Annual Report 2005 - Chubb Group of Insurance Companies

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Earnings were at their highest level since Chubb was incorporated in 1967. Total shareholder return for 2005, including stock price appreciation and dividends, was 30%, compared to 5% for the S&P 500 and 16% for the S&P Property and Casualty Insurance Index. Earnings were at their highest level since Chubb was incorporated in 1967. In addition, the market price of our common stock closed at $98.13 on November 14, 2005, an all-time high closing price for Chubb shares. Total shareholder return for 2005, including stock price appreciation and dividends, was 30%, compared to 5% for the S&P 500 and 16% for the S&P Property and Casualty Insurance Index. Net written premiums grew 2% to $12.3 billion. The combined loss and expense ratio was 92.3%, including 5.6 percentage points of catastrophe losses. The expense ratio was 28.0%, 1.2 percentage points better than in 2004 and an all-time best for the corporation. Net loss reserves increased by $1.9 billion or 11%, bringing 2005 year-end net loss reserves to $18.7 billion. Property and casualty investment income after taxes for the year 116% 112% 108% 104% 100% 96% 92% Combined Loss & Expense Ratio Percentage of premium dollars spent on claims and expenses 113.4% 106.7% 98.0% 92.3% 2001 2002 2003 2004 2005 92.3% increased 11% to $1.1 billion, bolstered by strong cash flow from operations. The combination of strong income from both investments and underwriting resulted in a 13% increase in book value per common share. It was a year that demonstrated what Chubb is capable of achieving. Chubb Personal Insurance (CPI) net written premiums grew 6% to $3.3 billion. CPI’s combined ratio improved 5.9 percentage points to 86.6%, making it one of the most profitable years in the history of our personal lines business. Excluding catastrophe losses, the combined ratio improved 4.2 points to 80.1%. 2
Letter to Shareholders John J. Degnan, Vice Chairman and Chief Administrative Officer Thomas F. Motamed, Vice Chairman and Chief Operating Officer Michael O’Reilly, Vice Chairman and Chief Financial Officer These results were the product of well executed strategies over the last few years: We priced our products according to our appraisers and underwriters’ expert assessment of the risk we assumed, not what competitors were charging; we made sure that property coverage amounts reflected home improvements and higher construction costs and that We successfully competed with new entrants into the high-net-worth niche market through our superior claims service and the broad appeal of our Masterpiece ® product. liability coverages reflected inflation in medical and litigation costs; we managed our catastrophe exposures by territory to limit our losses from hurricanes and other natural disasters; we reduced non-catastrophe water damage and mold losses through underwriting actions and loss remediation measures; and we successfully competed with new entrants into the highnet-worth niche market through our superior claims service and the broad 2005 Business Mix by Net Written Premiums Chubb Commercial Insurance 41% appeal of our Masterpiece ® product. In a more competitive market than 2004, Chubb Commercial Chubb Personal Insurance 27% Chubb Specialty Insurance 25% Insurance (CCI) grew premiums 2% to $5.0 billion and produced a combined ratio of 92.4%. Excluding catastrophes, the combined ratio 7% Reinsurance Assumed 3
Page 1 and 2: THE CHUBB CORPORATION Annual Report
Page 3: Letter to Shareholders John D. Finn
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
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theory, insurance coverage is deeme
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The following table presents the nu
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alance sheets and superior underwri
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On an after-tax basis, property and
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CORPORATE AND OTHER Corporate and o
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The writedowns of Ñxed maturities
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Ratings Chubb and its insurance sub
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The above table also excludes estim
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At December 31, 2004 Total Estimate
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Item 8. Consolidated Financial Stat
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PART III. Item 10. Directors and Ex
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SIGNATURES Pursuant to the requirem
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THE CHUBB CORPORATION INDEX TO FINA
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THE CHUBB CORPORATION Consolidated
Page 96 and 97:
THE CHUBB CORPORATION Consolidated
Page 98 and 99:
NOTES TO CONSOLIDATED FINANCIAL STA
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In 2005, the Corporation transferre
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(b) The components of unrealized ap
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(7) Unpaid Losses and Loss Expenses
Page 106 and 107:
In establishing toxic waste reserve
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(b) Interest costs of $134.8 millio
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(11) Stock-Based Employee Compensat
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The following table sets forth the
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(13) Commitments and Contingent Lia
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Revenues, income before income tax
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(17) Fair Values of Financial Instr
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In the event that any person or gro
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THE CHUBB CORPORATION Schedule I CO
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THE CHUBB CORPORATION Schedule II (
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THE CHUBB CORPORATION Schedule III
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Exhibit Number THE CHUBB CORPORATIO
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Exhibit Number Description 10.18 Am
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Exhibit Number Description 10.44 Fo
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Exhibit 23.1 THE CHUBB CORPORATION
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Exhibit 31.2 I, Michael O'Reilly, c
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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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