Annual Report 2005 - Chubb Group of Insurance Companies

Letter to Shareholders
With the improvement at CSI, all of our three major business units
were profitable in 2005.
Near the end of 2005, we transferred our ongoing reinsurance assumed
business (Chubb Re) to Harbor Point Limited, a global reinsurer sponsored
by Stone Point Capital LLC. In return, we received $200 million of 6%
We believe the
turnaround at CSI is
real and sustainable,
and we look forward to
continuing contributions
to Chubb’s earnings from
this business unit.
convertible notes as well as warrants, which, on a fully diluted basis,
represent a 16% interest in Harbor Point. As a result of this transaction,
we realized a pre-tax investment gain of $204 million, of which $171
million was recognized in the fourth quarter. The remaining gain of $33
million was deferred and will be recognized based on the timing of the
ultimate disposition of our economic interest in Harbor Point.
We believe this transaction is unique in the industry. Unlike most
startups, Harbor Point was able to function from its first day of operation
as a diversified global company with an existing book of business. It has
renewal rights on the existing Chubb reinsurance assumed business; it
can utilize Chubb’s strong credit rating to front business; it has the entire
former Chubb Re management team; and it is well capitalized. None
12000
Shareholders’ Equity
($ in billions)
$12.4
of the other startup reinsurers created in 2005 received a rating from
A.M. Best as high as the single A that was awarded to Harbor Point.
This transaction helped create a company that we believe will succeed
9500
7000
$6.5
$6.8
$8.5
$10.1
and generate significant future value for Chubb.
4500
2000
2001 2002 2003 2004 2005
5