Annual Report 2001 - Chubb Group of Insurance Companies

At December 31, 2001
Total
Estimated
There- Amortized Market
2002 2003 2004 2005 2006 after Cost Value
(in millions)
Euro ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7 $20 $40 $20 $40 $284 $411 $417
Canadian dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 21 48 49 53 203 398 415
British pound sterling ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 9 21 54 38 176 299 302
At December 31, 2000
Total
Estimated
There- Amortized Market
2001 2002 2003 2004 2005 after Cost Value
(in millions)
Euro ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9 $24 $25 $28 $14 $213 $313 $317
Canadian dollar ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 21 29 26 31 232 362 377
British pound sterling ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 13 26 30 34 134 237 240
exchange rate risk for the property and casualty each of the equity securities held at December 31, 2001
subsidiaries are the euro, the Canadian dollar and the and 2000 would have resulted in a decrease of
British pound sterling. The table above provides infor- $71 million and $83 million, respectively, in the fair
mation about those Ñxed maturity investments that are value of the equity securities portfolio.
denominated in these currencies. The table presents
cash Öows of principal amounts in U.S. dollar
All of the above risks are monitored on an ongoing
equivalents by expected maturity dates at December 31, basis. A combination of in-house systems and proprie-
2001 and 2000. Actual cash Öows could diÅer from the tary models and externally licensed software are used to
expected amounts.
analyze individual securities as well as each portfolio.
These tools provide the portfolio managers with infor-
Equity price risk is the potential loss arising from mation to assist them in the evaluation of the market
adverse changes in the value of equity securities. In risks of the portfolio.
general, equities have more year-to-year price variability
than intermediate term high grade bonds. However, CREDIT DERIVATIVES
equity returns over longer time frames have been CFSI's obligations with respect to its credit derivatives
consistently higher. Our publicly traded equity securities business are carried at estimated fair value. The fair
are high quality, diversiÑed across industries and readily value of our credit default swaps is subject to Öuctuamarketable.
Our portfolio also includes alternative tions arising from, among other factors, changes in
investments, primarily investment partnerships. These credit spreads and interest rates. At December 31, 2001,
investments by their nature are less liquid than our the fair value of future obligations under CFSI's credit
other investments. We actively manage our risk by derivatives business was approximately $48 million,
allocating a comparatively small amount of funds to which is included in accrued expenses and other
alternative investments, perform extensive research prior liabilities. For any particular credit default swap, an
to investing in a new investment and monitor the increase in the estimated fair value of our obligation may
performance of the entities in which we have invested. occur as a result of changing market conditions even
A hypothetical decrease of 10% in the market price of when the probability of an actual loss to CFSI remains
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