9 unchanged sentences
currencies change materially from the December 31, 2022, balances disclosed in the 2022 Form 10-K.
−Removed: Effective April 1, 2022, Turkey was designated as a highly inflationary economy and therefore we changed the functional currency for our Turkish operations from the Turkish lira to the U.S.
−Removed: Our net assets denominated in the Turkish lira represented less than 0.1% of consolidated shareholders’ equity.
−Removed: Therefore, this change in the functional currency of our Turkish operations did not have a material impact on our financial condition or results of operations.
−Removed: Reinsurance of GMDB and GLB guarantees
−Removed: Chubb views its variable annuity reinsurance business as having a similar risk profile to that of catastrophe reinsurance, with the probability of long-term economic loss relatively small at the time of pricing.
−Removed: Adverse changes in market factors and policyholder behavior will have an impact on both realized gains (losses) and net income for GLB and both Life Insurance underwriting income and net income for GMDB.
+Added: Reinsurance of market risk benefits
+Added: Effective January 1, 2023, we adopted new U.S.
+Added: GAAP accounting guidance for long-duration contracts that affects the accounting for GMDB and GLB liabilities, collectively referred to as market risk benefits (MRB).
+Added: MRB are measured at fair value using a valuation model based on current net exposures, market data, our experience, and other factors.
+Added: Changes in fair value are recorded to Market risk benefits gains (losses) in the Consolidated statements of operations, except for the change in fair value due to a change in the instrument-specific credit risk which will be recognized in Other comprehensive income.
+Added: Chubb views its MRB reinsurance business as having a similar risk profile to that of catastrophe reinsurance, with the probability of long-term economic loss relatively small at the time of pricing.
+Added: Adverse changes in market factors and policyholder behavior will have an impact on both MRB gains (losses) and net income.
When evaluating these risks, we expect to be compensated for taking both the risk of a cumulative long-term economic net loss, as well as the short-term accounting variations caused by these market movements.
Therefore, we evaluate this business in terms of its long-term economic risk and reward.
−Removed: For the GMDB reinsurance business, net income is directly impacted by changes in future policy benefit reserves.
−Removed: For the GLB reinsurance business, net income is directly impacted by changes in the fair value of the GLB liability (FVL), which is classified as a derivative for accounting purposes.
−Removed: The FVL calculation is directly affected by market factors, including equity levels, interest rate levels, credit risk, and implied volatilities, as well as policyholder behaviors, such as annuitization and lapse rates, and policyholder mortality.
−Removed: The tables below are estimates of the sensitivities to instantaneous changes in economic inputs (e.g., equity shock, interest rate shock etc.) at September 30, 2022, of the FVL and of the fair value of specific derivative instruments held (hedge value) to partially offset the risk in the variable annuity guarantee reinsurance portfolio.
+Added: The tables below are estimates of the sensitivities to instantaneous changes in economic inputs (e.g., equity shock, interest rate shock etc.) at March 31, 2023, of both the fair value of the MRB liability (FVL) and the fair value of specific derivative instruments held (hedge value) to partially offset the risk in the MRB reinsurance portfolio.
The following assumptions should be considered when using the below tables:
13 unchanged sentences
AA-rated credit spreads are a proxy for both our own credit spreads and the credit spreads of the ceding insurers.
−Removed: • The hedge sensitivity is from September 30, 2022, market levels and only applicable to the equity and interest rate sensitivities table below.
+Added: • The hedge sensitivity is from March 31, 2023, market levels and only applicable to the equity and interest rate sensitivities table below.
• The sensitivities do not scale linearly and may be proportionally greater for larger movements in the market factors.
18 unchanged sentences
Increase/(decrease) in net income $ 58 $ (65) $ (1) $ 1 $ (18) $ 17
−Removed: Variable Annuity Net Amount at Risk
−Removed: All our VA reinsurance treaties include annual or aggregate claim limits and many include an aggregate deductible which limit the net amount at risk under these programs.
−Removed: The tables below present the net amount at risk at September 30, 2022, following an immediate change in equity market levels, assuming all global equity markets are impacted equally.
+Added: Market Risk Benefits Net Amount at Risk
+Added: All our MRB reinsurance treaties include annual or aggregate claim limits and many include an aggregate deductible which limit the net amount at risk under these programs.
+Added: The tables below present the net amount at risk at March 31, 2023, following an immediate change in equity market levels, assuming all global equity markets are impacted equally.
a) Reinsurance covering the GMDB risk only
3 unchanged sentences
Claims at 100% immediate mortality 149 158 154 146 132 118
−Removed: The treaty claim limits function as a ceiling as equity markets fall.
−Removed: As the shocks in the table above become incrementally more negative, the impact on the NAR and claims at 100 percent mortality begin to drop due to the specific nature of these claim limits, many of which are annual claim limits calculated as a percentage of the reinsured account value.
−Removed: There is also some impact due to a small portion of the GMDB reinsurance under which claims are positively correlated to equity markets (claims decrease as equity markets fall).
+Added: The treaty limits function as a ceiling as equity markets fall.
+Added: As the shocks in the table above become incrementally more negative, the impacts begin to drop due to the specific nature of these claim limits, many of which are annual claim limits calculated as a percentage of the reinsured account value.
+Added: There is also an impact due to a portion of the reinsurance under which claims are positively correlated to equity markets (claims decrease as equity markets fall).
b) Reinsurance covering the GLB risk only
2 unchanged sentences
GLB net amount at risk $ 1,010 $ 1,370 $ 1,973 $ 2,414 $ 2,799 $ 3,024
−Removed: The treaty claim limits cause the net amount at risk to increase at a declining rate as equity markets fall.
+Added: The treaty limits cause the net amount at risk to increase at a declining rate as equity markets fall.
c) Reinsurance covering both the GMDB and GLB risks on the same underlying policyholders
4 unchanged sentences
Claims at 100% immediate mortality 32 32 32 31 31 31
−Removed: The treaty limits control the increase in the GMDB net amount at risk as equity markets fall.
−Removed: The GMDB net amount at risk continues to increase as equity markets fall because most of these reinsurance treaties do not have annual claim limits calculated as a percentage of the underlying account value.
−Removed: The treaty limits cause the GLB net amount at risk to increase at a declining rate as equity markets fall.
+Added: The treaty limits cause the GMDB and GLB net amount at risk to increase at a declining rate as equity markets fall.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.