# Chubb Ltd (CB) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Chubb Ltd's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/896159/000089615922000005/cb-20211231.htm
Accession: 0000896159-22-000005
Filing date: 2022-02-24
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CB/
All MD&A years: /company/CB/mda/
Next year: /company/CB/mda/fy2022/ (FY 2022)

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition and results of operations for the years ended December 31, 2021 and 2020 and comparisons between 2021 and 2020. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes, under Item 8 of this Form 10-K. Comparisons between 2020 and 2019 have been omitted from this Form 10-K, but can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Form 10-K for the year ended December 31, 2020.

All comparisons in this discussion are to the corresponding prior year unless otherwise indicated. All dollar amounts are rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded dollars may differ.

[[GREPCENT_TABLE]]
[["MD&A Index","Page"],["Forward-Looking Statements","37"],["Overview","38"],["Critical Accounting Estimates","39"],["Consolidated Operating Results","47"],["Segment Operating Results","53"],["Net Realized and Unrealized Gains (Losses)","62"],["Non-GAAP Reconciliation","63"],["Net Investment Income","67"],["Interest Expense","67"],["Amortization of Purchased Intangibles and Other Amortization","68"],["Investments","69"],["Asbestos and Environmental (A&E)","72"],["Catastrophe Management","73"],["Global Property Catastrophe Reinsurance Program","75"],["Political Risk and Credit Insurance","75"],["Crop Insurance","76"],["Liquidity","77"],["Capital Resources","80"],["Information provided in connection with outstanding debt of subsidiaries","83"],["Credit Facilities","84"],["Ratings","84"]]
[[/GREPCENT_TABLE]]

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Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,” “intend,” “hope,” “feel,” “foresee,” “will likely result,” “will continue,” and variations thereof and similar expressions, identify forward-looking statements. These forward-looking statements are subject to certain risks, uncertainties, and other factors that could, should potential events occur, cause actual results to differ materially from such statements. These risks, uncertainties, and other factors, which are described in more detail under Part I, Item 1A, under Risk Factors, and elsewhere herein and in other documents we file with the U.S. Securities and Exchange Commission (SEC), include but are not limited to:

•actual amount of new and renewal business, premium rates, underwriting margins, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets; the competitive environment in which we operate, including trends in pricing or in policy terms and conditions, which may differ from our projections and changes in market conditions that could render our business strategies ineffective or obsolete;

•losses arising out of natural or man-made catastrophes; actual loss experience from insured or reinsured events and the timing of claim payments; the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing environmental damage and asbestos-related latent injuries, the impact of aggregate-policy-coverage limits, the impact of bankruptcy protection sought by various asbestos producers and other related businesses, and the timing of loss payments;

•infection rates and severity of COVID-19 and related risks, and their effects on our business operations and claims activity, and any adverse impact to our insureds, brokers, agents, and employees; actual claims may exceed our best estimate of ultimate insurance losses incurred which could change including as a result of, among other things, the impact of legislative or regulatory actions taken in response to COVID-19;

•changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; the ability to collect reinsurance recoverable, credit developments of reinsurers, and any delays with respect thereto and changes in the cost, quality, or availability of reinsurance;

•uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and treaties; judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms; the effects of data privacy or cyber laws or regulation; global political conditions and possible business disruption or economic contraction that may result from such events;

•developments in global financial markets, including changes in interest rates, stock markets, and other financial markets; increased government involvement or intervention in the financial services industry; the cost and availability of financing, and foreign currency exchange rate fluctuations; changing rates of inflation; and other general economic and business conditions, including the depth and duration of potential recession;

•the availability of borrowings and letters of credit under our credit facilities; the adequacy of collateral supporting funded high deductible programs; the amount of dividends received from subsidiaries;

•changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available for sale fixed maturity investments before their anticipated recovery;

•actions that rating agencies may take from time to time, such as financial strength or credit ratings downgrades or placing these ratings on credit watch negative or the equivalent;

•the effects of public company bankruptcies and accounting restatements, as well as disclosures by and investigations of public companies relating to possible accounting irregularities, and other corporate governance issues;

•acquisitions made performing differently than expected, our failure to realize anticipated expense-related efficiencies or growth from acquisitions, the impact of acquisitions on our pre-existing organization, including with respect to our announced acquisitions not closing; risks and uncertainties relating to our planned purchases of additional interests in Huatai Insurance Group Co., Ltd. (Huatai Group), including our ability to receive Chinese insurance regulatory approval and complete the purchases;

•risks associated with being a Swiss corporation, including reduced flexibility with respect to certain aspects of capital management and the potential for additional regulatory burdens; share repurchase plans and share cancellations;

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•loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time frame;

•the ability of our technology resources, including information systems and security, to perform as anticipated such as with respect to preventing material information technology failures or third-party infiltrations or hacking resulting in consequences adverse to Chubb or its customers or partners; the ability of our company to increase use of data analytics and technology as part of our business strategy and adapt to new technologies; and

•management’s response to these factors and actual events (including, but not limited to, those described above).

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. For more information on our segments refer to “Segment Information” under Item 1.

We have grown our business through increased premium volume, expansion of product offerings and geographic reach, and acquisitions of other companies. Refer to Note 2 to the Consolidated Financial Statements for our most recent acquisitions.

Our product and geographic diversification differentiate us from the vast majority of our competitors and has been a source of stability during periods of industry volatility. Our long-term business strategy focuses on sustained growth in book value achieved through a combination of underwriting and investment income. By doing so, we provide value to our clients and shareholders through use of our substantial capital base in the insurance and reinsurance markets.

We are organized along a profit center structure by line of business and territory that does not necessarily correspond to corporate legal entities. Profit centers can access various legal entities subject to licensing and other regulatory rules. Profit centers are expected to generate underwriting income and appropriate risk-adjusted returns. Our corporate structure has facilitated the development of management talent by giving each profit center's senior management team the necessary autonomy within underwriting authorities to make operating decisions and create products and coverages needed by its target customer base. We are focused on delivering underwriting profit by only writing policies which we believe adequately compensate us for the risk we accept.

Our insurance and reinsurance operations generate gross revenues from two principal sources: premiums and investment income. Cash flow is generated from premiums collected and investment income received less paid losses and loss expenses, policy acquisition costs, and administrative expenses. Invested assets are substantially held in liquid, investment grade fixed income securities of relatively short duration. Claims payments in any short-term period are highly unpredictable due to the random nature of loss events and the timing of claims awards or settlements. The value of investments held to pay future claims is subject to market forces such as the level of interest rates, stock market volatility, and credit events such as corporate defaults. The actual cost of claims is also volatile based on loss trends, inflation rates, court awards, and catastrophes. We believe that our cash balance, our highly liquid investments, credit facilities, and reinsurance protection provide sufficient liquidity to meet unforeseen claim demands that might occur in the year ahead. Refer to “Liquidity” and “Capital Resources” for additional information.

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Critical Accounting Estimates

Our Consolidated Financial Statements include amounts that, either by their nature or due to requirements of generally accepted accounting principles in the U.S. (GAAP), are determined using best estimates and assumptions. While we believe that the amounts included in our Consolidated Financial Statements reflect our best judgment, actual amounts could ultimately materially differ from those currently presented. We believe the items that require the most subjective and complex estimates are:

•unpaid loss and loss expense reserves, including long-tail asbestos and environmental (A&E) reserves and non-A&E casualty exposures;

•future policy benefits reserves;

•the valuation of value of business acquired (VOBA) and amortization of deferred policy acquisition costs and VOBA;

•the assessment of risk transfer for certain structured insurance and reinsurance contracts;

•reinsurance recoverable, including a valuation allowance for uncollectible reinsurance;

•the valuation of our investment portfolio and assessment of valuation allowance for expected credit losses;

•the valuation of deferred income taxes; and

•the assessment of goodwill for impairment.

We believe our accounting policies for these items are of critical importance to our Consolidated Financial Statements. The following discussion provides more information regarding the estimates and assumptions required to arrive at these amounts and should be read in conjunction with the sections entitled: Prior Period Development, Asbestos and Environmental (A&E), Reinsurance Recoverable on Ceded Reinsurance, Investments, and Net Realized and Unrealized Gains (Losses).

Unpaid losses and loss expenses

As an insurance and reinsurance company, we are required by applicable laws and regulations and GAAP to establish loss and loss expense reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of our policies and agreements with our insured and reinsured customers. At December 31, 2021, our gross unpaid loss and loss expense reserves were $72.9 billion and our net unpaid loss and loss expense reserves were $56.8 billion. With the exception of certain structured settlements, for which the timing and amount of future claim payments are reliably determinable, and certain reserves for unsettled claims, our loss reserves are not discounted for the time value of money. The net undiscounted reserves related to structured settlements and certain reserves for unsettled claims are immaterial.

The following table presents a roll-forward of our unpaid losses and loss expenses:

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[["","December 31, 2021","","December 31, 2020"],["(in millions of U.S. dollars)","Gross Losses","","Reinsurance Recoverable(1)","","Net Losses","","Gross Losses","","Reinsurance Recoverable(1)","","Net Losses"],["Balance, beginning of year","$","67,811","","","$","14,647","","","$","53,164","","","$","62,690","","","$","14,181","","","$","48,509"],["Losses and loss expenses incurred","28,033","","","6,053","","","21,980","","","26,711","","","5,001","","","21,710"],["Losses and loss expenses paid","(22,242)","","","(4,358)","","","(17,884)","","","(22,053)","","","(4,619)","","","(17,434)"],["Other (including foreign exchange translation)","(659)","","","(158)","","","(501)","","","463","","","84","","","379"],["Balance, end of year","$","72,943","","","$","16,184","","","$","56,759","","","$","67,811","","","$","14,647","","","$","53,164"]]
[[/GREPCENT_TABLE]]

(1)Net of valuation allowance for uncollectible reinsurance.

The estimate of the liabilities includes provisions for claims that have been reported but are unpaid at the balance sheet date (case reserves) and for obligations on claims that have been incurred but not reported (IBNR) at the balance sheet date. IBNR may also include provisions to account for the possibility that reported claims may settle for amounts that differ from the established case reserves. Loss reserves also include an estimate of expenses associated with processing and settling unpaid claims (loss expenses). Our loss reserves comprise approximately 78 percent casualty-related business, which typically encompasses long-tail risks, and other risks where a high degree of judgment is required.

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The process of establishing loss reserves for property and casualty claims can be complex and is subject to considerable uncertainty as it requires the use of informed estimates and judgments based on circumstances underlying the insured losses known at the date of accrual. For example, the reserves established for high excess casualty claims, asbestos and environmental claims, claims from major catastrophic events, or for our various product lines each require different assumptions and judgments to be made. The impact of COVID on both underlying exposures and the legal and claim adjudication processes adds an additional layer of complexity. The effects of climate change could, over time, add new uncertainties to the loss reserving process.

Necessary judgments are based on numerous factors and may be revised as additional experience and other data become available and are reviewed, as new or improved methods are developed, or as laws change. Hence, ultimate loss payments may differ from the estimate of the ultimate liabilities made at the balance sheet date. Changes to our previous estimates of prior period loss reserves impact the reported calendar year underwriting results adversely if our estimates increase or favorably if our estimates decrease. The potential for variation in loss reserve estimates is impacted by numerous factors. Reserve estimates for casualty lines are particularly uncertain given the lengthy reporting patterns and corresponding need for IBNR.

Case reserves for those claims reported by insureds or ceding companies to us prior to the balance sheet date and where we have sufficient information are determined by our claims personnel as appropriate based on the circumstances of the claim(s), standard claim handling practices, and professional judgment. Furthermore, for our Brandywine run-off operations and our assumed reinsurance operation, Global Reinsurance, we may adjust the case reserves as notified by the ceding company if the judgment of our respective claims department differs from that of the cedant.

With respect to IBNR reserves and those claims that have been incurred but not reported prior to the balance sheet date, there is, by definition, limited actual information to form the case reserve estimate and reliance is placed upon historical loss experience and actuarial methods to estimate the ultimate loss obligations and the corresponding amount of IBNR. IBNR reserve estimates are generally calculated by first projecting the ultimate amount of losses for a product line and subtracting paid losses and case reserves for reported claims. The judgments involved in projecting the ultimate losses may pertain to the use and interpretation of various standard actuarial reserving methods that place reliance on the extrapolation of actual historical data, loss development patterns, industry data, and other benchmarks as appropriate. The estimate of the required IBNR reserve also requires judgment by actuaries and management to reflect the impact of more contemporary and subjective factors, both qualitative and quantitative. Among some of these factors that might be considered are changes in business mix or volume, changes in ceded reinsurance structures, changes in claims handling practices, reported and projected loss trends, inflation, the legal environment, and the terms and conditions of the contracts sold to our insured parties.

Determining management's best estimate

Our recorded reserves represent management's best estimate of the provision for unpaid claims as of the balance sheet date, and establishing them involves a process that includes collaboration with various relevant parties in the company. For information on our reserving process, refer to Note 7 to the Consolidated Financial Statements.

Sensitivity to underlying assumptions

While we believe that our reserve for unpaid losses and loss expenses at December 31, 2021, is adequate, new information or emerging trends that differ from our assumptions may lead to future development of losses and loss expenses that is significantly greater or less than the recorded reserve, which could have a material effect on future operating results. As noted previously, our best estimate of required loss reserves for most portfolios is judgmentally selected for each origin year after considering the results from a number of reserving methods and is not a purely mechanical process. Therefore, it is difficult to convey, in a simple and quantitative manner, the impact that a change to a single assumption will have on our best estimate. In the examples below, we attempt to give an indication of the potential impact by isolating a single change for a specific reserving method that would be pertinent in establishing the best estimate for the product line described. We consider each of the following sensitivity analyses to represent a reasonably likely deviation in the underlying assumption.

North America Commercial P&C Insurance - Workers' Compensation

Given the long reporting and paid development patterns for workers' compensation business, the development factors used to project actual current losses to ultimate losses for our current exposure require considerable judgment that could be material to consolidated loss and loss expense reserves. Specifically, adjusting ground up ultimate losses by a one percentage point change in the tail factor (i.e., 1.04 changed to either 1.05 or 1.03) would cause a change of approximately $942 million, either positive or negative, for the projected net loss and loss expense reserves. This represents an impact of about 9.5 percent relative to recorded net loss and loss expense reserves of approximately $9.9 billion.

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North America Commercial P&C Insurance – Liability

As is the case for Workers’ Compensation above, given the long reporting and paid development patterns, the development factors used to project actual current losses to ultimate losses for our current exposure require considerable judgment that could be material to consolidated loss and loss expense reserves. Specifically, for our main U.S. Excess/Umbrella portfolios, a five percentage point change in the tail factor (e.g., 1.10 changed to either 1.15 or 1.05) would cause a change of approximately $584 million, either positive or negative, for the projected net loss and loss expense reserves. This represents an impact of about 18.6 percent relative to recorded net loss and loss expense reserves of approximately $3.1 billion for these portfolios.

The reserve portfolio for our Chubb Bermuda operations contains exposure to predominantly high excess liability coverage on an occurrence-first-reported basis (typically with attachment points in excess of $325 million and gross limits of up to $150 million) and D&O and other professional liability coverage on a claims-made basis (typically with attachment points in excess of $125 million and gross limits of up to $75 million). Due to the layer of exposure covered, the expected frequency for this book is very low. As a result of the low frequency/high severity nature of the book, a small difference in the actual vs. expected claim frequency, either positive or negative, could result in a material change to the projected ultimate loss if such change in claim frequency was related to a policy where close to maximum limits were deployed.

North America Personal P&C Insurance

Due to the relatively short-tailed nature of many of the coverages involved (e.g., homeowners property damage), most of the incurred losses in Personal Lines are resolved within a few years of occurrence. As shown in our loss triangle disclosure, the vast majority (almost 95 percent) of Personal Lines net ultimate losses and allocated loss adjustment expenses are typically paid within five years of the accident date and 80 percent within two years. Even though there are significant reserves associated with some liability exposures such as personal excess/umbrella liability, our incurred loss triangle also shows a roughly consistent pattern of only relatively minor movements in incurred estimates over time by accident year especially after twenty-four months of maturity. While the liability exposures are subject to additional uncertainties from more protracted resolution times, the main drivers of volatility in the Personal Lines business are relatively short-term in nature and relate to things like natural catastrophes, non-catastrophe weather events, man-made risks, and individual large loss volatility from other fortuitous claim events.

North America Agricultural Insurance

Approximately 67 percent of the reserves for this segment are from the crop related lines, which all have short payout patterns, with the majority of the liabilities expected to be resolved in the ensuing twelve months. Claim reserves for our Multiple Peril Crop Insurance (MPCI) product are set on a case-by-case basis and our aggregate exposure is subject to state level risk sharing formulae as well as third-party reinsurance. The majority of the development risk arises out of the accuracy of case reserve estimates and the time needed for final crop conditions to be assessed. We do not view our Agriculture reserves as substantially influenced by the general assumptions and risks underlying more typical P&C reserve estimates.

Overseas General Insurance

Certain long-tail lines, such as casualty and financial lines, are particularly susceptible to changes in loss trend and claim inflation. Heightened perceptions of tort and settlement awards around the world can increase the demand for these products as well as contributing to the uncertainty in the reserving estimates. Our reserving methods rely on loss development patterns estimated from historical data and while we attempt to adjust such factors for known changes in the current tort environment, it is possible that such factors may not entirely reflect all recent trends in tort environments. For example, when applying the reported loss development method, the lengthening of our selected loss development patterns by six months would increase reserve estimates on long-tail casualty and financial lines for accident years 2019 and prior by approximately $611 million. This represents an impact of 14.8 percent relative to recorded net loss and loss expense reserves of approximately $4.1 billion.

Global Reinsurance

At December 31, 2021, net unpaid losses and loss expenses for the Global Reinsurance segment aggregated to $1.6 billion, consisting of $781 million of case reserves and $783 million of IBNR. In comparison, at December 31, 2020, net unpaid losses and loss expenses for the Global Reinsurance segment aggregated to $1.5 billion, consisting of $772 million of case reserves and $740 million of IBNR.

For our catastrophe business, we principally estimate unpaid losses and loss expenses on an event basis by considering various sources of information, including specific loss estimates reported by our cedants, ceding company and overall industry loss estimates reported by our brokers, and our internal data regarding reinsured exposures related to the geographical location of the

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event. Our internal data analysis enables us to establish catastrophe reserves for known events with more certainty at an earlier date than would be the case if we solely relied on reports from third parties to determine carried reserves.

For our casualty reinsurance business, we generally rely on ceding companies to report claims and then use that data as a key input to estimate unpaid losses and loss expenses. Due to the reliance on claims information reported by ceding companies, as well as other factors, the estimation of unpaid losses and loss expenses for assumed reinsurance includes certain risks and uncertainties that are unique relative to our direct insurance business. These include, but are not necessarily limited to, the following:

•The reported claims information could be inaccurate;

•Typically, a lag exists between the reporting of a loss event to a ceding company and its reporting to us as a reinsurance claim. The use of a broker to transmit financial information from a ceding company to us increases the reporting lag. Because most of our reinsurance business is produced by brokers, ceding companies generally first submit claim and other financial information to brokers, who then report the proportionate share of such information to each reinsurer of a particular treaty. The reporting lag generally results in a longer period of time between the date a claim is incurred and the date a claim is reported compared with direct insurance operations. Therefore, the risk of delayed recognition of loss reserve development is higher for assumed reinsurance than for direct insurance lines; and

•The historical claims data for a particular reinsurance contract can be limited relative to our insurance business in that there may be less historical information available. Further, for certain coverages or products, such as excess of loss contracts, there may be relatively few expected claims in a particular year so the actual number of claims may be susceptible to significant variability. In such cases, the actuary often relies on industry data from several recognized sources.

We mitigate the above risks in several ways. In addition to routine analytical reviews of ceding company reports to ensure reported claims information appears reasonable, we perform regular underwriting and claims audits of certain ceding companies to ensure reported claims information is accurate, complete, and timely. As appropriate, audit findings are used to adjust claims in the reserving process. We also use our knowledge of the historical development of losses from individual ceding companies to adjust the level of adequacy we believe exists in the reported ceded losses.

On occasion, there will be differences between our carried loss reserves and unearned premium reserves and the amount of loss reserves and unearned premium reserves reported by the ceding companies. This is due to the fact that we receive consistent and timely information from ceding companies only with respect to case reserves. For IBNR, we use historical experience and other statistical information, depending on the type of business, to estimate the ultimate loss. We estimate our unearned premium reserve by applying estimated earning patterns to net premiums written for each treaty based upon that treaty's coverage basis (i.e., risks attaching or losses occurring). At December 31, 2021, the case reserves, net of retrocessions, reported to us by our ceding companies approximated our recorded case reserves.  Our policy is to post additional case reserves in addition to the amounts reported by our cedants when our evaluation of the ultimate value of a reported claim is different than the evaluation of that claim by our cedant.

Typically, there is inherent uncertainty around the length of paid and reported development patterns, especially for certain casualty lines such as excess workers' compensation or general liability, which may take decades to fully develop. This uncertainty is accentuated by the need to supplement client development patterns with industry development patterns due to the sometimes low statistical credibility of the data. The underlying source and selection of the final development patterns can thus have a significant impact on the selected ultimate net losses and loss expenses. For example, a 20 percent shortening or lengthening of the development patterns used for U.S. long-tail lines would cause the loss reserve estimate derived by the reported Bornhuetter-Ferguson method for these lines to change by approximately $220 million. This represents an impact of 32 percent relative to recorded net loss and loss expense reserves of approximately $680 million.

Corporate

Within Corporate, we have exposure to certain liability insurance and reinsurance lines that have been in run-off, generally, since 1994. Unpaid losses and loss expenses relating to this run-off business resides within the Brandywine Division. Most of the remaining unpaid loss and loss expense reserves for the run-off business relate to A&E as well as molestation claims.

The A&E liabilities principally relate to claims arising from bodily-injury claims related to asbestos products and remediation costs associated with hazardous waste sites. The estimation of our A&E liabilities is particularly sensitive to future changes in the legal, social, and economic environment. We have not assumed any such future changes in setting the value of our A&E liabilities, which include provisions for both reported and IBNR claims.

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There are many complex variables that we consider when estimating the reserves for our inventory of asbestos accounts and these variables may directly impact the predicted outcome. We believe the most significant variables relating to our asbestos liabilities include the current legal environment; specific settlements that may be used as precedents to settle future claims; assumptions regarding trends with respect to claim severity and the frequency of higher severity claims; assumptions regarding the ability to allocate liability among defendants (including bankruptcy trusts) and other insurers; the ability of a claimant to bring a claim in a state in which they have no residency or exposure; the ability of a policyholder to claim the right to unaggregated coverage; whether high-level excess policies have the potential to be accessed given the policyholder's claim trends and liability situation; payments to unimpaired claimants; and, the potential liability of peripheral defendants. Based on the policies, the facts, the law, and a careful analysis of the impact that these factors will likely have on any given account, we estimate the potential liability for indemnity, policyholder defense costs, and coverage litigation expense.

The results in asbestos cases announced by other carriers or defendants may well have little or no relevance to us because coverage exposures are highly dependent upon the specific facts of individual coverage and resolution status of disputes among carriers, policyholders, and claimants.

Chubb's exposure to molestation claims principally arises out of liabilities acquired when it purchased CIGNA's P&C business in 1999 and Chubb Corp in 2016. The vast majority of the current liability relates to exposure from recently enacted "reviver" legislation in certain states that allow civil claims relating to molestation to be asserted against policyholders that would otherwise be barred by statutes of limitations.

For additional information refer to the “Asbestos and Environmental (A&E)” section and to Note 7 to the Consolidated Financial Statements.

Future policy benefits reserves

We issue contracts in our Overseas General Insurance and Life Insurance segments that are classified as long-duration. These contracts generally include accident and supplemental health products, term and whole life products, endowment products, and annuities. In accordance with GAAP, we establish reserves for contracts determined to be long-duration based on approved actuarial methods that include assumptions related to expenses, mortality, morbidity, persistency and investment yields. For traditional long-duration contracts, these assumptions also include a provision for adverse deviation (PAD), and are “locked in” at the inception of the contract, meaning we use our original assumptions throughout the life of the policy and do not subsequently modify them unless we deem the reserves to be inadequate; while for non-traditional long-duration contracts, the assumptions do not include a PAD and are unlocked at each reporting date. The future policy benefits reserves balance is regularly evaluated for a premium deficiency. If experience is less favorable than assumptions, additional liabilities may be required, resulting in a charge to policyholder benefits and claims.

Valuation of value of business acquired (VOBA), and amortization of deferred policy acquisition costs and VOBA

As part of the acquisition of businesses that sell long-duration contracts, such as life products, we established an intangible asset related to VOBA, which represented the fair value of the future profits of the in-force contracts. The valuation of VOBA at the time of acquisition is derived from similar assumptions to those used to establish the associated future policy benefits reserves. The most significant input in this calculation is the discount rate used to arrive at the present value of the net cash flows. We amortize deferred policy acquisition costs associated with long-duration contracts and VOBA (collectively policy acquisition costs) over the estimated life of the contracts, generally in proportion to premium revenue recognized based upon the same assumptions used in estimating the liability for future policy benefits. For non-traditional long-duration contracts, we amortize policy acquisition costs over the expected life of the contracts in proportion to estimates of expected gross profits. The estimated life is established at the inception of the contracts or upon acquisition and is based on current persistency assumptions. Policy acquisition costs, which consist of commissions, premium taxes, and certain underwriting costs related directly to the successful acquisition of a new or renewal insurance contract, are reviewed to determine if they are recoverable from future income, including investment income. Unrecoverable costs are expensed in the period identified.

Risk transfer

In the ordinary course of business, we both purchase (or cede) and sell (or assume) reinsurance protection. We discontinued the purchase of all finite risk reinsurance contracts, as a matter of policy, in 2002. For both ceded and assumed reinsurance, risk transfer requirements must be met in order to use reinsurance accounting, principally resulting in the recognition of cash flows under the contract as premiums and losses. If risk transfer requirements are not met, a contract is to be accounted for as a deposit, typically resulting in the recognition of cash flows under the contract through a deposit asset or liability and not as revenue or expense. To meet risk transfer requirements, a reinsurance contract must include both insurance risk, consisting of underwriting and timing risk, and a reasonable possibility of a significant loss for the assuming entity. We also apply similar risk

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transfer requirements to determine whether certain commercial insurance contracts should be accounted for as insurance or a deposit. Contracts that include fixed premium (i.e., premium not subject to adjustment based on loss experience under the contract) for fixed coverage generally transfer risk and do not require judgment.

Reinsurance and insurance contracts that include both significant risk sharing provisions, such as adjustments to premiums or loss coverage based on loss experience, and relatively low policy limits, as evidenced by a high proportion of maximum premium assessments to loss limits, can require considerable judgment to determine whether or not risk transfer requirements are met. For such contracts, often referred to as finite or structured products, we require that risk transfer be specifically assessed for each contract by developing expected cash flow analyses at contract inception. To support risk transfer, the cash flow analyses must demonstrate that a significant loss is reasonably possible, such as a scenario in which the ratio of the net present value of losses and commissions divided by the net present value of premiums equals or exceeds 110 percent with at least a 10 percent probability. For purposes of cash flow analyses, we generally use a risk-free rate of return consistent with the expected average duration of loss payments. In addition, to support insurance risk, we must prove the reinsurer's risk of loss varies with that of the reinsured and/or support various scenarios under which the assuming entity can recognize a significant loss.

To ensure risk transfer requirements are routinely assessed, qualitative and quantitative risk transfer analyses and memoranda supporting risk transfer are developed by underwriters for all structured products. We have established protocols for structured products that include criteria triggering an accounting review of the contract prior to quoting. If any criterion is triggered, a contract must be reviewed by a committee established by each of our segments with reporting oversight, including peer review, from our global Structured Transaction Review Committee.

With respect to ceded reinsurance, we entered into a few multi-year excess of loss retrospectively-rated contracts, principally in 2002. These contracts primarily provided severity protection for specific product divisions. Because traditional one-year reinsurance coverage had become relatively costly, these contracts were generally entered into in order to secure a more cost-effective reinsurance program. All of these contracts transferred risk and were accounted for as reinsurance. In addition, we maintain a few aggregate excess of loss reinsurance contracts that were principally entered into prior to 2003, such as the National Indemnity Company (NICO) contracts referred to in the section entitled, “Asbestos and Environmental (A&E)”. We have not purchased any other retroactive ceded reinsurance contracts since 1999.

With respect to assumed reinsurance and insurance contracts, products giving rise to judgments regarding risk transfer were primarily sold by our financial solutions business. Although we have significantly curtailed writing financial solutions business, several contracts remain in-force and principally include multi-year retrospectively-rated contracts and loss portfolio transfers. Because transfer of insurance risk is generally a primary client motivation for purchasing these products, relatively few insurance and reinsurance contracts have historically been written for which we concluded that risk transfer criteria had not been met. For certain insurance contracts that have been reported as deposits, the insured desired to self-insure a risk but was required, legally or otherwise, to purchase insurance so that claimants would be protected by a licensed insurance company in the event of non-payment from the insured.

Reinsurance recoverable

Reinsurance recoverable includes balances due to us from reinsurance companies for paid and unpaid losses and loss expenses and is presented net of a valuation allowance for uncollectible reinsurance. The valuation allowance for uncollectible reinsurance is determined based upon a review of the financial condition of the reinsurers and other factors. Ceded reinsurance contracts do not relieve our primary obligation to our policyholders. Consequently, an exposure exists with respect to reinsurance recoverable to the extent that any reinsurer is unable or unwilling to meet its obligations or disputes the liabilities assumed under the reinsurance contracts. We determine the reinsurance recoverable on unpaid losses and loss expenses using actuarial estimates as well as a determination of our ability to cede unpaid losses and loss expenses under existing reinsurance contracts.

The recognition of a reinsurance recoverable asset requires two key judgments. The first judgment involves our estimation based on the amount of gross reserves and the percentage of that amount which may be ceded to reinsurers. Ceded IBNR, which is a major component of the reinsurance recoverable on unpaid losses and loss expenses, is generally developed as part of our loss reserving process and, consequently, its estimation is subject to similar risks and uncertainties as the estimation of gross IBNR (refer to “Critical Accounting Estimates – Unpaid losses and loss expenses”). The second judgment involves our estimate of the amount of the reinsurance recoverable balance that we may ultimately be unable to recover from reinsurers due to insolvency, contractual dispute, or for other reasons. Estimated uncollectible amounts are reflected in a valuation allowance that reduces the reinsurance recoverable asset and, in turn, shareholders' equity. Changes in the valuation allowance for uncollectible reinsurance are reflected in net income.

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Although the obligation of individual reinsurers to pay their reinsurance obligations is based on specific contract provisions, the collectability of such amounts requires estimation by management. The majority of the recoverable balance will not be due for collection until sometime in the future, and the duration of our recoverables may be longer than the duration of our direct exposures. Over this period of time, economic conditions and operational performance of a particular reinsurer may impact their ability to meet these obligations and while they may continue to acknowledge their contractual obligation to do so, they may not have the financial resources or willingness to fully meet their obligation to us.

To estimate the valuation allowance for uncollectible reinsurance, the reinsurance recoverable must first be determined for each reinsurer. This determination is based on a process rather than an estimate, although an element of judgment must be applied. As part of the process, ceded IBNR is allocated to reinsurance contracts because ceded IBNR is not generally calculated on a contract by contract basis. The allocations are generally based on premiums ceded under reinsurance contracts, adjusted for actual loss experience and historical relationships between gross and ceded losses. If actual premium and loss experience vary materially from historical experience, the allocation of reinsurance recoverable by reinsurer will be reviewed and may change. While such change is unlikely to result in a large percentage change in the valuation allowance for uncollectible reinsurance, it could, nevertheless, have a material effect on our net income in the period recorded.

Generally, we use a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer, net of collateral, and forward looking default factors used to estimate the probability that the reinsurer may be unable to meet its future obligations in full. The definition of collateral for this purpose requires some judgment and is generally limited to assets held in a Chubb-only beneficiary trust, letters of credit, and liabilities held by us with the same legal entity for which we believe there is a right of offset. We do not currently include multi-beneficiary trusts. However, we have several reinsurers that have established multi-beneficiary trusts for which certain of our companies are beneficiaries. The determination of the default factor is principally based on the financial strength rating of the reinsurer and a corresponding default factor applicable to the financial strength rating. Default factors require considerable judgment and are determined using the current financial strength rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions. Significant considerations and assumptions include, but are not necessarily limited to, the following:

•For reinsurers that maintain a financial strength rating from a major rating agency, and for which recoverable balances are considered representative of the larger population (i.e., default probabilities are consistent with similarly rated reinsurers and payment durations conform to averages), the judgment exercised by management to determine the valuation allowance for uncollectible reinsurance of each reinsurer is typically limited because the financial rating is based on a published source and the default factor we apply is based on a historical default factor of a major rating agency applicable to the particular rating class. Default factors applied for financial ratings of AAA, AA, A, BBB, BB, B, and CCC, are 0.8 percent, 1.2 percent, 1.7 percent, 4.9 percent, 19.6 percent, 34.0 percent, and 62.2 percent, respectively. Because our model is predicated on the historical default factors of a major rating agency, we do not generally consider alternative factors. However, when a recoverable is expected to be paid in a brief period of time by a highly-rated reinsurer, such as certain property catastrophe claims, a default factor may not be applied;

•For balances recoverable from reinsurers that are both unrated by a major rating agency and for which management is unable to determine a credible rating equivalent based on a parent or affiliated company, we may determine a rating equivalent based on our analysis of the reinsurer that considers an assessment of the creditworthiness of the particular entity, industry benchmarks, or other factors as considered appropriate. We then apply the applicable default factor for that rating class. For balances recoverable from unrated reinsurers for which our ceded reserve is below a certain threshold, we generally apply a default factor of 34.0 percent;

•For balances recoverable from reinsurers that are either insolvent or under regulatory supervision, we establish a default factor and resulting valuation allowance for uncollectible reinsurance based on specific facts and circumstances surrounding each company. Upon initial notification of an insolvency, we generally recognize expense for a substantial portion of all balances outstanding, net of collateral, through a combination of write-offs of recoverable balances and increases to the valuation allowance for uncollectible reinsurance. When regulatory action is taken on a reinsurer, we generally recognize a default factor by estimating an expected recovery on all balances outstanding, net of collateral. When sufficient credible information becomes available, we adjust the valuation allowance for uncollectible reinsurance by establishing a default factor pursuant to information received; and

•For captives and other recoverables, management determines the valuation allowance for uncollectible reinsurance based on the specific facts and circumstances.

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The following table summarizes reinsurance recoverables and the valuation allowance for uncollectible reinsurance for each type of recoverable balance at December 31, 2021:

[[GREPCENT_TABLE]]
[["","","Gross Reinsurance Recoverables on Losses and Loss Expenses","","Recoverables (net of Usable Collateral)"],["","","","","Valuation Allowance for Uncollectible Reinsurance (1)"],["(in millions of U.S. dollars)"],["Type"],["Reinsurers with credit ratings","","$","14,186","","","$","12,210","","","$","213"],["Reinsurers not rated","","192","","","127","","","44"],["Reinsurers under supervision and insolvent reinsurers","","45","","","36","","","21"],["Captives","","2,325","","","559","","","28"],["Other - structured settlements and pools","","947","","","946","","","23"],["Total","","$","17,695","","","$","13,878","","","$","329"]]
[[/GREPCENT_TABLE]]

(1)     The valuation allowance for uncollectible reinsurance is based on a default analysis applied to gross reinsurance recoverables, net of approximately $3.8 billion of collateral at December 31, 2021.

At December 31, 2021, the use of different assumptions within our approach could have a material effect on the valuation allowance for uncollectible reinsurance. To the extent the creditworthiness of our reinsurers was to deteriorate due to an adverse event affecting the reinsurance industry, such as a large number of major catastrophes, actual uncollectible amounts could be significantly greater than our valuation allowance for uncollectible reinsurance. Such an event could have a material adverse effect on our financial condition, results of operations, and our liquidity. Given the various considerations used to estimate our uncollectible valuation allowance, we cannot precisely quantify the effect a specific industry event may have on the valuation allowance for uncollectible reinsurance. However, based on the composition (particularly the average credit quality) of the reinsurance recoverable balance at December 31, 2021, we estimate that a ratings downgrade of one notch for all rated reinsurers (e.g., from A to A- or A- to BBB+) could increase our valuation allowance for uncollectible reinsurance by approximately $87 million or approximately 0.5 percent of the gross reinsurance recoverable balance, assuming no other changes relevant to the calculation. While a ratings downgrade would result in an increase in our valuation allowance for uncollectible reinsurance and a charge to earnings in that period, a downgrade in and of itself does not imply that we will be unable to collect all of the ceded reinsurance recoverable from the reinsurers in question. Refer to Note 5 to the Consolidated Financial Statements, under item 8, for additional information.

Fair value measurements

Accounting guidance defines fair value as the price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants and establishes a three-level valuation hierarchy based on the reliability of the inputs. The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to unobservable data (Level 3 inputs). Level 2 includes inputs, other than quoted prices within Level 1, that are observable for assets or liabilities either directly or indirectly. Refer to Note 4 and Note 13 to the Consolidated Financial Statements, under item 8, for information on our fair value measurements.

Assessment of investment portfolio credit losses

Each quarter, we evaluate current expected credit losses (CECL) for fixed maturity securities classified as held to maturity and expected credit losses (ECL) for fixed maturity securities classified as available for sale. Because our investment portfolio is the largest component of consolidated assets, CECL and ECL could be material to our financial condition and results of operations. Refer to Notes 1 e) and 3 to the Consolidated Financial Statements, under item 8, for more information.

Deferred income taxes

At December 31, 2021, our net deferred tax liability was $389 million. Our deferred tax assets and liabilities primarily result from temporary differences between the amounts recorded in our Consolidated Financial Statements and the tax basis of our assets and liabilities. We determine deferred tax assets and liabilities separately for each tax-paying component (an individual entity or group of entities that is consolidated for tax purposes) in each tax jurisdiction. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. There may be changes in tax laws in a number of countries where we transact business that impact our deferred tax assets and liabilities. At each balance sheet date, management assesses the need to establish a valuation allowance that reduces deferred tax assets when it is more likely than not that all, or some portion, of the deferred tax assets will not be realized. The determination of the need for a valuation allowance is based on all available information including

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projections of future taxable income, principally derived from business plans and where appropriate available tax planning strategies. Projections of future taxable income incorporate assumptions of future business and operations that are apt to differ from actual experience. If our assumptions and estimates that resulted in our forecast of future taxable income prove to be incorrect, an additional valuation allowance could become necessary, which could have a material adverse effect on our financial condition, results of operations, and liquidity. At December 31, 2021, the valuation allowance of $92 million reflects management's assessment that it is more likely than not that a portion of the deferred tax assets will not be realized due to the inability of certain subsidiaries to generate sufficient taxable income.

Goodwill impairment assessment

Goodwill, which represents the excess of acquisition cost over the estimated fair value of net assets acquired, was $15.2 billion and $15.4 billion at December 31, 2021 and 2020, respectively. Goodwill is assigned to applicable reporting units of acquired entities at the time of acquisition. Our reporting units are the same as our reportable segments. For goodwill balances by reporting units, refer to Note 6 to the Consolidated Financial Statements, under item 8. Goodwill is not amortized but is subject to a periodic evaluation for impairment at least annually, or earlier if there are any indications of possible impairment. Impairment is tested at the reporting unit level. The impairment evaluation first uses a qualitative assessment to determine whether it is more likely than not (i.e., more than a 50 percent probability) that the fair value of a reporting unit is greater than its carrying amount. If a reporting unit fails this qualitative assessment, a single quantitative analysis is used to measure and record the amount of the impairment. In assessing the fair value of a reporting unit, we make assumptions and estimates about the profitability attributable to our reporting units, including:

•short-term and long-term growth rates; and

•estimated cost of equity and changes in long-term risk-free interest rates.

If our assumptions and estimates made in assessing the fair value of acquired entities change, we could be required to write-down the carrying value of goodwill which could be material to our results of operations in the period the charge is taken. Based on our impairment testing for 2021, we determined no impairment was required and none of our reporting units was at risk for impairment.

Consolidated Operating Results – Years Ended December 31, 2021, 2020, and 2019

[[GREPCENT_TABLE]]
[["","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","2020","","2019","","2021 vs. 2020","","2020 vs. 2019"],["Net premiums written","$","37,868","","","$","33,820","","","$","32,275","","","12.0","%","","4.8","%"],["Net premiums written - constant dollars (1)","","","","","","","10.5","%","","5.5","%"],["Net premiums earned","36,355","","","33,117","","","31,290","","","9.8","%","","5.8","%"],["Net investment income","3,456","","","3,375","","","3,426","","","2.4","%","","(1.5)","%"],["Net realized gains (losses)","1,152","","","(498)","","","(530)","","","NM","","(6.1)","%"],["Total revenues","40,963","","","35,994","","","34,186","","","13.8","%","","5.3","%"],["Losses and loss expenses","21,980","","","21,710","","","18,730","","","1.2","%","","15.9","%"],["Policy benefits","699","","","784","","","740","","","(10.9)","%","","5.9","%"],["Policy acquisition costs","6,918","","","6,547","","","6,153","","","5.7","%","","6.4","%"],["Administrative expenses","3,136","","","2,979","","","3,030","","","5.3","%","","(1.7)","%"],["Interest expense","492","","","516","","","552","","","(4.7)","%","","(6.4)","%"],["Other (income) expense","(2,365)","","","(994)","","","(596)","","","137.9","%","","66.8","%"],["Amortization of purchased intangibles","287","","","290","","","305","","","(0.9)","%","","(4.9)","%"],["Chubb integration expenses","\u2014","","","\u2014","","","23","","","\u2014","","","NM"],["Total expenses","31,147","","","31,832","","","28,937","","","(2.2)","%","","10.0","%"],["Income before income tax","9,816","","","4,162","","","5,249","","","135.9","%","","(20.7)","%"],["Income tax expense","1,277","","","629","","","795","","","102.9","%","","(20.8)","%"],["Net income","$","8,539","","","$","3,533","","","$","4,454","","","141.7","%","","(20.7)","%"],["NM \u2013 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."]]
[[/GREPCENT_TABLE]]

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Financial Highlights for the Year Ended December 31, 2021

•Net income was a record $8.5 billion compared with $3.5 billion in 2020. Net income in 2021 was driven by record P&C underwriting results, including growth in net premiums earned and improvements in our loss and loss expense ratios. Record net investment income and returns from our private equity investments also contributed to the higher net income.

•Consolidated net premiums written were $37.9 billion, up 12.0 percent, or 10.5 percent in constant dollars, primarily from growth in commercial lines, driven by positive rate increases, higher new business, increased exposure and higher renewal retention, and more moderate but positive growth in consumer lines.

•Consolidated net premiums earned were $36.4 billion, up 9.8 percent, or 8.3 percent in constant dollars, primarily from growth in commercial lines, and more moderate but positive growth in consumer lines.

•Total pre-tax and after-tax catastrophe losses were $2.4 billion (7.1 percentage points of the P&C combined ratio) and $2.0 billion, respectively, compared with $3.3 billion (10.6 percentage points of the P&C combined ratio) and $2.8 billion in 2020.

•Total pre-tax and after-tax favorable prior period development were $926 million (2.8 percentage points of the combined ratio) and $756 million, respectively, compared with favorable prior period development of $395 million (1.2 percentage points of the combined ratio) and $357 million, respectively, in 2020. The prior period development in 2021 of $926 million includes favorable development of $430 million for COVID-related liabilities, of which $20 million is in short-tail lines in our Overseas General Insurance segment, and an incremental $315 million favorable development in short-tail lines in our Overseas General Insurance segment, partially offset by 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. Refer to Note 7 to the Consolidated Financial Statements, under Item 8, for further information on prior period development.

•The P&C combined ratio was 89.1 percent compared with 96.1 percent in 2020. P&C current accident year (CAY) combined ratio excluding catastrophe losses was 84.8 percent compared with 86.7 percent in the prior year. The current year ratios decreased due to underlying loss ratio improvement, including earned rate exceeding loss cost trends, and the favorable impact of higher net premiums earned on the expense ratio.

•Net investment income was a record $3.5 billion compared with $3.4 billion in 2020, primarily due to higher income received from our private equity partnerships and increased dividends on public equities.

•Operating cash flow was a record $11.1 billion for 2021.

•Shareholders' equity increased by $273 million in 2021, primarily reflecting net income of $8.5 billion and total capital returned to shareholders in the year of $6.3 billion, including share repurchases of $4.9 billion, at an average purchase price of $175.85 per share, and dividends of $1.4 billion, and net unrealized losses on investments of $2.4 billion.

Outlook

2021 was a record year in terms of net income and underwriting results, double-digit commercial premium growth globally, strong levels of rate increase, and slow but improving growth in our consumer business globally. Looking ahead, we are off to a very good start in the first quarter overall. We expect 2022 to be a good year in terms of continued growth and margin improvement as we capitalize on favorable underwriting conditions for our commercial P&C businesses globally. We expect rates to continue to exceed loss costs for some time to come. Consumer lines growth is expected to return as the pandemic eases, though there is no certainty. In the future, as interest rates rise and spreads widen, our investment income will rise. And our strategic investments, such as our pending acquisition of Cigna's Life and Accident and Health Insurance Business in seven Asia-Pacific Markets and our agreements to increase our aggregate ownership in Huatai Group in China, will provide us with greater revenue, earnings and growth opportunity.

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[[GREPCENT_TABLE]]
[["Net Premiums Written","","","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","2020 vs. 2019","","C$ 2021 vs. 2020"],["Commercial casualty","$","6,994","","","$","6,177","","","$","5,654","","","13.2","%","","9.2","%","","12.5","%"],["Workers' compensation","2,130","","","2,015","","","2,098","","","5.7","%","","(4.0)","%","","5.7","%"],["Financial lines","5,067","","","4,201","","","3,697","","","20.6","%","","13.6","%","","18.5","%"],["Surety","572","","","531","","","639","","","7.9","%","","(16.9)","%","","7.0","%"],["Commercial multiple peril (1)","1,193","","","1,047","","","983","","","13.9","%","","6.6","%","","13.9","%"],["Property and other short-tail lines","6,425","","","5,231","","","4,468","","","22.8","%","","17.1","%","","19.9","%"],["Total Commercial P&C","22,381","","","19,202","","","17,539","","","16.6","%","","9.5","%","","15.1","%"],["Agriculture","2,388","","","1,846","","","1,810","","","29.3","%","","2.0","%","","29.3","%"],["Personal automobile","1,525","","","1,550","","","1,786","","","(1.6)","%","","(13.2)","%","","(3.6)","%"],["Personal homeowners","3,719","","","3,627","","","3,513","","","2.5","%","","3.2","%","","2.2","%"],["Personal other","1,825","","","1,656","","","1,514","","","10.2","%","","9.4","%","","6.6","%"],["Total Personal lines","7,069","","","6,833","","","6,813","","","3.4","%","","0.3","%","","2.0","%"],["Total Property and Casualty lines","31,838","","","27,881","","","26,162","","","14.2","%","","6.6","%","","12.8","%"],["Global A&H lines (2)","3,763","","","3,859","","","4,315","","","(2.5)","%","","(10.6)","%","","(4.7)","%"],["Reinsurance lines","873","","","731","","","649","","","19.5","%","","12.6","%","","18.0","%"],["Life","1,394","","","1,349","","","1,149","","","3.4","%","","17.4","%","","1.9","%"],["Total consolidated","$","37,868","","","$","33,820","","","$","32,275","","","12.0","%","","4.8","%","","10.5","%"]]
[[/GREPCENT_TABLE]]

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

(2)For purposes of this schedule only, A&H results from our Combined North America and International businesses, normally included in the Life Insurance and Overseas General Insurance segments, respectively, as well as the A&H results of our North America Commercial P&C segment, are included in Global A&H lines above.

The strong growth in consolidated net premiums written in 2021 principally reflects growth in commercial lines of 17.7 percent, and more moderate but positive growth in consumer lines of 1.5 percent. Commercial lines, which includes reinsurance and agriculture, grew across most lines of business, driven by higher new business, positive rate increases, increased exposure, and strong renewal retention.

•Commercial casualty grew globally, driven by higher new business and positive rate increases, primarily across North America, Europe and Asia. Additionally, there was increased exposure primarily on in-force policies following the adverse impact of prior year COVID-related exposure reductions.

•Workers' compensation growth was due to increased exposure primarily on in-force policies following the adverse impact of prior year COVID-related exposure adjustments.

•Financial lines grew globally, reflecting higher new business, improved retention and positive rate increases in North America, Asia, and Europe.

•Commercial multiple peril increased due to higher new and renewal business, including rate and exposure increases, in North America.

•Property and other short-tail lines grew due to higher new business, improved retention and positive rate increases in Asia, North America, and Europe.

•Personal lines increased globally primarily reflecting rate and exposure increases in homeowners' lines in North America and growth in specialty lines in Europe and Asia. Growth was partially offset by declines in automobile, reflecting reduced exposures from COVID-related impacts in North America and Latin America. While down for the year, Latin America began to experience growth in the latter half of the year.

•Global A&H lines began to experience modest growth in the latter half of the year in Latin America, but overall global growth was unfavorably impacted by less travel volume and reduced consumer activity due to COVID-related impacts. Our North American Combined Insurance supplemental A&H business decreased due to COVID-related impacts on face-to-face and worksite sales.

•Growth in our international life operations, principally from new business in Asia and Latin America, was partially offset by declines in our life reinsurance business that has not written new business since 2007.

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

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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 $3.2 billion, or $2.8 billion on a constant-dollar basis in 2021, reflecting growth in commercial lines, while consumer lines were relatively flat.

Catastrophe Losses and Prior Period Development

Catastrophe losses exclude 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 is net of expense adjustments which typically relate to either profit commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. Refer to the Non-GAAP Reconciliation section for further information on reinstatement premiums on catastrophe losses and adjustments to prior period development.

We generally define catastrophe loss events consistent with the definition of the Property Claims Service (PCS) for events in the U.S. and Canada. PCS defines a catastrophe as an event that causes damage of $25 million or more in insured losses and affects a significant number of insureds. For events outside of the U.S. and Canada, we generally use a similar definition. We also define losses from certain pandemics, such as COVID-19, as a catastrophe loss. The tables below represent catastrophe loss estimates for events that occurred in the related calendar year only. Changes in catastrophe loss estimates in the current calendar year that relate to loss events that occurred in previous calendar years are considered prior period development and are excluded from the tables below.

[[GREPCENT_TABLE]]
[["","Catastrophe Loss Charge by Event For Full Year 2021"],["","North America Commercial P&C Insurance","","North America Personal P&C Insurance","","North America Agricultural Insurance","","Overseas General Insurance","","Global Reinsurance","","","","Total excluding RIPs","","RIPs collected (expensed)","","Total including RIPs"],["(in millions of U.S. dollars)"],["Net losses"],["Hurricane Ida","$","400","","","$","231","","","$","1","","","$","68","","","$","156","","","","","$","856","","","$","22","","","$","834"],["Winter-related storms","426","","","201","","","8","","","63","","","56","","","","","754","","","(12)","","","766"],["U.S. flooding, hail, tornadoes, and wind events","257","","","165","","","29","","","18","","","8","","","","","477","","","(1)","","","478"],["International weather-related events","2","","","6","","","\u2014","","","99","","","9","","","","","116","","","1","","","115"],["European flooding","1","","","\u2014","","","\u2014","","","94","","","11","","","","","106","","","\u2014","","","106"],["Other U.S. hurricanes/tropical storms","24","","","55","","","\u2014","","","\u2014","","","\u2014","","","","","79","","","\u2014","","","79"],["Other","2","","","5","","","\u2014","","","16","","","\u2014","","","","","23","","","\u2014","","","23"],["Total","$","1,112","","","$","663","","","$","38","","","$","358","","","$","240","","","","","$","2,411"],["RIPs collected (expensed)","\u2014","","","(16)","","","(2)","","","\u2014","","","28","","","","","","","10"],["Total before income tax","$","1,112","","","$","679","","","$","40","","","$","358","","","$","212","","","","","","","","","$","2,401"],["Income tax benefit","","","","","","","","","","","","","","","","","417"],["Total after income tax","","","","","","","","","","","","","","","","","$","1,984"]]
[[/GREPCENT_TABLE]]

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Table of Contents

[[GREPCENT_TABLE]]
[["","Catastrophe Loss Charge by Event For Full Year 2020"],["","North America Commercial P&C Insurance","","North America Personal P&C Insurance","","North America Agricultural Insurance","","Overseas General Insurance","","Global Reinsurance","","Life Insurance","","Total excluding RIPs","","RIPs collected (expensed)","","Total including RIPs"],["(in millions of U.S. dollars)"],["Net losses"],["COVID-19","$","925","","","$","\u2014","","","$","\u2014","","","$","421","","","$","10","","","$","24","","","$","1,380","","","$","(16)","","","$","1,396"],["U.S. hurricanes/tropical storms","429","","","132","","","1","","","79","","","86","","","\u2014","","","727","","","7","","","720"],["U.S. flooding, hail, tornadoes, and wind events","295","","","191","","","25","","","9","","","11","","","\u2014","","","531","","","(3)","","","534"],["U.S. wildfires","61","","","162","","","1","","","5","","","1","","","\u2014","","","230","","","\u2014","","","230"],["Civil unrest","111","","","2","","","\u2014","","","17","","","\u2014","","","\u2014","","","130","","","\u2014","","","130"],["International weather-related events","3","","","6","","","\u2014","","","67","","","15","","","\u2014","","","91","","","2","","","89"],["Midwest derecho","37","","","38","","","8","","","\u2014","","","1","","","\u2014","","","84","","","\u2014","","","84"],["Australia storms","\u2014","","","\u2014","","","\u2014","","","66","","","\u2014","","","\u2014","","","66","","","\u2014","","","66"],["Other","7","","","2","","","\u2014","","","26","","","(1)","","","\u2014","","","34","","","\u2014","","","34"],["Total","$","1,868","","","$","533","","","$","35","","","$","690","","","$","123","","","$","24","","","$","3,273"],["RIPs collected (expensed)","(3)","","","(1)","","","(1)","","","(15)","","","10","","","\u2014","","","","","(10)"],["Total before income tax","$","1,871","","","$","534","","","$","36","","","$","705","","","$","113","","","$","24","","","","","","","$","3,283"],["Income tax benefit","","","","","","","","","","","","","","","","","506"],["Total after income tax","","","","","","","","","","","","","","","","","$","2,777"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Catastrophe Loss Charge by Event For Full Year 2019"],["","North America Commercial P&C Insurance","","North America Personal P&C Insurance","","North America Agricultural Insurance","","Overseas General Insurance","","Global Reinsurance","","Total excluding RIPs","","RIPs collected (expensed)","","Total including RIPs"],["(in millions of U.S. dollars)"],["Net losses"],["U.S. flooding, hail, tornadoes, and wind events","$","220","","","$","202","","","$","7","","","$","\u2014","","","$","9","","","$","438","","","$","\u2014","","","$","438"],["Tornado in Dallas, Texas","55","","","145","","","\u2014","","","\u2014","","","2","","","202","","","(11)","","","213"],["Winter-related storms","74","","","110","","","1","","","6","","","2","","","193","","","\u2014","","","193"],["Hurricane Dorian","26","","","30","","","\u2014","","","10","","","8","","","74","","","1","","","73"],["California wildfires","11","","","45","","","\u2014","","","\u2014","","","\u2014","","","56","","","\u2014","","","56"],["Typhoon Hagibis","\u2014","","","\u2014","","","\u2014","","","20","","","17","","","37","","","1","","","36"],["Civil unrest in Hong Kong and Chile","\u2014","","","\u2014","","","\u2014","","","33","","","\u2014","","","33","","","(4)","","","37"],["International weather-related events","1","","","2","","","\u2014","","","30","","","\u2014","","","33","","","\u2014","","","33"],["Other","34","","","9","","","\u2014","","","53","","","13","","","109","","","1","","","108"],["Total","$","421","","","$","543","","","$","8","","","$","152","","","$","51","","","$","1,175"],["RIPs collected (expensed)","\u2014","","","(11)","","","\u2014","","","(4)","","","3","","","","","(12)"],["Total before income tax","$","421","","","$","554","","","$","8","","","$","156","","","$","48","","","","","","","$","1,187"],["Income tax benefit","","","","","","","","","","","","","","","221"],["Total after income tax","","","","","","","","","","","","","","","$","966"]]
[[/GREPCENT_TABLE]]

51

Table of Contents

Prior Period Development

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","2021","","2020","","2019"],["Favorable prior period development","$","926","","","$","395","","","$","792"]]
[[/GREPCENT_TABLE]]

Prior period development (PPD) arises from changes to loss estimates recognized in the current year that relate to loss events that occurred in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years.

Pre-tax net favorable 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, is primarily comprised of 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.

Pre-tax net favorable prior period development for 2020 was $395 million, which included adverse development of $259 million for U.S. child molestation claims, predominately reviver statute-related, and $106 million adverse development related to legacy asbestos and environmental liabilities. The remaining favorable development of $760 million principally comprises 89 percent long-tail lines, principally from accident years 2016 and prior, and 11 percent short-tail lines.

Refer to the Prior Period Development section in Note 7 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 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.

[[GREPCENT_TABLE]]
[["","2021","","2020","","2019"],["Loss and loss expense ratio"],["CAY loss ratio excluding catastrophe losses","58.3","%","","59.2","%","","60.8","%"],["Catastrophe losses","7.1","%","","10.6","%","","4.1","%"],["Favorable prior period development","(2.8)","%","","(1.3)","%","","(2.8)","%"],["Loss and loss expense ratio","62.6","%","","68.5","%","","62.1","%"],["Policy acquisition cost ratio","18.3","%","","18.9","%","","19.1","%"],["Administrative expense ratio","8.2","%","","8.7","%","","9.4","%"],["P&C Combined ratio","89.1","%","","96.1","%","","90.6","%"]]
[[/GREPCENT_TABLE]]

The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased in 2021, primarily due to underlying loss ratio improvement including earned rate exceeding loss cost trends. The loss and loss expense ratio in 2021 also benefited from lower catastrophe losses and higher favorable prior period development.

The policy acquisition cost ratio decreased in 2021 primarily due to a change in the mix of business, including less premiums earned from consumer A&H lines that have a higher acquisition cost ratio and higher premiums earned from commercial P&C lines that have a lower acquisition cost ratio.

The administrative expense ratio decreased in 2021 primarily due to the favorable impact of higher net premiums earned, partially offset by increased investment to support growth.

52

Table of Contents

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 $699 million, $784 million and $740 million in 2021, 2020 and 2019, respectively, which included separate account liabilities (gains) losses of $(8) million, $58 million and $44 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 $707 million in 2021 compared with $726 million in 2020, reflecting growth in our International Life operations, offset by a decline in our Combined Insurance North America supplemental accident and health business and our life reinsurance business.

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.

Segment Operating Results – Years Ended December 31, 2021, 2020, and 2019

We operate through six business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. In addition, the results of our run-off Brandywine business, including all run-off asbestos and environmental (A&E) exposures, and the results of Westchester specialty operations for 1996 and prior years are presented within Corporate.

North America Commercial P&C Insurance

The North America Commercial P&C Insurance segment comprises operations that provide property and casualty (P&C) and accident & health (A&H) insurance and services to large, middle market, and small commercial businesses in the U.S., Canada, and Bermuda. This segment includes our North America Major Accounts and Specialty Insurance division (large corporate accounts and wholesale business), and the North America Commercial Insurance division (principally middle market and small commercial accounts).

[[GREPCENT_TABLE]]
[["","","","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","2020 vs. 2019"],["Net premiums written","$","16,415","","","$","14,474","","","$","13,375","","","13.4","%","","8.2","%"],["Net premiums earned","15,461","","","13,964","","","12,922","","","10.7","%","","8.1","%"],["Losses and loss expenses","10,015","","","10,129","","","8,206","","","(1.1)","%","","23.4","%"],["Policy acquisition costs","2,082","","","1,942","","","1,831","","","7.1","%","","6.1","%"],["Administrative expenses","1,052","","","1,006","","","1,028","","","4.6","%","","(2.2)","%"],["Underwriting income","2,312","","","887","","","1,857","","","160.8","%","","(52.2)","%"],["Net investment income","2,078","","","2,061","","","2,109","","","0.8","%","","(2.3)","%"],["Other (income) expense","31","","","23","","","24","","","39.2","%","","(4.2)","%"],["Segment income","$","4,359","","","$","2,925","","","$","3,942","","","49.0","%","","(25.8)","%"],["Loss and loss expense ratio:"],["CAY loss ratio excluding catastrophe losses","62.7","%","","64.2","%","","65.3","%","","(1.5)","","pts","","(1.1)","","pts"],["Catastrophe losses","7.2","%","","13.4","%","","3.3","%","","(6.2)","","pts","","10.1","","pts"],["Prior period development","(5.1)","%","","(5.1)","%","","(5.1)","%","","\u2014","","pts","","\u2014","","pts"],["Loss and loss expense ratio","64.8","%","","72.5","%","","63.5","%","","(7.7)","","pts","","9.0","","pts"],["Policy acquisition cost ratio","13.4","%","","14.0","%","","14.2","%","","(0.6)","","pts","","(0.2)","","pts"],["Administrative expense ratio","6.8","%","","7.2","%","","7.9","%","","(0.4)","","pts","","(0.7)","","pts"],["Combined ratio","85.0","%","","93.7","%","","85.6","%","","(8.7)","","pts","","8.1","","pts"]]
[[/GREPCENT_TABLE]]

53

Table of Contents

Catastrophe Losses and Prior Period Development

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","2021","","2020","","2019"],["Catastrophe losses","$","1,112","","","$","1,871","","","$","421"],["Favorable prior period development","$","762","","","$","702","","","$","649"]]
[[/GREPCENT_TABLE]]

Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for detail on prior period development.

Premiums

Net premiums written increased $1,941 million, or 13.4 percent in 2021, comprising:

•Commercial P&C lines: Positive growth of 14.6 percent reflecting strong new business written, positive rate increases, and strong premium retention across a number of retail and wholesale lines, including primary and excess casualty, financial lines, and property.

•Consumer lines: Negative growth of 11.3 percent principally from exposure declines in A&H.

Net premiums earned increased $1,497 million, or 10.7 percent in 2021, reflecting the growth in commercial lines described above.

Combined Ratio

The loss and loss expense ratio and the CAY loss ratio excluding catastrophe losses decreased in 2021 primarily reflecting underlying loss ratio improvement including earned rate exceeding loss cost trends. The loss and loss expense ratio in 2021 also benefited from higher favorable prior period development and lower catastrophe losses compared to the prior year, which included significant losses related to the COVID-19 pandemic.

The policy acquisition cost ratio decreased in 2021 primarily due to a change in mix of business towards lines that have a lower acquisition cost ratio, primarily excess casualty.

The administrative expense ratio decreased in 2021 primarily due to the favorable impact of higher net premiums earned, partially offset by increased investment to support growth.

54

Table of Contents

North America Personal P&C Insurance

The North America Personal P&C Insurance segment comprises operations that provide high net worth personal lines products, including homeowners and complementary products such as valuable articles, excess liability, automobile, and recreational marine insurance and services in the U.S. and Canada.

[[GREPCENT_TABLE]]
[["","","","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","2020 vs. 2019"],["Net premiums written","$","5,002","","","$","4,920","","","$","4,787","","","1.7","%","","2.8","%"],["Net premiums earned","4,915","","","4,866","","","4,694","","","1.0","%","","3.7","%"],["Losses and loss expenses","2,924","","","3,187","","","3,043","","","(8.3)","%","","4.7","%"],["Policy acquisition costs","1,001","","","974","","","948","","","2.9","%","","2.7","%"],["Administrative expenses","276","","","270","","","286","","","2.0","%","","(5.4)","%"],["Underwriting income","714","","","435","","","417","","","64.0","%","","4.6","%"],["Net investment income","249","","","260","","","258","","","(4.1)","%","","0.5","%"],["Other (income) expense","(2)","","","5","","","3","","","NM","","75.8","%"],["Amortization of purchased intangibles","10","","","11","","","12","","","(5.1)","%","","(5.0)","%"],["Segment income","$","955","","","$","679","","","$","660","","","40.6","%","","2.8","%"],["Loss and loss expense ratio:"],["CAY loss ratio excluding catastrophe losses","52.0","%","","53.1","%","","55.1","%","","(1.1)","","pts","","(2.0)","","pts"],["Catastrophe losses","13.6","%","","11.0","%","","11.6","%","","2.6","","pts","","(0.6)","","pts"],["Prior period development","(6.1)","%","","1.4","%","","(1.9)","%","","(7.5)","","pts","","3.3","","pts"],["Loss and loss expense ratio","59.5","%","","65.5","%","","64.8","%","","(6.0)","","pts","","0.7","","pts"],["Policy acquisition cost ratio","20.4","%","","20.0","%","","20.2","%","","0.4","","pts","","(0.2)","","pts"],["Administrative expense ratio","5.6","%","","5.6","%","","6.1","%","","\u2014","","pts","","(0.5)","","pts"],["Combined ratio","85.5","%","","91.1","%","","91.1","%","","(5.6)","","pts","","\u2014","","pts"]]
[[/GREPCENT_TABLE]]

NM – not meaningful

Catastrophe Losses and Prior Period Development

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","2021","","2020","","2019"],["Catastrophe losses","$","679","","","$","534","","","$","554"],["Favorable (unfavorable) prior period development","$","305","","","$","(63)","","","$","95"]]
[[/GREPCENT_TABLE]]

Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for detail on prior period development.

Premiums

Net premiums written increased $82 million, or 1.7 percent for 2021, primarily driven by new business and strong renewal retention, from both rate and exposure increases, mainly in homeowners. Partially offsetting the increase were cancellations in parts of California exposed to wildfires and the unfavorable year-over-year impact of reinstatement premiums. These items negatively impacted net premiums written growth by 1.3 percentage points.

Net premiums earned increased $49 million, or 1.0 percent for 2021, reflecting the growth in net premiums written.

Combined Ratio

The loss and loss expense ratio and CAY loss ratio excluding catastrophe losses decreased in 2021 due to better underlying loss ratio improvement in homeowners including earned rate exceeding loss cost trends, partially offset by an increase in automobile frequency. The loss and loss expense ratio in 2021 also benefited from favorable prior period development in the current year compared to unfavorable prior period development in the prior year, partially offset by higher catastrophe losses. Unfavorable prior period development in 2020 was due to higher than expected non-catastrophe loss development, primarily in homeowners. The policy acquisition cost ratio increased in 2021 primarily due to lower ceded commissions and the unfavorable year-over-year impact of reinstatement premiums.

55

Table of Contents

North America Agricultural Insurance

The North America Agricultural Insurance segment comprises our North American based businesses that provide a variety of coverages in the U.S. and Canada including crop insurance, primarily Multiple Peril Crop Insurance (MPCI) and crop-hail through Rain and Hail Insurance Service, Inc. (Rain and Hail) as well as farm and ranch and specialty P&C commercial insurance products and services through our Chubb Agribusiness unit.

[[GREPCENT_TABLE]]
[["","","","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","2020 vs. 2019"],["Net premiums written","$","2,388","","","$","1,846","","","$","1,810","","","29.3","%","","2.0","%"],["Net premiums earned","2,338","","","1,822","","","1,795","","","28.3","%","","1.5","%"],["Losses and loss expenses","1,962","","","1,544","","","1,616","","","27.1","%","","(4.5)","%"],["Policy acquisition costs","124","","","123","","","84","","","1.2","%","","45.7","%"],["Administrative expenses","(3)","","","9","","","6","","","NM","","67.2","%"],["Underwriting income","255","","","146","","","89","","","74.1","%","","65.3","%"],["Net investment income","28","","","30","","","30","","","(4.1)","%","","\u2014"],["Other (income) expense","1","","","1","","","1","","","\u2014","","","\u2014"],["Amortization of purchased intangibles","26","","","27","","","28","","","(0.8)","%","","(2.1)","%"],["Segment income","$","256","","","$","148","","","$","90","","","73.0","%","","65.1","%"],["Loss and loss expense ratio:"],["CAY loss ratio excluding catastrophe losses","81.5","%","","83.7","%","","93.5","%","","(2.2)","","pts","","(9.8)","","pts"],["Catastrophe losses","1.7","%","","2.0","%","","0.5","%","","(0.3)","","pts","","1.5","","pts"],["Prior period development","0.7","%","","(1.0)","%","","(3.9)","%","","1.7","","pts","","2.9","","pts"],["Loss and loss expense ratio","83.9","%","","84.7","%","","90.1","%","","(0.8)","","pts","","(5.4)","","pts"],["Policy acquisition cost ratio","5.3","%","","6.8","%","","4.7","%","","(1.5)","","pts","","2.1","","pts"],["Administrative expense ratio","(0.1)","%","","0.5","%","","0.3","%","","(0.6)","","pts","","0.2","","pts"],["Combined ratio","89.1","%","","92.0","%","","95.1","%","","(2.9)","","pts","","(3.1)","","pts"]]
[[/GREPCENT_TABLE]]

NM – not meaningful

Catastrophe Losses and Prior Period Development

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","2021","","2020","","2019"],["Catastrophe losses","$","40","","","$","36","","","$","8"],["(Unfavorable) favorable prior period development","$","(10)","","","$","10","","","$","80"]]
[[/GREPCENT_TABLE]]

Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for detail on prior period development.

Premiums

Net premiums written increased $542 million, or 29.3 percent in 2021, due mainly to an increase in MPCI, primarily reflecting higher commodity prices and volatility factors, both of which impact pricing, as well as higher reported acreage from policyholders and policy count growth. In addition, our Chubb Agribusiness unit contributed to the net premiums written increase with strong new business growth.

Net premiums earned increased $516 million, or 28.3 percent in 2021 reflecting the growth in net premiums written.

Combined Ratio

The loss and loss expense ratio and CAY loss ratio excluding catastrophe losses decreased in 2021 reflecting better crop year results, partially offset by the unfavorable impact of a commodity hedge loss. The loss and loss expense ratio in 2021 was unfavorably impacted by higher catastrophe losses and adverse prior period development. The policy acquisition cost ratio decreased in 2021 primarily due to the favorable impact of higher net premiums earned. The administrative expense ratio decreased in 2021 primarily due to an increase in administrative and operating reimbursements received under the government program for MPCI business and the favorable impact of higher net premiums earned.

56

Table of Contents

Overseas General Insurance

Overseas General Insurance segment comprises Chubb International and Chubb Global Markets (CGM). Chubb International comprises our international commercial P&C traditional and specialty lines serving large corporations, middle market and small customers; A&H and traditional and specialty personal lines business serving local territories outside the U.S., Bermuda, and Canada. CGM, our London-based international commercial P&C excess and surplus lines business, includes Lloyd's of London (Lloyd's) Syndicate 2488. Chubb provides funds at Lloyd's to support underwriting by Syndicate 2488 which is managed by Chubb Underwriting Agencies Limited.

[[GREPCENT_TABLE]]
[["","","","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","2020 vs. 2019"],["Net premiums written","$","10,713","","","$","9,335","","","$","9,262","","","14.8","%","","0.8","%"],["Net premiums written - constant dollars","","","","","","","10.6","%","","2.9","%"],["Net premiums earned","10,441","","","9,285","","","8,882","","","12.5","%","","4.5","%"],["Losses and loss expenses","5,143","","","5,255","","","4,606","","","(2.1)","%","","14.1","%"],["Policy acquisition costs","2,799","","","2,568","","","2,501","","","9.0","%","","2.7","%"],["Administrative expenses","1,078","","","1,034","","","1,033","","","4.3","%","","0.1","%"],["Underwriting income","1,421","","","428","","","742","","","232.2","%","","(42.4)","%"],["Net investment income","597","","","534","","","588","","","11.9","%","","(9.2)","%"],["Other (income) expense","\u2014","","","13","","","12","","","NM","","4.5","%"],["Amortization of purchased intangibles","48","","","45","","","45","","","8.2","%","","\u2014"],["Segment income","$","1,970","","","$","904","","","$","1,273","","","118.1","%","","(29.0)","%"],["Loss and loss expense ratio:"],["CAY loss ratio excluding catastrophe losses","50.1","%","","50.7","%","","51.2","%","","(0.6)","","pts","","(0.5)","","pts"],["Catastrophe losses","3.5","%","","7.5","%","","1.8","%","","(4.0)","","pts","","5.7","","pts"],["Prior period development","(4.3)","%","","(1.6)","%","","(1.1)","%","","(2.7)","","pts","","(0.5)","","pts"],["Loss and loss expense ratio","49.3","%","","56.6","%","","51.9","%","","(7.3)","","pts","","4.7","","pts"],["Policy acquisition cost ratio","26.8","%","","27.7","%","","28.1","%","","(0.9)","","pts","","(0.4)","","pts"],["Administrative expense ratio","10.3","%","","11.1","%","","11.6","%","","(0.8)","","pts","","(0.5)","","pts"],["Combined ratio","86.4","%","","95.4","%","","91.6","%","","(9.0)","","pts","","3.8","","pts"]]
[[/GREPCENT_TABLE]]

NM – not meaningful

Catastrophe Losses and Prior Period Development

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","2021","","2020","","2019"],["Catastrophe losses","$","358","","","$","705","","","$","156"],["Favorable prior period development","$","441","","","$","150","","","$","92"]]
[[/GREPCENT_TABLE]]

Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for detail on prior period development.

57

Table of Contents

[[GREPCENT_TABLE]]
[["Net Premiums Written by Region","","","","","","","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","C$ 2020","","","","2021 vs. 2020","","C$ 2021 vs. 2020","","2020 vs. 2019"],["Region"],["Europe, Middle East, and Africa","$","5,242","","","$","4,247","","","$","3,753","","","$","4,454","","","","","23.4","%","","17.7","%","","13.2","%"],["Latin America","2,044","","","1,928","","","2,277","","","1,956","","","","","6.1","%","","4.5","%","","(15.3)","%"],["Asia Pacific ex Japan","2,733","","","2,450","","","2,515","","","2,568","","","","","11.6","%","","6.4","%","","(2.6)","%"],["Japan","520","","","515","","","506","","","507","","","","","0.9","%","","2.5","%","","1.8","%"],["Other (1)","174","","","195","","","211","","","202","","","","","(10.8)","%","","(13.9)","%","","(7.6)","%"],["Net premiums written","$","10,713","","","$","9,335","","","$","9,262","","","$","9,687","","","","","14.8","%","","10.6","%","","0.8","%"],["","2021 % of Total","","2020 % of Total","","2019 % of Total"],["Region"],["Europe, Middle East, and Africa","49","%","","45","%","","40","%"],["Latin America","19","%","","21","%","","25","%"],["Asia Pacific ex Japan","25","%","","26","%","","27","%"],["Japan","5","%","","6","%","","6","%"],["Other (1)","2","%","","2","%","","2","%"],["Net premiums written","100","%","","100","%","","100","%"]]
[[/GREPCENT_TABLE]]

(1)     Includes the international supplemental A&H business of Combined Insurance and other international operations.

Premiums

Net premiums written increased $1,378 million in 2021, or $1,026 million on a constant-dollar basis, reflecting growth in commercial lines of 21.4 percent, or 16.9 percent on a constant-dollar basis, and growth in consumer lines of 5.6 percent, or 1.8 percent on a constant-dollar basis.

Growth in Europe, Middle East and Africa in 2021 was primarily driven by higher new business and positive rate increases in commercial lines, including commercial casualty, financial lines and property. Personal lines grew reflecting new business in specialty lines.

Growth in Latin America in 2021 was primarily driven by higher new business and retention in commercial P&C lines. Additionally, consumer lines in the prior year was adversely impacted by restrictions resulting from the COVID-19 pandemic in automobile and A&H.

Growth in Asia Pacific ex Japan in 2021 was primarily driven by higher new business, higher retention and positive rate increases in commercial P&C lines, including financial lines, property and casualty, and higher new business in consumer lines, primarily in specialty and homeowners. Additionally, consumer lines in the prior year was adversely impacted by restrictions resulting from the COVID-19 pandemic.

Growth in Japan in 2021 was primarily driven by new business in commercial P&C lines, including financial lines and casualty. Consumer lines also increased, driven by homeowners and specialty in personal lines. Additionally, consumer lines in the prior year was adversely impacted by restrictions resulting from the COVID-19 pandemic.

Net premiums earned increased $1,156 million in 2021, or $811 million on a constant-dollar basis, reflecting the increase in commercial and consumer lines described above.

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Combined Ratio

The loss and loss expense ratio and CAY loss ratio excluding catastrophe losses decreased in 2021 reflecting underlying loss ratio improvement including earned rate exceeding loss cost trends, partially offset by a COVID-related reduced claim frequency benefit in the prior year, primarily in the automobile portfolio in Latin America, and lower premiums earned from A&H lines which have a lower loss ratio. The loss and loss expense ratio in 2021 also benefited from higher favorable prior period development and lower catastrophe losses compared to the prior year.

The policy acquisition cost ratio decreased in 2021 primarily due to a change in the mix of business, including less premiums earned from A&H lines that have a higher acquisition cost ratio and higher premiums earned from commercial P&C lines that have a lower acquisition cost ratio.

The administrative expense ratio decreased in 2021 primarily due to the favorable impact of higher net premiums earned and expense management, partially offset by increased investment to support growth.

Global Reinsurance

The Global Reinsurance segment represents our reinsurance operations comprising Chubb Tempest Re Bermuda, Chubb Tempest Re USA, Chubb Tempest Re International, and Chubb Tempest Re Canada. Global Reinsurance markets its reinsurance products worldwide primarily through reinsurance brokers under the Chubb Tempest Re brand name and provides a broad range of traditional and non-traditional reinsurance coverage to a diverse array of primary P&C companies.

[[GREPCENT_TABLE]]
[["","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","2020 vs. 2019"],["Net premiums written","$","873","","","$","731","","","$","649","","","19.5","%","","12.6","%"],["Net premiums written - constant dollars","","","","","","","18.0","%","","12.1","%"],["Net premiums earned","798","","","698","","","654","","","14.3","%","","6.7","%"],["Losses and loss expenses","632","","","435","","","352","","","45.2","%","","23.5","%"],["Policy acquisition costs","200","","","174","","","169","","","15.3","%","","3.0","%"],["Administrative expenses","35","","","37","","","35","","","(4.5)","%","","5.2","%"],["Underwriting income (loss)","(69)","","","52","","","98","","","NM","","(46.8)","%"],["Net investment income","331","","","307","","","279","","","7.7","%","","10.1","%"],["Other (income) expense","\u2014","","","2","","","1","","","NM","","NM"],["Segment income","$","262","","","$","357","","","$","376","","","(26.8)","%","","(5.0)","%"],["Loss and loss expense ratio:"],["CAY loss ratio excluding catastrophe losses","50.7","%","","49.1","%","","50.6","%","","1.6","","pts","","(1.5)","","pts"],["Catastrophe losses","28.3","%","","17.0","%","","7.6","%","","11.3","","pts","","9.4","","pts"],["Prior period development","0.2","%","","(3.8)","%","","(4.3)","%","","4.0","","pts","","0.5","","pts"],["Loss and loss expense ratio","79.2","%","","62.3","%","","53.9","%","","16.9","","pts","","8.4","","pts"],["Policy acquisition cost ratio","25.1","%","","24.9","%","","25.7","%","","0.2","","pts","","(0.8)","","pts"],["Administrative expense ratio","4.4","%","","5.3","%","","5.4","%","","(0.9)","","pts","","(0.1)","","pts"],["Combined ratio","108.7","%","","92.5","%","","85.0","%","","16.2","","pts","","7.5","","pts"]]
[[/GREPCENT_TABLE]]

NM – not meaningful

Catastrophe Losses and Prior Period Development

[[GREPCENT_TABLE]]
[["(in millions of U.S dollars)","2021","","2020","","2019"],["Catastrophe losses","$","212","","","$","113","","","$","48"],["(Unfavorable) favorable prior period development","$","(3)","","","$","29","","","$","29"]]
[[/GREPCENT_TABLE]]

Refer to the tables on pages 50 - 51 for detail of catastrophe losses and Note 7 to the Consolidated Financial Statements for detail on prior period development.

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Premiums

Net premiums written increased $142 million in 2021 primarily from growth in property pro-rata business and financial lines, driven by new business written. In addition, net premiums written increased due to higher reinstatement premiums.

Net premiums earned increased $100 million in 2021 primarily reflecting the increase in net premiums written described above.

Combined Ratio

The loss and loss expense ratio increased in 2021 primarily due to higher catastrophe losses and unfavorable prior period development compared with favorable prior period development in the prior year. The CAY loss ratio excluding catastrophe losses increased in 2021 primarily due to a shift in the mix of business.

The administrative expense ratio decreased in 2021 primarily from the favorable impact of higher net premiums earned.

Life Insurance

The Life Insurance segment comprises our international life operations, Chubb Tempest Life Re (Chubb Life Re), and the North American supplemental A&H and life business of Combined Insurance. We assess the performance of our life business based on Life Insurance underwriting income, which includes Net investment income and (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.

[[GREPCENT_TABLE]]
[["","","","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","2020","","2019","","2021 vs. 2020","","2020 vs. 2019"],["Net premiums written","$","2,477","","","$","2,514","","","$","2,392","","","(1.5)","%","","5.1","%"],["Net premiums written - constant dollars","","","","","","","(2.8)","%","","5.6","%"],["Net premiums earned","2,402","","","2,482","","","2,343","","","(3.2)","%","","5.9","%"],["Losses and loss expenses","740","","","724","","","757","","","2.3","%","","(4.4)","%"],["Policy benefits","707","","","726","","","696","","","(2.7)","%","","4.3","%"],["Policy acquisition costs","712","","","766","","","620","","","(7.1)","%","","23.6","%"],["Administrative expenses","333","","","320","","","323","","","3.8","%","","(1.0)","%"],["Net investment income","407","","","385","","","373","","","5.6","%","","3.3","%"],["Life Insurance underwriting income","317","","","331","","","320","","","(4.2)","%","","3.6","%"],["Other (income) expense","(106)","","","(74)","","","(48)","","","42.4","%","","53.1","%"],["Amortization of purchased intangibles","5","","","4","","","2","","","23.3","%","","100.0","%"],["Segment income","$","418","","","$","401","","","$","366","","","4.1","%","","9.8","%"]]
[[/GREPCENT_TABLE]]

Premiums

Net premiums written decreased $37 million in 2021, or $72 million on a constant-dollar basis. For our International Life operations, net premiums written increased 9.4 percent, principally in Asia, from new business in Taiwan, Thailand and Vietnam, and in Latin America from new business in Brazil and Ecuador. This growth was offset by a decline in our North America Combined Insurance business of 7.1 percent, from the adverse impact of the COVID-19 pandemic on face-to-face and worksite sales, and a decline in our life reinsurance business which continues to decline as no new business is currently being written.

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Deposits

The following table presents deposits collected on universal life and investment contracts:

[[GREPCENT_TABLE]]
[["","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","C$ 2021 vs. 2020","","2020 vs. 2019"],["Deposits collected on universal life and investment contracts","$","2,441","","","$","1,559","","","$","1,463","","","56.6","%","","49.9","%","","6.5","%"]]
[[/GREPCENT_TABLE]]

Deposits collected on universal life and investment contracts (life deposits) are not reflected as revenues in our Consolidated statements of operations in accordance with GAAP. New life deposits are an important component of production, and although they do not significantly affect current period income from operations, they are key to our efforts to grow our business. Life deposits collected increased $882 million, or $812 million on a constant-dollar basis, in 2021, primarily from successful sales in broker and bank channels in Taiwan.

Life Insurance underwriting income and Segment income

Life Insurance underwriting income decreased $14 million in 2021, primarily due to the decrease in net premiums written described above, partially offset by higher net investment income. Segment income increased $17 million primarily due to higher other income from our share of net income from our investment in Huatai, our partially-owned insurance entity in China.

Corporate

Corporate results primarily include the results of our non-insurance companies, income and expenses not attributable to reportable segments and loss and loss expenses of asbestos and environmental (A&E) liabilities and certain other non-A&E run-off exposures, including molestation.

[[GREPCENT_TABLE]]
[["","","","% Change"],["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019","","","2021 vs. 2020","","2020 vs. 2019"],["Losses and loss expenses","$","572","","","$","435","","","$","158","","","31.4","%","","176.4","%"],["Administrative expenses","365","","","303","","","319","","","20.6","%","","(5.0)","%"],["Underwriting loss","937","","","738","","","477","","","26.9","%","","54.8","%"],["Net investment income (loss)","(55)","","","(87)","","","(125)","","","(35.6)","%","","(30.8)","%"],["Interest expense","492","","","516","","","552","","","(4.7)","%","","(6.4)","%"],["Net realized gains (losses)","1,160","","","(499)","","","(522)","","","NM","","(4.6)","%"],["Other (income) expense","(2,118)","","","(791)","","","(459)","","","168.0","%","","72.7","%"],["Amortization of purchased intangibles","198","","","203","","","218","","","(3.2)","%","","(6.9)","%"],["Chubb integration expenses","\u2014","","","\u2014","","","23","","","\u2014","","","NM"],["Income tax expense","1,277","","","629","","","795","","","102.9","%","","(20.8)","%"],["Net income (loss)","$","319","","","$","(1,881)","","","$","(2,253)","","","NM","","(16.5)","%"],["NM \u2013 not meaningful"]]
[[/GREPCENT_TABLE]]

The increase in losses and loss expenses was primarily from adverse development relating to our Brandywine asbestos and environmental exposures, and non A&E run-off casualty exposure, including molestation. Adverse development on molestation exposures in 2021 is primarily related to Boy Scouts of America related abuse claims. Refer to Note 7 of the Consolidated Financial Statements for further information. Administrative expenses increased $62 million in 2021 primarily due to higher employee-related expenses and increased spending to support digital growth initiatives.

Other (income) and expense increased $1.3 billion in 2021 primarily due to higher returns from our private equities where we own more than three percent, principally from mark-to-market movement. Refer to Note 14 to the Consolidated Financial Statements for additional information on Other (income) expense.

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

Net Realized and Unrealized Gains (Losses)

We take a long-term view with our investment strategy, and our investment managers manage our investment portfolio to maximize total return within specific guidelines designed to minimize risk. The majority of our investment portfolio is available for sale and reported at fair value. Our held to maturity investment portfolio is reported at amortized cost, net of valuation allowance.

The effect of market movements on our fixed maturities portfolio impacts Net income (through Net realized gains (losses)) when securities are sold, when we write down an asset, or when we record a change to the valuation allowance for expected credit losses. For a further discussion related to how we assess the valuation allowance for expected credit losses and the related impact on Net income, refer to Note 1 e) to the Consolidated Financial Statements. Additionally, Net income is impacted through the reporting of changes in the fair value of equity securities, private equity funds where we own less than three percent, and derivatives, including financial futures, options, swaps, and GLB reinsurance. Changes in unrealized appreciation and depreciation on available for sale securities, resulting from the revaluation of securities held, changes in cumulative foreign currency translation adjustment, and unrealized postretirement benefit obligations liability adjustment, are reported as separate components of Accumulated other comprehensive income in Shareholders’ equity in the Consolidated balance sheets.

The following table presents our net realized and unrealized gains (losses):

[[GREPCENT_TABLE]]
[["","Year Ended December 31"],["","2021","","2020","","2019"],["(in millions of U.S. dollars)","NetRealizedGains(Losses)","","Net Unrealized Gains (Losses)","","Net Impact","","Net Realized Gains (Losses)","","Net Unrealized Gains (Losses)","","Net Impact","","Net Realized Gains (Losses)"],["Fixed maturities","$","3","","","$","(2,919)","","","$","(2,916)","","","$","(281)","","","$","2,604","","","$","2,323","","","$","(31)"],["Fixed income and equity derivatives","(72)","","","\u2014","","","(72)","","","81","","","\u2014","","","81","","","(435)"],["Public equity"],["Sales","157","","","\u2014","","","157","","","455","","","\u2014","","","455","","","58"],["Mark-to-market","505","","","\u2014","","","505","","","131","","","\u2014","","","131","","","46"],["Private equity (less than 3 percent ownership)"],["Sales","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","(5)"],["Mark-to-market","111","","","\u2014","","","111","","","(32)","","","\u2014","","","(32)","","","(15)"],["Total investment portfolio","704","","","(2,919)","","","(2,215)","","","354","","","2,604","","","2,958","","","(382)"],["Variable annuity reinsurance derivative transactions, net of applicable hedges","114","","","\u2014","","","114","","","(310)","","","\u2014","","","(310)","","","(142)"],["Other derivatives","(8)","","","\u2014","","","(8)","","","1","","","\u2014","","","1","","","(8)"],["Foreign exchange","348","","","(530)","","","(182)","","","(483)","","","306","","","(177)","","","7"],["Other (1)","(6)","","","503","","","497","","","(60)","","","(244)","","","(304)","","","(5)"],["Net gains (losses), pre-tax","$","1,152","","","$","(2,946)","","","$","(1,794)","","","$","(498)","","","$","2,666","","","$","2,168","","","$","(530)"]]
[[/GREPCENT_TABLE]]

(1)     Net unrealized gains (losses) includes our postretirement programs of $522 million and $(232) million for the years ended December 31, 2021 and 2020, respectively.

Pre-tax net losses of $2,215 million in our investment portfolio were principally the result of an increase in interest rates, partially offset by positive equity returns.

The realized gains relating to the variable annuity reinsurance derivative transactions in 2021 reflected a decrease in the fair value of GLB liabilities due to higher global equity markets and higher interest rates. The realized losses relating to the variable annuity reinsurance derivative transactions in 2020 reflected an increase in the fair value of GLB liabilities due to lower interest rates and changes made to our valuation model relating to policyholder behavior, partially offset by higher global equity markets. Included in the realized gains (losses) are derivative instruments that decrease in fair value when the S&P 500 index increases. During the years ended December 31, 2021 and 2020, we experienced realized losses of $202 million and $108 million, respectively, related to these derivative instruments.

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Effective Income Tax Rate

Our effective tax rate (ETR) was 13.0 percent, 15.1 percent, and 14.9 percent in 2021, 2020, and 2019, respectively. Our ETR reflects a mix of income or losses in jurisdictions with a wide range of tax rates, permanent differences between U.S. GAAP and local tax laws, and the impact of discrete items. A change in the geographic mix of earnings could impact our ETR. The ETR in 2021 was impacted by a higher percentage of income generated in lower tax jurisdictions and discrete tax benefits.

Non-GAAP Reconciliation

In presenting our results, we included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition. However, they should not be viewed as a substitute for measures determined in accordance with generally accepted accounting principles (GAAP).

Book value per common share is shareholders’ equity divided by the shares outstanding. Tangible book value per common share is shareholders’ equity less goodwill and other intangible assets, net of tax, divided by the shares outstanding. We believe that book value comparisons to less acquisitive peer companies are more meaningful when adjusted for goodwill and other intangible assets. The calculation of tangible book value per share does not consider the embedded goodwill attributable to our investments in partially-owned insurance companies until we consolidate.

We provide financial measures, including net premiums written, net premiums earned, and underwriting income on a constant-dollar basis. We believe it is useful to evaluate the trends in our results exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign exchange rates between periods by translating prior period results using the same local currency exchange rates as the comparable current period.

P&C performance metrics comprise consolidated operating results (including Corporate) and exclude the operating results of the Life Insurance segment. We believe that these measures are useful and meaningful to investors as they are used by management to assess the company’s P&C operations which are the most economically similar. We exclude the Life Insurance segment because the results of this business do not always correlate with the results of our P&C operations.

P&C combined ratio is the sum of the loss and loss expense ratio, policy acquisition cost ratio, and the administrative expense ratio excluding the life business and including the realized gains and losses on the crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations.

CAY P&C combined ratio excluding catastrophe losses (CATs) excludes CATs and prior period development (PPD) from the P&C combined ratio. We exclude CATs as they are not predictable as to timing and amount and PPD as these unexpected loss developments on historical reserves are not indicative of our current underwriting performance. The combined ratio numerator is adjusted to exclude CATs, net premiums earned adjustments on PPD, prior period expense adjustments, and reinstatement premiums on PPD, and the denominator is adjusted to exclude net premiums earned adjustments on PPD and reinstatement premiums on CATs and PPD. In periods where there are adjustments on loss sensitive policies, these adjustments are excluded from PPD and net premiums earned when calculating the ratios. We believe this measure provides a better evaluation of our underwriting performance and enhances the understanding of the trends in our P&C business that may be obscured by these items. This measure is commonly reported among our peer companies and allows for a better comparison.

Reinstatement premiums are additional premiums paid on certain reinsurance agreements in order to reinstate coverage that had been exhausted by loss occurrences. The reinstatement premium amount is typically a pro rata portion of the original ceded premium paid based on how much of the reinsurance limit had been exhausted.

Net premiums earned adjustments within PPD are adjustments to the initial premium earned on retrospectively rated policies based on actual claim experience that develops after the policy period ends. The premium adjustments correlate to the prior period loss development on these same policies and are fully earned in the period the adjustments are recorded.

Prior period expense adjustments typically relate to adjustable commission reserves or policyholder dividend reserves based on actual claim experience that develops after the policy period ends. The expense adjustments correlate to the prior period loss development on these same policies.

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The following tables present the calculation of combined ratio, as reported for each segment to P&C combined ratio, adjusted for catastrophe losses (CATs) and PPD:

[[GREPCENT_TABLE]]
[["","","North America Commercial P&C Insurance","","North America Personal P&C Insurance","","North America Agricultural Insurance","","Overseas General Insurance","","Global Reinsurance","","Corporate","","Total P&C"],["For the Year Ended"],["December 31, 2021"],["(in millions of U.S. dollars except for ratios)"],["Numerator"],["Losses and loss expenses","A","$","10,015","","","$","2,924","","","$","1,962","","","$","5,143","","","$","632","","","$","572","","","$","21,248"],["Catastrophe losses and related adjustments"],["Catastrophe losses, net of related adjustments","","(1,112)","","","(679)","","","(40)","","","(358)","","","(212)","","","\u2014","","","(2,401)"],["Reinstatement premiums collected (expensed) on catastrophe losses","","\u2014","","","(16)","","","(2)","","","\u2014","","","28","","","\u2014","","","10"],["Catastrophe losses, gross of related adjustments","","(1,112)","","","(663)","","","(38)","","","(358)","","","(240)","","","\u2014","","","(2,411)"],["PPD and related adjustments"],["PPD, net of related adjustments - favorable (unfavorable)","","762","","","305","","","(10)","","","441","","","(3)","","","(569)","","","926"],["Net premiums earned adjustments on PPD - unfavorable (favorable)","","67","","","\u2014","","","(25)","","","\u2014","","","\u2014","","","\u2014","","","42"],["Expense adjustments - unfavorable (favorable)","","6","","","\u2014","","","(3)","","","\u2014","","","\u2014","","","\u2014","","","3"],["PPD reinstatement premiums - unfavorable (favorable)","","6","","","(1)","","","\u2014","","","7","","","3","","","\u2014","","","15"],["PPD, gross of related adjustments - favorable (unfavorable)","","841","","","304","","","(38)","","","448","","","\u2014","","","(569)","","","986"],["CAY loss and loss expense ex CATs","B","$","9,744","","","$","2,565","","","$","1,886","","","$","5,233","","","$","392","","","$","3","","","$","19,823"],["Policy acquisition costs and administrative expenses"],["Policy acquisition costs and administrative expenses","C","$","3,134","","","$","1,277","","","$","121","","","$","3,877","","","$","235","","","$","365","","","$","9,009"],["Expense adjustments - favorable (unfavorable)","","(6)","","","\u2014","","","3","","","\u2014","","","\u2014","","","\u2014","","","(3)"],["Policy acquisition costs and administrative expenses, adjusted","D","$","3,128","","","$","1,277","","","$","124","","","$","3,877","","","$","235","","","$","365","","","$","9,006"],["Denominator"],["Net premiums earned","E","$","15,461","","","$","4,915","","","$","2,338","","","$","10,441","","","$","798","","","","","$","33,953"],["Reinstatement premiums (collected) expensed on catastrophe losses","","\u2014","","","16","","","2","","","\u2014","","","(28)","","","","","(10)"],["Net premiums earned adjustments on PPD - unfavorable (favorable)","","67","","","\u2014","","","(25)","","","\u2014","","","\u2014","","","","","42"],["PPD reinstatement premiums - unfavorable (favorable)","","6","","","(1)","","","\u2014","","","7","","","3","","","","","15"],["Net premiums earned excluding adjustments","F","$","15,534","","","$","4,930","","","$","2,315","","","$","10,448","","","$","773","","","","","$","34,000"],["P&C Combined ratio"],["Loss and loss expense ratio","A/E","64.8","%","","59.5","%","","83.9","%","","49.3","%","","79.2","%","","","","62.6","%"],["Policy acquisition cost and administrative expense ratio","C/E","20.2","%","","26.0","%","","5.2","%","","37.1","%","","29.5","%","","","","26.5","%"],["P&C Combined ratio","","85.0","%","","85.5","%","","89.1","%","","86.4","%","","108.7","%","","","","89.1","%"],["CAY P&C Combined ratio ex CATs"],["Loss and loss expense ratio, adjusted","B/F","62.7","%","","52.0","%","","81.5","%","","50.1","%","","50.7","%","","","","58.3","%"],["Policy acquisition cost and administrative expense ratio, adjusted","D/F","20.2","%","","25.9","%","","5.3","%","","37.1","%","","30.5","%","","","","26.5","%"],["CAY P&C Combined ratio ex CATs","","82.9","%","","77.9","%","","86.8","%","","87.2","%","","81.2","%","","","","84.8","%"],["Combined ratio"],["Combined ratio","","","","","","","","","","","","","","89.1","%"],["Add: impact of gains and losses on crop derivatives","","","","","","","","","","","","","","\u2014"],["P&C Combined ratio","","","","","","","","","","","","","","89.1","%"]]
[[/GREPCENT_TABLE]]

Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E and F included in the table are references for calculating the ratios above.

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[[GREPCENT_TABLE]]
[["","","North America Commercial P&C Insurance","","North America Personal P&C Insurance","","North America Agricultural Insurance","","Overseas General Insurance","","Global Reinsurance","","Corporate","","Total P&C"],["For the Year Ended"],["December 31, 2020"],["(in millions of U.S. dollars except for ratios)"],["Numerator"],["Losses and loss expenses","A","$","10,129","","","$","3,187","","","$","1,544","","","$","5,255","","","$","435","","","$","435","","","$","20,985"],["Catastrophe losses and related adjustments"],["Catastrophe losses, net of related adjustments","","(1,871)","","","(534)","","","(36)","","","(705)","","","(113)","","","\u2014","","","(3,259)"],["Reinstatement premiums collected (expensed) on catastrophe losses","","(3)","","","(1)","","","(1)","","","(15)","","","10","","","\u2014","","","(10)"],["Catastrophe losses, gross of related adjustments","","(1,868)","","","(533)","","","(35)","","","(690)","","","(123)","","","\u2014","","","(3,249)"],["PPD and related adjustments"],["PPD, net of related adjustments - favorable (unfavorable)","","702","","","(63)","","","10","","","150","","","29","","","(433)","","","395"],["Net premiums earned adjustments on PPD - unfavorable (favorable)","","32","","","\u2014","","","3","","","\u2014","","","\u2014","","","\u2014","","","35"],["Expense adjustments - unfavorable (favorable)","","(1)","","","\u2014","","","6","","","\u2014","","","(2)","","","\u2014","","","3"],["PPD reinstatement premiums - unfavorable (favorable)","","\u2014","","","(18)","","","\u2014","","","\u2014","","","(1)","","","\u2014","","","(19)"],["PPD, gross of related adjustments - favorable (unfavorable)","","733","","","(81)","","","19","","","150","","","26","","","(433)","","","414"],["CAY loss and loss expense ex CATs","B","$","8,994","","","$","2,573","","","$","1,528","","","$","4,715","","","$","338","","","$","2","","","$","18,150"],["Policy acquisition costs and administrative expenses"],["Policy acquisition costs and administrative expenses","C","$","2,948","","","$","1,244","","","$","132","","","$","3,602","","","$","211","","","$","303","","","$","8,440"],["Expense adjustments - favorable (unfavorable)","","1","","","\u2014","","","(6)","","","\u2014","","","2","","","\u2014","","","(3)"],["Policy acquisition costs and administrative expenses, adjusted","D","$","2,949","","","$","1,244","","","$","126","","","$","3,602","","","$","213","","","$","303","","","$","8,437"],["Denominator"],["Net premiums earned","E","$","13,964","","","$","4,866","","","$","1,822","","","$","9,285","","","$","698","","","","","$","30,635"],["Reinstatement premiums (collected) expensed on catastrophe losses","","3","","","1","","","1","","","15","","","(10)","","","","","10"],["Net premiums earned adjustments on PPD - unfavorable (favorable)","","32","","","\u2014","","","3","","","\u2014","","","\u2014","","","","","35"],["PPD reinstatement premiums - unfavorable (favorable)","","\u2014","","","(18)","","","\u2014","","","\u2014","","","(1)","","","","","(19)"],["Net premiums earned excluding adjustments","F","$","13,999","","","$","4,849","","","$","1,826","","","$","9,300","","","$","687","","","","","$","30,661"],["P&C Combined ratio"],["Loss and loss expense ratio","A/E","72.5","%","","65.5","%","","84.7","%","","56.6","%","","62.3","%","","","","68.5","%"],["Policy acquisition cost and administrative expense ratio","C/E","21.2","%","","25.6","%","","7.3","%","","38.8","%","","30.2","%","","","","27.6","%"],["P&C Combined ratio","","93.7","%","","91.1","%","","92.0","%","","95.4","%","","92.5","%","","","","96.1","%"],["CAY P&C Combined ratio ex CATs"],["Loss and loss expense ratio, adjusted","B/F","64.2","%","","53.1","%","","83.7","%","","50.7","%","","49.1","%","","","","59.2","%"],["Policy acquisition cost and administrative expense ratio, adjusted","D/F","21.1","%","","25.6","%","","6.8","%","","38.7","%","","31.0","%","","","","27.5","%"],["CAY P&C Combined ratio ex CATs","","85.3","%","","78.7","%","","90.5","%","","89.4","%","","80.1","%","","","","86.7","%"],["Combined ratio"],["Combined ratio","","","","","","","","","","","","","","96.1","%"],["Add: impact of gains and losses on crop derivatives","","","","","","","","","","","","","","\u2014"],["P&C Combined ratio","","","","","","","","","","","","","","96.1","%"]]
[[/GREPCENT_TABLE]]

Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E and F included in the table are references for calculating the ratios above.

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[[GREPCENT_TABLE]]
[["","","North America Commercial P&C Insurance","","North America Personal P&C Insurance","","North America Agricultural Insurance","","Overseas General Insurance","","Global Reinsurance","","Corporate","","Total P&C"],["For the Year Ended"],["December 31, 2019"],["(in millions of U.S. dollars except for ratios)"],["Numerator"],["Losses and loss expenses","A","$","8,206","","","$","3,043","","","$","1,616","","","$","4,606","","","$","352","","","$","158","","","$","17,981"],["Catastrophe losses and related adjustments"],["Catastrophe losses, net of related adjustments","","(421)","","","(554)","","","(8)","","","(156)","","","(48)","","","\u2014","","","(1,187)"],["Reinstatement premiums collected (expensed) on catastrophe losses","","\u2014","","","(11)","","","\u2014","","","(4)","","","3","","","\u2014","","","(12)"],["Catastrophe losses, gross of related adjustments","","(421)","","","(543)","","","(8)","","","(152)","","","(51)","","","\u2014","","","(1,175)"],["PPD and related adjustments"],["PPD, net of related adjustments - favorable (unfavorable)","","649","","","95","","","80","","","92","","","29","","","(153)","","","792"],["Net premiums earned adjustments on PPD - unfavorable (favorable)","","38","","","\u2014","","","36","","","\u2014","","","1","","","\u2014","","","75"],["Expense adjustments - unfavorable (favorable)","","(3)","","","\u2014","","","(13)","","","\u2014","","","(1)","","","\u2014","","","(17)"],["PPD reinstatement premiums - unfavorable (favorable)","","(1)","","","(4)","","","\u2014","","","1","","","(1)","","","\u2014","","","(5)"],["PPD, gross of related adjustments - favorable (unfavorable)","","683","","","91","","","103","","","93","","","28","","","(153)","","","845"],["CAY loss and loss expense ex CATs","B","$","8,468","","","$","2,591","","","$","1,711","","","$","4,547","","","$","329","","","$","5","","","$","17,651"],["Policy acquisition costs and administrative expenses"],["Policy acquisition costs and administrative expenses","C","$","2,859","","","$","1,234","","","$","90","","","$","3,534","","","$","204","","","$","319","","","$","8,240"],["Expense adjustments - favorable (unfavorable)","","3","","","\u2014","","","13","","","\u2014","","","1","","","\u2014","","","17"],["Policy acquisition costs and administrative expenses, adjusted","D","$","2,862","","","$","1,234","","","$","103","","","$","3,534","","","$","205","","","$","319","","","$","8,257"],["Denominator"],["Net premiums earned","E","$","12,922","","","$","4,694","","","$","1,795","","","$","8,882","","","$","654","","","","","$","28,947"],["Reinstatement premiums (collected) expensed on catastrophe losses","","\u2014","","","11","","","\u2014","","","4","","","(3)","","","","","12"],["Net premiums earned adjustments on PPD - unfavorable (favorable)","","38","","","\u2014","","","36","","","\u2014","","","1","","","","","75"],["PPD reinstatement premiums - unfavorable (favorable)","","(1)","","","(4)","","","\u2014","","","1","","","(1)","","","","","(5)"],["Net premiums earned excluding adjustments","F","$","12,959","","","$","4,701","","","$","1,831","","","$","8,887","","","$","651","","","","","$","29,029"],["P&C Combined ratio"],["Loss and loss expense ratio","A/E","63.5","%","","64.8","%","","90.1","%","","51.9","%","","53.9","%","","","","62.1","%"],["Policy acquisition cost and administrative expense ratio","C/E","22.1","%","","26.3","%","","5.0","%","","39.7","%","","31.1","%","","","","28.5","%"],["P&C Combined ratio","","85.6","%","","91.1","%","","95.1","%","","91.6","%","","85.0","%","","","","90.6","%"],["CAY P&C Combined ratio ex CATs"],["Loss and loss expense ratio, adjusted","B/F","65.3","%","","55.1","%","","93.5","%","","51.2","%","","50.6","%","","","","60.8","%"],["Policy acquisition cost and administrative expense ratio, adjusted","D/F","22.1","%","","26.3","%","","5.6","%","","39.7","%","","31.5","%","","","","28.4","%"],["CAY P&C Combined ratio ex CATs","","87.4","%","","81.4","%","","99.1","%","","90.9","%","","82.1","%","","","","89.2","%"],["Combined ratio"],["Combined ratio","","","","","","","","","","","","","","90.6","%"],["Add: impact of gains and losses on crop derivatives","","","","","","","","","","","","","","\u2014"],["P&C Combined ratio","","","","","","","","","","","","","","90.6","%"]]
[[/GREPCENT_TABLE]]

Note: The ratios above are calculated using whole U.S. dollars. Accordingly, calculations using rounded amounts may differ. Letters A, B, C, D, E and F included in the table are references for calculating the ratios above.

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Net Investment Income

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars, except for percentages)","2021","","","2020","","","2019"],["Average invested assets","$","116,475","","","$","109,766","","","$","104,074"],["Net investment income (1)","$","3,456","","","$","3,375","","","$","3,426"],["Yield on average invested assets","3.0","%","","3.1","%","","3.3","%"],["Market yield on fixed maturities","2.3","%","","1.7","%","","2.7","%"]]
[[/GREPCENT_TABLE]]

(1)Includes $84 million, $116 million, and $161 million of amortization expense related to the fair value adjustment of acquired invested assets related to the Chubb Corp acquisition in 2021, 2020, and 2019, respectively.

Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation. Net investment income increased 2.4 percent in 2021 compared with 2020, primarily due to increased dividends on public equities which resulted from a higher allocation to public equities and higher income received from our private equity partnerships. Investment income for the year was tempered by lower reinvestment rates on new and reinvested assets. Refer to Note 1 e) to the Consolidated Financial Statements for additional information.

For private equities where we own less than three percent, investment income is included within Net investment income in the table above. For private equities where we own more than three percent, investment income is included within Other income (expense) in the Consolidated statements of operations. Excluded from Net investment income is the mark-to-market movement for private equities, which is recorded within either Other income (expense) or Net realized gains (losses) based on our percentage of ownership. The total mark-to-market movement for private equities excluded from Net investment income was as follows:

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","2021","","2020","","2019"],["Total mark-to-market gain on private equity, pre-tax","$","2,115","","","$","714","","","$","449"]]
[[/GREPCENT_TABLE]]

Interest Expense

Interest expense was $492 million, $516 million, and $552 million for the years ended December 31, 2021, 2020, and 2019, respectively, including a benefit of $21 million each year related to the amortization of the fair value of debt assumed in the Chubb Corp acquisition. Pre-tax interest expense for our existing debt obligations and fees based on expected usage of certain facilities, including letters of credit, collateral fees, and repurchase agreements, is expected to total $543 million for 2022 based on current foreign exchange rates. In addition, we expect a benefit of $21 million related to the fair value of debt amortization for 2022. The expected increase in pre-tax interest expense is primarily driven by the 2021 issuance of $600 million of 2.85 percent senior notes due December 2051 and $1,000 million of 3.05 percent senior notes due December 2061. Refer to Note 9 to the Consolidated Financial Statements, under Item 8, for more information.

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Amortization of Purchased Intangibles and Other Amortization

Amortization expense related to purchased intangibles was $287 million, $290 million, and $305 million for the years ended December 31, 2021, 2020, and 2019, respectively, and principally relates to the Chubb Corp acquisition. The amortization of purchased intangibles expense in 2022 is expected to be $281 million, or approximately $70 million each quarter. Refer to Note 6 to the Consolidated Financial Statements, under Item 8, for more information.

Reduction of deferred tax liability associated with Other intangible assets

At December 31, 2021, the deferred tax liability associated with the Other intangible assets (excluding the fair value adjustment on Unpaid losses and loss expenses) was $1,212 million.

The following table presents at December 31, 2021, the expected reduction to the deferred tax liability associated with the amortization of Other intangible assets, at current foreign currency exchange rates for the next five years:

[[GREPCENT_TABLE]]
[["For the Years Ending December 31 (in millions of U.S. dollars)","Reduction to deferred tax liability associated with intangible assets"],["2022","$","66"],["2023","60"],["2024","55"],["2025","51"],["2026","48"],["Total","$","280"]]
[[/GREPCENT_TABLE]]

Amortization of the fair value adjustment on acquired invested assets and assumed long-term debt

The following table presents at December 31, 2021, the expected amortization expense of the fair value adjustment on acquired invested assets related to the Chubb Corp acquisition, at current foreign currency exchange rates, and the expected amortization benefit from the fair value adjustment on assumed long-term debt for the next five years:

[[GREPCENT_TABLE]]
[["","Amortization (expense) benefit of the fair value adjustment on"],["For the Years Ending December 31 (in millions of U.S. dollars)","Acquired invested assets (1)","","Assumed long-term debt (2)"],["2022","$","(68)","","","$","21"],["2023","(50)","","","21"],["2024","(9)","","","21"],["2025","\u2014","","","21"],["2026","\u2014","","","21"],["Total","$","(127)","","","$","105"]]
[[/GREPCENT_TABLE]]

(1)    Recorded as a reduction to Net investment income in the Consolidated statements of operations.

(2)     Recorded as a reduction to Interest expense in the Consolidated statements of operations.

The estimate of amortization expense of the fair value adjustment on acquired invested assets could vary based on current market conditions, bond calls, overall duration of the acquired investment portfolio, and foreign exchange.

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Investments

Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of A/A as rated by the independent investment rating services Standard and Poor’s (S&P)/ Moody’s Investors Service (Moody’s). The portfolio is externally managed by independent, professional investment managers and is broadly diversified across geographies, sectors, and issuers. Other investments principally comprise direct investments, investment funds, and limited partnerships. We hold no collateralized debt obligations in our investment portfolio, and we provide no credit default protection. We have long-standing global credit limits for our entire portfolio across the organization. Exposures are aggregated, monitored, and actively managed by our Global Credit Committee, comprising senior executives, including our Chief Financial Officer, our Chief Risk Officer, our Chief Investment Officer, and our Treasurer. We also have well-established, strict contractual investment rules requiring managers to maintain highly diversified exposures to individual issuers and closely monitor investment manager compliance with portfolio guidelines.

The average duration of our fixed income securities, including the effect of options and swaps, was 4.1 years and 4.0 years at December 31, 2021 and 2020, respectively. We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately $4.4 billion at December 31, 2021. The following table shows the fair value and cost/amortized cost, net of valuation allowance, of our invested assets:

[[GREPCENT_TABLE]]
[["","December 31, 2021","","December 31, 2020"],["(in millions of U.S. dollars)","Fair Value","","Cost/ Amortized Cost, Net","","Fair Value","","Cost/ Amortized Cost"],["Fixed maturities available for sale","$","93,108","","","$","90,479","","","$","90,699","","","$","85,168"],["Fixed maturities held to maturity","10,647","","","10,118","","","12,510","","","11,653"],["Short-term investments","3,146","","","3,147","","","4,345","","","4,349"],["Fixed income securities","106,901","","","103,744","","","107,554","","","101,170"],["Equity securities","4,782","","","4,782","","","4,027","","","4,027"],["Other investments","11,169","","","11,169","","","7,945","","","7,945"],["Total investments","$","122,852","","","$","119,695","","","$","119,526","","","$","113,142"]]
[[/GREPCENT_TABLE]]

The fair value of our total investments increased $3.3 billion during the year ended December 31, 2021, due to strong operating cash flows, positive equity returns and net proceeds from debt issuance. The increase was partially offset by share repurchases, unrealized losses on fixed maturities and payment of dividends on our Common Shares.

The following tables present the fair value of our fixed income securities at December 31, 2021 and 2020. The first table lists investments according to type and second according to S&P credit rating:

[[GREPCENT_TABLE]]
[["","December 31, 2021","","December 31, 2020"],["(in millions of U.S. dollars, except for percentages)","Fair Value","","% of Total","","Fair Value","","% of Total"],["U.S. Treasury / Agency","$","3,458","","","3","%","","$","4,122","","","4","%"],["Corporate and asset-backed securities","41,264","","","39","%","","38,769","","","36","%"],["Mortgage-backed securities","22,292","","","21","%","","20,616","","","19","%"],["Municipal","9,650","","","9","%","","11,943","","","11","%"],["Non-U.S.","27,091","","","25","%","","27,759","","","26","%"],["Short-term investments","3,146","","","3","%","","4,345","","","4","%"],["Total","$","106,901","","","100","%","","$","107,554","","","100","%"],["AAA","$","15,364","","","14","%","","$","15,622","","","15","%"],["AA","35,179","","","33","%","","36,125","","","33","%"],["A","20,171","","","19","%","","19,712","","","18","%"],["BBB","17,362","","","16","%","","17,542","","","16","%"],["BB","9,084","","","8","%","","9,699","","","9","%"],["B","9,202","","","9","%","","8,267","","","8","%"],["Other","539","","","1","%","","587","","","1","%"],["Total","$","106,901","","","100","%","","$","107,554","","","100","%"]]
[[/GREPCENT_TABLE]]

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Corporate and asset-backed securities

The following table presents our 10 largest global exposures to corporate bonds by fair value at December 31, 2021:

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","Fair Value"],["Wells Fargo & Co","$","713"],["Bank of America Corp","680"],["JP Morgan Chase & Co","608"],["Comcast Corp","489"],["Verizon Communications Inc","487"],["AT&T Inc","472"],["Morgan Stanley","471"],["Citigroup Inc","418"],["HSBC Holdings Plc","378"],["Goldman Sachs Group Inc","360"]]
[[/GREPCENT_TABLE]]

Mortgage-backed securities

The following table shows the fair value and amortized cost, net of valuation allowance, of our mortgage-backed securities:

[[GREPCENT_TABLE]]
[["","S&P Credit Rating","","Fair Value","","Amortized Cost, Net"],["December 31, 2021 (in millions of U.S. dollars)","AAA","","AA","","A","","BBB","","BB and below","","Total","","Total"],["Agency residential mortgage-backed (RMBS)","$","92","","","$","18,234","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","18,326","","","$","17,920"],["Non-agency RMBS","309","","","42","","","74","","","43","","","6","","","474","","","478"],["Commercial mortgage-backed securities","3,030","","","276","","","170","","","12","","","4","","","3,492","","","3,412"],["Total mortgage-backed securities","$","3,431","","","$","18,552","","","$","244","","","$","55","","","$","10","","","$","22,292","","","$","21,810"]]
[[/GREPCENT_TABLE]]

Municipal

As part of our overall investment strategy, we may invest in states, municipalities, and other political subdivisions fixed maturity securities (Municipal). We apply the same investment selection process described previously to our Municipal investments. The portfolio is highly diversified primarily in state general obligation bonds and essential service revenue bonds including education and utilities (water, power, and sewers).

Non-U.S.

Our exposure to the Euro results primarily from Chubb European Group SE which is headquartered in France and offers a broad range of coverages throughout the European Union, Central, and Eastern Europe. Chubb primarily invests in Euro denominated investments to support its local currency insurance obligations and required capital levels. Chubb’s local currency investment portfolios have strict contractual investment guidelines requiring managers to maintain a high quality and diversified portfolio to both sector and individual issuers. Investment portfolios are monitored daily to ensure investment manager compliance with portfolio guidelines.

Our non-U.S. investment grade fixed income portfolios are currency-matched with the insurance liabilities of our non-U.S. operations. The average credit quality of our non-U.S. fixed income securities is A and 46 percent of our holdings are rated AAA or guaranteed by governments or quasi-government agencies. Within the context of these investment portfolios, our government and corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA—two percent, A—one percent, BBB—0.5 percent of the total portfolio) and are monitored daily via an internal compliance system. We manage our indirect exposure using the same credit rating based investment approach. Accordingly, we do not believe our indirect exposure is material.

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The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. government securities at December 31, 2021:

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","Fair Value","","Amortized Cost, Net"],["Canada","$","1,021","","","$","1,013"],["Republic of Korea","945","","","891"],["United Kingdom","664","","","655"],["Province of Ontario","661","","","648"],["United Mexican States","551","","","561"],["Kingdom of Thailand","548","","","510"],["Federative Republic of Brazil","527","","","539"],["Commonwealth of Australia","446","","","429"],["Socialist Republic of Vietnam","441","","","305"],["Province of Quebec","424","","","412"],["Other Non-U.S. Government Securities","5,484","","","5,361"],["Total","$","11,712","","","$","11,324"]]
[[/GREPCENT_TABLE]]

The following table summarizes the fair value and amortized cost, net of valuation allowance, of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. corporate securities at December 31, 2021:

[[GREPCENT_TABLE]]
[["(in millions of U.S. dollars)","Fair Value","","Amortized Cost, Net"],["United Kingdom","$","2,501","","","$","2,434"],["Canada","1,824","","","1,775"],["France","1,281","","","1,245"],["United States (1)","1,230","","","1,207"],["Australia","939","","","917"],["Japan","769","","","761"],["Germany","597","","","582"],["Switzerland","563","","","543"],["Netherlands","535","","","513"],["China","452","","","446"],["Other Non-U.S. Corporate Securities","4,688","","","4,597"],["Total","$","15,379","","","$","15,020"]]
[[/GREPCENT_TABLE]]

(1)     The countries that are listed in the non-U.S. corporate fixed income portfolio above represent the ultimate parent company's country of risk. Non-U.S. corporate securities could be issued by foreign subsidiaries of U.S. corporations.

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Below-investment grade corporate fixed income portfolio

Below-investment grade securities have different characteristics than investment grade corporate debt securities. Risk of loss from default by the borrower is greater with below-investment grade securities. Below-investment grade securities are generally unsecured and are often subordinated to other creditors of the issuer. Also, issuers of below-investment grade securities usually have higher levels of debt and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than investment grade issuers. At December 31, 2021, our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 15 percent of our fixed income portfolio. Our below-investment grade and non-rated portfolio includes over 1,600 issuers, with the greatest single exposure being $140 million.

We manage high-yield bonds as a distinct and separate asset class from investment grade bonds. The allocation to high-yield bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our minimum rating for initial purchase is BB/B. Fourteen external investment managers are responsible for high-yield security selection and portfolio construction. Our high-yield managers have a conservative approach to credit selection and very low historical default experience. Holdings are highly diversified across industries and generally subject to a 1.5 percent issuer limit as a percentage of high-yield allocation. We monitor position limits daily through an internal compliance system. Derivative and structured securities (e.g., credit default swaps and collateralized debt obligations) are not permitted in the high-yield portfolio.

Asbestos and Environmental (A&E)

Asbestos and environmental (A&E) reserving considerations

For asbestos, Chubb faces claims relating to policies issued to manufacturers, distributors, installers, and other parties in the chain of commerce for asbestos and products containing asbestos. Claimants will generally allege damages across an extended time period which may coincide with multiple policies covering a wide range of time periods for a single insured.

Environmental claims present exposure for remediation and defense costs associated with the contamination of property or bodily injury as a result of pollution.

The following table presents count information for asbestos claims by causative agent and environmental claims by account, for direct policies only:

[[GREPCENT_TABLE]]
[["","Asbestos (by causative agent)","","Environmental (by account)"],["","2021","","2020","","","2021","","","2020"],["Open at beginning of year","1,723","","","1,724","","","1,234","","","1,217"],["Newly reported/reopened","191","","","192","","","131","","","130"],["Closed or otherwise disposed","175","","","193","","","135","","","113"],["Open at end of year","1,739","","","1,723","","","1,230","","","1,234"]]
[[/GREPCENT_TABLE]]

Survival ratios are calculated by dividing the asbestos or environmental loss and allocated loss adjustment expense (ALAE) reserves by the average asbestos or environmental loss and ALAE payments for the three most recent calendar years (3-year survival ratio).

The following table presents the gross and net 3-year survival ratios for Asbestos and Environmental loss and ALAE reserves:

[[GREPCENT_TABLE]]
[["(in years)","Gross loss and ALAE reserves","","Net loss and ALAE reserves"],["Asbestos","5.7","","","6.2"],["Environmental","3.0","","","3.3"]]
[[/GREPCENT_TABLE]]

The survival ratios provide only a very rough depiction of reserves and are significantly impacted by a number of factors such as aggressive settlement practices, variations in gross to ceded relationships within the asbestos or environmental claims, and levels of coverage provided. Therefore, we urge caution in using these very simplistic ratios to gauge reserve adequacy.

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Catastrophe Management

We actively monitor and manage our catastrophe risk accumulation around the world from natural perils, including setting risk limits based on probable maximum loss (PML), and purchasing catastrophe reinsurance, to ensure sufficient liquidity and capital to meet the expectations of regulators, rating agencies and policyholders, and to provide shareholders with an appropriate risk-adjusted return. Chubb uses internal and external data together with sophisticated analytical, catastrophe loss and risk modeling techniques to ensure an appropriate understanding of risk, including diversification and correlation effects, across different product lines and territories. The table below presents our modeled pre-tax estimates of natural catastrophe PML, net of reinsurance, at December 31, 2021, and is not our expected catastrophe losses for any one year.

[[GREPCENT_TABLE]]
[["","Modeled Net Probable Maximum Loss (PML) Pre-tax"],["","Worldwide (1)","","U.S. Hurricane (2)","","California Earthquake (3)"],["","Annual Aggregate","","Annual Aggregate","","Single Occurrence"],["(in millions of U.S. dollars, except for percentages)","Chubb","","% of Total Shareholders\u2019 Equity","","Chubb","","% of Total Shareholders\u2019 Equity","","Chubb","","% of Total Shareholders\u2019 Equity"],["1-in-10","$","2,163","","","3.6","%","","$","1,090","","","1.8","%","","$","146","","","0.2","%"],["1-in-100","$","4,360","","","7.3","%","","$","2,734","","","4.6","%","","$","1,311","","","2.2","%"],["1-in-250","$","7,103","","","11.9","%","","$","4,971","","","8.3","%","","$","1,508","","","2.5","%"]]
[[/GREPCENT_TABLE]]

(1)     Worldwide aggregate is comprised of losses arising from tropical cyclones, convective storms, earthquakes, U.S. wildfires and inland floods, and do not include "non-modeled" perils such as man-made and other catastrophe risk including pandemic.

(2)     U.S. hurricane losses include losses from wind and storm-surge and exclude rainfall.

(3)     California earthquakes include the fire-following sub-peril.

The PML for worldwide and key U.S. peril regions are based on our in-force portfolio at October 1, 2021, and reflect the April 1, 2021 reinsurance program (see Global Property Catastrophe Reinsurance Program section) as well as inuring reinsurance protection coverages. These estimates assume that reinsurance recoverable is fully collectible.

According to the model, for the 1-in-100 return period scenario, there is a one percent chance that our pre-tax annual aggregate losses incurred in any year from U.S. hurricane events could be in excess of $2,734 million (or 4.6 percent of our total shareholders’ equity at December 31, 2021). Effective December 31, 2021, our worldwide PMLs include losses from U.S. wildfire and U.S. inland flood.

The above estimates of Chubb’s loss profile are inherently uncertain for many reasons, including the following:

•While the use of third-party modeling packages to simulate potential catastrophe losses is prevalent within the insurance industry, the models are reliant upon significant meteorology, seismology, and engineering assumptions to estimate catastrophe losses. In particular, modeled catastrophe events are not always a representation of actual events and ensuing additional loss potential;

•There is no universal standard in the preparation of insured data for use in the models, the running of the modeling software and interpretation of loss output. These loss estimates do not represent our potential maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates;

•The potential effects of climate change add to modeling complexity; and

•Changing climate conditions could impact our exposure to natural catastrophe risks. Published studies by leading government, academic and professional organizations combined with extensive research by Chubb climate scientists reveal the potential for increases in the frequency and severity of key natural perils such as tropical cyclones, inland flood, and wildfire. To understand the potential impacts on the Chubb portfolio, we have conducted stress tests on our peak exposure zone, namely in the U.S., using parameters outlined by the Intergovernmental Panel on Climate Change (IPCC) Climate Change 2021 report. These parameters consider the impacts of climate change and the resulting climate peril impacts over a timescale relevant to our business. The tests are conducted by adjusting our baseline view of risk for the perils of hurricane, inland flood, and wildfire in the U.S. to reflect increases in frequency and severity across the modeled domains for each of these perils. Based on these tests against the Chubb portfolio we do not expect material impacts to our baseline PMLs from climate change over the next 12 months. These tests reflect current exposures only and exclude potentially mitigating factors such as changes to building codes, public or private risk mitigation, regulation and public policy.

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Man-made and other catastrophes

We have substantial exposure to losses resulting from man-made catastrophes including terrorism, cyber-attack, financial events, and other catastrophe events, including pandemics. These events are inherently unpredictable and could impact a variety of our businesses, including commercial and personal lines, life insurance, A&H, and reinsurance products. Our losses from these events could be substantial.

Terrorism

We offer terrorism coverage in the U.S. and in many other countries through various insurance products. We actively monitor terrorism risk and manage exposures through set risk limits based on modeled losses from certain terrorism attack scenarios, the purchase of reinsurance, and the reliance on government-sponsored terrorism reinsurance programs. In the U.S., certain protections of our terrorism exposure are provided through the Terrorism Risk Insurance Program Reauthorization Act of 2019 (TRIPRA). In 2021, TRIPRA covers 80 percent of insured losses above a deductible, estimated to be approximately $2.6 billion. Refer to “Global Property Catastrophe Reinsurance Program” for information on our reinsurance protection purchased. At our largest exposure location in the U.S., our maximum modeled losses from a 10-ton truck-bomb explosion are estimated to be $1.7 billion pre-tax based on the exposures, net of reinsurance and TRIPRA as of December 31, 2021.

Cyber Insurance

While frequency and severity trends are being managed through long-standing underwriting strategies, the potential catastrophe risk that aggregation of cyber exposures presents to insurers is unique and unprecedented. In contrast with natural catastrophe risks, catastrophic cyber event scenarios are not bound by time or geography. Further, catastrophic cyber perils do not have well-established definitions or fundamental physical properties. For these reasons, catastrophic cyber events have the inherent potential for significant economic loss. Although cyber risk does not represent a material component of our net premiums written and we engage in significant risk mitigation through our underwriting and use of reinsurance, we are exposed to material losses in the event of a systemic cyber-attack.

Financial Risk

The consequences of adverse global or regional market and economic conditions may affect our investment portfolio. Our investment portfolio is subject to credit or default risk and may also be less liquid in times of economic weakness or market disruptions. Our investments are subject to market risks and risks inherent in individual securities. Our investment performance is highly sensitive to many factors, including interest rates, inflation, monetary and fiscal policies, and domestic and international political conditions. The volatility of our losses may force us to liquidate securities, which may cause us to incur capital losses. Realized and unrealized losses in our investment portfolio would reduce our book value, and if significant, can affect our ability to conduct business.

Moreover, we have substantial exposure to insurance products which are sensitive to certain system-wide financial conditions, such as our financial lines, surety, political risk, involuntary loss of employment (outside U.S.), and trade credit products. These products tend to be characterized by infrequent but potentially high severity losses. The majority of our exposure in these products may be impacted by an adverse economic climate such as an economic recession or depression. If the financial condition of these insureds were adversely affected by the economy or otherwise, we may experience an increase in filed claims and may incur high severity losses, which could have an adverse effect on our results of operations. We monitor credit exposures to single counterparties and to sectors of interest from sources across our operations (e.g. investments, insurance products, reinsurance recoverable, bank deposits, letters of credit) and establish guidelines for credit risk exposure at the counterparty level. Our net income may be volatile because certain variable annuity reinsurance products sold expose us to reserve and fair value liability changes that are directly affected by market and other factors and assumptions.

Pandemic

An outbreak of pandemic disease, such as the COVID-19 pandemic could have a materially adverse effect on our results of operations. The vast majority of our property and liability coverages do not provide coverage for pandemic claims. However, we are subject to the potential of aggregation of loss from coverages provided in our life, A&H, and workers compensation portfolios. We assess our direct pandemic exposure using stress scenarios that consider mortality, morbidity and other causes of insured loss such as trip cancellation. Our assessment also incorporates the impact of a severe economic downturn which, as stated above under Financial Risk, includes an adverse impact to our investment portfolio and to our insurance products sensitive to certain system-wide financial conditions.

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Global Property Catastrophe Reinsurance Program

Chubb’s core property catastrophe reinsurance program provides protection against natural catastrophes impacting its primary property operations (i.e., excluding our Global Reinsurance and Life Insurance segments).

We regularly review our reinsurance protection and corresponding property catastrophe exposures. This may or may not lead to the purchase of additional reinsurance prior to a program’s renewal date. In addition, prior to each renewal date, we consider how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and various other structuring considerations.

Chubb renewed its Global Property Catastrophe Reinsurance Program for our North American and International operations effective April 1, 2021 through March 31, 2022, with an additional $100 million of limit for international loss occurrences compared to the expiring program. The program consists of three layers in excess of losses retained by Chubb on a per occurrence basis. In addition, Chubb also renewed its terrorism coverage (excluding nuclear, biological, chemical and radiation coverage, with an inclusion of coverage for biological and chemical coverage for personal lines) for the United States from April 1, 2021 through March 31, 2022 with the same limits and retention and percentage placed except that the majority of terrorism coverage is on an aggregate basis above our retentions without a reinstatement.

[[GREPCENT_TABLE]]
[["Loss Location","","Layer of Loss","","Comments","Notes"],["United States (excluding Alaska and Hawaii)","","$0 million \u2013 $1.0 billion","","Losses retained by Chubb","(a)"],["United States (excluding Alaska and Hawaii)","","$1.0 billion \u2013$1.15 billion","","All natural perils and terrorism","(b)"],["United States (excluding Alaska and Hawaii)","","$1.15 billion \u2013$2.25 billion","","All natural perils and terrorism","(c)"],["United States (excluding Alaska and Hawaii)","","$2.25 billion \u2013$3.5 billion","","All natural perils and terrorism","(d)"],["International (including Alaska and Hawaii)","","$0 million \u2013$175 million","","Losses retained by Chubb","(a)"],["International (including Alaska and Hawaii)","","$175 million \u2013$1.275 billion","","All natural perils and terrorism","(c)"],["Alaska, Hawaii, and Canada","","$1.275 billion \u2013 $2.525 billion","","All natural perils and terrorism","(d)"]]
[[/GREPCENT_TABLE]]

(a)     Ultimate retention will depend upon the nature of the loss and the interplay between the underlying per risk programs and certain other catastrophe programs purchased by individual business units. These other catastrophe programs have the potential to reduce our effective retention below the stated levels.

(b)     These coverages are partially placed with Reinsurers.

(c)     These coverages are both part of the same Second layer within the Global Property Catastrophe Reinsurance Program and are fully placed with Reinsurers.

(d)     These coverages are both part of the same Third layer within the Global Property Catastrophe Reinsurance Program and are fully placed with Reinsurers.

Political Risk and Credit Insurance

Political risk insurance is a specialized coverage that provides clients with protection against unexpected, catastrophic political or macroeconomic events, primarily in emerging markets. We participate in this market through our Bermuda based wholly-owned subsidiary Sovereign Risk Insurance Ltd. (Sovereign), and through a unit of our London-based CGM operation. Chubb is one of the world's leading underwriters of political risk and credit insurance, has a global portfolio spread across more than 150 countries and is also a member of The Berne Union. Our clients include financial institutions, national export credit agencies, leading multilateral agencies, private equity firms and multinational corporations. CGM writes political risk and credit insurance business out of underwriting offices in London, United Kingdom; Hamburg, Germany; Sao Paulo, Brazil; Singapore; Tokyo, Japan; and in the U.S. in the following locations: Chicago, New York, Los Angeles and Washington, D.C.

Our political risk insurance products provide protection to commercial lenders against defaults on cross border loans, cover investors against equity losses, and protect exporters against defaults on contracts. Commercial lenders, our largest client segment, are covered for missed scheduled loan repayments due to acts of confiscation, expropriation or nationalization by the host government, currency inconvertibility or exchange transfer restrictions, or war or other acts of political violence. In addition,

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in the case of loans to government-owned entities or loans that have a government guarantee, political risk policies cover scheduled payments against risks of non-payment or non-honoring of government guarantees. Private equity investors and corporations cover their equity investments against financial losses, such as expropriatory events, inability to repatriate dividends, and physical damage to their operations caused by covered political risk events. Our export contracts product provides coverage for both exporters and their financing banks against the risk of contract frustration due to government actions, including non-payment by governmental entities.

CGM's credit insurance businesses cover losses due to insolvency, protracted default, and political risk perils including export and license cancellation. Our credit insurance product provides coverage to larger companies that have sophisticated credit risk management systems, with exposure to multiple customers and that have the ability to self-insure losses up to a certain level through excess of loss coverage. It also provides coverage to trade finance banks, exporters, and trading companies, with exposure to trade-related financing instruments. CGM also has limited capacity for Specialist Credit insurance products which provide coverage for project finance and working capital loans for large corporations and banks.

We have implemented structural features in our policies in order to control potential losses within the political risk and credit insurance businesses. These include basic loss sharing features such as co-insurance and deductibles and, in the case of trade credit, the use of non-qualifying losses that drop smaller exposures deemed too difficult to assess. Ultimate loss severity is also limited by using waiting periods to enable the insurer and insured to mitigate losses and to agree on recovery strategies if a claim does materialize. We have the option to pay claims over the original loan repayment schedule, rather than in a lump sum, in order to provide insureds and the insurer additional time to remedy problems and work towards full recoveries. It is important to note that political risk and credit policies are named peril conditional insurance contracts, not financial guarantees, and claims are only paid after conditions and warranties are fulfilled. Political risk and credit insurance policies do not cover currency devaluations, bond defaults, movements in overseas equity markets, transactions deemed illegal, situations where corruption or misrepresentation has occurred, or debt that is not legally enforceable. In addition to assessing and mitigating potential exposure on a policy-by-policy basis, we also have specific risk management measures in place to manage overall exposure and risk. These measures include placing country, credit, and individual transaction limits based on country risk and credit ratings, combined single loss limits on multi-country policies, the use of quota share and excess of loss reinsurance protection as well as quarterly modeling and stress-testing of the portfolio. We have a dedicated Country and Credit Risk management team that is responsible for the portfolio.

Crop Insurance

We are, and have been since the 1980s, one of the leading writers of crop insurance in the U.S. and have conducted that business through a managing general agent subsidiary of Rain and Hail. We provide protection throughout the U.S. on a variety of crops and are therefore geographically diversified, which reduces the risk of exposure to a single event or a heavy accumulation of losses in any one region. Given its concentration of risk exposed to temperature, moisture, drought, hail and the more frequent and severe storms associated with climate change, crop insurance is a business with catastrophe-like features. Our crop insurance business comprises two components - Multiple Peril Crop Insurance (MPCI) and crop-hail insurance.

The MPCI program, offered in conjunction with the U.S. Department of Agriculture’s Risk Management Agency (RMA), is a federal subsidized insurance program that covers revenue shortfalls or production losses due to natural causes such as drought, excessive moisture, hail, wind, freeze, insects, and disease. These revenue products are defined as providing both commodity price and yield coverages. Policies are available for various crops in different areas of the U.S. and generally have deductibles generally ranging from 10 percent to 50 percent of the insured's risk. The USDA's Risk Management Agency (RMA) sets the policy terms and conditions, rates and forms, and is also responsible for setting compliance standards. As a participant in the MPCI program, we report all details of policies to the RMA and are party to a Standard Reinsurance Agreement (SRA). The SRA sets out the relationship between private insurance companies and the Federal Crop Insurance Corporation (FCIC) concerning the terms and conditions regarding the risks each will bear including the pro-rata and state stop-loss provisions, which allows companies to limit the exposure of any one state or group of states on their underwriting results. In addition to the pro-rata and excess of loss reinsurance protections inherent in the SRA, we also purchase third-party proportional and stop-loss reinsurance for our MPCI business to reduce our exposure. We may also enter into crop derivative contracts to further manage our risk exposure.

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Each year the RMA issues a final SRA for the subsequent reinsurance year (i.e., the 2022 SRA covers the 2022 reinsurance year from July 1, 2021 through June 30, 2022). There were no significant changes in the terms and conditions from the 2021 SRA and therefore, the new SRA does not impact Chubb's outlook on the crop program relative to 2022.

We recognize net premiums written as soon as estimable on our MPCI business, which is generally when we receive acreage reports from the policyholders on the various crops throughout the U.S. This allows us to best determine the premium associated with the liability that is being planted. The MPCI program has specific timeframes as to when producers must report acreage to us and in certain cases, the reporting occurs after the close of the respective reinsurance year. Once the net premium written has been recorded, the premium is then earned over the growing season for the crops. A majority of the crops that are covered in the program are typically subject to the SRA in effect at the beginning of the year. Given the major crops covered in the program, we typically see a substantial written and earned premium impact in the second and third quarters.

The pricing of MPCI premium is determined using a number of factors including commodity prices and related volatility (i.e., both impact the amount of premium we can charge to the policyholder). For example, in most states, the pricing for the MPCI revenue product for corn (i.e., insurance coverage for lower than expected crop revenue in a given season) includes a factor based on the average commodity price in February. If corn commodity prices are higher in February, compared to the February price in the prior year, and all other factors are the same, the increase in price will increase the corn premium year-over-year. Pricing is also impacted by volatility factors, which measure the likelihood commodity prices will fluctuate over the crop year. For example, if volatility is set at a higher rate compared to the prior year, and all other factors are the same, the premium charged to the policyholder will be higher year-over-year for the same level of coverage.

Losses incurred on the MPCI business are determined using both commodity price and crop yield. With respect to commodity price, there are two important periods on a large portion of the business: The month of February when the initial premium base is set, and the month of October when the final harvest price is set. If the price declines from February to October, with yield remaining at normal levels, the policyholder may be eligible to recover on the policy. However, in most cases there are deductibles on these policies, therefore, the impact of a decline in price would have to exceed the deductible before a policyholder would be eligible to recover.

We evaluate our MPCI business at an aggregate level and the combination of all of our insured crops (both winter and summer) go into our underwriting gain or loss estimate in any given year. Typically, we do not have enough information on the harvest prices or crop yield outputs to quantify the preliminary estimated impact to our underwriting results until the fourth quarter.

Our crop-hail program is a private offering. Premium is earned on the crop-hail program over the coverage period of the policy. Given the very short nature of the growing season, most crop-hail business is typically written in the second and third quarters and the recognition of earned premium is also more heavily concentrated during this timeframe. We use industry data to develop our own rates and forms for the coverage offered. The policy primarily protects farmers against yield reduction caused by hail and/or fire, and related costs such as transit to storage. We offer various deductibles to allow the grower to partially self-insure for a reduced premium cost. We limit our crop-hail exposures through the use of township liability limits and third-party reinsurance on our net retained hail business.

Liquidity

Liquidity is a measure of a company's ability to generate cash flows sufficient to meet short-term and long-term cash requirements. As a holding company, Chubb Limited possesses assets that consist primarily of the stock of its subsidiaries and other investments. In addition to net investment income, Chubb Limited's cash flows depend primarily on dividends and other statutorily permissible payments. Historically, dividends and other statutorily permitted payments have come primarily from Chubb's Bermuda-based operating subsidiaries, which we refer to as our Bermuda subsidiaries. Our consolidated sources of funds consist primarily of net premiums written, fees, net investment income, and proceeds from sales and maturities of investments. Funds are used at our various companies primarily to pay claims, operating expenses, and dividends; to service debt; to purchase investments; and to fund acquisitions.

We anticipate that positive cash flows from operations (underwriting activities and investment income) should be sufficient to cover cash outflows under most loss scenarios for the near term. Should the need arise, we generally have access to capital markets and available credit facilities. Refer to “Credit Facilities” below for additional information. Our access to funds under the existing credit facility is dependent on the ability of the bank that is a party to the facility to meet its funding commitments. Should our existing credit provider experience financial difficulty, we may be required to replace credit sources, possibly in a

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difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty accessing our credit facility or establishing additional facilities when needed.

To further ensure the sufficiency of funds to settle unforeseen claims, we hold certain invested assets in cash and short-term investments. In addition, for certain insurance, reinsurance, or deposit contracts that tend to have relatively large and reasonably predictable cash outflows, we attempt to establish dedicated portfolios of assets that are duration-matched with the related liabilities. With respect to the duration of our overall investment portfolio, we manage asset durations to both maximize return given current market conditions and provide sufficient liquidity to cover future loss payments. At December 31, 2021, the average duration of our fixed maturities (4.1 years) is less than the average expected duration of our insurance liabilities (4.6 years).

Despite our safeguards, if paid losses accelerate beyond our ability to fund such paid losses from current operating cash flows, we might need to either liquidate a portion of our investment portfolio or arrange for financing. Potential events causing such a liquidity strain could include several significant catastrophes occurring in a relatively short period of time, large uncollectible reinsurance recoverables on paid losses (as a result of coverage disputes, reinsurers' credit problems, or decreases in the value of collateral supporting reinsurance recoverables) or increases in collateral postings under our variable annuity reinsurance business. Because each subsidiary focuses on a more limited number of specific product lines than is collectively available from the Chubb Group of Companies, the mix of business tends to be less diverse at the subsidiary level. As a result, the probability of a liquidity strain, as described above, may be greater for individual subsidiaries than when liquidity is assessed on a consolidated basis. If such a liquidity strain were to occur in a subsidiary, we could be required to liquidate a portion of our investments, potentially at distressed prices, as well as be required to contribute capital to the particular subsidiary and/or curtail dividends from the subsidiary to support holding company operations.

The payment of dividends or other statutorily permissible distributions from our operating companies are subject to the laws and regulations applicable to each jurisdiction, as well as the need to maintain capital levels adequate to support the insurance and reinsurance operations, including financial strength ratings issued by independent rating agencies. During 2021, we were able to meet all our obligations, including the payments of dividends on our Common Shares, with our net cash flows.

We assess which subsidiaries to draw dividends from based on a number of factors. Considerations such as regulatory and legal restrictions as well as the subsidiary's financial condition are paramount to the dividend decision. Chubb Limited received dividends of $3.7 billion and $1.9 billion from its Bermuda subsidiaries in 2021 and 2020, respectively. Chubb Limited also received cash dividends of $21 million and $110 million and non-cash dividends of $916 million and $734 million from a Swiss subsidiary in 2021 and 2020, respectively.

The U.S. insurance subsidiaries of Chubb INA Holdings Inc. (Chubb INA) may pay dividends, without prior regulatory approval, subject to restrictions set out in state law of the subsidiary's domicile (or, if applicable, commercial domicile). Chubb INA's international subsidiaries are also subject to insurance laws and regulations particular to the countries in which the subsidiaries operate. These laws and regulations sometimes include restrictions that limit the amount of dividends payable without prior approval of regulatory insurance authorities. Chubb Limited received no dividends from Chubb INA in 2021 and 2020. Debt issued by Chubb INA is serviced by statutorily permissible distributions by Chubb INA's insurance subsidiaries to Chubb INA as well as other group resources. Chubb INA received dividends of $2.3 billion and $1.2 billion from its subsidiaries in 2021 and 2020, respectively. At December 31, 2021, the amount of dividends available to be paid to Chubb INA in 2022 from its subsidiaries without prior approval of insurance regulatory authorities totals $2.9 billion.

Cash Flows

Our insurance and reinsurance operations provide liquidity in that premiums are received in advance, sometimes substantially in advance, of the time claims are paid. Generally, cash flows are affected by claim payments that, due to the nature of our operations, may comprise large loss payments on a limited number of claims and which can fluctuate significantly from period to period. The irregular timing of these loss payments can create significant variations in cash flows from operations between periods. For additional information regarding estimates of future claim payments over the next twelve months, refer to our discussion of Cash Requirements within "Capital Resources". Sources of liquidity include cash from operations, routine sales of investments, and financing arrangements. The following is a discussion of our cash flows for 2021, 2020, and 2019.

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Operating cash flows reflect Net income for each period, adjusted for non-cash items and changes in working capital.

Operating cash flows were a record $11.1 billion in 2021, compared to $9.8 billion and $6.3 billion in 2020 and 2019, respectively. Operating cash flow increased $1.3 billion in 2021 compared to 2020, due to higher premiums collected reflecting premium growth, principally in our commercial lines, partially offset by higher catastrophe loss payments and higher taxes paid.

Cash used for investing was $6.7 billion in 2021, compared to $7.5 billion and $5.9 billion in 2020 and 2019, respectively. Cash used for investing in the current year included lower net purchases of equity securities of $2.4 billion, partially offset by higher net purchases of fixed maturities of $2.0 billion. In addition, cash used related to acquisitions of Huatai Group ownership interest was $1.2 billion in 2021 compared to $1.6 billion in 2020. Refer to Note 2 to the Consolidated Financial Statements for additional information.

Cash used for financing was $4.4 billion in 2021, compared to $2.1 billion and $151 million in 2020 and 2019, respectively. Cash used for financing was higher by $2.3 billion in 2021 compared to 2020 principally from more shares repurchased in the current year of $4.3 billion, partially offset by higher net proceeds from the issuance of long-term debt (net of repayments) of $1.9 billion. Refer to Note 11 to the Consolidated Financial Statements for additional information on share repurchases.

Both internal and external forces influence our financial condition, results of operations, and cash flows. Claim settlements, premium levels, and investment returns may be impacted by changing rates of inflation and other economic conditions. In many cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to us, and the settlement of the liability for that loss.

We use repurchase agreements as a low-cost funding alternative. At December 31, 2021, there were $1.4 billion in repurchase agreements outstanding with various maturities over the next eight months.

In addition to cash from operations, routine sales of investments, and financing arrangements, we have agreements with a third-party bank provider which implemented two international multi-currency notional cash pooling programs to enhance cash management efficiency during periods of short-term timing mismatches between expected inflows and outflows of cash by currency. The programs allow us to optimize investment income by avoiding portfolio disruption. In each program, participating Chubb entities establish deposit accounts in different currencies with the bank provider. Each day the credit or debit balances in every account are notionally translated into a single currency (U.S. dollars) and then notionally pooled. The bank extends overdraft credit to all participating Chubb entities as needed, provided that the overall notionally pooled balance of all accounts in each pool at the end of each day is at least zero. Actual cash balances are not physically converted and are not commingled between legal entities. Chubb entities may incur overdraft balances as a means to address short-term liquidity needs. Any overdraft balances incurred under this program by a Chubb entity would be guaranteed by Chubb Limited (up to $300 million in the aggregate). Our syndicated letter of credit facility allows for same day drawings to fund a net pool overdraft should participating Chubb entities withdraw contributed funds from the pool.

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Capital Resources

Capital resources consist of funds deployed or available to be deployed to support our business operations.

[[GREPCENT_TABLE]]
[["","December 31","","December 31"],["(in millions of U.S. dollars, except for percentages)","2021","","2020"],["Short-term debt","$","999","","","$","\u2014"],["Long-term debt","15,169","","","14,948"],["Trust preferred securities","308","","","308"],["Total shareholders\u2019 equity","59,714","","","59,441"],["Total capitalization","$","76,190","","","$","74,697"],["Ratio of financial debt to total capitalization","21.2","%","","20.0","%"],["Ratio of financial debt plus trust preferred securities to total capitalization","21.6","%","","20.4","%"]]
[[/GREPCENT_TABLE]]

Repurchase agreements are excluded from the table above and are disclosed separately from short-term debt in the Consolidated balance sheets. The repurchase agreements are collateralized borrowings where we maintain the right and ability to redeem the collateral on short notice, unlike short-term debt which comprises the current maturities of our long-term debt instruments.

On November 15, 2021, Chubb INA issued $600 million of 2.85 percent senior notes due December 2051 and $1.0 billion of 3.05 percent senior notes due December 2061. Refer to Note 9 to the Consolidated Financial Statements for details about debt issued and debt redeemed.

We believe our financial strength provides us with the flexibility and capacity to obtain available funds externally through debt or equity financing on both a short-term and long-term basis. Our ability to access the capital markets is dependent on, among other things, market conditions and our perceived financial strength. We have accessed both the debt and equity markets from time to time. We generally maintain the ability to issue certain classes of debt and equity securities via an unlimited Securities and Exchange Commission (SEC) shelf registration which is renewed every three years. This allows us capital market access for refinancing as well as for unforeseen or opportunistic capital needs. In October 2021, we filed a new shelf registration statement which allows us to issue an unlimited amount of certain classes of debt and equity from time to time, replacing the shelf registration statement that was filed in October 2018. This new shelf registration statement expires in October 2024.

Securities Repurchases

From time to time, we repurchase shares as part of our capital management program. In November 2020, the Board of Directors (Board) authorized a share repurchase program of $1.5 billion of Chubb Common Shares from November 19, 2020 through December 31, 2021.

In February 2021, the Board approved an increase to this share repurchase program of $1.0 billion to a total of $2.5 billion, effective through December 31, 2021. On July 19, 2021, the Board authorized a one-time incremental share repurchase program of up to $5.0 billion through June 30, 2022, which is the only board authorization currently in effect.

Share repurchases may be made in the open market, in privately negotiated transactions, block trades, accelerated repurchases and/or through option or other forward transactions. In 2021, 2020, and 2019 we repurchased $4.9 billion, $516 million, and $1.5 billion, respectively, of Common Shares in a series of open market transactions under the Board share repurchase authorizations at an average per share price of $175.85, $143.91, and $146.61, respectively. For the period January 1, 2022 through February 23, 2022, we repurchased 1,966,600 Common Shares for a total of $405 million in a series of open market transactions under the share repurchase program authorization. At February 23, 2022, $2.2 billion in share repurchase authorization remained through June 30, 2022.

Common Shares

Our Common Shares had a par value of CHF 24.15 each at December 31, 2021.

As of December 31, 2021, there were 47,448,502 Common Shares in treasury with a weighted average cost of $157.31 per share.

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Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by Chubb in U.S. dollars.

At our May 2021 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.20 per share, expected to be paid in four quarterly installments of $0.80 per share after the annual general meeting by way of distribution from capital contribution reserves, transferred to free reserves for payment. The Board will determine the record and payment dates at which the annual dividend may be paid until the date of the 2022 annual general meeting, and is authorized to abstain from distributing a dividend at its discretion. The first three quarterly installments each of $0.80 per share, have been distributed by the Board as expected.

At our May 2020 annual general meeting, our shareholders approved an annual dividend for the following year of up to $3.12 per share, which was paid in four quarterly installments of $0.78 per share at dates determined by the Board after the annual general meeting by way of distribution from capital contribution reserves, transferred to free reserves for payment.

Dividend distributions on Common Shares amounted to CHF 2.88 ($3.18) per share for the year ended December 31, 2021. Refer to Note 11 to the Consolidated Financial Statements for additional information on our dividends.

Cash Requirements

Our cash requirements within the next twelve months include claims payable to claimants and other routine obligations typical to our business. We also have commitments related to our limited partnerships as well as our purchase agreements for Cigna’s Life and A&H business in Asia and for the incremental ownership interests in Huatai Group. We expect the cash required to meet these obligations to be primarily generated through a combination of cash on hand, cash from operations, routine sales of investments, and financing arrangements. We believe these sources will be sufficient to meet our anticipated cash requirements for at least the next twelve months, while maintaining sufficient liquidity for normal operating purposes. We believe our financial strength provides us with the flexibility and capacity to obtain available funds externally through debt or equity financing on both a short-term and long-term basis, if necessary. At December 31, 2021, our long-term cash requirements under our various contractual obligations and commitments include:

•Gross loss payments under insurance and reinsurance contracts - We are obligated to pay claims under insurance and reinsurance contracts for specified loss events covered under those contracts. Total cash requirements are not determinable from underlying contracts and must be estimated. Gross loss payments under insurance and reinsurance contracts are estimated at $73.0 billion with $20.3 billion estimated due over the next twelve months. These estimated gross loss payments are inherently uncertain and the amount and timing of actual loss payments are likely to differ from these estimates and the differences could be material. Given the numerous factors and assumptions involved in both estimates of loss reserves and related estimates as to the timing of future loss payments, differences between actual and estimated loss payments will not necessarily indicate a commensurate change in ultimate loss estimates. Refer to Note 7 to the Consolidated Financial Statements for additional information.

•Estimated payments for future policy benefits and GLB - Total estimated payments for future policy benefits and GLB are estimated at $21.0 billion and $1.4 billion, respectively, with a total $993 million estimated due over the next twelve months. These estimated payments, which are not determinable from the contracts, are gross of fees or premiums from the underlying contracts. These estimated payments are higher than the future policy benefits reserves and GLB liability presented on our Consolidated balance sheets which are discounted and are reflected net of fees and premiums due from the underlying contracts. The timing and amount of actual payments may vary from the estimates. Refer to Note 1 i) to the Consolidated Financial Statements for additional information.

•Short-term and Long-term debt, trust preferred securities, and related interest payments - Total obligations for short-term and long-term debt and trust preferred securities maturities are $16.3 billion with $1.0 billion due in November 2022. Interest payments related to these obligations total $7.1 billion with $515 million due over the next twelve months. These estimates are based on current exchange rates. Refer to Note 9 to the Consolidated Financial Statements for additional information.

•Commitments on invested assets - Total obligations for commitments related to our invested assets are $7.9 billion with $2.2 billion due over the next twelve months. Refer to Note 10 to the Consolidated Financial Statements for additional information.

•Pending acquisitions - Cash requirements for pending acquisitions include approximately $5.75 billion for Cigna's life and A&H business in Asia-Pacific markets which is expected to be paid over the next twelve months, subject to certain post-closing purchase adjustments. Additionally, we entered into agreements totaling $2.2 billion for additional equity interests in Huatai Group, of which we paid approximately $1.1 billion in 2021 and $113 million in January 2022. The remainder

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is expected to be paid over the next twelve months. The timing of completion is contingent upon important conditions. Refer to Note 2 to the Consolidated Financial Statements for additional information.

•Deposit liabilities - Total obligations for deposit liabilities, including contract holder deposit funds, are $2.3 billion with $68 million due over the next twelve months. Refer to Note 1 k) to the Consolidated Financial Statements for additional information.

•Repurchase agreements - We use repurchase agreements as a low-cost funding alternative. At December 31, 2021, there were $1.4 billion in repurchase agreements outstanding with various maturities over the next eight months. Refer to Note 9 to the Consolidated Financial Statements for additional information.

•Operating leases - Total obligations for operating leases are $513 million with $142 million estimated due over the next twelve months. Refer to Note 10 i) to the Consolidated Financial Statements for additional information. As of December 31, 2021, we entered into a lease for office space that is not yet recorded on our Consolidated balance sheets and is not included in the total obligations referenced above. The lease is expected to commence in 2023 with an initial term of approximately 21 years and the option to renew for an additional five to ten years. Total cash requirements are estimated at approximately $650 million.

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Information provided in connection with outstanding debt of subsidiaries

Chubb INA Holdings Inc. (Subsidiary Issuer) is an indirect 100 percent-owned and consolidated subsidiary of Chubb Limited (Parent Guarantor). The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer.

The following table presents the condensed balance sheets of Chubb Limited and Chubb INA Holdings Inc., after elimination of investment in any non-guarantor subsidiary:

[[GREPCENT_TABLE]]
[["","Chubb Limited (Parent Guarantor)","Chubb INA Holdings Inc. (Subsidiary Issuer)"],["","December 31","December 31"],["(in millions of U.S. dollars)","2021","","2020","","2021","","2020"],["Assets"],["Investments","$","\u2014","","","$","\u2014","","","$","149","","","$","197"],["Cash","1","","","84","","","580","","","1"],["Due from parent guarantor/subsidiary issuer, net","\u2014","","","479","","","346","","","\u2014"],["Due from subsidiaries that are not issuers or guarantors, net","1,564","","","3,099","","","\u2014","","","\u2014"],["Other assets","16","","","10","","","1,667","","","463"],["Total assets","$","1,581","","","$","3,672","","","$","2,742","","","$","661"],["Liabilities"],["Due to parent guarantor/subsidiary issuer, net","$","346","","","$","\u2014","","","$","\u2014","","","$","479"],["Due to subsidiaries that are not issuers or guarantors, net","\u2014","","","\u2014","","","1,121","","","2,583"],["Affiliated notional cash pooling programs","8","","","\u2014","","","\u2014","","","272"],["Short-term debt","\u2014","","","\u2014","","","999","","","\u2014"],["Long-term debt","\u2014","","","\u2014","","","15,169","","","14,948"],["Trust preferred securities","\u2014","","","\u2014","","","308","","","308"],["Other liabilities","363","","","379","","","1,803","","","1,364"],["Total liabilities","717","","","379","","","19,400","","","19,954"],["Total shareholders\u2019 equity","864","","","3,293","","","(16,658)","","","(19,293)"],["Total liabilities and shareholders\u2019 equity","$","1,581","","","$","3,672","","","$","2,742","","","$","661"]]
[[/GREPCENT_TABLE]]

The following table presents the condensed statements of operations and comprehensive income of Chubb Limited and Chubb INA Holdings Inc., excluding equity in earnings from non-guarantor subsidiaries:

[[GREPCENT_TABLE]]
[["Year Ended December 31, 2021","Chubb Limited (Parent Guarantor)","","","Chubb INA Holdings Inc. (Subsidiary Issuer)"],["(in millions of U.S. dollars)"],["Net investment income","$","4","","","","","$","1"],["Net realized gains (loss)","(18)","","","","","318"],["Administrative expenses","103","","","","","(84)"],["Interest (income) expense","(110)","","","","","564"],["Other (income) expense","(47)","","","","","(27)"],["Income tax expense (benefit)","15","","","","","(136)"],["Net income","$","25","","","","","$","2"],["Comprehensive income","$","25","","","","","$","357"]]
[[/GREPCENT_TABLE]]

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Credit Facilities

As our Bermuda subsidiaries are non-admitted insurers and reinsurers in the U.S., the terms of certain U.S. insurance and reinsurance contracts require them to provide collateral, which can be in the form of letters of credit (LOCs). LOCs may also be used for general corporate purposes.

Should the need arise, we generally have access to capital markets and to credit facilities with letter of credit capacity of $3.7 billion with a sub-limit of $1.9 billion for revolving credit. At December 31, 2021, our usage under these facilities was $1.4 billion in LOCs. Our access to credit under these facilities is dependent on the ability of the banks that are a party to the facilities to meet their funding commitments. Should the existing credit providers on these facilities experience financial difficulty, we may be required to replace credit sources, possibly in a difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty accessing our credit facilities or establishing additional facilities when needed.

In the event we are required to provide alternative security to clients, the security could take the form of additional insurance trusts supported by our investment portfolio or funds withheld using our cash resources. The value of LOCs required is driven by, among other things, statutory liabilities reported by variable annuity guarantee reinsurance clients, loss development of existing reserves, the payment pattern of such reserves, the expansion of business, and loss experience of such business.

The facilities noted above require that we maintain certain financial covenants, all of which have been met at December 31, 2021. These covenants include:

(i)a minimum consolidated net worth of not less than $34.985 billion; and

(ii)a ratio of consolidated debt to total capitalization of not greater than 0.35 to 1.

At December 31, 2021, (a) the minimum consolidated net worth requirement under the covenant described in (i) above was $34.985 billion and our actual consolidated net worth as calculated under that covenant was $59.4 billion and (b) our ratio of debt to total capitalization, as calculated under the covenant which excludes the fair value adjustment of debt acquired through the Chubb Corp acquisition, was 0.21 to 1, which is below the maximum debt to total capitalization ratio of 0.35 to 1 as described in (ii) above.

Our failure to comply with the covenants under any credit facility would, subject to grace periods in the case of certain covenants, result in an event of default. This could require us to repay any outstanding borrowings or to cash collateralize LOCs under such facility. Our failure to repay material financial obligations, as well as our failure with respect to certain other events expressly identified, would result in an event of default under the facility.

Ratings

Chubb Limited and its subsidiaries are assigned credit and financial strength (insurance) ratings from internationally recognized rating agencies, including S&P, A.M. Best, Moody's, and Fitch. The ratings issued on our companies by these agencies are announced publicly and are available directly from the agencies. Our Internet site (investors.chubb.com, under Shareholder Resources/Rating Agency Ratings) also contains some information about our ratings, but such information on our website is not incorporated by reference into this report.

Financial strength ratings reflect the rating agencies' opinions of a company's claims paying ability. Independent ratings are one of the important factors that establish our competitive position in the insurance markets. The rating agencies consider many factors in determining the financial strength rating of an insurance company, including the relative level of statutory surplus necessary to support the business operations of the company. These ratings are based upon factors relevant to policyholders, agents, and intermediaries and are not directed toward the protection of investors. Such ratings are not recommendations to buy, sell, or hold securities.

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Credit ratings assess a company's ability to make timely payments of principal and interest on its debt. It is possible that, in the future, one or more of the rating agencies may reduce our existing ratings. If one or more of our ratings were downgraded, we could incur higher borrowing costs, and our ability to access the capital markets could be impacted. In addition, our insurance and reinsurance operations could be adversely impacted by a downgrade in our financial strength ratings, including a possible reduction in demand for our products in certain markets. Also, we have insurance and reinsurance contracts which contain rating triggers. In the event the S&P or A.M. Best financial strength ratings of Chubb fall, we may be faced with the cancellation of premium or be required to post collateral on our underlying obligation associated with this premium. We estimate that at December 31, 2021, a one-notch downgrade of our S&P or A.M. Best financial strength ratings would result in an immaterial loss of premium or requirement for collateral to be posted.