Chubb Ltd 10-Q

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three months ended March 31, 2022. All comparisons in this discussion are to the corresponding prior year period unless otherwise indicated. All dollar amounts are rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded dollars may differ. Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. This discussion should be read in conjunction with our consolidated financial statements and related notes and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K). Other Information We routinely post important information for investors on our website (investors.chubb.com). We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Securities and Exchange Commission (SEC) Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Investor Information portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report. MD&A Index Page Forward-Looking Statements 35 Overview 36 Consolidated Operating Results 36 Segment Operating Results 41 Net Realized and Unrealized Gains (Losses) 50 Effective Income Tax Rate 51 Non-GAAP Reconciliation 51 Amortization of Purchased Intangibles and Other Amortization 55 Net Investment Income 56 Investments 57 Critical Accounting Estimates 61 Unpaid Losses and Loss Expenses 61 Asbestos and Environmental (A&E) 61 Fair Value Measurements 61 Catastrophe Management 62 Global Property Catastrophe Reinsurance Program 63 Liquidity 64 Capital Resources 65 Information Provided In Connection With Outstanding Debt of Subsidiaries 66 34 Table of Contents Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,” “intend,” “hope,” “feel,” “foresee,” “will likely result,” “will continue,” and variations thereof and similar expressions, identify forward-looking statements. These forward-looking statements are subject to certain risks, uncertainties, and other factors that could, should potential events occur, cause actual results to differ materially from such statements. These risks, uncertainties, and other factors, which are described in more detail elsewhere herein and in other documents we file with the U.S. Securities and Exchange Commission (SEC), include but are not limited to: • actual amount of new and renewal business, premium rates, underwriting margins, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets; the competitive environment in which we operate, including trends in pricing or in policy terms and conditions, which may differ from our projections and changes in market conditions that could render our business strategies ineffective or obsolete; • losses arising out of natural or man-made catastrophes; actual loss experience from insured or reinsured events and the timing of claim payments; the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing environmental damage and asbestos-related latent injuries, the impact of aggregate-policy-coverage limits, the impact of bankruptcy protection sought by various asbestos producers and other related businesses, and the timing of loss payments; • infection rates and severity of COVID-19 and related risks, and their effects on our business operations and claims activity, and any adverse impact to our insureds, brokers, agents, and employees; actual claims may exceed our best estimate of ultimate insurance losses incurred which could change including as a result of, among other things, the impact of legislative or regulatory actions taken in response to COVID-19; • changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; the ability to collect reinsurance recoverable, credit developments of reinsurers, and any delays with respect thereto and changes in the cost, quality, or availability of reinsurance; • uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and treaties; judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms; the effects of data privacy or cyber laws or regulation; global political conditions and possible business disruption or economic contraction that may result from such events; • developments in global financial markets, including changes in interest rates, stock markets, and other financial markets; increased government involvement or intervention in the financial services industry; the cost and availability of financing, and foreign currency exchange rate fluctuations; changing rates of inflation; and other general economic and business conditions, including the depth and duration of potential recession; • the availability of borrowings and letters of credit under our credit facilities; the adequacy of collateral supporting funded high deductible programs; the amount of dividends received from subsidiaries; • changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available for sale fixed maturity investments before their anticipated recovery; • actions that rating agencies may take from time to time, such as financial strength or credit ratings downgrades or placing these ratings on credit watch negative or the equivalent; • the effects of public company bankruptcies and accounting restatements, as well as disclosures by and investigations of public companies relating to possible accounting irregularities, and other corporate governance issues; • acquisitions made performing differently than expected, our failure to realize anticipated expense-related efficiencies or growth from acquisitions, the impact of acquisitions on our pre-existing organization, including with respect to our announced acquisitions not closing; risks and uncertainties relating to our planned purchases of additional interests in Huatai Insurance Group Co., Ltd. (Huatai Group), including our ability to receive Chinese insurance regulatory approval and complete the purchases; • risks associated with being a Swiss corporation, including reduced flexibility with respect to certain aspects of capital management and the potential for additional regulatory burdens; share repurchase plans and share cancellations; 35 Table of Contents • loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time frame; • the ability of our technology resources, including information systems and security, to perform as anticipated such as with respect to preventing material information technology failures or third-party infiltrations or hacking resulting in consequences adverse to Chubb or its customers or partners; the ability of our company to increase use of data analytics and technology as part of our business strategy and adapt to new technologies; and • management’s response to these factors and actual events (including, but not limited to, those described above). You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events or otherwise. Overview Chubb Limited is the Swiss-incorporated holding company of the Chubb Group of Companies. Chubb Limited, which is headquartered in Zurich, Switzerland, and its direct and indirect subsidiaries (collectively, the Chubb Group of Companies, Chubb, we, us, or our) are a global insurance and reinsurance organization, serving the needs of a diverse group of clients worldwide. At March 31, 2022, we had total assets of $198 billion and shareholders’ equity of $57 billion. Chubb was incorporated in 1985 at which time it opened its first business office in Bermuda and continues to maintain operations in Bermuda. We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more information on our segments refer to “Segment Information” under Item 1 in our 2021 Form 10-K. Consolidated Operating Results – Three Months Ended March 31, 2022 and 2021 Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Net premiums written $ 9,199 $ 8,662 6.2 % Net premiums written - constant dollars (1) 8.1 % Net premiums earned 8,746 8,221 6.4 % Net investment income 822 863 (4.8) % Net realized gains (losses) 101 887 (88.6) % Total revenues 9,669 9,971 (3.0) % Losses and loss expenses 4,787 5,053 (5.3) % Policy benefits 145 167 (13.1) % Policy acquisition costs 1,737 1,665 4.3 % Administrative expenses 778 744 4.6 % Interest expense 132 122 7.4 % Other (income) expense (310) (490) (36.7) % Amortization of purchased intangibles 71 72 (2.0) % Total expenses 7,340 7,333 0.1 % Income before income tax 2,329 2,638 (11.7) % Income tax expense 355 338 5.2 % Net income $ 1,974 $ 2,300 (14.2) % (1) On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency exchange rates as the comparable current period. 36 Table of Contents Financial Highlights for the Three Months Ended March 31, 2022 • Net income was $2.0 billion compared with $2.3 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 combined ratios. Net income is lower in the current year from lower year-over-year after-tax net realized gains on equity securities of $257 million and a lower gain of $198 million on our variable annuity reinsurance portfolio. • Consolidated net premiums written were $9.2 billion, up 6.2 percent, or 8.1 percent in constant dollars, primarily from growth in both commercial lines and consumer lines of 7.9 percent and 2.9 percent, respectively, or 9.4 percent and 5.5 percent in constant dollars, respectively. • Consolidated net premiums earned were $8.7 billion, up 6.4 percent, or 8.0 percent in constant dollars, primarily from growth in both commercial lines and consumer lines of 9.9 percent and 0.2 percent, respectively, or 11.1 percent and 2.7 percent in constant dollars, respectively. • Total pre-tax and after-tax catastrophe losses were $333 million (4.0 percentage points of the P&C combined ratio) and $290 million, respectively, compared with $700 million (9.1 percentage points of the P&C combined ratio) and $570 million, respectively, in the prior year period. • Total pre-tax and after-tax favorable prior period development were $240 million (3.2 percentage points of the P&C combined ratio) and $195 million, respectively, compared with $192 million (2.5 percentage points of the P&C combined ratio) and $156 million, respectively, in the prior year period. • The P&C combined ratio was 84.3 percent compared with 91.8 percent in the prior year period. P&C current accident year (CAY) combined ratio excluding catastrophe losses was 83.5 percent compared with 85.2 percent in the prior year period. The current year ratios decreased due to underlying loss ratio improvement and the favorable impact of higher net premiums earned on the expense ratio. • Net investment income was $822 million compared with $863 million in the prior year period, reflecting lower reinvestment rates on new and reinvested fixed maturities. • Operating cash flow was $2.4 billion for the quarter compared with $2.1 billion in the prior year period. • Shareholders' equity decreased by $3.0 billion in the quarter, as net income of $2.0 billion was more than offset by net unrealized losses on investments of $3.8 billion after-tax from rising interest rates. In addition, shareholders' equity reflected total capital returned to shareholders in the quarter of $1.3 billion, including share repurchases of $1.0 billion, at an average purchase price of $205.53 per share, and dividends of $340 million. 37 Table of Contents Net Premiums Written Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 C$ Q-22 vs. Q-21 Commercial casualty $ 1,837 $ 1,649 11.4 % 12.8 % Workers' compensation 603 563 7.2 % 7.2 % Financial lines 1,182 1,090 8.5 % 10.1 % Surety 153 158 (3.1) % (1.7) % Commercial multiple peril (1) 290 263 10.0 % 10.0 % Property and other short-tail lines 1,777 1,594 11.5 % 14.3 % Total Commercial P&C lines 5,842 5,317 9.9 % 11.5 % Agriculture 62 183 (65.9) % (65.9) % Personal automobile 412 387 6.5 % 9.0 % Personal homeowners 830 775 7.1 % 7.7 % Personal other 495 468 5.7 % 8.4 % Total Personal lines 1,737 1,630 6.5 % 8.2 % Total Property and Casualty lines 7,641 7,130 7.2 % 8.8 % Global A&H lines (2) 975 982 (0.6) % 2.8 % Reinsurance lines 253 207 22.0 % 22.4 % Life 330 343 (4.0) % (0.2) % Total consolidated $ 9,199 $ 8,662 6.2 % 8.1 % (1) Commercial multiple peril represents retail package business (property and general liability). (2) For purposes of this schedule only, A&H results from our Combined North America and International businesses, normally included in the Life Insurance and Overseas General Insurance segments, respectively, as well as the A&H results of our North America Commercial P&C segment, are included in Global A&H lines above. The increase in consolidated net premiums written for the three months ended March 31, 2022 reflects growth across most lines of business. Commercial lines growth was 7.9 percent and consumer lines growth was 2.9 percent, or 9.4 percent and 5.5 percent, respectively, on a constant dollar basis, driven by higher new business, positive rate increases, and strong renewal retention. Agriculture growth was impacted by $161 million of return of premium to the U.S. government under the profit-sharing agreement reflecting the profitable 2021 crop year. Commercial lines growth excluding Agriculture increased 10.3 percent, or 11.9 percent in constant dollars. • Commercial casualty grew primarily in North America, Europe and Asia, driven by higher new business, strong retention and positive rate increases. • Workers' compensation growth was due to higher renewal business, including exposure increases, in North America. • Financial lines grew in North America, Asia, and Europe, reflecting higher new business, strong retention and positive rate increases. • Commercial multiple peril increased due to higher renewal business, including exposure and rate increases, in North America. • Property and other short-tail lines grew due to higher new business, strong retention, and positive rate increases in North America, Europe, Latin America and Asia. • Agriculture decreased due to return of premium to the U.S. government noted above. Excluding this return of premium, there was underlying growth in crop insurance and Chubb Agribusiness, reflecting higher commodity prices and volatility factors, which improved pricing, and policy count growth. • Personal lines increased due to new business and strong renewal retention, from both rate and exposure increases, mainly in homeowners; partially offset by cancellations in parts of California exposed to wildfires. In addition, the prior year included the unfavorable impact of reinstatement premiums related to 2021 winter storm losses and automobile return premiums. This prior year impact and adverse impact of the cancellations noted above, contributed 1.8 percentage points to the year-over-year growth. 38 Table of Contents • Global A&H lines increased on a constant-dollar basis as lines in Latin America, Europe, and Asia began to recover from less travel volume and reduced consumer activity in the prior year. Our North American Combined Insurance supplemental A&H business decreased due to the continued impact of the COVID-19 pandemic on face-to-face and worksite sales. • The increase in reinsurance was due to continued growth in the portfolio reflecting the impact of new treaties bound in the current quarter and in 2021, as well as favorable premium adjustments. • International life operations declined, as new business in Asia was offset by a decline Latin America. For additional information on net premiums written, refer to the segment results discussions. Net Premiums Earned Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Net premiums earned for long-duration contracts, typically traditional life contracts, generally are recognized as earned when due from policyholders. For the three months ended March 31, 2022, net premiums earned increased $525 million, or 6.4 percent, comprising 9.9 percent positive growth in commercial lines and 0.2 percent positive growth in consumer lines. Partially offsetting the increase in net premiums earned is the return of premium under the profit-sharing agreement related to the profitable 2021 crop year as described above. Catastrophe Losses and Prior Period Development We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in the U.S. and Canada. PCS defines a catastrophe as an event that causes damage of $25 million or more in insured losses and affects a significant number of insureds. For events outside of the U.S. and Canada, we generally use a similar definition. We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. Prior period development includes adjustments relating to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development. Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Catastrophe losses $ 333 $ 700 Favorable prior period development $ 240 $ 192 Catastrophe losses through March 31, 2022 and 2021 were primarily from the following events: • 2022: Australia storms, Colorado wildfires, and other severe weather-related events in the U.S. and internationally. • 2021: Winter storm losses in the U.S. and other severe weather-related events in the U.S. and internationally. Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years. Pre-tax net favorable PPD for the three months ended March 31, 2022 was $240 million, with five percent in long-tail lines, principally from accident years 2018 and prior, and 95 percent in short-tail lines, primarily in A&H, property, and surety lines. Pre-tax net favorable PPD for the three months ended March 31, 2021 was $192 million, with 19 percent in long-tail lines, principally from accident years 2017 and prior, and 81 percent in short-tail lines, primarily in A&H, surety, and property lines. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. 39 Table of Contents P&C Combined Ratio In evaluating our segments excluding Life Insurance financial performance, we use the P&C combined ratio. We calculate this ratio by dividing the respective expense amounts by net premiums earned. We do not calculate this ratio for the Life Insurance segment as we do not use this measure to monitor or manage that segment. A P&C combined ratio under 100 percent indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting loss. Three Months Ended March 31 2022 2021 Loss and loss expense ratio CAY loss ratio excluding catastrophe losses 56.3 % 57.2 % Catastrophe losses 4.1 % 9.1 % Prior period development (3.9) % (2.6) % Loss and loss expense ratio 56.5 % 63.7 % Policy acquisition cost ratio 19.3 % 19.5 % Administrative expense ratio 8.5 % 8.6 % P&C Combined ratio 84.3 % 91.8 % The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased 7.2 percentage points and 0.9 percentage points, respectively, for the three months ended March 31, 2022, reflecting underlying loss ratio improvement, including earned rate exceeding loss cost trends. The loss and loss expense ratio for the three months ended March 31, 2022 also benefited from lower catastrophe losses and higher favorable prior period development. The policy acquisition cost ratio and administrative expense ratio were relatively flat for the three months ended March 31, 2022. Policy benefits Policy benefits represent losses on contracts classified as long-duration and generally include accident and supplemental health products, term and whole life products, endowment products, and annuities. Refer to the Life Insurance segment operating results section for further discussion. For the three months ended March 31, 2022 and 2021, Policy benefits were $145 million and $167 million, respectively, which included (gains) losses from fair value changes in separate account liabilities that do not qualify for separate account reporting under GAAP of $(31) million and $4 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 $176 million and $163 million for the three months ended March 31, 2022 and 2021, respectively. 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. 40 Table of Contents Segment Operating Results – Three Months Ended March 31, 2022 and 2021 We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more information on our segments refer to “Segment Information” under Item 1 in our 2021 Form 10-K. North America Commercial P&C Insurance The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) and accident & health (A&H) insurance and services to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda. This segment includes our North America Major Accounts and Specialty Insurance division (large corporate accounts and wholesale business), and the North America Commercial Insurance division (principally middle market and small commercial accounts). Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Net premiums written $ 4,039 $ 3,664 10.2 % Net premiums earned 4,114 3,674 12.0 % Losses and loss expenses 2,497 2,560 (2.4) % Policy acquisition costs 573 514 11.5 % Administrative expenses 265 254 4.0 % Underwriting income 779 346 125.0 % Net investment income 489 540 (9.4) % Other (income) expense 6 2 123.0 % Segment income $ 1,262 $ 884 42.8 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 61.5 % 63.4 % (1.9) pts Catastrophe losses 2.0 % 9.9 % (7.9) pts Prior period development (2.8) % (3.6) % 0.8 pts Loss and loss expense ratio 60.7 % 69.7 % (9.0) pts Policy acquisition cost ratio 13.9 % 14.0 % (0.1) pts Administrative expense ratio 6.5 % 6.9 % (0.4) pts Combined ratio 81.1 % 90.6 % (9.5) pts Catastrophe Losses and Prior Period Development Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Catastrophe losses $ 81 $ 362 Favorable prior period development $ 108 $ 127 41 Table of Contents Catastrophe losses through March 31, 2022 and 2021 were primarily from winter storm losses and other severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $375 million, or 10.2 percent, for the three months ended March 31, 2022, comprising: • Commercial lines: Positive growth of 10.5 percent reflecting strong premium retention, including rate and exposure increases, and new business across a number of retail and wholesale lines, including property, financial lines, primary and excess casualty, workers' compensation and commercial multiple peril. • Consumer lines: Positive growth of 4.4 percent due to recovery in A&H lines from exposure declines in the prior year and strong new business. Net premiums earned increased $440 million, or 12.0 percent for the three months ended March 31, 2022, reflecting the growth in net premiums written described above. Combined Ratio The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased for the three months ended March 31, 2022, primarily reflecting underlying loss ratio improvement, including earned rate exceeding loss cost trends. The loss and loss expense ratio was also impacted by lower catastrophe losses, partially offset by lower favorable prior period development. The administrative expense ratio decreased for the three months ended March 31, 2022, primarily due to the favorable impact of growth in net premiums earned, partially offset by higher employee-related benefit expenses. 42 Table of Contents North America Personal P&C Insurance The North America Personal P&C Insurance segment comprises operations that provide high net worth personal lines products, including homeowners and complementary products such as valuable articles, excess liability, automobile, and recreational marine insurance and services in the U.S. and Canada. Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Net premiums written $ 1,180 $ 1,098 7.4 % Net premiums earned 1,247 1,184 5.3 % Losses and loss expenses 713 819 (13.0) % Policy acquisition costs 260 247 4.9 % Administrative expenses 69 60 15.6 % Underwriting income 205 58 255.4 % Net investment income 59 65 (8.3) % Other (income) expense 1 1 — Amortization of purchased intangibles 2 3 (5.2) % Segment income $ 261 $ 119 119.7 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 53.3 % 53.2 % 0.1 pts Catastrophe losses 8.0 % 19.3 % (11.3) pts Prior period development (4.1) % (3.3) % (0.8) pts Loss and loss expense ratio 57.2 % 69.2 % (12.0) pts Policy acquisition cost ratio 20.8 % 20.9 % (0.1) pts Administrative expense ratio 5.5 % 5.0 % 0.5 pts Combined ratio 83.5 % 95.1 % (11.6) pts Catastrophe Losses and Prior Period Development Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Catastrophe losses $ 100 $ 240 Favorable prior period development $ 51 $ 40 Catastrophe losses through March 31, 2022 and 2021 were primarily from the following events: • 2022: Colorado wildfires and severe weather-related events in the U.S. • 2021: Winter storm losses and other severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $82 million, or 7.4 percent for the three months ended March 31, 2022, primarily driven by new business and strong renewal retention, from both rate and exposure increases, mainly in homeowners; partially offset by cancellations in parts of California exposed to wildfires. In addition, the prior year included the unfavorable impact of reinstatement premiums related to 2021 winter storm losses and automobile return premiums. This prior year impact and adverse impact of the cancellations noted above, contributed 1.8 percentage points to the year-over-year growth. 43 Table of Contents Net premiums earned increased $63 million, or 5.3 percent for the three months ended March 31, 2022, reflecting the growth in net premiums written. Combined Ratio The loss and loss expense ratio decreased for the three months ended March 31, 2022, due to lower catastrophe losses and higher favorable prior period development. The CAY loss ratio excluding catastrophe losses increased primarily due to slightly higher losses in automobile, offset by earned rate exceeding loss cost trends in homeowners. The administrative expense ratio increased for the three months ended March 31, 2022, primarily due to increased spending to support growth and higher employee-related benefit expenses. North America Agricultural Insurance The North America Agricultural Insurance segment comprises our North American based businesses that provide a variety of coverages in the U.S. and Canada including crop insurance, primarily Multiple Peril Crop Insurance (MPCI) and crop-hail through Rain and Hail Insurance Service, Inc. (Rain and Hail) as well as farm and ranch and specialty P&C commercial insurance products and services through our Chubb Agribusiness unit. Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Net premiums written $ 62 $ 183 (65.9) % Net premiums earned (29) 110 NM Losses and loss expenses (92) 85 NM Policy acquisition costs 12 12 — Administrative expenses (1) 3 NM Underwriting income 52 10 NM Net investment income 7 7 — Amortization of purchased intangibles 7 7 — Segment income $ 52 $ 10 NM Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 70.6 % 71.2 % 0.6 pts Catastrophe losses NM 7.4 % NM Prior period development NM (1.1) % NM Loss and loss expense ratio NM 77.5 % NM Policy acquisition cost ratio NM 10.7 % NM Administrative expense ratio NM 2.7 % NM Combined ratio NM 90.9 % NM NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Catastrophe losses $ — $ 8 Favorable prior period development $ 26 $ 2 Catastrophe losses through March 31, 2021 were primarily from winter storm losses and other severe weather-related events in the U.S. in Chubb Agribusiness. 44 Table of Contents Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written decreased $121 million, or 65.9 percent, for the three months ended March 31, 2022, primarily due to $161 million of return of premium to the U.S. government as part of the profit-sharing agreement reflecting the profitable 2021 crop year in our MPCI business. Under the profit-sharing agreement, we return additional premiums to the government because of the lower losses experienced in certain states in 2021. Excluding this return of premium, net premiums written increased 22 percent due mainly to an increase in MPCI, primarily 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 growth with strong renewal retention, including rate increases, and new business. Net premiums earned decreased $139 million for the three months ended March 31, 2022, due to the factors described above. Combined Ratio The combined ratio for the three months ended March 31, 2022 was impacted by higher favorable prior period development, including the return of premium to the U.S. government under the profit-sharing agreement related to the profitable 2021 crop year described above. This return of premium resulted in a reduction to net premiums earned of $161 million and a corresponding reduction to incurred losses, with no net impact to underwriting income. The CAY loss and loss expense ratio decreased 0.6 percentage point for the three months ended March 31, 2022, primarily due to the favorable year-over-year impact of the commodity hedge gain of 1.9 percentage points, partially offset by higher premiums earned from MPCI, which have a higher loss ratio. The CAY policy acquisition cost ratio decreased 0.9 percentage point for the three months ended March 31, 2022, primarily due to higher premiums earned from MPCI, which have a lower acquisition cost ratio. The CAY administrative expense ratio decreased 3.7 percentage points for the three months ended March 31, 2022, primarily due to higher Administrative and Operating (A&O) reimbursements on the MPCI business, as well as expense management. 45 Table of Contents Overseas General Insurance Overseas General Insurance segment comprises Chubb International and Chubb Global Markets (CGM). Chubb International comprises our international commercial P&C traditional and specialty lines serving large corporations, middle market and small customers; A&H and traditional and specialty personal lines business serving local territories outside the U.S., Bermuda, and Canada. CGM, our London-based international commercial P&C excess and surplus lines business, includes Lloyd's of London (Lloyd's) Syndicate 2488. Chubb provides funds at Lloyd's to support underwriting by Syndicate 2488 which is managed by Chubb Underwriting Agencies Limited. Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Net premiums written $ 3,079 $ 2,890 6.5 % Net premiums written - constant dollars 11.9 % Net premiums earned 2,628 2,478 6.0 % Losses and loss expenses 1,389 1,263 10.0 % Policy acquisition costs 679 668 1.6 % Administrative expenses 269 266 1.2 % Underwriting income 291 281 3.3 % Net investment income 147 141 4.2 % Other (income) expense 2 1 100.0 % Amortization of purchased intangibles 14 12 10.2 % Segment income $ 422 $ 409 3.2 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 49.4 % 49.9 % (0.5) pts Catastrophe losses 5.8 % 2.1 % 3.7 pts Prior period development (2.3) % (1.0) % (1.3) pts Loss and loss expense ratio 52.9 % 51.0 % 1.9 pts Policy acquisition cost ratio 25.8 % 27.0 % (1.2) pts Administrative expense ratio 10.2 % 10.7 % (0.5) pts Combined ratio 88.9 % 88.7 % 0.2 pts Catastrophe Losses and Prior Period Development Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Catastrophe losses $ 151 $ 50 Favorable prior period development $ 60 $ 25 Catastrophe losses through March 31, 2022 and 2021 were primarily from the following events: • 2022: Australia storms and international weather-related events. • 2021: Winter storm losses in the U.S. and international weather-related events. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. 46 Table of Contents Net Premiums Written by Region Three months ended March 31 (in millions of U.S. dollars, except for percentages) 2022 2022 % of Total 2021 2021 % of Total C$ 2021 Q-22 vs. Q-21 C$ Q-22 vs. Q-21 Region Europe, Middle East, and Africa $ 1,654 54 % $ 1,551 54 % $ 1,482 6.6 % 11.6 % Latin America 605 19 % 537 19 % 512 12.8 % 18.1 % Asia Pacific ex Japan 668 22 % 637 22 % 605 4.9 % 10.4 % Japan 115 4 % 124 4 % 113 (7.4) % 1.6 % Other (1) 37 1 % 41 1 % 40 (10.7) % (7.8) % Net premiums written $ 3,079 100 % $ 2,890 100 % $ 2,752 6.5 % 11.9 % (1) Includes the international supplemental A&H business of Combined Insurance and other international operations. Premiums Net premiums written increased $189 million, or $327 million on a constant-dollar basis, for the three months ended March 31, 2022, reflecting an increase in commercial lines of 8.6 percent, or 13.6 percent on a constant-dollar basis, and growth in consumer lines of 3.0 percent, or 9.0 percent on a constant-dollar basis. Growth in Europe, Middle East, and Africa for the three months ended March 31, 2022 was primarily driven by higher new business and positive rate increases in commercial lines, including commercial casualty, property, and financial lines. Consumer lines increased primarily due to A&H, reflecting increased travel volume. Additionally, A&H in the prior year was adversely impacted by restrictions resulting from the COVID-19 pandemic. Latin America increased for the three months ended March 31, 2022 driven by growth in consumer lines, including automobile in personal and travel in A&H. Commercial lines also grew due to exposure increases and new business in commercial lines, primarily property. Asia Pacific ex Japan increased for the three months ended March 31, 2022 driven by higher new business, higher retention and positive rate increases in commercial lines, including financial lines, property and casualty, and growth in consumer lines, primarily specialty in personal and travel in A&H. Japan increased for the three months ended March 31, 2022 primarily from new business in A&H. Net premiums earned increased $150 million, or $261 million on a constant-dollar basis, for the three months ended March 31, 2022, reflecting the increase in net premiums written described above. Combined Ratio The loss and loss expense ratio increased for the three months ended March 31, 2022, primarily due to higher catastrophe losses, partially offset by higher favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased for the three months ended March 31, 2022, primarily reflecting underlying loss ratio improvement, including earned rate exceeding loss cost trends. The policy acquisition cost ratio decreased for the three months ended March 31, 2022, primarily due to a change in the mix of business, including less premiums earned from consumer lines that have a higher acquisition cost ratio and higher premiums earned from commercial lines that have a lower acquisition cost ratio. The administrative expense ratio decreased for the three months ended March 31, 2022, primarily due to the favorable impact of higher net premiums earned, partially offset by increased investment to support growth. 47 Table of Contents Global Reinsurance The Global Reinsurance segment represents our reinsurance operations comprising Chubb Tempest Re Bermuda, Chubb Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada. Global Reinsurance markets its reinsurance products worldwide primarily through reinsurance brokers under the Chubb Tempest Re brand name and provides a broad range of traditional and non-traditional reinsurance coverage to a diverse array of primary P&C companies. Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Net premiums written $ 253 $ 207 22.0 % Net premiums written - constant dollars 22.4 % Net premiums earned 235 180 30.8 % Losses and loss expenses 115 120 (4.6) % Policy acquisition costs 62 45 39.3 % Administrative expenses 9 8 5.3 % Underwriting income 49 7 NM Net investment income 85 70 20.7 % Segment income $ 134 $ 77 74.9 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 49.9 % 48.3 % 1.6 pts Catastrophe losses 0.4 % 23.8 % (23.4) pts Prior period development (1.5) % (5.2) % 3.7 pts Loss and loss expense ratio 48.8 % 66.9 % (18.1) pts Policy acquisition cost ratio 26.5 % 24.9 % 1.6 pts Administrative expense ratio 3.7 % 4.6 % (0.9) pts Combined ratio 79.0 % 96.4 % (17.4) pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended March 31 (in millions of U.S dollars) 2022 2021 Catastrophe losses $ 1 $ 40 Favorable prior period development $ 3 $ 7 Catastrophe losses through March 31, 2021 were primarily from winter storm losses in the U.S. Premiums Net premiums written increased $46 million for the three months ended March 31, 2022, primarily due to continued growth in the portfolio reflecting the impact of new treaties bound in the current quarter and in 2021, as well as favorable premium adjustments. Net premiums earned increased $55 million for the three months ended March 31, 2022, primarily reflecting the increase in net premiums written described above. 48 Table of Contents Combined Ratio The loss and loss expense ratio decreased for the three months ended March 31, 2022, primarily due to lower catastrophe losses. The CAY loss ratio excluding catastrophe losses increased for the three months ended March 31, 2022, primarily due to a shift in the mix of business. The policy acquisition cost ratio increased for the three months ended March 31, 2022, primarily due to a shift in the mix of business. The administrative expense ratio decreased for the three months ended March 31, 2022, primarily from the favorable impact of higher net premiums earned. Life Insurance The Life Insurance segment comprises our international life operations, Chubb Tempest Life Re (Chubb Life Re), and the North American supplemental A&H and life business of Combined Insurance. We assess the performance of our life business based on Life Insurance underwriting income, which includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Net premiums written $ 586 $ 620 (5.5) % Net premiums written - constant dollars (3.5) % Net premiums earned 551 595 (7.5) % Losses and loss expenses 154 198 (22.1) % Policy benefits 176 163 8.2 % Policy acquisition costs 151 179 (15.8) % Administrative expenses 84 82 2.0 % Net investment income 103 98 5.1 % Life Insurance underwriting income 89 71 24.7 % Other (income) expense (28) (34) (16.9) % Amortization of purchased intangibles 2 1 100.0 % Segment income $ 115 $ 104 10.0 % Premiums Net premiums written decreased $34 million, or $21 million on a constant-dollar basis for the three months ended March 31, 2022. For our International life operations, net premiums written decreased 4.5 percent as growth in Asia from new business in Taiwan and Vietnam was offset by a decline in Latin America from lower business in Chile. Net premiums written also reflects a decline in our North American Combined Insurance business of 7.4 percent. Deposits The following table presents deposits collected on universal life and investment contracts: Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 C$ 2021 Q-22 vs. Q-21 C$ Q-22 vs. Q-21 Deposits collected on universal life and investment contracts $ 557 $ 551 $ 555 0.9 % 0.3 % 49 Table of Contents Deposits collected on universal life and investment contracts (life deposits) are not reflected as revenues in our Consolidated statements of operations in accordance with GAAP. New life deposits are an important component of production, and although they do not significantly affect current period income from operations, they are key to our efforts to grow our business. Life deposits collected increased $6 million for the three months ended March 31, 2022, primarily in Taiwan. Life Insurance underwriting income and Segment income Life Insurance underwriting income increased $18 million for the three months ended March 31, 2022, primarily reflecting lower year-over-year COVID-related losses. Segment income increased $11 million for the three months ended March 31, 2022, primarily due to the increase in underwriting income described above, partially offset by lower income from our investment in Huatai, our partially-owned insurance entity in China. Corporate Corporate results primarily include the results of our non-insurance companies, income and expenses not attributable to reportable segments and loss and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-off exposures, including molestation. Three Months Ended March 31 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 Losses and loss expenses $ 10 $ 9 0.1 % Administrative expenses 83 71 19.6 % Underwriting loss 93 80 17.4 % Net investment income (loss) (5) (17) (73.4) % Interest expense 132 122 7.4 % Net realized gains (losses) 100 888 (88.8) % Other (income) expense (259) (415) (37.5) % Amortization of purchased intangibles 46 49 (7.6) % Income tax expense 355 338 5.2 % Net income (loss) $ (272) $ 697 NM NM - not meaningful Administrative expenses increased $12 million for the three months ended March 31, 2022, primarily due to higher employee-related expenses and increased investment to support growth. 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 specific guidelines designed to minimize risk. The majority of our investment portfolio is available for sale and reported at fair value. Our held to maturity investment portfolio is reported at amortized cost, net of valuation allowance. The effect of market movements on our fixed maturities portfolio impacts Net income (through Net realized gains (losses)) when securities are sold, when we write down an asset, or when we record a change to the valuation allowance for expected credit losses. For a further discussion related to how we assess the valuation allowance for expected credit losses and the related impact on Net income, refer to Note 1 e) to the Consolidated Financial Statements in our 2021 Form 10-K. Additionally, Net income is impacted through the reporting of changes in the fair value of equity securities, private equity funds where we own less than three percent, and derivatives, including financial futures, options, swaps, and GLB reinsurance. Changes in unrealized appreciation and depreciation on available for sale securities, resulting from the revaluation of securities held, changes in cumulative foreign currency translation adjustment, and unrealized postretirement benefit obligations liability adjustment, are 50 Table of Contents reported as separate components of Accumulated other comprehensive income in Shareholders’ equity in the Consolidated balance sheets. The following table presents our net realized and unrealized gains (losses): Three Months Ended March 31 2022 2021 (in millions of U.S. dollars) Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Fixed maturities $ (136) $ (4,652) $ (4,788) $ 24 $ (2,317) $ (2,293) Fixed income and equity derivatives 47 — 47 109 — 109 Public equity Sales 255 — 255 45 — 45 Mark-to-market (199) — (199) 322 — 322 Private equity (less than 3 percent ownership) Mark-to-market 55 — 55 38 — 38 Total investment portfolio 22 (4,652) (4,630) 538 (2,317) (1,779) Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges 77 — 77 275 — 275 Other derivatives 1 — 1 (1) — (1) Foreign exchange 75 67 142 76 22 98 Other (1) (74) 19 (55) (1) (28) (29) Net gains (losses), pre-tax $ 101 $ (4,566) $ (4,465) $ 887 $ (2,323) $ (1,436) (1) Other realized losses include impairment of assets related to Chubb's Russian entities. Pre-tax net losses of $4,630 million in our investment portfolio for the three months ended March 31, 2022 were principally the result of an increase in interest rates. 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 gains of $77 million for the three months ended March 31, 2022, reflecting a net gain of $35 million, primarily from a decrease in the fair value of the GLB liabilities due to higher interest rates, partially offset by lower global equity markets, and a net realized gain of $42 million related to these derivative instruments. For the three months ended March 31, 2021, the variable annuity reinsurance derivative transactions resulted in realized gains of $275 million, reflecting a net decrease in the fair value of the GLB liabilities of $319 million due to higher interest rates and higher global equity markets, partially offset by a net realized loss of $44 million related to these derivative instruments. Effective Income Tax Rate Our effective tax rate (ETR) for the three months ended March 31, 2022 was 15.2 percent compared to 12.8 percent in the prior year period. Our ETR reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between GAAP and local tax laws, and the impact of discrete items. The ETR in the current year period was impacted by our mix of earnings among various jurisdictions and discrete tax benefits. Non-GAAP Reconciliation In presenting our results, we included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition. However, they should not be viewed as a substitute for measures determined in accordance with GAAP. 51 Table of Contents Book value per common share is shareholders’ equity divided by the shares outstanding. Tangible book value per common share is shareholders’ equity less goodwill and other intangible assets, net of tax, divided by the shares outstanding. We believe that book value comparisons to less acquisitive peer companies are more meaningful when adjusted for goodwill and other intangible assets. The calculation of tangible book value per share does not consider the embedded goodwill attributable to our investments in partially-owned insurance companies until we consolidate . We provide financial measures, including net premiums written, net premiums earned, and underwriting income on a constant-dollar basis. We believe it is useful to evaluate the trends in our results exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign exchange rates between periods by translating prior period results using the same local currency exchange rates as the comparable current period. P&C performance metrics comprise consolidated operating results (including Corporate) and exclude the operating results of the Life Insurance segment. We believe that these measures are useful and meaningful to investors as they are used by management to assess the company’s P&C operations which are the most economically similar. We exclude the Life Insurance segment because the results of this business do not always correlate with the results of our P&C operations. P&C combined ratio is the sum of the loss and loss expense ratio, policy acquisition cost ratio and the administrative expense ratio excluding the life business and including the realized gains and losses on the crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations. CAY P&C combined ratio excluding catastrophe losses (CATs) excludes CATs and prior period development (PPD) from the P&C combined ratio. We exclude CATs as they are not predictable as to timing and amount and PPD as these unexpected loss developments on historical reserves are not indicative of our current underwriting performance. The combined ratio numerator is adjusted to exclude CATs, net premiums earned adjustments on PPD, prior period expense adjustments and reinstatement premiums on PPD, and the 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. We believe this measure provides a better evaluation of our underwriting performance and enhances the understanding of the trends in our P&C business that may be obscured by these items. This measure is commonly reported among our peer companies and allows for a better comparison. Reinstatement premiums are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted. Net premiums earned adjustments within PPD are adjustments to the initial premium earned on retrospectively rated policies based on actual claim experience that develops after the policy period ends. The premium adjustments correlate to the prior period loss development on these same policies and are fully earned in the period the adjustments are recorded. Prior period expense adjustments typically relate to adjustable commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. 52 Table of Contents 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 Reinsurance Corporate Total P&C Three Months Ended March 31, 2022 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 2,497 $ 713 $ (92) $ 1,389 $ 115 $ 10 $ 4,632 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (81) (100) — (151) (1) — (333) Reinstatement premiums collected (expensed) on catastrophe losses — — — — — — — Catastrophe losses, gross of related adjustments (81) (100) — (151) (1) — (333) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 108 51 26 60 3 (8) 240 Net premiums earned adjustments on PPD - unfavorable (favorable) — — 159 — — — 159 Expense adjustments - unfavorable (favorable) 6 — (1) — — — 5 PPD reinstatement premiums - unfavorable (favorable) — — — — 1 — 1 PPD, gross of related adjustments - favorable (unfavorable) 114 51 184 60 4 (8) 405 CAY loss and loss expense ex CATs B $ 2,530 $ 664 $ 92 $ 1,298 $ 118 $ 2 $ 4,704 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 838 $ 329 $ 11 $ 948 $ 71 $ 83 $ 2,280 Expense adjustments - favorable (unfavorable) (6) — 1 — — — (5) Policy acquisition costs and administrative expenses, adjusted D $ 832 $ 329 $ 12 $ 948 $ 71 $ 83 $ 2,275 Denominator Net premiums earned E $ 4,114 $ 1,247 $ (29) $ 2,628 $ 235 $ 8,195 Net premiums earned adjustments on PPD - unfavorable (favorable) — — 159 — — 159 PPD reinstatement premiums - unfavorable (favorable) — — — — 1 1 Net premiums earned excluding adjustments F $ 4,114 $ 1,247 $ 130 $ 2,628 $ 236 $ 8,355 P&C Combined ratio Loss and loss expense ratio A/E 60.7 % 57.2 % 318.4 % 52.9 % 48.8 % 56.5 % Policy acquisition cost and administrative expense ratio C/E 20.4 % 26.3 % (36.8) % 36.0 % 30.2 % 27.8 % P&C Combined ratio 81.1 % 83.5 % 281.6 % 88.9 % 79.0 % 84.3 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 61.5 % 53.3 % 70.6 % 49.4 % 49.9 % 56.3 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.2 % 26.3 % 8.9 % 36.1 % 30.0 % 27.2 % CAY P&C Combined ratio ex CATs 81.7 % 79.6 % 79.5 % 85.5 % 79.9 % 83.5 % Combined ratio Combined ratio 84.3 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 84.3 % Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above. 53 Table of Contents North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Corporate Total P&C Three Months Ended March 31, 2021 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 2,560 $ 819 $ 85 $ 1,263 $ 120 $ 9 $ 4,856 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (362) (240) (8) (50) (40) — (700) Reinstatement premiums collected (expensed) on catastrophe losses — (23) — — 5 — (18) Catastrophe losses, gross of related adjustments (362) (217) (8) (50) (45) — (682) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 127 40 2 25 7 (9) 192 Net premiums earned adjustments on PPD - unfavorable (favorable) — — (2) — — — (2) Expense adjustments - unfavorable (favorable) 3 — — — — — 3 PPD reinstatement premiums - unfavorable (favorable) — — — — 3 — 3 PPD, gross of related adjustments - favorable (unfavorable) 130 40 — 25 10 (9) 196 CAY loss and loss expense ex CATs B $ 2,328 $ 642 $ 77 $ 1,238 $ 85 $ — $ 4,370 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 768 $ 307 $ 15 $ 934 $ 53 $ 71 $ 2,148 Expense adjustments - favorable (unfavorable) (3) — — — — — (3) Policy acquisition costs and administrative expenses, adjusted D $ 765 $ 307 $ 15 $ 934 $ 53 $ 71 $ 2,145 Denominator Net premiums earned E $ 3,674 $ 1,184 $ 110 $ 2,478 $ 180 $ 7,626 Reinstatement premiums (collected) expensed on catastrophe losses — 23 — — (5) 18 Net premiums earned adjustments on PPD - unfavorable (favorable) — — (2) — — (2) PPD reinstatement premiums - unfavorable (favorable) — — — — 3 3 Net premiums earned excluding adjustments F $ 3,674 $ 1,207 $ 108 $ 2,478 $ 178 $ 7,645 P&C Combined ratio Loss and loss expense ratio A/E 69.7 % 69.2 % 77.5 % 51.0 % 66.9 % 63.7 % Policy acquisition cost and administrative expense ratio C/E 20.9 % 25.9 % 13.4 % 37.7 % 29.5 % 28.1 % P&C Combined ratio 90.6 % 95.1 % 90.9 % 88.7 % 96.4 % 91.8 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.4 % 53.2 % 71.2 % 49.9 % 48.3 % 57.2 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.8 % 25.4 % 13.5 % 37.7 % 29.7 % 28.0 % CAY P&C Combined ratio ex CATs 84.2 % 78.6 % 84.7 % 87.6 % 78.0 % 85.2 % Combined ratio Combined ratio 91.8 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 91.8 % Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above. 54 Table of Contents Amortization of Purchased Intangibles and Other Amortization Amortization expense related to purchased intangibles was $71 million and $72 million for the three months ended March 31, 2022 and 2021, respectively, and principally relates to the Chubb Corp acquisition. The following table presents, as of March 31, 2022, the estimated pre-tax amortization expense (benefit) of purchased intangibles, at current foreign currency exchange rates, for the second through fourth quarters of 2022 and for the next five years: Associated with the Chubb Corp Acquisition For the Years Ending December 31 (in millions of U.S. dollars) Agency distribution relationships and renewal rights Fair value adjustment on Unpaid losses and loss expenses Total (1) Other intangible assets (2) Total Amortization of purchased intangibles Second quarter of 2022 $ 49 $ (4) $ 45 $ 25 $ 70 Third quarter of 2022 49 (4) 45 25 70 Fourth quarter of 2022 49 (4) 45 25 70 2023 178 (7) 171 96 267 2024 160 (5) 155 90 245 2025 144 (6) 138 89 227 2026 130 (6) 124 86 210 2027 117 (7) 110 83 193 Total $ 876 $ (43) $ 833 $ 519 $ 1,352 (1) Recorded in Corporate. (2) Recorded in applicable segment(s) that acquired the intangible assets. Reduction of deferred tax liability associated with Other intangible assets At March 31, 2022, the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was $1,200 million. The following table presents as of March 31, 2022, the expected reduction to the deferred tax liability associated with the amortization of Other intangible assets, at current foreign currency exchange rates, for the second through fourth quarters of 2022 and for the next five years: For the Years Ending December 31 (in millions of U.S. dollars) Reduction to deferred tax liability associated with intangible assets Second quarter of 2022 $ 16 Third quarter of 2022 16 Fourth quarter of 2022 17 2023 61 2024 55 2025 52 2026 48 2027 44 Total $ 309 55 Table of Contents Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt The following table presents at March 31, 2022, the expected amortization expense of the fair value adjustment on acquired invested assets related to the Chubb Corp acquisition, at current foreign currency exchange rates, and the expected amortization benefit from the fair value adjustment on assumed long-term debt for the second through fourth quarters of 2022 and for the next five years: Amortization (expense) benefit of the fair value adjustment on For the Years Ending December 31 (in millions of U.S. dollars) Acquired invested assets (1) Assumed long-term debt (2) Second quarter of 2022 $ (19) $ 5 Third quarter of 2022 (17) 5 Fourth quarter of 2022 (16) 6 2023 (50) 21 2024 (9) 21 2025 — 21 2026 — 21 2027 — 21 Total $ (111) $ 121 (1) Recorded as a reduction to Net investment income in the Consolidated statements of operations. (2) Recorded as a reduction to Interest expense in the Consolidated statements of operations. The estimate of amortization expense of the fair value adjustment on acquired invested assets could vary based on current market conditions, bond calls, overall duration of the acquired investment portfolio, and foreign exchange. Net Investment Income Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Fixed maturities (1) $ 799 $ 840 Short-term investments 9 9 Other interest income 3 2 Equity securities 38 36 Other investments 19 23 Gross investment income (1) 868 910 Investment expenses (46) (47) Net investment income (1) $ 822 $ 863 (1) Includes amortization expense related to fair value adjustment of acquired invested assets related to the Chubb Corp acquisition $ (16) $ (26) Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation. Net investment income decreased 4.8 percent for the three months ended March 31, 2022, primarily due to lower reinvestment rates on new and reinvested fixed maturities. 56 Table of Contents For private equities where we own less than three percent, investment income is included within Net investment income in the table above. For private equities where we own more than three percent, investment income is included within Other income (expense) in the Consolidated statements of operations. Excluded from Net investment income is the mark-to-market movement for private equities, which is recorded within either Other income (expense) or Net realized gains (losses) based on our percentage of ownership. The total mark-to-market movement for private equities excluded from Net investment income was as follows: Three Months Ended March 31 (in millions of U.S. dollars) 2022 2021 Total mark-to-market gain on private equity, pre-tax $ 310 $ 438 Investments Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of A/A as rated by the independent investment rating services Standard and Poor’s (S&P)/Moody’s Investors Service (Moody’s) at March 31, 2022. The portfolio is externally managed by independent, professional investment managers and is broadly diversified across geographies, sectors, and issuers. Other investments principally comprise direct investments, investment funds, and limited partnerships. We hold no collateralized debt obligations in our investment portfolio, and we provide no credit default protection. We have long-standing global credit limits for our entire portfolio across the organization. Exposures are aggregated, monitored, and actively managed by our Global Credit Committee, comprising senior executives, including our Chief Financial Officer, our Chief Risk Officer, our Chief Investment Officer, and our Treasurer. We also have well-established, strict contractual investment rules requiring managers to maintain highly diversified exposures to individual issuers and closely monitor investment manager compliance with portfolio guidelines. The average duration of our fixed income securities, including the effect of options and swaps, was 4.2 years and 4.1 years at March 31, 2022 and December 31, 2021, respectively. We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately $4.3 billion at March 31, 2022. The following table shows the fair value and cost/amortized cost, net of valuation allowance, of our invested assets: March 31, 2022 December 31, 2021 (in millions of U.S. dollars) Fair Value Cost/ Amortized Cost, Net Fair Value Cost/ Amortized Cost, Net Fixed maturities available for sale $ 89,479 $ 91,499 $ 93,108 $ 90,479 Fixed maturities held to maturity 9,888 9,818 10,647 10,118 Short-term investments 3,407 3,408 3,146 3,147 Fixed income securities 102,774 104,725 106,901 103,744 Equity securities 3,596 3,596 4,782 4,782 Other investments 11,947 11,947 11,169 11,169 Total investments $ 118,317 $ 120,268 $ 122,852 $ 119,695 The fair value of our total investments decreased $4.5 billion during the three months ended March 31, 2022 due to unrealized losses on fixed maturities and share repurchases, partially offset by strong operating cash flows. 57 Table of Contents The following tables present the fair value of our fixed income securities at March 31, 2022 and December 31, 2021. The first table lists investments according to type and second according to S&P credit rating: March 31, 2022 December 31, 2021 (in millions of U.S. dollars, except for percentages) Fair Value % of Total Fair Value % of Total U.S. Treasury / Agency $ 3,276 3 % $ 3,458 3 % Corporate and asset-backed securities 39,604 39 % 41,264 39 % Mortgage-backed securities 21,489 21 % 22,292 21 % Municipal 9,023 9 % 9,650 9 % Non-U.S. 25,975 25 % 27,091 25 % Short-term investments 3,407 3 % 3,146 3 % Total $ 102,774 100 % $ 106,901 100 % AAA $ 15,029 15 % $ 15,364 14 % AA 33,592 33 % 35,179 33 % A 18,821 18 % 20,171 19 % BBB 16,820 16 % 17,362 16 % BB 9,065 9 % 9,084 8 % B 8,983 9 % 9,202 9 % Other 464 — % 539 1 % Total $ 102,774 100 % $ 106,901 100 % Corporate and asset-backed securities The following table presents our 10 largest global exposures to corporate bonds by fair value at March 31, 2022: (in millions of U.S. dollars) Fair Value Bank of America Corp $ 650 JP Morgan Chase & Co 571 Wells Fargo & Co 527 AT&T Inc 488 Comcast Corp 453 Verizon Communications Inc 451 Morgan Stanley 436 Citigroup Inc 384 Goldman Sachs Group Inc 365 Anheuser-Busch InBev SA/NV 315 Mortgage-backed securities The following table shows the fair value and amortized cost, net of valuation allowance, of our mortgage-backed securities: S&P Credit Rating Fair Value Amortized Cost, Net March 31, 2022 (in millions of U.S. dollars) AAA AA A BBB BB and below Total Total Agency residential mortgage-backed securities (RMBS) $ 85 $ 17,567 $ — $ — $ — $ 17,652 $ 18,270 Non-agency RMBS 429 44 62 45 5 585 615 Commercial mortgage-backed securities 2,810 263 164 11 4 3,252 3,315 Total mortgage-backed securities $ 3,324 $ 17,874 $ 226 $ 56 $ 9 $ 21,489 $ 22,200 58 Table of Contents Municipal As part of our overall investment strategy, we may invest in states, municipalities, and other political subdivisions fixed maturity securities (Municipal). We apply the same investment selection process described previously to our Municipal investments. The portfolio is highly diversified primarily in state general obligation bonds and essential service revenue bonds including education and utilities (water, power, and sewers). Non-U.S. Our exposure to the Euro results primarily from Chubb European Group SE which is headquartered in France and offers a broad range of coverages throughout the European Union, Central, and Eastern Europe. Chubb primarily invests in Euro denominated investments to support its local currency insurance obligations and required capital levels. Chubb’s local currency investment portfolios have strict contractual investment guidelines requiring managers to maintain a high quality and diversified portfolio to both sector and individual issuers. Investment portfolios are monitored daily to ensure investment manager compliance with portfolio guidelines. Our non-U.S. investment grade fixed income portfolios are currency-matched with the insurance liabilities of our non-U.S. operations. The average credit quality of our non-U.S. fixed income securities is A and 45 percent of our holdings are rated AAA or guaranteed by governments or quasi-government agencies. Within the context of these investment portfolios, our government and corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA—two percent, A—one percent, BBB—0.5 percent of the total portfolio) and are monitored daily via an internal compliance system. We manage our indirect exposure using the same credit rating based investment approach. Accordingly, we do not believe our indirect exposure is material. The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. government securities at March 31, 2022: (in millions of U.S. dollars) Fair Value Amortized Cost, Net Canada $ 957 $ 995 Republic of Korea 903 895 Province of Ontario 633 654 Federative Republic of Brazil 586 598 United Mexican States 571 595 Kingdom of Thailand 510 498 United Kingdom 487 497 Socialist Republic of Vietnam 470 343 Commonwealth of Australia 455 486 Province of Quebec 395 405 Other Non-U.S. Government Securities 5,079 5,196 Total $ 11,046 $ 11,162 59 Table of Contents The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. corporate securities at March 31, 2022: (in millions of U.S. dollars) Fair Value Amortized Cost, Net United Kingdom $ 2,337 $ 2,388 Canada 1,860 1,909 United States (1) 1,254 1,284 France 1,220 1,244 Australia 961 993 Japan 763 787 Germany 578 594 Switzerland 552 566 Netherlands 527 530 China 394 408 Other Non-U.S. Corporate Securities 4,483 4,603 Total $ 14,929 $ 15,306 (1) The countries that are listed in the non-U.S. corporate fixed income portfolio above represent the ultimate parent company's country of risk. Non-U.S. corporate securities could be issued by foreign subsidiaries of U.S. corporations. Below-investment grade corporate fixed income portfolio Below-investment grade securities have different characteristics than investment grade corporate debt securities. Risk of loss from default by the borrower is greater with below-investment grade securities. Below-investment grade securities are generally unsecured and are often subordinated to other creditors of the issuer. Also, issuers of below-investment grade securities usually have higher levels of debt and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than investment grade issuers. At March 31, 2022, our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 16 percent of our fixed income portfolio. Our below-investment grade and non-rated portfolio includes 1,700 issuers, with the greatest single exposure being $143 million. We manage high-yield bonds as a distinct and separate asset class from investment grade bonds. The allocation to high-yield bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our minimum rating for initial purchase is BB/B. Fourteen external investment managers are responsible for high-yield security selection and portfolio construction. Our high-yield managers have a conservative approach to credit selection and very low historical default experience. Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit as a percentage of high-yield allocation. We monitor position limits daily through an internal compliance system. Derivative and structured securities (e.g., credit default swaps and collateralized debt obligations) are not permitted in the high-yield portfolio. 60 Table of Contents Critical Accounting Estimates As of March 31, 2022, 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 2021 Form 10-K. Unpaid losses and loss expenses As an insurance and reinsurance company, we are required by applicable laws and regulations and GAAP to establish loss and loss expense reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of our policies and agreements with our insured and reinsured customers. With the exception of certain structured settlements, for which the timing and amount of future claim payments are reliably determinable, and certain reserves for unsettled claims, our loss reserves are not discounted for the time value of money. The following table presents a roll-forward of our unpaid losses and loss expenses: (in millions of U.S. dollars) Gross Losses Reinsurance Recoverable (1) Net Losses Balance at December 31, 2021 $ 72,943 $ 16,184 $ 56,759 Losses and loss expenses incurred 6,260 1,473 4,787 Losses and loss expenses paid (5,308) (947) (4,361) Other (including foreign exchange translation) (51) (64) 13 Balance at March 31, 2022 $ 73,844 $ 16,646 $ 57,198 (1) Net of valuation allowance for uncollectible reinsurance. The estimate of the liabilities includes provisions for claims that have been reported but are unpaid at the balance sheet date (case reserves) and for obligations on claims that have been incurred but not reported (IBNR) at the balance sheet date. IBNR may also include provisions to account for the possibility that reported claims may settle for amounts that differ from the established case reserves. Loss reserves also include an estimate of expenses associated with processing and settling unpaid claims (loss expenses). Refer to Note 6 to the Consolidated Financial Statements for a discussion on the changes in the loss reserves. Asbestos and Environmental (A&E) There was no significant A&E reserve activity during the three months ende d March 31, 2022. A&E reserves are included in Corporate. Refer to our 2021 Form 10-K for further information on our A&E exposures. Fair value measurements Accounting guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to unobservable data (Level 3 inputs). Level 2 includes inputs, other than quoted prices within Level 1, that are observable for assets or liabilities either directly or indirectly. Refer to Note 4 to the Consolidated Financial Statements for information on our fair value measurements. 61 Table of Contents Catastrophe Management We actively monitor and manage our catastrophe risk accumulation around the world from natural perils, including setting risk limits based on probable maximum loss (PML), and purchasing catastrophe reinsurance, to ensure sufficient liquidity and capital to meet the expectations of regulators, rating agencies and policyholders, and to provide shareholders with an appropriate risk-adjusted return. Chubb uses internal and external data together with sophisticated analytical, catastrophe loss and risk modeling techniques to ensure an appropriate understanding of risk, including diversification and correlation effects, across different product lines and territories. The table below presents our modeled pre-tax estimates of natural catastrophe PML, net of reinsurance, at March 31, 2022, and does not represent our expected catastrophe losses for any one year. Modeled Net Probable Maximum Loss (PML) Pre-tax Worldwide (1) U.S. Hurricane (2) California Earthquake (3) Annual Aggregate Annual Aggregate Single Occurrence (in millions of U.S. dollars, except for percentages) Chubb % of Total Shareholders’ Equity Chubb % of Total Shareholders’ Equity Chubb % of Total Shareholders’ Equity 1-in-10 $ 2,160 3.8 % $ 1,117 2.0 % $ 142 0.3 % 1-in-100 $ 4,513 8.0 % $ 2,889 5.1 % $ 1,303 2.3 % 1-in-250 $ 7,417 13.1 % $ 5,393 9.5 % $ 1,487 2.6 % (1) Worldwide aggregate is comprised of losses arising from tropical cyclones, convective storms, earthquakes, U.S. wildfires and inland floods, and excludes "non-modeled" perils such as man-made and other catastrophe risks including pandemic. (2) U.S. hurricane losses include losses from wind and storm-surge and exclude rainfall. (3) California earthquakes include the fire-following sub-peril. The PML for worldwide and key U.S. peril regions are based on our in-force portfolio at January 1, 2022, and reflect the April 1, 2022 reinsurance program (see Global Property Catastrophe Reinsurance Program section) as well as inuring reinsurance protection coverages. These estimates assume that reinsurance recoverable is fully collectible. 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 $2,889 million (or 5.1 percent of our total shareholders’ equity at March 31, 2022). Effective December 31, 2021, our worldwide PMLs include losses from U.S. wildfire and U.S. inland flood. The above estimates of Chubb’s loss profile are inherently uncertain for many reasons, including the following: • While the use of third-party modeling packages to simulate potential catastrophe losses is prevalent within the insurance industry, the models are reliant upon significant meteorology, seismology, and engineering assumptions to estimate catastrophe losses. In particular, modeled catastrophe events are not always a representation of actual events and ensuing additional loss potential; • There is no universal standard in the preparation of insured data for use in the models, the running of the modeling software and interpretation of loss output. These loss estimates do not represent our potential maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates; • The potential effects of climate change add to modeling complexity; and • Changing climate conditions could impact our exposure to natural catastrophe risks. Published studies by leading government, academic and professional organizations combined with extensive research by Chubb climate scientists reveal the potential for increases in the frequency and severity of key natural perils such as tropical cyclones, inland flood, and wildfire. To understand the potential impacts on the Chubb portfolio, we have conducted stress tests on our peak exposure zone, namely in the U.S., using parameters outlined by the Intergovernmental Panel on Climate Change (IPCC) Climate Change 2021 report. These parameters consider the impacts of climate change and the resulting climate peril impacts over a timescale relevant to our business. The tests are conducted by adjusting our baseline view of risk for the perils of hurricane, inland flood, and wildfire in the U.S. to reflect increases in frequency and severity across the modeled domains for each of these perils. Based on these tests against the Chubb portfolio we do not expect material impacts to our baseline PMLs from climate change through December 31, 2022. These tests reflect current exposures only and exclude potentially mitigating factors such as changes to building codes, public or private risk mitigation, regulation and public policy. Refer to Item 7 in our 2021 Form 10-K for more information on man-made and other catastrophes. 62 Table of Contents Global Property Catastrophe Reinsurance Program Chubb’s core property catastrophe reinsurance program provides protection against natural catastrophes impacting its primary property operations (i.e., excluding our Global Reinsurance and Life Insurance segments). We regularly review our reinsurance protection and corresponding property catastrophe exposures. This may or may not lead to the purchase of additional reinsurance prior to a program’s renewal date. In addition, prior to each renewal date, we consider how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and various other structuring considerations. Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations effective April 1, 2022, through March 31, 2023, with no material changes in coverage from the expiring program. The program consists of three layers in excess of losses retained by Chubb on a per occurrence basis. In addition, Chubb renewed its terrorism coverage (excluding nuclear, biological, chemical and radiation coverage, with an inclusion of coverage for biological and chemical coverage for personal lines) for the United States from April 1, 2022, through March 31, 2023 with the same limits and retention and percentage placed except that the majority of terrorism coverage is on an aggregate basis above our retentions without a reinstatement. Loss Location Layer of Loss Comments Notes United States (excluding Alaska and Hawaii) $0 million – $1.0 billion Losses retained by Chubb (a) United States (excluding Alaska and Hawaii) $1.0 billion – $1.15 billion All natural perils and terrorism (b) United States (excluding Alaska and Hawaii) $1.15 billion – $2.25 billion All natural perils and terrorism (c) United States (excluding Alaska and Hawaii) $2.25 billion – $3.5 billion All natural perils and terrorism (d) International (including Alaska and Hawaii) $0 million – $175 million Losses retained by Chubb (a) International (including Alaska and Hawaii) $175 million – $1.275 billion All natural perils and terrorism (c) Alaska, Hawaii, and Canada $1.275 billion – $2.525 billion All natural perils and terrorism (d) (a) Ultimate retention will depend upon the nature of the loss and the interplay between the underlying per risk programs and certain other catastrophe programs purchased by individual business units. These other catastrophe programs have the potential to reduce our effective retention below the stated levels. (b) These coverages are partially placed with Reinsurers. (c) These coverages are both part of the same Second layer within the Global Property Catastrophe Reinsurance Program and are fully placed with Reinsurers. (d) These coverages are both part of the same Third layer within the Global Property Catastrophe Reinsurance Program and are fully placed with Reinsurers. 63 Table of Contents Liquidity We anticipate that positive cash flows from operations (underwriting activities and investment income) should be sufficient to cover cash outflows under most loss scenarios for the near term. In addition to cash from operations, routine sales of investments, and financing arrangements, we have agreements with a third-party bank provider which implemented two international multi-currency notional cash pooling programs to enhance cash management efficiency during periods of short-term timing mismatches between expected inflows and outflows of cash by currency. The programs allow us to optimize investment income by avoiding portfolio disruption. Should the need arise, we generally have access to capital markets and to credit facilities with letter of credit capacity of $3.7 billion with a sub-limit of $1.9 billion for revolving credit. At March 31, 2022, our usage under these facilities was $1.3 billion in letters of credit. Our access to credit under these facilities is dependent on the ability of the banks that are a party to the facilities to meet their funding commitments. The facilities require that we maintain certain financial covenants, all of which we met at March 31, 2022. Should the existing credit providers on these facilities experience financial difficulty, we may be required to replace credit sources, possibly in a difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty accessing our credit facilities. The payment of dividends or other statutorily permissible distributions from our operating companies are subject to the laws and regulations applicable to each jurisdiction, as well as the need to maintain capital levels adequate to support the insurance and reinsurance operations, including financial strength ratings issued by independent rating agencies. During the three months ended March 31, 2022, 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 $1.0 billion and $740 million from its Bermuda subsidiaries during the three months ended March 31, 2022 and 2021, respectively. The U.S. insurance subsidiaries of Chubb INA Holdings Inc. (Chubb INA) may pay dividends, without prior regulatory approval, subject to restrictions set out in state law of the subsidiary’s domicile (or, if applicable, commercial domicile). Chubb INA’s international subsidiaries are also subject to insurance laws and regulations particular to the countries in which the subsidiaries operate. These laws and regulations sometimes include restrictions that limit the amount of dividends payable without prior approval of regulatory insurance authorities. Chubb Limited received no dividends from Chubb INA during the three months ended March 31, 2022 and 2021. Debt issued by Chubb INA is serviced by statutorily permissible distributions by Chubb INA’s insurance subsidiaries to Chubb INA as well as other group resources. Chubb INA received no dividends from its subsidiaries during the three months ended March 31, 2022 and 2021. Cash Flows Our sources of liquidity include cash from operations, routine sales of investments, and financing arrangements. The following is a discussion of our cash flows for the three months ended March 31, 2022 and 2021. Operating cash flows were $2.4 billion in the three months ended March 31, 2022, compared to $2.1 billion in the prior year period. The increase of $335 million is due to higher premiums collected reflecting premium growth, principally in our commercial lines, and lower taxes paid, partially offset by higher losses paid. Cash used for investing was $995 million in the three months ended March 31, 2022, compared to $1.3 billion in the prior year period, a decrease of $257 million. Cash used for investing in the current year included higher net sales of equity securities of $730 million, partially offset by higher private equity contributions, net of distributions received, of $241 million, and higher net purchases of fixed maturities of $95 million. In addition, cash used related to acquisitions of Huatai Group ownership interest was $113 million in 2022 compared to $65 million in 2021. Cash used for financing was $1.3 billion in the three months ended March 31, 2022, compared to $812 million in the prior year period, an increase of $490 million, principally from more shares repurchased in the current year. Both internal and external forces influence our financial condition, results of operations, and cash flows. Claim settlements, premium levels, and investment returns may be impacted by changing rates of inflation and other economic conditions. In many 64 Table of Contents cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to us, and the settlement of the liability for that loss. We use repurchase agreements as a low-cost funding alternative. At March 31, 2022, there were $1.4 billion in repurchase agreements outstanding with various maturities over the next seven months. Capital Resources Capital resources consist of funds deployed or available to be deployed to support our business operations. March 31 December 31 (in millions of U.S. dollars, except for ratios) 2022 2021 Short-term debt $ 1,474 $ 999 Long-term debt 14,585 15,169 Total financial debt 16,059 16,168 Trust preferred securities 308 308 Total shareholders’ equity 56,698 59,714 Total capitalization $ 73,065 $ 76,190 Ratio of financial debt to total capitalization 22.0 % 21.2 % Ratio of financial debt plus trust preferred securities to total capitalization 22.4 % 21.6 % The ratios of financial debt to total capitalization in the table above are higher at March 31, 2022 compared to December 31, 2021 from the decline in shareholders' equity, principally reflecting net unrealized depreciation on investments in the current period compared to net unrealized appreciation in 2021. Repurchase agreements are excluded from the table above and are disclosed separately from short-term debt in the Consolidated balance sheets. The repurchase agreements are collateralized borrowings where we maintain the right and ability to redeem the collateral on short notice, unlike short-term debt which comprises the current maturities of our long-term debt instruments. For the three months ended March 31, 2022, we repurchased $1.0 billion of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorization. At March 31, 2022, there were 35,880,387 Common Shares in treasury with a weighted-average cost of $158.85 per share, and $1.6 billion in share repurchase authorization remained through June 30, 2022. For the period April 1, 2022 through April 28, 2022, we repurchased 115,000 Common Shares for a total of $24 million in a series of open market transactions. At April 28, 2022, $1.6 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. Dividends We have paid dividends each quarter since we became a public company in 1993. Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by Chubb in U.S. dollars. Refer to Note 8 to the Consolidated Financial Statements for a discussion of our dividend methodology. At our May 2021 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.20 per share, or CHF 2.87 per share, calculated using the USD/CHF exchange rate as published in the Wall Street Journal on May 20, 2021, expected to be paid in four quarterly installments of $0.80 per share after the general meeting by way of a distribution from capital contribution reserves, transferred to free reserves for payment. The Board determines the record and payment dates at which the annual dividend may be paid until the date of the 2022 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. The four quarterly installments each of $0.80 per share were distributed by the Board as expected. The annual dividend approved in May 2021 represented a $0.08 per share increase ($0.02 per quarter) over the prior year dividend. 65 Table of Contents The following table represents dividends paid per Common Share to shareholders of record on each of the following dates: Shareholders of record as of: Dividends paid as of: December 17, 2021 January 7, 2022 $0.80 (CHF 0.74) March 18, 2022 April 8, 2022 $0.80 (CHF 0.74) Information provided in connection with outstanding debt of subsidiaries Chubb INA Holdings Inc. (Subsidiary Issuer) is an indirect 100 percent-owned and consolidated subsidiary of Chubb Limited (Parent Guarantor). The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer. The following table presents the condensed balance sheets of Chubb Limited and Chubb INA Holdings Inc., after elimination of investment in any non-guarantor subsidiary: Chubb Limited (Parent Guarantor) Chubb INA Holdings Inc. (Subsidiary Issuer) March 31 December 31 March 31 December 31 (in millions of U.S. dollars) 2022 2021 2022 2021 Assets Investments $ — $ — $ 150 $ 149 Cash 142 1 31 580 Due from parent guarantor/subsidiary issuer 2 2 732 348 Due from subsidiaries that are not issuers or guarantors 1,825 1,805 567 526 Other assets 8 16 2,197 1,667 Total assets $ 1,977 $ 1,824 $ 3,677 $ 3,270 Liabilities Due to parent guarantor/subsidiary issuer $ 732 $ 348 $ 2 $ 2 Due to subsidiaries that are not issuers or guarantors 325 241 2,130 1,647 Affiliated notional cash pooling programs — 8 — — Short-term debt — — 1,474 999 Long-term debt — — 14,585 15,169 Trust preferred securities — — 308 308 Other liabilities 350 363 1,845 1,803 Total liabilities 1,407 960 20,344 19,928 Total shareholders’ equity 570 864 (16,667) (16,658) Total liabilities and shareholders’ equity $ 1,977 $ 1,824 $ 3,677 $ 3,270 66 Table of Contents 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: Three Months Ended March 31, 2022 Chubb Limited (Parent Guarantor) Chubb INA Holdings Inc. (Subsidiary Issuer) (in millions of U.S. dollars) Net investment income (loss) $ 2 $ (1) Net realized gains (loss) 24 96 Administrative expenses 27 (28) Interest (income) expense (15) 138 Other (income) expense (13) 10 Income tax expense (benefit) 7 (13) Net income (loss) $ 20 $ (12) Comprehensive income (loss) $ 20 $ (14)