Chubb(US:CB)2022-02-23 16:00Loss Reserves and Expenses - As of December 31, 2021, the company's gross unpaid loss and loss expense reserves were $72.9 billion, while net unpaid reserves were $56.8 billion[266]. - The company incurred losses and loss expenses of $28.0 billion in 2021, compared to $21.9 billion in 2020[268]. - The total losses and loss expenses paid in 2021 amounted to $22.2 billion, an increase from $17.9 billion in 2020[268]. - Approximately 78% of the company's loss reserves are related to casualty business, which involves long-tail risks requiring significant judgment[266]. - The establishment of loss reserves involves complex estimates and judgments, particularly for high excess casualty claims and asbestos-related claims[270]. - The reserve for unpaid losses and loss expenses at December 31, 2021, is approximately $9.9 billion, with a potential impact of about 9.5% (approximately $942 million) from a one percentage point change in the tail factor for Workers' Compensation[276]. - For the U.S. Excess/Umbrella portfolios, a five percentage point change in the tail factor could result in a change of approximately $584 million, representing an impact of about 18.6% relative to recorded net loss and loss expense reserves of approximately $3.1 billion[279]. - A 20% shortening or lengthening of development patterns for U.S. long-tail lines would change the loss reserve estimate by approximately $220 million, impacting recorded net loss and loss expense reserves of approximately $680 million by 32%[292]. - The majority (approximately 67%) of reserves in the North America Agricultural Insurance segment are from crop-related lines, with most liabilities expected to be resolved within the next twelve months[282]. - Almost 95% of Personal Lines net ultimate losses and allocated loss adjustment expenses are typically paid within five years of the accident date, with 80% paid within two years[281]. - A six-month lengthening of selected loss development patterns would increase reserve estimates for long-tail casualty and financial lines by approximately $611 million, representing an impact of 14.8% relative to recorded net loss and loss expense reserves of approximately $4.1 billion[283]. - The company has exposure to certain liability insurance and reinsurance lines that have been in run-off since 1994, primarily related to A&E and molestation claims[293]. - The estimation of asbestos liabilities is sensitive to changes in the legal, social, and economic environment, with significant variables impacting predicted outcomes[296]. Financial Performance - Consolidated net income reached a record $8.5 billion in 2021, up 141.7% from $3.5 billion in 2020, driven by strong P&C underwriting results and record net investment income[330][331]. - Net premiums written increased to $37.9 billion, a 12.0% rise from $33.8 billion in 2020, primarily due to growth in commercial lines[331][339]. - Net premiums earned rose to $36.4 billion, up 9.8% from $33.1 billion in 2020, reflecting growth in commercial lines and stable consumer lines[332][343]. - The P&C combined ratio improved to 89.1% in 2021 from 96.1% in 2020, with a current accident year combined ratio of 84.8%[334]. - Net investment income was a record $3.5 billion, compared to $3.4 billion in 2020, driven by higher returns from private equity partnerships[335]. - Operating cash flow reached a record $11.1 billion in 2021[335]. - Shareholders' equity increased by $273 million, reflecting net income of $8.5 billion and total capital returned to shareholders of $6.3 billion[336]. - The company expects continued growth and margin improvement in 2022, capitalizing on favorable underwriting conditions and strategic investments, including the acquisition of Cigna's Life and Accident and Health Insurance Business[337]. - Commercial lines grew by 17.7%, while consumer lines saw moderate growth of 1.5% in 2021[339]. - The company reported a pre-tax net favorable prior period development of $926 million for 2021, including $443 million in adverse development for molestation claims[354]. - The loss and loss expense ratio decreased to 62.6% in 2021 from 68.5% in 2020, benefiting from lower catastrophe losses and favorable prior period development[358]. - The company reported a total of $1,175 million in catastrophe losses for various events, including flooding, tornadoes, and winter-related storms[351]. Catastrophe Losses - Total pre-tax catastrophe losses were $2.4 billion, contributing 7.1 percentage points to the P&C combined ratio, down from $3.3 billion in 2020[332]. - Catastrophe losses for Hurricane Ida amounted to $400 million in North America Commercial P&C Insurance and $231 million in North America Personal P&C Insurance, totaling $856 million[346]. - Total catastrophe losses for the year reached $2,411 million, with $1,112 million from North America Commercial P&C Insurance and $663 million from North America Personal P&C Insurance[346]. - The company experienced $925 million in catastrophe losses related to COVID-19, with total losses for the year amounting to $3,273 million[350]. - The total after income tax for the year was reported at $1,984 million, reflecting the impact of catastrophe losses and tax benefits[346]. - The company recorded $1,871 million in total before income tax for catastrophe losses, with significant contributions from U.S. hurricanes and flooding events[350]. - Catastrophe losses decreased significantly to $1,112 million in 2021 from $1,871 million in 2020[367]. Investment Performance - The total investment portfolio generated net realized gains of $704 million in 2021, a recovery from net unrealized losses of $(2,919) million in the previous year[416]. - The company experienced realized losses of $202 million in 2021 related to derivative instruments that decrease in fair value when the S&P 500 index increases[416]. - The total mark-to-market gain on private equity investments was $2,115 million in 2021, significantly up from $714 million in 2020[438]. - The company reported a favorable net premium adjustment of $792 million, indicating strong performance in premium collections[435]. - The average invested assets rose to $116,475 million in 2021 from $109,766 million in 2020[437]. - The market yield on fixed maturities improved to 2.3% in 2021 from 1.7% in 2020[437]. - The company’s foreign exchange transactions resulted in net gains of $348 million in 2021, despite previous losses of $(530) million[416]. Risk Management and Strategy - The company emphasizes the importance of liquidity, supported by cash balances, liquid investments, credit facilities, and reinsurance protection[262]. - The company has not purchased any retroactive ceded reinsurance contracts since 1999, focusing on cost-effective multi-year excess of loss contracts[309]. - The company maintains a few aggregate excess of loss reinsurance contracts primarily entered into before 2003, indicating a strategic approach to risk management[309]. - The company has established strict contractual investment rules to maintain diversified exposures and actively manage compliance with portfolio guidelines[444]. - The company uses a risk-free rate of return consistent with the expected average duration of loss payments for cash flow analyses[307]. - The company has established protocols for structured products that include criteria triggering an accounting review prior to quoting[308]. Tax and Deferred Tax - The net deferred tax liability as of December 31, 2021, was $389 million, with a valuation allowance of $92 million indicating potential non-realization of certain deferred tax assets[323][325]. - The effective income tax rate (ETR) was 13.0% in 2021, down from 15.1% in 2020, influenced by a higher percentage of income generated in lower tax jurisdictions[418]. - The deferred tax liability associated with Other intangible assets was $1,212 million as of December 31, 2021, with an expected total reduction of $280 million over the next five years[442]. Segment Performance - Segment income for North America Commercial P&C Insurance increased by 49.0% to $4,359 million in 2021[365]. - The North America Personal P&C Insurance segment generated $4,915 million in net premiums earned[429]. - The overseas insurance general segment reported a loss and loss expense ratio of 89.1%[429]. - Life Insurance underwriting income decreased by $14 million in 2021, primarily due to a decrease in net premiums written[408]. - Deposits collected on universal life and investment contracts increased by 56.6% to $2.441 billion in 2021 from $1.559 billion in 2020[407].