Chubb Limited 2022 Form 10-K Summary
Business context and reporting period
Chubb is a global insurance and reinsurance group operating in 54 countries and territories across property and casualty (P&C), accident and health, life, and reinsurance. This annual report covers the fiscal year ended December 31, 2022; it is not a standalone fourth-quarter report.
Chubb acquired Cigna’s Asian accident, supplemental health, and life insurance operations on July 1, 2022, for approximately $5.4 billion. The acquisition’s results were included from that date. On January 4, 2023, Chubb increased its Huatai Group ownership from 47.3% to 64.2%; additional purchases remained subject to closing conditions.
Financial results and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net premiums written | $41.8 billion | $37.9 billion | +10.3% |
| Net premiums earned | $40.4 billion | $36.4 billion | +11.1% |
| Total revenues | $43.2 billion | $41.0 billion | +5.4% |
| Net investment income | $3.7 billion | $3.5 billion | +8.3% |
| Net realized gains (losses) | $(965) million | $1.2 billion | Unfavorable swing |
| Net income | $5.3 billion | $8.5 billion | -37.8% |
| Diluted earnings per share | $12.55 | $19.27 | -34.9% |
| Operating cash flow | $11.2 billion | $11.1 billion | +0.8% |
The P&C combined ratio improved to 87.6% from 89.1%; below 100% indicates underwriting profit. The current accident-year combined ratio excluding catastrophe losses was 84.2%, versus 84.8%. Catastrophe losses were $2.2 billion, compared with $2.4 billion, led by Hurricane Ian ($975 million) and winter storm Elliott ($400 million). Favorable prior-period development was $876 million, including adverse development of $155 million for molestation claims and $113 million for legacy asbestos and environmental exposures.
Net income fell mainly because 2022 included after-tax mark-to-market losses on public and private equities of $791 million, compared with gains of $2.4 billion in 2021. Rising interest rates also drove substantial unrealized fixed-income losses recorded in other comprehensive income. Net investment income reached a record $3.7 billion, reflecting higher reinvestment rates.
Total assets were $199.1 billion and shareholders’ equity was $50.5 billion at year-end, down from $200.1 billion and $59.7 billion, respectively. Equity was reduced by $9.5 billion of after-tax unrealized investment losses, $927 million of foreign-currency translation losses, and $4.4 billion returned to shareholders through repurchases and dividends.
Cash and restricted cash totaled $2.1 billion. Total investments were $113.6 billion. Debt included $475 million of short-term debt, $14.4 billion of long-term debt, and $308 million of trust preferred securities; $1.4 billion of repurchase agreements was reported separately. Financial debt was 22.6% of total capitalization. Gross and net unpaid loss reserves were $76.3 billion and $59.2 billion, respectively.
Material changes versus 2021
- Premium growth reflected stronger retention, rate and exposure increases, new business, and the Cigna acquisition. Cigna contributed $1.4 billion to 2022 net premiums written.
- Commercial P&C and Overseas General combined ratios improved to 83.3% and 84.6%, respectively. North America Personal P&C worsened to 87.5%, while Agriculture worsened to 94.2% amid lower crop-year margins. Global Reinsurance remained unprofitable on underwriting, with a 102.6% combined ratio, although improved from 108.7%.
- Life Insurance segment income rose to $704 million from $418 million, including the acquired Asian business. Deposits on universal life and investment contracts declined 26.2% to $1.8 billion, principally due to weaker deposit-product conditions in Taiwan.
- Shareholders’ equity declined despite positive net income, primarily reflecting market-value losses on investments. Chubb repurchased $3.0 billion of shares, compared with $4.9 billion in 2021, and paid $1.4 billion in dividends.
Outlook, commentary, risks, and unusual items
Management described 2022 as an outstanding year for underlying business and investment performance and said the company was starting 2023 with strong first-quarter momentum, especially in Asian consumer insurance. Management expects investment income to benefit as cash flows are reinvested at higher rates and cited growth opportunities in Asian life insurance. The filing provides no formal full-year earnings or premium guidance.
Key exposures include severe catastrophes and climate-related loss trends; uncertainty in long-tail casualty, asbestos and environmental, and molestation reserves; inflation and social inflation; reinsurance availability and collectability; investment-market and interest-rate volatility; and foreign-exchange movements. A 100-basis-point rate increase was estimated to reduce fixed-income portfolio fair value by $4.4 billion. Management cautions that modeled catastrophe losses are uncertain and assume reinsurance is collectible.
Notable items include the $800 million Boy Scouts of America abuse-claims settlement agreement: $300 million had been paid by year-end, with the remaining $500 million expected to be paid in 2023, subject to required approvals. Chubb also recorded $48 million of one-time Cigna integration costs. Adoption of long-duration insurance accounting guidance effective January 1, 2023 was expected to reduce January 1, 2021 beginning equity by approximately $1.8 billion after tax; it was expected to have an immaterial impact on equity at December 31, 2022. The acquired Cigna business, representing about 3% of consolidated assets and revenues, was excluded from the 2022 internal-control assessment while integration work continued; the auditor likewise excluded it from its controls audit.
Most important facts for investors to verify
- How much of earnings and underwriting performance depends on favorable prior-period reserve development, and whether casualty, molestation, and A&E reserves develop as estimated.
- Actual catastrophe claims and reinsurance recoveries, including collectability of the $19.2 billion gross reinsurance recoverable balance and exposure to Century Indemnity.
- Whether investment income continues to rise as assets reinvest at higher rates, and how investment values, realized losses, and equity respond to market conditions.
- Progress integrating Cigna’s Asian operations, the final purchase-price allocation, and completion and consolidation of the remaining Huatai ownership transactions.
- Liquidity and capital flexibility, including the holding company’s dependence on subsidiary distributions, debt and repurchase-agreement maturities, and regulatory limits on dividends and share repurchases.