CHUBB LTD, 10-Q filed on 7/31/2020
Quarterly Report
v3.20.2
Document and Entity Information - SFr / shares
6 Months Ended
Jun. 30, 2020
Jul. 17, 2020
Dec. 31, 2019
Document Type 10-Q    
Document Period End Date Jun. 30, 2020    
Document Quarterly Report true    
Document Transition Report false    
Entity Registrant Name Chubb Ltd    
Entity Central Index Key 0000896159    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus Q2    
Entity File Number 1-11778    
Entity Incorporation, State or Country Code V8    
Entity Tax Identification Number 98-0091805    
Entity Address, Address Line One Baerengasse 32    
Entity Address, City or Town Zurich    
Entity Address, Country CH    
Entity Address, Postal Zip Code 8001    
Country Region 41    
City Area Code (0)43    
Local Phone Number 456 76 00    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Shell Company false    
Entity Emerging Growth Company false    
Common Shares, par value SFr 24.15   SFr 24.15
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Common Shares Outstanding   451,365,891  
INA Senior Notes Due March 2038 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 2.50% Senior Notes due 2038    
Trading Symbol CB/38A    
Security Exchange Name NYSE    
INA Senior Notes Due December 2029 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2029    
Trading Symbol CB/29A    
Security Exchange Name NYSE    
INA Senior Notes Due June 2031 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 1.40% Senior Notes due 2031    
Trading Symbol CB/31    
Security Exchange Name NYSE    
INA Senior Notes Due March 2028 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 1.55% Senior Notes due 2028    
Trading Symbol CB/28    
Security Exchange Name NYSE    
INA Senior Notes Due June 2027 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 0.875% Senior Notes due 2027    
Trading Symbol CB/27    
Security Exchange Name NYSE    
INA Senior Notes Due December 2024 [Member]      
Title of 12(b) Security Guarantee of Chubb INA Holdings Inc. 0.30% Senior Notes due 2024    
Trading Symbol CB/24A    
Security Exchange Name NYSE    
Common Class A [Member]      
Title of 12(b) Security Common Shares, par value CHF 24.15 per share    
Trading Symbol CB    
Security Exchange Name NYSE    
v3.20.2
Consolidated Balance Sheets
$ in Millions
Jun. 30, 2020
USD ($)
shares
Dec. 31, 2019
USD ($)
shares
Assets    
Fixed maturities available for sale, at fair value, net of valuation allowance - $69 at June 30, 2020 (amortized cost – $82,740 and $82,580) $ 86,712 $ 85,488
Fixed maturities held to maturity, net carrying value 11,845  
Fixed maturities held to maturity, at amortized cost, net of valuation allowance - $51 at June 30, 2020 (fair value – $12,620 and $13,005) 11,896 12,581
Equity securities, at fair value 2,394 812
Short-term investments, at fair value (amortized cost - $4,004 and $4,291) 4,003 4,291
Other investments, at fair value 5,923 6,062
Total investments 110,877 109,234
Cash 1,557 [1] 1,537 [2]
Restricted cash 152 109
Securities lending collateral 1,832 994
Accrued investment income 845 867
Insurance and reinsurance balances receivable 10,853 10,357
Reinsurance recoverable on losses and loss expenses, net of valuation allowance - $303 and $316 15,207 15,181
Reinsurance recoverable on policy benefits 197 197
Deferred policy acquisition costs 5,243 5,242
Value of business acquired 290 306
Goodwill 15,184 15,296
Other intangible assets 5,909 6,063
Prepaid reinsurance premiums 2,725 2,647
Investments in partially-owned insurance companies 1,364 1,332
Other assets 9,239 7,581
Total assets 181,474 176,943
Liabilities    
Unpaid losses and loss expenses 65,699 62,690
Unearned premiums 17,081 16,771
Future policy benefits 5,895 5,814
Insurance and reinsurance balances payable 6,249 6,184
Securities lending payable 1,832 994
Accounts payable, accrued expenses, and other liabilities 12,589 11,773
Deferred tax liabilities 696 804
Repurchase agreements 1,409 1,416
Short-term debt 1,300 1,299
Long-term debt 13,656 13,559
Trust preferred securities 308 308
Total liabilities 126,714 121,612
Commitments and contingencies (refer to Note 7)
Shareholders’ equity    
Common Shares (CHF 24.15 par value; 479,783,864 shares issued; 451,360,023 and 451,971,567 shares outstanding) 11,121 11,121
Common Shares in treasury (28,423,841 and 27,812,297 shares) (3,866) (3,754)
Additional Paid in Capital, Common Stock 10,416 11,203
Retained earnings 35,991 36,142
Accumulated other comprehensive income (AOCI) 1,098 619
Total shareholders’ equity 54,760 55,331
Total liabilities and shareholders’ equity 181,474 176,943
Available for sale, at amortized cost 82,740 82,580
Debt Securities, Available-for-sale, Allowance for Credit Loss 69 0
Held-to-maturity, Fair Value 12,620 13,005
Debt Securities, Held-to-maturity, Allowance for Credit Loss 51 0
short-term investments, allowance for credit loss 2  
short-term investments amortized cost 4,004 4,291
Reinsurance Recoverable, Allowance for Credit Loss $ 303 $ 316
Common Shares, shares outstanding | shares 451,360,023 451,971,567
Common Shares, shares issued | shares 479,783,864 479,783,864
Common Shares in treasury, shares | shares 28,423,841 27,812,297
[1] Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various Chubb entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual Chubb accounts are translated daily into a single currency and pooled on a notional basis. Individual Chubb entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At June 30, 2020, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
[2] Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Refer to the 2019 Form 10-K for additional information.
v3.20.2
Consolidated Statements Of Operations and Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues        
Net premiums written $ 8,355 $ 8,343 $ 16,332 $ 15,656
Increase in unearned premiums (227) (452) (410) (628)
Net premiums earned 8,128 7,891 15,922 15,028
Net investment income 827 859 1,688 1,695
Net realized gains (losses):        
Other-than-temporary impairment (OTTI) losses gross 0 (14) 0 (27)
Portion of OTTI losses recognized in other comprehensive income (OCI) 0 1 0 1
Net OTTI losses recognized in income 0 (13) 0 (26)
Net realized gains (losses) excluding OTTI losses 0 (210) 0 (294)
Net Realized Gains Losses 30 (223) (928) (320)
Total revenues 8,985 8,527 16,682 16,403
Expenses        
Losses and loss expenses 6,577 4,715 11,062 8,813
Policy benefits 223 161 352 357
Policy acquisition costs 1,593 1,544 3,208 3,008
Administrative expenses 727 758 1,468 1,468
Interest expense 128 140 260 280
Other (income) expense 58 (230) 113 (269)
Amortization of purchased intangibles 72 77 145 153
Chubb integration expenses 0 4 0 7
Total expenses 9,378 7,169 16,608 13,817
Income (loss) before income tax (393) 1,358 74 2,586
Income tax expense (benefit) (includes $(2), $4, $(42), and $(2) on reclassified unrealized gains and losses) (62) 208 153 396
Net income (loss) (331) 1,150 (79) 2,190
Other comprehensive income        
Unrealized appreciation (depreciation) 3,248 1,252 769 3,097
Reclassification adjustment for net realized (gains) losses included in net income (loss) 33 (12) 352 32
Unrealized appreciation (Depreciation) after reclassification adjustment 3,281 1,240 1,121 3,129
Change in:        
Cumulative foreign currency translation adjustment 445 (97) (414) 50
Postretirement benefit liability adjustment (22) (18) (36) (45)
Other comprehensive income, before income tax 3,704 1,125 671 3,134
Income tax (expense) benefit related to OCI items (513) (216) (192) (547)
Other comprehensive income 3,191 909 479 2,587
Comprehensive income $ 2,860 $ 2,059 $ 400 $ 4,777
Earnings per share        
Basic earnings (loss) per share $ (0.73) $ 2.52 $ (0.17) $ 4.78
Diluted earnings (loss) per share $ (0.73) $ 2.50 $ (0.17) $ 4.75
Total net realized gains (losses) reclassified from AOCI $ (33) $ 12 $ (352) $ (32)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax (2) 4 (42) (2)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]        
Earnings per share        
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax $ (2) $ 4 $ (42) $ (2)
v3.20.2
Consolidated Statements Of Shareholders' Equity - USD ($)
$ in Millions
Total
Common Stock [Member]
Common shares in treasury [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Cumulative Foreign Currency Translation Adjustment [Member]
Postretirement Benefit Liability Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Balance - beginning of period at Dec. 31, 2018   $ 11,121 $ (2,618) $ 12,557 $ 31,688 $ (545) $ (1,976) $ 73  
Balance - beginning of period (Previous Accounting Guidance [Member]) at Dec. 31, 2018         31,700        
Balance - beginning of period (Accounting Standards Update 2016-13 [Member]) at Dec. 31, 2018         (12)        
Common Shares repurchased     (743)            
Net shares redeemed under employee share-based compensation plans     268 (190)          
Exercise of stock options       (48)          
Share-based compensation expense       117          
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (679)          
Net income (loss) $ 2,190       2,190        
Funding of dividends declared from Additional paid-in capital         679        
Dividends declared on Common Shares         (679)        
Change in period, before reclassification from AOCI, net of income tax expense of $(522), $(225), $(198) and $(549)           2,548      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(2), $4, $(42) and $(2)           30      
Change in period, net of income tax expense of $(524), $(221), $(240) and $(551)           2,578      
Change in period, net of income tax (expense) benefit of $6, $2, $40 and $(5)             45    
Change in period, net of income tax benefit of $5, $3, $8 and $9               (36)  
Balance - end of period at Jun. 30, 2019 53,802 11,121 (3,093) 11,757 33,878 2,033 (1,931) 37 $ 139
Other Comprehensive Income (Loss), Available-for-sale Securities, before Reclassification Adjustments, Tax           (549)      
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax (2)         (2)      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax           (551)      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax             (5)    
Pension liability adjustment, Change in period, income tax (expense) benefit               9  
Balance - beginning of period at Mar. 31, 2019   11,121 (2,775) 12,051 32,728 1,014 (1,836) 52  
Balance - beginning of period (Previous Accounting Guidance [Member]) at Mar. 31, 2019         32,728        
Balance - beginning of period (Accounting Standards Update 2017-08 [Member]) at Mar. 31, 2019         0        
Common Shares repurchased     (376)            
Net shares redeemed under employee share-based compensation plans     58 1          
Exercise of stock options       (14)          
Share-based compensation expense       63          
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (344)          
Net income (loss) 1,150       1,150        
Funding of dividends declared from Additional paid-in capital         344        
Dividends declared on Common Shares         (344)        
Change in period, before reclassification from AOCI, net of income tax expense of $(522), $(225), $(198) and $(549)           1,027      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(2), $4, $(42) and $(2)           (8)      
Change in period, net of income tax expense of $(524), $(221), $(240) and $(551)           1,019      
Change in period, net of income tax (expense) benefit of $6, $2, $40 and $(5)             (95)    
Change in period, net of income tax benefit of $5, $3, $8 and $9               (15)  
Balance - end of period at Jun. 30, 2019 53,802 11,121 (3,093) 11,757 33,878 2,033 (1,931) 37 139
Other Comprehensive Income (Loss), Available-for-sale Securities, before Reclassification Adjustments, Tax           (225)      
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax 4         4      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax           (221)      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax             2    
Pension liability adjustment, Change in period, income tax (expense) benefit               3  
Balance - beginning of period at Dec. 31, 2019 55,331 11,121 (3,754) 11,203 36,070 2,543 (1,939) 15  
Balance - beginning of period (Previous Accounting Guidance [Member]) at Dec. 31, 2019         36,142        
Balance - beginning of period (Accounting Standards Update 2016-13 [Member]) at Dec. 31, 2019         (72)        
Common Shares repurchased     (326)            
Net shares redeemed under employee share-based compensation plans     214 (189)          
Exercise of stock options       (29)          
Share-based compensation expense       124          
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (693)          
Net income (loss) (79)       (79)        
Funding of dividends declared from Additional paid-in capital         693        
Dividends declared on Common Shares         (693)        
Change in period, before reclassification from AOCI, net of income tax expense of $(522), $(225), $(198) and $(549)           571      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(2), $4, $(42) and $(2)           310      
Change in period, net of income tax expense of $(524), $(221), $(240) and $(551)           881      
Change in period, net of income tax (expense) benefit of $6, $2, $40 and $(5)             (374)    
Change in period, net of income tax benefit of $5, $3, $8 and $9               (28)  
Balance - end of period at Jun. 30, 2020 54,760 11,121 (3,866) 10,416 35,991 3,424 (2,313) (13) 1,098
Other Comprehensive Income (Loss), Available-for-sale Securities, before Reclassification Adjustments, Tax           (198)      
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax (42)         (42)      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax           (240)      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax             40    
Pension liability adjustment, Change in period, income tax (expense) benefit               8  
Balance - beginning of period at Mar. 31, 2020   11,121 (3,872) 10,710 36,322 667 (2,764) 4  
Balance - beginning of period (Previous Accounting Guidance [Member]) at Mar. 31, 2020         36,322        
Balance - beginning of period (Accounting Standards Update 2016-13 [Member]) at Mar. 31, 2020         0        
Common Shares repurchased     0            
Net shares redeemed under employee share-based compensation plans     6 7          
Exercise of stock options       (3)          
Share-based compensation expense       55          
Adjustments to Additional Paid in Capital, Dividends in Excess of Retained Earnings       (353)          
Net income (loss) (331)       (331)        
Funding of dividends declared from Additional paid-in capital         353        
Dividends declared on Common Shares         (353)        
Change in period, before reclassification from AOCI, net of income tax expense of $(522), $(225), $(198) and $(549)           2,726      
Amounts reclassified from AOCI, net of income tax (expense) benefit of $(2), $4, $(42) and $(2)           31      
Change in period, net of income tax expense of $(524), $(221), $(240) and $(551)           2,757      
Change in period, net of income tax (expense) benefit of $6, $2, $40 and $(5)             451    
Change in period, net of income tax benefit of $5, $3, $8 and $9               (17)  
Balance - end of period at Jun. 30, 2020 54,760 $ 11,121 $ (3,866) $ 10,416 $ 35,991 3,424 (2,313) (13) $ 1,098
Other Comprehensive Income (Loss), Available-for-sale Securities, before Reclassification Adjustments, Tax           (522)      
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax $ (2)         (2)      
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax           $ (524)      
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax             $ 6    
Pension liability adjustment, Change in period, income tax (expense) benefit               $ 5  
v3.20.2
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities    
Net income $ (79) $ 2,190
Adjustments to reconcile net income to net cash flows from operating activities    
Net realized (gains) losses 928 320
Amortization of premiums/discounts on fixed maturities 192 209
Amortization of purchased intangibles 145 153
Deferred income taxes (302) (133)
Unpaid losses and loss expenses 3,172 240
Unearned premiums 538 808
Future policy benefits 87 101
Insurance and reinsurance balances payable 118 (94)
Accounts payable, accrued expenses, and other liabilities (304) (357)
Income taxes payable 2 16
Insurance and reinsurance balances receivable (645) (843)
Reinsurance recoverable (71) 565
Deferred policy acquisition costs (62) (194)
Other (22) (273)
Net cash flows from operating activities 3,697 2,708
Cash flows from investing activities    
Purchases of fixed maturities available for sale (13,058) (12,566)
Purchases of fixed maturities held to maturity (42) (73)
Purchases of equity securities (2,824) (147)
Sales of fixed maturities available for sale 7,734 7,832
Sales of to be announced mortgage-backed securities 0 6
Sales of equity securities 1,353 266
Maturities and redemptions of fixed maturities available for sale 5,220 3,963
Maturities and redemptions of fixed maturities held to maturity 642 598
Net change in short-term investments 173 (763)
Net derivative instruments settlements (18) (536)
Private equity contribution (546) (920)
Private equity distribution 443 780
Payments for Other Deposits (1,550) 0
Other (221) (727)
Net cash flows used for investing activities (2,694) (2,287)
Cash flows from financing activities    
Dividends paid on Common Shares (678) (671)
Common Shares repurchased (333) (741)
Proceeds from issuance of repurchase agreements 1,402 1,984
Repayment of repurchase agreements (1,402) (1,986)
Proceeds from share-based compensation plans 74 95
Policyholder contract deposits 215 237
Policyholder contract withdrawals (173) (138)
Proceeds from (Payments for) Other Financing Activities (3) 0
Net cash flows used for financing activities (898) (431)
Proceeds from Issuance of Long-term Debt 0 1,289
Repayments of Long-term Debt 0 (500)
Effect of foreign currency rate changes on cash and restricted cash (42) 38
Net increase (decrease) in cash and restricted cash 63 28
Cash and restricted cash - beginning of period 1,646 [1] 1,340 [2]
Cash and restricted cash - end of period 1,709 [1] 1,368 [2]
Supplemental cash flow information    
Taxes paid 442 522
Interest paid $ 286 $ 286
[1] Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various Chubb entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual Chubb accounts are translated daily into a single currency and pooled on a notional basis. Individual Chubb entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At June 30, 2020 and December 31, 2019, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
[2] Chubb maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various Chubb entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual Chubb accounts are translated daily into a single currency and pooled on a notional basis. Individual Chubb entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At June 30, 2019 and December 31, 2018, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.
v3.20.2
General
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
General General
a) Basis of presentation
Chubb Limited is a holding company incorporated in Zurich, Switzerland. Chubb Limited, through its subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. Our results are reported through the following business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. Refer to Note 11 for additional information.

The interim unaudited consolidated financial statements, which include the accounts of Chubb Limited and its subsidiaries (collectively, Chubb, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and, in the opinion of management, reflect all adjustments necessary for a fair statement of the results and financial position for such periods. All significant intercompany accounts and transactions, including internal reinsurance transactions, have been eliminated.

The results of operations and cash flows for any interim period are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2019 Form 10-K.

b) Restricted cash
Restricted cash in the Consolidated balance sheets represents amounts held for the benefit of third parties and is legally or contractually restricted as to withdrawal or usage. Amounts include deposits with U.S. and non-U.S. regulatory authorities, trust funds set up for the benefit of ceding companies, and amounts pledged as collateral to meet financing arrangements.

The following table provides a reconciliation of cash and restricted cash reported within the Consolidated balance sheets that total to the amounts shown in the Consolidated statements of cash flows:
June 30December 31
(in millions of U.S. dollars)20202019
Cash$1,557  $1,537  
Restricted cash152  109  
Total cash and restricted cash shown in the Consolidated statements of cash flows$1,709  $1,646  

c) Goodwill
During the six months ended June 30, 2020, Goodwill decreased $112 million, primarily reflecting the impact of foreign exchange.

d) Accounting guidance adopted in 2020
Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments
Effective January 1, 2020, we adopted, on a modified retrospective basis, new guidance on the accounting for credit losses of financial instruments that are measured at amortized cost, including held to maturity securities, and reinsurance recoverables, by applying an approach based on the current expected credit losses (CECL). The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. In addition, the guidance also replaced the current available for sale (AFS) security other-than-temporary impairment model by requiring an estimate of the expected credit loss (ECL) only when the fair value is below the amortized cost of the asset. The length of time the fair value of an AFS security has been below its amortized cost no longer impacts the determination of whether a potential credit loss exists. The AFS security model also requires the use of a valuation allowance as compared to the previous practice of writing down the asset.

In 2020, we recognized a cumulative effect adjustment and decreased beginning retained earnings by $79 million pre-tax, or $72 million after-tax, principally related to the valuation allowance for credit losses. We also adopted the required disclosures within Note 3 Investments and Note 5 Reinsurance. Results for reporting periods prior to January 1, 2020 are presented in accordance with the previous guidance.
Accounting guidance not yet adopted
Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying GAAP to investments, derivatives, or other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Along with the optional expedients, the amendments include a general principle that permits an entity to consider contract modifications due to reference reform to be an event that does not require contract re-measurement at the modification date or reassessment of a previous accounting determination. Additionally, a company may make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that were classified as held to maturity before January 1, 2020. This standard may be elected over time through December 31, 2022 as reference rate reform activities occur. We are currently assessing the effect of adopting this guidance on our financial condition and results of operations.

Targeted Improvements to the Accounting for Long-Duration Contracts
In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments in this update require more frequent updating of assumptions and a standardized discount rate for the future policy benefit liability, a requirement to use the fair value measurement model for policies with market risk benefits, simplified amortization of deferred acquisition costs, and enhanced disclosures. This standard will be effective in the first quarter of 2022 with early adoption permitted. However, in July 2020, the FASB proposed to defer the adoption date by one year, therefore, if the guidance is amended, this standard will be effective for us in the first quarter of 2023. We are currently assessing the effect of adopting this guidance on our financial condition and results of operations. We will be better able to quantify the effect of adopting this standard as we progress in our implementation process and draw nearer to the date of adoption.

Refer to the 2019 Form 10-K for information on additional accounting guidance not yet adopted.
v3.20.2
Acquisitions
6 Months Ended
Jun. 30, 2020
Business Combinations [Abstract]  
Acquisitions Acquisitions
Huatai Group
Chubb maintains a direct investment in Huatai Insurance Group Company Limited (Huatai Group). Huatai Group is the parent company of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C) and approximately 80 percent of Huatai Life Insurance Co., Ltd. (Huatai Life). As of June 30, 2020 Chubb's aggregate ownership interest in Huatai Group was 30.9 percent. Chubb applies the equity method of accounting to its investment in Huatai Group by recording its share of net income or loss in Other (income) expense in the Consolidated statements of operations.
In 2019, Chubb entered into agreements to acquire an additional 22.4 percent ownership in Huatai Group for approximately $1.55 billion through two separate purchases, a 15.3 percent ownership interest for approximately $1.1 billion and a 7.1 percent ownership interest for approximately $493 million. On July 13, 2020, we acquired the 15.3 percent ownership interest. The purchase of the additional 7.1 percent ownership interest is contingent upon important conditions that are expected to be completed by the end of 2021.

In connection with these purchase agreements, in January 2020, we paid collateralized deposits totaling $1.55 billion to the selling shareholders. This transaction was recorded to Other assets on the Consolidated balance sheet and within investing activities on the Consolidated statement of cash flows.
Upon completion of the 7.1 percent purchase, which will result in majority ownership of Huatai Group, Chubb is expected to obtain control of Huatai Group, Huatai P&C and Huatai Life. At that time, Chubb is expected to apply consolidation accounting and discontinue the application of the equity method of accounting.
v3.20.2
Investments
6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Investments Investments
a) Fixed maturities
Effective January 1, 2020, we adopted new accounting guidance that requires a valuation allowance for credit losses to be established for fixed maturity securities classified as held to maturity (HTM) or available for sale (AFS). For information on accounting policies applicable to periods prior to January 1, 2020, refer to the 2019 Form 10-K.
June 30, 2020Amortized
Cost
Valuation AllowanceGross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency$2,636  $—  $239  $—  $2,875  
Non-U.S.23,370  (17) 1,420  (166) 24,607  
Corporate and asset-backed securities32,721  (52) 1,658  (410) 33,917  
Mortgage-backed securities17,165  —  1,051  (18) 18,198  
Municipal6,848  —  270  (3) 7,115  
$82,740  $(69) $4,638  $(597) $86,712  
Amortized
Cost
Valuation AllowanceNet Carrying ValueGross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
Held to maturity
U.S. Treasury / Agency$1,242  $—  $1,242  $73  $—  $1,315  
Non-U.S.1,278  (8) 1,270  102  (2) 1,370  
Corporate and asset-backed securities2,232  (41) 2,191  247  (10) 2,428  
Mortgage-backed securities2,189  (1) 2,188  146  (3) 2,331  
Municipal4,955  (1) 4,954  223  (1) 5,176  
$11,896  $(51) $11,845  $791  $(16) $12,620  

December 31, 2019Amortized
Cost
Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Fair
Value
OTTI Recognized
in AOCI
(in millions of U.S. dollars)
Available for sale
U.S. Treasury / Agency$3,188  $96  $(1) $3,283  $—  
Non-U.S.22,670  1,099  (62) 23,707  (25) 
Corporate and asset-backed securities30,689  1,180  (78) 31,791  (5) 
Mortgage-backed securities18,712  494  (14) 19,192  —  
Municipal7,321  205  (11) 7,515  —  
$82,580  $3,074  $(166) $85,488  $(30) 
Held to maturity
U.S. Treasury / Agency$1,318  $29  $—  $1,347  $—  
Non-U.S.1,423  62  —  1,485  —  
Corporate and asset-backed securities2,349  121  (2) 2,468  —  
Mortgage-backed securities2,331  65  —  2,396  —  
Municipal5,160  150  (1) 5,309  —  
$12,581  $427  $(3) $13,005  $—  
Management evaluates CECL for all HTM securities each quarter. U.S. Treasury and agency securities and U.S. government agency mortgage-backed securities are assumed to have no risk of non-payment and therefore are excluded from the CECL evaluation. The remaining HTM securities are evaluated for potential credit loss on a collective pool basis. We elected to pool HTM securities by 1) external credit rating and 2) time to maturity (duration). These characteristics are the most representative of similar risk characteristics within our portfolio. Chubb will pool HTM securities and calculate an expected credit loss for each pool using Moody’s corporate bond default average, corporate bond recovery rate, and an economic cycle multiplier. The multiplier is based on the leading economic index and will adjust the average default frequency for a forward-looking economic outlook. Prior to the adoption of this guidance, HTM securities were evaluated individually for other-than-temporary impairment (OTTI).

Management monitors the credit quality of HTM securities through the review of external credit ratings on a quarterly basis. The following table presents the amortized cost of our HTM securities according to S&P rating:
June 30, 2020
(in millions of U.S. dollars)Amortized cost% of Total
AAA$2,583  22 %
AA6,397  54 %
A2,302  19 %
BBB591  %
BB21  — %
Other — %
Total$11,896  100 %

Management evaluates expected credit losses (ECL) for AFS securities when fair value is below amortized cost. AFS securities are evaluated for potential credit loss on an individual security level but the evaluation may use assumptions consistent with expectations of credit losses for a group of similar securities. If management has the intent to sell or will be required to sell the security before recovery, the entire impairment loss will be recorded through income to net realized gains and losses. If management does not have the intent to sell or will not be required to sell the security before recovery, an allowance for credit losses is established and the portion of loss that relates to credit losses is recorded in income to Net realized gains (losses) and the portion of loss that relates to non-credit loss is recorded in Other comprehensive income.

Examples of criteria that are collectively evaluated to determine if a credit loss has occurred include the following:
The extent to which the fair value is less than amortized cost;
Adverse conditions related to the security, industry, or geographic area;
Downgrades in the security's credit rating by a rating agency; and
Failure of the issuer to make scheduled principal or interest payments

AFS securities that meet any one of the criteria included above will be subject to a discounted cash flow analysis by comparing the present value of expected future cash flows with the amortized cost basis. If the present value of expected future cash flows is less than the amortized cost, a credit loss exists and an allowance for credit losses will be recognized. If the present value of expected future cash flows is equal to or greater than the amortized cost basis, management will conclude an expected credit loss does not exist.

We elected to not measure an allowance for accrued investment income as uncollectible balances are written off in a timely manner, typically 30 to 45 days after uncollected balances are due.
The following table presents fixed maturities by contractual maturity:
June 30December 31
 20202019
(in millions of U.S. dollars)Net Carrying ValueFair ValueAmortized CostFair Value
Available for sale
Due in 1 year or less$4,487  $4,487  $3,951  $3,973  
Due after 1 year through 5 years26,867  26,867  27,142  27,720  
Due after 5 years through 10 years25,465  25,465  23,901  24,874  
Due after 10 years11,695  11,695  8,874  9,729  
68,514  68,514  63,868  66,296  
Mortgage-backed securities18,198  18,198  18,712  19,192  
$86,712  $86,712  $82,580  $85,488  
Held to maturity
Due in 1 year or less$890  $902  $478  $479  
Due after 1 year through 5 years3,505  3,662  3,869  3,940  
Due after 5 years through 10 years3,328  3,516  3,756  3,883  
Due after 10 years1,934  2,209  2,147  2,307  
9,657  10,289  10,250  10,609  
Mortgage-backed securities2,188  2,331  2,331  2,396  
$11,845  $12,620  $12,581  $13,005  

Expected maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties. 

b) Gross unrealized loss
Fixed maturities in an unrealized loss position at June 30, 2020 comprised both investment grade and below investment grade securities for which fair value declined primarily due to widening credit spreads since the date of purchase.

The following table presents, for AFS fixed maturities in an unrealized loss position (including securities on loan) that are not deemed to have credit losses, the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
0 – 12 MonthsOver 12 MonthsTotal
June 30, 2020Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
(in millions of U.S. dollars)
Non-U.S.$3,172  $(117) $105  $(22) $3,277  $(139) 
Corporate and asset-backed securities7,985  (295) 551  (35) 8,536  (330) 
Mortgage-backed securities953  (13) 27  (2) 980  (15) 
Municipal
95  (1) 65  (2) 160  (3) 
Total AFS fixed maturities $12,205  $(426) $748  $(61) $12,953  $(487) 
The following table presents, for all securities in an unrealized loss position (including securities on loan), the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
0 – 12 MonthsOver 12 MonthsTotal
December 31, 2019Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
Fair ValueGross
Unrealized
Loss
(in millions of U.S. dollars)
U.S. Treasury / Agency$234  $(1) $339  $—  $573  $(1) 
Non-U.S.1,846  (34) 802  (28) 2,648  (62) 
Corporate and asset-backed securities2,121  (40) 988  (40) 3,109  (80) 
Mortgage-backed securities1,174  (6) 932  (8) 2,106  (14) 
Municipal
188  —  276  (12) 464  (12) 
Total fixed maturities$5,563  $(81) $3,337  $(88) $8,900  $(169) 

c) Net realized gains (losses)

Management reviews credit losses and the valuation allowance for expected credit losses each quarter. When all or a portion of a fixed maturity security is identified to be uncollectible and written off, the valuation allowance for expected credit losses is reduced by the same amount. In general, a security is considered uncollectible no later than when all efforts to collect contractual cash flows have been exhausted. Below are considerations for when a security may be deemed uncollectible:

We have sufficient information to determine that the issuer of the security is insolvent;
We receive notice that the issuer of the security has filed for bankruptcy, and the collectability is expected to be adversely impacted by the bankruptcy;
The issuer of a security has violated multiple debt covenants;
Amounts have been past due for a specified period of time with no response from the issuer;
A significant deterioration in the value of the collateral has occurred;
We have received correspondence from the issuer of the security indicating that it doesn’t intend to pay the contractual principal and interest.

Projected cash flows are driven primarily by assumptions regarding probability of default and also the timing and amount of recoveries associated with defaults. Chubb developed the projected cash flows using market data, issuer-specific information, and credit ratings. In combination with contractual cash flows and the use of historical default and recovery data by Moody’s Investors Service (Moody’s) rating category we generate expected cash flows using the average cumulative issuer-weighted global default rates by letter rating.
The following table presents the components of Net realized gains (losses):
Three Months EndedSix Months Ended
June 30June 30
(in millions of U.S. dollars)2020201920202019
Fixed maturities:
OTTI on fixed maturities, gross$—  $(14) $—  $(27) 
OTTI on fixed maturities recognized in OCI (pre-tax)—   —   
OTTI on fixed maturities, net—  (13) —  (26) 
Gross realized gains excluding OTTI68  56  145  83  
Gross realized losses excluding OTTI(174) (31) (299) (89) 
Provision for expected credit losses104  —  (46) —  
Impairment (1)
(31) —  (152) —  
Total fixed maturities $(33) $12  $(352) $(32) 
Equity securities148   119  63  
Other investments(107) 30  (102) (14) 
Foreign exchange gains (losses)(61) (11) (129)  
Investment and embedded derivative instruments14  (181) 29  (311) 
Fair value adjustments on insurance derivative213  (65) (472) 49  
S&P futures(103) (20) 22  (83) 
Other derivative instruments(1)  (3)  
Other(40) —  (40) —  
Net realized gains (losses) (pre-tax)$30  $(223) $(928) $(320) 
(1)Relates to certain securities we intended to sell and securities written to market entering default.

Realized gains and losses from Equity securities and Other investments from the table above include sales of securities and
unrealized gains and losses from fair value changes as follows:
Three Months Ended
June 30
20202019
(in millions of U.S. dollars)Equity SecuritiesOther InvestmentsTotalEquity SecuritiesOther InvestmentsTotal
Net gains (losses) recognized during the period$148  $(107) $41  $ $30  $35  
Less: Net gains (losses) recognized from sales of securities187  —  187  32  —  32  
Unrealized gains (losses) recognized for securities still held at reporting date$(39) $(107) $(146) $(27) $30  $ 

Six Months Ended
June 30
20202019
(in millions of U.S. dollars)Equity SecuritiesOther InvestmentsTotalEquity SecuritiesOther InvestmentsTotal
Net gains (losses) recognized during the period$119  $(102) $17  $63  $(14) $49  
Less: Net gains (losses) recognized from sales of securities163  —  163  33  (2) 31  
Unrealized gains (losses) recognized for securities still held at reporting date$(44) $(102) $(146) $30  $(12) $18  
The following table presents a roll-forward of valuation allowance for expected credit losses on fixed maturities:
Three Months EndedSix Months Ended
June 30June 30
(in millions of U.S. dollars)20202020
Available for sale
Valuation allowance for expected credit losses - beginning of period$176  $—  
Impact of adoption of new accounting guidance—  25  
Provision for expected credit loss29  178  
Initial allowance for purchased securities with credit deterioration  
Write-offs charged against the expected credit loss(5) (5) 
Recovery of expected credit loss(134) (134) 
Valuation allowance for expected credit losses - end of period$69  $69  
Held to maturity
Valuation allowance for expected credit losses - beginning of period$45  $—  
Impact of adoption of new accounting guidance—  44  
Provision for expected credit loss  
Valuation allowance for expected credit losses - end of period$51