Annual Report 2001 - Chubb Group of Insurance Companies

The weighted average discount rate used in determin- At December 31, 2001, future minimum rental paying
the actuarial present value of the accumulated postre- ments required under non-cancellable operating leases
tirement beneÑt obligation at December 31, 2001 and were as follows:
2000 was 7 1 /4% and 7 1 /2%, respectively. At December 31,
Years Ending
2001, the weighted average health care cost trend rate December 31 (in millions)
used to measure the accumulated postretirement cost for
2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 91.3
medical beneÑts was 10% for 2002 and was assumed to 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 82.1
decrease gradually to 5% for the year 2009 and remain at 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73.4
that level thereafter. The health care cost trend rate 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65.0
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58.6
assumption has a signiÑcant eÅect on the amount of the
After 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 349.8
accumulated postretirement beneÑt obligation and the
$720.2
net postretirement beneÑt cost reported. To illustrate, a
one percent increase or decrease in the trend rate for
each year would increase or decrease the accumulated (16) Commitments and Contingent Liabilities
postretirement beneÑt obligation at December 31, 2001
(a) CFSI participates in the credit derivatives busiby
approximately $22 million and the aggregate of the
ness, principally as a counterparty to credit default swaps.
service and interest cost components of net postretire-
The Corporation has issued unconditional guarantees
ment beneÑt cost for the year ended December 31, 2001
with respect to all obligations of CFSI arising from these
by approximately $3 million.
transactions.
(c) The Corporation and its subsidiaries have a sav- Obligations with respect to credit default swaps are
ings plan, the Capital Accumulation Plan, in which carried at estimated fair value. At December 31, 2001,
substantially all employees are eligible to participate. the fair value of future obligations under credit default
Under this plan, the employer makes a matching contri- swaps was $47.9 million. At that date, the aggregate
bution equal to 100% of each eligible employee's pre-tax exposure or retained risk, referred to as notional
elective contributions, up to 4% of the employee's com- amounts, from open credit default swaps was approxipensation.
Contributions are invested at the election of mately $14.3 billion. The notional amounts are used to
the employee in the Corporation's common stock or in express the extent of involvement in swap transactions.
various other investment funds. Employer contributions Notional amounts are not a quantiÑcation of market risk
of $18.6 million, $17.1 million and $15.1 million were or credit risk and are not recorded on the balance sheet.
charged against income in 2001, 2000 and 1999, The notional amounts are used to calculate the exchange
respectively.
of contractual cash Öows and are not necessarily representative
of the potential for gain or loss.
(15) Leases
(b) A property and casualty insurance subsidiary issued
The Corporation and its subsidiaries occupy oÇce
a reinsurance contract to an insurer that provides
facilities under lease agreements that expire at various Ñnancial guarantees on asset-backed transactions. At De-
dates through 2019; such leases are generally renewed or cember 31, 2001, the aggregate principal commitments
replaced by other leases. In addition, the Corporation's related to the contract for which the subsidiary was
subsidiaries lease data processing, oÇce and transportalion,
contingently liable amounted to approximately $400 mil-
tion equipment.
all of which expire by
2023.
Most leases contain renewal options for increments
ranging from three to Ñve years; certain lease agreements
provide for rent increases based on price-level factors. All
leases are operating leases.
Rent expense was as follows:
Years Ended
December 31
2001 2000 1999
(in millions)
OÇce facilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $82.3 $75.2 $71.0
Equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.5 14.6 13.4
$97.8 $89.8 $84.4
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