Annual Report 2005 - Chubb Group of Insurance Companies

EXECUTIVE OVERVIEW
The following highlights do not address all of the matters covered in the other sections of
Management's Discussion and Analysis of Financial Condition and Results of Operations or contain all of
the information that may be important to Chubb's shareholders or the investing public. This overview
should be read in conjunction with the other sections of Management's Discussion and Analysis of
Financial Condition and Results of Operations.
‚Net income was $1,826 million in 2005 compared with $1,548 million in 2004 and $809 million in
2003. The increase in net income in 2005 was driven by increases in both underwriting and
investment income in our property and casualty insurance business.
‚Underwriting results in 2005 were adversely aÅected by pre-tax costs of $462 million related to
Hurricane Katrina, including estimated net losses of $403 million and net reinsurance reinstatement
premium costs of $59 million. We also incurred a charge of about $45 million, included in
our corporate segment, representing our share of the losses from Hurricane Katrina estimated
by an insurer in which we have a minority interest.
‚Despite the impact of Hurricane Katrina, underwriting results were highly proÑtable in 2005 as
they were in 2004, compared with modestly proÑtable results in 2003. Our combined loss and
expense ratio was 92.3% in both 2005 and 2004 compared with 98.0% in 2003.
‚Premium growth was 2% in 2005 and 9% in 2004. Premiums in our insurance business grew 4% in
2005 and 8% in 2004. The lower growth in 2005 reÖects our maintaining underwriting discipline
in a more competitive market environment. Rates were generally stable, but were under
competitive pressure in some classes of business. In our reinsurance assumed business, premiums
decreased 21% in 2005 after increasing 16% in 2004. The decrease in 2005 was in line with
our expectations as we had anticipated fewer attractive opportunities in the reinsurance market.
‚During 2005, we experienced overall unfavorable development of $163 million on loss reserves
established as of the previous year end, due primarily to unfavorable development in the
professional liability classes of business, principally errors and omissions liability, and in excess
liability and certain other commercial liability classes, oÅset in part by favorable development in
the property classes and in Ñdelity and surety.
‚Property and casualty investment income after taxes increased by 11% in 2005 and 13% in 2004.
‚In December 2005, we completed a transaction involving a new reinsurance company, Harbor
Point Limited. As part of the transaction, we transferred our continuing reinsurance assumed
business and certain related assets, including renewal rights, to Harbor Point. The transaction
resulted in the recognition of a pre-tax realized investment gain of $171 million in 2005.
A summary of our consolidated net income is as follows:
Years Ended December 31
2005 2004 2003
(in millions)
Property and casualty insurance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,235 $2,026 $1,133
Chubb Financial Solutions non-insurance businessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6) (17) (127)
Corporate and otherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (166) (159) (157)
Realized investment gainsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 384 218 85
Consolidated income before income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,447 2,068 934
Federal and foreign income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 621 520 125
Consolidated net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,826 $1,548 $ 809
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