Chubb Common Investment Fund Accounts 31.03.2020

Chubb Common Investment Fund Accounts 31.03.2020

Chubb Common Investment Fund

Annual report and financial statements

for the year ended 31 March 2020

0

Chubb Common Investment Fund

Annual report and financial statements for the year ended 31 March 2020

Contents

Page

Trustees and advisers

2 4

Trustees’ report

Independent auditors’ report

10 12 13 14

Fund account

Statement of net assets attributable to unit holders

Notes to the financial statements

1

Chubb Common Investment Fund

Annual report and financial statements for the year ended 31 March 2020

Trustees and advisers

Trustees:

B D McGowan *+ (Chairman) T P Allen * J Fazzino *+ (Resigned 31 March 2020) W Jones *+ M Konchan + (Appointed 31 March 2020, Resigned 11 May 2020)

K E Levine + (Resigned 31 March 2020) B Nutter *+ (Appointed 31 March 2020) G P Smart B van der Merwe + (Appointed 11 May 2020)

*

Trustees of Chubb Pension Plan

+ Director of Chubb Security (Pensions) Limited (Trustee of Chubb Security Pension Fund)

Secretary to the Trustees:

Mrs J Beake

Enquiries:

Mrs J Beake Raytheon Technologies Group Pensions Department Pentagon House Sir Frank Whittle Road Derby DE21 4XA

[email protected]

Investment Managers:

BlackRock Investment Management (UK) Limited First Eagle Investment Management LLC Insight Investment Management Legal & General Assurance (Pensions Management) Limited Rapleys LLP Ruffer LLP Western Asset Management Company Limited (Until November 2019)

Custodian, Bank and Administrator:

Bank of New York Mellon

2

Chubb Common Investment Fund

Annual report and financial statements for the year ended 31 March 2020

Trustees and advisers - continued

Investment Advisers

Barnett Waddingham LLP

Participating Schemes:

Chubb Security Pension Fund Chubb Pension Plan

Independent Auditors:

PricewaterhouseCoopers LLP 1 Hardman Square Manchester M3 3EB

Legal Advisers:

CMS Cameron McKenna Nabarro Olswang LLP Canon Place 78 Canon Street London EC4N 6AF

Geldards LLP Dumfries House Dumfries Place Cardiff CF1 4YF

Bankers:

All banking is transacted through the Custodian cash account.

Sponsoring Company:

Chubb Group Limited 1 st Floor Ash House Littleton Road Ashford

Middlesex TW15 1TZ

3

Chubb Common Investment Fund

Trustees’ report for the year ended 31 March 2020

Constitution

The Chubb Common Investment Fund (“CCIF”) is governed by a definitive Trust Deed dated 23 June 1998. The CCIF was established with effect from 1 July 1998 in accordance with the wishes of the “Participating Schemes” which are the Chubb Pension Plan (“CPP”) and the Chubb Security Pension Fund (“CSPF”).

The CCIF Trust Deed provides that any appointment and/or removal of the Trustees be made by the Sponsoring Company (Chubb Group Limited).

The Trustees are responsible for the administration of the CCIF and the investment policy, subject to the policy being consistent with the Statements of Investment Principles maintained by the Participating Schemes. The Trustees meet quarterly to discuss reports received from the investment managers and to assess the overall investment policy. Under the terms of the Trust Deed, resolutions are passed on a simple majority of those voting.

Management and custodial arrangements

The day to day management of the investments has been delegated by the Trustees to the Investment Managers. Bank of New York Mellon have been appointed as administrators, global custodian and the banker to the CCIF. This is in accordance with the agreement between the CCIF and the above parties dated 23 June 1998. The Trustees of the CCIF provide quarterly performance and investment details to the Trustees of the Participating Schemes together with copies of all Trustees’ minutes and decisions. Bank of New York Mellon acts as custodian for the Insight Investment Management segregated portfolios and previously acted as custodian for the BlackRock Investment Management (UK) Limited and Western Asset Management Company Limited segregated portfolios prior to these being transitioned to Insight Investment Management during the year. These investments are held in a designated nominee account at Bank of New York Mellon, in the name of the Trustees of the CCIF. The Trustees have invested in unitised funds managed by Legal & General Assurance (Pensions Management) Limited, BlackRock Investment Management (UK) Limited, First Eagle Investment Management LLC and Ruffer LLP the details of which are held for accounting purposes at Bank of New York Mellon. The Trustees receive reports each month covering the assets held by the custodian and transactions in the month. These are monitored and, if appropriate, followed up with the custodian on a timely basis. The custodian is independent of the fund managers and provides a check on the records of these assets of the CCIF.

Financial development

The financial statements have been prepared and audited in compliance with regulations made under section 41 (1) and (6) of the Pensions Act 1995.

Significant developments affecting the financial position of the CCIF during the year include:

• The overall value decreased by £49.5 million to £1,633.6 million at 31 March 2020.

• The decrease in value comprised of £13.6 million net return on investments less £63.1 million net withdrawals by Participating Schemes

4

Chubb Common Investment Fund

Trustees’ report - continued for the year ended 31 March 2020

Trustees Fees

In the year Trustees fees were paid to B D McGowan, T P Allen, W Jones and G P Smart. The aggregate amount paid was £72,000 (2019: £70,000).

Investment policy

The Trustees of the CCIF determine the investment policy within the guidelines laid down by the Statement of Investment Principles of the Participating Schemes. The objective set for each investment manager is summarised in their agreements with the Trustees.

The long-term target allocation was reviewed and agreed in March 2018 and implemented with effect from 1 April 2018.

The respective Participating Scheme Statement of Investment Principles were last formally updated in June 2020 and are in the process of being updated again in order to meet legislative requirements which come into effect on 1 October 2020. The actual proportion of assets is likely to be different at any point in time due to market valuations, which vary every day. Further differences can also arise due to the timing of implementation of changes to the long-term target. The aim of the Trustees’ policy is to ensure that the assets are sufficient to meet the liabilities of the Participating Schemes over the long term. In so far as the risk is at an acceptable level the Trustees will aim to minimise the long term costs of the Participating Schemes by maximising the return on the assets. The investments are diversified between available investment categories and between geographic areas in order to limit the risk to the Participating Schemes.

During the year the following significant transactions were effected;

• In July 2019 £294 million was transferred from Legal and General Index Linked Gilt pooled investment to Insight Investment Management (‘Insight’) to be managed by Insight in Participating Scheme specific LDI portfolios. • In November 2019 £349 million was transferred from BlackRock segregated bond portfolio to Insight. • In November 2019 £245 million was transferred fromWestern Asset Management Company segregated bond portfolio to Insight. • The amounts transferred from BlackRock and Western Asset Management Company in November 2019 (above) were invested as follows; o Insight placed £254 million into the existing Buy and Maintain portfolio. o The balance of £340 million was added to the Participating Scheme specific LDI portfolios. • All amounts placed in Participating Scheme specific portfolios with Insight recognised the respective proportions of overall unit holdings within CCIF at the time of the investments. New unit classes have been created as detailed below in respect of Participating Scheme specific LDI portfolio investments. • The Participating Schemes are phasing in the implementation of LDI over a 10 month period commencing February 2020 with the aim of targeting a hedge ratio of 70% of the self-sufficiency liabilities initially, with a long term objective of hedging 90%.

Financial instruments

The investment managers have the authority to use financial instruments, when hedging currency risks, in the course of implementing the investment strategy.

5

Chubb Common Investment Fund

Trustees’ report - continued for the year ended 31 March 2020

In order to provide partial protection against significant falls in equity prices, the Trustees might from time to time implement particular policies, including the use of derivative based collars. In the year there were no such transactions. The Trustees accept that there might be a cost to the CCIF of implementing such policies, either by way of option premiums or by sacrificing potential upside performance.

Valuation

The investments underpinning the unit prices from time to time are valued in the Statement of net assets attributable to unit holders at their bid market value at 31 March 2020. An analysis of investments by category is set out in note 5 of the financial statements. The movement of funds between the CCIF and the Participating Schemes for the year ended 31 March 2020 is shown in note 17. During the year two new categories of unit were created for the purpose of ring-fencing assets held specifically for each of the two Participating Schemes. All other assets are aggregated and underpin the valuation of units now referred to as comingled asset units.

As at 31 March 2020 the allocation of units between the Participating Schemes was as follows: -

Number of Units

Value

Percentage

£’000

Chubb Pension Plan – comingled asset units

474,167

136,100

46.3 *

Chubb Security Pension Fund – comingled asset units

549,414

157,698

53.7 *

Chubb Pension Plan – scheme specific units

283,313

272,595

46.4 #

Chubb Security Pension Fund – scheme specific units

326,662

313,530

53.6 #

Total

1,633,556

* As a percentage of comingled assets/units. # As a percentage of scheme specific assets/units.

Overall Chubb Pension Plan held units with an aggregate valuation of £757,480k (46.4%) and Chubb Security Pension Fund held units with an aggregate valuation of £876,076k (53.6%) at 31 March 2020.

Investment restrictions

The Participating Schemes have instructed the Trustees not to invest directly in the following:

(a) United Technologies Corporation, the previous ultimate holding company of the sponsoring employers of the Participating Schemes. The Trustees are in the process of amending this restriction to cover Carrier Global Corporation, the ultimate holding company following the break-up of United Technologies Corporation group of companies on 3 April 2020. (b) Companies where the Trustees of the CCIF or the Trustees or Trustee directors of the Participating Schemes have a material interest or are a Director, with the exception of the subsidiary undertakings, details of which are shown below.

6

Chubb Common Investment Fund

Trustees’ report - continued for the year ended 31 March 2020

The Trustees of the Participating Schemes have imposed this policy on the Trustees based on the belief that without such a policy, conflicts of interest would inevitably arise.

In addition, no member of the United Technologies Corporation group is a tenant in respect of the subsidiary undertakings investment properties. The Trustees intend to extend this restriction to include Carrier Global Corporation.

Employer related investments

At 31 March 2020, 0.01% of the CIF assets were indirectly invested in the employer through pooled investment vehicles with Legal and General.

Marketability of investments

At the year-end £1,629.7 million (99.8%) of the CCIF net investments were considered to be marketable on a short term basis. Longer periods may be required to dispose of development site investments amounting to 0.2% (£3.8 million) of the investment assets held.

Policy on voting rights and social, environmental and ethical considerations

The Trustees believe that environmental, social and governance (ESG) factors, including management of climate related risks are potentially financially material and therefore have a policy to take these into account, alongside other factors, in the selection, retention and realisation of investments. However, these factors do not take precedence over other financial and non-financial factors, including but not limited to historical performance or fees. The Trustees may consider both financial and non-financial factors when selecting or reviewing the CCIF investments.

The Trustees do not apply any specific ethical criteria to their investments.

As the CCIF investments (except the Insight Bonds) are held in pooled funds, ESG considerations are set by each of the investment managers. The CCIF investment managers will ultimately act in the best interests of the CCIF assets to maximise returns for a given level of risk. The Trustees do not currently impose any specific ESG-related restrictions or requirements on the segregated bonds mandate with Insight, so ESG considerations are determined at their discretion. The Trustees are aware of the approach that each of their investment managers take in relation to ESG considerations. The Trustees believe that good stewardship and positive engagement can lead to improved governance and better risk-adjusted investor returns. The Trustees delegate the exercise of rights (including voting rights) attached to the CCIF investments to the investment managers. The managers are all signatories to the UN Principles of Responsible Investment and all except First Eagle are signatories to the UK Stewardship Code.

In selecting, monitoring and reviewing their investment managers, where appropriate, the Trustees will consider investment managers’ policies on engagement and how these policies have been implemented.

The Trustees have not considered it appropriate to take into account individual members’ views when establishing the policy on environmental, social and governance factors, engagement and voting rights.

7

Chubb Common Investment Fund

Trustees’ report - continued for the year ended 31 March 2020

Investment performance

The overall investment performance of the CCIF and that of the appointed investment managers are monitored quarterly by the Trustees and the Sponsoring Company.

The total return for the CCIF for the year ended 31 March 2020 was 0.8%, compared with the return of the CCIF customised benchmark of 1.9%. Over a three-year period the return was 2.5% per annum, compared with the customised benchmark of 3.5%.

COVID-19

The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a global health emergency on the 30th January 2020, has caused disruption to businesses and economic activity which has been reflected in recent fluctuations in global stock markets. The Trustees are monitoring developments relating to COVID-19 and coordinating their operational response based on existing business continuity plans and on guidance from global health organisations, UK government and general pandemic response best practice.

The pandemic initially caused certain assets to reduce substantially in value but these reductions have largely recovered.

The Trustees are not aware of any restrictions being placed on any funds or investments as a consequence of the pandemic.

Trustees’ responsibilities in respect of the financial statements

The financial statements, which are prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including the Financial Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”), are the responsibility of the Trustees. The Trustees are responsible for ensuring that those financial statements:

• give a true and fair view of the financial transactions of the CCIF during the year and of the amount and disposition at the end of the year of its assets and liabilities;

• state whether applicable United Kingdom Accounting Standards, including FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements; and

• comply with the requirements of the Trust Deed dated 23 June 1998 and any subsequent amending deeds.

8

Chubb Common Investment Fund Independent auditors' report to the Trustees of the Chubb Common Investment Fund Report on the audit of the financial statements (}6riluir*n In our opirrior-r, Chubb Courntott Investutellt Furld's finaucial stateuretlts: . giye a true and fair r.ierr of the financial transactions of the CIF during the year ellded 3r March zozo, ancl of the arlount and disposition at that date of its assets and liabilities; . have been proper11,. prep"red in accordance r,r,ith United Kingdom Generalll' Accepted -Accounting practice tUnitea ti,igaon.r Accounting Stanclards comprising- FRS 1o2 "The Financial Reporting Staldard applicable inltre Uf and Repiblic of Ireland", and applicable lau'); and . have been prepared in accordance r,r,ith the requirements of the Trust Deed' We har.e audited the financial statenleltts, included in the Anrrual Report and Financial Statements, $'hich conprise: the staterlelt of net assets available to unit holders as at 31 Marcl-r zozo; the fi'rnd accoLlllt for the 1'ear then elded; ancl the notes to the fipalcial statements, r,hich include a description of the signiticaut rccottntitrg policies. Basis fot'*pinion We conducted our audit in accordance wiih International Standards on Auditing (UK) C'ISAS..(UK)") and applicable law. Our responsibilities under ISAS (UK) are further.described.in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Irrdr:penrlcttr.'r: We reltailed independelt of the CIF in accordalce nith the ethical reqttiremetlts that are relevaut to otrr audit of the fira.cial statelllents in the UK, u,liich inc]udes the FRC's Ethical Standard, arrd r'r'e ltaYe fulfilled our other ethical responsibilities iu accordauce u'ith these requiretnents. {}rnc}usi