Annual Report 2005 - Chubb Group of Insurance Companies

(18) Shareholders' Equity
(a) The authorized but unissued preferred shares may be issued in one or more series and the shares of each series
shall have such rights as Ñxed by the Board of Directors.
(b) The activity of Chubb's common stock was as follows:
Years Ended December 31
2005 2004 2003
(number of shares)
Common stock issued
Balance, beginning of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 195,803,824 195,803,824 180,296,834
Shares issued upon settlement of equity unit warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,683,117 Ì Ì
Common stock oÅering ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 15,525,000
Share activity under stock-based employee compensation plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,945,357 Ì (18,010)
Balance, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 210,432,298 195,803,824 195,803,824
Treasury stock
Balance, beginning of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,127,282 7,840,448 9,095,162
Repurchase of shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,393,900 Ì Ì
Share activity under stock-based employee compensation plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,127,282) (4,713,166) (1,254,714)
Balance, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,393,900 3,127,282 7,840,448
Common stock outstanding, end of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 209,038,398 192,676,542 187,963,376
In November 2002, Chubb issued 24 million mandatorily exercisable warrants to purchase its common stock and
$600 million of 4% senior notes. The warrants and notes were issued together in the form of 7% equity units. Each
warrant obligated the holder to purchase, and obligated Chubb to sell, on or before the settlement date of November 16,
2005, for a settlement price of $25, a variable number of newly issued shares of Chubb's common stock. The number of
shares of Chubb's common stock purchased was determined based on a formula that considered the market price of the
common stock immediately prior to the time of settlement in relation to the $56.64 per share sale price of the common
stock at the time the equity units were oÅered. Upon settlement of the warrants, Chubb received proceeds of
$600 million and issued 8,683,117 shares of common stock.
In June 2003, Chubb sold 15,525,000 shares of common stock through a public oÅering. The net proceeds of
$887 million from the sale were credited to common stock and paid-in surplus.
(c) In June 2003, Chubb issued 18.4 million purchase contracts to purchase its common stock and $460 million of
2.25% senior notes. The purchase contracts and notes were issued together in the form of 7% equity units. Each
purchase contract obligates the holder to purchase, and obligates Chubb to sell, on or before August 16, 2006, for a
settlement price of $25, a variable number of newly issued shares of Chubb's common stock. The number of shares of
Chubb's common stock to be purchased will be determined based on a formula that considers the market price of the
common stock immediately prior to the time of settlement in relation to the $59.50 per share sale price of the common
stock at the time the equity units were oÅered. Upon settlement of the purchase contracts, Chubb will receive proceeds
of approximately $460 million and will issue between approximately 6.5 million and 7.7 million shares of common stock.
Chubb will make quarterly contract adjustment payments to the equity unit holders at a rate of 4.75% per year on the
stated amount of $25 per purchase contract until the purchase contract is settled. The $66.2 million present value of the
contract adjustment payments was accrued as a liability at the date of issuance of the equity units with an oÅsetting
charge to paid-in surplus. Subsequent contract adjustment payments are being allocated between this liability account
and interest expense based on a constant rate calculation over the term of the purchase contracts.
For further discussion of the notes and equity units, see Note (8)(a).
(d) Chubb has a shareholders rights plan under which each shareholder has one right for each share of Chubb's
common stock held. Each right entitles the holder to purchase from Chubb one one-thousandth of a share of Series B
Participating Cumulative Preferred Stock at an exercise price of $240. The rights are attached to all outstanding shares
of common stock and trade with the common stock until the rights become exercisable. The rights are subject to
adjustment to prevent dilution of the interests represented by each right.
The rights will become exercisable and will detach from the common stock ten days after a person or group either
acquires 20% or more of the outstanding shares of Chubb's common stock or announces a tender or exchange oÅer
which, if consummated, would result in that person or group owning 20% or more of the outstanding shares of Chubb's
common stock.
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