Annual Report 2005 - Chubb Group of Insurance Companies

(15) Earnings Per Share
Basic earnings per common share is based on net income divided by the weighted average number of common shares
outstanding during the year. Diluted earnings per share includes the potential dilutive eÅect, using the treasury stock
method, of outstanding awards under stock-based employee compensation plans and of outstanding purchase contracts
and mandatorily exercisable warrants to purchase Chubb's common stock.
The following table sets forth the computation of basic and diluted earnings per share:
Years Ended December 31
2005 2004 2003
(in millions except for per share
amounts)
Basic earnings per share:
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,825.9 $1,548.4 $808.8
Weighted average number of common shares outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 198.2 189.9 179.2
Basic earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9.21 $ 8.15 $ 4.51
Diluted earnings per share:
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,825.9 $1,548.4 $808.8
Weighted average number of common shares outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 198.2 189.9 179.2
Additional shares from assumed exercise of stock-based compensation awardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.7 3.1 2.1
Additional shares from assumed issuance of common stock upon settlement of purchase contracts and
mandatorily exercisable warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.3 .2 Ì
Weighted average number of common shares and potential common shares assumed outstanding for
computing diluted earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 204.2 193.2 181.3
Diluted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8.94 $ 8.01 $ 4.46
In 2005, 2004 and 2003, options to purchase 0.8 million shares, 7.6 million shares and 11.7 million shares of common
stock with weighted average exercise prices of $84.04 per share, $75.01 per share and $70.98 per share, respectively,
were excluded from the computation of diluted earnings per share because the exercise price of these options was greater
than the average market price of Chubb's common stock. For additional disclosure regarding the stock-based
compensation awards, see Note (11).
The purchase contracts and mandatorily exercisable warrants aÅect diluted earnings per share only during periods
when the average market price of a share of Chubb's common stock is above the threshold appreciation price of $71.40
and $69.10, respectively. The average market price of Chubb's common stock during the periods the purchase contracts
and warrants were outstanding in 2003 was below these prices. Accordingly, shares issuable upon the settlement of the
purchase contracts and warrants were excluded from the computation of diluted earnings per share during that year.
(16) Comprehensive Income
Comprehensive income is deÑned as all changes in shareholders' equity, except those arising from transactions with
shareholders. Comprehensive income includes net income and other comprehensive income, which for the Corporation
consists of changes in unrealized appreciation or depreciation of investments carried at market value and changes in
foreign currency translation gains or losses.
The components of other comprehensive income or loss were as follows:
Years Ended December 31
2005 2004 2003
Before Income Before Income Before Income
Tax Tax Net Tax Tax Net Tax Tax Net
(in millions)
Unrealized holding gains (losses) arising
during the year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(286.4) $(100.3) $(186.1) $174.2 $56.9 $117.3 $219.8 $76.8 $143.0
ReclassiÑcation adjustment for
realized gains included in net income ÏÏÏÏÏÏÏ 196.5 68.8 127.7 249.6 83.2 166.4 84.4 29.5 54.9
Net unrealized gains (losses) recognized
in other comprehensive incomeÏÏÏÏÏÏÏÏÏÏÏÏ (482.9) (169.1) (313.8) (75.4) (26.3) (49.1) 135.4 47.3 88.1
Foreign currency translation gains (losses) ÏÏÏÏ (35.0) (12.7) (22.3) 103.5 36.5 67.0 106.2 37.7 68.5
Total other comprehensive
income (loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(517.9) $(181.8) $(336.1) $28.1 $10.2 $ 17.9 $241.6 $85.0 $156.6
F-26