Annual Report 2005 - Chubb Group of Insurance Companies

The lower section of the table on page 8 shows the gross liability, reinsurance recoverable and net
liability recorded at the balance sheet date for each of the indicated years and the reestimation of
these amounts as of December 31, 2005.
The liability for unpaid losses and loss adjustment expenses, net of reinsurance recoverable,
reported in the accompanying consolidated Ñnancial statements prepared in accordance with generally
accepted accounting principles (GAAP) comprises the liabilities of U.S. and foreign members of
the P&C Group as follows:
December 31
2005 2004
(in millions)
U.S. subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $15,928.0 $14,244.0
Foreign subsidiariesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,784.5 2,564.7
$18,712.5 $16,808.7
Members of the P&C Group are required to Ñle annual statements with insurance regulatory
authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory
basis). The diÅerence between the liability for unpaid losses and loss expenses reported in the
statutory basis Ñnancial statements of the U.S. members of the P&C Group and such liability reported
on a GAAP basis in the consolidated Ñnancial statements is not signiÑcant.
Investments
Investment decisions are centrally managed by investment professionals based on guidelines
established by management and approved by the respective boards of directors for each company in
the P&C Group.
Additional information about the Corporation's investment portfolio as well as its approach to
managing risks is presented in the Invested Assets section of MD&A, the Investment Portfolio section
of Quantitative and Qualitative Disclosures About Market Risk and Note (3) of the Notes to
Consolidated Financial Statements.
The investment results of the P&C Group for each of the past three years are shown in the
following table.
Average
Invested Investment Percent Earned
Year Assets(a) Income(b) Before Tax After Tax
(in millions)
2003ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $22,168.5 $1,058.4 4.77% 3.80%
2004ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,778.2 1,184.3 4.42 3.55
2005ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,570.3 1,315.3 4.30 3.45
(a) Average of amounts for the years presented with Ñxed maturity securities at amortized cost
and equity securities at market value.
(b) Investment income after deduction of investment expenses, but before applicable income tax.
Competition
The property and casualty insurance industry is highly competitive both as to price and service.
Members of the P&C Group compete not only with other stock companies but also with mutual
companies, other underwriting organizations and alternative risk sharing mechanisms. Some competitors
obtain their business at a lower cost through the use of salaried personnel rather than independent
agents and brokers. Rates are not uniform for all insurers and vary according to the types of insurers,
product coverage and methods of operation. The P&C Group competes for business not only on the
basis of price, but also on the basis of Ñnancial strength, availability of coverage desired by customers
and quality of service, including claim adjustment service. The P&C Group's products and services are
generally designed to serve speciÑc customer groups or needs and to oÅer a degree of customization
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