Chubb Limited Investor Presentation December 2016
The New Chubb: A Unique Global P&C Franchise Substantial Scale Customer & Product Diversification 64% commercial, 36% consumer 62% U.S., 38% International #1 P&C insurer by market cap globally $36B gross written premium; $4.5B - $4.6B operating income (2016E) 9 businesses with $2B+ premium ~31,000 employees Wide Geographic Presence 54 Countries, 658 Offices $7B premium and deposits Asia & Latin America (2016E) In-Depth Capabilities Respected Brand Balance Sheet Strength 1 Talent and culture underwriting, claims, engineering Products Distribution Technology and analytics Financial Outperformance 2 Last 10 years: TRS > 8x vs. peers Market cap >3x $48B equity; $62B total capital Financial leverage ~22% Excellent ratings ( AA S&P, A++ A.M. Best) Note: 2016 figures inclusive of first 14 days of January 1. As of September 30, 2016 2. As of November 30, 2016 1
Well Diversified by Product and Customer Product & Customer Mix Geographic Mix Asia life insurance business ($2B) 1 One of the largest supplemental A&H providers globally ($4B) Large Asia & Latin America presence ($7B) 1 - One of the largest P&C portfolios Consumer: 35.9% #1 U.S. high net worth insurer ($5B) A&H 11.8% Personal P&C - Int'l 4.6% Personal P&C - N.A. 13.6% Global Re 2.0% Agr. 5.9% Life 5.9% Comm. P&C - Int'l 16.8% Comm. P&C - N.A. Major & Spec. 25.5% Commercial: 64.1% Comm. P&C - N.A. Mid Market & Small Comm. 13.9% Leading major and multinational accounts insurer ($7B) #3 U.S. excess & surplus ($2B) #1 U.S. commercial lines ($15B) #1 Global professional lines ($4B) Leading U.S. mid-market insurer ($5B) Asia Pacific 12.5% U.K. / Europe 13.5% Canada / Bermuda 5.1% Latin America 7.3% U.S. 61.6% #1 U.S. crop insurer ($2B) Leading international commercial P&C insurer ($6B) ~85% retail in 54 countries ~15% London wholesale (longstanding Lloyd s presence) Total 2016E GPW and Deposits: $37 billion 1 1. Life insurance production includes $1B of deposits collected on universal life and investment contracts. Consistent with GAAP, premiums collected on universal life and investment contracts are considered deposits and excluded from revenues 2
A Strong Start: The First 9 Months Legacy ACE New Chubb ($ in billions, except per share amounts) 9/30/15 9/30/16 Change Gross Premiums Written 1 $18.2 $27.1 1.5x P&C Combined Ratio 1, 2 87.2% 88.2% -- Operating Income 1 $2.4 $3.5 1.5x Shareholders Equity $29.1 $48.4 1.7x Operating Cash Flow $2.7 $3.8 1.4x Operating Income per Share 1 $7.38 $7.42 +1% Book Value per Share 3 $89.88 $103.96 +16% Tangible Book Value per Share 3 $72.25 $60.26-17% (vs. -29% at close) Market Capitalization $33.5 $58.5 1.7x 1. 2016 YTD includes the 14 day period in January prior to transaction closing 2. 2016 YTD combined ratio does not include any impact from purchase accounting adjustments 3. Includes unrealized appreciation/depreciation on investment portfolio 3
Our Key Objectives Integrate and realize efficiencies, unify culture, improve operating and earnings power Realize potential growth and diversification Remain a growing and vital industry leader that serves customers globally Create a unified and exciting culture for employees Generate attractive shareholder returns Invest for the long term Manage risk exposure in line with capital and balance sheet asset and liability risk 4
The Year 1 Story: Integration, Customers and Growth Operational Integration Management team put in place before closing with detailed plans in hand Senior management led 16 work streams with 450 people, actively managing all geographies, lines of business and functions: real estate, IT, culture and people, HR, finance, branding Merger-related expense savings ahead of plan: $800M annualized by end of 2018 versus $650M announced; related costs of $0.62 per $1 of savings ($497M total) Nearly 2,000 positions eliminated globally through October 2016, ~60% of targeted total 2016E 2017E 2018E Annualized Savings $515M $740M $800M Realized Savings $310M $580M $760M Risk & Balance Sheet Integration Harmonized underwriting risk appetite and risk guidelines Underwriting actions taken in certain portfolios not meeting standards or exceeding risk appetite. Actions, which include cancelling or reinsuring certain business, reduce premium but improve risk/reward profile Integrated and rebalanced investment portfolio to improve investment performance at reduced cost (~ $120M more investment income) 2016E Chubb-cancelled business $220M Additional reinsurance purchased $430M Estimated business lost due to concentration $165M Total NPW Impact $815M Customers & Growth Retained customers renewal retention rate in line with or at historic highs: N.A. major accounts 92%; N.A. mid-market 88%; international P&C 85%; N.A. personal lines 94% (excluding Fireman s Fund) Building cross-sell and up-sell momentum: power of the new company generated revenue synergies of circa $300M NPW in 2016 Focused on customers and distribution partners Launched new products small commercial 5
Portfolio Well Balanced to Perform in All P&C Market Conditions Less Favorable Terms & Conditions More Favorable Agriculture 6% 39% U.S. & London Wholesale, Bermuda E&S, Global Re N.A. Major & Specialty 33% International Large P&C Global Small Commercial N.A. Personal Global Mid-Market A&H 22% Int l Personal Life Lesser Pricing Power Greater Commercial Consumer Note: bubble size based on relative GPW and deposits of business; market conditions vary by product and territory 6
Global P&C Industry Expected to Increase $1.7T over Next 10 Years Global P&C Direct Premiums Written, 2015 to 2025E ($ in billions) North America $1,322 $473 $849 4.5% p.a. $945 $340 $605 Europe 4.6% p.a. China $631 14.1% p.a. $463 $169 $470 $213 $256 2015 2025E Growth 6.2% p.a. Asia Pacific Latin America $172 $83 $89 6.8% p.a. Plenty of Room for Smart Growth Global P&C market expected to grow from $2.0T to $3.7T by 2025 Fragmented market: top 10 insurers have only ~20% market share, virtually unchanged from 5 years ago no single player dominates Asia life market represents ~$900B of premium growing to nearly $2T by 2025 Chubb is positioned to capitalize on growth. With just 11 countries with $400M premium or more, plenty of room to grow over time given local presence, deep underwriting culture and product and distribution capabilities. Source: Swiss Re 7
Significant Opportunities for Growth and Diversification Segment Opportunity Chubb Capability Commercial Mid-Market and Small Commercial Major and Global Accounts Cross-sell and Up-sell (Revenue Synergies) Combine complementary product and distribution capabilities to grow and serve new and existing customers in select markets globally Expand business with large, multinational corporations that have complex, interconnected risks globally only few carriers can serve Combine complementary product and distribution capabilities to grow and serve existing large and mid-market customers Breadth of traditional, specialty and package products Deep expertise in specific industries Agency and broker distribution Operations in 54 countries and knowledge of territories Local underwriting globally Claims handling and risk engineering expertise Technology: Worldview, global risk straight-through processing, digital technology/mobile (micro) International A&H Growth of middle-income consumers in select markets Consumer U.S. High Net Worth International Personal Lines North America Combined Insurance Large untapped market: $40B, < 20% with dedicated HNW carriers Select markets in Europe, Asia and Latin America Under-served lower middle income market; mid-market worksite voluntary benefits and Hispanic market Comprehensive product offering Local underwriting globally Exceptional claims and risk control capabilities and reputation Insights from deep and expanded data pools Multi-channel distribution capabilities: brokerage, agency, direct marketing, captive agency force, worksite marketing, bancassurance Technology Asia Life $900B market in region with largest wealth creation potential next 20-30 years 8
Investing for the Long Term Insurance is changing technology, alternative sources of capital, new market entrants, global concentrations of evolving risk types, etc. Continuing to make substantial investments to improve competitive profile across the entire value chain and better position company to grow in a more globalized, digital world Merger efficiencies and increased earnings power provide greater operating freedom to fund investments People Developing next generation of insurance professionals and internationalists Investing in well established training and development and talent management programs Technology & Digital Enhancing foundational technologies from front end to back office, commercial and consumer lines State-of-the-art global infrastructure with enhanced bandwidth and security; anytime, anywhere capabilities; more nimble, flexible and quick; lower cost Continuing investments in data acquisition, management and analytics Transforming Chubb into digitally integrated company that connects to networks around the globe Initiatives underway focusing on consumer, small commercial, agriculture, mid-market and large risk businesses with wide scope: distribution, customer sales and servicing, underwriting and claims Products & Services Enhancing claims and engineering services capabilities Innovating, launching new products industry-driven, emerging exposures-driven, customer segment-driven Brand Promoting, burnishing and protecting the distinctive Chubb brand which stands for excellence, quality and service a unique reputation in the industry Building awareness of Chubb with agents, brokers and customers with global advertising 9
Growth and Capital Management Strategies Producing Superior Shareholder Value Creation Over Time $57B of Capital Generated: Jan 07 Sept 16 Total Return to Shareholders through Nov 16 Capital Returned to Shareholders $10B Capital Invested in Strategic M&A 17 transactions 10-Year 22% 183% 161% Capital Retained $11B $36B 5-Year 108% 137% 29% Pre-Chubb Pre-Chubb $7B $7B 3-Year 35% 31% 4% Chubb Approach to Capital Management Chubb is a growth company as defined by growth in book value while deploying capital efficiently Retaining capital flexibility for risk and growth opportunities has served shareholders well: 5 and 10 year operating ROE (10.7% / 13.5%) well ahead of peers (+271 bps / +367 bps) and well in excess of cost of capital 20+ year record of annual dividend increases with target payout ratio of 30% Announced up to $1B share repurchase program for 2017 No change in long-term strategy preserve capital in line with risk and growth opportunities. Chubb will continue to capture organic growth and consider selective M&A where it enhances strategic position and returns are attractive. 14% 8% 1-Year 6% Chubb Chubb Market Cap Growth ($ in billions) $59.6 $18.5 Nov-06 Nov-16 Peers Peers: AIG, ALL, CNA, HIG, TRV, XL, Zurich 10
2016 Expected Results vs. Original Deal Model Operating Earnings per Share Book Value per Share Operating Return on Equity $9.75 $9.85 $100.00 $102.00 10.2% 10.4% $9.22 $97.88 9.9% Deal Model Forecast 2016 Deal Model Forecast 2016 Deal Model Forecast 2016 11
Financial Update vs. Merger Announcement Metric Announcement Behind On Track Ahead Current Status Expense savings $650M by 2018 $800M by 2018 (+23%) Revenue synergies Balanced with expense savings by 2020 Significant wins to date and momentum beginning to build Underwriting actions Not provided Premium loss including reinsurance more than expected Operating EPS Immediately accretive Operating return on investment ROI exceeds cost of capital in year 2 Double-digit ROI in year 3 Book value per Immediately accretive share 1 On track to be more accretive in 2016 than expected On track to deliver ROIs ahead of original plan BVPS up 7.2% at closing, up 15.8% as of Q3 2016 Tangible book 29% dilutive on close value per share 1 TBVPS down 29.3% at closing, down 16.6% as of Q3 2016 Return to pre-deal level within about 3 years On track to hit pre-deal level in 3 to 3½ years 1. Includes unrealized appreciation/depreciation on investment portfolio 12
Appendix
Explanatory Note This document and the remarks made during the presentation today may contain forward-looking statements, both written and spoken, including as defined in the Private Securities Litigation Reform Act of 1995. Words such as believe, anticipate, estimate, project, should, plan, expect, intend, hope, feel, foresee, will likely result, or will continue, and variations thereof and similar expressions, may identify forward-looking statements and may include statements relating to Company performance including 2016 performance and growth opportunities, pricing and business mix, economic and insurance market conditions including foreign exchange, and completion and integration of acquisitions including our acquisition of The Chubb Corporation and potential synergies, savings and commercial and investment benefits we may realize. Such statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the following: competition, pricing and policy term trends, the levels of new and renewal business achieved, the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, integration activities and performance of acquired companies, loss of key employees or disruptions to our operations, new theories of liability, judicial, legislative, regulatory and other governmental developments, litigation tactics and developments, investigation developments and actual settlement terms, the amount and timing of reinsurance recoverable, credit developments among reinsurers, rating agency action, possible terrorism or the outbreak and effects of war, economic, political, regulatory, insurance and reinsurance business conditions, potential strategic opportunities including acquisitions and our ability to achieve and integrate them, as well as management s response to these factors, and other factors identified in our filings with the Securities and Exchange Commission (SEC). You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The Company undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events, or otherwise. This document and the remarks made during the presentation today may also contain non-gaap financial measures. Reconciliations of these non-gaap financial measures to the most direct comparable GAAP measures and related information are provided in our quarterly earnings press release and financial supplement, which are available on the Investor Relations section of our website at investors.chubb.com, and in the Appendix to this presentation. 14
Regulation G - Non-GAAP Financial Measures Operating income Operating income is a non-gaap financial measure that excludes the after-tax impact of adjusted net realized gains (losses), net realized gains (losses) included in other income (expense) related to partially owned entities, Chubb integration and related expenses, and the amortization of the fair value adjustments related to purchased invested assets and long-term debt from The Chubb Corp acquisition. We exclude realized gains and losses because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the availability of market opportunities. We also exclude Chubb integration and related expenses due to the size and complexity of this acquisition. Chubb integration expenses are incurred by the overall company and are therefore included in Corporate. The costs are not related to the on-going activities of the individual segments and are therefore excluded from our definition of segment income, as well. These integration and related expenses are distortive to our results and are not indicative of our underlying profitability. We believe that excluding these integration and related expenses facilitate the comparison of our financial results to our historical operating results. These expenses include legal and professional fees and all other costs directly related to the integration activities of The Chubb Corp acquisition. In addition, we excluded the pre-acquisition interest expense on the $5.3 billion senior notes issued in November 2015 from operating income because the operations for which the debt was issued were not part of our operating activities prior to the completion of the acquisition. Effective with the close of The Chubb Corp acquisition (January 14, 2016), this debt was considered a cost of our operations and interest expense associated with this debt is included within operating income. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. Operating income should not be viewed as a substitute for net income determined in accordance with GAAP. The following table presents the reconciliation of Net income to Operating income: YTD YTD Q3 2016 Q3 2015 Net income, as reported $ 2,525 $ 2,151 Amortization of fair value adjustment of acquired invested assets and long-term debt, pre-tax (1) (257) - Tax benefit on amortization adjustment 79 - Chubb integration and related expenses, pre tax (368) (9) Tax benefit on Chubb integration and related expenses 106 2 Adjusted net realized gains (losses) (511) (354) Net realized gains (losses) related to unconsolidated entities (2) 65 84 Tax (expense) benefit on adjusted net realized gains (losses) (22) (2) Operating income $ 3,433 $ 2,430 (1) Related to the acquisition of The Chubb Corporation. (2) Realized gains (losses) on partially-owned entities, which are investments where we hold more than an insignificant percentage of the investee's shares. The net income or loss is included in other income (expense). YTD YTD Operating income per share Q3 2016 Q3 2015 Denominator Weighted average shares outstanding 460,631,794 325,904,502 Effect of other dilutive securities 3,439,017 3,269,724 Adj. wtd. avg. shares outstanding and assumed conversions 464,070,811 329,174,226 Diluted earnings per share Operating income $ 7.40 $ 7.38 Amortization of fair value adjustment of acquired invested assets and long-term debt (1) (0.39) - Chubb integration and related expenses (0.56) (0.02) Adjusted net realized gains (losses) (1.01) (0.83) Net income $ 5.44 $ 6.53 15
Regulation G - Non-GAAP Financial Measures (continued) Operating income including the first 14 days of January 2016 prior to the acquisition close The following presents the reconciliation of earnings per share to earnings per share, including the first 14 days of January 2016 prior to the acquisition close: YTD YTD Numerator Q3 2016 Denominator Q3 2016 Operating income as reported $ 3,433 Weighted average shares outstanding and assumed conversions 464,070,811 Add: 14-day stub period income Impact of shares issued in connection with Chubb Corp acquisition 6,719,638 Underwriting income 44 As If adjusted weighted average shares outstanding 470,790,449 Net investment income 45 Interest expense (9) Diluted earnings per share, including 14 day stub period Income tax expense (20) Operating income per share $ 7.42 Total 14-day stub period income 60 Net income per share $ 5.49 Operating income, including 14 day stub period $ 3,493 Net income as reported $ 2,525 Add: 14-day stub period income from above 60 Net income, including 14 day stub period $ 2,585 Tangible book value per share Tangible book value per common share is a non-gaap financial measure and is shareholders' equity less goodwill and other intangible assets, net of tax, divided by the shares outstanding. We believe that goodwill and other intangible assets are not indicative of our underlying insurance results or trends and make book value comparisons to less acquisitive peer companies less meaningful. The following table presents a reconciliation of book value per share to tangible book value per share: September 30 September 30 2016 2015 Shareholders' equity $ 48,372 $ 29,127 Less: goodwill and other intangible assets, net of tax 20,332 5,713 Numerator for tangible book value per share $ 28,040 $ 23,414 Denominator 465,286,110 324,062,368 Book value per common share $ 103.96 $ 89.88 Tangible book value per common share $ 60.26 $ 72.25 16
Regulation G - Non-GAAP Financial Measures (continued) Combined Ratio The 2016 P&C combined ratio presented in this report does not include any impact from purchase accounting adjustments in order to present the underlying profitability of our insurance business. We believe that excluding these adjustments provide visibility and comparability into our results. The P&C combined ratio also includes results from the first 14 days of January prior to the acquisition close. The following table presents the reconciliation of GAAP combined ratio to P&C combined ratio: YTD Q3 2016 GAAP combined ratio 89.0% Less: Acquisition expense elimination 6.2% Less: UPR intangible amortization -7.0% Add: Impact of 14 day stub period - P&C combined ratio 88.2% Operating ROE Operating return on equity (ROE) or ROE calculated using operating income: The ROE numerator includes income adjusted to excludeafter-tax adjusted net realized gains (losses), Chubb integration and related expenses, and the amortization of the fair value adjustment of acquired invested assets and long-term debt. The ROE denominator includes the average shareholders' equity for the period adjusted to exclude unrealized gains (losses) on investments, net of tax. In addition, the denominator was adjusted to account for the weighted-average impact of the $15,527 million issuance of common shares and equity awards related to The Chubb Corp acquisition on January 14, 2016. Operating ROE is a useful measures as it enhances the understanding of the return on shareholders' equity by highlighting the underlying profitability relative to shareholders' equity excluding the effect of unrealized gains and losses on our investments. 17