Annual Report 2001 - Chubb Group of Insurance Companies

In November 2001, the Corporation sold $400 million The Corporation has two credit agreements with a
of unsecured 6% notes due in 2011 and $200 million of group of banks that provide for unsecured borrowings
unsecured 6.8% debentures due in 2031 under a
of up to $500 million in the aggregate. The $200 million
previously Ñled shelf registration. The proceeds were short term revolving credit facility, which was to have
used for general corporate purposes. terminated on July 4, 2001, was extended to July 2,
2002. The $300 million medium term revolving credit
The Corporation also has outstanding $300 million of facility terminates on July 11, 2002. On the respective
unsecured 6.15% notes due in 2005 and $100 million of termination dates, any loans then outstanding become
unsecured 6.60% debentures due in 2018. Chubb payable. There have been no borrowings under these
Capital Corporation, a wholly owned subsidiary, has agreements. Management anticipates that similar credit
outstanding $100 million of unsecured 6 7 /8% notes due agreements will replace these agreements. These facilities
in 2003. The Chubb Capital notes are guaranteed by are available for general corporate purposes and to
the Corporation.
support the Corporation's commercial paper borrowing
arrangement.
The long term debt obligations of Executive Risk
remained in place subsequent to its acquisition in 1999.
Change in Accounting Principles
Chubb Executive Risk Inc., a wholly owned subsidiary In June 2001, the Financial Accounting Standards Board
of the Corporation, has outstanding $75 million of issued Statement of Financial Accounting Standards
unsecured 7 1/8% notes due in 2007. Executive Risk (SFAS) No. 142, Goodwill and Other Intangible
Capital Trust, wholly owned by Chubb Executive Risk, Assets. The Statement addresses how intangible assets
has outstanding $125 million of 8.675% capital securi- should be accounted for upon their acquisition and how
ties. The sole assets of the Trust are debentures issued goodwill and other intangible assets should be accounted
by Chubb Executive Risk. The capital securities are for after they have been initially recognized in the
subject to mandatory redemption in 2027 upon repay- Ñnancial statements. Under SFAS No. 142, goodwill will
ment of the debentures. The capital securities are also no longer be amortized but rather will be tested at least
subject to mandatory redemption under certain circum- annually for impairment. The provisions of SFAS
stances beginning in 2007. The Corporation has guaran- No. 142 are eÅective for the Corporation for the year
teed the unsecured notes and the capital securities. beginning January 1, 2002. The Statement will be
applied to goodwill recognized in the Corporation's
In August 2001, the Corporation entered into a
Ñnancial statements at that date. SFAS No. 142 may not
cancelable interest rate swap in order to monetize the be applied retroactively to Ñnancial statements of prior
value of the call option embedded in the $125 million periods. The elimination of goodwill amortization is
8.675% capital securities. Under the terms of the expected to result in an increase in net income in 2002
interest rate swap, the Corporation receives 8.675% and of approximately $20 million. The Corporation is in the
pays the counterparty the 3-month LIBOR rate plus process of assessing the eÅect, if any, that the implemen-
204 basis points. As a result of entering into the swap, tation of the other provisions of SFAS No. 142 will
interest costs related to this portion of our debt will have on its consolidated Ñnancial position or results of
Öoat with short term interest rates.
operations.
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