Chubb Ltd 10-Q

ITEM 1. Financial Statements CONSOLIDATED BALANCE SHEETS (Unaudited) Chubb Limited and Subsidiaries June 30 December 31 (in millions of U.S. dollars, except share and per share data) 2022 2021 Assets Investments Fixed maturities available for sale, at fair value, net of valuation allowance - $ 78 and $ 14 (amortized cost – $ 88,516 and $ 90,493 ) $ 82,069 $ 93,108 Fixed maturities held to maturity, at amortized cost, net of valuation allowance - $ 34 and $ 35 (fair value – $ 9,333 and $ 10,647 ) 9,532 10,118 Equity securities, at fair value 2,649 4,782 Short-term investments, at fair value (amortized cost – $ 3,433 and $ 3,147 ) 3,431 3,146 Other investments, at fair value 12,168 11,169 Total investments 109,849 122,323 Cash 7,122 1,659 Restricted cash 117 152 Securities lending collateral 1,658 1,831 Accrued investment income 829 821 Insurance and reinsurance balances receivable, net of valuation allowance - $ 50 and $ 46 12,758 11,322 Reinsurance recoverable on losses and loss expenses, net of valuation allowance - $ 341 and $ 329 17,777 17,366 Reinsurance recoverable on policy benefits 205 213 Deferred policy acquisition costs 5,602 5,513 Value of business acquired 221 236 Goodwill 15,045 15,213 Other intangible assets 5,272 5,455 Deferred tax assets 564 — Prepaid reinsurance premiums 3,356 3,028 Investments in partially-owned insurance companies 3,002 3,130 Other assets 12,274 11,792 Total assets $ 195,651 $ 200,054 Liabilities Unpaid losses and loss expenses $ 74,092 $ 72,943 Unearned premiums 20,386 19,101 Future policy benefits 5,940 5,947 Insurance and reinsurance balances payable 7,888 7,243 Securities lending payable 1,658 1,831 Accounts payable, accrued expenses, and other liabilities 14,516 15,004 Deferred tax liabilities — 389 Repurchase agreements 3,411 1,406 Short-term debt 1,474 999 Long-term debt 14,311 15,169 Trust preferred securities 308 308 Total liabilities 143,984 140,340 Commitments and contingencies (refer to Note 7) Shareholders’ equity Common Shares (CHF 24.15 par value; 459,555,714 and 474,021,114 shares issued; 418,474,087 and 426,572,612 shares outstanding) 10,666 10,985 Common Shares in treasury ( 41,081,627 and 47,448,502 shares) ( 6,794 ) ( 7,464 ) Additional paid-in capital 7,707 8,478 Retained earnings 48,363 47,365 Accumulated other comprehensive income (loss) (AOCI) ( 8,275 ) 350 Total shareholders’ equity 51,667 59,714 Total liabilities and shareholders’ equity $ 195,651 $ 200,054 See accompanying notes to the Consolidated Financial Statements 3 Table of Contents CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) Chubb Limited and Subsidiaries Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars, except per share data) 2022 2021 2022 2021 Revenues Net premiums written $ 10,302 $ 9,546 $ 19,501 $ 18,208 Increase in unearned premiums ( 745 ) ( 733 ) ( 1,198 ) ( 1,174 ) Net premiums earned 9,557 8,813 18,303 17,034 Net investment income 888 884 1,710 1,747 Net realized gains (losses) (includes $( 442 ), $ 12 , $( 578 ), and $ 36 reclassified from AOCI) ( 504 ) ( 33 ) ( 403 ) 854 Total revenues 9,941 9,664 19,610 19,635 Expenses Losses and loss expenses 5,408 5,006 10,195 10,059 Policy benefits 159 185 304 352 Policy acquisition costs 1,739 1,698 3,476 3,363 Administrative expenses 818 775 1,596 1,519 Interest expense 134 122 266 244 Other (income) expense 101 ( 777 ) ( 209 ) ( 1,267 ) Amortization of purchased intangibles 71 73 142 145 Cigna integration expenses 3 — 3 — Total expenses 8,433 7,082 15,773 14,415 Income before income tax 1,508 2,582 3,837 5,220 Income tax expense (includes $( 77 ), $( 6 ), $( 99 ), and $( 2 ) on unrealized gains and losses reclassified from AOCI) 293 317 648 655 Net income $ 1,215 $ 2,265 $ 3,189 $ 4,565 Other comprehensive income (loss) Unrealized appreciation (depreciation) $ ( 4,786 ) $ 706 $ ( 9,574 ) $ ( 1,587 ) Reclassification adjustment for net realized (gains) losses included in net income 442 ( 12 ) 578 ( 36 ) ( 4,344 ) 694 ( 8,996 ) ( 1,623 ) Change in: Cumulative foreign currency translation adjustment ( 777 ) 308 ( 710 ) 330 Postretirement benefit liability adjustment 5 ( 9 ) 24 ( 37 ) Other comprehensive income (loss), before income tax ( 5,116 ) 993 ( 9,682 ) ( 1,330 ) Income tax (expense) benefit related to OCI items 245 ( 129 ) 1,057 283 Other comprehensive income (loss) ( 4,871 ) 864 ( 8,625 ) ( 1,047 ) Comprehensive income (loss) $ ( 3,656 ) $ 3,129 $ ( 5,436 ) $ 3,518 Earnings per share Basic earnings per share $ 2.88 $ 5.09 $ 7.53 $ 10.20 Diluted earnings per share $ 2.86 $ 5.06 $ 7.46 $ 10.13 See accompanying notes to the Consolidated Financial Statements 4 Table of Contents CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Chubb Limited and Subsidiaries Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Common Shares Balance – beginning of period $ 10,666 $ 11,064 $ 10,985 $ 11,064 Cancellation of treasury shares — — ( 319 ) — Balance – end of period 10,666 11,064 10,666 11,064 Common Shares in treasury Balance – beginning of period ( 5,700 ) ( 3,901 ) ( 7,464 ) ( 3,644 ) Common Shares repurchased ( 1,129 ) ( 1,921 ) ( 2,130 ) ( 2,440 ) Cancellation of treasury shares — — 2,510 — Net shares issued under employee share-based compensation plans 35 50 290 312 Balance – end of period ( 6,794 ) ( 5,772 ) ( 6,794 ) ( 5,772 ) Additional paid-in capital Balance – beginning of period 7,988 9,318 8,478 9,815 Net shares issued under employee share-based compensation plans 4 5 ( 195 ) ( 182 ) Exercise of stock options ( 6 ) ( 6 ) ( 27 ) ( 30 ) Share-based compensation expense 69 81 139 147 Funding of dividends declared to Retained earnings ( 348 ) ( 352 ) ( 688 ) ( 704 ) Balance – end of period 7,707 9,046 7,707 9,046 Retained earnings Balance – beginning of period 47,148 41,637 47,365 39,337 Net income 1,215 2,265 3,189 4,565 Cancellation of treasury shares — — ( 2,191 ) — Funding of dividends declared from Additional paid-in capital 348 352 688 704 Dividends declared on Common Shares ( 348 ) ( 352 ) ( 688 ) ( 704 ) Balance – end of period 48,363 43,902 48,363 43,902 Accumulated other comprehensive income (loss) (AOCI) Net unrealized appreciation (depreciation) on investments Balance – beginning of period ( 1,584 ) 2,761 2,256 4,673 Change in period, before reclassification from AOCI, net of income tax (expense) benefit of $ 292 , $( 107 ), $ 1,126 , and $ 294 ( 4,494 ) 599 ( 8,448 ) ( 1,293 ) Amounts reclassified from AOCI, net of income tax expense of $( 77 ), $( 6 ), $( 99 ), and $( 2 ) 365 ( 18 ) 479 ( 38 ) Change in period, net of income tax (expense) benefit of $ 215 , $( 113 ), $ 1,027 , and $ 292 ( 4,129 ) 581 ( 7,969 ) ( 1,331 ) Balance – end of period ( 5,713 ) 3,342 ( 5,713 ) 3,342 Cumulative foreign currency translation adjustment Balance – beginning of period ( 2,075 ) ( 1,613 ) ( 2,146 ) ( 1,637 ) Change in period, net of income tax (expense) benefit of $ 31 , $( 18 ), $ 35 , and $( 16 ) ( 746 ) 290 ( 675 ) 314 Balance – end of period ( 2,821 ) ( 1,323 ) ( 2,821 ) ( 1,323 ) Postretirement benefit liability adjustment Balance – beginning of period 255 ( 190 ) 240 ( 167 ) Change in period, net of income tax (expense) benefit of $( 1 ), $ 2 , $( 5 ), and $ 7 4 ( 7 ) 19 ( 30 ) Balance – end of period 259 ( 197 ) 259 ( 197 ) Accumulated other comprehensive income (loss) ( 8,275 ) 1,822 ( 8,275 ) 1,822 Total shareholders’ equity $ 51,667 $ 60,062 $ 51,667 $ 60,062 See accompanying notes to the Consolidated Financial Statements 5 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Chubb Limited and Subsidiaries Six Months Ended June 30 (in millions of U.S. dollars) 2022 2021 Cash flows from operating activities Net income $ 3,189 $ 4,565 Adjustments to reconcile net income to net cash flows from operating activities Net realized (gains) losses 403 ( 854 ) Amortization of premiums/discounts on fixed maturities 148 147 Amortization of purchased intangibles 142 145 Equity in net income of partially-owned entities ( 290 ) ( 1,271 ) Deferred income taxes 110 ( 28 ) Unpaid losses and loss expenses 1,980 2,165 Unearned premiums 1,584 1,533 Future policy benefits 59 110 Insurance and reinsurance balances payable 670 796 Accounts payable, accrued expenses, and other liabilities 110 ( 630 ) Income taxes payable ( 83 ) 50 Insurance and reinsurance balances receivable ( 1,560 ) ( 1,180 ) Reinsurance recoverable ( 650 ) ( 47 ) Deferred policy acquisition costs ( 204 ) ( 198 ) Other ( 448 ) ( 76 ) Net cash flows from operating activities 5,160 5,227 Cash flows from investing activities Purchases of fixed maturities available for sale ( 13,474 ) ( 15,217 ) Purchases of fixed maturities held to maturity ( 380 ) ( 211 ) Purchases of equity securities ( 664 ) ( 642 ) Sales of fixed maturities available for sale 8,053 3,469 Sales of equity securities 2,445 614 Maturities and redemptions of fixed maturities available for sale 5,753 9,410 Maturities and redemptions of fixed maturities held to maturity 820 1,163 Net change in short-term investments ( 340 ) ( 120 ) Net derivative instruments settlements 117 ( 87 ) Private equity contributions ( 1,287 ) ( 873 ) Private equity distributions 448 640 Payment for Huatai Group interest ( 113 ) ( 65 ) Other ( 253 ) ( 106 ) Net cash flows from (used for) investing activities 1,125 ( 2,025 ) Cash flows from financing activities Dividends paid on Common Shares ( 681 ) ( 703 ) Common Shares repurchased ( 2,127 ) ( 2,440 ) Proceeds from issuance of repurchase agreements 3,002 550 Repayment of repurchase agreements ( 1,000 ) ( 550 ) Proceeds from share-based compensation plans 170 178 Policyholder contract deposits and other 238 268 Policyholder contract withdrawals and other ( 223 ) ( 245 ) Tax withholding payments for share-based compensation plans ( 98 ) ( 80 ) Net cash flows used for financing activities ( 719 ) ( 3,022 ) Effect of foreign currency rate changes on cash and restricted cash ( 138 ) ( 18 ) Net increase in cash and restricted cash 5,428 162 Cash and restricted cash – beginning of period 1,811 1,836 Cash and restricted cash – end of period $ 7,239 $ 1,998 Supplemental cash flow information Taxes paid $ 612 $ 631 Interest paid $ 290 $ 271 See accompanying notes to the Consolidated Financial Statements 6 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Chubb Limited and Subsidiaries 1. General a) Basis of presentation Chubb Limited is a holding company incorporated in Zurich, Switzerland. Chubb Limited, through its subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. Our results are reported through the following 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. Refer to Note 12 for additional information. The interim unaudited consolidated financial statements, which include the accounts of Chubb Limited and its subsidiaries (collectively, Chubb, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and, in the opinion of management, reflect all adjustments necessary for a fair statement of the results and financial position for such periods. All significant intercompany accounts and transactions, including internal reinsurance transactions, have been eliminated. The results of operations and cash flows for any interim period are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2021 Form 10-K. b) Restricted cash Restricted cash in the Consolidated balance sheets represents amounts held for the benefit of third parties and is legally or contractually restricted as to withdrawal or usage. Amounts include deposits with U.S. and non-U.S. regulatory authorities, trust funds set up for the benefit of ceding companies, and amounts pledged as collateral to meet financing arrangements. The following table provides a reconciliation of cash and restricted cash reported within the Consolidated balance sheets that total to the amounts shown in the Consolidated statements of cash flows: June 30 December 31 (in millions of U.S. dollars) 2022 2021 Cash (1) $ 7,122 $ 1,659 Restricted cash 117 152 Total cash and restricted cash shown in the Consolidated statements of cash flows $ 7,239 $ 1,811 (1) O n July 1, 2022, we paid $ 5.36 billion for the acquisition of Cigna's life and non-life insurance companies in six Asia-Pacific markets. Refer to Note 2 for additional information . c) Goodwill During the six months ended June 30, 2022, Goodwill decreased $ 168 million, primarily reflecting the impact of foreign exchange. d) Accounting guidance not yet adopted Targeted Improvements to the Accounting for Long-Duration Contracts In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments in this update require more frequent updating of assumptions and a standardized discount rate for the future policy benefit liability, a requirement to use the fair value measurement model for policies with market risk benefits, simplified amortization of deferred acquisition costs, and enhanced disclosures. This standard will be effective in the first quarter of 2023 with early adoption permitted. We are currently assessing the effect of adopting this guidance on our financial condition and results of operations. We will be better able to quantify the effect of adopting this standard as we progress in our implementation process and draw nearer to the date of adoption. 7 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 2. Acquisitions Cigna’s Life and Accident and Health (A&H) Insurance Business in Asia-Pacific Markets On July 1, 2022 , we completed the acquisition of the life and non-life insurance companies that house the personal accident, supplemental health, and life insurance business of Cigna in six Asia-Pacific markets. Chubb paid $ 5.36 billion in cash for the operations, which include Cigna's accident and health (A&H) and life business in Korea, Taiwan, New Zealand, Thailand, Hong Kong, and Indonesia. The reduction in the final purchase price from the original agreement reflects the impacts of rising interest rates and foreign exchange rates on acquired book value and other minor adjustments. This complementary strategic acquisition expands our presence and advances our long-term growth opportunity in the Asia-Pacific region. Effective July 1, 2022, the results of operations of this acquired business will be reported primarily in our Life Insurance segment and, to a lesser extent, our Overseas General Insurance segment. Huatai Group Chubb maintains a direct investment in Huatai Insurance Group Co., Ltd. (Huatai Group). Huatai Group is the parent company of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C), approximately 80 percent of Huatai Life Insurance Co., Ltd. (Huatai Life), and approximately 82 percent of Huatai Asset Management Co., Ltd. (collectively, Huatai). Huatai Group's insurance operations have more than 600 branches and approximately 19 million customers in China. As of June 30, 2022, Chubb's aggregate ownership interest in Huatai Group was approximately 47.3 percent. Chubb applies the equity method of accounting to its investment in Huatai Group by recording its share of net income or loss in Other (income) expense in the Consolidated statements of operations. During 2021, Chubb entered into agreements with several counterparties to purchase incremental ownership interests in Huatai Group totaling approximately 31.8 percent for approximately $ 2.2 billion. In connection with these agreements, Chubb paid approximately $ 1.1 billion in deposits. In January 2022, we paid $ 113 million relating to these agreements. Chubb entered into an agreement to acquire an approximate 7.1 percent ownership interest in Huatai Group for approximately $ 0.5 billion, which was paid as a deposit in 2020. The purchase of the additional ownership interests is contingent upon important conditions. As Chubb’s ownership interest increases, we will continue to evaluate the appropriateness of consolidation accounting in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation , and other applicable regulations. 8 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 3. Investments a) Fixed maturities June 30, 2022 Amortized Cost Valuation Allowance Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value (in millions of U.S. dollars) Available for sale U.S. Treasury / Agency $ 2,248 $ — $ 9 $ ( 80 ) $ 2,177 Non-U.S. 24,646 ( 32 ) 164 ( 1,961 ) 22,817 Corporate and asset-backed securities 38,166 ( 45 ) 59 ( 3,133 ) 35,047 Mortgage-backed securities 18,654 ( 1 ) 10 ( 1,328 ) 17,335 Municipal 4,802 — 18 ( 127 ) 4,693 $ 88,516 $ ( 78 ) $ 260 $ ( 6,629 ) $ 82,069 Amortized Cost Valuation Allowance Net Carrying Value Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value Held to maturity U.S. Treasury / Agency $ 1,298 $ — $ 1,298 $ 4 $ ( 29 ) $ 1,273 Non-U.S. 1,112 ( 4 ) 1,108 2 ( 39 ) 1,071 Corporate and asset-backed securities 1,844 ( 28 ) 1,816 3 ( 73 ) 1,746 Mortgage-backed securities 1,651 ( 1 ) 1,650 1 ( 53 ) 1,598 Municipal 3,661 ( 1 ) 3,660 8 ( 23 ) 3,645 $ 9,566 $ ( 34 ) $ 9,532 $ 18 $ ( 217 ) $ 9,333 December 31, 2021 Amortized Cost Valuation Allowance Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value (in millions of U.S. dollars) Available for sale U.S. Treasury / Agency $ 2,111 $ — $ 109 $ ( 6 ) $ 2,214 Non-U.S. 25,156 ( 8 ) 953 ( 272 ) 25,829 Corporate and asset-backed securities 37,844 ( 6 ) 1,410 ( 185 ) 39,063 Mortgage-backed securities 20,080 — 532 ( 123 ) 20,489 Municipal 5,302 — 216 ( 5 ) 5,513 $ 90,493 $ ( 14 ) $ 3,220 $ ( 591 ) $ 93,108 Amortized Cost Valuation Allowance Net Carrying Value Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value Held to maturity U.S. Treasury / Agency $ 1,213 $ — $ 1,213 $ 34 $ ( 3 ) $ 1,244 Non-U.S. 1,201 ( 5 ) 1,196 66 — 1,262 Corporate and asset-backed securities 2,032 ( 28 ) 2,004 197 — 2,201 Mortgage-backed securities 1,731 ( 1 ) 1,730 74 ( 1 ) 1,803 Municipal 3,976 ( 1 ) 3,975 162 — 4,137 $ 10,153 $ ( 35 ) $ 10,118 $ 533 $ ( 4 ) $ 10,647 9 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following table presents the amortized cost of our held to maturity securities according to S&P rating: June 30, 2022 December 31, 2021 (in millions of U.S. dollars, except for percentages) Amortized cost % of Total Amortized cost % of Total AAA $ 1,883 20 % $ 2,089 21 % AA 5,273 55 % 5,303 52 % A 1,740 18 % 1,964 19 % BBB 647 7 % 773 8 % BB 23 — % 23 — % Other — — % 1 — % Total $ 9,566 100 % $ 10,153 100 % The following table presents fixed maturities by contractual maturity: June 30, 2022 December 31, 2021 (in millions of U.S. dollars) Net Carrying Value Fair Value Net Carrying Value Fair Value Available for sale Due in 1 year or less $ 4,086 $ 4,086 $ 4,498 $ 4,498 Due after 1 year through 5 years 23,265 23,265 25,542 25,542 Due after 5 years through 10 years 25,273 25,273 28,207 28,207 Due after 10 years 12,110 12,110 14,372 14,372 64,734 64,734 72,619 72,619 Mortgage-backed securities 17,335 17,335 20,489 20,489 $ 82,069 $ 82,069 $ 93,108 $ 93,108 Held to maturity Due in 1 year or less $ 925 $ 921 $ 888 $ 894 Due after 1 year through 5 years 3,660 3,605 3,744 3,846 Due after 5 years through 10 years 1,844 1,823 2,242 2,349 Due after 10 years 1,453 1,386 1,514 1,755 7,882 7,735 8,388 8,844 Mortgage-backed securities 1,650 1,598 1,730 1,803 $ 9,532 $ 9,333 $ 10,118 $ 10,647 Expected maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties. b) Gross unrealized loss Fixed maturities in an unrealized loss position at June 30, 2022 and December 31, 2021 comprised both investment grade and below investment grade securities for which fair value declined, principally due to rising interest rates since the date of purchase. Refer to Note 3 in the 2021 Form 10-K for further information on factors considered in the evaluation of expected credit losses. 10 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following tables present, for Available for Sale (AFS) fixed maturities in an unrealized loss position (including securities on loan) that are not deemed to have expected credit losses, the aggregate fair value and gross unrealized loss by length of time the security has been in an unrealized loss position: 0 – 12 Months Over 12 Months Total June 30, 2022 Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss (in millions of U.S. dollars) U.S. Treasury / Agency $ 1,707 $ ( 70 ) $ 95 $ ( 10 ) $ 1,802 $ ( 80 ) Non-U.S. 15,832 ( 1,331 ) 2,578 ( 334 ) 18,410 ( 1,665 ) Corporate and asset-backed securities 27,714 ( 2,346 ) 1,395 ( 204 ) 29,109 ( 2,550 ) Mortgage-backed securities 15,048 ( 1,140 ) 1,294 ( 187 ) 16,342 ( 1,327 ) Municipal 2,643 ( 117 ) 10 ( 2 ) 2,653 ( 119 ) Total AFS fixed maturities $ 62,944 $ ( 5,004 ) $ 5,372 $ ( 737 ) $ 68,316 $ ( 5,741 ) 0 – 12 Months Over 12 Months Total December 31, 2021 Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss (in millions of U.S. dollars) U.S. Treasury / Agency $ 363 $ ( 3 ) $ 70 $ ( 3 ) $ 433 $ ( 6 ) Non-U.S. 6,917 ( 196 ) 1,093 ( 62 ) 8,010 ( 258 ) Corporate and asset-backed securities 9,449 ( 145 ) 806 ( 32 ) 10,255 ( 177 ) Mortgage-backed securities 8,086 ( 116 ) 190 ( 7 ) 8,276 ( 123 ) Municipal 226 ( 5 ) — — 226 ( 5 ) Total AFS fixed maturities $ 25,041 $ ( 465 ) $ 2,159 $ ( 104 ) $ 27,200 $ ( 569 ) During the three months ended June 30, 2022, the tax benefit on certain unrealized losses in our investment portfolio was reduced by a valuation allowance of $ 485 million necessary due to limitations on the utilization of these losses. As part of evaluating whether it was more likely than not that we could realize these losses, we considered realized gains, carryback capacity and available tax planning strategies. The following table presents a roll-forward of valuation allowance for expected credit losses on fixed maturities: Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Available for sale Valuation allowance for expected credit losses - beginning of period $ 27 $ 15 $ 14 $ 20 Provision for expected credit loss 61 1 78 5 Recovery of expected credit loss ( 10 ) ( 5 ) ( 14 ) ( 14 ) Valuation allowance for expected credit losses - end of period $ 78 $ 11 $ 78 $ 11 Held to maturity Valuation allowance for expected credit losses - beginning of period $ 34 $ 43 $ 35 $ 44 Provision for expected credit loss 1 — 1 — Recovery of expected credit loss ( 1 ) ( 6 ) ( 2 ) ( 7 ) Valuation allowance for expected credit losses - end of period $ 34 $ 37 $ 34 $ 37 11 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries c) Net realized gains (losses) The following table presents the components of Net realized gains (losses): Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Fixed maturities: Gross realized gains $ 362 $ 56 $ 401 $ 93 Gross realized losses ( 700 ) ( 53 ) ( 827 ) ( 72 ) Net (provision for) recovery of expected credit losses ( 51 ) 10 ( 63 ) 16 Impairment (1) ( 53 ) ( 1 ) ( 89 ) ( 1 ) Total fixed maturities ( 442 ) 12 ( 578 ) 36 Equity securities ( 263 ) 150 ( 207 ) 517 Other investments 4 62 59 100 Foreign exchange 268 ( 97 ) 343 ( 21 ) Investment and embedded derivative instruments ( 81 ) ( 91 ) ( 34 ) 18 Fair value adjustments on insurance derivative ( 143 ) ( 8 ) ( 108 ) 311 S&P futures 144 ( 64 ) 186 ( 108 ) Other derivative instruments 9 3 10 2 Other (2) — — ( 74 ) ( 1 ) Net realized gains (losses) (pre-tax) $ ( 504 ) $ ( 33 ) $ ( 403 ) $ 854 (1) Relates to certain securities we intended to sell and securities written to market entering default. (2) Other realized losses include impairment of assets related to Chubb's Russian entities. Realized gains and losses from Equity securities and Other investments from the table above include sales of securities and unrealized gains and losses from fair value changes as follows: Three Months Ended June 30 2022 2021 (in millions of U.S. dollars) Equity Securities Other Investments Total Equity Securities Other Investments Total Net gains (losses) recognized during the period $ ( 263 ) $ 4 $ ( 259 ) $ 150 $ 62 $ 212 Less: Net gains recognized from sales of securities 163 — 163 45 — 45 Unrealized gains (losses) recognized for securities still held at reporting date $ ( 426 ) $ 4 $ ( 422 ) $ 105 $ 62 $ 167 Six Months Ended June 30 2022 2021 (in millions of U.S. dollars) Equity Securities Other Investments Total Equity Securities Other Investments Total Net gains (losses) recognized during the period $ ( 207 ) $ 59 $ ( 148 ) $ 517 $ 100 $ 617 Less: Net gains recognized from sales of securities 418 — 418 90 — 90 Unrealized gains (losses) recognized for securities still held at reporting date $ ( 625 ) $ 59 $ ( 566 ) $ 427 $ 100 $ 527 12 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries d) Alternative investments Alternative investments include partially-owned investment companies, investment funds, and limited partnerships measured at fair value using net asset value (NAV) as a practical expedient. The following table presents, by investment category, the expected liquidation period, fair value, and maximum future funding commitments of alternative investments: Expected Liquidation Period of Underlying Assets June 30, 2022 December 31, 2021 (in millions of U.S. dollars) Fair Value Maximum Future Funding Commitments Fair Value Maximum Future Funding Commitments Financial 2 to 10 Years $ 1,144 $ 530 $ 1,096 $ 267 Real assets 2 to 13 Years 1,749 586 1,193 766 Distressed 2 to 8 Years 992 823 753 641 Private credit 3 to 8 Years 71 280 84 279 Traditional 2 to 14 Years 6,911 5,145 6,647 5,200 Vintage 1 to 2 Years 54 — 68 — Investment funds Not Applicable 317 — 267 — $ 11,238 $ 7,364 $ 10,108 $ 7,153 Included in all categories in the above table, except for Investment funds, are investments for which Chubb will never have the contractual option to redeem but receives distributions based on the liquidation of the underlying assets. Further, for all categories except for Investment funds, Chubb does not have the ability to sell or transfer the investments without the consent from the general partner of individual funds. Investment Category: Consists of investments in private equity funds: Financial targeting financial services companies, such as financial institutions and insurance services worldwide Real assets targeting investments related to hard physical assets, such as real estate, infrastructure and natural resources Distressed targeting distressed corporate debt/credit and equity opportunities in the U.S. Private credit targeting privately originated corporate debt investments, including senior secured loans and subordinated bonds Traditional employing traditional private equity investment strategies, such as buyout and growth equity globally Vintage funds where the initial fund term has expired Investment funds employ various investment strategies, such as long/short equity and arbitrage/distressed. Included in this category are investments for which Chubb has the option to redeem at agreed upon value as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investment fund investments may be redeemed monthly, quarterly, semi-annually, or annually. If Chubb wishes to redeem an investment fund investment, it must first determine if the investment fund is still in a lock-up period (a time when Chubb cannot redeem its investment so that the investment fund manager has time to build the portfolio). If the investment fund is no longer in its lock-up period, Chubb must then notify the investment fund manager of its intention to redeem by the notification date prescribed by the subscription agreement. Subsequent to notification, the investment fund can redeem Chubb’s investment within several months of the notification. Notice periods for redemption of the investment funds are up to 270 days. Chubb can redeem its investment funds without consent from the investment fund managers. e) Restricted assets Chubb is required to maintain assets on deposit with various regulatory authorities to support its insurance and reinsurance operations. These requirements are generally promulgated in the statutory regulations of the individual jurisdictions. The assets on deposit are available to settle insurance and reinsurance liabilities. Chubb is also required to restrict assets pledged under repurchase agreements, which represent Chubb's agreement to sell securities and repurchase them at a future date for a predetermined price. We use trust funds in certain large reinsurance transactions where the trust funds are set up for the benefit of the ceding companies and generally take the place of letter of credit (LOC) requirements. We have investments in segregated portfolios primarily to provide collateral or guarantees for LOC and derivative transactions. Included in restricted assets at June 13 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 30, 2022 and December 31, 2021 are investments, primarily fixed maturities, totaling $ 17,392 million and $ 17,092 million, respectively, and cash of $ 117 million and $ 152 million, respectively. The following table presents the components of restricted assets: June 30 December 31 (in millions of U.S. dollars) 2022 2021 Trust funds $ 7,927 $ 9,915 Deposits with U.S. regulatory authorities 2,317 2,402 Deposits with non-U.S. regulatory authorities 2,964 2,873 Assets pledged under repurchase agreements 3,582 1,420 Other pledged assets 719 634 Total $ 17,509 $ 17,244 4. Fair value measurements a) Fair value hierarchy Fair value of financial assets and financial liabilities is estimated based on the framework established in the fair value accounting guidance. The 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 and the lowest priority to unobservable data. The three levels of the hierarchy are as follows: • Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets; • Level 2 – Includes, among other items, inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves, quoted prices for similar assets and liabilities in active markets, and quoted prices for identical or similar assets and liabilities in markets that are not active; and • Level 3 – Inputs that are unobservable and reflect management’s judgments about assumptions that market participants would use in pricing an asset or liability. We categorize financial instruments within the valuation hierarchy at the balance sheet date based upon the lowest level of inputs that are significant to the fair value measurement. We use pricing services to obtain fair value measurements for the majority of our investment securities. Based on management’s understanding of the methodologies used, these pricing services only produce an estimate of fair value if there is observable market information that would allow them to make a fair value estimate. Based on our understanding of the market inputs used by the pricing services, all applicable investments have been valued in accordance with GAAP. We do not adjust prices obtained from pricing services. The following is a description of the valuation techniques and inputs used to determine fair values for financial instruments carried at fair value, as well as the general classification of such financial instruments pursuant to the valuation hierarchy. Fixed maturities We use pricing services to estimate fair value measurements for the majority of our fixed maturities. The pricing services use market quotations for fixed maturities that have quoted prices in active markets; such securities are classified within Level 1. For fixed maturities other than U.S. Treasury securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements using their pricing applications or pricing models, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Additional valuation factors that can be taken into account are nominal spreads, dollar basis, and liquidity adjustments. The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements, and sector news. The market inputs used in the pricing evaluation, listed in the approximate order of priority include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each input is dependent on the asset class and the market conditions. Given the asset class, the priority of the use of inputs may change, or some market inputs may not be relevant. Additionally, fixed maturities valuation is more subjective when markets are less liquid due to the lack of market based inputs (i.e., stale pricing) and may 14 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries require the use of models to be priced. The lack of market based inputs may increase the potential that an investment's estimated fair value is not reflective of the price at which an actual transaction would occur. The overwhelming majority of fixed maturities are classified within Level 2 because the most significant inputs used in the pricing techniques are observable. For a small number of fixed maturities, we obtain a single broker quote (typically from a market maker). Due to the disclaimers on the quotes that indicate that the price is indicative only, we include these fair value estimates in Level 3. Equity securities Equity securities with active markets are classified within Level 1 as fair values are based on quoted market prices. For equity securities in markets which are less active, fair values are based on market valuations and are classified within Level 2. Equity securities for which pricing is unobservable are classified within Level 3. Short-term investments Short-term investments, which comprise securities due to mature within one year of the date of purchase that are traded in active markets, are classified within Level 1 as fair values are based on quoted market prices. Securities such as commercial paper and discount notes are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity, and as such, their cost approximates fair value. Short-term investments for which pricing is unobservable are classified within Level 3. Other investments Fair values for the majority of Other investments including investments in partially-owned investment companies, investment funds, and limited partnerships are based on their respective NAV and are excluded from the fair value hierarchy table below. Certain of our long-duration contracts are supported by assets that do not qualify for separate account reporting under GAAP. These assets comprise mutual funds, classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Other investments also include equity securities, classified within Level 1 and fixed maturities, classified within Level 2, held in rabbi trusts maintained by Chubb for deferred compensation plans and supplemental retirement plans and are classified within the valuation hierarchy on the same basis as other equity securities and fixed maturities. Securities lending collateral The underlying assets included in Securities lending collateral in the Consolidated balance sheets are fixed maturities which are classified in the valuation hierarchy on the same basis as other fixed maturities. Excluded from the valuation hierarchy is the corresponding liability related to Chubb’s obligation to return the collateral plus interest as it is reported at contract value and not fair value in the Consolidated balance sheets. Investment derivative instruments Actively traded investment derivative instruments, including futures, options, and forward contracts are classified within Level 1 as fair values are based on quoted market prices. The fair value of cross-currency swaps and interest rate swaps is based on market valuations and is classified within Level 2. Investment derivative instruments are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. Other derivative instruments We maintain positions in exchange-traded equity futures contracts designed to limit exposure to a severe equity market decline, which would cause an increase in expected claims and, therefore, an increase in future policy benefit reserves for our guaranteed minimum death benefits (GMDB) and an increase in the fair value liability for our guaranteed living benefits (GLB) reinsurance business. Our positions in exchange-traded equity futures contracts are classified within Level 1. The fair value of the majority of the remaining positions in other derivative instruments is based on significant observable inputs including equity security and interest rate indices. Accordingly, these are classified within Level 2. Other derivative instruments based on unobservable inputs are classified within Level 3. Other derivative instruments are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. Separate account assets Separate account assets represent segregated funds where investment risks are borne by the customers, except to the extent of certain guarantees made by Chubb. Separate account assets comprise mutual funds classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Separate account assets also include fixed maturities classified within Level 2 because the most significant inputs used in the pricing techniques are observable. Excluded from the valuation hierarchy are the corresponding liabilities as they are reported at contract value and not fair value in the Consolidated balance sheets. Separate account assets are recorded in Other assets in the Consolidated balance sheets. 15 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Guaranteed living benefits The GLB arises from life reinsurance programs covering living benefit guarantees whereby we assume the risk of guaranteed minimum income benefits (GMIB) associated with variable annuity contracts. GLBs are recorded in Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. For GLB reinsurance, Chubb estimates fair value using an internal valuation model which includes current market information and estimates of policyholder behavior. All of the treaties contain claim limits, which are factored into the valuation model. The fair value depends on a number of factors, including interest rates, equity markets, credit risk, current account value, market volatility, expected annuitization rates and other policyholder behavior, and changes in policyholder mortality. Because of the significant use of unobservable inputs including policyholder behavior, GLB reinsurance is classified within Level 3. Financial instruments measured at fair value on a recurring basis, by valuation hierarchy June 30, 2022 Level 1 Level 2 Level 3 Total (in millions of U.S. dollars) Assets: Fixed maturities available for sale U.S. Treasury / Agency $ 1,657 $ 520 $ — $ 2,177 Non-U.S. — 22,268 549 22,817 Corporate and asset-backed securities — 32,786 2,261 35,047 Mortgage-backed securities — 17,316 19 17,335 Municipal — 4,693 — 4,693 1,657 77,583 2,829 82,069 Equity securities 2,568 — 81 2,649 Short-term investments 2,043 1,379 9 3,431 Other investments (1) 235 400 — 635 Securities lending collateral — 1,658 — 1,658 Investment derivative instruments 148 — — 148 Other derivative instruments 60 — — 60 Separate account assets 4,739 86 — 4,825 Total assets measured at fair value (1) $ 11,450 $ 81,106 $ 2,919 $ 95,475 Liabilities: Investment derivative instruments $ 163 $ — $ — $ 163 GLB (2) — — 832 832 Total liabilities measured at fair value $ 163 $ — $ 832 $ 995 (1) Excluded from the table above are partially-owned investments, investment funds, and limited partnerships of $ 11,238 million, policy loans of $ 245 million and other investments of $ 50 million at June 30, 2022 measured using NAV as a practical expedient. (2) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. 16 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries December 31, 2021 Level 1 Level 2 Level 3 Total (in millions of U.S. dollars) Assets: Fixed maturities available for sale U.S. Treasury / Agency $ 1,680 $ 534 $ — $ 2,214 Non-U.S. — 25,196 633 25,829 Corporate and asset-backed securities — 37,014 2,049 39,063 Mortgage-backed securities — 20,463 26 20,489 Municipal — 5,513 — 5,513 1,680 88,720 2,708 93,108 Equity securities 4,705 — 77 4,782 Short-term investments 1,744 1,395 7 3,146 Other investments (1) 286 481 — 767 Securities lending collateral — 1,831 — 1,831 Investment derivative instruments 58 — — 58 Separate account assets 5,461 99 — 5,560 Total assets measured at fair value (1) $ 13,934 $ 92,526 $ 2,792 $ 109,252 Liabilities: Investment derivative instruments $ 166 $ — $ — $ 166 Other derivative instruments 16 — — 16 GLB (2) — — 745 745 Total liabilities measured at fair value $ 182 $ — $ 745 $ 927 (1) Excluded from the table above are partially-owned investments, investment funds, and limited partnerships of $ 10,108 million, policy loans of $ 243 million and other investments of $ 51 million at December 31, 2021 measured using NAV as a practical expedient. (2) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Level 3 financial instruments The following table presents the significant unobservable inputs used in the Level 3 liability valuations. Excluded from the table below are inputs used to determine the fair value of Level 3 assets which are based on single broker quotes and contain no quantitative unobservable inputs developed by management. The majority of our fixed maturities classified as Level 3 used external pricing when markets are less liquid due to the lack of market inputs (i.e., stale pricing, broker quotes). (in millions of U.S. dollars, except for percentages) Fair Value Valuation Technique Significant Unobservable Inputs Ranges Weighted Average (1) June 30, 2022 December 31, 2021 GLB (1) $ 832 $ 745 Actuarial model Lapse rate 3 % – 31 % 4.0 % Annuitization rate 0 % – 100 % 4.4 % (1) The weighted-average lapse and annuitization rates are determined by weighting each treaty's rates by the GLB contracts fair value. The most significant policyholder behavior assumptions include lapse rates and the GMIB annuitization rates. Assumptions regarding lapse rates and GMIB annuitization rates differ by treaty, but the underlying methodologies to determine rates applied to each treaty are comparable. A lapse rate is the percentage of in-force policies surrendered in a given calendar year. All else equal, as lapse rates increase, ultimate claim payments will decrease. The GMIB annuitization rate is the percentage of policies for which the policyholder will elect to annuitize using the guaranteed benefit provided under the GMIB. All else equal, as GMIB annuitization rates increase, ultimate claim payments will increase, subject to treaty claim limits. 17 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The effect of changes in key market factors on assumed lapse and annuitization rates reflect emerging trends using data available from cedants. For treaties with limited experience, rates are established by blending the experience with data received from other ceding companies. The model and related assumptions are regularly re-evaluated by management and enhanced, as appropriate, based upon additional experience obtained related to policyholder behavior and availability of updated information such as market conditions, market participant assumptions, and demographics of in-force annuities. For the three and six months ended June 30, 2022 and 2021, no material refinements were made to the model. For detailed information on our lapse and annuitization rate assumptions, refer to Note 4 to the Consolidated Financial Statements of our 2021 Form 10-K. The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3): Assets Liabilities Three Months Ended June 30, 2022 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 618 $ 2,229 $ 20 $ 82 $ 4 $ 696 Transfers into Level 3 5 10 — — — — Transfers out of Level 3 — ( 43 ) — — — — Change in Net Unrealized Gains/Losses in OCI ( 41 ) ( 30 ) — — — — Net Realized Gains/Losses — — — — — 143 Purchases 26 179 — — 5 — Sales ( 19 ) ( 24 ) — ( 1 ) — — Settlements ( 40 ) ( 60 ) ( 1 ) — — — Other — — — — — ( 7 ) Balance, end of period $ 549 $ 2,261 $ 19 $ 81 $ 9 $ 832 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ — $ ( 1 ) $ — $ ( 1 ) $ — $ 143 Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ ( 41 ) $ ( 30 ) $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Assets Liabilities Three Months Ended June 30, 2021 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments Other investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 650 $ 1,612 $ 51 $ 75 $ 1 $ 10 $ 760 Transfers into Level 3 — 29 — — — — — Transfers out of Level 3 ( 10 ) ( 3 ) — — — — — Change in Net Unrealized Gains/Losses in OCI 5 6 — — — — — Net Realized Gains/Losses 3 6 — 5 — — 8 Purchases 54 240 1 4 2 — — Sales ( 9 ) ( 50 ) ( 1 ) ( 6 ) — — — Settlements ( 51 ) ( 152 ) ( 4 ) — — — — Other — — — — — — ( 8 ) Balance, end of period $ 642 $ 1,688 $ 47 $ 78 $ 3 $ 10 $ 760 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ — $ 6 $ — $ 4 $ — $ — $ 8 Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ 7 $ 6 $ — $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. 18 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Assets Liabilities Six Months Ended June 30, 2022 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 633 $ 2,049 $ 26 $ 77 $ 7 $ 745 Transfers into Level 3 23 39 — 1 — — Transfers out of Level 3 ( 23 ) ( 93 ) ( 5 ) — — — Change in Net Unrealized Gains/Losses in OCI ( 54 ) ( 52 ) — — — — Net Realized Gains/Losses ( 2 ) — — 4 — 108 Purchases 69 494 — 3 7 — Sales ( 25 ) ( 51 ) — ( 4 ) — — Settlements ( 72 ) ( 125 ) ( 2 ) — ( 5 ) — Other — — — — — ( 21 ) Balance, end of period $ 549 $ 2,261 $ 19 $ 81 $ 9 $ 832 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ ( 2 ) $ ( 1 ) $ — $ 3 $ — $ 108 Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ ( 54 ) $ ( 52 ) $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Assets Liabilities Six Months Ended June 30, 2021 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments Other investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 546 $ 1,573 $ 60 $ 73 $ 5 $ 10 $ 1,089 Transfers into Level 3 — 46 — — — — — Transfers out of Level 3 ( 10 ) ( 3 ) — — — — — Change in Net Unrealized Gains/Losses in OCI 13 12 — — — — — Net Realized Gains/Losses 3 3 — 7 — — ( 311 ) Purchases 175 409 1 7 3 — — Sales ( 16 ) ( 75 ) ( 1 ) ( 9 ) — — — Settlements ( 69 ) ( 277 ) ( 13 ) — ( 5 ) — — Other — — — — — — ( 18 ) Balance, end of period $ 642 $ 1,688 $ 47 $ 78 $ 3 $ 10 $ 760 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ — $ 3 $ — $ 6 $ — $ — $ ( 311 ) Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ 17 $ 17 $ — $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. b) Financial instruments disclosed, but not measured, at fair value Chubb uses various financial instruments in the normal course of its business. Our insurance contracts are excluded from fair value of financial instruments accounting guidance, and therefore, are not included in the amounts discussed below. The carrying values of cash, other assets, other liabilities, and other financial instruments not included below approximated their fair values. Refer to the 2021 Form 10-K for information on the fair value methods and assumptions for investments in partially-owned insurance companies, short-term and long-term debt, repurchase agreements, and trust-preferred securities. 19 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following tables present fair value, by valuation hierarchy, and carrying value of the financial instruments not measured at fair value: June 30, 2022 Fair Value Net Carrying Value (in millions of U.S. dollars) Level 1 Level 2 Level 3 Total Assets: Fixed maturities held to maturity U.S. Treasury / Agency $ 1,198 $ 75 $ — $ 1,273 $ 1,298 Non-U.S. — 1,071 — 1,071 1,108 Corporate and asset-backed securities — 1,746 — 1,746 1,816 Mortgage-backed securities — 1,598 — 1,598 1,650 Municipal — 3,645 — 3,645 3,660 Total assets $ 1,198 $ 8,135 $ — $ 9,333 $ 9,532 Liabilities: Repurchase agreements $ — $ 3,411 $ — $ 3,411 $ 3,411 Short-term debt — 1,473 — 1,473 1,474 Long-term debt — 13,122 — 13,122 14,311 Trust preferred securities — 395 — 395 308 Total liabilities $ — $ 18,401 $ — $ 18,401 $ 19,504 December 31, 2021 Fair Value Net Carrying Value (in millions of U.S. dollars) Level 1 Level 2 Level 3 Total Assets: Fixed maturities held to maturity U.S. Treasury / Agency $ 1,192 $ 52 $ — $ 1,244 $ 1,213 Non-U.S. — 1,262 — 1,262 1,196 Corporate and asset-backed securities — 2,201 — 2,201 2,004 Mortgage-backed securities — 1,803 — 1,803 1,730 Municipal — 4,137 — 4,137 3,975 Total assets $ 1,192 $ 9,455 $ — $ 10,647 $ 10,118 Liabilities: Repurchase agreements $ — $ 1,406 $ — $ 1,406 $ 1,406 Short-term debt — 1,019 — 1,019 999 Long-term debt — 16,848 — 16,848 15,169 Trust preferred securities — 460 — 460 308 Total liabilities $ — $ 19,733 $ — $ 19,733 $ 17,882 5. Reinsurance Reinsurance recoverable on ceded reinsurance June 30, 2022 December 31, 2021 (in millions of U.S. dollars) Net Reinsurance Recoverable (1) Valuation allowance Net Reinsurance Recoverable (1) Valuation allowance Reinsurance recoverable on unpaid losses and loss expenses $ 16,573 $ 283 $ 16,184 $ 271 Reinsurance recoverable on paid losses and loss expenses 1,204 58 1,182 58 Reinsurance recoverable on losses and loss expenses $ 17,777 $ 341 $ 17,366 $ 329 Reinsurance recoverable on policy benefits $ 205 $ 4 $ 213 $ 4 (1) Net of valuation allowance for uncollectible reinsurance. 20 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The increase in reinsurance recoverable on losses and loss expenses was primarily due to prior period development in certain lines and higher underlying ceded exposures due to premium growth. The following table presents a roll-forward of valuation allowance for uncollectible reinsurance related to Reinsurance recoverable on loss and loss expenses: Six Months Ended June 30 (in millions of U.S. dollars) 2022 2021 Valuation allowance for uncollectible reinsurance - beginning of period $ 329 $ 314 Provision for uncollectible reinsurance 17 9 Write-offs charged against the valuation allowance ( 4 ) ( 1 ) Foreign exchange revaluation ( 1 ) — Valuation allowance for uncollectible reinsurance - end of period $ 341 $ 322 For additional information, refer to Note 1 d) to the Consolidated Financial Statements of our 2021 Form 10-K. 6. Unpaid losses and loss expenses The following table presents a reconciliation of beginning and ending Unpaid losses and loss expenses: Six Months Ended June 30 (in millions of U.S. dollars) 2022 2021 Gross unpaid losses and loss expenses – beginning of period $ 72,943 $ 67,811 Reinsurance recoverable on unpaid losses – beginning of period (1) ( 16,184 ) ( 14,647 ) Net unpaid losses and loss expenses – beginning of period 56,759 53,164 Net losses and loss expenses incurred in respect of losses occurring in: Current year 10,846 10,546 Prior years (2) ( 651 ) ( 487 ) Total 10,195 10,059 Net losses and loss expenses paid in respect of losses occurring in: Current year 2,281 2,355 Prior years 6,566 5,531 Total 8,847 7,886 Foreign currency revaluation and other ( 588 ) 231 Net unpaid losses and loss expenses – end of period 57,519 55,568 Reinsurance recoverable on unpaid losses (1) 16,573 14,721 Gross unpaid losses and loss expenses – end of period $ 74,092 $ 70,289 (1) Net of valuation allowance for uncollectible reinsurance. (2) Relates to prior period loss reserve development only and excludes prior period development related to reinstatement premiums, expense adjustments and earned premiums totaling $ 164 million and $ 27 million for the six months ended June 30, 2022 and 2021, respectively. Gross and net unpaid losses and loss expenses increased $ 1,149 million and $ 760 million, respectively, for the six months ended June 30, 2022, driven by an increase in underlying exposure due to premium growth, partially offset by catastrophe loss payments, favorable prior period development, and favorable foreign exchange movement. 21 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Prior Period Development 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. Long-tail lines include lines such as workers' compensation, general liability, and financial lines; while short-tail lines include lines such as most property lines, energy, personal accident, and agriculture. The following table summarizes (favorable) and adverse PPD by segment: Three Months Ended June 30 Six Months Ended June 30 (in millions of U.S. dollars) Long-tail Short-tail Total Long-tail Short-tail Total 2022 North America Commercial P&C Insurance $ ( 266 ) $ ( 21 ) $ ( 287 ) $ ( 286 ) $ ( 109 ) $ ( 395 ) North America Personal P&C Insurance — ( 3 ) ( 3 ) — ( 54 ) ( 54 ) North America Agricultural Insurance — — — — ( 26 ) ( 26 ) Overseas General Insurance — ( 173 ) ( 173 ) — ( 233 ) ( 233 ) Global Reinsurance ( 7 ) 32 25 ( 7 ) 29 22 Corporate 191 — 191 199 — 199 Total $ ( 82 ) $ ( 165 ) $ ( 247 ) $ ( 94 ) $ ( 393 ) $ ( 487 ) 2021 North America Commercial P&C Insurance $ ( 96 ) $ ( 60 ) $ ( 156 ) $ ( 142 ) $ ( 141 ) $ ( 283 ) North America Personal P&C Insurance — ( 44 ) ( 44 ) — ( 84 ) ( 84 ) North America Agricultural Insurance — — — — ( 2 ) ( 2 ) Overseas General Insurance 5 ( 161 ) ( 156 ) 5 ( 186 ) ( 181 ) Global Reinsurance ( 22 ) 22 — ( 22 ) 15 ( 7 ) Corporate 88 — 88 97 — 97 Total $ ( 25 ) $ ( 243 ) $ ( 268 ) $ ( 62 ) $ ( 398 ) $ ( 460 ) Significant prior period movements by segment, principally driven by reserve reviews completed during each respective period, are discussed in more detail below. The remaining net development for long-tail lines and short-tail business for each segment and Corporate comprises numerous favorable and adverse movements across a number of lines and accident years, none of which is significant individually or in the aggregate. North America Commercial P&C Insurance 2022 For the three months ended June 30, 2022, net favorable PPD was $ 287 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes: • Net favorable development of $ 266 million in long-tail business, primarily from: • Net favorable development of $ 286 million in workers’ compensation lines. This included favorable development of $ 59 million related to our annual assessment of multi-claimant events, including industrial accidents, in the 2021 accident year. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or identification of significant losses. The remaining overall favorable development was mainly in accident years 2017 and prior, driven by lower than expected loss experience and related updates to loss development factors; • Net favorable development of $ 132 million in primary general liability portfolios, driven by lower than expected paid and reported case incurred activity in accident years 2017 and prior; and 22 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries • Net adverse development of $ 123 million in commercial automobile liability, including $ 90 million in our high deductible and excess automobile liability portfolios, driven by adverse reported loss experience, mainly impacting accident years 2018 through 2021. For the six months ended June 30, 2022, net favorable PPD was $ 395 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes: • Net favorable development of $ 286 million in long-tail business, primarily from: • Net favorable development of $ 328 million in workers’ compensation lines, mainly due to the same factors experienced for the three months ended June 30, 2022, as described above; • Net favorable development of $ 136 million in primary general liability portfolios, mainly due to the same factors experienced for the three months ended June 30, 2022, as described above; and • Net adverse development of $ 116 million in commercial automobile liability, mainly due to the same factors experienced for the three months ended June 30, 2022, as described above. • Net favorable development of $ 109 million in short-tail business, primarily from net favorable development of $ 78 million in A&H, in accident years 2020 and 2021, driven by lower than expected loss emergence. 2021 For the three months ended June 30, 2021, net favorable PPD was $ 156 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes: • Net favorable development of $ 96 million in long-tail business, primarily from: • Net favorable development of $ 137 million in workers’ compensation lines. This included favorable development of $ 36 million related to our annual assessment of multi-claimant events, including industrial accidents, in the 2020 accident year. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or identification of significant losses. The remaining overall favorable development was mainly in accident years 2016 and prior, driven by lower than expected loss experience and related updates to loss development factors; • Net favorable development of $ 45 million in general liability portfolios, driven by lower than expected paid and reported case incurred activity in accident years 2017 and prior, partly offset by higher than expected reported case incurred activity in accident years 2018 and 2019; and • Net adverse development of $ 76 million in commercial automobile liability, driven by adverse reported loss experience, mainly impacting accident years 2017 and 2019. • Net favorable development of $ 60 million in short-tail business, primarily from net favorable development of $ 41 million in surety, $ 35 million of which was due to lower than expected COVID-19 claim activity in accident year 2020. The remaining favorable development is predominantly driven by automobile, which experienced lower than expected claim development related to physical damage coverages in the 2020 accident year. For the six months ended June 30, 2021, net favorable PPD was $ 283 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes: • Net favorable development of $ 142 million in long-tail business, primarily from: • Net favorable development of $ 158 million in workers’ compensation lines, mainly due to the same factors experienced for the three months ended June 30, 2021, as described above; and • Net adverse development of $ 74 million in commercial automobile liability, due to the same factors experienced for the three months ended June 30, 2021. 23 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries • Net favorable development of $ 141 million in short-tail business, primarily from net favorable development of $ 89 million in surety, mainly in accident years 2018 through 2020, driven by lower than expected loss emergence. Overseas General Insurance 2022 For the three months ended June 30, 2022, net favorable PPD was $ 173 million across short-tail lines, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes: • Net favorable development of $ 53 million in A&H lines driven by favorable loss developments across all regions in accident years 2019 through 2021; • Net favorable development of $ 44 million in property lines mainly due to favorable loss development across most regions, favorable catastrophe development in accident years 2019 through 2021, specific case reductions, and salvage and subrogation recoveries in accident year 2018 and prior; and • Net favorable development of $ 41 million in personal lines mainly due to favorable loss frequency in Latin America and Asia Pacific automobile in accident years 2020 and 2021, UK and Asia Pacific high net worth homeowners in accident year 2021 and Asia Pacific and Continental Europe cell phones in accident year 2021. For the six months ended June 30, 2022, net favorable PPD was $ 233 million across a number of short-tail lines, which was the net of several underlying favorable and adverse movements, and was driven by the following principal changes: • Net favorable development of $ 75 million in A&H lines, net favorable development of $ 67 million in property lines, and net favorable development of $ 53 million in personal lines, mainly due to the same factors experienced for the three months ended June 30, 2022. 2021 For the three months ended June 30, 2021, net favorable PPD was $ 156 million, which was the net result of several underlying favorable and adverse movements, and was driven by the following principal changes: • Net favorable development of $ 161 million in short-tail business, primarily from: • Net favorable development of $ 50 million, in property lines in accident years 2019 and 2020, including a $ 21 million favorable reduction in COVID-19 estimates in accident year 2020. The remaining favorable development was across most regions in accident years 2019 and 2020; • Net favorable development of $ 49 million, in A&H lines, mainly due to favorable loss development across all regions in accident years 2019 and 2020; and • Net favorable development of $ 31 million in marine lines in accident years 2018 through 2020, driven by favorable loss development, specific claim reductions, and salvage and subrogation recoveries in Continental Europe and Asia Pacific. For the six months ended June 30, 2021, net favorable PPD in short-tail business was $ 186 million principally comprising favorable development of $ 58 million in property lines, and $ 55 million in A&H lines, due to the same factors experienced for the three months ended June 30, 2021. Global Reinsurance 2022 For the three and six months ended June 30, 2022, net adverse PPD was $ 25 million and $ 22 million, respectively, driven by adverse development of $ 32 million in property lines, mainly in accident years 2020 and 2021. The adverse development was driven by higher costs due to the current economic environment and increased litigation costs. 24 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Corporate 2022 For the three and six months ended June 30, 2022, net adverse PPD was $ 191 million and $ 199 million, respectively, driven by adverse development of $ 155 million for molestation claims, primarily from updated modeling and specific account reviews. The remainder of the adverse development was driven by increased claim costs on non-A&E runoff workers’ compensation exposures, and charges relating to run-off operating expenses incurred. 2021 For the three and six months ended June 30, 2021, net adverse PPD was $ 88 million and $ 97 million, respectively, driven by adverse development of $ 68 million for molestation claims. The remainder of the adverse development was driven by increased claim costs on non-A&E runoff workers’ compensation exposures, and charges relating to run-off operating expenses incurred. 7. Commitments, contingencies, and guarantees a) Derivative instruments Foreign currency management As a global company, Chubb entities transact business in multiple currencies. Our policy is to generally match assets, liabilities, and required capital for each individual jurisdiction in local currency, which would include the use of derivatives discussed below. We do not hedge our net asset non-U.S. dollar capital positions; however, we do consider economic hedging for planned cross border transactions. Derivative instruments employed Chubb maintains positions in derivative instruments such as futures, options, swaps, and foreign currency forward contracts for which the primary purposes are to manage duration and foreign currency exposure, yield enhancement, or to obtain an exposure to a particular financial market. Chubb also maintains positions in convertible securities that contain embedded derivatives. Investment derivative instruments are recorded in either Other assets (OA) or Accounts payable, accrued expenses, and other liabilities (AP); convertible bonds are recorded in Fixed maturities available for sale (FM AFS); and convertible equity securities are recorded in Equity securities (ES) in the Consolidated balance sheets. These are the most numerous and frequent derivative transactions. In addition, Chubb, from time to time, purchases to be announced mortgage-backed securities (TBAs) as part of its investing activities. Under reinsurance programs covering GLBs, Chubb assumes the risk of GLBs, principally GMIB, associated with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed minimum level of monthly income. The GLB reinsurance product meets the definition of a derivative instrument and is classified within AP. Chubb also generally maintains positions in exchange-traded equity futures contracts on equity market indices to limit equity exposure in the GMDB and GLB book of business. All derivative instruments are carried at fair value with changes in fair value recorded in Net realized gains (losses) in the Consolidated statements of operations. None of the derivative instruments are designated as hedges for accounting purposes. 25 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following table presents the balance sheet locations, fair values of derivative instruments in an asset or (liability) position, and notional values/payment provisions of our derivative instruments: June 30, 2022 December 31, 2021 Consolidated Balance Sheet Location Fair Value Notional Value/ Payment Provision Fair Value Notional Value/ Payment Provision (in millions of U.S. dollars) Derivative Asset Derivative (Liability) Derivative Asset Derivative (Liability) Investment and embedded derivative instruments: Foreign currency forward contracts OA / (AP) $ 67 $ ( 153 ) $ 4,973 $ 25 $ ( 139 ) $ 6,182 Options/Futures contracts on notes, bonds, and equities OA / (AP) 81 ( 10 ) 5,782 33 ( 27 ) 12,944 Convertible securities (1) FM AFS / ES 17 — 22 11 — 12 $ 165 $ ( 163 ) $ 10,777 $ 69 $ ( 166 ) $ 19,138 Other derivative instruments: Futures contracts on equities (2) OA / (AP) $ 39 $ — $ 772 $ — $ ( 16 ) $ 905 Other OA / (AP) 21 — 304 — — 3 $ 60 $ — $ 1,076 $ — $ ( 16 ) $ 908 GLB (3) (AP) $ — $ ( 832 ) $ 2,086 $ — $ ( 745 ) $ 1,432 (1) Includes fair value of embedded derivatives. (2) Related to GMDB and GLB book of business. (3) Note that the payment provision related to GLB is the net amount at risk. The concept of a notional value does not apply to the GLB reinsurance contracts. At June 30, 2022 and December 31, 2021, net derivative assets of $ 46 million and net derivative liabilities of $ 123 million, respectively, included in the table above were subject to a master netting agreement. The remaining derivatives included in the table above were not subject to a master netting agreement. The following table presents net realized gains (losses) related to derivative instrument activity in the Consolidated statements of operations: Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Investment and embedded derivative instruments: Foreign currency forward contracts $ ( 214 ) $ ( 6 ) $ ( 268 ) $ ( 22 ) All other futures contracts, options, and equities 134 ( 86 ) 236 39 Convertible securities (1) ( 1 ) 1 ( 2 ) 1 Total investment and embedded derivative instruments $ ( 81 ) $ ( 91 ) $ ( 34 ) $ 18 GLB and other derivative instruments: GLB $ ( 143 ) $ ( 8 ) $ ( 108 ) $ 311 Futures contracts on equities (2) 144 ( 64 ) 186 ( 108 ) Other 9 3 10 2 Total GLB and other derivative instruments $ 10 $ ( 69 ) $ 88 $ 205 $ ( 71 ) $ ( 160 ) $ 54 $ 223 (1) Includes embedded derivatives. (2) Related to GMDB and GLB book of business. b) Derivative instrument objectives (i) Foreign currency exposure management A foreign currency forward contract (forward) is an agreement between participants to exchange specific currencies at a future date. Chubb uses forwards to minimize the effect of fluctuating foreign currencies as discussed above. 26 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries (ii) Duration management and market exposure Futures Futures contracts give the holder the right and obligation to participate in market movements, determined by the index or underlying security on which the futures contract is based. Settlement is made daily in cash by an amount equal to the change in value of the futures contract times a multiplier that scales the size of the contract. Exchange-traded futures contracts on money market instruments, notes and bonds are used in fixed maturity portfolios to more efficiently manage duration, as substitutes for ownership of the money market instruments, bonds and notes without significantly increasing the risk in the portfolio. Investments in futures contracts may be made only to the extent that there are assets under management not otherwise committed. Exchange-traded equity futures contracts are used to limit exposure to a severe equity market decline, which would cause an increase in expected claims and therefore, an increase in future policy benefit reserves for GMDB and an increase in the fair value liability for GLB reinsurance business. Options An option contract conveys to the holder the right, but not the obligation, to purchase or sell a specified amount or value of an underlying security at a fixed price. Option contracts are used in our investment portfolio as protection against unexpected shifts in interest rates, which would affect the duration of the fixed maturity portfolio. By using options in the portfolio, the overall interest rate sensitivity of the portfolio can be reduced. Option contracts may also be used as an alternative to futures contracts in the synthetic strategy as described above. The price of an option is influenced by the underlying security, level of interest rates, expected volatility, time to expiration, and supply and demand. The credit risk associated with the above derivative financial instruments relates to the potential for non-performance by counterparties. Although non-performance is not anticipated, in order to minimize the risk of loss, management monitors the creditworthiness of its counterparties and obtains collateral. The performance of exchange-traded instruments is guaranteed by the exchange on which they trade. For non-exchange-traded instruments, the counterparties are principally banks which must meet certain criteria according to our investment guidelines. Other Included within Other are derivatives intended to reduce potential losses which may arise from certain exposures in our insurance business. The economic benefit provided by these derivatives is similar to purchased reinsurance. For example, Chubb may enter into crop derivative contracts to protect underwriting results in the event of a significant decline in commodity prices. (iii) Convertible security investments A convertible security is a debt instrument or preferred stock that can be converted into a predetermined amount of the issuer’s equity. The convertible option is an embedded derivative within the host instruments which are classified in the investment portfolio as either available for sale or as an equity security. Chubb purchases convertible securities for their total return and not specifically for the conversion feature. (iv) TBA By acquiring TBAs, we make a commitment to purchase a future issuance of mortgage-backed securities. For the period between purchase of the TBAs and issuance of the underlying security, we account for our position as a derivative in the Consolidated Financial Statements. Chubb purchases TBAs, from time to time, both for their total return and for the flexibility they provide related to our mortgage-backed security strategy. (v) GLB Under the GLB program, as the assuming entity, Chubb is obligated to provide coverage until the expiration or maturity of the underlying deferred annuity contracts or the expiry of the reinsurance treaty. The GLB is accounted for as a derivative and is recorded at fair value. Fair value represents management’s estimate of an exit price and thus includes a risk margin. We may recognize a realized loss for other changes in fair value due to adverse changes in the capital markets (e.g., declining interest rates and/or declining U.S. and/or international equity markets) and changes in actual or estimated future policyholder behavior (e.g., increased annuitization or decreased lapse rates) although we expect the business to be profitable. To mitigate adverse changes in the capital markets, we maintain positions in exchange-traded equity futures contracts, as noted under section "(ii) Futures" above. These futures increase in fair value when the S&P 500 index decreases (and decrease in fair 27 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries value when the S&P 500 index increases). The net impact of gains or losses related to changes in fair value of the GLB liability and the exchange-traded equity futures are included in Net realized gains (losses). c) Securities lending and secured borrowings Chubb participates in a securities lending program operated by a third-party banking institution whereby certain assets are loaned to qualified borrowers and from which we earn an incremental return. The securities lending collateral can only be drawn down by Chubb in the event that the institution borrowing the securities is in default under the lending agreement. An indemnification agreement with the lending agent protects us in the event a borrower becomes insolvent or fails to return any of the securities on loan. The collateral is recorded in Securities lending collateral and the liability is recorded in Securities lending payable in the Consolidated balance sheets. The following table presents the carrying value of collateral held under securities lending agreements by investment category and remaining contractual maturity of the underlying agreements: Remaining contractual maturity June 30, 2022 December 31, 2021 (in millions of U.S. dollars) Overnight and Continuous Collateral held under securities lending agreements: Cash $ 914 $ 931 U.S. Treasury / Agency 131 128 Non-U.S. 577 752 Corporate and asset-backed securities 33 12 Mortgage-backed securities — 1 Equity securities 3 7 $ 1,658 $ 1,831 Gross amount of recognized liability for securities lending payable $ 1,658 $ 1,831 At June 30, 2022 and December 31, 2021, our repurchase agreement obligations of $ 3,411 million and $ 1,406 million, respectively, were fully collateralized. In contrast to securities lending programs, the use of cash received is not restricted for the repurchase obligations. The fair value of the underlying securities sold remains in Fixed maturities available for sale, and the repurchase agreement obligation is recorded in Repurchase agreements in the Consolidated balance sheets. The following table presents the carrying value of collateral pledged under repurchase agreements by investment category and remaining contractual maturity of the underlying agreements: Remaining contractual maturity June 30, 2022 December 31, 2021 30-90 Days Greater than 90 Days Total 30-90 Days Greater than 90 Days Total (in millions of U.S. dollars) Collateral pledged under repurchase agreements: Cash $ 21 $ 24 $ 45 $ — $ 29 $ 29 U.S. Treasury / Agency 104 — 104 103 — 103 Corporate securities 8 — 8 — — $ — Mortgage-backed securities 1,521 1,904 3,425 — 1,288 1,288 $ 1,654 $ 1,928 $ 3,582 $ 103 $ 1,317 $ 1,420 Gross amount of recognized liabilities for repurchase agreements $ 3,411 $ 1,406 Difference (1) $ 171 $ 14 (1) Per the repurchase agreements, the amount of collateral posted is required to exceed the amount of gross liability. 28 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Potential risks exist in our secured borrowing transactions due to market conditions and counterparty exposure. With collateral that we pledge, there is a risk that the collateral may not be returned at the expiration of the agreement. If the counterparty fails to return the collateral, Chubb will have free use of the borrowed funds until our collateral is returned. In addition, we may encounter the risk that Chubb may not be able to renew outstanding borrowings with a new term or with an existing counterparty due to market conditions including a decrease in demand as well as more restrictive terms from banks due to increased regulatory and capital constraints. Should this condition occur, Chubb may seek alternative borrowing sources or reduce borrowings. Additionally, increased margins and collateral requirements due to market conditions would increase our restricted assets as we are required to provide additional collateral to support the transaction. d) Fixed maturities At June 30, 2022, and December 31, 2021, commitments to purchase fixed income securities over the next several years were $ 632 million and $ 771 million, respectively. e) Other investments At June 30, 2022, included in Other investments in the Consolidated balance sheet are investments in limited partnerships and partially-owned investment companies with a carrying value of $ 10.9 billion. In connection with these investments, we have commitments that may require funding of up to $ 7.4 billion over the next several years. At December 31, 2021, these investments had a carrying value of $ 9.8 billion with a commitment that may require funding of up to $ 7.2 billion. f) Income taxes At June 30, 2022, $ 58 million of unrecognized tax benefits remain out standing. It is reasonably possible that, over the next twelve months, the amount of unrecognized tax benefits may change resulting from the re-evaluation of unrecognized tax benefits arising from examinations by taxing authorities, settlements and the lapses of statutes of limitations. With few exceptions, Chubb is no longer subject to income tax examinations for years before 2012 . g) Legal proceedings Our insurance subsidiaries are subject to claims litigation involving disputed interpretations of policy coverages and, in some jurisdictions, direct actions by allegedly-injured persons seeking damages from policyholders. These lawsuits, involving claims on policies issued by our subsidiaries which are typical to the insurance industry in general and in the normal course of business, are considered in our loss and loss expense reserves. In addition to claims litigation, we are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance policies. This category of business litigation typically involves, among other things, allegations of underwriting errors or misconduct, employment claims, regulatory activity, or disputes arising from our business ventures. In the opinion of management, our ultimate liability for these matters could be, but we believe is not likely to be, material to our consolidated financial condition and results of operations. h) Lease commitments At June 30, 2022, and December 31, 2021, the right-of-use asset was $ 433 million and $ 445 million, respectively, recorded within Other assets and the lease liability was $ 461 million and $ 484 million, respectively, recorded within Accounts payable, accrued expenses, and other liabilities on the Consolidated balance sheets. These leases consist principally of real estate operating leases that are amortized on a straight-line basis over the term of the lease, which expire at various dates. 8. Shareholders’ equity All of Chubb’s Common Shares are authorized under Swiss corporate law. Though the par value of Common Shares is stated in Swiss francs, Chubb continues to use U.S. dollars as its reporting currency for preparing the Consolidated Financial statements. Under Swiss corporate law, dividends, including distributions from legal reserves or through a reduction in par value (par value reduction), must be stated in Swiss francs though dividend payments are made by Chubb in U.S. dollars. At June 30, 2022, our Common Shares had a par value of CHF 24.15 per share. At our May 2022 annual general meeting, our shareholders approved an annual dividend for the following year of up to $ 3.32 per share, expected to be paid in four quarterly installments of $ 0.83 per share after the general meeting by way of distribution from capital contribution reserves, transferred to free reserves for payment. The Board of Directors (Board) will determine the record and payment dates at which the annual dividend may be paid until the date of the 2023 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. 29 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries At our May 2021 and 2020 annual general meetings, our shareholders approved annual dividends for the following year of up to $ 3.20 per share and $ 3.12 per share, respectively, which were paid in four quarterly installments of $ 0.80 per share and $ 0.78 per share, respectively, at dates determined by the Board after the annual general meetings by way of a distribution from capital contribution reserves, transferred to free reserves for payment. The following table presents dividend distributions per Common Share in Swiss francs (CHF) and U.S. dollars (USD): Three Months Ended Six Months Ended June 30 June 30 2022 2021 2022 2021 CHF USD CHF USD CHF USD CHF USD Total dividend distributions per common share 0.80 $ 0.83 0.71 $ 0.80 1.54 $ 1.63 1.41 $ 1.58 Increases in Common Shares in treasury are due to open market repurchases of Common Shares and the surrender of Common Shares to satisfy tax withholding obligations in connection with the vesting of restricted stock and the forfeiture of unvested restricted stock. Decreases in Common Shares in treasury are principally due to grants of restricted stock, exercises of stock options, purchases under the Employee Stock Purchase Plan (ESPP), and share cancellations. At the Chubb Limited Extraordinary General Meeting of Shareholders, held on November 3, 2021, shareholders approved the cancellation of 14,465,400 shares repurchased under our share repurchase program during the first six months of 2021. The capital reduction by cancellation of shares was subject to publication requirements and a two-month waiting period in accordance with Swiss law and became effective on January 17, 2022. During the six months ended June 30, 2022, 10,346,200 shares were repurchased, 14,465,400 shares were canceled, and 2,247,675 net shares were issued under employee share-based compensation plans. At June 30, 2022, 41,081,627 Common Shares remain in treasury. Chubb Limited securities repurchase authorizations The Board has authorized share repurchase programs as follows: • $ 1.5 billion of Chubb Common Shares from November 19, 2020 through December 31, 2021; • $ 1.0 billion increase to the November 2020 share repurchase program to a total of $ 2.5 billion in February 2021, effective through December 31, 2021; • One-time incremental share repurchase program of $ 5.0 billion of Chubb Common Shares from July 19, 2021 through June 30, 2022; and • $ 2.5 billion of Chubb Common Shares from May 19, 2022 through June 30, 2023. The following table presents repurchases of Chubb's Common Shares conducted in a series of open market transactions under the Board authorizations: Three Months Ended Six Months Ended July 1, 2022 through July 28, 2022 June 30 June 30 (in millions of U.S. dollars, except share data) 2022 2021 2022 2021 Number of shares repurchased 5,476,300 11,355,400 10,346,200 14,465,400 1,513,728 Cost of shares repurchased $ 1,129 $ 1,921 $ 2,130 $ 2,440 $ 281 Repurchase authorization remaining at end of period (1) $ 2,500 $ 65 $ 2,500 $ 65 $ 2,220 (1) As of June 30, 2022, $ 522 million expired under the July 2021 $ 5.0 billion share repurchase authorization. 9. Share-based compensation The Chubb Limited 2016 Long-Term Incentive Plan, as amended and restated (the Amended 2016 LTIP), permits grants of both incentive and non-qualified stock options principally at an option price per share equal to the grant date fair value of Chubb's Common Shares. Stock options are generally granted with a 3 -year vesting period and a 10 -year term. Stock options typically vest in equal annual installments over the respective vesting period, which is also the requisite service period. On February 24, 2022, Chubb granted 1,699,554 stock options with a weighted-average grant date fair value of $ 35.21 each. The fair value of the options issued is estimated on the grant date using the Black-Scholes option pricing model. 30 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The Amended 2016 LTIP also permits grants of service-based restricted stock and restricted stock units as well as performance-based restricted stock awards. Chubb generally grants service-based restricted stock and restricted stock units with a 4 -year vesting period, based on a graded vesting schedule. The performance-based restricted stock awards granted comprise target awards and premium awards that cliff vest at the end of a 3 -year performance period based on both tangible book value (shareholders' equity less goodwill and intangible assets, net of tax) per share growth and P&C combined ratio compared to a defined group of peer companies. Premium awards are subject to an additional vesting provision based on total shareholder return compared to our peer group. The restricted stock is principally granted at market close price on the grant date. On February 24, 2022, Chubb granted 807,194 service-based restricted stock awards, 295,301 service-based restricted stock units, and 294,229 performance-based stock awards to employees and officers with a grant date fair value of $ 199.03 each. Each restricted stock unit represents our obligation to deliver to the holder one Common Share upon vesting. 10. Postretirement benefits The components of net pension and other postretirement benefit costs (benefits) reflected in Net income in the Consolidated statements of operations were as follows: Pension Benefit Plans Other Postretirement Benefit Plans 2022 2021 2022 2021 Three Months Ended June 30 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans (in millions of U.S. dollars) Service cost $ — $ 1 $ — $ 1 $ — $ — Non-service cost (benefit): Interest cost 22 6 17 4 1 — Expected return on plan assets ( 71 ) ( 11 ) ( 63 ) ( 11 ) ( 1 ) — Amortization of net actuarial loss — — — 1 — — Amortization of prior service cost — — — — — ( 6 ) Settlements — — — — — — Total non-service cost (benefit) ( 49 ) ( 5 ) ( 46 ) ( 6 ) — ( 6 ) Net periodic benefit cost (benefit) $ ( 49 ) $ ( 4 ) $ ( 46 ) $ ( 5 ) $ — $ ( 6 ) Pension Benefit Plans Other Postretirement Benefit Plans 2022 2021 2022 2021 Six Months Ended June 30 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans (in millions of U.S. dollars) Service cost $ — $ 2 $ — $ 2 $ — $ — Non-service cost (benefit): Interest cost 43 12 35 9 1 — Expected return on plan assets ( 142 ) ( 22 ) ( 127 ) ( 22 ) ( 1 ) — Amortization of net actuarial loss — — — 2 — — Amortization of prior service cost — — — — — ( 26 ) Settlements — — — — — — Total non-service cost (benefit) ( 99 ) ( 10 ) ( 92 ) ( 11 ) — ( 26 ) Net periodic benefit cost (benefit) $ ( 99 ) $ ( 8 ) $ ( 92 ) $ ( 9 ) $ — $ ( 26 ) 31 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The line items in which the service cost and non-service cost (benefit) components of net periodic benefit cost (benefit) are included in the Consolidated statements of operations were as follows: Pension Benefit Plans Other Postretirement Benefit Plans Three Months Ended June 30 2022 2021 2022 2021 (in millions of U.S. dollars) Service cost: Losses and loss expenses $ — $ — $ — $ — Administrative expenses 1 1 — — Total service cost 1 1 — — Non-service cost (benefit): Losses and loss expenses ( 5 ) ( 4 ) — ( 1 ) Administrative expenses ( 49 ) ( 48 ) — ( 5 ) Total non-service cost (benefit) ( 54 ) ( 52 ) — ( 6 ) Net periodic benefit cost (benefit) $ ( 53 ) $ ( 51 ) $ — $ ( 6 ) Pension Benefit Plans Other Postretirement Benefit Plans Six Months Ended June 30 2022 2021 2022 2021 (in millions of U.S. dollars) Service cost: Losses and loss expenses $ — $ — $ — $ — Administrative expenses 2 2 — — Total service cost 2 2 — — Non-service cost (benefit): Losses and loss expenses ( 10 ) ( 9 ) — ( 3 ) Administrative expenses ( 99 ) ( 94 ) — ( 23 ) Total non-service cost (benefit) ( 109 ) ( 103 ) — ( 26 ) Net periodic benefit cost (benefit) $ ( 107 ) $ ( 101 ) $ — $ ( 26 ) 11. Other income and expense Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Equity in net income (loss) of partially-owned entities (1) $ ( 71 ) $ 774 $ 290 $ 1,271 Gains (losses) from fair value changes in separate account assets (2) ( 18 ) 15 ( 49 ) 19 Federal excise and capital taxes ( 5 ) ( 5 ) ( 9 ) ( 10 ) Other ( 7 ) ( 7 ) ( 23 ) ( 13 ) Total $ ( 101 ) $ 777 $ 209 $ 1,267 (1) Equity in net income (loss) of partially-owned entities principally comprises market-to-market gain (loss) on private equities where we own more than three percent of $( 134 ) million and $ 121 million for the three and six months ended June 30, 2022, respectively, and $ 674 million and $ 1,074 million, respectively, for the prior year periods. This line item also includes net income of $ 15 million and $ 55 million attributable to our investments in Huatai (Huatai Group, Huatai P&C, and Huatai Life) for the three and six months ended June 30, 2022, respectively, compared to $ 49 million and $ 98 million, respectively, for the prior year periods. (2) Related to gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. 32 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Other income and expense includes equity in net income of partially-owned entities, which includes our share of net income or loss, both underlying operating income and mark-to-market movement, related to partially-owned investment companies (private equity) and partially-owned insurance companies. Also included in Other income and expense are gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. The offsetting movement in the separate account liabilities is included in Policy benefits in the Consolidated statements of operations. Certain federal excise and capital taxes incurred as a result of capital management initiatives are included in Other income and expense as these are considered capital transactions and are excluded from underwriting results. Bad debt expense for uncollectible premiums is also included in Other income and expense. 12. Segment information Chubb operates 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. Corporate results primarily include income and expenses not attributable to reportable segments and losses and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-off exposures. Management uses underwriting income (loss) as the basis for segment performance. Chubb calculates underwriting income (loss) by subtracting Losses and loss expenses, Policy benefits, Policy acquisition costs, and Administrative expenses from Net premiums earned. Segment income (loss) includes underwriting income (loss), net investment income (loss), and other operating income and expense items such as each segment's share of the operating income (loss) related to partially-owned entities and miscellaneous income and expense items for which the segments are held accountable. Our main measure of segment performance is Segment income (loss), which also includes amortization of purchased intangibles acquired by the segment. We determined that this definition of segment income (loss) is appropriate and aligns with how the business is managed. We continue to evaluate our segments as our business continues to evolve and may further refine our segments and segment income (loss) measures. Revenue and expenses managed at the corporate level, including net realized gains (losses), interest expense, Cigna integration expenses, and income tax are reported within Corporate. Cigna integration expenses are one-time costs that are directly attributable to third-party consulting fees and other professional and legal fees related to the acquisition of Cigna's life and non-life insurance companies in six Asia-Pacific markets. These items are not allocated to the segment level as they are one-time in nature and are not related to the ongoing business activities of the segment. The Chief Executive Officer does not manage segment results or allocate resources to segments when considering these costs, and therefore are excluded from our definition of segment income (loss). Certain items are presented in a different manner for segment reporting purposes than in the Consolidated Financial Statements. These items are reconciled to the consolidated presentation in the Segment measure reclass column below and include: • Losses and loss expenses include realized gains and losses on 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, and therefore realized gains (losses) from these derivatives are reclassified to losses and loss expenses. • Policy benefits include fair value changes on separate accounts that do not qualify for separate accounting under GAAP. These gains and losses have been reclassified from Other (income) expense. We view gains and losses from fair value changes in both separate account assets and liabilities as part of the results of our underwriting operations, and therefore these gains and losses are reclassified to policy benefits. • Net investment income includes investment income reclassified from Other (income) expense related to partially-owned investment companies (private equity partnerships) where our ownership interest is in excess of three percent. We view investment income from these equity-method private equity partnerships as net investment income for segment reporting purposes. 33 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following tables present the Statement of Operations by segment: For the Three Months Ended June 30, 2022 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 4,665 $ 1,426 $ 738 $ 2,640 $ 262 $ 571 $ — $ — $ 10,302 Net premiums earned 4,248 1,271 573 2,696 222 547 — — 9,557 Losses and loss expenses 2,446 773 478 1,224 139 148 191 9 5,408 Policy benefits — — — — — 177 — ( 18 ) 159 Policy acquisition costs 545 258 31 697 57 151 — — 1,739 Administrative expenses 277 73 2 278 10 88 90 — 818 Underwriting income (loss) 980 167 62 497 16 ( 17 ) ( 281 ) 9 1,433 Net investment income (loss) 522 64 7 162 76 109 ( 4 ) ( 48 ) 888 Other (income) expense — 1 — 3 1 ( 12 ) 138 ( 30 ) 101 Amortization expense of purchased intangibles — 3 6 14 — 3 45 — 71 Segment income (loss) $ 1,502 $ 227 $ 63 $ 642 $ 91 $ 101 $ ( 468 ) $ ( 9 ) $ 2,149 Net realized gains (losses) ( 513 ) 9 ( 504 ) Interest expense 134 — 134 Cigna integration expenses 3 — 3 Income tax expense 293 — 293 Net income (loss) $ ( 1,411 ) $ — $ 1,215 For the Three Months Ended June 30, 2021 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 4,285 $ 1,363 $ 512 $ 2,497 $ 274 $ 615 $ — $ — $ 9,546 Net premiums earned 3,803 1,224 410 2,579 192 605 — — 8,813 Losses and loss expenses 2,426 676 331 1,186 110 185 89 3 5,006 Policy benefits — — — — — 170 — 15 185 Policy acquisition costs 489 245 27 699 47 191 — — 1,698 Administrative expenses 245 67 3 279 10 83 88 — 775 Underwriting income (loss) 643 236 49 415 25 ( 24 ) ( 177 ) ( 18 ) 1,149 Net investment income (loss) 535 64 8 149 81 101 ( 15 ) ( 39 ) 884 Other (income) expense 14 ( 5 ) — 2 — ( 26 ) ( 708 ) ( 54 ) ( 777 ) Amortization expense of purchased intangibles — 3 6 13 — 1 50 — 73 Segment income $ 1,164 $ 302 $ 51 $ 549 $ 106 $ 102 $ 466 $ ( 3 ) $ 2,737 Net realized gains (losses) ( 36 ) 3 ( 33 ) Interest expense 122 — 122 Income tax expense 317 — 317 Net income (loss) $ ( 9 ) $ — $ 2,265 34 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries For the Six Months Ended June 30, 2022 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 8,704 $ 2,606 $ 800 $ 5,719 $ 515 $ 1,157 $ — $ — $ 19,501 Net premiums earned 8,362 2,518 544 5,324 457 1,098 — — 18,303 Losses and loss expenses 4,943 1,486 386 2,613 254 302 201 10 10,195 Policy benefits — — — — — 353 — ( 49 ) 304 Policy acquisition costs 1,118 518 43 1,376 119 302 — — 3,476 Administrative expenses 542 142 1 547 19 172 173 — 1,596 Underwriting income (loss) 1,759 372 114 788 65 ( 31 ) ( 374 ) 39 2,732 Net investment income (loss) 1,011 123 14 309 161 212 ( 9 ) ( 111 ) 1,710 Other (income) expense 6 2 — 5 1 ( 40 ) ( 121 ) ( 62 ) ( 209 ) Amortization expense of purchased intangibles — 5 13 28 — 5 91 — 142 Segment income (loss) $ 2,764 $ 488 $ 115 $ 1,064 $ 225 $ 216 $ ( 353 ) $ ( 10 ) $ 4,509 Net realized gains (losses) ( 413 ) 10 ( 403 ) Interest expense 266 — 266 Cigna integration expenses 3 — 3 Income tax expense 648 — 648 Net income (loss) $ ( 1,683 ) $ — $ 3,189 For the Six Months Ended June 30, 2021 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 7,949 $ 2,461 $ 695 $ 5,387 $ 481 $ 1,235 $ — $ — $ 18,208 Net premiums earned 7,477 2,408 520 5,057 372 1,200 — — 17,034 Losses and loss expenses 4,986 1,495 416 2,449 230 383 98 2 10,059 Policy benefits — — — — — 333 — 19 352 Policy acquisition costs 1,003 492 39 1,367 92 370 — — 3,363 Administrative expenses 499 127 6 545 18 165 159 — 1,519 Underwriting income (loss) 989 294 59 696 32 ( 51 ) ( 257 ) ( 21 ) 1,741 Net investment income (loss) 1,075 129 15 290 151 199 ( 32 ) ( 80 ) 1,747 Other (income) expense 16 ( 4 ) — 3 — ( 60 ) ( 1,123 ) ( 99 ) ( 1,267 ) Amortization expense of purchased intangibles — 6 13 25 — 2 99 — 145 Segment income $ 2,048 $ 421 $ 61 $ 958 $ 183 $ 206 $ 735 $ ( 2 ) $ 4,610 Net realized gains (losses) 852 2 854 Interest expense 244 — 244 Income tax expense 655 — 655 Net income $ 688 $ — $ 4,565 Underwriting assets are reviewed in total by management for purposes of decision-making. Other than Unpaid losses and loss expenses, Future policy benefits, Reinsurance recoverables, Goodwill and Other intangible assets, Chubb does not allocate assets to its segments. 35 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 13. Earnings per share Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars, except share and per share data) 2022 2021 2022 2021 Numerator: Net income $ 1,215 $ 2,265 $ 3,189 $ 4,565 Denominator: Denominator for basic earnings per share: Weighted-average shares outstanding 421,624,660 445,094,678 423,703,328 447,802,079 Denominator for diluted earnings per share: Share-based compensation plans 3,793,686 2,857,242 3,982,116 2,900,440 Weighted-average shares outstanding and assumed conversions 425,418,346 447,951,920 427,685,444 450,702,519 Basic earnings per share $ 2.88 $ 5.09 $ 7.53 $ 10.20 Diluted earnings per share $ 2.86 $ 5.06 $ 7.46 $ 10.13 Potential anti-dilutive share conversions 1,690,893 1,777,555 1,196,180 1,879,882 Excluded from weighted-average shares outstanding and assumed conversions is the impact of securities that would have been anti-dilutive during the respective periods. These securities consisted of stock options in which the underlying exercise prices were greater than the average market prices of our Common Shares. Refer to Note 12 to the Consolidated Financial Statements of our 2021 Form 10-K for additional information on stock options. 36 Table of Contents