Chubb Ltd

Consolidated Operating Results – Years Ended December 31, 2023, 2022, and 2021

NM - not meaningful

(1)On a constant-dollar basis. Amounts are calculated by translating prior period results using the same local currency exchange rates as the comparable current period.

Financial Highlights for the Year Ended December 31, 2023

•On July 1, 2023, Chubb acquired a majority controlling interest in its investment in Huatai Group, discontinued the equity method of accounting, and applied consolidation accounting. Chubb's investment in Huatai Group was approximately 76.5 percent as of December 31, 2023. Business activity for, and the financial position of, Huatai Group is reported at 100 percent on the Consolidated Financial Statements. The relevant amounts attributable to investors other than Chubb are reflected under Noncontrolling interests, Net income (loss) attributable to noncontrolling interests, and Comprehensive income (loss) attributable to noncontrolling interests on the Consolidated Financial Statements. Refer to Note 2 to the Consolidated Financial Statements for additional information.

•Net income attributable to Chubb was a record $9.0 billion compared with $5.2 billion in 2022. Net income in 2023 was driven by strong underwriting results, including growth in net premiums earned, and record net investment income. Net income in 2023 also includes the one-time deferred tax benefit of $1.1 billion, reflecting the transition provisions related to the enactment of Bermuda’s new income tax law (tax benefit). In connection with the tax benefit, we elected to step up the tax basis for assets in Bermuda to fair value resulting in the one-time deferred tax benefit.

•Consolidated net premiums written were $47.4 billion, up 13.5 percent. P&C net premiums written increased 9.9 percent, with commercial lines and consumer lines up 8.6 percent and 13.8 percent, respectively. Life Insurance segment net premiums written increased 51.5 percent, driven substantially by the acquisition of Cigna's Asian business on July 1, 2022 and consolidation of Huatai on July 1, 2023. The consolidation of Huatai Group added 1.5 percentage points, 1.0 percentage points, and 7.3 percentage points to consolidated, P&C, and Life insurance net premiums written growth, respectively.

•Consolidated net premiums earned were $45.7 billion, up 13.3 percent, or 13.1 percent in constant dollars. The consolidation of Huatai Group added 1.7 percentage points to consolidated net premiums earned growth.

•Total pre-tax and after-tax catastrophe losses, net of reinsurance and including reinstatement premiums, were $1.8 billion (4.5 percentage points of the P&C combined ratio) and $1.5 billion, respectively, compared with $2.2 billion (5.9 percentage points of the P&C combined ratio) and $1.8 billion, respectively, in 2022.

•Total pre-tax and after-tax favorable prior period development were $773 million (1.9 percentage points of the P&C combined ratio) and $604 million, respectively, including pre-tax adverse development of $149 million related to legacy asbestos and environmental exposures, and $49 million for molestation claims. Excluding the adverse development we had pre-tax favorable development of $971 million, with 5 percent in long-tail lines, and 95 percent in short-tail lines. This compares with $876 million (2.5 percentage points of the P&C combined ratio) and $729 million, respectively, in 2022.

•The P&C combined ratio was 86.5 percent compared with 87.6 percent in 2022. The current year ratio improved primarily due to lower catastrophe losses, partially offset by lower favorable prior period development. The P&C current accident year (CAY) combined ratio excluding catastrophe losses was 83.9 percent compared with 84.2 percent in 2022.

•Net investment income was a record $4.9 billion compared with $3.7 billion in 2022, primarily due to higher reinvestment rates on fixed maturities.

•Net loss attributable to noncontrolling interests of $13 million reflects segment income that was more than offset by realized losses principally from mark-to-market movement in Huatai’s investment portfolio.

•Operating cash flow was a record $12.6 billion compared with $11.3 billion in 2022.

•Chubb shareholders' equity increased $9.0 billion in 2023, primarily from net income attributable to Chubb of $9.0 billion and net unrealized gains on investments of $3.1 billion after-tax, partially offset by total capital returned to shareholders of $3.9 billion. Total capital returned to shareholders comprises share repurchases of $2.5 billion, at an average purchase price of $209.52 per share, and dividends of $1.4 billion. Relative to our share repurchase program, our Board of Directors approved a new program of up to $5 billion with no expiration date, effective July 1, 2023.

•Effective January 1, 2023, we adopted the Long-Duration Targeted Improvements (LDTI) U.S. GAAP guidance, which principally impacted the Life Insurance segment. Financial data for the prior reporting periods in this report are adjusted, as applicable, and are presented in accordance with the new guidance. The impact of this adoption to 2022 and 2021 results was immaterial.

Outlook

2023 was an exceptional year reflecting double-digit premium growth, a P&C combined ratio of 86.5 percent, and record net investment income. Relative to our Major Accounts business, growth in the fourth quarter was adversely impacted by about $125 million of lower premium from underwriting actions we planned for, and took in, a segment of our primary and excess casualty business. One half of the reduction in premium was the result of increased client retentions with the balance due to lost business. For clarity, these actions are expected to contribute to future growth in underwriting income.

Regarding future North America commercial growth given current market conditions and our capabilities across all segments of commercial P&C, including large accounts, E&S and middle market, we fully expect to return to more robust growth beginning with the first quarter of 2024.

Overall, we had another record-setting year and we are well positioned to continue producing outstanding results going forward.

(1)Commercial multiple peril represents retail package business (property and general liability).

The increase in consolidated net premiums written in 2023 principally reflects growth across most product lines driven by strong premium retention, including rate and exposure increases, and strong new business. The increase also reflects contributions from the acquisition of Cigna's business in Asia on July 1, 2022, and the consolidation of Huatai Group on July 1, 2023. The consolidation of Huatai Group added 1.5 percentage points to consolidated net premiums written growth.

•Property and other short-tail lines grew globally due to strong new business, including rate and exposure increases.

•Commercial casualty grew in all regions globally, principally in North America and Europe, driven by strong premium retention, including both rate and exposure increases, and strong new business. Growth was partially offset by the unfavorable impact of planned corrective underwriting actions in North America in the fourth quarter of 2023.

•Commercial multiple peril increased due to strong premium retention, including both rate and exposure increases, and strong new business in North America.

•Surety growth reflects strong new business in North America.

•Agriculture growth reflects lower premium cessions to the U.S. government of $386 million due to higher losses experienced in certain states in 2023 and strong new business in Chubb Agribusiness.

•Personal lines grew principally in North America and Latin America, with growth strongest in homeowners. Growth was driven by rate and exposure increases.

•Global A&H – P&C increased primarily due to the acquisition of Cigna's business in Asia; and higher new business and increased consumer activity, including higher travel volume, in Europe, and Latin America.

•Reinsurance lines growth reflects continued growth in the portfolio, mainly in property lines, partially offset by the impact of catastrophe reinstatement premiums recognized in 2022.

•Life Insurance increased primarily due to the acquisition of Cigna's business in Asia in the third quarter of 2022, the consolidation of Huatai Group in the third quarter of 2023, and underlying growth in existing business in Latin America and Asia. The consolidation of Huatai Group contributed $265 million, or 7.3 percentage points to growth.

For additional information on net premiums written, refer to the segment results discussions.

Net Premiums Earned

Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written that was recorded as revenues for the period as the exposure periods expire. Net premiums earned for long-duration contracts, typically traditional life contracts, generally are recognized as earned when due from policyholders. Net premiums earned increased $5.4 billion, up 13.3 percent, or 13.1 percent in constant dollars in 2023. P&C net premiums earned increased 9.4 percent, comprising growth in commercial and consumer lines of 8.8 percent and 11.1 percent, respectively.

Catastrophe Losses and Prior Period Development

We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in the U.S. and Canada. PCS defines a catastrophe as an event that causes damage of $25 million or more in insured losses and affects a significant number of insureds. For events outside of the U.S. and Canada, we generally use a similar definition. Catastrophe losses are net of reinsurance and include reinstatement premiums, which are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted.

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. PPD includes adjustments relating to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies.

Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development.

•2023: Severe weather-related events in the U.S. and internationally, Hawaii wildfires, and New Zealand storms.

• 2022: Hurricane Ian losses of $975 million, winter storm Elliott losses of $400 million, severe weather-related events in the U.S. and internationally, Australia storms, and Colorado wildfires.

• 2021: Hurricane Ida losses of $834 million, winter storm losses in the U.S., flooding in Europe, and other severe weather-related events in the U.S. and internationally.

Pre-tax net favorable prior period development for 2023 was $773 million, including adverse development of $149 million related to legacy asbestos and environmental exposures and $49 million for molestation claims. The remaining net favorable development of $971 million primarily comprises 5 percent in long-tail lines, principally from accident years 2013 through 2018, and 95 percent in short-tail lines, mainly in property, A&H, and surety lines.

Pre-tax net favorable prior period development for 2022 was $876 million, including adverse development of $155 million for molestation claims, primarily reviver statute-related, and $113 million related to legacy asbestos and environmental exposures. The remaining favorable development of $1,144 million primarily comprises 18 percent in long-tail lines, principally from accident years 2011 through 2017, and 82 percent in short-tail lines, mainly in property and A&H lines.

Pre-tax net favorable prior period development for 2021 was $926 million, including adverse development of $443 million for molestation claims, of which $375 million was related to the pending Boy Scouts of America settlement in the fourth quarter, and $83 million related to legacy A&E exposures. The remaining favorable development of $1,452 million, including favorable development of $430 million for COVID-related claims, primarily comprises 39 percent in long-tail lines, principally from accident years 2020 and 2017 and prior, and 61 percent in short-tail lines, mainly in homeowners, accident and health, property, and surety lines.

Refer to the Prior Period Development section in Note 8 to the Consolidated Financial Statements for additional information.

P&C Combined Ratio

In evaluating our segments excluding Life Insurance financial performance, we use the P&C combined ratio, the loss and loss expense ratio, the policy acquisition cost ratio, and the administrative expense ratio. We calculate these ratios by dividing the respective expense amounts by net premiums earned. We do not calculate these ratios for the Life Insurance segment as we do not use these measures to monitor or manage the business in that segment. The P&C combined ratio is determined by adding the loss and loss expense ratio, the policy acquisition cost ratio, and the administrative expense ratio. A P&C combined ratio under 100 percent indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting loss.

The loss and loss expense ratio improved in 2023, reflecting lower catastrophe losses, partially offset by lower favorable prior period development. The CAY loss ratio excluding catastrophe losses decreased in 2023, primarily from a higher percentage of net premiums earned from lines with a lower loss ratio, most notably in property.

The administrative expense ratio increased in 2023, primarily due to higher pension expenses and higher employee-related expenses, partially offset by the favorable impact of higher net premiums earned. The increase in pension expense reflects the adverse impact of market conditions in 2022.

Policy benefits

Policy benefits represent losses on contracts classified as long-duration and generally include accident and supplemental health products, term and whole life products, endowment products, and annuities. Refer to the Life Insurance segment operating results section for further discussion.

Policy benefits were $3,628 million, $2,314 million and $1,740 million in 2023, 2022, and 2021, respectively, which included (gains) losses from fair value changes in separate account liabilities that do not qualify for separate account reporting under U.S. GAAP of $(45) million, $(42) million and $(8) million, respectively. The offsetting movements of these liabilities are recorded in Other (income) expense on the Consolidated statements of operations. Excluding the separate account gains and losses, Policy benefits were $3,673 million, $2,356 million, and $1,748 million in 2023, 2022, and 2021, respectively. The increase in Policy benefits for 2023 is primarily due to the acquisition of Cigna's business in Asia and the consolidation of Huatai.

Refer to the respective sections that follow for a discussion of Net investment income, Other (income) expense, Net realized gains (losses), Interest expense, Amortization of purchased intangibles, and Income tax expense.