Chubb Ltd [CB] Filings

10-Q 1 cb-20220331.htm 10-Q cb-20220331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File No. 1-11778

CHUBB LIMITED

(Exact name of registrant as specified in its charter)


Switzerland			98-0091805
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

Baerengasse 32
Zurich, Switzerland CH-8001
(Address of principal executive offices) (Zip Code)

+41 (0)43 456 76 00

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value CHF 24.15 per share	CB	New York Stock Exchange
Guarantee of Chubb INA Holdings Inc. 0.30% Senior Notes due 2024	CB/24A	New York Stock Exchange
Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2027	CB/27	New York Stock Exchange
Guarantee of Chubb INA Holdings Inc. 1.55% Senior Notes due 2028	CB/28	New York Stock Exchange
Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2029	CB/29A	New York Stock Exchange
Guarantee of Chubb INA Holdings Inc. 1.40% Senior Notes due 2031	CB/31	New York Stock Exchange
Guarantee of Chubb INA Holdings Inc. 2.50% Senior Notes due 2038	CB/38A	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of registrant’s Common Shares (CHF 24.15 par value) outstanding as of April 22, 2022 was 423,711,369.

Table of Contents

CHUBB LIMITED

INDEX TO FORM 10-Q



Part I.	FINANCIAL INFORMATION		Page
Item 1.	Financial Statements:
	Consolidated Balance Sheets (Unaudited) March 31, 2022 and December 31, 2021		3
	Consolidated Statements of Operations and Comprehensive Income (Unaudited) Three Months Ended March 31, 2022 and 2021		4
	Consolidated Statements of Shareholders' Equity (Unaudited) Three Months Ended March 31, 2022 and 2021		5
	Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2022 and 2021		6
	Notes to Consolidated Financial Statements (Unaudited)
	Note 1.	General	7
	Note 2.	Acquisitions	8
	Note 3.	Investments	8
	Note 4.	Fair value measurements	13
	Note 5.	Reinsurance	20
	Note 6.	Unpaid losses and loss expenses	21

	Note 7.	Commitments, contingencies, and guarantees	24
	Note 8.	Shareholders’ equity	28
	Note 9.	Share-based compensation	29
	Note 10.	Postretirement benefits	30
	Note 11.	Other income and expense	31
	Note 12.	Segment information	31
	Note 13.	Earnings per share	33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		67
Item 4.	Controls and Procedures		69

Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings		70
Item 1A.	Risk Factors		70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities		70
Item 6.	Exhibits		71

Table of Contents

PART I FINANCIAL INFORMATION


ITEM 1. Financial Statements

CONSOLIDATED BALANCE SHEETS (Unaudited)

Chubb Limited and Subsidiaries


	March 31		December 31
(in millions of U.S. dollars, except share and per share data)	2022		2021
Assets
Investments
Fixed maturities available for sale, at fair value, net of valuation allowance - $27 and $14 (amortized cost – $91,526 and $90,493)	$	89,479	$	93,108
Fixed maturities held to maturity, at amortized cost, net of valuation allowance - $34 and $35 (fair value – $9,888 and $10,647)	9,818		10,118
Equity securities, at fair value	3,596		4,782
Short-term investments, at fair value (amortized cost – $3,408 and $3,147)	3,407		3,146
Other investments, at fair value	11,947		11,169
Total investments	118,247		122,323
Cash	1,734		1,659
Restricted cash	180		152
Securities lending collateral	1,800		1,831
Accrued investment income	822		821
Insurance and reinsurance balances receivable, net of valuation allowance - $50 and $46	11,452		11,322
Reinsurance recoverable on losses and loss expenses, net of valuation allowance - $329 and $329	17,761		17,366
Reinsurance recoverable on policy benefits	208		213
Deferred policy acquisition costs	5,587		5,513

Value of business acquired	231		236
Goodwill	15,244		15,213
Other intangible assets	5,399		5,455
Deferred tax assets	333		—
Prepaid reinsurance premiums	3,068		3,028
Investments in partially-owned insurance companies	3,161		3,130
Other assets	12,763		11,792
Total assets	$	197,990	$	200,054
Liabilities
Unpaid losses and loss expenses	$	73,844	$	72,943
Unearned premiums	19,586		19,101
Future policy benefits	5,974		5,947
Insurance and reinsurance balances payable	7,401		7,243

Securities lending payable	1,800		1,831

Accounts payable, accrued expenses, and other liabilities	14,914		15,004

Deferred tax liabilities	—		389
Repurchase agreements	1,406		1,406
Short-term debt	1,474		999
Long-term debt	14,585		15,169
Trust preferred securities	308		308
Total liabilities	141,292		140,340
Commitments and contingencies (refer to Note 7)
Shareholders’ equity
Common Shares (CHF 24.15 par value; 459,555,714 and 474,021,114 shares issued; 423,675,327 and 426,572,612 shares outstanding)	10,666		10,985
Common Shares in treasury (35,880,387 and 47,448,502 shares)	(5,700)		(7,464)
Additional paid-in capital	7,988		8,478
Retained earnings	47,148		47,365
Accumulated other comprehensive income (loss) (AOCI)	(3,404)		350
Total shareholders’ equity	56,698		59,714
Total liabilities and shareholders’ equity	$	197,990	$	200,054

See accompanying notes to the Consolidated Financial Statements

Table of Contents

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)

Chubb Limited and Subsidiaries


	Three Months Ended
	March 31
(in millions of U.S. dollars, except per share data)	2022		2021
Revenues
Net premiums written	$	9,199	$	8,662
Increase in unearned premiums	(453)		(441)
Net premiums earned	8,746		8,221
Net investment income	822		863
Net realized gains (losses) (includes $(136) and $24 reclassified from AOCI)	101		887
Total revenues	9,669		9,971
Expenses
Losses and loss expenses	4,787		5,053
Policy benefits	145		167
Policy acquisition costs	1,737		1,665
Administrative expenses	778		744
Interest expense	132		122
Other (income) expense	(310)		(490)
Amortization of purchased intangibles	71		72

Total expenses	7,340		7,333
Income before income tax	2,329		2,638
Income tax expense (includes $(22) and $4 on unrealized gains and losses reclassified from AOCI)	355		338
Net income	$	1,974	$	2,300
Other comprehensive loss
Unrealized depreciation	$	(4,788)	$	(2,293)
Reclassification adjustment for net realized (gains) losses included in net income	136		(24)
	(4,652)		(2,317)
Change in:
Cumulative foreign currency translation adjustment	67		22
Postretirement benefit liability adjustment	19		(28)
Other comprehensive loss, before income tax	(4,566)		(2,323)
Income tax benefit related to OCI items	812		412
Other comprehensive loss	(3,754)		(1,911)
Comprehensive income (loss)	$	(1,780)	$	389
Earnings per share
Basic earnings per share	$	4.64	$	5.10
Diluted earnings per share	$	4.59	$	5.07

See accompanying notes to the Consolidated Financial Statements

Table of Contents

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

Chubb Limited and Subsidiaries


	Three Months Ended
	March 31
(in millions of U.S. dollars)	2022		2021
Common Shares
Balance – beginning of period	$	10,985	$	11,064
Cancellation of treasury shares	(319)		—
Balance – end of period	10,666		11,064
Common Shares in treasury
Balance – beginning of period	(7,464)		(3,644)
Common Shares repurchased	(1,001)		(519)
Cancellation of treasury shares	2,510		—
Net shares issued under employee share-based compensation plans	255		262
Balance – end of period	(5,700)		(3,901)
Additional paid-in capital
Balance – beginning of period	8,478		9,815
Net shares issued under employee share-based compensation plans	(199)		(187)
Exercise of stock options	(21)		(24)
Share-based compensation expense	70		66
Funding of dividends declared to Retained earnings	(340)		(352)
Balance – end of period	7,988		9,318
Retained earnings
Balance – beginning of period	47,365		39,337
Net income	1,974		2,300
Cancellation of treasury shares	(2,191)		—
Funding of dividends declared from Additional paid-in capital	340		352
Dividends declared on Common Shares	(340)		(352)
Balance – end of period	47,148		41,637
Accumulated other comprehensive income (loss) (AOCI)
Net unrealized appreciation (depreciation) on investments
Balance – beginning of period	2,256		4,673
Change in period, before reclassification from AOCI, net of income tax benefit of $834 and $401	(3,954)		(1,892)
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(22) and $4	114		(20)
Change in period, net of income tax benefit of $812 and $405	(3,840)		(1,912)
Balance – end of period	(1,584)		2,761
Cumulative foreign currency translation adjustment
Balance – beginning of period	(2,146)		(1,637)
Change in period, net of income tax benefit of $4 and $2	71		24
Balance – end of period	(2,075)		(1,613)
Postretirement benefit liability adjustment
Balance – beginning of period	240		(167)
Change in period, net of income tax (expense) benefit of $(4) and $5	15		(23)
Balance – end of period	255		(190)
Accumulated other comprehensive income (loss)	(3,404)		958
Total shareholders’ equity	$	56,698	$	59,076

See accompanying notes to the Consolidated Financial Statements

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Chubb Limited and Subsidiaries


	Three Months Ended
	March 31
(in millions of U.S. dollars)	2022		2021
Cash flows from operating activities
Net income	$	1,974	$	2,300
Adjustments to reconcile net income to net cash flows from operating activities
Net realized (gains) losses	(101)		(887)
Amortization of premiums/discounts on fixed maturities	91		76
Amortization of purchased intangibles	71		72
Equity in net income of partially-owned entities	(361)		(497)
Deferred income taxes	93		—
Unpaid losses and loss expenses	957		1,368
Unearned premiums	502		503
Future policy benefits	36		47
Insurance and reinsurance balances payable	147		(36)
Accounts payable, accrued expenses, and other liabilities	(338)		(663)
Income taxes payable	128		101
Insurance and reinsurance balances receivable	(125)		(209)
Reinsurance recoverable	(456)		(290)
Deferred policy acquisition costs	(96)		(81)
Other	(82)		301
Net cash flows from operating activities	2,440		2,105
Cash flows from investing activities
Purchases of fixed maturities available for sale	(5,933)		(7,738)

Purchases of fixed maturities held to maturity	(143)		(102)
Purchases of equity securities	(380)		(351)
Sales of fixed maturities available for sale	1,838		1,343


Sales of equity securities	1,110		351
Maturities and redemptions of fixed maturities available for sale	3,003		4,289
Maturities and redemptions of fixed maturities held to maturity	398		604
Net change in short-term investments	(267)		595
Net derivative instruments settlements	74		87
Private equity contributions	(669)		(427)
Private equity distributions	207		206
Payment for Huatai Group interest	(113)		(65)
Other	(120)		(44)
Net cash flows used for investing activities	(995)		(1,252)
Cash flows from financing activities
Dividends paid on Common Shares	(341)		(352)
Common Shares repurchased	(1,001)		(519)

Proceeds from issuance of repurchase agreements	146		450
Repayment of repurchase agreements	(146)		(450)
Proceeds from share-based compensation plans	114		115
Policyholder contract deposits and other	118		133
Policyholder contract withdrawals and other	(111)		(124)
Tax withholding payments for share-based compensation plans	(81)		(65)
Net cash flows used for financing activities	(1,302)		(812)
Effect of foreign currency rate changes on cash and restricted cash	(40)		(36)
Net increase in cash and restricted cash	103		5
Cash and restricted cash – beginning of period	1,811		1,836
Cash and restricted cash – end of period	$	1,914	$	1,841
Supplemental cash flow information
Taxes paid	$	132	$	236
Interest paid	$	85	$	90

See accompanying notes to the Consolidated Financial Statements

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Chubb Limited and Subsidiaries

1. General

a) Basis of presentation

Chubb Limited is a holding company incorporated in Zurich, Switzerland. Chubb Limited, through its subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. Our results are reported through the following business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. Refer to Note 12 for additional information.

The interim unaudited consolidated financial statements, which include the accounts of Chubb Limited and its subsidiaries (collectively, Chubb, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and, in the opinion of management, reflect all adjustments necessary for a fair statement of the results and financial position for such periods. All significant intercompany accounts and transactions, including internal reinsurance transactions, have been eliminated.

The results of operations and cash flows for any interim period are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2021 Form 10-K.

b) Restricted cash

Restricted cash in the Consolidated balance sheets represents amounts held for the benefit of third parties and is legally or contractually restricted as to withdrawal or usage. Amounts include deposits with U.S. and non-U.S. regulatory authorities, trust funds set up for the benefit of ceding companies, and amounts pledged as collateral to meet financing arrangements.

The following table provides a reconciliation of cash and restricted cash reported within the Consolidated balance sheets that total to the amounts shown in the Consolidated statements of cash flows:


	March 31		December 31
(in millions of U.S. dollars)	2022		2021
Cash	$	1,734	$	1,659
Restricted cash	180		152
Total cash and restricted cash shown in the Consolidated statements of cash flows	$	1,914	$	1,811

c) Goodwill

During the three months ended March 31, 2022, Goodwill increased $31 million, primarily reflecting the impact of foreign exchange.

d) Accounting guidance not yet adopted

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments in this update require more frequent updating of assumptions and a standardized discount rate for the future policy benefit liability, a requirement to use the fair value measurement model for policies with market risk benefits, simplified amortization of deferred acquisition costs, and enhanced disclosures. This standard will be effective in the first quarter of 2023 with early adoption permitted. We are currently assessing the effect of adopting this guidance on our financial condition and results of operations. We will be better able to quantify the effect of adopting this standard as we progress in our implementation process and draw nearer to the date of adoption.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)

Chubb Limited and Subsidiaries

2. Acquisitions

Cigna’s Life and Accident and Health (A&H) Insurance Business in Asia-Pacific Markets

On October 7, 2021, we entered into a definitive agreement to acquire the life and non-life insurance companies that house the personal accident, supplemental health and life insurance business of Cigna in six Asia-Pacific markets, for approximately $5.72 billion in cash, subject to certain post-closing purchase adjustments. The transaction is expected to be completed in 2022. The timing of completion is subject to required regulatory approvals and customary closing conditions.

Huatai Group

Chubb maintains a direct investment in Huatai Insurance Group Co., Ltd. (Huatai Group). Huatai Group is the parent company of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C), approximately 80 percent of Huatai Life Insurance Co., Ltd. (Huatai Life), and approximately 82 percent of Huatai Asset Management Co., Ltd. (collectively, Huatai). Huatai Group's insurance operations have more than 600 branches and approximately 19 million customers in China.

As of March 31, 2022, Chubb's aggregate ownership interest in Huatai Group was approximately 47.3 percent. Chubb applies the equity method of accounting to its investment in Huatai Group by recording its share of net income or loss in Other (income) expense in the Consolidated statements of operations.

During 2021, Chubb entered into agreements with several counterparties to purchase incremental ownership interests in Huatai Group totaling approximately 31.8 percent for approximately $2.2 billion. In connection with these agreements, Chubb paid approximately $1.1 billion in deposits. In January 2022, we paid $113 million relating to these agreements. Chubb entered into an agreement to acquire an approximate 7.1 percent ownership interest in Huatai Group for approximately $0.5 billion, which was paid as a deposit in 2020. The purchase of the additional ownership interests is contingent upon important conditions. As Chubb’s ownership interest increases, we will continue to evaluate the appropriateness of consolidation accounting in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation, and other applicable regulations.

3. Investments

a) Fixed maturities


March 31, 2022	Amortized Cost		Valuation Allowance		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency	$	2,111	$	—	$	31	$	(40)	$	2,102
Non-U.S.	25,304		(16)		380		(884)		24,784
Corporate and asset-backed securities	38,469		(11)		360		(1,149)		37,669
Mortgage-backed securities	20,511		—		90		(796)		19,805
Municipal	5,131		—		49		(61)		5,119
	$	91,526	$	(27)	$	910	$	(2,930)	$	89,479
	Amortized Cost		Valuation Allowance		Net Carrying Value		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value

Held to maturity
U.S. Treasury / Agency	$	1,180	$	—	$	1,180	$	12	$	(18)	$	1,174
Non-U.S.	1,185		(5)		1,180		19		(8)		1,191
Corporate and asset-backed securities	1,913		(28)		1,885		56		(6)		1,935
Mortgage-backed securities	1,689		—		1,689		8		(13)		1,684
Municipal	3,885		(1)		3,884		24		(4)		3,904
	$	9,852	$	(34)	$	9,818	$	119	$	(49)	$	9,888

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)

Chubb Limited and Subsidiaries


December 31, 2021	Amortized Cost		Valuation Allowance		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency	$	2,111	$	—	$	109	$	(6)	$	2,214
Non-U.S.	25,156		(8)		953		(272)		25,829
Corporate and asset-backed securities	37,844		(6)		1,410		(185)		39,063
Mortgage-backed securities	20,080		—		532		(123)		20,489
Municipal	5,302		—		216		(5)		5,513
	$	90,493	$	(14)	$	3,220	$	(591)	$	93,108
	Amortized Cost		Valuation Allowance		Net Carrying Value		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value

Held to maturity
U.S. Treasury / Agency	$	1,213	$	—	$	1,213	$	34	$	(3)	$	1,244
Non-U.S.	1,201		(5)		1,196		66		—		1,262
Corporate and asset-backed securities	2,032		(28)		2,004		197		—		2,201
Mortgage-backed securities	1,731		(1)		1,730		74		(1)		1,803
Municipal	3,976		(1)		3,975		162		—		4,137
	$	10,153	$	(35)	$	10,118	$	533	$	(4)	$	10,647

The following table presents the amortized cost of our HTM securities according to S&P rating:


	March 31, 2022				December 31, 2021
(in millions of U.S. dollars, except for percentages)	Amortized cost		% of Total		Amortized cost		% of Total
AAA	$	2,021	21	%	$	2,089	21	%
AA	5,210		52	%	5,303		52	%
A	1,922		20	%	1,964		19	%
BBB