Annual Report 2005 - Chubb Group of Insurance Companies

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(b) The components of unrealized appreciation or depreciation of investments carried at market value were as follows: December 31 2005 2004 (in millions) Equity securities Gross unrealized appreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $162.7 $ 162.5 Gross unrealized depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38.4 8.5 124.3 154.0 Fixed maturities Gross unrealized appreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 565.0 889.2 Gross unrealized depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 211.4 82.4 353.6 806.8 477.9 960.8 Deferred income tax liability ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 167.2 336.3 $310.7 $ 624.5 When the market value of any investment is lower than its cost, an assessment is made to determine whether the decline is temporary or other-than-temporary. The assessment is based on both quantitative criteria and qualitative information and considers a number of factors including, but not limited to, the length of time and the extent to which the market value has been less than the cost, the Ñnancial condition and near term prospects of the issuer, whether the issuer is current on contractually obligated interest and principal payments, the intent and ability of the Corporation to hold the investment for a period of time suÇcient to allow for the recovery of cost, general market conditions and industry or sector speciÑc factors. Based on a review of the securities in an unrealized loss position of December 31, 2005 and 2004, management believes that none of the declines in market value at those dates were other-than-temporary. The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2005, the aggregate market value and gross unrealized depreciation by investment category and length of time that individual securities have continuously been in an unrealized loss position. Less Than 12 Months 12 Months or More Total Estimated Gross Estimated Gross Estimated Gross Market Unrealized Market Unrealized Market Unrealized Value Depreciation Value Depreciation Value Depreciation (in millions) Fixed maturities Ó available-for-sale Tax exempt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,984.0 $ 40.3 $ 829.4 $ 20.7 $ 4,813.4 $61.0 Taxable U.S. Government and government agency and authority obligations ÏÏÏÏÏ 977.7 6.4 437.7 10.8 1,415.4 17.2 Corporate bondsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 948.2 22.6 303.3 12.0 1,251.5 34.6 Foreign bondsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,283.7 14.3 79.5 2.4 1,363.2 16.7 Mortgage-backed securities ÏÏÏÏÏÏÏÏÏÏÏÏ 1,804.4 32.5 1,319.2 49.0 3,123.6 81.5 Redeemable preferred stocks ÏÏÏÏÏÏÏÏÏÏ Ì Ì 10.1 .4 10.1 .4 5,014.0 75.8 2,149.8 74.6 7,163.8 150.4 Total fixed maturities Óavailable-for-saleÏÏ 8,998.0 116.1 2,979.2 95.3 11,977.2 211.4 Equity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 185.8 26.2 67.1 12.2 252.9 38.4 $9,183.8 $142.3 $3,046.3 $107.5 $12,230.1 $249.8 The total gross unrealized depreciation amount at December 31, 2005 comprised approximately 1,425 securities, of which 1,375 were fixed maturities. Almost all of the fixed maturities in an unrealized loss position were investment grade securities depressed due to changes in interest rates from the date of purchase. There were no securities with a market value less than 80% of the security's amortized cost for six continuous months. Securities in an unrealized loss position for less than twelve months comprised approximately 1,150 securities, of which 99% were securities with a market value to amortized cost ratio at or greater than 90%. Securities in an unrealized loss position for twelve months or more comprised approximately 275 securities, of which 98% were securities with a market value to amortized cost ratio at or greater than 90%. At December 31, 2004, Ñxed maturities and equity securities with an aggregate market value of $7,512.0 million were in an unrealized loss position and the gross unrealized depreciation of such securities was $90.9 million. Securities with a market value of $1,685.3 million had been in an unrealized loss position for twelve months or more and the gross unrealized depreciation of such securities was $36.2 million. F-11
The change in unrealized appreciation or depreciation of investments carried at market value was as follows: Years Ended December 31 2005 2004 2003 (in millions) Change in unrealized appreciation or depreciation of equity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(29.7) $ 21.0 $139.1 Change in unrealized appreciation of Ñxed maturities ÏÏÏÏÏÏÏÏÏÏÏÏÏ (453.2) (96.4) (3.7) In September 2005, the Corporation sold Personal Lines Insurance Brokerage, Inc., an insurance brokerage subsidiary. In September 2004, the Corporation sold The Chubb Institute, Inc., its post secondary educational subsidiary. (4) Deferred Policy Acquisition Costs Policy acquisition costs deferred and the related amortization charged against income were as follows: (482.9) (75.4) 135.4 Years Ended December 31 Deferred income tax (credit)ÏÏÏÏÏÏ (169.1) (26.3) 47.3 2005 2004 2003 $(313.8) $(49.1) $ 88.1 (in millions) Balance, beginning of yearÏÏÏÏÏ $1,434.7 $1,343.4 $1,150.0 The unrealized appreciation of Ñxed maturities carried Costs deferred during year at amortized cost is not reÖected in the Ñnancial state- Commissions and brokerage 1,635.9 1,634.5 1,491.6 ments. The change in unrealized appreciation of Ñxed Premium taxes and assessments 260.1 256.3 239.1 maturities carried at amortized cost was a decrease of Salaries and operating costs ÏÏÏ 1,051.1 1,029.1 973.2 $9.9 million, $14.1 million and $20.6 million for the 2,947.1 2,919.9 2,703.9 years ended December 31, 2005, 2004 and 2003, Increase (decrease) due to respectively. foreign exchangeÏÏÏÏÏÏÏÏÏÏÏ (6.6) 14.7 25.1 Amortization during yearÏÏÏÏÏÏ (2,930.4) (2,843.3) (2,535.6) (c) The sources of net investment income were as follows: Balance, end of year ÏÏÏÏÏÏÏÏÏÏ $1,444.8 $1,434.7 $1,343.4 Years Ended December 31 (5) Real Estate 2005 2004 2003 (in millions) The components of real estate assets were as follows: Fixed maturities ÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,295.7 $1,155.5 $1,003.0 December 31 Equity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏ 50.2 50.0 36.2 2005 2004 Short term investments ÏÏÏÏÏÏÏ 52.8 44.3 71.3 Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.0 6.2 7.8 (in millions) Gross investment income ÏÏÏ 1,407.7 1,256.0 1,118.3 Mortgages and notes receivable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $19.0 $ 19.7 Investment expensesÏÏÏÏÏÏÏÏÏÏ 29.2 24.7 29.0 Income producing properties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 143.8 157.9 Construction in progressÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.9 28.6 $1,378.5 $1,231.3 $1,089.3 Land under development and unimproved land ÏÏÏÏÏÏÏ 183.7 268.0 $367.4 $474.2 (d) Realized investment gains and losses were as follows: Years Ended December 31 Impairment losses of $65.7 million, $27.3 million and 2005 2004 2003 $8.4 million were recognized in 2005, 2004 and 2003, (in millions) respectively, to write down the carrying value of certain Fixed maturities properties to their estimated fair value. Gross realized gains ÏÏÏÏÏÏÏÏÏÏÏÏÏ $73.6 $ 97.1 $131.9 Gross realized lossesÏÏÏÏÏÏÏÏÏÏÏÏÏ (108.9) (72.5) (65.5) Depreciation expense related to income producing Other-than-temporary impairments (4.4) (.2) (42.1) properties was $5.5 million, $5.9 million and $4.1 million (39.7) 24.4 24.3 for 2005, 2004 and 2003, respectively. Equity securities Gross realized gains ÏÏÏÏÏÏÏÏÏÏÏÏÏ 342.6 336.2 159.8 Gross realized lossesÏÏÏÏÏÏÏÏÏÏÏÏÏ (105.4) (111.0) (85.2) (6) Property and Equipment Other-than-temporary impairments (1.0) Ì (14.5) 236.2 225.2 60.1 Property and equipment included in other assets were as follows: Transfer of reinsurance business ÏÏÏÏ 171.0 Ì Ì Sale of Personal Lines Insurance December 31 Brokerage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.0 Ì Ì 2005 2004 Sale of The Chubb Institute ÏÏÏÏÏÏÏ Ì (31.4) Ì (in millions) Realized investment gains ÏÏÏÏÏÏÏÏÏÏ 383.5 218.2 84.4 Income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135.8 72.2 29.5 Cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $804.0 $840.9 Accumulated depreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 419.1 411.6 $247.7 $146.0 $ 54.9 $384.9 $429.3 Depreciation expense related to property and equipment was $85.3 million, $99.7 million and $103.9 million for 2005, 2004 and 2003, respectively. In December 2005, the Corporation transferred its ongoing reinsurance assumed business and certain related assets to Harbor Point Limited. This transaction is further described in Note (2). F-12
Page 1 and 2:
THE CHUBB CORPORATION Annual Report
Page 3 and 4:
Letter to Shareholders John D. Finn
Page 5 and 6:
Letter to Shareholders John J. Degn
Page 7 and 8:
Letter to Shareholders With the imp
Page 9 and 10:
Letter to Shareholders • In Janua
Page 11 and 12:
Featured in this year’s report ar
Page 13 and 14:
California From the moment they dec
Page 15:
Pennsylvania Among acoustic guitari
Page 18 and 19:
Canada Ellen Moore, Canada Aglobal
Page 20 and 21:
Nebraska Timothy Szerlong, U.S. Nor
Page 22 and 23:
Employee Profiles Meet six Chubb ma
Page 24 and 25:
Chubb & Son, a division of Federal
Page 26 and 27:
The Chubb Corporation Directors Zo
Page 28 and 29:
CONTENTS ITEM DESCRIPTION PAGE PART
Page 30 and 31:
Indemnity), Executive Risk Specialt
Page 32 and 33:
those reinsurers with strong balanc
Page 34 and 35:
ANALYSIS OF LOSS AND LOSS ADJUSTMEN
Page 36 and 37:
that is of value to the insured. Th
Page 38 and 39:
Another area of potential regulatio
Page 40 and 41:
However, there are inherent limitat
Page 42 and 43:
Intense competition for our product
Page 44 and 45:
Purported class actions arising out
Page 46 and 47:
PART II. Item 5. Market for the Reg
Page 48 and 49:
Item 7. Management's Discussion and
Page 50 and 51:
‚the eÅects of disclosures by, a
Page 52 and 53: PROPERTY AND CASUALTY INSURANCE A s
Page 54 and 55: Net premiums written by business un
Page 56 and 57: loss ratio. Losses from catastrophe
Page 58 and 59: premiums, multiple peril premiums w
Page 60 and 61: Our specialty insurance business pr
Page 62 and 63: District of New York. We are cooper
Page 64 and 65: Our loss reserves include signiÑca
Page 66 and 67: We regularly review the loss reserv
Page 68 and 69: theory, insurance coverage is deeme
Page 70 and 71: The following table presents the nu
Page 72 and 73: alance sheets and superior underwri
Page 74 and 75: On an after-tax basis, property and
Page 76 and 77: CORPORATE AND OTHER Corporate and o
Page 78 and 79: The writedowns of Ñxed maturities
Page 80 and 81: Ratings Chubb and its insurance sub
Page 82 and 83: The above table also excludes estim
Page 84 and 85: At December 31, 2004 Total Estimate
Page 86 and 87: Item 8. Consolidated Financial Stat
Page 88 and 89: PART III. Item 10. Directors and Ex
Page 90 and 91: SIGNATURES Pursuant to the requirem
Page 92 and 93: THE CHUBB CORPORATION INDEX TO FINA
Page 94 and 95: THE CHUBB CORPORATION Consolidated
Page 96 and 97: THE CHUBB CORPORATION Consolidated
Page 98 and 99: NOTES TO CONSOLIDATED FINANCIAL STA
Page 100 and 101: In 2005, the Corporation transferre
Page 104 and 105: (7) Unpaid Losses and Loss Expenses
Page 106 and 107: In establishing toxic waste reserve
Page 108 and 109: (b) Interest costs of $134.8 millio
Page 110 and 111: (11) Stock-Based Employee Compensat
Page 112 and 113: The following table sets forth the
Page 114 and 115: (13) Commitments and Contingent Lia
Page 116 and 117: Revenues, income before income tax
Page 118 and 119: (17) Fair Values of Financial Instr
Page 120 and 121: In the event that any person or gro
Page 122 and 123: THE CHUBB CORPORATION Schedule I CO
Page 124 and 125: THE CHUBB CORPORATION Schedule II (
Page 126 and 127: THE CHUBB CORPORATION Schedule III
Page 128 and 129: Exhibit Number THE CHUBB CORPORATIO
Page 130 and 131: Exhibit Number Description 10.18 Am
Page 132 and 133: Exhibit Number Description 10.44 Fo
Page 134 and 135: Exhibit 23.1 THE CHUBB CORPORATION
Page 136 and 137: Exhibit 31.2 I, Michael O'Reilly, c
Page 138 and 139: Exhibit 32.2 CERTIFICATION OF PERIO
Page 140: The Chubb Corporation • Annual Re
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Annual Report 2005 - Chubb Group of Insurance Companies

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