Exhibit 99.3

 

 

 

 

 

Chubb Limited

Financial Supplement

Legacy Chubb Corporation Financial Results for the

Quarter and Year Ended December 31, 2015

 

Investor Contact

Helen M. Wilson

Phone: (441) 299-9283

email: investorrelations@chubb.com

This report is for informational purposes only. It should be read in conjunction with documents filed by Chubb Limited with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

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THE CHUBB CORPORATION

SUPPLEMENTARY INVESTOR INFORMATION

TABLE OF CONTENTS

DECEMBER 31, 2015

 

		Page
The Chubb Corporation:
Consolidated Balance Sheet Highlights		1
Share Repurchase Activity		2
Summary of Invested Assets:
Corporate		3
Property and Casualty		3
Investment Income After Taxes:
Corporate		4
Property and Casualty		4
Property and Casualty Insurance Group:
Statutory Policyholders’ Surplus		4
Change in Net Unpaid Losses		5
Underwriting Results - Quarterly		6-10
Underwriting Results - Year-To-Date		11-15
Definitions of Key Terms		16-17

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THE CHUBB CORPORATION

CONSOLIDATED BALANCE SHEET HIGHLIGHTS

(in millions, except per share amounts)

 

		December 31 2015								December 31 2014
						% of Total								% of Total
Invested Assets (at carrying value)
Short Term Investments		$	4,631				11	%		$	1,318				3	%
Fixed Maturities
Tax Exempt			20,000				46				19,772				45
Taxable			15,703				37				19,008				44
Equity Securities			1,279				3				1,964				5
Other Invested Assets			1,371				3				1,423				3
Total Invested Assets		$	42,984				100	%		$	43,485				100	%
Unrealized Appreciation of Investments
Fixed Maturities		$	1,480							$	1,822
Equity Securities			465								875
			1,945								2,697
Deferred Income Tax Liability			681								944
		$	1,264							$	1,753
Fixed Maturities - Average Credit Rating			Aa3								Aa3
Fixed Maturities - Average Duration (in years)			4.2								4.0
Capitalization
Long Term Debt		$	3,300							$	3,300
Shareholders’ Equity			16,694								16,296
Total Capitalization		$	19,994							$	19,596
Debt as a Percentage of Total Capitalization			16.5	%							16.8	%
Actual Common Shares Outstanding			227.5								232.4
Book Value Per Common Share		$	73.38							$	70.12
Book Value Per Common Share, with Available-for-Sale Fixed Maturities at Amortized Cost		$	69.15							$	65.03

 

Page 1 of 17

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THE CHUBB CORPORATION

SHARE REPURCHASE ACTIVITY

(dollars in millions, except per share amounts)

 

		Periods Ended December 31
		Fourth Quarter 2015				Twelve Months 2015				From December 2005 to December 31, 2015
Cost of Shares Repurchased		$	—			$	604			$	14,072
Average Cost Per Share		$	—			$	99.83			$	59.88
Shares Repurchased			—				6,046,623				235,013,012

During the period from December 2005 through January 2014, the Board of Directors periodically authorized share repurchase programs. Pursuant to these authorizations, approximately 229 million shares of the Corporation’s common stock were repurchased. No shares or funds remain available under these authorizations.

In January 2015, the Board of Directors authorized the repurchase of up to $1.3 billion of the Corporation’s common stock. The Corporation suspended repurchases of its common stock in connection with its agreeing to be acquired by ACE Limited, which was announced on July 1, 2015. As of December 31, 2015, approximately $749 million remained under this authorization.

 

Page 2 of 17

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THE CHUBB CORPORATION

SUMMARY OF INVESTED ASSETS

AS OF DECEMBER 31

CORPORATE

 

		Cost or								Carrying
		Amortized Cost								Value (a)
		2015				2014				2015				2014
		(in millions)
Short Term Investments		$	2,965			$	585			$	2,965			$	585
Taxable Fixed Maturities			246				1,231				249				1,244
TOTAL		$	3,211			$	1,816			$	3,214			$	1,829

PROPERTY AND CASUALTY

 

		Cost or								Carrying
		Amortized Cost								Value (a)
		2015				2014				2015				2014
		(in millions)
Short Term Investments		$	1,666			$	733			$	1,666			$	733
Fixed Maturities
Tax Exempt			18,946				18,614				20,000				19,772
Taxable			15,031				17,113				15,454				17,764
Equity Securities			814				1,089				1,279				1,964
Other Invested Assets			1,371				1,423				1,371				1,423
TOTAL		$	37,828			$	38,972			$	39,770			$	41,656

 

(a)	Short term investments are carried at amortized cost, which approximates fair value. Fixed maturities and equity securities are carried at fair value. Other invested assets include private equity limited partnerships carried at the Corporation’s equity in the net assets of the partnerships.

 

Page 3 of 17

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THE CHUBB CORPORATION

INVESTMENT INCOME AFTER TAXES

 

		Periods Ended December 31
		Fourth Quarter								Twelve Months
		2015				2014				2015				2014
		(in millions)
CORPORATE INVESTMENT INCOME		$	3			$	4			$	13			$	15
PROPERTY AND CASUALTY INVESTMENT INCOME
Tax Exempt Interest		$	157			$	163			$	647			$	659
Taxable Interest			89				95				361				397
Other			14				15				56				58
Investment Expenses			(8	)			(6	)			(30	)			(25	)
TOTAL		$	252			$	267			$	1,034			$	1,089
Effective Tax Rate			17.6	%			17.8	%			17.6	%			18.1	%
After-Tax Annualized Yield			2.59	%			2.64	%			2.62	%			2.73	%

After-tax annualized yield is based on the average invested assets for the periods presented, with fixed maturities at amortized cost and equity securities at fair value.

STATUTORY POLICYHOLDERS’ SURPLUS

AS OF DECEMBER 31

 

		2015				2014				2013
		(in millions)
Estimated Statutory Policyholders’ Surplus		$	13,500			$	15,127			$	15,024
Rolling Year Statutory Net Premiums Written		$	12,622			$	12,593			$	12,214
Ratio of Statutory Net Premiums Written to Policyholders’ Surplus			0.93:1				0.83:1				0.81:1

Statutory Policyholders’ Surplus and Net Premiums Written include all domestic and foreign property and casualty subsidiaries.

 

 

Page 4 of 17

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THE CHUBB CORPORATION

PROPERTY AND CASUALTY

CHANGE IN NET UNPAID LOSSES

TWELVE MONTHS ENDED DECEMBER 31, 2015

 

		Net Unpaid Losses												IBNR Increase (Decrease)				All Other Unpaid Losses Increase (Decrease)
		Dec. 31 2015				Dec. 31 2014				Increase (Decrease)
		(in millions)
Personal Insurance
Automobile		$	383			$	397			$	(14	)		$	(7	)		$	(7	)
Homeowners			765				748				17				(3	)			20
Other			942				1,000				(58	)			(17	)			(41	)
Total Personal			2,090				2,145				(55	)			(27	)			(28	)
Commercial Insurance
Multiple Peril			1,739				1,750				(11	)			7				(18	)
Casualty			6,383				6,514				(131	)			(25	)			(106	)
Workers’ Compensation			3,138				2,918				220				93				127
Property and Marine			900				883				17				(12	)			29
Total Commercial			12,160				12,065				95				63				32
Specialty Insurance
Professional Liability			6,081				6,480				(399	)			(333	)			(66	)
Surety			86				75				11				7				4
Total Specialty			6,167				6,555				(388	)			(326	)			(62	)
Total Insurance			20,417				20,765				(348	)			(290	)			(58	)
Reinsurance Assumed			231				274				(43	)			(19	)			(24	)
Total		$	20,648			$	21,039			$	(391	)		$	(309	)		$	(82	)

 

Page 5 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE QUARTERS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Personal																Other								Total
		Automobile								Homeowners								Personal								Personal
		2015				2014				2015				2014				2015				2014				2015				2014
Net Premiums Written		$	162			$	182			$	682			$	672			$	243			$	265			$	1,087			$	1,119
Decrease (Increase) in Unearned Premiums			8				1				14				13				(1	)			(11	)			21				3
Net Premiums Earned			170				183				696				685				242				254				1,108				1,122
Net Losses Paid			118				122				368				339				168				137				654				598
Increase (Decrease) in Outstanding Losses			(2	)			(2	)			(52	)			(27	)			(29	)			—				(83	)			(29	)
Net Losses Incurred			116				120				316				312				139				137				571				569
Expenses Incurred			51				54				218				208				96				109				365				371
Dividends Incurred			—				—				—				—				—				—				—				—
Statutory Underwriting Income (Loss)		$	3			$	9			$	162			$	165			$	7			$	8			$	172			$	182
Ratios After Dividends to Policyholders:
Loss			68.2	%			65.5	%			45.4	%			45.5	%			57.4	%			54.0	%			51.5	%			50.7	%
Expense			31.5				29.7				32.0				31.0				39.5				41.1				33.6				33.2
Combined			99.7	%			95.2	%			77.4	%			76.5	%			96.9	%			95.1	%			85.1	%			83.9	%
Premiums Written as a % of Total			5.3	%			5.8	%			22.4	%			21.4	%			8.0	%			8.5	%			35.7	%			35.7	%

 

Page 6 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE QUARTERS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Commercial Multiple Peril								Commercial Casualty								Commercial Workers’ Compensation								Commercial Property and Marine								Total Commercial
		2015				2014				2015				2014				2015				2014				2015				2014				2015				2014
Net Premiums Written		$	270			$	284			$	376			$	393			$	291			$	284			$	331			$	357			$	1,268			$	1,318
Decrease (Increase) in Unearned Premiums			6				(3	)			21				14				28				2				29				7				84				20
Net Premiums Earned			276				281				397				407				319				286				360				364				1,352				1,338
Net Losses Paid			131				156				239				289				140				123				212				196				722				764
Increase (Decrease) in Outstanding Losses			27				(12	)			(17	)			(1	)			55				37				17				(10	)			82				14
Net Losses Incurred			158				144				222				288				195				160				229				186				804				778
Expenses Incurred			104				96				112				113				68				61				119				119				403				389
Dividends Incurred			1				1				—				1				9				10				—				—				10				12
Statutory Underwriting Income (Loss)		$	13			$	40			$	63			$	5			$	47			$	55			$	12			$	59			$	135			$	159
Ratios After Dividends to Policyholders:
Loss			57.4	%			51.5	%			55.9	%			71.0	%			62.9	%			57.9	%			63.6	%			51.1	%			59.9	%			58.7	%
Expense			38.7				33.9				29.8				28.8				24.1				22.3				36.0				33.3				32.0				29.8
Combined			96.1	%			85.4	%			85.7	%			99.8	%			87.0	%			80.2	%			99.6	%			84.4	%			91.9	%			88.5	%
Premiums Written as a % of Total			8.9	%			9.1	%			12.3	%			12.5	%			9.5	%			9.1	%			10.9	%			11.3	%			41.6	%			42.0	%

 

 

Page 7 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE QUARTERS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Professional Liability								Surety								Total Specialty
		2015				2014				2015				2014				2015				2014
Net Premiums Written		$	616			$	628			$	75			$	73			$	691			$	701
Decrease (Increase) in Unearned Premiums			(38	)			(45	)			—				—				(38	)			(45	)
Net Premiums Earned			578				583				75				73				653				656
Net Losses Paid			395				492				(5	)			4				390				496
Increase (Decrease) in Outstanding Losses			(76	)			(174	)			8				(1	)			(68	)			(175	)
Net Losses Incurred			319				318				3				3				322				321
Expenses Incurred			166				162				29				32				195				194
Dividends Incurred			—				—				1				1				1				1
Statutory Underwriting Income (Loss)		$	93			$	103			$	42			$	37			$	135			$	140
Ratios After Dividends to Policyholders:
Loss			55.2	%			54.5	%			4.0	%			4.2	%			49.3	%			49.0	%
Expense			26.9				25.8				39.2				44.4				28.3				27.7
Combined			82.1	%			80.3	%			43.2	%			48.6	%			77.6	%			76.7	%
Premiums Written as a % of Total			20.2	%			20.0	%			2.5	%			2.3	%			22.7	%			22.3	%

 

Page 8 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE QUARTERS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Total Insurance								Reinsurance Assumed								Worldwide Total
		2015				2014				2015				2014				2015				2014
Net Premiums Written		$	3,046			$	3,138			$	1			$	—			$	3,047			$	3,138
Decrease (Increase) in Unearned Premiums			67				(22	)			—				—				67				(22	)
Net Premiums Earned			3,113				3,116				1				—				3,114				3,116
Net Losses Paid			1,766				1,858				8				7				1,774				1,865
Increase (Decrease) in Outstanding Losses			(69	)			(190	)			(12	)			(6	)			(81	)			(196	)
Net Losses Incurred			1,697				1,668				(4	)			1				1,693				1,669
Expenses Incurred			963				954				—				—				963				954
Dividends Incurred			11				13				—				—				11				13
Statutory Underwriting Income (Loss)		$	442			$	481			$	5			$	(1	)			447				480
Decrease in Deferred Acquisition Costs																			(12	)			(3	)
GAAP Underwriting Income																		$	435			$	477
Ratios After Dividends to Policyholders:
Loss			54.7	%			53.8	%			*	%			*	%			54.6	%			53.8	%
Expense			31.7				30.5				*				*				31.7				30.5
Combined			86.4	%			84.3	%			*	%			*	%			86.3	%			84.3	%
Premiums Written as a % of Total			100.0	%			100.0	%			0.0	%			0.0	%			100.0	%			100.0	%

 

*	Combined, loss and expense ratios are no longer presented for the Reinsurance Assumed business since it is in runoff.

 

Page 9 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE QUARTERS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		United States								Outside the United States								Worldwide Total
		2015				2014				2015				2014				2015				2014
Net Premiums Written		$	2,377			$	2,362			$	670			$	776			$	3,047			$	3,138
Decrease (Increase) in Unearned Premiums			77				—				(10	)			(22	)			67				(22	)
Net Premiums Earned			2,454				2,362				660				754				3,114				3,116
Net Losses Paid			1,392				1,426				382				439				1,774				1,865
Increase (Decrease) in Outstanding Losses			(49	)			(211	)			(32	)			15				(81	)			(196	)
Net Losses Incurred			1,343				1,215				350				454				1,693				1,669
Expenses Incurred			701				655				262				299				963				954
Dividends Incurred			11				13				—				—				11				13
Statutory Underwriting Income (Loss)		$	399			$	479			$	48			$	1				447				480
Decrease in Deferred Acquisition Costs																			(12	)			(3	)
GAAP Underwriting Income																		$	435			$	477
Ratios After Dividends to Policyholders:
Loss			55.0	%			51.7	%			53.0	%			60.2	%			54.6	%			53.8	%
Expense			29.6				27.9				39.1				38.5				31.7				30.5
Combined			84.6	%			79.6	%			92.1	%			98.7	%			86.3	%			84.3	%
Premiums Written as a % of Total			78.0	%			75.3	%			22.0	%			24.7	%			100.0	%			100.0	%

 

Page 10 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Personal Automobile								Homeowners								Other Personal								Total Personal
		2015				2014				2015				2014				2015				2014				2015				2014
Net Premiums Written		$	701			$	740			$	2,821			$	2,765			$	988			$	1,003			$	4,510			$	4,508
Decrease (Increase) in Unearned Premiums			2				(16	)			(38	)			(55	)			(2	)			(19	)			(38	)			(90	)
Net Premiums Earned			703				724				2,783				2,710				986				984				4,472				4,418
Net Losses Paid			456				466				1,535				1,500				562				476				2,553				2,442
Increase (Decrease) in Outstanding Losses			13				13				36				43				(23	)			42				26				98
Net Losses Incurred			469				479				1,571				1,543				539				518				2,579				2,540
Expenses Incurred			223				227				893				866				392				415				1,508				1,508
Dividends Incurred			—				—				—				—				—				—				—				—
Statutory Underwriting Income		$	11			$	18			$	319			$	301			$	55			$	51			$	385			$	370
Ratios After Dividends to Policyholders:
Loss			66.7	%			66.1	%			56.4	%			57.0	%			54.6	%			52.6	%			57.7	%			57.5	%
Expense			31.8				30.7				31.7				31.3				39.7				41.4				33.4				33.4
Combined			98.5	%			96.8	%			88.1	%			88.3	%			94.3	%			94.0	%			91.1	%			90.9	%
Premiums Written as a % of Total			5.6	%			5.9	%			22.3	%			21.9	%			7.8	%			8.0	%			35.7	%			35.8	%

 

Page 11 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Commercial Multiple Peril								Commercial Casualty								Commercial Workers’ Compensation								Commercial Property and Marine								Total Commercial
		2015				2014				2015				2014				2015				2014				2015				2014				2015				2014
Net Premiums Written		$	1,113			$	1,121			$	1,619			$	1,644			$	1,280			$	1,158			$	1,462			$	1,479			$	5,474			$	5,402
Decrease (Increase) in Unearned Premiums			(1	)			(4	)			10				(16	)			(44	)			(51	)			(10	)			(50	)			(45	)			(121	)
Net Premiums Earned			1,112				1,117				1,629				1,628				1,236				1,107				1,452				1,429				5,429				5,281
Net Losses Paid			570				548				942				1,029				546				513				799				848				2,857				2,938
Increase (Decrease) in Outstanding Losses			17				20				(5	)			11				229				134				42				8				283				173
Net Losses Incurred			587				568				937				1,040				775				647				841				856				3,140				3,111
Expenses Incurred			421				411				458				469				280				252				511				505				1,670				1,637
Dividends Incurred			1				1				—				1				37				39				—				—				38				41
Statutory Underwriting Income		$	103			$	137			$	234			$	118			$	144			$	169			$	100			$	68			$	581			$	492
Ratios After Dividends to Policyholders:
Loss			52.8	%			50.9	%			57.5	%			63.9	%			64.7	%			60.6	%			57.9	%			59.9	%			58.3	%			59.4	%
Expense			37.9				36.7				28.3				28.6				22.5				22.5				35.0				34.1				30.7				30.5
Combined			90.7	%			87.6	%			85.8	%			92.5	%			87.2	%			83.1	%			92.9	%			94.0	%			89.0	%			89.9	%
Premiums Written as a % of Total			8.8	%			8.9	%			12.8	%			13.1	%			10.1	%			9.2	%			11.6	%			11.7	%			43.3	%			42.9	%

 

Page 12 of 17

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Professional Liability								Surety								Total Specialty
		2015				2014				2015				2014				2015				2014
Net Premiums Written		$	2,340			$	2,381			$	309			$	300			$	2,649			$	2,681
Decrease (Increase) in Unearned Premiums			(31	)			(52	)			(1	)			(1	)			(32	)			(53	)
Net Premiums Earned			2,309				2,329				308				299				2,617				2,628
Net Losses Paid			1,416				1,550				1				62				1,417				1,612
Increase (Decrease) in Outstanding Losses			(183	)			(286	)			12				7				(171	)			(279	)
Net Losses Incurred			1,233				1,264				13				69				1,246				1,333
Expenses Incurred			657				666				127				130				784				796
Dividends Incurred			—				—				4				4				4				4
Statutory Underwriting Income		$	419			$	399			$	164			$	96			$	583			$	495
Ratios After Dividends to Policyholders:
Loss			53.4	%			54.2	%			4.3	%			23.4	%			47.7	%			50.8	%
Expense			28.1				28.0				41.6				43.9				29.6				29.7
Combined			81.5	%			82.2	%			45.9	%			67.3	%			77.3	%			80.5	%
Premiums Written as a % of Total			18.5	%			18.9	%			2.5	%			2.4	%			21.0	%			21.3	%

 

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		Total Insurance								Reinsurance Assumed								Worldwide Total
		2015				2014				2015				2014				2015				2014
Net Premiums Written		$	12,633			$	12,591			$	—			$	1			$	12,633			$	12,592
Decrease (Increase) in Unearned Premiums			(115	)			(264	)			—				—				(115	)			(264	)
Net Premiums Earned			12,518				12,327				—				1				12,518				12,328
Net Losses Paid			6,827				6,992				31				38				6,858				7,030
Increase (Decrease) in Outstanding Losses			138				(8	)			(43	)			(37	)			95				(45	)
Net Losses Incurred			6,965				6,984				(12	)			1				6,953				6,985
Expenses Incurred			3,962				3,941				—				—				3,962				3,941
Dividends Incurred			42				45				—				—				42				45
Statutory Underwriting Income		$	1,549			$	1,357			$	12			$	—				1,561				1,357
Increase in Deferred Acquisition Costs																			32				45
GAAP Underwriting Income																		$	1,593			$	1,402
Ratios After Dividends to Policyholders:
Loss			55.8	%			56.9	%			*	%			*	%			55.7	%			56.9	%
Expense			31.5				31.4				*				*				31.5				31.4
Combined			87.3	%			88.3	%			*	%			*	%			87.2	%			88.3	%
Premiums Written as a % of Total			100.0	%			100.0	%			0.0	%			0.0	%			100.0	%			100.0	%

 

*	Combined, loss and expense ratios are no longer presented for the Reinsurance Assumed business since it is in runoff.

 

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THE CHUBB CORPORATION — WORLDWIDE

PROPERTY AND CASUALTY UNDERWRITING RESULTS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2015 AND 2014

(DOLLARS IN MILLIONS)

 

		United States								Outside the United States								Worldwide Total
		2015				2014				2015				2014				2015				2014
Net Premiums Written		$	9,858			$	9,513			$	2,775			$	3,079			$	12,633			$	12,592
Decrease (Increase) in Unearned Premiums			(92	)			(197	)			(23	)			(67	)			(115	)			(264	)
Net Premiums Earned			9,766				9,316				2,752				3,012				12,518				12,328
Net Losses Paid			5,374				5,333				1,484				1,697				6,858				7,030
Increase (Decrease) in Outstanding Losses			163				(13	)			(68	)			(32	)			95				(45	)
Net Losses Incurred			5,537				5,320				1,416				1,665				6,953				6,985
Expenses Incurred			2,878				2,749				1,084				1,192				3,962				3,941
Dividends Incurred			42				45				—				—				42				45
Statutory Underwriting Income		$	1,309			$	1,202			$	252			$	155				1,561				1,357
Increase in Deferred Acquisition Costs																			32				45
GAAP Underwriting Income																		$	1,593			$	1,402
Ratios After Dividends to Policyholders:
Loss			57.0	%			57.4	%			51.4	%			55.3	%			55.7	%			56.9	%
Expense			29.3				29.0				39.1				38.7				31.5				31.4
Combined			86.3	%			86.4	%			90.5	%			94.0	%			87.2	%			88.3	%
Premiums Written as a % of Total			78.0	%			75.5	%			22.0	%			24.5	%			100.0	%			100.0	%

 

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THE CHUBB CORPORATION

Definitions of Key Terms

Underwriting Income (Loss)

Management evaluates underwriting results separately from investment results. The underwriting operations consist of four separate business units: personal insurance, commercial insurance, specialty insurance and reinsurance assumed. Performance of the business units is measured based on statutory underwriting results. Statutory accounting principles applicable to property and casualty insurance companies differ in certain respects from generally accepted accounting principles (GAAP). Under statutory accounting principles, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned. Statutory underwriting income (loss) is arrived at by reducing premiums earned by losses and loss expenses incurred and statutory underwriting expenses incurred.

Management uses underwriting results determined in accordance with GAAP, among other measures, to assess the overall performance of the underwriting operations. To convert statutory underwriting results to a GAAP basis, certain policy acquisition expenses are deferred and amortized over the period in which the related premiums are earned. Underwriting income (loss) determined in accordance with GAAP is defined as premiums earned less losses and loss expenses incurred and GAAP underwriting expenses incurred.

Property and Casualty Investment Income After Income Tax

Management uses property and casualty investment income after income tax, a non-GAAP financial measure, to evaluate its investment results because it reflects the impact of any change in the proportion of tax exempt investment income to total investment income and is therefore more meaningful for analysis purposes than investment income before income tax.

Book Value per Common Share with Available-for-Sale Fixed Maturities at Amortized Cost

Book value per common share represents the portion of consolidated shareholders’ equity attributable to one share of common stock outstanding as of the balance sheet date. Consolidated shareholders’ equity includes, as part of accumulated other comprehensive income or loss, the after-tax appreciation or depreciation, including unrealized other-than-temporary impairment losses, of the Corporation’s available-for-sale fixed maturities, which are carried at fair value. The appreciation or depreciation of available-for-sale fixed maturities is subject to fluctuation due to changes in interest rates and therefore could distort the analysis of trends. Management believes that book value per common share with available-for-sale fixed maturities at amortized cost, a non-GAAP financial measure, is an important measure of the underlying equity attributable to one share of common stock.

Combined Loss and Expense Ratio or Combined Ratio

The combined loss and expense ratio, expressed as a percentage, is the key measure of underwriting profitability. Management uses the combined loss and expense ratio calculated in accordance with statutory accounting principles applicable to property and casualty insurance companies to evaluate the performance of the underwriting operations. It is the sum of the ratio of losses and loss expenses to premiums earned (loss ratio) and the ratio of statutory underwriting expenses to premiums written (expense ratio) after reducing both premium amounts by dividends to policyholders.

 

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THE CHUBB CORPORATION

Definitions of Key Terms

 

Operating Income

Operating income, a non-GAAP financial measure, is net income excluding after-tax realized investment gains and losses. Management uses operating income, among other measures, to evaluate its performance because the realization of investment gains and losses in any given period is largely discretionary as to timing and can fluctuate significantly, which could distort the analysis of trends.

Return on Equity and Operating Return on Equity

Return on equity is the ratio of annualized net income divided by average shareholders’ equity. Average shareholders’ equity is the average of the beginning and all quarter-end balances within the period.

Operating return on equity, a non-GAAP measure, is the ratio of annualized operating income divided by average shareholders’ equity excluding the after-tax unrealized appreciation or depreciation of investments. Consolidated shareholders’ equity includes, as part of accumulated other comprehensive income or loss, the after-tax appreciation or depreciation, including unrealized other-than-temporary impairment losses, of the Corporation’s available-for-sale fixed maturities and equity securities, which are carried at fair value. The appreciation or depreciation of available-for-sale fixed maturities and equity securities is subject to fluctuation and could distort the analysis of trends. Average shareholders’ equity excluding the after-tax unrealized appreciation or depreciation of investments is the average of the beginning and all quarter-end balances within the period. Management uses operating return on equity, among other measures, to assess the overall performance of the Corporation.

 

		Periods Ended December 31
		Fourth Quarter								Twelve Months
		2015				2014				2015				2014
		(dollars in millions)
Annualized Net Income		$	2,664			$	2,232			$	2,136			$	2,100
Average Shareholders’ Equity		$	16,533			$	16,401			$	16,288			$	16,325
Return on Equity			16.1	%			13.6	%			13.1	%			12.9	%
Annualized Operating Income		$	1,876			$	2,176			$	1,864			$	1,858
Average Shareholders’ Equity Excluding Unrealized Appreciation or Depreciation		$	15,167			$	14,699			$	14,721			$	14,767
Operating Return on Equity			12.4	%			14.8	%			12.7	%			12.6	%

 

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