Realized Gains Losses As A Result of Valuation Model Refinement

[Table of Contents](#i529cc89e10964e18ae4139b5b2341a84_7)  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)Chubb Limited and Subsidiaries  
The effect of changes in key market factors on assumed lapse and annuitization rates reflect emerging trends using data available from cedants. For treaties with limited experience, rates are established by blending the experience with data received from other ceding companies. The model and related assumptions are regularly re-evaluated by management and enhanced, as appropriate, based upon additional experience obtained related to policyholder behavior and availability of updated information such as market conditions, market participant assumptions, and demographics of in-force annuities. In the third quarter of 2022, we completed a review of policyholder behavior related to annuitizations, partial withdrawals, lapses, and mortality for our variable annuity reinsurance business. As a result, we refined our policyholder behavior assumptions (mainly those relating to annuitizations and partial withdrawals). This refinement increased the fair value of GLB liabilities, and resulted in a realized loss of approximately $40 million. We also made routine model refinements to the internal valuation model which had an insignificant impact on net income. For detailed information on our lapse and annuitization rate assumptions, refer to Note 4 to the Consolidated Financial Statements of our 2021 Form 10-K.  
The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3):

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | Assets |  | Liabilities |
| Three Months EndedSeptember 30, 2022(in millions of U.S. dollars) |  |  | Available-for-Sale Debt Securities |  | Equitysecurities |  | Short-term investments |  | GLB (1) |
|  |  | Non-U.S. |  | Corporate and asset-backed securities |  | Mortgage-backed securities |  |  |  |
|  |  |  |  |  |
| Balance, beginning of period |  |  | $ | 549  |  |  | $ | 2,261  |  |  | $ | 19  |  |  |  |  | $ | 81  |  |  | $ | 9  |  |  | $ | 832  |  |
| Transfers into Level 3 |  |  | —  |  |  | 2  |  |  | —  |  |  |  |  | —  |  |  | —  |  |  | —  |  |
| Transfers out of Level 3 |  |  | —  |  |  | (4) |  |  | —  |  |  |  |  | —  |  |  | —  |  |  | —  |  |
| Change in Net Unrealized Gains/Losses in OCI |  |  | (34) |  |  | (16) |  |  | —  |  |  |  |  | —  |  |  | —  |  |  | —  |  |
| Net Realized Gains/Losses |  |  | (4) |  |  | (9) |  |  | —  |  |  |  |  | 3  |  |  | (1) |  |  | (22) |  |
| Purchases |  |  | 39  |  |  | 164  |  |  | 4  |  |  |  |  | 3  |  |  | 1  |  |  | —  |  |
| Sales |  |  | (19) |  |  | (8) |  |  | —  |  |  |  |  | (4) |  |  | —  |  |  | —  |  |
| Settlements |  |  | (25) |  |  | (94) |  |  | (4) |  |  |  |  | —  |  |  | (6) |  |  | —  |  |
| Other |  |  | —  |  |  | —  |  |  | —  |  |  |  |  | —  |  |  | —  |  |  | (26) |  |
| Balance, end of period |  |  | $ | 506  |  |  | $ | 2,296  |  |  | $ | 19  |  |  |  |  | $ | 83  |  |  | $ | 3  |  |  | $ | 784  |  |
| Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet date |  |  | $ | (1) |  |  | $ | (3) |  |  | $ | —  |  |  |  |  | $ | 3  |  |  | $ | (1) |  |  | $ | (22) |  |
| Change in Net Unrealized Gains/Losses included in OCI at the Balance Sheet date |  |  | $ | (35) |  |  | $ | (19) |  |  | $ | —  |  |  |  |  | $ | —  |  |  | $ | —  |  |  | $ | —  |  |

(1)Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. 20
