01—Abstract
Summary
Summary of the 10-K filed February 24, 2022. Cited figures are marked; the original filing is the authoritative source.
Chubb Limited (NYSE: CB) closed 2021 with record results: net income rose 141.7% to $8.5 billiona from $3.5 billion, driven by record P&C underwriting, higher net premiums earned, and record net investment income.
Net premiums written grew 12.0% to $37.9 billionb (10.5% in constant dollars), led by commercial lines growth of about 17.7%, while consumer lines grew a more modest 1.5%. The P&C combined ratio improved to 89.1% from 96.1%, helped by lower catastrophe losses ($2.4 billion pre-tax versus $3.3 billion in 2020) and $926 million of favorable prior period development, which was partly offset by $443 million of adverse molestation-related development, including the pending Boy Scouts of America settlement. Balance sheet and capital activity were substantial.
Total assets reached $200 billionc and shareholders' equity was $59.7 billion, roughly flat year over year. Operating cash flow was a record $11.1 billion. Chubb returned $6.3 billion to shareholders in 2021 through $4.9 billion of buybacks and $1.4 billion of dividends.
Gross unpaid losses and loss expenses rose to $72.9 billiond, and A&E reserves are a small share of the total at about 2.2 percent of gross loss reserves. Looking ahead, management expects 2022 to bring continued growth and margin improvement in commercial P&C, with rates expected to keep exceeding loss cost trends.
Pending transactions include the approximately $5.75 billion acquisition of Cigna's Asia-Pacific life and A&H business and additional purchases of Huatai Group interests, which together represent roughly $2.2 billion. Key risks flagged in the filing include catastrophe exposure (climate-related and cyber), reserve adequacy for long-tail casualty and A&E lines, reinsurance counterparty risk, and evolving global tax rules such as the OECD minimum tax.
02—Key points
Key Highlights
- Record net income of $8.5 billion (up 141.7% from $3.5 billion), with diluted EPS of $19.27 versus $7.79 in 2020.
- P&C combined ratio improved to 89.1% from 96.1%, supported by lower catastrophe losses ($2.4B pre-tax vs. $3.3B) and $926M of favorable prior period development.
- Net premiums written rose 12.0% to $37.9B, led by commercial lines growth of about 17.7% from positive rate increases and higher new business and retention.
- Record operating cash flow of $11.1B; returned $6.3B to shareholders in 2021 ($4.9B buybacks and $1.4B dividends), with $2.24B of buyback authorization remaining as of February 23, 2022.
- Molestation claims produced $443M of adverse development in 2021, including $375M tied to the pending Boy Scouts of America settlement, a material item in the Corporate segment.
- Pending acquisition of Cigna's Asia-Pacific life and A&H business (~$5.75B) and additional Huatai Group stake purchases (~$2.2B) signal continued international expansion.
- Shareholders' equity of $59.7B and total assets of $200B; book value is essentially flat year over year as strong earnings were offset by buybacks and unrealized investment losses of $2.4B.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 24, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $40.87B$35.99B | +13.5% |
| Interest Expense | $492.00M$516.00M | −4.7% |
| Net Income | $8.53B$3.53B | +141.3% |
| EPS (Basic) | $19.38$7.82 | +147.8% |
| EPS (Diluted) | $19.24$7.79 | +147.0% |
| Shares Outstanding (Basic) | 439.97M451.60M | −2.6% |
| Shares Outstanding (Diluted) | 443.20M453.44M | −2.3% |
05—Questions
Frequently Asked Questions
What drove Chubb's record 2021 net income?
Net income rose to $8.5 billion from $3.5 billion. The main drivers were record P&C underwriting results, with growth in net premiums earned and improvement in the loss and loss expense ratio, plus record net investment income and strong returns from private equity investments. Lower catastrophe losses and higher favorable reserve development also contributed. The 2020 figure was depressed by COVID-19 losses.
How strong is Chubb's underlying underwriting profitability?
The reported P&C combined ratio was 89.1%, and the current accident year combined ratio excluding catastrophe losses was 84.8%, improved from 86.7%. Underlying loss ratio improvement was driven by earned rate exceeding loss cost trends. Both measures suggest solid underwriting margins, though the reported ratio benefits from $926M of favorable prior period development.
What are the main risks to Chubb's reserves and earnings?
Gross unpaid losses and loss expenses were $72.9B, and about 78% are casualty-related long-tail exposures. Management notes that reserve estimates are inherently uncertain, with particular sensitivity in workers' compensation, excess and umbrella liability, A&E, and molestation claims. The filing quantifies sensitivities, such as a 1-point change in the workers' compensation tail factor moving net reserves by about $942M. Catastrophe exposure is also significant: a 1-in-100 U.S. hurricane event produces about $2.7B of modeled pre-tax net losses.
How is Chubb returning capital to shareholders?
In 2021 Chubb repurchased $4.9B of shares at an average price of $175.85 and paid $1.4B in dividends, funded from capital contribution reserves. The Board authorized a one-time $5.0B buyback through June 30, 2022, and the company also plans an annual dividend of up to $3.20 per share for 2022, paid quarterly. Swiss law requires shareholder approval for share cancellations and dividend structures, which adds some process to capital returns.
What should investors watch in 2022?
Key items include closing the Cigna Asia-Pacific life and A&H acquisition, completing the additional Huatai Group purchases subject to Chinese regulatory approval, and whether commercial rate increases continue to exceed loss trends. Investors should also watch the impact of climate and cyber catastrophe exposure, reinsurance recoveries, the Boy Scouts settlement, and pending global minimum tax legislation, which the filing says could raise income taxes in future years.
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