Chubb Limited Annual Report 2020 Report Annual Limited Chubb Chubb Limited Bärengasse 32 Chubb Limited CH—8001 Zurich Switzerland Annual Report chubb.com 2020 002CSNB930 Financial Summary 1 Chairman and CEO Letter to Shareholders 2 Review of Operations 22 Citizenship at Chubb 34 Chubb Group Corporate Officers and Other Executives 36 Chubb Limited Board of Directors 38 Shareholder Information 39 Non–GAAP Financial Measures 40 Form 10–K Swiss Statutory Financial Statements Swiss Statutory Compensation Report Environmental Statement Financial Summary Year Ended Year Ended Percentage Percentage In millions of U.S. dollars Dec. 31, 2020 Dec. 31, 2019 Change Change Constant except per share data and ratios Dollars Gross premiums written $41,261 $40,124 2.8% 3.4% Net premiums written 33,820 32,275 4.8% 5.5% Net premiums earned 33,117 31,290 5.8% 6.5% P&C combined ratio 96.1% 90.6% NM Current accident year P&C combined ratio excluding catastrophe losses 86.7% 89.2% NM Net income 3,533 4,454 –20.7% Core operating income 3,313 4,641 –28.6% Diluted earnings per share — net income 7.79 9.71 –19.8% Diluted earnings per share — core operating income 7.31 10.11 –27.7% Total investments 118,669 109,234 8.6% Total assets 190,774 176,943 7.8% Shareholders’ equity 59,441 55,331 7.4% Book value per share 131.88 122.42 7.7% Tangible book value per share 87.69 78.14 12.2% Return on equity 6.2% 8.4% NM Core operating return on equity 6.2% 9.0% NM Core operating return on tangible equity 9.8% 14.6% NM This document contains non–GAAP financial measures. Refer to pages 40–42 for reconciliations to the most directly comparable GAAP measures. NM—not meaningful 1 Evan G. Greenberg Chairman and Chief Executive Officer Chubb Group 2 To My Fellow Shareholders This was an unprecedented year. Over across the commercial, social and Strong financial performance in the last 12 months, Chubb withstood geopolitical landscape. The last the face of adversity a global pandemic, a recession and a year has been difficult in all parts record run of natural catastrophes. of the world. The United States has Chubb is a leading global insurance Our 31,000–strong workforce in 54 faced particular upheavals having company and the world’s largest countries performed substantially as mishandled the healthcare response publicly traded property and casualty normal despite working from home for to the pandemic. We have watched (P&C) insurer, providing a wide range much of the year. We never stopped widespread protests on our streets, of products and services to individuals, writing insurance contracts, paying drawing attention to problems of racial families and businesses of all sizes. This claims, offering risk engineering and justice. Most shocking was the display year’s pandemic hit our industry hard. protection services, and marketing of demagoguery in our nation’s capital Our company’s published results were our capabilities. I am proud of my in January, scenes the likes of which impacted both by the pandemic and colleagues: because of their efforts we have not witnessed in our 240–year how we chose prudently to recognize we concluded the year stronger than history. They left our country shaken our ultimate exposures to it, as well we started, with momentum, earning and our international image tarnished. as natural catastrophes. But Chubb’s power and optimism for the future. Make no mistake: I remain optimistic underlying financial results were very about the future of our country. But strong. I would draw your attention to COVID–19 impacted us financially nothing is guaranteed if the U.S. does four points in particular. and operationally. We kept moving not step up its game. forward though, even as others pulled First, we produced core operating back. Our fundamentals are very We will continue to feel the health, income of $3.3 billion, or $7.31 per strong, and we continued to invest economic and social impact of the share, down 28%, a noteworthy and advance our strategy. Our digital pandemic — perhaps endemic is now performance in the context of a transformation accelerated, both a better description — despite vaccines quarter of earnings lost due to COVID. because of the substantial investments and therapeutics. COVID is accelerating Our total net catastrophe losses for we have made over the years and the many global trends, from our reliance the year, which included our sizable way shelter–in–place orders forced our on new technologies to rising income COVID charge, were $6.12 per share, employees to work digitally from home. inequality and political populism. compared to $2.11 in the prior year We capitalized on improved market Inside and outside our borders, support and our five–year average of $3.51. But conditions in our commercial insurance for economic globalization remained no handwringing: We are in the risk businesses, propelling revenue under pressure, with trade facing business, and we are paid to accept growth and expanding margins. Our multiple headwinds. Relations between volatility. global footprint expanded, notably the U.S. and China sank to their lowest in Asia. We ended the year with a ebb in decades. And extreme weather Second, we delivered an underwriting stronger balance sheet than we began. showed the climate crisis looming more profit, despite the year’s events. Our And we distinguished ourselves as urgently than ever. The environment published P&C combined ratio was industry leaders, both in our response faced by a global company like Chubb 96.1%, a result that for many insurers to commercial insurance market is ever–more complex, and there are would represent a normal or even good conditions and on the issues impacting important lessons to draw from the year. But hardly for us — our combined our industry caused by the pandemic. last 12 months, both for our business ratio has averaged 91.2% over the last 10 and our country, as we move forward years, outperforming our competitors I want to use this year’s shareholder confidently into a new period of by nearly 7.7 percentage points. Our letter to explain why 2020 renewed shareholder wealth creation. underlying combined ratio last year, my optimism about Chubb’s future, which excludes CAT losses, told a despite the challenges of COVID. very positive story that speaks to our I also want to reflect on the many earning power — more on that later. other challenges we faced that remain 3 Third, considering global economic insurance, though we expect these and no time limit. The COVID health conditions, Chubb produced strong businesses to bounce back as the crisis was exacerbated by shelter– top–line premium revenue growth. pandemic begins to recede and in–place and travel restrictions, P&C net premiums written were $31.3 economies recover. and consequent broad economic billion, up 5.4% in constant dollars. shutdowns. Simply to illustrate the Within that our commercial lines grew Due to pandemic–related exposures, magnitude, my guess is that, taken over 9%, benefiting from improved we took a sizable charge in the together, this combined health and underwriting conditions, while our second quarter. We estimated that economic crisis is likely over time to consumer lines were down 2.5%, our ultimate COVID–related losses produce an industry insured loss in the impacted by the pandemic’s effects would approximate $1.4 billion. Our region of $80 billion globally. on economic activity. I’ll go into more decision to reserve as closely as we detail on that later, too. could to ultimate means we have now Our and the industry’s COVID–related accounted for emerging pandemic– claims come from a broad range Finally, Chubb is a balance sheet related losses, rather than taking the of exposures, principally in four business. Our book and tangible book pay– or recognize–as–you–go approach areas. The first occurred as people value grew, respectively, by 7.7% and many seem to be adopting — a mark of suffered from ill health or death, 12.2% on a per share basis. At the same confidence in our risk management. On from front–line workers to ordinary time, the strength of our loss reserves, the other side of the coin, we have also employees, affecting everything from the most important part of the balance been extremely cautious in recognizing life and health insurance to workers sheet, improved throughout the year. the reduction in frequency of losses compensation. The second source of because of the economic shutdown. exposures come from liability–related Growth and underlying profitability insurance, including employment improved in most of our commercial We ended the year with a strong capital practices, directors and officers (D&O) P&C insurance businesses as a result of and liquidity position as measured and medical malpractice. Next are hardening markets globally. Chubb has by some $75 billion in total capital, business interruption losses, from long shown underwriting discipline and $59 billion in equity, and record businesses that had coverage and a willingness to trade market share for cash flow of $9.8 billion. Our AA were shut down during the pandemic. underwriting profitability. With nearly ratings by S&P and A++ by AM Best And finally, there are credit–related 70% of our portfolio in commercial are solid. We continue to maintain exposures, such as surety and trade lines, these favorable conditions capital flexibility and we will keep credit. represent a major opportunity for investing in critical areas like our digital further growth. Our geographic transformation and international Each year Chubb undertakes a presence, broad product portfolio, expansion.