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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 months endedMarch 31, 2022 . 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, 2021 (2021 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 35 Overview 36 Consolidated Operating Results 36 Segment Operating Results 41 Net Realized and Unrealized Gains (Losses) 50 Effective Income Tax Rate 51 Non-GAAP Reconciliation 51 Amortization of Purchased Intangibles and Other Amortization 55 Net Investment Income 56 Investments 57 Critical Accounting Estimates 61 Unpaid Losses and Loss Expenses 61 Asbestos and Environmental (A&E) 61 Fair Value Measurements 61 Catastrophe Management 62 Global Property Catastrophe Reinsurance Program 63 Liquidity 64 Capital Resources 65 Information Provided In Connection With Outstanding Debt of Subsidiaries 66
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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, including with respect to our announced acquisitions not closing; risks and uncertainties relating to our planned purchases of additional interests inHuatai 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;
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•loss of the services of any of our executive officers without suitable
replacements being recruited in a reasonable time frame;
•the ability of our technology resources, including information systems and security, to perform as anticipated such as with respect to preventing material information technology failures or third-party infiltrations or hacking resulting in consequences adverse to Chubb or its customers or partners; the ability of our company to increase use of data analytics and technology as part of our business strategy and adapt to new technologies; and
•management's response to these factors and actual events (including, but not
limited to, those described above).
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 March 31, 2022 , we
had total assets of $198 billion and shareholders' equity of $57 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 2021 Form 10-K.
Consolidated Operating Results - Three Months Ended March 31, 2022 and 2021
Three Months Ended
March 31 % Change
Q-22 vs.
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-21
Net premiums written $ 9,199 $ 8,662 6.2 %
Net premiums written - constant dollars (1) 8.1 %
Net premiums earned 8,746 8,221 6.4 %
Net investment income 822 863 (4.8) %
Net realized gains (losses) 101 887 (88.6) %
Total revenues 9,669 9,971 (3.0) %
Losses and loss expenses 4,787 5,053 (5.3) %
Policy benefits 145 167 (13.1) %
Policy acquisition costs 1,737 1,665 4.3 %
Administrative expenses 778 744 4.6 %
Interest expense 132 122 7.4 %
Other (income) expense (310) (490) (36.7) %
Amortization of purchased intangibles 71 72 (2.0) %
Total expenses 7,340 7,333 0.1 %
Income before income tax 2,329 2,638 (11.7) %
Income tax expense 355 338 5.2 %
Net income $ 1,974 $ 2,300 (14.2) %
(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
period. Net income in the current quarter was driven by strong underwriting
results, including growth in net premiums earned and improvements in our
combined ratios. Net income is lower in the current year from lower
year-over-year after-tax net realized gains on equity securities of
and a lower gain of
•Consolidated net premiums written were$9.2 billion , up 6.2 percent, or 8.1 percent in constant dollars, primarily from growth in both commercial lines and consumer lines of 7.9 percent and 2.9 percent, respectively, or 9.4 percent and 5.5 percent in constant dollars, respectively. •Consolidated net premiums earned were$8.7 billion , up 6.4 percent, or 8.0 percent in constant dollars, primarily from growth in both commercial lines and consumer lines of 9.9 percent and 0.2 percent, respectively, or 11.1 percent and 2.7 percent in constant dollars, respectively. •Total pre-tax and after-tax catastrophe losses were$333 million (4.0 percentage points of the P&C combined ratio) and$290 million , respectively, compared with$700 million (9.1 percentage points of the P&C combined ratio) and$570 million , respectively, in the prior year period.
•Total pre-tax and after-tax favorable prior period development were
million
respectively, compared with
combined ratio) and
•The P&C combined ratio was 84.3 percent compared with 91.8 percent in the prior year period. P&C current accident year (CAY) combined ratio excluding catastrophe losses was 83.5 percent compared with 85.2 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. •Net investment income was$822 million compared with$863 million in the prior year period, reflecting lower reinvestment rates on new and reinvested fixed maturities.
•Operating cash flow was
in the prior year period.
•Shareholders' equity decreased by$3.0 billion in the quarter, as net income of$2.0 billion was more than offset by net unrealized losses on investments of$3.8 billion after-tax from rising interest rates. In addition, shareholders' equity reflected total capital returned to shareholders in the quarter of$1.3 billion , including share repurchases of$1.0 billion , at an average purchase price of$205.53 per share, and dividends of$340 million .
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Three Months Ended
Net Premiums Written March 31 % Change
C$
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Q-22 vs. Q-21
Commercial casualty $ 1,837 $ 1,649 11.4 % 12.8 %
Workers' compensation 603 563 7.2 % 7.2 %
Financial lines 1,182 1,090 8.5 % 10.1 %
Surety 153 158 (3.1) % (1.7) %
Commercial multiple peril (1) 290 263 10.0 % 10.0 %
Property and other short-tail lines 1,777 1,594 11.5 % 14.3 %
Total Commercial P&C lines 5,842 5,317 9.9 % 11.5 %
Agriculture 62 183 (65.9) % (65.9) %
Personal automobile 412 387 6.5 % 9.0 % Personal homeowners 830 775 7.1 % 7.7 % Personal other 495 468 5.7 % 8.4 % Total Personal lines 1,737 1,630 6.5 % 8.2 % Total Property and Casualty lines 7,641 7,130 7.2 % 8.8 % Global A&H lines (2) 975 982 (0.6) % 2.8 % Reinsurance lines 253 207 22.0 % 22.4 % Life 330 343 (4.0) % (0.2) % Total consolidated$ 9,199 $ 8,662 6.2 % 8.1 % (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 months endedMarch 31, 2022 reflects growth across most lines of business. Commercial lines growth was 7.9 percent and consumer lines growth was 2.9 percent, or 9.4 percent and 5.5 percent, respectively, on a constant dollar basis, driven by higher new business, positive rate increases, and strong renewal retention. Agriculture growth was impacted by$161 million of return of premium to theU.S. government under the profit-sharing agreement reflecting the profitable 2021 crop year. Commercial lines growth excluding Agriculture increased 10.3 percent, or 11.9 percent in constant dollars. •Commercial casualty grew primarily inNorth America ,Europe andAsia , driven by higher new business, strong retention and positive rate increases. •Workers' compensation growth was due to higher renewal business, including exposure increases, inNorth America . •Financial lines grew inNorth America ,Asia , andEurope , reflecting higher new business, strong retention and positive rate increases. •Commercial multiple peril increased due to higher renewal business, including exposure and rate increases, inNorth America . •Property and other short-tail lines grew due to higher new business, strong retention, and positive rate increases inNorth America ,Europe ,Latin America andAsia . •Agriculture decreased due to return of premium to theU.S. government noted above. Excluding this return of premium, there was underlying growth in crop insurance and Chubb Agribusiness, reflecting higher commodity prices and volatility factors, which improved pricing, and policy count growth. •Personal lines increased due to new business and strong renewal retention, from both rate and exposure increases, mainly in homeowners; partially offset by cancellations in parts ofCalifornia exposed to wildfires. In addition, the prior year included the unfavorable impact of reinstatement premiums related to 2021 winter storm losses and automobile return premiums. This prior year impact and adverse impact of the cancellations noted above, contributed 1.8 percentage points to the year-over-year growth.
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Table of Contents •Global A&H lines increased on a constant-dollar basis as lines inLatin America ,Europe , andAsia began to recover from less travel volume and reduced consumer activity in the prior year. OurNorth American Combined Insurance supplemental A&H business decreased due to the continued impact of the COVID-19 pandemic on face-to-face and worksite sales. •The increase in reinsurance was due to continued growth in the portfolio reflecting the impact of new treaties bound in the current quarter and in 2021, as well as favorable premium adjustments. •International life operations declined, as new business inAsia was offset by a declineLatin America . 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 endedMarch 31, 2022 , net premiums earned increased$525 million , or 6.4 percent, comprising 9.9 percent positive growth in commercial lines and 0.2 percent positive growth in consumer lines. Partially offsetting the increase in net premiums earned is the return of premium under the profit-sharing agreement related to the profitable 2021 crop year as described above.
Catastrophe Losses and Prior
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$25 million or more in insured losses and affects a significant number of insureds. For events outside of theU.S. andCanada , we generally use a similar definition. We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. Prior period development includes adjustments relating to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development. Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Catastrophe losses$ 333 $ 700 Favorable prior period development$ 240 $ 192 Catastrophe losses throughMarch 31, 2022 and 2021 were primarily from the following events: •2022:Australia storms,Colorado wildfires, and other severe weather-related events in theU.S. and internationally. •2021: Winter storm losses in theU.S. and other severe weather-related events in theU.S. and internationally. 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 endedMarch 31, 2022 was$240 million , with five percent in long-tail lines, principally from accident years 2018 and prior, and 95 percent in short-tail lines, primarily in A&H, property, and surety lines. Pre-tax net favorable PPD for the three months endedMarch 31, 2021 was$192 million , with 19 percent in long-tail lines, principally from accident years 2017 and prior, and 81 percent in short-tail lines, primarily in A&H, surety, and property lines.
Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
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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
March 31
2022 2021
Loss and loss expense ratio
CAY loss ratio excluding catastrophe losses 56.3 %
57.2 %
Catastrophe losses 4.1 %
9.1 %
Prior period development (3.9) %
(2.6) %
Loss and loss expense ratio 56.5 %
63.7 %
Policy acquisition cost ratio 19.3 %
19.5 %
Administrative expense ratio 8.5 % 8.6 %
P&C Combined ratio 84.3 % 91.8 %
The loss and loss expense ratio and the CAY loss ratio excluding catastrophe
losses decreased 7.2 percentage points and 0.9 percentage points, respectively,
for the three months ended March 31, 2022 , reflecting underlying loss ratio
improvement, including earned rate exceeding loss cost trends. The loss and loss
expense ratio for the three months ended March 31, 2022 also benefited from
lower catastrophe losses and higher favorable prior period development.
The policy acquisition cost ratio and administrative expense ratio were
relatively flat for the three months ended
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. For the three months endedMarch 31, 2022 and 2021, Policy benefits were$145 million and$167 million , respectively, which included (gains) losses from fair value changes in separate account liabilities that do not qualify for separate account reporting under GAAP of$(31) million and$4 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$176 million and$163 million for the three months endedMarch 31, 2022 and 2021, respectively. 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 Months Ended March 31, 2022 and 2021
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 2021 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
March 31 % Change
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21
Net premiums written $ 4,039 $ 3,664 10.2 %
Net premiums earned 4,114 3,674 12.0 %
Losses and loss expenses 2,497 2,560 (2.4) %
Policy acquisition costs 573 514 11.5 %
Administrative expenses 265 254 4.0 %
Underwriting income 779 346 125.0 %
Net investment income 489 540 (9.4) %
Other (income) expense 6 2 123.0 %
Segment income $ 1,262 $ 884 42.8 %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 61.5 % 63.4 % (1.9) pts
Catastrophe losses 2.0 % 9.9 % (7.9) pts
Prior period development (2.8) % (3.6) % 0.8 pts
Loss and loss expense ratio 60.7 % 69.7 % (9.0) pts
Policy acquisition cost ratio 13.9 % 14.0 % (0.1) pts
Administrative expense ratio 6.5 % 6.9 % (0.4) pts
Combined ratio 81.1 % 90.6 % (9.5) pts
Catastrophe Losses and Prior Period Development Three Months Ended
March 31
(in millions of U.S. dollars) 2022 2021
Catastrophe losses $ 81 $ 362
Favorable prior period development $ 108 $ 127
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Catastrophe losses through
storm losses and other severe weather-related events in the
Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
Premiums
Net premiums written increased$375 million , or 10.2 percent, for the three months endedMarch 31, 2022 , comprising: •Commercial lines: Positive growth of 10.5 percent reflecting strong premium retention, including rate and exposure increases, and new business across a number of retail and wholesale lines, including property, financial lines, primary and excess casualty, workers' compensation and commercial multiple peril. •Consumer lines: Positive growth of 4.4 percent due to recovery in A&H lines from exposure declines in the prior year and strong new business. Net premiums earned increased$440 million , or 12.0 percent for the three months endedMarch 31, 2022 , 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 months endedMarch 31, 2022 , primarily reflecting underlying loss ratio improvement, including earned rate exceeding loss cost trends. The loss and loss expense ratio was also impacted by lower catastrophe losses, partially offset by lower favorable prior period development. The administrative expense ratio decreased for the three months endedMarch 31, 2022 , primarily due to the favorable impact of growth in net premiums earned, partially offset by higher employee-related benefit expenses.
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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
March 31 % Change
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21
Net premiums written $ 1,180 $ 1,098 7.4 %
Net premiums earned 1,247 1,184 5.3 %
Losses and loss expenses 713 819 (13.0) %
Policy acquisition costs 260 247 4.9 %
Administrative expenses 69 60 15.6 %
Underwriting income 205 58 255.4 %
Net investment income 59 65 (8.3) %
Other (income) expense 1 1 -
Amortization of purchased intangibles 2 3 (5.2) %
Segment income $ 261 $ 119 119.7 %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 53.3 % 53.2 % 0.1 pts
Catastrophe losses 8.0 % 19.3 % (11.3) pts
Prior period development (4.1) % (3.3) % (0.8) pts
Loss and loss expense ratio 57.2 % 69.2 % (12.0) pts
Policy acquisition cost ratio 20.8 % 20.9 % (0.1) pts
Administrative expense ratio 5.5 % 5.0 % 0.5 pts
Combined ratio 83.5 % 95.1 % (11.6) pts
Catastrophe Losses and Prior Period Development Three Months Ended
March 31
(in millions of U.S. dollars) 2022 2021
Catastrophe losses $ 100 $ 240
Favorable prior period development $ 51
Catastrophe losses through
following events:
•2022:
•2021: Winter storm losses and other severe weather-related events in the
Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
Premiums
Net premiums written increased$82 million , or 7.4 percent for the three months endedMarch 31, 2022 , primarily driven by new business and strong renewal retention, from both rate and exposure increases, mainly in homeowners; partially offset by cancellations in parts ofCalifornia exposed to wildfires. In addition, the prior year included the unfavorable impact of reinstatement premiums related to 2021 winter storm losses and automobile return premiums. This prior year impact and adverse impact of the cancellations noted above, contributed 1.8 percentage points to the year-over-year growth.
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Net premiums earned increased
ended
Combined Ratio The loss and loss expense ratio decreased for the three months endedMarch 31, 2022 , due to lower catastrophe losses and higher favorable prior period development. The CAY loss ratio excluding catastrophe losses increased primarily due to slightly higher losses in automobile, offset by earned rate exceeding loss cost trends in homeowners.
The administrative expense ratio increased for the three months ended
2022
employee-related benefit expenses.
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
March 31 % Change
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21
Net premiums written $ 62 $ 183 (65.9) %
Net premiums earned (29) 110 NM
Losses and loss expenses (92) 85 NM
Policy acquisition costs 12 12 -
Administrative expenses (1) 3 NM
Underwriting income 52 10 NM
Net investment income 7 7 -
Amortization of purchased intangibles 7 7 -
Segment income $ 52 $ 10 NM
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 70.6 % 71.2 % 0.6 pts
Catastrophe losses NM 7.4 % NM
Prior period development NM (1.1) % NM
Loss and loss expense ratio NM 77.5 % NM
Policy acquisition cost ratio NM 10.7 % NM
Administrative expense ratio NM 2.7 % NM
Combined ratio NM 90.9 % NM
NM - not meaningful
Catastrophe Losses and Prior Period Development Three Months Ended
March 31
(in millions of U.S. dollars) 2022 2021
Catastrophe losses $ - $ 8
Favorable prior period development $ 26
Catastrophe losses through
losses and other severe weather-related events in the
Agribusiness.
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Refer to the prior period development discussion in Note 6 to the Consolidated
Financial Statements for additional information.
Premiums
Net premiums written decreased$121 million , or 65.9 percent, for the three months endedMarch 31, 2022 , primarily due to$161 million of return of premium to theU.S. government as part of the profit-sharing agreement reflecting the profitable 2021 crop year in ourMPCI business. Under the profit-sharing agreement, we return additional premiums to the government because of the lower losses experienced in certain states in 2021. Excluding this return of premium, net premiums written increased 22 percent due mainly to an increase inMPCI , primarily 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 growth with strong renewal retention, including rate increases, and new business.
Net premiums earned decreased
2022
Combined Ratio The combined ratio for the three months endedMarch 31, 2022 was impacted by higher favorable prior period development, including the return of premium to theU.S. government under the profit-sharing agreement related to the profitable 2021 crop year described above. This return of premium resulted in a reduction to net premiums earned of$161 million and a corresponding reduction to incurred losses, with no net impact to underwriting income. The CAY loss and loss expense ratio decreased 0.6 percentage point for the three months endedMarch 31, 2022 , primarily due to the favorable year-over-year impact of the commodity hedge gain of 1.9 percentage points, partially offset by higher premiums earned fromMPCI , which have a higher loss ratio. The CAY policy acquisition cost ratio decreased 0.9 percentage point for the three months endedMarch 31, 2022 , primarily due to higher premiums earned fromMPCI , which have a lower acquisition cost ratio. The CAY administrative expense ratio decreased 3.7 percentage points for the three months endedMarch 31, 2022 , primarily due to higher Administrative and Operating (A&O) reimbursements on theMPCI business, as well as expense management. 45
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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
March 31 % Change
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21
Net premiums written $ 3,079 $ 2,890 6.5 %
Net premiums written - constant dollars 11.9 %
Net premiums earned 2,628 2,478 6.0 %
Losses and loss expenses 1,389 1,263 10.0 %
Policy acquisition costs 679 668 1.6 %
Administrative expenses 269 266 1.2 %
Underwriting income 291 281 3.3 %
Net investment income 147 141 4.2 %
Other (income) expense 2 1 100.0 %
Amortization of purchased intangibles 14 12 10.2 %
Segment income $ 422 $ 409 3.2 %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 49.4 % 49.9 % (0.5) pts
Catastrophe losses 5.8 % 2.1 % 3.7 pts
Prior period development (2.3) % (1.0) % (1.3) pts
Loss and loss expense ratio 52.9 % 51.0 % 1.9 pts
Policy acquisition cost ratio 25.8 % 27.0 % (1.2) pts
Administrative expense ratio 10.2 % 10.7 % (0.5) pts
Combined ratio 88.9 % 88.7 % 0.2 pts
Catastrophe Losses and Prior
Three Months Ended
March 31
(in millions of U.S. dollars) 2022 2021
Catastrophe losses $ 151 $ 50
Favorable prior period development $ 60 $ 25
Catastrophe losses through
following events:
•2022:
•2021: Winter storm losses in the
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 March 31 (in millions ofU.S. dollars, except for percentages) 2022 2021 C$ C$ Q-22 vs. Region 2022 % of Total 2021 % of Total 2021 Q-22 vs. Q-21 Q-21Europe ,Middle East , and Africa$ 1,654 54 %$ 1,551 54 %$ 1,482 6.6 % 11.6 % Latin America 605 19 % 537 19 % 512 12.8 % 18.1 % Asia Pacific ex Japan 668 22 % 637 22 % 605 4.9 % 10.4 % Japan 115 4 % 124 4 % 113 (7.4) % 1.6 % Other (1) 37 1 % 41 1 % 40 (10.7) % (7.8) % Net premiums written$ 3,079 100 %$ 2,890 100 %$ 2,752 6.5 % 11.9 %
(1) Includes the international supplemental A&H business of
and other international operations.
Premiums
Net premiums written increased
constant-dollar basis, for the three months ended
increase in commercial lines of 8.6 percent, or 13.6 percent on a
constant-dollar basis, and growth in consumer lines of 3.0 percent, or 9.0
percent on a constant-dollar basis.
Growth inEurope ,Middle East , andAfrica for the three months endedMarch 31, 2022 was primarily driven by higher new business and positive rate increases in commercial lines, including commercial casualty, property, and financial lines. Consumer lines increased primarily due to A&H, reflecting increased travel volume. Additionally, A&H in the prior year was adversely impacted by restrictions resulting from the COVID-19 pandemic.
growth in consumer lines, including automobile in personal and travel in A&H.
Commercial lines also grew due to exposure increases and new business in
commercial lines, primarily property.
Asia Pacific exJapan increased for the three months endedMarch 31, 2022 driven by higher new business, higher retention and positive rate increases in commercial lines, including financial lines, property and casualty, and growth in consumer lines, primarily specialty in personal and travel in A&H.
business in A&H.
Net premiums earned increased$150 million , or$261 million on a constant-dollar basis, for the three months endedMarch 31, 2022 , reflecting the increase in net premiums written described above. Combined Ratio The loss and loss expense ratio increased for the three months endedMarch 31, 2022 , primarily due to higher catastrophe losses, partially offset by higher favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased for the three months endedMarch 31, 2022 , primarily reflecting underlying loss ratio improvement, including earned rate exceeding loss cost trends. The policy acquisition cost ratio decreased for the three months endedMarch 31, 2022 , primarily due to a change in the mix of business, including less premiums earned from consumer lines that have a higher acquisition cost ratio and higher premiums earned from commercial lines that have a lower acquisition cost ratio.
The administrative expense ratio decreased for the three months ended
2022
partially offset by increased investment to support growth.
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Table of Contents 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
March 31 % Change
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21
Net premiums written $ 253 $ 207 22.0 %
Net premiums written - constant dollars 22.4 %
Net premiums earned 235 180 30.8 %
Losses and loss expenses 115 120 (4.6) %
Policy acquisition costs 62 45 39.3 %
Administrative expenses 9 8 5.3 %
Underwriting income 49 7 NM
Net investment income 85 70 20.7 %
Segment income $ 134 $ 77 74.9 %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 49.9 % 48.3 % 1.6 pts
Catastrophe losses 0.4 % 23.8 % (23.4) pts
Prior period development (1.5) % (5.2) % 3.7 pts
Loss and loss expense ratio 48.8 % 66.9 % (18.1) pts
Policy acquisition cost ratio 26.5 % 24.9 % 1.6 pts
Administrative expense ratio 3.7 % 4.6 % (0.9) pts
Combined ratio 79.0 % 96.4 % (17.4) pts
NM - not meaningful
Catastrophe Losses and Prior
Three Months Ended
March 31
(in millions of U.S dollars) 2022 2021
Catastrophe losses $ 1 $ 40
Favorable prior period development $ 3 $ 7
Catastrophe losses through
losses in the
Premiums
Net premiums written increased$46 million for the three months endedMarch 31, 2022 , primarily due to continued growth in the portfolio reflecting the impact of new treaties bound in the current quarter and in 2021, as well as favorable premium adjustments.
Net premiums earned increased
2022
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Table of Contents Combined Ratio The loss and loss expense ratio decreased for the three months endedMarch 31, 2022 , primarily due to lower catastrophe losses. The CAY loss ratio excluding catastrophe losses increased for the three months endedMarch 31, 2022 , primarily due to a shift in the mix of business.
The policy acquisition cost ratio increased for the three months ended
2022
The administrative expense ratio decreased for the three months ended
2022
Life Insurance
The Life Insurance segment comprises our 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
March 31 % Change
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21
Net premiums written $ 586 $ 620 (5.5) %
Net premiums written - constant dollars (3.5) %
Net premiums earned 551 595 (7.5) %
Losses and loss expenses 154 198 (22.1) %
Policy benefits 176 163 8.2 %
Policy acquisition costs 151 179 (15.8) %
Administrative expenses 84 82 2.0 %
Net investment income 103 98 5.1 %
Life Insurance underwriting income 89 71 24.7 %
Other (income) expense (28) (34) (16.9) %
Amortization of purchased intangibles 2 1 100.0 %
Segment income $ 115 $ 104 10.0 %
Premiums
Net premiums written decreased $34 million , or $21 million on a constant-dollar
basis for the three months ended March 31, 2022 . For our International life
operations, net premiums written decreased 4.5 percent as growth in Asia from
new business in Taiwan and Vietnam was offset by a decline in Latin America from
lower business in Chile . Net premiums written also reflects a decline in our
North American Combined Insurance business of 7.4 percent.
Deposits
The following table presents deposits collected on universal life and investment
contracts:
Three Months Ended
March 31 % Change
C$
C$ Q-22 vs. Q-22 vs.
(in millions of U.S. dollars, except for percentages) 2022 2021 2021 Q-21 Q-21
Deposits collected on universal life and investment
contracts $ 557 $ 551 $ 555 0.9 % 0.3 %
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Table of Contents 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$6 million for the three months endedMarch 31, 2022 , primarily inTaiwan. Life Insurance underwriting income and Segment income Life Insurance underwriting income increased$18 million for the three months endedMarch 31, 2022 , primarily reflecting lower year-over-year COVID-related losses. Segment income increased$11 million for the three months endedMarch 31, 2022 , primarily due to the increase in underwriting income described above, partially offset by lower 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, including molestation.
Three Months Ended
March 31 % Change
(in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21
Losses and loss expenses $ 10 $ 9 0.1 %
Administrative expenses 83 71 19.6 %
Underwriting loss 93 80 17.4 %
Net investment income (loss) (5) (17) (73.4) %
Interest expense 132 122 7.4 %
Net realized gains (losses) 100 888 (88.8) %
Other (income) expense (259) (415) (37.5) %
Amortization of purchased intangibles 46 49 (7.6) %
Income tax expense 355 338 5.2 %
Net income (loss) $ (272) $ 697 NM
NM - not meaningful
Administrative expenses increased
31, 2022
investment to support growth.
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 2021
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 table presents our net realized and unrealized gains (losses):
Three Months Ended March 31
2022 2021
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 $ (136) $ (4,652)
Fixed income and equity derivatives
47 - 47 109 - 109 Public equity Sales 255 - 255 45 - 45 Mark-to-market (199) - (199) 322 - 322 Private equity (less than 3 percent ownership) Mark-to-market 55 - 55 38 - 38 Total investment portfolio 22 (4,652) (4,630) 538 (2,317) (1,779) Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges 77 - 77 275 - 275 Other derivatives 1 - 1 (1) - (1) Foreign exchange 75 67 142 76 22 98 Other (1) (74) 19 (55) (1) (28) (29) Net gains (losses), pre-tax$ 101 $ (4,566) $ (4,465) $ 887 $ (2,323) $ (1,436)
(1) Other realized losses include impairment of assets related to Chubb's
Russian entities.
Pre-tax net losses of
months ended
interest rates.
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 gains of$77 million for the three months endedMarch 31, 2022 , reflecting a net gain of$35 million , primarily from a decrease in the fair value of the GLB liabilities due to higher interest rates, partially offset by lower global equity markets, and a net realized gain of$42 million related to these derivative instruments. For the three months endedMarch 31, 2021 , the variable annuity reinsurance derivative transactions resulted in realized gains of$275 million , reflecting a net decrease in the fair value of the GLB liabilities of$319 million due to higher interest rates and higher global equity markets, partially offset by a net realized loss of$44 million related to these derivative instruments. Effective Income Tax Rate Our effective tax rate (ETR) for the three months endedMarch 31, 2022 was 15.2 percent compared to 12.8 percent in the prior year period. Our ETR reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between GAAP and local tax laws, and the impact of discrete items. The ETR in the current year period 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 GAAP.
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Table of Contents 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 book value comparisons to less acquisitive peer companies are more meaningful when adjusted for goodwill and other intangible assets. 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 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. P&C combined ratio is the sum of the loss and loss expense ratio, policy acquisition cost ratio and the administrative expense ratio excluding the life business and including the realized gains and losses on the crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations. CAY P&C combined ratio excluding catastrophe losses (CATs) excludes CATs and prior period development (PPD) from the P&C combined ratio. We exclude CATs as they are not predictable as to timing and amount and PPD as these unexpected loss developments on historical reserves are not indicative of our current underwriting performance. The combined ratio numerator is adjusted to exclude CATs, net premiums earned adjustments on PPD, prior period expense adjustments and reinstatement premiums on PPD, and the denominator is adjusted to exclude net premiums earned adjustments on PPD and reinstatement premiums on CATs and PPD. In periods where there are adjustments on loss sensitive policies, these adjustments are excluded from PPD and net premiums earned when calculating the ratios. We believe this measure provides a better evaluation of our underwriting performance and enhances the understanding of the trends in our P&C business that may be obscured by these items. This measure is commonly reported among our peer companies and allows for a better comparison. Reinstatement premiums are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted. Net premiums earned adjustments within PPD are adjustments to the initial premium earned on retrospectively rated policies based on actual claim experience that develops after the policy period ends. The premium adjustments correlate to the prior period loss development on these same policies and are fully earned in the period the adjustments are recorded. Prior period expense adjustments typically relate to adjustable commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies.
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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 March 31, 2022 North America North America (in millions of U.S. dollars except Commercial P&C Personal P&C North America Overseas General Global for ratios) Insurance InsuranceAgricultural Insurance Insurance Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 2,497 $ 713 $ (92)$ 1,389 $ 115 $ 10 $ 4,632 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (81) (100) - (151) (1) - (333) Reinstatement premiums collected (expensed) on catastrophe losses - - - - - - - Catastrophe losses, gross of related adjustments (81) (100) - (151) (1) - (333) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 108 51 26 60 3 (8) 240 Net premiums earned adjustments on PPD - unfavorable (favorable) - - 159 - - - 159 Expense adjustments - unfavorable (favorable) 6 - (1) - - - 5 PPD reinstatement premiums - unfavorable (favorable) - - - - 1 - 1 PPD, gross of related adjustments - favorable (unfavorable) 114 51 184 60 4 (8) 405 CAY loss and loss expense ex CATs B$ 2,530 $ 664 $ 92$ 1,298 $ 118 $ 2 $ 4,704 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 838$ 329 $ 11$ 948 $ 71 $ 83 $ 2,280 Expense adjustments - favorable (unfavorable) (6) - 1 - - - (5) Policy acquisition costs and administrative expenses, adjusted D $ 832$ 329 $ 12$ 948 $ 71 $ 83 $ 2,275 Denominator Net premiums earned E$ 4,114 $ 1,247 $ (29)$ 2,628 $ 235 $ 8,195 Net premiums earned adjustments on PPD - unfavorable (favorable) - - 159 - - 159 PPD reinstatement premiums - unfavorable (favorable) - - - - 1 1 Net premiums earned excluding adjustments F$ 4,114 $ 1,247 $ 130$ 2,628 $ 236 $ 8,355 P&C Combined ratio Loss and loss expense ratio A/E 60.7 % 57.2 % 318.4 % 52.9 % 48.8 % 56.5 % Policy acquisition cost and administrative expense ratioC/E 20.4 % 26.3 % (36.8) % 36.0 % 30.2 % 27.8 % P&C Combined ratio 81.1 % 83.5 % 281.6 % 88.9 % 79.0 % 84.3 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 61.5 % 53.3 % 70.6 % 49.4 % 49.9 % 56.3 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.2 % 26.3 % 8.9 % 36.1 % 30.0 % 27.2 % CAY P&C Combined ratio ex CATs 81.7 % 79.6 % 79.5 % 85.5 % 79.9 % 83.5 % Combined ratio Combined ratio 84.3 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 84.3 %
Note: The ratios above are calculated using whole
calculating the ratios above.
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Table of Contents Three Months Ended March 31, 2021 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$ 2,560 $ 819 $ 85$ 1,263 $ 120$ 9 $ 4,856 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (362) (240) (8) (50) (40) - (700) Reinstatement premiums collected (expensed) on catastrophe losses - (23) - - 5 - (18) Catastrophe losses, gross of related adjustments (362) (217) (8) (50) (45) - (682) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 127 40 2 25 7 (9) 192 Net premiums earned adjustments on PPD - unfavorable (favorable) - - (2) - - - (2) Expense adjustments - unfavorable (favorable) 3 - - - - - 3 PPD reinstatement premiums - unfavorable (favorable) - - - - 3 - 3 PPD, gross of related adjustments - favorable (unfavorable) 130 40 - 25 10 (9) 196 CAY loss and loss expense ex CATs B$ 2,328 $ 642 $ 77$ 1,238 $ 85 $ -$ 4,370 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 768$ 307 $ 15$ 934 $ 53$ 71 $ 2,148 Expense adjustments - favorable (unfavorable) (3) - - - - - (3) Policy acquisition costs and administrative expenses, adjusted D $ 765$ 307 $ 15$ 934 $ 53$ 71 $ 2,145 Denominator Net premiums earned E$ 3,674 $ 1,184 $ 110$ 2,478 $ 180$ 7,626 Reinstatement premiums (collected) expensed on catastrophe losses - 23 - - (5) 18 Net premiums earned adjustments on PPD - unfavorable (favorable) - - (2) - - (2) PPD reinstatement premiums - unfavorable (favorable) - - - - 3 3 Net premiums earned excluding adjustments F$ 3,674 $ 1,207 $ 108$ 2,478 $ 178$ 7,645 P&C Combined ratio Loss and loss expense ratio A/E 69.7 % 69.2 % 77.5 % 51.0 % 66.9 % 63.7 % Policy acquisition cost and administrative expense ratioC/E 20.9 % 25.9 % 13.4 % 37.7 % 29.5 % 28.1 % P&C Combined ratio 90.6 % 95.1 % 90.9 % 88.7 % 96.4 % 91.8 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.4 % 53.2 % 71.2 % 49.9 % 48.3 % 57.2 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.8 % 25.4 % 13.5 % 37.7 % 29.7 % 28.0 % CAY P&C Combined ratio ex CATs 84.2 % 78.6 % 84.7 % 87.6 % 78.0 % 85.2 % Combined ratio Combined ratio 91.8 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 91.8 %
Note: The ratios above are calculated using whole
the ratios above.
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Amortization of Purchased Intangibles and Other Amortization
Amortization expense related to purchased intangibles was $71 million and $72
million for the three months ended March 31, 2022 and 2021, respectively, and
principally relates to the Chubb Corp acquisition.
The following table presents, as of March 31, 2022 , the estimated pre-tax
amortization expense (benefit) of purchased intangibles, at current foreign
currency exchange rates, for the second through fourth quarters of 2022 and for
the next five years:
Associated with the Chubb Corp Acquisition
Fair value
For the Years Ending adjustment on Total
December 31 Agency 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
Second quarter of 2022 $ 49 $ (4) $ 45 $ 25 $ 70
Third quarter of 2022 49 (4) 45 25 70
Fourth quarter of 2022 49 (4) 45 25 70
2023 178 (7) 171 96 267
2024 160 (5) 155 90 245
2025 144 (6) 138 89 227
2026 130 (6) 124 86 210
2027 117 (7) 110 83 193
Total $ 876 $ (43) $ 833 $ 519 $ 1,352
(1)Recorded in Corporate.
(2)Recorded in applicable segment(s) that acquired the intangible assets.
Reduction of deferred tax liability associated with Other intangible assets AtMarch 31, 2022 , the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was$1,200 million .
The following table presents as of
deferred tax liability associated with the amortization of Other intangible
assets, at current foreign currency exchange rates, for the second through
fourth quarters of 2022 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
Second quarter of 2022 $ 16
Third quarter of 2022 16
Fourth quarter of 2022 17
2023 61
2024 55
2025 52
2026 48
2027 44
Total $ 309
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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 atMarch 31, 2022 , the expected amortization expense of the fair value adjustment on acquired invested assets related to theChubb Corp acquisition, at current foreign currency exchange rates, and the expected amortization benefit from the fair value adjustment on assumed long-term debt for the second through fourth quarters of 2022 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)
Second quarter of 2022 $ (19) $ 5
Third quarter of 2022 (17) 5
Fourth quarter of 2022 (16) 6
2023 (50) 21
2024 (9) 21
2025 - 21
2026 - 21
2027 - 21
Total $ (111) $ 121
(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 based on current market conditions, bond calls,
overall duration of the acquired investment portfolio, and foreign exchange.
Net Investment Income
Three Months Ended
March 31
(in millions of U.S. dollars) 2022 2021
Fixed maturities (1) $ 799 $ 840
Short-term investments 9 9
Other interest income 3 2
Equity securities 38 36
Other investments 19 23
Gross investment income (1) 868 910
Investment expenses (46) (47)
Net investment income (1) $ 822 $ 863
(1) Includes amortization expense related to fair value adjustment
of acquired invested assets
related to theChubb Corp acquisition $
(16)
Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation. Net investment income decreased 4.8 percent for the three months endedMarch 31, 2022 , primarily due to lower reinvestment rates on new and reinvested fixed maturities.
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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
March 31
(in millions of U.S. dollars)
2022 2021
Total mark-to-market gain on private equity, pre-tax
$ 438 Investments Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of A/A as rated by the independent investment rating services Standard and Poor's (S&P)/Moody's Investors Service (Moody's) atMarch 31, 2022 . 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, ourChief 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 4.2 years and 4.1 years atMarch 31, 2022 andDecember 31, 2021 , respectively. We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately$4.3 billion atMarch 31, 2022 . The following table shows the fair value and cost/amortized cost, net of valuation allowance, of our invested assets: March 31, 2022 December 31, 2021 Cost/ Cost/ Fair Amortized Fair Amortized (in millions of U.S. dollars) Value Cost, Net Value Cost, Net Fixed maturities available for sale$ 89,479 $ 91,499 $ 93,108 $ 90,479 Fixed maturities held to maturity 9,888 9,818 10,647 10,118 Short-term investments 3,407 3,408 3,146 3,147 Fixed income securities 102,774 104,725 106,901 103,744 Equity securities 3,596 3,596 4,782 4,782 Other investments 11,947 11,947 11,169 11,169 Total investments$ 118,317 $ 120,268 $ 122,852 $ 119,695 The fair value of our total investments decreased$4.5 billion during the three months endedMarch 31, 2022 due to unrealized losses on fixed maturities and share repurchases, partially offset by strong operating cash flows.
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The following tables present the fair value of our fixed income securities at
according to type and second according to S&P credit rating:
March 31, 2022 December 31, 2021
Fair Fair
(in millions of U.S. dollars, except for percentages) Value % of Total Value % of Total
U.S. Treasury / Agency $ 3,276 3 % $ 3,458 3 %
Corporate and asset-backed securities 39,604 39 % 41,264 39 %
Mortgage-backed securities 21,489 21 % 22,292 21 %
Municipal 9,023 9 % 9,650 9 %
Non-U.S. 25,975 25 % 27,091 25 %
Short-term investments 3,407 3 % 3,146 3 %
Total $ 102,774 100 % $ 106,901 100 %
AAA $ 15,029 15 % $ 15,364 14 %
AA 33,592 33 % 35,179 33 %
A 18,821 18 % 20,171 19 %
BBB 16,820 16 % 17,362 16 %
BB 9,065 9 % 9,084 8 %
B 8,983 9 % 9,202 9 %
Other 464 - % 539 1 %
Total $ 102,774 100 % $ 106,901 100 %
Corporate and asset-backed securities
The following table presents our 10 largest global exposures to corporate bonds
by fair value at March 31, 2022 :
(in millions of U.S. dollars) Fair Value
Bank of America Corp $ 650
JP Morgan Chase & Co 571
Wells Fargo & Co 527
AT&T Inc 488
Comcast Corp 453
Verizon Communications Inc 451
Morgan Stanley 436
Citigroup Inc 384
Goldman Sachs Group Inc 365
Anheuser-Busch InBev SA/NV 315
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
March 31, 2022 BB and
(in millions of U.S. dollars) AAA AA A BBB below Total Total
Agency residential mortgage-backed
securities (RMBS) $ 85 $ 17,567 $ - $ - $ - $ 17,652 $ 18,270
Non-agency RMBS 429 44 62 45 5 585 615
Commercial mortgage-backed
securities 2,810 263 164 11 4 3,252 3,315
Total mortgage-backed securities
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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 45 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-
for non-
(in millions of U.S. dollars) Fair Value Amortized Cost, Net Canada$ 957 $ 995 Republic of Korea 903 895 Province of Ontario 633 654 Federative Republic of Brazil 586 598 United Mexican States 571 595 Kingdom of Thailand 510 498 United Kingdom 487 497 Socialist Republic of Vietnam 470 343 Commonwealth of Australia 455 486 Province of Quebec 395 405 Other Non-U.S. Government Securities 5,079 5,196 Total$ 11,046 $ 11,162 59
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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 $ 2,337 $ 2,388
Canada 1,860 1,909
United States (1) 1,254 1,284
France 1,220 1,244
Australia 961 993
Japan 763 787
Germany 578 594
Switzerland 552 566
Netherlands 527 530
China 394 408
OtherNon-U.S. Corporate Securities 4,483
4,603
Total $ 14,929 $ 15,306
(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. AtMarch 31, 2022 , our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 16 percent of our fixed income portfolio. Our below-investment grade and non-rated portfolio includes 1,700 issuers, with the greatest single exposure being$143 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 debt obligations) are not permitted in the high-yield portfolio.
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Critical Accounting Estimates
As of March 31, 2022 , there were no material changes to our critical accounting
estimates. For a full discussion of our critical accounting estimates, refer to
Item 7 in our 2021 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, 2021 $ 72,943 $ 16,184 $ 56,759
Losses and loss expenses incurred 6,260 1,473 4,787
Losses and loss expenses paid (5,308) (947) (4,361)
Other (including foreign exchange translation) (51) (64) 13
Balance at March 31, 2022 $ 73,844 $ 16,646 $ 57,198
(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) There was no significant A&E reserve activity during the three months endedMarch 31, 2022 . A&E reserves are included in Corporate. Refer to our 2021 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 from natural perils, including setting risk limits based on probable
maximum loss (PML), and purchasing catastrophe reinsurance, to ensure sufficient
liquidity and capital to meet the expectations of regulators, rating agencies
and policyholders, and to provide shareholders with an appropriate risk-adjusted
return. Chubb uses internal and external data together with sophisticated
analytical, catastrophe loss and risk modeling techniques to ensure an
appropriate understanding of risk, including diversification and correlation
effects, across different product lines and territories. The table below
presents our modeled pre-tax estimates of natural catastrophe PML, net of
reinsurance, at March 31, 2022 , and does not represent our expected catastrophe
losses for any one year.
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 $ 2,160 3.8 % $ 1,117 2.0 % $ 142 0.3 %
1-in-100 $ 4,513 8.0 % $ 2,889 5.1 % $ 1,303 2.3 %
1-in-250 $ 7,417 13.1 % $ 5,393 9.5 % $ 1,487 2.6 %
(1) Worldwide aggregate is comprised of losses arising from tropical cyclones,
convective storms, earthquakes, U.S. wildfires and inland floods, and excludes
"non-modeled" perils such as man-made and other catastrophe risks including
pandemic.
(2)
rainfall.
(3)
The PML for worldwide and keyU.S. peril regions are based on our in-force portfolio atJanuary 1, 2022 , and reflect theApril 1, 2022 reinsurance program (see Global Property Catastrophe Reinsurance Program section) as well as inuring reinsurance protection coverages. These estimates assume that reinsurance recoverable is fully collectible. 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 fromU.S. hurricane events could be in excess of$2,889 million (or 5.1 percent of our total shareholders' equity atMarch 31, 2022 ). EffectiveDecember 31, 2021 , our worldwide PMLs include losses fromU.S. wildfire andU.S. inland flood. The above estimates of Chubb's loss profile are inherently uncertain for many reasons, including the following: •While the use of third-party modeling packages to simulate potential catastrophe 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. Published studies by leading government, academic and professional organizations combined with extensive research by Chubb climate scientists reveal the potential for increases in the frequency and severity of key natural perils such as tropical cyclones, inland flood, and wildfire. To understand the potential impacts on the Chubb portfolio, we have conducted stress tests on our peak exposure zone, namely in theU.S. , using parameters outlined by theIntergovernmental Panel on Climate Change (IPCC) Climate Change 2021 report. These parameters consider the impacts of climate change and the resulting climate peril impacts over a timescale relevant to our business. The tests are conducted by adjusting our baseline view of risk for the perils of hurricane, inland flood, and wildfire in theU.S. to reflect increases in frequency and severity across the modeled domains for each of these perils. Based on these tests against the Chubb portfolio we do not expect material impacts to our baseline PMLs from climate change throughDecember 31, 2022 . These tests reflect current exposures only and exclude potentially mitigating factors such as changes to building codes, public or private risk mitigation, regulation and public policy.
Refer to Item 7 in our 2021 Form 10-K for more information on man-made and other
catastrophes.
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Global Property Catastrophe 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, 2022 , throughMarch 31, 2023 , with no material changes in coverage from the expiring program. The program consists of three layers in excess of losses retained by Chubb on a per occurrence basis. In addition, Chubb 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, 2022 , throughMarch 31, 2023 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
Property Catastrophe Reinsurance Program and are fully placed with Reinsurers.
(d) These coverages are both part of the same Third layer within the Global
Property Catastrophe Reinsurance 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 March 31,
2022 , our usage under these facilities was $1.3 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 March 31, 2022 . 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 three months ended March 31,
2022 , we were able to meet all our obligations, including the payments of
dividends on our Common Shares, with our net cash flows.
We assess which subsidiaries to draw dividends from based on a number of
factors. Considerations such as regulatory and legal restrictions as well as the
subsidiary's financial condition are paramount to the dividend decision. Chubb
Limited received dividends of $1.0 billion and $740 million from its Bermuda
subsidiaries during the three months ended March 31, 2022 and 2021,
respectively.
The U.S. insurance subsidiaries of Chubb INA Holdings Inc. (Chubb INA ) may pay
dividends, without prior regulatory approval, subject to restrictions set out in
state law of the subsidiary's domicile (or, if applicable, commercial domicile).
Chubb INA's international subsidiaries are also subject to insurance laws and
regulations particular to the countries in which the subsidiaries operate. These
laws and regulations sometimes include restrictions that limit the amount of
dividends payable without prior approval of regulatory insurance authorities.
Chubb Limited received no dividends from Chubb INA during the three months ended
March 31, 2022 and 2021. 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 no dividends from its
subsidiaries during the three months ended March 31, 2022 and 2021.
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 three months ended March 31, 2022 and 2021.
Operating cash flows were $2.4 billion in the three months ended March 31, 2022 ,
compared to $2.1 billion in the prior year period. The increase of $335 million
is due to higher premiums collected reflecting premium growth, principally in
our commercial lines, and lower taxes paid, partially offset by higher losses
paid.
Cash used for investing was $995 million in the three months ended March 31,
2022 , compared to $1.3 billion in the prior year period, a decrease of $257
million . Cash used for investing in the current year included higher net sales
of equity securities of $730 million , partially offset by higher private equity
contributions, net of distributions received, of $241 million , and higher net
purchases of fixed maturities of $95 million . In addition, cash used related to
acquisitions of Huatai Group ownership interest was $113 million in 2022
compared to $65 million in 2021.
Cash used for financing was $1.3 billion in the three months ended March 31,
2022 , compared to $812 million in the prior year period, an increase of $490
million , principally from more shares repurchased in the current year.
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
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Table of Contents 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. AtMarch 31, 2022 , there were$1.4 billion in repurchase agreements outstanding with various maturities over the next seven months. Capital Resources
Capital resources consist of funds deployed or available to be deployed to
support our business operations.
March 31 December 31
(in millions of U.S. dollars, except for ratios) 2022 2021
Short-term debt $ 1,474 $ 999
Long-term debt 14,585 15,169
Total financial debt 16,059 16,168
Trust preferred securities 308 308
Total shareholders' equity 56,698 59,714
Total capitalization $ 73,065 $ 76,190
Ratio of financial debt to total capitalization 22.0 % 21.2 %
Ratio of financial debt plus trust preferred securities to total
capitalization 22.4 % 21.6 %
The ratios of financial debt to total capitalization in the table above are
higher at
shareholders' equity, principally reflecting net unrealized depreciation on
investments in the current period compared to net unrealized appreciation in
2021.
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 three months endedMarch 31, 2022 , we repurchased$1.0 billion of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorization. AtMarch 31, 2022 , there were 35,880,387 Common Shares in treasury with a weighted-average cost of$158.85 per share, and$1.6 billion in share repurchase authorization remained throughJune 30, 2022 . For the periodApril 1, 2022 throughApril 28, 2022 , we repurchased 115,000 Common Shares for a total of$24 million in a series of open market transactions. AtApril 28, 2022 ,$1.6 billion in share repurchase authorization remained. We generally maintain the ability to issue certain classes of debt and equity securities via aSecurities 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.
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 four quarterly installments each of$0.80 per share were distributed by the Board as expected. 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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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 17, 2021 January 7, 2022$0.80 (CHF 0.74 ) March 18, 2022 April 8, 2022$0.80 (CHF 0.74 )
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) March 31 December 31 March 31 December 31 (in millions of U.S. dollars) 2022 2021 2022 2021 Assets Investments $ - $ -$ 150 $ 149 Cash 142 1 31 580 Due from parent guarantor/subsidiary issuer 2 2 732 348 Due from subsidiaries that are not issuers or guarantors 1,825 1,805 567 526 Other assets 8 16 2,197 1,667 Total assets$ 1,977 $ 1,824 $ 3,677 $ 3,270 Liabilities Due to parent guarantor/subsidiary issuer$ 732 $ 348 $ 2 $ 2 Due to subsidiaries that are not issuers or guarantors 325 241 2,130 1,647 Affiliated notional cash pooling programs - 8 - - Short-term debt - - 1,474 999 Long-term debt - - 14,585 15,169 Trust preferred securities - - 308 308 Other liabilities 350 363 1,845 1,803 Total liabilities 1,407 960 20,344 19,928 Total shareholders' equity 570 864 (16,667) (16,658) Total liabilities and shareholders' equity$ 1,977 $ 1,824 $ 3,677 $ 3,270 66
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The following table presents the condensed statements of operations and
comprehensive income of
equity in earnings from non-guarantor subsidiaries:
Three Months Ended March 31, 2022 Chubb Limited Chubb INA Holdings Inc. (in millions of U.S. dollars) (Parent Guarantor) (Subsidiary Issuer) Net investment income (loss) $ 2 $ (1) Net realized gains (loss) 24 96 Administrative expenses 27 (28) Interest (income) expense (15) 138 Other (income) expense (13) 10 Income tax expense (benefit) 7 (13) Net income (loss) $ 20 $ (12) Comprehensive income (loss) $ 20 $ (14)
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