Annual Report 2005 - Chubb Group of Insurance Companies

were issued together in the form of 7% equity units, each of which initially represents $25 principal
amount of notes and one purchase contract. The notes will be remarketed in May 2006. Each purchase
contract obligates the holder to purchase, for a settlement price of $25, a variable number of shares of
Chubb's common stock on or before August 16, 2006. The number of shares to be purchased will be
determined based on a formula that considers the market price of Chubb's common stock immediately
prior to the time of settlement in relation to the $59.50 per share sale price of the common stock at the
time the equity units were oÅered. Upon settlement of the purchase contracts, Chubb will receive
proceeds of approximately $460 million and will issue between approximately 6,500,000 and
7,700,000 shares of common stock.
The equity units are further described in Notes (8) and (18) of the Notes to Consolidated
Financial Statements.
Chubb also has outstanding $225 million of unsecured 3.95% notes due in 2008, $400 million of
unsecured 6% notes due in 2011, $275 million of unsecured 5.2% notes due in 2013, $100 million of
unsecured 6.6% debentures due in 2018 and $200 million of unsecured 6.8% debentures due in 2031. In
August 2005, $300 million of 6.15% notes were paid when due.
Chubb Executive Risk Inc., a wholly owned subsidiary, has outstanding $75 million of unsecured
7 1 /8% notes due in 2007. Executive Risk Capital Trust, wholly owned by Chubb Executive Risk, has
outstanding $125 million of 8.675% capital securities. The sole assets of the Trust are debentures issued
by Chubb Executive Risk. The capital securities are subject to mandatory redemption in 2027 upon
repayment of the debentures. The capital securities are also subject to mandatory redemption under
certain circumstances beginning in 2007. Chubb has guaranteed the unsecured notes and the capital
securities.
Management continuously monitors the amount of capital resources that Chubb maintains both
for itself and its operating subsidiaries. In connection with our long-term capital strategy, Chubb from
time to time contributes capital to its property and casualty subsidiaries. In addition, in order to satisfy
its capital needs as a result of any rating agency capital adequacy or other future rating issues, or in the
event we were to need additional capital to make strategic investments in light of market opportunities,
we may take a variety of actions, which could include the issuance of additional debt and/or
equity securities.
In June 2003, a shelf registration statement that Chubb Ñled in March 2003 was declared eÅective
by the Securities and Exchange Commission. Under the registration statement, up to $2.5 billion of
various types of securities may be issued. At December 31, 2005, approximately $650 million remained
under the shelf registration statement.
In December 2005, the Board of Directors authorized the repurchase of up to 14,000,000 shares of
Chubb's common stock. The authorization has no expiration date. The authorization replaced an
existing program authorized by the Board in July 1998 to purchase up to 12,500,000 shares, of which
3,287,100 shares had remained available. We made no share repurchases during 2003 and 2004. We
repurchased 1,393,900 shares in open market transactions in 2005 at a cost of $135 million. As of
December 31, 2005, 12,606,100 shares remained under the current share repurchase authorization.
Based on our outlook for 2006, we expect to repurchase all of the shares remaining under this
authorization by the end of 2006.
On January 3, 2006, we repurchased 2,550,000 shares under an accelerated stock buyback program
at an initial price of $97.80 per share, for a total cost of approximately $250 million. At the end of the
program, we may receive, or be required to pay, a price adjustment based on the volume weighted
average price of Chubb's common stock during the agreed upon program period, which will not
exceed four months. The price adjustment may be settled, at our election, in Chubb's common stock or
cash.
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