Annual Report 2001 - Chubb Group of Insurance Companies

(13) Stock-Based Compensation Plans
(a) In 2000, the Corporation adopted the Long-Term Stock Incentive Plan (2000), which succeeded the Long-
Term Stock Incentive Plan (1996). The Long-Term Stock Incentive Plan (2000), which is similar to the 1996 plan,
provides for the granting of stock options, performance shares, restricted stock and other stock-based awards to key
employees. The maximum number of shares of the Corporation's common stock in respect to which stock-based awards
may be granted under the 2000 Plan is 13,000,000. At December 31, 2001, 9,075,809 shares were available for grant
under the 2000 Plan.
Stock options are granted at exercise prices not less than the fair market value of the Corporation's common stock
on the date of grant. The terms and conditions upon which options become exercisable may vary among grants. Options
expire no later than ten years from the date of grant.
Information concerning stock options is as follows:
2001 2000 1999
Number Weighted Average Number Weighted Average Number Weighted Average
of Shares Exercise Price of Shares Exercise Price of Shares Exercise Price
Outstanding, beginning of year ÏÏÏÏÏÏÏÏÏ 16,683,741 $55.66 14,565,584 $55.58 9,765,090 $54.78
Exchanged for Executive Risk options ÏÏÏ Ì Ì Ì Ì 1,809,885 36.77
Granted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,760,311 72.60 5,833,616 50.88 4,761,683 60.31
ExercisedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,740,701) 47.80 (3,242,900) 46.05 (1,359,855) 39.50
Forfeited ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (327,047) 67.51 (472,559) 60.13 (411,219) 64.20
Outstanding, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,376,304 59.66 16,683,741 55.66 14,565,584 55.58
Exercisable, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,215,260 57.86 8,787,173 57.80 9,187,352 51.09
December 31, 2001
Options Outstanding
Options Exercisable
Weighted Average
Range of Number Weighted Average Remaining Number Weighted Average
Option Exercise Prices Outstanding Exercise Price Contractual Life Exercisable Exercise Price
$ 3.95 Ì $46.84 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,437,650 $39.75 2.4 1,437,650 $39.75
47.06 Ì 59.97 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,243,089 52.95 6.7 6,782,637 54.31
60.25 Ì 78.97 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,695,565 71.44 6.7 3,994,973 70.41
18,376,304 59.66 6.4 12,215,260 57.86
Performance share awards are based on the achievement of various goals over performance cycle periods and are
payable in cash, in shares of the Corporation's common stock or in a combination of both. Restricted stock awards
consist of shares of common stock of the Corporation granted at no cost. Shares of restricted stock become outstanding
when granted, receive dividends and have voting rights. The shares are subject to forfeiture and to restrictions that limit
the sale or transfer during the restriction period.
The Corporation uses the intrinsic value based method of accounting for stock-based compensation, under which
compensation cost is measured as the excess, if any, of the quoted market price of the stock at the measurement date
over the amount an employee must pay to acquire the stock. Since the exercise price of stock options granted under the
Long-Term Stock Incentive Plans is not less than the market price of the underlying stock on the date of grant, no
compensation cost is recognized for such grants. The cost of performance share awards is expensed over the
performance cycle. An amount equal to the fair market value of restricted share awards at the date of grant is expensed
over the restriction period. The aggregate amount charged against income with respect to performance share and
restricted stock awards was $13.5 million in 2001, $11.5 million in 2000 and $5.2 million in 1999.
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