01—Abstract
Summary
Summary of the 10-K filed February 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Chubb Limited (NYSE: CB) closed 2023 with record results: net income attributable to Chubb was $9.0 billiona versus $5.2 billion in 2022, helped by strong underwriting, record net investment income of $4.9 billion, and a one-time $1.1 billion Bermuda tax-law deferred tax benefit.
Consolidated net premiums written rose 13.5% to $47.4 billionb, and net premiums earned rose 13.3% to $45.7 billion. The P&C combined ratio improved to 86.5% from 87.6%, aided by lower catastrophe losses ($1.8 billion, or 4.5 points) and $773 million of favorable prior period development, which was partly offset by adverse legacy asbestos/environmental and molestation development. Growth was broad-based but partly inorganic.
Consolidation of Huatai Group from July 1, 2023 (now about 76.5% owned) added to premiums, assets, goodwill and noncontrolling interests, and the 2022 Cigna Asia acquisition continued to boost the Life Insurance segment. Operating cash flow was a record $12.6 billionc, and Chubb returned $3.9 billion to shareholders through $2.5 billion of buybacks and $1.4 billion of dividends. Chubb shareholders' equity rose to $59.5 billion, and financial debt to total capitalization fell to 19.5%.
Key watch items for investors include the new 15% Bermuda corporate income tax effective January 1, 2025, reserve adequacy for long-tail casualty lines (gross unpaid losses of $80.1 billiond, about 78% casualty-related), roughly 17% of the fixed income portfolio in below-investment-grade securities, and a 100 bp rate rise that would reduce fixed income fair value by about $5.5 billion. Management also flagged a planned Q4 2023 underwriting action in Major Accounts that reduced premium by about $125 million.
02—Key points
Key Highlights
- Record net income attributable to Chubb of $9.0 billion (up 72% from $5.2 billion), including a one-time $1.1 billion deferred tax benefit from Bermuda's new income tax law
- Consolidated net premiums written up 13.5% to $47.4 billion; net premiums earned up 13.3% to $45.7 billion
- P&C combined ratio improved to 86.5% from 87.6%; catastrophe losses fell to $1.8 billion from $2.2 billion
- Favorable prior period reserve development of $773 million, net of $149 million adverse legacy A&E and $49 million molestation development
- Record net investment income of $4.9 billion (up 32%), driven by higher reinvestment rates and the Huatai consolidation; record operating cash flow of $12.6 billion
- Returned $3.9 billion to shareholders in 2023 ($2.5 billion buybacks, $1.4 billion dividends); $3.6 billion of buyback authorization remained as of February 22, 2024
- Shareholders' equity rose $9.0 billion to $59.5 billion; financial debt to total capitalization declined to 19.5% from 22.6%
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 23, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $49.73B$43.10B | +15.4% |
| Interest Expense | $672.00M$570.00M | +17.9% |
| Net Income | $9.03B$5.25B | +72.1% |
| EPS (Basic) | $21.97$12.50 | +75.8% |
| EPS (Diluted) | $21.80$12.39 | +75.9% |
| Shares Outstanding (Basic) | 410.85M419.78M | −2.1% |
| Shares Outstanding (Diluted) | 414.20M423.53M | −2.2% |
05—Questions
Frequently Asked Questions
What drove the increase in Chubb's 2023 net income?
Net income attributable to Chubb rose to $9.0 billion from $5.2 billion. The main drivers were growth in net premiums earned, lower catastrophe losses, record net investment income, and a one-time $1.1 billion deferred tax benefit from Bermuda's new income tax law. Net realized losses of $607 million partly offset these gains.
How much of the premium growth came from acquisitions versus organic growth?
The consolidation of Huatai Group added about 1.5 points to consolidated net premiums written growth and 1.7 points to net premiums earned growth. The 2022 Cigna Asia acquisition contributed substantially to Life Insurance growth. Excluding these effects, the company reported strong organic growth driven by rate and exposure increases and new business, particularly in property, commercial casualty and homeowners.
What are the main risks to Chubb's loss reserves?
Chubb holds $62.2 billion of net unpaid losses, with about 78% in casualty-related long-tail lines. Reserve estimates for lines such as workers' compensation, excess and umbrella, and asbestos and environmental claims are highly uncertain. For example, a one-point change in the workers' compensation tail factor would move reserves by about $1.1 billion. Management notes that social inflation and reviver statutes for molestation claims could lead to further adverse development.
How will the new Bermuda tax affect Chubb in the future?
Bermuda enacted a 15% corporate income tax effective January 1, 2025, which will apply to Chubb's Bermuda subsidiaries. The company expects this tax to count toward the OECD global minimum tax in jurisdictions that adopt it. The one-time 2023 tax benefit reflected the company's election to step up the tax basis of Bermuda assets, but ongoing earnings will bear the new tax starting in 2025.
How exposed is Chubb's investment portfolio to interest rate and credit risk?
The fixed income portfolio of $114.9 billion has an average duration of 4.8 years and an average credit quality of A/A. A 100 basis point rise in rates would reduce its fair value by about $5.5 billion, or 4.8%, and this would hit shareholders' equity through unrealized losses rather than net income. Roughly 15% of the corporate fixed income portfolio is below investment grade or not rated, and the company notes that credit losses could increase in a recession.
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