Chubb Ltd 10-Q

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three and six months ended June 30, 2021. All comparisons in this discussion are to the corresponding prior year period unless otherwise indicated. All dollar amounts are rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded dollars may differ. Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. This discussion should be read in conjunction with our consolidated financial statements and related notes and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K). Other Information We routinely post important information for investors on our website (investors.chubb.com). We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Securities and Exchange Commission (SEC) Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Investor Information portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report. MD&A Index Page Forward-Looking Statements 41 Overview 42 Consolidated Operating Results 42 Segment Operating Results 47 Net Realized and Unrealized Gains (Losses) 57 Effective Income Tax Rate 58 Non-GAAP Reconciliation 59 Amortization of Purchased Intangibles and Other Amortization 64 Net Investment Income 65 Investments 66 Critical Accounting Estimates 70 Unpaid Losses and Loss Expenses 70 Asbestos and Environmental (A&E) 70 Fair Value Measurements 70 Catastrophe Management 71 Natural Catastrophe Property Reinsurance Program 72 Liquidity 73 Capital Resources 74 Information P rovided I n C onnection W ith O utstanding D ebt of S ubsidiaries 75 40 Table of Contents Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,” “intend,” “hope,” “feel,” “foresee,” “will likely result,” “will continue,” and variations thereof and similar expressions, identify forward-looking statements. These forward-looking statements are subject to certain risks, uncertainties, and other factors that could, should potential events occur, cause actual results to differ materially from such statements. These risks, uncertainties, and other factors, which are described in more detail elsewhere herein and in other documents we file with the U.S. Securities and Exchange Commission (SEC), include but are not limited to: • actual amount of new and renewal business, premium rates, underwriting margins, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets; the competitive environment in which we operate, including trends in pricing or in policy terms and conditions, which may differ from our projections and changes in market conditions that could render our business strategies ineffective or obsolete; • losses arising out of natural or man-made catastrophes; actual loss experience from insured or reinsured events and the timing of claim payments; the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing environmental damage and asbestos-related latent injuries, the impact of aggregate-policy-coverage limits, the impact of bankruptcy protection sought by various asbestos producers and other related businesses, and the timing of loss payments; • infection rates and severity of COVID-19 and related risks, and their effects on our business operations and claims activity, and any adverse impact to our insureds, brokers, agents, and employees; actual claims may exceed our best estimate of ultimate insurance losses incurred through June 30, 2021 which could change including as a result of, among other things, the impact of legislative or regulatory actions taken in response to COVID-19; • changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; the ability to collect reinsurance recoverable, credit developments of reinsurers, and any delays with respect thereto and changes in the cost, quality, or availability of reinsurance; • uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and treaties; judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms; the effects of data privacy or cyber laws or regulation; global political conditions and possible business disruption or economic contraction that may result from such events; • developments in global financial markets, including changes in interest rates, stock markets, and other financial markets; increased government involvement or intervention in the financial services industry; the cost and availability of financing, and foreign currency exchange rate fluctuations; changing rates of inflation; and other general economic and business conditions, including the depth and duration of potential recession; • the availability of borrowings and letters of credit under our credit facilities; the adequacy of collateral supporting funded high deductible programs; the amount of dividends received from subsidiaries; • changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available for sale fixed maturity investments before their anticipated recovery; • actions that rating agencies may take from time to time, such as financial strength or credit ratings downgrades or placing these ratings on credit watch negative or the equivalent; • the effects of public company bankruptcies and accounting restatements, as well as disclosures by and investigations of public companies relating to possible accounting irregularities, and other corporate governance issues; • acquisitions made performing differently than expected, our failure to realize anticipated expense-related efficiencies or growth from acquisitions, the impact of acquisitions on our pre-existing organization, or announced acquisitions not closing; risks and uncertainties relating to our planned purchases of additional interests in Huatai Insurance Group Co., Ltd. (Huatai Group), including our ability to receive Chinese insurance regulatory approval and complete the purchases; • risks associated with being a Swiss corporation, including reduced flexibility with respect to certain aspects of capital management and the potential for additional regulatory burdens; share repurchase plans and share cancellations; • loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time frame; 41 Table of Contents • the ability of our technology resources, including information systems and security, to perform as anticipated such as with respect to preventing material information technology failures or third-party infiltrations or hacking resulting in consequences adverse to Chubb or its customers or partners; the ability of our company to increase use of data analytics and technology as part of our business strategy and adapt to new technologies; and • management’s response to these factors and actual events (including, but not limited to, those described above). You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events or otherwise. Overview Chubb Limited is the Swiss-incorporated holding company of the Chubb Group of Companies. Chubb Limited, which is headquartered in Zurich, Switzerland, and its direct and indirect subsidiaries (collectively, the Chubb Group of Companies, Chubb, we, us, or our) are a global insurance and reinsurance organization, serving the needs of a diverse group of clients worldwide. At June 30, 2021, we had total assets of $197 billion and shareholders’ equity of $60 billion. Chubb was incorporated in 1985 at which time it opened its first business office in Bermuda and continues to maintain operations in Bermuda. We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more information on our segments refer to “Segment Information” under Item 1 in our 2020 Form 10-K. Consolidated Operating Results – Three and Six Months Ended June 30, 2021 and 2020 Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written $ 9,546 $ 8,355 14.3 % $ 18,208 $ 16,332 11.5 % Net premiums written - constant dollars (1) 11.5 % 9.3 % Net premiums earned 8,813 8,128 8.4 % 17,034 15,922 7.0 % Net investment income 884 827 7.0 % 1,747 1,688 3.5 % Net realized gains (losses) (33) 30 NM 854 (928) NM Total revenues 9,664 8,985 7.6 % 19,635 16,682 17.7 % Losses and loss expenses 5,006 6,577 (23.9) % 10,059 11,062 (9.1) % Policy benefits 185 223 (17.2) % 352 352 — Policy acquisition costs 1,698 1,593 6.6 % 3,363 3,208 4.8 % Administrative expenses 775 727 6.7 % 1,519 1,468 3.5 % Interest expense 122 128 (4.9) % 244 260 (6.3) % Other (income) expense (777) 58 NM (1,267) 113 NM Amortization of purchased intangibles 73 72 1.1 % 145 145 — Total expenses 7,082 9,378 (24.5) % 14,415 16,608 (13.2) % Income (loss) before income tax 2,582 (393) NM 5,220 74 NM Income tax expense (benefit) 317 (62) NM 655 153 NM Net income (loss) $ 2,265 $ (331) NM $ 4,565 $ (79) NM NM – not meaningful (1) On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency exchange rates as the comparable current period. 42 Table of Contents 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 $5.0 billion through June 30, 2022. 43 Table of Contents Net Premiums Written Three Months Ended June 30 % Change Six Months Ended June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 C$ Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 C$ YTD-21 vs. YTD-20 Commercial casualty $ 1,609 $ 1,478 8.9 % 8.5 % $ 3,258 $ 2,819 15.6 % 14.7 % Workers' compensation 546 467 17.0 % 17.0 % 1,109 1,053 5.3 % 5.3 % Professional liability 1,263 997 26.7 % 23.0 % 2,353 1,909 23.3 % 20.3 % Surety 138 117 18.5 % 14.3 % 296 267 11.2 % 10.7 % Commercial multiple peril (1) 316 267 18.0 % 18.0 % 579 508 13.9 % 13.9 % Property and other short-tail lines 1,740 1,344 29.5 % 24.0 % 3,334 2,678 24.5 % 20.1 % Total Commercial P&C lines 5,612 4,670 20.2 % 17.7 % 10,929 9,234 18.4 % 16.3 % Agriculture 512 461 11.0 % 11.0 % 695 618 12.4 % 12.4 % Personal automobile 364 353 3.2 % (1.0) % 751 794 (5.5) % (6.2) % Personal homeowners 1,025 980 4.5 % 3.5 % 1,800 1,753 2.6 % 1.9 % Personal other 464 402 15.5 % 9.0 % 932 820 13.6 % 8.6 % Total Personal lines 1,853 1,735 6.8 % 3.9 % 3,483 3,367 3.4 % 1.7 % Total Property and Casualty lines 7,977 6,866 16.2 % 13.8 % 15,107 13,219 14.3 % 12.4 % Global A&H lines (2) 951 951 0.1 % (4.2) % 1,933 2,018 (4.2) % (7.5) % Reinsurance lines 274 207 32.4 % 30.7 % 481 425 13.1 % 11.7 % Life 344 331 3.8 % (0.6) % 687 670 2.5 % (0.3) % Total consolidated $ 9,546 $ 8,355 14.3 % 11.5 % $ 18,208 $ 16,332 11.5 % 9.3 % (1) Commercial multiple peril represents retail package business (property and general liability). (2) For purposes of this schedule only, A&H results from our Combined North America and International businesses, normally included in the Life Insurance and Overseas General Insurance segments, respectively, as well as the A&H results of our North America Commercial P&C segment, are included in Global A&H lines above. The increase in net premiums written for the three and six months ended June 30, 2021 reflects growth across most lines of business. • The growth in commercial casualty was due to new business and positive rate increases, primarily across North America and Europe. Additionally, the prior year included a $58 million reduction in premium due to exposure adjustments on in-force policies resulting from the COVID-19 pandemic. Partially offsetting growth is the year-over-year decrease in large structured transactions of $178 million. Excluding these items, commercial casualty increased 18.5 percent and 20.7 percent, for the three and six months ended June 30, 2021, respectively. • Workers' compensation growth was due to a reduction in the prior year's premium of $121 million related to exposure adjustments on in-force policies resulting from the COVID-19 pandemic, partially offset by the year-over-year decrease in large structured transactions. Excluding these items, workers’ compensation increased slightly reflecting new business written in small commercial and large risk accounts. • The increase in professional liability was due to new business and positive rate increases in North America, Asia and Europe. • Commercial multiple peril increased due to higher new and renewal business in North America. • Property and other short-tail lines increased due to positive rate increases in Asia, North America and Europe, as well as higher new business in North America and Europe. • Personal lines increased globally primarily reflecting new business in homeowners lines in North America and Latin America and growth in specialty lines in Europe. Growth for the six months ended June 30, 2021 was partially offset by declines in automobile lines in North America and Latin America reflecting reduced exposures from the impact of the COVID-19 pandemic. • Global A&H lines decreased due to declines in Asia and Latin America, principally from less travel volume, and in our North American Combined Insurance supplemental A&H program from the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales. 44 Table of Contents • 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. Net Premiums Earned Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Net premiums earned for long-duration contracts, typically traditional life contracts, generally are recognized as earned when due from policyholders. For the three months 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 We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in the U.S. and Canada. PCS defines a catastrophe as an event that causes damage of $25 million or more in insured losses and affects a significant number of insureds. For events outside of the U.S. and Canada, we generally use a similar definition. We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. Prior period development includes adjustments relating to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development. Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Catastrophe losses $ 280 $ 1,807 $ 980 $ 2,044 Favorable (Unfavorable) prior period development $ 268 $ (75) $ 460 $ 43 Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events: • 2021: Winter storm losses in the U.S. and other severe weather-related events in the U.S. and internationally. • 2020: 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 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 45 Table of Contents favorable development of $184 million split approximately 79 percent long-tail lines, principally from accident years 2016 and prior, and 21 percent short-tail lines. Pre-tax net favorable PPD for the six months 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. P&C Combined Ratio In evaluating our segments excluding Life Insurance financial performance, we use the P&C combined ratio. We calculate this ratio by dividing the respective expense amounts by net premiums earned. We do not calculate this ratio for the Life Insurance segment as we do not use this measure to monitor or manage that segment. A P&C combined ratio under 100 percent indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting loss. Three Months Ended Six Months Ended June 30 June 30 2021 2020 2021 2020 Loss and loss expense ratio CAY loss ratio excluding catastrophe losses 58.6 % 60.4 % 57.9 % 59.3 % Catastrophe losses 3.5 % 23.9 % 6.2 % 13.8 % Prior period development (3.4) % 0.9 % (3.0) % (0.3) % Loss and loss expense ratio 58.7 % 85.2 % 61.1 % 72.8 % Policy acquisition cost ratio 18.4 % 18.5 % 18.9 % 19.3 % Administrative expense ratio 8.4 % 8.6 % 8.6 % 8.9 % P&C Combined ratio 85.5 % 112.3 % 88.6 % 101.0 % The loss and loss expense ratio decreased 26.5 percentage points and 11.7 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to lower catastrophe losses compared to the prior year which included significant losses related to the COVID-19 pandemic and higher favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased 1.8 percentage points and 1.4 percentage points for the three and six months ended June 30, 2021, respectively, reflecting in part, underlying loss ratio improvement. The policy acquisition cost ratio decreased 0.1 percentage points and 0.4 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to a change in the mix of business, including less premiums earned from consumer A&H lines that have a higher acquisition cost ratio and higher premiums earned from commercial P&C lines that have a lower acquisition cost ratio. The administrative expense ratio decreased 0.2 percentage points and 0.3 percentage points for the three and six months ended June 30, 2021, respectively, primarily due to the favorable impact of higher net premiums earned. Policy benefits Policy benefits represent losses on contracts classified as long-duration and generally include accident and supplemental health products, term and whole life products, endowment products, and annuities. Refer to the Life Insurance segment operating results section for further discussion. For the three months 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 $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. 46 Table of Contents 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 and Six Months Ended June 30, 2021 and 2020 We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more information on our segments refer to “Segment Information” under Item 1 in our 2020 Form 10-K. North America Commercial P&C Insurance The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) and accident & health (A&H) insurance and services to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda. This segment includes our North America Major Accounts and Specialty Insurance division (large corporate accounts and wholesale business), and the North America Commercial Insurance division (principally middle market and small commercial accounts). Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written $ 4,285 $ 3,720 15.2 % $ 7,949 $ 6,972 14.0 % Net premiums earned 3,803 3,595 5.8 % 7,477 6,971 7.3 % Losses and loss expenses 2,426 3,498 (30.6) % 4,986 5,679 (12.2) % Policy acquisition costs 489 471 3.8 % 1,003 963 4.1 % Administrative expenses 245 249 (1.8) % 499 508 (1.7) % Underwriting income (loss) 643 (623) NM 989 (179) NM Net investment income 535 509 5.3 % 1,075 1,034 4.1 % Other (income) expense 14 6 124.8 % 16 12 39.4 % Segment income (loss) $ 1,164 $ (120) NM $ 2,048 $ 843 142.9 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 63.7 % 66.1 % (2.4) pts 63.6 % 65.2 % (1.6) pts Catastrophe losses 4.3 % 35.4 % (31.1) pts 7.0 % 20.0 % (13.0) pts Prior period development (4.2) % (4.2) % — pts (3.9) % (3.7) % (0.2) pts Loss and loss expense ratio 63.8 % 97.3 % (33.5) pts 66.7 % 81.5 % (14.8) pts Policy acquisition cost ratio 12.9 % 13.1 % (0.2) pts 13.4 % 13.8 % (0.4) pts Administrative expense ratio 6.4 % 6.9 % (0.5) pts 6.7 % 7.3 % (0.6) pts Combined ratio 83.1 % 117.3 % (34.2) pts 86.8 % 102.6 % (15.8) pts NM - not meaningful 47 Table of Contents Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Catastrophe losses $ 165 $ 1,273 $ 527 $ 1,391 Favorable prior period development $ 156 $ 146 $ 283 $ 251 Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events: • 2021: Winter storm losses and other severe weather-related events in the U.S. • 2020: COVID-19 pandemic claims of $973 million, civil unrest in the U.S. of $118 million, and natural catastrophes including Nashville, Tennessee tornado and other severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $565 million, or 15.2 percent, and $977 million, or 14.0 percent, for the three and six months 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 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. 48 Table of Contents 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. and Canada. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written $ 1,363 $ 1,327 2.6 % $ 2,461 $ 2,434 1.1 % Net premiums earned 1,224 1,192 2.7 % 2,408 2,392 0.7 % Losses and loss expenses 676 762 (11.2) % 1,495 1,445 3.5 % Policy acquisition costs 245 231 6.0 % 492 476 3.5 % Administrative expenses 67 66 1.4 % 127 134 (5.4) % Underwriting income 236 133 76.6 % 294 337 (12.9) % Net investment income 64 65 (0.1) % 129 131 (1.1) % Other (income) expense (5) 1 NM (4) 3 NM Amortization of purchased intangibles 3 3 — 6 6 — Segment income $ 302 $ 194 55.9 % $ 421 $ 459 (8.2) % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 53.6 % 54.7 % (1.1) pts 53.4 % 54.9 % (1.5) pts Catastrophe losses 5.3 % 9.2 % (3.9) pts 12.2 % 5.5 % 6.7 pts Prior period development (3.7) % (0.1) % (3.6) pts (3.5) % — (3.5) pts Loss and loss expense ratio 55.2 % 63.8 % (8.6) pts 62.1 % 60.4 % 1.7 pts Policy acquisition cost ratio 20.0 % 19.4 % 0.6 pts 20.4 % 19.9 % 0.5 pts Administrative expense ratio 5.5 % 5.6 % (0.1) pts 5.3 % 5.6 % (0.3) pts Combined ratio 80.7 % 88.8 % (8.1) pts 87.8 % 85.9 % 1.9 pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Catastrophe losses $ 61 $ 110 $ 301 $ 131 Favorable prior period development $ 44 $ 1 $ 84 $ — Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events: • 2021: Winter storm losses and other severe weather-related events in the U.S. • 2020: Severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $36 million, or 2.6 percent, for the three months 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. 49 Table of Contents 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 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 The North America Agricultural Insurance segment comprises our North American based businesses that provide a variety of coverages in the U.S. and Canada including crop insurance, primarily Multiple Peril Crop Insurance (MPCI) and crop-hail through Rain and Hail Insurance Service, Inc. (Rain and Hail) as well as farm and ranch and specialty P&C commercial insurance products and services through our Chubb Agribusiness unit. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written $ 512 $ 461 11.0 % $ 695 $ 618 12.4 % Net premiums earned 410 376 8.9 % 520 470 10.5 % Losses and loss expenses 331 313 5.8 % 416 378 10.0 % Policy acquisition costs 27 29 (7.1) % 39 40 (2.0) % Administrative expenses 3 3 — 6 7 (21.3) % Underwriting income 49 31 59.1 % 59 45 30.8 % Net investment income 8 7 3.9 % 15 16 (8.7) % Other (income) expense — 1 NM — 1 NM Amortization of purchased intangibles 6 6 — 13 13 — Segment income $ 51 $ 31 61.5 % $ 61 $ 47 27.9 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 79.7 % 81.5 % (1.8) pts 77.9 % 80.4 % (2.5) pts Catastrophe losses 1.0 % 1.6 % (0.6) pts 2.3 % 3.0 % (0.7) pts Prior period development — — — pts (0.2) % (3.0) % 2.8 pts Loss and loss expense ratio 80.7 % 83.1 % (2.4) pts 80.0 % 80.4 % (0.4) pts Policy acquisition cost ratio 6.7 % 7.8 % (1.1) pts 7.6 % 8.5 % (0.9) pts Administrative expense ratio 0.7 % 0.9 % (0.2) pts 1.1 % 1.5 % (0.4) pts Combined ratio 88.1 % 91.8 % (3.7) pts 88.7 % 90.4 % (1.7) pts NM - not meaningful 50 Table of Contents Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Catastrophe losses $ 4 $ 6 $ 12 $ 14 Favorable prior period development $ — $ — $ 2 $ 14 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. 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. Premiums 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 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. 51 Table of Contents Overseas General Insurance Overseas General Insurance segment comprises Chubb International and Chubb Global Markets (CGM). Chubb International comprises our international commercial P&C traditional and specialty lines serving large corporations, middle market and small customers; A&H and traditional and specialty personal lines business serving local territories outside the U.S., Bermuda, and Canada. CGM, our London-based international commercial P&C excess and surplus lines business, includes Lloyd's of London (Lloyd's) Syndicate 2488. Chubb provides funds at Lloyd's to support underwriting by Syndicate 2488 which is managed by Chubb Underwriting Agencies Limited. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written $ 2,497 $ 2,021 23.6 % $ 5,387 $ 4,619 16.6 % Net premiums written - constant dollars 15.0 % 10.6 % Net premiums earned 2,579 2,194 17.6 % 5,057 4,501 12.4 % Losses and loss expenses 1,186 1,485 (20.1) % 2,449 2,743 (10.7) % Policy acquisition costs 699 624 12.0 % 1,367 1,266 8.0 % Administrative expenses 279 241 16.0 % 545 499 9.3 % Underwriting income (loss) 415 (156) NM 696 (7) NM Net investment income 149 121 22.2 % 290 266 8.7 % Other (income) expense 2 5 (66.9) % 3 9 (72.0) % Amortization of purchased intangibles 13 11 17.8 % 25 23 11.8 % Segment income (loss) $ 549 $ (51) NM $ 958 $ 227 NM Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 50.6 % 51.6 % (1.0) pts 50.3 % 51.2 % (0.9) pts Catastrophe losses 1.6 % 17.8 % (16.2) pts 1.8 % 10.7 % (8.9) pts Prior period development (6.2) % (1.7) % (4.5) pts (3.7) % (0.9) % (2.8) pts Loss and loss expense ratio 46.0 % 67.7 % (21.7) pts 48.4 % 61.0 % (12.6) pts Policy acquisition cost ratio 27.1 % 28.4 % (1.3) pts 27.0 % 28.1 % (1.1) pts Administrative expense ratio 10.8 % 11.0 % (0.2) pts 10.8 % 11.1 % (0.3) pts Combined ratio 83.9 % 107.1 % (23.2) pts 86.2 % 100.2 % (14.0) pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Catastrophe losses $ 40 $ 399 $ 90 $ 489 Favorable prior period development $ 156 $ 36 $ 181 $ 40 Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events: • 2021: Winter storm losses in the U.S. and international weather-related events • 2020: COVID-19 pandemic claims of $373 million, storms in Australia, Australia wildfires, and other international weather-related events Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. 52 Table of Contents Net Premiums Written by Region Three months ended June 30 (in millions of U.S. dollars, except for percentages) 2021 2021 % of Total 2020 2020 % of Total C$ 2020 Q-21 vs. Q-20 C$ Q-21 vs. Q-20 Region Europe, Middle East and Africa $ 1,188 48 % $ 879 43 % $ 946 35.2 % 25.6 % Latin America 451 18 % 389 19 % 418 16.3 % 8.2 % Asia 825 33 % 721 36 % 774 14.4 % 6.7 % Other (1) 33 1 % 32 2 % 35 1.9 % (6.5) % Net premiums written $ 2,497 100 % $ 2,021 100 % $ 2,173 23.6 % 15.0 % Six months ended June 30 (in millions of U.S. dollars, except for percentages) 2021 2021 % of Total 2020 2020 % of Total C$ 2020 Y-21 vs. Y-20 C$ Y-21 vs. Y-20 Region Europe, Middle East and Africa $ 2,739 51 % $ 2,156 47 % $ 2,307 27.1 % 18.7 % Latin America 988 18 % 972 21 % 975 1.7 % 1.4 % Asia 1,586 30 % 1,409 30 % 1,501 12.5 % 5.7 % Other (1) 74 1 % 82 2 % 87 (10.3) % (15.5) % Net premiums written $ 5,387 100 % $ 4,619 100 % $ 4,870 16.6 % 10.6 % (1) Includes the international supplemental A&H business of Combined Insurance and other international operations. Premiums Net premiums written increased $476 million and $768 million, or $324 million and $517 million on a constant-dollar basis, for the three and six months 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 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 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 . 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. 53 Table of Contents Global Reinsurance The Global Reinsurance segment represents our reinsurance operations comprising Chubb Tempest Re Bermuda, Chubb Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada. Global Reinsurance markets its reinsurance products worldwide primarily through reinsurance brokers under the Chubb Tempest Re brand name and provides a broad range of traditional and non-traditional reinsurance coverage to a diverse array of primary P&C companies. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written $ 274 $ 207 32.4 % $ 481 $ 425 13.1 % Net premiums written - constant dollars 30.7 % 11.7 % Net premiums earned 192 163 17.8 % 372 349 6.6 % Losses and loss expenses 110 73 47.3 % 230 160 43.0 % Policy acquisition costs 47 42 13.9 % 92 87 5.8 % Administrative expenses 10 9 6.1 % 18 19 (4.6) % Underwriting income 25 39 (32.3) % 32 83 (60.8) % Net investment income 81 60 33.4 % 151 129 16.7 % Other (income) expense — 1 NM — 1 NM Segment income $ 106 $ 98 8.5 % $ 183 $ 211 (13.2) % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 50.9 % 46.8 % 4.1 pts 49.6 % 48.7 % 0.9 pts Catastrophe losses 5.2 % 7.9 % (2.7) pts 14.2 % 3.7 % 10.5 pts Prior period development 0.7 % (9.2) % 9.9 pts (2.1) % (6.4) % 4.3 pts Loss and loss expense ratio 56.8 % 45.5 % 11.3 pts 61.7 % 46.0 % 15.7 pts Policy acquisition cost ratio 24.7 % 25.5 % (0.8) pts 24.8 % 25.0 % (0.2) pts Administrative expense ratio 5.1 % 5.6 % (0.5) pts 4.8 % 5.3 % (0.5) pts Combined ratio 86.6 % 76.6 % 10.0 pts 91.3 % 76.3 % 15.0 pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S dollars) 2021 2020 2021 2020 Catastrophe losses $ 10 $ 13 $ 50 $ 13 Favorable prior period development $ — $ 16 $ 7 $ 23 Catastrophe losses through June 30, 2021 and 2020 were primarily from the following events: • 2021: Winter storm losses in the U.S. • 2020: COVID-19 pandemic claims of $10 million and severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $67 million and $56 million for the three and six months 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. 54 Table of Contents 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 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 The Life Insurance segment comprises Chubb's international life operations, Chubb Tempest Life Re (Chubb Life Re), and the North American supplemental A&H and life business of Combined Insurance. We assess the performance of our life business based on Life Insurance underwriting income, which includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Net premiums written $ 615 $ 619 (0.7) % $ 1,235 $ 1,264 (2.3) % Net premiums written - constant dollars (4.0) % (4.3) % Net premiums earned 605 608 (0.4) % 1,200 1,239 (3.1) % Losses and loss expenses 185 171 8.5 % 383 373 3.0 % Policy benefits 170 183 (7.2) % 333 368 (9.8) % Policy acquisition costs 191 196 (3.0) % 370 376 (1.8) % Administrative expenses 83 82 2.3 % 165 158 4.9 % Net investment income 101 95 6.5 % 199 190 4.9 % Life Insurance underwriting income 77 71 8.6 % 148 154 (3.8) % Other (income) expense (26) (17) 45.8 % (60) (29) 102.9 % Amortization of purchased intangibles 1 1 — 2 2 — Segment income $ 102 $ 87 16.1 % $ 206 $ 181 13.6 % Premiums Net premiums written decreased $4 million and $29 million, or $25 million and $56 million on a constant-dollar basis for the three and six months ended June 30, 2021, respectively. For our International Life operations, net premiums written increased 11.6 percent and 10.7 percent for the three and six months ended June 30, 2021, respectively, principally in Asia, from new business in Taiwan, Vietnam and Thailand. This growth was more than offset by a decline in our North America Combined Insurance business of 5.9 percent and 7.7 percent for the three and six months ended June 30, 2021, respectively, due to the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales. There was also a decline in our life reinsurance business which continues to decline as no new business is currently being written. 55 Table of Contents Deposits The following table presents deposits collected on universal life and investment contracts: Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 C$ 2020 Q-21 vs. Q-20 C$ Q-21 vs. Q-20 2021 2020 C$ 2020 Y-21 vs. Y-20 C$ Y-21 vs. Y-20 Deposits collected on Universal life and investment contracts $ 605 $ 309 $ 323 95.8 % 86.9 % $ 1,156 $ 752 $ 794 53.7 % 45.7 % Deposits collected on universal life and investment contracts (life deposits) are not reflected as revenues in our Consolidated statements of operations in accordance with GAAP. New life deposits are an important component of production, and although they do not significantly affect current period income from operations, they are key to our efforts to grow our business. Life deposits collected increased $296 million and $404 million for the three and six months ended June 30, 2021, respectively, primarily due to successful sales in broker and bank channels in Taiwan. Life Insurance underwriting income and Segment income Life Insurance underwriting income increased $6 million for the three months ended June 30, 2021, primarily due to higher net investment income. Life Insurance underwriting income decreased $6 million for the six months ended June 30, 2021, primarily due to a one-time employee related benefit of $7 million in the prior year. Segment income increased $15 million and $25 million for the three and six months ended June 30, 2021, respectively, primarily due to our share of net income from our investment in Huatai, our partially-owned insurance entity in China. Corporate Corporate results primarily include the results of our non-insurance companies, income and expenses not attributable to reportable segments and loss and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-off exposures. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2021 2020 Q-21 vs. Q-20 2021 2020 YTD-21 vs. YTD-20 Losses and loss expenses $ 89 $ 276 (67.6) % $ 98 $ 287 (65.9) % Administrative expenses 88 77 15.8 % 159 143 10.9 % Underwriting loss 177 353 (49.6) % 257 430 (40.3) % Net investment income (loss) (15) (22) (33.6) % (32) (46) (29.7) % Interest expense 122 128 (4.9) % 244 260 (6.3) % Net realized gains (losses) (36) 31 NM 852 (925) NM Other (income) expense (708) 109 NM (1,123) 132 NM Amortization of purchased intangibles 50 51 (2.4) % 99 101 (2.7) % Income tax expense (benefit) 317 (62) NM 655 153 NM Net income (loss) $ (9) $ (570) NM $ 688 $ (2,047) NM NM - not meaningful Losses and loss expenses primarily includes unfavorable prior period development for molestation claims. Administrative expenses increased $11 million and $16 million for the three and six months 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). 56 Table of Contents Net Realized and Unrealized Gains (Losses) We take a long-term view with our investment strategy, and our investment managers manage our investment portfolio to maximize total return within certain specific guidelines designed to minimize risk. The majority of our investment portfolio is available for sale and reported at fair value. Our held to maturity investment portfolio is reported at amortized cost, net of valuation allowance. The effect of market movements on our fixed maturities portfolio impacts Net income (through Net realized gains (losses)) when securities are sold, when we write down an asset, or when we record a change to the valuation allowance for expected credit losses. For a further discussion related to how we assess the valuation allowance for expected credit losses and the related impact on Net income, refer to Note 1 e) to the Consolidated Financial Statements in our 2020 Form 10-K. Additionally, Net income is impacted through the reporting of changes in the fair value of equity securities, private equity funds where we own less than three percent, and derivatives, including financial futures, options, swaps, and GLB reinsurance. Changes in unrealized appreciation and depreciation on available for sale securities, resulting from the revaluation of securities held, changes in cumulative foreign currency translation adjustment, and unrealized postretirement benefit obligations liability adjustment, are reported as separate components of Accumulated other comprehensive income in Shareholders’ equity in the Consolidated balance sheets. The following tables presents our net realized and unrealized gains (losses): Three Months Ended June 30 2021 2020 (in millions of U.S. dollars) Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Fixed maturities $ 12 $ 694 $ 706 $ (33) $ 3,281 $ 3,248 Fixed income and equity derivatives (91) — (91) 14 — 14 Public equity Sales 45 — 45 187 — 187 Mark-to-market 105 — 105 (39) — (39) Private equity (less than 3 percent ownership) Mark-to-market 62 — 62 (107) — (107) Total investment portfolio 133 694 827 22 3,281 3,303 Variable annuity reinsurance derivative transactions, net of applicable hedges (72) — (72) 110 — 110 Other derivatives 3 — 3 (1) — (1) Foreign exchange (97) 308 211 (61) 445 384 Other — (9) (9) (40) (22) (62) Net gains (losses), pre-tax $ (33) $ 993 $ 960 $ 30 $ 3,704 $ 3,734 57 Table of Contents Six Months Ended June 30 2021 2020 (in millions of U.S. dollars) Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact 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 (ETR) reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between U.S. GAAP and local tax laws, and the impact of discrete items. A change in the geographic mix of earnings could impact our effective tax rate. For the three and six months ended June 30, 2021 our ETR was 12.3 percent and 12.5 percent, respectively. The ETRs were impacted by a higher percentage of income generated in lower tax jurisdictions and discrete tax benefits compared to 15.8 percent and 206.8 percent for the three and six months ended June 30, 2020, respectively. In addition, the ETR for the prior period was impacted by the high level of catastrophe losses, principally COVID-19. 58 Table of Contents Non-GAAP Reconciliation In presenting our results, we included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition. However, they should not be viewed as a substitute for measures determined in accordance with generally accepted accounting principles (GAAP). Book value per common share, is shareholders’ equity divided by the shares outstanding. Tangible book value per common share, is shareholders’ equity less goodwill and other intangible assets, net of tax, divided by the shares outstanding. We believe that goodwill and other intangible assets are not indicative of our underlying insurance results or trends and make book value comparisons to less acquisitive peer companies less meaningful. The calculation of tangible book value per share does not consider the embedded goodwill attributable to our investments in partially-owned insurance companies until we attain majority ownership and consolidate . We provide financial measures, including net premiums written, net premiums earned, and underwriting income on a constant-dollar basis. We believe it is useful to evaluate the trends in our results exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign exchange rates between periods by translating prior period results using the same local currency exchange rates as the comparable current period. P&C performance metrics comprise consolidated operating results (including Corporate) and exclude the operating results of the Life Insurance segment. We believe that these measures are useful and meaningful to investors as they are used by management to assess the company’s P&C operations which are the most economically similar. We exclude the Life Insurance segment because the results of this business do not always correlate with the results of our P&C operations. P&C combined ratio is the sum of the loss and loss expense ratio, policy acquisition cost ratio and the administrative expense ratio excluding the life business and including the realized gains and losses on the crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations. CAY P&C combined ratio excluding catastrophe losses (CATs) excludes CATs and prior period development (PPD) from the P&C combined ratio. We exclude CATs as they are not predictable as to timing and amount and PPD as these unexpected loss developments on historical reserves are not indicative of our current underwriting performance. The combined ratio numerator is adjusted to exclude CATs, net premiums earned adjustments on PPD, prior period expense adjustments and reinstatement premiums on PPD, and the denominator is adjusted to exclude net premiums earned adjustments on PPD and reinstatement premiums on CATs and PPD. In periods where there are adjustments on loss sensitive policies, these adjustments are excluded from PPD and net premiums earned when calculating the ratios. We believe this measure provides a better evaluation of our underwriting performance and enhances the understanding of the trends in our P&C business that may be obscured by these items. This measure is commonly reported among our peer companies and allows for a better comparison. Reinstatement premiums are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted. Net premiums earned adjustments within PPD are adjustments to the initial premium earned on retrospectively rated policies based on actual claim experience that develops after the policy period ends. The premium adjustments correlate to the prior period loss development on these same policies and are fully earned in the period the adjustments are recorded. Prior period expense adjustments typically relate to adjustable commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. 59 Table of Contents The following tables present the calculation of combined ratio, as reported for each segment to P&C combined ratio, adjusted for catastrophe losses (CATs) and PPD: 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 Three Months Ended June 30, 2021 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 2,426 $ 676 $ 331 $ 1,186 $ 110 $ 89 $ 4,818 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (165) (61) (4) (40) (10) — (280) Reinstatement premiums collected (expensed) on catastrophe losses — 7 — — 1 — 8 Catastrophe losses, gross of related adjustments (165) (68) (4) (40) (11) — (288) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 156 44 — 156 — (88) 268 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — — — — — 11 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 (2) — 12 PPD, gross of related adjustments - favorable (unfavorable) 173 45 — 163 (2) (88) 291 CAY loss and loss expense ex CATs B $ 2,434 $ 653 $ 327 $ 1,309 $ 97 $ 1 $ 4,821 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 734 $ 312 $ 30 $ 978 $ 57 $ 88 $ 2,199 Expense adjustments - favorable (unfavorable) — — — — — — — Policy acquisition costs and administrative expenses, adjusted D $ 734 $ 312 $ 30 $ 978 $ 57 $ 88 $ 2,199 Denominator Net premiums earned E $ 3,803 $ 1,224 $ 410 $ 2,579 $ 192 $ 8,208 Reinstatement premiums (collected) expensed on catastrophe losses — (7) — — (1) (8) Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — — — — 11 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 (2) 12 Net premiums earned excluding adjustments F $ 3,820 $ 1,218 $ 410 $ 2,586 $ 189 $ 8,223 P&C Combined ratio Loss and loss expense ratio A/E 63.8 % 55.2 % 80.7 % 46.0 % 56.8 % 58.7 % Policy acquisition cost and administrative expense ratio C/E 19.3 % 25.5 % 7.4 % 37.9 % 29.8 % 26.8 % P&C Combined ratio 83.1 % 80.7 % 88.1 % 83.9 % 86.6 % 85.5 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.7 % 53.6 % 79.7 % 50.6 % 50.9 % 58.6 % Policy acquisition cost and administrative expense ratio, adjusted D/F 19.2 % 25.6 % 7.4 % 37.8 % 30.3 % 26.8 % CAY P&C Combined ratio ex CATs 82.9 % 79.2 % 87.1 % 88.4 % 81.2 % 85.4 % Combined ratio Combined ratio 85.5 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 85.5 % Note: The ratios above are calculated using whole U.S. dollars. 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. 60 Table of Contents 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 Three Months Ended June 30, 2020 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 3,498 $ 762 $ 313 $ 1,485 $ 73 $ 276 $ 6,407 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (1,273) (110) (6) (399) (13) — (1,801) Reinstatement premiums collected (expensed) on catastrophe losses (3) (1) — (16) — — (20) Catastrophe losses, gross of related adjustments (1,270) (109) (6) (383) (13) — (1,781) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 146 1 — 36 16 (274) (75) Net premiums earned adjustments on PPD - unfavorable (favorable) 4 — — — — — 4 Expense adjustments - unfavorable (favorable) 1 — — — — — 1 PPD reinstatement premiums - unfavorable (favorable) — — — — (1) — (1) PPD, gross of related adjustments - favorable (unfavorable) 151 1 — 36 15 (274) (71) CAY loss and loss expense ex CATs B $ 2,379 $ 654 $ 307 $ 1,138 $ 75 $ 2 $ 4,555 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 720 $ 297 $ 32 $ 865 $ 51 $ 77 $ 2,042 Expense adjustments - favorable (unfavorable) (1) — — — — — (1) Policy acquisition costs and administrative expenses, adjusted D $ 719 $ 297 $ 32 $ 865 $ 51 $ 77 $ 2,041 Denominator Net premiums earned E $ 3,595 $ 1,192 $ 376 $ 2,194 $ 163 $ 7,520 Reinstatement premiums (collected) expensed on catastrophe losses 3 1 — 16 — 20 Net premiums earned adjustments on PPD - unfavorable (favorable) 4 — — — — 4 PPD reinstatement premiums - unfavorable (favorable) — — — — (1) (1) Net premiums earned excluding adjustments F $ 3,602 $ 1,193 $ 376 $ 2,210 $ 162 $ 7,543 P&C Combined ratio Loss and loss expense ratio A/E 97.3 % 63.8 % 83.1 % 67.7 % 45.5 % 85.2 % Policy acquisition cost and administrative expense ratio C/E 20.0 % 25.0 % 8.7 % 39.4 % 31.1 % 27.1 % P&C Combined ratio 117.3 % 88.8 % 91.8 % 107.1 % 76.6 % 112.3 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 66.1 % 54.7 % 81.5 % 51.6 % 46.8 % 60.4 % Policy acquisition cost and administrative expense ratio, adjusted D/F 19.9 % 24.9 % 8.7 % 39.1 % 31.4 % 27.0 % CAY P&C Combined ratio ex CATs 86.0 % 79.6 % 90.2 % 90.7 % 78.2 % 87.4 % Combined ratio Combined ratio 112.3 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 112.3 % Note: The ratios above are calculated using whole U.S. dollars. 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. 61 Table of Contents 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 except for ratios) Numerator Losses and loss expenses A $ 4,986 $ 1,495 $ 416 $ 2,449 $ 230 $ 98 $ 9,674 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (527) (301) (12) (90) (50) — (980) Reinstatement premiums collected (expensed) on catastrophe losses — (16) — — 6 — (10) Catastrophe losses, gross of related adjustments (527) (285) (12) (90) (56) — (970) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 283 84 2 181 7 (97) 460 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — (2) — — — 9 Expense adjustments - unfavorable (favorable) 3 — — — — — 3 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 1 — 15 PPD, gross of related adjustments - favorable (unfavorable) 303 85 — 188 8 (97) 487 CAY loss and loss expense ex CATs B $ 4,762 $ 1,295 $ 404 $ 2,547 $ 182 $ 1 $ 9,191 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 1,502 $ 619 $ 45 $ 1,912 $ 110 $ 159 $ 4,347 Expense adjustments - favorable (unfavorable) (3) — — — — — (3) Policy acquisition costs and administrative expenses, adjusted D $ 1,499 $ 619 $ 45 $ 1,912 $ 110 $ 159 $ 4,344 Denominator Net premiums earned E $ 7,477 $ 2,408 $ 520 $ 5,057 $ 372 $ 15,834 Reinstatement premiums (collected) expensed on catastrophe losses — 16 — — (6) 10 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — (2) — — 9 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 1 15 Net premiums earned excluding adjustments F $ 7,494 $ 2,425 $ 518 $ 5,064 $ 367 $ 15,868 P&C Combined ratio Loss and loss expense ratio A/E 66.7 % 62.1 % 80.0 % 48.4 % 61.7 % 61.1 % Policy acquisition cost and administrative expense 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 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 88.6 % Note: The ratios above are calculated using whole U.S. dollars. 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. 62 Table of Contents 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) Numerator Losses and loss expenses A $ 5,679 $ 1,445 $ 378 $ 2,743 $ 160 $ 287 $ 10,692 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (1,391) (131) (14) (489) (13) — (2,038) Reinstatement premiums collected (expensed) on catastrophe losses (3) (1) — (16) — — (20) Catastrophe losses, gross of related adjustments (1,388) (130) (14) (473) (13) — (2,018) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 251 — 14 40 23 (285) 43 Net premiums earned adjustments on PPD - unfavorable (favorable) 4 — 3 — — — 7 PPD reinstatement premiums - unfavorable (favorable) — — — — (1) — (1) PPD, gross of related adjustments - favorable (unfavorable) 255 — 17 40 22 (285) 49 CAY loss and loss expense ex CATs B $ 4,546 $ 1,315 $ 381 $ 2,310 $ 169 $ 2 $ 8,723 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 1,471 $ 610 $ 47 $ 1,765 $ 106 $ 143 $ 4,142 Expense adjustments - favorable (unfavorable) — — — — — — — Policy acquisition costs and administrative expenses, adjusted D $ 1,471 $ 610 $ 47 $ 1,765 $ 106 $ 143 $ 4,142 Denominator Net premiums earned E $ 6,971 $ 2,392 $ 470 $ 4,501 $ 349 $ 14,683 Reinstatement premiums (collected) expensed on catastrophe losses 3 1 — 16 — 20 Net premiums earned adjustments on PPD - unfavorable (favorable) 4 — 3 — — 7 PPD reinstatement premiums - unfavorable (favorable) — — — — (1) (1) Net premiums earned excluding adjustments F $ 6,978 $ 2,393 $ 473 $ 4,517 $ 348 $ 14,709 P&C Combined ratio Loss and loss expense ratio A/E 81.5 % 60.4 % 80.4 % 61.0 % 46.0 % 72.8 % Policy acquisition cost and administrative expense 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 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 101.0 % Note: The ratios above are calculated using whole U.S. dollars. 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. 63 Table of Contents Amortization of purchased intangibles and Other amortization Amortization expense of purchased intangibles was $73 million and $145 million for the three and six months ended June 30, 2021, respectively, and principally relates to the Chubb Corp acquisition. The following table presents, as of June 30, 2021, the estimated pre-tax amortization expense (benefit) of purchased intangibles, at current foreign currency exchange rates, for the third and fourth quarters of 2021 and the next five years: Associated with the Chubb Corp Acquisition For the Years Ending December 31 (in millions of U.S. dollars) Agency distribution relationships and renewal rights Fair value adjustment on Unpaid losses and loss expenses Total (1) Other intangible assets (2) Total Amortization of purchased intangibles Third quarter of 2021 $ 54 $ (5) $ 49 $ 23 $ 72 Fourth quarter of 2021 54 (5) 49 23 72 2022 198 (15) 183 103 286 2023 179 (7) 172 97 269 2024 161 (6) 155 91 246 2025 145 (6) 139 90 229 2026 131 (5) 126 87 213 Total $ 922 $ (49) $ 873 $ 514 $ 1,387 (1) Recorded in Corporate. (2) Recorded in applicable segment(s) that acquired the intangible assets. Reduction of deferred tax liability associated with intangible assets related to Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) At June 30, 2021, the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was $1,270 million. The following table presents, as of June 30, 2021, the expected reduction of the deferred tax liability associated with Other intangible assets (which reduces as agency distribution relationships and renewal rights, and other intangible assets amortize), at current foreign currency exchange rates, for the third and fourth quarters of 2021 and for the next five years: For the Years Ending December 31 (in millions of U.S. dollars) Reduction to deferred tax liability associated with intangible assets Third quarter of 2021 $ 17 Fourth quarter of 2021 17 2022 67 2023 61 2024 56 2025 52 2026 49 Total $ 319 64 Table of Contents Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt 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 For the Years Ending December 31 (in millions of U.S. dollars) Acquired invested assets (1) Assumed long-term debt (2) Third quarter of 2021 $ (25) $ 5 Fourth quarter of 2021 (22) 6 2022 (117) 21 2023 — 21 2024 — 21 2025 — 21 2026 — 21 Total $ (164) $ 116 (1) Recorded as a reduction to Net investment income in the Consolidated statements of operations. (2) Recorded as a reduction to Interest expense in the Consolidated statements of operations. The estimate of amortization expense of the fair value adjustment on acquired invested assets could vary materially based on current market conditions, bond calls, overall duration of the acquired investment portfolio, and foreign exchange. Net Investment Income Three Months Ended June 30 Six Months Ended June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Fixed maturities (1) $ 836 $ 810 $ 1,676 $ 1,661 Short-term investments 8 11 17 28 Other interest income 3 3 5 12 Equity securities 41 24 77 33 Other investments 43 21 66 41 Gross investment income (1) 931 869 1,841 1,775 Investment expenses (47) (42) (94) (87) Net investment income (1) $ 884 $ 827 $ 1,747 $ 1,688 (1) Includes amortization expense related to fair value adjustment of acquired invested assets related to the Chubb Corp acquisition $ (22) $ (30) $ (48) $ (62) Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation. Net investment income increased 7.0 percent and 3.5 percent for the three and six months ended June 30, 2021, respectively, primarily due to higher income received from our private equity partnerships and increased dividends on public equities. Investment income for the year was tempered by lower reinvestment rates on new and reinvested assets. 65 Table of Contents For private equities where we own less than three percent, investment income is included within Net investment income in the table above. For private equities where we own more than three percent, investment income is included within Other income (expense) in the Consolidated statements of operations. Excluded from Net investment income is the mark-to-market movement for private equities, which is recorded within either Other income (expense) or Net realized gains (losses) based on our percentage of ownership. The total mark-to-market movement for private equities excluded from Net investment income was as follows: Three Months Ended June 30 Six Months Ended June 30 (in millions of U.S. dollars) 2021 2020 2021 2020 Total mark-to-market gain (loss) on private equity, pre-tax $ 736 $ (200) $ 1,174 $ (207) Investments Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of A/Aa as rated by the independent investment rating services Standard and Poor’s (S&P)/Moody’s Investors Service (Moody’s). The portfolio is externally managed by independent, professional investment managers and is broadly diversified across geographies, sectors, and issuers. Other investments principally comprise direct investments, investment funds, and limited partnerships. We hold no collateralized debt obligations in our investment portfolio, and we provide no credit default protection. We have long-standing global credit limits for our entire portfolio across the organization. Exposures are aggregated, monitored, and actively managed by our Global Credit Committee, comprising senior executives, including our Chief Financial Officer, our Chief Risk Officer, our Chief Investment Officer, and our Treasurer. We also have well-established, strict contractual investment rules requiring managers to maintain highly diversified exposures to individual issuers and closely monitor investment manager compliance with portfolio guidelines. The average duration of our fixed income securities, including the effect of options and swaps, was 4.2 years and 4.0 years at June 30, 2021 and December 31, 2020, respectively. We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately $4.5 billion at June 30, 2021. The following table shows the fair value and cost/amortized cost, net of valuation allowance, of our invested assets: June 30, 2021 December 31, 2020 (in millions of U.S. dollars) Fair Value Cost/ Amortized Cost, Net Fair Value Cost/ Amortized Cost, Net Fixed maturities available for sale $ 92,163 $ 88,254 $ 90,699 $ 85,168 Fixed maturities held to maturity 11,343 10,673 12,510 11,653 Short-term investments 4,470 4,471 4,345 4,349 Fixed income securities 107,976 103,398 107,554 101,170 Equity securities 4,607 4,607 4,027 4,027 Other investments 9,457 9,457 7,945 7,945 Total investments $ 122,040 $ 117,462 $ 119,526 $ 113,142 The fair value of our total investments increased $2.5 billion during the six months ended June 30, 2021 due to strong operating cash flow, positive equity market returns, and favorable foreign currency movement. This increase was partially offset by unrealized losses on fixed maturities, payment of dividends on our Common Shares, and share repurchases. 66 Table of Contents 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: June 30, 2021 December 31, 2020 (in millions of U.S. dollars, except for percentages) Fair Value % of Total Fair Value % of Total U.S. Treasury / Agency $ 3,560 3 % $ 4,122 4 % Corporate and asset-backed securities 39,889 37 % 38,769 36 % Mortgage-backed securities 21,445 20 % 20,616 19 % Municipal 10,834 10 % 11,943 11 % Non-U.S. 27,778 26 % 27,759 26 % Short-term investments 4,470 4 % 4,345 4 % Total $ 107,976 100 % $ 107,554 100 % AAA $ 16,274 15 % $ 15,622 15 % AA 35,412 33 % 36,125 33 % A 19,720 18 % 19,712 18 % BBB 17,479 16 % 17,542 16 % BB 9,495 9 % 9,699 9 % B 9,004 8 % 8,267 8 % Other 592 1 % 587 1 % Total $ 107,976 100 % $ 107,554 100 % Corporate and asset-backed securities The following table presents our 10 largest global exposures to corporate bonds by fair value at June 30, 2021: (in millions of U.S. dollars) Fair Value Wells Fargo & Co $ 726 Bank of America Corp 657 JP Morgan Chase & Co 615 Comcast Corp 507 Verizon Communications Inc 489 Morgan Stanley 474 AT&T Inc 430 Citigroup Inc 419 HSBC Holdings Plc 393 Goldman Sachs Group Inc 379 Mortgage-backed securities The following table shows the fair value and amortized cost, net of valuation allowance, of our mortgage-backed securities: S&P Credit Rating Fair Value Amortized Cost, Net June 30, 2021 (in millions of U.S. dollars) AAA AA A BBB BB and below Total Total Agency residential mortgage-backed securities (RMBS) $ 99 $ 17,605 $ — $ — $ — $ 17,704 $ 17,033 Non-agency RMBS 236 38 72 26 8 380 379 Commercial mortgage-backed securities 2,915 269 155 16 6 3,361 3,220 Total mortgage-backed securities $ 3,250 $ 17,912 $ 227 $ 42 $ 14 $ 21,445 $ 20,632 67 Table of Contents Municipal As part of our overall investment strategy, we may invest in states, municipalities, and other political subdivisions fixed maturity securities (Municipal). We apply the same investment selection process described previously to our Municipal investments. The portfolio is highly diversified primarily in state general obligation bonds and essential service revenue bonds including education and utilities (water, power, and sewers). Non-U.S. Our exposure to the Euro results primarily from Chubb European Group SE which is headquartered in France and offers a broad range of coverages throughout the European Union, Central, and Eastern Europe. Chubb primarily invests in Euro denominated investments to support its local currency insurance obligations and required capital levels. Chubb’s local currency investment portfolios have strict contractual investment guidelines requiring managers to maintain a high quality and diversified portfolio to both sector and individual issuers. Investment portfolios are monitored daily to ensure investment manager compliance with portfolio guidelines. Our non-U.S. investment grade fixed income portfolios are currency-matched with the insurance liabilities of our non-U.S. operations. The average credit quality of our non-U.S. fixed income securities is A and 48 percent of our holdings are rated AAA or guaranteed by governments or quasi-government agencies. Within the context of these investment portfolios, our government and corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA—two percent, A—one percent, BBB—0.5 percent of the total portfolio) and are monitored daily via an internal compliance system. We manage our indirect exposure using the same credit rating based investment approach. Accordingly, we do not believe our indirect exposure is material. The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. government securities at June 30, 2021: (in millions of U.S. dollars) Fair Value Amortized Cost, Net Republic of Korea $ 1,050 $ 977 Canada 1,035 1,015 United Kingdom 824 805 Province of Ontario 714 692 Kingdom of Thailand 632 577 United Mexican States 571 571 Federative Republic of Brazil 555 559 Province of Quebec 470 450 Commonwealth of Australia 437 409 Socialist Republic of Vietnam 426 294 Other Non-U.S. Government Securities 5,734 5,503 Total $ 12,448 $ 11,852 68 Table of Contents The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. corporate securities at June 30, 2021: (in millions of U.S. dollars) Fair Value Amortized Cost, Net United Kingdom $ 2,558 $ 2,446 Canada 1,840 1,767 France 1,242 1,185 United States (1) 1,161 1,111 Australia 907 862 Japan 691 671 Germany 608 582 Switzerland 592 559 Netherlands 539 510 China 481 471 Other Non-U.S. Corporate Securities 4,711 4,528 Total $ 15,330 $ 14,692 (1) The countries that are listed in the non-U.S. corporate fixed income portfolio above represent the ultimate parent company's country of risk. Non-U.S. corporate securities could be issued by foreign subsidiaries of U.S. corporations. Below-investment grade corporate fixed income portfolio Below-investment grade securities have different characteristics than investment grade corporate debt securities. Risk of loss from default by the borrower is greater with below-investment grade securities. Below-investment grade securities are generally unsecured and are often subordinated to other creditors of the issuer. Also, issuers of below-investment grade securities usually have higher levels of debt and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than investment grade issuers. 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. We manage high-yield bonds as a distinct and separate asset class from investment grade bonds. The allocation to high-yield bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our minimum rating for initial purchase is BB/B. Fourteen external investment managers are responsible for high-yield security selection and portfolio construction. Our high-yield managers have a conservative approach to credit selection and very low historical default experience. Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit as a percentage of high-yield allocation. We monitor position limits daily through an internal compliance system. Derivative and structured securities (e.g., credit default swaps and collateralized loan obligations) are not permitted in the high-yield portfolio. 69 Table of Contents Critical Accounting Estimates As of June 30, 2021, there were no material changes to our critical accounting estimates. For a full discussion of our critical accounting estimates, refer to Item 7 in our 2020 Form 10-K. Unpaid losses and loss expenses As an insurance and reinsurance company, we are required by applicable laws and regulations and GAAP to establish loss and loss expense reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of our policies and agreements with our insured and reinsured customers. With the exception of certain structured settlements, for which the timing and amount of future claim payments are reliably determinable, and certain reserves for unsettled claims, our loss reserves are not discounted for the time value of money. The following table presents a roll-forward of our unpaid losses and loss expenses: (in millions of U.S. dollars) Gross Losses Reinsurance Recoverable (1) Net Losses Balance at December 31, 2020 $ 67,811 $ 14,647 $ 53,164 Losses and loss expenses incurred 12,365 2,306 10,059 Losses and loss expenses paid (10,200) (2,314) (7,886) Other (including foreign exchange translation) 313 82 231 Balance at June 30, 2021 $ 70,289 $ 14,721 $ 55,568 (1) Net of valuation allowance for uncollectible reinsurance. The estimate of the liabilities includes provisions for claims that have been reported but are unpaid at the balance sheet date (case reserves) and for obligations on claims that have been incurred but not reported (IBNR) at the balance sheet date. IBNR may also include provisions to account for the possibility that reported claims may settle for amounts that differ from the established case reserves. Loss reserves also include an estimate of expenses associated with processing and settling unpaid claims (loss expenses). Refer to Note 6 to the Consolidated Financial Statements for a discussion on the changes in the loss reserves. Asbestos and Environmental (A&E) There was no significant A&E reserve activity during the three and six months ende d June 30, 2021. A&E reserves are included in Corporate. Refer to our 2020 Form 10-K for further information on our A&E exposures. Fair value measurements Accounting guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to unobservable data (Level 3 inputs). Level 2 includes inputs, other than quoted prices within Level 1, that are observable for assets or liabilities either directly or indirectly. Refer to Note 4 to the Consolidated Financial Statements for information on our fair value measurements. 70 Table of Contents Catastrophe Management We actively monitor and manage our catastrophe risk accumulation around the world, including setting risk limits based on probable maximum loss (PML) and purchasing catastrophe reinsurance. The table below presents our modeled pre-tax estimates of natural catastrophe PML, net of reinsurance, at June 30, 2021, for Worldwide, U.S. hurricane and California earthquake events, based on our in-force portfolio at April 1, 2021 and reflecting the April 1, 2021 reinsurance program (see Natural Catastrophe Property Reinsurance Program section) as well as inuring reinsurance protection coverages. According to the model, for the 1-in-100 return period scenario, there is a one percent chance that our pre-tax annual aggregate losses incurred in any year from U.S. hurricane events could be in excess of $2,759 million (or 4.6 percent of our total shareholders’ equity at June 30, 2021). These estimates assume that reinsurance recoverable is fully collectible. Modeled Net Probable Maximum Loss (PML) Pre-tax Worldwide (1) U.S. Hurricane (2) California Earthquake (3) Annual Aggregate Annual Aggregate Single Occurrence (in millions of U.S. dollars, except for percentages) Chubb % of Total Shareholders’ Equity Chubb % of Total Shareholders’ Equity Chubb % of Total Shareholders’ Equity 1-in-10 $ 1,885 3.1 % $ 1,110 1.8 % $ 138 0.2 % 1-in-100 $ 3,995 6.7 % $ 2,759 4.6 % $ 1,297 2.2 % 1-in-250 $ 6,587 11.0 % $ 4,959 8.3 % $ 1,471 2.4 % (1) Worldwide losses are comprised of losses arising only from hurricanes, typhoons, convective storms and earthquakes and do not include “non-modeled” perils such as wildfire and flood. (2) U.S. Hurricane losses include losses from wind and storm-surge and exclude rainfall. (3) California earthquakes include fire-following perils. The above estimates of Chubb’s loss profile are inherently uncertain for many reasons, including the following: • While the use of third-party catastrophe modeling packages to simulate potential hurricane and earthquake losses is prevalent within the insurance industry, the models are reliant upon significant meteorology, seismology, and engineering assumptions to estimate catastrophe losses. In particular, modeled catastrophe events are not always a representation of actual events and ensuing additional loss potential; • There is no universal standard in the preparation of insured data for use in the models, the running of the modeling software and interpretation of loss output. These loss estimates do not represent our potential maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates; • The potential effects of climate change add to modeling complexity; and • Changing climate conditions could impact our exposure to natural catastrophe risks, including U.S. hurricane. Published studies by leading government, academic and professional organizations predict an increase in the expected annual frequency of Atlantic-basin hurricanes and sea level rise through the end of the century over observed historical averages. These studies contemplate expected multi-decadal impacts of climate change on sea surface temperatures, sea levels and other factors contributing to the frequency and intensity of hurricanes. Based on preliminary stress tests conducted against the Chubb portfolio at January 1, 2021, the impacts of climate change are not expected to materially impact our reported U.S. hurricane PML over the next 12 months. These tests reflect current exposures only and exclude potential mitigating factors, such as changes to building codes, public or private risk mitigation, regulation and public policy. 71 Table of Contents Natural Catastrophe Property Reinsurance Program Chubb’s core property catastrophe reinsurance program provides protection against natural catastrophes impacting its primary property operations (i.e., excluding our Global Reinsurance and Life Insurance segments). We regularly review our reinsurance protection and corresponding property catastrophe exposures. This may or may not lead to the purchase of additional reinsurance prior to a program’s renewal date. In addition, prior to each renewal date, we consider how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and various other structuring considerations. Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations effective April 1, 2021 through March 31, 2022, with an additional $100 million of limit for international loss occurrences compared to the expiring program. The program consists of three layers in excess of losses retained by Chubb on a per occurrence basis. In addition, Chubb also renewed its terrorism coverage (excluding nuclear, biological, chemical and radiation coverage, with an inclusion of coverage for biological and chemical coverage for personal lines) for the United States from April 1, 2021 through March 31, 2022 with the same limits and retention and percentage placed except that the majority of terrorism coverage is on an aggregate basis above our retentions without a reinstatement. Loss Location Layer of Loss Comments Notes United States (excluding Alaska and Hawaii) $0 million – $1.0 billion Losses retained by Chubb (a) United States (excluding Alaska and Hawaii) $1.0 billion – $1.15 billion All natural perils and terrorism (b) United States (excluding Alaska and Hawaii) $1.15 billion – $2.25 billion All natural perils and terrorism (c) United States (excluding Alaska and Hawaii) $2.25 billion – $3.5 billion All natural perils and terrorism (d) International (including Alaska and Hawaii) $0 million – $175 million Losses retained by Chubb (a) International (including Alaska and Hawaii) $175 million – $1.275 billion All natural perils and terrorism (c) Alaska, Hawaii, and Canada $1.275 billion – $2.525 billion All natural perils and terrorism (d) (a) Ultimate retention will depend upon the nature of the loss and the interplay between the underlying per risk programs and certain other catastrophe programs purchased by individual business units. These other catastrophe programs have the potential to reduce our effective retention below the stated levels. (b) These coverages are partially placed with Reinsurers. (c) These coverages are both part of the same Second layer within the Global Catastrophe Program and are fully placed with Reinsurers. (d) These coverages are both part of the same Third layer within the Global Catastrophe Program and are fully placed with Reinsurers. 72 Table of Contents Liquidity We anticipate that positive cash flows from operations (underwriting activities and investment income) should be sufficient to cover cash outflows under most loss scenarios for the near term. In addition to cash from operations, routine sales of investments, and financing arrangements, we have agreements with a third-party bank provider which implemented two international multi-currency notional cash pooling programs to enhance cash management efficiency during periods of short-term timing mismatches between expected inflows and outflows of cash by currency. The programs allow us to optimize investment income by avoiding portfolio disruption. Should the need arise, we generally have access to capital markets and to credit facilities with letter of credit capacity of $3.7 billion with a sub-limit of $1.9 billion for revolving credit. At June 30, 2021, our usage under these facilities was $1.4 billion in letters of credit. Our access to credit under these facilities is dependent on the ability of the banks that are a party to the facilities to meet their funding commitments. The facilities require that we maintain certain financial covenants, all of which we met at June 30, 2021. Should the existing credit providers on these facilities experience financial difficulty, we may be required to replace credit sources, possibly in a difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty accessing our credit facilities. The payment of dividends or other statutorily permissible distributions from our operating companies are subject to the laws and regulations applicable to each jurisdiction, as well as the need to maintain capital levels adequate to support the insurance and reinsurance operations, including financial strength ratings issued by independent rating agencies. During the six months ended June 30, 2021, we were able to meet all our obligations, including the payments of dividends on our Common Shares, with our net cash flows. We assess which subsidiaries to draw dividends from based on a number of factors. Considerations such as regulatory and legal restrictions as well as the subsidiary’s financial condition are paramount to the dividend decision. Chubb Limited received dividends of $1.8 billion and nil from its Bermuda subsidiaries during the six months ended June 30, 2021 and 2020, respectively. Chubb Limited received cash dividends of $21 million and $110 million and non-cash dividends of $536 million and $734 million from a Swiss subsidiary during the six months ended June 30, 2021 and 2020, respectively. The payment of any dividends from CGM or its subsidiaries is subject to applicable U.K. insurance laws and regulations. In addition, the release of funds by Syndicate 2488 to subsidiaries of CGM is subject to regulations promulgated by the Society of Lloyd’s. The U.S. insurance subsidiaries of Chubb INA Holdings Inc. (Chubb INA) may pay dividends, without prior regulatory approval, subject to restrictions set out in state law of the subsidiary’s domicile (or, if applicable, commercial domicile). Chubb INA’s international subsidiaries are also subject to insurance laws and regulations particular to the countries in which the subsidiaries operate. These laws and regulations sometimes include restrictions that limit the amount of dividends payable without prior approval of regulatory insurance authorities. Chubb Limited received no dividends from CGM or Chubb INA during the six months ended June 30, 2021 and 2020. Debt issued by Chubb INA is serviced by statutorily permissible distributions by Chubb INA’s insurance subsidiaries to Chubb INA as well as other group resources. Chubb INA received $470 million and nil from its subsidiaries during the six months ended June 30, 2021 and 2020, respectively. Cash Flows Our sources of liquidity include cash from operations, routine sales of investments, and financing arrangements. The following is a discussion of our cash flows for the six months ended June 30, 2021 and 2020. Operating cash flows were $5.2 billion in the six months ended June 30, 2021, compared to $3.7 billion in the prior year period. The increase of $1.5 billion is due to higher premiums collected reflecting premium growth, principally in our commercial lines. Partially offsetting the increase are higher catastrophe loss payments and higher taxes paid. Cash used for investing was $2.0 billion in the six months ended June 30, 2021, compared to $2.7 billion in the prior year period. Cash used for investing principally relates to net purchases of fixed maturities. In addition, the prior year included cash used for the incremental purchase of Huatai Group ownership interest of $1.6 billion. Cash used for financing was $3.0 billion in the six months ended June 30, 2021, compared to $898 million in the prior year period, an increase of $2.1 billion principally from more shares repurchased in the current year. Both internal and external forces influence our financial condition, results of operations, and cash flows. Claim settlements, premium levels, and investment returns may be impacted by changing rates of inflation and other economic conditions. In many 73 Table of Contents cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to us, and the settlement of the liability for that loss. We use repurchase agreements as a low-cost funding alternative. At 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. June 30 December 31 (in millions of U.S. dollars, except for ratios) 2021 2020 Long-term debt $ 14,954 $ 14,948 Trust preferred securities 308 308 Total shareholders’ equity 60,062 59,441 Total capitalization $ 75,324 $ 74,697 Ratio of financial debt to total capitalization 19.9 % 20.0 % Ratio of financial debt plus trust preferred securities to total capitalization 20.3 % 20.4 % Repurchase agreements are excluded from the table above and are disclosed separately from short-term debt in the Consolidated balance sheets. The repurchase agreements are collateralized borrowings where we maintain the right and ability to redeem the collateral on short notice, unlike short-term debt which comprises the current maturities of our long-term debt instruments. For the six months ended June 30, 2021, we repurchased $2.44 billion of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorization. At June 30, 2021, there were 38,888,051 Common Shares in treasury with a weighted average cost of $148.42 per share, and $65 million in share repurchase authorization remained through December 31, 2021. Subsequently, on July 19, 2021, the Board authorized a one-time incremental share repurchase program of up to $5.0 billion through June 30, 2022. At July 28, 2021, $5.06 billion in share repurchase authorizations remained. We generally maintain the ability to issue certain classes of debt and equity securities via an unlimited Securities and Exchange Commission (SEC) shelf registration which is renewed every three years. This allows us capital market access for refinancing as well as for unforeseen or opportunistic capital needs. Dividends We have paid dividends each quarter since we became a public company in 1993. Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by Chubb in U.S. dollars. Refer to Note 8 to the Consolidated Financial Statements for a discussion of our dividend methodology. At our May 2021 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.20 per share, or CHF 2.87 per share, calculated using the USD/CHF exchange rate as published in the Wall Street Journal on May 20, 2021, expected to be paid in four quarterly installments of $0.80 per share after the general meeting by way of a distribution from capital contribution reserves, transferred to free reserves for payment. The Board determines the record and payment dates at which the annual dividend may be paid until the date of the 2022 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. The annual dividend approved in May 2021 represented a $0.08 per share increase ($0.02 per quarter) over the prior year dividend. The following table represents dividends paid per Common Share to shareholders of record on each of the following dates: Shareholders of record as of: Dividends paid as of: December 18, 2020 January 8, 2021 $0.78 (CHF 0.71) March 19, 2021 April 9, 2021 $0.78 (CHF 0.70) June 18, 2021 July 9, 2021 $0.80 (CHF 0.71) 74 Table of Contents 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 Assets Investments $ — $ — $ 207 $ 197 Cash 1 84 1 1 Due from parent guarantor/subsidiary issuer, net — 479 449 — Due from subsidiaries that are not issuers or guarantors, net 3,067 3,043 — — Other assets 8 10 448 463 Total assets $ 3,076 $ 3,616 $ 1,105 $ 661 Liabilities Due to parent guarantor/subsidiary issuer, net $ 449 $ — $ — $ 479 Due to subsidiaries that are not issuers or guarantors, net — — 2,712 2,529 Affiliated notional cash pooling programs 293 — 819 272 Long-term debt — — 14,954 14,948 Trust preferred securities — — 308 308 Other liabilities 309 323 1,296 1,418 Total liabilities 1,051 323 20,089 19,954 Total shareholders’ equity 2,025 3,293 (18,984) (19,293) Total liabilities and shareholders’ equity $ 3,076 $ 3,616 $ 1,105 $ 661 The following table presents the condensed statements of operations and comprehensive income of 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. dollars) 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) 75 Table of Contents