CHUBB LIMITED The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three and six months endedJune 30, 2021 . All comparisons in this discussion are to the corresponding prior year period unless otherwise indicated. All dollar amounts are rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded dollars may differ. Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. This discussion should be read in conjunction with our consolidated financial statements and related notes and our Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 (2020 Form 10-K). Other Information We routinely post important information for investors on our website (investors.chubb.com). We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations underSecurities and Exchange Commission (SEC) Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Investor Information portion of our website, in addition to following our press releases,SEC filings, public conference calls, and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report. MD&A Index Page Forward-Looking Statements 41 Overview 42 Consolidated Operating Results 42 Segment Operating Results 47 Net Realized and Unrealized Gains (Losses) 57 Effective Income Tax Rate 58 Non-GAAP Reconciliation 59 Amortization of Purchased Intangibles and Other Amortization 64 Net Investment Income 65 Investments 66 Critical Accounting Estimates 70 Unpaid Losses and Loss Expenses 70 Asbestos and Environmental (A&E) 70 Fair Value Measurements 70 Catastrophe Management 71 Natural Catastrophe Property Reinsurance Program 72 Liquidity 73 Capital Resources 74 Information P rovided I n C onnection W ith O utstanding D ebt of S ubsidiaries 75
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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 through June 30, 2021 which could
change including as a result of, among other things, the impact of legislative
or regulatory actions taken in response to COVID-19;
•changes in the distribution or placement of risks due to increased
consolidation of insurance and reinsurance brokers; material differences between
actual and expected assessments for guaranty funds and mandatory pooling
arrangements; the ability to collect reinsurance recoverable, credit
developments of reinsurers, and any delays with respect thereto and changes in
the cost, quality, or availability of reinsurance;
•uncertainties relating to governmental, legislative and regulatory policies,
developments, actions, investigations, and treaties; judicial decisions and
rulings, new theories of liability, legal tactics, and settlement terms; the
effects of data privacy or cyber laws or regulation; global political conditions
and possible business disruption or economic contraction that may result from
such events;
•developments in global financial markets, including changes in interest rates,
stock markets, and other financial markets; increased government involvement or
intervention in the financial services industry; the cost and availability of
financing, and foreign currency exchange rate fluctuations; changing rates of
inflation; and other general economic and business conditions, including the
depth and duration of potential recession;
•the availability of borrowings and letters of credit under our credit
facilities; the adequacy of collateral supporting funded high deductible
programs; the amount of dividends received from subsidiaries;
•changes to our assessment as to whether it is more likely than not that we will
be required to sell, or have the intent to sell, available for sale fixed
maturity investments before their anticipated recovery;
•actions that rating agencies may take from time to time, such as financial
strength or credit ratings downgrades or placing these ratings on credit watch
negative or the equivalent;
•the effects of public company bankruptcies and accounting restatements, as well
as disclosures by and investigations of public companies relating to possible
accounting irregularities, and other corporate governance issues;
•acquisitions made performing differently than expected, our failure to realize
anticipated expense-related efficiencies or growth from acquisitions, the impact
of acquisitions on our pre-existing organization, or announced acquisitions not
closing; risks and uncertainties relating to our planned purchases of additional
interests in Huatai Insurance Group Co., Ltd. (Huatai Group ), including our
ability to receive Chinese insurance regulatory approval and complete the
purchases;
•risks associated with being a Swiss corporation, including reduced flexibility
with respect to certain aspects of capital management and the potential for
additional regulatory burdens; share repurchase plans and share cancellations;
•loss of the services of any of our executive officers without suitable
replacements being recruited in a reasonable time frame;
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•the ability of our technology resources, including information systems and
security, to perform as anticipated such as with respect to preventing material
information technology failures or third-party infiltrations or hacking
resulting in consequences adverse to Chubb or its customers or partners; the
ability of our company to increase use of data analytics and technology as part
of our business strategy and adapt to new technologies; and
•management's response to these factors and actual events (including, but not
limited to, those described above).
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. We undertake no obligation to
publicly update or review any forward-looking statements, whether as a result of
new information, future events or otherwise.
Overview
Chubb Limited is the Swiss-incorporated holding company of the Chubb Group of
Companies . Chubb Limited , which is headquartered in Zurich, Switzerland , and its
direct and indirect subsidiaries (collectively, the Chubb Group of Companies ,
Chubb, we, us, or our) are a global insurance and reinsurance organization,
serving the needs of a diverse group of clients worldwide. At June 30, 2021 , we
had total assets of $197 billion and shareholders' equity of $60 billion . Chubb
was incorporated in 1985 at which time it opened its first business office in
Bermuda and continues to maintain operations in Bermuda . We operate through six
business segments: North America Commercial P&C Insurance , North America
Personal P&C Insurance , North America Agricultural Insurance , Overseas General
Insurance , Global Reinsurance, and Life Insurance. For more information on our
segments refer to "Segment Information" under Item 1 in our 2020 Form 10-K.
Consolidated Operating Results - Three and Six Months Ended June 30, 2021 and 2020
Three Months Ended Six Months Ended
June 30 % Change June 30 % Change
(in millions of U.S. dollars, except for Q-21 vs.
percentages) 2021 2020 Q-20 2021 2020 YTD-21 vs. YTD-20
Net premiums written $ 9,546 $ 8,355 14.3 % $ 18,208 $ 16,332 11.5 %
Net premiums written - constant dollars
(1) 11.5 % 9.3 %
Net premiums earned 8,813 8,128 8.4 % 17,034 15,922 7.0 %
Net investment income 884 827 7.0 % 1,747 1,688 3.5 %
Net realized gains (losses) (33) 30 NM 854 (928) NM
Total revenues 9,664 8,985 7.6 % 19,635 16,682 17.7 %
Losses and loss expenses 5,006 6,577 (23.9) % 10,059 11,062 (9.1) %
Policy benefits 185 223 (17.2) % 352 352 -
Policy acquisition costs 1,698 1,593 6.6 % 3,363 3,208 4.8 %
Administrative expenses 775 727 6.7 % 1,519 1,468 3.5 %
Interest expense 122 128 (4.9) % 244 260 (6.3) %
Other (income) expense (777) 58 NM (1,267) 113 NM
Amortization of purchased intangibles 73 72 1.1 % 145 145 -
Total expenses 7,082 9,378 (24.5) % 14,415 16,608 (13.2) %
Income (loss) before income tax 2,582 (393) NM 5,220 74 NM
Income tax expense (benefit) 317 (62) NM 655 153 NM Net income (loss)$ 2,265 $ (331) NM$ 4,565 $ (79) NM NM - not meaningful (1) On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency exchange rates as the comparable current period.
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Financial Highlights for the Three Months Ended
•Net income was$2.3 billion compared with a net loss of$331 million in the prior year period. Net income in the current quarter was driven by record underwriting results, record net investment income, and higher income related to our partially-owned companies. Both commercial P&C and consumer lines grew globally, reflecting positive rate increases which exceeded loss cost trend, strong retention and higher new business.
•Total pre-tax and after-tax catastrophe losses were
•Total pre-tax and after-tax favorable prior period development were$268 million (3.3 percentage points of the combined ratio) and$224 million , respectively, compared with unfavorable prior period development of$75 million (1.0 percentage point of the combined ratio) and$52 million , respectively, in the prior year period. The current quarter included a charge of$68 million pre-tax for molestation claims, compared to$259 million in the prior year. •The P&C combined ratio was 85.5 percent compared with 112.3 percent in the prior year period. P&C current accident year combined ratio excluding catastrophe losses was 85.4 percent compared with 87.4 percent in the prior year period. The 2.0 percentage point decrease was substantially driven by improvement in the loss ratio. •Consolidated net premiums written were$9.5 billion , up 14.3 percent, or 11.5 percent in constant dollars. P&C net premiums written were$8.9 billion , up 15.5 percent, or 12.7 percent in constant dollars, comprising positive growth in both commercial P&C lines and consumer lines of 19.9 percent and 5.6 percent, respectively. The increase is primarily due to new business and positive rate increases across most lines and regions. There were two items that also impacted growth including a$184 million reduction in premium due to exposure adjustments on in-force policies resulting from the COVID-19 pandemic in the prior year, which was more than offset by a year-over-year decrease in large structured transactions of$241 million . Excluding these items, P&C net premiums written increased 16.4 percent. •Consolidated net premiums earned were$8.8 billion , up 8.4 percent, or 5.6 percent in constant dollars. P&C net premiums earned increased 9.1 percent, comprising positive growth in both commercial P&C lines and consumer lines of 11.6 percent and 3.8 percent, respectively. Net premiums earned increased due to the same reasons described above for net premiums written, including from the prior year COVID-19 exposure adjustments that depressed prior year growth by$103 million . Partially offsetting the overall growth is the year-over-year decrease in large structured transactions of$241 million , which are fully earned when written.
•Net investment income was
•Shareholders' equity increased by$986 million in the quarter, primarily reflecting net income of$2.3 billion and net unrealized gains on investments of$581 million after-tax. Partially offsetting the increase was total capital returned to shareholders in the quarter of$2.3 billion , including share repurchases of$1.9 billion , at an average purchase price of$169.19 per share, and dividends of$352 million . InJuly 2021 , our Board of Directors approved a one-time incremental share repurchase program of up to$5.0 billion throughJune 30, 2022 . 43
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Three Months Ended Six Months Ended %
Net Premiums Written June 30 % Change June 30 Change
C$ C$
(in millions of U.S. dollars, Q-21 vs. Q-21 vs. YTD-21 vs. YTD-21 vs.
except for percentages) 2021 2020 Q-20 Q-20 2021 2020 YTD-20 YTD-20
Commercial casualty $ 1,609 $ 1,478 8.9 % 8.5 % $ 3,258 $ 2,819 15.6 % 14.7 %
Workers' compensation 546 467 17.0 % 17.0 % 1,109 1,053 5.3 % 5.3 %
Professional liability 1,263 997 26.7 % 23.0 % 2,353 1,909 23.3 % 20.3 %
Surety 138 117 18.5 % 14.3 % 296 267 11.2 % 10.7 %
Commercial multiple peril (1) 316 267 18.0 % 18.0 % 579 508 13.9 % 13.9 % Property and other short-tail lines 1,740 1,344 29.5 % 24.0 % 3,334 2,678
24.5 % 20.1 %
Total Commercial P&C lines 5,612 4,670 20.2 % 17.7 % 10,929 9,234 18.4 % 16.3 %
Agriculture 512 461 11.0 % 11.0 % 695 618 12.4 % 12.4 %
Personal automobile 364 353 3.2 % (1.0) % 751 794 (5.5) % (6.2) %
Personal homeowners 1,025 980 4.5 % 3.5 % 1,800 1,753 2.6 % 1.9 %
Personal other 464 402 15.5 % 9.0 % 932 820 13.6 % 8.6 %
Total Personal lines 1,853 1,735 6.8 % 3.9 % 3,483 3,367 3.4 % 1.7 %
Total Property and Casualty lines 7,977 6,866 16.2 % 13.8 % 15,107 13,219 14.3 % 12.4 %
Global A&H lines (2) 951 951 0.1 % (4.2) % 1,933 2,018 (4.2) % (7.5) %
Reinsurance lines 274 207 32.4 % 30.7 % 481 425 13.1 % 11.7 %
Life 344 331 3.8 % (0.6) % 687 670 2.5 % (0.3) %
Total consolidated $ 9,546 $ 8,355 14.3 % 11.5 % $ 18,208 $ 16,332 11.5 % 9.3 %
(1)Commercial multiple peril represents retail package business (property and
general liability).
(2)For purposes of this schedule only, A&H results from our Combined North
America and International businesses, normally included in the Life Insurance
and Overseas General Insurance segments, respectively, as well as the A&H
results of our North America Commercial P&C segment, are included in Global A&H
lines above.
The increase in net premiums written for the three and six months ended June 30,
2021 reflects growth across most lines of business.
•The growth in commercial casualty was due to new business and positive rate
increases, primarily across North America and Europe . Additionally, the prior
year included a $58 million reduction in premium due to exposure adjustments on
in-force policies resulting from the COVID-19 pandemic. Partially offsetting
growth is the year-over-year decrease in large structured transactions of $178
million . Excluding these items, commercial casualty increased 18.5 percent and
20.7 percent, for the three and six months ended June 30, 2021 , respectively.
•Workers' compensation growth was due to a reduction in the prior year's premium
of $121 million related to exposure adjustments on in-force policies resulting
from the COVID-19 pandemic, partially offset by the year-over-year decrease in
large structured transactions. Excluding these items, workers' compensation
increased slightly reflecting new business written in small commercial and large
risk accounts.
•The increase in professional liability was due to new business and positive
rate increases in North America , Asia and Europe .
•Commercial multiple peril increased due to higher new and renewal business in
North America .
•Property and other short-tail lines increased due to positive rate increases in
Asia , North America and Europe , as well as higher new business in North America
and Europe .
•Personal lines increased globally primarily reflecting new business in
homeowners lines in North America and Latin America and growth in specialty
lines in Europe . Growth for the six months ended June 30, 2021 was partially
offset by declines in automobile lines in North America and Latin America
reflecting reduced exposures from the impact of the COVID-19 pandemic.
•Global A&H lines decreased due to declines in Asia and Latin America ,
principally from less travel volume, and in our North American Combined
Insurance supplemental A&H program from the adverse impact of the COVID-19
pandemic on face-to-face and worksite sales.
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Table of Contents •Growth in our international life operations, principally from new business written inTaiwan ,Vietnam andThailand was partially offset by declines in our life reinsurance business that has not written new business since 2007. For additional information on net premiums written, refer to the segment results discussions. Net Premiums Earned Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Net premiums earned for long-duration contracts, typically traditional life contracts, generally are recognized as earned when due from policyholders. For the three months endedJune 30, 2021 , net premiums earned increased$685 million , or 8.4 percent, comprising 11.6 percent positive growth in commercial P&C lines and 2.9 percent positive growth in consumer lines. For the six months endedJune 30, 2021 , net premiums earned increased$1,112 million or 7.0 percent, comprising 11.5 percent positive growth in commercial P&C lines and 0.3 percent negative growth in consumer lines. The growth in net premiums earned was adversely impacted by the year-over-year decrease in large structured transactions, which are fully earned when written, partially offset by the prior year COVID-19 exposure adjustments on in-force policies. Catastrophe Losses and PriorPeriod Development We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in theU.S. andCanada . PCS defines a catastrophe as an event that causes damage of$25 million or more in insured losses and affects a significant number of insureds. For events outside of theU.S. andCanada , we generally use a similar definition. We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. Prior period development includes adjustments relating to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development. Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Catastrophe losses$ 280 $ 1,807 $ 980 $ 2,044 Favorable (Unfavorable) prior period development$ 268 $ (75) $ 460 $ 43 Catastrophe losses throughJune 30, 2021 and 2020 were primarily from the following events: •2021: Winter storm losses in theU.S. and other severe weather-related events in theU.S. and internationally. •2020: COVID-19 pandemic claims of$1,365 million , flooding, hail, tornadoes, and wind events in theU.S. , and civil unrest in theU.S. Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years. Pre-tax net favorable PPD for the three months endedJune 30, 2021 was$268 million , including adverse development of$68 million for molestation claims. Excluding the adverse development, we had favorable development of$336 million with 28 percent in long-tail lines, principally from accident years 2017 and prior, and 72 percent in short-tail lines, primarily in accident and health, property, and surety lines. Pre-tax net favorable PPD for the six months endedJune 30, 2021 was$460 million , including adverse development of$68 million for molestation claims described above. Excluding the adverse development, we had favorable development of$528 million with 25 percent in long-tail lines, principally from accident years 2017 and prior, and 75 percent in short-tail lines, primarily in accident and health, property, and surety lines.
Pre-tax net adverse PPD for the three months ended
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Table of Contents favorable development of$184 million split approximately 79 percent long-tail lines, principally from accident years 2016 and prior, and 21 percent short-tail lines. Pre-tax net favorable PPD for the six months endedJune 30, 2020 was$43 million , including adverse development of$259 million forU.S. child molestation claims as noted above. Excluding the adverse development, we had favorable development of$302 million split approximately 59 percent long-tail lines, principally from accident years 2016 and prior, and 41 percent short-tail lines.
Refer to the prior period development discussion in Footnote 6 to the Consolidated Financial Statements for additional information.
P&C Combined Ratio
In evaluating our segments excluding Life Insurance financial performance, we
use the P&C combined ratio. We calculate this ratio by dividing the respective
expense amounts by net premiums earned. We do not calculate this ratio for the
Life Insurance segment as we do not use this measure to monitor or manage that
segment. A P&C combined ratio under 100 percent indicates underwriting income,
and a combined ratio exceeding 100 percent indicates underwriting loss.
Three Months Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Loss and loss expense ratio
CAY loss ratio excluding catastrophe losses 58.6 % 60.4 % 57.9 % 59.3 %
Catastrophe losses 3.5 % 23.9 % 6.2 % 13.8 %
Prior period development (3.4) % 0.9 % (3.0) % (0.3) %
Loss and loss expense ratio 58.7 % 85.2 % 61.1 % 72.8 %
Policy acquisition cost ratio 18.4 % 18.5 % 18.9 % 19.3 %
Administrative expense ratio 8.4 % 8.6 % 8.6 % 8.9 %
P&C Combined ratio 85.5 % 112.3 % 88.6 % 101.0 %
The loss and loss expense ratio decreased 26.5 percentage points and 11.7
percentage points for the three and six months ended June 30, 2021 ,
respectively, primarily due to lower catastrophe losses compared to the prior
year which included significant losses related to the COVID-19 pandemic and
higher favorable prior period development. The CAY loss ratio excluding
catastrophe losses decreased 1.8 percentage points and 1.4 percentage points for
the three and six months ended June 30, 2021 , respectively, reflecting in part,
underlying loss ratio improvement.
The policy acquisition cost ratio decreased 0.1 percentage points and 0.4
percentage points for the three and six months ended June 30, 2021 ,
respectively, primarily due to a change in the mix of business, including less
premiums earned from consumer A&H lines that have a higher acquisition cost
ratio and higher premiums earned from commercial P&C lines that have a lower
acquisition cost ratio.
The administrative expense ratio decreased 0.2 percentage points and 0.3
percentage points for the three and six 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 endedJune 30, 2021 and 2020, Policy benefits were$185 million and$223 million , respectively, which included separate account liabilities losses of$15 million and$40 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$170 million and$183 million for the three months endedJune 30, 2021 and 2020, respectively, reflecting a decline in ourCombined Insurance North America supplemental accident and health business and our life reinsurance business, partially offset by growth in our International Life operations.
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Table of Contents For both the six months endedJune 30, 2021 and 2020, Policy benefits were$352 million , which included separate account liabilities (gains) losses of$19 million and$(16) million , respectively. Excluding the separate account gains and losses, Policy benefits were$333 million and$368 million for the six months endedJune 30, 2021 and 2020, respectively, reflecting a decline in ourCombined Insurance North America supplemental accident and health business and our life reinsurance business, partially offset by growth in our International Life operations. Refer to the respective sections that follow for a discussion of Net investment income, Other (income) expense, Net realized gains (losses), Amortization of purchased intangibles, and Income tax expense.
Segment Operating Results - Three and Six Months Ended
We operate through six business segments:North America Commercial P&C Insurance ,North America Personal P&C Insurance ,North America Agricultural Insurance ,Overseas General Insurance , Global Reinsurance, and Life Insurance. For more information on our segments refer to "Segment Information" under Item 1 in our 2020 Form 10-K.
The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) and accident & health (A&H) insurance and services to large, middle market, and small commercial businesses in theU.S. ,Canada , andBermuda . This segment includes ourNorth America Major Accounts andSpecialty Insurance division (large corporate accounts and wholesale business), and theNorth America Commercial Insurance division (principally middle market and small commercial accounts). Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 4,285 $ 3,720 15.2 %$ 7,949 $ 6,972 14.0 % Net premiums earned 3,803 3,595 5.8 % 7,477 6,971 7.3 % Losses and loss expenses 2,426 3,498 (30.6) % 4,986 5,679 (12.2) % Policy acquisition costs 489 471 3.8 % 1,003 963 4.1 % Administrative expenses 245 249 (1.8) % 499 508 (1.7) % Underwriting income (loss) 643 (623) NM 989 (179) NM Net investment income 535 509 5.3 % 1,075 1,034 4.1 % Other (income) expense 14 6 124.8 % 16 12 39.4 % Segment income (loss)$ 1,164 $ (120) NM$ 2,048 $ 843 142.9 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 63.7 % 66.1 % (2.4) pts 63.6 % 65.2 % (1.6) pts Catastrophe losses 4.3 % 35.4 % (31.1) pts 7.0 % 20.0 % (13.0) pts Prior period development (4.2) % (4.2) % - pts (3.9) % (3.7) % (0.2) pts Loss and loss expense ratio 63.8 % 97.3 % (33.5) pts 66.7 % 81.5 % (14.8) pts Policy acquisition cost ratio 12.9 % 13.1 % (0.2) pts 13.4 % 13.8 % (0.4) pts Administrative expense ratio 6.4 % 6.9 % (0.5) pts 6.7 % 7.3 % (0.6) pts Combined ratio 83.1 % 117.3 % (34.2) pts 86.8 % 102.6 % (15.8) pts NM - not meaningful 47
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Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended
June 30 June 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 165 $ 1,273 $ 527 $ 1,391
Favorable prior period development $ 156 $ 146 $ 283 $ 251
Catastrophe losses through June 30, 2021 and 2020 were primarily from the
following events:
•2021: Winter storm losses and other severe weather-related events in the U.S.
•2020: COVID-19 pandemic claims of $973 million , civil unrest in the U.S. of
$118 million , and natural catastrophes including Nashville, Tennessee tornado
and other severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.
Premiums
Net premiums written increased$565 million , or 15.2 percent, and$977 million , or 14.0 percent, for the three and six months endedJune 30, 2021 , respectively, comprising: •Commercial P&C lines: Positive growth of 16.3 percent and 15.6 percent, respectively, reflecting strong premium retention, positive rate increases, and growth in new business written across a number of retail and wholesale lines, including financial lines, property, excess casualty, and primary casualty. In addition, the prior year included a$160 million reduction in premium due to exposure adjustments on in-force policies resulting from the COVID-19 pandemic. Partially offsetting growth in premium is the year-over-year decrease in large structured transactions of$241 million . Adjusting for both these items, growth in the segment would have been 18.0 percent and 15.5 percent, for the three and six months endedJune 30, 2021 , respectively. •Consumer lines: Negative growth of 8.9 percent and 14.1 percent, respectively, principally from exposure declines in A&H. Net premiums earned increased$208 million , or 5.8 percent, and$506 million , or 7.3 percent for the three and six months endedJune 30, 2021 , respectively, reflecting the growth in net premiums written described above. In addition, the percentage growth for the three months endedJune 30, 2021 was adversely impacted by the year-over-year decrease in large structured transactions described above, which are fully earned when written, partially offset by$95 million of exposure adjustments on in-force policies from the COVID-19 pandemic in the prior year, as described above. Adjusting for both these items, growth would have been 10.4 percent and 9.6 percent, respectively. Combined Ratio The loss and loss expense ratio decreased 33.5 percentage points and 14.8 percentage points for the three and six months endedJune 30, 2021 , respectively, primarily due to lower catastrophe losses compared to the prior year which included significant losses related to the COVID-19 pandemic. The CAY loss ratio excluding catastrophe losses decreased 2.4 percentage points and 1.6 percentage points for the three and six months endedJune 30, 2021 , respectively. About half of the margin improvement is coming from underlying loss ratio improvement, with the balance due to the favorable impact of lower year-over-year large structured transactions written and non-recurring unfavorable items in the quarter.
The policy acquisition cost ratio decreased 0.2 percentage points and 0.4
percentage points for the three and six months ended
The administrative expense ratio decreased 0.5 percentage points and 0.6 percentage points for the three and six months endedJune 30, 2021 , respectively, primarily due to higher net profit from our third-party claims administration business, ESIS, and the favorable impact of higher net premiums earned and continued expense management. The decrease was partially offset by the unfavorable impact of lower year-over-year large structured transactions written.
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Three Months Ended Six Months Ended
June 30 % Change June 30 % Change
(in millions of U.S. dollars, except for
percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20
Net premiums written $ 1,363 $ 1,327 2.6 % $ 2,461 $ 2,434 1.1 %
Net premiums earned 1,224 1,192 2.7 % 2,408 2,392 0.7 %
Losses and loss expenses 676 762 (11.2) % 1,495 1,445 3.5 %
Policy acquisition costs 245 231 6.0 % 492 476 3.5 %
Administrative expenses 67 66 1.4 % 127 134 (5.4) %
Underwriting income 236 133 76.6 % 294 337 (12.9) %
Net investment income 64 65 (0.1) % 129 131 (1.1) %
Other (income) expense (5) 1 NM (4) 3 NM
Amortization of purchased intangibles 3 3 - 6 6 -
Segment income $ 302 $ 194 55.9 % $ 421 $ 459 (8.2) %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 53.6 % 54.7 % (1.1) pts 53.4 % 54.9 % (1.5) pts
Catastrophe losses 5.3 % 9.2 % (3.9) pts 12.2 % 5.5 % 6.7 pts
Prior period development (3.7) % (0.1) % (3.6) pts (3.5) % - (3.5) pts
Loss and loss expense ratio 55.2 % 63.8 % (8.6) pts 62.1 % 60.4 % 1.7 pts
Policy acquisition cost ratio 20.0 % 19.4 % 0.6 pts 20.4 % 19.9 % 0.5 pts
Administrative expense ratio 5.5 % 5.6 % (0.1) pts 5.3 % 5.6 % (0.3) pts
Combined ratio 80.7 % 88.8 % (8.1) pts 87.8 % 85.9 % 1.9 pts
NM - not meaningful
Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended
June 30 June 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 61 $ 110 $ 301 $ 131
Favorable prior period development $ 44 $ 1 $ 84 $ -
Catastrophe losses through June 30, 2021 and 2020 were primarily from the
following events:
•2021: Winter storm losses and other severe weather-related events in the U.S.
•2020: Severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.
Premiums
Net premiums written increased$36 million , or 2.6 percent, for the three months endedJune 30, 2021 , primarily driven by strong renewal retention, from both rate and exposure increases, and new business in homeowners. Partially offsetting the increase was wildfire exposure-related cancellations in parts ofCalifornia . Net premiums written increased$27 million , or 1.1 percent, for the six months endedJune 30, 2021 , primarily driven by the factors described above, partially offset by the unfavorable impact of automobile return premiums and the unfavorable impact of reinstatement premiums related to 2021 winter storm losses. 49
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Net premiums earned increased
Combined Ratio The loss and loss expense ratio decreased 8.6 percentage points and increased 1.7 percentage points for the three and six months endedJune 30, 2021 , respectively, reflecting catastrophe losses and higher favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased 1.1 percentage points and 1.5 percentage points for the three and six months endedJune 30, 2021 , respectively, due to lower claim frequency in automobile and in homeowners from underlying loss ratio improvement.
The policy acquisition cost ratio increased 0.6 percentage points and 0.5
percentage points for the three and six months ended
The administrative expense ratio decreased 0.1 percentage points and 0.3
percentage points for the three and six months ended
The North America Agricultural Insurance segment comprises our North American based businesses that provide a variety of coverages in theU.S. andCanada including crop insurance, primarilyMultiple Peril Crop Insurance (MPCI) and crop-hail throughRain and Hail Insurance Service, Inc. (Rain and Hail ) as well as farm and ranch and specialty P&C commercial insurance products and services through our Chubb Agribusiness unit. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 512 $ 461 11.0 %$ 695 $ 618 12.4 % Net premiums earned 410 376 8.9 % 520 470 10.5 % Losses and loss expenses 331 313 5.8 % 416 378 10.0 % Policy acquisition costs 27 29 (7.1) % 39 40 (2.0) % Administrative expenses 3 3 - 6 7 (21.3) % Underwriting income 49 31 59.1 % 59 45 30.8 % Net investment income 8 7 3.9 % 15 16 (8.7) % Other (income) expense - 1 NM - 1 NM Amortization of purchased intangibles 6 6 - 13 13 - Segment income$ 51 $ 31 61.5 %$ 61 $ 47 27.9 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 79.7 % 81.5 % (1.8) pts 77.9 % 80.4 % (2.5) pts Catastrophe losses 1.0 % 1.6 % (0.6) pts 2.3 % 3.0 % (0.7) pts Prior period development - - - pts (0.2) % (3.0) % 2.8 pts Loss and loss expense ratio 80.7 % 83.1 % (2.4) pts 80.0 % 80.4 % (0.4) pts Policy acquisition cost ratio 6.7 % 7.8 % (1.1) pts 7.6 % 8.5 % (0.9) pts Administrative expense ratio 0.7 % 0.9 % (0.2) pts 1.1 % 1.5 % (0.4) pts Combined ratio 88.1 % 91.8 % (3.7) pts 88.7 % 90.4 % (1.7) pts NM - not meaningful 50
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Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended
June 30 June 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 4 $ 6 $ 12 $ 14
Favorable prior period development $ -
$ -
Catastrophe losses through
For the six months endedJune 30, 2020 , net favorable prior period development was$14 million which included$17 million of favorable incurred losses due to lower than expectedMPCI losses for the 2019 crop year, partially offset by a$3 million decrease in net premiums earned related to theMPCI profit and loss calculation formula.
Premiums
Net premiums written increased$51 million , or 11.0 percent, and$77 million , or 12.4 percent for the three and six months endedJune 30, 2021 , respectively, due to policy count growth and a modest increase in commodity price for winter wheat in ourMPCI business. In addition, our Chubb Agribusiness unit contributed to strong new business growth. Net premiums earned increased$34 million , or 8.9 percent, and$50 million , or 10.5 percent for the three and six months endedJune 30, 2021 , respectively, reflecting the growth in net premiums written described above. Combined Ratio The loss and loss expense ratio decreased 2.4 percentage points and 0.4 percentage points for the three and six months endedJune 30, 2021 , respectively, primarily due to higher premiums earned from Chubb Agribusiness, which has a lower loss ratio, lower catastrophe losses, the favorable year-over-year impact of our crop derivative, and lower underlying losses in Chubb Agribusiness. The decrease in the loss ratio for the six months endedJune 30, 2021 was mostly offset by lower favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased 1.8 percentage points and 2.5 percentage points for the three and six months endedJune 30, 2021 , respectively, due to the factors noted above. The policy acquisition cost ratio decreased 1.1 percentage points and 0.9 percentage point for the three and six months endedJune 30, 2021 , respectively, primarily due to a lower year-over-year amount of supplemental commissions in our Chubb Agribusiness unit.
The administrative expense ratio decreased 0.2 percentage points and 0.4
percentage points for the three and six months ended
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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 Six Months Ended June 30 % Change June 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 2,497 $ 2,021 23.6 %$ 5,387 $ 4,619 16.6 % Net premiums written - constant dollars 15.0 % 10.6 % Net premiums earned 2,579 2,194 17.6 % 5,057 4,501 12.4 % Losses and loss expenses 1,186 1,485 (20.1) % 2,449 2,743 (10.7) % Policy acquisition costs 699 624 12.0 % 1,367 1,266 8.0 % Administrative expenses 279 241 16.0 % 545 499 9.3 % Underwriting income (loss) 415 (156) NM 696 (7) NM Net investment income 149 121 22.2 % 290 266 8.7 % Other (income) expense 2 5 (66.9) % 3 9 (72.0) % Amortization of purchased intangibles 13 11 17.8 % 25 23 11.8 % Segment income (loss)$ 549 $ (51) NM$ 958 $ 227 NM
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 50.6 % 51.6 %
(1.0) pts 50.3 % 51.2 % (0.9) pts
Catastrophe losses 1.6 % 17.8 % (16.2) pts 1.8 % 10.7 % (8.9) pts
Prior period development (6.2) % (1.7) % (4.5) pts (3.7) % (0.9) % (2.8) pts
Loss and loss expense ratio 46.0 % 67.7 % (21.7) pts 48.4 % 61.0 % (12.6) pts
Policy acquisition cost ratio 27.1 % 28.4 % (1.3) pts 27.0 % 28.1 % (1.1) pts
Administrative expense ratio 10.8 % 11.0 % (0.2) pts 10.8 % 11.1 % (0.3) pts
Combined ratio 83.9 % 107.1 % (23.2) pts 86.2 % 100.2 % (14.0) pts
NM - not meaningful
Catastrophe Losses and Prior
Three Months Ended Six Months Ended
June 30 June 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Catastrophe losses $ 40 $ 399 $ 90 $ 489
Favorable prior period development $ 156 $ 36 $ 181 $ 40
Catastrophe losses through June 30, 2021 and 2020 were primarily from the
following events:
•2021: Winter storm losses in the U.S. and international weather-related events
•2020: COVID-19 pandemic claims of $373 million , storms in Australia , Australia
wildfires, and other international weather-related events
Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.
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Table of Contents Net Premiums Written by Region Three months ended June 30 (in millions ofU.S. dollars, except for percentages) 2021 2020 C$ C$ Q-21 vs. Region 2021 % of Total 2020 % of Total 2020 Q-21 vs. Q-20 Q-20 Europe, Middle East and Africa$ 1,188 48 %$ 879 43 %$ 946 35.2 % 25.6 % Latin America 451 18 % 389 19 % 418 16.3 % 8.2 % Asia 825 33 % 721 36 % 774 14.4 % 6.7 % Other (1) 33 1 % 32 2 % 35 1.9 % (6.5) % Net premiums written$ 2,497 100 %$ 2,021 100 %$ 2,173 23.6 % 15.0 % Six months ended June 30 (in millions ofU.S. dollars, except for percentages) 2021 2020 C$ C$Y-21 vs. Region 2021 % of Total 2020 % of Total 2020Y-21 vs.Y-20 Y-20 Europe, Middle East and Africa$ 2,739 51 %$ 2,156 47 %$ 2,307 27.1 % 18.7 % Latin America 988 18 % 972 21 % 975 1.7 % 1.4 % Asia 1,586 30 % 1,409 30 % 1,501 12.5 % 5.7 % Other (1) 74 1 % 82 2 % 87 (10.3) % (15.5) % Net premiums written$ 5,387 100 %$ 4,619 100 %$ 4,870 16.6 % 10.6 %
(1) Includes the international supplemental A&H business of
Premiums
Net premiums written increased$476 million and$768 million , or$324 million and$517 million on a constant-dollar basis, for the three and six months endedJune 30, 2021 , respectively, comprising: •Commercial P&C lines: Positive growth of 23.4 percent and 18.8 percent, respectively, across most regions and lines from new business and positive rate increases. •Consumer lines: Positive growth of 4.6 percent for the three months endedJune 30, 2021 across all regions and most lines, principally in specialty personal and homeowners lines. For the six months endedJune 30, 2021 , net premiums written in our consumer lines was relatively flat as growth in the second quarter noted above, was offset by declines in A&H in all regions, resulting from less travel volume and lower exposures, and in automobile lines inLatin America . Net premiums earned increased$385 million and$556 million , or$216 million and$305 million on a constant-dollar basis, for the three and six months endedJune 30, 2021 , respectively, reflecting the increase in net premiums written described above. Combined Ratio The loss and loss expense ratio decreased 21.7 percentage points and 12.6 percentage points for the three and six months endedJune 30, 2021 , respectively, primarily due to lower catastrophe losses and higher favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased 1.0 percentage points and 0.9 percentage points for the three and six months endedJune 30, 2021 , respectively, primarily due to margin improvements coming from underlying loss ratio improvement and lower losses in automobile lines inLatin America . The decrease was partially offset by lower premiums earned from A&H lines which have a lower loss ratio. The policy acquisition cost ratio decreased 1.3 percentage points and 1.1 percentage points for the three and six months endedJune 30, 2021 , respectively, primarily due to a change in the mix of business, including less premiums earned from A&H lines that have a higher acquisition cost ratio and higher premiums earned from commercial P&C lines, that have a lower acquisition cost ratio.
The administrative expense ratio decreased 0.2 percentage points and 0.3
percentage points for the three and six months ended
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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 Six Months Ended June 30 % Change June 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 274 $ 207 32.4 %$ 481 $ 425 13.1 % Net premiums written - constant dollars 30.7 % 11.7 % Net premiums earned 192 163 17.8 % 372 349 6.6 % Losses and loss expenses 110 73 47.3 % 230 160 43.0 % Policy acquisition costs 47 42 13.9 % 92 87 5.8 % Administrative expenses 10 9 6.1 % 18 19 (4.6) % Underwriting income 25 39 (32.3) % 32 83 (60.8) % Net investment income 81 60 33.4 % 151 129 16.7 % Other (income) expense - 1 NM - 1 NM Segment income$ 106 $ 98 8.5 %$ 183 $ 211 (13.2) %
Loss and loss expense ratio:
CAY loss ratio excluding catastrophe losses 50.9 % 46.8 % 4.1 pts 49.6 % 48.7 % 0.9 pts Catastrophe losses 5.2 % 7.9 % (2.7) pts 14.2 % 3.7 % 10.5 pts Prior period development 0.7 % (9.2) % 9.9 pts (2.1) % (6.4) % 4.3 pts Loss and loss expense ratio 56.8 % 45.5 % 11.3 pts 61.7 % 46.0 % 15.7
pts
Policy acquisition cost ratio 24.7 % 25.5 % (0.8) pts 24.8 % 25.0 % (0.2)
pts
Administrative expense ratio 5.1 % 5.6 % (0.5) pts 4.8 % 5.3 % (0.5) pts Combined ratio 86.6 % 76.6 % 10.0 pts 91.3 % 76.3 % 15.0 pts NM - not meaningful
Catastrophe Losses and Prior
Three Months Ended Six Months Ended
June 30 June 30
(in millions of U.S dollars) 2021 2020 2021 2020
Catastrophe losses $ 10 $ 13 $ 50 $ 13
Favorable prior period development $ - $ 16 $ 7 $ 23
Catastrophe losses through June 30, 2021 and 2020 were primarily from the
following events:
•2021: Winter storm losses in the U.S.
•2020: COVID-19 pandemic claims of $10 million and severe weather-related events
in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.
Premiums
Net premiums written increased$67 million and$56 million for the three and six months endedJune 30, 2021 , respectively, primarily from new business written, including a large treaty bound in the quarter, and positive rate increases in property, casualty, and financial lines.
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Table of Contents Net premiums earned increased$29 million and$23 million , for the three and six months endedJune 30, 2021 , respectively, reflecting the increase in net premiums written described above. Combined Ratio The loss and loss expense ratio increased 11.3 percentage points for the three months endedJune 30, 2021 , primarily due to lower favorable prior period development. The loss and loss expense ratio increased 15.7 percentage points for the six months endedJune 30, 2021 , primarily due to higher catastrophe losses and lower favorable prior period development. The CAY loss ratio excluding catastrophe losses increased 4.1 percentage points and 0.9 percentage points for the three and six months endedJune 30, 2021 , respectively, primarily due to a shift in the mix of business towards lines which have a higher loss ratio.
The policy acquisition cost ratio decreased 0.8 percentage points and 0.2
percentage points for the three and six months ended
The administrative expense ratio decreased 0.5 percentage points for both the three and six months endedJune 30, 2021 , primarily from the favorable impact of higher net premiums earned. Life InsuranceThe Life Insurance segment comprises Chubb's international life operations,Chubb Tempest Life Re (Chubb Life Re ), and the North American supplemental A&H and life business ofCombined Insurance . We assess the performance of our life business based on Life Insurance underwriting income, which includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions ofU.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written$ 615 $ 619 (0.7) %$ 1,235 $ 1,264 (2.3) % Net premiums written - constant dollars (4.0) % (4.3) % Net premiums earned 605 608 (0.4) % 1,200 1,239 (3.1) % Losses and loss expenses 185 171 8.5 % 383 373 3.0 % Policy benefits 170 183 (7.2) % 333 368 (9.8) % Policy acquisition costs 191 196 (3.0) % 370 376 (1.8) % Administrative expenses 83 82 2.3 % 165 158 4.9 % Net investment income 101 95 6.5 % 199 190 4.9 % Life Insurance underwriting income 77 71 8.6 % 148 154 (3.8) % Other (income) expense (26) (17) 45.8 % (60) (29) 102.9 % Amortization of purchased intangibles 1 1 - 2 2 - Segment income$ 102 $ 87 16.1 %$ 206 $ 181 13.6 % Premiums Net premiums written decreased$4 million and$29 million , or$25 million and$56 million on a constant-dollar basis for the three and six months endedJune 30, 2021 , respectively. For our International Life operations, net premiums written increased 11.6 percent and 10.7 percent for the three and six months endedJune 30, 2021 , respectively, principally inAsia , from new business inTaiwan ,Vietnam andThailand . This growth was more than offset by a decline in ourNorth America Combined Insurance business of 5.9 percent and 7.7 percent for the three and six months endedJune 30, 2021 , respectively, due to the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales. There was also a decline in our life reinsurance business which continues to decline as no new business is currently being written.
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Deposits
The following table presents deposits collected on universal life and investment
contracts:
Three Months Ended Six Months Ended
June 30 % Change June 30 % Change
C$ C$
(in millions of U.S. dollars, Q-21 vs. Q-21 vs. Y-21 vs. Y-21 vs.
except for percentages) 2021 2020 C$ 2020 Q-20 Q-20 2021 2020 C$ 2020 Y-20 Y-20
Deposits collected on
Universal life and investment
contracts $ 605 $ 309 $ 323 95.8 % 86.9 % $ 1,156 $ 752 $ 794 53.7 % 45.7 %
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 $296 million and $404 million for the three and six months
ended June 30, 2021 , respectively, primarily due to successful sales in broker
and bank channels in Taiwan.
Life Insurance underwriting income and Segment income
Life Insurance underwriting income increased $6 million for the three months
ended June 30, 2021 , primarily due to higher net investment income. Life
Insurance underwriting income decreased $6 million for the six months ended June
30, 2021 , primarily due to a one-time employee related benefit of $7 million in
the prior year. Segment income increased $15 million and $25 million for the
three and six months ended June 30, 2021 , respectively, primarily due to our
share of net income from our investment in Huatai , our partially-owned insurance
entity in China .
Corporate
Corporate results primarily include the results of our non-insurance companies,
income and expenses not attributable to reportable segments and loss and loss
expenses of asbestos and environmental (A&E) liabilities and certain other
non-A&E run-off exposures.
Three Months Ended Six Months Ended
June 30 % Change June 30 % Change
(in millions of U.S. dollars, except for
percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20
Losses and loss expenses $ 89 $ 276 (67.6) % $ 98 $ 287 (65.9) %
Administrative expenses 88 77 15.8 % 159 143 10.9 %
Underwriting loss 177 353 (49.6) % 257 430 (40.3) %
Net investment income (loss) (15) (22) (33.6) % (32) (46) (29.7) %
Interest expense 122 128 (4.9) % 244 260 (6.3) %
Net realized gains (losses) (36) 31 NM 852 (925) NM
Other (income) expense (708) 109 NM (1,123) 132 NM
Amortization of purchased intangibles 50 51 (2.4) % 99 101 (2.7) %
Income tax expense (benefit) 317 (62) NM 655 153 NM
Net income (loss) $ (9) $ (570) NM $ 688 $ (2,047) NM
NM - not meaningful
Losses and loss expenses primarily includes unfavorable prior period development for molestation claims.
Administrative expenses increased$11 million and$16 million for the three and six months endedJune 30, 2021 , respectively, primarily due to higher employee-related expenses. The increase for six months also includes increased spending to support digital growth initiatives.
Refer to the respective sections that follow for a discussion of Net realized gains (losses), Net investment income (loss), Amortization of purchased intangibles, and Income tax expense (benefit).
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Net Realized and Unrealized Gains (Losses)
We take a long-term view with our investment strategy, and our investment
managers manage our investment portfolio to maximize total return within certain
specific guidelines designed to minimize risk. The majority of our investment
portfolio is available for sale and reported at fair value. Our held to maturity
investment portfolio is reported at amortized cost, net of valuation allowance.
The effect of market movements on our fixed maturities portfolio impacts Net
income (through Net realized gains (losses)) when securities are sold, when we
write down an asset, or when we record a change to the valuation allowance for
expected credit losses. For a further discussion related to how we assess the
valuation allowance for expected credit losses and the related impact on Net
income, refer to Note 1 e) to the Consolidated Financial Statements in our 2020
Form 10-K. Additionally, Net income is impacted through the reporting of changes
in the fair value of equity securities, private equity funds where we own less
than three percent, and derivatives, including financial futures, options,
swaps, and GLB reinsurance. Changes in unrealized appreciation and depreciation
on available for sale securities, resulting from the revaluation of securities
held, changes in cumulative foreign currency translation adjustment, and
unrealized postretirement benefit obligations liability adjustment, are reported
as separate components of Accumulated other comprehensive income in
Shareholders' equity in the Consolidated balance sheets.
The following tables presents our net realized and unrealized gains (losses):
Three Months Ended June 30
2021 2020
Net Net Net Net
Realized Unrealized Realized Unrealized
Gains Gains Net Gains Gains Net
(in millions of U.S. dollars) (Losses) (Losses) Impact (Losses) (Losses) Impact
Fixed maturities $ 12 $ 694
(91) - (91) 14 - 14
Public equity
Sales 45 - 45 187 - 187
Mark-to-market 105 - 105 (39) - (39)
Private equity (less than 3 percent
ownership)
Mark-to-market 62 - 62 (107) - (107)
Total investment portfolio 133 694 827 22 3,281 3,303
Variable annuity reinsurance derivative
transactions, net of applicable hedges (72) - (72) 110 - 110
Other derivatives 3 - 3 (1) - (1)
Foreign exchange (97) 308 211 (61) 445 384
Other - (9) (9) (40) (22) (62)
Net gains (losses), pre-tax $ (33) $ 993 $ 960 $ 30 $ 3,704 $ 3,734
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Six Months Ended June 30
2021 2020
Net Net Net Net
Realized Unrealized Realized Unrealized
Gains Gains Net Gains Gains Net
(in millions of U.S. dollars) (Losses) (Losses) Impact (Losses) (Losses) Impact
Fixed maturities$ 36 $ (1,623)
18 - 18 29 - 29
Public equity
Sales 90 - 90 163 - 163
Mark-to-market 427 - 427 (44) - (44)
Private equity (less than 3 percent
ownership)
Mark-to-market 100 - 100 (102) - (102)
Total investment portfolio 671 (1,623) (952) (306) 1,121 815
Variable annuity reinsurance derivative
transactions, net of applicable hedges 203 - 203 (450) - (450)
Other derivatives 2 - 2 (3) - (3)
Foreign exchange (21) 330 309 (129) (414) (543)
Other (1) (37) (38) (40) (36) (76)
Net gains (losses), pre-tax $ 854 $ (1,330) $ (476) $ (928) $ 671 $ (257)
Pre-tax net gains of $827 million in our investment portfolio for the three
months ended June 30, 2021 were principally the result of a decline in interest
rates and positive equity returns. Pre-tax net losses of $952 million in our
investment portfolio for the six months ended June 30, 2021 were principally the
result of an increase in interest rates, partially offset by positive equity
returns.
The variable annuity reinsurance derivative transactions consist of changes in
the fair value of GLB liabilities and gains or losses on other derivative
instruments we maintain that decrease in fair value when the S&P 500 index
increases. The variable annuity reinsurance derivative transactions resulted in
realized losses of $72 million for the three months ended June 30, 2021 ,
reflecting principally a net realized loss of $64 million related to these other
derivatives. The fair value of the GLB liabilities remained relatively flat for
the three months ended June 30, 2021 , as the impact of higher global equity
markets was offset by lower interest rates. For the six months ended June 30,
2021 , the variable annuity reinsurance derivative transactions resulted in
realized gains of $203 million reflecting a net gain of $311 million principally
related to a decrease in the fair value of the GLB liabilities due to higher
interest rates and higher global equity markets, partially offset by a net
realized loss of $108 million related to these other derivatives.
For the three months ended June 30, 2020 , the variable annuity reinsurance
derivative transactions resulted in realized gains of $110 million , reflecting a
net decrease in the fair value of the GLB liabilities of $213 million due to
higher global equity markets, partially offset by a net realized loss of $103
million related to these other derivatives. For the six months ended June 30,
2020 , the variable annuity reinsurance derivative transactions resulted in
realized losses of $450 million reflecting a net increase in the fair value of
the GLB liabilities of $472 million due to lower interest rates and lower global
equity markets, partially offset by a net realized gain of $22 million related
to these other derivatives.
Effective Income Tax Rate
Our effective tax rate (ETR) reflects a mix of income or losses in jurisdictions
with a wide range of tax rates, permanent differences between U.S. GAAP and
local tax laws, and the impact of discrete items. A change in the geographic mix
of earnings could impact our effective tax rate.
For the three and six months ended June 30, 2021 our ETR was 12.3 percent and
12.5 percent, respectively. The ETRs were impacted by a higher percentage of
income generated in lower tax jurisdictions and discrete tax benefits compared
to 15.8 percent and 206.8 percent for the three and six months ended June 30,
2020 , respectively. In addition, the ETR for the prior period was impacted by
the high level of catastrophe losses, principally COVID-19.
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Non-GAAP Reconciliation
In presenting our results, we included and discussed certain non-GAAP measures.
These non-GAAP measures, which may be defined differently by other companies,
are important for an understanding of our overall results of operations and
financial condition. However, they should not be viewed as a substitute for
measures determined in accordance with generally accepted accounting principles
(GAAP).
Book value per common share, is shareholders' equity divided by the shares
outstanding. Tangible book value per common share, is shareholders' equity less
goodwill and other intangible assets, net of tax, divided by the shares
outstanding. We believe that goodwill and other intangible assets are not
indicative of our underlying insurance results or trends and make book value
comparisons to less acquisitive peer companies less meaningful. The calculation
of tangible book value per share does not consider the embedded goodwill
attributable to our investments in partially-owned insurance companies until we
attain majority ownership and consolidate.
We provide financial measures, including net premiums written, net premiums
earned, and underwriting income on a constant-dollar basis. We believe it is
useful to evaluate the trends in our results exclusive of the effect of
fluctuations in exchange rates between the U.S. dollar and the currencies in
which our international business is transacted, as these exchange rates could
fluctuate significantly between periods and distort the analysis of trends. The
impact is determined by assuming constant foreign exchange rates between periods
by translating prior period results using the same local currency exchange rates
as the comparable current period.
P&C performance metrics comprise consolidated operating results (including
Corporate) and exclude the operating results of the Life Insurance segment. We
believe that these measures are useful and meaningful to investors as they are
used by management to assess the company's P&C operations which are the most
economically similar. We exclude the Life Insurance segment because the results
of this business do not always correlate with the results of our P&C operations.
P&C combined ratio is the sum of the loss and loss expense ratio, policy
acquisition cost ratio and the administrative expense ratio excluding the life
business and including the realized gains and losses on the crop derivatives.
These derivatives were purchased to provide economic benefit, in a manner
similar to reinsurance protection, in the event that a significant decline in
commodity pricing impacts underwriting results. We view gains and losses on
these derivatives as part of the results of our underwriting operations.
CAY P&C combined ratio excluding catastrophe losses (CATs) excludes CATs and
prior period development (PPD) from the P&C combined ratio. We exclude CATs as
they are not predictable as to timing and amount and PPD as these unexpected
loss developments on historical reserves are not indicative of our current
underwriting performance. The combined ratio numerator is adjusted to exclude
CATs, net premiums earned adjustments on PPD, prior period expense adjustments
and reinstatement premiums on PPD, and the denominator is adjusted to exclude
net premiums earned adjustments on PPD and reinstatement premiums on CATs and
PPD. In periods where there are adjustments on loss sensitive policies, these
adjustments are excluded from PPD and net premiums earned when calculating the
ratios. We believe this measure provides a better evaluation of our underwriting
performance and enhances the understanding of the trends in our P&C business
that may be obscured by these items. This measure is commonly reported among our
peer companies and allows for a better comparison.
Reinstatement premiums are additional premiums paid on certain reinsurance
agreements in order to reinstate coverage that had been exhausted by loss
occurrences. The reinstatement premium amount is typically a pro rata portion of
the original ceded premium paid based on how much of the reinsurance limit had
been exhausted.
Net premiums earned adjustments within PPD are adjustments to the initial
premium earned on retrospectively rated policies based on actual claim
experience that develops after the policy period ends. The premium adjustments
correlate to the prior period loss development on these same policies and are
fully earned in the period the adjustments are recorded.
Prior period expense adjustments typically relate to adjustable commission
reserves or policyholder dividend reserves based on actual claim experience that
develops after the policy period ends. The expense adjustments correlate to the
prior period loss development on these same policies.
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Table of Contents The following tables present the calculation of combined ratio, as reported for each segment to P&C combined ratio, adjusted for catastrophe losses (CATs) and PPD: Three Months Ended June 30, 2021 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$ 2,426 $ 676 $ 331$ 1,186 $ 110 $ 89 $ 4,818 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (165) (61) (4) (40) (10) - (280) Reinstatement premiums collected (expensed) on catastrophe losses - 7 - - 1 - 8 Catastrophe losses, gross of related adjustments (165) (68) (4) (40) (11) - (288) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 156 44 - 156 - (88) 268 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 - - - - - 11 PPD reinstatement premiums - unfavorable (favorable) 6 1 - 7 (2) - 12 PPD, gross of related adjustments - favorable (unfavorable) 173 45 - 163 (2) (88) 291 CAY loss and loss expense ex CATs B$ 2,434 $ 653 $ 327$ 1,309 $ 97 $ 1 $ 4,821 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 734$ 312 $ 30$ 978 $ 57 $ 88 $ 2,199 Expense adjustments - favorable (unfavorable) - - - - - - - Policy acquisition costs and administrative expenses, adjusted D $ 734$ 312 $ 30$ 978 $ 57 $ 88 $ 2,199 Denominator Net premiums earned E$ 3,803 $ 1,224 $ 410$ 2,579 $ 192 $ 8,208 Reinstatement premiums (collected) expensed on catastrophe losses - (7) - - (1) (8) Net premiums earned adjustments on PPD - unfavorable (favorable) 11 - - - - 11 PPD reinstatement premiums - unfavorable (favorable) 6 1 - 7 (2) 12 Net premiums earned excluding adjustments F$ 3,820 $ 1,218 $ 410$ 2,586 $ 189 $ 8,223 P&C Combined ratio Loss and loss expense ratio A/E 63.8 % 55.2 % 80.7 % 46.0 % 56.8 % 58.7 % Policy acquisition cost and administrative expense ratioC/E 19.3 % 25.5 % 7.4 % 37.9 % 29.8 % 26.8 % P&C Combined ratio 83.1 % 80.7 % 88.1 % 83.9 % 86.6 % 85.5 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.7 % 53.6 % 79.7 % 50.6 % 50.9 % 58.6 % Policy acquisition cost and administrative expense ratio, adjusted D/F 19.2 % 25.6 % 7.4 % 37.8 % 30.3 % 26.8 % CAY P&C Combined ratio ex CATs 82.9 % 79.2 % 87.1 % 88.4 % 81.2 % 85.4 % Combined ratio Combined ratio 85.5 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 85.5 %
Note: The ratios above are calculated using whole
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Table of Contents Three Months Ended June 30, 2020 North America North America (in millions of U.S. dollars Commercial P&C
Personal P&C North America Overseas General except for ratios) Insurance InsuranceAgricultural Insurance Insurance Global Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 3,498 $ 762 $ 313$ 1,485 $ 73$ 276 $ 6,407 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (1,273) (110) (6) (399) (13) - (1,801) Reinstatement premiums collected (expensed) on catastrophe losses (3) (1) - (16) - - (20) Catastrophe losses, gross of related adjustments (1,270) (109) (6) (383) (13) - (1,781) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 146 1 - 36 16 (274) (75) Net premiums earned adjustments on PPD - unfavorable (favorable) 4 - - - - - 4 Expense adjustments - unfavorable (favorable) 1 - - - - - 1 PPD reinstatement premiums - unfavorable (favorable) - - - - (1) - (1) PPD, gross of related adjustments - favorable (unfavorable) 151 1 - 36 15 (274) (71) CAY loss and loss expense ex CATs B$ 2,379 $ 654 $ 307$ 1,138 $ 75$ 2 $ 4,555 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 720$ 297 $ 32$ 865 $ 51$ 77 $ 2,042 Expense adjustments - favorable (unfavorable) (1) - - - - - (1) Policy acquisition costs and administrative expenses, adjusted D $ 719$ 297 $ 32$ 865 $ 51$ 77 $ 2,041 Denominator Net premiums earned E$ 3,595 $ 1,192 $ 376$ 2,194 $ 163$ 7,520 Reinstatement premiums (collected) expensed on catastrophe losses 3 1 - 16 - 20 Net premiums earned adjustments on PPD - unfavorable (favorable) 4 - - - - 4 PPD reinstatement premiums - unfavorable (favorable) - - - - (1) (1) Net premiums earned excluding adjustments F$ 3,602 $ 1,193 $ 376$ 2,210 $ 162$ 7,543 P&C Combined ratio Loss and loss expense ratio A/E 97.3 % 63.8 % 83.1 % 67.7 % 45.5 % 85.2 % Policy acquisition cost and administrative expense ratioC/E 20.0 % 25.0 % 8.7 % 39.4 % 31.1 % 27.1 % P&C Combined ratio 117.3 % 88.8 % 91.8 % 107.1 % 76.6 % 112.3 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 66.1 % 54.7 % 81.5 % 51.6 % 46.8 % 60.4 % Policy acquisition cost and administrative expense ratio, adjusted D/F 19.9 % 24.9 % 8.7 % 39.1 % 31.4 % 27.0 % CAY P&C Combined ratio ex CATs 86.0 % 79.6 % 90.2 % 90.7 % 78.2 % 87.4 % Combined ratio Combined ratio 112.3 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 112.3 %
Note: The ratios above are calculated using whole
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Table of Contents Six Months Ended June 30, 2021 North America North America (in millions of U.S. dollars except Commercial P&C Personal P&C North America Overseas General for ratios) Insurance InsuranceAgricultural Insurance Insurance Global Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 4,986 $ 1,495 $ 416$ 2,449 $ 230$ 98 $ 9,674 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (527) (301) (12) (90) (50) - (980) Reinstatement premiums collected (expensed) on catastrophe losses - (16) - - 6 - (10) Catastrophe losses, gross of related adjustments (527) (285) (12) (90) (56) - (970) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 283 84 2 181 7 (97) 460 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 - (2) - - - 9 Expense adjustments - unfavorable (favorable) 3 - - - - - 3 PPD reinstatement premiums - unfavorable (favorable) 6 1 - 7 1 - 15 PPD, gross of related adjustments - favorable (unfavorable) 303 85 - 188 8 (97) 487 CAY loss and loss expense ex CATs B$ 4,762 $ 1,295 $ 404$ 2,547 $ 182$ 1 $ 9,191 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C$ 1,502 $ 619 $ 45$ 1,912 $ 110$ 159 $ 4,347 Expense adjustments - favorable (unfavorable) (3) - - - - - (3) Policy acquisition costs and administrative expenses, adjusted D$ 1,499 $ 619 $ 45$ 1,912 $ 110$ 159 $ 4,344 Denominator Net premiums earned E$ 7,477 $ 2,408 $ 520$ 5,057 $ 372$ 15,834 Reinstatement premiums (collected) expensed on catastrophe losses - 16 - - (6) 10 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 - (2) - - 9 PPD reinstatement premiums - unfavorable (favorable) 6 1 - 7 1 15 Net premiums earned excluding adjustments F$ 7,494 $ 2,425 $ 518$ 5,064 $ 367$ 15,868 P&C Combined ratio Loss and loss expense ratio A/E 66.7 % 62.1 % 80.0 % 48.4 % 61.7 % 61.1 % Policy acquisition cost and administrative expense ratioC/E 20.1 % 25.7 % 8.7 % 37.8 % 29.6 % 27.5 % P&C Combined ratio 86.8 % 87.8 % 88.7 % 86.2 % 91.3 % 88.6 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.6 % 53.4 % 77.9 % 50.3 % 49.6 % 57.9 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.0 % 25.5 % 8.7 % 37.8 % 30.0 % 27.4 % CAY P&C Combined ratio ex CATs 83.6 % 78.9 % 86.6 % 88.1 % 79.6 % 85.3 % Combined ratio Combined ratio 88.6 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 88.6 %
Note: The ratios above are calculated using whole
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Table of Contents Six Months Ended June 30, 2020 North America North America (in millions of U.S. dollars except Commercial P&C Personal P&C North America Overseas General for ratios) Insurance InsuranceAgricultural Insurance Insurance Global Reinsurance Corporate Total P&C Numerator Losses and loss expenses A$ 5,679 $ 1,445 $ 378$ 2,743 $ 160$ 287 $ 10,692 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (1,391) (131) (14) (489) (13) - (2,038) Reinstatement premiums collected (expensed) on catastrophe losses (3) (1) - (16) - - (20) Catastrophe losses, gross of related adjustments (1,388) (130) (14) (473) (13) - (2,018) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 251 - 14 40 23 (285) 43 Net premiums earned adjustments on PPD - unfavorable (favorable) 4 - 3 - - - 7 PPD reinstatement premiums - unfavorable (favorable) - - - - (1) - (1) PPD, gross of related adjustments - favorable (unfavorable) 255 - 17 40 22 (285) 49 CAY loss and loss expense ex CATs B$ 4,546 $ 1,315 $ 381$ 2,310 $ 169$ 2 $ 8,723 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C$ 1,471 $ 610 $ 47$ 1,765 $ 106$ 143 $ 4,142 Expense adjustments - favorable (unfavorable) - - - - - - - Policy acquisition costs and administrative expenses, adjusted D$ 1,471 $ 610 $ 47$ 1,765 $ 106$ 143 $ 4,142 Denominator Net premiums earned E$ 6,971 $ 2,392 $ 470$ 4,501 $ 349$ 14,683 Reinstatement premiums (collected) expensed on catastrophe losses 3 1 - 16 - 20 Net premiums earned adjustments on PPD - unfavorable (favorable) 4 - 3 - - 7 PPD reinstatement premiums - unfavorable (favorable) - - - - (1) (1) Net premiums earned excluding adjustments F$ 6,978 $ 2,393 $ 473$ 4,517 $ 348$ 14,709 P&C Combined ratio Loss and loss expense ratio A/E 81.5 % 60.4 % 80.4 % 61.0 % 46.0 % 72.8 % Policy acquisition cost and administrative expense ratioC/E 21.1 % 25.5 % 10.0 % 39.2 % 30.3 % 28.2 % P&C Combined ratio 102.6 % 85.9 % 90.4 % 100.2 % 76.3 % 101.0 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 65.2 % 54.9 % 80.4 % 51.2 % 48.7 % 59.3 % Policy acquisition cost and administrative expense ratio, adjusted D/F 21.0 % 25.5 % 10.0 % 39.0 % 30.5 % 28.2 % CAY P&C Combined ratio ex CATs 86.2 % 80.4 % 90.4 % 90.2 % 79.2 % 87.5 % Combined ratio Combined ratio 101.0 % Add: impact of gains and losses on crop derivatives - P&C Combined ratio 101.0 %
Note: The ratios above are calculated using whole
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Amortization of purchased intangibles and Other amortization
Amortization expense of purchased intangibles was $73 million and $145 million
for the three and six months ended June 30, 2021 , respectively, and principally
relates to the Chubb Corp acquisition.
The following table presents, as of June 30, 2021 , the estimated pre-tax
amortization expense (benefit) of purchased intangibles, at current foreign
currency exchange rates, for the third and fourth quarters of 2021 and the next
five years:
Associated with the Chubb Corp Acquisition
Fair value
For the Years Ending Agency adjustment on Total
December 31 distribution Unpaid losses Amortization of
(in millions of U.S. relationships and and loss Other intangible purchased
dollars) renewal rights expenses Total (1) assets (2) intangibles
Third quarter of 2021 $ 54 $ (5) $ 49 $ 23 $ 72
Fourth quarter of 2021 54 (5) 49 23 72
2022 198 (15) 183 103 286
2023 179 (7) 172 97 269
2024 161 (6) 155 91 246
2025 145 (6) 139 90 229
2026 131 (5) 126 87 213
Total $ 922 $ (49) $ 873 $ 514 $ 1,387
(1)Recorded in Corporate.
(2)Recorded in applicable segment(s) that acquired the intangible assets.
Reduction of deferred tax liability associated with intangible assets related to
Other intangible assets (excluding the fair value adjustment on Unpaid losses
and loss expense)
At June 30, 2021 , the deferred tax liability associated with Other intangible
assets (excluding the fair value adjustment on Unpaid losses and loss expense)
was $1,270 million .
The following table presents, as of June 30, 2021 , the expected reduction of the
deferred tax liability associated with Other intangible assets (which reduces as
agency distribution relationships and renewal rights, and other intangible
assets amortize), at current foreign currency exchange rates, for the third and
fourth quarters of 2021 and for the next five years:
Reduction to
deferred tax
liability
For the Years Ending December 31 associated with
(in millions of U.S. dollars) intangible assets
Third quarter of 2021 $ 17
Fourth quarter of 2021 17
2022 67
2023 61
2024 56
2025 52
2026 49
Total $ 319
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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 atJune 30, 2021 , the expected amortization expense of the fair value adjustment on acquired invested assets, at current foreign currency exchange rates, and the expected amortization benefit from the fair value adjustment on assumed long-term debt for the third and fourth quarters of 2021 and for the next five years: Amortization
(expense) benefit of the fair
value adjustment on
For the Years Ending December 31 Acquired invested Assumed long-term
(in millions of U.S. dollars) assets (1) debt (2)
Third quarter of 2021 $ (25) $ 5
Fourth quarter of 2021 (22) 6
2022 (117) 21
2023 - 21
2024 - 21
2025 - 21
2026 - 21
Total $ (164) $ 116
(1)Recorded as a reduction to Net investment income in the Consolidated
statements of operations.
(2)Recorded as a reduction to Interest expense in the Consolidated statements of
operations.
The estimate of amortization expense of the fair value adjustment on acquired
invested assets could vary materially based on current market conditions, bond
calls, overall duration of the acquired investment portfolio, and foreign
exchange.
Net Investment Income
Three Months Ended Six Months Ended
June 30 June 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Fixed maturities (1) $ 836 $ 810 $ 1,676 $ 1,661
Short-term investments 8 11 17 28
Other interest income 3 3 5 12
Equity securities 41 24 77 33
Other investments 43 21 66 41
Gross investment income (1) 931 869 1,841 1,775
Investment expenses (47) (42) (94) (87)
Net investment income (1) $ 884 $ 827 $ 1,747 $ 1,688
(1) Includes amortization expense related to
fair value adjustment of acquired invested
assets related to the Chubb Corp acquisition $ (22) $ (30) $ (48) $ (62)
Net investment income is influenced by a number of factors including the amounts
and timing of inward and outward cash flows, the level of interest rates, and
changes in overall asset allocation. Net investment income increased 7.0 percent
and 3.5 percent for the three and six months ended June 30, 2021 , respectively,
primarily due to higher income received from our private equity partnerships and
increased dividends on public equities. Investment income for the year was
tempered by lower reinvestment rates on new and reinvested assets.
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For private equities where we own less than three percent, investment income is
included within Net investment income in the table above. For private equities
where we own more than three percent, investment income is included within Other
income (expense) in the Consolidated statements of operations. Excluded from Net
investment income is the mark-to-market movement for private equities, which is
recorded within either Other income (expense) or Net realized gains (losses)
based on our percentage of ownership. The total mark-to-market movement for
private equities excluded from Net investment income was as follows:
Three Months Ended Six Months Ended
June 30 June 30
(in millions of U.S. dollars) 2021 2020 2021 2020
Total mark-to-market gain (loss) on private
equity, pre-tax $ 736 $ (200) $ 1,174 $ (207)
Investments
Our investment portfolio is invested primarily in publicly traded, investment
grade, fixed income securities with an average credit quality of A/Aa as rated
by the independent investment rating services Standard and Poor's (S&P)/Moody's
Investors Service (Moody's). The portfolio is externally managed by independent,
professional investment managers and is broadly diversified across geographies,
sectors, and issuers. Other investments principally comprise direct investments,
investment funds, and limited partnerships. We hold no collateralized debt
obligations in our investment portfolio, and we provide no credit default
protection. We have long-standing global credit limits for our entire portfolio
across the organization. Exposures are aggregated, monitored, and actively
managed by our Global Credit Committee, comprising senior executives, including
our Chief Financial Officer, our Chief Risk Officer , our Chief Investment
Officer, and our Treasurer. We also have well-established, strict contractual
investment rules requiring managers to maintain highly diversified exposures to
individual issuers and closely monitor investment manager compliance with
portfolio guidelines.
The average duration of our fixed income securities, including the effect of
options and swaps, was 4.2 years and 4.0 years at June 30, 2021 and December 31,
2020 , respectively. We estimate that a 100 basis point (bps) increase in
interest rates would reduce the valuation of our fixed income portfolio by
approximately $4.5 billion at June 30, 2021 .
The following table shows the fair value and cost/amortized cost, net of
valuation allowance, of our invested assets:
June 30, 2021 December 31, 2020
Cost/ Cost/
Fair Amortized Fair Amortized
(in millions of U.S. dollars) Value Cost, Net Value Cost, Net
Fixed maturities available for sale $ 92,163 $ 88,254 $ 90,699 $ 85,168
Fixed maturities held to maturity 11,343 10,673 12,510 11,653
Short-term investments 4,470 4,471 4,345 4,349
Fixed income securities 107,976 103,398 107,554 101,170
Equity securities 4,607 4,607 4,027 4,027
Other investments 9,457 9,457 7,945 7,945
Total investments $ 122,040 $ 117,462 $ 119,526 $ 113,142
The fair value of our total investments increased $2.5 billion during the six
months ended June 30, 2021 due to strong operating cash flow, positive equity
market returns, and favorable foreign currency movement. This increase was
partially offset by unrealized losses on fixed maturities, payment of dividends
on our Common Shares, and share repurchases.
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Table of Contents The following tables present the fair value of our fixed maturities and short-term investments atJune 30, 2021 andDecember 31, 2020 . The first table lists investments according to type and second according to S&P credit rating: June 30, 2021 December 31, 2020 Fair Fair (in millions of U.S. dollars, except for percentages) Value % of Total Value % of Total U.S. Treasury / Agency$ 3,560 3 %$ 4,122 4 % Corporate and asset-backed securities 39,889 37 % 38,769 36 % Mortgage-backed securities 21,445 20 % 20,616 19 % Municipal 10,834 10 % 11,943 11 % Non-U.S. 27,778 26 % 27,759 26 % Short-term investments 4,470 4 % 4,345 4 % Total$ 107,976 100 %$ 107,554 100 % AAA$ 16,274 15 %$ 15,622 15 % AA 35,412 33 % 36,125 33 % A 19,720 18 % 19,712 18 % BBB 17,479 16 % 17,542 16 % BB 9,495 9 % 9,699 9 % B 9,004 8 % 8,267 8 % Other 592 1 % 587 1 % Total$ 107,976 100 %$ 107,554 100 % Corporate and asset-backed securities The following table presents our 10 largest global exposures to corporate bonds by fair value atJune 30, 2021 : (in millions of U.S. dollars) Fair Value Wells Fargo & Co$ 726 Bank of America Corp 657 JP Morgan Chase & Co 615 Comcast Corp 507 Verizon Communications Inc 489 Morgan Stanley 474 AT&T Inc 430 Citigroup Inc 419 HSBC Holdings Plc 393 Goldman Sachs Group Inc 379 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 June 30, 2021 BB and (in millions of U.S. dollars) AAA AA A BBB below Total Total Agency residential mortgage-backed securities (RMBS)$ 99 $ 17,605 $ - $ - $ -$ 17,704 $ 17,033 Non-agency RMBS 236 38 72 26 8 380 379 Commercial mortgage-backed securities 2,915 269 155 16 6 3,361 3,220 Total mortgage-backed securities$ 3,250 $ 17,912 $ 227 $ 42 $ 14 $ 21,445 $ 20,632 67
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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 48 percent of our holdings are ratedAAA or guaranteed by governments or quasi-government agencies. Within the context of these investment portfolios, our government and corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA-two percent, A-one percent, BBB-0.5 percent of the total portfolio) and are monitored daily via an internal compliance system. We manage our indirect exposure using the same credit rating based investment approach. Accordingly, we do not believe our indirect exposure is material. The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. government securities atJune 30, 2021 : (in millions of U.S. dollars) Fair Value Amortized Cost, Net Republic of Korea$ 1,050 $ 977 Canada 1,035 1,015 United Kingdom 824 805 Province of Ontario 714 692 Kingdom of Thailand 632 577 United Mexican States 571 571 Federative Republic of Brazil 555 559 Province of Quebec 470 450 Commonwealth of Australia 437 409 Socialist Republic of Vietnam 426 294 Other Non-U.S. Government Securities 5,734 5,503 Total$ 12,448 $ 11,852 68
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The following table summarizes the fair value and amortized cost, net of
valuation allowance, of our non-
(in millions of U.S. dollars) Fair Value Amortized
Cost, Net
United Kingdom $ 2,558 $ 2,446
Canada 1,840 1,767
France 1,242 1,185
United States (1) 1,161 1,111
Australia 907 862
Japan 691 671
Germany 608 582
Switzerland 592 559
Netherlands 539 510
China 481 471
Other Non-U.S. Corporate Securities 4,711
4,528
Total $ 15,330 $ 14,692
(1) The countries that are listed in the non-
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. AtJune 30, 2021 , our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 15 percent of our fixed income portfolio. Our below-investment grade and non-rated portfolio includes over 1,500 issuers, with the greatest single exposure being$161 million . We manage high-yield bonds as a distinct and separate asset class from investment grade bonds. The allocation to high-yield bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our minimum rating for initial purchase is BB/B. Fourteen external investment managers are responsible for high-yield security selection and portfolio construction. Our high-yield managers have a conservative approach to credit selection and very low historical default experience. Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit as a percentage of high-yield allocation. We monitor position limits daily through an internal compliance system. Derivative and structured securities (e.g., credit default swaps and collateralized loan obligations) are not permitted in the high-yield portfolio.
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Critical Accounting Estimates
As of June 30, 2021 , 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 2020 Form 10-K.
Unpaid losses and loss expenses
As an insurance and reinsurance company, we are required by applicable laws and
regulations and GAAP to establish loss and loss expense reserves for the
estimated unpaid portion of the ultimate liability for losses and loss expenses
under the terms of our policies and agreements with our insured and reinsured
customers. With the exception of certain structured settlements, for which the
timing and amount of future claim payments are reliably determinable, and
certain reserves for unsettled claims, our loss reserves are not discounted for
the time value of money.
The following table presents a roll-forward of our unpaid losses and loss expenses:
Gross Reinsurance Net
(in millions of U.S. dollars) Losses Recoverable (1) Losses
Balance at December 31, 2020 $ 67,811 $ 14,647 $ 53,164
Losses and loss expenses incurred 12,365 2,306 10,059
Losses and loss expenses paid (10,200) (2,314) (7,886)
Other (including foreign exchange translation) 313 82 231
Balance at June 30, 2021 $ 70,289 $ 14,721 $ 55,568 (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 and six months endedJune 30, 2021 . A&E reserves are included in Corporate. Refer to our 2020 Form 10-K for further information on our A&E exposures. Fair value measurements Accounting guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to unobservable data (Level 3 inputs). Level 2 includes inputs, other than quoted prices within Level 1, that are observable for assets or liabilities either directly or indirectly. Refer to Note 4 to the Consolidated Financial Statements for information on our fair value measurements.
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Catastrophe Management
We actively monitor and manage our catastrophe risk accumulation around the
world, including setting risk limits based on probable maximum loss (PML) and
purchasing catastrophe reinsurance. The table below presents our modeled pre-tax
estimates of natural catastrophe PML, net of reinsurance, at June 30, 2021 , for
Worldwide, U.S. hurricane and California earthquake events, based on our
in-force portfolio at April 1, 2021 and reflecting the April 1, 2021 reinsurance
program (see Natural Catastrophe Property Reinsurance Program section) as well
as inuring reinsurance protection coverages. According to the model, for the
1-in-100 return period scenario, there is a one percent chance that our pre-tax
annual aggregate losses incurred in any year from U.S. hurricane events could be
in excess of $2,759 million (or 4.6 percent of our total shareholders' equity at
June 30, 2021 ). These estimates assume that reinsurance recoverable is fully
collectible.
Modeled Net Probable Maximum Loss (PML) Pre-tax
Worldwide (1) U.S. Hurricane (2) California Earthquake (3)
Annual Aggregate Annual Aggregate Single Occurrence
(in millions of U.S. % of Total % of Total % of Total
dollars, except for Shareholders' Shareholders' Shareholders'
percentages) Chubb Equity Chubb Equity Chubb Equity
1-in-10 $ 1,885 3.1 % $ 1,110 1.8 % $ 138 0.2 %
1-in-100 $ 3,995 6.7 % $ 2,759 4.6 % $ 1,297 2.2 %
1-in-250 $ 6,587 11.0 % $ 4,959 8.3 % $ 1,471 2.4 %
(1) Worldwide losses are comprised of losses arising only from hurricanes,
typhoons, convective storms and earthquakes and do not include "non-modeled"
perils such as wildfire and flood.
(2) U.S. Hurricane losses include losses from wind and storm-surge and exclude
rainfall.
(3) California earthquakes include fire-following perils.
The above estimates of Chubb's loss profile are inherently uncertain for many
reasons, including the following:
•While the use of third-party catastrophe modeling packages to simulate
potential hurricane and earthquake losses is prevalent within the insurance
industry, the models are reliant upon significant meteorology, seismology, and
engineering assumptions to estimate catastrophe losses. In particular, modeled
catastrophe events are not always a representation of actual events and ensuing
additional loss potential;
•There is no universal standard in the preparation of insured data for use in
the models, the running of the modeling software and interpretation of loss
output. These loss estimates do not represent our potential maximum exposures
and it is highly likely that our actual incurred losses would vary materially
from the modeled estimates;
•The potential effects of climate change add to modeling complexity; and
•Changing climate conditions could impact our exposure to natural catastrophe
risks, including U.S. hurricane. Published studies by leading government,
academic and professional organizations predict an increase in the expected
annual frequency of Atlantic -basin hurricanes and sea level rise through the end
of the century over observed historical averages. These studies contemplate
expected multi-decadal impacts of climate change on sea surface temperatures,
sea levels and other factors contributing to the frequency and intensity of
hurricanes. Based on preliminary stress tests conducted against the Chubb
portfolio at January 1, 2021 , the impacts of climate change are not expected to
materially impact our reported U.S. hurricane PML over the next 12 months. These
tests reflect current exposures only and exclude potential mitigating factors,
such as changes to building codes, public or private risk mitigation, regulation
and public policy.
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Natural Catastrophe Property Reinsurance Program
Chubb's core property catastrophe reinsurance program provides protection
against natural catastrophes impacting its primary property operations (i.e.,
excluding our
We regularly review our reinsurance protection and corresponding property catastrophe exposures. This may or may not lead to the purchase of additional reinsurance prior to a program's renewal date. In addition, prior to each renewal date, we consider how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and various other structuring considerations. Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations effectiveApril 1, 2021 throughMarch 31, 2022 , with an additional$100 million of limit for international loss occurrences compared to the expiring program. The program consists of three layers in excess of losses retained by Chubb on a per occurrence basis. In addition, Chubb also renewed its terrorism coverage (excluding nuclear, biological, chemical and radiation coverage, with an inclusion of coverage for biological and chemical coverage for personal lines) forthe United States fromApril 1, 2021 throughMarch 31, 2022 with the same limits and retention and percentage placed except that the majority of terrorism coverage is on an aggregate basis above our retentions without a reinstatement. Loss Location Layer of Loss Comments Notes United States$0 million - Losses retained by Chubb (a) (excluding Alaska and Hawaii)$1.0 billion United States$1.0 billion - All natural perils and terrorism (b) (excluding Alaska and Hawaii)$1.15 billion United States$1.15 billion - All natural perils and terrorism (c) (excluding Alaska and Hawaii)$2.25 billion United States$2.25 billion - All natural perils and terrorism (d) (excluding Alaska and Hawaii)$3.5 billion International$0 million - Losses retained by Chubb (a) (including Alaska and Hawaii)$175 million International$175 million - All natural perils and terrorism (c) (including Alaska and Hawaii)$1.275 billion Alaska, Hawaii, and Canada$1.275 billion - All natural perils and terrorism (d)$2.525 billion (a) Ultimate retention will depend upon the nature of the loss and the interplay between the underlying per risk programs and certain other catastrophe programs purchased by individual business units. These other catastrophe programs have the potential to reduce our effective retention below the stated levels. (b) These coverages are partially placed with Reinsurers. (c) These coverages are both part of the same Second layer within the Global Catastrophe Program and are fully placed with Reinsurers. (d) These coverages are both part of the same Third layer within the Global Catastrophe Program and are fully placed with Reinsurers.
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Liquidity
We anticipate that positive cash flows from operations (underwriting activities
and investment income) should be sufficient to cover cash outflows under most
loss scenarios for the near term. In addition to cash from operations, routine
sales of investments, and financing arrangements, we have agreements with a
third-party bank provider which implemented two international multi-currency
notional cash pooling programs to enhance cash management efficiency during
periods of short-term timing mismatches between expected inflows and outflows of
cash by currency. The programs allow us to optimize investment income by
avoiding portfolio disruption. Should the need arise, we generally have access
to capital markets and to credit facilities with letter of credit capacity of
$3.7 billion with a sub-limit of $1.9 billion for revolving credit. At June 30,
2021 , our usage under these facilities was $1.4 billion in letters of credit.
Our access to credit under these facilities is dependent on the ability of the
banks that are a party to the facilities to meet their funding commitments. The
facilities require that we maintain certain financial covenants, all of which we
met at June 30, 2021 . Should the existing credit providers on these facilities
experience financial difficulty, we may be required to replace credit sources,
possibly in a difficult market. If we cannot obtain adequate capital or sources
of credit on favorable terms, on a timely basis, or at all, our business,
operating results, and financial condition could be adversely affected. To date,
we have not experienced difficulty accessing our credit facilities.
The payment of dividends or other statutorily permissible distributions from our
operating companies are subject to the laws and regulations applicable to each
jurisdiction, as well as the need to maintain capital levels adequate to support
the insurance and reinsurance operations, including financial strength ratings
issued by independent rating agencies. During the six months ended June 30,
2021 , we were able to meet all our obligations, including the payments of
dividends on our Common Shares, with our net cash flows.
We assess which subsidiaries to draw dividends from based on a number of
factors. Considerations such as regulatory and legal restrictions as well as the
subsidiary's financial condition are paramount to the dividend decision. Chubb
Limited received dividends of $1.8 billion and nil from its Bermuda subsidiaries
during the six months ended June 30, 2021 and 2020, respectively. Chubb Limited
received cash dividends of $21 million and $110 million and non-cash dividends
of $536 million and $734 million from a Swiss subsidiary during the six months
ended June 30, 2021 and 2020, respectively.
The payment of any dividends from CGM or its subsidiaries is subject to
applicable U.K. insurance laws and regulations. In addition, the release of
funds by Syndicate 2488 to subsidiaries of CGM is subject to regulations
promulgated by the Society of Lloyd's . The U.S. insurance subsidiaries of Chubb
INA Holdings Inc. (Chubb INA ) may pay dividends, without prior regulatory
approval, subject to restrictions set out in state law of the subsidiary's
domicile (or, if applicable, commercial domicile). Chubb INA's international
subsidiaries are also subject to insurance laws and regulations particular to
the countries in which the subsidiaries operate. These laws and regulations
sometimes include restrictions that limit the amount of dividends payable
without prior approval of regulatory insurance authorities. Chubb Limited
received no dividends from CGM or Chubb INA during the six months ended June 30,
2021 and 2020. Debt issued by Chubb INA is serviced by statutorily permissible
distributions by Chubb INA's insurance subsidiaries to Chubb INA as well as
other group resources. Chubb INA received $470 million and nil from its
subsidiaries during the six months ended June 30, 2021 and 2020, respectively.
Cash Flows
Our sources of liquidity include cash from operations, routine sales of
investments, and financing arrangements. The following is a discussion of our
cash flows for the six months ended June 30, 2021 and 2020.
Operating cash flows were $5.2 billion in the six months ended June 30, 2021 ,
compared to $3.7 billion in the prior year period. The increase of $1.5 billion
is due to higher premiums collected reflecting premium growth, principally in
our commercial lines. Partially offsetting the increase are higher catastrophe
loss payments and higher taxes paid.
Cash used for investing was $2.0 billion in the six months ended June 30, 2021 ,
compared to $2.7 billion in the prior year period. Cash used for investing
principally relates to net purchases of fixed maturities. In addition, the prior
year included cash used for the incremental purchase of Huatai Group ownership
interest of $1.6 billion .
Cash used for financing was $3.0 billion in the six months ended June 30, 2021 ,
compared to $898 million in the prior year period, an increase of $2.1 billion
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. At
Capital ResourcesCapital resources consist of funds deployed or available to be deployed to support our business operations.
June 30 December 31
(in millions of U.S. dollars, except for ratios) 2021 2020
Long-term debt $ 14,954 $ 14,948
Trust preferred securities 308 308
Total shareholders' equity 60,062 59,441
Total capitalization $ 75,324 $ 74,697
Ratio of financial debt to total capitalization 19.9 % 20.0 %
Ratio of financial debt plus trust preferred securities to total
capitalization 20.3 % 20.4 %
Repurchase agreements are excluded from the table above and are disclosed
separately from short-term debt in the Consolidated balance sheets. The
repurchase agreements are collateralized borrowings where we maintain the right
and ability to redeem the collateral on short notice, unlike short-term debt
which comprises the current maturities of our long-term debt instruments.
For the six months ended June 30, 2021 , we repurchased $2.44 billion of Common
Shares in a series of open market transactions under the Board of Directors
(Board) share repurchase authorization. At June 30, 2021 , there were 38,888,051
Common Shares in treasury with a weighted average cost of $148.42 per share, and
$65 million in share repurchase authorization remained through December 31,
2021 . Subsequently, on July 19, 2021 , the Board authorized a one-time
incremental share repurchase program of up to $5.0 billion through June 30,
2022 . At July 28, 2021 , $5.06 billion in share repurchase authorizations
remained.
We generally maintain the ability to issue certain classes of debt and equity
securities via an unlimited Securities and Exchange Commission (SEC) shelf
registration which is renewed every three years. This allows us capital market
access for refinancing as well as for unforeseen or opportunistic capital needs.
Dividends
We have paid dividends each quarter since we became a public company in 1993. Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by Chubb inU.S. dollars. Refer to Note 8 to the Consolidated Financial Statements for a discussion of our dividend methodology. At ourMay 2021 annual general meeting, our shareholders approved an annual dividend for the following year of up to$3.20 per share, orCHF 2.87 per share, calculated using the USD/CHF exchange rate as published in theWall Street Journal onMay 20, 2021 , expected to be paid in four quarterly installments of$0.80 per share after the general meeting by way of a distribution from capital contribution reserves, transferred to free reserves for payment. The Board determines the record and payment dates at which the annual dividend may be paid until the date of the 2022 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. The annual dividend approved inMay 2021 represented a$0.08 per share increase ($0.02 per quarter) over the prior year dividend. The following table represents dividends paid per Common Share to shareholders of record on each of the following dates: Shareholders of record as of: Dividends paid as of: December 18, 2020 January 8, 2021$0.78 (CHF 0.71 ) March 19, 2021 April 9, 2021$0.78 (CHF 0.70 ) June 18, 2021 July 9, 2021$0.80 (CHF 0.71 ) 74
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Information provided in connection with outstanding debt of subsidiaries
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) December 31, (in millions of U.S. dollars) June 30, 2021 2020 June 30, 2021 December 31, 2020 Assets Investments $ - $ - $ 207 $ 197 Cash 1 84 1 1 Due from parent guarantor/subsidiary issuer, net - 479 449 - Due from subsidiaries that are not issuers or guarantors, net 3,067 3,043 - - Other assets 8 10 448 463 Total assets$ 3,076 $ 3,616 $ 1,105 $ 661 Liabilities Due to parent guarantor/subsidiary issuer, net$ 449 $ - $ - $ 479 Due to subsidiaries that are not issuers or guarantors, net - - 2,712 2,529 Affiliated notional cash pooling programs 293 - 819 272 Long-term debt - - 14,954 14,948 Trust preferred securities - - 308 308 Other liabilities 309 323 1,296 1,418 Total liabilities 1,051 323 20,089 19,954 Total shareholders' equity 2,025 3,293 (18,984) (19,293) Total liabilities and shareholders' equity$ 3,076 $ 3,616 $ 1,105 $ 661
The following table presents the condensed statements of operations and
comprehensive income of
Six Months Ended June 30, 2021 Chubb Limited Chubb INA Holdings Inc. (in millions of U.S. dollars) (Parent Guarantor) (Subsidiary Issuer) Net investment income $ 2 $ 1 Net realized gains (loss) 18 (13) Administrative expenses 47 (78) Interest (income) expense (67) 289 Other (income) expense (26) (13) Income tax expense (benefit) 17
(70)
Net income (loss) $ 49 $
(140)
Comprehensive income (loss) $ 49 $ (141)
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