Chubb Ltd 10-Q

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three and six months ended June 30, 2022. All comparisons in this discussion are to the corresponding prior year period unless otherwise indicated. All dollar amounts are rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded dollars may differ. Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. This discussion should be read in conjunction with our consolidated financial statements and related notes and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K). Other Information We routinely post important information for investors on our website (investors.chubb.com). We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Securities and Exchange Commission (SEC) Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Investor Information portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report. MD&A Index Page Forward-Looking Statements 38 Overview 39 Outlook 39 Consolidated Operating Results 40 Segment Operating Results 45 Net Realized and Unrealized Gains (Losses) 56 Effective Income Tax Rate 57 Non-GAAP Reconciliation 58 Amortization of Purchased Intangibles and Other Amortization 63 Net Investment Income 64 Interest Expense 65 Investments 65 Critical Accounting Estimates 69 Unpaid Losses and Loss Expenses 69 Asbestos and Environmental (A&E) 69 Fair Value Measurements 69 Catastrophe Management 70 Global Property Catastrophe Reinsurance Program 71 Liquidity 72 Capital Resources 73 Information Provided In Connection With Outstanding Debt of Subsidiaries 74 37 Table of Contents Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,” “intend,” “hope,” “feel,” “foresee,” “will likely result,” “will continue,” and variations thereof and similar expressions, identify forward-looking statements. These forward-looking statements are subject to certain risks, uncertainties, and other factors that could, should potential events occur, cause actual results to differ materially from such statements. These risks, uncertainties, and other factors, which are described in more detail elsewhere herein and in other documents we file with the U.S. Securities and Exchange Commission (SEC), include but are not limited to: • actual amount of new and renewal business, premium rates, underwriting margins, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets; the competitive environment in which we operate, including trends in pricing or in policy terms and conditions, which may differ from our projections and changes in market conditions that could render our business strategies ineffective or obsolete; • losses arising out of natural or man-made catastrophes; actual loss experience from insured or reinsured events and the timing of claim payments; the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing environmental damage and asbestos-related latent injuries, the impact of aggregate-policy-coverage limits, the impact of bankruptcy protection sought by various asbestos producers and other related businesses, and the timing of loss payments; • infection rates and severity of COVID-19 and related risks, and their effects on our business operations and claims activity, and any adverse impact to our insureds, brokers, agents, and employees; actual claims may exceed our best estimate of ultimate insurance losses incurred which could change including as a result of, among other things, the impact of legislative or regulatory actions taken in response to COVID-19; • changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; the ability to collect reinsurance recoverable, credit developments of reinsurers, and any delays with respect thereto and changes in the cost, quality, or availability of reinsurance; • uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and treaties; judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms; the effects of data privacy or cyber laws or regulation; global political conditions and possible business disruption or economic contraction that may result from such events; • developments in global financial markets, including changes in interest rates, stock markets, and other financial markets; increased government involvement or intervention in the financial services industry; the cost and availability of financing, and foreign currency exchange rate fluctuations; changing rates of inflation; and other general economic and business conditions, including the depth and duration of potential recession; • the availability of borrowings and letters of credit under our credit facilities; the adequacy of collateral supporting funded high deductible programs; the amount of dividends received from subsidiaries; • changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available for sale fixed maturity investments before their anticipated recovery; • actions that rating agencies may take from time to time, such as financial strength or credit ratings downgrades or placing these ratings on credit watch negative or the equivalent; • the effects of public company bankruptcies and accounting restatements, as well as disclosures by and investigations of public companies relating to possible accounting irregularities, and other corporate governance issues; • acquisitions made performing differently than expected, our failure to realize anticipated expense-related efficiencies or growth from acquisitions, the impact of acquisitions on our pre-existing organization, including with respect to our announced acquisitions not closing; risks and uncertainties relating to our planned purchases of additional interests in Huatai Insurance Group Co., Ltd. (Huatai Group), including our ability to receive Chinese insurance regulatory approval and complete the purchases; • risks associated with being a Swiss corporation, including reduced flexibility with respect to certain aspects of capital management and the potential for additional regulatory burdens; share repurchase plans and share cancellations; 38 Table of Contents • loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time frame; • the ability of our technology resources, including information systems and security, to perform as anticipated such as with respect to preventing material information technology failures or third-party infiltrations or hacking resulting in consequences adverse to Chubb or its customers or partners; the ability of our company to increase use of data analytics and technology as part of our business strategy and adapt to new technologies; and • management’s response to these factors and actual events (including, but not limited to, those described above). You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events or otherwise. Overview Chubb Limited is the Swiss-incorporated holding company of the Chubb Group of Companies. Chubb Limited, which is headquartered in Zurich, Switzerland, and its direct and indirect subsidiaries (collectively, the Chubb Group of Companies, Chubb, we, us, or our) are a global insurance and reinsurance organization, serving the needs of a diverse group of clients worldwide. At June 30, 2022, we had total assets of $196 billion and shareholders’ equity of $52 billion. Chubb was incorporated in 1985 at which time it opened its first business office in Bermuda and continues to maintain operations in Bermuda. We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more information on our segments refer to “Segment Information” under Item 1 in our 2021 Form 10-K. Outlook 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 efficiencies created by the transaction are expected to provide greater flexibility for the company to invest in people, technology, products and distribution in the region. With the acquisition completed on July 1, we will have a full quarter of earnings in the third quarter of 2022. We now expect expense synergies to reach a run-rate of about $100 million pre-tax, which is higher than our initial estimate. To achieve that run-rate savings, we expect one-time pre-tax integration costs over the next three years to be $140 million on an economic basis, as the deal price was reduced by $30 million of non-cash employee-related retention costs. The $30 million will also be recorded as an integration cost, resulting in total expected integration costs of $170 million pre-tax. 39 Table of Contents Consolidated Operating Results – Three and Six Months Ended June 30, 2022 and 2021 Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Net premiums written $ 10,302 $ 9,546 7.9 % $ 19,501 $ 18,208 7.1 % Net premiums written - constant dollars (1) 10.0 % 9.1 % Net premiums earned 9,557 8,813 8.4 % 18,303 17,034 7.4 % Net investment income 888 884 0.4 % 1,710 1,747 (2.1) % Net realized gains (losses) (504) (33) NM (403) 854 NM Total revenues 9,941 9,664 2.9 % 19,610 19,635 (0.1) % Losses and loss expenses 5,408 5,006 8.0 % 10,195 10,059 1.3 % Policy benefits 159 185 (13.9) % 304 352 (13.5) % Policy acquisition costs 1,739 1,698 2.4 % 3,476 3,363 3.4 % Administrative expenses 818 775 5.4 % 1,596 1,519 5.0 % Interest expense 134 122 10.7 % 266 244 9.0 % Other (income) expense 101 (777) NM (209) (1,267) (83.5) % Amortization of purchased intangibles 71 73 (1.7) % 142 145 (1.8) % Cigna integration expenses 3 — NM 3 — NM Total expenses 8,433 7,082 19.1 % 15,773 14,415 9.4 % Income before income tax 1,508 2,582 (41.6) % 3,837 5,220 (26.5) % Income tax expense 293 317 (7.7) % 648 655 (1.1) % Net income $ 1,215 $ 2,265 (46.4) % $ 3,189 $ 4,565 (30.1) % NM - not meaningful (1) On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency exchange rates as the comparable current period. Financial Highlights for the Three Months Ended June 30, 2022 • Net income was $1.2 billion compared with $2.3 billion in the prior year period. Net income in the current quarter was driven by strong underwriting results, including growth in net premiums earned and improvements in our combined ratios. Net income is lower compared to prior year, reflecting the after-tax mark-to-market losses on public and private equities of $345 million and $144 million, respectively, compared to gains of $82 million and $712 million, respectively, in the prior year. Additionally, losses in the fixed income portfolio were higher year-over-year by $362 million after-tax. • Consolidated net premiums written were $10.3 billion, up 7.9 percent, or 10.0 percent in constant dollars, primarily from growth in commercial lines and consumer lines of 10.6 percent and 2.5 percent, respectively, or 12.1 percent and 5.5 percent in constant dollars, respectively. • Consolidated net premiums earned were $9.6 billion, up 8.4 percent, or 10.7 percent in constant dollars. Commercial lines growth was 13.0 percent, or 14.8 percent in constant dollars, while consumer lines were essentially flat, or up 2.8 percent in constant dollars. • Total pre-tax and after-tax catastrophe losses were $291 million (3.2 percentage points of the P&C combined ratio) and $241 million, respectively, compared with $280 million (3.4 percentage points of the P&C combined ratio) and $226 million, respectively, in the prior year period. Catastrophe losses in the current quarter were from weather-related events globally with approximately 79 percent in the U.S. and 21 percent internationally. • Total pre-tax and after-tax favorable prior period development were $247 million (2.7 percentage points of the P&C combined ratio) and $205 million, respectively, including pre-tax adverse development of $155 million for molestation claims, predominantly reviver statute-related. Excluding the adverse development, we had pre-tax favorable development of 40 Table of Contents $402 million, with 59 percent in long-tail lines, and 41 percent in short-tail lines. This compares with pre-tax and after-tax favorable prior period development of $268 million (3.3 percentage points of the P&C combined ratio) and $224 million, respectively, in the prior year period. • The P&C combined ratio was 84.0 percent compared with 85.5 percent in the prior year period. The P&C current accident year (CAY) combined ratio excluding catastrophe losses was 83.5 percent compared with 85.4 percent in the prior year period. The current year ratios decreased due to underlying loss ratio improvement, including earned rate exceeding lost cost trends, and the favorable impact of higher net premiums earned on the expense ratio. • Net investment income was a record $888 million compared with $884 million in the prior year period. • Operating cash flow was $2.7 billion for the quarter compared with $3.1 billion in the prior year period. • Shareholders' equity decreased by $5.0 billion in the quarter, as net income of $1.2 billion was more than offset by net unrealized losses on investments of $4.1 billion after-tax from rising interest rates and $746 million related to cumulative foreign exchange translation. In addition, shareholders' equity reflected total capital returned to shareholders in the quarter of $1.5 billion, including share repurchases of $1.1 billion, at an average purchase price of $206.11 per share, and dividends of $348 million. Net Premiums Written Three Months Ended June 30 % Change Six Months Ended June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 C$ Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 C$ YTD-22 vs. YTD-21 Commercial casualty $ 1,773 $ 1,609 10.2 % 11.9 % $ 3,610 $ 3,258 10.8 % 12.4 % Workers' compensation 546 546 (0.1) % (0.1) % 1,149 1,109 3.6 % 3.6 % Financial lines 1,275 1,263 0.9 % 2.6 % 2,457 2,353 4.4 % 6.1 % Surety 172 138 24.1 % 24.9 % 325 296 9.6 % 10.8 % Commercial multiple peril (1) 341 316 8.2 % 8.2 % 631 579 9.0 % 9.0 % Property and other short-tail lines 1,970 1,740 13.2 % 15.8 % 3,747 3,334 12.4 % 15.1 % Total Commercial P&C lines 6,077 5,612 8.3 % 9.9 % 11,919 10,929 9.1 % 10.7 % Agriculture 738 512 44.0 % 44.0 % 800 695 15.1 % 15.1 % Personal automobile 423 364 16.2 % 17.6 % 835 751 11.2 % 13.2 % Personal homeowners 1,057 1,025 3.2 % 4.0 % 1,887 1,800 4.9 % 5.6 % Personal other 460 464 (0.8) % 4.2 % 955 932 2.4 % 6.4 % Total Personal lines 1,940 1,853 4.7 % 6.7 % 3,677 3,483 5.6 % 7.4 % Total Property and Casualty lines 8,755 7,977 9.8 % 11.4 % 16,396 15,107 8.5 % 10.2 % Global A&H lines (2) 958 951 0.7 % 5.3 % 1,933 1,933 — 4.0 % Reinsurance lines 262 274 (4.0) % (3.2) % 515 481 7.2 % 7.9 % Life 327 344 (4.9) % (1.0) % 657 687 (4.5) % (0.6) % Total consolidated $ 10,302 $ 9,546 7.9 % 10.0 % $ 19,501 $ 18,208 7.1 % 9.1 % (1) Commercial multiple peril represents retail package business (property and general liability). (2) For purposes of this schedule only, A&H results from our Combined North America and International businesses, normally included in the Life Insurance and Overseas General Insurance segments, respectively, as well as the A&H results of our North America Commercial P&C segment, are included in Global A&H lines above. The increase in consolidated net premiums written for the three and six months ended June 30, 2022 reflects growth across most lines of business. For the three months ended June 30, 2022, commercial lines growth was 10.6 percent and consumer lines growth was 2.5 percent, or 12.1 percent and 5.5 percent, respectively, on a constant dollar basis, driven by higher new business, positive rate increases, and strong renewal retention. 41 Table of Contents • Commercial casualty grew primarily in North America, Europe, and Asia, driven by higher new business and strong retention, including exposure and rate increases. • Workers' compensation growth for the six months ended June 30, 2022 was due to exposure increases in North America. • Financial lines grew in North America, Asia, and Europe reflecting higher new business, strong retention and positive rate increases. • Commercial multiple peril increased due to strong new business and renewal retention, including exposure and positive rate increases in North America. • Property and other short-tail lines grew globally due to strong new business and renewal retention, including positive rate increases and increased exposure. • Agriculture increased for the three and six months ended June 30, 2022 due to underlying growth in crop insurance, reflecting higher commodity prices and policy count growth. Partially offsetting growth for the six months was a return of premium to the U.S. government in the first quarter of 2022 of $161 million. • Personal lines grew in most regions reflecting new business and strong renewal retention, from both rate and exposure increases, primarily in homeowners and automobile in North America, high net worth and specialty lines in Asia, and specialty lines and automobile in Latin America. Partially offsetting growth in North America were additional cancellations in parts of California exposed to wildfires. • Global A&H lines grew in Asia, Latin America, Europe, and Japan on a constant dollar basis, driven by higher new business and recovery from less travel volume and reduced consumer activity in the prior year. Our North American Combined Insurance supplemental A&H business decreased primarily due to the non-renewal of a large program. • Reinsurance lines decreased for the quarter as the impact of new treaties bound was offset by a one-time portfolio transfer in the prior year. The year-to-date increase reflects continued growth in the portfolio from the impact of new treaties bound in the current year and in 2021; and favorable premium adjustments. • International life operations declined, as new business in Asia, primarily in Thailand, was offset by lower business in Hong Kong, driven by the continued impact of the pandemic on our agency force, and Latin America, principally reflecting the non-renewal of certain large account business in Chile. For additional information on net premiums written, refer to the segment results discussions. 42 Table of Contents Net Premiums Earned Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Net premiums earned for long-duration contracts, typically traditional life contracts, generally are recognized as earned when due from policyholders. For the three months ended June 30, 2022, net premiums earned increased $744 million, or 8.4 percent, comprising 13.0 percent positive growth in commercial lines, or 14.8 percent in constant dollars, while consumer lines were flat, or up 2.8 percent in constant dollars, as the acceleration of growth in net premiums written described above are not yet reflected in net premiums earned. For the six months ended June 30, 2022, net premiums earned increased $1,269 million, or 7.4 percent, comprising 11.5 percent positive growth in commercial lines, or 13.0 percent in constant dollars, while consumer lines were flat, or up 2.7 percent in constant dollars. Catastrophe Losses and Prior Period Development We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in the U.S. and Canada. PCS defines a catastrophe as an event that causes damage of $25 million or more in insured losses and affects a significant number of insureds. For events outside of the U.S. and Canada, we generally use a similar definition. We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. Prior period development includes adjustments relating to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development. Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Catastrophe losses $ 291 $ 280 $ 624 $ 980 Favorable prior period development $ 247 $ 268 $ 487 $ 460 Catastrophe losses through June 30, 2022 and 2021 were primarily from the following events: • 2022: Severe weather-related events in the U.S. and internationally, Australia storms, and Colorado wildfires. • 2021: Winter storm losses in the U.S. and other severe weather-related events in the U.S. and internationally. Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years. Pre-tax net favorable PPD for the three months ended June 30, 2022 was $247 million, including adverse development of $155 million for molestation claims, predominantly reviver statute-related. Excluding the adverse development, we had favorable development of $402 million, with 59 percent in long-tail lines, principally from accident years 2017 and prior, and 41 percent in short-tail lines, primarily in A&H, specialty, and automobile lines. Pre-tax net favorable PPD for the six months ended June 30, 2022 was $487 million, including adverse development of $155 million for molestation claims described above, predominantly reviver statute-related. This molestation adverse development includes no change to the previously established reserve for the Boy Scouts of America settlement. Excluding the adverse development, we had favorable development of $642 million with 39 percent in long-tail lines, principally from accident years 2017 and prior, and 61 percent in short-tail lines, primarily in A&H, property, and specialty lines. Pre-tax net favorable PPD for the three months ended June 30, 2021 was $268 million, including adverse development of $68 million for molestation claims. Excluding the adverse development, we had favorable development of $336 million with 28 percent in long-tail lines, principally from accident years 2017 and prior, and 72 percent in short-tail lines, primarily in A&H, property, and surety lines. Pre-tax net favorable PPD for the six months ended June 30, 2021 was $460 million, including adverse development of $68 million for molestation claims described above. Excluding the adverse development, we had favorable development of $528 million with 25 percent in long-tail lines, principally from accident years 2017 and prior, and 75 percent in short-tail lines, primarily in A&H, property, and surety lines. 43 Table of Contents Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. P&C Combined Ratio In evaluating our segments excluding Life Insurance financial performance, we use the P&C combined ratio. We calculate this ratio by dividing the respective expense amounts by net premiums earned. We do not calculate this ratio for the Life Insurance segment as we do not use this measure to monitor or manage that segment. A P&C combined ratio under 100 percent indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting loss. Three Months Ended Six Months Ended June 30 June 30 2022 2021 2022 2021 Loss and loss expense ratio CAY loss ratio excluding catastrophe losses 57.8 % 58.6 % 57.1 % 57.9 % Catastrophe losses 3.2 % 3.5 % 3.6 % 6.2 % Prior period development (2.7) % (3.4) % (3.3) % (3.0) % Loss and loss expense ratio 58.3 % 58.7 % 57.4 % 61.1 % Policy acquisition cost ratio 17.6 % 18.4 % 18.5 % 18.9 % Administrative expense ratio 8.1 % 8.4 % 8.3 % 8.6 % P&C Combined ratio 84.0 % 85.5 % 84.2 % 88.6 % The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased for the three and six months ended June 30, 2022, reflecting earned rate exceeding loss cost trends. The loss and loss expense ratio for the three months ended June 30, 2022 was favorably impacted by higher net premiums earned, partially offset by higher catastrophe losses and lower favorable prior period development. The loss and loss expense ratio for the six months ended June 30, 2022 benefited from higher net premiums earned, lower catastrophe losses compared to the prior year, and higher favorable prior period development. The policy acquisition cost ratio decreased for the three and six months ended June 30, 2022, primarily due to a higher percentage of net premiums earned from commercial P&C lines that have a lower acquisition cost ratio. The administrative expense ratio decreased for the three and six months ended June 30, 2022, primarily due to the favorable impact of higher net premiums earned, partially offset by increased investment to support growth and higher employee-related expenses. Policy benefits Policy benefits represent losses on contracts classified as long-duration and generally include accident and supplemental health products, term and whole life products, endowment products, and annuities. Refer to the Life Insurance segment operating results section for further discussion. For the three months ended June 30, 2022 and 2021, Policy benefits were $159 million and $185 million, respectively, which included (gains) losses from fair value changes in separate account liabilities that do not qualify for separate account reporting under GAAP of $(18) million and $15 million, respectively. The offsetting movements of these liabilities are recorded in Other (income) expense on the Consolidated statements of operations. Excluding the separate account gains and losses, Policy benefits were $177 million and $170 million for the three months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021, Policy benefits were $304 million and $352 million, respectively, which included (gains) losses from fair value changes in separate account liabilities that do not qualify for separate account reporting under GAAP of $(49) million and $19 million, respectively. The offsetting movements of these liabilities are recorded in Other (income) expense on the Consolidated statements of operations. Excluding the separate account gains and losses, Policy benefits were $353 million and $333 million for the six months ended June 30, 2022 and 2021, respectively. Refer to the respective sections that follow for a discussion of Net investment income, Other (income) expense, Net realized gains (losses), Amortization of purchased intangibles, and Income tax expense. 44 Table of Contents Segment Operating Results – Three and Six Months Ended June 30, 2022 and 2021 We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more information on our segments refer to “Segment Information” under Item 1 in our 2021 Form 10-K. North America Commercial P&C Insurance The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) and accident & health (A&H) insurance and services to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda. This segment includes our North America Major Accounts and Specialty Insurance division (large corporate accounts and wholesale business), and the North America Commercial Insurance division (principally middle market and small commercial accounts). Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Net premiums written $ 4,665 $ 4,285 8.9 % $ 8,704 $ 7,949 9.5 % Net premiums earned 4,248 3,803 11.7 % 8,362 7,477 11.8 % Losses and loss expenses 2,446 2,426 0.8 % 4,943 4,986 (0.9) % Policy acquisition costs 545 489 11.5 % 1,118 1,003 11.5 % Administrative expenses 277 245 13.4 % 542 499 8.6 % Underwriting income 980 643 52.6 % 1,759 989 78.0 % Net investment income 522 535 (2.5) % 1,011 1,075 (6.0) % Other (income) expense — 14 NM 6 16 (61.9) % Segment income $ 1,502 $ 1,164 29.1 % $ 2,764 $ 2,048 35.0 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 61.4 % 63.7 % (2.3) pts 61.5 % 63.6 % (2.1) pts Catastrophe losses 2.9 % 4.3 % (1.4) pts 2.4 % 7.0 % (4.6) pts Prior period development (6.7) % (4.2) % (2.5) pts (4.8) % (3.9) % (0.9) pts Loss and loss expense ratio 57.6 % 63.8 % (6.2) pts 59.1 % 66.7 % (7.6) pts Policy acquisition cost ratio 12.8 % 12.9 % (0.1) pts 13.4 % 13.4 % — pts Administrative expense ratio 6.5 % 6.4 % 0.1 pts 6.5 % 6.7 % (0.2) pts Combined ratio 76.9 % 83.1 % (6.2) pts 79.0 % 86.8 % (7.8) pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Catastrophe losses $ 124 $ 165 $ 205 $ 527 Favorable prior period development $ 287 $ 156 $ 395 $ 283 45 Table of Contents Catastrophe losses through June 30, 2022 and 2021 were primarily from severe weather-related events and winter storm losses in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $380 million, or 8.9 percent, and $755 million, or 9.5 percent, for the three and six months ended June 30, 2022, respectively, comprising: • Commercial lines: Positive growth of 8.7 percent and 9.6 percent, respectively, reflecting strong premium retention, including both rate and exposure increases, as well as new business across a number of retail and wholesale lines, including property, primary and excess casualty, commercial multiple peril, surety, and financial lines. Growth for the six months ended June 30, 2022 also reflects strong premium retention, including rate and exposure increases, from workers’ compensation. • Consumer lines: Positive growth of 11.6 percent and 7.9 percent, respectively, due to recovery in A&H lines from exposure declines in the prior year and strong new business. Net premiums earned increased $445 million, or 11.7 percent, and $885 million, or 11.8 percent for the three and six months ended June 30, 2022, respectively, reflecting the growth in net premiums written described above. Combined Ratio The loss and loss expense ratio decreased for the three and six months ended June 30, 2022, reflecting lower catastrophe losses, higher favorable prior period development, and earned rate exceeding loss cost trends. The administrative expense ratio was relatively flat for the three and six months ended June 30, 2022, primarily due to the favorable impact of higher net premiums earned, offset by higher employee-related expenses and increased investment to support growth. 46 Table of Contents North America Personal P&C Insurance The North America Personal P&C Insurance segment comprises operations that provide high net worth personal lines products, including homeowners and complementary products such as valuable articles, excess liability, automobile, and recreational marine insurance and services in the U.S. and Canada. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Net premiums written $ 1,426 $ 1,363 4.7 % $ 2,606 $ 2,461 5.9 % Net premiums earned 1,271 1,224 3.9 % 2,518 2,408 4.6 % Losses and loss expenses 773 676 14.5 % 1,486 1,495 (0.6) % Policy acquisition costs 258 245 5.2 % 518 492 5.1 % Administrative expenses 73 67 8.9 % 142 127 12.0 % Underwriting income 167 236 (29.4) % 372 294 26.7 % Net investment income 64 64 — 123 129 (4.5) % Other (income) expense 1 (5) NM 2 (4) NM Amortization of purchased intangibles 3 3 — 5 6 (5.2) % Segment income $ 227 $ 302 (25.0) % $ 488 $ 421 15.8 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 53.6 % 53.6 % — pts 53.4 % 53.4 % — pts Catastrophe losses 7.4 % 5.3 % 2.1 pts 7.7 % 12.2 % (4.5) pts Prior period development (0.2) % (3.7) % 3.5 pts (2.1) % (3.5) % 1.4 pts Loss and loss expense ratio 60.8 % 55.2 % 5.6 pts 59.0 % 62.1 % (3.1) pts Policy acquisition cost ratio 20.3 % 20.0 % 0.3 pts 20.5 % 20.4 % 0.1 pts Administrative expense ratio 5.8 % 5.5 % 0.3 pts 5.7 % 5.3 % 0.4 pts Combined ratio 86.9 % 80.7 % 6.2 pts 85.2 % 87.8 % (2.6) pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Catastrophe losses $ 95 $ 61 $ 195 $ 301 Favorable prior period development $ 3 $ 44 $ 54 $ 84 Catastrophe losses through June 30, 2022 and 2021 were primarily from the following events: • 2022: Severe weather-related events in the U.S. and Colorado wildfires. • 2021: Winter storm losses and other severe weather-related events in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $63 million, or 4.7 percent, and $145 million, or 5.9 percent for the three and six months ended June 30, 2022, respectively, primarily driven by new business and strong renewal retention, from both rate and exposure increases, primarily in homeowners and automobile; partially offset by additional cancellations in parts of California exposed to wildfires. Net premiums earned increased $47 million, or 3.9 percent, and $110 million, or 4.6 percent for the three and six months ended June 30, 2022, respectively, reflecting the growth in net premiums written described above. 47 Table of Contents Combined Ratio The loss and loss expense ratio increased for the three months ended June 30, 2022, primarily from higher catastrophe losses and lower favorable prior period development. The loss and loss expense ratio decreased for the six months ended June 30, 2022, reflecting lower catastrophe losses compared to the prior year, partially offset by lower favorable prior period development. The CAY loss ratio excluding catastrophe losses was flat for the three and six months ended June 30, 2022, reflecting slightly higher losses in automobile, offset by earned rate exceeding loss cost trends in homeowners. The policy acquisition cost ratio increased for the three and six months ended June 30, 2022, primarily due to a higher year-over-year amount of supplemental commissions. The administrative expense ratio increased for the three and six months ended June 30, 2022, primarily due to increased investment to support growth and higher employee-related expenses. North America Agricultural Insurance The North America Agricultural Insurance segment comprises our North American based businesses that provide a variety of coverages in the U.S. and Canada including crop insurance, primarily Multiple Peril Crop Insurance (MPCI) and crop-hail through Rain and Hail Insurance Service, Inc. (Rain and Hail) as well as farm and ranch and specialty P&C commercial insurance products and services through our Chubb Agribusiness unit. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Net premiums written $ 738 $ 512 44.0 % $ 800 $ 695 15.1 % Net premiums earned 573 410 39.6 % 544 520 4.6 % Losses and loss expenses 478 331 44.1 % 386 416 (7.3) % Policy acquisition costs 31 27 14.2 % 43 39 10.4 % Administrative expenses 2 3 (24.3) % 1 6 (86.6) % Underwriting income 62 49 26.9 % 114 59 93.9 % Net investment income 7 8 (1.0) % 14 15 (5.3) % Amortization of purchased intangibles 6 6 — 13 13 — Segment income $ 63 $ 51 25.6 % $ 115 $ 61 90.1 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 79.6 % 79.7 % (0.1) pts 77.9 % 77.9 % — pts Catastrophe losses 3.7 % 1.0 % 2.7 pts 4.0 % 2.3 % 1.7 pts Prior period development — — — pts (11.0) % (0.2) % (10.8) pts Loss and loss expense ratio 83.3 % 80.7 % 2.6 pts 70.9 % 80.0 % (9.1) pts Policy acquisition cost ratio 5.4 % 6.7 % (1.3) pts 8.0 % 7.6 % 0.4 pts Administrative expense ratio 0.4 % 0.7 % (0.3) pts 0.1 % 1.1 % (1.0) pts Combined ratio 89.1 % 88.1 % 1.0 pts 79.0 % 88.7 % (9.7) pts Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Catastrophe losses $ 21 $ 4 $ 21 $ 12 Favorable prior period development $ — $ — $ 26 $ 2 48 Table of Contents Catastrophe losses through June 30, 2022 and 2021 were primarily from severe weather-related events in Chubb Agribusiness and winter storm losses in the U.S. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. Premiums Net premiums written increased $226 million, or 44.0 percent for the three months ended June 30, 2022, primarily due to an increase in MPCI, primarily reflecting higher commodity prices and policy count growth. Net premiums written increased $105 million, or 15.1 percent for the six months ended June 30, 2022, primarily due to an increase in MPCI due to the factors noted above, partly offset by a return of premium to the U.S. government in the first quarter of 2022 of $161 million. Under the profit-sharing agreement, we returned additional premiums to the government because of the lower losses experienced in certain states in 2021. This return of premium reduced net premiums written growth for the six months ended June 30, 2022 by 23.2 percentage points. Net premiums earned increased $163 million, or 39.6 percent, and increased $24 million, or 4.6 percent for the three and six months ended June 30, 2022, respectively, reflecting the growth in net premiums written described above. Combined Ratio The combined ratio for the six months ended June 30, 2022, was impacted by the return of premium to the U.S. government under the profit-sharing agreement related to the profitable 2021 crop year described above. This prior period development resulted in a reduction to net premiums earned of $161 million and a corresponding reduction to incurred losses, with no net impact to underwriting income. The loss and loss expense ratio increased for the three months ended June 30, 2022, primarily from higher catastrophe losses. The loss and loss expense ratio decreased for the six months ended June 30, 2022, primarily due to the impact of the return of premium described above. The CAY loss ratio excluding catastrophe losses was relatively flat for the three and six months ended June 30, 2022. The policy acquisition cost ratio decreased for the three months ended June 30, 2022, primarily due to the favorable impact of higher net premiums earned from MPCI. The policy acquisition cost ratio increased for the six months ended June 30, 2022, primarily due to the impact of the return of premium described above. The CAY policy acquisition cost ratio, which excludes the unfavorable impact of catastrophe losses and prior period development of 1.7 percentage points, decreased 1.3 percentage points for the six months ended June 30, 2022, mainly due to the favorable impact of higher net premiums earned from MPCI. The administrative expense ratio decreased for the three and six months ended June 30, 2022, reflecting the favorable impact of higher net premiums earned from MPCI, higher Administrative and Operating (A&O) reimbursements on the MPCI business, and strong expense management. 49 Table of Contents Overseas General Insurance Overseas General Insurance segment comprises Chubb International and Chubb Global Markets (CGM). Chubb International comprises our international commercial P&C traditional and specialty lines serving large corporations, middle market and small customers; A&H and traditional and specialty personal lines business serving local territories outside the U.S., Bermuda, and Canada. CGM, our London-based international commercial P&C excess and surplus lines business, includes Lloyd's of London (Lloyd's) Syndicate 2488. Chubb provides funds at Lloyd's to support underwriting by Syndicate 2488 which is managed by Chubb Underwriting Agencies Limited. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Net premiums written $ 2,640 $ 2,497 5.7 % $ 5,719 $ 5,387 6.2 % Net premiums written - constant dollars 12.4 % 12.1 % Net premiums earned 2,696 2,579 4.6 % 5,324 5,057 5.3 % Losses and loss expenses 1,224 1,186 3.2 % 2,613 2,449 6.7 % Policy acquisition costs 697 699 (0.3) % 1,376 1,367 0.6 % Administrative expenses 278 279 (0.4) % 547 545 0.4 % Underwriting income 497 415 19.9 % 788 696 13.2 % Net investment income 162 149 8.7 % 309 290 6.5 % Other (income) expense 3 2 30.8 % 5 3 45.8 % Amortization of purchased intangibles 14 13 17.4 % 28 25 13.8 % Segment income $ 642 $ 549 16.9 % $ 1,064 $ 958 11.1 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 50.0 % 50.6 % (0.6) pts 49.7 % 50.3 % (0.6) pts Catastrophe losses 1.8 % 1.6 % 0.2 pts 3.8 % 1.8 % 2.0 pts Prior period development (6.4) % (6.2) % (0.2) pts (4.4) % (3.7) % (0.7) pts Loss and loss expense ratio 45.4 % 46.0 % (0.6) pts 49.1 % 48.4 % 0.7 pts Policy acquisition cost ratio 25.9 % 27.1 % (1.2) pts 25.8 % 27.0 % (1.2) pts Administrative expense ratio 10.3 % 10.8 % (0.5) pts 10.3 % 10.8 % (0.5) pts Combined ratio 81.6 % 83.9 % (2.3) pts 85.2 % 86.2 % (1.0) pts Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Catastrophe losses $ 49 $ 40 $ 200 $ 90 Favorable prior period development $ 173 $ 156 $ 233 $ 181 Catastrophe losses through June 30, 2022 and 2021 were primarily from the following events: • 2022: International weather-related events and storms in Australia. • 2021: Winter storm losses in the U.S. and international weather-related events. Refer to the prior period development discussion in Note 6 to the Consolidated Financial Statements for additional information. 50 Table of Contents Net Premiums Written by Region Three months ended June 30 (in millions of U.S. dollars, except for percentages) 2022 2022 % of Total 2021 2021 % of Total C$ 2021 Q-22 vs. Q-21 C$ Q-22 vs. Q-21 Region Europe, Middle East, and Africa $ 1,203 46 % $ 1,188 48 % $ 1,106 1.3 % 8.7 % Latin America 549 21 % 451 18 % 446 21.5 % 23.2 % Asia Pacific 690 26 % 652 26 % 613 5.6 % 12.5 % Japan 143 5 % 162 6 % 142 (11.7) % 0.8 % Other (1) 55 2 % 44 2 % 41 28.3 % 36.8 % Net premiums written $ 2,640 100 % $ 2,497 100 % $ 2,348 5.7 % 12.4 % Six months ended June 30 (in millions of U.S. dollars, except for percentages) 2022 2022 % of Total 2021 2021 % of Total C$ 2021 Y-22 vs. Y-21 C$ Y-22 vs. Y-21 Region Europe, Middle East, and Africa $ 2,857 50 % $ 2,739 51 % $ 2,588 4.3 % 10.4 % Latin America 1,154 20 % 988 18 % 958 16.8 % 20.5 % Asia Pacific 1,333 23 % 1,255 23 % 1,184 6.2 % 12.6 % Japan 258 5 % 286 6 % 255 (9.8) % 1.1 % Other (1) 117 2 % 119 2 % 115 (1.7) % 1.7 % Net premiums written $ 5,719 100 % $ 5,387 100 % $ 5,100 6.2 % 12.1 % (1) Includes the international supplemental A&H business of Combined Insurance and other international operations including mainland China. Premiums Overall, net premiums written increased $143 million and $332 million, or $292 million and $619 million on a constant dollar basis, for the three and six months ended June 30, 2022, respectively, reflecting growth in both commercial and consumer lines. For the three and six months ended June 30, 2022, commercial lines grew 7.0 percent and 7.9 percent, or 13.0 percent and 13.3 percent on a constant-dollar basis, respectively, and consumer lines grew 3.9 percent and 3.4 percent, or 11.6 percent and 10.2 percent on a constant-dollar basis, respectively. Growth in our European division for the three and six months ended June 30, 2022 was supported by both our wholesale and retail divisions. This growth was primarily driven by higher new business, premium retention, and positive rate increases in commercial lines, including commercial property and casualty, and financial lines. Consumer lines increased primarily due to A&H, reflecting increased travel volume. Additionally, A&H in the prior year was adversely impacted by restrictions resulting from the COVID-19 pandemic. Latin America increased for the three and six months ended June 30, 2022 driven by growth in consumer lines, including automobile in personal and travel in A&H. Commercial lines also grew due to exposure increases, positive rate increases, and new business, primarily property. Asia Pacific increased for the three and six months ended June 30, 2022 driven by higher new business, higher retention and positive rate increases in commercial lines, including property and casualty, financial lines, and growth in consumer lines, primarily specialty and high net worth in personal, and travel in A&H. Japan increased for the three and six months ended June 30, 2022 on a constant-dollar basis primarily from new business in A&H. Net premiums earned increased $117 million and $267 million, or $270 million and $531 million on a constant-dollar basis, for the three and six months ended June 30, 2022, respectively, reflecting the increase in net premiums written described above. Combined Ratio The loss and loss expense ratio decreased for the three months ended June 30, 2022, due to underlying loss ratio improvement and higher favorable prior period development, partially offset by higher catastrophe losses. The loss and loss expense ratio increased for the six months ended June 30, 2022, primarily due to higher catastrophe losses, partially offset by higher 51 Table of Contents favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased for the three and six months ended June 30, 2022, primarily reflecting underlying loss ratio improvement, including earned rate exceeding loss cost trends. The policy acquisition cost ratio decreased for the three and six months ended June 30, 2022, primarily due to a change in the mix of business, including higher premiums earned from commercial lines that have a lower acquisition cost ratio than consumer lines. The administrative expense ratio decreased for the three and six months ended June 30, 2022, reflecting continued expense management control and the favorable impact of higher net premiums earned. 52 Table of Contents Global Reinsurance The Global Reinsurance segment represents our reinsurance operations comprising Chubb Tempest Re Bermuda, Chubb Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada. Global Reinsurance markets its reinsurance products worldwide primarily through reinsurance brokers under the Chubb Tempest Re brand name and provides a broad range of traditional and non-traditional reinsurance coverage to a diverse array of primary P&C companies. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Net premiums written $ 262 $ 274 (4.0) % $ 515 $ 481 7.2 % Net premiums written - constant dollars (3.2) % 7.9 % Net premiums earned 222 192 15.2 % 457 372 22.7 % Losses and loss expenses 139 110 26.9 % 254 230 10.4 % Policy acquisition costs 57 47 19.5 % 119 92 29.1 % Administrative expenses 10 10 — 19 18 4.6 % Underwriting income 16 25 (38.3) % 65 32 101.6 % Net investment income 76 81 (5.6) % 161 151 6.6 % Other (income) expense 1 — NM 1 — NM Segment income $ 91 $ 106 (14.3) % $ 225 $ 183 22.9 % Loss and loss expense ratio: CAY loss ratio excluding catastrophe losses 49.7 % 50.9 % (1.2) pts 49.8 % 49.6 % 0.2 pts Catastrophe losses 0.8 % 5.2 % (4.4) pts 0.6 % 14.2 % (13.6) pts Prior period development 12.1 % 0.7 % 11.4 pts 5.1 % (2.1) % 7.2 pts Loss and loss expense ratio 62.6 % 56.8 % 5.8 pts 55.5 % 61.7 % (6.2) pts Policy acquisition cost ratio 25.6 % 24.7 % 0.9 pts 26.1 % 24.8 % 1.3 pts Administrative expense ratio 4.6 % 5.1 % (0.5) pts 4.1 % 4.8 % (0.7) pts Combined ratio 92.8 % 86.6 % 6.2 pts 85.7 % 91.3 % (5.6) pts NM - not meaningful Catastrophe Losses and Prior Period Development Three Months Ended Six Months Ended June 30 June 30 (in millions of U.S dollars) 2022 2021 2022 2021 Catastrophe losses $ 2 $ 10 $ 3 $ 50 (Unfavorable) favorable prior period development $ (25) $ — $ (22) $ 7 Catastrophe losses through June 30, 2022 were primarily from storms in Australia. Catastrophe losses through June 30, 2021 were primarily from winter storm losses in the U.S. Premiums Net premiums written decreased $12 million for the three months ended June 30, 2022 as the impact of new treaties bound was offset by a one-time portfolio transfer in the prior year. Net premiums written increased $34 million for the six months ended June 30, 2022 due to continued growth in the portfolio reflecting the impact of new treaties bound in the current year and in 2021, and favorable premium adjustments. Net premiums earned increased $30 million and $85 million for the three and six months ended June 30, 2022, respectively, primarily reflecting the factors as described above. The change was also due to the impact of higher new business written in the prior year for which premiums are earned in the current year. 53 Table of Contents Combined Ratio The loss and loss expense ratio increased for the three months ended June 30, 2022, primarily due to unfavorable prior period development in the current year. The loss and loss expense ratio decreased for the six months ended June 30, 2022, primarily due to lower catastrophe losses, partially offset by unfavorable prior period development in the current year. The CAY loss ratio excluding catastrophe losses decreased for the three months ended June 30, 2022 primarily due to a shift in the mix of business. The policy acquisition cost ratio increased for the three and six months ended June 30, 2022, primarily due to a shift in the mix of business. The administrative expense ratio decreased for the three and six months ended June 30, 2022, primarily from the favorable impact of higher net premiums earned. Life Insurance The Life Insurance segment comprises our international life operations, Chubb Tempest Life Re (Chubb Life Re), and the North American supplemental A&H and life business of Combined Insurance. We assess the performance of our life business based on Life Insurance underwriting income, which includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Net premiums written $ 571 $ 615 (7.2) % $ 1,157 $ 1,235 (6.4) % Net premiums written - constant dollars (4.9) % (4.2) % Net premiums earned 547 605 (9.6) % 1,098 1,200 (8.5) % Losses and loss expenses 148 185 (20.8) % 302 383 (21.5) % Policy benefits 177 170 3.9 % 353 333 6.0 % Policy acquisition costs 151 191 (20.4) % 302 370 (18.1) % Administrative expenses 88 83 5.3 % 172 165 3.7 % Net investment income 109 101 7.5 % 212 199 6.3 % Life Insurance underwriting income 92 77 20.9 % 181 148 22.7 % Other (income) expense (12) (26) (56.3) % (40) (60) (34.0) % Amortization of purchased intangibles 3 1 65.8 % 5 2 99.2 % Segment income $ 101 $ 102 0.3 % $ 216 $ 206 5.2 % Premiums Net premiums written decreased $44 million and $78 million, or $29 million and $50 million on a constant-dollar basis, for the three and six months ended June 30, 2022, respectively. For our international life operations, net premiums written decreased 4.9 percent for the three months ended June 30, 2022, as growth in Asia from new business, principally in Thailand and Indonesia, was offset by lower business in H ong Kong and Korea, driven by the continued impact of the pandemic on our agency force, and Latin America, principally reflecting the non-renewal of certain large account business in Chile. For the six months ended June 30, 2022, net premiums written declined 4.7 percent as growth in Thailand, Taiwan, Indonesia and Vietnam were more than offset by declines in Hong Kong, Korea, and Latin America as noted above. Net premiums written in our North American Combined Insurance business declined 10.2 percent and 8.8 percent, for the three and six months ended June 30, 2022, respectively, primarily due to the non-renewal of a large program. 54 Table of Contents Deposits The following table presents deposits collected on universal life and investment contracts: Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 C$ 2021 Q-22 vs. Q-21 C$ Q-22 vs. Q-21 2022 2021 C$ 2021 Y-22 vs. Y-21 C$ Y-22 vs. Y-21 Deposits collected on universal life and investment contracts $ 427 $ 605 $ 591 (29.3) % (27.5) % $ 984 $ 1,156 $ 1,145 (14.9) % (14.1) % Deposits collected on universal life and investment contracts (life deposits) are not reflected as revenues in our Consolidated statements of operations in accordance with GAAP. New life deposits are an important component of production, and although they do not significantly affect current period income from operations, they are key to our efforts to grow our business. Life deposits collected decreased $178 million and $172 million for the three and six months ended June 30, 2022, respectively, primarily in Taiwan, reflecting challenging market conditions for deposit products. The prior year benefited from successful sales campaigns in broker and bank channels in Taiwan. Life Insurance underwriting income and Segment income Life Insurance underwriting income increased $15 million and $33 million for the three and six months ended June 30, 2022, respectively, reflecting lower year-over-year COVID-related losses and lower policy acquisition costs primarily due to the decrease in net premiums written and deposits collected noted above. Segment income was flat for the three months ended June 30, 2022. Segment income increased $10 million for the six months ended June 30, 2022, primarily due to the increase in underwriting income described above, partially offset by lower income from our investment in Huatai, our partially-owned insurance entity in China. Corporate Corporate results primarily include the results of our non-insurance companies, income and expenses not attributable to reportable segments and loss and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-off exposures, including molestation. Three Months Ended Six Months Ended June 30 % Change June 30 % Change (in millions of U.S. dollars, except for percentages) 2022 2021 Q-22 vs. Q-21 2022 2021 YTD-22 vs. YTD-21 Losses and loss expenses $ 191 $ 89 116.2 % $ 201 $ 98 105.9 % Administrative expenses 90 88 0.3 % 173 159 8.9 % Underwriting loss 281 177 58.6 % 374 257 45.8 % Net investment income (loss) (4) (15) (75.6) % (9) (32) (74.4) % Interest expense 134 122 10.7 % 266 244 9.0 % Net realized gains (losses) (513) (36) NM (413) 852 NM Other (income) expense 138 (708) NM (121) (1,123) (89.2) % Amortization of purchased intangibles 45 50 (8.0) % 91 99 (7.8) % Cigna integration expenses 3 — NM 3 — NM Income tax expense 293 317 (7.5) % 648 655 (1.0) % Net income (loss) $ (1,411) $ (9) NM $ (1,683) $ 688 NM NM - not meaningful Losses and loss expenses primarily includes unfavorable prior period development for molestation claims. Administrative expenses were relatively flat for the three months ended June 30, 2022. Administrative expenses increased $14 million for the six months ended June 30, 2022, primarily due to higher employee-related expenses and increased investment to support growth. 55 Table of Contents Cigna integration expenses are one-time in nature and are not related to the on-going business activities of the segments. The Chief Executive Officer does not manage segment results or allocate resources to segments when considering these costs and they are therefore excluded from our definition of segment income. Refer to the respective sections that follow for a discussion of Net realized gains (losses), Net investment income (loss), Amortization of purchased intangibles, and Income tax expense (benefit). Refer to Note 11 to the Consolidated Financial Statements for additional information on Other (income) expense. Net Realized and Unrealized Gains (Losses) We take a long-term view with our investment strategy, and our investment managers manage our investment portfolio to maximize total return within specific guidelines designed to minimize risk. The majority of our investment portfolio is available for sale and reported at fair value. Our held to maturity investment portfolio is reported at amortized cost, net of valuation allowance. The effect of market movements on our fixed maturities portfolio impacts Net income (through Net realized gains (losses)) when securities are sold, when we write down an asset, or when we record a change to the valuation allowance for expected credit losses. For a further discussion related to how we assess the valuation allowance for expected credit losses and the related impact on Net income, refer to Note 1 e) to the Consolidated Financial Statements in our 2021 Form 10-K. Additionally, Net income is impacted through the reporting of changes in the fair value of equity securities, private equity funds where we own less than three percent, and derivatives, including financial futures, options, swaps, and GLB reinsurance. Changes in unrealized appreciation and depreciation on available for sale securities, resulting from the revaluation of securities held, changes in cumulative foreign currency translation adjustment, and unrealized postretirement benefit obligations liability adjustment, are reported as separate components of Accumulated other comprehensive income in Shareholders’ equity in the Consolidated balance sheets. The following tables present our net realized and unrealized gains (losses): Three Months Ended June 30 2022 2021 (in millions of U.S. dollars) Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Fixed maturities $ (442) $ (4,344) $ (4,786) $ 12 $ 694 $ 706 Fixed income and equity derivatives (81) — (81) (91) — (91) Public equity Sales 163 — 163 45 — 45 Mark-to-market (426) — (426) 105 — 105 Private equity (less than 3 percent ownership) Mark-to-market 4 — 4 62 — 62 Total investment portfolio (782) (4,344) (5,126) 133 694 827 Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges 1 — 1 (72) — (72) Other derivatives 9 — 9 3 — 3 Foreign exchange 268 (777) (509) (97) 308 211 Other — 5 5 — (9) (9) Net gains (losses), pre-tax $ (504) $ (5,116) $ (5,620) $ (33) $ 993 $ 960 56 Table of Contents Six Months Ended June 30 2022 2021 (in millions of U.S. dollars) Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Impact Fixed maturities $ (578) $ (8,996) $ (9,574) $ 36 $ (1,623) $ (1,587) Fixed income and equity derivatives (34) — (34) 18 — 18 Public equity Sales 418 — 418 90 — 90 Mark-to-market (625) — (625) 427 — 427 Private equity (less than 3 percent ownership) Mark-to-market 59 — 59 100 — 100 Total investment portfolio (760) (8,996) (9,756) 671 (1,623) (952) Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges 78 — 78 203 — 203 Other derivatives 10 — 10 2 — 2 Foreign exchange 343 (710) (367) (21) 330 309 Other (1) (74) 24 (50) (1) (37) (38) Net gains (losses), pre-tax $ (403) $ (9,682) $ (10,085) $ 854 $ (1,330) $ (476) (1) Other realized losses include impairment of assets related to Chubb's Russian entities. Pre-tax net unrealized losses of $4,344 million and $8,996 million in our investment portfolio for the three and six months ended June 30, 2022, respectively, were principally the result of an increase in interest rates. In addition, there were realized losses of $782 million and $760 million for the three and six months ended June 30, 2022, respectively, primarily from mark-to-market losses on public equities and sales in fixed income securities. The variable annuity reinsurance derivative transactions consist of changes in the fair value of GLB liabilities and gains or losses on other derivative instruments we maintain that decrease in fair value when the S&P 500 index increases. The variable annuity reinsurance derivative transactions resulted in realized gains of $1 million for the three months ended June 30, 2022, reflecting a net loss of $143 million, primarily from an increase in the fair value of the GLB liabilities, and a net realized gain of $144 million related to these derivative instruments. The variable annuity reinsurance derivative transactions resulted in realized gains of $78 million for the six months ended June 30, 2022, reflecting a net loss of $108 million, primarily from an increase in the fair value of the GLB liabilities, and a net realized gain of $186 million related to these derivative instruments. The increase in the fair value of the GLB liabilities for the three and six months ended June 30, 2022, was primarily due to lower global equity markets and higher volatility, partially offset by higher interest rates. For the three months ended June 30, 2021, the variable annuity reinsurance derivative transactions resulted in realized losses of $72 million, reflecting principally a net realized loss of $64 million related to these other derivatives. The fair value of the GLB liabilities remained relatively flat for the three months ended June 30, 2021, as the impact of higher global equity markets was offset by lower interest rates. For the six months ended June 30, 2021, the variable annuity reinsurance derivative transactions resulted in realized gains of $203 million reflecting a net gain of $311 million principally related to a decrease in the fair value of the GLB liabilities due to higher interest rates and higher global equity markets, partially offset by a net realized loss of $108 million related to these other derivatives. Effective Income Tax Rate Our effective tax rate (ETR) reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between GAAP and local tax laws, and the impact of discrete items. A change in the geographic mix of earnings could impact our ETR. 57 Table of Contents For the three and six months ended June 30, 2022 our ETR was 19.4 percent and 16.9 percent, respectively. This compares to an ETR of 12.3 percent and 12.5 percent for the three and six months ended June 30, 2021, respectively. The ETR for each period was impacted by our mix of earnings among various jurisdictions and discrete tax benefits. Non-GAAP Reconciliation In presenting our results, we included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition. However, they should not be viewed as a substitute for measures determined in accordance with GAAP. Book value per common share is shareholders’ equity divided by the shares outstanding. Tangible book value per common share is shareholders’ equity less goodwill and other intangible assets, net of tax, divided by the shares outstanding. We believe that book value comparisons to less acquisitive peer companies are more meaningful when adjusted for goodwill and other intangible assets. The calculation of tangible book value per share does not consider the embedded goodwill attributable to our investments in partially-owned insurance companies until we consolidate . We provide financial measures, including net premiums written, net premiums earned, and underwriting income on a constant-dollar basis. We believe it is useful to evaluate the trends in our results exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign exchange rates between periods by translating prior period results using the same local currency exchange rates as the comparable current period. P&C performance metrics comprise consolidated operating results (including Corporate) and exclude the operating results of the Life Insurance segment. We believe that these measures are useful and meaningful to investors as they are used by management to assess the company’s P&C operations which are the most economically similar. We exclude the Life Insurance segment because the results of this business do not always correlate with the results of our P&C operations. P&C combined ratio is the sum of the loss and loss expense ratio, policy acquisition cost ratio and the administrative expense ratio excluding the life business and including the realized gains and losses on the crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations. CAY P&C combined ratio excluding catastrophe losses (CATs) excludes CATs and prior period development (PPD) from the P&C combined ratio. We exclude CATs as they are not predictable as to timing and amount and PPD as these unexpected loss developments on historical reserves are not indicative of our current underwriting performance. The combined ratio numerator is adjusted to exclude CATs, net premiums earned adjustments on PPD, prior period expense adjustments and reinstatement premiums on PPD, and the denomi nator is adjusted to exclude net premiums earned adjustments on PPD and reinstatement premiums on CATs and PPD. In periods where there are adjustments on loss sensitive policies, these adjustments are excluded from PPD and net premiums earned when calculating the ratios. We believe this measure provides a better evaluation of our underwriting performance and enhances the understanding of the trends in our P&C business that may be obscured by these items. This measure is commonly reported among our peer companies and allows for a better comparison. Reinstatement premiums are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted. Net premiums earned adjustments within PPD are adjustments to the initial premium earned on retrospectively rated policies based on actual claim experience that develops after the policy period ends. The premium adjustments correlate to the prior period loss development on these same policies and are fully earned in the period the adjustments are recorded. Prior period expense adjustments typically relate to adjustable commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies. 58 Table of Contents The following tables present the calculation of combined ratio, as reported for each segment to P&C combined ratio, adjusted for CATs and PPD: North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Corporate Total P&C Three Months Ended June 30, 2022 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 2,446 $ 773 $ 478 $ 1,224 $ 139 $ 191 $ 5,251 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (124) (95) (21) (49) (2) — (291) Reinstatement premiums collected (expensed) on catastrophe losses — — — — — — — Catastrophe losses, gross of related adjustments (124) (95) (21) (49) (2) — (291) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 287 3 — 173 (25) (191) 247 Net premiums earned adjustments on PPD - unfavorable (favorable) 3 — — — — — 3 Expense adjustments - unfavorable (favorable) (1) — — — — — (1) PPD reinstatement premiums - unfavorable (favorable) — — — — (3) — (3) PPD, gross of related adjustments - favorable (unfavorable) 289 3 — 173 (28) (191) 246 CAY loss and loss expense ex CATs B $ 2,611 $ 681 $ 457 $ 1,348 $ 109 $ — $ 5,206 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 822 $ 331 $ 33 $ 975 $ 67 $ 90 $ 2,318 Expense adjustments - favorable (unfavorable) 1 — — — — — 1 Policy acquisition costs and administrative expenses, adjusted D $ 823 $ 331 $ 33 $ 975 $ 67 $ 90 $ 2,319 Denominator Net premiums earned E $ 4,248 $ 1,271 $ 573 $ 2,696 $ 222 $ 9,010 Net premiums earned adjustments on PPD - unfavorable (favorable) 3 — — — — 3 PPD reinstatement premiums - unfavorable (favorable) — — — — (3) (3) Net premiums earned excluding adjustments F $ 4,251 $ 1,271 $ 573 $ 2,696 $ 219 $ 9,010 P&C Combined ratio Loss and loss expense ratio A/E 57.6 % 60.8 % 83.3 % 45.4 % 62.6 % 58.3 % Policy acquisition cost and administrative expense ratio C/E 19.3 % 26.1 % 5.8 % 36.2 % 30.2 % 25.7 % P&C Combined ratio 76.9 % 86.9 % 89.1 % 81.6 % 92.8 % 84.0 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 61.4 % 53.6 % 79.6 % 50.0 % 49.7 % 57.8 % Policy acquisition cost and administrative expense ratio, adjusted D/F 19.4 % 26.1 % 5.8 % 36.2 % 30.7 % 25.7 % CAY P&C Combined ratio ex CATs 80.8 % 79.7 % 85.4 % 86.2 % 80.4 % 83.5 % Combined ratio Combined ratio 84.1 % Add: impact of gains and losses on crop derivatives (0.1) % P&C Combined ratio 84.0 % Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above. 59 Table of Contents North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Corporate Total P&C Three Months Ended June 30, 2021 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 2,426 $ 676 $ 331 $ 1,186 $ 110 $ 89 $ 4,818 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (165) (61) (4) (40) (10) — (280) Reinstatement premiums collected (expensed) on catastrophe losses — 7 — — 1 — 8 Catastrophe losses, gross of related adjustments (165) (68) (4) (40) (11) — (288) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 156 44 — 156 — (88) 268 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — — — — — 11 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 (2) — 12 PPD, gross of related adjustments - favorable (unfavorable) 173 45 — 163 (2) (88) 291 CAY loss and loss expense ex CATs B $ 2,434 $ 653 $ 327 $ 1,309 $ 97 $ 1 $ 4,821 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 734 $ 312 $ 30 $ 978 $ 57 $ 88 $ 2,199 Expense adjustments - favorable (unfavorable) — — — — — — — Policy acquisition costs and administrative expenses, adjusted D $ 734 $ 312 $ 30 $ 978 $ 57 $ 88 $ 2,199 Denominator Net premiums earned E $ 3,803 $ 1,224 $ 410 $ 2,579 $ 192 $ 8,208 Reinstatement premiums (collected) expensed on catastrophe losses — (7) — — (1) (8) Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — — — — 11 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 (2) 12 Net premiums earned excluding adjustments F $ 3,820 $ 1,218 $ 410 $ 2,586 $ 189 $ 8,223 P&C Combined ratio Loss and loss expense ratio A/E 63.8 % 55.2 % 80.7 % 46.0 % 56.8 % 58.7 % Policy acquisition cost and administrative expense ratio C/E 19.3 % 25.5 % 7.4 % 37.9 % 29.8 % 26.8 % P&C Combined ratio 83.1 % 80.7 % 88.1 % 83.9 % 86.6 % 85.5 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.7 % 53.6 % 79.7 % 50.6 % 50.9 % 58.6 % Policy acquisition cost and administrative expense ratio, adjusted D/F 19.2 % 25.6 % 7.4 % 37.8 % 30.3 % 26.8 % CAY P&C Combined ratio ex CATs 82.9 % 79.2 % 87.1 % 88.4 % 81.2 % 85.4 % Combined ratio Combined ratio 85.5 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 85.5 % Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above. 60 Table of Contents North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Corporate Total P&C Six Months Ended June 30, 2022 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 4,943 $ 1,486 $ 386 $ 2,613 $ 254 $ 201 $ 9,883 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (205) (195) (21) (200) (3) — (624) Reinstatement premiums collected (expensed) on catastrophe losses — — — — — — — Catastrophe losses, gross of related adjustments (205) (195) (21) (200) (3) — (624) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 395 54 26 233 (22) (199) 487 Net premiums earned adjustments on PPD - unfavorable (favorable) 3 — 159 — — — 162 Expense adjustments - unfavorable (favorable) 5 — (1) — — — 4 PPD reinstatement premiums - unfavorable (favorable) — — — — (2) — (2) PPD, gross of related adjustments - favorable (unfavorable) 403 54 184 233 (24) (199) 651 CAY loss and loss expense ex CATs B $ 5,141 $ 1,345 $ 549 $ 2,646 $ 227 $ 2 $ 9,910 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 1,660 $ 660 $ 44 $ 1,923 $ 138 $ 173 $ 4,598 Expense adjustments - favorable (unfavorable) (5) — 1 — — — (4) Policy acquisition costs and administrative expenses, adjusted D $ 1,655 $ 660 $ 45 $ 1,923 $ 138 $ 173 $ 4,594 Denominator Net premiums earned E $ 8,362 $ 2,518 $ 544 $ 5,324 $ 457 $ 17,205 Net premiums earned adjustments on PPD - unfavorable (favorable) 3 — 159 — — 162 PPD reinstatement premiums - unfavorable (favorable) — — — — (2) (2) Net premiums earned excluding adjustments F $ 8,365 $ 2,518 $ 703 $ 5,324 $ 455 $ 17,365 P&C Combined ratio Loss and loss expense ratio A/E 59.1 % 59.0 % 70.9 % 49.1 % 55.5 % 57.4 % Policy acquisition cost and administrative expense ratio C/E 19.9 % 26.2 % 8.1 % 36.1 % 30.2 % 26.8 % P&C Combined ratio 79.0 % 85.2 % 79.0 % 85.2 % 85.7 % 84.2 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 61.5 % 53.4 % 77.9 % 49.7 % 49.8 % 57.1 % Policy acquisition cost and administrative expense ratio, adjusted D/F 19.7 % 26.3 % 6.4 % 36.1 % 30.3 % 26.4 % CAY P&C Combined ratio ex CATs 81.2 % 79.7 % 84.3 % 85.8 % 80.1 % 83.5 % Combined ratio Combined ratio 84.3 % Add: impact of gains and losses on crop derivatives (0.1) % P&C Combined ratio 84.2 % Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above. 61 Table of Contents North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Corporate Total P&C Six Months Ended June 30, 2021 (in millions of U.S. dollars except for ratios) Numerator Losses and loss expenses A $ 4,986 $ 1,495 $ 416 $ 2,449 $ 230 $ 98 $ 9,674 Catastrophe losses and related adjustments Catastrophe losses, net of related adjustments (527) (301) (12) (90) (50) — (980) Reinstatement premiums collected (expensed) on catastrophe losses — (16) — — 6 — (10) Catastrophe losses, gross of related adjustments (527) (285) (12) (90) (56) — (970) PPD and related adjustments PPD, net of related adjustments - favorable (unfavorable) 283 84 2 181 7 (97) 460 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — (2) — — — 9 Expense adjustments - unfavorable (favorable) 3 — — — — — 3 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 1 — 15 PPD, gross of related adjustments - favorable (unfavorable) 303 85 — 188 8 (97) 487 CAY loss and loss expense ex CATs B $ 4,762 $ 1,295 $ 404 $ 2,547 $ 182 $ 1 $ 9,191 Policy acquisition costs and administrative expenses Policy acquisition costs and administrative expenses C $ 1,502 $ 619 $ 45 $ 1,912 $ 110 $ 159 $ 4,347 Expense adjustments - favorable (unfavorable) (3) — — — — — (3) Policy acquisition costs and administrative expenses, adjusted D $ 1,499 $ 619 $ 45 $ 1,912 $ 110 $ 159 $ 4,344 Denominator Net premiums earned E $ 7,477 $ 2,408 $ 520 $ 5,057 $ 372 $ 15,834 Reinstatement premiums (collected) expensed on catastrophe losses — 16 — — (6) 10 Net premiums earned adjustments on PPD - unfavorable (favorable) 11 — (2) — — 9 PPD reinstatement premiums - unfavorable (favorable) 6 1 — 7 1 15 Net premiums earned excluding adjustments F $ 7,494 $ 2,425 $ 518 $ 5,064 $ 367 $ 15,868 P&C Combined ratio Loss and loss expense ratio A/E 66.7 % 62.1 % 80.0 % 48.4 % 61.7 % 61.1 % Policy acquisition cost and administrative expense ratio C/E 20.1 % 25.7 % 8.7 % 37.8 % 29.6 % 27.5 % P&C Combined ratio 86.8 % 87.8 % 88.7 % 86.2 % 91.3 % 88.6 % CAY P&C Combined ratio ex CATs Loss and loss expense ratio, adjusted B/F 63.6 % 53.4 % 77.9 % 50.3 % 49.6 % 57.9 % Policy acquisition cost and administrative expense ratio, adjusted D/F 20.0 % 25.5 % 8.7 % 37.8 % 30.0 % 27.4 % CAY P&C Combined ratio ex CATs 83.6 % 78.9 % 86.6 % 88.1 % 79.6 % 85.3 % Combined ratio Combined ratio 88.6 % Add: impact of gains and losses on crop derivatives — P&C Combined ratio 88.6 % Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E, and F included in the table are references for calculating the ratios above. 62 Table of Contents Amortization of Purchased Intangibles and Other Amortization Amortization expense related to purchased intangibles was $71 million and $142 million for the three and six months ended June 30, 2022, respectively, and principally relates to the Chubb Corp acquisition. The following table presents, as of June 30, 2022, the estimated pre-tax amortization expense (benefit) of purchased intangibles, at current foreign currency exchange rates, for the third and fourth quarters of 2022 and for the next five years: Associated with the Chubb Corp Acquisition For the Years Ending December 31 (in millions of U.S. dollars) Agency distribution relationships and renewal rights Fair value adjustment on Unpaid losses and loss expenses Total (1) Other intangible assets (2) Total Amortization of purchased intangibles Third quarter of 2022 $ 49 $ (3) $ 46 $ 24 $ 70 Fourth quarter of 2022 49 (3) 46 25 71 2023 177 (6) 171 94 265 2024 159 (5) 154 88 242 2025 143 (5) 138 86 224 2026 129 (6) 123 84 207 2027 116 (10) 106 82 188 Total $ 822 $ (38) $ 784 $ 483 $ 1,267 (1) Recorded in Corporate. (2) Recorded in applicable segment(s) that acquired the intangible assets. Reduction of deferred tax liability associated with Other intangible assets At June 30, 2022, the deferred tax liability associated with Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expense) was $1,171 million. The following table presents as of June 30, 2022, the expected reduction to the deferred tax liability associated with the amortization of Other intangible assets, at current foreign currency exchange rates, for the third and fourth quarters of 2022 and for the next five years: For the Years Ending December 31 (in millions of U.S. dollars) Reduction to deferred tax liability associated with intangible assets Third quarter of 2022 16 Fourth quarter of 2022 16 2023 60 2024 55 2025 51 2026 48 2027 45 Total $ 291 63 Table of Contents Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt The following table presents at June 30, 2022, the expected amortization expense of the fair value adjustment on acquired invested assets related to the Chubb Corp acquisition, at current foreign currency exchange rates, and the expected amortization benefit from the fair value adjustment on assumed long-term debt for the third and fourth quarters of 2022 and for the next five years: Amortization (expense) benefit of the fair value adjustment on For the Years Ending December 31 (in millions of U.S. dollars) Acquired invested assets (1) Assumed long-term debt (2) Third quarter of 2022 (15) 5 Fourth quarter of 2022 (14) 6 2023 (50) 21 2024 (15) 21 2025 — 21 2026 — 21 2027 — 21 Total $ (94) $ 116 (1) Recorded as a reduction to Net investment income in the Consolidated statements of operations. (2) Recorded as a reduction to Interest expense in the Consolidated statements of operations. The estimate of amortization expense of the fair value adjustment on acquired invested assets could vary based on current market conditions, bond calls, overall duration of the acquired investment portfolio, and foreign exchange. Net Investment Income Three Months Ended June 30 Six Months Ended June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Fixed maturities (1) $ 853 $ 836 $ 1,652 $ 1,676 Short-term investments 15 8 24 17 Other interest income 4 3 7 5 Equity securities 34 41 72 77 Other investments 27 43 46 66 Gross investment income (1) 933 931 1,801 1,841 Investment expenses (45) (47) (91) (94) Net investment income (1) $ 888 $ 884 $ 1,710 $ 1,747 (1) Includes amortization expense related to fair value adjustment of acquired invested assets related to the Chubb Corp acquisition $ (14) $ (22) $ (30) $ (48) Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation. Net investment income increased 0.4 percent for the three months ended June 30, 2022, primarily due to higher reinvestment rates on fixed maturities, offset by reduced call activity in fixed income securities, and lower income from equity securities and private equities, which are included in Other investments. Net investment income decreased 2.1 percent for the six months ended June 30, 2022, due to reduced call activity in fixed income securities and lower income from equity securities, and private equities, which are included in Other investments. 64 Table of Contents For private equities where we own less than three percent, investment income is included within Net investment income in the table above. For private equities where we own more than three percent, investment income is included within Other income (expense) in the Consolidated statements of operations. Excluded from Net investment income is the mark-to-market movement for private equities, which is recorded within either Other income (expense) or Net realized gains (losses) based on our percentage of ownership. The total mark-to-market movement for private equities excluded from Net investment income was as follows: Three Months Ended June 30 Six Months Ended June 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Total mark-to-market gain (loss) on private equity, pre-tax $ (130) $ 736 $ 180 $ 1,174 Interest Expense Interest expense was $266 million for the six months ended June 30, 2022, including a benefit of $10 million related to the amortization of the fair value of debt assumed in the Chubb Corp acquisition. Pre-tax interest expense for our existing debt obligations and fees based on expected usage of certain facilities, including letters of credit, collateral fees, and repurchase agreements, is expected to be $297 million for the rest of 2022, or, $573 million for the full year 2022 based on current foreign exchange rates. This is an increase of about $30 million from our previous estimate of $543 million for full year 2022 as disclosed in our 2021 Form 10-K. This increase is primarily driven by interest from an additional $2.0 billion in repurchase agreements which Chubb entered into during the second quarter of 2022 to finance a portion of the acquisition of Cigna's accident and health (A&H) and life business in six Asia-Pacific markets. The $2.0 billion repurchase agreements are due to expire by the end of 2022. In addition, we expect a benefit of $11 million related to the fair value of debt amortization for the rest of 2022, or, $21 million for the full year 2022. For more information on our debt obligations, refer to Note 9 to the Consolidated Financial Statements, under Item 8 in our 2021 Form 10-K. Investments Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of A/A as rated by the independent investment rating services Standard and Poor’s (S&P)/Moody’s Investors Service (Moody’s) at June 30, 2022. The portfolio is externally managed by independent, professional investment managers and is broadly diversified across geographies, sectors, and issuers. Other investments principally comprise direct investments, investment funds, and limited partnerships. We hold no collateralized debt obligations in our investment portfolio, and we provide no credit default protection. We have long-standing global credit limits for our entire portfolio across the organization. Exposures are aggregated, monitored, and actively managed by our Global Credit Committee, comprising senior executives, including our Chief Financial Officer, our Chief Risk Officer, our Chief Investment Officer, and our Treasurer. We also have well-established, strict contractual investment rules requiring managers to maintain highly diversified exposures to individual issuers and closely monitor investment manager compliance with portfolio guidelines. The average duration of our fixed income securities, including the effect of options and swaps, was 4.3 years and 4.1 years at June 30, 2022 and December 31, 2021, respectively. We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately $4.1 billion at June 30, 2022. The following table shows the fair value and cost/amortized cost, net of valuation allowance, of our invested assets: June 30, 2022 December 31, 2021 (in millions of U.S. dollars) Fair Value Cost/ Amortized Cost, Net Fair Value Cost/ Amortized Cost, Net Fixed maturities available for sale $ 82,069 $ 88,438 $ 93,108 $ 90,479 Fixed maturities held to maturity 9,333 9,532 10,647 10,118 Short-term investments 3,431 3,433 3,146 3,147 Fixed income securities 94,833 101,403 106,901 103,744 Equity securities 2,649 2,649 4,782 4,782 Other investments 12,168 12,168 11,169 11,169 Total investments $ 109,650 $ 116,220 $ 122,852 $ 119,695 65 Table of Contents The fair value of our total investments decreased $13.2 billion during the six months ended June 30, 2022 due to unrealized losses on fixed maturities, sales of fixed income securit ies, and sh are repurchases, partially offset by strong operating cash flows. The following tables present the fair value of our fixed income securities at June 30, 2022 and December 31, 2021. The first table lists investments according to type and second according to S&P credit rating: June 30, 2022 December 31, 2021 (in millions of U.S. dollars, except for percentages) Fair Value % of Total Fair Value % of Total U.S. Treasury / Agency $ 3,450 4 % $ 3,458 3 % Corporate and asset-backed securities 36,793 38 % 41,264 39 % Mortgage-backed securities 18,933 20 % 22,292 21 % Municipal 8,338 9 % 9,650 9 % Non-U.S. 23,888 25 % 27,091 25 % Short-term investments 3,431 4 % 3,146 3 % Total $ 94,833 100 % $ 106,901 100 % AAA $ 13,946 15 % $ 15,364 14 % AA 30,771 32 % 35,179 33 % A 17,326 18 % 20,171 19 % BBB 15,726 17 % 17,362 16 % BB 8,514 9 % 9,084 8 % B 8,167 9 % 9,202 9 % Other 383 — % 539 1 % Total $ 94,833 100 % $ 106,901 100 % Corporate and asset-backed securities The following table presents our 10 largest global exposures to corporate bonds by fair value at June 30, 2022: (in millions of U.S. dollars) Fair Value Bank of America Corp $ 596 JP Morgan Chase & Co 568 Wells Fargo & Co 487 Morgan Stanley 449 Comcast Corp 414 Verizon Communications Inc 412 AT&T Inc 387 Citigroup Inc 385 Goldman Sachs Group Inc 366 HSBC Holdings Plc 324 66 Table of Contents Mortgage-backed securities The following table shows the fair value and amortized cost, net of valuation allowance, of our mortgage-backed securities: S&P Credit Rating Fair Value Amortized Cost, Net June 30, 2022 (in millions of U.S. dollars) AAA AA A BBB BB and below Total Total Agency residential mortgage-backed securities (RMBS) $ 8 $ 15,399 $ — $ — $ — $ 15,407 $ 16,571 Non-agency RMBS 366 45 68 38 5 522 577 Commercial mortgage-backed securities 2,567 268 154 12 3 3,004 3,155 Total mortgage-backed securities $ 2,941 $ 15,712 $ 222 $ 50 $ 8 $ 18,933 $ 20,303 Municipal As part of our overall investment strategy, we may invest in states, municipalities, and other political subdivisions fixed maturity securities (Municipal). We apply the same investment selection process described previously to our Municipal investments. The portfolio is highly diversified primarily in state general obligation bonds and essential service revenue bonds including education and utilities (water, power, and sewers). Non-U.S. Our exposure to the Euro results primarily from Chubb European Group SE which is headquartered in France and offers a broad range of coverages throughout the European Union, Central, and Eastern Europe. Chubb primarily invests in Euro denominated investments to support its local currency insurance obligations and required capital levels. Chubb’s local currency investment portfolios have strict contractual investment guidelines requiring managers to maintain a high quality and diversified portfolio to both sector and individual issuers. Investment portfolios are monitored daily to ensure investment manager compliance with portfolio guidelines. Our non-U.S. investment grade fixed income portfolios are currency-matched with the insurance liabilities of our non-U.S. operations. The average credit quality of our non-U.S. fixed income securities is A and 45 percent of our holdings are rated AAA or guaranteed by governments or quasi-government agencies. Within the context of these investment portfolios, our government and corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA—two percent, A—one percent, BBB—0.5 percent of the total portfolio) and are monitored daily via an internal compliance system. We manage our indirect exposure using the same credit rating based investment approach. Accordingly, we do not believe our indirect exposure is material. The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. government securities at June 30, 2022: (in millions of U.S. dollars) Fair Value Amortized Cost, Net Republic of Korea $ 949 $ 982 Canada 890 956 Federative Republic of Brazil 605 629 Province of Ontario 575 616 United Mexican States 508 548 United Kingdom 440 461 Kingdom of Thailand 435 461 Socialist Republic of Vietnam 426 339 Commonwealth of Australia 411 470 Province of Quebec 400 422 Other Non-U.S. Government Securities 4,562 4,983 Total $ 10,201 $ 10,867 67 Table of Contents The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. corporate securities at June 30, 2022: (in millions of U.S. dollars) Fair Value Amortized Cost, Net United Kingdom $ 2,106 $ 2,266 Canada 1,687 1,822 United States (1) 1,088 1,229 France 1,038 1,115 Australia 932 1,014 Japan 722 766 Switzerland 518 565 Germany 502 552 Netherlands 495 530 China 386 413 Other Non-U.S. Corporate Securities 4,213 4,583 Total $ 13,687 $ 14,855 (1) The countries that are listed in the non-U.S. corporate fixed income portfolio above represent the ultimate parent company's country of risk. Non-U.S. corporate securities could be issued by foreign subsidiaries of U.S. corporations. Below-investment grade corporate fixed income portfolio Below-investment grade securities have different characteristics than investment grade corporate debt securities. Risk of loss from default by the borrower is greater with below-investment grade securities. Below-investment grade securities are generally unsecured and are often subordinated to other creditors of the issuer. Also, issuers of below-investment grade securities usually have higher levels of debt and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than investment grade issuers. At June 30, 2022, our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 16 percent of our fixed income portfolio. Our below-investment grade and non-rated portfolio includes 1,739 issuers, with the greatest single exposure being $143 million. We manage high-yield bonds as a distinct and separate asset class from investment grade bonds. The allocation to high-yield bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our minimum rating for initial purchase is BB/B. Fourteen external investment managers are responsible for high-yield security selection and portfolio construction. Our high-yield managers have a conservative approach to credit selection and very low historical default experience. Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit as a percentage of high-yield allocation. We monitor position limits daily through an internal compliance system. Derivative and structured securities (e.g., credit default swaps and collateralized debt obligations) are not permitted in the high-yield portfolio. 68 Table of Contents Critical Accounting Estimates As of June 30, 2022, there were no material changes to our critical accounting estimates. For a full discussion of our critical accounting estimates, refer to Item 7 in our 2021 Form 10-K. Unpaid losses and loss expenses As an insurance and reinsurance company, we are required by applicable laws and regulations and GAAP to establish loss and loss expense reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of our policies and agreements with our insured and reinsured customers. With the exception of certain structured settlements, for which the timing and amount of future claim payments are reliably determinable, and certain reserves for unsettled claims, our loss reserves are not discounted for the time value of money. The following table presents a roll-forward of our unpaid losses and loss expenses: (in millions of U.S. dollars) Gross Losses Reinsurance Recoverable (1) Net Losses Balance at December 31, 2021 $ 72,943 $ 16,184 $ 56,759 Losses and loss expenses incurred 13,003 2,808 10,195 Losses and loss expenses paid (11,027) (2,180) (8,847) Other (including foreign exchange translation) (827) (239) (588) Balance at June 30, 2022 $ 74,092 $ 16,573 $ 57,519 (1) Net of valuation allowance for uncollectible reinsurance. The estimate of the liabilities includes provisions for claims that have been reported but are unpaid at the balance sheet date (case reserves) and for obligations on claims that have been incurred but not reported (IBNR) at the balance sheet date. IBNR may also include provisions to account for the possibility that reported claims may settle for amounts that differ from the established case reserves. Loss reserves also include an estimate of expenses associated with processing and settling unpaid claims (loss expenses). Refer to Note 6 to the Consolidated Financial Statements for a discussion on the changes in the loss reserves. Asbestos and Environmental (A&E) There was no significant A&E reserve activity during the three and six months ended June 30, 2022. A&E reserves are included in Corporate. Refer to our 2021 Form 10-K for further information on our A&E exposures. Fair value measurements Accounting guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to unobservable data (Level 3 inputs). Level 2 includes inputs, other than quoted prices within Level 1, that are observable for assets or liabilities either directly or indirectly. Refer to Note 4 to the Consolidated Financial Statements for information on our fair value measurements. 69 Table of Contents Catastrophe Management We actively monitor and manage our catastrophe risk accumulation around the world from natural perils, including setting risk limits based on probable maximum loss (PML), and purchasing catastrophe reinsurance, to ensure sufficient liquidity and capital to meet the expectations of regulators, rating agencies and policyholders, and to provide shareholders with an appropriate risk-adjusted return. Chubb uses internal and external data together with sophisticated analytical, catastrophe loss and risk modeling techniques to ensure an appropriate understanding of risk, including diversification and correlation effects, across different product lines and territories. The table below presents our modeled pre-tax estimates of natural catastrophe PML, net of reinsurance, at June 30, 2022, and does not represent our expected catastrophe losses for any one year. Modeled Net Probable Maximum Loss (PML) Pre-tax Worldwide (1) U.S. Hurricane (2) California Earthquake (3) Annual Aggregate Annual Aggregate Single Occurrence (in millions of U.S. dollars, except for percentages) Chubb % of Total Shareholders’ Equity Chubb % of Total Shareholders’ Equity Chubb % of Total Shareholders’ Equity 1-in-10 $ 2,177 4.2 % $ 1,132 2.2 % $ 146 0.3 % 1-in-100 $ 4,558 8.8 % $ 2,916 5.6 % $ 1,314 2.5 % 1-in-250 $ 7,475 14.5 % $ 5,443 10.5 % $ 1,500 2.9 % (1) Worldwide aggregate is comprised of losses arising from tropical cyclones, convective storms, earthquakes, U.S. wildfires and inland floods, and excludes "non-modeled" perils such as man-made and other catastrophe risks including pandemic. (2) U.S. hurricane losses include losses from wind and storm-surge and exclude rainfall. (3) California earthquakes include the fire-following sub-peril. The PML for worldwide and key U.S. peril regions are based on our in-force portfolio at April 1, 2022, and reflect the April 1, 2022, reinsurance program (see Global Property Catastrophe Reinsurance Program section) as well as inuring reinsurance protection coverages. These estimates assume that reinsurance recoverable is fully collectible. According to the model, for the 1-in-100 return period scenario, there is a one percent chance that our pre-tax annual aggregate losses incurred in any year from U.S. hurricane events could be in excess of $2,916 million (or 5.6 percent of our total shareholders’ equity at June 30, 2022). Effective December 31, 2021, our worldwide PMLs include losses from U.S. wildfire and U.S. inland flood. The above estimates of Chubb’s loss profile are inherently uncertain for many reasons, including the following: • While the use of third-party modeling packages to simulate potential catastrophe losses is prevalent within the insurance industry, the models are reliant upon significant meteorology, seismology, and engineering assumptions to estimate catastrophe losses. In particular, modeled catastrophe events are not always a representation of actual events and ensuing additional loss potential; • There is no universal standard in the preparation of insured data for use in the models, the running of the modeling software and interpretation of loss output. These loss estimates do not represent our potential maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates; • The potential effects of climate change add to modeling complexity; and • Changing climate conditions could impact our exposure to natural catastrophe risks. Published studies by leading government, academic and professional organizations combined with extensive research by Chubb climate scientists reveal the potential for increases in the frequency and severity of key natural perils such as tropical cyclones, inland flood, and wildfire. To understand the potential impacts on the Chubb portfolio, we have conducted stress tests on our peak exposure zone, namely in the U.S., using parameters outlined by the Intergovernmental Panel on Climate Change (IPCC) Climate Change 2021 report. These parameters consider the impacts of climate change and the resulting climate peril impacts over a timescale relevant to our business. The tests are conducted by adjusting our baseline view of risk for the perils of hurricane, inland flood, and wildfire in the U.S. to reflect increases in frequency and severity across the modeled domains for each of these perils. Based on these tests against the Chubb portfolio we do not expect material impacts to our baseline PMLs from climate change through December 31, 2022. These tests reflect current exposures only and exclude potentially mitigating factors such as changes to building codes, public or private risk mitigation, regulation and public policy. Refer to Item 7 in our 2021 Form 10-K for more information on man-made and other catastrophes. 70 Table of Contents Global Property Catastrophe Reinsurance Program Chubb’s core property catastrophe reinsurance program provides protection against natural catastrophes impacting its primary property operations (i.e., excluding our Global Reinsurance and Life Insurance segments). We regularly review our reinsurance protection and corresponding property catastrophe exposures. This may or may not lead to the purchase of additional reinsurance prior to a program’s renewal date. In addition, prior to each renewal date, we consider how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and various other structuring considerations. Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations effective April 1, 2022, through March 31, 2023, with no material changes in coverage from the expiring program. The program consists of three layers in excess of losses retained by Chubb on a per occurrence basis. In addition, Chubb renewed its terrorism coverage (excluding nuclear, biological, chemical and radiation coverage, with an inclusion of coverage for biological and chemical coverage for personal lines) for the United States from April 1, 2022, through March 31, 2023 with the same limits and retention and percentage placed except that the majority of terrorism coverage is on an aggregate basis above our retentions without a reinstatement. Loss Location Layer of Loss Comments Notes United States (excluding Alaska and Hawaii) $0 million – $1.0 billion Losses retained by Chubb (a) United States (excluding Alaska and Hawaii) $1.0 billion – $1.15 billion All natural perils and terrorism (b) United States (excluding Alaska and Hawaii) $1.15 billion – $2.25 billion All natural perils and terrorism (c) United States (excluding Alaska and Hawaii) $2.25 billion – $3.5 billion All natural perils and terrorism (d) International (including Alaska and Hawaii) $0 million – $175 million Losses retained by Chubb (a) International (including Alaska and Hawaii) $175 million – $1.275 billion All natural perils and terrorism (c) Alaska, Hawaii, and Canada $1.275 billion – $2.525 billion All natural perils and terrorism (d) (a) Ultimate retention will depend upon the nature of the loss and the interplay between the underlying per risk programs and certain other catastrophe programs purchased by individual business units. These other catastrophe programs have the potential to reduce our effective retention below the stated levels. (b) These coverages are partially placed with Reinsurers. (c) These coverages are both part of the same Second layer within the Global Property Catastrophe Reinsurance Program and are fully placed with Reinsurers. (d) These coverages are both part of the same Third layer within the Global Property Catastrophe Reinsurance Program and are fully placed with Reinsurers. 71 Table of Contents Liquidity We anticipate that positive cash flows from operations (underwriting activities and investment income) should be sufficient to cover cash outflows under most loss scenarios for the near term. In addition to cash from operations, routine sales of investments, and financing arrangements, we have agreements with a third-party bank provider which implemented two international multi-currency notional cash pooling programs to enhance cash management efficiency during periods of short-term timing mismatches between expected inflows and outflows of cash by currency. The programs allow us to optimize investment income by avoiding portfolio disruption. Should the need arise, we generally have access to capital markets and to credit facilities with letter of credit capacity of $3.7 billion with a sub-limit of $2.0 billion for revolving credit. At June 30, 2022, our usage under these facilities was $1.3 billion in letters of credit. Our access to credit under these facilities is dependent on the ability of the banks that are a party to the facilities to meet their funding commitments. The facilities require that we maintain certain financial covenants, all of which we met at June 30, 2022. Should the existing credit providers on these facilities experience financial difficulty, we may be required to replace credit sources, possibly in a difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty accessing our credit facilities. The payment of dividends or other statutorily permissible distributions from our operating companies are subject to the laws and regulations applicable to each jurisdiction, as well as the need to maintain capital levels adequate to support the insurance and reinsurance operations, including financial strength ratings issued by independent rating agencies. During the six months ended June 30, 2022, we were able to meet all our obligations, including the payments of dividends on our Common Shares, with our net cash flows. We assess which subsidiaries to draw dividends from based on a number of factors. Considerations such as regulatory and legal restrictions as well as the subsidiary’s financial condition are paramount to the dividend decision. Chubb Limited received dividends of $5.8 billion and $1.8 billion from its Bermuda subsidiaries during the six months ended June 30, 2022 and 2021, respectively. Chubb Limited received cash dividends of nil and $21 million and non-cash dividends of nil and $536 million from a Swiss subsidiary during the six months ended June 30, 2022 and 2021, respectively. The U.S. insurance subsidiaries of Chubb INA Holdings Inc. (Chubb INA) may pay dividends, without prior regulatory approval, subject to restrictions set out in state law of the subsidiary’s domicile (or, if applicable, commercial domicile). Chubb INA’s international subsidiaries are also subject to insurance laws and regulations particular to the countries in which the subsidiaries operate. These laws and regulations sometimes include restrictions that limit the amount of dividends payable without prior approval of regulatory insurance authorities. Chubb Limited received no dividends from Chubb INA during the six months ended June 30, 2022 and 2021. Debt issued by Chubb INA is serviced by statutorily permissible distributions by Chubb INA’s insurance subsidiaries to Chubb INA as well as other group resources. Chubb INA received $1.8 billion and $470 million from its subsidiaries during the six months ended June 30, 2022 and 2021, respectively. Cash Flows Our sources of liquidity include cash from operations, routine sales of investments, and financing arrangements. The following is a discussion of our cash flows for the six months ended June 30, 2022 and 2021. Operating cash flows were $5.2 billion in both the six months ended June 30, 2022, and 2021. Cash from (used for) investing was $1.1 billion in the six months ended June 30, 2022, compared to $(2.0) billion in the prior period, an increase of $3.1 billion. Cash from investing in the current period included higher net sales of fixed maturities and equity securities of $3.7 billion, partially offset by higher private equity contributions, net of distributions received, of $606 million. In addition, cash used related to acquisitions of Huatai Group ownership interest was $113 million in 2022 compared to $65 million in 2021. Cash used for financing was $0.7 billion in the six months ended June 30, 2022, compared to $3.0 billion in the prior year period. This decrease of $2.3 billion was the result of an additional $2.0 billion in repurchase agreements which Chubb entered into during the second quarter of 2022 to finance a portion of the acquisition of Cigna's A&H and life business in six Asia-Pacific markets. Chubb uses repurchase agreements as a low-cost funding alternative. At June 30, 2022, there were $3.4 billion in repurchase agreements outstanding with various maturities over the next six months. 72 Table of Contents Both internal and external forces influence our financial condition, results of operations, and cash flows. Claim settlements, premium levels, and investment returns may be impacted by changing rates of inflation and other economic conditions. In many cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to us, and the settlement of the liability for that loss. Capital Resources Capital resources consist of funds deployed or available to be deployed to support our business operations. June 30 December 31 (in millions of U.S. dollars, except for ratios) 2022 2021 Short-term debt $ 1,474 $ 999 Long-term debt 14,311 15,169 Total financial debt 15,785 16,168 Trust preferred securities 308 308 Total shareholders’ equity 51,667 59,714 Total capitalization $ 67,760 $ 76,190 Ratio of financial debt to total capitalization 23.3 % 21.2 % Ratio of financial debt plus trust preferred securities to total capitalization 23.8 % 21.6 % The ratios of financial debt to total capitalization in the table above are higher at June 30, 2022 compared to December 31, 2021 from the decline in shareholders' equity, principally reflecting net unrealized depreciation on investments in the current period compared to net unrealized appreciation in 2021. Repurchase agreements are excluded from the table above and are disclosed separately from short-term debt in the Consolidated balance sheets. The repurchase agreements are collateralized borrowings where we maintain the right and ability to redeem the collateral on short notice, unlike short-term debt which comprises the current maturities of our long-term debt instruments. For the six months ended June 30, 2022, we repurchased $2.1 billion of Common Shares in a series of open market transactions under the Board of Directors (Board) share repurchase authorization. At June 30, 2022, there were 41,081,627 Common Shares in treasury with a weighted-average cost of $165.36 per share, and $2.5 billion in share repurchase authorization remained through June 30, 2023. For the period July 1, 2022 through July 28, 2022, we repurchased 1,513,728 Common Shares for a total of $281 million in a series of open market transactions. At July 28, 2022, $2.2 billion in share repurchase authorization remained. We generally maintain the ability to issue certain classes of debt and equity securities via a Securities and Exchange Commission (SEC) shelf registration statement which is renewed every three years. This allows us capital market access for refinancing as well as for unforeseen or opportunistic capital needs. Dividends We have paid dividends each quarter since we became a public company in 1993. Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by Chubb in U.S. dollars. Refer to Note 8 to the Consolidated Financial Statements for a discussion of our dividend methodology. At our May 2022 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.32 per share, or CHF 3.22 per share, calculated using the USD/CHF exchange rate as published in the Wall Street Journal on May 19, 2022, expected to be paid in four quarterly installments of $0.83 per share after the general meeting by way of a distribution from capital contribution reserves, transferred to free reserves for payment. The Board determines the record and payment dates at which the annual dividend may be paid until the date of the 2023 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. The annual dividend approved in May 2022 represented a $0.12 per share increase ($0.03 per quarter) over the prior year dividend. 73 Table of Contents The following table represents dividends paid per Common Share to shareholders of record on each of the following dates: Shareholders of record as of: Dividends paid as of: December 17, 2021 January 7, 2022 $0.80 (CHF 0.74) March 18, 2022 April 8, 2022 $0.80 (CHF 0.74) June 17, 2022 July 8, 2022 $0.83 (CHF 0.80) Information provided in connection with outstanding debt of subsidiaries Chubb INA Holdings Inc. (Subsidiary Issuer) is an indirect 100 percent-owned and consolidated subsidiary of Chubb Limited (Parent Guarantor). The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer. The following table presents the condensed balance sheets of Chubb Limited and Chubb INA Holdings Inc., after elimination of investment in any non-guarantor subsidiary: Chubb Limited (Parent Guarantor) Chubb INA Holdings Inc. (Subsidiary Issuer) June 30 December 31 June 30 December 31 (in millions of U.S. dollars) 2022 2021 2022 2021 Assets Investments $ — $ — $ 149 $ 149 Cash 3,917 1 3 580 Due from parent guarantor/subsidiary issuer 4 2 1,070 348 Due from subsidiaries that are not issuers or guarantors 1,814 1,805 571 526 Other assets 5 16 2,195 1,667 Total assets $ 5,740 $ 1,824 $ 3,988 $ 3,270 Liabilities Due to parent guarantor/subsidiary issuer $ 1,070 $ 348 $ 4 $ 2 Due to subsidiaries that are not issuers or guarantors 239 241 1,823 1,647 Affiliated notional cash pooling programs 243 8 425 — Short-term debt — — 1,474 999 Long-term debt — — 14,311 15,169 Trust preferred securities — — 308 308 Other liabilities 354 363 1,803 1,803 Total liabilities 1,906 960 20,148 19,928 Total shareholders’ equity 3,834 864 (16,160) (16,658) Total liabilities and shareholders’ equity $ 5,740 $ 1,824 $ 3,988 $ 3,270 74 Table of Contents The following table presents the condensed statements of operations and comprehensive income of Chubb Limited and Chubb INA Holdings Inc., excluding equity in earnings from non-guarantor subsidiaries: Six Months Ended June 30, 2022 Chubb Limited (Parent Guarantor) Chubb INA Holdings Inc. (Subsidiary Issuer) (in millions of U.S. dollars) Net investment income (loss) $ 4 $ (2) Net realized gains (losses) 14 200 Administrative expenses 54 (52) Interest (income) expense (29) 273 Other (income) expense (24) 20 Cigna integration expenses — 1 Income tax expense (benefit) 6 (22) Net income (loss) $ 11 $ (22) Comprehensive income (loss) $ 11 $ (49)