on
For the Years Ending December 31 Acquired invested Assumed long-term
(in millions of U.S. dollars) assets (1) debt (2)
Fourth quarter of 2021 $ (22) $ 6
2022 (115) 21
2023 (7) 21
2024 - 21
2025 - 21
2026 - 21
Total $ (144) $ 111
(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.
Net Investment Income
Three Months Ended Nine Months Ended
September 30 September 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Fixed maturities (1) $ 804 $ 826 $ 2,480 $ 2,487
Short-term investments 9 11 26 39
Other interest income 3 4 8 16
Equity securities 40 24 117 57
Other investments 56 18 122 59
Gross investment income (1) 912 883 2,753 2,658
Investment expenses (46) (43) (140) (130)
Net investment income (1) $ 866 $ 840 $ 2,613 $ 2,528
(1) Includes amortization expense related to
fair value adjustment of acquired invested
assets related to the Chubb Corp acquisition $ (19) $ (28) $ (67) $ (90)
Net investment income is influenced by a number of factors including the amounts
and timing of inward and outward cash flows, the level of interest rates, and
changes in overall asset allocation. Net investment income increased 3.1 percent
and 3.4 percent for the three and nine months ended September 30, 2021 ,
respectively, primarily due to higher income from our private equity
partnerships and increased dividends on public equities which resulted from a
higher allocation to public equity securities. Investment income for the year
was tempered by lower reinvestment rates on new and reinvested assets.
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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:
Three Months Ended Nine Months Ended
September 30 September 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Total mark-to-market gain on private equity,
pre-tax $ 713 $ 436 $ 1,887 $ 229
Investments
Our investment portfolio is invested primarily in publicly traded, investment
grade, fixed income securities with an average credit quality of A as rated by
the independent investment rating services Standard and Poor's (S&P)/Moody's
Investors Service (Moody's) at September 30, 2021 . 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 4.1 years and 4.0 years at
increase in interest rates would reduce the valuation of our fixed income
portfolio by approximately
The following table shows the fair value and cost/amortized cost, net of
valuation allowance, of our invested assets:
September 30, 2021 December 31, 2020
Cost/ Cost/
Fair Amortized Fair Amortized
(in millions of U.S. dollars) Value Cost, Net Value Cost, Net
Fixed maturities available for sale $ 92,685 $ 89,323 $ 90,699 $ 85,168
Fixed maturities held to maturity 11,119 10,515 12,510 11,653
Short-term investments 3,529 3,529 4,345 4,349
Fixed income securities 107,333 103,367 107,554 101,170
Equity securities 4,557 4,557 4,027 4,027
Other investments 10,843 10,843 7,945 7,945
Total investments $ 122,733 $ 118,767 $ 119,526 $ 113,142
The fair value of our total investments increased $3.2 billion during the nine
months ended September 30, 2021 due to strong operating cash flow and positive
equity market returns. This increase was partially offset by unrealized losses
on fixed maturities, payment of dividends on our Common Shares, and share
repurchases.
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Table of Contents The following tables present the fair value of our fixed maturities and short-term investments atSeptember 30, 2021 andDecember 31, 2020 . The first table lists investments according to type and second according to S&P credit rating: September 30, 2021 December 31, 2020 Fair Fair (in millions of U.S. dollars, except for percentages) Value % of Total Value % of Total U.S. Treasury / Agency$ 3,534 3 %$ 4,122 4 % Corporate and asset-backed securities 40,976 39 % 38,769 36 % Mortgage-backed securities 21,831 20 % 20,616 19 % Municipal 10,206 10 % 11,943 11 % Non-U.S. 27,257 25 % 27,759 26 % Short-term investments 3,529 3 % 4,345 4 % Total$ 107,333 100 %$ 107,554 100 % AAA$ 15,432 14 %$ 15,622 15 % AA 35,275 33 % 36,125 33 % A 20,242 19 % 19,712 18 % BBB 17,485 16 % 17,542 16 % BB 9,236 9 % 9,699 9 % B 9,115 8 % 8,267 8 % Other 548 1 % 587 1 % Total$ 107,333 100 %$ 107,554 100 % Corporate and asset-backed securities The following table presents our 10 largest global exposures to corporate bonds by fair value atSeptember 30, 2021 : (in millions of U.S. dollars) Fair Value Wells Fargo & Co$ 725 Bank of America Corp 683 JP Morgan Chase & Co 616 Comcast Corp 498 Verizon Communications Inc 487 Morgan Stanley 479 AT&T Inc 453 Citigroup Inc 426 HSBC Holdings Plc 383 Goldman Sachs Group Inc 358 Mortgage-backed securities The following table shows the fair value and amortized cost, net of valuation allowance, of our mortgage-backed securities: Fair Amortized S&P Credit Rating Value Cost, Net September 30, 2021 BB and (in millions of U.S. dollars) AAA AA A BBB below Total Total Agency residential mortgage-backed securities (RMBS)$ 97 $ 17,959 $ - $ - $ -$ 18,056 $ 17,453 Non-agency RMBS 290 39 70 34 7 440 439 Commercial mortgage-backed securities 2,909 250 160 12 4 3,335 3,211 Total mortgage-backed securities$ 3,296 $ 18,248 $ 230 $ 46 $ 11 $ 21,831 $ 21,103 71
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Table of Contents 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-
Our exposure to the Euro results primarily fromChubb European Group SE which is headquartered inFrance and offers a broad range of coverages throughout theEuropean Union , Central, andEastern 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 46 percent of our holdings are ratedAAA 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. 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 atSeptember 30, 2021 : (in millions of U.S. dollars) Fair Value Amortized Cost, Net Canada$ 997 $ 983 Republic of Korea 918 859 United Kingdom 698 688 Province of Ontario 665 647 Kingdom of Thailand 555 506 United Mexican States 552 556 Federative Republic of Brazil 549 556 Province of Quebec 454 438 Socialist Republic of Vietnam 430 294 Commonwealth of Australia 423 398 Other Non-U.S. Government Securities 5,531 5,349 Total$ 11,772 $ 11,274 72
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The following table summarizes the fair value and amortized cost, net of
valuation allowance, of our non-
for non-
(in millions of U.S. dollars) Fair Value Amortized
Cost, Net
United Kingdom $ 2,528 $ 2,435
Canada 1,832 1,767
France 1,296 1,245
United States (1) 1,210 1,172
Australia 924 886
Japan 734 719
Switzerland 607 579
Germany 604 581
Netherlands 538 513
China 469 460
OtherNon-U.S. Corporate Securities 4,743
4,605
Total $ 15,485 $ 14,962
(1) The countries that are listed in the non-
portfolio above represent the ultimate parent company's country of risk.
Non-
corporations.
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. AtSeptember 30, 2021 , 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 1,500 issuers, with the greatest single exposure being$160 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.
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Critical Accounting Estimates
As of
accounting estimates. For a full discussion of our critical accounting
estimates, refer to Item 7 in our 2020 Form 10-K.
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. 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.
The following table presents a roll-forward of our unpaid losses and loss
expenses:
Gross Reinsurance Net
(in millions of U.S. dollars) Losses Recoverable (1) Losses
Balance at December 31, 2020 $ 67,811 $ 14,647 $ 53,164
Losses and loss expenses incurred 20,857 4,169 16,688
Losses and loss expenses paid (15,950) (3,257) (12,693)
Other (including foreign exchange translation) (87) (9) (78)
Balance at September 30, 2021 $ 72,631
$ 15,550
(1)Net of valuation allowance for uncollectible reinsurance.
The estimate of the liabilities includes provisions for claims that have been reported but are unpaid at the balance sheet date (case reserves) and for obligations on claims that have been incurred but not reported (IBNR) at the balance sheet date. IBNR may also include provisions to account for the possibility that reported claims may settle for amounts that differ from the established case reserves. Loss reserves also include an estimate of expenses associated with processing and settling unpaid claims (loss expenses).
Refer to Note 6 to the Consolidated Financial Statements for a discussion on the
changes in the loss reserves.
Asbestos and Environmental (A&E) During the three months endedSeptember 30, 2021 , we increased environmental net loss reserves for Brandywine managed operations by$33 million . A&E reserves are included in Corporate. Refer to our 2020 Form 10-K for further information on our A&E exposures. 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 to the Consolidated Financial Statements for information on our fair value measurements.
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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 September 30, 2021 ,
for Worldwide, U.S. hurricane and California earthquake events, based on our
in-force portfolio at July 1, 2021 and reflecting the April 1, 2021 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 $2,717 million (or 4.6 percent of our total shareholders' equity at
September 30, 2021 ). These estimates assume that reinsurance recoverable is
fully collectible.
Modeled Net Probable Maximum Loss (PML) Pre-tax
Worldwide (1) U.S. Hurricane (2) California Earthquake (3)
Annual Aggregate Annual Aggregate Single Occurrence
(in millions of U.S. % of Total % of Total % of Total
dollars, except for Shareholders' Shareholders' Shareholders'
percentages) Chubb Equity Chubb Equity Chubb Equity
1-in-10 $ 1,879 3.2 % $ 1,089 1.8 % $ 141 0.2 %
1-in-100 $ 3,973 6.7 % $ 2,717 4.6 % $ 1,311 2.2 %
1-in-250 $ 6,547 11.0 % $ 4,924 8.3 % $ 1,487 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 at January 1, 2021 , 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 exclude potential mitigating factors,
such as changes to building codes, public or private risk mitigation, regulation
and public policy.
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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
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 effectiveApril 1, 2021 throughMarch 31, 2022 , with an additional$100 million of limit for international loss occurrences compared to 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) forthe United States fromApril 1, 2021 throughMarch 31, 2022 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 Layer of Loss Comments Notes United States$0 million - Losses retained by Chubb (a) (excluding Alaska and Hawaii)$1.0 billion United States$1.0 billion - All natural perils and terrorism (b) (excluding Alaska and Hawaii)$1.15 billion United States$1.15 billion - All natural perils and terrorism (c) (excluding Alaska and Hawaii)$2.25 billion United States$2.25 billion - All natural perils and terrorism (d) (excluding Alaska and Hawaii)$3.5 billion International$0 million - Losses retained by Chubb (a) (including Alaska and Hawaii)$175 million International$175 million - All natural perils and terrorism (c) (including Alaska and Hawaii)$1.275 billion Alaska, Hawaii, and Canada$1.275 billion - All natural perils and terrorism (d)$2.525 billion (a) 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. (b) These coverages are partially placed with Reinsurers. (c) These coverages are both part of the same Second layer within the Global Catastrophe Program and are fully placed with Reinsurers. (d) These coverages are both part of the same Third layer within the Global Catastrophe Program and are fully placed with Reinsurers.
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Liquidity
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. 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. Should the need arise, we generally have access
to capital markets and to credit facilities with letter of credit capacity of
$3.7 billion with a sub-limit of $1.9 billion for revolving credit. At September
30, 2021 , our usage under these facilities was $1.4 billion in letters of
credit. 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. The facilities require that we maintain certain financial
covenants, all of which we met at September 30, 2021 . 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.
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 the nine months ended September
30, 2021 , 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 $3.1 billion and $800 million from its Bermuda
subsidiaries during the nine months ended September 30, 2021 and 2020,
respectively. Chubb Limited received cash dividends of $21 million and $110
million and non-cash dividends of $536 million and $734 million from a Swiss
subsidiary during the nine months ended September 30, 2021 and 2020,
respectively.
The payment of any dividends from CGM or its subsidiaries is subject to
applicable U.K. insurance laws and regulations. In addition, the release of
funds by Syndicate 2488 to subsidiaries of CGM is subject to regulations
promulgated by the Society of Lloyd's . 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 CGM or Chubb INA during the nine months ended
September 30, 2021 and 2020. 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 $910 million and $180 million
from its subsidiaries during the nine months ended September 30, 2021 and 2020,
respectively.
Cash Flows
Our sources of liquidity include cash from operations, routine sales of
investments, and financing arrangements. The following is a discussion of our
cash flows for the nine months ended September 30, 2021 and 2020.
Operating cash flows were $8.5 billion in the nine months ended September 30,
2021 , compared to $7.2 billion in the prior year period. The increase of $1.3
billion is due to higher premiums collected reflecting premium growth,
principally in our commercial lines, partially offset by higher taxes paid.
Cash used for investing was $3.8 billion in the nine months ended September 30,
2021 , compared to $6.7 billion in the prior year period, a decrease of $2,978
million . Cash used for investing in the current year included lower net
purchases of equity securities of $2.0 billion and lower cash used related to
acquisitions of Huatai Group ownership interest of $1.3 billion , partially
offset by higher private equity contributions, net of distributions received, of
$513 million .
Cash used for financing was $4.8 billion in the nine months ended September 30,
2021 , compared to $234 million in the prior year period, an increase of $4.6
billion principally from more shares repurchased in the current year. The prior
year included $988 million of net proceeds from the issuance of long-term debt.
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Table of Contents 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. AtSeptember 30, 2021 , there were$1.4 billion in repurchase agreements outstanding with various maturities over the next eight months. Capital Resources
Capital resources consist of funds deployed or available to be deployed to
support our business operations.
September 30 December 31
(in millions of U.S. dollars, except for ratios) 2021 2020
Long-term debt $ 14,823 $ 14,948
Trust preferred securities 308 308
Total shareholders' equity 59,318 59,441
Total capitalization $ 74,449 $ 74,697
Ratio of financial debt to total capitalization 19.9 % 20.0 %
Ratio of financial debt plus trust preferred securities to total
capitalization 20.3 % 20.4 %
Repurchase agreements are excluded from the table above and are disclosed
separately from short-term debt in the Consolidated balance sheets. The
repurchase agreements are collateralized borrowings where we maintain the right
and ability to redeem the collateral on short notice, unlike short-term debt
which comprises the current maturities of our long-term debt instruments.
For the nine months ended September 30, 2021 , we repurchased $3.96 billion of
Common Shares in a series of open market transactions under the Board of
Directors (Board) share repurchase authorizations. At September 30, 2021 , there
were 43,144,862 Common Shares in treasury with a weighted average cost of
$153.47 per share, and $3.55 billion in share repurchase authorization remained
through June 30, 2022 . For the period October 1, 2021 through October 27, 2021 ,
we repurchased 167,700 Common Shares for a total of $29 million in a series of
open market transactions. At October 27, 2021 , $3.52 billion in share repurchase
authorization remained.
We generally maintain the ability to issue certain classes of debt and equity
securities via a Securities and Exchange Commission (SEC) shelf registration
statement which is renewed every three years. This allows us capital market
access for refinancing as well as for unforeseen or opportunistic capital needs.
On October 6, 2021 , we filed a new shelf registration statement which allows us
to issue an unlimited amount of certain classes of debt and equity from time to
time, replacing the shelf registration statement that was filed in October 2018 .
This new shelf registration statement expires in October 2024 .
Dividends
We have paid dividends each quarter since we became a public company in 1993. Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by Chubb inU.S. dollars. Refer to Note 8 to the Consolidated Financial Statements for a discussion of our dividend methodology. At ourMay 2021 annual general meeting, our shareholders approved an annual dividend for the following year of up to$3.20 per share, orCHF 2.87 per share, calculated using the USD/CHF exchange rate as published in theWall Street Journal onMay 20, 2021 , expected to be paid in four quarterly installments of$0.80 per share after the general meeting by way of a distribution from capital contribution reserves, transferred to free reserves for payment. The Board determines the record and payment dates at which the annual dividend may be paid until the date of the 2022 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. The annual dividend approved inMay 2021 represented a$0.08 per share increase ($0.02 per quarter) over the prior year dividend.
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Table of Contents The following table represents dividends paid per Common Share to shareholders of record on each of the following dates: Shareholders of record as of: Dividends paid as of: December 18, 2020 January 8, 2021$0.78 (CHF 0.71 ) March 19, 2021 April 9, 2021$0.78 (CHF 0.70 ) June 18, 2021 July 9, 2021$0.80 (CHF 0.71 ) September 17, 2021 October 8, 2021$0.80 (CHF 0.73 )
Information provided in connection with outstanding debt of subsidiaries
consolidated subsidiary of
Guarantor fully and unconditionally guarantees certain of the debt of the
Subsidiary Issuer.
The following table presents the condensed balance sheets ofChubb Limited andChubb INA Holdings Inc. , after elimination of investment in any non-guarantor subsidiary: Chubb Limited Chubb INA Holdings Inc. (Parent Guarantor) (Subsidiary Issuer) September 30 December 31 September 30 December 31
(in millions of U.S. dollars) 2021 2020 2021 2020 Assets Investments $ - $ - $ 144$ 197 Cash 1 84 8 1 Due from parent guarantor/subsidiary issuer, net - 479 143 - Due from subsidiaries that are not issuers or guarantors, net 2,022 3,043 - - Other assets 7 10 588 463 Total assets$ 2,030 $ 3,616 $ 883$ 661 Liabilities Due to parent guarantor/subsidiary issuer, net$ 143 $ - $ -$ 479 Due to subsidiaries that are not issuers or guarantors, net - - 1,886 2,529 Affiliated notional cash pooling programs 76 - 976 272 Long-term debt - - 14,823 14,948 Trust preferred securities - - 308 308 Other liabilities 342 323 1,436 1,418 Total liabilities 561 323 19,429 19,954 Total shareholders' equity 1,469 3,293 (18,546) (19,293) Total liabilities and shareholders' equity$ 2,030 $ 3,616 $ 883$ 661 79
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The following table presents the condensed statements of operations and
comprehensive income of
equity in earnings from non-guarantor subsidiaries:
Nine Months Ended September 30, 2021 Chubb Limited Chubb INA Holdings Inc. (in millions of U.S. dollars) (Parent Guarantor) (Subsidiary Issuer) Net investment income $ 3 $ 1 Net realized gains (loss) (5) 114 Administrative expenses 75 (82) Interest (income) expense (91) 425 Other (income) expense (36) (13) Income tax expense (benefit) 15 (74) Net income (loss) $ 35 $ (141) Comprehensive income (loss) $ 35 $ (145)
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