Annual Report 2005 - Chubb Group of Insurance Companies

Workers' compensation results were highly proÑtable in each of the past three years. Results were
more proÑtable in each succeeding year. Results in all three years beneÑted from our disciplined risk
selection during the past several years.
Property and marine results were marginally proÑtable in 2005 compared with highly proÑtable
results in the previous two years, particularly in 2004. Results in each year beneÑted from improved
pricing, higher deductibles and better terms and conditions. Results in 2005 and 2004 also beneÑted
from unusually low non-catastrophe losses. Results in 2005 deteriorated, however, due to substantially
higher catastrophe losses, primarily from Hurricane Katrina. The impact of catastrophes accounted for
27.2 percentage points of the combined loss and expense ratio for this class in 2005 compared with
1.8 percentage points in 2004 and 7.1 percentage points in 2003. The impact of catastrophes in 2004
reÖects a $20 million reduction in net loss reserves related to the September 11, 2001 attack.
Specialty Insurance
Net premiums from specialty insurance, which represented 25% of our total writings in 2005,
increased by 6% in 2005 compared with a 4% increase in 2004. Net premiums written for the classes of
business within the specialty insurance segment were as follows:
Years Ended December 31
% Increase % Increase
2005 2005 vs. 2004 2004 2004 vs. 2003 2003
(dollars in millions)
Professional liability ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,798 5% $2,654 4% $2,562
SuretyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 244 18 206 11 186
Total specialty ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,042 6 $2,860 4 $2,748
Growth in net premiums written for the professional liability classes of business was constrained
in both 2005 and 2004 by the competitive pressure on rates that began in the latter half of 2003 and by
our commitment to maintain underwriting discipline. Growth in 2005 was also dampened by the sale of
renewal rights, eÅective July 1, 2005, on our hospital medical malpractice and managed care errors and
omissions business. The net premium growth in 2005 in the professional liability classes was due solely
to the non-renewal of a per risk reinsurance treaty.
Overall, rates increased slightly in 2004 and were down slightly in 2005. The most signiÑcant rate
declines occurred in the for-proÑt directors and oÇcers liability component. Retention levels were
signiÑcantly higher in 2004 compared with 2003, while new business volume was similar to 2003 levels.
Retention levels in 2005 were comparable to the 2004 levels, while new business volume was lower due
in part to our exiting the hospital medical malpractice and managed care errors and omissions business.
Overall, we continued to get adequate rates and favorable terms and conditions on both new business
and renewals. While large public companies remain a signiÑcant component of our book of business,
that component has decreased in recent years in line with our strategy to focus on small and middle
market publicly traded and privately held companies.
The growth in net premiums written for our surety business was substantial in both 2005 and 2004.
The growth in 2005 was due in part to the non-renewal of a high excess reinsurance treaty.
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