Acquisitions

9 Months Ended

Sep. 30, 2022

Cigna’s Accident and Health (A&H) and Life Insurance Business in Asian Markets

On July 1, 2022, we completed the acquisition of the life and non-life insurance companies that house the personal accident, supplemental health, and life insurance business of Cigna in six Asian markets. Chubb paid $5.36 billion in cash for the operations, which include Cigna's accident and health (A&H) and life business in Korea, Taiwan, New Zealand, Thailand, Hong Kong, and Indonesia, collectively referred to as Cigna's business in Asia. The reduction in the final purchase price from the original agreement reflects the impacts of rising interest rates and foreign exchange rates on acquired book value and other minor adjustments. This complementary strategic acquisition expands our presence and advances our long-term growth opportunity in Asia. Effective July 1, 2022, the results of operations of this acquired business are reported primarily in our Life Insurance segment and, to a lesser extent, our Overseas General Insurance segment.

The interim consolidated financial statements include the results of Cigna's business in Asia from July 1, 2022. The acquisition of Cigna's business in Asia generated $1,340 million of goodwill, attributable to expected growth and profitability, and $269 million of other intangible assets. None of the goodwill is expected to be deductible for income tax purposes. Additionally, the acquisition of Cigna's business in Asia generated $3,379 million of value of business acquired (VOBA). Refer to Note 7 for more information. Chubb financed the transaction through a combination of available cash and $2.0 billion in repurchase agreement transactions, of which $1.0 billion were outstanding as of September 30, 2022, and due to expire by the end of 2022.

The following table summarizes Chubb's best estimate of fair value of the assets acquired and liabilities assumed at July 1, 2022. The fair value of assets and liabilities, including intangible assets and tax-related items (classified below in Other assets and Other liabilities), are preliminary and may change with offsetting adjustments to goodwill. Chubb may make further adjustments to its purchase price allocation through the end of the permissible one-year measurement period. Chubb does not expect changes, if any, to materially affect its financial position, results of operations, or cash flows.


Preliminary estimate of assets acquired and liabilities assumed from Cigna's business in Asia	July 1
(in millions of U.S. dollars)	2022
Assets
Investments and Cash	$	5,311
Accrued investment income	33
Insurance and reinsurance balances receivable	52
Reinsurance recoverable on losses and loss expenses	3
Reinsurance recoverable on future policy benefits	82
Value of business acquired	3,379
Goodwill and other intangible assets	1,609
Other assets	655
Total assets	$	11,124
Liabilities
Unpaid losses and loss expenses	$	10
Unearned premiums	60
Future policy benefits	3,844
Insurance and reinsurance balances payable	115
Accounts payable, accrued expenses, and other liabilities	925
Deferred tax liabilities	839
Total liabilities	$	5,793

Net acquired assets, including goodwill	5,331
Total	$	11,124

Direct costs related to the acquisition were expensed as incurred. Cigna integration expenses were $23 million and $26 million for the three and nine months ended September 30, 2022, respectively, and include one-time costs that are directly attributable to third-party consulting fees, employee-related retention costs, and other professional and legal fees related to the acquisition.

The following table summarizes the results of operations of the acquired Cigna business in Asia since the acquisition date that have been included within our Consolidated statements of operations for both the three and nine months ended September 30, 2022.


(in millions of U.S. dollars)
Total revenues	$	681
Net income	$	21

The preliminary purchase price allocation to intangible assets recorded in connection with the Cigna acquisition and their related useful lives at July 1, 2022, are as follows:



(in millions of U.S. dollars)	Amount		Weighted-average useful life
Definite life
Agency distribution relationships and renewal rights	$	190	20 years
Unearned premium reserves (UPR) intangible asset	9		1 year

Indefinite life
Trademarks	70		Indefinite

Total identified intangible assets	$	269

The following table presents supplemental unaudited pro forma consolidated information for the periods indicated as though the acquisition of Cigna's business in Asia that occurred on July 1, 2022, had instead occurred on January 1, 2021. The unaudited pro forma consolidated financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated on January 1, 2021, nor is it necessarily indicative of future operating results. Significant assumptions used to determine pro forma operating results include amortization of VOBA and other intangible assets and recognition of interest expense associated with the repurchase agreement transactions used to effect the acquisition.


	Three Months Ended				Nine Months Ended
Pro forma:	September 30				September 30
(in millions of U.S. dollars)	2022		2021		2022		2021
Net premiums earned	$	11,535	$	10,788	$	31,362	$	29,406
Total revenues	$	12,132	$	11,632	$	33,253	$	32,879
Net income	$	825	$	1,894	$	4,203	$	6,649

Huatai Group

Chubb maintains a direct investment in Huatai Insurance Group Co., Ltd. (Huatai Group). Huatai Group is the parent company of, and owns 100 percent of, Huatai Property & Casualty Insurance Co., Ltd. (Huatai P&C), approximately 80 percent of Huatai Life Insurance Co., Ltd. (Huatai Life), and approximately 82 percent of Huatai Asset Management Co., Ltd. (collectively, Huatai). Huatai Group's insurance operations have more than 700 branches and approximately 19 million customers in China.

As of September 30, 2022, Chubb's aggregate ownership interest in Huatai Group was approximately 47.3 percent. Chubb applies the equity method of accounting to its investment in Huatai Group by recording its share of net income or loss in Other (income) expense in the Consolidated statements of operations.

During 2021, Chubb entered into agreements with several counterparties to purchase incremental ownership interests in Huatai Group totaling approximately 31.8 percent for approximately $2.2 billion. In connection with these agreements, Chubb paid approximately $1.1 billion in deposits. In January 2022, we paid $113 million relating to these agreements. Chubb entered into an agreement to acquire an approximate 7.1 percent ownership interest in Huatai Group for approximately $0.5 billion, which was paid as a deposit in 2020. The purchase of the additional ownership interest is contingent upon important conditions.