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General | 9 Months Ended
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Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
General | General a) Basis of presentation Chubb Limited is a holding company incorporated in Zurich, Switzerland. Chubb Limited, through its subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. Chubb operates through the following business segments: North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance. Refer to Note 10 for additional information. The interim unaudited consolidated financial statements, which include the accounts of Chubb Limited and its subsidiaries (collectively, Chubb, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and, in the opinion of management, reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of the results and financial position for such periods. All significant intercompany accounts and transactions, including internal reinsurance transactions, have been eliminated. The results of operations and cash flows for any interim period are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2017 Form 10-K. b) Restricted cash Effective January 1, 2018, we retrospectively adopted guidance on "Restricted Cash" that clarified the presentation of restricted cash on the consolidated statement of cash flows. As a result, we revised the statement of cash flows for the nine months ended September 30, 2017 to include restricted cash in the beginning and ending cash balances. In addition, we reclassified $123 million of Restricted cash from Other assets to a separate line in the balance sheet as of December 31, 2017. Restricted cash in the consolidated balance sheets represents amounts held for the benefit of third parties and is legally or contractually restricted as to withdrawal or usage. Amounts include deposits with U.S. and non-U.S. regulatory authorities, trust funds set up for the benefit of ceding companies, and amounts pledged as collateral to meet financing arrangements. The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that total to the amounts shown in the consolidated statements of cash flows:
| September 30 |  |  | December 31 |
(in millions of U.S. dollars) | 2018 |  |  | 2017 |
Cash | $ | 1,053 |  |  | $ | 728 |
Restricted cash | 104 |  |  | 123 |
Total cash and restricted cash shown in the consolidated statements of cash flows | $ | 1,157 |  |  | $ | 851 |
c) Goodwill During the nine months ended September 30, 2018, Goodwill decreased $209 million, primarily reflecting the impact of foreign exchange. d) Accounting guidance adopted in 2018 Revenue from Contracts with Customers In May 2014, the FASB issued an accounting standard that supersedes most existing revenue recognition guidance. The standard excludes from its scope the accounting for insurance contracts, leases, financial instruments, and certain other agreements that are governed under other GAAP guidance, but could affect the revenue recognition for certain of our claims management and risk control services. The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. This guidance was effective for us on January 1, 2018. The adoption of this guidance did not have a material impact on our financial condition or results of operations given that the majority of our business is outside the scope of this guidance. Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities Effective January 2018, we adopted new accounting guidance on "Recognition and Measurement of Financial Assets and Financial Liabilities" on a modified-retrospective basis. The guidance requires equity investments, other than those accounted for under the equity method of accounting, to be measured at fair value with changes in fair value recognized through net income. The guidance impacts our public equities and cost-method private equities. As a result, we recorded a cumulative-effect adjustment to increase beginning Retained earnings by $417 million after tax ($454 million pre-tax), representing the unrealized appreciation on our equity investments with an offsetting adjustment to decrease Accumulated other comprehensive income. All subsequent changes in fair value of our equity investments are recognized within realized gains (losses) on the consolidated statement of operations. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. Income Taxes Effective January 2018, we adopted new accounting guidance on “Intra-Entity Transfers of Assets Other Than Inventory” on a modified-retrospective basis. Under the new guidance, we will no longer defer taxes on intra-company asset transfers and will recognize any related income tax expense (benefit) immediately through the consolidated statement of operations. As a result, we recorded a cumulative-effect adjustment to decrease beginning Retained earnings by $7 million representing the removal of the deferred tax asset for previous intra-company asset transfer transactions not yet recognized through earnings. Income Tax Accounting Implications of the Tax Cuts and Jobs Act The Tax Cuts and Jobs Act (2017 Tax Act) was signed into legislation in December 2017. The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118), Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which provides guidance for the application of the 2017 Tax Act. The income tax guidance allows for the transition impact of the 2017 Tax Act to be recorded as 1) complete with all accounting implications identified, 2) provisional based on a reasonable estimate, or 3) not recorded as no reasonable estimate was determinable. In December 2017, we recorded a $450 million income tax benefit which was our estimate of the tax effects of the 2017 Tax Act. This amount was recorded as provisional under SAB 118. During the third quarter of 2018, we increased our provisional income tax benefit by $20 million, from $450 million to $470 million. This increase, which is also provisional, relates to the recognition of certain foreign tax credits consistent with proposed regulations issued under IRC Section 965. We will continue to analyze the impact of the 2017 Tax Act. The final amount of the tax benefit recognized may increase or decrease as a result of this analysis and as new regulations and interpretive guidance are released in the fourth quarter of 2018. Changes to the Disclosure Requirements for Fair Value Measurements In August 2018, the FASB issued amendments to modify the disclosure requirements on fair value measurements as part of the disclosure framework project whose objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements. The amendments in this update allow for the removal of (1) the amount and reasons for transfer between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. This update also requires the expanded discussion on unobservable inputs that are significant to the fair value measurement. We have early adopted the amendments that allow the removal of certain disclosures and deferred the adoption of the additional disclosure until the effective date in the first quarter of 2020. The guidance changes disclosure only and did not have an impact on our financial condition or results of operations. e) Accounting guidance not yet adopted Lease Accounting In February 2016, the FASB issued accounting guidance requiring leases with lease terms of more than 12 months to recognize a right of use asset and a corresponding lease liability on the balance sheets. This accounting guidance is effective for us in the first quarter of 2019 on a modified retrospective basis with early adoption permitted. In January 2018, the FASB issued a proposed update that provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. The adoption of this guidance is not expected to have a material effect on our results of operations, financial position or liquidity. Based on the number and type of our leases, we expect that the most significant impact will be the recognition of a right of use asset and a corresponding lease liability for our real estate leases of approximately $800 million. Targeted Improvements to the Accounting for Long-Duration Contracts In August 2018, the FASB issued guidance to improve the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments in this update require more frequent updating of assumptions and a standardized discount rate for the future policy benefit liability, a requirement to use the fair value measurement model for policies with market risk benefits, simplified amortization of deferred acquisition costs, and enhanced disclosures. This standard will be effective for us in the first quarter of 2021 with early adoption permitted. We are currently assessing the effect of adopting this guidance on our financial condition and results of operations. We will be better able to quantify the effect of adopting this standard as we progress in our implementation process and draw nearer to the date of adoption. Changes to the Disclosure Requirements for Defined Benefit Plans In August 2018, the FASB issued amendments to modify the disclosure requirements on defined benefit pension or other postretirement plans as part of the disclosure framework project whose objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements. The amendments in this update allow for the removal and addition of various disclosures and is effective the first quarter of 2021. Early adoption is permitted. The guidance changes disclosure only and will not have an impact on our financial condition or results of operations. Refer to the 2017 Form 10-K for information on other accounting guidance not yet adopted. f) Subsequent event During October 2018, Hurricane Michael made landfall in Florida in the U.S. At this time, there are uncertainties surrounding the number of claims and scope of damage for this named catastrophe. At the time of this filing, our very early indication of the pre-tax loss estimate, net of reinsurance and reinstatement premiums, related to Hurricane Michael is $150 million to $250 million. This estimate may increase or decrease as additional information emerges. The impact of this event will be reflected in our fourth quarter 2018 results.

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