Annual Report 2005 - Chubb Group of Insurance Companies

Net premiums written by business unit were as follows:
Years Ended December 31
% Increase % Increase
2005 2005 vs. 2004 2004 2004 vs. 2003 2003
(dollars in millions)
Personal insuranceÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,307 6% $3,116 9% $2,868
Commercial insurance ÏÏÏÏÏÏÏÏÏÏ 5,030 2 4,938 11 4,468
Specialty insurance ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,042 6 2,860 4 2,748
Total insuranceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,379 4 10,914 8 10,084
Reinsurance assumed ÏÏÏÏÏÏÏÏÏÏÏ 904 (21) 1,139 16 984
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $12,283 2 $12,053 9 $11,068
Premiums from our insurance business grew 4% in 2005 and 8% in 2004. Premiums in 2005
reÖected reinsurance reinstatement premium costs of $102 million related to Hurricane Katrina.
Approximately 80% of our insurance premiums in 2005 were written in the United States. Insurance
premiums in the U.S. grew by 3% in 2005 and 7% in 2004. Insurance premiums outside the U.S. grew 8%
in 2005 and 12% in 2004. In local currencies, such growth was 6% and 4% in 2005 and 2004, respectively,
reÖecting the weakness of the U.S. dollar.
We experienced modest premium growth in our insurance business in 2005. In a more competitive
market environment, we maintained underwriting discipline by continuing to get acceptable rates and
appropriate terms and conditions on business written. Rates were generally stable, but were under
competitive pressure in some classes of business. We continued to retain a high percentage of our
existing customers and to renew these accounts at adequate prices. In addition, while we continued to
be selective, we found opportunities to write new business at acceptable rates. The premium growth in
2004 was largely the result of our retaining a higher percentage of our existing customers compared
with the prior year and attracting new customers. We did get rate increases in 2004 on a signiÑcant
portion of the business we wrote, although the size of such increases decelerated throughout the year.
Reinsurance assumed premiums generated by Chubb Re decreased by 21% in 2005 after increasing
by 16% in 2004. Premiums in 2005 included net reinstatement premium revenue of $43 million related
to Hurricane Katrina. The premium decline in 2005 was in line with our expectations. As discussed
below, we sold our ongoing reinsurance assumed business to Harbor Point Limited in December 2005.
Reinsurance Ceded
Our premiums written are net of amounts ceded to reinsurers who assume a portion of the risk
under the insurance policies we write that are subject to the reinsurance.
Our overall reinsurance costs in 2004 were similar to those in 2003. We discontinued a casualty per
risk treaty that responded primarily to excess liability exposures over $25 million. Underwriting actions
we have taken in recent years resulted in a reduction in the number of such exposures, which we
believe made this treaty no longer economical. Our professional liability per risk treaty was renewed
with coverage similar to the prior year. On our property per risk treaty, our retention remained at
$15 million. Our property catastrophe treaty for events in the United States was modiÑed to increase
our initial retention and to increase the reinsurance coverage at the top.
Our overall reinsurance costs in 2005 were lower than those in 2004. We discontinued our
professional liability per risk treaty. Underwriting actions we have taken in recent years have resulted
in lower average limits on those large risks we write, which we believe made this treaty no longer
economical. On our casualty clash treaty, which operates like a catastrophe treaty, we increased our
retention from $50 million to $75 million. This treaty now provides $125 million of coverage in excess
of $75 million per insured event. We did not renew a high excess surety per risk treaty as we believe
the cost was not justiÑed. On our commercial property per risk treaty, our retention remained at
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