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Item 2. Management’s Discussion and Analysis

2021-07-29 compared with 2021-04-30 · 471 added, 263 removed, 775 unchanged (49% 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 months ended March 31, 2021.

The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three and six months ended June 30, 2021.

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

11 unchanged sentences

Forward-Looking Statements

Financial Highlights

Consolidated Operating Results

3 unchanged sentences

Non-GAAP Reconciliation

Other Income and Expense

Amortization of Purchased Intangibles and Other Amortization

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Capital Resources

Information P rovided I n C onnection W ith O utstanding D ebt of S ubsidiaries

Forward-Looking Statements

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• 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;

actual claims may exceed our best estimate of ultimate insurance losses incurred through June 30, 2021 which could change including as a result of, among other things, the impact of legislative or regulatory actions taken in response to COVID-19;

• changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers;

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

At June 30, 2021, we had total assets of $197 billion and shareholders’ equity of $60 billion.

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

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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 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 $8.0 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.

• 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

Consolidated Operating Results – Three and Six Months Ended June 30, 2021 and 2020

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Net premiums written $ 9,546 $ 8,355 14.3 % $ 18,208 $ 16,332 11.5 %

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Net investment income 884 827 7.0 % 1,747 1,688 3.5 %

Net realized gains (losses) 887 (958) NM

Net realized gains (losses) (33) 30 NM 854 (928) NM

Total revenues 9,664 8,985 7.6 % 19,635 16,682 17.7 %

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Interest expense 122 128 (4.9) % 244 260 (6.3) %

Other (income) expense (490) 55 NM

Other (income) expense (777) 58 NM (1,267) 113 NM

Amortization of purchased intangibles 73 72 1.1 % 145 145 —

Total expenses 7,082 9,378 (24.5) % 14,415 16,608 (13.2) %

Income before income tax 2,638 467 NM

Income tax expense 338 215 57.0 %

Net income $ 2,300 $ 252 NM

Income (loss) before income tax 2,582 (393) NM 5,220 74 NM

Income tax expense (benefit) 317 (62) NM 655 153 NM

Net income (loss) $ 2,265 $ (331) NM $ 4,565 $ (79) NM

NM – not meaningful

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

Financial Highlights for the Three Months Ended June 30, 2021

• Net income was $2.3 billion compared with a net loss of $331 million in the prior year period.

Net income in the current quarter was driven by record underwriting results, record net investment income, and higher income related to our partially-owned companies.

Both commercial P&C and consumer lines grew globally, reflecting positive rate increases which exceeded loss cost trend, strong retention and higher new business.

• Total pre-tax and after-tax catastrophe losses were $280 million (3.4 percentage points of the combined ratio) and $226 million, respectively, compared with $1.8 billion (23.9 percentage points of the combined ratio) and $1.5 billion, respectively, in the prior year period, which included $1,365 million of pre-tax losses, or $1,157 million after tax, related to COVID-19.

• Total pre-tax and after-tax favorable prior period development were $268 million (3.3 percentage points of the combined ratio) and $224 million, respectively, compared with unfavorable prior period development of $75 million (1.0 percentage point of the combined ratio) and $52 million, respectively, in the prior year period.

The current quarter included a charge of $68 million pre-tax for molestation claims, compared to $259 million in the prior year.

• The P&C combined ratio was 85.5 percent compared with 112.3 percent in the prior year period.

P&C current accident year combined ratio excluding catastrophe losses was 85.4 percent compared with 87.4 percent in the prior year period.

The 2.0 percentage point decrease was substantially driven by improvement in the loss ratio.

• Consolidated net premiums written were $9.5 billion, up 14.3 percent, or 11.5 percent in constant dollars.

P&C net premiums written were $8.9 billion, up 15.5 percent, or 12.7 percent in constant dollars, comprising positive growth in both commercial P&C lines and consumer lines of 19.9 percent and 5.6 percent, respectively.

The increase is primarily due to new business and positive rate increases across most lines and regions.

There were two items that also impacted growth including a $184 million reduction in premium due to exposure adjustments on in-force policies resulting from the COVID-19 pandemic in the prior year, which was more than offset by a year-over-year decrease in large structured transactions of $241 million.

Excluding these items, P&C net premiums written increased 16.4 percent.

• Consolidated net premiums earned were $8.8 billion, up 8.4 percent, or 5.6 percent in constant dollars.

P&C net premiums earned increased 9.1 percent, comprising positive growth in both commercial P&C lines and consumer lines of 11.6 percent and 3.8 percent, respectively.

Net premiums earned increased due to the same reasons described above for net premiums written, including from the prior year COVID-19 exposure adjustments that depressed prior year growth by $103 million.

Partially offsetting the overall growth is the year-over-year decrease in large structured transactions of $241 million, which are fully earned when written.

• Net investment income was $884 million compared with $827 million in the prior year period primarily due to higher income received from our private equity partnerships and increased dividends on public equities.

• Shareholders' equity increased by $986 million in the quarter, primarily reflecting net income of $2.3 billion and net unrealized gains on investments of $581 million after-tax.

Partially offsetting the increase was total capital returned to shareholders in the quarter of $2.3 billion, including share repurchases of $1.9 billion, at an average purchase price of $169.19 per share, and dividends of $352 million.

In July 2021, our Board of Directors approved a one-time incremental share repurchase program of up to $5.0 billion through June 30, 2022.

Net Premiums Written Three Months Ended

March 31 % Change

June 30 % Change Six Months Ended

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Commercial casualty $ 1,609 $ 1,478 8.9 % 8.5 % $ 3,258 $ 2,819 15.6 % 14.7 %

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(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 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.

• 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.

The increase in net premiums written for the three and six months ended June 30, 2021 reflects growth across most lines of business.

• The growth in commercial casualty was due to new business and positive rate increases, primarily across North America and Europe.

Additionally, the prior year included a $58 million reduction in premium due to exposure adjustments on in-force policies resulting from the COVID-19 pandemic.

Partially offsetting growth is the year-over-year decrease in large structured transactions of $178 million.

Excluding these items, commercial casualty increased 18.5 percent and 20.7 percent, for the three and six months ended June 30, 2021, respectively.

• Workers' compensation growth was due to a reduction in the prior year's premium of $121 million related to exposure adjustments on in-force policies resulting from the COVID-19 pandemic, partially offset by the year-over-year decrease in large structured transactions.

Excluding these items, workers’ compensation increased slightly reflecting new business written in small commercial and large risk accounts.

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

• Commercial multiple peril increased due to higher new and renewal business in North America.

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

• Personal lines increased globally primarily reflecting new business in homeowners lines in North America and Latin America and growth in specialty lines in Europe.

Growth for the six months ended June 30, 2021 was partially offset by declines in automobile lines in North America and Latin America reflecting reduced exposures from the impact of the COVID-19 pandemic.

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

• Growth in our international life operations, principally from new business written in Taiwan, Vietnam and Thailand was partially offset by declines in our life reinsurance business that has not written new business since 2007.

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

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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 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.

For the three months ended June 30, 2021, net premiums earned increased $685 million, or 8.4 percent, comprising 11.6 percent positive growth in commercial P&C lines and 2.9 percent positive growth in consumer lines.

For the six months ended June 30, 2021, net premiums earned increased $1,112 million or 7.0 percent, comprising 11.5 percent positive growth in commercial P&C lines and 0.3 percent negative growth in consumer lines.

The growth in net premiums earned was adversely impacted by the year-over-year decrease in large structured transactions, which are fully earned when written, partially offset by the prior year COVID-19 exposure adjustments on in-force policies.

Catastrophe Losses and Prior Period Development

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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

Three Months Ended Six Months Ended

June 30 June 30

(in millions of U.S.

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Catastrophe losses $ 280 $ 1,807 $ 980 $ 2,044

Favorable prior period development $ 192 $ 118

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

Favorable (Unfavorable) prior period development $ 268 $ (75) $ 460 $ 43

Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events:

Winter storm losses in the U.S.

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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.

COVID-19 pandemic claims of $1,365 million, flooding, hail, tornadoes, and wind events in the U.S., and civil unrest in the U.S.

Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years.

Pre-tax net favorable PPD for the three months 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.

Pre-tax net favorable PPD for the three months ended June 30, 2021 was $268 million, including adverse development of $68 million for molestation claims.

Excluding the adverse development, we had favorable development of $336 million with 28 percent in long-tail lines, principally from accident years 2017 and prior, and 72 percent in short-tail lines, primarily in accident and health, property, and surety lines.

Pre-tax net favorable PPD for the six months ended June 30, 2021 was $460 million, including adverse development of $68 million for molestation claims described above.

Excluding the adverse development, we had favorable development of $528 million with 25 percent in long-tail lines, principally from accident years 2017 and prior, and 75 percent in short-tail lines, primarily in accident and health, property, and surety lines.

Pre-tax net adverse PPD for the three months ended June 30, 2020 was $75 million, including adverse development of $259 million for U.S.

child molestation claims, predominantly reviver statute-related.

Excluding the adverse development, we had

favorable development of $184 million split approximately 79 percent long-tail lines, principally from accident years 2016 and prior, and 21 percent short-tail lines.

Pre-tax net favorable PPD for the six months ended June 30, 2020 was $43 million, including adverse development of $259 million for U.S.

child molestation claims as noted above.

Excluding the adverse development, we had favorable development of $302 million split approximately 59 percent long-tail lines, principally from accident years 2016 and prior, and 41 percent short-tail lines.

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

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

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2021 2020 2021 2020

Loss and loss expense ratio

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P&C Combined ratio 85.5 % 112.3 % 88.6 % 101.0 %

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.

The loss and loss expense ratio decreased 26.5 percentage points and 11.7 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to lower catastrophe losses compared to the prior year which included significant losses related to the COVID-19 pandemic and higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 1.8 percentage points and 1.4 percentage points for the three and six months ended June 30, 2021, respectively, reflecting in part, underlying loss ratio improvement.

The policy acquisition cost ratio decreased 0.1 percentage points and 0.4 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to a change in the mix of business, including less premiums earned from consumer A&H lines that have a higher acquisition cost ratio and higher premiums earned from commercial P&C lines that have a lower acquisition cost ratio.

The administrative expense ratio decreased 0.2 percentage points and 0.3 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to the favorable impact of higher net premiums earned.

Policy benefits

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

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.

For the three months ended June 30, 2021 and 2020, Policy benefits were $185 million and $223 million, respectively, which included separate account liabilities losses of $15 million and $40 million, respectively.

The offsetting movements of these liabilities are recorded in Other (income) expense on the Consolidated statements of operations.

Excluding the separate account gains and losses, Policy benefits were $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.

Excluding the separate account gains and losses, Policy benefits were $170 million and $183 million for the three months ended June 30, 2021 and 2020, respectively, reflecting a decline in our Combined Insurance North America supplemental accident and health business and our life reinsurance business, partially offset by growth in our International Life operations.

For both the six months ended June 30, 2021 and 2020, Policy benefits were $352 million, which included separate account liabilities (gains) losses of $19 million and $(16) million, respectively.

Excluding the separate account gains and losses, Policy benefits were $333 million and $368 million for the six months ended June 30, 2021 and 2020, respectively, reflecting a decline in our Combined Insurance North America supplemental accident and health business and our life reinsurance business, partially offset by growth in our International Life operations.

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

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

Segment Operating Results – Three and Six Months Ended June 30, 2021 and 2020

We operate through six business segments:

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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

March 31 % Change

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Net premiums written $ 4,285 $ 3,720 15.2 % $ 7,949 $ 6,972 14.0 %

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Administrative expenses 245 249 (1.8) % 499 508 (1.7) %

Underwriting income 346 444 (22.1) %

Underwriting income (loss) 643 (623) NM 989 (179) NM

Net investment income 535 509 5.3 % 1,075 1,034 4.1 %

Other (income) expense 14 6 124.8 % 16 12 39.4 %

Segment income $ 884 $ 963 (8.3) %

Segment income (loss) $ 1,164 $ (120) NM $ 2,048 $ 843 142.9 %

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

CAY loss ratio excluding catastrophe losses 63.7 % 66.1 % (2.4) pts 63.6 % 65.2 % (1.6) pts

Catastrophe losses 4.3 % 35.4 % (31.1) pts 7.0 % 20.0 % (13.0) pts

Prior period development (4.2) % (4.2) % — pts (3.9) % (3.7) % (0.2) pts

Loss and loss expense ratio 63.8 % 97.3 % (33.5) pts 66.7 % 81.5 % (14.8) pts

Policy acquisition cost ratio 12.9 % 13.1 % (0.2) pts 13.4 % 13.8 % (0.4) pts

Administrative expense ratio 6.4 % 6.9 % (0.5) pts 6.7 % 7.3 % (0.6) pts

Combined ratio 83.1 % 117.3 % (34.2) pts 86.8 % 102.6 % (15.8) pts

NM - not meaningful

Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended

June 30 June 30

(in millions of U.S.

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Favorable prior period development $ 156 $ 146 $ 283 $ 251

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

Catastrophe losses through June 30, 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.

COVID-19 pandemic claims of $973 million, civil unrest in the U.S.

of $118 million, and natural catastrophes including Nashville, Tennessee tornado and other severe weather-related events in the U.S.

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

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.

Net premiums written increased $565 million, or 15.2 percent, and $977 million, or 14.0 percent, for the three and six months ended June 30, 2021, respectively, comprising:

• Commercial P&C lines:

Positive growth of 16.3 percent and 15.6 percent, respectively, reflecting strong premium retention, positive rate increases, and growth in new business written across a number of retail and wholesale lines, including financial lines, property, excess casualty, and primary casualty.

In addition, the prior year included a $160 million reduction in premium due to exposure adjustments on in-force policies resulting from the COVID-19 pandemic.

Partially offsetting growth in premium is the year-over-year decrease in large structured transactions of $241 million.

Adjusting for both these items, growth in the segment would have been 18.0 p ercent and 15.5 percent, for the three and six months ended June 30, 2021, respectivel y.

• Consumer lines:

Negative growth of 8.9 percent and 14.1 percent, respectively, principally from exposure declines in A&H.

Net premiums earned increased $208 million, or 5.8 percent, and $506 million, or 7.3 percent for the three and six months ended June 30, 2021, respectively, reflecting the growth in net premiums written described above.

In addition, the percentage growth for the three months ended June 30, 2021 was adversely impacted by the year-over-year decrease in large structured transactions described above, which are fully earned when written, partially offset by $95 million of exposure adjustments on in-force policies from the COVID-19 pandemic in the prior year, as described above.

Adjusting for both these items, growth would have been 10.4 percent and 9.6 percent, respectively.

Combined Ratio

The loss and loss expense ratio 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.

The loss and loss expense ratio decreased 33.5 percentage points and 14.8 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to lower catastrophe losses compared to the prior year which included significant losses related to the COVID-19 pandemic.

The CAY loss ratio excluding catastrophe losses decreased 2.4 percentage points and 1.6 percentage points for the three and six months ended June 30, 2021, respectively.

About half of the margin improvement is coming from underlying loss ratio improvement, with the balance due to the favorable impact of lower year-over-year large structured transactions written and non-recurring unfavorable items in the quarter.

The policy acquisition cost ratio decreased 0.2 percentage points and 0.4 percentage points for the three and six months ended June 30, 2021, respectively, reflecting a change in mix of business towards lines that have a lower acquisition cost ratio and lower commissions, partly offset by the unfavorable impact of large structured transactions noted above.

The administrative expense ratio decreased 0.5 percentage points and 0.6 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to higher net profit from our third-party claims administration business, ESIS, and the favorable impact of higher net premiums earned and continued expense management.

The decrease was partially offset by the unfavorable impact of lower year-over-year large structured transactions written.

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

March 31 % Change

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Net premiums written $ 1,363 $ 1,327 2.6 % $ 2,461 $ 2,434 1.1 %

5 unchanged sentences

Net investment income 64 65 (0.1) % 129 131 (1.1) %

Other (income) expense 1 2 (49.4) %

Other (income) expense (5) 1 NM (4) 3 NM

Amortization of purchased intangibles 3 3 — 6 6 —

1 unchanged sentence

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

CAY loss ratio excluding catastrophe losses 53.6 % 54.7 % (1.1) pts 53.4 % 54.9 % (1.5) pts

Catastrophe losses 5.3 % 9.2 % (3.9) pts 12.2 % 5.5 % 6.7 pts

Prior period development (3.7) % (0.1) % (3.6) pts (3.5) % — (3.5) pts

Loss and loss expense ratio 55.2 % 63.8 % (8.6) pts 62.1 % 60.4 % 1.7 pts

Policy acquisition cost ratio 20.0 % 19.4 % 0.6 pts 20.4 % 19.9 % 0.5 pts

Administrative expense ratio 5.5 % 5.6 % (0.1) pts 5.3 % 5.6 % (0.3) pts

Combined ratio 80.7 % 88.8 % (8.1) pts 87.8 % 85.9 % 1.9 pts

NM - not meaningful

Catastrophe Losses and Prior Period Development

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

(in millions of U.S.

1 unchanged sentence

Catastrophe losses $ 61 $ 110 $ 301 $ 131

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

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

Favorable prior period development $ 44 $ 1 $ 84 $ —

Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events:

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

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.

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.

Net premiums written increased $36 million, or 2.6 percent, for the three months ended June 30, 2021, primarily driven by strong renewal retention, from both rate and exposure increases, and new business in homeowners.

Partially offsetting the increase was wildfire exposure-related cancellations in parts of California.

Net premiums written increased $27 million, or 1.1 percent, for the six months ended June 30, 2021, primarily driven by the factors described above, partially offset by the unfavorable impact of automobile return premiums and the unfavorable impact of reinstatement premiums related to 2021 winter storm losses.

Net premiums earned increased $32 million, or 2.7 percent, and $16 million, or 0.7 percent for the three and six months ended June 30, 2021, respectively, reflecting the growth 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.

The loss and loss expense ratio decreased 8.6 percentage points and increased 1.7 percentage points for the three and six months ended June 30, 2021, respectively, reflecting catastrophe losses and higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 1.1 percentage points and 1.5 percentage points for the three and six months ended June 30, 2021, respectively, due to lower claim frequency in automobile and in homeowners from underlying loss ratio improvement.

The policy acquisition cost ratio increased 0.6 percentage points and 0.5 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to a favorable commission accrual adjustment in the prior year.

The administrative expense ratio decreased 0.1 percentage points and 0.3 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to continued expense management.

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

March 31 % Change

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Net premiums written $ 512 $ 461 11.0 % $ 695 $ 618 12.4 %

5 unchanged sentences

Net investment income 8 7 3.9 % 15 16 (8.7) %

Other (income) expense — 1 NM — 1 NM

Amortization of purchased intangibles 6 6 — 13 13 —

1 unchanged sentence

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

CAY loss ratio excluding catastrophe losses 79.7 % 81.5 % (1.8) pts 77.9 % 80.4 % (2.5) pts

Catastrophe losses 1.0 % 1.6 % (0.6) pts 2.3 % 3.0 % (0.7) pts

Prior period development — — — pts (0.2) % (3.0) % 2.8 pts

Loss and loss expense ratio 80.7 % 83.1 % (2.4) pts 80.0 % 80.4 % (0.4) pts

Policy acquisition cost ratio 6.7 % 7.8 % (1.1) pts 7.6 % 8.5 % (0.9) pts

Administrative expense ratio 0.7 % 0.9 % (0.2) pts 1.1 % 1.5 % (0.4) pts

Combined ratio 88.1 % 91.8 % (3.7) pts 88.7 % 90.4 % (1.7) pts

NM - not meaningful

Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended

June 30 June 30

(in millions of U.S.

2 unchanged sentences

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.

Catastrophe losses through June 30, 2021 and 2020 were primarily from winter storm losses and other 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.

For the six months ended June 30, 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 $51 million, or 11.0 percent, and $77 million, or 12.4 percent for the three and six months ended June 30, 2021, respectively, due to policy count growth and a modest increase in commodity price for winter wheat in our MPCI business.

In addition, our Chubb Agribusiness unit contributed to strong new business growth.

Net premiums earned increased $34 million, or 8.9 percent, and $50 million, or 10.5 percent for the three and six months ended June 30, 2021, respectively, 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.

The loss and loss expense ratio decreased 2.4 percentage points and 0.4 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to higher premiums earned from Chubb Agribusiness, which has a lower loss ratio, lower catastrophe losses, the favorable year-over-year impact of our crop derivative, and lower underlying losses in Chubb Agribusiness.

The decrease in the loss ratio for the six months ended June 30, 2021 was mostly offset by lower favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 1.8 percentage points and 2.5 percentage points for the three and six months ended June 30, 2021, respectively, due to the factors noted above.

The policy acquisition cost ratio decreased 1.1 percentage points and 0.9 percentage point for the three and six months ended June 30, 2021, respectively, primarily due to a lower year-over-year amount of supplemental commissions in our Chubb Agribusiness unit.

The administrative expense ratio decreased 0.2 percentage points and 0.4 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to 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

March 31 % Change

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Net premiums written $ 2,497 $ 2,021 23.6 % $ 5,387 $ 4,619 16.6 %

4 unchanged sentences

Administrative expenses 279 241 16.0 % 545 499 9.3 %

Underwriting income 281 149 88.3 %

Underwriting income (loss) 415 (156) NM 696 (7) NM

Net investment income 149 121 22.2 % 290 266 8.7 %

1 unchanged sentence

Amortization of purchased intangibles 13 11 17.8 % 25 23 11.8 %

Segment income $ 409 $ 278 47.0 %

Segment income (loss) $ 549 $ (51) NM $ 958 $ 227 NM

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

CAY loss ratio excluding catastrophe losses 50.6 % 51.6 % (1.0) pts 50.3 % 51.2 % (0.9) pts

Catastrophe losses 1.6 % 17.8 % (16.2) pts 1.8 % 10.7 % (8.9) pts

Prior period development (6.2) % (1.7) % (4.5) pts (3.7) % (0.9) % (2.8) pts

Loss and loss expense ratio 46.0 % 67.7 % (21.7) pts 48.4 % 61.0 % (12.6) pts

Policy acquisition cost ratio 27.1 % 28.4 % (1.3) pts 27.0 % 28.1 % (1.1) pts

Administrative expense ratio 10.8 % 11.0 % (0.2) pts 10.8 % 11.1 % (0.3) pts

Combined ratio 83.9 % 107.1 % (23.2) pts 86.2 % 100.2 % (14.0) pts

NM - not meaningful

Catastrophe Losses and Prior Period Development

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

(in millions of U.S.

2 unchanged sentences

Favorable prior period development $ 156 $ 36 $ 181 $ 40

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

Catastrophe losses through June 30, 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.

COVID-19 pandemic claims of $373 million, storms in Australia, Australia wildfires, and other international weather-related events

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

Net Premiums Written by Region

Three months ended March 31

Three months ended June 30

(in millions of U.S.

3 unchanged sentences

Q-20 C$ Q-21 vs.

Europe $ 1,516 52 % $ 1,228 47 % $ 1,313 23.4 % 15.4 %

Europe, Middle East and Africa $ 1,188 48 % $ 879 43 % $ 946 35.2 % 25.6 %

Latin America 451 18 % 389 19 % 418 16.3 % 8.2 %

2 unchanged sentences

Net premiums written $ 2,497 100 % $ 2,021 100 % $ 2,173 23.6 % 15.0 %

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

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.

Six months ended June 30

(in millions of U.S.

dollars, except for percentages) 2021 2021

% of Total 2020 2020

% of Total C$

Y-20 C$ Y-21 vs.

Europe, Middle East and Africa $ 2,739 51 % $ 2,156 47 % $ 2,307 27.1 % 18.7 %

Latin America 988 18 % 972 21 % 975 1.7 % 1.4 %

Asia 1,586 30 % 1,409 30 % 1,501 12.5 % 5.7 %

74 1 % 82 2 % 87 (10.3) % (15.5) %

Net premiums written $ 5,387 100 % $ 4,619 100 % $ 4,870 16.6 % 10.6 %

(1) Includes the international supplemental A&H business of Combined Insurance and other international operations.

Net premiums written increased $476 million and $768 million, or $324 million and $517 million on a constant-dollar basis, for the three and six months ended June 30, 2021, respectively, comprising:

• Commercial P&C lines:

Positive growth of 23.4 percent and 18.8 percent, respectively, across most regions and lines from new business and positive rate increases.

• Consumer lines:

Positive growth of 4.6 percent for the three months ended June 30, 2021 across all regions and most lines, principally in specialty personal and homeowners lines.

For the six months ended June 30, 2021, net premiums written in our consumer lines was relatively flat as growth in the second quarter noted above, was offset by declines in A&H in all regions, resulting from less travel volume and lower exposures, and in automobile lines in Latin America.

Net premiums earned increased $385 million and $556 million, or $216 million and $305 million on a constant-dollar basis, for the three and six months ended June 30, 2021, respectively, reflecting the increase in net premiums written described above.

Combined 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 loss and loss expense ratio decreased 21.7 percentage points and 12.6 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to lower catastrophe losses and higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses decreased 1.0 percentage points and 0.9 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to margin improvements coming from underlying loss ratio improvement and lower losses in automobile lines in Latin America.

The decrease was partially offset by lower premiums earned from A&H lines which have a lower loss ratio.

The policy acquisition cost ratio decreased 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.

The policy acquisition cost ratio decreased 1.3 percentage points and 1.1 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to a change in the mix of business, including less premiums earned from 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 .

Global Reinsurance

1 unchanged sentence

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Net premiums written $ 274 $ 207 32.4 % $ 481 $ 425 13.1 %

6 unchanged sentences

Net investment income 81 60 33.4 % 151 129 16.7 %

Other (income) expense — 1 NM — 1 NM

Segment income $ 106 $ 98 8.5 % $ 183 $ 211 (13.2) %

Loss and loss expense ratio:

CAY loss ratio excluding catastrophe losses 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

CAY loss ratio excluding catastrophe losses 50.9 % 46.8 % 4.1 pts 49.6 % 48.7 % 0.9 pts

Catastrophe losses 5.2 % 7.9 % (2.7) pts 14.2 % 3.7 % 10.5 pts

Prior period development 0.7 % (9.2) % 9.9 pts (2.1) % (6.4) % 4.3 pts

Loss and loss expense ratio 56.8 % 45.5 % 11.3 pts 61.7 % 46.0 % 15.7 pts

Policy acquisition cost ratio 24.7 % 25.5 % (0.8) pts 24.8 % 25.0 % (0.2) pts

Administrative expense ratio 5.1 % 5.6 % (0.5) pts 4.8 % 5.3 % (0.5) pts

Combined ratio 86.6 % 76.6 % 10.0 pts 91.3 % 76.3 % 15.0 pts

NM - not meaningful

Catastrophe Losses and Prior Period Development

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

(in millions of U.S dollars) 2021 2020 2021 2020

1 unchanged sentence

Favorable prior period development $ — $ 16 $ 7 $ 23

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

Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events:

Winter storm losses in the U.S.

COVID-19 pandemic claims of $10 million and severe weather-related events in the U.S.

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

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.

Net premiums written increased $67 million and $56 million for the three and six months ended June 30, 2021, respectively, primarily from new business written, including a large treaty bound in the quarter, and positive rate increases in property, casualty, and financial lines.

Net premiums earned increased $29 million and $23 million, for the three and six months ended June 30, 2021, respectively, reflecting the increase in net premiums written 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.

The loss and loss expense ratio increased 11.3 percentage points for the three months ended June 30, 2021, primarily due to lower favorable prior period development.

The loss and loss expense ratio increased 15.7 percentage points for the six months ended June 30, 2021, primarily due to higher catastrophe losses and lower favorable prior period development.

The CAY loss ratio excluding catastrophe losses increased 4.1 percentage points and 0.9 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to a shift in the mix of business towards lines which have a higher loss ratio.

The policy acquisition cost ratio decreased 0.8 percentage points and 0.2 percentage points for the three and six months ended June 30, 2021, respectively, primarily from a shift in mix of business towards lines that have lower acquisition costs.

The administrative expense ratio decreased 0.5 percentage points for both the three and six months ended June 30, 2021, primarily from the favorable impact of higher net premiums earned.

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

March 31 % Change

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Net premiums written $ 615 $ 619 (0.7) % $ 1,235 $ 1,264 (2.3) %

10 unchanged sentences

Segment income $ 102 $ 87 16.1 % $ 206 $ 181 13.6 %

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.

Net premiums written decreased $4 million and $29 million, or $25 million and $56 million on a constant-dollar basis for the three and six months ended June 30, 2021, respectively.

For our International Life operations, net premiums written increased 11.6 percent and 10.7 percent for the three and six months ended June 30, 2021, respectively, principally in Asia, from new business in Taiwan, Vietnam and Thailand.

This growth was more than offset by a decline in our North America Combined Insurance business of 5.9 percent and 7.7 percent for the three and six months ended June 30, 2021, respectively, due to the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales.

There was also a decline in our life reinsurance business which continues to decline as no new business is currently being written.

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

Three Months Ended

March 31 % Change

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

2021 2020 C$ 2020 Y-21 vs.

Deposits collected on Universal life and investment contracts $ 605 $ 309 $ 323 95.8 % 86.9 % $ 1,156 $ 752 $ 794 53.7 % 45.7 %

1 unchanged sentence

New life deposits are an important component of production, and although they do not significantly affect current period income from operations, they are key to our efforts to grow our business.

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

Life deposits collected increased $296 million and $404 million for the three and six months ended June 30, 2021, respectively, primarily due to successful sales in broker and bank channels in Taiwan.

Life Insurance underwriting income and Segment income

Life Insurance underwriting income 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.

Life Insurance underwriting income increased $6 million for the three months ended June 30, 2021, primarily due to higher net investment income.

Life Insurance underwriting income decreased $6 million for the six months ended June 30, 2021, primarily due to a one-time employee related benefit of $7 million in the prior year.

Segment income increased $15 million and $25 million for the three and six months ended June 30, 2021, respectively, primarily due to our share of net income from our investment in Huatai, our partially-owned insurance entity in China.

Corporate 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

March 31 % Change

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

Losses and loss expenses $ 89 $ 276 (67.6) % $ 98 $ 287 (65.9) %

3 unchanged sentences

Interest expense 122 128 (4.9) % 244 260 (6.3) %

Net realized gains (losses) 888 (956) NM

Other (income) expense (415) 23 NM

Net realized gains (losses) (36) 31 NM 852 (925) NM

Other (income) expense (708) 109 NM (1,123) 132 NM

Amortization of purchased intangibles 50 51 (2.4) % 99 101 (2.7) %

Income tax expense 338 215 57.0 %

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

Income tax expense (benefit) 317 (62) NM 655 153 NM

Net income (loss) $ (9) $ (570) NM $ 688 $ (2,047) NM

NM - not meaningful

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.

Losses and loss expenses primarily includes unfavorable prior period development for molestation claims.

Administrative expenses increased $11 million and $16 million for the three and six months ended June 30, 2021, respectively, primarily due to higher employee-related expenses.

The increase for six months also includes increased spending to support digital growth initiatives.

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

Net Realized and Unrealized Gains (Losses)

5 unchanged sentences

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 March 31

Changes in unrealized appreciation and depreciation on available for sale securities, resulting from the revaluation of securities held, changes in cumulative foreign currency translation adjustment, and unrealized postretirement benefit obligations liability adjustment, are reported as separate components of Accumulated other comprehensive income in Shareholders’ equity in the Consolidated balance sheets.

The following tables presents our net realized and unrealized gains (losses):

Three Months Ended June 30

(in millions of U.S.

12 unchanged sentences

Net gains (losses), pre-tax $ (33) $ 993 $ 960 $ 30 $ 3,704 $ 3,734

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 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.

Six Months Ended June 30

(in millions of U.S.

Fixed maturities $ 36 $ (1,623) $ (1,587) $ (352) $ 1,121 $ 769

Fixed income and equity derivatives 18 — 18 29 — 29

Public equity

Sales 90 — 90 163 — 163

Mark-to-market 427 — 427 (44) — (44)

Private equity (less than 3 percent ownership)

Mark-to-market 100 — 100 (102) — (102)

Total investment portfolio 671 (1,623) (952) (306) 1,121 815

Variable annuity reinsurance derivative transactions, net of applicable hedges 203 — 203 (450) — (450)

Other derivatives 2 — 2 (3) — (3)

Foreign exchange (21) 330 309 (129) (414) (543)

Other (1) (37) (38) (40) (36) (76)

Net gains (losses), pre-tax $ 854 $ (1,330) $ (476) $ (928) $ 671 $ (257)

Pre-tax net gains of $827 million in our investment portfolio for the three months ended June 30, 2021 were principally the result of a decline in interest rates and positive equity returns.

Pre-tax net losses of $952 million in our investment portfolio for the six months ended June 30, 2021 were principally the result of an increase in interest rates, partially offset by positive equity returns.

The variable annuity reinsurance derivative transactions consist of changes in the fair value of GLB liabilities and gains or losses on other derivative instruments we maintain that decrease in fair value when the S&P 500 index increases.

The variable annuity reinsurance derivative transactions resulted in realized losses of $72 million for the three months ended June 30, 2021, reflecting principally a net realized loss of $64 million related to these other derivatives.

The fair value of the GLB liabilities remained relatively flat for the three months ended June 30, 2021, as the impact of higher global equity markets was offset by lower interest rates.

For the six months ended June 30, 2021, the variable annuity reinsurance derivative transactions resulted in realized gains of $203 million reflecting a net gain of $311 million principally related to a decrease in the fair value of the GLB liabilities due to higher interest rates and higher global equity markets, partially offset by a net realized loss of $108 million related to these other derivatives.

For the three months ended June 30, 2020, the variable annuity reinsurance derivative transactions resulted in realized gains of $110 million, reflecting a net decrease in the fair value of the GLB liabilities of $213 million due to higher global equity markets, partially offset by a net realized loss of $103 million related to these other derivatives.

For the six months ended June 30, 2020, the variable annuity reinsurance derivative transactions resulted in realized losses of $450 million reflecting a net increase in the fair value of the GLB liabilities of $472 million due to lower interest rates and lower global equity markets, partially offset by a net realized gain of $22 million related to these other derivatives.

Effective Income Tax Rate

Our effective tax rate 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.

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

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

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

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.

For the three and six months ended June 30, 2021 our ETR was 12.3 percent and 12.5 percent, respectively.

The ETRs were impacted by a higher percentage of income generated in lower tax jurisdictions and discrete tax benefits compared to 15.8 percent and 206.8 percent for the three and six months ended June 30, 2020, respectively.

In addition, the ETR for the prior period was impacted by the high level of catastrophe losses, principally COVID-19.

Non-GAAP Reconciliation

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Three Months Ended

March 31, 2021

June 30, 2021

(in millions of U.S.

8 unchanged sentences

Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — — — — — 11

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

PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 (2) — 12

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Three Months Ended

March 31, 2020

June 30, 2020

(in millions of U.S.

9 unchanged sentences

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

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

PPD, gross of related adjustments - favorable (unfavorable) 151 1 — 36 15 (274) (71)

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Net premiums earned E $ 3,595 $ 1,192 $ 376 $ 2,194 $ 163 $ 7,520

Reinstatement premiums (collected) expensed on catastrophe losses 3 1 — 16 — 20

Net premiums earned adjustments on PPD - unfavorable (favorable) 4 — — — — 4

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

Net premiums earned excluding adjustments F $ 3,602 $ 1,193 $ 376 $ 2,210 $ 162 $ 7,543

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

Other Income and Expense

Three Months Ended

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

Six Months Ended

June 30, 2021

(in millions of U.S.

dollars) 2021 2020

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

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

Federal excise and capital taxes (5) (6)

Other (6) (22)

Total $ 490 $ (55)

(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, 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.

The offsetting movement in the separate account liabilities is included in Policy benefits in the Consolidated statements of operations.

Certain federal excise and capital taxes incurred as a result of capital management initiatives are included in Other income and expense as these are considered capital transactions and are excluded from underwriting results.

dollars except for ratios)

Losses and loss expenses A $ 4,986 $ 1,495 $ 416 $ 2,449 $ 230 $ 98 $ 9,674

Catastrophe losses and related adjustments

Catastrophe losses, net of related adjustments (527) (301) (12) (90) (50) — (980)

Reinstatement premiums collected (expensed) on catastrophe losses — (16) — — 6 — (10)

Catastrophe losses, gross of related adjustments (527) (285) (12) (90) (56) — (970)

PPD and related adjustments

PPD, net of related adjustments - favorable (unfavorable) 283 84 2 181 7 (97) 460

Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — (2) — — — 9

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

PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 1 — 15

PPD, gross of related adjustments - favorable (unfavorable) 303 85 — 188 8 (97) 487

CAY loss and loss expense ex CATs B $ 4,762 $ 1,295 $ 404 $ 2,547 $ 182 $ 1 $ 9,191

Policy acquisition costs and administrative expenses

Policy acquisition costs and administrative expenses C $ 1,502 $ 619 $ 45 $ 1,912 $ 110 $ 159 $ 4,347

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

Policy acquisition costs and administrative expenses, adjusted D $ 1,499 $ 619 $ 45 $ 1,912 $ 110 $ 159 $ 4,344

Net premiums earned E $ 7,477 $ 2,408 $ 520 $ 5,057 $ 372 $ 15,834

Reinstatement premiums (collected) expensed on catastrophe losses — 16 — — (6) 10

Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — (2) — — 9

PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 1 15

Net premiums earned excluding adjustments F $ 7,494 $ 2,425 $ 518 $ 5,064 $ 367 $ 15,868

P&C Combined ratio

Loss and loss expense ratio A/E 66.7 % 62.1 % 80.0 % 48.4 % 61.7 % 61.1 %

Policy acquisition cost and administrative expense ratio C/E 20.1 % 25.7 % 8.7 % 37.8 % 29.6 % 27.5 %

P&C Combined ratio 86.8 % 87.8 % 88.7 % 86.2 % 91.3 % 88.6 %

CAY P&C Combined ratio ex CATs

Loss and loss expense ratio, adjusted B/F 63.6 % 53.4 % 77.9 % 50.3 % 49.6 % 57.9 %

Policy acquisition cost and administrative expense ratio, adjusted D/F 20.0 % 25.5 % 8.7 % 37.8 % 30.0 % 27.4 %

CAY P&C Combined ratio ex CATs 83.6 % 78.9 % 86.6 % 88.1 % 79.6 % 85.3 %

Combined ratio

Combined ratio 88.6 %

impact of gains and losses on crop derivatives —

P&C Combined ratio 88.6 %

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

Six Months Ended

June 30, 2020

(in millions of U.S.

dollars except for ratios)

Losses and loss expenses A $ 5,679 $ 1,445 $ 378 $ 2,743 $ 160 $ 287 $ 10,692

Catastrophe losses and related adjustments

Catastrophe losses, net of related adjustments (1,391) (131) (14) (489) (13) — (2,038)

Reinstatement premiums collected (expensed) on catastrophe losses (3) (1) — (16) — — (20)

Catastrophe losses, gross of related adjustments (1,388) (130) (14) (473) (13) — (2,018)

PPD and related adjustments

PPD, net of related adjustments - favorable (unfavorable) 251 — 14 40 23 (285) 43

Net premiums earned adjustments on PPD - unfavorable (favorable) 4 — 3 — — — 7

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

PPD, gross of related adjustments - favorable (unfavorable) 255 — 17 40 22 (285) 49

CAY loss and loss expense ex CATs B $ 4,546 $ 1,315 $ 381 $ 2,310 $ 169 $ 2 $ 8,723

Policy acquisition costs and administrative expenses

Policy acquisition costs and administrative expenses C $ 1,471 $ 610 $ 47 $ 1,765 $ 106 $ 143 $ 4,142

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

Policy acquisition costs and administrative expenses, adjusted D $ 1,471 $ 610 $ 47 $ 1,765 $ 106 $ 143 $ 4,142

Net premiums earned E $ 6,971 $ 2,392 $ 470 $ 4,501 $ 349 $ 14,683

Reinstatement premiums (collected) expensed on catastrophe losses 3 1 — 16 — 20

Net premiums earned adjustments on PPD - unfavorable (favorable) 4 — 3 — — 7

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

Net premiums earned excluding adjustments F $ 6,978 $ 2,393 $ 473 $ 4,517 $ 348 $ 14,709

P&C Combined ratio

Loss and loss expense ratio A/E 81.5 % 60.4 % 80.4 % 61.0 % 46.0 % 72.8 %

Policy acquisition cost and administrative expense ratio C/E 21.1 % 25.5 % 10.0 % 39.2 % 30.3 % 28.2 %

P&C Combined ratio 102.6 % 85.9 % 90.4 % 100.2 % 76.3 % 101.0 %

CAY P&C Combined ratio ex CATs

Loss and loss expense ratio, adjusted B/F 65.2 % 54.9 % 80.4 % 51.2 % 48.7 % 59.3 %

Policy acquisition cost and administrative expense ratio, adjusted D/F 21.0 % 25.5 % 10.0 % 39.0 % 30.5 % 28.2 %

CAY P&C Combined ratio ex CATs 86.2 % 80.4 % 90.4 % 90.2 % 79.2 % 87.5 %

Combined ratio

Combined ratio 101.0 %

impact of gains and losses on crop derivatives —

P&C Combined ratio 101.0 %

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.

Amortization of purchased intangibles and Other amortization

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:

Amortization expense of purchased intangibles was $73 million and $145 million for the three and six months ended June 30, 2021, respectively, and principally relates to the Chubb Corp acquisition.

The following table presents, as of June 30, 2021, the estimated pre-tax amortization expense (benefit) of purchased intangibles, at current foreign currency exchange rates, for the third and fourth quarters of 2021 and the next five years:

Associated with the Chubb Corp Acquisition

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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

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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 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:

At June 30, 2021, the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was $1,270 million.

The following table presents, as of June 30, 2021, the expected reduction of the deferred tax liability associated with Other intangible assets (which reduces as agency distribution relationships and renewal rights, and other intangible assets amortize), at current foreign currency exchange rates, for the third and fourth quarters of 2021 and for the next five years:

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

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

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:

The following table presents at June 30, 2021, the expected amortization expense of the fair value adjustment on acquired invested assets, at current foreign currency exchange rates, and the expected amortization benefit from the fair value adjustment on assumed long-term debt for the third and fourth quarters of 2021 and for the next five years:

Amortization (expense) benefit of the fair value adjustment on

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Assumed long-term debt (2)

Second quarter of 2021 $ (30) $ 5

Third quarter of 2021 $ (25) $ 5

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Three Months Ended

June 30 Six Months Ended

(in millions of U.S.

1 unchanged sentence

Fixed maturities (1)

$ 836 $ 810 $ 1,676 $ 1,661

Short-term investments 8 11 17 28

3 unchanged sentences

Gross investment income (1)

931 869 1,841 1,775

Investment expenses (47) (42) (94) (87)

Net investment income (1)

$ 884 $ 827 $ 1,747 $ 1,688

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

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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 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.

Net investment income increased 7.0 percent and 3.5 percent for the three and six months ended June 30, 2021, respectively, primarily due to higher income received from our private equity partnerships and increased dividends on public equities.

Investment income for the year was tempered by lower reinvestment rates on new and reinvested assets.

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

June 30 Six Months Ended

(in millions of U.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 4.3 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 average duration of our fixed income securities, including the effect of options and swaps, was 4.2 years and 4.0 years at June 30, 2021 and December 31, 2020, respectively.

We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately $4.5 billion at June 30, 2021.

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(in millions of U.S.

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Total investments $ 122,040 $ 117,462 $ 119,526 $ 113,142

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 fair value of our total investments increased $2.5 billion during the six months ended June 30, 2021 due to strong operating cash flow, positive equity market returns, and favorable foreign currency movement.

This increase was partially offset by unrealized losses on fixed maturities, payment of dividends on our Common Shares, and share repurchases.

The following tables present the fair value of our fixed maturities and short-term investments at June 30, 2021 and December 31, 2020.

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

March 31, 2021 December 31, 2020

June 30, 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 March 31, 2021:

The following table presents our 10 largest global exposures to corporate bonds by fair value at June 30, 2021:

(in millions of U.S.

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JP Morgan Chase & Co 615

Verizon Communications Inc 532

Comcast Corp 507

Verizon Communications Inc 489

Morgan Stanley 474

Citigroup Inc 419

Goldman Sachs Group Inc 394

HSBC Holdings Plc 393

Goldman Sachs Group Inc 379

Mortgage-backed securities

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Value Amortized Cost, Net

March 31, 2021

June 30, 2021

(in millions of U.S.

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

government securities at March 31, 2021:

government securities at June 30, 2021:

(in millions of U.S.

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United Mexican States 571 571

Province of Quebec 483 465

Federative Republic of Brazil 555 559

Province of Quebec 470 450

Commonwealth of Australia 437 409

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

corporate securities at March 31, 2021:

corporate securities at June 30, 2021:

(in millions of U.S.

2 unchanged sentences

Canada 1,840 1,767

United States (1)

France 1,242 1,185

United States (1)

Australia 907 862

1 unchanged sentence

Germany 608 582

Netherlands 580 556

Switzerland 592 559

Netherlands 539 510

China 481 471

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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 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.

At June 30, 2021, our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 15 percent of our fixed income portfolio.

Our below-investment grade and non-rated portfolio includes over 1,500 issuers, with the greatest single exposure being $161 million.

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Our high-yield managers have a conservative approach to credit selection and very low historical default experience.

Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit

as a percentage of high-yield allocation.

Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit as a percentage of high-yield allocation.

We monitor position limits daily through an internal compliance system.

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Critical Accounting Estimates

As of March 31, 2021, there were no material changes to our critical accounting estimates.

As of June 30, 2021, there were no material changes to our critical accounting estimates.

For a full discussion of our critical accounting estimates, refer to Item 7 in our 2020 Form 10-K.

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Other (including foreign exchange translation) 313 82 231

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

Balance at June 30, 2021 $ 70,289 $ 14,721 $ 55,568

(1) Net of valuation allowance for uncollectible reinsurance.

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Asbestos and Environmental (A&E)

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

There was no significant A&E reserve activity during the three and six months ende d June 30, 2021.

A&E reserves are included in Corporate.

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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.

The table below presents our modeled pre-tax estimates of natural catastrophe PML, net of reinsurance, at June 30, 2021, for Worldwide, U.S.

hurricane and California earthquake events, based on our in-force portfolio at April 1, 2021 and reflecting the April 1, 2021 reinsurance program (see Natural Catastrophe Property Reinsurance Program section) as well as inuring reinsurance protection coverages.

According to the model, for the 1-in-100 return period scenario, there is a one percent chance that our pre-tax annual aggregate losses incurred in any year from U.S.

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

hurricane events could be in excess of $2,759 million (or 4.6 percent of our total shareholders’ equity at June 30, 2021).

These estimates assume that reinsurance recoverable is fully collectible.

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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.

Based on preliminary stress tests conducted against the Chubb portfolio at January 1, 2021, the impacts of climate change are not expected to materially impact our reported U.S.

hurricane PML over the next 12 months.

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

At June 30, 2021, our usage under these facilities was $1.4 billion in letters of credit.

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

The facilities require that we maintain certain financial covenants, all of which we met at March 31, 2021.

The facilities require that we maintain certain financial covenants, all of which we met at June 30, 2021.

Should the existing credit providers on these facilities experience financial difficulty, we may be required to replace credit sources, possibly in a difficult market.

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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 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.

During the six months ended June 30, 2021, we were able to meet all our obligations, including the payments of dividends on our Common Shares, with our net cash flows.

We assess which subsidiaries to draw dividends from based on a number of factors.

Considerations such as regulatory and legal restrictions as well as the subsidiary’s financial condition are paramount to the dividend decision.

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

Chubb Limited received dividends of $1.8 billion and nil from its Bermuda subsidiaries during the six months ended June 30, 2021 and 2020, respectively.

Chubb Limited received cash dividends of $21 million and $110 million and non-cash dividends of $536 million and $734 million from a Swiss subsidiary during the six months ended June 30, 2021 and 2020, respectively.

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

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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 three months ended March 31, 2021 and 2020.

Chubb Limited received no dividends from CGM or Chubb INA during the six months ended June 30, 2021 and 2020.

Debt issued by Chubb INA is serviced by statutorily permissible distributions by Chubb INA’s insurance subsidiaries to Chubb INA as well as other group resources.

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

Chubb INA received $470 million and nil from its subsidiaries during the six months ended June 30, 2021 and 2020, respectively.

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

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

The following is a discussion of our cash flows for the six months ended June 30, 2021 and 2020.

Operating cash flows were $5.2 billion in the six months ended June 30, 2021, compared to $3.7 billion in the prior year period.

The increase of $1.5 billion is due to higher premiums collected reflecting premium growth, principally in our commercial lines.

Partially offsetting the increase are higher catastrophe loss payments and higher taxes paid.

Cash used for investing was $2.0 billion in the six months ended June 30, 2021, compared to $2.7 billion in the prior year period.

Cash used for investing principally relates to net purchases of fixed maturities.

In addition, the prior year included cash used for the incremental purchase of Huatai Group ownership interest of $1.6 billion.

Cash used for financing was $3.0 billion in the six months ended June 30, 2021, compared to $898 million in the prior year period, an increase of $2.1 billion principally from more shares repurchased in the current year.

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

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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.

At June 30, 2021, there were $1.4 billion in repurchase agreements outstanding with various maturities over the next nine months.

Capital Resources

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

March 31 December 31

June 30 December 31

(in millions of U.S.

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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.

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.

For the six months ended June 30, 2021, we repurchased $2.44 billion of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorization.

At June 30, 2021, there were 38,888,051 Common Shares in treasury with a weighted average cost of $148.42 per share, and $65 million in share repurchase authorization remained through December 31, 2021.

Subsequently, on July 19, 2021, the Board authorized a one-time incremental share repurchase program of up to $5.0 billion through June 30, 2022.

At July 28, 2021, $5.06 billion in share repurchase authorizations remained.

We generally maintain the ability to issue certain classes of debt and equity securities via an unlimited Securities and Exchange Commission (SEC) shelf registration which is renewed every three years.

5 unchanged sentences

The Board determines the record and payment dates at which the annual dividend may be paid until the date of the 2022 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion.

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

The annual dividend approved in May 2021 represented a $0.08 per share increase ($0.02 per quarter) over the prior year dividend.

4 unchanged sentences

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

June 18, 2021 July 9, 2021 $0.80 (CHF 0.71)

Information provided in connection with outstanding debt of subsidiaries

Chubb INA Holdings Inc.

(Subsidiary Issuer) is an indirect 100 percent-owned and consolidated subsidiary of Chubb Limited (Parent Guarantor).

The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer.

The following table presents the condensed balance sheets of Chubb Limited and Chubb INA Holdings Inc., after elimination of investment in any non-guarantor subsidiary:

Chubb Limited

(Parent Guarantor) Chubb INA Holdings Inc.

(Subsidiary Issuer)

(in millions of U.S.

dollars) June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

Investments $ — $ — $ 207 $ 197

Cash 1 84 1 1

Due from parent guarantor/subsidiary issuer, net — 479 449 —

Due from subsidiaries that are not issuers or guarantors, net 3,067 3,043 — —

Other assets 8 10 448 463

Total assets $ 3,076 $ 3,616 $ 1,105 $ 661

Due to parent guarantor/subsidiary issuer, net $ 449 $ — $ — $ 479

Due to subsidiaries that are not issuers or guarantors, net — — 2,712 2,529

Affiliated notional cash pooling programs 293 — 819 272

Long-term debt — — 14,954 14,948

Trust preferred securities — — 308 308

Other liabilities 309 323 1,296 1,418

Total liabilities 1,051 323 20,089 19,954

Total shareholders’ equity 2,025 3,293 (18,984) (19,293)

Total liabilities and shareholders’ equity $ 3,076 $ 3,616 $ 1,105 $ 661

The following table presents the condensed statements of operations and comprehensive income of Chubb Limited and Chubb INA Holdings Inc., excluding equity in earnings from non-guarantor subsidiaries:

Six Months Ended June 30, 2021 Chubb Limited

(Parent Guarantor) Chubb INA Holdings Inc.

(Subsidiary Issuer)

(in millions of U.S.

Net investment income $ 2 $ 1

Net realized gains (loss) 18 (13)

Administrative expenses 47 (78)

Interest (income) expense (67) 289

Other (income) expense (26) (13)

Income tax expense (benefit) 17 (70)

Net income (loss) $ 49 $ (140)

Comprehensive income (loss) $ 49 $ (141)

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