Annual Report 2005 - Chubb Group of Insurance Companies

(c) A property and casualty insurance subsidiary is- The property and casualty underwriting operations
sued a reinsurance contract to an insurer that provides consist of four separate business units: personal insurfinancial
guarantees on debt obligations. At December 31, ance, commercial insurance, specialty insurance and rein-
2005, the aggregate principal commitments related to this surance assumed. The personal segment targets the
contract for which the subsidiary was contingently liable personal insurance market. The personal classes include
amounted to approximately $350 million, net of reinsur- automobile, homeowners and other personal coverages.
ance. These commitments expire by 2023.
The commercial segment includes those classes of business
that are generally available in broad markets and are
(d) The Corporation occupies oÇce facilities under of a more commodity nature. Commercial classes include
lease agreements that expire at various dates through multiple peril, casualty, workers' compensation and
2019; such leases are generally renewed or replaced by property and marine. The specialty segment includes
other leases. In addition, the Corporation leases data those classes of business that are available in more limited
processing, oÇce and transportation equipment. Most markets since they require specialized underwriting and
leases contain renewal options for increments ranging claim settlement. Specialty classes include professional
from three to ten years. All leases are operating leases. liability coverages and surety. Reinsurance assumed includes
the business produced by Chubb Re. In Decem-
Rent expense was as follows:
ber 2005, the Corporation transferred its ongoing
Years Ended reinsurance assumed business to Harbor Point (see
December 31
Note (2)).
2005 2004 2003
(in millions) CFS's non-insurance business was primarily structured
OÇce facilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $86.5 $ 90.1 $ 88.8 credit derivatives, principally as a counterparty in portfo-
EquipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.2 14.9 16.5 lio credit default swap contracts. The Corporation has
$100.7 $105.0 $105.3 implemented a plan to exit the credit derivatives
business.
At December 31, 2005, future minimum rental pay- Corporate and other includes investment income
ments required under non-cancellable operating leases earned on corporate invested assets, corporate expenses
were as follows:
and the Corporation's real estate and other non-insur-
Years Ending
ance subsidiaries.
December 31
(in millions)
Performance of the property and casualty underwrit-
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $89.2
2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 88.5 ing segments is measured based on statutory underwrit-
2008 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 80.8 ing results. Statutory underwriting proÑt is arrived at by
2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70.1 reducing premiums earned by losses and loss expenses
2010 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58.1 incurred and statutory underwriting expenses incurred.
After 2010 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 253.1 Under statutory accounting principles applicable to
$639.8 property and casualty insurance companies, policy acquisition
and other underwriting expenses are recognized
(e) The Corporation had certain commitments total- immediately, not at the time premiums are earned.
ing $1.0 billion at December 31, 2005 to fund limited
partnership investments. These capital commitments can Management uses underwriting results determined in
be called by the partnerships during the commitment accordance with generally accepted accounting principles
period (on average, 1 to 4 years) to fund working capital (GAAP) to assess the overall performance of the under-
needs or the purchase of new investments.
writing operations. Underwriting income determined in
accordance with GAAP is deÑned as premiums earned
(14) Segments Information
less losses and loss expenses incurred and GAAP underwriting
expenses incurred. To convert statutory underwriting
results to a GAAP basis, policy acquisition
The principal business of the Corporation is property
and casualty insurance. The proÑtability of the property expenses are deferred and amortized over the period in
and casualty insurance business depends on the results of which the related premiums are earned.
both underwriting operations and investments, which Investment income performance is measured based on
are viewed as two distinct operations. The underwriting investment income net of investment expenses, excludoperations
are managed and evaluated separately from ing realized investment gains and losses.
the investment function.
Distinct investment portfolios are not maintained for
The reporting format for property and casualty under- each underwriting segment. Property and casualty inwriting
results by business unit was changed in the Ñrst vested assets are available for payment of losses and
quarter of 2005 to more closely reÖect the way the expenses for all classes of business. Therefore, such assets
business is now managed. Prior year amounts have been and the related investment income are not allocated to
restated to conform with the new presentation. underwriting segments.
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