Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - CHUBB CORP | d336368d8k.htm |
| EX-99.1 - PRESS RELEASE DATED APRIL 19, 2012 - CHUBB CORP | d336368dex991.htm |
Exhibit 99.2
|
The |
Supplementary | March 31, 2012 | ||
| Chubb |
Investor | |||
| Corporation |
Information |
| This report is for informational purposes only. It should be read in conjunction with documents filed by The Chubb Corporation with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. |
| |
THE CHUBB CORPORATION
Adoption of New Accounting Pronouncement
Shareholders’ equity and book value per common share at December 31, 2011 and March 31, 2011 and return on equity and operating return on equity for the three months ended March 31, 2011 have been restated to reflect the adoption of new guidance issued by the Financial Accounting Standards Board related to the accounting for costs associated with acquiring or renewing insurance contracts. The adoption of this guidance decreased shareholders’ equity by $273 million as of December 31, 2010 and 2011 and each of the quarter-end balances within 2011. The effect of the adoption of the new guidance on net income for the three months ended March 31, 2012 and March 31, 2011 was not material.
(i)
THE CHUBB CORPORATION
SUPPLEMENTARY INVESTOR INFORMATION
TABLE OF CONTENTS
MARCH 31, 2012
| Page | ||
| The Chubb Corporation: |
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| Consolidated Balance Sheet Highlights |
1 | |
| Share Repurchase Activity |
2 | |
| Summary of Invested Assets: |
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| Corporate |
3 | |
| Property and Casualty |
3 | |
| Investment Income After Taxes: |
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| Corporate |
4 | |
| Property and Casualty |
4 | |
| Property and Casualty Insurance Group: |
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| Statutory Policyholders’ Surplus |
4 | |
| Change in Net Unpaid Losses |
5 | |
| Underwriting Results |
6-10 | |
| Definitions of Key Terms |
11-12 | |
THE CHUBB CORPORATION
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(in millions, except per share amounts)
| Mar. 31
2012 |
Dec. 31 2011 |
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| % of Total | % of Total | |||||||||||||||
| (Restated) | ||||||||||||||||
| Invested Assets (at carrying value) |
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| Short Term Investments |
$ | 1,772 | 4 | % | $ | 1,893 | 4 | % | ||||||||
| Fixed Maturities |
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| Tax Exempt |
20,032 | 47 | 20,211 | 47 | ||||||||||||
| Taxable |
17,293 | 40 | 16,973 | 40 | ||||||||||||
| Equity Securities |
1,620 | 4 | 1,512 | 4 | ||||||||||||
| Other Invested Assets |
2,139 | 5 | 2,180 | 5 | ||||||||||||
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| Total Invested Assets |
$ | 42,856 | 100 | % | $ | 42,769 | 100 | % | ||||||||
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| Unrealized Appreciation of Investments |
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| Fixed Maturities |
$ | 2,405 | $ | 2,422 | ||||||||||||
| Equity Securities |
350 | 248 | ||||||||||||||
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| 2,755 | 2,670 | |||||||||||||||
| Deferred Income Tax Liability |
964 | 934 | ||||||||||||||
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| $ | 1,791 | $ | 1,736 | |||||||||||||
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| Capitalization |
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| Long Term Debt |
$ | 3,575 | $ | 3,575 | ||||||||||||
| Shareholders’ Equity |
15,490 | 15,301 | ||||||||||||||
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| Total Capitalization |
$ | 19,065 | $ | 18,876 | ||||||||||||
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| Debt as a Percentage of Total Capitalization |
18.8 | % | 18.9 | % | ||||||||||||
| Actual Common Shares Outstanding |
270.0 | 272.5 | ||||||||||||||
| Book Value Per Common Share |
$ | 57.37 | $ | 56.15 | ||||||||||||
| Book Value Per Common Share, with Available-for-Sale Fixed Maturities at Amortized Cost |
$ | 51.58 | $ | 50.37 | ||||||||||||
Page 1 of 12
THE CHUBB CORPORATION
SHARE REPURCHASE ACTIVITY
(dollars in millions, except per share amounts)
| Three Months Ended March 31, 2012 |
From December 2005 to March 31, 2012 |
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| Cost of Shares Repurchased |
$301 | $9,979 | ||||||
| Average Cost Per Share |
$68.44 | $52.94 | ||||||
| Shares Repurchased |
4,391,046 | 188,481,639 | ||||||
During the period from December 2005 through December 2010, under several share repurchase authorizations the Board of Directors authorized the repurchases of a total of 185 million shares of the Corporation's common stock. No shares remain under these repurchase authorizations.
In January 2012, the Board of Directors authorized the repurchase of up to $1.2 billion of the Corporation's common stock. The authorization has no expiration date. As of March 31, 2012, approximately $963 million remained under the share repurchase authorization.
Page 2 of 12
THE CHUBB CORPORATION
SUMMARY OF INVESTED ASSETS
CORPORATE
| Cost or Amortized Cost |
Carrying Value (a) |
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| Mar. 31 2012 |
Dec. 31 2011 |
Mar. 31 2012 |
Dec. 31 2011 |
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| (in millions) | ||||||||||||||||
| Short Term Investments |
$ | 780 | $ | 1,035 | $ | 780 | $ | 1,035 | ||||||||
| Taxable Fixed Maturities |
1,133 | 955 | 1,163 | 983 | ||||||||||||
| Equity Securities |
200 | 200 | 175 | 179 | ||||||||||||
| Other Invested Assets |
26 | 27 | 26 | 27 | ||||||||||||
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| TOTAL |
$ | 2,139 | $ | 2,217 | $ | 2,144 | $ | 2,224 | ||||||||
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| PROPERTY AND CASUALTY
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| Cost or Amortized Cost |
Carrying Value (a) |
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| Mar. 31 2012 |
Dec. 31 2011 |
Mar. 31 2012 |
Dec. 31 2011 |
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| (in millions) | ||||||||||||||||
| Short Term Investments |
$ | 992 | $ | 858 | $ | 992 | $ | 858 | ||||||||
| Fixed Maturities |
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| Tax Exempt |
18,638 | 18,786 | 20,032 | 20,211 | ||||||||||||
| Taxable |
15,149 | 15,021 | 16,130 | 15,990 | ||||||||||||
| Equity Securities |
1,070 | 1,064 | 1,445 | 1,333 | ||||||||||||
| Other Invested Assets |
2,113 | 2,153 | 2,113 | 2,153 | ||||||||||||
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| TOTAL |
$ | 37,962 | $ | 37,882 | $ | 40,712 | $ | 40,545 | ||||||||
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| (a) | Short term investments are carried at amortized cost, which approximates fair value. Fixed maturities and equity securities are carried at fair value. Other invested assets include private equity limited partnerships carried at the Corporation's equity in the net assets of the partnerships. |
Page 3 of 12
THE CHUBB CORPORATION
INVESTMENT INCOME AFTER TAXES
| Three Months Ended March 31 |
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| 2012 | 2011 | |||||||
| (in millions) | ||||||||
| CORPORATE INVESTMENT INCOME |
$ | 7 | $ | 8 | ||||
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| PROPERTY AND CASUALTY INVESTMENT INCOME |
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| Tax Exempt Interest |
$ | 187 | $ | 192 | ||||
| Taxable Interest |
116 | 116 | ||||||
| Other |
12 | 9 | ||||||
| Investment Expenses |
(7 | ) | (7 | ) | ||||
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| TOTAL |
$ | 308 | $ | 310 | ||||
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| Effective Tax Rate |
18.9 | % | 18.6 | % | ||||
| After-Tax Annualized Yield |
3.21 | % | 3.20 | % | ||||
After-tax annualized yield is based on the average invested assets for the periods presented, with fixed maturities at amortized cost and equity securities at fair value.
STATUTORY POLICYHOLDERS’ SURPLUS
| Mar. 31 2012 |
Dec. 31 2011 |
Mar. 31 2011 |
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| (in millions) | ||||||||||||
| Estimated Statutory Policyholders’ Surplus |
$ | 14,250 | $ | 13,958 | $ | 14,620 | ||||||
| Rolling Year Statutory Net Premiums Written |
$ | 11,857 | $ | 11,778 | $ | 11,360 | ||||||
| Ratio of Statutory Net Premiums Written to Policyholders’ Surplus |
0.83:1 | 0.84:1 | 0.78:1 | |||||||||
Statutory Policyholders’ Surplus and Net Premiums Written include all domestic and foreign property and casualty subsidiaries.
Page 4 of 12
THE CHUBB CORPORATION
PROPERTY AND CASUALTY
CHANGE IN NET UNPAID LOSSES
THREE MONTHS ENDED MARCH 31, 2012
| Net Unpaid Losses | IBNR Increase (Decrease) |
All Other Unpaid Losses Increase (Decrease) |
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| 3/31/12 | 12/31/11 | Increase (Decrease) |
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| (in millions) | ||||||||||||||||||||
| Personal Insurance |
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| Automobile |
$ | 400 | $ | 404 | $ | (4 | ) | $ | (2 | ) | $ | (2 | ) | |||||||
| Homeowners |
723 | 769 | (46 | ) | 5 | (51 | ) | |||||||||||||
| Other |
885 | 902 | (17 | ) | 11 | (28 | ) | |||||||||||||
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| Total Personal |
2,008 | 2,075 | (67 | ) | 14 | (81 | ) | |||||||||||||
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| Commercial Insurance |
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| Multiple Peril |
1,762 | 1,735 | 27 | 25 | 2 | |||||||||||||||
| Casualty |
6,327 | 6,274 | 53 | 43 | 10 | |||||||||||||||
| Workers’ Compensation |
2,451 | 2,392 | 59 | 53 | 6 | |||||||||||||||
| Property and Marine |
1,080 | 1,118 | (38 | ) | 8 | (46 | ) | |||||||||||||
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| Total Commercial |
11,620 | 11,519 | 101 | 129 | (28 | ) | ||||||||||||||
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| Specialty Insurance |
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| Professional Liability |
7,218 | 7,180 | 38 | 24 | 14 | |||||||||||||||
| Surety |
78 | 75 | 3 | 4 | (1 | ) | ||||||||||||||
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| Total Specialty |
7,296 | 7,255 | 41 | 28 | 13 | |||||||||||||||
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| Total Insurance |
20,924 | 20,849 | 75 | 171 | (96 | ) | ||||||||||||||
| Reinsurance Assumed |
451 | 480 | (29 | ) | (28 | ) | (1 | ) | ||||||||||||
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| Total |
$ | 21,375 | $ | 21,329 | $ | 46 | $ | 143 | $ | (97 | ) | |||||||||
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Page 5 of 12
THE CHUBB CORPORATION — WORLDWIDE
PROPERTY AND CASUALTY UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(DOLLARS IN MILLIONS )
| Personal Automobile |
Homeowners | Other Personal |
Total Personal |
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| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||
| Net Premiums Written |
$ | 164 | $ | 162 | $ | 555 | $ | 533 | $ | 221 | $ | 199 | $ | 940 | $ | 894 | ||||||||||||||||
| Decrease (Increase) in Unearned Premiums |
2 | 1 | 63 | 68 | (15 | ) | (6 | ) | 50 | 63 | ||||||||||||||||||||||
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| Net Premiums Earned |
166 | 163 | 618 | 601 | 206 | 193 | 990 | 957 | ||||||||||||||||||||||||
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| Net Losses Paid |
105 | 96 | 318 | 309 | 138 | 108 | 561 | 513 | ||||||||||||||||||||||||
| Increase (Decrease) in Outstanding Losses |
(4 | ) | 5 | (47 | ) | 44 | (14 | ) | 1 | (65 | ) | 50 | ||||||||||||||||||||
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| Net Losses Incurred |
101 | 101 | 271 | 353 | 124 | 109 | 496 | 563 | ||||||||||||||||||||||||
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| Expenses Incurred |
50 | 50 | 201 | 192 | 82 | 71 | 333 | 313 | ||||||||||||||||||||||||
| Dividends Incurred |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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| Statutory Underwriting Income (Loss) |
$ | 15 | $ | 12 | $ | 146 | $ | 56 | $ | — | $ | 13 | $ | 161 | $ | 81 | ||||||||||||||||
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| Ratios After Dividends to Policyholders: |
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| Loss |
60.8 | % | 62.0 | % | 43.9 | % | 58.8 | % | 60.2 | % | 56.5 | % | 50.1 | % | 58.8 | % | ||||||||||||||||
| Expense |
30.5 | 30.8 | 36.2 | 36.0 | 37.1 | 35.7 | 35.4 | 35.0 | ||||||||||||||||||||||||
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| Combined |
91.3 | % | 92.8 | % | 80.1 | % | 94.8 | % | 97.3 | % | 92.2 | % | 85.5 | % | 93.8 | % | ||||||||||||||||
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| Premiums Written as a % of Total |
5.6 | % | 5.7 | % | 18.8 | % | 18.6 | % | 7.5 | % | 7.0 | % | 31.9 | % | 31.3 | % | ||||||||||||||||
Page 6 of 12
THE CHUBB CORPORATION — WORLDWIDE
PROPERTY AND CASUALTY UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(DOLLARS IN MILLIONS)
| Commercial Multiple Peril |
Commercial Casualty |
Commercial Workers’ Compensation |
Commercial Property and Marine |
Total Commercial |
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| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||||||||
| Net Premiums Written |
$ | 261 | $ | 267 | $ | 450 | $ | 436 | $ | 298 | $ | 243 | $ | 396 | $ | 380 | $ | 1,405 | $ | 1,326 | ||||||||||||||||||||
| Decrease (Increase) in |
20 | 15 | (40 | ) | (36 | ) | (62 | ) | (46 | ) | (37 | ) | (50 | ) | (119 | ) | (117 | ) | ||||||||||||||||||||||
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| Net Premiums Earned |
281 | 282 | 410 | 400 | 236 | 197 | 359 | 330 | 1,286 | 1,209 | ||||||||||||||||||||||||||||||
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| Net Losses Paid |
125 | 150 | 217 | 159 | 110 | 98 | 256 | 153 | 708 | 560 | ||||||||||||||||||||||||||||||
| Increase (Decrease) in |
26 | 41 | 55 | 64 | 60 | 31 | (36 | ) | 153 | 105 | 289 | |||||||||||||||||||||||||||||
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| Net Losses Incurred |
151 | 191 | 272 | 223 | 170 | 129 | 220 | 306 | 813 | 849 | ||||||||||||||||||||||||||||||
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| Expenses Incurred |
103 | 102 | 123 | 121 | 61 | 51 | 128 | 123 | 415 | 397 | ||||||||||||||||||||||||||||||
| Dividends Incurred |
— | — | — | — | 7 | 7 | — | — | 7 | 7 | ||||||||||||||||||||||||||||||
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| Statutory Underwriting |
$ | 27 | $ | (11 | ) | $ | 15 | $ | 56 | $ | (2 | ) | $ | 10 | $ | 11 | $ | (99 | ) | $ | 51 | $ | (44 | ) | ||||||||||||||||
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| Ratios After Dividends |
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| Loss |
53.7 | % | 67.7 | % | 66.4 | % | 55.7 | % | 74.2 | % | 67.9 | % | 61.3 | % | 92.7 | % | 63.6 | % | 70.6 | % | ||||||||||||||||||||
| Expense |
39.5 | 38.2 | 27.3 | 27.8 | 21.0 | 21.6 | 32.3 | 32.4 | 29.7 | 30.1 | ||||||||||||||||||||||||||||||
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| Combined |
93.2 | % | 105.9 | % | 93.7 | % | 83.5 | % | 95.2 | % | 89.5 | % | 93.6 | % | 125.1 | % | 93.3 | % | 100.7 | % | ||||||||||||||||||||
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| Premiums Written as a % of Total |
8.8 | % | 9.3 | % | 15.3 | % | 15.3 | % | 10.1 | % | 8.5 | % | 13.4 | % | 13.3 | % | 47.6 | % | 46.4 | % | ||||||||||||||||||||
Page 7 of 12
THE CHUBB CORPORATION — WORLDWIDE
PROPERTY AND CASUALTY UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(DOLLARS IN MILLIONS)
| Professional Liability |
Surety | Total Specialty |
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| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
| Net Premiums Written |
$ | 538 | $ | 551 | $ | 64 | $ | 88 | $ | 602 | $ | 639 | ||||||||||||
| Decrease (Increase) in Unearned Premiums |
57 | 53 | 13 | (5 | ) | 70 | 48 | |||||||||||||||||
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| Net Premiums Earned |
595 | 604 | 77 | 83 | 672 | 687 | ||||||||||||||||||
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| Net Losses Paid |
356 | 362 | 6 | 6 | 362 | 368 | ||||||||||||||||||
| Increase (Decrease) in Outstanding Losses |
42 | (20 | ) | 3 | 9 | 45 | (11 | ) | ||||||||||||||||
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| Net Losses Incurred |
398 | 342 | 9 | 15 | 407 | 357 | ||||||||||||||||||
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| Expenses Incurred |
170 | 166 | 28 | 28 | 198 | 194 | ||||||||||||||||||
| Dividends Incurred |
— | — | 1 | 1 | 1 | 1 | ||||||||||||||||||
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| Statutory Underwriting Income (Loss) |
$ | 27 | $ | 96 | $ | 39 | $ | 39 | $ | 66 | $ | 135 | ||||||||||||
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| Ratios After Dividends to Policyholders: |
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| Loss |
66.9 | % | 56.6 | % | 11.9 | % | 18.3 | % | 60.6 | % | 52.0 | % | ||||||||||||
| Expense |
31.6 | 30.2 | 44.4 | 32.2 | 33.0 | 30.4 | ||||||||||||||||||
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| Combined |
98.5 | % | 86.8 | % | 56.3 | % | 50.5 | % | 93.6 | % | 82.4 | % | ||||||||||||
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| Premiums Written as a % of Total |
18.2 | % | 19.3 | % | 2.2 | % | 3.0 | % | 20.4 | % | 22.3 | % | ||||||||||||
Page 8 of 12
THE CHUBB CORPORATION — WORLDWIDE
PROPERTY AND CASUALTY UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(DOLLARS IN MILLIONS)
| Total Insurance |
Reinsurance Assumed |
Worldwide Total |
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| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
| Net Premiums Written |
$ | 2,947 | $ | 2,859 | $ | 2 | $ | — | $ | 2,949 | $ | 2,859 | ||||||||||||
| Decrease (Increase) in Unearned Premiums |
1 | (6 | ) | 1 | 1 | 2 | (5 | ) | ||||||||||||||||
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| Net Premiums Earned |
2,948 | 2,853 | 3 | 1 | 2,951 | 2,854 | ||||||||||||||||||
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| Net Losses Paid |
1,631 | 1,441 | 20 | 26 | 1,651 | 1,467 | ||||||||||||||||||
| Increase (Decrease) in Outstanding Losses |
85 | 328 | (29 | ) | (30 | ) | 56 | 298 | ||||||||||||||||
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| Net Losses Incurred |
1,716 | 1,769 | (9 | ) | (4 | ) | 1,707 | 1,765 | ||||||||||||||||
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| Expenses Incurred |
946 | 904 | 1 | — | 947 | 904 | ||||||||||||||||||
| Dividends Incurred |
8 | 8 | — | — | 8 | 8 | ||||||||||||||||||
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| Statutory Underwriting Income (Loss) |
$ | 278 | $ | 172 | $ | 11 | $ | 5 | 289 | 177 | ||||||||||||||
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| Increase in Deferred Acquisition Costs |
14 | 25 | ||||||||||||||||||||||
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| GAAP Underwriting Income |
$ | 303 | $ | 202 | ||||||||||||||||||||
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| Ratios After Dividends to Policyholders: |
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| Loss |
58.4 | % | 62.2 | % | * | % | * | % | 58.0 | % | 62.0 | % | ||||||||||||
| Expense |
32.2 | 31.7 | * | * | 32.2 | 31.7 | ||||||||||||||||||
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| Combined |
90.6 | % | 93.9 | % | * | % | * | % | 90.2 | % | 93.7 | % | ||||||||||||
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| Premiums Written as a % of Total |
99.9 | % | 100.0 | % | 0.1 | % | 0.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
| * | Combined, loss and expense ratios are no longer presented for Reinsurance Assumed since this business is in runoff. |
Page 9 of 12
THE CHUBB CORPORATION — WORLDWIDE
PROPERTY AND CASUALTY UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(DOLLARS IN MILLIONS)
| United States | Outside the United States |
Worldwide Total | ||||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
| Net Premiums Written |
$ | 2,082 | $ | 1,986 | $ | 867 | $ | 873 | $ | 2,949 | $ | 2,859 | ||||||||||||
| Decrease (Increase) in Unearned Premiums |
103 | 126 | (101 | ) | (131 | ) | 2 | (5 | ) | |||||||||||||||
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| Net Premiums Earned |
2,185 | 2,112 | 766 | 742 | 2,951 | 2,854 | ||||||||||||||||||
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| Net Losses Paid |
1,262 | 1,152 | 389 | 315 | 1,651 | 1,467 | ||||||||||||||||||
| Increase (Decrease) in Outstanding Losses |
(5 | ) | 98 | 61 | 200 | 56 | 298 | |||||||||||||||||
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| Net Losses Incurred |
1,257 | 1,250 | 450 | 515 | 1,707 | 1,765 | ||||||||||||||||||
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| Expenses Incurred |
646 | 604 | 301 | 300 | 947 | 904 | ||||||||||||||||||
| Dividends Incurred |
8 | 8 | — | — | 8 | 8 | ||||||||||||||||||
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| Statutory Underwriting Income (Loss) |
$ | 274 | $ | 250 | $ | 15 | $ | (73 | ) | 289 | 177 | |||||||||||||
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| Increase in Deferred Acquisition Costs |
14 | 25 | ||||||||||||||||||||||
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| GAAP Underwriting Income |
$ | 303 | $ | 202 | ||||||||||||||||||||
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| Ratios After Dividends to Policyholders: |
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| Loss |
57.7 | % | 59.4 | % | 58.7 | % | 69.4 | % | 58.0 | % | 62.0 | % | ||||||||||||
| Expense |
31.1 | 30.5 | 34.7 | 34.4 | 32.2 | 31.7 | ||||||||||||||||||
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| Combined |
88.8 | % | 89.9 | % | 93.4 | % | 103.8 | % | 90.2 | % | 93.7 | % | ||||||||||||
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| Premiums Written as a % of Total |
70.6 | % | 69.5 | % | 29.4 | % | 30.5 | % | 100.0 | % | 100.0 | % | ||||||||||||
Property and casualty underwriting results for the first three months of 2011 reflect a reclassification of certain business that was previously considered outside the United States business and is now considered United States business. This reclassification had no impact on worldwide total amounts.
Page 10 of 12
THE CHUBB CORPORATION
Definitions of Key Terms
Underwriting Income (Loss)
Management evaluates underwriting results separately from investment results. The underwriting operations consist of four separate business units: personal insurance, commercial insurance, specialty insurance and reinsurance assumed. Performance of the business units is measured based on statutory underwriting results. Statutory accounting principles applicable to property and casualty insurance companies differ in certain respects from generally accepted accounting principles (GAAP). Under statutory accounting principles, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned. Statutory underwriting income (loss) is arrived at by reducing premiums earned by losses and loss expenses incurred and statutory underwriting expenses incurred.
Management uses underwriting results determined in accordance with GAAP, among other measures, to assess the overall performance of the underwriting operations. To convert statutory underwriting results to a GAAP basis, certain policy acquisition expenses are deferred and amortized over the period in which the related premiums are earned. Underwriting income (loss) determined in accordance with GAAP is defined as premiums earned less losses and loss expenses incurred and GAAP underwriting expenses incurred.
Property and Casualty Investment Income After Income Tax
Management uses property and casualty investment income after income tax, a non-GAAP financial measure, to evaluate its investment results because it reflects the impact of any change in the proportion of the investment portfolio invested in tax exempt securities and is therefore more meaningful for analysis purposes than investment income before income taxes.
Book Value per Common Share with Available-for-Sale Fixed Maturities at Amortized Cost
Book value per common share represents the portion of consolidated shareholders’ equity attributable to one share of common stock outstanding as of the balance sheet date. Consolidated shareholders’ equity includes, as part of accumulated other comprehensive income (loss), the after-tax appreciation or depreciation, including unrealized other-than-temporary impairment losses, of the Corporation’s available-for-sale fixed maturities, which are carried at fair value. The appreciation or depreciation of available-for-sale fixed maturities is subject to fluctuation due to changes in interest rates and therefore could distort the analysis of trends. Management believes that book value per common share with available-for-sale fixed maturities at amortized cost, a non-GAAP financial measure, is an important measure of the underlying equity attributable to one share of common stock.
Combined Loss and Expense Ratio or Combined Ratio
The combined loss and expense ratio, expressed as a percentage, is the key measure of underwriting profitability. Management uses the combined loss and expense ratio calculated in accordance with statutory accounting principles applicable to property and casualty insurance companies to evaluate the performance of the underwriting operations. It is the sum of the ratio of losses and loss expenses to premiums earned (loss ratio) plus the ratio of statutory underwriting expenses to premiums written (expense ratio) after reducing both premium amounts by dividends to policyholders.
Page 11 of 12
THE CHUBB CORPORATION
Definitions of Key Terms
Operating Income
Operating income, a non-GAAP financial measure, is net income excluding after-tax realized investment gains and losses. Management uses operating income, among other measures, to evaluate its performance because the realization of investment gains and losses in any given period is largely discretionary as to timing and can fluctuate significantly, which could distort the analysis of trends.
Return on Equity and Operating Return on Equity
Return on equity is the ratio of annualized net income divided by average shareholders' equity. Average shareholders' equity is the average of the beginning and all quarter-end balances within the period.
Operating return on equity, a non-GAAP measure, is the ratio of annualized operating income divided by average shareholders' equity excluding the after-tax unrealized appreciation or depreciation of investments. Consolidated shareholders' equity includes, as part of accumulated other comprehensive income (loss), the after-tax appreciation or depreciation, including unrealized other-than-temporary impairment losses, of the Corporation's available-for-sale fixed maturities and equity securities, which are carried at fair value. The appreciation or depreciation of available-for-sale fixed maturities and equity securities is subject to fluctuation and could distort the analysis of trends. Average shareholders' equity excluding the after-tax unrealized appreciation or depreciation of investments is the average of the beginning and all quarter-end balances within the period. Management uses operating return on equity, among other measures, to assess the overall performance of the Corporation.
| Three Months Ended March 31 |
||||||||
| 2012 | 2011 | |||||||
| (dollars in millions) | ||||||||
| (Restated) | ||||||||
| Annualized Net Income |
$ | 2,024 | $ | 2,036 | ||||
| Average Shareholders’ Equity |
$ | 15,396 | $ | 15,282 | ||||
| Return on Equity |
13.1 | % | 13.3 | % | ||||
| Annualized Operating Income |
$ | 1,876 | $ | 1,620 | ||||
| Average Shareholders’ Equity Excluding Unrealized Appreciation or Depreciation |
$ | 13,632 | $ | 14,190 | ||||
| Operating Return on Equity |
13.8 | % | 11.4 | % | ||||
Page 12 of 12