def14a
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
þ
Filed by a Party other than the Registrant
o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§ 240.14a-12
The Chubb
Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
þ
No fee required.
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o
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
o Fee
paid previously with preliminary materials.
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o
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
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(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NOTICE OF 2010 ANNUAL MEETING OF SHAREHOLDERS
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DATE AND TIME |
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Tuesday, April 27, 2010 at 8:00 a.m., local time |
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PLACE |
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Amphitheater
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059 |
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ITEMS OF BUSINESS |
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(1) To elect 11 directors to serve until the next
annual meeting of shareholders and until their respective
successors are elected and qualified. |
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(2) To ratify the appointment of Ernst & Young
LLP as independent auditor. |
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RECORD DATE |
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You are entitled to vote at the annual meeting and at any
adjournment or postponement thereof if you were a shareholder of
record at the close of business on March 8, 2010. |
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ADJOURNMENTS AND POSTPONEMENTS |
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Any action on the items of business described above may be
considered at the annual meeting at the time and on the date
specified above or at any time and date to which the annual
meeting may be properly adjourned or postponed. |
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VOTING BY PROXY |
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The notice you received providing instructions on accessing our
annual meeting materials through the internet includes
instructions for voting online or by telephone. Also, in the
event that you affirmatively request paper copies of our annual
meeting materials, you may complete, sign, date and return the
accompanying proxy card in the enclosed addressed envelope. The
giving of a proxy will not affect your right to revoke the proxy
by appropriate written notice or to vote in person should you
later decide to attend the annual meeting. |
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ADMISSION TO THE MEETING |
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You are entitled to attend the annual meeting if you were a
shareholder as of the close of business on March 8, 2010.
For admittance to the meeting, please be prepared to present a
valid, government-issued photo identification (federal, state or
local), such as a drivers license or passport, and proof
of beneficial ownership if you hold your shares through a
broker, bank or other nominee. The annual meeting will begin
promptly at 8:00 a.m., local time. Please allow yourself
ample time for the check-in procedures. Video and audio
recording devices and other electronic devices will not be
permitted at the meeting, and attendees may be subject to
security inspections. |
By order of the Board of Directors,
W. Andrew Macan
Vice President and Secretary
March 18, 2010
2010
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
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A-1
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iv
PROXY
STATEMENT
PROXY AND
VOTING INFORMATION
Our Board of Directors (our Board) has provided you with these
proxy materials in connection with its solicitation of proxies
to be voted at the 2010 Annual Meeting of Shareholders (the 2010
Annual Meeting). We will hold the 2010 Annual Meeting on
Tuesday, April 27, 2010 in the Amphitheater at The Chubb
Corporation, 15 Mountain View Road, Warren, New Jersey
07059, beginning at 8:00 a.m., local time. Please note that
throughout these proxy materials we may refer to The Chubb
Corporation as Chubb, we, us
or our. We mailed the instructions for accessing our
annual meeting materials, which include this proxy statement,
the proxy card, voting instructions and our Annual Report on
Form 10-K
for the year ended December 31, 2009 (the 2009
10-K), on or
before March 18, 2010.
Information
about the Delivery of our Annual Meeting Materials
As permitted by rules adopted by the Securities and Exchange
Commission (the SEC), we have made our annual meeting materials
available to our shareholders electronically via the internet.
On or before March 18, 2010, we mailed to our shareholders
a notice containing instructions on how to access our annual
meeting materials, how to request paper copies of these
materials and how to vote online or by telephone. Unless you
affirmatively request a paper copy of our annual meeting
materials by following the instructions set forth in the notice,
you will not receive a paper copy of our annual meeting
materials in the mail. However, due to an ambiguity in the
regulations promulgated under the Employee Retirement Income
Security Act of 1974, as amended (ERISA), unless we have
previously received a written consent to deliver materials
electronically, we have assumed that participants in the Capital
Accumulation Plan of The Chubb Corporation (the CCAP) have
affirmatively requested paper copies of our annual meeting
materials and, therefore, have mailed or will mail copies of the
annual meeting materials to each participant in the CCAP whose
account holds shares of our stock.
The SECs rules also permit us to deliver a single notice
or set of annual meeting materials to one address shared by two
or more of our shareholders. This delivery method is referred to
as householding and can result in significant cost
savings. To take advantage of this opportunity, we have
delivered only one notice or set of annual meeting materials to
multiple shareholders who share an address, unless we received
contrary instructions from such impacted shareholders prior to
our mailing date. We agree to deliver promptly, upon written or
oral request, a separate copy of the notice or set of annual
meeting materials, as requested, to any shareholder at the
shared address to which a single copy of those documents was
delivered. For future meetings, if you prefer to receive
separate copies of our annual meeting materials, please contact
Broadridge Financial Solutions, Inc. at
800-542-1061
or in writing at Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. If you are currently a
shareholder sharing an address with another shareholder and wish
to receive only one copy of our future annual meeting materials
for your household, please contact Broadridge at the above phone
number or address.
Who Can
Vote
Our Board has set March 8, 2010 as the record date for the
2010 Annual Meeting. Shareholders of record of our common stock
at the close of business on March 8, 2010 may vote at
the 2010 Annual Meeting.
How Many
Shares Can Be Voted
Each shareholder has one vote for each share of common stock
owned at the close of business on the record date. On the record
date, 328,527,950 shares of our common stock were
outstanding.
How You
Can Vote
Record
Holders
If your shares are registered in your name with BNY Mellon
Shareowner Services, our dividend agent, transfer agent and
registrar, you are considered a shareholder of record, and the
notice containing instructions on accessing our annual meeting
materials online or requesting a paper copy thereof is being
sent directly to you by us. Shareholders of record can vote in
person at the 2010 Annual Meeting or give their proxy to be
voted at the 2010 Annual Meeting in any one of the following
ways:
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over the internet;
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by telephone; or
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for shareholders requesting a paper copy of our annual
meeting materials, by completing, signing, dating and returning
the proxy card accompanying the paper copy.
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CCAP
Participants
If you are a participant in the CCAP, your proxy will include
all shares allocated to you in the CCAP (Plan Shares), which you
may vote in person at the 2010 Annual Meeting or over the
internet, by telephone or, provided that you have not delivered
a written consent to receive our materials electronically, by
completing and mailing the proxy card accompanying your paper
copy of the annual meeting materials. Your proxy will serve as a
voting instruction for the trustee of the CCAP. If your voting
instructions are not received by April 22, 2010, any Plan
Shares you hold will not be voted.
Brokerage
and Other Account Holders
You are considered to be the beneficial owner of shares you hold
in an account maintained by a broker, bank or other nominee,
which may be referred to as shares held in street
name. For shares held in street name, your broker, bank or
nominee, who is the shareholder of record, has forwarded you the
instructions for accessing, or requesting paper copies of, our
annual meeting materials. You have the right to direct your
broker, bank or nominee on how to vote these shares, and you may
also attend the 2010 Annual Meeting. Your broker, bank or
nominee has enclosed a voting instruction card. Beneficial
owners of shares who wish to vote at the 2010 Annual Meeting
must obtain a legal proxy from their broker, bank or nominee and
present it at the 2010 Annual Meeting. The availability of
telephone and internet voting for beneficial owners will depend
on the voting processes of their broker, bank or nominee. Please
refer to the voting instructions of your broker, bank or nominee
for directions as to how to vote shares that you beneficially
own.
Voting
Whether you vote over the internet, by telephone or by mail, you
can specify whether you vote your shares for or against each of
the nominees for election as a director (Proposal 1 on the
proxy card). You can also specify whether you vote for or
against or abstain from the ratification of Ernst &
Young LLP as independent auditor (Proposal 2 on the proxy
card).
If you are a shareholder of record and return a signed and dated
proxy card without marking any voting selections, your shares
will be considered present and entitled to vote and will be
voted FOR the election of each of the director
nominees and FOR the ratification of
Ernst & Young LLP as independent auditor. If any other
matter is properly presented at the meeting, your proxy (one of
the individuals named on your proxy card) will vote your shares
using his best judgment.
Please note that this year, the rules that guide how brokers
vote your shares have changed. Brokers may no longer vote your
shares in the absence of your specific instructions as to how to
vote with respect to the election of nominees for director or
any other matter that is not considered a routine matter by the
New York Stock Exchange (NYSE). Please return your voting
instruction card to your broker so that your vote can be
counted. If you are a beneficial owner of shares held in
street name and return a signed and dated proxy card without
marking any voting selections for the election of director
nominees, your shares will not be voted and will not be
considered as present and entitled to vote with respect to the
election of each of the director nominees. The
2
ratification of Ernst & Young LLP as independent
auditor is considered a routine matter by the NYSE. If you are a
beneficial owner of shares held in street name and return a
signed and dated voting instruction card without marking any
voting selection with respect to ratification of
Ernst & Young LLP as independent auditor, your shares
will be considered as present and entitled to vote with respect
to that proposal and voted FOR this proposal.
Revocation
of Proxies
If you are a shareholder of record or a holder of Plan Shares,
you may revoke your proxy at any time before it is exercised in
any of four ways:
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by notifying our Corporate Secretary of the revocation in
writing;
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by delivering a duly executed proxy card bearing a later
date;
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by properly submitting a new, timely and valid proxy via
the internet or by telephone after the date of the revoked
proxy; or
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by voting in person at the 2010 Annual Meeting.
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You will not revoke a proxy merely by attending the 2010 Annual
Meeting. To revoke a proxy, you must take one of the actions
described above.
If you hold your shares in a brokerage or other account, you may
submit new voting instructions by contacting your broker, bank
or nominee.
Required
Votes
The presence, in person or by proxy, of the holders of a
majority of all outstanding shares of our common stock entitled
to vote at the 2010 Annual Meeting is necessary to constitute a
quorum. Each of the proposals to be voted upon at the 2010
Annual Meeting requires the affirmative vote of a majority of
the votes cast on the proposal. Abstentions are counted as
shares present at the 2010 Annual Meeting for purposes of
determining a quorum. Similarly, shares which brokers do not
have the authority to vote in the absence of timely instructions
from beneficial owners (broker non-votes) also are counted as
shares present at the 2010 Annual Meeting for purposes of
determining a quorum. Abstentions and broker non-votes are not
considered votes cast and will not be counted either for or
against these proposals and, accordingly, will have no effect on
the outcome of the vote for Proposal 1 or 2.
Adjournments
and Postponements
Any action on the items of business described above may be
considered at the 2010 Annual Meeting at the time and on the
date specified above or at any time and date to which the 2010
Annual Meeting may be properly adjourned or postponed.
2009
10-K
The 2009
10-K is not
a part of the proxy soliciting materials. However, the
instructions for accessing the 2009
10-K online
and for requesting a paper copy are included in the notice you
received regarding our annual meeting materials. The 2009
10-K is
available on our website at
www.chubb.com/investors, as well as on a website
maintained by Broadridge at www.proxyvote.com. It also is
available without charge by sending a written request to our
Corporate Secretary at 15 Mountain View Road, Warren, New Jersey
07059.
Important
Notice about Security
All 2010 Annual Meeting attendees may be asked to present a
valid, government-issued photo identification (federal, state or
local), such as a drivers license or passport, and proof
of beneficial ownership if you hold your shares through a
broker, bank or other nominee before entering the 2010 Annual
Meeting. Attendees may be subject to security inspections. Video
and audio recording devices and other electronic devices will
not be permitted at the 2010 Annual Meeting.
3
CORPORATE
GOVERNANCE
Commitment
to Corporate Governance
Our Board and management have a strong commitment to effective
corporate governance. We have in place a comprehensive corporate
governance framework for our operations which, among other
things, takes into account the requirements of the
Sarbanes-Oxley Act of 2002, the SEC and the NYSE. The key
components of this framework are set forth in the following
documents:
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our Restated Certificate of Incorporation;
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our By-Laws;
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our Audit Committee Charter;
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our Corporate Governance & Nominating Committee
Charter;
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our Organization & Compensation Committee
Charter;
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our Corporate Governance Guidelines;
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our Code of Business Conduct; and
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our Code of Ethics for CEO and Senior Financial Officers.
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Copies of these documents are available on our website at
www.chubb.com/investors. Copies also are available
without charge by sending a written request to our Corporate
Secretary.
Corporate
Governance Guidelines
Our Corporate Governance Guidelines address a number of policies
and principles employed in the operation of our Board and our
business generally, including our policies with respect to:
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the size of our Board;
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director independence and minimum qualifications;
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factors to be considered in selecting candidates to serve
on our Board;
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director nominating procedures, including the procedures
by which shareholders may propose director candidates;
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incumbent directors who do not receive a majority of the
votes cast in uncontested elections;
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term limits, director retirement, director resignations
upon job change and Board vacancies;
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directors outside directorships and outside audit
committee service;
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the role and responsibilities of the independent Lead
Director;
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director responsibilities;
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director attendance at Board meetings, committee meetings
and the annual meeting of shareholders;
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executive sessions of our independent directors;
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director access to management and our Boards ability
to retain outside consultants;
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director compensation;
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stock ownership guidelines for directors and certain
employees;
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administration of our legal compliance and ethics program;
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director orientation and continuing education;
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management succession and evaluation of our Chief
Executive Officer;
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annual self-assessments of our Board and each of our Audit
Committee, our Corporate Governance & Nominating
Committee (our Governance Committee) and our
Organization & Compensation Committee (our
Compensation Committee); and
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shareholder access to our Board and Audit Committee.
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Director
Qualifications and Director Nominee Considerations
Our Board of Directors has established our Governance Committee
which is comprised solely of directors satisfying the
independence requirements of the NYSE. A copy of the charter of
our Governance Committee is available on our website at
www.chubb.com/investors. Copies also are available by
sending a written request to our Corporate Secretary. Our Board
has delegated to our Governance Committee responsibility for,
among other things:
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recruiting qualified independent directors, consisting of
persons with diverse backgrounds and skills who have the time
and ability to exercise independent judgment and perform our
Boards function effectively and who meet the needs of our
Board; and
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identifying the respective qualifications needed for
directors serving on our Board committees and serving as
chairmen of such committees, recommending to our Board the
nomination of persons meeting such respective qualifications to
the appropriate committees of our Board and as chairmen of such
committees and taking a leadership role in shaping our corporate
governance policies.
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We require that a majority of the directors on our Board meet
the criteria for independence under applicable law and the
requirements of the NYSE. We believe that variety in the lengths
of service among the directors benefits us and our shareholders.
Accordingly, we do not have term limits for service on our
Board. As an alternative to term limits, all director
nominations are considered annually by our Governance Committee.
Individuals who would be age 72 or older at the time of
election are ineligible for nomination to serve on our Board.
While our Board does not require that in every instance
directors who retire or change from the position they held when
they were elected to our Board resign, it does require that our
Governance Committee consider the desirability of continued
Board membership under the circumstances.
Our Governance Committee takes a holistic approach in
identifying and considering director nominees. The Governance
Committee primarily focuses on the composition and competencies
of our Board as a whole and how the traits possessed by
individual director nominees will complement one another. While
evaluating individual director nominees within this framework,
the factors that our Governance Committee considers include:
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the personal and professional ethics, integrity and values
of the candidate;
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the independence of the candidate under legal, regulatory
and other applicable standards, including the ability of the
candidate to represent all of our shareholders without any
conflicting relationship with any particular constituency;
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the diversity of the existing Board, so that we maintain a
diverse body of directors, with diversity reflecting gender,
ethnic background and geographic and professional experience;
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the professional experience and industry expertise of the
candidate and whether it will add to or complement that of the
existing Board;
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the compatibility of the candidate with the existing Board;
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the length of tenure of the members of the existing Board;
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the number of other public company boards of directors on
which the candidate serves or intends to serve, with the general
expectation that the candidate would not serve on the boards of
directors of more than four other public companies;
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the number of public company audit committees on which the
candidate serves or intends to serve, with the general
expectation that, if the candidate is to be considered for
service on our Audit Committee, the candidate would not serve on
the audit committees of more than two other public companies;
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the candidates service on the boards of directors of
other for-profit companies,
not-for-profit
organizations, trade associations or industry associations;
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the ability and willingness of the candidate to devote
sufficient time to carrying out his or her Board duties and
responsibilities effectively;
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the commitment of the candidate to serve on our Board for
an extended period of time; and
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such other attributes of the candidate and external
factors as our Governance Committee deems appropriate.
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Our Governance Committee has the discretion to weight these
factors as it deems appropriate. The importance of these factors
may vary from candidate to candidate.
Nominating
Procedures
The primary purpose of our nominating procedures is to identify
and recruit outstanding individuals to serve on our Board. Our
Governance Committee meets periodically to consider the slate of
nominees for election at our next annual meeting of
shareholders. If appropriate, our Governance Committee schedules
follow-up
meetings and interviews with potential candidates. Our
Governance Committee submits its recommended nominee slate to
our Board for approval.
Our Governance Committee will consider candidates recommended by
directors, members of management and our shareholders. In
addition, our Governance Committee is authorized to engage one
or more search firms to assist in the recruitment of director
candidates.
The procedures for shareholders to propose director candidates
are set forth in Article I, Section 10 of our
By-Laws. Our
Governance Committee may make such additional inquiries of the
candidate or the proposing shareholder as our Governance
Committee deems appropriate. This information is necessary to
allow our Governance Committee to evaluate the
shareholders proposed candidate on the same basis as those
candidates referred through directors, members of management or
by consultants retained by our Governance Committee.
Shareholders wishing to propose a candidate for consideration
should refer to Article I, Section 10 of our By-Laws,
the information set forth under the heading
2011 Shareholder Proposals and Nominations and
the SEC rules applicable to shareholder proposal submission
procedures.
Director
Election Procedures
In uncontested elections, our directors are elected by the
affirmative vote of a majority of the votes cast. In the event
that an incumbent director receives less than the affirmative
vote of a majority of the votes cast and the director would
otherwise remain in office by operation of New Jersey law, the
affected director is required to tender his or her resignation.
Our Governance Committee is required to promptly consider the
resignation and make a recommendation to our Board as to whether
or not to accept such resignation. Our Board is required to take
action with respect to our Governance Committees
recommendation within 90 days after the date of the
election. These procedures are described in full in our
Corporate Governance Guidelines.
Director
Independence
Our Governance Committee reviews each directors
independence annually in accordance with the standards set forth
in our Corporate Governance Guidelines and the requirements of
the NYSE. No member of our Board will be considered independent
unless our Governance Committee determines that the director has
no material relationship with us that would affect the
directors independence and that the director satisfies the
independence requirements of all applicable laws, rules and
regulations. To facilitate the analysis of whether a director
has a
6
relationship with us that could affect his or her independence,
our Board has identified in our Corporate Governance Guidelines
the following categories of relationships which should not
affect a directors independence or are deemed immaterial
and, therefore, are not considered by our Governance Committee
in determining director independence:
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charitable contributions made by us to any organization:
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pursuant to our Matching Gifts Program on terms of general
applicability to employees and directors;
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in amounts that do not exceed $25,000 per year; or
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that have been approved by our Governance Committee;
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commercial relationships with any entity or organization
where the annual sales to, or purchases from, us are less than
two percent of our annual revenue and less than two percent of
the annual revenue of the other entity or organization; and
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insurance, reinsurance and other risk transfer
arrangements entered into on an arms length basis in the
ordinary course of business.
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Our Board reviewed director independence in 2009 based on the
assessment of our Governance Committee. As a result of this
review, our Board determined that each of our directors, other
than John D. Finnegan, who is our Chairman, President and Chief
Executive Officer, was independent as defined in the listing
standards of the NYSE and, in the case of the members of our
Audit Committee, Section 10A(m)(3) of the Exchange Act.
Related
Person Transactions
Our Governance Committee has adopted a written policy governing
the review and approval of transactions in which we are a
participant and in which any of our officers, our directors,
holders of five percent or more of our common stock or any of
their respective immediate family members (as defined by the
SEC) has a material direct or indirect interest. These
individuals collectively are referred to as related persons.
This policy prohibits us from participating in any transaction
in which a related person has a direct or indirect material
interest unless:
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the transaction is a permitted transaction (as defined
below);
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in the case of our executive officers and holders of five
percent or more of our common stock, the transaction is reported
to and approved by our Board, our Governance Committee or
another Board committee comprised of disinterested
directors; or
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in the case of our directors and nominees for director,
the transaction is reported to and approved by a majority of the
disinterested members of our Governance Committee or, if less
than a majority of our Governance Committee is disinterested, a
majority of the disinterested members of our Board.
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In the event that a related person inadvertently fails to obtain
the appropriate approvals prior to engaging in a transaction in
which the related person has a material direct or indirect
interest and in which we are a participant, the related person
is required to seek ratification of the transaction by the
appropriate decision maker referenced above as soon as
reasonably practicable after discovery of such failure.
Our Governance Committee has identified categories of
transactions that are appropriate and generally do not give rise
to conflicts of interest or the appearance of impropriety,
which, accordingly, do not require approval or ratification.
These categories of transactions, referred to as permitted
transactions under the policy, are:
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the purchase of insurance products or services from us on
an arms length basis in the ordinary course of business
and on terms and conditions generally available to other
insureds;
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claims activity relating to insurance policies
administered on an arms length basis in the ordinary
course of business and consistent with the administration of the
claims of other insureds;
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any transaction or series of transactions with an
aggregate dollar amount involved of $100,000 or less;
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transactions within the scope of a related persons
ordinary business duties to us, where the benefits inuring to
the related person relate solely to our performance review
process (and resulting compensation and advancement decisions);
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our payment or reimbursement of a related persons
expenses incurred in performing his or her Chubb-related
responsibilities;
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the receipt of compensation and benefits from us, provided
that such arrangements are approved in accordance with the
policies and procedures established by our Board or a committee
thereof;
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the purchase or sale of our securities in the open market
or pursuant to any equity compensation plan approved by our
Board and our shareholders;
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any transaction with an entity or organization with whom
the related person is serving or affiliated solely at our
request;
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any transaction in which the related persons
interest arises only: (i) from the related persons
position as a director of another corporation or organization
that is a party to the transaction; (ii) from the direct or
indirect ownership by the related person and all other related
persons, in the aggregate, of less than a ten percent equity
interest in another person (other than a partnership) which is a
party to the transaction; or (iii) from both such position
and ownership; and
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any transaction in which the related persons
interest arises only from the related persons position as
a limited partner in a partnership in which the related person
and all other related persons have an interest of less than ten
percent and the person is not a general partner of and does not
have another position in the partnership.
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Related person transactions since January 1, 2009 are
discussed under the heading Certain Transactions and Other
Matters.
Board
Leadership Structure and Risk Oversight
Board
Structure
As noted in our Corporate Governance Guidelines, the
determination of our Boards leadership structure is an
integral part of our succession planning process. Based on our
Boards current composition as well as
Mr. Finnegans business experience and
day-to-day
involvement in our operations, our Board has determined that the
most effective leadership structure for our Board is for the
roles of Chief Executive Officer and Chairman of the Board to be
combined. To ensure our Boards independence and proper
functioning, our Board has also elected a Lead Director with
substantial authority over our Boards operations. Our
Board has determined that this structure currently is beneficial
because it fosters the development and implementation of
business strategies, while also providing the balance of an
empowered independent Board.
The Lead Director has the following authority:
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to act as a liaison between the Chairman and the
independent directors;
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to call special meetings of our Board;
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to call special meetings of any committee of our Board;
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with the consent of a majority of the members of our
Executive Committee, to call special meetings of our
shareholders;
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in the absence of the Chairman of the Board, to preside at
meetings of our Board;
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to preside at all executive sessions of the non-employee
directors and the independent directors;
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in the absence of the Chairman of the Board, to preside at
meetings of our shareholders;
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to provide direction regarding the meeting schedule,
information to be sent to our Board and the agenda for our Board
meetings to assure that there is sufficient time for discussion
of all agenda items;
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at the Lead Directors discretion, to attend meetings
of any committee on which he or she is not otherwise a member;
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to hire independent legal, financial or other advisors as
he or she deems desirable or appropriate, without consulting or
obtaining the approval of any member of management in
advance; and
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to exercise such additional powers as may be conferred
upon the office of Lead Director by resolution of our Board or
our Governance Committee from time to time.
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The Lead Director serves on our Executive Committee and is
eligible to serve on any or all other committees of our Board.
The Lead Director is elected annually and is not subject to term
limits. James M. Zimmerman currently serves as our Lead Director.
Risk
Oversight
Our Board recognizes that one of its key responsibilities is to
understand and evaluate how the material risks to which we are
subject interrelate, how they affect our business and how
management addresses those risks. Pursuant to its charter, our
Audit Committee is responsible for overseeing our major risk
exposures and related mitigation strategies. Our Chief Risk
Officer and other members of senior management report quarterly
(and more frequently if warranted) to the Audit Committee on
these subjects. In turn, the Audit Committee members regularly
report on these matters to our Board. In addition, our Lead
Director generally attends meetings of the Audit Committee and,
as he deems appropriate, he (or any other member of the Audit
Committee) may discuss matters (risk-related or otherwise)
raised during those meetings in the executive sessions of our
independent directors at which he presides. Any member of the
Board may attend Audit Committee meetings and are regularly
invited to do so. From time to time, members of senior
management also make presentations to the other committees of
the Board as well as to the full Board on a variety of topics
that include discussion of risks that we face.
Contacting
our Board and Audit Committee
Director
Communications
Parties interested in contacting our Board, the Chairman of the
Board, the Lead Director, the independent directors as a group
or any individual director are invited to do so by writing to
them in care of our Corporate Secretary at:
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
Complaints and concerns relating to our accounting, internal
controls over financial reporting or auditing matters should be
communicated to our Audit Committee using the procedures
described below. Communications addressed to a particular
director will be referred to that director. All other
communications addressed to our Board will be referred to our
Lead Director and tracked by the Corporate Secretary.
Audit
Committee Communications
Complaints and concerns relating to our accounting, internal
controls over financial reporting or auditing matters should be
communicated to our Audit Committee, which consists solely of
non-employee directors. Any such communication may be anonymous
and may be reported to our Audit Committee through our General
Counsel by writing to:
Executive Vice President and General Counsel
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
GeneralCounsel@chubb.com
9
All such concerns will be reviewed under our Audit
Committees direction and oversight by the General Counsel,
our Internal Audit Department or such other persons as our Audit
Committee determines to be appropriate. Confidentiality will be
maintained to the fullest extent possible, consistent with the
need to conduct an adequate review. Prompt and appropriate
corrective action will be taken when and as warranted in the
judgment of our Audit Committee. The General Counsel will
prepare a periodic summary report of all such communications for
our Audit Committee.
Our Code of Business Conduct provides that we will not
discharge, demote, suspend, threaten, harass or in any manner
discriminate against any employee in the terms and conditions of
employment based upon any lawful actions of such employee with
respect to good faith reporting of complaints regarding
accounting matters or otherwise as specified in Section 806
of the Sarbanes-Oxley Act of 2002.
Meeting
Attendance and Related Matters
Our directors are expected to attend all Board meetings,
meetings of committees on which they serve and the annual
meeting of shareholders. Twelve of our directors attended the
2009 Annual Meeting of Shareholders. Directors also are expected
to spend the time needed and to meet as frequently as necessary
to properly discharge their responsibilities. In 2009, our Board
met seven times. All of our incumbent directors attended at
least 75% of the meetings of our Board and the committees on
which they serve.
Audit
Committee
Our Audit Committee is directly responsible for the appointment,
compensation and retention (or termination) of our independent
auditor. Our Audit Committee also is responsible for the
oversight of the integrity of our financial statements, risk
management, compliance with legal and regulatory requirements,
the independence and qualifications of our independent auditor,
the performance of our internal audit function and independent
auditor and other significant financial matters. For 2009, our
Board designated Joel J. Cohen, Martin G. McGuinn and Daniel E.
Somers as our audit committee financial experts (as defined by
SEC rules). In 2009, our Audit Committee met eight times. The
Audit Committee Report for 2009 is set forth under the heading
Audit Committee Report.
Compensation
Committee
Composition;
Scope of Authority
Each member of our Compensation Committee satisfies the
independence requirements of the NYSE and the independence
standards set forth in our Corporate Governance Guidelines. Our
Compensation Committees primary responsibilities include
establishing our general compensation philosophy and overseeing
the development, implementation and administration of our
compensation, benefit and perquisite programs. It also evaluates
the performance and sets all aspects of the compensation paid to
our Chief Executive Officer and reviews and approves the
compensation paid to our other executive officers. In addition,
our Compensation Committee is responsible for recommending the
form and amount of compensation for our non-employee directors
to our Governance Committee. The principal duties and
responsibilities of our Compensation Committee are set forth in
its charter, which is available on our website at
www.chubb.com/investors.
Processes
and Procedures
In 2009, our Compensation Committee met five times.
During the first quarter of each year, our Compensation
Committee evaluates our performance relative to the
pre-established goals under The Chubb Corporation Annual
Incentive Compensation Plan (2006) (the Annual Incentive Plan),
in the case of annual incentive compensation, The Chubb
Corporation Long-Term Incentive Plan (2009) (the 2009 LTIP), in
the case of long-term incentive awards, and for certain other
plans in which our named executive officers identified under the
heading Executive CompensationSummary Compensation
Table (our NEOs) do not participate. In addition, our
Compensation Committee evaluates our Chief Executive
Officers overall individual performance and contributions
over the prior year. Our Chief Executive Officer presents our
10
Compensation Committee with his evaluation of each of the other
NEOs, which includes a review of contributions and performance
during the prior year, strengths, weaknesses, development plans,
succession potential and compensation recommendations. Our
Compensation Committee then makes a final determination of
compensation amounts for each NEO with respect to each of the
elements of the executive compensation program for both
compensation based on prior year performance and target
compensation for the current year.
Mid-year, typically in June, our Compensation Committee
considers each NEOs total compensation as compared with
that of the named executive officers of a peer group of
companies. Information regarding this peer group analysis is set
forth under the heading Compensation Discussion and
AnalysisSetting of Executive Compensation. This peer
group review provides our Compensation Committee with an
external basis to evaluate our overall compensation program,
including an assessment of its pay to performance relationship.
Following this presentation of competitive market data, our
Compensation Committee makes decisions, in consultation with our
Chief Executive Officer regarding the other NEOs, assessing the
need for any modifications to executive compensation
opportunities and overall program design for implementation in
the following year. Final approval of any program or individual
changes typically occurs in the first quarter of the following
year, at or around the same time that our Compensation Committee
is evaluating overall performance for the just-completed year to
determine actual award amounts payable under our incentive-based
plans.
Role
of Executive Officers
Our Compensation Committee, and through it our Board, retains
final authority with respect to our compensation, benefit and
perquisite programs and all actions taken thereunder. However,
as noted above, our Chief Executive Officer recommends to our
Compensation Committee compensation actions for each of the
other NEOs. Our other NEOs evaluate the performance of and
recommend compensation actions for other members of our senior
management team to our Chief Executive Officer. Our Chief
Executive Officer, after making any adjustments he deems
appropriate, presents these recommendations to our Compensation
Committee for consideration and compensation action.
Compensation actions for the rest of our employees are
determined by management, with our Compensation Committee
receiving and approving aggregated information (e.g., aggregate
incentive compensation and equity awards) by employee level with
respect to such actions. None of our employees has a role in
determining or recommending the amount or form of non-employee
director compensation.
Delegation
of Authority
Subject to an aggregate limit of 400,000 shares of our
common stock, our Compensation Committee has delegated authority
to our Chief Executive Officer to make equity grants to
employees at or below the level of Senior Vice President. In
accordance with the terms of this delegation of authority, our
Compensation Committee periodically reviews all such awards. If
our Compensation Committee ratifies the awards, the number of
shares so ratified is restored to our Chief Executive
Officers pool of awardable shares. Our Chief Executive
Officer uses this authority to grant performance, promotion,
retention and new hire awards. Our Compensation Committee has
retained exclusive authority for granting equity awards to
employees above the level of Senior Vice President, as well as
for certain of our Senior Vice Presidents, including those
subject to the reporting requirements of Section 16 of the
Exchange Act.
Role
of Executive Compensation Consultant
Pursuant to its charter, our Compensation Committee has the sole
authority to retain any compensation consultant to be used to
assist in the evaluation of executive compensation and to
approve the fees and terms of such retention. In accordance with
this authority, our Compensation Committee directly engaged a
compensation consulting firm, Compensation Advisory Partners LLC
(CAP or the Compensation Consultant), effective
September 21, 2009. CAP has been engaged by our
Compensation Committee to assist in reviewing our overall
compensation strategy and total compensation package and to
provide input on the competitive market for executive talent,
evolving executive compensation market practices, program design
and regulatory compliance. CAP does not provide any other
services to us.
Prior to the retention of CAP, our Compensation Committee
directly retained the Executive Remuneration Services group at
the compensation consulting firm, Mercer (US) Inc. (Mercer or
the Compensation Consultant), to
11
perform the services described above. Our Compensation Committee
previously determined that there was overlap between the
structuring of our compensation programs by our Compensation
Committee and their implementation and administration by
management. Accordingly, our Compensation Committee authorized
our management to retain other consulting groups within Mercer
to assist with our medical, prescription and dental benefit
plans and to serve as the actuary for our qualified and
nonqualified defined benefit pension plans. To ensure that these
management level services did not impair the Compensation
Consultants objectivity, all of these services required
the pre-approval of our Compensation Committee and the nature of
the services rendered together with the Compensation
Consultants aggregate fees for such services were reviewed
periodically. In 2009, we paid Mercer approximately $440,000 in
fees related to executive compensation consulting. During 2009,
we paid approximately $3,369,000 to Mercer (US) Inc. and certain
of its international affiliates for additional HR consulting
services.
Mercer is a subsidiary of Marsh & McLennan Companies,
Inc., and, as a result, it has over 700 affiliates that operate
in numerous distinct areas of business unrelated to
Mercers compensation consulting practice, including in the
property and casualty insurance industry in which we operate. In
connection with insurance business relationships we have with
certain of these affiliates, we paid an aggregate of
approximately $153 million to such affiliates during 2009
relating to brokerage commissions, reinsurance procurement,
service and collection fees and other consulting services.
Executive
Committee
Our Executive Committee, which consists of the Chairman of the
Board, our Lead Director and the Chairmen of our Audit,
Compensation and Governance Committees, is responsible for
overseeing our business, property and affairs during the
intervals between the meetings of our Board, if necessary. Our
Executive Committee did not meet during 2009.
Finance
Committee
Our Finance Committee oversees and regularly reviews the
purchase and sale of securities in our investment portfolio. In
2009, our Finance Committee met four times.
Governance
Committee
As noted above, our Governance Committee assists our Board in
identifying individuals qualified to become members of our Board
and oversees the annual evaluation of our Board and each
committee. As provided in its charter, our Governance Committee
also makes recommendations to our Board on a variety of
corporate governance and nominating matters, including
recommending standards of independence, director nominees,
appointments to committees of our Board, designees for chairmen
of each of our Board committees, non-employee director
compensation and corporate governance guidelines. In 2009, our
Governance Committee met four times.
Compensation
Committee Interlocks and Insider Participation
During our 2009 fiscal year, each of Sheila P. Burke, Martin G.
McGuinn, Daniel E. Somers, Karen Hastie Williams, James M.
Zimmerman and Alfred W. Zollar served on our Compensation
Committee. None of these individuals has at any time been an
officer or employee of Chubb. During our 2009 fiscal year, none
of our executive officers served as a member of the board of
directors or compensation committee of any entity for which a
member of our Board or Compensation Committee served as an
executive officer.
Directors
Compensation
Our Governance Committee, with the assistance of our
Compensation Committee, is responsible for establishing and
overseeing non-employee director compensation. The Compensation
and Governance Committees consult periodically with the
Compensation Consultant to evaluate and, if appropriate, adjust
non-employee director compensation. To benchmark the
competitiveness of our non-employee director compensation, the
Compensation and Governance Committees utilize the same peer
group of companies described below under the heading
Compensation Discussion and AnalysisSetting of
Executive Compensation. Consistent with our compensation
philosophy for our NEOs, our non-employee director compensation
program is designed to target total non-employee director
compensation in the second quartile of the compensation paid to
non-employee directors in this peer group.
12
Director
Compensation Table
The following table sets forth the compensation we paid to our
non-employee directors in 2009:
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Change
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in Pension
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Value and
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Fees
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Non-Equity
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Nonqualified
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Earned
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Incentive
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Deferred
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or Paid
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Stock
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Option
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Plan
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Compensation
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name(1)
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($)
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($)(2)
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($)(3)
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($)
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($)
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($)(4)
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($)
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Zoë Baird
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$
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113,000
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$
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99,997
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$
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107
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$
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213,104
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Sheila P. Burke
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107,000
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99,997
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206,997
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James I. Cash, Jr.
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102,000
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99,997
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201,997
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Joel J.
Cohen(5)
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132,167
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232,164
|
|
Klaus J.
Mangold(5)
|
|
|
89,500
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,497
|
|
Martin G.
McGuinn(6)
|
|
|
130,000
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,234
|
|
|
|
256,231
|
|
Lawrence M. Small
|
|
|
89,500
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
986
|
|
|
|
190,483
|
|
Jess
Søderberg(7)
|
|
|
89,500
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,219
|
|
|
|
217,716
|
|
Daniel E. Somers
|
|
|
131,000
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,399
|
|
|
|
257,396
|
|
Karen Hastie Williams
|
|
|
105,000
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
531
|
|
|
|
205,528
|
|
James M.
Zimmerman(8)
|
|
|
129,833
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,830
|
|
Alfred W. Zollar
|
|
|
111,000
|
|
|
|
99,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178
|
|
|
|
211,175
|
|
|
|
|
(1) |
|
Compensation for Mr. Finnegan is not included in this
table because he does not receive compensation for services that
he renders as a member of our Board. Information regarding
Mr. Finnegans compensation is set forth under the
headings Compensation Discussion and Analysis and
Executive Compensation. |
|
(2) |
|
Pursuant to the 2009 LTIP, on April 28, 2009, each
non-employee director received deferred stock units representing
the right to receive 2,481 shares of our common stock
valued at $40.31 per share. These awards vested immediately upon
grant, but the issuance of the shares underlying such awards was
mandatorily deferred until following the recipients
separation of service from our Board. Accordingly, the aggregate
grant date fair value of each of these awards, calculated in
accordance with FASB ASC Topic 718, is $99,997 per non-employee
director. |
|
|
|
As of December 31, 2009, each of our non-employee directors
other than Messrs. McGuinn, Søderberg and Zimmerman
had the following outstanding equity awards: |
|
|
|
|
|
|
|
Grant Date
|
|
Type of Award
|
|
Number of
Units(a)
|
|
|
April 24, 2007
|
|
Stock Unit
|
|
|
413
|
(b)
|
April 29, 2008
|
|
Stock Unit
|
|
|
469
|
(b)
|
April 29, 2008
|
|
Performance Unit
|
|
|
1,407
|
(c)
|
April 28, 2009
|
|
Deferred Stock Unit
|
|
|
2,481
|
(d)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
4,770
|
(e)
|
|
|
|
(a) |
|
Each stock unit and each performance unit has the equivalent
value of one share of our common stock. The grant date fair
value of each of these awards is estimated based on the fair
market value of our common stock on the date of grant. |
|
(b) |
|
Settles on the third anniversary of grant date. |
|
(c) |
|
Represents target award. Actual payout may range from 0% to 200%
of target. Additional information regarding non-employee
director performance units is set forth under the heading
Directors CompensationStock Awards. |
|
(d) |
|
Settles following separation of service from our Board. |
|
(e) |
|
Excludes the April 24, 2007 performance unit awards that
were earned as of December 31, 2009. The actual payment of
these awards was made on February 24, 2010, pursuant to
which each non-employee director other than
Messrs. McGuinn, Søderberg and Zimmerman received, or
was entitled to receive, 1,638 shares of our common stock
(132.2% of the original performance unit award). |
13
|
|
|
(3) |
|
The following table sets forth the option awards outstanding for
each non-employee director at December 31, 2009, all of
which are fully vested: |
|
|
|
|
|
|
|
Aggregate Number of
|
|
|
|
Shares Subject to
|
|
Name
|
|
Option Awards
|
|
|
Zoë Baird
|
|
|
40,000
|
|
Sheila P. Burke
|
|
|
56,000
|
|
James I. Cash, Jr.
|
|
|
8,000
|
|
Joel J. Cohen
|
|
|
103,371
|
|
Klaus J. Mangold
|
|
|
16,000
|
|
Martin G. McGuinn
|
|
|
|
|
Lawrence M. Small
|
|
|
41,943
|
|
Jess Søderberg
|
|
|
|
|
Daniel E. Somers
|
|
|
2,000
|
|
Karen Hastie Williams
|
|
|
24,000
|
|
James M. Zimmerman
|
|
|
|
|
Alfred W. Zollar
|
|
|
|
|
|
|
|
(4) |
|
Represents (i) imputed income for premiums paid to purchase
life insurance under the Directors Group Term Life
Insurance Program; (ii) premiums paid for life insurance
policies through which we will fund our non-employee
directors charitable contributions under the
Directors Charitable Award Program; and/or
(iii) imputed income for premiums paid to purchase life
insurance under The Chubb Corporation Estate Enhancement Program
for Non-Employee Directors. Additional information regarding
these programs is set forth under the heading
Directors CompensationAll Other
Compensation. |
|
(5) |
|
Mr. Cohen and Dr. Mangold will retire from our Board
as of April 27, 2010. |
|
(6) |
|
Mr. McGuinn was elected to our Board on June 8, 2007.
As of December 31, 2009, Mr. McGuinn had the following
outstanding equity awards, which have the same general terms as
those described in footnote (2) above: |
|
|
|
|
|
|
|
Grant Date
|
|
Type of Award
|
|
Number of
Units(a)
|
|
|
June 8, 2007
|
|
Stock Unit
|
|
|
384
|
(b)
|
April 29, 2008
|
|
Stock Unit
|
|
|
469
|
(b)
|
April 29, 2008
|
|
Performance Unit
|
|
|
1,407
|
(c)
|
April 28, 2009
|
|
Deferred Stock Unit
|
|
|
2,481
|
(d)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
4,741
|
(e)
|
|
|
|
(a) |
|
Each stock unit and each performance unit has the equivalent
value of one share of our common stock. The grant date fair
value of each of these awards is estimated based on the fair
market value of our common stock on the date of grant. |
|
(b) |
|
Settles on the third anniversary of grant date. |
|
(c) |
|
Represents target award. Actual payout may range from 0% to 200%
of target. Additional information regarding non-employee
director performance units is set forth under the heading
Directors CompensationStock Awards. |
|
(d) |
|
Settles following separation of service from our Board. |
|
(e) |
|
Excludes the June 8, 2007 performance unit award that was
earned as of December 31, 2009. The actual payment of this
award was made on February 24, 2010, pursuant to which
Mr. McGuinn received 1,530 shares of our common stock
(132.2% of the original performance unit award). |
14
|
|
|
(7) |
|
Mr. Søderberg was elected to our Board on
September 6, 2007. As of December 31, 2009,
Mr. Søderberg had the following outstanding equity
awards, which have the same general terms as those described in
footnote (2) above: |
|
|
|
|
|
|
|
Grant Date
|
|
Type of Award
|
|
Number of
Units(a)
|
|
|
September 6, 2007
|
|
Stock Unit
|
|
|
295
|
(b)
|
April 29, 2008
|
|
Stock Unit
|
|
|
469
|
(b)
|
April 29, 2008
|
|
Performance Unit
|
|
|
1,407
|
(c)
|
April 28, 2009
|
|
Deferred Stock Unit
|
|
|
2,481
|
(d)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
4,652
|
(e)
|
|
|
|
(a) |
|
Each stock unit and each performance unit has the equivalent
value of one share of our common stock. The grant date fair
value of each of these awards is estimated based on the fair
market value of our common stock on the date of grant. |
|
(b) |
|
Settles on the third anniversary of grant date. |
|
(c) |
|
Represents target award. Actual payout may range from 0% to 200%
of target. Additional information regarding non-employee
director performance units is set forth under the heading
Directors CompensationStock Awards. |
|
(d) |
|
Settles following separation of service from our Board. |
|
(e) |
|
Excludes the September 6, 2007 performance unit award that
was earned as of December 31, 2009. The actual payment of
this award was made on February 24, 2010, pursuant to which
Mr. Søderberg received 1,170 shares of our common
stock (132.2% of the original performance unit award). |
|
|
|
(8) |
|
Mr. Zimmerman was elected to our Board on June 11,
2008. As of December 31, 2009, Mr. Zimmerman had the
following outstanding equity awards, which have the same general
terms as those described in footnote (2) above: |
|
|
|
|
|
|
|
Grant Date
|
|
Type of Award
|
|
Number of
Units(a)
|
|
|
June 11, 2008
|
|
Stock Unit
|
|
|
433
|
(b)
|
June 11, 2008
|
|
Performance Unit
|
|
|
1,301
|
(c)
|
April 28, 2009
|
|
Deferred Stock Unit
|
|
|
2,481
|
(d)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
4,215
|
|
|
|
|
(a) |
|
Each stock unit and each performance unit has the equivalent
value of one share of our common stock. The grant date fair
value of each of these awards is estimated based on the fair
market value of our common stock on the date of grant. |
|
(b) |
|
Settles on the third anniversary of grant date. |
|
(c) |
|
Represents target award. Actual payout may range from 0% to 200%
of target. Additional information regarding non-employee
director performance units is set forth under the heading
Directors CompensationStock Awards. |
|
(d) |
|
Settles following separation of service from our Board. |
15
Fees
Earned or Paid in Cash
The following table summarizes the cash components of our 2009
non-employee director compensation program:
|
|
|
|
|
Item
|
|
Amount
|
|
|
Annual Director Retainer
|
|
$
|
60,000
|
|
Lead Director Annual Supplemental Retainer
|
|
|
50,000
|
|
Audit Committee Chairman Retainer
|
|
|
20,000
|
|
Audit Committee Member Retainer
|
|
|
7,500
|
|
Compensation Committee Chairman Retainer
|
|
|
15,000
|
|
Compensation Committee Member Retainer
|
|
|
7,500
|
|
Executive Committee Retainer
|
|
|
7,500
|
|
Finance Committee Member Retainer
|
|
|
7,500
|
|
Governance Committee Chairman Retainer
|
|
|
12,500
|
|
Governance Committee Member Retainer
|
|
|
7,500
|
|
Board Meeting Fee
|
|
|
2,000
|
|
Committee Meeting Fee
|
|
|
2,000
|
|
Stock
Awards
With respect to non-employee directors, the 2009 LTIP is
administered by our Governance Committee with the assistance of
our Compensation Committee. Subject to adjustment upon the
occurrence of certain events described below, as of
March 8, 2010, a maximum of 548,114 shares of our
common stock were issuable to non-employee directors under the
2009 LTIP.
Based upon its market analysis, a peer group comparison and the
recommendation of the Compensation Consultant and Compensation
Committee, our Governance Committee approved deferred stock unit
awards to each of our non-employee directors in the amount of
approximately $100,000 on April 28, 2009. The deferred
stock units vested immediately upon grant, but the issuance of
the shares underlying such awards was mandatorily deferred until
following the recipients separation of service from our
Board.
Option
Awards
Since the adoption of The Chubb Corporation Long-Term Stock
Incentive Plan for Non-Employee Directors (2004)
(2004 Director Plan) in April 2004, our Boards
practice has been to refrain from granting stock options to
non-employee directors. The only stock options that have been
granted to non-employee directors since the adoption of the
2004 Director Plan were granted on a non-discretionary
basis pursuant to a restoration stock option feature that was
included in the terms of stock options granted under predecessor
plans to the 2004 Director Plan. The restoration stock
option feature provides for an automatic grant of a new stock
option if, upon exercise of the original stock option, shares
are exchanged in a
stock-for-stock
exercise. The restoration stock option feature only applies if
the original stock option is exercised within seven years of the
grant date and if the fair market value of our common stock on
the date of exercise is at least 25% higher than the exercise
price of the original stock option. The grant date of the
restoration stock option is the date of exercise of the original
option and the exercise price is the average of the high and low
prices of our common stock on the date that the original option
is exercised.
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
Cash Compensation. Under the Deferred
Compensation Plan for Directors, non-employee directors may
defer receipt of all or a portion of their cash compensation.
Amounts of deferred compensation are payable at the option of
the non-employee director either upon the non-employee
directors separation of service from our Board or at a
specified date chosen by the non-employee director at the time
the deferral election is made. The Deferred Compensation Plan
for Directors provides that amounts deferred may be invested in:
|
|
|
|
|
an interest bearing account;
|
16
|
|
|
|
|
a market value account; or
|
|
|
|
a shareholders equity account.
|
A non-employee director participating in the Deferred
Compensation Plan for Directors may elect to receive the
compensation deferred in either a lump sum or in annual
installments. All amounts are paid in cash, except for the
market value accounts which we pay in shares of our common
stock. Deferred compensation represents an unsecured obligation
payable out of our general corporate assets.
Cash Accounts. Interest bearing accounts
(cash accounts) bear interest at the lesser of 120% of the
applicable long-term federal interest rate and Citibank,
N.A.s prime rate in effect on the first day of each
January, April, July and October during the deferral period. At
December 31, 2009, we maintained cash accounts for two
non-employee directors, one of whom deferred 2009 compensation
into this account pursuant to the Deferred Compensation Plan for
Directors.
Market Value Accounts. Market value
accounts, which are denominated in units with one unit having
the equivalent value of one share of our common stock, track the
value of shares of our common stock. On each date compensation
otherwise would have been paid in accordance with our normal
practice (the credit date), non-employee directors deferring
cash compensation into market value accounts are credited with
the number of market value units equal to the quotient of:
|
|
|
|
|
the amount of compensation deferred by the non-employee
director, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
credit date or on the trading day preceding the credit date if
the credit date is not a trading day.
|
When we pay cash dividends on our common stock, the market value
account of each participating non-employee director is credited
with the number of market value units equal to:
|
|
|
|
|
the product of (i) the amount of the dividend per share,
multiplied by (ii) the number of units in the non-employee
directors market value account on the dividend payment
date, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
dividend payment date or on the trading day preceding the
dividend payment date if the dividend payment date is not a
trading day.
|
At December 31, 2009, we maintained market value accounts
for six non-employee directors, two of whom deferred 2009
compensation into a market value account pursuant to the
Deferred Compensation Plan for Directors.
Shareholders Equity
Accounts. Shareholders equity accounts,
which are denominated in units, track the book value per share
of our common stock. On each date compensation otherwise would
have been paid in accordance with our normal practice,
non-employee directors deferring cash compensation into
shareholders equity accounts are credited with the number
of shareholders equity units equal to the quotient of:
|
|
|
|
|
the amount of compensation deferred by the non-employee
director, divided by
|
|
|
|
the shareholders equity per share as reported in our
annual report to shareholders for the immediately preceding year.
|
When we pay cash dividends on our common stock, the
shareholders equity account of each participating
non-employee director is credited with the number of
shareholders equity units equal to:
|
|
|
|
|
the product of (i) the amount of the dividend per share,
multiplied by (ii) the number of units in the non-employee
directors shareholders equity account on the
dividend payment date, divided by
|
|
|
|
the closing share price of our common stock on the NYSE on the
dividend payment date or on the trading day preceding the
dividend payment date if the dividend payment date is not a
trading day.
|
At December 31, 2009, we did not maintain
shareholders equity accounts for any of our non-employee
directors.
Equity Compensation. Prior to 2009, we
offered non-employee directors the option of deferring receipt
of all or a portion of their equity compensation. At
December 31, 2009, we maintained deferred equity accounts
for seven non-employee directors who had elected to defer
receipt of all or a portion of the shares they would have been
17
entitled to receive upon settlement of pre-2009 equity grants.
Amounts of voluntarily deferred equity are payable at the option
of the non-employee director either upon the non-employee
directors separation of service from our Board or at a
specified date chosen by the non-employee director at the time
the deferral election is made. Non-employee directors receive
current payment of dividend equivalents on their deferred
equity, whether such deferral is voluntary or mandatory. We
declare and pay dividend equivalents on equity held in director
deferral accounts at the same rate and at the same time as we
declare and pay dividends on our common stock generally.
In 2009, our Governance Committee determined that deferred stock
units would be the primary equity award structure under the 2009
LTIP for our non-employee directors. Accordingly, in April 2009,
our non-employee directors were awarded deferred stock units
which vested immediately upon grant but the issuance of the
shares underlying such awards was mandatorily deferred until
following each recipients separation of service from our
Board.
All
Other Compensation
Directors Group Term Life Insurance
Program. Our non-employee directors have the
option of purchasing $50,000 in group term life insurance
coverage for themselves. Directors pay the full cost of the
coverage, which is based on coverage rates for our active
employees. Mmes. Baird and Williams and Messrs. Small,
Somers and Zollar have elected to purchase life insurance
coverage under this program. In connection with the premiums
they paid to purchase life insurance policies under
Directors Group Term Life Insurance Program, income was
imputed in 2009 to Mmes. Baird and Williams in the respective
amounts of $107 and $531 and to Messrs. Small, Somers and
Zollar in the respective amounts of $318, $165 and $178. The
imputed income represented the difference between the group
rates on these policies and the IRS prescribed coverage values.
Directors Charitable Award
Program. Effective January 1, 1992, we
established the Directors Charitable Award Program. Under
this program, each non-employee director, following his or her
first election to our Board by our shareholders, was entitled to
request that we direct one or more charitable contributions
totaling up to $500,000 to eligible tax exempt organizations. We
have elected to fund the Directors Charitable Award
Program through the proceeds of
second-to-die
life insurance policies that we have purchased on the lives of
the participating non-employee directors. We are the owner and
beneficiary of these policies. Non-employee directors have no
rights in these policies or the benefits thereunder.
Under the terms of these policies, participating non-employee
directors are paired and, upon the death of the second paired
non-employee director, we use the proceeds of these policies to
fund the contributions to the organizations selected by the
non-employee directors. At December 31, 2009, ten
non-employee directors were participating in the program. For
seven of these non-employee directors, we paid the full premium
on the life insurance policies through which we fund the program
prior to 2009. For Messrs. McGuinn, Søderberg and
Somers, the premiums paid in 2009 in connection with their
participation in this program, which also are reflected in the
All Other Compensation column of the Director
Compensation Table set forth under the heading Corporate
GovernanceDirectors Compensation, were
$26,234, $28,219 and $26,234, respectively.
In March 2008, our Board voted to close the Directors
Charitable Award Program to future participants (with currently
eligible participants under the Directors Charitable Award
Program being grandfathered). In addition, we may further amend
or terminate the Directors Charitable Award Program at our
election at any time. Participating non-employee directors are
entitled to change their designated charities at any time.
Estate Enhancement Program. Prior to 2002,
we maintained The Chubb Corporation Estate Enhancement Program
for Non-Employee Directors. This program was offered to
non-employee directors as an estate enhancement benefit pursuant
to which a participant could exchange deferred compensation for
a split-dollar whole-life insurance benefit. The program was
designed so that it would be cost neutral to us, with the
after-tax cost of the program (including amounts we will receive
upon payout of the life insurance benefit) to us being intended
to approximate the participants foregone deferred
compensation. During 2009, Mr. Small recognized imputed
income of $668 in connection with the premiums paid on the
insurance policies purchased in connection with his
participation in the program.
18
OUR BOARD
OF DIRECTORS
Our Board oversees our business operations, assets, affairs and
performance. In accordance with our long-standing practice, each
of the director nominees other than our Chief Executive Officer
is independent. Set forth below are the name, age, length of
service on our Board and principal occupation of each director
nominee, together with certain other biographical information
and factors considered by our Governance Committee and the Board
in nominating each director nominee for election to our Board.
Unless otherwise indicated, each nominee has served for at least
ten years in the business position currently or most recently
held. The age of each director is as of April 27, 2010, the
date of the 2010 Annual Meeting.
|
|
|
|
|
ZOË BAIRD (Age 57)
Director since 1998
Zoë Baird is President of the Markle Foundation, a
private philanthropy that focuses on using information and
communications technologies to address critical public needs,
particularly in the areas of health care and national security.
Ms. Bairds career spans business, government and academia.
She has been Senior Vice President and General Counsel of Aetna,
Inc., a senior visiting scholar at Yale Law School, counselor
and staff executive at General Electric Co., and a partner in
the law firm of OMelveny and Myers. She was Associate
General Counsel to President Jimmy Carter and an attorney in the
Office of Legal Counsel of the Department of Justice. She served
on President Clintons Foreign Intelligence Advisory Board
from 1993 - 2001 and on the International Competition Policy
Advisory Committee to the Attorney General. Ms. Baird served on
the Technology & Privacy Advisory Committee to the
Secretary of Defense in 2003 - 2004, which advised on the use of
technology to counter terrorism. She is on a number of
non-profit and corporate boards, including the Convergys
Corporation, Boston Properties, and Brookings Institution, among
others.
|
|
|
In selecting Ms. Baird as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Ms. Bairds outside
board service and business activities, including her knowledge
of the insurance industry, legal matters, public policy matters,
governmental affairs and information technology.
|
|
|
|
|
|
SHEILA P. BURKE (Age 58)
Director since 1997
Faculty Research Fellow, Malcolm Wiener Center for Social
Policy, Member of Faculty, J.F. Kennedy School of Government,
Harvard University since 2007. Senior Public Policy Advisor,
Baker, Donelson, Bearman, Caldwell & Berkowitz from 2009 to
present. From 2004 - 2007 Deputy Secretary and Chief Operating
Officer, Smithsonian Institution. Ms. Burke previously was Under
Secretary for American Museums and National Programs,
Smithsonian Institution, from June 2000 to December 2003 and
Executive Dean and Lecturer in Public Policy of the John F.
Kennedy School of Government, Harvard University, from November
1996 until June 2000. Ms. Burke served as Chief of Staff to the
Majority Leader of the U.S. Senate and Deputy Staff Director of
the U.S. Senate Committee on Finance from 1985 - 1996. Ms.
Burke also serves on the boards of Wellpoint Inc., the Kaiser
Commission on the Future of Medicaid and Uninsured, the
Georgetown University School of Nursing and Health Studies, the
Partnership for Public Service and the Association of American
Medical Colleges.
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In selecting Ms. Burke as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Ms. Burkes outside
board service and business activities, including her knowledge
of public policy matters and governmental affairs.
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JAMES I. CASH, JR. (Age 62)
Director since 1996
The James E. Robison Emeritus Professor of Business
Administration, Harvard University. Dr. Cash was a member
of the Harvard Business School faculty from July 1976 to October
2003. He also serves on the boards of General Electric Company
and Wal-Mart. He owns a private company - The Cash Catalyst -
and serves as a Special Advisor or Director of several private
companies including General Catalyst Partners, Verne Global and
Veracode. Dr. Cash also serves on the non-profit boards of
the National Association of Basketball Coaches Foundation and
the Bert King Foundation.
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In selecting Dr. Cash as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Dr. Cashs outside
board service and business experience, including his knowledge
of information technology, strategic planning and international
business operations.
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JOHN D. FINNEGAN (Age 61)
Director since 2002
President and Chief Executive Officer of The Chubb
Corporation since December 2002 and Chairman since December
2003. Mr. Finnegan previously had been Executive Vice President
of General Motors Corporation, which is primarily engaged in the
development, manufacture and sale of automotive vehicles, and
Chairman and President of General Motors Acceptance Corporation,
a finance company and subsidiary of General Motors Corporation,
from May 1999 to December 2002. He was Vice President and Group
Executive of General Motors and also President of General Motors
Acceptance Corporation from November 1997 to April 1999. Mr.
Finnegan was associated with General Motors Corporation from
1976 to December 2002.
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In selecting Mr. Finnegan as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Finnegans role as
our Chief Executive Officer and his extensive experience in the
financial services industry as well as the perspective he has
gained through his outside board service and business activities.
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MARTIN G. McGUINN (Age 67)
Director since 2007
Chairman and Chief Executive Officer of Mellon Financial
Corporation from January 1999 until February 2006. Mr. McGuinn
held a number of positions during his 25 years at Mellon.
Mr. McGuinn recently concluded a one-year term as Chairman of
the Financial Services Roundtable. He served as the 2005
President of the Federal Reserve Boards Advisory Council.
Mr. McGuinn serves on the Boards of Celanese Corporation and
iGate Corporation, and is a member of the Advisory Board of
CapGen Financial. Mr. McGuinn also serves on several nonprofit
boards, including the Carnegie Museums of Pittsburgh and the
University of Pittsburgh Medical Center.
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In selecting Mr. McGuinn as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. McGuinns outside
board service and business activities, including his role as
Chairman and Chief Executive Officer of a major public financial
services company.
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LAWRENCE M. SMALL (Age 68)
Director since 1989
Former Secretary of the Smithsonian Institution, the
worlds largest museum and research complex, a position he
held from 2000 - 2007. Mr. Small previously had been President
and Chief Operating Officer of Fannie Mae from 1991 to 2000.
Before joining Fannie Mae, he served as Vice Chairman of the
executive committee of the boards of directors of Citicorp and
Citibank, where he worked for 27 years. He currently also
serves as a director on the boards of Marriott International and
New York Citys Spanish Repertory Theatre.
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In selecting Mr. Small as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Smalls outside
board service and business activities, including his senior
leadership roles at major public financial services companies
and a government institution.
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JESS SØDERBERG (Age 65)
Director since 2007
Retired from A.P. Moller-Maersk in November 2007. Mr.
Søderberg was Partner and Group CEO of A.P. Moller-Maersk
since 1994. He joined the company after graduating with an MBA
from the Copenhagen Business School in 1969, and has since held
a number of senior financial positions in both the USA and
Denmark. Mr. Søderberg was a member of JP Morgan
Chases International Council until recently, is a member
of Danske Banks Advisory Board, is the Vice Chairman of
the board of Carlsberg A/S, is Chairman of Carlsberg A/Ss
audit committee, and an adviser to Permira (a major
international equity fund). Mr. Søderberg is honored as a
Knight 1st Degree of the Order of Dannebrog and the Chilean
Order of Bernardo OHiggins.
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In selecting Mr. Søderberg as a director nominee, our
Nominating Committee and Board considered the factors set forth
under the heading Corporate Governance - Director
Qualifications and Candidate Considerations. In addition,
the Nominating Committee and the Board considered Mr.
Søderbergs outside board service and business
activities, including his role as Chief Executive Officer of a
major public company and his expertise in international business
operations.
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DANIEL E. SOMERS (Age 62)
Director since 2003
Vice Chairman of Blaylock and Partners LP, an investment
banking firm, from January 2002 until September 2007. Mr.
Somers previously had been President and Chief Executive Officer
of AT&T Broadband, a provider of cable and broadband
services, from December 1999 to October 2001, and Senior
Executive Vice President and Chief Financial Officer at
AT&T Corp., a telecommunications company, from May 1997 to
December 1999. Mr. Somers served on the board of The Lubrizol
Corporation until February 2007. He is also a member of the
Board of Trustees of Stonehill College.
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In selecting Mr. Somers as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Somers outside
board service and business activities, including his role as
Chief Financial Officer of a major public company.
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KAREN HASTIE WILLIAMS (Age 65)
Director since 2000
Partner, Crowell & Moring LLP, attorneys, from 1982
until her retirement to Senior Counsel status in January 2005.
Ms. Williams also serves on the boards of Continental Airlines
Inc., Gannett Company, Inc., SunTrust Banks, Inc. and Washington
Gas Light Holdings, Inc. She is also a Trustee Emeritus of
Amherst College and Trustee of the Black Student Fund and the
NAACP Legal Defense and Education Fund.
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In selecting Ms. Williams as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Ms. Williams outside
board service and business activities, including her experience
with legal matters, public policy matters and governmental
affairs.
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JAMES M. ZIMMERMAN (Age 66)
Director since 2008
Retired Chairman and Chief Executive Officer of Federated
Department Stores, Inc. Mr. Zimmerman was Chairman of the
Board from February 2003 until January 2004, Chairman and Chief
Executive Officer from May 1997 to February 2003, and President
and Chief Operating Officer from March 1988 to May 1997. He
began his career with Federated in 1965 after graduating from
Rice University in Houston, Texas. Mr. Zimmerman is also a
director of Fossil, Inc., continues on the boards of and in
leadership roles with several community organizations, and
previously served on the boards of the H. J. Heinz Company,
Goodyear Tire and Rubber Company, and Convergys Corporation.
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In selecting Mr. Zimmerman as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Zimmermans outside
board service and business activities, including his role as
Chairman and Chief Executive Officer of a major public company.
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ALFRED W. ZOLLAR (Age 55)
Director since 2001
General Manager, Tivoli Software, IBM Corporation, which
manufactures and sells computer services, hardware and software,
since July 2004. Mr. Zollar previously had been General Manager,
eServer iSeries, IBM Corporation, from January 2003 to
July 2004; General Manager, Lotus Software, which designs
and develops business software and was a subsidiary of IBM
Corporation, from January 2000 to January 2003; General Manager,
Network Computing Software Division, IBM Corporation from 1998
to 2000 and General Manager, Network Software, IBM Corporation,
from 1996 to 1998.
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In selecting Mr. Zollar as a director nominee, our Nominating
Committee and Board considered the factors set forth under the
heading Corporate Governance - Director Qualifications and
Candidate Considerations. In addition, the Nominating
Committee and the Board considered Mr. Zollars outside
board service and business activities, including his experience
with product management and information technology matters.
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COMMITTEE
ASSIGNMENTS
Our Board has established the five committees described above
under the headings Corporate GovernanceAudit
Committee, Compensation Committee,
Executive Committee, Finance
Committee, and Governance Committee to
assist our Board in fulfilling its responsibilities. The charter
for each of our Audit, Compensation and Governance Committees,
which are available on our website at
www.chubb.com/investors, requires that all members
satisfy the independence requirements of the NYSE. Our
Governance Committee annually considers committee assignments,
with appointments being effective as of the date of the annual
meeting of shareholders. Current members of our committees are
identified below:
Audit
Committee
Daniel
E. Somers (Chair)
Zoë Baird
Joel J. Cohen
Martin G. McGuinn
Alfred W. Zollar
Compensation
Committee
Martin
G. McGuinn (Chair)
Sheila P. Burke
Daniel E. Somers
Karen Hastie Williams
James M. Zimmerman
Alfred W. Zollar
Executive
Committee
John
D. Finnegan (Chair)
James I. Cash, Jr.
Martin G. McGuinn
Daniel E. Somers
James M. Zimmerman
Finance
Committee
John
D. Finnegan (Chair)
Sheila P. Burke
Klaus J. Mangold
Jess Søderberg
Governance
Committee
James
I. Cash, Jr. (Chair)
Zoë Baird
Joel J. Cohen
Lawrence M. Small
Karen Hastie Williams
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AUDIT
COMMITTEE REPORT
Purpose
Our Board has formed our Audit Committee to assist our Board in
monitoring:
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the integrity of our financial statements;
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our compliance with legal and regulatory requirements;
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the independence and qualifications of our independent auditor;
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the performance of our internal auditors and independent
auditor; and
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other significant financial matters.
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Composition
and Meetings
At December 31, 2009, our Audit Committee was comprised of
five directors, each of whom our Board determined to be
independent and each of whom satisfied the applicable legal and
regulatory independence requirements. Mr. Somers served as
the Chairman of our Audit Committee during 2009 and our Board
designated him, together with Messrs. Cohen and McGuinn, as
the audit committee financial experts. Information regarding the
respective experience of Messrs. Cohen, McGuinn and Somers
is set forth under the heading Our Board of
Directors.
Our Governance Committee and the full Board consider Audit
Committee membership annually. Committee appointments are
effective as of the date of the annual meeting of shareholders.
In addition to Messrs. Cohen, McGuinn and Somers,
Ms. Baird and Mr. Zollar currently serve on our Audit
Committee. Our Audit Committee met eight times during 2009.
Charter
and Self-Assessment
Our Audit Committee operates pursuant to its written charter,
which is available on our website at
www.chubb.com/investors. The Audit Committee Charter has
been approved by our Audit Committee and our Board and it is
subject to review at least annually. It was last revised in
February 2005.
Pursuant to its charter, our Audit Committee performs an annual
self-assessment. For 2009, our Audit Committee concluded that,
in all material respects, it had fulfilled its responsibilities
and satisfied the requirements of its charter and applicable
laws and regulations.
Appointment
of Independent Auditor
Under its charter, our Audit Committee, among other things, is
directly responsible for the appointment, compensation,
retention and oversight of the work of the independent auditor
engaged for the purpose of preparing or issuing an audit report
or related work or performing other audit, review or attest
services for us. Our Audit Committee has appointed
Ernst & Young LLP to serve as independent auditor. Our
Audit Committee has recommended to our Board that
Ernst & Youngs appointment as independent
auditor be submitted for ratification by our shareholders. This
matter is described under the heading
Proposal 2Ratification of Appointment of
Independent Auditor.
Review of
Financial Information
Management is responsible for our internal controls over the
financial reporting process and the independent auditor is
responsible for performing an independent audit of our
consolidated financial statements in accordance with generally
accepted auditing standards and for issuing a report on its
audit. Our Audit Committee is charged with overseeing and
monitoring these activities on behalf of our Board. During 2009
and the first quarter of 2010, our Audit Committee reviewed and
discussed with management and the independent auditor our
quarterly financial statements and our audited consolidated
financial statements for the year ended December 31, 2009.
Our Audit
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Committee discussed with the independent auditor the matters
required to be discussed by the statement on Auditing Standards
No. 61, as amended (AICPA, Professional Standards, Vol. 1.
AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T.
Auditor
Independence
The Audit Committee has received the written disclosures and the
letter from the independent accountant required by the
applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountants
communications with the audit committee concerning independence,
and has discussed with the independent accountant the
independent accountants independence.
Inclusion
of Consolidated Financial Statements in the 2009
10-K
Based on the foregoing, our Audit Committee recommended to our
Board that the audited consolidated financial statements be
included in the 2009
10-K filed
with the SEC.
The foregoing report has been furnished by the following members
of our Board who comprise our Audit Committee:
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Daniel E. Somers (Chair)
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Martin G. McGuinn
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Zoë Baird
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Alfred W. Zollar
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Joel J. Cohen
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This Audit Committee Report shall not be deemed to be
soliciting material, to be filed with
the SEC, subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that we specifically request that the information be
treated as soliciting material, nor shall it be incorporated by
reference into any document filed under the Securities Act of
1933, as amended (Securities Act), or the Exchange Act unless we
specifically incorporate it by reference.
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COMPENSATION
COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis included
under the heading Compensation Discussion and
Analysis pursuant to Item 402(b) of SEC
Regulation S-K.
Based upon the review and discussion described in the preceding
paragraph, our Compensation Committee recommended to our Board
that the Compensation Discussion and Analysis be
included in our proxy statement on Schedule 14A prepared in
connection with the 2010 Annual Meeting and that the
Compensation Discussion and Analysis be incorporated
by reference into the 2009
10-K for the
year ended December 31, 2009.
The foregoing report has been furnished by the following members
of our Board who comprise our Compensation Committee:
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Martin G. McGuinn (Chair)
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Karen Hastie Williams
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Sheila P. Burke
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James M. Zimmerman
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Daniel E. Somers
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Alfred W. Zollar
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This Compensation Committee Report shall not be deemed to be
soliciting material, to be filed with
the SEC, subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that we specifically request that the information be
treated as soliciting material, nor shall it be incorporated by
reference into any document filed under the Securities Act or
the Exchange Act unless we specifically incorporate it by
reference.
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COMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the 2009
compensation program for our NEOs. During 2009, our executive
management team consisted of the following NEOs:
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John D. Finnegan, Chief Executive Officer;
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Richard G. Spiro, Chief Financial Officer;
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John J. Degnan, Chief Operating Officer;
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Paul J. Krump, Chief Underwriting Officer;
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Harold L. Morrison, Jr., Chief Global Field
Officer; and
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Dino E. Robusto, Chief Administrative Officer.
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Overall
Executive Compensation Philosophy and Objectives
The property and casualty insurance industry is comprised of
hundreds of companies vying for part of the multibillion-dollar
market for personal, commercial and specialty lines of insurance
coverage. Within this competitive environment, we are considered
to be one of the worlds preeminent insurers, offering
extensive business and personal insurance solutions globally. We
distinguish ourselves with an approach that focuses on providing
premier customer service, quality underwriting and highly
disciplined cost management. It is imperative to our success and
long-term viability that our business continues to be managed by
highly experienced, focused and capable executives who possess
the dedication to oversee our global organization on a
day-to-day
basis and have the vision to anticipate and respond to market
developments. It is also important that we concentrate on
retaining and developing the capabilities of our emerging
leaders to ensure that we continue to have an appropriate depth
of executive talent.
Our executive compensation program is intended to attract,
reward and retain a management team with the individual and
collective abilities that fit our profile described above. With
this philosophy in mind, our executive compensation program is
intended to motivate our employees to achieve the following
objectives:
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enhance our market reputation as a provider of the highest
quality customer service;
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attain superior financial performance, in both the short- and
long-term;
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take accountability for the performance of the business units
and functions for which they are responsible; and
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make decisions about our business that will maximize long-term
shareholder value.
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As discussed more fully below, a substantial portion of an
executives compensation incorporates performance criteria
that support and reward achievement of our annual operating plan
and long-term business goals. Specifically, compensation
decisions for our NEOs are linked to corporate goals based on
financial results (merit-based salary increases and Annual
Incentive Plan awards), absolute stock price appreciation
(restricted stock unit (RSU)) and a combination of total
shareholder return relative to companies in the S&P 500
Index and stock price appreciation (performance unit awards).
For 2009, approximately 71% of Mr. Finnegans total
target compensation was performance-based (Annual Incentive Plan
award and performance unit award). The percentages of
performance-based pay relative to total target compensation for
Messrs. Spiro, Degnan, Krump, Morrison and Robusto were
approximately 67%, 68%, 55%, 56% and 56%, respectively.
Setting
of Executive Compensation
Our Compensation Committee is responsible for establishing the
philosophy and objectives that underlie our executive
compensation program and guiding its design and administration.
Additional information on the structure, scope of authority and
operation of our Compensation Committee, as well as the roles of
the
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Compensation Consultant and management in determining
compensation, is set forth under the heading Corporate
GovernanceCompensation Committee.
Market
Data
Our Compensation Committee, with the assistance of the
Compensation Consultant, reviews the compensation of similarly
situated officers of a representative peer group of companies on
an annual basis to ensure that our executive compensation
program is competitive with the companies with which we believe
we compete for executive talent. The overall peer group is
comprised of companies similar in size and scope to us within
the property and casualty and broader insurance industries as
well as the financial services industry. In 2009, the
19 companies comprising our peer group, of which seven were
in the property and casualty insurance industry, were:
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*ACE Ltd.
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*CNA Financial Corp.
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Prudential Financial, Inc.
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Aetna, Inc.
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Genworth Financial, Inc.
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Principal Financial Group, Inc.
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Aflac, Inc.
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*Hartford Financial Services Group Inc.
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State Street Corp.
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*Allstate Corp.
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Lincoln National Corp.
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*The Travelers Companies, Inc.
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Bank of New York Mellon Corp.
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MetLife, Inc.
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*XL Capital Ltd.
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BB&T Corp.
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PNC Financial Svcs Grp, Inc.
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Cigna Corp.
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*Progressive Corp.
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Our Compensation Committee has established what it believes to
be challenging performance goalsboth on an absolute basis
and relative to our peers, with an emphasis on our property and
casualty insurance industry peers (indicated above with an
asterisk). Accordingly, total compensation for our NEOs is
targeted between the
50th and
75th
percentiles of our peers, combined salary and annual cash
incentive compensation is targeted at the median of our peers
and long-term incentive awards are targeted between the
50th and
75th
percentiles. During 2009, we achieved the second highest
operating income (net income excluding after-tax realized
investment gains) per share result in our 127 year history.
The total compensation for Messrs. Finnegan and Degnan
exceeded the
75th
percentile as a result of their individual performance as well
as our strong absolute and relative performance.
Mr. Spiros total compensation slightly exceeded the
75th
percentile goal, reflective of the external market for
attracting the superior talent that he provides, his excellent
performance and our financial results. While our Compensation
Committee recognizes the outstanding contributions to our
financial results attributable to Messrs. Krump, Morrison
and Robusto, each of them was recently promoted and each
received raises in 2008 and 2009, which brought their respective
total compensation packages close to the
25th
percentile of other NEOs within our peer group.
Our emphasis on long-term performance-based compensation
supports our need for executives to maintain a longer-term focus
on our business, while merit-based salary increases and annual
incentive compensation reward the delivery of strong annual
results. For 2009, approximately 70% of Mr. Finnegans
total target compensation represented long-term equity incentive
awards. The percentage of long-term equity incentive awards
relative to total target compensation for Messrs. Spiro and
Degnan was approximately 62% and 60%, respectively. The
percentage of long-term equity incentive awards relative to
total target compensation for Messrs. Krump, Morrison and
Robusto was approximately 35%, 37% and 37%, respectively.
Individual
Performance
Our executive compensation program provides our Compensation
Committee with the flexibility to make annual compensation
decisions based on individual performance. Specifically, our
program is designed to provide our Compensation Committee with
the ability to adjust individual compensation, significantly in
some cases, to the extent the executive achieves individual
annual performance goals and strengthens his or her
competencies, performance and potential over a longer period.
Our Compensation Committee believes that this flexibility is
imperative to reward and recognize the key skills, talents and
contributions to annual performance and overall
long-term
company success. Each year, our Compensation Committee evaluates
Mr. Finnegans performance. Mr. Finnegan, in
turn, presents our Compensation Committee with his evaluation of
each of the other NEOs, which includes a review of contributions
and performance over the prior year, strengths, weaknesses,
development plans,
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succession potential and compensation recommendations. Our
Compensation Committee then makes a final determination of
compensation amounts for each NEO with respect to each of the
elements of the executive compensation program for actual
compensation relative to the preceding year and target
compensation for the current year.
Tally
Sheets
Our Compensation Committee reviews tally sheets prepared by
management on an annual basis. The tally sheets set forth all
components of the NEOs compensation, including base
salary, annual incentive compensation, equity incentive awards,
benefits and perquisites, retirement plan accruals and total
payments upon various termination scenarios. Our Compensation
Committee uses these tally sheets to confirm that it has a full
understanding of our NEOs comprehensive compensation
packages.
Assessment
of Compensation Programs
During 2009, with the assistance of the Compensation Consultant,
our Compensation Committee performed an assessment of the
primary components of our executive compensation
programannual salary, annual incentive compensation,
long-term equity incentive awards and deferred compensation
plan. Our Compensation Committee reviewed each component from an
internal perspective, including the alignment of our overall
executive compensation philosophy and objectives to our business
strategy, and from an external perspective, which considered our
peer group and evolving market trends. The assessment revealed
that our overall executive compensation program is aligned with
our business strategy of emphasizing operating income and
shareholder return and reflects market practices in terms of
incentive mix, metrics and equity use. Based on the assessment,
the Compensation Committee determined that these components of
our executive compensation program did not encourage
inappropriate risk-taking by our NEOs.
In reaching this conclusion, our Compensation Committee noted
that:
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The financial performance objectives of our annual cash
incentive program are the budgeted objectives that are reviewed
and approved by the Compensation Committee.
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We generally use the same financial performance measures under
our Annual Incentive Plan for our NEOs that we use for all other
plan participants.
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Our variable compensation awards (annual cash incentives and
long-term incentives in the form of performance units and RSUs)
are based on a formula and are at the discretion of the
Compensation Committee.
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We have a recoupment policy that requires the repayment of any
bonus or other incentive-based or equity-based compensation in
certain circumstances.
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A substantial component of our NEOs annual compensation is
in the form of performance units that are subject to a
three-year performance cycle, which mitigates excessive
short-term risk taking.
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Our NEOs hold a significant amount of their personal wealth in
the form of our stock. Accordingly, they would be personally
impacted by the potential consequences of inappropriate or
unnecessary risk-taking.
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We balance short- and long-term decision making with the annual
cash incentive program and equity awards that vest over three
years.
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In addition to the risk assessment of the compensation programs
in which our NEOs participate, in February 2010, our
Compensation Committee undertook a risk analysis of our other
compensation programs and determined that these compensation
programs do not create any risk that is reasonably likely to
have a material adverse effect on us.
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Tax
Policies
Section 162(m) of the Internal Revenue Code limits to
$1 million per year the federal income tax deduction to
public corporations for compensation paid for any fiscal year to
the CEO and the three most highly compensated executive officers
(other than the CFO) as of the end of the fiscal year as
determined in accordance with the Exchange Act. This limitation
does not apply to qualifying performance-based
compensation. Our Compensation Committee has designed our
annual incentive compensation awards and performance unit awards
to qualify for the performance-based compensation exception to
the $1 million limit. In establishing targets for meeting
the performance-based compensation exception, our Compensation
Committee anticipated using negative discretion in calculating
final incentive payouts. In addition, our NEOs (other than
Mr. Spiro) generally are required to defer compensation
that would not otherwise be deductible. Due to guidance issued
in 2007 by the Internal Revenue Service (IRS), the compensation
of Mr. Spiro, our principal financial officer for 2009, was
not subject to the Section 162(m) limitation on
deductibility.
Our Compensation Committee believes that our shareholders are
best served by not restricting our Compensation Committees
discretion and flexibility in crafting compensation plans and
arrangements, such as annual salaries and RSU awards, even
though they may result in certain non-deductible compensation
expenses. Accordingly, our Compensation Committee may from time
to time approve elements of compensation for one or more of our
NEOs that are not fully deductible and reserves the right to do
so in the future.
Components
of Executive Compensation
Our executive compensation program consists of annual and
long-term compensation and company-sponsored benefit plans. Each
component is designed for a specific purpose and contributes to
an overall total compensation package that is competitive,
predominantly performance-based and valued by our executives.
Annual
Salary
Annual salary is designed to provide a fixed level of
compensation to our NEOs based on their skills, background, and
market data, as well as to retain their services. Annual
salaries are generally targeted at the median of our peer group
because we want to provide attractive and competitive levels of
base compensation to ensure our ability to attract and retain
superior talent. In addition to considering peer group data,
individual performance and contributions, our Compensation
Committee determines annual salaries based upon the skills,
knowledge and competencies of each NEO, as reviewed and
recommended annually by Mr. Finnegan (for all NEOs other
than himself). Setting of annual salaries is important because
each NEOs target annual incentive compensation is then
developed based on annual salary levels.
In February 2009, our Compensation Committee reviewed annual
salaries for each of our NEOs based upon the above factors.
Although we achieved another year of excellent performance, at
that time, our Compensation Committee decided to maintain the
2008 base salaries in 2009 for all of our NEOs given that
Mr. Spiros annual salary had just been fixed in
October 2008 and each of Messrs. Degnan, Krump, Morrison
and Robusto had received substantial increases in connection
with their respective promotions in June 2008. The Compensation
Committee also determined that Mr. Finnegans salary
remained competitive without adjustment. Accordingly, the 2009
base salaries for Messrs. Finnegan, Spiro, Degnan, Krump,
Morrison and Robusto were set at $1,275,000, $750,000, $825,000,
$550,000, $480,000, and $450,000, respectively. In September
2009, our Board extended for one year the mandatory retirement
date for Mr. Degnan so that he could remain our Chief
Operating Officer until the end of 2010. In connection with this
decision to defer Mr. Degnans retirement, the
Compensation Committee undertook a comprehensive review of the
compensation of our NEOs during the third quarter of 2009. As a
result of that analysis, the Compensation Committee approved
base salary increases for Messrs. Degnan, Krump, Morrison
and Robusto of 6.0%, 5.5%, 6.3% and 13.3%, respectively.
Accordingly, effective September 1, 2009, the annual base
salaries for Messrs. Degnan, Krump, Morrison and Robusto
increased to $874,500, $580,000, $510,000 and $510,000,
respectively. Due to his recent hire in 2008, our Compensation
Committee decided to maintain Mr. Spiros base salary
for the remainder of 2009.
30
Annual
Incentive Compensation
Our Annual Incentive Plan is designed to support our
compensation strategy by linking a significant portion of total
annual cash compensation to the achievement of critical business
goals on an annual basis. All of our salaried employees,
including our NEOs, are eligible to participate in the Annual
Incentive Plan.
Incentive Opportunity. As
discussed under the heading Compensation Discussion and
AnalysisSetting of Executive Compensation, baseline
opportunities for annual incentive compensation awards (combined
with salary) are generally set at the median for executives with
commensurate positions at our peers. Our Compensation Committee
establishes the range of potential payments for
Mr. Finnegans annual incentive compensation based
upon its analysis of market data from our peer group of
companies, advice from the Compensation Consultant and subject
to the minimum annual incentive compensation award target of
$1.6 million as provided for in his employment agreement.
For the other NEOs, our Compensation Committee establishes the
annual incentive compensation payment range after taking into
consideration Mr. Finnegans recommendations, advice
from the Compensation Consultant and market data from our peer
group of companies. For information regarding the potential
ranges of awards under the Annual Incentive Plan for our NEOs in
2009, see the information set forth under the heading
Executive CompensationGrants of Plan-Based
Awards. Baseline opportunities are disclosed in the
target column.
Performance Goal. Since
2007, annual incentive compensation awards have been earned
based on our adjusted operating income. We define adjusted
operating income as net income excluding after-tax realized
investment gains and losses and adjusted to account for the loss
of investment income attributable to our repurchase of shares of
our common stock. Our Compensation Committee believes that
adjusted operating income provides an effective means of
directly linking executive compensation to our
shareholders interests. We adjust for investment income so
that the calculation is not distorted by the impact of our
continuing commitment to return capital to shareholders through
our share repurchase program.
Pool Funding. Each year we
fund an aggregate award pool for all Annual Incentive Plan
participants in an amount equal to 8.8% of adjusted operating
income subject to a minimum funding condition that requires us
to achieve operating income greater than 50% of the prior
years operating income. This means that each percentage
increase or decrease in 2009 operating income relative to 2008
operating income will result in a proportional increase or
decrease in the 2009 Annual Incentive Compensation award pool,
thus providing a direct link between incentive payouts and year
over year performance.
Performance
Multiplier. Actual incentive compensation
awards for our NEOs are earned by applying a performance
multiplier to each NEOs baseline opportunity. The
performance multiplier is derived by dividing the total Annual
Incentive Compensation award pool by the total baseline
opportunities for all participants covered by the Annual
Incentive Plan.
Incentive Payouts. Adjusted
operating income in 2009 was $2.3 billion, which was
approximately 7.0% higher than 2008 adjusted operating income of
$2.2 billion. This created a 2009 award pool of
$202.7 million. Based upon this award pool and total
baseline opportunities, awards to Messrs. Spiro, Degnan,
Krump, Morrison and Robusto were set at $1,563,300, $1,974,700,
$806,000, $708,700 and $708,700, respectively. These amounts
reflect our formulaic approach to calculating bonuses and the
Compensation Committee did not make any adjustments. Our
Compensation Committee decided to adjust the formulaic approach
for Mr. Finnegan to reflect his outstanding performance
towards the achievement of enterprise financial goals and the
development of a rigorous succession plan that included
comprehensive competencies for CFO, COO, CAO and CEO. With this
adjustment, the award to Mr. Finnegan was increased by
$206,500 to $3,750,000.
The incentive payouts for our NEOs who are subject to the
$1 million compensation limit under Section 162(m) of
the Internal Revenue Code are below their respective targets
established by our Compensation Committee to meet the
performance-based compensation exception.
31
Long-Term
Equity Incentive Awards
In 2009, our Board adopted, and our shareholders approved the
2009 LTIP to replace the 2004 Employee Plan. The terms of the
new plan and types of awards granted thereunder are
substantially similar to those of the 2004 Employee Plan. Our
NEOs received their 2009 equity awards under the 2004 Employee
Plan and did not begin receiving equity awards under the new
plan until 2010.
Equity Incentive
Awards. Long-term equity incentive awards
made pursuant to the 2004 Employee Plan are designed to support
several of our compensation objectives, including:
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placing a significant portion of total compensation at risk;
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linking long-term performance-based awards with shareholder
value; and
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retaining our highly-skilled and valued senior management.
|
All employees at or above the level of Assistant Vice President
(approximately 1,700 employees), including our NEOs,
participate in our long-term equity incentive award program.
Target long-term equity incentive awards are designed to achieve
our desired competitive market position of being between the
50th and
75th
percentiles of our peer group of companies and are commensurate
with the individuals level within our organization. For
2009, the target long-term equity incentive awards for
Messrs. Finnegan, Spiro and Degnan were $7,600,000,
$2,650,000 and $3,000,000, respectively. The target long-term
equity incentive award for each of Messrs. Krump, Morrison,
and Robusto was $550,000. These target levels were determined
based on analysis of data from our peer group of companies.
Annual equity incentive awards to our NEOs are in the form of
performance units and RSUs. Consistent with our emphasis on
performance-based compensation, for officers at or above the
level of Senior Vice President, including our NEOs, performance
units generally constitute 75% of the annual equity award, while
RSUs generally constitute the remaining 25%. We believe our
emphasis on performance-based long-term equity incentive awards
is consistent with the practice of our peer group companies.
Our Compensation Committee manages the potential dilutive effect
of equity incentive awards by monitoring our run
ratethe number of shares granted as a percentage of
our fully diluted common shares outstandingrelative to our
peer companies. Our Compensation Committee also evaluates
guidelines used by certain institutional advisory services and
considers advice from the Compensation Consultant. Our annual
run rate was approximately 0.6% in 2009, which we believe is
conservative relative to the practices of our peer group
companies. Our conservative run rate is primarily attributable
to the fact that fewer full-value shares are needed to provide a
target award value in the form of performance units and RSUs
than would be required for an award of stock options as well as
our limited participation levels.
Performance
Units. Performance units are intended to
motivate our senior officers to achieve superior total
shareholder returnshare price appreciation plus reinvested
dividends (TSR)versus companies in the
Standard & Poor 500 Index (S&P 500) over a
three-year performance period. We view the other companies in
the S&P 500 as the competition for our shareholders
investment dollars. The value of performance units is directly
linked to the total return delivered to our shareholders, thus
motivating our senior officers to deliver superior returns over
an extended performance period. Performance units also support
retention, as they are subject to forfeiture if the
recipients employment terminates before the shares are
settled for any reason other than death, disability, retirement
or with the consent of our Compensation Committee.
32
The number of performance units earned for each three-year
performance period can vary from 0% to 200% of the original
target award based on our relative TSR versus S&P
500 companies as follows:
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TSR
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|
Percentile
|
|
Percent of Target
|
Ranking
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|
Shares Earned
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85th
& higher
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200
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%
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50th
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100
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%
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25th
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50
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%
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Below 25th
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0
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%
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For relative performance between the
25th and
85th
percentiles, the number of shares earned is determined by
multiplying the relative percentile of comparative performance
achieved by two. The final dollar value of each recipients
performance unit award is also dependent on the price of our
common stock at the awards settlement date, thus providing
an additional link to shareholders interests and providing
our senior officers with significant value potential based on
our results.
The performance period for the performance units granted in 2007
ended on December 31, 2009. Our TSR over the performance
period was 0.4%, which positioned us at the 66.1 percentile
of companies in the S&P 500. Based on the performance scale
above, each of our NEOs (other than Mr. Spiro), like all
recipients of 2007 performance units who did not forfeit such
awards due to termination of their employment, received in
February 2010 the number of shares of common stock equal to
132.2% of the respective target number of performance units
granted in 2007. Information regarding the vesting of each
NEOs respective 2007 performance unit award is set forth
under the heading Executive CompensationOption
Exercises and Stock Vested.
The number and grant date fair value of performance units
granted to our NEOs in 2009 for the performance period running
from January 1, 2009 to December 31, 2011 is set forth
under the heading Executive CompensationGrants of
Plan-Based Awards.
RSUs. RSUs are intended to
align managements interests with those of our shareholders
and serve as a strong retention tool for key employees. Like
performance units, RSUs support retention because they generally
cliff vest on the third anniversary of the date of grant,
provided the recipient remains employed by us over that period.
The number and grant date value of RSUs granted to NEOs in 2009
is set forth under the heading Executive
CompensationGrants of Plan-Based Awards.
Stock Options. We
discontinued the use of stock options as part of our core
long-term equity incentive award program in 2004. However, we
still utilize stock option grants as a means of providing
tax-efficient equity awards to certain internationally-based
employees. In addition, stock options granted to all
participants, including participating NEOs, under predecessor
plans to the 2004 Employee Plan included a restoration option
feature that provides the optionee with the right to receive a
restoration stock option upon exercise of the original option if
shares are exchanged in a
stock-for-stock
exercise within seven years of the grant date and our stock
price is at least 25% above the exercise price on the exercise
date. Restoration stock options are granted on the same date the
original stock option award is exercised, have an exercise price
equal to the average of the high and low prices of our common
stock on the grant date and have a term equal to the remaining
term of the original option.
Equity Grant Practices. Our
Compensation Committee approves and grants annual equity awards
at a regularly scheduled meeting in the first quarter of each
year based on market data from our peer group of companies,
advice from the Compensation Consultant and recommendations from
Mr. Finnegan for the other NEOs. There is no relationship
between the timing of equity incentive award grants and our
release of material, non-public information. Although our
Compensation Committee has the discretion to do so, our
Compensation Committee generally does not make interim equity
award grants to employees at or above the level of Executive
Vice President, including our NEOs.
As discussed under the heading Corporate
GovernanceCompensation Committee, our Compensation
Committee has delegated authority to Mr. Finnegan to grant
equity awards to employees up to and including the level of
Senior Vice President pursuant to guidelines that specify the
range of award values an employee could
33
receive based on his or her level within our organization. These
guidelines are adjusted on a periodic basis as warranted by
competitive market conditions. Grants made by Mr. Finnegan
pursuant to this authority are effective on the last business
day of the month (date of hire for newly hired employees), with
the number of shares awarded determined by dividing the award
value by the average of the high and low prices of our common
stock on the grant date. These grants are reported to our
Compensation Committee at its next regularly scheduled meeting
following the date of grant.
Perquisites
We provide certain executives, including each of our NEOs, with
a limited range of perquisites. The incremental cost and
valuation of these perquisites for the NEOs is set forth under
the heading Executive CompensationSummary
Compensation Table.
Corporate Aircraft. During
2009, we owned one corporate aircraft and leased a second. From
time to time, we have leased a third aircraft on a per trip
basis. Senior executives use these aircraft to minimize and more
efficiently utilize their travel time, protect the
confidentiality of their travel and our business and enhance
their personal security. Our Board also permits
Messrs. Finnegan and Degnan limited use of the corporate
aircraft for personal travel. The annual personal use of the
corporate aircraft for Messrs. Finnegan and Degnan is
limited to 35 hours and 20 hours, respectively.
Automobile Use/Allowance. As
required pursuant to his employment agreement, we provide
Mr. Finnegan with a car and driver for all of his business
travel needs to minimize and more efficiently utilize his travel
time and enhance his personal security. Mr. Finnegans
personal use of the car and driver is primarily for his commute
to and from the office. Mr. Finnegan bears the applicable
taxes with respect to his personal usage. We provide all
domestic employees at or above the level of Vice President,
including our NEOs other than Mr. Finnegan, a monthly
automobile allowance of $500. Recipients of this benefit bear
the applicable income taxes with respect thereto.
Financial Counseling. We
offer all of our domestic employees at or above the level of
Senior Vice Presidents, including our NEOs, financial counseling
services. These services include income tax preparation,
portfolio management and estate planning. Recipients of this
benefit bear the applicable income taxes with respect thereto.
Company-Sponsored
Benefit Plans
We maintain company-sponsored retirement and deferred
compensation plans for the benefit of all of our salaried
employees, including our NEOs. These benefits are designed to
assist employees, including our NEOs, in providing for their
financial security and personal needs in a manner that
recognizes individual goals and preferences.
Retirement Plans. We
maintain the Pension Plan of The Chubb Corporation (the Pension
Plan), which is our tax-qualified defined benefit plan, and the
Pension Excess Benefit Plan of The Chubb Corporation (the
Pension Excess Benefit Plan), which is our nonqualified excess
defined benefit plan, to help us attract and retain our
employees. Our NEOs participate in the Pension Plan on the same
terms and conditions as other employees. Our NEOs participate in
the Pension Excess Benefit Plan on the same terms and conditions
as other highly compensated employees, except that
Mr. Finnegan is entitled to a supplemental pension benefit
under his employment agreement (the Pension SERP). Information
about our retirement plans is set forth under the heading
Executive CompensationPension Benefits.
We also maintain the CCAP, which is a qualified 401(k) savings
plan, for all eligible employees. The CCAP provides employees
with an opportunity to voluntarily defer pre-tax or after-tax
dollars into a 401(k) account. Chubb provides matching
contributions on an annual basis equal to the lesser of 4% or
the actual percentage deferred by the participant.
34
our nonqualified deferred compensation plans for our employees
at or above the level of Vice President, including our NEOs, to
provide them with additional tools to enhance their retirement
planning and wealth management. These plans allow participants
to defer receipt, and thus the tax liability, of income (salary,
annual incentive compensation and equity compensation) to a
later specified date. We also maintain the Defined Contribution
Excess Benefit Plan of The Chubb Corporation (the CCAP Excess
Benefit Plan), which is our nonqualified excess defined
contribution plan, and the CCAP-related supplemental executive
retirement plan for Mr. Finnegan pursuant to his employment
agreement (the CCAP SERP). None of these plans provide for
above-market returns. Information about our nonqualified defined
contribution and deferred compensation plans is set forth under
the heading Executive CompensationNonqualified
Defined Contribution and Deferred Compensation Plans.
Restrictive
Covenants and Recoupment Provisions
To protect our competitive position, since 2005, individual
equity award agreements for each of our employees, including our
NEOs, have contained non-disclosure, non-solicitation and
invention assignment covenants. In addition, the NEO equity
award agreements and those of certain other senior officers
contain non-competition provisions. Failure to comply with these
provisions, among other potential consequences, results in the
forfeiture of unsettled awards. Our Compensation Committee also
may require repayment of any awards that are settled within one
year prior to the breach of the applicable covenant and within
one year after termination of employment. Additionally, we may
seek an injunction, restraining order or such other equitable
relief restraining the officer from committing any violation of
the covenants.
In 2009, we adopted a policy on the recoupment of
performance-based compensation in restatement situations. The
policy provides that if we are required to restate our financial
statements due to material noncompliance with any financial
reporting requirement under the securities laws, as a result of
misconduct of a senior executive, the independent members of the
Board, in their sole discretion, have the right to cause such
senior executive to reimburse us for (1) any bonus or other
incentive-based or equity-based compensation received by that
senior executive during the
12-month
period following the first public issuance or filing with the
SEC (whichever first occurs) of the document containing such
financial statements; and (2) any profits realized from the
sale of our stock during that
12-month
period. A senior executive means any of our officers who are
subject to Section 16 of the Exchange Act and any of our
other officers who the Board designates.
Employment
and Severance Agreements
In general, it is our Boards policy not to enter into
employment agreements with, or provide executive severance
benefits to, our executive officers beyond those generally
available to our salaried employees, other than the change in
control agreements discussed below. As a result, our NEOs serve
at the will of our Board. The only exception to this policy is
the employment agreement with Mr. Finnegan that we entered
into when he was hired in 2002. Our Compensation Committee
believed, and continues to believe, that it is in our best
interest and the best interests of our shareholders to have a
specific compensation package with incentives and guarantees in
order to retain Mr. Finnegans services. A description
of, and the amount of the estimated payments and benefits
payable to Mr. Finnegan upon a termination of employment
under, his employment agreement is set forth under the heading
Executive CompensationPotential Payments upon
Termination or a Change in Control.
Change in
Control Agreements
Our Board has determined that it is in our best interest and the
best interests of our shareholders to assure that we will have
the continued dedication of Messrs. Finnegan and Spiro in
the event of a threat or occurrence of a change in control. Our
Board continues to believe that change in control agreements
diminish the inevitable distraction of these individuals by
virtue of the personal uncertainties and risks created by a
pending or threatened change in control and encourage their full
attention and dedication to our business in the event of any
pending or threatened change in control. As such, we have
individual change in control agreements with
Messrs. Finnegan and Spiro. The change in control agreement
for Mr. Spiro requires both a change in control event as
well as a termination event to trigger benefits. A description
of, and the amount of the estimated payments and benefits
payable upon a change in control under, these agreements is set
forth under the heading Executive
CompensationPotential
35
Payments upon Termination or a Change in Control.
Mr. Finnegans change in control agreement provides
for a
gross-up
payment in connection with the determination that a payment
would be subject to the excise tax under Section 280G of
the Internal Revenue Code. Mr. Degnan is
retirement-eligible. Consequently, he is no longer entitled to
any enhanced benefits under his change in control agreement.
Share
Ownership Guidelines
Our Board, based upon our Compensation Committees
recommendation, adopted executive share ownership guidelines in
2004. Our Compensation Committee believes that these guidelines
promote our objective of increasing shareholder value by
encouraging senior officers to acquire and maintain a meaningful
equity stake in Chubb.
The guidelines were designed to maintain share ownership at
levels high enough to assure our shareholders of our senior
officers commitment to value creation, while taking into
account each individual officers need for portfolio
diversification. Under these guidelines, senior officers,
including each of our NEOs, are expected, over time, to acquire
and hold shares of our common stock equal in value to a multiple
of their annual salaries. Owned shares, unvested RSUs, shares
allocated in our retirement plans and shares deferred until
termination of employment count toward satisfying the
guidelines. Unexercised stock options and unearned performance
units do not count toward satisfaction of the guidelines. There
is a five-year phase-in period beginning on the later of
becoming an officer subject to the share ownership guidelines
and the date the guidelines were adopted in February 2004. Our
current share ownership guidelines are as follows:
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Pay Band
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Officer Titles Included
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Ownership Level
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15
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Chief Executive Officer
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5x Salary
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14
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Chief Operating Officer/Chief Financial Officer
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3x Salary
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13
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Executive Vice President/Senior Vice President
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2x Salary
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12
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Senior Vice President
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|
1x Salary
|
|
Our Compensation Committee reviews the guidelines on a periodic
basis and monitors the officers progress toward meeting
their target ownerships levels. The share ownership of our NEOs
at the end of 2009 was:
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|
|
|
|
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Target
|
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Target Number
|
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Number of Shares
|
Name
|
|
Ownership Level
|
|
of
Shares(1)
|
|
Deemed Owned
|
|
John D. Finnegan
|
|
|
5x Salary
|
|
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129,626
|
|
|
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663,470
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|
Richard G. Spiro
|
|
|
3x Salary
|
|
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45,750
|
|
|
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80,448
|
|
John J. Degnan
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|
|
3x Salary
|
|
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53,345
|
|
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217,231
|
|
Paul J. Krump
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|
|
2x Salary
|
|
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|
23,587
|
|
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|
76,899
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|
Harold L. Morrison, Jr.
|
|
|
2x Salary
|
|
|
|
20,740
|
|
|
|
29,445
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|
Dino E. Robusto
|
|
|
2x Salary
|
|
|
|
20,740
|
|
|
|
32,846
|
|
|
|
|
|
(1)
|
Based on a per share price of $49.18, which was the closing
price of our common stock on December 31, 2009, and the
respective salaries of our NEOs as of that date.
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As shown in the above table, each of our NEOs has met his
required ownership threshold. We generally discourage our
employees (including our NEOs) from engaging in hedging
transactions in our common stock that would allow the employee
to continue to own shares of our common stock without the full
risks and rewards of ownership.
36
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth information regarding NEO
compensation during 2009, 2008 and 2007:
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Change in
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Pension
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Value and
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Non-Equity
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Nonqualified
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Incentive
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Deferred
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Stock
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Option
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Plan
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Compensation
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All Other
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Name and
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Salary
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Bonus
|
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Awards
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Awards
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Compensation
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Earnings
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Compensation
|
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Total
|
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Principal Position
|
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Year
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
($)(6)
|
|
|
($)(7)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
|
2009
|
|
|
$
|
1,275,000
|
|
|
|
|
|
|
$
|
8,339,203
|
|
|
|
|
|
|
$
|
3,750,000
|
|
|
$
|
5,514,009
|
|
|
$
|
283,019
|
|
|
$
|
19,161,231
|
|
Chairman, President and Chief
|
|
|
2008
|
|
|
|
1,275,000
|
|
|
|
|
|
|
|
7,718,690
|
|
|
|
|
|
|
|
3,357,800
|
|
|
|
4,412,367
|
|
|
|
205,615
|
|
|
|
16,969,472
|
|
Executive Officer
|
|
|
2007
|
|
|
|
1,275,000
|
|
|
|
|
|
|
|
7,904,809
|
|
|
|
|
|
|
|
3,569,900
|
|
|
|
3,542,642
|
|
|
|
189,248
|
|
|
|
16,481,599
|
|
Richard G. Spiro
|
|
|
2009
|
|
|
|
750,000
|
|
|
|
|
|
|
|
2,907,723
|
|
|
|
|
|
|
|
1,563,300
|
|
|
|
|
|
|
|
6,000
|
|
|
|
5,227,023
|
|
Executive Vice President and Chief
|
|
|
2008
|
|
|
|
187,500
|
|
|
$
|
1,735,000
|
|
|
|
3,716,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
5,640,951
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
2009
|
|
|
|
841,500
|
|
|
|
|
|
|
|
3,291,772
|
|
|
|
|
|
|
|
1,974,700
|
|
|
|
1,487,700
|
|
|
|
134,991
|
|
|
|
7,730,663
|
|
Vice Chairman and Chief Operating
|
|
|
2008
|
|
|
|
759,588
|
|
|
|
|
|
|
|
2,467,924
|
|
|
|
|
|
|
|
1,765,300
|
|
|
|
1,424,657
|
|
|
|
144,819
|
|
|
|
6,562,288
|
|
Officer
|
|
|
2007
|
|
|
|
669,188
|
|
|
|
|
|
|
|
2,527,460
|
|
|
|
|
|
|
|
1,438,500
|
|
|
|
941,587
|
|
|
|
100,947
|
|
|
|
5,677,682
|
|
Paul J. Krump
|
|
|
2009
|
|
|
|
560,000
|
|
|
|
|
|
|
|
603,469
|
|
|
|
|
|
|
|
806,000
|
|
|
|
519,244
|
|
|
|
63,191
|
|
|
|
2,551,904
|
|
Executive Vice President and Chief
|
|
|
2008
|
|
|
|
505,285
|
|
|
|
|
|
|
|
482,384
|
|
|
|
|
|
|
|
775,000
|
|
|
|
522,480
|
|
|
|
58,056
|
|
|
|
2,343,205
|
|
Underwriting Officer
|
|
|
2007
|
|
|
|
447,855
|
|
|
|
|
|
|
|
442,032
|
|
|
$
|
86,683
|
|
|
|
725,000
|
|
|
|
425,293
|
|
|
|
50,704
|
|
|
|
2,177,567
|
|
Harold L. Morrison, Jr.
|
|
|
2009
|
|
|
|
490,000
|
|
|
|
|
|
|
|
603,469
|
|
|
|
|
|
|
|
708,700
|
|
|
|
601,945
|
|
|
|
55,330
|
|
|
|
2,459,444
|
|
Executive Vice President and Chief
|
|
|
2008
|
|
|
|
433,744
|
|
|
|
|
|
|
|
456,990
|
|
|
|
|
|
|
|
682,000
|
|
|
|
563,237
|
|
|
|
48,239
|
|
|
|
2,184,210
|
|
Global Field Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dino E. Robusto
|
|
|
2009
|
|
|
|
470,000
|
|
|
|
|
|
|
|
603,469
|
|
|
|
|
|
|
|
708,700
|
|
|
|
536,190
|
|
|
|
53,939
|
|
|
|
2,372,298
|
|
Executive Vice President and Chief
|
|
|
2008
|
|
|
|
398,975
|
|
|
|
|
|
|
|
456,990
|
|
|
|
|
|
|
|
675,000
|
|
|
|
432,120
|
|
|
|
47,071
|
|
|
|
2,010,156
|
|
Administrative Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
$275,000 of Mr. Finnegans salary for 2009, 2008 and
2007 was deferred under the 2005 Deferred Compensation Plan.
Additional information regarding the 2005 Deferred Compensation
Plan is set forth under the heading Executive
CompensationNonqualified Defined Contribution and Deferred
Compensation Plans. For 2009, salaries earned by our NEOs
accounted for the following percentages of their total
compensation: Mr. Finnegan (6.7%), Mr. Spiro (14.3%),
Mr. Degnan (10.9%), Mr. Krump (21.9%),
Mr. Morrison (19.9%) and Mr. Robusto (19.8%). |
|
(2) |
|
Pursuant to his offer letter, Mr. Spiro received a
guaranteed cash bonus in the amount of $1,420,000 paid in March
2009 (which would have been reduced to the extent he had
received any 2008 bonus from his previous employer) and a cash
payment in the amount of $315,000 paid on his start date of
October 1, 2008. |
|
(3) |
|
The grant date fair values of the RSU and performance unit
awards are estimated based upon the fair market value of our
common stock on the date of grant. A breakdown of the 2009 stock
awards is set forth under the heading Executive
Compensation Grants of Plan-Based Awards. The
grant date fair value for RSU awards is based upon a price of
$40.365 (average of the high and low price on the grant date).
Performance unit awards use a grant date fair value of $45.60.
The fair value of the performance unit awards is adjusted to
reflect (i) the anticipated appreciation of our common
stock over the performance period and (ii) that these
awards do not receive dividend equivalents during such period.
The grant date fair value of performance unit awards is based
upon target payout of 100%. For our performance unit awards, a
range of 0% to 200% of the original award can be achieved under
the program. |
|
(4) |
|
In 2004, we eliminated stock options from our core long-term
equity incentive program. Amounts in this column reflect the
grant date fair value of non-discretionary restoration stock
options granted to Mr. Krump upon his exercise in 2007 of
vested stock options. The restoration stock option feature is
described under the heading Compensation Discussion and
AnalysisComponents of Executive Compensation.
Restoration stock options are fully vested on the grant date.
The grant date fair value of these awards is the same as the
amount of compensation expense we reflect in our financial
statements with respect to these awards. The grant date fair
value of each restoration stock option was estimated using the
Black-Scholes option pricing model. Information regarding our
grant date fair value calculations is set forth in footnote 12
to the financial statements included in the 2009
10-K. |
37
|
|
|
(5) |
|
Reflects 2009, 2008 and 2007 incentive compensation paid in
March 2010, March 2009 and March 2008, respectively, under our
Annual Incentive Plan. Additional information regarding annual
incentive compensation is set forth under the headings
Compensation Discussion and AnalysisComponents of
Executive Compensation and Executive
CompensationGrants of Plan-Based Awards. |
|
(6) |
|
Reflects solely the aggregate change in pension value for 2009
under our defined benefit plans as follows:
Mr. Finnegans benefits under the Pension Plan,
Pension Excess Benefit Plan and Pension SERP, $15,575, $274,775
and $5,223,659, respectively; Mr. Degnans benefits
under the Pension Plan and Pension Excess Benefit Plan, $94,832
and $1,392,868, respectively; Mr. Krumps benefits
under the Pension Plan and Pension Excess Benefit Plan, $70,714
and $448,530, respectively; Mr. Morrisons benefits
under the Pension Plan and Pension Excess Benefit Plan, $78,287
and $523,658, respectively; and Mr. Robustos benefits
under the Pension Plan and Pension Excess Benefit Plan, $69,879
and $466,311, respectively. Since Mr. Spiro joined us on
October 1, 2008, he has not accrued any benefits under the
Pension Plan or Pension Excess Benefit Plan. Information
regarding our calculations of pension values is set forth in
footnote 13 to the financial statements included in the 2009
10-K. |
|
(7) |
|
The following table reflects the components for the All
Other Compensation column for 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Defined
|
|
|
|
|
|
|
|
|
|
Personal Use
|
|
|
Financial
|
|
|
Automobile
|
|
|
Contribution
|
|
|
|
|
|
|
|
|
|
of Aircraft
|
|
|
Planning
|
|
|
Expense
|
|
|
Plans
|
|
|
Life Insurance
|
|
|
Total
|
|
Name
|
|
($)(a)
|
|
|
($)(b)
|
|
|
($)(c)
|
|
|
($)(d)
|
|
|
$(e)
|
|
|
($)
|
|
|
John D.
Finnegan(f)
|
|
$
|
8,111
|
|
|
$
|
13,000
|
|
|
$
|
12,558
|
|
|
$
|
193,796
|
|
|
$
|
55,554
|
|
|
$
|
283,019
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
John J. Degnan
|
|
|
28,067
|
|
|
|
13,000
|
|
|
|
6,000
|
|
|
|
87,924
|
|
|
|
|
|
|
|
134,991
|
|
Paul J. Krump
|
|
|
|
|
|
|
7,980
|
|
|
|
6,000
|
|
|
|
49,211
|
|
|
|
|
|
|
|
63,191
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
7,980
|
|
|
|
6,000
|
|
|
|
41,350
|
|
|
|
|
|
|
|
55,330
|
|
Dino E. Robusto
|
|
|
|
|
|
|
7,980
|
|
|
|
6,000
|
|
|
|
39,959
|
|
|
|
|
|
|
|
53,939
|
|
|
|
|
(a) |
|
The incremental cost of the personal use of corporate aircraft
expense for each of the NEOs is calculated by multiplying the
direct operating cost per hour by the NEOs personal use
hours. Direct operating cost of the aircraft is comprised of
fuel, landing/parking fees, crew fees and expenses, custom fees,
flight services/charts, variable maintenance costs, catering,
aircraft supplies and other miscellaneous expenses. |
|
(b) |
|
The incremental cost of financial planning represents the actual
cost incurred by us. |
|
(c) |
|
The incremental cost to us relating to automobile expense is the
amount of the automobile allowance provided to our NEOs (other
than Mr. Finnegan). The incremental cost of
Mr. Finnegans automobile and driver was calculated by
multiplying the variable expenses of owning and operating the
car that Mr. Finnegan uses by the personal use percentage
of the total vehicle miles in 2009. The variable expenses are
comprised of gas, maintenance, driver overtime and miscellaneous
driving expenses. Mr. Finnegans personal use
percentage for 2009 was approximately 21.3% of the total vehicle
miles. |
|
(d) |
|
Reflects 2009 matching contributions under the CCAP and the CCAP
Excess Benefit Plan. |
|
(e) |
|
The incremental cost of providing life insurance coverage for
Mr. Finnegan equal to five times his annual salary (as required
under his employment agreement) represents the actual premiums
paid by us. |
|
|
|
(f) |
|
As stipulated in Mr. Finnegans employment agreement,
we pay the club dues and membership fees associated with his
country club membership but do not recognize any incremental
cost due to his personal use because club dues and membership
fees are generally fixed. For 2009, the club dues and membership
fees were $10,995. Mr. Finnegan is responsible for paying
income tax on his personal use of the country club and any
additional costs resulting from such personal use. |
38
Grants of
Plan-Based Awards
The following table sets forth information regarding 2009 grants
to our NEOs under our Annual Incentive Plan and 2004 Employee
Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
Number
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Closing
|
|
|
Fair Value
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
Under Equity Incentive
|
|
|
of Shares
|
|
|
Securities
|
|
|
Base Price
|
|
|
Market Price
|
|
|
of Stock
|
|
|
|
|
|
|
Incentive Plan
Awards(1)
|
|
|
Plan
Awards(3)
|
|
|
of Stock
|
|
|
Underlying
|
|
|
of Option
|
|
|
on the Date
|
|
|
and Option
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
of the Grant
|
|
|
Awards
|
|
Name
|
|
Grant Date
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)(4)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($/Sh)
|
|
|
($)(5)
|
|
|
John D. Finnegan
|
|
|
02/25/2009
|
|
|
$
|
1,595,300
|
|
|
$
|
2,040,000
|
|
|
$
|
4,972,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,606
|
|
|
|
141,211
|
|
|
|
282,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,439,222
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,899,981
|
|
Richard G. Spiro
|
|
|
02/25/2009
|
|
|
|
703,800
|
|
|
|
900,000
|
|
|
|
2,325,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,619
|
|
|
|
49,238
|
|
|
|
98,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,245,253
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
662,470
|
|
John J. Degnan
|
|
|
02/25/2009
|
|
|
|
889,100
|
|
|
|
1,136,900
|
|
|
|
2,885,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,871
|
|
|
|
55,741
|
|
|
|
111,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,541,790
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
749,982
|
|
Paul J. Krump
|
|
|
02/25/2009
|
|
|
|
362,800
|
|
|
|
464,000
|
|
|
|
1,334,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,110
|
|
|
|
10,219
|
|
|
|
20,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465,986
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,483
|
|
Harold L. Morrison, Jr.
|
|
|
02/25/2009
|
|
|
|
319,100
|
|
|
|
408,000
|
|
|
|
1,173,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,110
|
|
|
|
10,219
|
|
|
|
20,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465,986
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,483
|
|
Dino E. Robusto
|
|
|
02/25/2009
|
|
|
|
319,100
|
|
|
|
408,000
|
|
|
|
1,173,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,110
|
|
|
|
10,219
|
|
|
|
20,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465,986
|
|
|
|
|
02/25/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,483
|
|
|
|
|
(1) |
|
Represents the range of potential awards to each NEO under our
Annual Incentive Plan. The plan is designed so that the
Compensation Committee can apply negative discretion to annual
awards of each NEO. Maximum awards reflect the maximum annual
incentive compensation awards established by our Compensation
Committee pursuant to Section 162(m) of the Internal Revenue
Code. Accordingly, the amounts represented above reflect the
Section 162(m) target awards after application of negative
discretion by our Compensation Committee. Information regarding
the actual payouts under the Annual Incentive Plan is set forth
in the Non-Equity Incentive Plan Compensation column
of the table included under the heading Executive
CompensationSummary Compensation Table. Information
regarding the structure of the Annual Incentive Plan is set
forth under the heading Compensation Discussion and
AnalysisComponents of Executive Compensation. |
|
(2) |
|
Represents payouts under the Annual Incentive Plan assuming that
2009 operating income was 50% of 2008 operating income. No
payouts would have been awarded if 2009 operating income had
been less than 50% of 2008 operating income. |
|
(3) |
|
Represents grants to each NEO during 2009 of performance units
under our 2004 Employee Plan. Performance units are earned, if
at all, based on our TSR over a three-year performance period
relative to the TSR over the same period for the companies in
the S&P 500 Index. No dividend equivalents are paid on
performance unit awards during the performance period.
Information regarding performance targets, vesting and
additional performance unit award details are set forth under
the heading Compensation Discussion and
AnalysisComponents of Executive Compensation. |
|
(4) |
|
Represents RSU grants to each NEO during 2009. The RSUs will
vest, subject to continued employment, on the third anniversary
of the grant date. RSUs pay dividend equivalents at the same
time and in the same amount as dividends are paid on our common
stock. Additional information regarding RSUs is set forth under
the heading Executive CompensationComponents of
Executive Compensation. |
|
(5) |
|
Represents full grant date fair value of stock awards granted to
each NEO in 2009. The grant date fair value of each stock award
is estimated based on the fair market value of our common stock
on the date of grant adjusted, in the case of performance units,
to reflect (i) the anticipated appreciation of our common
stock over the performance period and (ii) that these
awards do not receive dividend equivalents during such period.
The grant date fair value of performance unit awards is based
upon target payout of 100%. For our performance unit awards, a
range of 0% to 200% of the original award can be achieved under
the program. |
39
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth information regarding our
NEOs equity holdings as of December 31, 2009. The
market value of unvested and unearned stock awards is based on
the closing price of our common stock on December 31, 2009
of $49.18 per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
Number
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Value
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
or Units
|
|
|
of Shares
|
|
|
Shares,
|
|
|
Shares, Units
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
or Units
|
|
|
Units or
|
|
|
or Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
that
|
|
|
of Stock
|
|
|
Other Rights
|
|
|
Rights that
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
that Have
|
|
|
that Have
|
|
|
Have Not
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Vested
|
|
Name
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)(1)
|
|
|
($)
|
|
|
(#)(2)
|
|
|
($)
|
|
|
John D. Finnegan
|
|
|
40,650
|
|
|
|
|
|
|
|
|
|
|
$
|
39.7125
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,554
|
|
|
|
|
|
|
|
|
|
|
|
45.8750
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,750
|
|
|
|
|
|
|
|
|
|
|
|
51.4550
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,826
|
|
|
|
|
|
|
|
|
|
|
|
53.5100
|
|
|
|
12/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,533
|
|
|
$
|
6,026,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
296,752
|
|
|
$
|
14,594,263
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,701
|
|
|
|
3,181,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,619
|
|
|
|
1,210,762
|
|
John J. Degnan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,708
|
|
|
|
2,100,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,177
|
|
|
|
4,926,705
|
|
Paul J. Krump
|
|
|
15,682
|
|
|
|
|
|
|
|
|
|
|
|
36.8400
|
|
|
|
03/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,840
|
|
|
|
|
|
|
|
|
|
|
|
41.5975
|
|
|
|
03/06/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,663
|
|
|
|
|
|
|
|
|
|
|
|
52.0200
|
|
|
|
03/02/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,295
|
|
|
|
|
|
|
|
|
|
|
|
52.7250
|
|
|
|
03/01/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,873
|
|
|
|
387,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,244
|
|
|
|
946,420
|
|
Harold L. Morrison, Jr
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,625
|
|
|
|
374,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,500
|
|
|
|
909,830
|
|
Dino E. Robusto
|
|
|
9,460
|
|
|
|
|
|
|
|
|
|
|
|
35.4250
|
|
|
|
03/01/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,396
|
|
|
|
|
|
|
|
|
|
|
|
36.8400
|
|
|
|
03/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,932
|
|
|
|
|
|
|
|
|
|
|
|
23.0250
|
|
|
|
03/06/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,625
|
|
|
|
374,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,500
|
|
|
|
909,830
|
|
|
|
|
(1) |
|
Represents unvested RSUs for Mr. Finnegan, of which 37,773
RSUs vested on March 1, 2010, 37,690 RSUs will vest on
March 12, 2011 and 47,070 RSUs will vest on
February 25, 2012. Represents unvested RSUs for
Mr. Spiro, of which 24,145 RSUs vested on January 31,
2010, 24,144 RSUs will vest on January 31, 2011 and 16,412
RSUs will vest on February 25, 2012. Represents unvested
RSUs for Mr. Degnan, of which 12,077 RSUs vested on
March 1, 2010, 12,051 RSUs will vest on March 12, 2011
and 18,580 RSUs will vest on February 25, 2012. Represents
unvested RSUs for Mr. Krump, of which 2,112 RSUs vested on
March 1, 2010, 2,355 RSUs will vest on March 12, 2011
and 3,406 RSUs will vest on February 25, 2012. Represents
unvested RSUs for Mr. Morrison, of which 1,988 RSUs vested
on March 1, 2010, 2,231 RSUs will vest on March 12,
2011 and 3,406 RSUs will vest on February 25, 2012.
Represents unvested RSUs for Mr. Robusto, of which 1,988
RSUs vested on March 1, 2010, 2,231 RSUs will vest on
March 12, 2011 and 3,406 RSUs will vest on
February 25, 2012. Dividend equivalents are paid on RSUs
during the restricted period. |
|
(2) |
|
Represents outstanding performance unit awards for the
2008-2010
performance period assuming maximum performance, which would
produce a 200% payout (performance was above target as of
December 31, 2009) for Messrs. Finnegan, Degnan,
Krump, Morrison and Robusto in the amounts of 226,146, 72,306,
14,134, |
40
|
|
|
|
|
13,390 and 13,390 shares, respectively. Such awards will
vest, if at all, on December 31, 2010. Also represents
outstanding performance unit awards for the
2009-2011
performance period assuming threshold performance, which would
produce a 50% payout (performance was below threshold as of
December 31, 2009) for Messrs. Finnegan, Spiro,
Degnan, Krump, Morrison and Robusto in the amounts of 70,606,
24,619, 27,871, 5,110, 5,110 and 5,110 shares,
respectively. Such awards will vest, if at all, on
December 31, 2011. Performance units awarded in 2007 vested
on December 31, 2009. Information regarding the vesting of
the NEOs respective 2007 performance units is set forth
under the heading Executive CompensationOption
Exercises and Stock Vested. The actual value of awards at
the end of the performance period may vary from the valuations
indicated above. No dividend equivalents are paid on performance
unit awards during the performance period. |
Option
Exercises and Stock Vested
The following table sets forth the value realized by our NEOs
with respect to stock option exercises and stock awards that
vested in 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized
|
|
|
|
on Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)(1)
|
|
|
($)(2)
|
|
|
(#)(3)
|
|
|
($)(4)
|
|
|
John D. Finnegan
|
|
|
|
|
|
|
|
|
|
|
189,701
|
|
|
$
|
8,818,153
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
24,145
|
|
|
|
1,035,217
|
|
John J. Degnan
|
|
|
|
|
|
|
|
|
|
|
60,654
|
|
|
|
2,819,477
|
|
Paul J. Krump
|
|
|
|
|
|
|
|
|
|
|
10,582
|
|
|
|
492,088
|
|
Harold L. Morrison, Jr
|
|
|
|
|
|
|
|
|
|
|
9,982
|
|
|
|
464,018
|
|
Dino E. Robusto
|
|
|
14,318
|
|
|
$
|
348,361
|
|
|
|
9,852
|
|
|
|
458,888
|
|
|
|
|
(1) |
|
Represents the exercise of the following stock options by
Mr. Robusto: (a) 4,252 shares at an exercise
price of $48.3147, and (b) 10,066 shares at an
exercise price of $48.3147. |
|
(2) |
|
For stock options exercised through a cashless-sell-all
transaction, value realized is based on the market price at the
time of the exercise. |
|
(3) |
|
For Mr. Finnegan, represents the vesting of 39,892 RSUs
granted in 2006 and the vesting of 149,809 shares in
respect of the performance unit award granted in 2007. For
Mr. Spiro, represents the vesting of 24,145 RSUs granted in
2008. For Mr. Degnan, represents the vesting of 12,754 RSUs
granted in 2006 and 47,900 shares in respect of the
performance unit award granted in 2007. For Mr. Krump,
represents the vesting of 2,204 RSUs granted in 2006 and
8,378 shares in respect of the performance unit award
granted in 2007. For Mr. Morrison, represents the vesting
of 2,098 RSUs granted in 2006 and 7,884 shares in respect
of the performance unit award granted in 2007. For
Mr. Robusto, represents the vesting of 1,968 RSUs granted
in 2006 and 7,884 shares in respect of the performance unit
award granted in 2007. Receipt of the 39,892 RSUs for
Mr. Finnegan and 12,495 RSUs of Mr. Degnans
12,754 granted in 2006 have been deferred until their respective
retirements. Information regarding performance unit awards is
set forth under the heading Compensation Discussion and
AnalysisComponents of Executive Compensation. |
|
(4) |
|
For RSU awards, the value realized is based on the average of
the high and low prices of our common stock on the applicable
settlement date. Performance unit awards are valued at their
settlement price of $48.355 which was the average of the high
and low prices of our common stock on the settlement date. |
41
Pension
Benefits
Pension
Plan
Our eligible employees, and certain eligible employees of our
subsidiaries, participate in the Pension Plan. Our NEOs
participate on the same terms and conditions as other eligible
employees, except as noted below. The Pension Plan, as in effect
during 2009, provides each eligible employee with annual
retirement income beginning at age 65 equal to the product
of:
|
|
|
|
|
the total number of years of participation in the Pension
Plan; and
|
|
|
|
13/4%
of average compensation for the highest five years in the last
ten years of participation prior to retirement during which the
employee was most highly paid or, if higher, the last 60
consecutive months (final average earnings).
|
Average compensation under the Pension Plan includes salary and
annual incentive compensation. A social security offset is
subtracted from this benefit. The social security offset is
equal to the product of:
|
|
|
|
|
the total number of years of participation in the Pension Plan
(for years prior to February 1, 2008, this number was
capped at 35 years); and
|
|
|
|
an amount related to the participants primary social
security benefit.
|
Benefits can commence as early as age 55. However, if
pension benefits commence prior to age 65, they may be
actuarially reduced. The reduction in the gross benefit (prior
to offset for social security benefits) is based on the
participants age at retirement and years of Pension Plan
participation as follows:
|
|
|
|
|
If the participant has at least 25 years of Pension Plan
participation, benefits are unreduced at age 62. They are
reduced 2.5% per year from 62 to 60 (5% reduction at
60) and 5% per year from 60 to 55 (30% reduction at 55).
|
|
|
|
If the participant has at least 15 but less than 25 years
of Pension Plan participation, benefits are unreduced at
age 65. They are reduced 2% per year from 65 to 62 (6%
reduction at 62) and 4% per year from 62 to 61 (10%
reduction at 61) and 5% per year from 61 to 55 (40%
reduction at 55).
|
|
|
|
If the participant has less than 15 years of Pension Plan
participation, or if the participant terminates employment with
us before age 55, benefits are unreduced at age 65.
They are reduced 6.67% per year from 65 to 60 (33.3% reduction
at 60) and 3.33% per year from 60 to 55 (50% reduction at
55).
|
The participants social security benefit is reduced based
on factors relating to the participants year of birth and
age at retirement.
Benefits are generally paid in the form of an annuity. If a
participant retires and elects a joint and survivor annuity, the
Pension Plan provides a 10% subsidy. The portion of the
benefit attributable to the cash balance account, as described
in the following paragraph, may be paid in the form of a lump
sum upon termination of employment.
Effective January 1, 2001, we amended the Pension Plan to
provide a cash balance benefit, in lieu of the benefit described
above, to reduce the rate of increase in the Pension Plan costs.
This benefit provides for a participant to receive a credit to
his or her cash balance account every six months. The amount of
the cash balance credit increases as the sum of a
participants age and years of service credit increases
from 2.5% to 5% of compensation. The maximum credit of 5% of
compensation (subject to the maximum limitation on compensation
permitted by the Internal Revenue Code) earned over the
preceding six months is made when the sum of a
participants age and years of service credit equals or
exceeds 55 (which is the case for each NEO). Amounts credited to
a participants cash balance account earn interest at a
rate based on the
30-year
U.S. treasury bond rate. Participants who were hired by us
prior to January 1, 2001 (including Messrs. Degnan,
Krump, Morrison and Robusto) will receive a benefit under the
Pension Plan equal to the greater of the pension benefit
described in the preceding paragraphs or the amount calculated
under the cash balance formula.
42
ERISA and the Internal Revenue Code impose maximum limitations
on the recognized compensation and the amount of a pension which
may be paid under a funded defined benefit plan such as the
Pension Plan. The Pension Plan complies with these limitations.
Pension
Excess Benefit Plan
We also maintain the Pension Excess Benefit Plan, which is a
supplemental, nonqualified, unfunded plan. The Pension Excess
Benefit Plan uses essentially the same benefit formula, early
retirement reduction factors and other features as the Pension
Plan, except that the Pension Excess Benefit Plan recognizes
compensation (salary and annual incentive plan compensation)
above IRS compensation limits. The Pension Excess Benefit Plan
also recognizes deferred compensation for purposes of
determining applicable retirement benefits. Benefits under both
the Pension Plan and the Pension Excess Benefit Plan are
provided by us on a noncontributory basis.
Benefits payable under the Pension Excess Benefit Plan are
generally paid in the form of a lump sum, calculated using an
interest discount rate of 5%. However, the portion of the
benefit that was earned and vested as of December 31,
2004 may be payable in certain other forms, including
installment payments and life annuities, if properly elected by
the participant and if the participant satisfies the
requirements of the Pension Excess Benefit Plan.
Pension
SERPMr. Finnegan
Under the terms of Mr. Finnegans employment
agreement, he is entitled to a Pension SERP, which provides a
nonqualified and unfunded benefit in addition to those provided
under the Pension Plan and the Pension Excess Benefit Plan. The
benefit will equal 6% of his final average compensation for each
full year of service up to a maximum of 60% of final average
compensation offset by benefits under the Pension Plan and
Pension Excess Benefit Plan, previous employer pension benefits
and social security benefits. The Pension Plan provisions
described above with respect to the early retirement discount
and joint and survivor benefits apply to the Pension SERP. Under
the Pension SERP, Mr. Finnegans compensation means
the sum of his annual salary plus annual incentive compensation
earned for the relevant year (whether or not any such
compensation is deferred).
43
Pension
Benefits Table
The following table sets forth information regarding
participation by our NEOs in our pension plans as of
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Present Value
|
|
|
|
|
|
|
Years
|
|
of
|
|
Payments During
|
|
|
|
|
Credited
|
|
Accumulated
|
|
Last
|
|
|
|
|
Service
|
|
Benefit
|
|
Fiscal Year
|
Name
|
|
Plan Name
|
|
(#)
|
|
($)(1)(2)
|
|
($)
|
|
John D. Finnegan
|
|
Pension Plan
|
|
|
6
|
|
|
$
|
75,739
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
6
|
|
|
|
1,285,238
|
|
|
|
|
|
|
|
Pension SERP
|
|
|
7
|
|
|
|
20,305,474
|
|
|
|
|
|
Richard G. Spiro
|
|
Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
Pension Plan
|
|
|
18
|
|
|
|
710,559
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
18
|
|
|
|
6,225,343
|
|
|
|
|
|
Paul J. Krump
|
|
Pension Plan
|
|
|
27
|
|
|
|
529,648
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
27
|
|
|
|
2,537,126
|
|
|
|
|
|
Harold L. Morrison, Jr.
|
|
Pension Plan
|
|
|
25
|
|
|
|
572,939
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
25
|
|
|
|
2,053,936
|
|
|
|
|
|
Dino E. Robusto
|
|
Pension Plan
|
|
|
23
|
|
|
|
500,166
|
|
|
|
|
|
|
|
Pension Excess Benefit Plan
|
|
|
23
|
|
|
|
1,598,946
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the present value of the NEOs accumulated
pension benefit computed as of the same Pension Plan measurement
date we used for 2009 financial statement reporting. The
following actuarial assumptions were used: |
(a) Interest discount rate: 6.00%;
(b) Future interest crediting rate on
cash balance accounts: 5.00%;
(c) Mortality table: RP 2000 projected to
2009 white collar combined mortality table; and
(i) Pension Plan50% take cash
balance account as a lump sum;
(ii) Pension Excess Benefit Plan100% take
benefit as a lump sum; and
(iii) Pension SERPlump sum.
|
|
|
(2) |
|
The figures shown in the table above assume retirement benefits
commence at the earliest unreduced retirement age, reflecting
the assumptions described in the preceding footnote. However, if
the NEOs employment terminated or he retired on
December 31, 2009 (which is the assumption underlying the
figures set forth in the Voluntary
Resignation/Retirement column in the tables under the
heading Executive CompensationPotential Payments
upon Termination), and plan benefits were immediately
payable as lump sums (calculated using the 5% discount rate
specified in the plans), the Pension Excess Benefit Plan and
Pension SERP benefits, as applicable, would have been as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum
|
Name
|
|
Plan Name
|
|
Amount
|
|
John D. Finnegan
|
|
|
Pension Excess Benefit Plan
|
|
|
$
|
1,298,500
|
|
|
|
|
Pension SERP
|
|
|
|
21,786,735
|
|
Richard G. Spiro
|
|
|
Pension Excess Benefit Plan
|
|
|
|
|
|
John J. Degnan
|
|
|
Pension Excess Benefit Plan
|
|
|
|
6,225,345
|
|
Paul Krump
|
|
|
Pension Excess Benefit Plan
|
|
|
|
2,275,524
|
|
Harold L. Morrison Jr.
|
|
|
Pension Excess Benefit Plan
|
|
|
|
1,807,126
|
|
Dino E. Robusto
|
|
|
Pension Excess Benefit Plan
|
|
|
|
1,415,435
|
|
|
|
|
(3) |
|
The amount payable from the Pension Plan will be offset by the
benefit payable from the Pension Plan for the Employees of Chubb
Insurance Company of Canada, under which Mr. Robusto is no
longer accruing additional service. The amount is estimated to
be C$14,407 per year commencing at age 65. In addition to
the amounts shown above, Mr. Robusto is also entitled to a
benefit from the Supplementary Income Plan for Employees of
Chubb Insurance Company of Canada in the amount of C$1,800 per
year commencing at age 65. |
44
Nonqualified
Defined Contribution and Deferred Compensation Plans
Deferred
Compensation Plans
Pursuant to the Deferred Compensation Plans, we provide certain
of our employees, including our NEOs, with the opportunity to
electively defer the payment of certain components of
compensation (annual salary, annual incentive compensation, RSUs
and performance unit awards) that would otherwise be payable to
them. Deferred RSUs and performance unit awards are deemed to be
invested in our common stock. Deferred annual salary and annual
incentive compensation are credited with earnings based on the
deemed returns that would have been received had such amounts
been invested in one of the investment options available under
the Deferred Compensation Plans that are generally available for
investment in the marketplace and as selected by the
participant. Dividends on deferred RSUs and performance unit
awards are treated the same as an annual salary or annual
incentive compensation deferral. The investment options
available under the Deferred Compensation Plans are the same as
those investment alternatives that are available under the CCAP
Plan except for the Chubb Stock Fund. Investment elections may
be changed by the participant at any time, at his or her
discretion.
CCAP
Excess Benefit Plan
We also maintain the CCAP Excess Benefit Plan which is a
supplemental, nonqualified, unfunded excess defined contribution
plan. The CCAP Excess Benefit Plan recognizes compensation in
excess of IRS limits for the CCAP and provides the participants
with the applicable company match on eligible compensation.
Matching contributions for each of the NEOs equal 4% of plan
compensation. Messrs. Finnegan, Degnan and Krump have
elected to defer receipt of matching contribution amounts
attributable to the CCAP Excess Benefit Plan. Deferred balances
are notionally invested in the Fidelity Stable Value Fund, which
is one of the investment funds available under the CCAP. For
2009, the Fidelity Stable Value Fund had a 2.83% investment
return. Messrs. Morrison and Robusto elected to take a cash
distribution of their matching contribution amounts attributable
to the CCAP Excess Benefit Plan, paid in March 2009. Mr. Spiro
did not receive a matching contribution under the CCAP Excess
Benefit Plan during 2009.
CCAP
SERPMr. Finnegan
Mr. Finnegans employment agreement also provides that
he is entitled to the CCAP SERP. The CCAP Excess Benefit Plan,
like the CCAP, requires a one-year waiting period before a
participant becomes eligible for our company matching
contributions and has a six-year graded vesting schedule.
Mr. Finnegans employment agreement, however, provides
that he is entitled to the matching contributions for eligible
deferrals from his employment date and provides that the CCAP
SERP will pay any otherwise unvested company match dollars
forfeited under the CCAP and CCAP Excess Benefit Plan if his
employment with us terminates prior to his becoming being 100%
vested. Amounts credited to the CCAP SERP account earn 5%
interest per annum.
ESOP
Excess Benefit Plan
In 2004, we merged the Employee Stock Ownership Plan (the ESOP)
and the ESOP Excess Benefit Plan into the respective CCAP and
CCAP Excess Plans. No new shares or contributions are credited
to balances under the ESOP and the ESOP Excess Benefit Plan.
Annual earnings for the ESOP Excess Benefit Plan include only
the change in account balance attributable to changes in our
stock price and any dividends we pay.
ESOP
SERPMr. Finnegan
Mr. Finnegans employment agreement also provides that
he is entitled to the ESOP SERP. The ESOP and ESOP Excess
Benefit Plan included a one-year waiting period prior to entry
as well as five years of vesting service.
Mr. Finnegans employment agreement, however, provides
that he was credited with an amount equal to the stock that he
would have been entitled under the ESOP and ESOP Excess Benefit
Plan from his date of employment and provides that the ESOP SERP
account is immediately vested and the balance credited
thereunder earns 5% interest per annum.
45
Nonqualified
Defined Contribution and Deferred Compensation
Table
The following table sets forth information regarding
participation by our NEOs in our nonqualified defined
contribution and deferred compensation plans as of
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings in
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
in Last
|
|
|
in Last
|
|
|
Last
|
|
|
Withdrawals/
|
|
|
Last Fiscal
|
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Distributions
|
|
|
Year-End
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
John D. Finnegan
|
|
$
|
1,849,138
|
|
|
$
|
184,596
|
|
|
$
|
454,280
|
|
|
$
|
268,198
|
|
|
$
|
13,806,287
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
493,053
|
|
|
|
78,724
|
|
|
|
138,453
|
|
|
|
54,696
|
|
|
|
3,438,251
|
|
Paul J. Krump
|
|
|
|
|
|
|
40,011
|
|
|
|
64,038
|
|
|
|
|
|
|
|
948,125
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
32,150
|
|
|
|
460
|
|
|
|
|
|
|
|
85,282
|
|
Dino E. Robusto
|
|
|
|
|
|
|
30,759
|
|
|
|
(268
|
)
|
|
|
|
|
|
|
98,521
|
|
|
|
|
(1) |
|
Represents RSU deferrals for Messrs. Finnegan and Degnan in
the amounts of $1,574,138 and $493,053, respectively.
Mr. Finnegans amount also includes the deferral of
$275,000 of his 2009 annual salary. This amount is included in
the Salary column of the table set forth under the
heading Executive CompensationSummary Compensation
Table. All of these deferrals were made under the 2005
Deferred Compensation Plan. |
|
(2) |
|
Represents the company match for the CCAP Excess Benefit Plan. |
|
(3) |
|
The following table reflects the components for the
Aggregate Earnings in Last Fiscal Year column: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCAP Excess
|
|
|
|
|
|
ESOP Excess
|
|
|
|
|
Benefit Plan and
|
|
Deferred
|
|
Appreciation and
|
|
Benefit Plan and
|
|
|
|
|
CCAP SERP
|
|
Compensation
|
|
Dividends on
|
|
ESOP SERP
|
|
|
|
|
Earnings
|
|
Earnings
|
|
Deferred RSUs
|
|
Earnings
|
|
Total
|
Name
|
|
($)(a)
|
|
($)
|
|
($)
|
|
($)(b)
|
|
($)
|
|
John D. Finnegan
|
|
$
|
25,219
|
|
|
$
|
68,291
|
|
|
$
|
357,479
|
|
|
$
|
3,291
|
|
|
$
|
454,280
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
13,390
|
|
|
|
7,567
|
|
|
|
121,315
|
|
|
|
(3,819
|
)
|
|
|
138,453
|
|
Paul J. Krump
|
|
|
6,685
|
|
|
|
58,431
|
|
|
|
|
|
|
|
(1,078
|
)
|
|
|
64,038
|
|
Harold L. Morrison, Jr.
|
|
|
748
|
|
|
|
|
|
|
|
|
|
|
|
(288
|
)
|
|
|
460
|
|
Dino E. Robusto
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
(454
|
)
|
|
|
(268
|
)
|
|
|
|
|
(a)
|
For Mr. Finnegan, represents CCAP Excess earnings of
$21,389 and CCAP SERP earnings of $3,830. For all other
participants, represents CCAP Excess benefit only.
|
|
|
|
|
(b)
|
For Mr. Finnegan, represents ESOP Excess earnings of ($793)
and ESOP SERP earnings of $4,084. For all other participants,
represents ESOP Excess benefits only.
|
|
|
|
(4) |
|
Represents dividends paid on deferred vested RSUs for
Messrs. Finnegan and Degnan. |
|
(5) |
|
Messrs. Morrison and Robusto have made cash
elections under the CCAP Excess Benefit Plan in 2009,
resulting in lower account balances. |
Potential
Payments upon Termination or a Change in Control
Accrued
Compensation and Benefits
As of December 31, 2009, each of our NEOs other than Mr.
Spiro was fully vested in the amounts set forth under the
heading Executive CompensationPension Benefits
and the amounts set forth under the heading Executive
CompensationNonqualified Defined Contribution and Deferred
Compensation Plans. In addition, at that date, each NEO
was entitled to receive all earned but unpaid salary, other
vested long-term equity awards (as set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End and the other applicable tables set forth
under the heading Executive Compensation), amounts
held in his account under the CCAP and employee welfare plans.
46
Termination
Events
Disability or Death. With
the exception of Mr. Finnegan, a termination of employment
due to disability or death does not entitle our NEOs to payments
or benefits that are not generally available to our salaried
employees.
Equity Awards. With respect to equity
awards, under the terms of the 2004 Employee Plan, upon the
disability or death of a participant, including each of our
NEOs, the participant or the participants estate, as
applicable, would receive pro-rata vesting of the unvested
portion of outstanding RSUs and continuation of the exercise
period within which the participant or the participants
estate may exercise outstanding options through the stated
expiration date of such options. With respect to performance
unit awards, if a participants employment terminates due
to disability or death on or after the completion of the first
calendar year of any performance period, the participant or the
participants estate, as applicable, would receive all of
the performance units for the performance period that would have
been earned had the participant continued employment for the
full period (with payments contingent on our relative TSR over
the performance period).
Mr. Finnegan. In addition to the
equity vesting provisions described in the preceding paragraph,
Mr. Finnegans employment agreement calls for us to
provide him with a death benefit equal to fives times his annual
salary as of the time of his death. We provide this benefit on
an insured basis. In the event of Mr. Finnegans
disability, his employment agreement provides that he is
entitled to receive a disability benefit equal to 60% of his
annual salary as of the date of disability until he reaches
age 65. We provide this coverage in the form of an
unsecured, uninsured disability benefit.
Mr. Finnegans employment agreement also provides that
he or his estate, as applicable, would be entitled to a pro-rata
portion of the annual incentive compensation award he would have
received for the year of his disability or death. For purposes
of Mr. Finnegans employment agreement, disability
means Mr. Finnegans inability to perform his duties
on a full-time basis for six consecutive months as a result of
incapacity due to mental or physical illness.
Retirement. Mr. Degnan
is eligible for retirement under all of our compensation and
benefit plans and arrangements. Accordingly, other than in
connection with a termination for cause, the termination of his
employment would be treated as a retirement, as is the case for
all of our retirement-eligible salaried employees. As such, upon
termination of his employment other than for cause,
Mr. Degnan would receive pro-rata vesting of the unvested
portion of his outstanding RSUs and continued vesting of all
performance units for which the first calendar year of the
performance period has been completed (with payments contingent
on actual performance for the performance period).
For Cause Termination. Under
Mr. Finnegans employment agreement, in the event of
his termination for cause, he is entitled to receive retiree
health benefits pursuant to our retiree health plans that would
be available to an employee with 34 years of service with
us. None of our other NEOs are entitled to any additional
payments or benefits, and each of our NEOs would forfeit his
unvested equity awards, in the event we terminate his employment
for cause. Under the 2004 Employee Plan, cause means:
|
|
|
|
|
the willful failure of a participant to perform his or her
employment-related duties or gross negligence in the performance
of such duties;
|
|
|
|
a participants willful or serious misconduct that has
caused or could reasonably be expected to result in material
injury to our business or reputation;
|
|
|
|
a participants indictment for a crime constituting a
felony; or
|
|
|
|
a material breach by a participant of any written covenant or
agreement with us or any of our written policies.
|
The 2004 Employee Plan provides that the definition of cause in
an employment or severance agreement will govern in lieu of the
foregoing definition. Accordingly, the definition of cause in
Mr. Finnegans employment agreement applies to
Mr. Finnegan for purposes of the 2004 Employee Plan.
Therefore, in his case, cause means:
|
|
|
|
|
Mr. Finnegans willful and continued failure to
perform his duties under the terms of his employment agreement;
|
47
|
|
|
|
|
Mr. Finnegans willful engagement in any malfeasance,
fraud, dishonesty or gross misconduct in connection with his
position as our President and Chief Executive Officer or as a
member of our Board that causes us material damage;
|
|
|
|
Mr. Finnegans conviction of, or plea of guilty or
nolo contendere to, a felony; or
|
|
|
|
Mr. Finnegans breach of certain representations,
warranties and covenants contained in his employment agreement
that materially damage or could reasonably be expected to
materially damage us.
|
Voluntary
Resignation. Messrs. Spiro, Krump,
Morrison and Robusto are not entitled to any payments or
benefits that are not generally available to our salaried
employees upon voluntary resignation. As discussed above,
Mr. Degnan is retirement-eligible for purposes of our
plans. Accordingly, a resignation by Mr. Degnan would be
treated as a retirement under such plans. Under
Mr. Finnegans employment agreement, in the event of
his voluntary resignation, he is entitled to receive retiree
health benefits pursuant to our retiree health plans that would
be available to an employee with 34 years of service with
us.
Involuntary Termination without
Cause. Except for Mr. Finnegan and as
discussed below for Mr. Spiro in connection with a change
in control, neither a termination of employment by us without
cause nor a demotion or other constructive termination would
entitle our NEOs to any payments or benefits that are not
generally available to our salaried employees. The severance
policy applicable to all of our salaried employees generally
provides two weeks of severance pay for each year of service up
to a maximum of 52 weeks. As discussed above,
Mr. Degnan is retirement-eligible for purposes of our
plans. Accordingly, an involuntary termination by
Mr. Degnan without cause would be treated as a retirement
under such plans.
Mr. Finnegans employment agreement provides that,
upon the termination of his employment without cause, his
constructive termination or in the event we elect not to renew
his employment agreement in accordance with its terms, he is
entitled to receive the following benefits beyond those
generally available to our salaried employees:
|
|
|
|
|
current annual salary (without proration);
|
|
|
|
pro-rated annual incentive compensation for the year of his
termination;
|
|
|
|
a severance payment equal to the sum of up to 2.5 times (with
the 2.5 multiple being subject to reduction as described below)
the sum of his then-current annual salary and the average amount
of his annual incentive compensation paid in the preceding three
years;
|
|
|
|
up to 2.5 years of additional age and service credit for
purposes of his supplemental retirement benefits (with the 2.5
multiple being subject to reduction as described below);
|
|
|
|
up to 2.5 years of continued health and welfare benefits
(with the 2.5 multiple being subject to reduction as described
below) under our employee welfare plans and then retiree
benefits; and
|
|
|
|
if any payments or benefits that Mr. Finnegan receives are
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code on golden parachute payments, an
additional payment to him to restore him to the after-tax
position that he would have been in if the excise tax had not
been imposed.
|
In addition, any outstanding equity awards would accelerate and
vest in full (subject to the achievement of the performance
goals in the case of performance units) and his stock options
would continue to be exercisable until the earlier of the fifth
anniversary of the date of termination of his employment or the
expiration of the option term.
In the case of our non-renewal of his employment agreement only,
the 2.5 multiplier decreases by 0.5 when Mr. Finnegan
attains age 58 and decreases by an additional 0.5 on each
anniversary of such date so that when Mr. Finnegan turns
62, this multiplier will be zero. In addition, the obligation to
continue to provide health and welfare benefits would cease if
Mr. Finnegan were to receive such benefits from a new
employer. As of December 31, 2009, Mr. Finnegans
severance multiplier was equal to 2.5.
48
Under Mr. Finnegans employment agreement,
constructive termination means his voluntary termination of
employment following:
|
|
|
|
|
a reduction in Mr. Finnegans annual salary or target
annual incentive compensation;
|
|
|
|
our failure to appoint Mr. Finnegan as our President and
Chief Executive Officer and as a member of our Board or his
removal from any of these positions;
|
|
|
|
a material diminution in Mr. Finnegans duties or
responsibilities or the assignment to him of duties or
responsibilities materially inconsistent with his position and
status as our President and Chief Executive Officer;
|
|
|
|
a material change in Mr. Finnegans reporting
relationship so that he no longer reports solely to our Board in
his positions as President and Chief Executive Officer;
|
|
|
|
our breach of any material obligations to Mr. Finnegan
under the terms of his employment agreement;
|
|
|
|
our breach of certain representations, warranties and covenants
set forth in Mr. Finnegans employment
agreement; or
|
|
|
|
our requiring that Mr. Finnegans principal location
of employment to be at any office or location more than
50 miles from our corporate headquarters in Warren, New
Jersey.
|
Mr. Finnegans employment agreement requires
Mr. Finnegan to comply with confidentiality,
non-competition
and non-solicitation covenants. The non-competition and
non-solicitation provisions run during the term of
Mr. Finnegans employment through the second
anniversary of the termination thereof.
Change
in Control
Equity Awards. Under the
terms of the 2004 Employee Plan, if outstanding equity awards
are assumed by an acquirer in accordance with the terms of the
2004 Employee Plan, the awards would remain outstanding and
vesting would not accelerate unless the employee was terminated
without cause or experienced a constructive termination. In the
event of a change in control in which the acquirer did not
assume outstanding equity awards in accordance with the 2004
Employee Plan, RSUs would immediately vest in full (but would be
paid out in accordance with the terms of the awards) and
performance unit awards would become earned and payable at 100%
of the applicable target award. These provisions would apply to
the outstanding RSUs and performance unit awards held by
Messrs. Spiro, Degnan, Krump, Morrison and Robusto as of
December 31, 2009. The impact of a change in control on
Mr. Finnegans equity awards is discussed below. For
purposes of the 2004 Employee Plan, change in control is defined
as:
|
|
|
|
|
the acquisition of 20% or more of our shares by any person;
|
|
|
|
a change in a majority of the members of our Board due to a
proxy contest or tender or exchange offer; or
|
|
|
|
a merger, reorganization or similar transaction (including a
sale of substantially all assets), where our shareholders
immediately prior to such transaction do not control more than
50% of the surviving entity immediately after the transaction.
|
Mr. Finnegan. Upon the occurrence
of a change in control (as defined below),
Mr. Finnegans employment agreement would be
superseded by his change in control employment agreement with
us. Mr. Finnegans change in control employment
agreement provides generally that the terms and conditions of
his employment (including position, location and benefits) may
not be adversely changed during the three-year period after a
change in control. The change in control employment agreement
contains a double trigger mechanism such that (i) if a
change in control occurs, and (ii) Mr. Finnegans
employment is terminated (other than for cause, death or
disability), or constructively terminated, during the three-year
period following a change in control, Mr. Finnegan would be
entitled to receive:
|
|
|
|
|
pro-rated annual incentive compensation through the date of
termination for the year in which the termination of employment
occurs;
|
49
|
|
|
|
|
three times the sum of his then-current annual salary and
highest annual bonus over the past three years, including any
bonus payable for the current year;
|
|
|
|
three years of additional age and service credit for purposes of
the supplemental retirement benefits;
|
|
|
|
three years of continued health and welfare benefits (or, if
shorter, until a new employer provides these benefits) under our
employee welfare plans and thereafter retiree benefits;
|
|
|
|
up to $100,000 of outplacement services; and
|
|
|
|
if any payments or benefits that Mr. Finnegan receives are
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code on golden parachute payments, an
additional payment to him to restore him to the after-tax
position that he would have been in if the excise tax had not
been imposed.
|
In addition, any outstanding equity awards would vest and his
stock options would continue to be exercisable until the earlier
of the fifth anniversary of the date of termination of his
employment or the expiration of the option term.
Mr. Finnegan also is entitled to reimbursement for legal
fees he incurs as a result of the termination of his employment.
For purposes of Mr. Finnegans change in control
employment agreement, change in control means:
|
|
|
|
|
the acquisition of 20% or more of our outstanding common stock
by any person;
|
|
|
|
continuing directors (or their approved successors) ceasing to
constitute a majority of our Board;
|
|
|
|
a merger, reorganization or similar transaction (including a
sale of substantially all assets), where our shareholders
immediately prior to such transaction do not control more than
50% of the surviving entity immediately after the
transaction; or
|
|
|
|
shareholder approval of any plan or proposal for our liquidation
or dissolution.
|
Mr. Finnegans change in control employment agreement
requires Mr. Finnegan to comply with confidentiality,
non-competition and non-solicitation covenants. The
non-competition and non-solicitation provisions run during the
term of Mr. Finnegans employment through the second
anniversary of the termination thereof.
Mr. Spiro. In addition to the
above terms with respect to equity awards, we have entered into
a change in control agreement with Mr. Spiro. The agreement
with Mr. Spiro comes into effect in the event that his
employment is terminated (other than as a result of his death,
disability, retirement, voluntary termination or by us for
cause) or is constructively terminated within two years after
the effective date of the change in control (as defined below).
Upon actual or constructive termination following a change in
control, Mr. Spiro is entitled to receive a severance
payment equal to two times the sum of:
|
|
|
|
|
his then-current annual salary; and
|
|
|
|
the average amount of his annual incentive compensation for the
last three years;
|
provided that the amount of the severance payment cannot exceed
the amount the individual would have received had he remained in
our employment until his normal retirement age under the Pension
Plan. In addition to severance, Mr. Spiro also is entitled
to reimbursement for legal fees incurred by him as a result of
the termination and continuation of health and other welfare
benefits for a period of two years after the date of
termination. Mr. Spiros agreement does not provide
for a
gross-up of
any excise taxes that might be triggered by these payments.
For purposes of Mr. Spiros agreement, the definition
of a change in control is the same definition of a change in
control used in the 2004 Employee Plan.
For purposes of Mr. Spiros agreement, cause means:
|
|
|
|
|
his willful and continued failure to perform his duties; or
|
|
|
|
his willful engagement in misconduct which is materially
injurious to us.
|
50
For purposes of Mr. Spiros agreement, the definition
of a constructive termination means his voluntary termination of
employment following the occurrence of certain events, including:
|
|
|
|
|
the assignment to Mr. Spiro, without his express written
consent, of any duties inconsistent with his positions, duties,
responsibilities, authority and status immediately prior to the
change in control;
|
|
|
|
a change in reporting responsibilities, titles or offices as in
effect immediately prior to the change in control or any removal
of, or any failure to re-elect, Mr. Spiro to any of such
positions, except in limited circumstances;
|
|
|
|
a reduction in Mr. Spiros annual salary as in effect
at the time of the change in control;
|
|
|
|
our failure to continue Mr. Spiros participation in
certain compensation plans in effect at the time of the change
in control; or
|
|
|
|
our requiring Mr. Spiro to maintain his principal office or
conduct his principal activities anywhere other than our
corporate headquarters located within the New York Metropolitan
area (including Warren, New Jersey).
|
Mr. Degnan. Since Mr. Degnan
is now retirement-eligible, his change in control agreement no
longer provides him any enhanced benefits.
Messrs. Krump, Morrison and
Robusto. Messrs. Krump, Morrison and
Robusto are not entitled to any payments or benefits beyond
those generally available to our salaried employees upon a
change in control.
51
Estimate
of Incremental Potential Payment
The following tables quantify the additional payments and
benefits under the compensation and benefit plans and
arrangements to which our NEOs would be entitled upon
termination of employment under the termination scenarios
described above that are beyond those generally available to our
salaried employees. Because the payments to be made to an NEO
depend on several factors, the actual amounts to be paid out
upon a triggering event can only be determined at the time of
the triggering event.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Finnegan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change in
|
|
|
Change in
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
Control
|
|
|
Control
|
|
Payment Type
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(1)(2)
|
|
$
|
6,375,000
|
|
|
$
|
2,838,000
|
|
|
|
|
|
|
|
$11,663,000
|
|
|
|
$15,075,000
|
|
|
|
|
|
RSUs(3)
|
|
|
3,478,764
|
|
|
|
3,478,764
|
|
|
|
|
|
|
|
6,026,173
|
|
|
|
6,026,173
|
|
|
$
|
6,026,173
|
|
Performance
Units(4)
|
|
|
14,594,263
|
|
|
|
14,594,263
|
|
|
|
|
|
|
|
14,594,263
|
|
|
|
12,505,687
|
|
|
|
12,505,687
|
|
Retirement
Benefits(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,446,091
|
|
|
|
10,908,561
|
|
|
|
|
|
Retiree Medical
Benefits(6)
|
|
|
137,100
|
|
|
|
223,101
|
|
|
|
$212,400
|
|
|
|
212,400
|
|
|
|
212,400
|
|
|
|
|
|
Other
Benefits(7)
|
|
|
26,000
|
|
|
|
26,000
|
|
|
|
|
|
|
|
184,407
|
|
|
|
316,089
|
|
|
|
|
|
Gross-up on
Excise
Tax(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,611,127
|
|
|
$
|
21,160,128
|
|
|
|
$212,400
|
|
|
|
$42,126,334
|
|
|
|
$45,043,910
|
|
|
$
|
18,531,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the event of death, reflects a death benefit of five times
annual salary as of December 31, 2009 ($1,275,000). In the event
of disability, reflects the present value of payments equal to
60% of annual salary until age 65. In the event of a termination
without cause, reflects a multiple of annual salary as of
December 31, 2009 and the average of Mr. Finnegans last
three annual incentive compensation awards ($3,390,200). In the
event of an Involuntary Termination or Constructive
Termination after Change in Control, reflects a multiple
of annual salary and the highest of his last three annual or
current incentive compensation awards ($3,750,000). |
|
(2) |
|
Except for the amount listed under the Involuntary
Termination or Constructive Termination after Change in
Control column, these amounts do not include any amounts
attributable to Mr. Finnegans 2009 annual incentive
compensation award to be paid in March 2010 and disclosed under
the heading Executive CompensationSummary
Compensation Table. |
|
(3) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $49.18 per share on December 31,
2009. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(4) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $49.18 per share on
December 31, 2009. In the case of a termination of Mr.
Finnegans employment without cause or due to death or
disability, the number of performance units that vest would be
based on our actual performance at the end of the performance
period and, for purposes of this calculation, reflects the same
performance assumptions used for Mr. Finnegans outstanding
performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control, the
number of performance units that vest would be based on target
performance. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(5) |
|
Reflects the value attributable to additional age and service
credit under Mr. Finnegans Pension SERP. |
|
(6) |
|
Mr. Finnegans employment agreement provides for retiree
medical benefits assuming that Mr. Finnegan had 34 years of
service at retirement. None of our other employees hired on or
after January 1, 1999 receives company-subsidized retiree
medical benefits. The present value of these benefits is
calculated based on the assumptions used for financial reporting
purposes at year-end 2009, including a discount rate of 6.0%,
medical trend of 8.75% in 2009 and grading down gradually to a
trend rate of 4.5% in 2028 and thereafter. |
52
|
|
|
(7) |
|
In the case of a termination in the connection with a change of
control, represents outplacement benefits ($100,000), three
years of continued life insurance ($166,663), three years of
continued medical and dental benefits ($23,426) and two years of
executive financial counseling ($26,000). In the event of an
involuntary termination without cause, value represents
2.5 years of continued medical and dental benefits
($19,521), 2.5 years of continued life insurance benefits
($138,886) and two years of executive financial counseling
($26,000). |
|
(8) |
|
This calculation is an estimate for proxy disclosure purposes
only. Payments upon a change in control may differ based on
factors such as transaction price, timing of employment
termination and payments, changes in compensation and reasonable
compensation analyses. For purposes of this calculation, no
portion of the performance units that would accelerate upon a
change in control have been treated as reasonable compensation
for services rendered prior to the change in control or no value
has been attributed to non-competition covenants. The increase
in Mr. Finnegans prior taxable wages negates any excise
tax liabilities under Section 280G of the Internal Revenue Code. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard G. Spiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,340,000
|
|
|
|
|
|
RSUs(4)
|
|
$
|
1,973,550
|
|
|
$
|
1,973,550
|
|
|
|
|
|
|
|
|
|
|
|
3,181,995
|
|
|
$
|
3,181,995
|
|
Performance
Units(5)
|
|
|
1,210,762
|
|
|
|
1,210,762
|
|
|
|
|
|
|
|
|
|
|
|
2,421,525
|
|
|
|
2,421,525
|
|
Other
Benefits(6)
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
|
|
|
$
|
12,000
|
|
|
|
38,682
|
|
|
|
38,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,196,312
|
|
|
$
|
3,196,312
|
|
|
|
|
|
|
$
|
12,000
|
|
|
$
|
9,982,202
|
|
|
$
|
5,642,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Spiro was not eligible for retirement as of
December 31, 2009. |
|
(2) |
|
Figure reflected in the Involuntary Termination or
Constructive Termination after Change in Control column
represents two years of compensation based on
Mr. Spiros annual salary as of December 31, 2009
($750,000) and a deemed annual bonus of $1,420,000 pursuant to
his change in control agreement. |
|
(3) |
|
Does not include any amounts attributable to
Mr. Spiros 2009 annual incentive compensation award
to be paid in March 2010 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(4) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $49.18 per share on December 31,
2009. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(5) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $49.18 per share on
December 31, 2009. In the case of a termination of
Mr. Spiros employment due to death, disability or
without cause, the number of performance units that vest would
be based on our actual performance at the end of the performance
period and, for purposes of this calculation, reflects the same
performance assumptions used for Mr. Spiros
outstanding performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(6) |
|
Represents the value attributable to two years of executive
financial counseling ($12,000) and, in the case of a termination
in connection with a change in control, two years of
(i) life insurance premiums ($1,044) and (ii) medical
and dental coverage ($25,638). |
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Degnan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(4)
|
|
$
|
1,160,496
|
|
|
$
|
1,160,496
|
|
|
$
|
1,160,496
|
|
|
$
|
1,160,496
|
|
|
$
|
2,100,379
|
|
|
$
|
2,100,379
|
|
Performance
Units(5)
|
|
|
4,926,705
|
|
|
|
4,926,705
|
|
|
|
4,926,705
|
|
|
|
4,926,705
|
|
|
|
4,519,347
|
|
|
|
4,519,347
|
|
Other
Benefits(6)
|
|
|
26,000
|
|
|
|
26,000
|
|
|
|
26,000
|
|
|
|
26,000
|
|
|
|
48,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,113,201
|
|
|
$
|
6,113,201
|
|
|
$
|
6,113,201
|
|
|
$
|
6,113,201
|
|
|
$
|
6,668,523
|
|
|
$
|
6,619,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of December 31, 2009, Mr. Degnan was eligible for
retirement under all plans. |
|
(2) |
|
Since Mr. Degnan reached his normal retirement age in
October 2009, he is no longer entitled to severance compensation
under his change in control agreement. |
|
(3) |
|
Does not include any amounts attributable to
Mr. Degnans 2009 annual incentive compensation award
to be paid in March 2010 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(4) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $49.18 per share on December 31,
2009. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(5) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $49.18 per share on
December 31, 2009. In the case of a termination of
Mr. Degnans employment due to death, disability,
retirement or termination without cause, the number of
performance units that vest would be based on our actual
performance at the end of the performance period and, for
purposes of this calculation, reflects the same performance
assumptions used for Mr. Degnans outstanding
performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(6) |
|
Represents the value attributable to two years of executive
financial counseling ($26,000) and, in the case of a termination
in connection with a change in control, two years of
(i) life insurance premiums ($4,578) and (ii) medical
and dental coverage ($18,219). |
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Krump
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(3)
|
|
$
|
212,188
|
|
|
$
|
212,188
|
|
|
|
|
|
|
|
|
|
|
$
|
387,194
|
|
|
$
|
387,194
|
|
Performance
Units(4)
|
|
|
946,420
|
|
|
|
946,420
|
|
|
|
|
|
|
|
|
|
|
|
850,125
|
|
|
|
850,125
|
|
Retirement
Benefits(5)
|
|
|
2,304,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Benefits(6)
|
|
|
15,960
|
|
|
|
15,960
|
|
|
|
|
|
|
$
|
15,960
|
|
|
|
15,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,478,790
|
|
|
$
|
1,174,568
|
|
|
|
|
|
|
$
|
15,960
|
|
|
$
|
1,253,279
|
|
|
$
|
1,237,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Krump was not eligible for retirement as of
December 31, 2009. |
|
(2) |
|
Does not include any amounts attributable to
Mr. Krumps 2009 annual incentive compensation award
to be paid in March 2010 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(3) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $49.18 per share on December 31,
2009. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(4) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $49.18 per share on
December 31, 2009. In the case of a termination of
Mr. Krumps employment due to death, disability or
without cause, the number of performance units that vest would
be based on our actual performance at the end of the performance
period and, for purposes of this calculation, reflects the same
performance assumptions used for Mr. Krumps
outstanding performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(5) |
|
In the event of death, the Pension Plan and Pension Excess
Benefit Plan provide for a pre-retirement survivors
benefit with an incremental value of $2,304,222. For
Mr. Krump, the pre-retirement survivors benefit is
more valuable than the benefits that he would have received in
the event of a voluntary termination due to his commencement of
employment prior to January 1, 2001. |
|
(6) |
|
Represents the value attributable to continuation of two years
of executive financial counseling. |
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold L. Morrison, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(3)
|
|
$
|
202,872
|
|
|
$
|
202,872
|
|
|
|
|
|
|
|
|
|
|
$
|
374,998
|
|
|
$
|
374,998
|
|
Performance
units(4)
|
|
|
909,830
|
|
|
|
909,830
|
|
|
|
|
|
|
|
|
|
|
|
831,830
|
|
|
|
831,830
|
|
Retirement
Benefits(5)
|
|
|
1,215,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Benefits(6)
|
|
|
15,960
|
|
|
|
15,960
|
|
|
|
|
|
|
$
|
15,960
|
|
|
|
15,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,343,937
|
|
|
$
|
1,128,662
|
|
|
|
|
|
|
$
|
15,960
|
|
|
$
|
1,222,788
|
|
|
$
|
1,206,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Morrison was not eligible for retirement as of
December 31, 2009. |
|
(2) |
|
Does not include any amounts attributable to
Mr. Morrisons 2009 annual incentive compensation
award to be paid in March 2010 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(3) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $49.18 per share on December 31,
2009. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(4) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $49.18 per share on
December 31, 2009. In the case of a termination of
Mr. Morrisons employment due to death, disability or
without cause, the number of performance units that vest would
be based on our actual performance at the end of the performance
period and, for purposes of this calculation, reflects the same
performance assumptions used for Mr. Morrisons
outstanding performance units awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(5) |
|
In the event of death, the Pension Plan and Pension Excess
Benefit Plan provide for a pre-retirement survivors
benefit with an incremental value of $1,215,275. For
Mr. Morrison, the pre-retirement survivors benefit is
more valuable than the benefits that he would have received in
the event of a voluntary termination due to his commencement of
employment prior to January 1, 2001. |
|
(6) |
|
Represents the value attributable to continuation of two years
of executive financial counseling. |
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dino E. Robusto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation/
|
|
|
Involuntary
|
|
|
after Change
|
|
|
Change
|
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Cash
Payment(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(3)
|
|
$
|
202,872
|
|
|
$
|
202,872
|
|
|
|
|
|
|
|
|
|
|
$
|
374,998
|
|
|
$
|
374,998
|
|
Performance
Units(4)
|
|
|
909,830
|
|
|
|
909,830
|
|
|
|
|
|
|
|
|
|
|
|
831,830
|
|
|
|
831,830
|
|
Retirement
Benefits(5)
|
|
|
1,487,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Benefits(6)
|
|
|
15,960
|
|
|
|
15,960
|
|
|
|
|
|
|
$
|
15,960
|
|
|
|
15,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,615,705
|
|
|
$
|
1,128,662
|
|
|
|
|
|
|
$
|
15,960
|
|
|
$
|
1,222,788
|
|
|
$
|
1,206,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Robusto was not eligible for retirement as of
December 31, 2009. |
|
(2) |
|
Does not include any amounts attributable to
Mr. Robustos 2009 annual incentive compensation award
to be paid in March 2010 and disclosed under the heading
Executive CompensationSummary Compensation
Table. |
|
(3) |
|
Reflects fair market value of accelerated unvested RSUs based on
our closing stock price of $49.18 per share on December 31,
2009. Figure reflected in the Change in Control
column assumes that RSUs are not assumed by the acquirer. |
|
(4) |
|
Reflects fair market value of accelerated unearned performance
units based on our closing stock price of $49.18 per share on
December 31, 2009. In the case of a termination of
Mr. Robustos employment due to death, disability or
without cause, the number of performance units that vest would
be based on our actual performance at the end of the performance
period and, for purposes of this calculation, reflects the same
performance assumptions used for Mr. Robustos
outstanding performance unit awards set forth under the heading
Executive CompensationOutstanding Equity Awards at
Fiscal Year-End. In the event of an Involuntary
Termination or Constructive Termination after Change in
Control or upon a Change in Control,
performance units would become earned and payable at 100% of the
applicable target award. Figure reflected in the Change in
Control column assumes that performance units are not
assumed by the acquirer. |
|
(5) |
|
In the event of death, the Pension Plan and Pension Excess
Benefit Plan provide for a pre-retirement survivors
benefit with an incremental value of $1,487,043. For
Mr. Robusto, the pre-retirement survivors benefit is
more valuable than the benefits that he would have received in
the event of a voluntary termination due to his commencement of
employment prior to January 1, 2001. |
|
(6) |
|
Represents the value attributable to continuation of two years
of executive financial counseling. |
57
EQUITY
COMPENSATION PLAN INFORMATION
The following table shows certain information with respect to
our equity compensation plans as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
|
Securities Remaining
|
|
|
|
Securities
|
|
|
|
|
|
Available for Future
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
Issuance under
|
|
|
|
upon Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Plans (excluding
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
securities reflected
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
in column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
12,003,605
|
(2)
|
|
$
|
35.76
|
(4)
|
|
|
24,082,942
|
(6)
|
Equity compensation plans not approved by security
holders(1)
|
|
|
202,613
|
(3)
|
|
$
|
52.02
|
(5)
|
|
|
347,629
|
|
Total
|
|
|
12,206,218
|
|
|
$
|
35.82
|
(4)(5)
|
|
|
24,430,571
|
|
|
|
|
(1) |
|
These plans are the CCAP Excess Benefit Plan and the Deferred
Compensation Plan for Directors, under which 141,932 shares
of common stock and 205,697 shares of common stock,
respectively, are available for future issuance. |
|
|
|
The CCAP Excess Benefit Plan is a nonqualified, defined
contribution plan and covers those participants in the CCAP and
the ESOP whose total benefits under those plans are limited by
certain provisions of the Internal Revenue Code. A participant
in the CCAP Excess Benefit Plan is entitled to a benefit
equaling the difference between the participants benefits
under the CCAP and the ESOP, without considering the applicable
limitations of the Internal Revenue Code, and the
participants actual benefits under such plans. A
participants excess ESOP benefit is expressed as shares of
our common stock. Payments under the CCAP Excess Benefit Plan
are generally made: (i) for excess benefits related to the
CCAP in cash annually as soon as practical after the amount of
excess benefit can be determined; and (ii) for excess
benefits related to the ESOP, in common stock as soon as
practicable after the earlier of the participants 65th
birthday or termination of employment. Allocations under the
ESOP ceased in 2004. Accordingly, other than dividends, no new
contributions are made to the ESOP or the CCAP Excess Benefit
Plan with respect to excess ESOP benefits. Additional
information regarding the CCAP and the CCAP Excess Benefit Plan
is set forth under the heading Compensation Discussion and
AnalysisCompany-Sponsored Benefit Plans. |
|
|
|
The material terms of the Deferred Compensation Plan for
Directors are described under the heading Corporate
GovernanceDirectors Compensation. |
|
(2) |
|
Includes 3,587,773 shares, representing 200% of the
aggregate target for the performance unit awards for the
three-year performance periods ending December 31, 2010 and
December 31, 2011, which is the maximum number of shares
issuable under these awards and 829,531 shares for the
performance period ended December 31, 2009. The
December 31, 2009 performance units are shown at the actual
payout percentage of 132.2% of target. Shortly after the end of
each performance period, our Compensation Committee will
determine the actual number of shares to be received by 2004
Employee Plan participants for the awards that are earned on
December 31, 2010 and December 31, 2011. |
|
(3) |
|
Includes an aggregate of 16,681 shares issuable upon
exercise of the special option grants awarded to two independent
directors in 2002 as individual compensation for their service
on our CEO search committee. |
|
(4) |
|
Weighted average exercise price excludes shares issuable under
outstanding performance unit awards, RSU awards and director
stock unit awards. |
|
(5) |
|
Weighted average exercise price consists of exercise price of
special option grants described in note (3) above, and
excludes shares issuable in connection with the CCAP Excess
Benefit Plan and the Deferred Compensation Plan for Directors. |
|
(6) |
|
Includes 14,139,932 shares available for issuance under the
Global Employee Stock Purchase Plan (2001),
9,943,010 shares available for issuance under the 2009 LTIP
(which includes 425,467 shares previously reserved for
issuance in connection with the 2007 performance unit awards).
After December 31, 2009, the number of shares available for
issuance under the 2009 LTIP was reduced by approximately
1.8 million net shares due to grants made to participants
in the 2009 LTIP during the first quarter of 2010 (partially
offset by shares returned to the status of available for
issuance due to forfeitures and shares cancelled in connection
with tax withholdings). |
58
The following table sets forth certain information concerning
the only persons or entities known to us to be beneficial owners
of more than 5% of our outstanding common stock. The information
below is as reported by that entity in statements filed with the
SEC.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
|
|
|
|
Ownership of
|
|
|
|
|
Name and Address
|
|
Common Stock
|
|
|
Percent of
Class(3)
|
|
|
BlackRock, Inc.
|
|
|
25,162,691
|
(1)
|
|
|
7.5
|
%
|
Morgan Stanley
|
|
|
22,130,668
|
(2)
|
|
|
6.5
|
%
|
|
|
|
(1) |
|
Reflects ownership as of December 31, 2009 as reported on
an amendment to Schedule 13G filed with the SEC by
BlackRock, Inc., located at 40 East 52nd Street, New York, NY
10022. BlackRock, Inc. reports sole voting and dispositive power
over all of the reported shares. BlackRock, Inc. has certified
that these shares of our common stock were acquired in the
ordinary course of business and were not acquired for the
purpose of, and do not have the effect of, changing or
influencing the control of Chubb and were not acquired in
connection with or as a participant in any transaction having
such purpose or effect. |
|
(2) |
|
Reflects ownership as of December 31, 2009 as reported on a
Schedule 13G/A filed with the SEC by Morgan Stanley,
located at 1585 Broadway, New York, NY 10036. Morgan Stanley
reports sole voting power over 21,465,067 of the reported
shares, shared voting power over none of the reported shares and
sole dispositive power over all of the reported shares. Morgan
Stanley has certified that these shares of our common stock were
acquired in the ordinary course of business and were not
acquired for the purpose of, and do not have the effect of,
changing or influencing the control of Chubb and were not
acquired in connection with or as a participant in any
transaction having such purpose or effect. |
|
(3) |
|
As reported in the applicable statement filed with the SEC. |
59
The following table sets forth certain information regarding the
beneficial ownership of our common stock and common stock-based
holdings by each of our directors and nominees for director, by
each of our NEOs and by our directors and executive officers as
a group as of March 8, 2010.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
|
|
|
|
Ownership of
|
|
|
|
|
Name and
Address(1)
|
|
Common
Stock(2)
|
|
|
Percent of
Class(3)
|
|
|
Zoë
Baird(4)(8)
|
|
|
63,027
|
|
|
|
|
*
|
Sheila P.
Burke(4)(9)
|
|
|
77,766
|
|
|
|
|
*
|
James I. Cash,
Jr.(4)(10)
|
|
|
18,933
|
|
|
|
|
*
|
Joel J.
Cohen(4)(11)
|
|
|
181,701
|
|
|
|
|
*
|
John D.
Finnegan(12)
|
|
|
1,126,654
|
|
|
|
|
*
|
Klaus J.
Mangold(4)(13)
|
|
|
36,897
|
|
|
|
|
*
|
Martin G.
McGuinn(5)
|
|
|
14,864
|
|
|
|
|
*
|
Lawrence M.
Small(4)(14)
|
|
|
103,503
|
|
|
|
|
*
|
Jess
Søderberg(6)
|
|
|
4,345
|
|
|
|
|
*
|
Daniel E.
Somers(4)(15)
|
|
|
20,530
|
|
|
|
|
*
|
Karen Hastie
Williams(4)(16)
|
|
|
38,223
|
|
|
|
|
*
|
James M.
Zimmerman(7)
|
|
|
8,674
|
|
|
|
|
*
|
Alfred W.
Zollar(4)(17)
|
|
|
12,906
|
|
|
|
|
*
|
John J.
Degnan(18)
|
|
|
219,409
|
|
|
|
|
*
|
Paul J.
Krump(19)
|
|
|
141,792
|
|
|
|
|
*
|
Harold L. Morrison,
Jr.(20)
|
|
|
36,029
|
|
|
|
|
*
|
Dino E.
Robusto(21)
|
|
|
69,880
|
|
|
|
|
*
|
Richard G.
Spiro(22)
|
|
|
84,158
|
|
|
|
|
*
|
All directors and executive officers as a
group(23)
|
|
|
2,488,924
|
|
|
|
|
*
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
The business address of each director and executive officer
named in this table is
c/o The
Chubb Corporation, 15 Mountain View Road, Warren, New Jersey
07059. |
|
(2) |
|
Unless otherwise indicated, share amounts are as of
March 8, 2010 and each person has sole voting and
investment power with respect to the shares listed. |
|
(3) |
|
Based upon 328,527,950 shares of our common stock
outstanding as of March 8, 2010. |
|
(4) |
|
Includes (i) 882 fully vested stock units and
(ii) 2,481 deferred stock units but does not include
performance units representing a target of 1,407 shares for
the performance period ending December 31, 2010. Payment of
such performance units will range from 0% to 200% depending on
actual performance measured against the stated performance goals
for the applicable performance period. |
|
(5) |
|
Includes (i) 853 fully vested stock units and
(ii) 2,481 deferred stock units but does not include
performance units representing a target of 1,407 shares for
the performance period ending December 31, 2010. Payment of
such performance units will range from 0% to 200% depending on
actual performance measured against the stated performance goals
for the applicable performance period. |
|
(6) |
|
Includes (i) 764 fully vested stock units and
(ii) 2,481 deferred stock units but does not include
performance units representing a target of 1,407 shares for
the performance period ending December 31, 2010. Payment of
such performance units will range from 0% to 200% depending on
actual performance measured against the stated performance goals
for the applicable performance period. |
|
(7) |
|
Includes (i) 433 fully vested stock units and
(ii) 2,481 deferred stock units but does not include
performance units representing a target of 1,301 shares for
the performance period ending December 31, 2010. Payment of
such performance units will range from 0% to 200% depending on
actual performance measured against the stated performance goals
for the applicable performance period. |
60
|
|
|
(8) |
|
Includes (i) 40,000 shares that may be purchased
within 60 days; and (ii) 3,988 market value units and
609 vested stock units which Ms. Baird has elected to defer
her receipt of. |
|
(9) |
|
Includes (i) 56,000 shares that may be purchased
within 60 days; and (ii) 7,213 market value units and
9,442 vested stock units which Ms. Burke has elected to
defer her receipt of. |
|
(10) |
|
Includes (i) 8,000 shares that may be purchased within
60 days; and (ii) 2,288 market value units and 644
vested stock units which Dr. Cash has elected to defer his
receipt of. |
|
(11) |
|
Includes (i) 90,708 shares that may be purchased
within 60 days; (ii) 12,663 shares that may be
purchased within 60 days pursuant to a restoration stock
option awarded pursuant to exercising a special stock option
grant; and (iii) 1,638 vested stock units and 35,791 market
value units which Mr. Cohen has elected to defer his
receipt of. |
|
(12) |
|
Includes (i) 80,000 shares held by a family-owned
limited liability company; (ii) 364,780 shares that
may be purchased within 60 days; (iii) 37,690 RSUs
that will vest on March 12, 2011; (iv) 47,070 RSUs
that will vest on February 25, 2012; (v) 37,262 RSUs
that will vest on February 24, 2013;
(vi) 197 shares that were allocated to
Mr. Finnegan pursuant to the ESOP; and (vii) 241,659
RSUs that are fully vested which Mr. Finnegan has elected
to defer receipt of until retirement. This amount does not
include (i) performance units representing a target of
113,073 shares for the performance period ending
December 31, 2010; (ii) 141,211 shares for the
performance period ending December 31, 2011; and
(iii) 111,786 shares for the performance period ending
December 31, 2012. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(13) |
|
Includes (i) 16,000 shares that may be purchased
within 60 days; and (ii) 5,741 market value units and
9,793 vested stock units which Dr. Mangold has elected to
defer his receipt of. |
|
(14) |
|
Includes (i) 37,925 shares that may be purchased within
60 days; and (ii) 4,018 shares that may be
purchased within 60 days pursuant to a restoration stock
option awarded pursuant to exercising a special stock option
grant. |
|
(15) |
|
Includes (i) 2,000 shares that may be purchased within
60 days; and (ii) 2,459 market value units and 10,660
vested stock units which Mr. Somers has elected to defer
his receipt of. |
|
(16) |
|
Includes (i) 24,000 shares that may be purchased
within 60 days; and (ii) 5,874 vested stock units
which Ms. Hastie Williams has elected to defer her receipt
of. |
|
(17) |
|
Includes 322 vested stock units which Mr. Zollar has
elected to defer his receipt of. |
|
(18) |
|
Includes (i) 12,051 RSUs that will vest on March 12,
2011; (ii) 18,580 RSUs that will vest on February 25,
2012; (iii) 14,708 RSUs that will vest on February 24,
2013; (iv) 54,700 RSUs that are fully vested which
Mr. Degnan has elected to defer receipt of until
retirement; and (v) 6,607 shares that were allocated
to Mr. Degnan pursuant to the ESOP. This amount does not
include (i) performance units representing a target of
36,153 shares for the performance period ending
December 31, 2010; (ii) 55,741 shares for the
performance period ending December 31, 2011; and
(iii) 44,127 shares for the performance period ending
December 31, 2012. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(19) |
|
Includes (i) 60,480 shares that may be purchased
within 60 days; (ii) 2,355 RSUs that will vest on
March 12, 2011; (iii) 3,406 RSUs that will vest on
February 25, 2012; (iv) 3,432 RSUs that will vest on
February 24, 2013; and (v) 6,483 shares that were
allocated to Mr. Krump pursuant to the ESOP. This amount
does not include (i) performance units representing a
target of 7,067 shares for the performance period ending
December 31, 2010; (ii) 10,219 shares for the
performance period ending December 31, 2011; and
(iii) 10,296 shares for the performance period ending
December 31, 2012. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(20) |
|
Includes (i) 2,231 RSUs that will vest on March 12,
2011; (ii) 3,406 RSUs that will vest on February 25,
2012; (iii) 3,432 RSUs that will vest on February 24,
2013; (iv) 348 shares in the Chubb Stock Fund of the
CCAP; and (v) 129 shares that were allocated to
Mr. Morrison pursuant to the ESOP. This amount does not
include (i) performance units representing a target of
6,695 shares for the performance period ending |
61
|
|
|
|
|
December 31, 2010; (ii) 10,219 shares for the
performance period ending December 31, 2011; and
(iii) 10,296 shares for the performance period ending
December 31, 2012. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
|
(21) |
|
Includes (i) 31,788 shares that may be purchased
within 60 days; (ii) 2,231 RSUs that will vest on
March 12, 2011; (iii) 3,406 RSUs that will vest on
February 25, 2012; and (iv) 3,432 RSUs that will vest
on February 24, 2013. This amount does not include
(i) performance units representing a target of 6,695 shares
for the performance period ending December 31, 2010;
(ii) 10,219 shares for the performance period ending
December 31, 2011; and (iii) 10,296 shares for
the performance period ending December 31, 2012. Payment of
such shares will range from 0% to 200% depending on actual
performance measured against the stated performance goals for
the applicable performance period. |
|
(22) |
|
Includes (i) 24,144 RSUs that will vest on January 31,
2011; (ii) 16,412 RSUs that will vest on February 25,
2012; and (iii) 12,992 RSUs that will vest on
February 24, 2013. This amount does not include
(i) performance units representing a target of
49,238 shares for the performance period ending
December 31, 2011; and (ii) 38,978 shares for the
performance period ending December 31, 2012. Payment of
such shares will range from 0% to 200% depending on actual
performance measured against the stated performance goals for
the applicable performance period. |
|
(23) |
|
Includes (i) 1,162 shares which executive officers
other than those listed in the table above disclaim beneficial
ownership; (ii) 116 shares which were allocated to
executive officers other than those listed in the table above
pursuant to the Chubb Stock Fund of the CCAP;
(iii) 8,403 shares which were allocated to executive
officers other than those listed in the table above pursuant to
the ESOP; (iv) 58,018 shares which executive officers
other than those listed in the table above have the right to
purchase within 60 days; (v) 10,436 RSUs that will
vest on March 12, 2011; (vi) 16,027 RSUs that will
vest on February 25, 2012; and (vii) 12,648 RSUs that
will vest on February 24, 2013. This amount does not
include (i) performance units awarded to executive officers
other than those listed in the table above representing a target
of 31,318 shares for the performance period ending
December 31, 2010; (ii) 48,085 shares for the
performance period ending December 31, 2011; and
(iii) 37,949 shares for the performance period ending
December 31, 2012. Payment of such shares will range from
0% to 200% depending on actual performance measured against the
stated performance goals for the applicable performance period. |
62
CERTAIN
TRANSACTIONS AND OTHER MATTERS
At December 31, 2009, BlackRock, Inc. was the beneficial
owner of more than 5% of our outstanding common stock. In 2009,
BlackRock, Inc. purchased insurance policies from one of our
property and casualty insurance subsidiaries with an aggregate
net written premium of approximately $2,800,000. At
December 31, 2009, we owned approximately $40 million
of BlackRock, Inc. fixed income securities.
At December 31, 2009, Morgan Stanley was the beneficial
owner of more than 5% of our outstanding common stock. During
2009, an affiliate of Morgan Stanley acted as our broker in
connection with certain securities transactions for which it
earned aggregate commissions of approximately $2,000,000. In
addition, during 2009, we paid an affiliate of Morgan Stanley
approximately $150,000 in brokerage commissions relating to
certain equity trades made by us. As of December 31, 2009,
an affiliate of Morgan Stanley served as the general partner of
three limited partnerships in which we have invested. During
2009, we paid management fees to this affiliate in the
approximate amount of $1,500,000. As of December 31, 2009,
an affiliate of Morgan Stanley managed a fixed income portfolio
in our Pension Plan for which it received approximately $425,000
in fees. In addition, as of December 31, 2009, an affiliate
of Morgan Stanley managed one of the funds offered to
participants in the CCAP. As of December 31, 2009, CCAP
participants had invested approximately $49 million in this
fund. The associated management fees are borne by the CCAP
participants who invest in this fund. In 2009, a subsidiary of
Morgan Stanley purchased insurance policies from one of our
property and casualty insurance subsidiaries with an aggregate
net written premium of approximately $2,000,000. At
December 31, 2009, we owned approximately $6,200,000 of
Morgan Stanley common stock.
During the first quarter of 2010, one of our property and
casualty insurance subsidiaries agreed to pay 650,000 on
behalf of the subsidiarys insured to resolve all claims of
a third party against the insureds directors, officers and
employees. The company that purchased the insurance policy from
our subsidiary was an early stage venture capital backed
software company that, like many information technology
companies, filed for bankruptcy in 2002 when its backers
declined to make further investments in it. Dr. Cash was a
director of the insured. The settlement was negotiated at
arms length between counsel for the claimant and the
insureds. Our subsidiary administered the insureds claim
for insurance coverage in the ordinary course of business and
consistent with our administration of claims of other insureds.
The insured, together with its directors, officers and
employees, have denied, and continue to deny, liability for the
claims. No portion of the settlement payment has been attributed
to Dr. Cash.
Effective December 1, 2002, we entered into an employment
agreement with Mr. Finnegan. This employment agreement
covers Mr. Finnegans roles and responsibilities, his
compensation and benefits and the results of the termination of
his employment under various circumstances. The employment
agreement contains an automatic renewal clause, providing that
the employment agreement will have a perpetual two-year term
unless Mr. Finnegan or we deliver a notice of non-renewal.
Additional information regarding Mr. Finnegans
employment agreement is set forth under the headings
Compensation Discussion and AnalysisEmployment and
Severance Agreements, Compensation Discussion and
AnalysisChange in Control Agreements and
Executive CompensationPotential Payments upon
Termination.
We have entered into change in control agreements with our Chief
Operating Officer and our Chief Financial Officer. Information
regarding these change in control agreements is set forth under
the headings Compensation Discussion and
AnalysisChange in Control Agreements and
Executive CompensationPotential Payments upon
Termination.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors
and executive officers and persons who beneficially own more
than 10% of our common stock to file reports of securities
ownership and changes in such ownership with the SEC. Based
solely upon a review of copies of such reports or written
representations that all such reports were timely filed, we
believe that each of our directors, executive officers and
greater than 10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them during
2009, except for Mr. Søderberg who filed a Form 4
due on April 23, 2008 on July 24, 2009 as a result of
an administrative error and Mr. Krump who filed a
Form 4 on February 8, 2010 reporting transactions that
should have been reported by February 12, 2007 and
May 7, 2007, respectively, as a result of a broker error.
63
PROPOSAL 1
ELECTION
OF DIRECTORS
Upon the recommendation of the Governance Committee, our Board
has nominated the following individuals for election to our
Board this year:
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Zoë Baird
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Jess Søderberg
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Sheila P. Burke
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Daniel E. Somers
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James I. Cash, Jr.
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Karen Hastie Williams
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John D. Finnegan
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James M. Zimmerman
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Martin G. McGuinn
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Alfred W. Zollar
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Lawrence M. Small
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Information regarding the business experience of each nominee
and the factors considered by our Governance Committee and the
Board in selecting each nominee for election to our Board is
provided under the heading Our Board of Directors.
Each of our directors is elected annually to serve until the
next annual meeting of shareholders and until his or her
successor is elected and qualified. There are no family
relationships among our executive officers and directors. Each
director nominee other than Mr. Finnegan satisfies the
independence requirements set forth in the NYSE listing
standards and, with respect to the nominees expected to serve on
our Audit Committee, Section 10A(m)(3) of the Exchange Act.
Our Board expects that each of the nominees named in this proxy
statement will be available for election and, if elected, will
be willing to serve as a director. If any nominee is not
available, then the proxies may vote for a substitute as may be
designated by our Board, unless our Board reduces the number of
directors. Our Board has, in accordance with our By-Laws, fixed
the number of directors to be elected at 11. If elected, each
director will serve until the next annual meeting of
shareholders and until his or her successor is duly elected and
qualified.
Director nominees will be elected by a majority of the votes
cast by shareholders entitled to vote at the 2010 Annual
Meeting. If you wish to give specific instructions with respect
to the voting of directors, you may do so by indicating your
instructions on your proxy card.
Our Board unanimously recommends that you vote
FOR each of the foregoing nominees for director. If
you are a shareholder of record and return a signed and dated
proxy card without marking any voting selections, your shares
will be voted FOR the election of each of the
director nominees. If you are a beneficial owner of shares held
in street name and return a signed and dated voting instruction
card without marking any voting selections for the election of
directors, your shares will not be voted and will not be
considered as present and entitled to vote with respect to the
election of each of the director nominees.
64
PROPOSAL 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITOR
Our Audit Committee, acting pursuant to the authority granted to
it in its charter, has retained Ernst & Young LLP
(Ernst & Young) as our independent auditor. The
appointment of Ernst & Young is being submitted to our
shareholders for ratification. Ernst & Young has acted
as our independent auditor for many years. The following
summarizes the fees billed to us by Ernst & Young for
professional services rendered in 2009 and 2008:
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2009
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2008
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$
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6,840,000
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$
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6,555,000
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Audit-Related
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1,190,000
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852,000
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Tax
Fees(3)
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All Other
Fees(4)
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33,000
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102,000
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Audit Fees primarily relate to the audit of our annual financial
statements, review of our financial statements included in our
quarterly reports on
Form 10-Q,
statutory audits for our insurance subsidiaries and review of
SEC registration statements. |
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Audit-Related Fees primarily relate to an International
Financial Reporting Standards impact assessment, a SAS 70
internal control report, employee benefit plan audits and
certain non-insurance related statutory audits. |
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Tax Fees primarily relate to tax compliance, tax advice and tax
planning. |
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All Other Fees relate to other services not described in notes
(1), (2), and (3) above, including special actuarial
reports filed with regulators, technical training and an online
information service. |
Our Audit Committee determined that the provision of these
services is compatible with maintaining Ernst &
Youngs independence.
In 2009, our Audit Committee pre-approved all services performed
for us by Ernst & Young.
Representatives of Ernst & Young are expected to be
present at the 2010 Annual Meeting and to have the opportunity
to make a statement should they desire to do so and to be
available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast by
shareholders entitled to vote at the 2010 Annual Meeting is
required to ratify the appointment of Ernst & Young as
our independent auditor. If our shareholders do not ratify the
appointment of Ernst & Young, our Audit Committee will
reconsider the appointment.
Our Board unanimously recommends that you vote
FOR ratification of the appointment of
Ernst & Young LLP as our independent auditor. Proxies
solicited by our Board will be voted FOR this
proposal unless a shareholder has indicated otherwise on the
proxy card. If you are a shareholder of record and return a
signed and dated proxy card without marking any voting
selections with respect to ratification of Ernst &
Young LLP as independent auditor, or if you are a beneficial
owner of shares held in street name and return a signed and
dated voting instruction card without marking any voting
selection with respect to ratification of Ernst &
Young LLP as independent auditor, your shares will be considered
as present and entitled to vote with respect to that proposal
and your shares will be voted FOR
Proposal 2.
65
SOLICITATION
OF PROXIES
We will pay the cost of this solicitation of proxies. In
addition to the solicitation of proxies by use of the internet
and mail, we may use the services of one or more of our
directors, officers or other regular employees (who will receive
no additional compensation for their services in such
solicitation) to solicit proxies personally, by telephone or by
other electronic means. In addition, we may enter into an
agreement with a professional proxy solicitor, pursuant to which
it may assist us in the solicitation of proxies by mail, in
person and by telephone for a fee, which is estimated not to
exceed $8,500 plus
out-of-pocket
expenses. Arrangements will be made with brokerage firms and
other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held
on the record date by such persons and we will reimburse them
for reasonable expenses actually incurred by them in so doing.
2011
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any proposal that a shareholder intends to be included in our
proxy statement and form of proxy card for our 2011 Annual
Meeting of Shareholders must be in writing and be received by
our Corporate Secretary at The Chubb Corporation, 15 Mountain
View Road, Warren, New Jersey 07059 no later than
November 18, 2010 and must otherwise comply with the rules
promulgated by the SEC in order to be eligible for inclusion in
our proxy materials for the 2011 Annual Meeting of Shareholders.
Under our By-Laws, if a shareholder desires to bring a matter
before the annual meeting of shareholders or if a shareholder
wants to nominate a person for election to our Board, the
shareholder must follow the procedures set forth in our By-Laws.
A copy of Article I, Section 10, of our By-Laws, which
covers those matters, is available without charge upon written
request to our Corporate Secretary. Our By-Laws also are
available on our website at www.chubb.com/investors. Our
By-Law procedures are separate from the SECs requirements
that a shareholder must meet in order to have a shareholder
proposal included in our proxy statement.
One of the procedural requirements in our By-Laws is timely
notice in writing of any business the shareholder proposes to
bring before the annual meeting of shareholders
and/or the
nomination any shareholder proposes to make at the annual
meeting of shareholders. Notice of business proposed to be
brought before the 2011 Annual Meeting of Shareholders
and/or
director nominations proposed to be made at the 2011 Annual
Meeting of Shareholders must be received by our Corporate
Secretary no earlier than December 28, 2010 and no later
than January 27, 2011.
The notice for business that a shareholder proposes to bring
before the annual meeting of shareholders must be a proper
matter for shareholder action and must set forth:
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the name and address of such shareholder, as they appear on our
books, and the name and address of any certain parties related
to the shareholder (each a Shareholder Associated Person);
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the class and number of shares of our stock that are, directly
or indirectly, owned beneficially and of record by such
shareholder or Shareholder Associated Person;
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the date such shares of our stock were acquired;
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a representation that the shareholder is a holder of record of
shares of our stock entitled to vote at the meeting and intends
to appear in person or by proxy at the meeting to bring or
propose such business or make such nomination, as the case may
be;
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a description of any agreement, understanding or arrangement,
direct or indirect, with respect to such business, proposal or
nomination between or among such shareholder, any Shareholder
Associated Person or any others (including their names) acting
in concert with any of the foregoing;
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a description of any agreement, understanding or arrangement
(including any derivative or short positions, profit interests,
options, hedging transactions and borrowed or loaned shares)
that has been entered into, directly or indirectly, as of the
date of such shareholders notice by, or on behalf of, the
shareholder or any Shareholder Associated Person, the effect or
intent of which is to mitigate loss to, manage risk or benefit
of
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share price changes for, or increase or decrease the voting
power of such shareholder or any Shareholder Associated Person
with respect to shares of our stock;
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if such shareholders notice relates to the nomination of a
person for election to the Board of Directors, (i) a
description of all direct and indirect compensation and other
material monetary agreements, arrangements and understandings
during the past three years, and any other material
relationships, between or among such nominating shareholder, any
Shareholder Associated Person or others acting in concert with
any of the foregoing, including all information that would be
required to be disclosed pursuant to Rule 404 promulgated by the
SEC under
Regulation S-K,
as amended from time to time, if such nominating shareholder,
Shareholder Associated Person or any person acting in concert
therewith, were the registrant for the purposes of
such rule and the person being nominated for election as
director were a director or executive of such
registrant and (ii) as to each person whom the
shareholder proposes to nominate for election as a director, all
information relating to such person that would be required to be
disclosed in a solicitation of proxies for the election of such
person as a director pursuant to Regulation 14A under the
Exchange Act (including such persons written consent to
being named in the proxy statement as a nominee and to serving
as a director if so elected);
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a description of any proxy (including revocable proxies),
contract, arrangement, understanding or other relationship
pursuant to which such shareholder or Shareholder Associated
Person has a right to vote any shares of our stock;
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with respect to any and all of the agreements, contracts,
understandings, arrangements, proxies or other relationships
referred to in the foregoing bullets, a representation that such
shareholder will notify us in writing of any such agreement,
contract, understanding, arrangement, proxy
and/or other
relationship that are or will be in effect as of the date of the
applicable annual meeting of shareholders no later than five
business days before the date of such meeting;
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all other information that would be required to be filed with
the SEC if such shareholder or Shareholder Associated Person
were participants in a solicitation subject to Section 14
of the Exchange Act;
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as to any business that the shareholder proposes to bring before
the meeting, (i) a brief description of such business,
(ii) if such business includes a proposal, the text of the
proposal (including the text of any resolutions proposed for
consideration), (iii) if the proposal includes an amendment
to our By-Laws, the language of the proposed amendment,
(iv) the reasons for conducting such business at the
meeting and (v) any material interest of such shareholder
and any Shareholder Associated Person in such business; and
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a representation as to whether the shareholder intends
(i) to deliver a proxy statement and form of proxy to
holders of at least the percentage of our outstanding capital
stock required to approve or adopt the proposal or elect the
nominee or (ii) otherwise to solicit proxies from
shareholders in support of such proposal or nomination. In
addition, a shareholder seeking to submit a shareholder proposal
or other business or make a director nomination shall promptly
provide any other information reasonably requested by us, and
any proposed nominee for election to our Board must furnish such
other information as we may reasonably require to determine the
eligibility of such proposed nominee to serve as a member of our
Board.
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By Order of the Board of Directors,
W. Andrew Macan
Vice President and Secretary
March 18, 2010
67
ANNEX A
THE CHUBB
CORPORATION
POLICY ON PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES
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I.
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Statement
of Principles
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The Audit Committee of the Board of Directors is responsible for
the appointment, compensation, retention, and oversight of the
work of the independent auditor. The Chubb Corporation and the
Audit Committee are committed to ensuring the independence of
the auditor, both in appearance and in fact. Accordingly,
significant attention is directed toward ensuring that services
provided by the auditor are consistent with the SECs rules
on auditor independence.
The Audit Committee is required to pre-approve the audit and
non-audit services performed by the independent auditor or its
affiliates on behalf of The Chubb Corporation or any of its
subsidiaries (collectively, the Corporation) in
order to assure that the provision of such services does not
impair the auditors independence from the Corporation. In
the case of audit services, pre-approval by the Audit Committee
is required for such services provided to all consolidated
subsidiaries of the Corporation, whether provided by the
principal independent auditor or other firms.
The Audit Committee has delegated to the Chairman of the Audit
Committee authority to pre-approve specific services not to
exceed $25,000 per engagement. Any services pre-approved by the
Chairman shall be reported to the Audit Committee at its next
scheduled meeting.
The Audit Committee may consult with management but does not
delegate its responsibilities to pre-approve services performed
by the independent auditor to management.
III. Audit
Services
Audit services include all services to be performed to comply
with generally accepted auditing standards and those services
that generally only the Corporations independent auditor
can provide, such as comfort letters, statutory audits, attest
services, consents and assistance with and review of documents
filed with the SEC.
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IV.
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Audit-Related
Services
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Audit-related services are assurance and related services that
are reasonably related to the performance of the audit or review
of the Corporations financial statements and that are
traditionally performed by the independent auditor. The Audit
Committee believes that the provision of audit-related services
does not impair the independence of the auditor and is
consistent with the SECs rules on auditor independence.
Audit-related services include, among other services, audits of
employee benefit plans; due diligence related to mergers and
acquisitions; internal control reviews; attest services that are
not required by statute or regulation; and consultations related
to financial accounting or reporting standards.
The Audit Committee believes that the provision of tax services
to the Corporation including tax planning, compliance, and
advice does not impair the independence of the auditor and is
consistent with the SECs rules on auditor independence.
Tax services include tax planning, compliance, and advice;
preparation and review of original and amended tax returns;
assistance with claims for refund and tax payment-planning
services, tax audits and appeals before the IRS and similar
state, local and foreign agencies; and advice related to mergers
and acquisitions, employee benefit plans and requests for
rulings or technical advice for taxing authorities. The
Corporation shall not record a transaction or transactions, the
primary business purpose of which may be tax avoidance and the
tax treatment of which may not be supported in the Internal
Revenue Code and related
A-1
regulations; the rendering of services to the Corporation, its
executive officers and its directors by the independent auditor
in connection with the auditors recommendation of such
transaction or transactions is prohibited.
The Audit Committee believes that certain specific non-audit
services do not impair the auditors independence.
Accordingly, the Audit Committee may grant pre-approval to
specific, permissible non-audit services classified as All
Other Services that it believes are routine and recurring
services that would not impair the independence of the auditor.
All Other Services may include preparation of
actuarial reports in accordance with regulatory requirements
provided that the Audit Committee reasonably concludes that the
results of these services will not be subject to audit
procedures during an audit of the Corporations financial
statements.
VII. Procedures
Requests for services to be rendered by the independent auditor
will be provided annually to the Audit Committee for specific
pre-approval. The requests will include a description of the
particular services to be rendered and the expected fee range.
On a periodic basis at subsequent Audit Committee meetings, an
update on independent auditor services and all other audit
services will be provided to the Audit Committee and any
proposed new services, increases in engagement scope, and
increases in engagement fees will be provided for specific
pre-approval by the Audit Committee. Requests for pre-approval
will be submitted to the Audit Committee by both the independent
auditor and management and must include a written statement by
the independent auditor as to whether, in its view, the request
is consistent with the SECs rules on auditor independence.
The Audit Committee will consider whether such service requests
are consistent with the SEC rules on auditor independence. The
Audit Committee will also consider whether the independent
auditor is best positioned to provide the most effective and
efficient service, for reasons such as its familiarity with the
Corporations business, people, culture, accounting
systems, risk profile and other factors.
The term of any pre-approval is the period beginning on the date
of pre-approval and ending on the last day of the first full
calendar year after the date of pre-approval, unless the
Corporation specifically provides for a different period.
The Audit Committee is also mindful of the overall relationship
of fees for audit and non-audit services in determining whether
to pre-approve any such services. For each fiscal year, the
Audit Committee may determine the appropriate ratio between the
total amount of fees for Audit, Audit-related, Tax, and All
Other Services.
VIII. Prohibited
Non-Audit Services
Provision of the following non-audit services by the independent
auditor is prohibited in accordance with the SECs rules.
The SECs rules and relevant guidance should be consulted
to determine the precise definitions of these services and the
applicability of exceptions to certain of the prohibitions.
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Bookkeeping or other services related to the accounting records
or financial statements of the Corporation;
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Financial information systems design and implementation;
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Appraisal or valuation services, fairness opinions or
contribution-in-kind
reports;
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Actuarial services;
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Internal audit outsourcing services;
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Management functions or human resources;
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Broker-dealer, investment adviser, or investment banking
services;
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Legal services and expert services unrelated to the
audit; and
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Any other service that the Public Company Accounting Oversight
Board determines, by regulation, is impermissible.
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A-2
THE CHUBB CORPORATION
15
MOUNTAIN VIEW ROAD
WARREN, NJ
07059
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions
and for electronic delivery of information up until
11:59 P.M. Eastern Time on April 26, 2010. Have your
proxy card in hand when you access the website and then
follow the instructions to obtain your records and to
create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and
annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive
or access proxy materials electronically in future
years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time on April
26, 2010. Have your proxy card in hand when you call and
then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to
Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS: |
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M19415-P89631- Z51848 |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
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THE CHUBB CORPORATION |
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The Board of Directors recommends you vote
FOR the following proposals: |
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Election of Directors: |
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Nominees: |
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1a) |
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Zoë Baird |
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1h) Daniel E. Somers |
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Sheila P. Burke |
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1i) Karen Hastie Williams |
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James I. Cash, Jr. |
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1j) James M. Zimmerman |
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John D. Finnegan |
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1k) Alfred W. Zollar |
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1e) |
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Martin G. McGuinn |
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For |
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Abstain |
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1f) |
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Lawrence M. Small |
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To ratify the appointment of Ernst &
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1g) |
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Jess Søderberg |
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For address changes and/or comments, please check this
box and write them on the back where indicated. |
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Please sign exactly as your name(s) appear(s) hereon.
When signing as attorney, executor, administrator, or
other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must
sign. If a corporation or partnership, please sign in
full corporate or partnership name, by authorized
officer.
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