What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-28 compared with 2021-07-29 · 282 added, 283 removed, 963 unchanged (37% of the section changed)

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

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

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

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

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Capital Resources

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

Information Provided In Connection With Outstanding Debt of Subsidiaries

Forward-Looking Statements

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

actual claims may exceed our best estimate of ultimate insurance losses incurred through 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;

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

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

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

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

At September 30, 2021, we had total assets of $199 billion and shareholders’ equity of $59 billion.

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

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

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

Consolidated Operating Results – Three and Nine Months Ended September 30, 2021 and 2020

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

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Net premiums written - constant dollars (1)

14.2 % 11.1 %

Net premiums earned 10,000 8,765 14.1 % 27,034 24,687 9.5 %

Net investment income 866 840 3.1 % 2,613 2,528 3.4 %

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

Net realized gains (losses) (21) (141) (85.2) % 833 (1,069) NM

Total revenues 10,845 9,464 14.6 % 30,480 26,146 16.6 %

4 unchanged sentences

Interest expense 122 130 (6.3) % 366 390 (6.3) %

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

Other (income) expense (763) (485) 57.3 % (2,030) (372) NM

Amortization of purchased intangibles 71 72 (1.4) % 216 217 (0.6) %

Total expenses 8,794 8,128 8.2 % 23,209 24,736 (6.2) %

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

Income before income tax 2,051 1,336 53.6 % 7,271 1,410 NM

Income tax expense 218 142 53.4 % 873 295 195.7 %

Net income $ 1,833 $ 1,194 53.5 % $ 6,398 $ 1,115 NM

NM – not meaningful

1 unchanged sentence

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

Financial Highlights for the Three Months Ended June 30, 2021

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

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

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

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

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

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

Financial Highlights for the Three Months Ended September 30, 2021

• Net income was $1.8 billion compared with $1.2 billion in the prior year period.

Net income in the current quarter was driven by strong underwriting results, including growth in net premiums earned and improvements in our loss and loss expense ratios.

Both commercial P&C and consumer lines grew globally, driven by positive rate increases, higher new business, increased exposure and strong renewal retention.

Returns from our private equity investments contributed to the higher net income.

• Total pre-tax and after-tax catastrophe losses were $1.1 billion (12.2 percentage points of the combined ratio) and $943 million, respectively, compared with $925 million (11.3 percentage points of the combined ratio) and $797 million, respectively, in the prior year period.

• Total pre-tax and after-tax favorable prior period development were $321 million (3.6 percentage points of the combined ratio) and $227 million, respectively, compared with favorable prior period development of $146 million (1.8 percentage points of the combined ratio) and $126 million, respectively, in the prior year period.

• The P&C combined ratio was 93.4 percent compared with 95.2 percent in the prior year period.

P&C current accident year combined ratio excluding catastrophe losses was 84.8 percent compared with 85.7 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.

The current year ratios decreased due to underlying loss ratio improvement and the favorable impact of higher net premiums earned on the expense ratio.

The prior year loss ratio was favorably impacted by COVID-related reduced claim frequency primarily in the automobile portfolios in North America and Latin America of 1.0 percentage point.

• Consolidated net premiums written were $10.5 billion, up 15.8 percent, or 14.2 percent in constant dollars, comprising positive growth in both commercial P&C lines and consumer lines of 22.0 percent and 3.1 percent, respectively.

• Consolidated net premiums earned were $10.0 billion, up 14.1 percent, or 12.6 percent in constant dollars, comprising positive growth in both commercial P&C lines and consumer lines of 21.1 percent and 0.8 percent, respectively.

• Net investment income was $866 million compared with $840 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.

• Shareholders' equity decreased by $744 million in the quarter, primarily reflecting total capital returned to shareholders in the quarter of $1.9 billion, including share repurchases of $1.5 billion, at an average purchase price of $180.23 per share, and dividends of $346 million, and net unrealized losses on investments of $456 million.

Partially offsetting the decrease was net income of $1.8 billion.

Net Premiums Written Three Months Ended

June 30 % Change Six Months Ended

September 30 % Change Nine Months Ended

September 30 %

(in millions of U.S.

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

Q-20 2021 2020 YTD-21 vs.

2021 2020 YTD-21 vs.

Commercial casualty $ 1,957 $ 1,722 13.6 % 12.7 % $ 5,215 $ 4,541 14.9 % 13.9 %

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(2) For purposes of this schedule only, A&H results from our Combined North America and International businesses, normally included in the Life Insurance and Overseas General Insurance segments, respectively, as well as the A&H results of our North America Commercial P&C segment, are included in Global A&H lines above.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The increase in consolidated net premiums written for the three and nine months ended September 30, 2021 reflects growth across most lines of business, comprising commercial lines growth of 22.0 percent and consumer lines growth of 3.1 percent, driven by higher new business, positive rate increases, increased exposure, and strong renewal retention.

• Commercial casualty grew globally, driven by higher new business and positive rate increases, primarily across North America, Europe, and Asia.

Additionally, there was increased exposure primarily on in-force policies following the adverse impact of prior year exposure adjustments resulting from the COVID-19 pandemic.

• Workers' compensation growth was due to increased exposure primarily on in-force policies following the adverse impact of prior year exposure adjustments resulting from the COVID-19 pandemic.

• Professional liability grew globally, reflecting higher new business, improved retention and positive rate increases in North America, Asia, and Europe.

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

• Property and other short-tail lines grew due to higher new business, improved retention and positive rate increases in Asia, North America, and Europe.

• Personal lines increased globally primarily reflecting new business and positive rate increases in homeowners' lines in North America and Latin America, and growth in specialty lines in Europe and Asia.

Growth was partially offset by declines in automobile lines in North America primarily due to the unfavorable impact of automobile return premiums.

Latin America also had declines in automobile lines for the nine months ended September 30, 2021 as a result of continued reduced exposures from the impact of the COVID-19 pandemic, but began to experience modest growth for the three months ended September 30, 2021.

• Global A&H lines began to experience modest growth for the three months ended September 30, 2021, but was unfavorably impacted from less travel volume and reduced consumer activity in Asia and Latin America for the nine

months ended September 30, 2021.

Our North American Combined Insurance supplemental A&H business decreased due to the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales.

• Growth in our international life operations, principally from new business in Asia and Latin America, 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.

2 unchanged sentences

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.

For the three months ended September 30, 2021, net premiums earned increased $1,235 million, or 14.1 percent, comprising 21.1 percent positive growth in commercial P&C lines and 0.8 percent positive growth in consumer lines.

For the nine months ended September 30, 2021, net premiums earned increased $2,347 million or 9.5 percent, comprising 15.0 percent positive growth in commercial P&C lines and 0.1 percent positive growth in consumer lines.

Catastrophe Losses and Prior Period Development

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

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

(in millions of U.S.

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Catastrophe losses $ 1,146 $ 925 $ 2,126 $ 2,969

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

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

Winter storm losses in the U.S.

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

Favorable prior period development $ 321 $ 146 $ 781 $ 189

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

Hurricane Ida losses of $806 million, winter storm losses in the U.S., flooding in Europe, and other severe weather-related events in the U.S.

and internationally.

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.

COVID-19 pandemic claims of $1,378 million, severe weather-related events in the U.S.

and internationally, and civil unrest-related losses 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

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.

Pre-tax net favorable PPD for the three months ended September 30, 2021 was $321 million, including adverse development of $33 million related to legacy environmental exposures.

Excluding the adverse development, we had favorable development of $354 million with 30 percent in long-tail lines, principally from accident years 2017 and prior, and 70 percent in short-tail lines, primarily in homeowners and property lines.

Pre-tax net favorable PPD for the nine months ended September 30, 2021 was $781 million, including adverse development of $33 million related to legacy environmental exposures and $68 million for molestation claims.

Excluding the adverse development, we had favorable development of $882 million with 27 percent in long-tail lines, principally from accident years 2017 and prior, and 73 percent in short-tail lines, primarily in homeowners, accident and health, property, and surety lines.

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

The remaining favorable development of $181 million comprises $312

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

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

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

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

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

P&C Combined Ratio

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

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

2021 2020 2021 2020

7 unchanged sentences

P&C Combined ratio 93.4 % 95.2 % 90.4 % 98.9 %

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.

The decrease in the loss and loss expense ratio for the three and nine months ended September 30, 2021 was primarily due to higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses increased 0.4 percentage points for the three months ended September 30, 2021.

The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 1.0 percentage point primarily in the automobile portfolios in North America and Latin America.

Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased 0.6 percentage points reflecting underlying loss ratio improvement.

The CAY loss ratio excluding catastrophe losses decreased 0.7 percentage points for the nine months ended September 30, 2021 reflecting underlying loss ratio improvement.

The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 0.3 percentage point.

Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased 1.0 percentage point reflecting underlying loss ratio improvement.

The policy acquisition cost ratio decreased 0.9 percentage points and 0.5 percentage points for the three and nine months ended September 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 0.3 percentage points and 0.4 percentage points for the three and nine months ended September 30, 2021, respectively, primarily due to the favorable impact of higher net premiums earned.

Policy benefits

1 unchanged sentence

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

For the three months ended 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.

For the three months ended September 30, 2021 and 2020, Policy benefits were $151 million and $198 million, respectively, which included separate account liabilities (gains) losses of $(24) million and $24 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.

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.

Excluding the separate account gains and losses, Policy benefits were $175 million and $174 million for the three months ended September 30, 2021 and 2020, respectively, reflecting growth in our International Life operations, offset by a decline in our Combined Insurance North America supplemental accident and health business and our life reinsurance business.

For the nine months ended September 30, 2021 and 2020, Policy benefits were $503 million and $550 million, which included separate account liabilities (gains) losses of $(5) million and $8 million, respectively.

Excluding the separate account gains and losses, Policy benefits were $508 million and $542 million for the nine months ended September 30, 2021 and 2020, respectively, reflecting growth in our International Life operations, offset by a decline in our Combined Insurance North America supplemental accident and health business and our life reinsurance business.

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

Segment Operating Results – Three and Nine Months Ended September 30, 2021 and 2020

We operate through six business segments:

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

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Administrative expenses 273 243 11.8 % 772 751 2.7 %

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

Underwriting income 390 280 39.9 % 1,379 101 NM

Net investment income 507 510 (0.7) % 1,582 1,544 2.5 %

Other (income) expense 8 7 17.6 % 24 19 31.9 %

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

Segment income $ 889 $ 783 13.6 % $ 2,937 $ 1,626 80.6 %

Loss and loss expense ratio:

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NM - not meaningful

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

June 30 June 30

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

September 30 September 30

(in millions of U.S.

2 unchanged sentences

Favorable prior period development $ 157 $ 200 $ 440 $ 451

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

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

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.

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

Hurricane Ida losses of $391 million, winter storm losses and other severe weather-related events in the U.S.

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

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

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

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:

Net premiums written increased $591 million, or 15.6 percent, and $1,568 million, or 14.6 percent, for the three and nine months ended September 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.

Positive growth of 16.6 percent and 15.9 percent, respectively, reflecting strong new business written, positive rate increases, and strong premium retention across a number of retail and wholesale lines, including financial lines, primary and excess casualty, and property.

• Consumer lines:

Negative growth of 3.9 percent and 10.9 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.

Net premiums earned increased $498 million, or 14.4 percent, and $1,004 million, or 9.6 percent for the three and nine months ended September 30, 2021, respectively, reflecting the growth in net premiums written described above.

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.

The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased for the three and nine months ended September 30, 2021, due to underlying loss ratio improvement.

The loss and loss expense ratio for the nine months ended September 30, 2021 was also impacted by lower catastrophe losses compared to the prior year which included significant losses related to the COVID-19 pandemic and the favorable impact of lower year-over-year large structured transactions written.

The policy acquisition cost ratio decreased 0.7 percentage point and 0.4 percentage point for the three and nine months ended September 30, 2021, respectively, reflecting lower commissions and a change in mix of business towards lines that have a lower acquisition cost ratio.

The decrease in the policy acquisition ratio for the nine months ended, September 30, 2021 was partially offset by the impact of lower year-over-year structured transactions noted above.

The administrative expense ratio decreased 0.1 percentage point and 0.5 percentage point for the three and nine months ended September 30, 2021, respectively, primarily due to the favorable impact of higher net premiums earned, partially offset by increased spending to support growth.

North America Personal P&C Insurance

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

6 unchanged sentences

Administrative expenses 73 65 11.7 % 200 199 0.2 %

Underwriting income 236 133 76.6 % 294 337 (12.9) %

Underwriting income 71 (43) NM 365 294 24.2 %

Net investment income 60 64 (7.9) % 189 195 (3.4) %

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

Other (income) expense 1 1 — (3) 4 NM

Amortization of purchased intangibles 2 2 — 8 8 —

Segment income $ 302 $ 194 55.9 % $ 421 $ 459 (8.2) %

Segment income $ 128 $ 18 NM $ 549 $ 477 15.1 %

Loss and loss expense ratio:

8 unchanged sentences

Catastrophe Losses and Prior Period Development

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

(in millions of U.S.

1 unchanged sentence

Catastrophe losses $ 397 $ 305 $ 698 $ 436

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

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

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

Severe weather-related events in the U.S.

Favorable (unfavorable) prior period development $ 182 $ (48) $ 266 $ (48)

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

Hurricane Ida losses of $281 million, winter storm losses and other severe weather-related events in the U.S.

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

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

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

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

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

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

Net premiums written increased $15 million, or 1.2 percent, and $42 million, or 1.1 percent for the three and nine months ended September 30, 2021, respectively, primarily driven by new business and strong renewal retention, from both rate and exposure increases in homeowners.

Partially offsetting the increase were cancellations in parts of California exposed to wildfires, and the unfavorable impact of automobile return premiums.

Net premiums earned increased $13 million, or 1.0 percent, and $29 million, or 0.8 percent for the three and nine months ended September 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.

The loss and loss expense ratio decreased for the three and nine months ended September 30, 2021, reflecting higher favorable prior period development, partially offset by higher catastrophe losses.

The CAY loss ratio excluding catastrophe losses increased for the three months ended September 30, 2021 and decreased for the nine months ended September 30, 2021.

The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 3.3 percentage points and 1.1 percentage points, respectively, in the automobile portfolio.

Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased reflecting underlying loss ratio improvement in homeowners.

The policy acquisition cost ratio increased 0.3 percentage point and 0.4 percentage point for the three and nine months ended September 30, 2021, respectively, primarily due to lower ceded commissions.

The nine months ended September 30, 2021 was also impacted by a favorable commission accrual adjustment in the prior year.

The administrative expense ratio increased 0.6 percentage point for the three months ended September 30, 2021 primarily due to increased spending to support growth and was flat for the nine months ended September 30, 2021.

North America Agricultural Insurance

2 unchanged sentences

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

8 unchanged sentences

Net investment income 6 7 (0.8) % 21 23 (6.3) %

Other (income) expense — 1 NM — 1 NM

Other (income) expense — — — — 1 NM

Amortization of purchased intangibles 7 7 — 20 20 —

9 unchanged sentences

NM - not meaningful

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

June 30 June 30

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

September 30 September 30

(in millions of U.S.

1 unchanged sentence

Catastrophe losses $ 8 $ 10 $ 20 $ 24

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.

Unfavorable prior period development $ (7) $ (18) $ (5) $ (4)

Catastrophe losses through September 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.

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.

Net premiums written increased $429 million, or 43.6 percent, and $506 million, or 31.6 percent for the three and nine months ended September 30, 2021, respectively, due mainly to an increase in MPCI, reflecting higher commodity prices and volatility factors, both of which impact pricing, as well as higher reported acreage from policyholders and policy count growth.

In addition, our Chubb Agribusiness unit contributed to the net premiums written increase with strong new business growth.

Net premiums earned increased $367 million, or 37.9 percent, and $417 million, or 29.0 percent for the three and nine months ended September 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.

The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased for the three and nine months ended September 30, 2021, primarily due to higher net premiums earned from MPCI, partially offset by the unfavorable impact of a commodity hedge loss in the current period.

The policy acquisition cost ratio decreased 1.2 percentage points for both the three and nine months ended September 30, 2021, primarily due to the favorable impact of higher net premiums earned.

The policy acquisition cost ratio for the nine months ended September 30, 2021 also benefited from a lower year-over-year amount of supplemental commissions in our Chubb Agribusiness unit.

The administrative expense ratio decreased 0.1 percentage point and 0.2 percentage point for the three and nine months ended September 30, 2021, respectively, primarily due to the favorable impact of higher net premiums earned.

Overseas General Insurance

4 unchanged sentences

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

7 unchanged sentences

Administrative expenses 266 260 2.3 % 811 759 6.9 %

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

Underwriting income 208 248 (15.9) % 904 241 275.5 %

Net investment income 157 130 20.9 % 447 396 12.7 %

1 unchanged sentence

Amortization of purchased intangibles 11 10 8.1 % 36 33 10.6 %

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

Segment income $ 354 $ 367 (3.5) % $ 1,312 $ 594 120.8 %

Loss and loss expense ratio:

6 unchanged sentences

Combined ratio 92.2 % 89.4 % 2.8 pts 88.3 % 96.5 % (8.2) pts

NM - not meaningful

Catastrophe Losses and Prior Period Development

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

(in millions of U.S.

2 unchanged sentences

Favorable prior period development $ 28 $ 60 $ 209 $ 100

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

Winter storm losses in the U.S.

and international weather-related events

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

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

Flooding in Europe, Hurricane Ida, winter storm losses and international weather-related events

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

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

Net Premiums Written by Region

Three months ended June 30

Three months ended September 30

(in millions of U.S.

8 unchanged sentences

Net premiums written $ 2,596 100 % $ 2,238 100 % $ 2,333 15.9 % 11.2 %

Six months ended June 30

Nine months ended September 30

(in millions of U.S.

9 unchanged sentences

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

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

• Commercial P&C lines:

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

• Consumer lines:

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

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

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

Overall, net premiums written increased for the three and nine months ended September 30, 2021, reflecting growth in commercial P&C lines of 20.6.

percent and 23.8 percent, or 16.0 percent and 17.8 percent on a constant-dollar basis, respectively, and growth in consumer lines of 9.2 percent and 6.4 percent, or 4.5 percent and 1.3 percent on a constant-dollar basis, respectively.

Growth in Europe, Middle East and Africa of 17.1 percent and 18.2 percent on a constant-dollar basis for the three and nine months ended September 30, 2021, respectively, was primarily driven by higher new business, higher retention and positive rate increases in commercial P&C lines, including commercial casualty, professional liability and property.

Latin America increased 7.8 percent on a constant-dollar basis for the three months ended September 30, 2021 driven by higher new business in homeowners and A&H.

The prior year included the adverse impact of restrictions resulting from the COVID-19 pandemic in automobile and A&H.

Latin America increased 3.5 percent on a constant-dollar basis for the nine months ended September 30, 2021 due to growth in commercial P&C lines.

Asia growth of 5.1 percent and 5.5 percent on a constant-dollar basis for the three and nine months ended September 30, 2021, respectively, was primarily driven by higher new business, higher retention and positive rate increases in commercial P&C lines, including professional liability and property.

Net premiums earned increased $327 million and $883 million, or $237 million and $542 million on a constant-dollar basis, for the three and nine months ended September 30, 2021, respectively, reflecting the increase in commercial P&C 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 loss and loss expense ratio increased for the three months ended September 30, 2021, primarily due to higher catastrophe losses and lower favorable prior period development.

The loss and loss expense ratio decreased for the nine months ended September 30, 2021, primarily from lower catastrophe losses and higher favorable prior period development.

The CAY loss ratio excluding catastrophe losses increased for the three months ended September 30, 2021 and decreased for the nine months ended September 30, 2021.

The prior year loss ratio was favorably impacted by a COVID-related reduced claim frequency benefit of 1.7 percentage points and 0.6 percentage point for the three and nine months ended September 30, 2020, respectively, primarily in the automobile portfolio in Latin America.

Excluding this prior year benefit, the CAY loss ratio excluding catastrophe losses decreased for the three and nine months ended September 30, 2021, reflecting underlying loss ratio improvement, partially offset by lower premiums earned from A&H lines which have a lower loss ratio.

The policy acquisition cost ratio decreased 0.9 percentage point and 1.0 percentage point for the three and nine months ended September 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 1.1 percentage points and 0.6 percentage point for the three and nine months ended September 30, 2021, respectively, primarily due to the favorable impact of higher net premiums earned.

Global Reinsurance

1 unchanged sentence

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

7 unchanged sentences

Administrative expenses 9 9 — 27 28 (2.7) %

Underwriting income 25 39 (32.3) % 32 83 (60.8) %

Underwriting income (loss) (45) (32) 45.0 % (13) 51 NM

Net investment income 99 85 17.6 % 250 214 17.1 %

Other (income) expense — 1 NM — 1 NM

Other (income) expense — — — — 1 NM

Segment income $ 54 $ 53 3.0 % $ 237 $ 264 (10.0) %

9 unchanged sentences

Catastrophe Losses and Prior Period Development

Three Months Ended Six Months Ended

June 30 June 30

Three Months Ended Nine Months Ended

September 30 September 30

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

1 unchanged sentence

Favorable prior period development $ 4 $ 6 $ 11 $ 29

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

Winter storm losses in the U.S.

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

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

Severe weather-related events in the U.S.

and Canada, including Hurricane Ida and winter storms

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

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

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

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

Net premiums written increased $40 million and $96 million for the three and nine months ended September 30, 2021, respectively, primarily from new business written and positive rate increases.

Net premiums earned increased $40 million and $63 million for the three and nine months ended September 30, 2021, respectively, primarily 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.

The loss and loss expense ratio increased 1.6 percentage points for the three months ended September 30, 2021, primarily due to a shift in the mix of business towards lines which have a higher loss ratio, and increased 12.1 percentage points for the nine months ended September 30, 2021, primarily due to higher catastrophe losses and lower favorable prior period development.

The CAY loss ratio excluding catastrophe losses increased 2.3 percentage points and 1.5 percentage points, for the three and nine months ended September 30, 2021, respectively, also primarily due to a shift in the mix of business towards lines which have a higher loss ratio.

The policy acquisition cost ratio increased 2.5 percentage points and 0.7 percentage points for the three and nine months ended September 30, 2021, respectively, primarily due to favorable expense adjustments in the prior year.

Additionally, the increase for the three months ended September 30, 2020 was also due to a shift in mix of business towards lines that have higher acquisition costs.

The administrative expense ratio decreased 1.0 percentage point and 0.7 percentage points for the three and nine months ended September 30, 2021, respectively, primarily from the favorable impact of higher net premiums earned.

Life Insurance

1 unchanged sentence

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

13 unchanged sentences

Segment income $ 104 $ 104 — $ 310 $ 285 9.0 %

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.

Net premiums written was relatively flat and decreased slightly for the three and nine months ended September 30, 2021, respectively, including growth of 14.8 percent and 12.0 percent, respectively, in our International Life operations, principally in Asia, from new business in Taiwan, Vietnam and Thailand, and in Latin America.

This growth was offset by a decline in our North America Combined Insurance business of 7.3 percent and 7.5 percent for the three and nine months ended September 30, 2021, respectively, due to the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales, and a decline in our life reinsurance business which continues to decline as no new business is currently being written.

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

4 unchanged sentences

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 deposits collected increased $295 million and $699 million for the three and nine months ended September 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.

Life Insurance underwriting income increased $5 million for the three months ended September 30, 2021, primarily due to higher net investment income.

Life Insurance underwriting income was relatively flat for the nine months ended September 30, 2021.

Segment income was relatively flat for the three months ended September 30, 2021.

Segment income increased $25 million for the nine months ended September 30, 2021, primarily due to our share of net income from our investment in Huatai, our partially-owned insurance entity in China.

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

Three Months Ended Six Months Ended

June 30 % Change June 30 % Change

Three Months Ended Nine Months Ended

September 30 % Change September 30 % Change

(in millions of U.S.

6 unchanged sentences

Interest expense 122 130 (6.3) % 366 390 (6.3) %

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

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

Net realized gains (losses) (11) (142) (92.2) % 841 (1,067) NM

Other (income) expense (722) (415) 73.2 % (1,845) (283) NM

Amortization of purchased intangibles 49 52 (3.6) % 148 153 (3.0) %

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

Income tax expense 218 142 53.4 % 873 295 195.7 %

Net income (loss) $ 170 $ (196) NM $ 858 $ (2,243) 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.

Losses and loss expenses for the three months ended September 30, 2021 and 2020 were primarily from adverse development relating to our Brandywine environmental exposures of $33 million and $35 million, respectively.

Losses and loss expenses for the nine months ended September 30, 2020, also includes $254 million for U.S.

child molestation claims, predominantly reviver statute-related.

Administrative expenses increased $28 million and $44 million for the three and nine months ended September 30, 2021, respectively, primarily due to higher employee-related expenses and 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).

Refer to Note 11 to the Consolidated Financial Statements for additional information on Other (income) expense.

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.

We take a long-term view with our investment strategy, and our investment managers manage our investment portfolio to maximize total return within specific guidelines designed to minimize risk.

The majority of our investment portfolio is available for sale and reported at fair value.

3 unchanged sentences

Additionally, Net income is impacted through the reporting of changes in the fair value of equity securities, private equity funds where we own less than three percent, and derivatives, including financial futures, options, swaps, and GLB reinsurance.

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

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

Three Months Ended September 30

(in millions of U.S.

7 unchanged sentences

Total investment portfolio (50) (554) (604) 89 638 727

Variable annuity reinsurance derivative transactions, net of applicable hedges (72) — (72) 110 — 110

Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges (63) — (63) (6) — (6)

Other derivatives (10) — (10) 1 — 1

2 unchanged sentences

Net gains (losses), pre-tax $ (21) $ (964) $ (985) $ (141) $ 861 $ 720

Six Months Ended June 30

Nine Months Ended September 30

(in millions of U.S.

7 unchanged sentences

Total investment portfolio 621 (2,177) (1,556) (217) 1,759 1,542

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

Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges 140 — 140 (456) — (456)

Other derivatives (8) — (8) (2) — (2)

2 unchanged sentences

Net gains (losses), pre-tax $ 833 $ (2,294) $ (1,461) $ (1,069) $ 1,532 $ 463

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.

Pre-tax net losses of $604 million in our investment portfolio for the three months ended September 30, 2021 were principally the result of an increase in interest rates.

Pre-tax net losses of $1,556 million in our investment portfolio for the nine months ended September 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.

The variable annuity reinsurance derivative transactions resulted in realized losses of $63 million for the three months ended September 30, 2021, reflecting a net loss of $59 million, primarily from an increase in the fair value of the GLB liabilities due to underperformance in certain equity markets, partially offset by an increase in interests rates, and a net realized loss of $4 million related to these other derivatives.

For the nine months ended September 30, 2021, the variable annuity reinsurance derivative transactions resulted in net realized gains of $140 million reflecting a net gain of $252 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 $112 million related to these other derivatives.

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

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

Effective Income Tax Rate

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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.

For the three and nine months ended September 30, 2021 our ETR was 10.7 percent and 12.0 percent, respectively.

This compares to an ETR of 10.7 percent and 20.9 percent for the three and nine months ended September 30, 2020, respectively.

The ETR for each period in both years was impacted by our mix of earnings among various jurisdictions and discrete tax benefits.

Non-GAAP Reconciliation

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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.

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 denomi nator 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.

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This measure is commonly reported among our peer companies and allows for a better comparison.

Reference to the year-over-year improvement of 0.6 percentage point and 1.0 percentage point in the P&C CAY excluding catastrophe loss ratio for the three and nine months ended September 30, 2021, respectively, is calculated by adjusting the prior year ratio to exclude the COVID-related reduced claim frequency impact.

We believe this information is meaningful to evaluate trends in the underlying business on a comparable basis.

Reinstatement premiums are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences.

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

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:

The following tables present the calculation of combined ratio, as reported for each segment to P&C combined ratio, adjusted for CATs and PPD:

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

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Three Months Ended

June 30, 2021

September 30, 2021

(in millions of U.S.

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Net premiums earned adjustments on PPD - unfavorable (favorable) 56 — — — — — 56

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

PPD reinstatement premiums - unfavorable (favorable) — (2) — — 3 — 1

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Three Months Ended

June 30, 2020

September 30, 2020

(in millions of U.S.

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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

Nine Months Ended

September 30, 2021

(in millions of U.S.

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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

Nine Months Ended

September 30, 2020

(in millions of U.S.

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

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

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

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Amortization of purchased intangibles and Other amortization

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

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

Amortization expense of purchased intangibles was $71 million and $216 million for the three and nine months ended September 30, 2021, respectively, and principally relates to the Chubb Corp acquisition.

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

Associated with the Chubb Corp Acquisition

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Amortization of purchased intangibles

Third quarter of 2021 $ 54 $ (5) $ 49 $ 23 $ 72

Fourth quarter of 2021 $ 54 $ (5) $ 49 $ 22 $ 71

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Reduction of deferred tax liability associated with intangible assets related to Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense)

At 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:

At September 30, 2021, the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was $1,242 million.

The following table presents, as of September 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 fourth quarter of 2021 and for the next five years:

For the Years Ending December 31

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dollars) Reduction to deferred tax liability associated with intangible assets

Third quarter of 2021 $ 17

Fourth quarter of 2021 $ 17

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

The following table presents at 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:

The following table presents at September 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 fourth quarter of 2021 and for the next five years:

Amortization (expense) benefit of the fair value adjustment on

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Assumed long-term debt (2)

Third quarter of 2021 $ (25) $ 5

Fourth quarter of 2021 $ (22) $ 6

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

(in millions of U.S.

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

Net investment income 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.

Net investment income increased 3.1 percent and 3.4 percent for the three and nine months ended September 30, 2021, respectively, primarily due to higher income from our private equity partnerships and increased dividends on public equities which resulted from a higher allocation to public equity securities.

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

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

(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)

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).

Total mark-to-market gain on private equity, pre-tax $ 713 $ 436 $ 1,887 $ 229

Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of A as rated by the independent investment rating services Standard and Poor’s (S&P)/Moody’s Investors Service (Moody’s) at September 30, 2021.

The portfolio is externally managed by independent, professional investment managers and is broadly diversified across geographies, sectors, and issuers.

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

The average duration of our fixed income securities, including the effect of options and swaps, was 4.2 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 average duration of our fixed income securities, including the effect of options and swaps, was 4.1 years and 4.0 years at September 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 $4.4 billion at September 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

September 30, 2021 December 31, 2020

(in millions of U.S.

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Total investments $ 122,733 $ 118,767 $ 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.

The fair value of our total investments increased $3.2 billion during the nine months ended September 30, 2021 due to strong operating cash flow and positive equity market returns.

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

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

The following tables present the fair value of our fixed maturities and short-term investments at September 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

September 30, 2021 December 31, 2020

(in millions of U.S.

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Corporate and asset-backed securities

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

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

(in millions of U.S.

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Value Amortized Cost, Net

June 30, 2021

September 30, 2021

(in millions of U.S.

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

government securities at June 30, 2021:

government securities at September 30, 2021:

(in millions of U.S.

dollars) Fair Value Amortized Cost, Net

Republic of Korea $ 1,050 $ 977

Canada $ 997 $ 983

Republic of Korea 918 859

United Kingdom 698 688

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Province of Quebec 454 438

Commonwealth of Australia 437 409

Socialist Republic of Vietnam 430 294

Commonwealth of Australia 423 398

Other Non-U.S.

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

corporate securities at June 30, 2021:

corporate securities at September 30, 2021:

(in millions of U.S.

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Japan 734 719

Germany 608 582

Switzerland 607 579

Germany 604 581

Netherlands 538 513

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

At 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.

At September 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 $160 million.

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Critical Accounting Estimates

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

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

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

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Other (including foreign exchange translation) (87) (9) (78)

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

Balance at September 30, 2021 $ 72,631 $ 15,550 $ 57,081

(1) Net of valuation allowance for uncollectible reinsurance.

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Asbestos and Environmental (A&E)

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

During the three months ende d September 30, 2021, we increased environmental net loss reserves for Brandywine managed operations by $33 million.

A&E reserves are included in Corporate.

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

The table below presents our modeled pre-tax estimates of natural catastrophe PML, net of reinsurance, at 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.

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

hurricane and California earthquake events, based on our in-force portfolio at July 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).

hurricane events could be in excess of $2,717 million (or 4.6 percent of our total shareholders’ equity at September 30, 2021).

These estimates assume that reinsurance recoverable is fully collectible.

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

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

At September 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.

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

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

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

During the 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.

During the nine months ended September 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.

Chubb Limited received dividends of $3.1 billion and $800 million from its Bermuda subsidiaries during the nine months ended September 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 nine months ended September 30, 2021 and 2020, respectively.

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

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

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

Chubb Limited received no dividends from CGM or Chubb INA during the nine months ended September 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.

Chubb INA received $910 million and $180 million from its subsidiaries during the nine months ended September 30, 2021 and 2020, respectively.

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

The following is a discussion of our cash flows for the 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.

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

Operating cash flows were $8.5 billion in the nine months ended September 30, 2021, compared to $7.2 billion in the prior year period.

The increase of $1.3 billion is due to higher premiums collected reflecting premium growth, principally in our commercial lines, partially offset by higher taxes paid.

Cash used for investing was $3.8 billion in the nine months ended September 30, 2021, compared to $6.7 billion in the prior year period, a decrease of $2,978 million.

Cash used for investing in the current year included lower net purchases of equity securities of $2.0 billion and lower cash used related to acquisitions of Huatai Group ownership interest of $1.3 billion, partially offset by higher private equity contributions, net of distributions received, of $513 million.

Cash used for financing was $4.8 billion in the nine months ended September 30, 2021, compared to $234 million in the prior year period, an increase of $4.6 billion principally from more shares repurchased in the current year.

The prior year included $988 million of net proceeds from the issuance of long-term debt.

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.

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.

In many cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to us, and the settlement of the liability for that loss.

We use repurchase agreements as a 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.

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

Capital Resources

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

June 30 December 31

September 30 December 31

(in millions of U.S.

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The repurchase agreements are collateralized borrowings where we maintain the right and ability to redeem the collateral on short notice, unlike short-term debt which comprises the current maturities of our long-term debt instruments.

For the 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.

For the nine months ended September 30, 2021, we repurchased $3.96 billion of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorizations.

At September 30, 2021, there were 43,144,862 Common Shares in treasury with a weighted average cost of $153.47 per share, and $3.55 billion in share repurchase authorization remained through June 30, 2022.

For the period October 1, 2021 through October 27, 2021, we repurchased 167,700 Common Shares for a total of $29 million in a series of open market transactions.

At October 27, 2021, $3.52 billion in share repurchase authorization remained.

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

This allows us capital market access for refinancing as well as for unforeseen or opportunistic capital needs.

On October 6, 2021, we filed a new shelf registration statement which allows us to issue an unlimited amount of certain classes of debt and equity from time to time, replacing the shelf registration statement that was filed in October 2018.

This new shelf registration statement expires in October 2024.

We have paid dividends each quarter since we became a public company in 1993.

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

September 17, 2021 October 8, 2021 $0.80 (CHF 0.73)

Information provided in connection with outstanding debt of subsidiaries

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(Subsidiary Issuer)

September 30 December 31 September 30 December 31

(in millions of U.S.

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

dollars) 2021 2020 2021 2020

Investments $ — $ — $ 144 $ 197

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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

Nine Months Ended September 30, 2021 Chubb Limited

(Parent Guarantor) Chubb INA Holdings Inc.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis