x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 |
|
OR | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
|
Commission File No. 1-8661
|
New Jersey
|
13-2595722 | |
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer Identification No.) | |
15 Mountain View Road | ||
Warren, New Jersey
|
07059 | |
(Address of principal executive offices) | (Zip Code) |
(Title of each class) |
(Name of each exchange on which
registered)
|
|
Common Stock, par value $1 per share | New York Stock Exchange | |
Series B Participating Cumulative | New York Stock Exchange | |
Preferred Stock Purchase Rights |
Large accelerated
filer
[
ü
]
|
Accelerated filer [ ] | |
Non-accelerated filer
[ ]
(Do not check if a smaller reporting company) |
Smaller reporting company [ ] |
ITEM |
DESCRIPTION
|
PAGE | ||||
PART I
|
1 | 3 | ||||
1A | 12 | |||||
1B | 17 | |||||
2 | 17 | |||||
3 | 18 | |||||
4 | 20 | |||||
PART II
|
5 | 21 | ||||
6 | 23 | |||||
7 | 24 | |||||
7A | 61 | |||||
8 | 64 | |||||
9 | 64 | |||||
9A | 64 | |||||
9B | 65 | |||||
PART III
|
10 | 67 | ||||
11 | 67 | |||||
12 | 67 | |||||
13 | 67 | |||||
14 | 67 | |||||
PART IV
|
15 | 67 | ||||
68 | ||||||
F-1 | ||||||
E-1 |
Table of Contents
Direct
Reinsurance
Reinsurance
Net
Premiums
Premiums
Premiums
Premiums
(in millions)
$
12,224
$
954
$
1,204
$
11,974
12,432
775
1,335
11,872
12,443
549
1,210
11,782
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December 31
(in millions)
$
9,050
$
9,749
$
10,051
$
11,010
$
12,642
$
14,521
$
16,809
$
18,713
$
19,699
$
20,316
$
20,155
8,855
9,519
9,856
11,799
13,039
14,848
16,972
18,417
19,002
19,443
8,517
9,095
10,551
12,143
13,634
15,315
17,048
17,861
18,215
8,058
9,653
10,762
12,642
14,407
15,667
16,725
17,298
8,527
9,740
11,150
13,246
14,842
15,584
16,526
8,656
9,999
11,605
13,676
14,907
15,657
8,844
10,373
11,936
13,812
15,064
9,119
10,602
12,019
13,994
9,324
10,702
12,170
9,434
10,828
9,536
(Redundancy)
486
1,079
2,119
2,984
2,422
1,136
(283
)
(1,415
)
(1,484
)
(873
)
1,437
1,390
1,359
1,298
557
307
232
197
173
85
Net Liability Paid as of*:
2,520
2,483
2,794
3,135
3,550
3,478
3,932
4,118
4,066
4,108
3,708
4,079
4,699
5,499
5,911
6,161
6,616
6,896
6,789
4,653
5,306
6,070
7,133
7,945
8,192
8,612
8,850
5,362
6,196
7,137
8,564
9,396
9,689
10,048
5,925
6,909
8,002
9,588
10,543
10,794
6,370
7,453
8,765
10,366
11,353
6,719
8,009
9,305
10,950
7,086
8,402
9,714
7,382
8,697
7,562
$
10,357
$
11,435
$
11,904
$
15,515
$
16,713
$
17,948
$
20,292
$
22,482
$
22,293
$
22,623
$
22,367
1,307
1,686
1,853
4,505
4,071
3,427
3,483
3,769
2,594
2,307
2,212
$
9,050
$
9,749
$
10,051
$
11,010
$
12,642
$
14,521
$
16,809
$
18,713
$
19,699
$
20,316
$
20,155
$
11,166
$
13,265
$
15,013
$
19,460
$
19,901
$
19,450
$
19,936
$
20,838
$
20,720
$
21,691
1,630
2,437
2,843
5,466
4,837
3,793
3,410
3,540
2,505
2,248
$
9,536
$
10,828
$
12,170
$
13,994
$
15,064
$
15,657
$
16,526
$
17,298
$
18,215
$
19,443
(Redundancy)
$
809
$
1,830
$
3,109
$
3,945
$
3,188
$
1,502
$
(356
)
$
(1,644
)
$
(1,573
)
$
(932
)
*
The cumulative amount of net
liability paid amounts in the table for years prior to 2008 have
been revised to remove the foreign currency fluctuation offset
amounts that had been included in the past. The change did not
have an effect on the other amounts in the table.
Table of Contents
December 31
(in millions)
$
16,871
$
16,597
3,284
3,719
$
20,155
$
20,316
Table of Contents
Average
Invested
Investment
Percent Earned
(in millions)
$
33,492
$
1,454
4.34
%
3.48
%
36,406
1,590
4.37
3.50
37,190
1,622
4.36
3.49
(a)
Average of amounts with fixed maturity securities at amortized
cost, equity securities at fair value and other invested assets,
which include private equity limited partnerships, at the
P&C Groups equity in the net assets of the
partnerships.
(b)
Investment income after deduction of investment expenses, but
before applicable income tax.
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Item 1A.
Risk
Factors
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engaging in vigorous underwriting;
carefully evaluating terms and conditions of our policies;
focusing on our risk aggregations by geographic zones, industry
type, credit exposure and other bases; and
ceding reinsurance.
Table of Contents
an apparent trend of courts to grant increasingly larger awards
for certain damages;
catastrophic hurricanes, windstorms, earthquakes and other
natural disasters, as well as the occurrence of man-made
disasters (e.g., a terrorist attack);
availability, price and terms of reinsurance;
fluctuations in interest rates;
changes in the investment environment that affect market prices
of and income and returns on investments; and
inflationary pressures that may tend to affect the size of
losses experienced by insurance companies.
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Year of
60
2002
46
2008
52
2005
51
2003
64
1994
53
2008
49
2001
54
1997
51
2008
52
2009
50
2006
44
2008
Table of Contents
Item 5.
Market
for the Registrants Common Stock and Related Stockholder
Matters
2008
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
$
54.38
$
54.65
$
64.50
$
53.06
48.02
49.01
45.61
38.75
.33
.33
.33
.33
2007
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
$
53.34
$
55.91
$
54.63
$
55.52
48.82
51.68
47.36
49.80
.29
.29
.29
.29
Total Number of
Maximum Number of
Total
Shares Purchased as
Shares that May Yet Be
Number of
Part of Publicly
Purchased Under
Shares
Average Price
Announced Plans or
the Plans or
Purchased(a)
Paid Per Share
Programs
Programs(b)
1,921,900
$
43.61
1,921,900
1,478,982
860,200
45.66
860,200
618,782
834,882
48.37
834,882
19,783,900
3,616,982
45.20
3,616,982
(a)
The stated amounts exclude 6,971 shares and
8,493 shares delivered to Chubb during the months of
November 2008 and December 2008, respectively, by
employees of the Corporation to cover option exercise prices and
withholding taxes in connection with the Corporations
stock-based compensation plans.
(b)
On December 13, 2007, the Board of Directors authorized the
repurchase of up to 28,000,000 shares of common stock. No
shares remain under this share repurchase authorization. On
December 4, 2008, the Board of Directors authorized the
repurchase of up to 20,000,000 additional shares of common
stock. The authorization has no expiration date.
Table of Contents
December 31
2003
2004
2005
2006
2007
2008
$
100
$
115
$
150
$
165
$
174
$
167
100
111
116
135
142
90
100
110
127
143
123
87
Table of Contents
(in millions except for per share amounts)
$
11,828
$
11,946
$
11,958
$
12,176
$
11,636
1,652
1,622
1,485
1,342
1,207
4
11
108
154
315
181
116
(Losses), Net
(371
)
374
245
384
218
$
13,221
$
14,107
$
14,003
$
14,083
$
13,177
$
1,361
$
2,116
$
1,905
$
921
(a)
$
846
1,622
1,590
1,454
1,315
1,184
9
6
10
(1
)
(4
)
Insurance Income
2,992
3,712
3,369
2,235
2,026
(214
)
(149
)
(89
)
(172
)
(176
)
(Losses), Net
(371
)
374
245
384
218
2,407
3,937
3,525
2,447
2,068
603
1,130
997
621
520
$
1,804
$
2,807
$
2,528
$
1,826
$
1,548
$
4.92
$
7.01
$
5.98
$
4.47
$
4.01
Common Stock
1.32
1.16
1.00
.86
.78
$
48,429
$
50,574
$
50,277
$
48,061
$
44,260
3,975
3,460
2,466
2,467
2,814
13,432
14,445
13,863
12,407
10,126
38.13
38.56
33.71
29.68
26.28
(a)
Underwriting income in 2005 reflected net costs of
$462 million ($300 million
after-tax
or
$0.74 per share) related to Hurricane Katrina.
Item
7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
PAGE
25
27
27
28
29
29
29
30
31
33
33
34
36
37
37
38
38
39
41
41
45
45
48
49
50
53
54
54
54
55
56
56
58
58
59
60
61
61
Table of Contents
global political conditions and the occurrence of terrorist
attacks, including any nuclear, biological, chemical or
radiological events;
the effects of the outbreak or escalation of war or hostilities;
premium pricing and profitability or growth estimates overall or
by lines of business or geographic area, and related
expectations with respect to the timing and terms of any
required regulatory approvals;
adverse changes in loss cost trends;
our ability to retain existing business and attract new business;
our expectations with respect to cash flow and investment income
and with respect to other income;
the adequacy of loss reserves, including:
our expectations relating to reinsurance recoverables;
the willingness of parties, including us, to settle disputes;
developments in judicial decisions or regulatory or legislative
actions relating to coverage and liability, in particular, for
asbestos, toxic waste and other mass tort claims;
development of new theories of liability;
our estimates relating to ultimate asbestos liabilities;
the impact from the bankruptcy protection sought by various
asbestos producers and other related businesses; and
the effects of proposed asbestos liability legislation,
including the impact of claims patterns arising from the
possibility of legislation and those that may arise if
legislation is not passed;
the availability and cost of reinsurance coverage;
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the occurrence of significant weather-related or other natural
or human-made disasters, particularly in locations where we have
concentrations of risk;
the impact of economic factors on companies on whose behalf we
have issued surety bonds, and in particular, on those companies
that file for bankruptcy or otherwise experience deterioration
in creditworthiness;
the effects of disclosures by, and investigations of, companies
relating to possible accounting irregularities, practices in the
financial services industry, investment losses or other
corporate governance issues, including:
claims and litigation arising out of stock option
backdating, spring loading and other equity
grant practices by public companies;
the effects on the capital markets and the markets for directors
and officers and errors and omissions insurance;
claims and litigation arising out of actual or alleged
accounting or other corporate malfeasance by other companies;
claims and litigation arising out of practices in the financial
services industry;
claims and litigation relating to uncertainty in the credit and
broader financial markets; and
legislative or regulatory proposals or changes;
the effects of changes in market practices in the
U.S. property and casualty insurance industry, in
particular contingent commissions and loss mitigation and finite
reinsurance arrangements, arising from any legal or regulatory
proceedings, related settlements and industry reform, including
changes that have been announced and changes that may occur in
the future;
the impact of legislative and regulatory developments on our
business, including those relating to terrorism, catastrophes
and the financial markets;
any downgrade in our claims-paying, financial strength or other
credit ratings;
the ability of our subsidiaries to pay us dividends;
general economic and market conditions including:
changes in interest rates, market credit spreads and the
performance of the financial markets;
currency fluctuations;
the effects of inflation;
changes in domestic and foreign laws, regulations and taxes;
changes in competition and pricing environments;
regional or general changes in asset valuations;
the inability to reinsure certain risks economically; and
changes in the litigation environment; and
our ability to implement managements strategic plans and
initiatives.
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Net income was $1.8 billion in 2008 compared with
$2.8 billion in 2007 and $2.5 billion in 2006. The
lower net income in 2008 was due primarily to two factors.
First, underwriting income in our property and casualty
insurance business was substantially lower in 2008 than in 2007
and 2006. Second, we had realized investment losses in 2008
compared with realized investment gains in 2007 and 2006.
Underwriting results were highly profitable in 2008, 2007 and
2006, but more so in 2007 and 2006. Our combined loss and
expense ratio was 88.7% in 2008 compared with 82.9% in 2007 and
84.2% in 2006. The less profitable results in 2008 were due in
large part to higher catastrophe losses and the cumulative
impact of rate reductions experienced in our commercial and
professional liability classes over the past several years. The
impact of catastrophes accounted for 5.1 percentage points
of the combined ratio in 2008 compared with 3.0 percentage
points in 2007 and 1.4 percentage points in 2006.
During 2008, we experienced overall favorable development of
$873 million on loss reserves established as of the
previous year end, due primarily to favorable loss experience in
certain professional liability and commercial liability classes
as well as lower than expected emergence of losses in the
homeowners and commercial property classes. During 2007, we
experienced overall favorable development of $697 million
due primarily to favorable loss trends in the professional
liability classes, lower than expected emergence of losses in
the homeowners and commercial property classes and better than
expected reported loss activity in the run-off of our
reinsurance assumed business. During 2006, we experienced
overall favorable development of $296 million due primarily
to lower than expected emergence of losses in the homeowners and
commercial property classes.
Total net premiums written decreased by 1% in both 2008 and
2007. The lack of growth in both years reflected our continued
emphasis on underwriting discipline in a highly competitive
market environment. Net premiums written in the United States
decreased by 2% in 2008 and 1% in 2007. Net premiums written
outside the United States increased by 6% in 2008 and 10% in
2007; such growth was largely attributable to the impact of
currency fluctuation.
Property and casualty investment income after tax increased by
2% in 2008 and 9% in 2007. The growth in 2008 was limited as
average invested assets increased only modestly during the year.
For more information on this non-GAAP financial measure, see
Property and Casualty Insurance Investment
Results.
Table of Contents
Net realized investment losses before taxes were
$371 million in 2008 compared with net realized gains
before taxes of $374 million in 2007 and $245 million
in 2006. The net realized losses in 2008 were primarily
attributable to other-than-temporary impairment losses on equity
securities. The net realized gains in 2007 and 2006 were
primarily attributable to gains from investments in limited
partnerships.
Years Ended December 31
2008
2007
2006
(in millions)
$
2,992
$
3,712
$
3,369
(214
)
(149
)
(89
)
(371
)
374
245
2,407
3,937
3,525
603
1,130
997
$
1,804
$
2,807
$
2,528
Years Ended December 31
2008
2007
2006
(in millions)
$
11,782
$
11,872
$
11,974
46
74
(16
)
11,828
11,946
11,958
6,898
6,299
6,574
3,546
3,564
3,467
(17
)
(52
)
(19
)
40
19
31
1,361
2,116
1,905
1,652
1,622
1,485
30
32
31
1,622
1,590
1,454
9
6
10
$
2,992
$
3,712
$
3,369
$
1,297
$
1,273
$
1,166
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Years Ended December 31
% Increase
% Increase
(Decrease)
(Decrease)
2008
2008 vs. 2007
2007
2007 vs. 2006
2006
(dollars in millions)
$
3,826
3
%
$
3,709
5
%
$
3,518
4,993
(2
)
5,083
(1
)
5,125
2,899
(2
)
2,944
2,941
11,718
11,736
1
11,584
64
(53
)
136
(65
)
390
$
11,782
(1
)
$
11,872
(1
)
$
11,974
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Years Ended December 31
2008
2007
2006
58.5
%
52.8
%
55.2
%
30.2
30.1
29.0
88.7
%
82.9
%
84.2
%
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Years Ended December 31
% Increase
% Increase
2008
2008 vs. 2007
2007
2007 vs. 2006
2006
(dollars in millions)
$
602
(3
)%
$
621
(7
)%
$
670
2,449
1
2,423
7
2,268
775
17
665
15
580
$
3,826
3
$
3,709
5
$
3,518
Years Ended December 31
2008
2007
2006
87.6
%
89.8
%
90.4
%
83.7
80.2
74.6
97.5
96.4
98.6
87.1
84.8
81.7
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Years Ended December 31
% Increase
% Increase
(Decrease)
(Decrease)
2008
2008 vs. 2007
2007
2007 vs. 2006
2006
(dollars in millions)
$
1,210
(3
)%
$
1,252
(3
)%
$
1,290
1,654
(4
)
1,726
1,731
851
(4
)
890
(1
)
901
1,278
5
1,215
1
1,203
$
4,993
(2
)
$
5,083
(1
)
$
5,125
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Years Ended December 31
2008
2007
2006
85.3
%
80.8
%
75.8
%
95.0
94.6
96.8
82.1
77.6
80.4
108.8
84.3
72.5
93.9
85.8
83.1
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Years Ended December 31
% Increase
% Increase
(Decrease)
(Decrease)
2008
2008 vs. 2007
2007
2007 vs. 2006
2006
(dollars in millions)
$
2,546
(2
)%
$
2,605
(1
)%
$
2,641
353
4
339
13
300
$
2,899
(2
)
$
2,944
$
2,941
Years Ended December 31
2008
2007
2006
85.0
%
82.4
%
91.8
%
69.9
35.4
44.2
83.3
77.4
87.5
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Net
Gross Loss Reserves
Reinsurance
Loss
Case
IBNR
Total
Recoverable
Reserves
(in millions)
$
210
$
195
$
405
$
14
$
391
434
310
744
29
715
382
608
990
175
815
1,026
1,113
2,139
218
1,921
589
1,034
1,623
37
1,586
1,431
4,621
6,052
392
5,660
832
1,377
2,209
227
1,982
889
449
1,338
499
839
3,741
7,481
11,222
1,155
10,067
1,690
5,959
7,649
474
7,175
28
51
79
11
68
1,718
6,010
7,728
485
7,243
6,485
14,604
21,089
1,858
19,231
370
908
1,278
354
924
$
6,855
$
15,512
$
22,367
$
2,212
$
20,155
Net
Gross Loss Reserves
Reinsurance
Loss
Case
IBNR
Total
Recoverable
Reserves
(in millions)
$
226
$
200
$
426
$
15
$
411
432
305
737
32
705
452
526
978
230
748
1,110
1,031
2,141
277
1,864
646
1,010
1,656
37
1,619
1,640
4,302
5,942
402
5,540
842
1,323
2,165
255
1,910
814
395
1,209
532
677
3,942
7,030
10,972
1,226
9,746
2,079
5,999
8,078
552
7,526
33
52
85
14
71
2,112
6,051
8,163
566
7,597
7,164
14,112
21,276
2,069
19,207
400
947
1,347
238
1,109
$
7,564
$
15,059
$
22,623
$
2,307
$
20,316
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changes in the inflation rate for goods and services related to
covered damages such as medical care and home repair costs,
changes in the judicial interpretation of policy provisions
relating to the determination of coverage,
changes in the general attitude of juries in the determination
of liability and damages,
legislative actions,
changes in the medical condition of claimants,
changes in our estimates of the number
and/or
severity of claims that have been incurred but not reported as
of the date of the financial statements,
changes in our book of business,
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changes in our underwriting standards, and
changes in our claim handling procedures.
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Various challenges to mass screening claimants have been
mounted, including a June 2005 U.S. District Court decision
in Texas. Many believe that this decision is leading to higher
medical evidentiary standards. For example, several asbestos
injury settlement trusts suspended their acceptance of claims
that were based on the diagnosis of physicians or screening
companies named in the case, citing concerns about their
reliability. Further investigations of the medical screening
process for asbestos claims are underway.
A number of states have implemented legislative and judicial
reforms that focus the courts resources on the claims of
the most seriously injured. Those who allege serious injury and
can present credible evidence of their injuries are receiving
priority trial settings in the courts, while those who have not
shown any credible disease manifestation are having their
hearing dates delayed or are placed on an inactive docket, which
preserves the right to pursue litigation in the future.
A number of key jurisdictions have adopted venue reform that
requires plaintiffs to have a connection to the jurisdiction in
order to file a complaint.
In recognition that many aspects of bankruptcy plans are unfair
to certain classes of claimants and to the insurance industry,
these plans are beginning to be closely scrutinized by the
courts and rejected when appropriate.
Table of Contents
Years Ended December 31
2008
2007
2006
(in millions)
$
838
$
841
$
930
45
52
50
793
789
880
75
18
46
71
109
747
793
789
47
45
52
$
794
$
838
$
841
Table of Contents
Number of
Net Loss
Net Losses
Policyholders
Reserves
Paid
(in millions)
23
$
201
$
9
372
393
37
153
$
747
$
46
the long latency period between asbestos exposure and disease
manifestation and the resulting potential for involvement of
multiple policy periods for individual claims;
plaintiffs expanding theories of liability and increased
focus on peripheral defendants;
the volume of claims by unimpaired plaintiffs and the extent to
which they can be precluded from making claims;
the efforts by insureds to claim the right to non-products
coverage not subject to aggregate limits;
the number of insureds seeking bankruptcy protection as a result
of asbestos related liabilities;
the ability of claimants to bring a claim in a state in which
they have no residency or exposure;
the impact of the exhaustion of primary limits and the resulting
increase in claims on excess liability policies we have issued;
inconsistent court decisions and diverging legal
interpretations; and
the possibility, however remote, of federal legislation that
would address the asbestos problem.
Table of Contents
Years Ended December 31
2008
2007
2006
(in millions)
$
154
$
169
$
191
85
13
6
58
28
28
$
181
$
154
$
169
Table of Contents
2008
2007
2006
(in millions)
$
20,316
$
19,699
$
18,713
7,771
6,996
6,870
(873
)
(697
)
(296
)
6,898
6,299
6,574
2,401
1,883
1,703
4,108
4,066
4,118
6,509
5,949
5,821
(550
)
267
233
$
20,155
$
20,316
$
19,699
Table of Contents
Calendar Year
(Favorable) Unfavorable Development
2008
2007
2006
(in millions)
$
(86
)
(224
)
$
(141
)
(364
)
(233
)
$
(372
)
(272
)
(240
)
(276
)
(84
)
(148
)
(83
)
(25
)
(71
)
5
31
53
99
25
(17
)
102
24
(10
)
24
102
110
205
$
(873
)
$
(697
)
$
(296
)
We experienced favorable development of about $390 million
in the professional liability classes other than fidelity,
including about $150 million outside the
U.S. Favorable development occurred in each of the primary
professional liability classes, including directors and officers
liability, errors and omissions liability, fiduciary liability
and employment practices liability. A majority of this favorable
development was in the 2004 and 2005 accident years. Reported
loss activity related to these accident years has been less than
expected due to a favorable business climate, lower policy
limits and better terms and conditions. As these years have
become increasingly mature, and as the reported loss experience
has emerged better than we expected, we have gradually decreased
the expected loss ratios for these accident years. This
favorable development was recognized as one among many factors
in the determination of loss reserves for more current accident
years. Our estimates of expected loss ratios for more recent
accident years, particularly 2007 and 2008, were more influenced
by the uncertainty surrounding the ongoing crisis in the
financial markets as well as the downward trend in prices in
recent years.
We experienced favorable development of about $170 million
in the homeowners and commercial property classes, primarily
related to the 2006 and 2007 accident years. The severity of
late reported property claims that emerged during 2008 was lower
than expected. Because the incidence of such property losses is
subject to a considerable element of fortuity, reserve estimates
for these classes are based on an analysis of past loss
experience on average over a period of years. As a result, the
favorable development in 2008 was recognized but had a
relatively modest effect on our determination of carried
property loss reserves at December 31, 2008.
We experienced favorable development of about $120 million
in the commercial liability classes. Favorable development,
particularly in excess liability and multiple peril liability
classes in accident years 2002 through 2006, more than offset
adverse development in accident years prior to 1998, which was
mostly due to $85 million of incurred losses related to
toxic waste claims. The severity of excess liability and
multiple peril liability claims has been generally lower than
expected and the effects of underwriting changes that affected
these years have been more positive than expected. These factors
were reflected in the determination of the carried loss reserves
for these classes at December 31, 2008.
Table of Contents
We experienced favorable development of about $75 million
in the fidelity class due to lower than expected reported loss
emergence, particularly outside the U.S., mainly related to
recent accident years. Loss reserve estimates at the end of 2007
included an expectation of more late reported losses than
actually occurred in 2008, and this factor was reflected in the
determination of carried fidelity loss reserves at
December 31, 2008.
We experienced favorable development of about $60 million
in the run-off of our reinsurance assumed business due primarily
to better than expected reported loss activity from cedants.
We experienced favorable development of about $30 million
in the workers compensation class due in part to the
positive effects of reforms in California. This factor was
reflected in the determination of carried loss reserves for this
class at December 31, 2008.
We experienced favorable development of about $30 million
in the personal automobile business due primarily to lower than
expected severity. This factor was given only modest weight in
our determination of carried personal automobile loss reserves
at December 31, 2008.
We experienced favorable development of about $300 million
in the professional liability classes other than fidelity,
including about $100 million outside the U.S. A
majority of this favorable development was in the 2003 through
2005 accident years. Reported loss activity related to these
accident years was less than expected due to a favorable
business climate, lower policy limits and better terms and
conditions. While these accident years were still somewhat
immature, we concluded that there was sufficient evidence to
modestly decrease the expected loss ratios for these accident
years.
We experienced favorable development of about $180 million
in the homeowners and commercial property classes, primarily
related to the 2006 and 2005 accident years. This favorable
development arose from the lower than expected emergence of
actual losses during 2007 relative to expectations used to
establish our loss reserves at the end of 2006. The severity of
late reported property claims that emerged during 2007 was lower
than expected and case development, including salvage
recoveries, on previously reported claims was better than
expected.
We experienced favorable development of about $135 million
in the run-off of our reinsurance assumed business due primarily
to better than expected reported loss activity from cedants.
We experienced favorable development of about $40 million
in the fidelity class and $30 million in the surety class
due to lower than expected reported loss emergence, mainly
related to more recent accident years.
We experienced favorable development of about $30 million
in the personal automobile class. Case development during 2007
on previously reported claims was better than expected,
reflecting improved case management. Also, the number of late
reported claims was less than expected, reflecting a
continuation of recent generally favorable frequency trends.
We experienced adverse development of about $20 million in
the commercial liability classes. Adverse development in
accident years prior to 1997, mostly the $88 million
related to asbestos and toxic waste claims, was largely offset
by favorable development in these classes in the more recent
accident years.
We experienced favorable development of about $190 million
in the homeowners and commercial property classes, primarily
related to the 2005 accident year. This favorable development
arose from the lower than expected emergence of actual losses
during 2006 relative to expectations used to establish our loss
reserves at the end of 2005. The severity of late reported
property claims that
Table of Contents
emerged during 2006 was lower than expected and case
development, including salvage recoveries, on previously
reported claims was better than expected.
We experienced favorable loss development of about
$70 million in the fidelity class due to lower than
expected reported loss emergence, mainly related to more recent
accident years.
We experienced favorable development of about $65 million
in the run-off of our reinsurance assumed business due primarily
to better than expected reported loss activity from cedants.
We experienced favorable development of about $45 million
in the professional liability classes other than fidelity.
Favorable development in the 2004 and 2005 accident years more
than offset continued unfavorable development in accident years
2000 through 2002. Reported loss activity related to accident
years 2004 and 2005 was less than expected due to a favorable
business climate, lower policy limits and better terms and
conditions. While these accident years were somewhat immature,
we concluded that there was sufficient evidence to modestly
decrease the expected loss ratios for these accident years. On
the other hand, we continued to experience higher than expected
reported loss activity related to the 2000 through 2002 accident
years, largely from claims related to corporate failures and
allegations of management misconduct and accounting
irregularities. As a result, we increased the expected loss
ratios for these accident years.
We experienced favorable development of about $25 million
in the personal automobile class. Case development during 2006
on previously reported claims was better than expected,
reflecting improved case management. The number of late reported
claims was also less than expected.
We experienced adverse development of about $100 million in
the commercial liability classes, including $24 million
related to asbestos and toxic waste claims. The adverse
development was primarily due to reported loss activity in
accident years prior to 1997 that was worse than expected,
primarily related to specific individual excess liability and
other liability claims.
Table of Contents
Table of Contents
Years Ended December 31
2008
2007
2006
(in millions)
$
32
$
135
$
51
66
4
(2
)
(56
)
344
209
33
75
483
258
(335
)
(79
)
(10
)
(111
)
(30
)
(3
)
(446
)
(109
)
(13
)
$
(371
)
$
374
$
245
$
(241
)
$
243
$
161
Table of Contents
Table of Contents
Table of Contents
A.M. Best
Standard & Poors
Moodys
Fitch
aa−
A+
A2
A+
a
A−
A3
A
AMB-1+
A-1
P-1
F1+
A.M. Best
Standard & Poors
Moodys
Fitch
A++
AA
Aa2
AA
Table of Contents
2010
2012
and
and
There-
2009
2011
2013
after
Total
(in millions)
$
$
400
$
275
$
3,300
$
3,975
244
487
432
3,475
4,638
78
122
99
133
432
322
1,009
806
6,908
9,045
4,921
6,486
3,802
7,158
22,367
$
5,243
$
7,495
$
4,608
$
14,066
$
31,412
(a)
Junior subordinated capital securities of $1 billion bear
interest at a fixed rate of 6.375% through April 14, 2017
and at a rate equal to the three-month LIBOR rate plus 2.25%
thereafter. For purposes of the above table, interest after
April 14, 2017 was calculated using the three-month LIBOR
rate as of December 31, 2008. The table includes future
interest payments through the scheduled maturity date,
April 15, 2037. Interest payments for the period from the
scheduled maturity date through the final maturity date,
March 29, 2067, would increase the contractual obligation
by $1.1 billion. It is
Table of Contents
our expectation that the capital securities will be redeemed at
the end of the fixed interest rate period.
(b)
There is typically no stated contractual commitment associated
with property and casualty insurance loss reserves. The
obligation to pay a claim arises only when a covered loss event
occurs and a settlement is reached. The vast majority of our
loss reserves relate to claims for which settlements have not
yet been reached. Our loss reserves therefore represent
estimates of future payments. These estimates are dependent on
the outcome of claim settlements that will occur over many
years. Accordingly, the payment of the loss reserves is not
fixed as to either amount or timing. The estimate of the timing
of future payments is based on our historical loss payment
patterns. The ultimate amount and timing of loss payments will
likely differ from our estimate and the differences could be
material. We expect that these loss payments will be funded, in
large part, by future cash receipts from operations.
Table of Contents
Item 7A.
Quantitative
and Qualitative Disclosures About Market Risk
Table of Contents
At December 31, 2008
Total
There-
Amortized
Fair
2009
2010
2011
2012
2013
after
Cost
Value
(in millions)
$
1,102
$
874
$
1,385
$
1,641
$
2,717
$
10,580
$
18,299
$
18,345
5.1
%
4.7
%
4.3
%
4.1
%
4.1
%
4.3
%
768
1,101
1,225
1,429
1,560
4,329
10,412
10,645
5.2
%
4.9
%
4.9
%
5.1
%
4.5
%
5.0
%
580
551
669
702
738
940
4,180
3,765
4.7
%
4.6
%
4.9
%
5.0
%
5.4
%
5.1
%
$
2,450
$
2,526
$
3,279
$
3,772
$
5,015
$
15,849
$
32,891
$
32,755
At December 31, 2007
Total
There-
Amortized
Fair
2008
2009
2010
2011
2012
after
Cost
Value
(in millions)
$
1,179
$
891
$
1,047
$
1,421
$
1,766
$
11,904
$
18,208
$
18,559
5.2
%
5.1
%
4.7
%
4.3
%
4.1
%
4.1
%
808
1,125
1,388
1,196
1,494
4,494
10,505
10,562
5.6
%
4.8
%
4.8
%
5.0
%
5.2
%
5.1
%
623
580
556
529
694
1,779
4,761
4,750
5.0
%
4.7
%
4.7
%
4.8
%
5.0
%
5.3
%
$
2,610
$
2,596
$
2,991
$
3,146
$
3,954
$
18,177
$
33,474
$
33,871
Table of Contents
At December 31, 2008
Total
There-
Amortized
Fair
2009
2010
2011
2012
2013
after
Cost
Value
(in millions)
$
36
$
125
$
142
$
173
$
301
$
776
$
1,553
$
1,634
83
162
283
205
146
644
1,523
1,641
33
106
162
143
189
670
1,303
1,397
Table of Contents
At December 31, 2008
There-
Fair
2009
2010
2011
2012
2013
after
Total
Value
(in millions)
$
$
$
400
$
$
275
$
3,300
$
3,975
$
3,493
6.0
%
5.2
%
6.2
%
Item 8.
Consolidated
Financial Statements and Supplementary Data
Item 9.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 9A.
Controls
and Procedures
Table of Contents
Table of Contents
Table of Contents
By
Executive Officer and
Director
February 26, 2009
February 26, 2009
February 26, 2009
February 26, 2009
February 26, 2009
February 26, 2009
February 26, 2009
Table of Contents
February 26, 2009
February 26, 2009
February 26, 2009
February 26, 2009
February 26, 2009
February 26, 2009
Chief Financial Officer
February 26, 2009
Chief Accounting Officer
February 26, 2009
Table of Contents
Form 10-K
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-31
S-1
S-2
S-5
Table of Contents
5 Times Square
New York, New York 10036
The Chubb Corporation
Table of Contents
In Millions,
|
||||||||||||||
Except For Per Share Amounts
|
||||||||||||||
Years Ended December 31 | ||||||||||||||
2008 | 2007 | 2006 | ||||||||||||
Revenues
|
||||||||||||||
Premiums Earned
|
$ | 11,828 | $ | 11,946 | $ | 11,958 | ||||||||
Investment Income
|
1,732 | 1,738 | 1,580 | |||||||||||
Other Revenues
|
32 | 49 | 220 | |||||||||||
Realized Investment Gains (Losses), Net
|
(371 | ) | 374 | 245 | ||||||||||
TOTAL REVENUES
|
13,221 | 14,107 | 14,003 | |||||||||||
Losses and Expenses
|
||||||||||||||
Losses and Loss Expenses
|
6,898 | 6,299 | 6,574 | |||||||||||
Amortization of Deferred Policy Acquisition Costs
|
3,123 | 3,092 | 2,919 | |||||||||||
Other Insurance Operating Costs and Expenses
|
441 | 444 | 550 | |||||||||||
Investment Expenses
|
32 | 35 | 34 | |||||||||||
Other Expenses
|
36 | 48 | 207 | |||||||||||
Corporate Expenses
|
284 | 252 | 194 | |||||||||||
TOTAL LOSSES AND EXPENSES
|
10,814 | 10,170 | 10,478 | |||||||||||
INCOME BEFORE FEDERAL AND FOREIGN INCOME TAX
|
2,407 | 3,937 | 3,525 | |||||||||||
Federal and Foreign Income Tax
|
603 | 1,130 | 997 | |||||||||||
NET INCOME
|
$ | 1,804 | $ | 2,807 | $ | 2,528 | ||||||||
Net Income Per Share
|
||||||||||||||
Basic
|
$ | 5.00 | $ | 7.13 | $ | 6.13 | ||||||||
Diluted
|
4.92 | 7.01 | 5.98 |
In Millions
|
|||||||||
December 31 | |||||||||
2008 | 2007 | ||||||||
Assets
|
|||||||||
Invested Assets
|
|||||||||
Short Term Investments
|
$ | 2,478 | $ | 1,839 | |||||
Fixed Maturities
|
|||||||||
Tax Exempt (cost $18,299 and $18,208)
|
18,345 | 18,559 | |||||||
Taxable (cost $14,592 and $15,266)
|
14,410 | 15,312 | |||||||
Equity Securities (cost $1,563 and $1,907)
|
1,479 | 2,320 | |||||||
Other Invested Assets
|
2,026 | 2,051 | |||||||
TOTAL INVESTED ASSETS
|
38,738 | 40,081 | |||||||
Cash
|
56 | 49 | |||||||
Securities Lending Collateral
|
| 1,247 | |||||||
Accrued Investment Income
|
435 | 440 | |||||||
Premiums Receivable
|
2,201 | 2,227 | |||||||
Reinsurance Recoverable on Unpaid Losses and Loss Expenses
|
2,212 | 2,307 | |||||||
Prepaid Reinsurance Premiums
|
373 | 392 | |||||||
Deferred Policy Acquisition Costs
|
1,532 | 1,556 | |||||||
Deferred Income Tax
|
1,144 | 442 | |||||||
Goodwill
|
467 | 467 | |||||||
Other Assets
|
1,271 | 1,366 | |||||||
TOTAL ASSETS
|
$ | 48,429 | $ | 50,574 | |||||
Liabilities
|
|||||||||
Unpaid Losses and Loss Expenses
|
$ | 22,367 | $ | 22,623 | |||||
Unearned Premiums
|
6,367 | 6,599 | |||||||
Securities Lending Payable
|
| 1,247 | |||||||
Long Term Debt
|
3,975 | 3,460 | |||||||
Dividend Payable to Shareholders
|
118 | 110 | |||||||
Accrued Expenses and Other Liabilities
|
2,170 | 2,090 | |||||||
TOTAL LIABILITIES
|
34,997 | 36,129 | |||||||
Commitments and Contingent Liabilities (Note 6 and
14)
|
|||||||||
Shareholders Equity
|
|||||||||
Preferred Stock Authorized 8,000,000 Shares;
$1 Par Value; Issued None |
| | |||||||
Common Stock Authorized 1,200,000,000 Shares;
$1 Par Value; Issued 371,980,710 and 374,649,923 Shares |
372 | 375 | |||||||
Paid-In Surplus
|
253 | 346 | |||||||
Retained Earnings
|
14,509 | 13,280 | |||||||
Accumulated Other Comprehensive Income (Loss)
|
(735 | ) | 444 | ||||||
Treasury Stock, at Cost 19,726,097 Shares in 2008
|
(967 | ) | | ||||||
TOTAL SHAREHOLDERS EQUITY
|
13,432 | 14,445 | |||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
$ | 48,429 | $ | 50,574 | |||||
In Millions
|
||||||||||||||
Years Ended December 31 | ||||||||||||||
2008 | 2007 | 2006 | ||||||||||||
Preferred Stock
|
||||||||||||||
Balance, Beginning and End of Year
|
$ | | $ | | $ | | ||||||||
Common Stock
|
||||||||||||||
Balance, Beginning of Year
|
375 | 411 | 210 | |||||||||||
Two-for-One Stock Split
|
| | 210 | |||||||||||
Treasury Shares Cancelled
|
| | (7 | ) | ||||||||||
Repurchase of Shares
|
(4 | ) | (42 | ) | (21 | ) | ||||||||
Shares Issued Upon Settlement of Equity Unit
Purchase Contracts |
| | 13 | |||||||||||
Shares Issued Under Stock-Based Employee Compensation Plans
|
1 | 6 | 6 | |||||||||||
Balance, End of Year
|
372 | 375 | 411 | |||||||||||
Paid-In Surplus
|
||||||||||||||
Balance, Beginning of Year
|
346 | 1,539 | 2,364 | |||||||||||
Two-for-One Stock Split
|
| | (210 | ) | ||||||||||
Treasury Shares Cancelled
|
| | (377 | ) | ||||||||||
Repurchase of Shares
|
(114 | ) | (1,361 | ) | (987 | ) | ||||||||
Shares Issued Upon Settlement of Equity Unit
Purchase Contracts |
| | 447 | |||||||||||
Changes Related to Stock-Based Employee Compensation (includes
tax benefit of $32, $16, and $46)
|
21 | 168 | 302 | |||||||||||
Balance, End of Year
|
253 | 346 | 1,539 | |||||||||||
Retained Earnings
|
||||||||||||||
Balance, Beginning of Year
|
13,280 | 11,711 | 9,600 | |||||||||||
Net Income
|
1,804 | 2,807 | 2,528 | |||||||||||
Dividends Declared (per share $1.32, $1.16 and $1.00)
|
(479 | ) | (457 | ) | (417 | ) | ||||||||
Repurchase of Shares
|
(96 | ) | (781 | ) | | |||||||||
Balance, End of Year
|
14,509 | 13,280 | 11,711 | |||||||||||
Accumulated Other Comprehensive Income (Loss)
|
||||||||||||||
Unrealized Appreciation (Depreciation) of Investments
|
||||||||||||||
Balance, Beginning of Year
|
526 | 392 | 311 | |||||||||||
Change During Year, Net of Tax
|
(669 | ) | 134 | 81 | ||||||||||
Balance, End of Year
|
(143 | ) | 526 | 392 | ||||||||||
Foreign Currency Translation Gains (Losses)
|
||||||||||||||
Balance, Beginning of Year
|
216 | 91 | 57 | |||||||||||
Change During Year, Net of Tax
|
(226 | ) | 125 | 34 | ||||||||||
Balance, End of Year
|
(10 | ) | 216 | 91 | ||||||||||
Postretirement Benefit Costs Not Yet Recognized
in Net Income |
||||||||||||||
Balance, Beginning of Year
|
(298 | ) | (281 | ) | | |||||||||
Change During Year, Net of Tax
|
(284 | ) | (17 | ) | | |||||||||
Adjustment to Recognize Funded Status at December 31, 2006,
Net of Tax
|
| | (281 | ) | ||||||||||
Balance, End of Year
|
(582 | ) | (298 | ) | (281 | ) | ||||||||
Accumulated Other Comprehensive Income (Loss),
End of Year |
(735 | ) | 444 | 202 | ||||||||||
Treasury Stock, at Cost
|
||||||||||||||
Balance, Beginning of Year
|
| | (135 | ) | ||||||||||
Repurchase of Shares
|
(1,097 | ) | | (249 | ) | |||||||||
Cancellation of Shares
|
| | 384 | |||||||||||
Shares Issued Under Stock-Based Employee Compensation Plans
|
130 | | | |||||||||||
Balance, End of Year
|
(967 | ) | | | ||||||||||
TOTAL SHAREHOLDERS EQUITY
|
$ | 13,432 | $ | 14,445 | $ | 13,863 | ||||||||
In Millions
|
||||||||||||||
Years Ended December 31 | ||||||||||||||
2008 | 2007 | 2006 | ||||||||||||
Cash Flows from Operating Activities
|
||||||||||||||
Net Income
|
$ | 1,804 | $ | 2,807 | $ | 2,528 | ||||||||
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities |
||||||||||||||
Increase in Unpaid Losses and Loss Expenses, Net
|
389 | 350 | 753 | |||||||||||
Increase (Decrease) in Unearned Premiums, Net
|
(46 | ) | (74 | ) | 16 | |||||||||
Decrease (Increase) in Reinsurance Recoverable on
Paid Losses |
148 | 258 | (225 | ) | ||||||||||
Amortization of Premiums and Discounts on
Fixed Maturities |
206 | 233 | 233 | |||||||||||
Depreciation
|
64 | 69 | 81 | |||||||||||
Realized Investment Losses (Gains), Net
|
371 | (374 | ) | (245 | ) | |||||||||
Other, Net
|
(392 | ) | (78 | ) | 201 | |||||||||
NET CASH PROVIDED BY OPERATING
ACTIVITIES |
2,544 | 3,191 | 3,342 | |||||||||||
Cash Flows from Investing Activities
|
||||||||||||||
Proceeds from Fixed Maturities
|
||||||||||||||
Sales
|
4,145 | 4,616 | 3,623 | |||||||||||
Maturities, Calls and Redemptions
|
2,173 | 1,790 | 1,579 | |||||||||||
Proceeds from Sales of Equity Securities
|
432 | 360 | 186 | |||||||||||
Purchases of Fixed Maturities
|
(7,125 | ) | (7,909 | ) | (6,758 | ) | ||||||||
Purchases of Equity Securities
|
(191 | ) | (650 | ) | (377 | ) | ||||||||
Investments in Other Invested Assets, Net
|
(45 | ) | (164 | ) | (264 | ) | ||||||||
Decrease (Increase) in Short Term Investments, Net
|
(654 | ) | 455 | (355 | ) | |||||||||
Increase (Decrease) in Net Payable from Security Transactions
not Settled
|
(18 | ) | (106 | ) | 50 | |||||||||
Purchases of Property and Equipment, Net
|
(46 | ) | (53 | ) | (53 | ) | ||||||||
Other, Net
|
3 | 12 | | |||||||||||
NET CASH USED IN INVESTING ACTIVITIES
|
(1,326 | ) | (1,649 | ) | (2,369 | ) | ||||||||
Cash Flows from Financing Activities
|
||||||||||||||
Proceeds from Issuance of Long Term Debt
|
1,200 | 1,800 | | |||||||||||
Repayment of Long Term Debt
|
(685 | ) | (800 | ) | | |||||||||
Proceeds from Common Stock Issued Upon Settlement of Equity Unit
Purchase Contracts
|
| | 460 | |||||||||||
Proceeds from Issuance of Common Stock Under
Stock-Based Employee Compensation Plans |
109 | 130 | 229 | |||||||||||
Repurchase of Shares
|
(1,336 | ) | (2,185 | ) | (1,228 | ) | ||||||||
Dividends Paid to Shareholders
|
(471 | ) | (451 | ) | (403 | ) | ||||||||
Other, Net
|
(28 | ) | (25 | ) | (29 | ) | ||||||||
NET CASH USED IN FINANCING ACTIVITIES
|
(1,211 | ) | (1,531 | ) | (971 | ) | ||||||||
Net Increase in Cash
|
7 | 11 | 2 | |||||||||||
Cash at Beginning of Year
|
49 | 38 | 36 | |||||||||||
CASH AT END OF YEAR
|
$ | 56 | $ | 49 | $ | 38 | ||||||||
In Millions
|
||||||||||||||
Years Ended December 31 | ||||||||||||||
2008 | 2007 | 2006 | ||||||||||||
Net Income
|
$ | 1,804 | $ | 2,807 | $ | 2,528 | ||||||||
Other Comprehensive Income (Loss), Net of Tax
|
||||||||||||||
Change in Unrealized Appreciation or Depreciation of Investments
|
(669 | ) | 134 | 81 | ||||||||||
Foreign Currency Translation Gains (Losses)
|
(226 | ) | 125 | 34 | ||||||||||
Change in Postretirement Benefit Costs Not Yet Recognized in Net
Income
|
(284 | ) | (17 | ) | | |||||||||
(1,179 | ) | 242 | 115 | |||||||||||
COMPREHENSIVE INCOME
|
$ | 625 | $ | 3,049 | $ | 2,643 | ||||||||
(1)
Summary
of Significant Accounting Policies
Table of Contents
Table of Contents
(l)
Cash Flow
Information
(m)
Accounting
Pronouncements Not Yet Adopted
(2)
Adoption
of New Accounting Pronouncements
(3)
Transfer
of Ongoing Reinsurance Assumed Business
Table of Contents
December 31
2008
2007
Gross
Gross
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Amortized
Unrealized
Unrealized
Fair
(in millions)
$
18,299
$
451
$
405
$
18,345
$
18,208
$
385
$
34
$
18,559
agency and authority obligations
587
43
4
626
671
36
2
705
3,161
39
143
3,057
2,888
42
22
2,908
6,664
340
42
6,962
6,946
66
63
6,949
4,180
52
467
3,765
4,761
31
42
4,750
14,592
474
656
14,410
15,266
175
129
15,312
$
32,891
$
925
$
1,061
$
32,755
$
33,474
$
560
$
163
$
33,871
Amortized
Cost
Fair Value
(in millions)
$
1,064
$
1,073
8,658
8,828
12,108
12,480
6,881
6,609
28,711
28,990
4,180
3,765
$
32,891
$
32,755
December 31
2008
2007
(in millions)
$
131
$
490
215
77
(84
)
413
925
560
1,061
163
(136
)
397
(220
)
810
(77
)
284
$
(143
)
$
526
Table of Contents
Less Than 12 Months
12 Months or More
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Depreciation
Value
Depreciation
Value
Depreciation
(in millions)
$
3,796
$
181
$
1,525
$
224
$
5,321
$
405
28
1
46
3
74
4
1,213
90
496
53
1,709
143
381
26
322
16
703
42
576
160
958
307
1,534
467
2,198
277
1,822
379
4,020
656
5,994
458
3,347
603
9,341
1,061
629
161
126
54
755
215
$
6,623
$
619
$
3,473
$
657
$
10,096
$
1,276
Less Than 12 Months
12 Months or More
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Depreciation
Value
Depreciation
Value
Depreciation
(in millions)
$
1,109
$
19
$
1,556
$
15
$
2,665
$
34
and authority obligations
66
2
66
2
262
8
610
14
872
22
1,302
20
2,052
43
3,354
63
813
8
2,263
34
3,076
42
2,377
36
4,991
93
7,368
129
3,486
55
6,547
108
10,033
163
373
52
81
25
454
77
$
3,859
$
107
$
6,628
$
133
$
10,487
$
240
Years Ended December 31
(in millions)
$
(497
)
$
17
$
272
(533
)
190
(147
)
(1,030
)
207
125
(361
)
73
44
$
(669
)
$
134
$
81
Table of Contents
Years Ended December 31
(in millions)
$
1,559
$
1,516
$
1,433
49
46
33
72
119
74
52
57
40
1,732
1,738
1,580
32
35
34
$
1,700
$
1,703
$
1,546
Years Ended December 31
(in millions)
$
109
$
57
$
29
(43
)
(53
)
(31
)
(111
)
(30
)
(3
)
(45
)
(26
)
(5
)
125
136
60
(93
)
(1
)
(9
)
(335
)
(79
)
(10
)
(303
)
56
41
(56
)
344
209
33
$
(371
)
$
374
$
245
Years Ended December 31
(in millions)
$
1,556
$
1,480
$
1,445
1,736
1,713
1,534
256
253
265
1,148
1,178
1,139
3,140
3,144
2,938
foreign exchange
(41
)
24
16
(3,123
)
(3,092
)
(2,919
)
$
1,532
$
1,556
$
1,480
Table of Contents
(in millions)
$
22,623
$
22,293
$
22,482
beginning of year
2,307
2,594
3,769
20,316
19,699
18,713
expenses related to
7,771
6,996
6,870
(873
)
(697
)
(296
)
6,898
6,299
6,574
2,401
1,883
1,703
4,108
4,066
4,118
6,509
5,949
5,821
(550
)
267
233
20,155
20,316
19,699
end of year
2,212
2,307
2,594
$
22,367
$
22,623
$
22,293
Table of Contents
Table of Contents
Table of Contents
December 31
2008
2007
(in millions)
$
$
225
460
400
400
275
275
600
100
100
200
200
800
800
600
1,000
1,000
$
3,975
$
3,460
Years Ending
(in millions)
$
400
275
December 31
(in millions)
$
813
$
839
489
490
$
324
$
349
Table of Contents
Years Ended December 31
(in millions)
$
457
$
952
$
735
202
168
154
(56
)
10
108
$
603
$
1,130
$
997
Years Ended December 31
2008
2007
2006
% of
% of
% of
Pre-Tax
Pre-Tax
Pre-Tax
(in millions)
$
2,407
$
3,937
$
3,525
$
842
35.0
%
$
1,378
35.0
%
$
1,234
35.0
%
(235
)
(9.7
)
(232
)
(5.9
)
(215
)
(6.1
)
(4
)
(.2
)
(16
)
(.4
)
(22
)
(.6
)
$
603
25.1
%
$
1,130
28.7
%
$
997
28.3
%
December 31
(in millions)
$
680
$
729
351
357
788
631
134
175
285
138
77
90
2,405
2,030
451
447
810
630
284
227
1,261
1,588
$
1,144
$
442
Table of Contents
Years Ended December 31
(in millions)
$
12,443
$
12,432
$
12,224
549
775
954
(1,210
)
(1,335
)
(1,204
)
$
11,782
$
11,872
$
11,974
$
12,441
$
12,457
$
12,084
607
789
971
(1,220
)
(1,300
)
(1,097
)
$
11,828
$
11,946
$
11,958
Table of Contents
Years Ended December 31
(in millions)
$
3,787
$
3,642
$
3,409
5,015
5,120
5,079
2,935
2,971
2,953
11,737
11,733
11,441
91
213
517
11,828
11,946
11,958
1,652
1,622
1,485
4
11
13,484
13,579
13,443
108
154
315
(371
)
374
245
$
13,221
$
14,107
$
14,003
$
478
$
532
$
590
309
738
840
499
678
371
1,286
1,948
1,801
58
116
85
1,344
2,064
1,886
17
52
19
1,361
2,116
1,905
1,622
1,590
1,454
9
6
10
2,992
3,712
3,369
(214
)
(149
)
(89
)
(371
)
374
245
$
2,407
$
3,937
$
3,525
December 31
(in millions)
$
45,354
$
47,931
$
47,671
3,297
2,785
2,811
(222
)
(142
)
(205
)
$
48,429
$
50,574
$
50,277
Years Ended December 31
(in millions)
$
10,329
$
10,624
$
10,807
3,155
2,955
2,636
$
13,484
$
13,579
$
13,443
Table of Contents
Restricted Stock Units and Restricted Stock
Performance Shares*
Weighted Average
Weighted Average
Number
Grant Date
Number
Grant Date
3,306,693
$
45.23
1,309,029
$
48.73
1,152,068
50.44
669,336
51.46
(1,286,813
)
39.68
(668,768
)**
44.73
(119,387
)
47.17
(78,665
)
51.04
3,052,561
49.46
1,230,932
52.24
*
The number of shares earned may range from 0% to 200% of
the performance shares shown in the table above.
**
The performance shares earned in 2008 were 168.6% of the vested
shares shown in the table, or 1,127,543 shares.
2008
2007
2006
2
.5%
4
.4%
4
.8%
16
.4%
16
.9%
15
.9%
2
.5%
2
.2%
2
.0%
3
.9
4
.3
3
.4
Table of Contents
Weighted Average
Number
Weighted Average
Remaining
Aggregate
(in years)
(in millions)
8,107,931
$
33.99
330,329
52.55
(2,543,530
)
33.68
(80,530
)
45.55
5,814,200
35.02
3.0
$
77
5,592,086
34.44
2.8
77
(13)
Employee
Benefits
Other
Pension Benefits
Postretirement Benefits
(in millions)
$
1,761
$
1,658
$
315
$
289
1,125
1,409
32
37
$
636
$
249
$
283
$
252
Table of Contents
Other
Postretirement
Pension Benefits
Benefits
(in millions)
$
808
$
383
$
59
$
33
30
44
(2
)
(2
)
$
838
$
427
$
57
$
31
Other
Postretirement
Pension Benefits
Benefits
6
.0
%
6
.0
%
6.0
%
6.0
%
4
.5
4
.5
Other
Postretirement
Pension Benefits
Benefits
(in millions)
$
76
$
79
$
67
$
10
$
10
$
9
99
89
75
17
16
14
(114
)
(100
)
(85
)
(3
)
(2
)
(2
)
51
32
34
1
1
1
$
112
$
100
$
91
$
25
$
25
$
22
$
462
$
54
$
27
$
4
1
(51
)
(32
)
(1
)
(1
)
$
411
$
23
$
26
$
3
Table of Contents
Other
Pension Benefits
Postretirement Benefits
6
.0
%
5
.75
%
5
.75
%
6
.0
%
5
.75
%
5
.75
%
4
.5
4
.5
4
.5
8
.0
8
.0
8
.0
8
.0
8
.0
8
.0
December 31
8.75
%
8.75
%
5.0
5.0
2015
2014
December 31
46
%
60
%
54
40
100
%
100
%
Other
Years Ending
Postretirement
Pension Benefits
Benefits
(in millions)
$
96
$
10
66
11
70
13
78
14
83
15
576
99
Table of Contents
Table of Contents
December 31
Notional Amount
Fair Value
(in billions)
(in millions)
$
$
.1
$
$
1
.3
.3
5
6
$
.3
$
.4
$
5
$
7
Years Ended
December 31
(in millions)
$
79
$
81
$
89
13
12
9
$
92
$
93
$
98
Years Ending
(in millions)
$
78
64
58
51
48
133
$
432
Table of Contents
Years Ended December 31
(in millions except for per share amounts)
$
1,804
$
2,807
$
2,528
361.1
393.6
412.5
$
5.00
$
7.13
$
6.13
$
1,804
$
2,807
$
2,528
361.1
393.6
412.5
5.7
6.7
7.7
2.2
366.8
400.3
422.4
$
4.92
$
7.01
$
5.98
Years Ended December 31
2008
2007
2006
Before
Income
Before
Income
Before
Income
(in millions)
during the year
$
(1,378
)
$
(483
)
$
(895
)
$
237
$
83
$
154
$
161
$
55
$
106
realized gains (losses) included in net income
(348
)
(122
)
(226
)
30
10
20
36
11
25
in other comprehensive income or loss
(1,030
)
(361
)
(669
)
207
73
134
125
44
81
(348
)
(122
)
(226
)
193
68
125
52
18
34
(437
)
(153
)
(284
)
(26
)
(9
)
(17
)
$
(1,815
)
$
(636
)
$
(1,179
)
$
374
$
132
$
242
$
177
$
62
$
115
Table of Contents
December 31
2008
2007
Carrying
Fair
Carrying
Fair
(in millions)
$
2,478
$
2,478
$
1,839
$
1,839
32,755
32,755
33,871
33,871
1,479
1,479
2,320
2,320
3,975
3,493
3,460
3,427
5
5
7
7
Level 1
Level 2
Level 3
Total
(in millions)
$
$
32,481
$
274
$
32,755
1,275
204
1,479
Table of Contents
Years Ended December 31
(number of shares)
374,649,923
411,276,940
420,864,596
(7,887,800
)
(4,017,884
)
(41,733,268
)
(20,266,262
)
12,883,527
1,348,671
5,106,251
5,682,879
371,980,710
374,649,923
411,276,940
2,787,800
22,310,886
5,100,000
(7,887,800
)
(2,584,789
)
19,726,097
352,254,613
374,649,923
411,276,940
Table of Contents
December 31
2008
2007
(in millions)
$
14,381
$
12,342
$
15,490
$
12,998
(949
)
(1,045
)
$
13,432
$
14,445
Years Ended December 31
2008
2007
2006
GAAP
Statutory
GAAP
Statutory
GAAP
Statutory
(in millions)
$
1,997
$
1,963
$
2,992
$
2,859
$
2,637
$
2,575
(193
)
(185
)
(109
)
$
1,804
$
2,807
$
2,528
Table of Contents
Three Months Ended
March 31
June 30
September 30
December 31
(in millions except for per share amounts)
$
3,489
$
3,519
$
3,354
$
3,521
$
3,303
$
3,549
$
3,075
$
3,518
2,560
2,518
2,725
2,534
2,985
2,502
2,544
2,616
265
291
160
278
54
309
124
252
$
664
$
710
$
469
$
709
$
264
$
738
$
407
$
650
$
1.80
$
1.74
$
1.29
$
1.78
$
.74
$
1.90
$
1.15
$
1.71
$
1.77
$
1.71
$
1.27
$
1.75
$
.73
$
1.87
$
1.13
$
1.68
53.4
%
53.0
%
58.7
%
53.1
%
67.9
%
51.8
%
53.9
%
53.3
%
30.5
30.4
29.8
29.6
30.2
29.8
30.4
30.5
83.9
%
83.4
%
88.5
%
82.7
%
98.1
%
81.6
%
84.3
%
83.8
%
Table of Contents
Amount
at Which
Cost or
Shown in
Amortized
Fair
the
$
2,478
$
2,478
$
2,478
and authorities
2,799
2,891
2,891
18,340
18,383
18,383
6,664
6,962
6,962
674
653
653
4,414
3,866
3,866
32,891
32,755
32,755
94
82
82
486
537
537
947
824
824
1,527
1,443
1,443
36
36
36
1,563
1,479
1,479
2,026
2,026
2,026
$
38,958
$
38,738
$
38,738
Table of Contents
$
1,553
$
881
759
1,022
504
478
2,816
2,381
14,510
15,633
280
183
$
17,606
$
18,197
Liabilities
$
3,975
$
3,460
118
110
81
182
4,174
3,752
Shareholders Equity
$1 Par Value; Issued None
$1 Par Value; Issued 371,980,710 and 374,649,923 Shares
372
375
253
346
14,509
13,280
(735
)
444
(967
)
13,432
14,445
$
17,606
$
18,197
Table of Contents
$
79
$
125
$
111
4
(5
)
17
49
(31
)
132
89
128
282
249
192
2
3
3
4
288
252
195
(156
)
(163
)
(67
)
30
7
16
(186
)
(170
)
(83
)
1,990
2,977
2,611
$
1,804
$
2,807
$
2,528
Table of Contents
$
1,804
$
2,807
$
2,528
Provided by Operating Activities
(1,990
)
(2,977
)
(2,611
)
(49
)
31
(94
)
15
(7
)
(329
)
(124
)
(90
)
49
121
92
86
113
56
(21
)
(61
)
(75
)
(672
)
(133
)
168
(20
)
(10
)
2,000
1,550
650
13
40
17
53
(65
)
49
1,521
1,446
1,033
1,200
1,800
(685
)
(600
)
460
Stock-Based Employee Compensation Plans
109
130
229
(1,336
)
(2,185
)
(1,228
)
(471
)
(451
)
(403
)
(9
)
(17
)
(1,192
)
(1,323
)
(942
)
(1
)
1
1
$
$
$
1
Table of Contents
December 31
Year Ended December 31
Amortization
Other
Deferred
of Deferred
Insurance
Policy
Net
Policy
Operating
Acquisition
Unpaid
Unearned
Premiums
Investment
Insurance
Acquisition
Costs and
Premiums
Costs
Losses
Premiums
Earned
Income*
Losses
Costs
Expenses**
Written
$
523
$
2,139
$
1,935
$
3,787
$
2,087
$
1,089
$
105
$
3,826
641
11,222
2,641
5,015
3,131
1,313
240
4,993
355
7,728
1,666
2,935
1,686
667
93
2,899
13
1,278
125
91
(6
)
54
8
64
$
1,622
$
1,532
$
22,367
$
6,367
$
11,828
$
1,622
$
6,898
$
3,123
$
446
$
11,782
$
509
$
2,141
$
1,932
$
3,642
$
1,942
$
1,039
$
106
$
3,709
637
10,972
2,718
5,120
2,822
1,301
224
5,083
374
8,163
1,748
2,971
1,551
635
90
2,944
36
1,347
201
213
(16
)
117
19
136
$
1,590
$
1,556
$
22,623
$
6,599
$
11,946
$
1,590
$
6,299
$
3,092
$
439
$
11,872
$
478
$
2,060
$
1,848
$
3,409
$
1,735
$
911
$
145
$
3,518
591
10,521
2,716
5,079
2,726
1,215
290
5,125
352
8,218
1,746
2,953
1,865
602
104
2,941
59
1,494
236
517
248
191
21
390
$
1,454
$
1,480
$
22,293
$
6,546
$
11,958
$
1,454
$
6,574
$
2,919
$
560
$
11,974
*
Property and casualty assets are
available for payment of losses and expenses for all classes of
business; therefore, such assets and the related investment
income have not been allocated to the underwriting segments.
**
Other insurance operating costs and
expenses does not include other income and charges.
Table of Contents
Exhibit
3
.1
3
.2
3
.3
3
.4
3
.5
3
.6
4
.1
10
.1
10
.2
10
.3
10
.4
10
.5
10
.6
10
.7
10
.8
Table of Contents
Exhibit
10
.9
10
.10
10
.11
10
.12
10
.13
10
.14
10
.15
10
.16
10
.17
10
.18
10
.19
10
.20
10
.21
10
.22
10
.23
10
.24
10
.25
Table of Contents
Exhibit
10
.26
10
.27
10
.28
10
.29
10
.30
10
.31
10
.32
10
.33
10
.34
10
.35
10
.36
10
.37
10
.38
10
.39
Table of Contents
Exhibit
10
.40
10
.41
10
.42
10
.43
10
.44
10
.45
10
.46
10
.47
10
.48
10
.49
10
.50
10
.51
10
.52
Table of Contents
Exhibit
10
.53
10
.54
10
.55
10
.56
10
.57
10
.58
10
.59
10
.60
10
.61
10
.62
Table of Contents
Exhibit
10
.63
10
.64
10
.65
11
.1
12
.1
21
.1
23
.1
31
.1
31
.2
32
.1
32
.2
99
.1
By: |
/s/ W.
Andrew Macan
Title: Vice President and Secretary |
By: |
/s/ W.
Andrew Macan
|
By: |
/s/ W.
Andrew Macan
|
By: |
/s/ W.
Andrew Macan
|
By: |
/s/ W.
Andrew Macan
|
By: |
/s/ W.
Andrew Macan
|
By: |
/s/ W.
Andrew Macan
|
THE CHUBB CORPORATION
|
JOHN D. FINNEGAN | |||||
By:
|
/s/ W.
Andrew Macan
|
/s/ John
D. Finnegan
|
||||
|
|
|||||
Date:
|
12/18/08 | Date: | 12/18/08 | |||
|
|
By: |
/s/ John
D. Finnegan
|
By: |
/s/ Richard
G. Spiro
|
THE CHUBB CORPORATION
|
JOHN J. DEGNAN | |||||
By:
|
/s/ W.
Andrew Macan
|
/s/ John
J. Degnan
|
||||
|
|
|||||
Date:
|
12/10/08 | Date: | 12/17/08 | |||
|
|
THE CHUBB CORPORATION
|
MICHAEL OREILLY | |||||
By:
|
/s/ W.
Andrew Macan
|
/s/ Michael
OReilly
|
||||
|
|
|||||
Date:
|
12/10/08 | Date: | 12/18/08 | |||
|
|
THE CHUBB CORPORATION
|
JOHN D. FINNEGAN | |||||
By:
|
/s/ W. Andrew Macan | /s/ John D. Finnegan | ||||
|
|
|||||
Date:
|
12/18/08 | Date: | 12/18/08 | |||
|
|
Years Ended December 31 | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(in millions except for ratio amounts) | ||||||||||||||||||||
Income from continuing operations before provision for income
taxes
|
$ | 2,407 | $ | 3,937 | $ | 3,525 | $ | 2,447 | $ | 2,068 | ||||||||||
Less:
|
||||||||||||||||||||
Income (loss) from equity investees
|
(14 | ) | 390 | 266 | 186 | 207 | ||||||||||||||
Add:
|
||||||||||||||||||||
Interest expensed
|
240 | 206 | 134 | 135 | 139 | |||||||||||||||
Capitalized interest amortized or expensed
|
8 | 12 | 32 | 15 | 14 | |||||||||||||||
Portion of rents representative of the interest factor
|
31 | 31 | 32 | 34 | 35 | |||||||||||||||
Distributions from equity investees
|
166 | 151 | 72 | 138 | 101 | |||||||||||||||
Income as adjusted
|
$ | 2,866 | $ | 3,947 | $ | 3,529 | $ | 2,583 | $ | 2,150 | ||||||||||
Fixed charges:
|
||||||||||||||||||||
Interest expensed
|
$ | 240 | $ | 206 | $ | 134 | $ | 135 | $ | 139 | ||||||||||
Portion of rents representative of the interest factor
|
31 | 31 | 32 | 34 | 35 | |||||||||||||||
Fixed charges
|
$ | 271 | $ | 237 | $ | 166 | $ | 169 | $ | 174 | ||||||||||
Ratio of consolidated earnings to fixed charges
|
10.58 | 16.65 | 21.26 | 15.28 | 12.36 | |||||||||||||||
Percentage
|
||||||
Place of
|
of Securities
|
|||||
Company
|
Incorporation
|
Owned
|
||||
Federal Insurance Company
|
Indiana | 100 | % | |||
Vigilant Insurance Company
|
New York | 100 | ||||
Pacific Indemnity Company
|
Wisconsin | 100 | ||||
Northwestern Pacific Indemnity Company
|
Oregon | 100 | ||||
Texas Pacific Indemnity Company
|
Texas | 100 | ||||
Great Northern Insurance Company
|
Indiana | 100 | ||||
Chubb Insurance Company of New Jersey
|
New Jersey | 100 | ||||
Chubb Custom Insurance Company
|
Delaware | 100 | ||||
Chubb National Insurance Company
|
Indiana | 100 | ||||
Chubb Indemnity Insurance Company
|
New York | 100 | ||||
Executive Risk Indemnity Inc.
|
Delaware | 100 | ||||
Executive Risk Specialty Insurance Company
|
Connecticut | 100 | ||||
CC Canada Holdings Ltd.
|
Canada | 100 | ||||
Chubb Insurance Company of Canada
|
Canada | 100 | ||||
Chubb Insurance Investment Holdings Ltd.
|
United Kingdom | 100 | ||||
Chubb Insurance Company of Europe, S.A.
|
Belgium | 100 | ||||
Chubb Insurance Company of Australia Limited
|
Australia | 100 | ||||
Chubb Argentina de Seguros, S.A.
|
Argentina | 100 | ||||
Chubb Insurance (China) Company Ltd.
|
China | 100 | ||||
Chubb Atlantic Indemnity Ltd.
|
Bermuda | 100 | ||||
DHC Corporation
|
Delaware | 100 | ||||
Chubb do Brasil Companhia de Seguros
|
Brazil | 99 | ||||
Bellemead Development Corporation
|
Delaware | 100 | ||||
Chubb Financial Solutions, Inc.
|
Delaware | 100 | ||||
Chubb Financial Solutions LLC
|
Delaware | 100 |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
(1) | the Annual Report on Form 10-K of the Corporation for the annual period ended December 31, 2008 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and | |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |
(1) | the Annual Report on Form 10-K of the Corporation for the annual period ended December 31, 2008 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and | |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |