Chubb Ltd 10-Q

ITEM 1. Financial Statements CONSOLIDATED BALANCE SHEETS (Unaudited) Chubb Limited and Subsidiaries September 30 December 31 (in millions of U.S. dollars, except share and per share data) 2022 2021 Assets Investments Fixed maturities available for sale, at fair value, net of valuation allowance - $ 147 and $ 14 (amortized cost – $ 93,316 and $ 90,493 ) $ 83,741 $ 93,108 Fixed maturities held to maturity, at amortized cost, net of valuation allowance - $ 33 and $ 35 (fair value – $ 8,491 and $ 10,647 ) 8,976 10,118 Equity securities, at fair value 844 4,782 Short-term investments, at fair value (amortized cost – $ 4,536 and $ 3,147 ) 4,534 3,146 Other investments, at fair value 13,645 11,169 Total investments 111,740 122,323 Cash 2,128 1,659 Restricted cash 136 152 Securities lending collateral 1,626 1,831 Accrued investment income 900 821 Insurance and reinsurance balances receivable, net of valuation allowance - $ 51 and $ 46 12,853 11,322 Reinsurance recoverable on losses and loss expenses, net of valuation allowance - $ 352 and $ 329 18,754 17,366 Reinsurance recoverable on policy benefits 297 213 Deferred policy acquisition costs 5,578 5,513 Value of business acquired 3,324 236 Goodwill 16,107 15,213 Other intangible assets 5,383 5,455 Prepaid reinsurance premiums 3,265 3,028 Investments in partially-owned insurance companies 2,943 3,130 Other assets 13,077 11,792 Total assets $ 198,111 $ 200,054 Liabilities Unpaid losses and loss expenses $ 75,992 $ 72,943 Unearned premiums 20,520 19,101 Future policy benefits 9,586 5,947 Insurance and reinsurance balances payable 7,829 7,243 Securities lending payable 1,626 1,831 Accounts payable, accrued expenses, and other liabilities 16,673 15,004 Deferred tax liabilities 2 389 Repurchase agreements 2,417 1,406 Short-term debt 1,475 999 Long-term debt 14,044 15,169 Trust preferred securities 308 308 Total liabilities 150,472 140,340 Commitments and contingencies (refer to Note 8) Shareholders’ equity Common Shares (CHF 24.15 par value; 446,376,614 and 474,021,114 shares issued; 415,020,484 and 426,572,612 shares outstanding) 10,346 10,985 Common Shares in treasury ( 31,356,130 and 47,448,502 shares) ( 4,978 ) ( 7,464 ) Additional paid-in capital 7,429 8,478 Retained earnings 47,022 47,365 Accumulated other comprehensive income (loss) (AOCI) ( 12,180 ) 350 Total shareholders’ equity 47,639 59,714 Total liabilities and shareholders’ equity $ 198,111 $ 200,054 See accompanying notes to the Consolidated Financial Statements 3 Table of Contents CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) Chubb Limited and Subsidiaries Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars, except per share data) 2022 2021 2022 2021 Revenues Net premiums written $ 12,020 $ 10,510 $ 31,521 $ 28,718 Increase in unearned premiums ( 485 ) ( 510 ) ( 1,683 ) ( 1,684 ) Net premiums earned 11,535 10,000 29,838 27,034 Net investment income 979 866 2,689 2,613 Net realized gains (losses) ( 384 ) ( 21 ) ( 787 ) 833 Total revenues 12,130 10,845 31,740 30,480 Expenses Losses and loss expenses 7,279 6,629 17,474 16,688 Policy benefits 486 151 790 503 Policy acquisition costs 1,975 1,778 5,451 5,141 Administrative expenses 883 806 2,479 2,325 Interest expense 150 122 416 366 Other (income) expense 188 ( 763 ) ( 21 ) ( 2,030 ) Amortization of purchased intangibles 69 71 211 216 Cigna integration expenses 23 — 26 — Total expenses 11,053 8,794 26,826 23,209 Income before income tax 1,077 2,051 4,914 7,271 Income tax expense 265 218 913 873 Net income $ 812 $ 1,833 $ 4,001 $ 6,398 Other comprehensive income (loss) Change in: Unrealized depreciation $ ( 3,045 ) $ ( 554 ) $ ( 12,041 ) $ ( 2,177 ) Cumulative foreign currency translation adjustment ( 966 ) ( 414 ) ( 1,676 ) ( 84 ) Other, including postretirement benefit liability adjustment ( 59 ) 4 ( 35 ) ( 33 ) Other comprehensive loss, before income tax ( 4,070 ) ( 964 ) ( 13,752 ) ( 2,294 ) Income tax benefit related to OCI items 165 120 1,222 403 Other comprehensive loss ( 3,905 ) ( 844 ) ( 12,530 ) ( 1,891 ) Comprehensive income (loss) $ ( 3,093 ) $ 989 $ ( 8,529 ) $ 4,507 Earnings per share Basic earnings per share $ 1.95 $ 4.21 $ 9.50 $ 14.42 Diluted earnings per share $ 1.94 $ 4.18 $ 9.41 $ 14.33 See accompanying notes to the Consolidated Financial Statements 4 Table of Contents CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Chubb Limited and Subsidiaries Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Common Shares Balance – beginning of period $ 10,666 $ 11,064 $ 10,985 $ 11,064 Cancellation of treasury shares ( 320 ) ( 79 ) ( 639 ) ( 79 ) Balance – end of period 10,346 10,985 10,346 10,985 Common Shares in treasury Balance – beginning of period ( 6,794 ) ( 5,772 ) ( 7,464 ) ( 3,644 ) Common Shares repurchased ( 685 ) ( 1,516 ) ( 2,815 ) ( 3,956 ) Cancellation of treasury shares 2,473 590 4,983 590 Net shares issued under employee share-based compensation plans 28 77 318 389 Balance – end of period ( 4,978 ) ( 6,621 ) ( 4,978 ) ( 6,621 ) Additional paid-in capital Balance – beginning of period 7,707 9,046 8,478 9,815 Net shares redeemed (issued) under employee share-based compensation plans 10 ( 2 ) ( 185 ) ( 184 ) Exercise of stock options ( 8 ) ( 15 ) ( 35 ) ( 45 ) Share-based compensation expense 66 69 205 216 Funding of dividends declared to Retained earnings ( 346 ) ( 346 ) ( 1,034 ) ( 1,050 ) Balance – end of period 7,429 8,752 7,429 8,752 Retained earnings Balance – beginning of period 48,363 43,902 47,365 39,337 Net income 812 1,833 4,001 6,398 Cancellation of treasury shares ( 2,153 ) ( 511 ) ( 4,344 ) ( 511 ) Funding of dividends declared from Additional paid-in capital 346 346 1,034 1,050 Dividends declared on Common Shares ( 346 ) ( 346 ) ( 1,034 ) ( 1,050 ) Balance – end of period 47,022 45,224 47,022 45,224 Accumulated other comprehensive income (loss) (AOCI) Balance – beginning of period ( 8,275 ) 1,822 350 2,869 Total other comprehensive loss ( 3,905 ) ( 844 ) ( 12,530 ) ( 1,891 ) Balance – end of period ( 12,180 ) 978 ( 12,180 ) 978 Total shareholders’ equity $ 47,639 $ 59,318 $ 47,639 $ 59,318 See accompanying notes to the Consolidated Financial Statements 5 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Chubb Limited and Subsidiaries Nine Months Ended September 30 (in millions of U.S. dollars) 2022 2021 Cash flows from operating activities Net income $ 4,001 $ 6,398 Adjustments to reconcile net income to net cash flows from operating activities Net realized (gains) losses 787 ( 833 ) Amortization of premiums/discounts on fixed maturities 185 242 Amortization of purchased intangibles 211 216 Equity in net income of partially-owned entities ( 192 ) ( 2,073 ) Deferred income taxes ( 7 ) ( 268 ) Unpaid losses and loss expenses 4,848 4,907 Unearned premiums 2,035 2,032 Future policy benefits 40 163 Insurance and reinsurance balances payable 559 408 Accounts payable, accrued expenses, and other liabilities 573 45 Income taxes payable ( 108 ) 212 Insurance and reinsurance balances receivable ( 1,756 ) ( 1,257 ) Reinsurance recoverable ( 1,881 ) ( 1,071 ) Deferred policy acquisition costs ( 320 ) ( 208 ) Other ( 383 ) ( 364 ) Net cash flows from operating activities 8,592 8,549 Cash flows from investing activities Purchases of fixed maturities available for sale ( 23,533 ) ( 23,028 ) Purchases of fixed maturities held to maturity ( 454 ) ( 434 ) Purchases of equity securities ( 837 ) ( 799 ) Sales of fixed maturities available for sale 14,142 5,225 Sales of equity securities 4,453 750 Maturities and redemptions of fixed maturities available for sale 7,882 13,710 Maturities and redemptions of fixed maturities held to maturity 1,357 1,488 Net change in short-term investments ( 1,106 ) 809 Net derivative instruments settlements ( 52 ) ( 66 ) Private equity contributions ( 2,194 ) ( 1,872 ) Private equity distributions 649 891 Acquisition of subsidiaries (net of cash acquired of $ 366 and nil ) ( 4,982 ) — Payment for Huatai Group interest ( 113 ) ( 208 ) Other ( 414 ) ( 217 ) Net cash flows used for investing activities ( 5,202 ) ( 3,751 ) Cash flows from financing activities Dividends paid on Common Shares ( 1,030 ) ( 1,056 ) Common Shares repurchased ( 2,783 ) ( 3,941 ) Proceeds from issuance of repurchase agreements 3,552 1,405 Repayment of repurchase agreements ( 2,554 ) ( 1,405 ) Proceeds from share-based compensation plans 198 239 Policyholder contract deposits and other 357 365 Policyholder contract withdrawals and other ( 362 ) ( 331 ) Tax withholding payments for share-based compensation plans ( 100 ) ( 81 ) Net cash flows used for financing activities ( 2,722 ) ( 4,805 ) Effect of foreign currency rate changes on cash and restricted cash ( 215 ) ( 33 ) Net increase (decrease) in cash and restricted cash 453 ( 40 ) Cash and restricted cash – beginning of period 1,811 1,836 Cash and restricted cash – end of period $ 2,264 $ 1,796 Supplemental cash flow information Taxes paid $ 964 $ 931 Interest paid $ 339 $ 316 See accompanying notes to the Consolidated Financial Statements 6 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Chubb Limited and Subsidiaries 1. General a) Basis of presentation Chubb Limited is a holding company incorporated in Zurich, Switzerland. Chubb Limited, through its subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. Our results are reported through the following business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. Refer to Note 13 for additional information. The interim unaudited consolidated financial statements, which include the accounts of Chubb Limited and its subsidiaries (collectively, Chubb, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and, in the opinion of management, reflect all adjustments necessary for a fair statement of the results and financial position for such periods. All significant intercompany accounts and transactions, including internal reinsurance transactions, have been eliminated. The results of operations and cash flows for any interim period are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2021 Form 10-K. b) Restricted cash Restricted cash in the Consolidated balance sheets represents amounts held for the benefit of third parties and is legally or contractually restricted as to withdrawal or usage. Amounts include deposits with U.S. and non-U.S. regulatory authorities, trust funds set up for the benefit of ceding companies, and amounts pledged as collateral to meet financing arrangements. The following table provides a reconciliation of cash and restricted cash reported within the Consolidated balance sheets that total to the amounts shown in the Consolidated statements of cash flows: September 30 December 31 (in millions of U.S. dollars) 2022 2021 Cash $ 2,128 $ 1,659 Restricted cash 136 152 Total cash and restricted cash shown in the Consolidated statements of cash flows $ 2,264 $ 1,811 c) Accounting guidance not yet adopted Targeted Improvements to the Accounting for Long-Duration Contracts In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments in this update require more frequent updating of assumptions and a standardized discount rate for the future policy benefit liability, a requirement to use the fair value measurement model for policies with market risk benefits, simplified amortization of deferred acquisition costs, and enhanced disclosures. This standard will be effective in the first quarter of 2023 with early adoption permitted. We are currently assessing the effect of adopting this guidance on our financial condition and results of operations. We will be better able to quantify the effect of adopting this standard as we progress in our implementation process and draw nearer to the date of adoption. 7 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 2. Acquisitions Cigna’s Accident and Health (A&H) and Life Insurance Business in Asian Markets On July 1, 2022 , we completed the acquisition of the life and non-life insurance companies that house the personal accident, supplemental health, and life insurance business of Cigna in six Asian 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, collectively referred to as Cigna's business in Asia. The reduction in the final purchase price from the original agreement reflects the impacts of rising interest rates and foreign exchange rates on acquired book value and other minor adjustments. This complementary strategic acquisition expands our presence and advances our long-term growth opportunity in Asia. Effective July 1, 2022, the results of operations of this acquired business are reported primarily in our Life Insurance segment and, to a lesser extent, our Overseas General Insurance segment. The interim consolidated financial statements include the results of Cigna's business in Asia from July 1, 2022. The acquisition of Cigna's business in Asia generated $ 1,340 million of goodwill, attributable to expected growth and profitability, and $ 269 million of other intangible assets. None of the goodwill is expected to be deductible for income tax purposes. Additionally, the acquisition of Cigna's business in Asia generated $ 3,379 million of value of business acquired (VOBA). Refer to Note 7 for more information. Chubb financed the transaction through a combination of available cash and $ 2.0 billion in repurchase agreement transactions, of which $ 1.0 billion were outstanding as of September 30, 2022, and due to expire by the end of 2022. The following table summarizes Chubb's best estimate of fair value of the assets acquired and liabilities assumed at July 1, 2022. The fair value of assets and liabilities, including intangible assets and tax-related items (classified below in Other assets and Other liabilities), are preliminary and may change with offsetting adjustments to goodwill. Chubb may make further adjustments to its purchase price allocation through the end of the permissible one-year measurement period. Chubb does not expect changes, if any, to materially affect its financial position, results of operations, or cash flows. Preliminary estimate of assets acquired and liabilities assumed from Cigna's business in Asia July 1 (in millions of U.S. dollars) 2022 Assets Investments and Cash $ 5,311 Accrued investment income 33 Insurance and reinsurance balances receivable 52 Reinsurance recoverable on losses and loss expenses 3 Reinsurance recoverable on future policy benefits 82 Value of business acquired 3,379 Goodwill and other intangible assets 1,609 Other assets 655 Total assets $ 11,124 Liabilities Unpaid losses and loss expenses $ 10 Unearned premiums 60 Future policy benefits 3,844 Insurance and reinsurance balances payable 115 Accounts payable, accrued expenses, and other liabilities 925 Deferred tax liabilities 839 Total liabilities $ 5,793 Net acquired assets, including goodwill 5,331 Total $ 11,124 Direct costs related to the acquisition were expensed as incurred. Cigna integration expenses were $ 23 million and $ 26 million for the three and nine months ended September 30, 2022, respectively, and include one-time costs that are directly attributable to third-party consulting fees, employee-related retention costs, and other professional and legal fees related to the acquisition. 8 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following table summarizes the results of operations of the acquired Cigna business in Asia since the acquisition date that have been included within our Consolidated statements of operations for both the three and nine months ended September 30, 2022. (in millions of U.S. dollars) Total revenues $ 681 Net income $ 21 The preliminary purchase price allocation to intangible assets recorded in connection with the Cigna acquisition and their related useful lives at July 1, 2022, are as follows: (in millions of U.S. dollars) Amount Weighted-average useful life Definite life Agency distribution relationships and renewal rights $ 190 20 years Unearned premium reserves (UPR) intangible asset 9 1 year Indefinite life Trademarks 70 Indefinite Total identified intangible assets $ 269 The following table presents supplemental unaudited pro forma consolidated information for the periods indicated as though the acquisition of Cigna's business in Asia that occurred on July 1, 2022, had instead occurred on January 1, 2021. The unaudited pro forma consolidated financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated on January 1, 2021, nor is it necessarily indicative of future operating results. Significant assumptions used to determine pro forma operating results include amortization of VOBA and other intangible assets and recognition of interest expense associated with the repurchase agreement transactions used to effect the acquisition. Three Months Ended Nine Months Ended Pro forma: September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Net premiums earned $ 11,535 $ 10,788 $ 31,362 $ 29,406 Total revenues $ 12,132 $ 11,632 $ 33,253 $ 32,879 Net income $ 825 $ 1,894 $ 4,203 $ 6,649 Huatai Group Chubb maintains a direct investment in Huatai Insurance Group Co., Ltd. (Huatai Group). Huatai Group is the parent company of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C), approximately 80 percent of Huatai Life Insurance Co., Ltd. (Huatai Life), and approximately 82 percent of Huatai Asset Management Co., Ltd. (collectively, Huatai). Huatai Group's insurance operations have more than 700 branches and approximately 19 million customers in China. As of September 30, 2022, Chubb's aggregate ownership interest in Huatai Group was approximately 47.3 percent. Chubb applies the equity method of accounting to its investment in Huatai Group by recording its share of net income or loss in Other (income) expense in the Consolidated statements of operations. During 2021, Chubb entered into agreements with several counterparties to purchase incremental ownership interests in Huatai Group totaling approximately 31.8 percent for approximately $ 2.2 billion. In connection with these agreements, Chubb paid approximately $ 1.1 billion in deposits. In January 2022, we paid $ 113 million relating to these agreements. Chubb entered into an agreement to acquire an approximate 7.1 percent ownership interest in Huatai Group for approximately $ 0.5 billion, which was paid as a deposit in 2020. The purchase of the additional ownership interest is contingent upon important conditions. 9 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 3. Investments a) Fixed maturities September 30, 2022 Amortized Cost Valuation Allowance Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value (in millions of U.S. dollars) Available for sale U.S. Treasury / Agency $ 2,725 $ — $ 5 $ ( 174 ) $ 2,556 Non-U.S. 26,766 ( 61 ) 77 ( 2,599 ) 24,183 Corporate and asset-backed securities 40,776 ( 85 ) 30 ( 4,341 ) 36,380 Mortgage-backed securities 18,425 ( 1 ) 1 ( 2,190 ) 16,235 Municipal 4,624 — 6 ( 243 ) 4,387 $ 93,316 $ ( 147 ) $ 119 $ ( 9,547 ) $ 83,741 Amortized Cost Valuation Allowance Net Carrying Value Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value Held to maturity U.S. Treasury / Agency $ 1,281 $ — $ 1,281 $ — $ ( 52 ) $ 1,229 Non-U.S. 1,046 ( 4 ) 1,042 — ( 86 ) 956 Corporate and asset-backed securities 1,769 ( 27 ) 1,742 — ( 157 ) 1,585 Mortgage-backed securities 1,549 ( 1 ) 1,548 — ( 110 ) 1,438 Municipal 3,364 ( 1 ) 3,363 1 ( 81 ) 3,283 $ 9,009 $ ( 33 ) $ 8,976 $ 1 $ ( 486 ) $ 8,491 December 31, 2021 Amortized Cost Valuation Allowance Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value (in millions of U.S. dollars) Available for sale U.S. Treasury / Agency $ 2,111 $ — $ 109 $ ( 6 ) $ 2,214 Non-U.S. 25,156 ( 8 ) 953 ( 272 ) 25,829 Corporate and asset-backed securities 37,844 ( 6 ) 1,410 ( 185 ) 39,063 Mortgage-backed securities 20,080 — 532 ( 123 ) 20,489 Municipal 5,302 — 216 ( 5 ) 5,513 $ 90,493 $ ( 14 ) $ 3,220 $ ( 591 ) $ 93,108 Amortized Cost Valuation Allowance Net Carrying Value Gross Unrealized Appreciation Gross Unrealized Depreciation Fair Value Held to maturity U.S. Treasury / Agency $ 1,213 $ — $ 1,213 $ 34 $ ( 3 ) $ 1,244 Non-U.S. 1,201 ( 5 ) 1,196 66 — 1,262 Corporate and asset-backed securities 2,032 ( 28 ) 2,004 197 — 2,201 Mortgage-backed securities 1,731 ( 1 ) 1,730 74 ( 1 ) 1,803 Municipal 3,976 ( 1 ) 3,975 162 — 4,137 $ 10,153 $ ( 35 ) $ 10,118 $ 533 $ ( 4 ) $ 10,647 10 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following table presents the amortized cost of our held to maturity securities according to S&P rating: September 30, 2022 December 31, 2021 (in millions of U.S. dollars, except for percentages) Amortized cost % of Total Amortized cost % of Total AAA $ 1,710 19 % $ 2,089 21 % AA 4,975 55 % 5,303 52 % A 1,679 19 % 1,964 19 % BBB 622 7 % 773 8 % BB 23 — % 23 — % Other — — % 1 — % Total $ 9,009 100 % $ 10,153 100 % The following table presents fixed maturities by contractual maturity: September 30, 2022 December 31, 2021 (in millions of U.S. dollars) Net Carrying Value Fair Value Net Carrying Value Fair Value Available for sale Due in 1 year or less $ 3,173 $ 3,173 $ 4,498 $ 4,498 Due after 1 year through 5 years 23,685 23,685 25,542 25,542 Due after 5 years through 10 years 26,350 26,350 28,207 28,207 Due after 10 years 14,298 14,298 14,372 14,372 67,506 67,506 72,619 72,619 Mortgage-backed securities 16,235 16,235 20,489 20,489 $ 83,741 $ 83,741 $ 93,108 $ 93,108 Held to maturity Due in 1 year or less $ 1,003 $ 990 $ 888 $ 894 Due after 1 year through 5 years 3,373 3,233 3,744 3,846 Due after 5 years through 10 years 1,743 1,677 2,242 2,349 Due after 10 years 1,309 1,153 1,514 1,755 7,428 7,053 8,388 8,844 Mortgage-backed securities 1,548 1,438 1,730 1,803 $ 8,976 $ 8,491 $ 10,118 $ 10,647 Expected maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties. b) Gross unrealized loss Fixed maturities in an unrealized loss position at September 30, 2022 and December 31, 2021 comprised both investment grade and below investment grade securities for which fair value declined, principally due to rising interest rates since the date of purchase. Refer to Note 3 in the 2021 Form 10-K for further information on factors considered in the evaluation of expected credit losses. 11 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following tables present, for available for sale (AFS) fixed maturities in an unrealized loss position (including securities on loan) that are not deemed to have expected credit losses, the aggregate fair value and gross unrealized loss by length of time the security has been in an unrealized loss position: 0 – 12 Months Over 12 Months Total September 30, 2022 Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss (in millions of U.S. dollars) U.S. Treasury / Agency $ 1,873 $ ( 145 ) $ 227 $ ( 29 ) $ 2,100 $ ( 174 ) Non-U.S. 16,585 ( 1,480 ) 3,907 ( 588 ) 20,492 ( 2,068 ) Corporate and asset-backed securities 28,533 ( 2,832 ) 2,621 ( 456 ) 31,154 ( 3,288 ) Mortgage-backed securities 12,776 ( 1,459 ) 3,324 ( 728 ) 16,100 ( 2,187 ) Municipal 3,905 ( 216 ) 70 ( 18 ) 3,975 ( 234 ) Total AFS fixed maturities $ 63,672 $ ( 6,132 ) $ 10,149 $ ( 1,819 ) $ 73,821 $ ( 7,951 ) 0 – 12 Months Over 12 Months Total December 31, 2021 Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss (in millions of U.S. dollars) U.S. Treasury / Agency $ 363 $ ( 3 ) $ 70 $ ( 3 ) $ 433 $ ( 6 ) Non-U.S. 6,917 ( 196 ) 1,093 ( 62 ) 8,010 ( 258 ) Corporate and asset-backed securities 9,449 ( 145 ) 806 ( 32 ) 10,255 ( 177 ) Mortgage-backed securities 8,086 ( 116 ) 190 ( 7 ) 8,276 ( 123 ) Municipal 226 ( 5 ) — — 226 ( 5 ) Total AFS fixed maturities $ 25,041 $ ( 465 ) $ 2,159 $ ( 104 ) $ 27,200 $ ( 569 ) During the nine months ended September 30, 2022, the tax benefit on certain unrealized losses in our investment portfolio was reduced by a valuation allowance of $ 950 million necessary due to limitations on the utilization of these losses. As part of evaluating whether it was more likely than not that we could realize these losses, we considered realized gains, carryback capacity and available tax planning strategies. The following table presents a roll-forward of valuation allowance for expected credit losses on fixed maturities: Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Available for sale Valuation allowance for expected credit losses - beginning of period $ 78 $ 11 $ 14 $ 20 Provision for expected credit loss 91 3 169 8 Foreign currency revaluation ( 2 ) — ( 2 ) — Recovery of expected credit loss ( 20 ) ( 2 ) ( 34 ) ( 16 ) Valuation allowance for expected credit losses - end of period $ 147 $ 12 $ 147 $ 12 Held to maturity Valuation allowance for expected credit losses - beginning of period $ 34 $ 37 $ 35 $ 44 Provision for expected credit loss — — 1 — Recovery of expected credit loss ( 1 ) ( 2 ) ( 3 ) ( 9 ) Valuation allowance for expected credit losses - end of period $ 33 $ 35 $ 33 $ 35 12 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries c) Net realized gains (losses) The following table presents the components of Net realized gains (losses): Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Fixed maturities: Gross realized gains $ 144 $ 27 $ 545 $ 120 Gross realized losses ( 331 ) ( 27 ) ( 1,158 ) ( 99 ) Net (provision for) recovery of expected credit losses ( 70 ) 1 ( 133 ) 17 Impairment (1) ( 22 ) ( 11 ) ( 111 ) ( 12 ) Total fixed maturities ( 279 ) ( 10 ) ( 857 ) 26 Equity securities ( 80 ) ( 42 ) ( 287 ) 475 Other investments ( 42 ) 11 17 111 Foreign exchange 198 106 541 85 Investment and embedded derivative instruments ( 198 ) ( 9 ) ( 232 ) 9 Fair value adjustments on insurance derivative 22 ( 59 ) ( 86 ) 252 S&P futures 54 ( 4 ) 240 ( 112 ) Other derivative instruments ( 19 ) ( 10 ) ( 9 ) ( 8 ) Other (2) ( 40 ) ( 4 ) ( 114 ) ( 5 ) Net realized gains (losses) (pre-tax) $ ( 384 ) $ ( 21 ) $ ( 787 ) $ 833 (1) Relates to certain securities we intended to sell and securities written to market entering default. (2) Other realized losses includes $36 million related to impairment of fixed assets. The nine months ended September 30, 2022 also includes impairment of assets related to Chubb’s Russian entities. Realized gains and losses from Equity securities and Other investments from the table above include sales of securities and unrealized gains and losses from fair value changes as follows: Three Months Ended September 30 2022 2021 (in millions of U.S. dollars) Equity Securities Other Investments Total Equity Securities Other Investments Total Net gains (losses) recognized during the period $ ( 80 ) $ ( 42 ) $ ( 122 ) $ ( 42 ) $ 11 $ ( 31 ) Less: Net gains (losses) recognized from sales of securities ( 12 ) — ( 12 ) 19 — 19 Unrealized gains (losses) recognized for securities still held at reporting date $ ( 68 ) $ ( 42 ) $ ( 110 ) $ ( 61 ) $ 11 $ ( 50 ) 13 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Nine Months Ended September 30 2022 2021 (in millions of U.S. dollars) Equity Securities Other Investments Total Equity Securities Other Investments Total Net gains (losses) recognized during the period $ ( 287 ) $ 17 $ ( 270 ) $ 475 $ 111 $ 586 Less: Net gains recognized from sales of securities 406 — 406 109 — 109 Unrealized gains (losses) recognized for securities still held at reporting date $ ( 693 ) $ 17 $ ( 676 ) $ 366 $ 111 $ 477 d) Alternative investments Alternative investments include partially-owned investment companies, investment funds, and limited partnerships measured at fair value using net asset value (NAV) as a practical expedient. The following table presents, by investment category, the expected liquidation period, fair value, and maximum future funding commitments of alternative investments: Expected Liquidation Period of Underlying Assets September 30, 2022 December 31, 2021 (in millions of U.S. dollars) Fair Value Maximum Future Funding Commitments Fair Value Maximum Future Funding Commitments Financial 2 to 10 Years $ 1,085 $ 528 $ 1,096 $ 267 Real assets 2 to 13 Years 2,045 807 1,193 766 Distressed 2 to 8 Years 1,055 746 753 641 Private credit 3 to 8 Years 194 450 84 279 Traditional 2 to 14 Years 7,548 5,091 6,647 5,200 Vintage 1 to 2 Years 51 — 68 — Investment funds Not Applicable 414 — 267 — $ 12,392 $ 7,622 $ 10,108 $ 7,153 Included in all categories in the above table, except for Investment funds, are investments for which Chubb will never have the contractual option to redeem but receives distributions based on the liquidation of the underlying assets. Further, for all categories except for Investment funds, Chubb does not have the ability to sell or transfer the investments without the consent from the general partner of individual funds. Investment Category: Consists of investments in private equity funds: Financial targeting financial services companies, such as financial institutions and insurance services worldwide Real assets targeting investments related to hard physical assets, such as real estate, infrastructure and natural resources Distressed targeting distressed corporate debt/credit and equity opportunities in the U.S. Private credit targeting privately originated corporate debt investments, including senior secured loans and subordinated bonds Traditional employing traditional private equity investment strategies, such as buyout and growth equity globally Vintage funds where the initial fund term has expired 14 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Investment funds employ various investment strategies, such as long/short equity and arbitrage/distressed. Included in this category are investments for which Chubb has the option to redeem at agreed upon value as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investment fund investments may be redeemed monthly, quarterly, semi-annually, or annually. If Chubb wishes to redeem an investment fund investment, it must first determine if the investment fund is still in a lock-up period (a time when Chubb cannot redeem its investment so that the investment fund manager has time to build the portfolio). If the investment fund is no longer in its lock-up period, Chubb must then notify the investment fund manager of its intention to redeem by the notification date prescribed by the subscription agreement. Subsequent to notification, the investment fund can redeem Chubb’s investment within several months of the notification. Notice periods for redemption of the investment funds are up to 270 days. Chubb can redeem its investment funds without consent from the investment fund managers. e) Restricted assets Chubb is required to maintain assets on deposit with various regulatory authorities to support its insurance and reinsurance operations. These requirements are generally promulgated in the statutory regulations of the individual jurisdictions. The assets on deposit are available to settle insurance and reinsurance liabilities. Chubb is also required to restrict assets pledged under repurchase agreements, which represent Chubb's agreement to sell securities and repurchase them at a future date for a predetermined price. We use trust funds in certain large reinsurance transactions where the trust funds are set up for the benefit of the ceding companies and generally take the place of letter of credit (LOC) requirements. We have investments in segregated portfolios primarily to provide collateral or guarantees for LOC and derivative transactions. Included in restricted assets at September 30, 2022 and December 31, 2021 are investments, primarily fixed maturities, totaling $ 16,202 million and $ 17,092 million, respectively, and cash of $ 136 million and $ 152 million, respectively. The following table presents the components of restricted assets: September 30 December 31 (in millions of U.S. dollars) 2022 2021 Trust funds $ 7,992 $ 9,915 Deposits with U.S. regulatory authorities 2,318 2,402 Deposits with non-U.S. regulatory authorities 2,825 2,873 Assets pledged under repurchase agreements 2,529 1,420 Other pledged assets 674 634 Total $ 16,338 $ 17,244 4. Fair value measurements a) Fair value hierarchy Fair value of financial assets and financial liabilities is estimated based on the framework established in the fair value accounting guidance. The guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The three levels of the hierarchy are as follows: • Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets; • Level 2 – Includes, among other items, inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves, quoted prices for similar assets and liabilities in active markets, and quoted prices for identical or similar assets and liabilities in markets that are not active; and • Level 3 – Inputs that are unobservable and reflect management’s judgments about assumptions that market participants would use in pricing an asset or liability. We categorize financial instruments within the valuation hierarchy at the balance sheet date based upon the lowest level of inputs that are significant to the fair value measurement. We use pricing services to obtain fair value measurements for the majority of our investment securities. Based on management’s understanding of the methodologies used, these pricing services only produce an estimate of fair value if there is observable 15 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries market information that would allow them to make a fair value estimate. Based on our understanding of the market inputs used by the pricing services, all applicable investments have been valued in accordance with GAAP. We do not adjust prices obtained from pricing services. The following is a description of the valuation techniques and inputs used to determine fair values for financial instruments carried at fair value, as well as the general classification of such financial instruments pursuant to the valuation hierarchy. Fixed maturities We use pricing services to estimate fair value measurements for the majority of our fixed maturities. The pricing services use market quotations for fixed maturities that have quoted prices in active markets; such securities are classified within Level 1. For fixed maturities other than U.S. Treasury securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements using their pricing applications or pricing models, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Additional valuation factors that can be taken into account are nominal spreads, dollar basis, and liquidity adjustments. The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements, and sector news. The market inputs used in the pricing evaluation, listed in the approximate order of priority include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each input is dependent on the asset class and the market conditions. Given the asset class, the priority of the use of inputs may change, or some market inputs may not be relevant. Additionally, fixed maturities valuation is more subjective when markets are less liquid due to the lack of market based inputs (i.e., stale pricing) and may require the use of models to be priced. The lack of market based inputs may increase the potential that an investment's estimated fair value is not reflective of the price at which an actual transaction would occur. The overwhelming majority of fixed maturities are classified within Level 2 because the most significant inputs used in the pricing techniques are observable. For a small number of fixed maturities, we obtain a single broker quote (typically from a market maker). Due to the disclaimers on the quotes that indicate that the price is indicative only, we include these fair value estimates in Level 3. Equity securities Equity securities with active markets are classified within Level 1 as fair values are based on quoted market prices. For equity securities in markets which are less active, fair values are based on market valuations and are classified within Level 2. Equity securities for which pricing is unobservable are classified within Level 3. Short-term investments Short-term investments, which comprise securities due to mature within one year of the date of purchase that are traded in active markets, are classified within Level 1 as fair values are based on quoted market prices. Securities such as commercial paper and discount notes are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity, and as such, their cost approximates fair value. Short-term investments for which pricing is unobservable are classified within Level 3. Other investments Fair values for the majority of Other investments including investments in partially-owned investment companies, investment funds, and limited partnerships are based on their respective NAV and are excluded from the fair value hierarchy table below. Certain of our long-duration contracts are supported by assets that do not qualify for separate account reporting under GAAP. These assets comprise mutual funds, classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Other investments also include equity securities, classified within Level 1 and fixed maturities, classified within Level 2, held in rabbi trusts maintained by Chubb for deferred compensation plans and supplemental retirement plans and are classified within the valuation hierarchy on the same basis as other equity securities and fixed maturities. Securities lending collateral The underlying assets included in Securities lending collateral in the Consolidated balance sheets are fixed maturities which are classified in the valuation hierarchy on the same basis as other fixed maturities. Excluded from the valuation hierarchy is the corresponding liability related to Chubb’s obligation to return the collateral plus interest as it is reported at contract value and not fair value in the Consolidated balance sheets. Investment derivatives not designated as hedging instruments Actively traded investment derivative instruments, including futures, options, and forward contracts are classified within Level 1 as fair values are based on quoted market prices. The fair value of cross-currency swaps and interest rate swaps is based on 16 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries market valuations and is classified within Level 2. Investment derivative instruments are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. Other derivative instruments We maintain positions in exchange-traded equity futures contracts designed to limit exposure to a severe equity market decline, which would cause an increase in expected claims and, therefore, an increase in future policy benefit reserves for our guaranteed minimum death benefits (GMDB) and an increase in the fair value liability for our guaranteed living benefits (GLB) reinsurance business. Our positions in exchange-traded equity futures contracts are classified within Level 1. The fair value of the majority of the remaining positions in other derivative instruments is based on significant observable inputs including equity security and interest rate indices. Accordingly, these are classified within Level 2. Other derivative instruments based on unobservable inputs are classified within Level 3. Other derivative instruments are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. Derivatives designated as hedging instruments Certain of our derivatives are cross-currency swaps designated as fair value and net investment hedging instruments. The fair value of cross-currency swaps and interest rate swaps is based on market valuations and is classified within Level 2. Investment derivative instruments are recorded in either Other assets or Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. Separate account assets Separate account assets represent segregated funds where investment risks are borne by the customers, except to the extent of certain guarantees made by Chubb. Separate account assets comprise mutual funds classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Separate account assets also include fixed maturities classified within Level 2 because the most significant inputs used in the pricing techniques are observable. Excluded from the valuation hierarchy are the corresponding liabilities as they are reported at contract value and not fair value in the Consolidated balance sheets. Separate account assets are recorded in Other assets in the Consolidated balance sheets. Guaranteed living benefits The GLB arises from life reinsurance programs covering living benefit guarantees whereby we assume the risk of guaranteed minimum income benefits (GMIB) associated with variable annuity contracts. GLBs are recorded in Accounts payable, accrued expenses, and other liabilities in the Consolidated balance sheets. For GLB reinsurance, Chubb estimates fair value using an internal valuation model which includes current market information and estimates of policyholder behavior. All of the treaties contain claim limits, which are factored into the valuation model. The fair value depends on a number of factors, including interest rates, equity markets, credit risk, current account value, market volatility, expected annuitization rates and other policyholder behavior, and changes in policyholder mortality. Because of the significant use of unobservable inputs including policyholder behavior, GLB reinsurance is classified within Level 3. 17 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Financial instruments measured at fair value on a recurring basis, by valuation hierarchy September 30, 2022 Level 1 Level 2 Level 3 Total (in millions of U.S. dollars) Assets: Fixed maturities available for sale U.S. Treasury / Agency $ 2,032 $ 524 $ — $ 2,556 Non-U.S. — 23,677 506 24,183 Corporate and asset-backed securities — 34,084 2,296 36,380 Mortgage-backed securities — 16,216 19 16,235 Municipal — 4,387 — 4,387 2,032 78,888 2,821 83,741 Equity securities 761 — 83 844 Short-term investments 2,782 1,749 3 4,534 Other investments (1) 506 381 — 887 Securities lending collateral — 1,626 — 1,626 Investment derivatives not designated as hedging instruments 129 — — 129 Other derivative instruments 109 — — 109 Derivatives designated as hedging instruments — 71 — 71 Separate account assets 4,810 81 — 4,891 Total assets measured at fair value (1) $ 11,129 $ 82,796 $ 2,907 $ 96,832 Liabilities: Investment derivatives not designated as hedging instruments $ 306 $ — $ — $ 306 Derivatives designated as hedging instruments — 101 — 101 GLB (2) — — 784 784 Total liabilities measured at fair value $ 306 $ 101 $ 784 $ 1,191 (1) Excluded from the table above are partially-owned investments, investment funds, and limited partnerships of $ 12,392 million, policy loans of $ 316 million, and other investments of $ 50 million at September 30, 2022 measured using NAV as a practical expedient. (2) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. 18 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries December 31, 2021 Level 1 Level 2 Level 3 Total (in millions of U.S. dollars) Assets: Fixed maturities available for sale U.S. Treasury / Agency $ 1,680 $ 534 $ — $ 2,214 Non-U.S. — 25,196 633 25,829 Corporate and asset-backed securities — 37,014 2,049 39,063 Mortgage-backed securities — 20,463 26 20,489 Municipal — 5,513 — 5,513 1,680 88,720 2,708 93,108 Equity securities 4,705 — 77 4,782 Short-term investments 1,744 1,395 7 3,146 Other investments (1) 286 481 — 767 Securities lending collateral — 1,831 — 1,831 Investment derivative instruments 58 — — 58 Separate account assets 5,461 99 — 5,560 Total assets measured at fair value (1) $ 13,934 $ 92,526 $ 2,792 $ 109,252 Liabilities: Investment derivative instruments $ 166 $ — $ — $ 166 Other derivative instruments 16 — — 16 GLB (2) — — 745 745 Total liabilities measured at fair value $ 182 $ — $ 745 $ 927 (1) Excluded from the table above are partially-owned investments, investment funds, and limited partnerships of $ 10,108 million, policy loans of $ 243 million and other investments of $ 51 million at December 31, 2021, measured using NAV as a practical expedient. (2) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Level 3 financial instruments The following table presents the significant unobservable inputs used in the Level 3 liability valuations. Excluded from the table below are inputs used to determine the fair value of Level 3 assets which are based on single broker quotes and contain no quantitative unobservable inputs developed by management. The majority of our fixed maturities classified as Level 3 used external pricing when markets are less liquid due to the lack of market inputs (i.e., stale pricing, broker quotes). (in millions of U.S. dollars, except for percentages) Fair Value Valuation Technique Significant Unobservable Inputs Ranges Weighted Average (1) September 30, 2022 December 31, 2021 GLB (1) $ 784 $ 745 Actuarial model Lapse rate 3 % – 30 % 3.5 % Annuitization rate 0 % – 100 % 4.6 % (1) The weighted-average lapse and annuitization rates are determined by weighting each treaty's rates by the GLB contracts fair value. The most significant policyholder behavior assumptions include lapse rates and the GMIB annuitization rates. Assumptions regarding lapse rates and GMIB annuitization rates differ by treaty, but the underlying methodologies to determine rates applied to each treaty are comparable. A lapse rate is the percentage of in-force policies surrendered in a given calendar year. All else equal, as lapse rates increase, ultimate claim payments will decrease. The GMIB annuitization rate is the percentage of policies for which the policyholder will elect to annuitize using the guaranteed benefit provided under the GMIB. All else equal, as GMIB annuitization rates increase, ultimate claim payments will increase, subject to treaty claim limits. 19 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The effect of changes in key market factors on assumed lapse and annuitization rates reflect emerging trends using data available from cedants. For treaties with limited experience, rates are established by blending the experience with data received from other ceding companies. The model and related assumptions are regularly re-evaluated by management and enhanced, as appropriate, based upon additional experience obtained related to policyholder behavior and availability of updated information such as market conditions, market participant assumptions, and demographics of in-force annuities. In the third quarter of 2022, we completed a review of policyholder behavior related to annuitizations, partial withdrawals, lapses, and mortality for our variable annuity reinsurance business. As a result, we refined our policyholder behavior assumptions (mainly those relating to annuitizations and partial withdrawals). This refinement increased the fair value of GLB liabilities, and resulted in a realized loss of approximately $ 40 million. We also made routine model refinements to the internal valuation model which had an insignificant impact on net income. For detailed information on our lapse and annuitization rate assumptions, refer to Note 4 to the Consolidated Financial Statements of our 2021 Form 10-K. The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3): Assets Liabilities Three Months Ended September 30, 2022 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 549 $ 2,261 $ 19 $ 81 $ 9 $ 832 Transfers into Level 3 — 2 — — — — Transfers out of Level 3 — ( 4 ) — — — — Change in Net Unrealized Gains/Losses in OCI ( 34 ) ( 16 ) — — — — Net Realized Gains/Losses ( 4 ) ( 9 ) — 3 ( 1 ) ( 22 ) Purchases 39 164 4 3 1 — Sales ( 19 ) ( 8 ) — ( 4 ) — — Settlements ( 25 ) ( 94 ) ( 4 ) — ( 6 ) — Other — — — — — ( 26 ) Balance, end of period $ 506 $ 2,296 $ 19 $ 83 $ 3 $ 784 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ ( 1 ) $ ( 3 ) $ — $ 3 $ ( 1 ) $ ( 22 ) Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ ( 35 ) $ ( 19 ) $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. 20 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Assets Liabilities Three Months Ended September 30, 2021 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments Other investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 642 $ 1,688 $ 47 $ 78 $ 3 $ 10 $ 760 Transfers into Level 3 22 45 — — — — — Transfers out of Level 3 — — — — — ( 10 ) — Change in Net Unrealized Gains/Losses in OCI ( 15 ) 2 — — — — — Net Realized Gains/Losses ( 3 ) — — 1 — — 59 Purchases 60 272 17 4 7 — — Sales ( 19 ) ( 13 ) — ( 4 ) — — — Settlements ( 27 ) ( 135 ) ( 11 ) — — — — Other — — — — — — ( 1 ) Balance, end of period $ 660 $ 1,859 $ 53 $ 79 $ 10 $ — $ 818 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ — $ — $ — $ ( 1 ) $ — $ — $ 59 Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ ( 15 ) $ — $ — $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. 21 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Assets Liabilities Nine Months Ended September 30, 2022 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 633 $ 2,049 $ 26 $ 77 $ 7 $ 745 Transfers into Level 3 23 41 — 1 — — Transfers out of Level 3 ( 23 ) ( 97 ) ( 5 ) — — — Change in Net Unrealized Gains/Losses in OCI ( 88 ) ( 68 ) — — — — Net Realized Gains/Losses ( 6 ) ( 9 ) — 7 ( 1 ) 86 Purchases 108 658 4 6 8 — Sales ( 44 ) ( 59 ) — ( 8 ) — — Settlements ( 97 ) ( 219 ) ( 6 ) — ( 11 ) — Other — — — — — ( 47 ) Balance, end of period $ 506 $ 2,296 $ 19 $ 83 $ 3 $ 784 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ ( 3 ) $ ( 4 ) $ — $ 6 $ ( 1 ) $ 86 Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ ( 89 ) $ ( 71 ) $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Assets Liabilities Nine Months Ended September 30, 2021 (in millions of U.S. dollars) Available-for-Sale Debt Securities Equity securities Short-term investments Other investments GLB (1) Non-U.S. Corporate and asset- backed securities Mortgage-backed securities Balance, beginning of period $ 546 $ 1,573 $ 60 $ 73 $ 5 $ 10 $ 1,089 Transfers into Level 3 22 91 — — — — — Transfers out of Level 3 ( 10 ) ( 3 ) — — — ( 10 ) — Change in Net Unrealized Gains/Losses in OCI ( 2 ) 14 — — — — — Net Realized Gains/Losses — 3 — 8 — — ( 252 ) Purchases 235 681 18 11 10 — — Sales ( 35 ) ( 88 ) ( 1 ) ( 13 ) — — — Settlements ( 96 ) ( 412 ) ( 24 ) — ( 5 ) — — Other — — — — — — ( 19 ) Balance, end of period $ 660 $ 1,859 $ 53 $ 79 $ 10 $ — $ 818 Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date $ — $ 3 $ — $ 5 $ — $ — $ ( 252 ) Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date $ 2 $ 17 $ — $ — $ — $ — $ — (1) Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. b) Financial instruments disclosed, but not measured, at fair value Chubb uses various financial instruments in the normal course of its business. Our insurance contracts are excluded from fair value of financial instruments accounting guidance, and therefore, are not included in the amounts discussed below. The carrying values of cash, other assets, other liabilities, and other financial instruments not included below approximated their fair values. Refer to the 2021 Form 10-K for information on the fair value methods and assumptions for investments in partially-owned insurance companies, short-term and long-term debt, repurchase agreements, and trust-preferred securities. 22 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following tables present fair value, by valuation hierarchy, and carrying value of the financial instruments not measured at fair value: September 30, 2022 Fair Value Net Carrying Value (in millions of U.S. dollars) Level 1 Level 2 Level 3 Total Assets: Fixed maturities held to maturity U.S. Treasury / Agency $ 1,157 $ 72 $ — $ 1,229 $ 1,281 Non-U.S. — 956 — 956 1,042 Corporate and asset-backed securities — 1,585 — 1,585 1,742 Mortgage-backed securities — 1,438 — 1,438 1,548 Municipal — 3,283 — 3,283 3,363 Total assets $ 1,157 $ 7,334 $ — $ 8,491 $ 8,976 Liabilities: Repurchase agreements $ — $ 2,417 $ — $ 2,417 $ 2,417 Short-term debt — 1,469 — 1,469 1,475 Long-term debt — 12,067 — 12,067 14,044 Trust preferred securities — 387 — 387 308 Total liabilities $ — $ 16,340 $ — $ 16,340 $ 18,244 December 31, 2021 Fair Value Net Carrying Value (in millions of U.S. dollars) Level 1 Level 2 Level 3 Total Assets: Fixed maturities held to maturity U.S. Treasury / Agency $ 1,192 $ 52 $ — $ 1,244 $ 1,213 Non-U.S. — 1,262 — 1,262 1,196 Corporate and asset-backed securities — 2,201 — 2,201 2,004 Mortgage-backed securities — 1,803 — 1,803 1,730 Municipal — 4,137 — 4,137 3,975 Total assets $ 1,192 $ 9,455 $ — $ 10,647 $ 10,118 Liabilities: Repurchase agreements $ — $ 1,406 $ — $ 1,406 $ 1,406 Short-term debt — 1,019 — 1,019 999 Long-term debt — 16,848 — 16,848 15,169 Trust preferred securities — 460 — 460 308 Total liabilities $ — $ 19,733 $ — $ 19,733 $ 17,882 5. Reinsurance Reinsurance recoverable on ceded reinsurance September 30, 2022 December 31, 2021 (in millions of U.S. dollars) Net Reinsurance Recoverable (1) Valuation allowance Net Reinsurance Recoverable (1) Valuation allowance Reinsurance recoverable on unpaid losses and loss expenses $ 17,380 $ 297 $ 16,184 $ 271 Reinsurance recoverable on paid losses and loss expenses 1,374 55 1,182 58 Reinsurance recoverable on losses and loss expenses $ 18,754 $ 352 $ 17,366 $ 329 Reinsurance recoverable on policy benefits $ 297 $ 4 $ 213 $ 4 (1) Net of valuation allowance for uncollectible reinsurance. 23 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The increase in reinsurance recoverable on losses and loss expenses was primarily due to prior period development in certain lines and higher underlying ceded exposures due to premium growth, partially offset by foreign currency movement. The following table presents a roll-forward of valuation allowance for uncollectible reinsurance related to Reinsurance recoverable on loss and loss expenses: Nine Months Ended September 30 (in millions of U.S. dollars) 2022 2021 Valuation allowance for uncollectible reinsurance - beginning of period $ 329 $ 314 Provision for uncollectible reinsurance 30 16 Write-offs charged against the valuation allowance ( 4 ) ( 4 ) Foreign exchange revaluation ( 3 ) ( 1 ) Valuation allowance for uncollectible reinsurance - end of period $ 352 $ 325 For additional information, refer to Note 1 d) to the Consolidated Financial Statements of our 2021 Form 10-K. 6. Unpaid losses and loss expenses The following table presents a reconciliation of beginning and ending Unpaid losses and loss expenses: Nine Months Ended September 30 (in millions of U.S. dollars) 2022 2021 Gross unpaid losses and loss expenses – beginning of period $ 72,943 $ 67,811 Reinsurance recoverable on unpaid losses – beginning of period (1) ( 16,184 ) ( 14,647 ) Net unpaid losses and loss expenses – beginning of period 56,759 53,164 Net losses and loss expenses incurred in respect of losses occurring in: Current year 18,426 17,556 Prior years (2) ( 952 ) ( 868 ) Total 17,474 16,688 Net losses and loss expenses paid in respect of losses occurring in: Current year 5,104 4,771 Prior years 9,217 7,922 Total 14,321 12,693 Foreign currency revaluation and other ( 1,300 ) ( 78 ) Net unpaid losses and loss expenses – end of period 58,612 57,081 Reinsurance recoverable on unpaid losses (1) 17,380 15,550 Gross unpaid losses and loss expenses – end of period $ 75,992 $ 72,631 (1) Net of valuation allowance for uncollectible reinsurance. (2) Relates to prior period loss reserve development only and excludes prior period development related to reinstatement premiums, expense adjustments, and earned premiums totaling $ 243 million and $ 87 million for the nine months ended September 30, 2022 and 2021, respectively. Gross and net unpaid losses and loss expenses increased $ 3,049 million and $ 1,853 million, respectively, for the nine months ended September 30, 2022, driven by an increase in underlying exposure due to premium growth and net catastrophe losses, partially offset by favorable prior period development, and favorable foreign exchange movement. 24 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Prior Period Development Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years. Long-tail lines include lines such as workers' compensation, general liability, and financial lines; while short-tail lines include lines such as most property lines, energy, personal accident, and agriculture. The following table summarizes (favorable) and adverse PPD by segment: Three Months Ended September 30 Nine Months Ended September 30 (in millions of U.S. dollars) Long-tail Short-tail Total Long-tail Short-tail Total 2022 North America Commercial P&C Insurance $ ( 29 ) $ ( 137 ) $ ( 166 ) $ ( 315 ) $ ( 246 ) $ ( 561 ) North America Personal P&C Insurance — ( 133 ) ( 133 ) — ( 187 ) ( 187 ) North America Agricultural Insurance — 9 9 — ( 17 ) ( 17 ) Overseas General Insurance ( 5 ) — ( 5 ) ( 5 ) ( 233 ) ( 238 ) Global Reinsurance — — — ( 7 ) 29 22 Corporate 73 — 73 272 — 272 Total $ 39 $ ( 261 ) $ ( 222 ) $ ( 55 ) $ ( 654 ) $ ( 709 ) 2021 North America Commercial P&C Insurance $ ( 101 ) $ ( 56 ) $ ( 157 ) $ ( 243 ) $ ( 197 ) $ ( 440 ) North America Personal P&C Insurance — ( 182 ) ( 182 ) — ( 266 ) ( 266 ) North America Agricultural Insurance — 7 7 — 5 5 Overseas General Insurance ( 13 ) ( 15 ) ( 28 ) ( 8 ) ( 201 ) ( 209 ) Global Reinsurance ( 4 ) — ( 4 ) ( 26 ) 15 ( 11 ) Corporate 43 — 43 140 — 140 Total $ ( 75 ) $ ( 246 ) $ ( 321 ) $ ( 137 ) $ ( 644 ) $ ( 781 ) Significant prior period movements by segment, principally driven by reserve reviews completed during each respective period, are discussed in more detail below. The remaining net development for long-tail lines and short-tail business for each segment and Corporate comprises numerous favorable and adverse movements across a number of lines and accident years, none of which is significant individually or in the aggregate. North America Commercial P&C Insurance . Net favorable development for the three months ended September 30, 2022, included $ 164 million from lower than expected loss experience in workers’ compensation lines and $ 66 million, net of premium adjustments, from lower claims activity in large multi-line loss sensitive accounts. The favorable development was partially offset by net adverse development of $ 58 million from higher than expected claims severity in commercial auto liability, and $ 71 million from commercial umbrella/excess portfolios. Net favorable development on our short-tail businesses primarily included $ 132 million from property and marine portfolios, where paid and reported loss activity for the most recent accident years was lower than expected. Net favorable development for the nine months ended September 30, 2022, also included favorable development in workers’ compensation lines due to updates to loss development factors and our annual assessment of multi-claimant events, including industrial accidents. Net favorable development for the three and nine months ended September 30, 2021, included $ 97 million and $ 255 million from workers' compensation lines due to lower than expected loss experience. This favorable development for the nine months ended September 30, 2021, from workers' compensation lines also included related updates to loss development factors and our annual assessment of multi-claimant events, including industrial accidents. The favorable development for the nine months ended September 30, 2021, was partially offset by net adverse development in commercial auto liability of $ 74 million and commercial excess and umbrella portfolios of $ 74 million. North America Personal P&C Insurance . Net favorable development for the three and nine months ended September 30, 2022, included favorable development in the homeowners and valuables lines of business, driven by lower than expected claims reserve development. 25 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Net favorable development for the three and nine months ended September 30, 2021, included favorable development in homeowners and valuables, which experienced lower than expected loss development. Overseas General Insurance . Net favorable development for the three months ended September 30, 2022, included lower than expected paid and reported loss activity of $ 82 million in casualty lines, including primary and excess lines in Continental Europe, the U.K., and Asia Pacific, and $ 34 million in environmental lines. The favorable development was partially offset by net adverse development of $ 114 million from financial lines, including Directors and Officers (D&O) due to a combination of higher than expected development on specific claims and increased expected future development in the U.K., Continental Europe, Asia Pacific, and London wholesale business. Net favorable development for the nine months ended September 30, 2022, also included net favorable development of $ 75 million in A&H lines, $ 67 million in property lines, and $ 53 million in personal lines. Net favorable development for the three months ended September 30, 2021, included favorable development in casualty lines partially offset by adverse development in financial lines, primarily D&O. Net favorable development for the nine months ended September 30, 2021, also included favorable development in A&H and property lines, the latter of which included a $ 21 million favorable reduction in COVID-19 estimates. Corporate . Net adverse development for the three months ended September 30, 2022 and 2021, included adverse development for environmental liabilities. Net adverse development for the nine months ended September 30, 2022 and 2021, also included adverse development for molestation claims of $ 155 million and $ 68 million, respectively. Molestation claims In the third quarter of 2022, the bankruptcy court approved the agreement-in-principle regarding the bankruptcy of the Boy Scouts of America (BSA), which will proceed to further approval before the U.S. District Court. The terms of the agreement are consistent with the 2021 10-K disclosure. Of the $ 800 million that will be paid per the agreement, we paid $ 200 million during the third quarter and expect to pay the remaining $ 600 million liability within the next twelve months. Refer to the 2021 10-K for additional information on molestation claims. 7. Value of business acquired, Goodwill, and Other intangible assets Value of business acquired Value of business acquired (VOBA) represents the fair value of the future profits of in-force long duration contracts, and is amortized in relation to the profit emergence of the underlying contracts, in a manner similar to deferred acquisition costs. The VOBA calculation is based on many factors including mortality, morbidity, persistency, investment yields, expenses, and the discount rate, with the discount rate being the most significant factor. The following table presents a roll-forward of VOBA: Nine months ended September 30 (in millions of U.S. dollars) 2022 Balance, beginning of period $ 236 Acquisition of Cigna's business in Asia 3,379 Amortization of VOBA (1) ( 107 ) Foreign exchange revaluation and other ( 184 ) Balance, end of period $ 3,324 (1) Recognized in Policy acquisition costs in the Consolidated statements of operations. During the three months ended September 30, 2022, amortization of VOBA associated with the acquisition of Cigna’s business in Asia was $ 93 million pre-tax. The expected pre-tax amortization expense related to VOBA associated with the acquisition of Cigna’s business in Asia for the fourth quarter of 2022 at current exchange rates is approximately $ 100 million. Amortization of VOBA beyond next quarter will be determined in conjunction with the adoption of long-duration accounting guidance effective January 1, 2023. Refer to Note 1 for more information. 26 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Goodwill The following table presents a roll-forward of Goodwill by segment: (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Chubb Consolidated Balance at December 31, 2021 $ 6,972 $ 2,240 $ 134 $ 4,653 $ 371 $ 843 $ 15,213 Acquisition of Cigna's business in Asia — — — 103 — 1,237 1,340 Foreign exchange revaluation and other ( 11 ) ( 4 ) — ( 431 ) — — ( 446 ) Balance at September 30, 2022 $ 6,961 $ 2,236 $ 134 $ 4,325 $ 371 $ 2,080 $ 16,107 Other intangible assets Other intangible assets that are subject to amortization principally relate to agency distribution relationships, renewal rights, and patents, and other intangible assets that are not subject to amortization principally relate to trademarks. (in millions of U.S. dollars) September 30 2022 December 31 2021 Subject to amortization $ 2,417 $ 2,508 Not subject to amortization 2,966 2,947 Total $ 5,383 $ 5,455 The following table presents, as of September 30, 2022, the expected pre-tax amortization expense of purchased intangibles, at current foreign currency exchange rates, for the fourth quarter of 2022 and for the next five years: For the Years Ending December 31 (in millions of U.S. dollars) Associated with the Cigna acquisition in Asia (1) Associated with the Chubb acquisition (2) Other intangible assets (3) Total amortization of purchased intangibles Fourth quarter of 2022 $ 1 $ 45 $ 25 $ 71 2023 2 170 96 268 2024 4 153 89 246 2025 5 137 87 229 2026 6 123 84 213 2027 9 108 81 198 Total $ 27 $ 736 $ 462 $ 1,225 (1) Recorded in Life Insurance segment. (2) Recorded in Corporate. (3) Recorded in applicable segment(s) that acquired the intangible assets . 27 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 8. Commitments, contingencies, and guarantees a) Derivative instruments Chubb maintains positions in derivative instruments such as futures, options, swaps, and foreign currency forward contracts for which the primary purposes are to manage duration and foreign currency exposure, yield enhancement, or to obtain an exposure to a particular financial market. Chubb also maintains positions in convertible securities that contain embedded derivatives. Investment derivative instruments and derivatives designated as hedges are recorded in either Other assets (OA) or Accounts payable, accrued expenses, and other liabilities (AP); convertible bonds are recorded in Fixed maturities available for sale (FM AFS); and convertible equity securities are recorded in Equity securities (ES) in the Consolidated balance sheets. These are the most numerous and frequent derivative transactions. In addition, Chubb, from time to time, purchases to be announced mortgage-backed securities (TBAs) as part of its investing activities. As a global company, Chubb entities transact business in multiple currencies. Our policy is to generally match assets, liabilities, and required capital for each individual jurisdiction in local currency, which would include the use of derivatives discussed below. Some of Chubb's derivatives satisfy hedge accounting requirements, as discussed below. We also consider economic hedging for planned cross border transactions. Under reinsurance programs covering GLBs, Chubb assumes the risk of GLBs, principally GMIB, associated with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed minimum level of monthly income. The GLB reinsurance product meets the definition of a derivative instrument and is classified within AP. Chubb also generally maintains positions in exchange-traded equity futures contracts on equity market indices to limit equity exposure in the GMDB and GLB book of business. The following table presents the balance sheet locations, fair values of derivative instruments in an asset or (liability) position, and notional values/payment provisions of our derivative instruments: September 30, 2022 December 31, 2021 Consolidated Balance Sheet Location Fair Value Notional Value/ Payment Provision Fair Value Notional Value/ Payment Provision (in millions of U.S. dollars) Derivative Asset Derivative (Liability) Derivative Asset Derivative (Liability) Investment and embedded derivatives not designated as hedging instruments: Foreign currency forward contracts OA / (AP) $ 72 $ ( 277 ) $ 5,211 $ 25 $ ( 139 ) $ 6,182 Options/Futures contracts on notes, bonds, and equities OA / (AP) 57 ( 29 ) 1,366 33 ( 27 ) 12,944 Convertible securities (1) FM AFS / ES 32 — 41 11 — 12 $ 161 $ ( 306 ) $ 6,618 $ 69 $ ( 166 ) $ 19,138 Other derivative instruments: Futures contracts on equities (2) OA / (AP) $ 107 $ — $ 952 $ — $ ( 16 ) $ 905 Other OA / (AP) 2 — 301 — — 3 $ 109 $ — $ 1,253 $ — $ ( 16 ) $ 908 GLB (3) (AP) $ — $ ( 784 ) $ 2,210 $ — $ ( 745 ) $ 1,432 Derivatives designated as hedging instruments: Cross-currency swaps - fair value hedges OA / (AP) $ — $ ( 94 ) $ 1,501 $ — $ — $ — Cross-currency swaps - net investment hedges OA / (AP) 71 ( 7 ) 1,501 — — — $ 71 $ ( 101 ) $ 3,002 $ — $ — $ — (1) Includes fair value of embedded derivatives. (2) Related to GMDB and GLB book of business. (3) Note that the payment provision related to GLB is the net amount at risk. The concept of a notional value does not apply to the GLB reinsurance contracts. 28 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries At September 30, 2022, and December 31, 2021, net derivative liabilities of $ 98 million and $ 123 million, respectively, included in the table above were subject to a master netting agreement. The remaining derivatives included in the table above were not subject to a master netting agreement. b) Hedge accounting We designated certain derivatives as fair value hedges and net investment hedges for accounting purposes to hedge for foreign currency exposure associated with portions of our Euro denominated debt and the net investment in certain foreign subsidiaries, respectively. These derivatives comprise cross-currency swaps, which are agreements under which two counterparties exchange interest payments and principal denominated in different currencies at a future date. (i) Cross-currency swaps - fair value hedges In September 2022, Chubb entered into certain cross-currency swaps designated as fair value hedges. The objective of these cross-currency swaps is to hedge the foreign currency risk on our Euro denominated debt by converting cash flows back into the U.S dollar. These fair value hedges are carried at fair value. The hedges are expected to be highly effective, with gains or losses on the fair value hedges offsetting the foreign currency remeasurement on the hedged Euro denominated senior notes within Net realized gains (losses) on the Consolidated statements of operations. The remaining change in fair value is recorded in Other comprehensive income (OCI). The carrying value of hedged Euro denominated senior notes, recorded within Long-term debt on the Consolidated balance sheets, was $ 1.5 billion as of September 30, 2022. This carrying value includes a $ 32 million gain from foreign currency remeasurement since the inception of the hedge. For the three and nine months ended September 30, 2022, $ 94 million of losses on fair value hedges were recognized in OCI, of which $ 32 million of losses were reclassified from OCI to Net realized gains (losses). (ii) Cross-currency swaps - net investment hedges In September 2022, Chubb entered into certain cross-currency swaps designated as net investment hedges. The objective of these cross-currency swaps is to hedge the foreign currency exposure in the net investments of certain foreign subsidiaries by converting cash flows from U.S. dollar to the British pound sterling, Japanese yen, and Swiss franc. The hedged risk is designated as the foreign currency exposure arising between the functional currency of the foreign subsidiary and the functional currency of its parent entity. These net investment hedges are carried at fair value, with changes in fair value recorded in Cumulative translation adjustments (CTA) within OCI. The mark-to-market adjustments for foreign currency changes will remain until the underlying hedge subsidiary is deconsolidated or if hedge accounting is discontinued. For the three and nine months ended September 30, 2022, $ 64 million of gains on net investment hedges were recognized in CTA. 29 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries c) Derivative instruments not designated as hedges Derivative instruments which are not designated as hedges are carried at fair value with changes in fair value recorded in Net realized gains (losses) in the Consolidated statements of operations. The following table presents net realized gains (losses) related to derivative instrument activity in the Consolidated statements of operations: Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Investment and embedded derivative instruments: Foreign currency forward contracts $ ( 247 ) $ ( 15 ) $ ( 515 ) $ ( 37 ) All other futures contracts, options, and equities 49 6 285 45 Convertible securities (1) — — ( 2 ) 1 Total investment and embedded derivative instruments $ ( 198 ) $ ( 9 ) $ ( 232 ) $ 9 GLB and other derivative instruments: GLB $ 22 $ ( 59 ) $ ( 86 ) $ 252 Futures contracts on equities (2) 54 ( 4 ) 240 ( 112 ) Other ( 19 ) ( 10 ) ( 9 ) ( 8 ) Total GLB and other derivative instruments $ 57 $ ( 73 ) $ 145 $ 132 $ ( 141 ) $ ( 82 ) $ ( 87 ) $ 141 (1) Includes embedded derivatives. (2) Related to GMDB and GLB book of business. (i) Foreign currency exposure management A foreign currency forward contract (forward) is an agreement between participants to exchange specific currencies at a future date. Chubb uses forwards to minimize the effect of fluctuating foreign currencies as discussed above. (ii) Duration management and market exposure Futures Futures contracts give the holder the right and obligation to participate in market movements, determined by the index or underlying security on which the futures contract is based. Settlement is made daily in cash by an amount equal to the change in value of the futures contract times a multiplier that scales the size of the contract. Exchange-traded futures contracts on money market instruments, notes and bonds are used in fixed maturity portfolios to more efficiently manage duration, as substitutes for ownership of the money market instruments, bonds and notes without significantly increasing the risk in the portfolio. Investments in futures contracts may be made only to the extent that there are assets under management not otherwise committed. Exchange-traded equity futures contracts are used to limit exposure to a severe equity market decline, which would cause an increase in expected claims and, therefore, an increase in future policy benefit reserves for GMDB and an increase in the fair value liability for GLB reinsurance business. Options An option contract conveys to the holder the right, but not the obligation, to purchase or sell a specified amount or value of an underlying security at a fixed price. Option contracts are used in our investment portfolio as protection against unexpected shifts in interest rates, which would affect the duration of the fixed maturity portfolio. By using options in the portfolio, the overall interest rate sensitivity of the portfolio can be reduced. Option contracts may also be used as an alternative to futures contracts in the synthetic strategy as described above. The price of an option is influenced by the underlying security, level of interest rates, expected volatility, time to expiration, and supply and demand. 30 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The credit risk associated with the above derivative financial instruments relates to the potential for non-performance by counterparties. Although non-performance is not anticipated, in order to minimize the risk of loss, management monitors the creditworthiness of its counterparties and obtains collateral. The performance of exchange-traded instruments is guaranteed by the exchange on which they trade. For non-exchange-traded instruments, the counterparties are principally banks which must meet certain criteria according to our investment guidelines. Other Included within Other are derivatives intended to reduce potential losses which may arise from certain exposures in our insurance business. The economic benefit provided by these derivatives is similar to purchased reinsurance. For example, Chubb may enter into crop derivative contracts to protect underwriting results in the event of a significant decline in commodity prices. (iii) Convertible security investments A convertible security is a debt instrument or preferred stock that can be converted into a predetermined amount of the issuer’s equity. The convertible option is an embedded derivative within the host instruments which are classified in the investment portfolio as either available for sale or as an equity security. Chubb purchases convertible securities for their total return and not specifically for the conversion feature. (iv) TBA By acquiring TBAs, we make a commitment to purchase a future issuance of mortgage-backed securities. For the period between purchase of the TBAs and issuance of the underlying security, we account for our position as a derivative in the Consolidated Financial Statements. Chubb purchases TBAs, from time to time, both for their total return and for the flexibility they provide related to our mortgage-backed security strategy. (v) GLB Under the GLB program, as the assuming entity, Chubb is obligated to provide coverage until the expiration or maturity of the underlying deferred annuity contracts or the expiry of the reinsurance treaty. The GLB is accounted for as a derivative and is recorded at fair value. Fair value represents management’s estimate of an exit price and thus, includes a risk margin. We may recognize a realized loss for other changes in fair value due to adverse changes in the capital markets (e.g., declining interest rates and/or declining U.S. and/or international equity markets) and changes in actual or estimated future policyholder behavior (e.g., increased annuitization or decreased lapse rates) although we expect the business to be profitable. To mitigate adverse changes in the capital markets, we maintain positions in exchange-traded equity futures contracts, as noted under section "(ii) Futures" above. These futures increase in fair value when the S&P 500 index decreases (and decrease in fair value when the S&P 500 index increases). The net impact of gains or losses related to changes in fair value of the GLB liability and the exchange-traded equity futures are included in Net realized gains (losses). d) Securities lending and secured borrowings Chubb participates in a securities lending program operated by a third-party banking institution whereby certain assets are loaned to qualified borrowers and from which we earn an incremental return. The securities lending collateral can only be drawn down by Chubb in the event that the institution borrowing the securities is in default under the lending agreement. An indemnification agreement with the lending agent protects us in the event a borrower becomes insolvent or fails to return any of the securities on loan. The collateral is recorded in Securities lending collateral and the liability is recorded in Securities lending payable in the Consolidated balance sheets. 31 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following table presents the carrying value of collateral held under securities lending agreements by investment category and remaining contractual maturity of the underlying agreements: Remaining contractual maturity September 30, 2022 December 31, 2021 (in millions of U.S. dollars) Overnight and Continuous Collateral held under securities lending agreements: Cash $ 857 $ 931 U.S. Treasury / Agency 93 128 Non-U.S. 641 752 Corporate and asset-backed securities 35 12 Mortgage-backed securities — 1 Equity securities — 7 $ 1,626 $ 1,831 Gross amount of recognized liability for securities lending payable $ 1,626 $ 1,831 At September 30, 2022, and December 31, 2021, our repurchase agreement obligations of $ 2,417 million and $ 1,406 million, respectively, were fully collateralized. In contrast to securities lending programs, the use of cash received is not restricted for the repurchase obligations. The fair value of the underlying securities sold remains in Fixed maturities available for sale, and the repurchase agreement obligation is recorded in Repurchase agreements in the Consolidated balance sheets. The following table presents the carrying value of collateral pledged under repurchase agreements by investment category and remaining contractual maturity of the underlying agreements: Remaining contractual maturity September 30, 2022 December 31, 2021 Up to 30 Days 30-90 Days Greater than 90 Days Total 30-90 Days Greater than 90 Days Total (in millions of U.S. dollars) Collateral pledged under repurchase agreements: Cash $ 66 $ 10 $ — $ 76 $ — $ 29 $ 29 U.S. Treasury / Agency — 102 — 102 103 — 103 Mortgage-backed securities 350 1,530 471 2,351 — 1,288 1,288 $ 416 $ 1,642 $ 471 $ 2,529 $ 103 $ 1,317 $ 1,420 Gross amount of recognized liabilities for repurchase agreements $ 2,417 $ 1,406 Difference (1) $ 112 $ 14 (1) Per the repurchase agreements, the amount of collateral posted is required to exceed the amount of gross liability. Potential risks exist in our secured borrowing transactions due to market conditions and counterparty exposure. With collateral that we pledge, there is a risk that the collateral may not be returned at the expiration of the agreement. If the counterparty fails to return the collateral, Chubb will have free use of the borrowed funds until our collateral is returned. In addition, we may encounter the risk that Chubb may not be able to renew outstanding borrowings with a new term or with an existing counterparty due to market conditions including a decrease in demand as well as more restrictive terms from banks due to increased regulatory and capital constraints. Should this condition occur, Chubb may seek alternative borrowing sources or reduce borrowings. Additionally, increased margins and collateral requirements due to market conditions would increase our restricted assets as we are required to provide additional collateral to support the transaction. 32 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries e) Fixed maturities At September 30, 2022, and December 31, 2021, commitments to purchase fixed income securities over the next several years were $ 630 million and $ 771 million, respectively. f) Other investments At September 30, 2022, included in Other investments in the Consolidated balance sheet are investments in limited partnerships and partially-owned investment companies with a carrying value of $ 12.0 billion. In connection with these investments, we have commitments that may require funding of up to $ 7.6 billion over the next several years. At December 31, 2021, these investments had a carrying value of $ 9.8 billion with a commitment that may require funding of up to $ 7.2 billion. g) Income taxes At September 30, 2022, $ 57 million of unrecognized tax benefits remain out standing. It is reasonably possible that, over the next twelve months, the amount of unrecognized tax benefits may change resulting from the re-evaluation of unrecognized tax benefits arising from examinations by taxing authorities, settlements, and the lapses of statutes of limitations. With few exceptions, Chubb is no longer subject to income tax examinations for years before 2012 . h) Legal proceedings Our insurance subsidiaries are subject to claims litigation involving disputed interpretations of policy coverages and, in some jurisdictions, direct actions by allegedly-injured persons seeking damages from policyholders. These lawsuits, involving claims on policies issued by our subsidiaries which are typical to the insurance industry in general and in the normal course of business, are considered in our loss and loss expense reserves. In addition to claims litigation, we are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance policies. This category of business litigation typically involves, among other things, allegations of underwriting errors or misconduct, employment claims, regulatory activity, or disputes arising from our business ventures. In the opinion of management, our ultimate liability for these matters could be, but we believe is not likely to be, material to our consolidated financial condition and results of operations. i) Lease commitments At September 30, 2022, and December 31, 2021, the right-of-use asset was $ 458 million and $ 445 million, respectively, recorded within Other assets and the lease liability was $ 486 million and $ 484 million, respectively, recorded within Accounts payable, accrued expenses, and other liabilities on the Consolidated balance sheets. These leases consist principally of real estate operating leases that are amortized on a straight-line basis over the term of the lease, which expire at various dates. j) Letters of credit In October 2022, Chubb entered into a new group syndicated credit facility through 2027 with capacity of $ 3.0 billion. This facility consolidated our three existing syndicated facilities with capacity of $ 2.7 billion. 9. Shareholders’ equity All of Chubb’s Common Shares are authorized under Swiss corporate law. Though the par value of Common Shares is stated in Swiss francs, Chubb continues to use U.S. dollars as its reporting currency for preparing the Consolidated Financial Statements. Under Swiss corporate law, dividends, including distributions from legal reserves or through a reduction in par value (par value reduction), must be stated in Swiss francs though dividend payments are made by Chubb in U.S. dollars. At September 30, 2022, our Common Shares had a par value of CHF 24.15 per share. At our May 2022 annual general meeting, our shareholders approved an annual dividend for the following year of up to $ 3.32 per share, expected to be paid in four quarterly installments of $ 0.83 per share after the general meeting by way of distribution from capital contribution reserves, transferred to free reserves for payment. The Board of Directors (Board) will determine the record and payment dates at which the annual dividend may be paid until the date of the 2023 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. At our May 2021 and 2020 annual general meetings, our shareholders approved annual dividends for the following year of up to $ 3.20 per share and $ 3.12 per share, respectively, which were paid in four quarterly installments of $ 0.80 per share and $ 0.78 per share, respectively, at dates determined by the Board after the annual general meetings by way of a distribution from capital contribution reserves, transferred to free reserves for payment. The following table presents dividend distributions per Common Share in Swiss francs (CHF) and U.S. dollars (USD): 33 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 CHF USD CHF USD CHF USD CHF USD Total dividend distributions per common share 0.78 $ 0.83 0.73 $ 0.80 2.32 $ 2.46 2.14 $ 2.38 Increases in Common Shares in treasury are due to open market repurchases of Common Shares and the surrender of Common Shares to satisfy tax withholding obligations in connection with the vesting of restricted stock and the forfeiture of unvested restricted stock. Decreases in Common Shares in treasury are principally due to grants of restricted stock, exercises of stock options, purchases under the Employee Stock Purchase Plan (ESPP), and share cancellations. At the Chubb Limited Extraordinary General Meeting of Shareholders, held on November 3, 2021, shareholders approved the cancellation of 14,465,400 shares repurchased under our share repurchase program during the first six months of 2021. The capital reduction by cancellation of shares was subject to publication requirements and a two-month waiting period in accordance with Swiss law and became effective on January 17, 2022. At our May 2022 annual general meeting, held on May 19, 2022, our shareholders approved the cancellation of 13,179,100 shares purchased under our share repurchase program during the last six months of 2021. The capital reduction by cancellation of shares was subject to publication requirements and a two-month waiting period in accordance with Swiss law and became effective on August 4, 2022. During the nine months ended September 30, 2022, 14,022,728 shares were repurchased, 27,644,500 shares were canceled, and 2,470,600 net shares were issued under employee share-based compensation plans. At September 30, 2022, 31,356,130 Common Shares remain in treasury. Chubb Limited securities repurchase authorizations The Board has authorized share repurchase programs as follows: • $ 1.5 billion of Chubb Common Shares from November 19, 2020 through December 31, 2021; • $ 1.0 billion increase to the November 2020 share repurchase program to a total of $ 2.5 billion in February 2021, effective through December 31, 2021; • One-time incremental share repurchase program of $ 5.0 billion of Chubb Common Shares from July 19, 2021 through June 30, 2022; and • $ 2.5 billion of Chubb Common Shares from May 19, 2022 through June 30, 2023. The following table presents repurchases of Chubb's Common Shares conducted in a series of open market transactions under the Board authorizations: Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars, except share data) 2022 2021 2022 2021 Number of shares repurchased 3,676,528 8,412,000 14,022,728 22,877,400 Cost of shares repurchased $ 685 $ 1,516 $ 2,815 $ 3,956 Repurchase authorization remaining at end of period $ 1,816 $ 3,551 $ 1,816 $ 3,551 34 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following table presents changes in accumulated other comprehensive income (loss): Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Accumulated other comprehensive income (loss) (AOCI) Net unrealized appreciation (depreciation) on investments Balance – beginning of period, net of tax $ ( 5,713 ) $ 3,342 $ 2,256 $ 4,673 Change in period, before reclassification from AOCI (before tax) ( 3,324 ) ( 564 ) ( 12,898 ) ( 2,151 ) Amounts reclassified from AOCI (before tax) 279 10 857 ( 26 ) Change in period, before tax ( 3,045 ) ( 554 ) ( 12,041 ) ( 2,177 ) Income tax benefit 147 98 1,174 390 Balance – end of period, net of tax ( 8,611 ) 2,886 ( 8,611 ) 2,886 Cumulative foreign currency translation adjustment Balance – beginning of period, net of tax ( 2,821 ) ( 1,323 ) ( 2,146 ) ( 1,637 ) Change in period, before tax ( 966 ) ( 414 ) ( 1,676 ) ( 84 ) Income tax benefit 6 23 41 7 Balance – end of period, net of tax ( 3,781 ) ( 1,714 ) ( 3,781 ) ( 1,714 ) Fair value hedging instruments Balance – beginning of period, net of tax — — — — Change in period, before reclassification from AOCI (before tax) ( 94 ) — ( 94 ) — Amounts reclassified from AOCI (before tax) 32 — 32 — Change in period, before tax ( 62 ) — ( 62 ) — Income tax benefit 13 — 13 — Balance – end of period, net of tax ( 49 ) — ( 49 ) — Postretirement benefit liability adjustment Balance – beginning of period, net of tax 259 ( 197 ) 240 ( 167 ) Change in period, before tax 3 4 27 ( 33 ) Income tax (expense) benefit ( 1 ) ( 1 ) ( 6 ) 6 Balance – end of period, net of tax 261 ( 194 ) 261 ( 194 ) Accumulated other comprehensive income (loss) $ ( 12,180 ) $ 978 $ ( 12,180 ) $ 978 The following table presents reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations: Three Months Ended Nine Months Ended Consolidated Statement of Operations Location September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Fixed maturities available for sale $ ( 279 ) $ ( 10 ) $ ( 857 ) $ 26 Net realized gains (losses) Income tax (expense) benefit 39 3 138 5 Income tax expense $ ( 240 ) $ ( 7 ) $ ( 719 ) $ 31 Net income Net gains (losses) of fair value hedging instruments Cross-currency swaps $ ( 32 ) $ — $ ( 32 ) $ — Net realized gains (losses) Income tax (expense) benefit 7 — 7 — Income tax expense $ ( 25 ) $ — $ ( 25 ) $ — Net income Total amounts reclassified from AOCI $ ( 265 ) $ ( 7 ) $ ( 744 ) $ 31 35 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 10. Share-based compensation The Chubb Limited 2016 Long-Term Incentive Plan, as amended and restated (the Amended 2016 LTIP), permits grants of both incentive and non-qualified stock options principally at an option price per share equal to the grant date fair value of Chubb's Common Shares. Stock options are generally granted with a 3 -year vesting period and a 10 -year term. Stock options typically vest in equal annual installments over the respective vesting period, which is also the requisite service period. On February 24, 2022, Chubb granted 1,699,554 stock options with a weighted-average grant date fair value of $ 35.21 each. The fair value of the options issued is estimated on the grant date using the Black-Scholes option pricing model. The Amended 2016 LTIP also permits grants of service-based restricted stock and restricted stock units as well as performance-based restricted stock awards. Chubb generally grants service-based restricted stock and restricted stock units with a 4 -year vesting period, based on a graded vesting schedule. The performance-based restricted stock awards granted comprise target awards and premium awards that cliff vest at the end of a 3 -year performance period based on both tangible book value (shareholders' equity less goodwill and intangible assets, net of tax) per share growth and P&C combined ratio compared to a defined group of peer companies. Premium awards are subject to an additional vesting provision based on total shareholder return compared to our peer group. The restricted stock is principally granted at market close price on the grant date. On February 24, 2022, Chubb granted 807,194 service-based restricted stock awards, 295,301 service-based restricted stock units, and 294,229 performance-based stock awards to employees and officers with a grant date fair value of $ 199.03 each. Each restricted stock unit represents our obligation to deliver to the holder one Common Share upon vesting. 11. Postretirement benefits The components of net pension and other postretirement benefit costs (benefits) reflected in Net income in the Consolidated statements of operations were as follows: Pension Benefit Plans Other Postretirement Benefit Plans 2022 2021 2022 2021 Three Months Ended September 30 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans (in millions of U.S. dollars) Service cost $ — $ 1 $ — $ 1 $ — $ 1 Non-service cost (benefit): Interest cost 21 5 18 5 — 1 Expected return on plan assets ( 70 ) ( 11 ) ( 64 ) ( 10 ) — ( 1 ) Amortization of net actuarial loss — — — — — — Amortization of prior service cost — — — — — — Settlements — — 1 — — — Total non-service cost (benefit) ( 49 ) ( 6 ) ( 45 ) ( 5 ) — — Net periodic benefit cost (benefit) $ ( 49 ) $ ( 5 ) $ ( 45 ) $ ( 4 ) $ — $ 1 36 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Pension Benefit Plans Other Postretirement Benefit Plans 2022 2021 2022 2021 Nine Months Ended September 30 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans (in millions of U.S. dollars) Service cost $ — $ 3 $ — $ 3 $ — $ 1 Non-service cost (benefit): Interest cost 64 17 53 14 1 1 Expected return on plan assets ( 212 ) ( 33 ) ( 191 ) ( 32 ) ( 1 ) ( 1 ) Amortization of net actuarial loss — — — 2 — — Amortization of prior service cost — — — — — ( 26 ) Settlements — — 1 — — — Total non-service cost (benefit) ( 148 ) ( 16 ) ( 137 ) ( 16 ) — ( 26 ) Net periodic benefit cost (benefit) $ ( 148 ) $ ( 13 ) $ ( 137 ) $ ( 13 ) $ — $ ( 25 ) 37 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The line items in which the service cost and non-service cost (benefit) components of net periodic benefit cost (benefit) are included in the Consolidated statements of operations were as follows: Pension Benefit Plans Other Postretirement Benefit Plans Three Months Ended September 30 2022 2021 2022 2021 (in millions of U.S. dollars) Service cost: Losses and loss expenses $ — $ — $ — $ — Administrative expenses 1 1 — 1 Total service cost 1 1 — 1 Non-service cost (benefit): Losses and loss expenses ( 5 ) ( 5 ) — — Administrative expenses ( 50 ) ( 45 ) — — Total non-service cost (benefit) ( 55 ) ( 50 ) — — Net periodic benefit cost (benefit) $ ( 54 ) $ ( 49 ) $ — $ 1 Pension Benefit Plans Other Postretirement Benefit Plans Nine Months Ended September 30 2022 2021 2022 2021 (in millions of U.S. dollars) Service cost: Losses and loss expenses $ — $ — $ — $ — Administrative expenses 3 3 — 1 Total service cost 3 3 — 1 Non-service cost (benefit): Losses and loss expenses ( 15 ) ( 14 ) — ( 3 ) Administrative expenses ( 149 ) ( 139 ) — ( 23 ) Total non-service cost (benefit) ( 164 ) ( 153 ) — ( 26 ) Net periodic benefit cost (benefit) $ ( 161 ) $ ( 150 ) $ — $ ( 25 ) 12. Other income and expense Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars) 2022 2021 2022 2021 Equity in net income (loss) of partially-owned entities (1) $ ( 98 ) $ 802 $ 192 $ 2,073 Gains (losses) from fair value changes in separate account assets (2) ( 67 ) ( 24 ) ( 116 ) ( 5 ) Federal excise and capital taxes ( 6 ) ( 5 ) ( 15 ) ( 15 ) Other ( 17 ) ( 10 ) ( 40 ) ( 23 ) Total $ ( 188 ) $ 763 $ 21 $ 2,030 (1) Equity in net income (loss) of partially-owned entities principally comprises mark-to-market gain (loss) on private equities where we own more than three percent of $( 190 ) million and $( 69 ) million for the three and nine months ended September 30, 2022, respectively, and $ 702 million and $ 1,776 million, respectively, for the prior year periods. This line item also includes net income of $ 28 million and $ 83 million attributable to our investments in Huatai (Huatai Group, Huatai P&C, and Huatai Life) for the three and nine months ended September 30, 2022, respectively, compared to $ 40 million and $ 144 million, respectively, for the prior year periods. (2) Related to gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. 38 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries Other income and expense includes equity in net income of partially-owned entities, which includes our share of net income or loss, both underlying operating income and mark-to-market movement, related to partially-owned investment companies (private equity) and partially-owned insurance companies. Also included in Other income and expense are gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. The offsetting movement in the separate account liabilities is included in Policy benefits in the Consolidated statements of operations. Certain federal excise and capital taxes incurred as a result of capital management initiatives are included in Other income and expense as these are considered capital transactions and are excluded from underwriting results. Bad debt expense for uncollectible premiums is also included in Other income and expense. 13. Segment information Chubb operates through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. Corporate results primarily include income and expenses not attributable to reportable segments and losses and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-off exposures. Segment results for the three and nine months ended September 30, 2022, include the results of Cigna's business in Asia from July 1, 2022. Results from Cigna's business in Asia are included in our Life Insurance segment and, to a lesser extent, Overseas General Insurance segment according to the nature of the business written. Management uses underwriting income (loss) as the basis for segment performance. Chubb calculates underwriting income (loss) by subtracting Losses and loss expenses, Policy benefits, Policy acquisition costs, and Administrative expenses from Net premiums earned. Segment income (loss) includes underwriting income (loss), net investment income (loss), and other operating income and expense items such as each segment's share of the operating income (loss) related to partially-owned entities and miscellaneous income and expense items for which the segments are held accountable. Our main measure of segment performance is Segment income (loss), which also includes amortization of purchased intangibles acquired by the segment. We determined that this definition of segment income (loss) is appropriate and aligns with how the business is managed. We continue to evaluate our segments as our business continues to evolve and may further refine our segments and segment income (loss) measures. Revenue and expenses managed at the corporate level, including net realized gains (losses), interest expense, Cigna integration expenses, and income tax are reported within Corporate. Cigna integration expenses are one-time costs that are directly attributable to third-party consulting fees, employee-related retention costs, and other professional and legal fees related to the acquisition of Cigna's A&H and Life insurance companies in six Asian markets. These items are not allocated to the segment level as they are one-time in nature and are not related to the ongoing business activities of the segment. The Chief Executive Officer does not manage segment results or allocate resources to segments when considering these costs, and therefore are excluded from our definition of segment income (loss). Certain items are presented in a different manner for segment reporting purposes than in the Consolidated Financial Statements. These items are reconciled to the consolidated presentation in the Segment measure reclass column below and include: • Losses and loss expenses include realized gains and losses on crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations, and therefore realized gains (losses) from these derivatives are reclassified to losses and loss expenses. • Policy benefits include fair value changes on separate accounts that do not qualify for separate accounting under GAAP. These gains and losses have been reclassified from Other (income) expense. We view gains and losses from fair value changes in both separate account assets and liabilities as part of the results of our underwriting operations, and therefore these gains and losses are reclassified to policy benefits. • Net investment income includes investment income reclassified from Other (income) expense related to partially-owned investment companies (private equity partnerships) where our ownership interest is in excess of three percent. We view investment income from these equity-method private equity partnerships as net investment income for segment reporting purposes. 39 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries The following tables present the Statement of Operations by segment: For the Three Months Ended September 30, 2022 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 4,722 $ 1,392 $ 1,723 $ 2,645 $ 265 $ 1,273 $ — $ — $ 12,020 Net premiums earned 4,283 1,334 1,673 2,741 255 1,249 — — 11,535 Losses and loss expenses 3,036 857 1,444 1,441 311 135 74 ( 19 ) 7,279 Policy benefits — — — — — 553 — ( 67 ) 486 Policy acquisition costs 583 274 68 720 59 271 — — 1,975 Administrative expenses 272 71 3 264 8 174 91 — 883 Underwriting income (loss) 392 132 158 316 ( 123 ) 116 ( 165 ) 86 912 Net investment income 589 76 9 151 71 147 5 ( 69 ) 979 Other (income) expense 6 1 1 ( 2 ) — ( 10 ) 194 ( 2 ) 188 Amortization expense of purchased intangibles — 2 7 12 — 2 46 — 69 Segment income (loss) $ 975 $ 205 $ 159 $ 457 $ ( 52 ) $ 271 $ ( 400 ) $ 19 $ 1,634 Net realized gains (losses) ( 365 ) ( 19 ) ( 384 ) Interest expense 150 — 150 Cigna integration expenses 23 — 23 Income tax expense 265 — 265 Net income (loss) $ ( 1,203 ) $ — $ 812 For the Three Months Ended September 30, 2021 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 4,369 $ 1,300 $ 1,415 $ 2,596 $ 221 $ 609 $ — $ — $ 10,510 Net premiums earned 3,954 1,244 1,338 2,664 211 589 — — 10,000 Losses and loss expenses 2,754 846 1,138 1,487 192 179 43 ( 10 ) 6,629 Policy benefits — — — — — 175 — ( 24 ) 151 Policy acquisition costs 537 254 61 703 55 168 — — 1,778 Administrative expenses 273 73 4 266 9 82 99 — 806 Underwriting income (loss) 390 71 135 208 ( 45 ) ( 15 ) ( 142 ) 34 636 Net investment income (loss) 507 60 6 157 99 102 ( 10 ) ( 55 ) 866 Other (income) expense 8 1 — — — ( 19 ) ( 722 ) ( 31 ) ( 763 ) Amortization expense of purchased intangibles — 2 7 11 — 2 49 — 71 Segment income $ 889 $ 128 $ 134 $ 354 $ 54 $ 104 $ 521 $ 10 $ 2,194 Net realized gains (losses) ( 11 ) ( 10 ) ( 21 ) Interest expense 122 — 122 Income tax expense 218 — 218 Net income $ 170 $ — $ 1,833 40 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries For the Nine Months Ended September 30, 2022 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 13,426 $ 3,998 $ 2,523 $ 8,364 $ 780 $ 2,430 $ — $ — $ 31,521 Net premiums earned 12,645 3,852 2,217 8,065 712 2,347 — — 29,838 Losses and loss expenses 7,979 2,343 1,830 4,054 565 437 275 ( 9 ) 17,474 Policy benefits — — — — — 906 — ( 116 ) 790 Policy acquisition costs 1,701 792 111 2,096 178 573 — — 5,451 Administrative expenses 814 213 4 811 27 346 264 — 2,479 Underwriting income (loss) 2,151 504 272 1,104 ( 58 ) 85 ( 539 ) 125 3,644 Net investment income (loss) 1,600 199 23 460 232 359 ( 4 ) ( 180 ) 2,689 Other (income) expense 12 3 1 3 1 ( 50 ) 73 ( 64 ) ( 21 ) Amortization expense of purchased intangibles — 7 20 40 — 7 137 — 211 Segment income (loss) $ 3,739 $ 693 $ 274 $ 1,521 $ 173 $ 487 $ ( 753 ) $ 9 $ 6,143 Net realized gains (losses) ( 778 ) ( 9 ) ( 787 ) Interest expense 416 — 416 Cigna integration expenses 26 — 26 Income tax expense 913 — 913 Net income (loss) $ ( 2,886 ) $ — $ 4,001 For the Nine Months Ended September 30, 2021 (in millions of U.S. dollars) North America Commercial P&C Insurance North America Personal P&C Insurance North America Agricultural Insurance Overseas General Insurance Global Reinsurance Life Insurance Corporate Segment Measure Reclass Chubb Consolidated Net premiums written $ 12,318 $ 3,761 $ 2,110 $ 7,983 $ 702 $ 1,844 $ — $ — $ 28,718 Net premiums earned 11,431 3,652 1,858 7,721 583 1,789 — — 27,034 Losses and loss expenses 7,740 2,341 1,554 3,936 422 562 141 ( 8 ) 16,688 Policy benefits — — — — — 508 — ( 5 ) 503 Policy acquisition costs 1,540 746 100 2,070 147 538 — — 5,141 Administrative expenses 772 200 10 811 27 247 258 — 2,325 Underwriting income (loss) 1,379 365 194 904 ( 13 ) ( 66 ) ( 399 ) 13 2,377 Net investment income (loss) 1,582 189 21 447 250 301 ( 42 ) ( 135 ) 2,613 Other (income) expense 24 ( 3 ) — 3 — ( 79 ) ( 1,845 ) ( 130 ) ( 2,030 ) Amortization expense of purchased intangibles — 8 20 36 — 4 148 — 216 Segment income $ 2,937 $ 549 $ 195 $ 1,312 $ 237 $ 310 $ 1,256 $ 8 $ 6,804 Net realized gains (losses) 841 ( 8 ) 833 Interest expense 366 — 366 Income tax expense 873 — 873 Net income $ 858 $ — $ 6,398 Underwriting assets are reviewed in total by management for purposes of decision-making. Other than Unpaid losses and loss expenses, Future policy benefits, Reinsurance recoverables, Goodwill and Other intangible assets, Chubb does not allocate assets to its segments. 41 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited) Chubb Limited and Subsidiaries 14. Earnings per share Three Months Ended Nine Months Ended September 30 September 30 (in millions of U.S. dollars, except share and per share data) 2022 2021 2022 2021 Numerator: Net income $ 812 $ 1,833 $ 4,001 $ 6,398 Denominator: Denominator for basic earnings per share: Weighted-average shares outstanding 416,542,101 435,318,088 421,290,032 443,595,026 Denominator for diluted earnings per share: Share-based compensation plans 3,076,855 3,123,550 3,733,449 3,032,989 Weighted-average shares outstanding and assumed conversions 419,618,956 438,441,638 425,023,481 446,628,015 Basic earnings per share $ 1.95 $ 4.21 $ 9.50 $ 14.42 Diluted earnings per share $ 1.94 $ 4.18 $ 9.41 $ 14.33 Potential anti-dilutive share conversions 1,693,502 1,758,853 1,377,784 1,439,882 Excluded from weighted-average shares outstanding and assumed conversions is the impact of securities that would have been anti-dilutive during the respective periods. These securities consisted of stock options in which the underlying exercise prices were greater than the average market prices of our Common Shares. Refer to Note 12 to the Consolidated Financial Statements of our 2021 Form 10-K for additional information on stock options. 42 Table of Contents