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Item 2. Management’s Discussion and Analysis

2021-04-30 compared with 2020-10-30 · 335 added, 643 removed, 703 unchanged (58% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three and nine months ended September 30, 2020.

The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three months ended March 31, 2021.

All comparisons in this discussion are to the corresponding prior year period unless otherwise indicated.

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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.

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Securities and Exchange Commission (SEC), include but are not limited to:

• losses arising out of natural or man-made catastrophes such as hurricanes, typhoons, earthquakes, floods, climate change (including effects on weather patterns;

greenhouse gases;

sea, land and air temperatures;

and rain and snow), nuclear accidents, pandemics (including COVID-19), or terrorism which could be affected by:

• the number of insureds and ceding companies affected;

• the amount and timing of losses actually incurred and reported by insureds;

• the impact of these losses on our reinsurers and the amount and timing of reinsurance recoverable actually received;

• the cost of building materials and labor to reconstruct properties or to perform environmental remediation following a catastrophic event;

• complex coverage and regulatory issues such as whether losses occurred from storm surge or flooding and related lawsuits;

• 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 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;

• 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;

• actual claims may exceed our best estimate of ultimate insurance losses incurred through September 30, 2020 resulting directly from the COVID-19 pandemic and consequent economic crises;

our COVID-19 related reserve at September 30, 2020 could change including as a result of, among other things, the impact of legislative or regulatory actions taken in response to COVID-19;

• the continued impact of COVID-19 and related risks, including from shelter-in-place orders, unemployment, and the financial market volatility, could continue to adversely impact our results, including premiums written and investment income;

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;

• 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;

• infection rates and severity of pandemics, including COVID-19, and their effects on our business operations and claims activity, and any adverse impact to our insureds, brokers, agents, and employees;

• 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 (which we refer to in this report as foreign exchange and foreign currency exchange), which could affect our statement of operations, investment portfolio, financial condition, and financing plans;

• general economic and business conditions resulting from volatility in the stock and credit markets and the depth and duration of potential recession;

• global political conditions, the occurrence of any terrorist attacks, including any nuclear, radiological, biological, or chemical events, or the outbreak and effects of war, and possible business disruption or economic contraction that may result from such events;

• the potential impact of the United Kingdom’s vote to withdraw from the European Union, including political, regulatory, social, and economic uncertainty and market and exchange rate volatility;

• 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 March 31, 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 public company bankruptcies and/or accounting restatements, as well as disclosures by and investigations of public companies relating to possible accounting irregularities, and other corporate governance issues, including the effects of such events on:

• the capital markets;

• the markets for directors and officers (D&O) and errors and omissions (E&O) insurance;

• claims and litigation arising out of such disclosures or practices by other companies;

• uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and treaties, which, among other things, could subject us to insurance regulation or taxation in additional jurisdictions or affect our current operations;

• the effects of data privacy or cyber laws or regulation on our current or future business;

• the actual amount of new and renewal business, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets, including regulatory constraints on exit strategies;

• 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;

• acquisitions made by us 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 Company Limited (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;

• the potential impact from government-mandated insurance coverage for acts of terrorism;

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;

• 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 effects of investigations into market practices in the property and casualty (P&C) industry;

• changing rates of inflation and other economic conditions, for example, recession;

the amount of dividends received from subsidiaries;

• 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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• management’s response to these factors and actual events (including, but not limited to, those described above).

The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,” “intend,” “hope,” “feel,” “foresee,” “will likely result,” or “will continue,” and variations thereof and similar expressions, identify forward-looking statements.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

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Chubb Limited, which is headquartered in Zurich, Switzerland, and its direct and indirect subsidiaries (collectively, the Chubb Group of Companies, Chubb, we, us, or our) are a global insurance and reinsurance organization, serving the needs of a diverse group of clients worldwide.

At September 30, 2020, we had total assets of $188 billion and shareholders’ equity of $56 billion.

At March 31, 2021, we had total assets of $192 billion and shareholders’ equity of $59 billion.

Chubb was incorporated in 1985 at which time it opened its first business office in Bermuda and continues to maintain operations in Bermuda.

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For more information on our segments refer to “Segment Information” under Item 1 in our 2020 Form 10-K.

Financial Highlights for the Three Months Ended September 30, 2020

• Net income was $1,194 million compared with $1,091 million in the prior year period.

• Pre-tax net catastrophe losses were $925 million, primarily attributable to severe weather-related events globally and wildfires.

There were no changes to the previously reported aggregate COVID-19 losses from June 30, 2020.

• Total pre-tax and after-tax favorable prior period development were $146 million (1.8 percentage points of the combined ratio) and $126 million, respectively, compared with prior period development of $167 million (2.3 percentage points of the combined ratio) and $112 million, respectively, in the prior year period.

Financial Highlights for the Three Months Ended March 31, 2021

• Net income was $2.3 billion compared with $252 million in the prior year period.

• Total P&C pre-tax and after-tax catastrophe losses were $700 million (9.1 percentage points of the combined ratio) and $570 million, respectively, compared with $237 million (3.3 percentage points of the combined ratio) and $199 million, respectively, in the prior year period.

The current quarter included $657 million of winter storm losses in the U.S.

• Total pre-tax and after-tax favorable prior period development were $192 million (2.5 percentage points of the combined ratio) and $156 million, respectively, compared with $118 million (1.7 percentage points of the combined ratio) and $94 million, respectively, in the prior year period.

• The P&C combined ratio was 91.8 percent compared with 89.1 percent in the prior year period.

P&C current accident year combined ratio excluding catastrophe losses was 85.2 percent compared with 87.5 percent in the prior year period.

• Consolidated net premiums written were $8.7 billion, up 8.6 percent, or 7.0 percent in constant dollars.

P&C net premiums written were $8.5 billion, up 5.7 percent, or up 6.4 percent in constant dollars.

On a constant-dollar basis, P&C growth comprises 10.8 percent positive growth globally in commercial P&C lines and 3.3 percent negative growth in consumer lines, which includes A&H, travel and personal lines.

• The P&C combined ratio was 95.2 percent compared with 90.2 percent in the prior year, including catastrophe losses of 11.3 percentage points compared with 3.0 percentage points prior year.

The P&C current accident year combined ratio excluding catastrophe losses was 85.7 percent compared with 89.5 percent prior year.

P&C net premiums written were $8.0 billion, up 9.7 percent, or up 8.1 percent in constant dollars, comprising 15.6 percent positive growth in commercial P&C lines and 2.5 percent negative growth in consumer lines.

• Consolidated net premiums earned were $8.2 billion, up 5.5 percent, or 4.2 percent in constant dollars.

P&C net premiums earned increased 6.5 percent, comprising positive growth of 11.3 percent in commercial P&C lines and negative growth of 2.8 percent in consumer lines.

• Operating cash flow was $2,105 million compared with $1,712 million in the prior year period.

Refer to the Liquidity section for additional information on our cash flows.

Consolidated Operating Results – Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

• Net investment income was $863 million compared with $861 million in the prior year period.

• Share repurchases totaled $519 million during the quarter at an average purchase price of $166.75 per share.

Consolidated Operating Results – Three Months Ended March 31, 2021 and 2020

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Net premiums written $ 8,662 $ 7,977 8.6 %

Net premiums written - constant dollars (1)

Net premiums earned 8,221 7,794 5.5 %

Net investment income 863 861 0.2 %

Net realized gains (losses) (141) (155) (8.8) % (1,069) (475) 125.1 %

Net realized gains (losses) 887 (958) NM

Total revenues 9,971 7,697 29.5 %

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Amortization of purchased intangibles 72 73 (1.4) %

Chubb integration expenses — 2 NM — 9 NM

Total expenses 7,333 7,230 1.4 %

Income before income tax 1,336 1,321 1.2 % 1,410 3,907 (63.9) %

Income before income tax 2,638 467 NM

Income tax expense 338 215 57.0 %

Net income $ 1,194 $ 1,091 9.4 % $ 1,115 $ 3,281 (66.0) %

Net premiums written - constant dollars (1)

Net income $ 2,300 $ 252 NM

NM – not meaningful

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Amounts are calculated by translating prior period results using the same local currency exchange rates as the comparable current period.

Net Premiums Written

Net premiums written reflect the premiums we retain after purchasing reinsurance protection.

For the three and nine months ended September 30, 2020, consolidated net premiums written increased $456 million and $1,132 million, or $512 million and $1,356 million, respectively, on a constant-dollar basis reflecting growth across all segments.

The adverse impact of COVID-19 partially offset growth in 2020 due to economic contraction and market limitations resulting in lower exposures in commercial P&C and in personal lines, primarily in personal automobile, and a decrease in global A&H lines due to less travel volume.

• Net premiums written in our North America Commercial P&C Insurance segment increased $326 million, or 9.4 percent, and $813 million, or 8.2 percent, for the three and nine months ended September 30, 2020, respectively.

Growth in net premiums written reflected positive rate increases, strong renewal retention and new business written across a number of retail and wholesale lines, including property, financial lines, excess casualty, and commercial multiple peril.

Net premiums written for the nine months ended September 30, 2020 also benefited from new business written in large risk casualty, including a year-over-year increase in large structured transactions written.

The growth in net premiums written described above was depressed by economic contraction resulting from the COVID-19 pandemic including $160 million of exposure adjustments on in-force policies recognized in the second quarter of 2020, and lower renewal exposures and new business market limitations that impacted several lines of business, including A&H, surety, large corporate accounts, entertainment, hospitality, retail, and construction.

• Net premiums written in our North America Personal P&C Insurance segment increased $34 million, or 2.8 percent, and $103 million, or 2.9 percent, for the three and nine months ended September 30, 2020, respectively, primarily due to rate increases and strong account retention across most lines.

In addition, net premiums written also increased due to the favorable year-over-year impact in reinstatement premiums of $7 million and $4 million for the three and nine months ended September 30, 2020.

Growth for the three and nine months ended September 30, 2020 was partially offset by $4

million and $11 million, respectively, in lower automobile premiums as a result of reduced exposures related to the conditions caused by the COVID-19 pandemic.

• Net premiums written in our North America Agricultural Insurance segment increased $48 million, or 5.0 percent, for the three months ended September 30, 2020, primarily due to an increase in MPCI premiums, driven by new policy growth, higher reported acreage from policyholders and favorable change in the mix of crops planted, and growth in our Chubb Agribusiness unit.

Net premiums written increased $70 million, or 4.5 percent, for the nine months ended September 30, 2020 due to the year-over-year increase in MPCI premiums reflecting less premiums returned to the U.S.

government under the premium-sharing formulas as well as the items noted above, partially offset by lower rates resulting from year-over-year commodity price declines.

Under the MPCI premium-sharing formulas, we retained more premiums on the 2019 crop year due to higher than expected losses for that year.

Net premiums written in the first nine months of 2019 was lower due to higher cessions to the U.S.

government reflecting the more profitable 2018 crop year.

• Net premiums written in our Overseas General Insurance segment increased $10 million and decreased $24 million, or increased $61 million and $183 million on a constant-dollar basis, for the three and nine months ended September 30, 2020, respectively, due to growth in commercial P&C lines across all regions resulting from new business, retention, and positive rate increases, partially offset by the impact of the COVID-19 pandemic which negatively impacted several lines, mainly in consumer personal lines in Latin America and A&H in Asia, resulting from less travel volume and lower exposures.

In addition, for the nine months ended September 30, 2020, the growth in net premiums written was partially offset by $24 million of exposure adjustments on in-force policies due to economic contraction resulting from the COVID-19 pandemic.

• Net premiums written in our Global Reinsurance segment increased $40 million and $66 million, for the three and nine months ended September 30, 2020, respectively, primarily driven by new business in casualty lines, rate increases in property catastrophe lines and reinstatement premiums on catastrophe losses, partially offset by an increase in retrocessions.

In addition, the prior year had unfavorable premium adjustments which lowered premium in 2019.

• Net premiums written in our Life Insurance segment decreased $2 million, or increased $1 million on a constant-dollar basis, for the three months ended September 30, 2020, primarily due to growth in Latin America international life operations, principally driven by our expanded presence in Chile, offset by declines in North America Combined Insurance business including the adverse impact of the COVID-19 pandemic.

For the nine months ended September 30, 2020, net premiums written increased $104 million, or $115 million on a constant-dollar basis, primarily reflecting growth in Latin America, and Asian international life operations, partially offset by a decline in our North America Combined Insurance business.

Net Premiums Written By Line of Business

Three Months Ended Nine Months Ended

September 30 September 30

Net Premiums Written Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2020 2019 % Change Q-20 vs.

Q-19 C$ (1) 2019

C$ (1) % Change

2020 2019 % Change YTD-20 vs.

YTD-19 C$ (1) 2019

C$ (1) % Change YTD-20 vs.

dollars, except for percentages) 2021 2020 Q-21 vs.

Commercial casualty $ 1,649 $ 1,341 23.0 % 21.4 %

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Property and other short-tail lines 1,594 1,334 19.5 % 16.1 %

Total Commercial P&C 4,924 4,438 11.0 % 4,418 11.5 % 14,158 13,004 8.9 % 12,907 9.7 %

Total Commercial P&C lines 5,317 4,564 16.5 % 14.8 %

Agriculture 183 157 16.5 % 16.5 %

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Total consolidated $ 8,662 $ 7,977 8.6 % 7.0 %

(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.

(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 nine months ended September 30, 2020 reflects growth across most lines of business, partially offset by the adverse impact of the economic contraction resulting from the COVID-19 pandemic.

• The growth in commercial casualty was due to new business, positive rate increases and growth in Asia and Europe, partially offset by the adverse impact of the COVID-19 pandemic, including $58 million of exposure adjustments on in-force policies which depressed growth by 1.4 percentage points for the nine months ended September 30, 2020.

The nine months ended September 30, 2020 also benefited from the year-over-year increase in large structured transactions in North America.

• Workers' compensation was adversely impacted by market conditions and by the adverse impact of the economic contraction resulting from COVID-19 pandemic.

For the nine months ended September 30, 2020, the decrease included $121 million of exposure adjustments on in-force policies which depressed growth by 7.9 percentage points.

The increase in net premiums written for the three months ended March 31, 2021 reflects growth across most lines of business, partially offset by the adverse impact of the economic contraction resulting from the COVID-19 pandemic.

• The growth in commercial casualty was due to new business and positive rate increases across all regions.

• Workers' compensation experienced lower renewal business in North America reflecting reduced exposures primarily from the COVID-19 pandemic.

• The increase in professional liability was due to new business and positive rate increases primarily in North America and Europe.

• Surety decreased in North America and Latin America due to market conditions and the adverse impact of the economic contraction resulting from the COVID-19 pandemic.

• Commercial multiple peril increased due to higher renewal retention and positive rate increases in North America.

For the nine months ended September 30, 2020, the increase was partially offset by the adverse impact of the economic contraction resulting from the COVID-19 pandemic, including $5 million of exposure adjustments on in-force policies which depressed growth by 0.8 percentage points.

• Property and other short-tail lines increased due to new business and positive rate increases primarily in North America and Europe.

• Personal lines increased on a constant-dollar basis primarily due to rate increases and strong retention in North America, as well as growth in Europe.

In addition, North America benefited from the favorable year-over-year impact in reinstatement premiums.

The increase was partially offset by the impact of the COVID-19 pandemic, which caused declines in automobile and homeowners business in Latin America.

• Global A&H lines decreased due to declines in Asia and Latin America, principally from less travel volume due to COVID-19 pandemic, and in our North American Combined Insurance supplemental A&H program.

• The increase in Life was primarily driven by growth in Latin America, principally driven by our expanded presence in Chile, and Asian international life operations.

• Commercial multiple peril increased due to higher renewal business and positive rate increases in North America.

• Property and other short-tail lines increased due to positive rate increases in Asia, North America and Europe, as well as new business in North America and Europe.

• Personal lines was unfavorably impacted by a decline in automobile lines in North America and Latin America reflecting reduced exposures from the impact of the COVID-19 pandemic and in homeowners lines from reinstatement premiums related to the 2021 winter storm losses in the U.S.

Excluding the reinstatement premiums, personal lines increased globally reflecting strong renewal retention in homeowners and recreational marine lines, primarily in the U.S., and in specialty lines, primarily outside the U.S.

• Global A&H lines decreased due to declines in Asia and Latin America, principally from less travel volume due to the COVID-19 pandemic, and in our North American Combined Insurance supplemental A&H program.

• Life insurance reflects growth in our international life operations, principally from new business written in Taiwan, Vietnam and Chile, which was offset by the Chubb Life Re business that has no new business written.

For additional information on net premiums written, refer to the segment results discussions.

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Net premiums earned for long-duration contracts, typically traditional life contracts, generally are recognized as earned when due from policyholders.

For the three and nine months ended September 30, 2020, net premiums earned increased $438 million and $1,332 million, reflecting the growth in net premiums written described above, including the impact of premiums that were fully earned when written (e.g., large structured transactions and audit and retrospective premium adjustments).

On a constant-dollar basis, for the three and nine months ended September 30, 2020, net premiums earned increased $488 million and $1,542 million, respectively.

P&C Combined Ratio

In evaluating our segments excluding Life Insurance financial performance, we use the P&C combined ratio, the loss and loss expense ratio, the policy acquisition cost ratio, and the administrative expense ratio.

We calculate these ratios by dividing the respective expense amounts by net premiums earned.

We do not calculate these ratios for the Life Insurance segment as we do not use these measures to monitor or manage that segment.

The P&C combined ratio is determined by adding the loss and loss expense ratio, the policy acquisition cost ratio, and the administrative expense ratio.

A P&C combined ratio under 100 percent indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting loss.

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

Loss and loss expense ratio 69.2 % 63.1 % 71.5 % 61.5 %

Policy acquisition cost ratio 18.0 % 18.4 % 18.8 % 19.2 %

Administrative expense ratio 8.0 % 8.7 % 8.6 % 9.2 %

P&C Combined ratio 95.2 % 90.2 % 98.9 % 89.9 %

The loss and loss expense ratio increased 6.1 percentage points and 10.0 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to higher catastrophe losses and lower prior period development, partially offset by a decrease in the underlying loss ratio reflecting earned rate increases outpacing loss cost trends, better underlying claims experience, as well as lower projected crop losses in the current year.

Included in catastrophe losses for the nine months ended September 30, 2020 were losses related to COVID-19 pandemic claims.

The policy acquisition cost ratio decreased 0.4 percentage points for both the three and nine months ended September 30, 2020 primarily due to a shift in mix of business towards lines that have a lower acquisition cost ratio.

The administrative expense ratio decreased 0.7 percentage points and 0.6 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to lower business expenses from continued expense management control, including during the COVID-19 pandemic, and the favorable impact of higher net premiums earned.

For the three months ended March 31, 2021, net premiums earned increased $427 million, or $330 million on a constant-dollar basis, comprising 10.1 percent positive growth in commercial P&C lines and 4.7 percent negative growth in consumer lines on a constant-dollar basis.

Catastrophe Losses and Prior Period Development

Catastrophe losses exclude reinstatement premiums which are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences.

The reinstatement premium amount is typically a pro rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted.

Prior period development is net of related adjustments which typically relate to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends.

The expense adjustments correlate to the prior period loss development on these same policies.

Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development.

Three Months Ended Nine Months Ended

September 30 September 30

(in millions of U.S.

dollars) 2020 2019 2020 2019

Catastrophe losses (excludes reinstatement premiums) (1)

$ 932 $ 234 $ 2,950 $ 759

Favorable prior period development $ 146 $ 167 $ 189 $ 559

(1) Three and nine months ended September 30, 2020 excludes reinstatement premiums collected (expensed) of $7 million and $(13) million, respectively.

We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in the U.S.

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We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss.

Catastrophe Loss Charge by Event

Three Months Ended North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Total excluding RIPs RIPs collected Total including RIPs

September 30, 2020

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

(in millions of U.S.

Hurricanes/Tropical storms $ 318 $ 117 $ 1 $ 51 $ 47 $ 534 $ 4 $ 530

wildfires 30 80 — — — 110 — 110

Midwest derecho 53 34 8 — 1 96 — 96

International weather-related events 1 3 — 28 — 32 — 32

Other events 14 23 1 2 — 40 — 40

IBNR 35 32 — — — 67 — 67

Q1 and Q2 Development (4) 16 — 14 27 53 3 50

Total $ 447 $ 305 $ 10 $ 95 $ 75 $ 932

RIPs collected — — — — 7 7

Total before income tax $ 447 $ 305 $ 10 $ 95 $ 68 $ 925

Income tax benefit 128

Total after income tax $ 797

In addition to the table above, catastrophe losses through September 30, 2020 included COVID-19 pandemic of $1,378 million, severe weather-related events in the U.S.

and internationally, and civil unrest-related losses in the U.S.

Catastrophe losses through September 30, 2019 were primarily due to Hurricane Dorian and severe weather-related events in the U.S., including winter-related storms, and storms in Australia.

Pre-tax net favorable prior period development for the three months ended September 30, 2020 was $146 million, including $35 million adverse development related to legacy environmental exposures.

The remaining favorable development of $181 million comprises $312 million of favorable development from long-tail lines, principally from accident years 2016 and prior, and adverse development of $131 million in short-tail lines.

Pre-tax net favorable prior period development for the nine months ended September 30, 2020 was $189 million, including adverse development of $259 million for U.S.

child molestation claims, predominately reviver statute-related and $35 million adverse development related to legacy environmental exposures.

The remaining favorable development of $483 million principally comprises favorable development from long-tail lines, principally from accident years 2016 and prior.

Pre-tax net favorable PPD for the three months ended September 30, 2019 was $167 million, including $27 million adverse development related to legacy environmental exposures.

The remaining favorable development of $194 million comprises $279

million favorable development from long-tail lines, principally from accident years 2015 and prior, and adverse development of $85 million in short-tail lines principally from non-catastrophe large losses in commercial property lines.

Pre-tax net favorable PPD for the nine months ended September 30, 2019 was $559 million, including $51 million adverse development related to our run-off non-A&E casualty exposures and environmental liabilities.

The remaining favorable development of $610 million comprises $565 million favorable development from long-tail lines, principally from accident years 2015 and prior, and favorable development of $45 million in short-tail lines.

dollars) 2021 2020

Catastrophe losses $ 700 $ 237

Favorable prior period development $ 192 $ 118

Catastrophe losses through March 31, 2021 and 2020 were primarily from the following events:

Winter storm losses in the U.S.

and other severe weather-related events in the U.S.

and internationally.

Global weather-related events of $224 million (including Tornado in Nashville, Tennessee and other severe weather-related events in the U.S., storms in Australia, Australia wildfires, and other international weather-related events);

and COVID-19 pandemic claims of $13 million.

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 ended March 31, 2021 was $192 million, with 19 percent in long-tail lines, principally from accident years 2017 and prior, and 81 percent in short-tail lines, primarily in accident and health, surety, and homeowners lines.

Pre-tax net favorable PPD for the three months ended March 31, 2020 was $118 million, with 28 percent in long-tail lines, principally from accident years 2016 and prior, and 72 percent in short-tail lines.

Favorable development for the three months ended March 31, 2020 included a $14 million benefit from crop insurance.

Refer to the prior period development discussion in Footnote 6 to the Consolidated Financial Statements for additional information.

Current Accident Year (CAY) Loss Ratio excluding CATs and CAY P&C Combined Ratio excluding CATs

The following table presents the impact of catastrophe losses and prior period development on our loss and loss expense ratio.

Refer to the Non-GAAP Reconciliation section for additional information.

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

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

Loss and loss expense ratio

CAY loss ratio excluding catastrophe losses 57.2 % 58.2 %

Catastrophe losses 9.1 % 3.3 %

Prior period development (2.6) % (1.7) %

CAY loss ratio excluding catastrophe losses 59.7 % 62.4 % 59.4 % 60.6 %

The CAY loss ratio excluding CATs decreased 2.7 percentage points and 1.2 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to a decrease in the underlying loss ratio reflecting earned rate increases outpacing loss cost trends and better underlying claims experience as well as lower projected crop losses in the current year.

CAY P&C Combined Ratio excluding Catastrophe Losses

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

CAY Loss and loss expense ratio ex CATs 59.7 % 62.4 % 59.4 % 60.6 %

CAY Policy acquisition cost ratio ex CATs 18.0 % 18.4 % 18.8 % 19.2 %

CAY Administrative expense ratio ex CATs 8.0 % 8.7 % 8.6 % 9.2 %

CAY P&C combined ratio ex CATs 85.7 % 89.5 % 86.8 % 89.0 %

Loss and loss expense ratio 63.7 % 59.8 %

Policy acquisition cost ratio 19.5 % 20.0 %

Administrative expense ratio 8.6 % 9.3 %

P&C Combined ratio 91.8 % 89.1 %

The loss and loss expense ratio increased 3.9 percentage points for the three months ended March 31, 2021 due to higher catastrophe losses, partially offset by higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 1.0 percentage point for the three months ended March 31, 2021 due to margin improvements coming from earned rate exceeding loss cost trends.

The policy acquisition cost ratio decreased 0.5 percentage points for the three months ended March 31, 2021 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 0.7 percentage points for the three months ended March 31, 2021 primarily due to lower expenses during the COVID-19 pandemic, reduced pension obligations reflecting favorable market conditions, and the favorable impact of higher net premiums earned.

Policy benefits

1 unchanged sentence

Refer to the Life Insurance segment operating results section for further discussion.

For the three months ended September 30, 2020 and 2019, Policy benefits were $198 million, and $158 million, respectively, which included separate account liabilities (gains) losses of $24 million and $(7) 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 $174 million and $165 million for the three months ended September 30, 2020 and 2019, respectively, reflecting our expanded presence in Chile.

For the nine months ended September 30, 2020 and 2019, Policy benefits were $550 million, and $515 million, respectively, which included separate account liabilities (gains) losses of $8 million and $20 million, respectively.

For the three months ended March 31, 2021 and 2020, Policy benefits were $167 million and $129 million, respectively, which included separate account liabilities (gains) losses of $4 million and $(56) 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 $542 million and $495 million for the nine months ended September 30, 2020 and 2019, respectively, reflecting growth in new business as described above and our expanded presence in Chile.

Refer to the respective sections for a discussion of Net investment income, Other (income) expense, Net realized gains and losses, Amortization of purchased intangibles, and Income tax expense.

Segment Operating Results – Three and Nine Months Ended September 30, 2020 and 2019

Excluding the separate account gains and losses, Policy benefits were $163 million and $185 million for the three months ended March 31, 2021 and 2020, respectively, reflecting a decline in our North America Combined Insurance and Chubb Life Re business, partially offset by growth in 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 Months Ended March 31, 2021 and 2020

We operate through six business segments:

2 unchanged sentences

North America Commercial P&C Insurance

The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) insurance and services to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda.

The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) and accident & health (A&H) insurance and services to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda.

This segment includes our North America Major Accounts and Specialty Insurance division (large corporate accounts and wholesale business), and the North America Commercial Insurance division (principally middle market and small commercial accounts).

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Net premiums written $ 3,664 $ 3,252 12.7 %

7 unchanged sentences

Segment income $ 884 $ 963 (8.3) %

Loss and loss expense ratio 70.7 % 64.4 % 6.3 pts 77.9 % 64.6 % 13.3 pts

Policy acquisition cost ratio 14.2 % 14.4 % (0.2) pts 13.9 % 14.2 % (0.3) pts

Administrative expense ratio 7.0 % 8.1 % (1.1) pts 7.2 % 7.8 % (0.6) pts

Combined ratio 91.9 % 86.9 % 5.0 pts 99.0 % 86.6 % 12.4 pts

Net premiums written increased $326 million, or 9.4 percent, and $813 million, or 8.2 percent, for the three and nine months ended September 30, 2020, respectively.

Net premiums earned increased $271 million, or 8.5 percent, and $767 million, or 7.9 percent, for the three and nine months ended September 30, 2020, respectively, reflecting the growth in net premiums written.

Growth for the three and nine months ended September 30, 2020 was adversely impacted by the impact of the COVID-19 pandemic, including $39 million and $134 million, respectively, of exposure adjustments on in-force policies written in the second quarter of 2020.

Combined Ratio

The loss and loss expense ratio increased 6.3 percentage points and 13.3 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to higher catastrophe losses, partially offset by higher favorable prior period development and a decrease in the underlying loss ratio reflecting earned rate increases outpacing loss cost trends.

In addition, the higher catastrophe losses for the nine months ended September 30, 2020 included losses related to COVID-19 pandemic claims.

The administrative expense ratio decreased 1.1 percentage points and 0.6 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to lower business expenses from continued expense management control, including during the COVID-19 pandemic.

These decreases were partially offset by lower net profit from our third-party claims administration business, ESIS, and normal inflationary increases.

Catastrophe Losses and Prior Period Development

Three Months Ended Nine Months Ended

September 30 September 30

Loss and loss expense ratio:

CAY loss ratio excluding catastrophe losses 63.4 % 64.2 % (0.8) pts

Catastrophe losses 9.9 % 3.5 % 6.4 pts

Prior period development (3.6) % (3.1) % (0.5) pts

Loss and loss expense ratio 69.7 % 64.6 % 5.1 pts

Policy acquisition cost ratio 14.0 % 14.6 % (0.6) pts

Administrative expense ratio 6.9 % 7.6 % (0.7) pts

Combined ratio 90.6 % 86.8 % 3.8 pts

Catastrophe Losses and Prior Period Development Three Months Ended

(in millions of U.S.

dollars) 2021 2020

Catastrophe losses (excludes reinstatement premiums) $ 447 $ 88 $ 1,835 $ 319

Catastrophe losses $ 362 $ 118

Favorable prior period development $ 127 $ 105

Catastrophe losses through September 30, 2020 and 2019 were primarily from the following events:

COVID-19 pandemic of $973 million, civil unrest in the U.S., and natural catastrophes including Nashville, Tennessee tornado, Hurricane Laura, Hurricane Sally, Tropical Storm Isaias, Midwest derecho, U.S.

wildfires, and other severe weather-related events in the U.S.

Winter-related storms and other severe weather-related events in the U.S., Hurricane Dorian and Tropical Storm Imelda

Catastrophe losses through March 31, 2021 and 2020 were primarily from the following events:

Winter storm losses and other severe weather-related events in the U.S.

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.

CAY Loss Ratio excluding Catastrophe Losses

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

Loss and loss expense ratio 70.7 % 64.4 % 77.9 % 64.6 %

Catastrophe losses (12.9) % (2.8) % (17.6) % (3.3) %

Prior period development 6.0 % 3.9 % 4.4 % 4.5 %

CAY loss ratio excluding catastrophe losses 63.8 % 65.5 % 64.7 % 65.8 %

The CAY loss ratio excluding catastrophe losses decreased 1.7 percentage points and 1.1 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to a decrease in the underlying loss ratio reflecting earned rate increases outpacing loss cost trends.

Net premiums written increased $412 million, or 12.7 percent, for the three months ended March 31, 2021 comprising positive growth of 14.7 percent in commercial P&C lines and negative growth of 18.5 percent in consumer lines.

The growth in commercial P&C lines reflects positive rate increases, net of exposure declines, and growth in new business written across a number of retail and wholesale lines, including financial lines, property, excess casualty, and large risk casualty.

This was partially offset by lower new business and exposure declines in A&H, impacting our consumer lines.

Net premiums earned increased $298 million, or 8.8 percent, for the three months ended March 31, 2021, reflecting the growth in net premiums written described above.

Combined Ratio

The loss and loss expense ratio increased 5.1 percentage points for the three months ended March 31, 2021, primarily due to higher catastrophe losses, partially offset by higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 0.8 percentage points for the three months ended March 31, 2021 primarily due to margin improvements coming from earned rate exceeding loss cost trends.

The policy acquisition cost ratio decreased 0.6 percentage points for the three months ended March 31, 2021 primarily due to a change in mix of business towards lines that have a lower acquisition cost ratio.

The administrative expense ratio decreased 0.7 percentage points for the three months ended March 31, 2021, primarily due to continued expense management and the shutdown associated with the COVID-19 pandemic, as well as reduced pension obligations reflecting favorable market conditions.

North America Personal P&C Insurance

The North America Personal P&C Insurance segment comprises operations that provide high net worth personal lines products, including homeowners and complementary products such as valuable articles, excess liability, automobile, and recreational marine insurance and services in the U.S.

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Net premiums written $ 1,098 $ 1,107 (0.8) %

3 unchanged sentences

Administrative expenses 60 68 (12.0) %

Underwriting income (loss) (43) 201 NM 294 412 (28.7) %

Underwriting income 58 204 (71.6) %

Net investment income 65 66 (2.4) %

2 unchanged sentences

Segment income $ 119 $ 265 (55.2) %

Loss and loss expense ratio 78.1 % 56.9 % 21.2 pts 66.4 % 62.1 % 4.3 pts

Policy acquisition cost ratio 20.1 % 20.2 % (0.1) pts 20.0 % 20.2 % (0.2) pts

Administrative expense ratio 5.3 % 6.0 % (0.7) pts 5.5 % 6.0 % (0.5) pts

Combined ratio 103.5 % 83.1 % 20.4 pts 91.9 % 88.3 % 3.6 pts

NM – not meaningful

Net premiums written increased $34 million, or 2.8 percent, and $103 million, or 2.9 percent, for the three and nine months ended September 30, 2020, respectively, primarily due to rate increases and strong account retention across most lines.

Growth for the three and nine months ended September 30, 2020 was partially offset by $4 million and $11 million, respectively, in lower automobile premiums as a result of reduced exposures related to the conditions caused by the COVID-19 pandemic.

Net premiums earned increased $44 million, or 3.8 percent, and $114 million, or 3.3 percent, for the three and nine months ended September 30, 2020, respectively, reflecting the growth in net premiums written described above.

Combined Ratio

The loss and loss expense ratio increased 21.2 percentage points and 4.3 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to higher catastrophe losses and unfavorable prior period development in the current year compared to favorable prior period development in the prior year, partially offset by a decrease in the underlying loss ratio reflecting better underlying claims experience.

The policy acquisition cost ratio was relatively flat for the three months ended September 30, 2020.

The policy acquisition cost ratio decreased 0.2 percentage points for the nine months ended September 30, 2020 primarily due to a lower year-over-year amount of supplemental commissions.

The administrative expense ratio decreased 0.7 percentage points and 0.5 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to lower employee benefit-related expenses and lower business expenses from continued expense management control, including during the COVID-19 pandemic, partially offset by normal inflationary increases.

Loss and loss expense ratio:

CAY loss ratio excluding catastrophe losses 53.2 % 55.1 % (1.9) pts

Catastrophe losses 19.3 % 1.8 % 17.5 pts

Prior period development (3.3) % 0.1 % (3.4) pts

Loss and loss expense ratio 69.2 % 57.0 % 12.2 pts

Policy acquisition cost ratio 20.9 % 20.4 % 0.5 pts

Administrative expense ratio 5.0 % 5.6 % (0.6) pts

Combined ratio 95.1 % 83.0 % 12.1 pts

Catastrophe Losses and Prior Period Development

Three Months Ended Nine Months Ended

September 30 September 30

Three Months Ended

(in millions of U.S.

dollars) 2021 2020

Catastrophe losses (excludes reinstatement premiums) $ 305 $ 83 $ 435 $ 329

Catastrophe losses $ 240 $ 21

Favorable (unfavorable) prior period development $ 40 $ (1)

Catastrophe losses through September 30, 2020 and 2019 were primarily from the following events:

wildfires, Tropical Storm Isaias, Midwest derecho, Hurricane Sally, Hurricane Laura, and other severe weather-related events in the U.S.

Winter-related storms and other severe weather-related events in the U.S.

and Hurricane Dorian

Catastrophe losses through March 31, 2021 were primarily from winter storm losses 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.

CAY Loss Ratio excluding Catastrophe Losses

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

Loss and loss expense ratio 78.1 % 56.9 % 66.4 % 62.1 %

Catastrophe losses (24.7) % (7.0) % (12.0) % (9.4) %

Prior period development (4.2) % 5.2 % (1.4) % 2.5 %

CAY loss ratio excluding catastrophe losses 49.2 % 55.1 % 53.0 % 55.2 %

The CAY loss ratio excluding catastrophe losses decreased 5.9 percentage points and 2.2 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to a decrease in the underlying loss ratio reflecting better underlying claims experience.

Net premiums written decreased $9 million, or 0.8 percent, for the three months ended March 31, 2021, primarily due to the unfavorable impact of reinstatement premiums of $23 million related to 2021 winter storm losses and automobile return premiums as mandated by certain states due to the slowdown in miles driven as a result of the COVID-19 pandemic.

This decrease was partially offset by strong renewal retention, principally in homeowners and recreational marine lines.

Net premiums earned decreased $16 million, or 1.3 percent, for the three months ended March 31, 2021, reflecting the decline in net premiums written described above.

Combined Ratio

The loss and loss expense ratio increased 12.2 percentage points for the three months ended March 31, 2021, primarily due to higher catastrophe losses, partially offset by favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 1.9 percentage points reflecting a favorable year-over-year loss ratio improvement in automobile, due to lower claim frequency, and in homeowners as earned rate exceeded loss cost trends.

The policy acquisition cost ratio increased 0.5 percentage points for the three months ended March 31, 2021, primarily due to the unfavorable impact of reinstatement premiums on net premiums earned.

The administrative expense ratio decreased 0.6 percentage points for the three months ended March 31, 2021, primarily due to continued expense management and the shutdown associated with the COVID-19 pandemic, as well as reduced pension obligations reflecting favorable market conditions.

North America Agricultural Insurance

2 unchanged sentences

(Rain and Hail) as well as farm and ranch and specialty P&C commercial insurance products and services through our Chubb Agribusiness unit.

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Net premiums written $ 183 $ 157 16.5 %

3 unchanged sentences

Administrative expenses 3 4 (23.8) %

Underwriting income 65 1 NM 110 112 (1.1) %

Underwriting income 10 14 (30.2) %

Net investment income 7 9 (18.5) %

Other (income) expense — — — 1 1 —

Amortization of purchased intangibles 7 7 —

Segment income $ 65 $ 2 NM $ 112 $ 112 0.6 %

Loss and loss expense ratio 87.1 % 93.5 % (6.4) pts 84.9 % 84.7 % 0.2 pts

Policy acquisition cost ratio 5.8 % 6.0 % (0.2) pts 6.6 % 6.6 % — pts

Administrative expense ratio 0.4 % 0.4 % — pts 0.8 % 0.6 % 0.2 pts

Combined ratio 93.3 % 99.9 % (6.6) pts 92.3 % 91.9 % 0.4 pts

NM – not meaningful

Net premiums written increased $48 million, or 5.0 percent, for the three months ended September 30, 2020 primarily due to an increase in MPCI premiums, driven by new policy growth, higher reported acreage from policyholders and a favorable change in the mix of crops planted, and growth in our Chubb Agribusiness unit.

government under the premium-sharing formulas as well as the items noted above, partially offset by lower rates resulting from year-over-year commodity price declines.

Under the MPCI premium-sharing formulas, we retained more premiums on the 2019 crop year due to higher than expected losses for that year.

Net premiums written in the first nine months of 2019 was lower due to higher cessions to the U.S.

government reflecting the more profitable 2018 crop year.

Net premiums earned increased $30 million, or 3.2 percent, and $67 million, or 4.9 percent, respectively, for the three and nine months ended September 30, 2020, reflecting the growth in net premiums written described above.

Combined Ratio

The loss and loss expense ratio decreased 6.4 percentage points for the three months ended September 30, 2020 primarily due to lower projected crop losses in the current year and the favorable year-over-year impact of our crop derivatives, partially offset by higher underlying losses in our Chubb Agribusiness unit.

Additionally, the prior year included the adverse impact of weather conditions.

The loss and loss expense ratio increased 0.2 percentage points for the nine months ended September 30, 2020 primarily due to our MPCI business, reflecting unfavorable prior period development, which were partially offset by lower crop losses in the current year and the favorable year-over-year impact of our crop derivatives;

as well as in our Chubb Agribusiness unit, reflecting higher catastrophe losses, and in our Rain and Hail business, due to higher underlying losses.

The policy acquisition cost ratio decreased 0.2 percentage points for the three months ended September 30, 2020 primarily due to the favorable impact of higher net premiums earned in the current year.

The policy acquisition cost ratio was flat for the nine months ended September 30, 2020.

The administrative expense ratio was flat for the three months ended September 30, 2020.

The administrative expense ratio increased 0.2 percentage points for the nine months ended September 30, 2020 primarily due to normal operating expense and inflationary increases and a reduction in the current year Administrative and Operating (A&O) reimbursements related to the MPCI business we earned under the government program.

Catastrophe Losses and Prior Period Development

Three Months Ended Nine Months Ended

September 30 September 30

Segment income $ 10 $ 16 (36.0) %

Loss and loss expense ratio:

CAY loss ratio excluding catastrophe losses 71.2 % 76.2 % (5.0) pts

Catastrophe losses 7.4 % 8.9 % (1.5) pts

Prior period development (1.1) % (15.5) % 14.4 pts

Loss and loss expense ratio 77.5 % 69.6 % 7.9 pts

Policy acquisition cost ratio 10.7 % 11.1 % (0.4) pts

Administrative expense ratio 2.7 % 4.1 % (1.4) pts

Combined ratio 90.9 % 84.8 % 6.1 pts

Catastrophe Losses and Prior Period Development Three Months Ended

(in millions of U.S.

dollars) 2021 2020

Catastrophe losses (excludes reinstatement premiums) $ 10 $ 3 $ 24 $ 7

Favorable (unfavorable) prior period development $ (18) $ (18) $ (4) $ 43

Catastrophe losses through September 30, 2020 were primarily from the Midwest derecho and other severe weather-related events in the U.S.

in our farm, ranch, and specialty P&C businesses.

Catastrophe losses through September 30, 2019 were primarily from severe weather-related events in the U.S.

in our farm, ranch, and specialty P&C businesses.

Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.

For the three months ended September 30, 2020, net unfavorable prior period development was $18 million.

For the nine months ended September 30, 2020, net unfavorable prior period development was $4 million which included $1 million of incurred losses due to higher than expected MPCI losses for the 2019 crop year and a $3 million decrease in net premiums earned related to the MPCI profit and loss calculation formula.

For the three months ended September 30, 2019, net unfavorable prior period development was $18 million.

For the nine months ended September 30, 2019, net favorable prior period development was $43 million which included $72 million of favorable incurred losses and $3 million of lower acquisition costs due to lower than expected MPCI losses for the 2018 crop year, partially offset by a $32 million decrease in net premiums earned related to the MPCI profit and loss calculation formula.

CAY Loss Ratio excluding Catastrophe Losses

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

Loss and loss expense ratio 87.1 % 93.5 % 84.9 % 84.7 %

Catastrophe losses $ 8 $ 8

Prior period development (1.9) % (1.9) % (0.2) % 3.2 %

CAY loss ratio excluding catastrophe losses 84.2 % 91.3 % 83.0 % 87.4 %

The CAY loss ratio excluding catastrophe losses decreased 7.1 percentage points and 4.4 percentage points for the three and nine months ended September 30, 2020, respectively, principally due to lower projected crop losses in the current year and the favorable year-over-year impact of our crop derivatives, partially offset by higher underlying losses in our Rain and Hail business.

Favorable prior period development $ 2 $ 14

Catastrophe losses through March 31, 2021 and 2020 were primarily from severe weather-related events in the U.S.

in Chubb Agribusiness.

Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.

For the three months ended March 31, 2021, net favorable prior period development comprised a $2 million increase in net premiums earned related to the MPCI profit and loss calculation formula.

For the three months ended March 31, 2020, net favorable prior period development was $14 million which included $17 million of favorable incurred losses due to lower than expected MPCI losses for the 2019 crop year, partially offset by a $3 million decrease in net premiums earned related to the MPCI profit and loss calculation formula.

Net premiums written increased $26 million, or 16.5 percent, for the three months ended March 31, 2021, due to policy count growth and higher commodity prices in our MPCI business, and strong new business growth in Chubb Agribusiness.

Net premiums earned increased $16 million, or 16.7 percent, for the three months ended March 31, 2021, reflecting the growth in net premiums written described above.

Combined Ratio

The loss and loss expense ratio increased 7.9 percentage points for the three months ended March 31, 2021, primarily due to lower favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 5.0 percentage points due to higher premiums earned from Chubb Agribusiness, which has a lower loss ratio, the favorable year-over-year impact of our crop derivatives, and lower underlying losses in Chubb Agribusiness.

The policy acquisition cost ratio decreased 0.4 percentage points for the three months ended March 31, 2021, primarily due to the favorable impact of higher net premiums earned.

The administrative expense ratio decreased 1.4 percentage points for the three months ended March 31, 2021, primarily due to continued expense management and the shutdown associated with the COVID-19 pandemic and the favorable impact of higher net premiums earned.

Overseas General Insurance

4 unchanged sentences

Chubb provides funds at Lloyd's to support underwriting by Syndicate 2488 which is managed by Chubb Underwriting Agencies Limited.

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Net premiums written $ 2,890 $ 2,598 11.2 %

Net premiums written - constant dollars 7.1 %

Net premiums earned 2,478 2,307 7.4 %

7 unchanged sentences

Segment income $ 409 $ 278 47.0 %

Net premiums written - constant dollars (1)

Loss and loss expense ratio 51.0 % 51.1 % (0.1) pts 57.6 % 51.3 % 6.3 pts

Policy acquisition cost ratio 27.3 % 28.0 % (0.7) pts 27.8 % 28.1 % (0.3) pts

Administrative expense ratio 11.1 % 11.4 % (0.3) pts 11.1 % 11.7 % (0.6) pts

Combined ratio 89.4 % 90.5 % (1.1) pts 96.5 % 91.1 % 5.4 pts

Loss and loss expense ratio:

CAY loss ratio excluding catastrophe losses 49.9 % 50.8 % (0.9) pts

Catastrophe losses 2.1 % 3.8 % (1.7) pts

Prior period development (1.0) % (0.1) % (0.9) pts

Loss and loss expense ratio 51.0 % 54.5 % (3.5) pts

Policy acquisition cost ratio 27.0 % 27.8 % (0.8) pts

Administrative expense ratio 10.7 % 11.2 % (0.5) pts

Combined ratio 88.7 % 93.5 % (4.8) pts

Catastrophe Losses and Prior Period Development

Three Months Ended

(in millions of U.S.

dollars) 2021 2020

Catastrophe losses $ 50 $ 90

Favorable prior period development $ 25 $ 4

Catastrophe losses through March 31, 2021 and 2020 were primarily from the following events:

Winter storm losses in the U.S.

and International weather-related events

Storms in Australia, Australia wildfires, and other international weather-related events;

and COVID-19 pandemic claims of $13 million.

Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.

Net Premiums Written by Region

Three months ended September 30

Three months ended March 31

(in millions of U.S.

8 unchanged sentences

Net premiums written $ 2,890 100 % $ 2,598 100 % $ 2,697 11.2 % 7.1 %

Nine months ended September 30

(in millions of U.S.

dollars, except for percentages) 2020 2020

% of Total 2019 2019

% of Total C$ (1)

Y-19 C$ (1) Y-20 vs.

Europe $ 2,994 44 % $ 2,698 39 % $ 2,678 11.0 % 11.8 %

Latin America 1,414 21 % 1,657 24 % 1,496 (14.6) % (5.5) %

Asia 2,203 32 % 2,259 33 % 2,237 (2.5) % (1.5) %

246 3 % 267 4 % 263 (8.0) % (6.6) %

Net premiums written $ 6,857 100 % $ 6,881 100 % $ 6,674 (0.3) % 2.7 %

(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.

(1) Comprises Combined International, Eurasia and Africa region, and other international.

Net premiums written increased $10 million and decreased $24 million, or increased $61 million and $183 million on a constant-dollar basis, for the three and nine months ended September 30, 2020, respectively, due to growth in commercial P&C lines across all regions resulting from new business, retention, and positive rate increases, partially offset by the impact of the COVID-19 pandemic which negatively impacted several lines, mainly in consumer personal lines in Latin America and A&H in Asia, resulting from less travel volume and lower exposures.

For the three and nine months ended September 30, 2020 net premiums earned increased $81 million and $243 million, or $127 million and $436 million on a constant-dollar basis, respectively, reflecting higher net premiums written in prior periods.

Net premiums written increased $292 million, or $193 million on a constant-dollar basis, for the three months ended March 31, 2021, reflecting growth in commercial P&C lines of 15.2 percent, primarily in Europe and Asia, most notably in casualty, resulting from new business and positive rate increases.

Net premiums written also reflected a decline in consumer lines of 4.2 percent, primarily automobile in Latin America, and A&H in Asia, resulting from less travel volume and lower exposures, partially offset by personal lines growth in Europe, principally in specialty personal lines.

Net premiums earned increased $171 million, or $89 million on a constant-dollar basis, for the three months ended March 31, 2021, reflecting the increase in net premiums written described above.

Combined Ratio

The loss and loss expense ratio was relatively flat for the three months ended September 30, 2020.

The loss and loss expense ratio increased 6.3 percentage points for the nine months ended September 30, 2020 primarily due to higher catastrophe losses, primarily related to the COVID-19 pandemic, along with lower premiums earned from A&H lines in Latin America and Asia, which have a lower loss ratio.

These increases were partially offset by higher favorable prior period development.

The policy acquisition cost ratio decreased 0.7 percentage points and 0.3 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to a shift in mix of business from A&H lines towards P&C lines, which have a lower acquisition cost ratio.

The administrative expense ratio decreased 0.3 percentage points and 0.6 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to lower business expenses from continued expense management control, including during the COVID-19 pandemic, and the favorable impact of higher net premiums earned in the current year.

Catastrophe Losses and Prior Period Development

Three Months Ended Nine Months Ended

September 30 September 30

(in millions of U.S.

dollars) 2020 2019 2020 2019

Catastrophe losses (excludes reinstatement premiums) $ 95 $ 35 $ 568 $ 69

Favorable prior period development $ 60 $ 25 $ 100 $ 49

Catastrophe losses through September 30, 2020 and 2019 were primarily from the following events:

COVID-19 pandemic of $373 million, storms in Australia, Australia wildfires, Hurricane Laura, Hurricane Sally, Tropical Storm Isaias, and other weather-related events

Typhoon Faxai, Hurricane Dorian, storms in Australia, and other international weather-related events

Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.

CAY Loss Ratio excluding Catastrophe Losses

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

Loss and loss expense ratio 51.0 % 51.1 % 57.6 % 51.3 %

Catastrophe losses (4.1) % (1.5) % (8.5) % (1.0) %

Prior period development 2.6 % 1.1 % 1.5 % 0.7 %

CAY loss ratio excluding catastrophe losses 49.5 % 50.7 % 50.6 % 51.0 %

The CAY loss ratio excluding catastrophe losses decreased 1.2 percentage points and 0.4 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to a decrease in the underlying loss ratio from earned rate changes modestly above loss trends and a benefit from lower current accident year losses resulting from a decrease in exposures

due to the COVID-19 pandemic, partially offset by lower premiums earned from A&H lines in Latin America and Asia, which have a lower loss ratio.

The loss and loss expense ratio decreased 3.5 percentage points for the three months ended March 31, 2021, primarily due to lower catastrophe losses and higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 0.9 percentage points primarily due to margin improvements coming from earned rates exceeding loss cost trends and a benefit from lower current accident year losses resulting from a decrease in exposures due to the COVID-19 pandemic.

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 0.8 percentage points for the three months ended March 31, 2021, 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 0.5 percentage points for the three months ended March 31, 2021, primarily due to the favorable impact of higher net premiums earned.

Global Reinsurance

The Global Reinsurance segment represents our reinsurance operations comprising Chubb Tempest Re Bermuda, Chubb Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada.

Global Reinsurance markets its reinsurance products worldwide under the Chubb Tempest Re brand name and provides a broad range of traditional reinsurance coverage to a diverse array of primary P&C companies.

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Global Reinsurance markets its reinsurance products worldwide primarily through reinsurance brokers under the Chubb Tempest Re brand name and provides a broad range of traditional and non-traditional reinsurance coverage to a diverse array of primary P&C companies.

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Net premiums written $ 207 $ 218 (5.1) %

Net premiums written - constant dollars (6.2) %

Net premiums earned 180 186 (3.3) %

2 unchanged sentences

Administrative expenses 8 10 (14.8) %

Underwriting income (loss) (32) 30 NM 51 89 (42.2) %

Underwriting income 7 44 (85.3) %

Net investment income 70 69 2.0 %

Other (income) expense — — — 1 — NM

Segment income $ 77 $ 113 (32.2) %

Net premiums written - constant dollars (1)

27.2 % 11.9 %

Loss and loss expense ratio 89.6 % 49.6 % 40.0 pts 60.3 % 50.3 % 10.0 pts

Policy acquisition cost ratio 23.5 % 26.2 % (2.7) pts 24.5 % 26.1 % (1.6) pts

Administrative expense ratio 5.2 % 5.3 % (0.1) pts 5.3 % 5.3 % — pts

Combined ratio 118.3 % 81.1 % 37.2 pts 90.1 % 81.7 % 8.4 pts

NM – not meaningful

(1) On a constant-dollar basis.

Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.

For the three and nine months ended September 30, 2020 net premiums written increased $40 million and $66 million, respectively, primarily driven by new business in casualty lines, rate increases in property catastrophe lines and reinstatement premiums on catastrophe losses, partially offset by an increase in retrocessions.

In addition, the prior year had unfavorable premium adjustments which lowered premium in 2019.

For the three and nine months ended September 30, 2020 net premiums earned increased $11 million and $33 million, respectively, principally reflecting the increase in net premiums written described above.

Combined Ratio

The loss and loss expense ratio increased 40.0 percentage points and 10.0 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to higher catastrophe losses and lower favorable prior period development, partially offset by a shift in mix of business towards lines which have a lower loss ratio.

The policy acquisition cost ratio decreased 2.7 percentage points and 1.6 percentage points for the three and nine months ended September 30, 2020, respectively, primarily due to lower profit commissions paid and a shift in mix of business towards lines which have lower acquisition costs.

Loss and loss expense ratio:

CAY loss ratio excluding catastrophe losses 48.3 % 50.4 % (2.1) pts

Catastrophe losses 23.8 % — 23.8 pts

Prior period development (5.2) % (3.9) % (1.3) pts

Loss and loss expense ratio 66.9 % 46.5 % 20.4 pts

Policy acquisition cost ratio 24.9 % 24.5 % 0.4 pts

Administrative expense ratio 4.6 % 5.1 % (0.5) pts

Combined ratio 96.4 % 76.1 % 20.3 pts

Catastrophe Losses and Prior Period Development

Three Months Ended Nine Months Ended

September 30 September 30

Three Months Ended

(in millions of U.S dollars) 2021 2020

Catastrophe losses (excludes reinstatement premiums) $ 75 $ 25 $ 88 $ 35

Catastrophe losses $ 40 $ —

Favorable prior period development $ 7 $ 7

Catastrophe losses through September 30, 2020 and 2019 were primarily from the following events:

COVID-19 pandemic claims of $10 million, Hurricane Laura, Hurricane Sally, Tropical Storm Isaias, and other severe weather-related events in Canada and the U.S.

Hurricane Dorian and various U.S.

and Japanese severe weather-related events

Catastrophe losses through March 31, 2021 were primarily from winter storm losses in the U.S.

Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information.

CAY Loss Ratio excluding Catastrophe Losses

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

Loss and loss expense ratio 89.6 % 49.6 % 60.3 % 50.3 %

Catastrophe losses (42.0) % (15.4) % (16.3) % (7.0) %

Prior period development 2.1 % 15.7 % 5.0 % 6.7 %

CAY loss ratio excluding catastrophe losses 49.7 % 49.9 % 49.0 % 50.0 %

The CAY loss ratio excluding catastrophe losses decreased 0.2 percentage points and 1.0 percentage points for the three and nine months ended September 30, 2020, respectively, primarily from a shift in mix of business towards catastrophe lines which have a lower loss ratio.

More new business was written in the three months ended March 31, 2021 compared to the prior year.

However, net premiums written decreased $11 million for the three months ended March 31, 2021, mainly from timing of premium recognition associated with a change in the mix of business.

Some treaties written in the prior year, for which premiums were recognized at the effective date, were not renewed and were offset by new business, for which premiums are recognized over the treaty term.

For the three months ended March 31, 2021, net premiums earned decreased $6 million, reflecting the change in mix of business and the timing of premium recognition, as described above.

Combined Ratio

The loss and loss expense ratio increased 20.4 percentage points for the three months ended March 31, 2021, primarily due to higher catastrophe losses.

The CAY loss ratio excluding catastrophe losses decreased by 2.1 percentage points primarily from a shift in mix of business towards lines which have a lower loss ratio.

The policy acquisition cost ratio increased 0.4 percentage points for the three months ended March 31, 2021, primarily due to higher commissions paid on proportional business.

The administrative expense ratio decreased 0.5 percentage points for the three months ended March 31, 2021, primarily due to lower employee benefit-related expenses.

Life Insurance

1 unchanged sentence

We assess the performance of our life business based on Life Insurance underwriting income, which includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Net premiums written $ 620 $ 645 (3.8) %

Net premiums written - constant dollars (4.7) %

Net premiums earned 595 631 (5.7) %

8 unchanged sentences

Segment income $ 104 $ 94 11.2 %

Net premiums written - constant dollars (1)

(1) On a constant-dollar basis.

Amounts are calculated by translating prior period results using the same local currency rates as the comparable current period.

For the three months ended September 30, 2020, net premiums written decreased $2 million, and increased $1 million on a constant-dollar basis, primarily due to growth in our international life operations of 9.4 percent, principally in Latin America driven by our expanded presence in Chile.

The growth in international life operations was offset by declines in North America Combined Insurance business of 6.9 percent, including the adverse impact of the COVID-19 pandemic.

For the nine months ended September 30, 2020, net premiums written increased $104 million, or $115 million on a constant-dollar basis, primarily reflecting growth in international life operations of 22.4 percent, principally in Latin America and Asia, partially offset by a decline in our North America Combined Insurance business of 5.2 percent.

Net premiums written decreased $25 million, or $31 million on a constant-dollar basis for the three months ended March 31, 2021.

This decrease reflects the adverse impact of the COVID-19 pandemic on our North America Combined Insurance business of 9.4 percent, and a decline in our Chubb Life Re business which continues to decline as no new life reinsurance business is currently being written.

These decreases were partially offset by growth in our International Life operations of 9.8 percent, principally in Asia, from new business in Taiwan and Vietnam, and Chile.

The following table presents deposits collected on universal life and investment contracts:

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2020 2019 C$ (1) 2019

2020 2019 C$ (1) 2019

dollars, except for percentages) 2021 2020 C$ 2020 Q-21 vs.

Deposits collected on Universal life and investment contracts $ 551 $ 443 $ 470 24.4 % 17.3 %

(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.

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 decreased for the three months ended September 30, 2020 due to competitive market conditions and the impact of the COVID-19 pandemic.

Life deposits collected increased for the nine months ended September 30, 2020 as growth in Taiwan during the first quarter more than offset declines in the second and third quarters.

Life deposits collected increased $108 million for the three months ended March 31, 2021, primarily due to growth in Taiwan.

Life Insurance underwriting income and Segment income

Life Insurance underwriting income increased $3 million for the three months ended September 30, 2020 primarily due to higher net investment income.

Life Insurance underwriting income decreased $5 million for the nine months ended September 30, 2020 primarily due to the impact of COVID-19 related catastrophe losses and a decrease in underwriting income in our variable annuity business, which continues to decline as no new life reinsurance business is currently being written.

Additionally, segment income included other income of $23 million and $52 million for the three and nine months ended September 30, 2020, respectively, principally due to our share of net income from Huatai Life, our partially-owned life insurance entity in China.

Life Insurance underwriting income decreased $12 million for the three months ended March 31, 2021, primarily due to a one-time employee related benefit of $7 million in the prior year.

Segment income increased $10 million for the three months ended March 31, 2021, as the decline in life insurance underwriting income was offset by higher other income, principally due to our share of net income from our investment in Huatai, our partially-owned insurance entity in China.

Corporate results primarily include the results of our non-insurance companies, income and expenses not attributable to reportable segments and loss and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-off exposures.

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

Three Months Ended

March 31 % Change

(in millions of U.S.

dollars, except for percentages) 2021 2020 Q-21 vs.

Q-19 2020 2019 YTD-20 vs.

Losses and loss expenses $ 55 $ 38 47.1 % $ 342 $ 83 NM

Losses and loss expenses $ 9 $ 11 (22.9) %

Administrative expenses 71 66 5.2 %

2 unchanged sentences

Interest expense 122 132 (7.6) %

Net realized gains (losses) (142) (141) 0.9 % (1,067) (467) 128.2 %

Net realized gains (losses) 888 (956) NM

Other (income) expense (415) 23 NM

Amortization of purchased intangibles 49 50 (3.0) %

Chubb integration expenses — 2 NM — 9 NM

Income tax expense 338 215 57.0 %

Net loss $ (196) $ (671) (70.9) % $ (2,243) $ (1,837) 22.1 %

Net income (loss) $ 697 $ (1,477) NM

NM - not meaningful

Losses and loss expenses for the three months ended September 30, 2020 and 2019 were primarily from adverse development relating to our Brandywine environmental exposures of $35 million and $27 million, respectively, and unallocated loss adjustment expenses of the A&E claims operations.

Losses and loss expenses for the nine months ended September 30, 2020 also included unfavorable prior period development of $254 million for U.S.

child molestation claims, predominantly reviver statute-related, while the prior year-to-date period also included charges for our non-A&E run-off casualty exposures, including workers' compensation.

Administrative expenses decreased $3 million for the three months ended September 30, 2020 primarily due to lower advertising expenses and lower travel-related costs.

Administrative expenses increased $3 million for the nine months ended September 30, 2020 primarily due to the impact of the COVID-19 pandemic and higher legal expenses.

Refer to the respective sections for a discussion of Net investment income, Net realized gains and losses, Other (income) expense, Amortization of purchased intangibles, and Income tax expense.

Administrative expenses increased $5 million for the three months ended March 31, 2021, primarily due to 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, Other (income) expense, Amortization of purchased intangibles, and Income tax expense.

Net Realized and Unrealized Gains (Losses)

2 unchanged sentences

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 because we intend to sell the security, or when we record a change to the allowance for expected credit losses.

For a further discussion related to how we assess the allowance for expected credit losses and the related impact on Net income, refer to Note 3 c) to the Consolidated Financial Statements.

Additionally, Net income is impacted through the reporting of changes in the fair value of equity securities, private equity securities 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 liability adjustment, are reported as separate components of Accumulated other comprehensive income (loss) in Shareholders’ equity in the Consolidated balance sheets.

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 table presents our net realized and unrealized gains (losses):

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

(in millions of U.S.

Fixed maturities $ 49 $ 638 $ 687 $ (11) $ 705 $ 694

Fixed income and equity derivatives 9 — 9 (97) — (97)

Public equity

Sales 34 — 34 24 — 24

Mark-to-market (34) — (34) (21) — (21)

Private equity (less than 3 percent ownership)

Sales — — — (2) — (2)

Mark-to-market 31 — 31 (2) — (2)

Total investment portfolio 89 638 727 (109) 705 596

Variable annuity reinsurance derivative transactions, net of applicable hedges (6) — (6) (112) — (112)

Other derivatives 1 — 1 (14) — (14)

Foreign exchange (222) 246 24 84 (193) (109)

Other (3) (23) (26) (4) (17) (21)

Net gains (losses), pre-tax $ (141) $ 861 $ 720 $ (155) $ 495 $ 340

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Three Months Ended March 31

(in millions of U.S.

5 unchanged sentences

Private equity (less than 3 percent ownership)

Sales — — — (4) — (4)

Mark-to-market 38 — 38 5 — 5

5 unchanged sentences

Net gains (losses), pre-tax $ 887 $ (2,323) $ (1,436) $ (958) $ (3,033) $ (3,991)

Pre-tax net gains of $463 million for the nine months ended September 30, 2020 reflected the financial market volatility in the credit, equity and foreign exchange markets, driven by the impact of the COVID-19 global pandemic.

The $1,542 million gain in our investment portfolio was principally a result of a decline in interest rates, partially offset by $163 million of impairments for securities we intended to sell, and securities written to market entering default.

The $519 million foreign exchange loss reflected the strengthening of the U.S.

dollar against most major currencies.

The $456 million realized loss in our variable annuity reinsurance portfolio was principally driven by lower interest rates and lower global equities markets, as discussed below.

The $1,779 million loss in our investment portfolio was principally a result of a rise in fixed income yields during the quarter, partially offset by positive global equity returns.

The variable annuity reinsurance derivative transactions consist of changes in the fair value of GLB liabilities and gain 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 $6 million for the three months ended September 30, 2020 reflecting a net decrease in the fair value of the GLB liabilities of $46 million due to higher equity markets, particularly in the U.S., and a net realized loss of $52 million related to these other derivatives.

For the nine months ended September 30, 2020, the variable annuity reinsurance derivative transactions resulted in realized losses of $456 million reflecting a net increase in the fair value of the GLB liabilities of $426 million due to lower interest rates and lower international equity markets and a net realized loss of $30 million related to these other derivatives.

The variable annuity reinsurance derivative transactions resulted in realized losses of $112 million and $146 million for the three and nine months ended September 30, 2019, respectively, reflecting a net increase in the fair value of GLB liabilities of $106 million and $57 million, respectively.

The net increase in the fair value of GLB liabilities was principally due to lower interest rates.

There were realized losses of $6 million and $89 million for the three and nine months ended September 30, 2019, respectively, related to other derivative instruments.

The variable annuity reinsurance derivative transactions resulted in realized gains of $275 million for the three months ended March 31, 2021, reflecting a net decrease in the fair value of the GLB liabilities of $319 million due to higher interest rates and higher global equity markets, partially offset by a net realized loss of $44 million related to these other derivatives.

For the three months ended March 31, 2020, the variable annuity reinsurance derivative transactions resulted in realized losses of $560 million, reflecting a net increase in the fair value of GLB liabilities of $685 million and a net realized gain of $125 million related to these other derivative instruments.

The net increase in the fair value of GLB liabilities was principally due to lower global equity market levels.

Effective Income Tax Rate

Our effective income tax rate reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between US GAAP and local tax laws, and the timing of recording discrete items.

Our effective tax rate for the three months ended March 31, 2021 was 12.8 percent compared to 46.0 percent in the prior year period.

Our effective income tax rate reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between U.S.

GAAP and local tax laws, and the impact of discrete items.

A change in the geographic mix of earnings could impact our effective tax rate.

Our effective tax rate for the three and nine months ended September 30, 2020 was 10.7 percent and 20.9 percent, respectively.

The effective tax rate for each period was impacted by realized gains and realized losses, respectively, generated in lower tax jurisdictions.

In addition, the effective tax rate for the nine months ended September 30, 2020 was impacted by the

high level of catastrophe losses, principally related to COVID-19.

This compares to an effective tax rate on our tax expense of 17.4 percent and 16.0 percent for the three and nine months ended September 30, 2019, respectively.

The effective tax rate in the current year was lower compared to the prior year primarily due to the impact of realized gains generated in lower tax jurisdictions and a higher discrete tax benefit on employee benefit programs compared to the prior year that had realized losses.

Non-GAAP Reconciliation

32 unchanged sentences

Three Months Ended

September 30, 2020

March 31, 2021

(in millions of U.S.

38 unchanged sentences

Three Months Ended

September 30, 2019

(in millions of U.S.

dollars except for ratios)

Losses and loss expenses $ 2,051 $ 674 $ 880 $ 1,154 $ 79 $ 38 $ 4,876

Catastrophe losses and related adjustments

Catastrophe losses, net of related adjustments (88) (83) (3) (35) (23) — (232)

Reinstatement premiums collected (expensed) on catastrophe losses — — — — 2 — 2

Catastrophe losses, gross of related adjustments (88) (83) (3) (35) (25) — (234)

PPD and related adjustments

PPD, net of related adjustments - favorable (unfavorable) 109 62 (18) 25 25 (36) 167

Net premiums earned adjustments on PPD - unfavorable (favorable) 39 — — — 1 — 40

Expense adjustments - unfavorable (favorable) 3 — — — (1) — 2

PPD reinstatement premiums - unfavorable (favorable) (1) (1) — 1 — — (1)

PPD, gross of related adjustments - favorable (unfavorable) 150 61 (18) 26 25 (36) 208

CAY loss and loss expense ex CATs B $ 2,113 $ 652 $ 859 $ 1,145 $ 79 $ 2 $ 4,850

Policy acquisition costs and administrative expenses

Policy acquisition costs and administrative expenses C $ 715 $ 312 $ 60 $ 887 $ 51 $ 74 $ 2,099

Expense adjustments - favorable (unfavorable) (3) — — — 1 — (2)

Policy acquisition costs and administrative expenses, adjusted D $ 712 $ 312 $ 60 $ 887 $ 52 $ 74 $ 2,097

Net premiums earned E $ 3,185 $ 1,187 $ 941 $ 2,256 $ 160 $ 7,729

Reinstatement premiums (collected) expensed on catastrophe losses — — — — (2) (2)

Net premiums earned adjustments on PPD - unfavorable (favorable) 39 — — — 1 40

PPD reinstatement premiums - unfavorable (favorable) (1) (1) — 1 — (1)

Net premiums earned excluding adjustments F $ 3,223 $ 1,186 $ 941 $ 2,257 $ 159 $ 7,766

P&C Combined ratio

Loss and loss expense ratio A/E 64.4 % 56.9 % 93.5 % 51.1 % 49.6 % 63.1 %

Policy acquisition cost and administrative expense ratio C/E 22.5 % 26.2 % 6.4 % 39.4 % 31.5 % 27.1 %

P&C Combined ratio 86.9 % 83.1 % 99.9 % 90.5 % 81.1 % 90.2 %

CAY P&C Combined ratio ex CATs

Loss and loss expense ratio, adjusted B/F 65.5 % 55.1 % 91.3 % 50.7 % 49.9 % 62.4 %

Policy acquisition cost and administrative expense ratio, adjusted D/F 22.1 % 26.2 % 6.4 % 39.3 % 32.2 % 27.1 %

CAY P&C Combined ratio ex CATs 87.6 % 81.3 % 97.7 % 90.0 % 82.1 % 89.5 %

Combined ratio

Combined ratio 90.0 %

impact of gains and losses on crop derivatives 0.2 %

P&C Combined ratio 90.2 %

The ratios above are calculated using whole U.S.

Accordingly, calculations using rounded amounts may differ.

Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above.

North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Corporate Total P&C

Nine Months Ended

September 30, 2020

(in millions of U.S.

dollars except for ratios)

Losses and loss expenses A $ 8,123 $ 2,406 $ 1,223 $ 3,935 $ 314 $ 342 $ 16,343

Catastrophe losses and related adjustments

Catastrophe losses, net of related adjustments (1,838) (436) (24) (584) (81) — (2,963)

Reinstatement premiums collected (expensed) on catastrophe losses (3) (1) — (16) 7 — (13)

Catastrophe losses, gross of related adjustments (1,835) (435) (24) (568) (88) — (2,950)

PPD and related adjustments

PPD, net of related adjustments - favorable (unfavorable) 451 (48) (4) 100 29 (339) 189

Net premiums earned adjustments on PPD - unfavorable (favorable) 32 — 3 — — — 35

Expense adjustments - unfavorable (favorable) (1) — — — (2) — (3)

PPD reinstatement premiums - unfavorable (favorable) — (8) — — (1) — (9)

PPD, gross of related adjustments - favorable (unfavorable) 482 (56) (1) 100 26 (339) 212

CAY loss and loss expense ex CATs B $ 6,770 $ 1,915 $ 1,198 $ 3,467 $ 252 $ 3 $ 13,605

Policy acquisition costs and administrative expenses

Policy acquisition costs and administrative expenses C $ 2,203 $ 923 $ 108 $ 2,662 $ 155 $ 214 $ 6,265

Expense adjustments - favorable (unfavorable) 1 — — — 2 — 3

Policy acquisition costs and administrative expenses, adjusted D $ 2,204 $ 923 $ 108 $ 2,662 $ 157 $ 214 $ 6,268

Net premiums earned E $ 10,427 $ 3,623 $ 1,441 $ 6,838 $ 520 $ 22,849

Reinstatement premiums (collected) expensed on catastrophe losses 3 1 — 16 (7) 13

Net premiums earned adjustments on PPD - unfavorable (favorable) 32 — 3 — — 35

PPD reinstatement premiums - unfavorable (favorable) — (8) — — (1) (9)

Net premiums earned excluding adjustments F $ 10,462 $ 3,616 $ 1,444 $ 6,854 $ 512 $ 22,888

P&C Combined ratio

Loss and loss expense ratio A/E 77.9 % 66.4 % 84.9 % 57.6 % 60.3 % 71.5 %

Policy acquisition cost and administrative expense ratio C/E 21.1 % 25.5 % 7.4 % 38.9 % 29.8 % 27.4 %

P&C Combined ratio 99.0 % 91.9 % 92.3 % 96.5 % 90.1 % 98.9 %

CAY P&C Combined ratio ex CATs

Loss and loss expense ratio, adjusted B/F 64.7 % 53.0 % 83.0 % 50.6 % 49.0 % 59.4 %

Policy acquisition cost and administrative expense ratio, adjusted D/F 21.1 % 25.5 % 7.4 % 38.8 % 30.7 % 27.4 %

CAY P&C Combined ratio ex CATs 85.8 % 78.5 % 90.4 % 89.4 % 79.7 % 86.8 %

Combined ratio

Combined ratio 98.9 %

impact of gains and losses on crop derivatives —

P&C Combined ratio 98.9 %

The ratios above are calculated using whole U.S.

Accordingly, calculations using rounded amounts may differ.

Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above.

North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global

Reinsurance Corporate Total P&C

Nine Months Ended

September 30, 2019

March 31, 2020

(in millions of U.S.

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Expense adjustments - unfavorable (favorable) (1) — — — — — (1)

PPD reinstatement premiums - unfavorable (favorable) (1) (4) — 1 — — (4)

PPD, gross of related adjustments - favorable (unfavorable) 104 (1) 17 4 7 (11) 120

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Net premiums earned E $ 3,376 $ 1,200 $ 94 $ 2,307 $ 186 $ 7,163

Reinstatement premiums (collected) expensed on catastrophe losses — — — — (2) (2)

Net premiums earned adjustments on PPD - unfavorable (favorable) — — 3 — — 3

PPD reinstatement premiums - unfavorable (favorable) (1) (4) — 1 — (4)

Net premiums earned excluding adjustments F $ 3,376 $ 1,200 $ 97 $ 2,307 $ 186 $ 7,166

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Other Income and Expense

Three Months Ended Nine Months Ended

September 30 September 30

Three Months Ended

(in millions of U.S.

dollars) 2021 2020

Equity in net income (loss) of partially-owned entities (1)

$ 479 $ 81 $ 435 $ 353

Equity in net income of partially-owned entities (1)

Gains (losses) from fair value changes in separate account assets (2)

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Total $ 490 $ (55)

(1) Equity in net income (loss) of partially-owned entities includes $37 million and $86 million attributable to our investments in Huatai (Huatai Group, Huatai P&C, and Huatai Life) for the three and nine months ended September 30, 2020, respectively, compared to $30 million and $59 million, respectively, for the prior year periods.

(1) Equity in net income of partially-owned entities includes $49 million and $18 million attributable to our investments in Huatai for the three months ended March 31, 2021 and 2020, respectively.

(2) Related to gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.

Other income and expense includes equity in net income of partially-owned entities, which includes our share of net income or loss related to partially-owned investment companies (private equity) and partially-owned insurance companies.

Other income and expense includes equity in net income of partially-owned entities, which includes our share of net income or loss, both underlying operating income and mark-to-market movement, related to partially-owned investment companies (private equity) and partially-owned insurance companies.

Also included in Other income and expense are gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.

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Amortization of purchased intangibles and Other amortization

Amortization expense related to purchased intangibles was $72 million and $217 million for the three and nine months ended September 30, 2020, respectively, compared with $76 million and $229 million, respectively, in the prior year periods and principally relates to the Chubb Corp acquisition.

The decrease in amortization expense of purchased intangibles reflects lower intangible amortization expense related to agency distribution relationships and renewal rights.

The following table presents, as of September 30, 2020, the estimated pre-tax amortization expense (benefit) of purchased intangibles, at current foreign currency exchange rates, for the fourth quarter of 2020 and the next five years:

Amortization expense of purchased intangibles was $72 million and $73 million for the three months ended March 31, 2021 and 2020, respectively, and principally relates to the Chubb Corp acquisition.

The following table presents, as of March 31, 2021, the estimated pre-tax amortization expense (benefit) of purchased intangibles, at current foreign currency exchange rates, for the second through fourth quarters of 2021 and the next five years:

Associated with the Chubb Corp Acquisition

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Amortization of purchased intangibles

Second quarter of 2021 $ 54 $ (5) $ 49 $ 21 $ 70

Third quarter of 2021 54 (5) 49 23 72

Fourth quarter of 2021 54 (5) 49 23 72

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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 September 30, 2020, the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was $1,301 million.

The following table presents, as of September 30, 2020, the expected reduction of the deferred tax liability associated with Other intangible assets (which reduces as agency distribution relationships and renewal rights and other intangible assets amortize), at current foreign currency exchange rates, for the fourth quarter of 2020 and for the next five years:

At March 31, 2021, the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was $1,280 million.

The following table presents, as of March 31, 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 second through fourth quarters of 2021 and for the next five years:

For the Years Ending December 31

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dollars) Reduction to deferred tax liability associated with intangible assets

Second quarter of 2021 $ 17

Third quarter of 2021 17

Fourth quarter of 2021 17

Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt

The following table presents at September 30, 2020, the expected amortization expense of the fair value adjustment on acquired invested assets, at current foreign currency exchange rates, and the expected amortization benefit from the amortization of the fair value adjustment on assumed long-term debt for the fourth quarter of 2020 and for the next five years:

The following table presents at March 31, 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 second through fourth quarters of 2021 and for the next five years:

Amortization (expense) benefit of the fair value adjustment on

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Assumed long-term debt (2)

Second quarter of 2021 $ (30) $ 5

Third quarter of 2021 (28) 5

Fourth quarter of 2021 (27) 6

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Net Investment Income

Three Months Ended Nine Months Ended

September 30 September 30

Three Months Ended

(in millions of U.S.

1 unchanged sentence

Fixed maturities (1)

$ 826 $ 862 $ 2,487 $ 2,533

Short-term investments 9 17

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Net investment income (1)

(1) Includes amortization expense related to fair value adjustment on acquired invested assets related to the Chubb Corp acquisition

(1) Includes amortization expense related to fair value adjustment of acquired invested assets related to the Chubb Corp acquisition

$ (26) $ (32)

Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation.

Net investment income decreased 3.8 percent and 1.6 percent for the three and nine months ended September 30, 2020, respectively, primarily due to lower reinvestment rates on new and reinvested assets, partially offset by higher average invested assets.

Net investment income remained flat for the three months ended March 31, 2021 primarily as higher dividends on public equities were offset by lower interest received due to lower reinvestment rates on new and reinvested assets.

For private equities where we own less than three percent, investment income is included within Net investment income in the table above.

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Three Months Ended

September 30 Nine Months Ended

(in millions of U.S.

dollars) 2021 2020

Total mark-to-market gain on private equity, pre-tax $ 436 $ 34 $ 229 $ 227

Total mark-to-market gain (loss) on private equity, pre-tax $ 438 $ (7)

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).

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We also have well-established, strict contractual investment rules requiring managers to maintain highly diversified exposures to individual issuers and closely monitor investment manager compliance with portfolio guidelines.

The average duration of our fixed income securities, including the effect of options and swaps, was 4.0 years and 3.8 years at September 30, 2020 and December 31, 2019, respectively.

We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately $4.3 billion at September 30, 2020.

We established credit loss valuation allowances as a result of our adoption of guidance on Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments (CECL) on January 1, 2020 and established a valuation allowance of $69 million.

The COVID-19 global pandemic and related economic conditions adversely impacted our investment portfolio and

resulted in an increase in our valuation allowance.

This adverse impact was mitigated by the overall high credit quality of the portfolio and the stabilization of the valuation of investment grade securities due to measures announced by the U.S.

Federal Reserve, including programs to support corporate and asset backed securities.

Overall, the valuation allowance increased by $10 million for the nine months ended September 30, 2020.

Refer to Note 3 to the Consolidated Financial Statements for additional information on expected credit losses.

The average duration of our fixed income securities, including the effect of options and swaps, was 4.3 years and 4.0 years at March 31, 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 $4.6 billion at March 31, 2021.

The following table shows the fair value and cost/amortized cost, net of valuation allowance, of our invested assets:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(in millions of U.S.

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Short-term investments 3,735 3,736 4,345 4,349

106,985 101,480 102,784 99,452

Fixed income securities 106,558 102,726 107,554 101,170

Equity securities 4,405 4,405 4,027 4,027

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Total investments $ 119,599 $ 115,767 $ 119,526 $ 113,142

The fair value of our total investments increased $7.2 billion during the nine months ended September 30, 2020, primarily due to the investing of operating cash flow, unrealized appreciation and the investing of debt issuance proceeds.

This increase was partially offset by the payment of collateralized deposits for the purchase of additional ownership in Huatai Group.

The following tables present the fair value of our fixed maturities and short-term investments at September 30, 2020 and December 31, 2019.

The fair value of our total investments increased $73 million during the three months ended March 31, 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 due to an increase in interest rates during the quarter, payment of dividends on our Common Shares, and share repurchases.

The following tables present the fair value of our fixed maturities and short-term investments at March 31, 2021 and December 31, 2020.

The first table lists investments according to type and second according to S&P credit rating:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(in millions of U.S.

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Corporate and asset-backed securities

The following table presents our 10 largest global exposures to corporate bonds by fair value at September 30, 2020:

The following table presents our 10 largest global exposures to corporate bonds by fair value at March 31, 2021:

(in millions of U.S.

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JP Morgan Chase & Co 617

Verizon Communications Inc 532

Comcast Corp 508

1 unchanged sentence

Citigroup Inc 412

Verizon Communications Inc 430

Goldman Sachs Group Inc 394

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Value Amortized Cost, Net

September 30, 2020

March 31, 2021

(in millions of U.S.

1 unchanged sentence

below Total Total

Agency residential mortgage-backed (RMBS)

Agency residential mortgage-backed securities (RMBS)

$ 118 $ 17,668 $ — $ — $ — $ 17,786 $ 17,156

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fixed income portfolio by country/sovereign for non-U.S.

government securities at September 30, 2020:

government securities at March 31, 2021:

(in millions of U.S.

5 unchanged sentences

Kingdom of Thailand 593 543

United Mexican States 563 558

Province of Quebec 483 465

1 unchanged sentence

Commonwealth of Australia 461 447

United Mexican States 453 434

Socialist Republic of Vietnam 407 279

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fixed income portfolio by country/sovereign for non-U.S.

corporate securities at September 30, 2020:

corporate securities at March 31, 2021:

(in millions of U.S.

2 unchanged sentences

Canada 1,876 1,806

France 1,189 1,126

United States (1)

France 1,177 1,122

Australia 875 837

Netherlands 617 580

Japan 667 652

Switzerland 566 527

Germany 623 597

Netherlands 580 556

Switzerland 565 539

China 433 419

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Also, issuers of below-investment grade securities usually have higher levels of debt and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than investment grade issuers.

At September 30, 2020, our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 15 percent of our fixed income portfolio.

At March 31, 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 $172 million.

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Critical Accounting Estimates

As of September 30, 2020, there were no material changes to our critical accounting estimates.

As of March 31, 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.

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Other (including foreign exchange translation) 77 6 71

Balance at September 30, 2020 $ 67,905 $ 14,767 $ 53,138

Balance at March 31, 2021 $ 69,255 $ 14,860 $ 54,395

(1) Net of valuation allowance for uncollectible reinsurance.

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Asbestos and Environmental (A&E)

During the three m onths ended September 30, 2020, we increased environmental net loss reserves for Brandywine managed operations by $35 million.

There was no significant A&E reserve activity during the three months ende d March 31, 2021.

A&E reserves are included in Corporate.

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Catastrophe Management

We actively monitor and manage our catastrophe risk accumulation around the world such as setting risk limits based on probable maximum loss (PML) and purchasing catastrophe reinsurance.

The table below presents our modeled pre-tax estimates of natural catastrophe PML, net of reinsurance, at September 30, 2020, for Worldwide, U.S.

hurricane and California earthquake events, based on our in-force portfolio at July 1, 2020 and reflecting the April 1, 2020 reinsurance program (see Natural Catastrophe Property Reinsurance Program section) as well as inuring reinsurance protection coverages.

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 March 31, 2021, for Worldwide, U.S.

hurricane and California earthquake events, based on our in-force portfolio at January 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 $2,720 million (or 4.8 percent of our total shareholders’ equity at September 30, 2020).

hurricane events could be in excess of $2,707 million (or 4.6 percent of our total shareholders’ equity at March 31, 2021).

These estimates assume that reinsurance recoverable is fully collectible.

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• The potential effects of climate change add to modeling complexity;

• Changing climate conditions could impact our exposure to natural catastrophe risks, including U.S.

Published studies by leading government, academic and professional organizations predict an increase in the expected annual frequency of Atlantic-basin hurricanes and sea level rise through the end of the century over observed historical averages.

These studies contemplate expected multi-decadal impacts of climate change on sea surface temperatures, sea levels and other factors contributing to the frequency and intensity of hurricanes.

Based on preliminary stress tests conducted against the Chubb portfolio, the impacts of climate change are not expected to materially impact our reported U.S.

hurricane PML over the next 12 months.

These tests reflect current exposures only and exclude potential mitigating factors, such as changes to building codes, public or private risk mitigation, regulation and public policy.

Natural Catastrophe Property Reinsurance Program

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In addition, prior to each renewal date, we consider how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and various other structuring considerations.

Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations effective April 1, 2020 through March 31, 2021, with no material changes in coverage from the expiring program.

Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations effective April 1, 2021 through March 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.

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Should the need arise, we generally have access to capital markets and to credit facilities with letter of credit capacity of $3.7 billion with a sub-limit of $1.9 billion for revolving credit.

At September 30, 2020, our usage under these facilities was $1.7 billion in letters of credit.

At March 31, 2021, our usage under these facilities was $1.4 billion in letters of credit.

Our access to credit under these facilities is dependent on the ability of the banks that are a party to the facilities to meet their funding commitments.

The facilities require that we maintain certain financial covenants, all of which we met at September 30, 2020.

The facilities require that we maintain certain financial covenants, all of which we met at March 31, 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.

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The payment of dividends or other statutorily permissible distributions from our operating companies are subject to the laws and regulations applicable to each jurisdiction, as well as the need to maintain capital levels adequate to support the insurance and reinsurance operations, including financial strength ratings issued by independent rating agencies.

During the nine months ended September 30, 2020, we were able to meet all our obligations, including the payments of dividends on our Common Shares, with our net cash flows.

During the three months ended March 31, 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 $800 million and $200 million from its Bermuda subsidiaries during the nine months ended September 30, 2020 and 2019, respectively.

Chubb Limited also received non-cash dividends of $844 million and nil from a Swiss subsidiary during the nine months ended September 30, 2020 and 2019, respectively.

Chubb Limited received dividends of $740 million and nil from its Bermuda subsidiaries during the three months ended March 31, 2021 and 2020, respectively.

The payment of any dividends from CGM or its subsidiaries is subject to applicable U.K.

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These laws and regulations sometimes include restrictions that limit the amount of dividends payable without prior approval of regulatory insurance authorities.

Chubb Limited received no dividends from CGM or Chubb INA during the nine months ended September 30, 2020 and 2019.

Chubb Limited received no dividends from CGM or Chubb INA during the three months ended March 31, 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 dividends of $180 million and $1.7 billion from its subsidiaries during the nine months ended September 30, 2020 and 2019, respectively.

Chubb INA received no dividends from its subsidiaries during the three months ended March 31, 2021 and 2020.

Our sources of liquidity include cash from operations, routine sales of investments, and financing arrangements.

The following is a discussion of our cash flows for the nine months ended September 30, 2020 and 2019.

Operating cash flows were $7.2 billion in the nine months ended September 30, 2020, compared to $4.9 billion in the prior year period, an increase of $2.3 billion, principally reflecting higher premiums collected and reduced payment activity due to the economic slowdown related to COVID-19 pandemic.

Cash used for investing was $6.7 billion in the nine months ended September 30, 2020, compared to $3.6 billion in the prior year period.

The current year included a payment of $1,054 million and a deposit, net of return, of approximately $500 million for the purchase of an additional 22.4 percent ownership in Huatai Group, while the prior year included the purchase of an additional 6.2 percent ownership interest in Huatai Group for $329 million.

Refer to Note 2 to the Consolidated Financial Statements for additional information.

In addition, the current year had cash used of $4.3 billion for net investments purchased, excluding derivative settlements, compared to cash used of $2.0 billion in the prior year.

Cash used for financing was $234 million in the nine months ended September 30, 2020, compared to $1.1 billion in the prior year period, a decrease of $890 million principally from fewer share repurchases in the current year due to the suspension of share repurchases in April 2020.

Refer to Note 9 to the Consolidated Financial Statements for additional information on share repurchases.

The following is a discussion of our cash flows for the three months ended March 31, 2021 and 2020.

Operating cash flows were $2.1 billion in the three months ended March 31, 2021, compared to $1.7 billion in the prior year period, an increase of $393 million, principally reflecting higher premiums collected and reduced payment activity, partially offset by higher catastrophe loss payments.

Cash used for investing was $1.3 billion in the three months ended March 31, 2021, compared to $1.0 billion in the prior year period.

Cash used in the current year related to net investments purchased, principally fixed maturities.

Cash used in the prior year principally related to the incremental purchase of Huatai Group ownership interest of $1.6 billion, partially offset by net proceeds from sales of fixed maturities.

Cash used for financing was $812 million in the three months ended March 31, 2021, compared to $645 million in the prior year period, an increase of $167 million principally from more shares repurchased in the current year.

Both internal and external forces influence our financial condition, results of operations, and cash flows.

Claim settlements, premium levels, and investment returns may be impacted by changing rates of inflation and other economic conditions.

In many 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 funding alternative.

At September 30, 2020, there were $1.4 billion in repurchase agreements outstanding with various maturities over the next five months.

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 March 31, 2021, there were $1.4 billion in repurchase agreements outstanding with various maturities over the next eight months.

Capital Resources

Capital resources consist of funds deployed or available to be deployed to support our business operations.

September 30 December 31

March 31 December 31

(in millions of U.S.

dollars, except for ratios) 2021 2020

Short-term debt $ 1,300 $ 1,299

Long-term debt $ 14,879 $ 14,948

Total financial debt 16,130 14,858

Trust preferred securities 308 308

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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.

In September 2020, Chubb INA Holdings Inc.

(Chubb INA) issued $1.0 billion of 1.375 percent senior notes due September 2030.

At September 30, 2020 and December 31, 2019, total debt included $2.3 billion and $1.3 billion, respectively, of senior notes issued to provide proceeds to retire existing debt coming due in November 2022 and November 2020, respectively.

These prefundings had the effect of increasing the leverage ratios at September 30, 2020 and December 31, 2019 by 2.5 percentage points and 1.4 percentage points, respectively.

Refer to Note 7 to the Consolidated Financial Statements for additional details about the debt issued.

For the nine months ended September 30, 2020, we repurchased $326 million of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorization.

At September 30, 2020, there were 26,229,070 Common Shares in treasury with a weighted average cost of $135.00 per share, and $1.12 billion in share repurchase authorization remained through December 31, 2020.

We suspended share repurchase activity during the second and third quarters of 2020, given the economic environment.

Subsequently, we resumed share repurchases, and on October 29, 2020, we repurchased 52,500 Common Shares for a total of $7 million in a series of open market transactions.

At October 29, 2020, $1.12 billion in share repurchase authorization remained through December 31, 2020.

For the three months ended March 31, 2021, we repurchased $519 million of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorization.

At March 31, 2021, there were 27,928,305 Common Shares in treasury with a weighted average cost of $139.68 per share, and $1.98 billion in share repurchase authorization remained through December 31, 2021.

For the period April 1, 2021 through April 29, 2021, we repurchased 450,000 Common Shares for a total of $76 million in a series of open market transactions.

At April 29, 2021, $1.91 billion in share repurchase authorization remained through December 31, 2021.

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.

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The Board determines the record and payment dates at which the annual dividend may be paid until the date of the 2021 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion.

The annual dividend approved in May 2020 represented an $0.12 per share increase ($0.03 per quarter) over the prior year dividend.

The four quarterly installments each of $0.78 per share were distributed by the Board as expected.

The annual dividend approved in May 2020 represented a $0.12 per share increase ($0.03 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:

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March 19, 2021 April 9, 2021 $0.78 (CHF 0.70)

June 19, 2020 July 10, 2020 $0.78 (CHF 0.75)

September 18, 2020 October 9, 2020 $0.78 (CHF 0.71)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis