<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 1-8661
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THE CHUBB CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-2595722
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
15 MOUNTAIN VIEW ROAD, WARREN, NEW JERSEY 07061-1615
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 903-2000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----------------- -----------------
The number of shares of common stock outstanding as of April 28, 1995
was 86,953,582.
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THE CHUBB CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
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<S> <C>
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Balance Sheets as of
March 31, 1995 and December 31, 1994......................... 1
Consolidated Statements of Income for the
Three Months Ended March 31, 1995 and 1994................... 2
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1995 and 1994................... 3
Notes to Consolidated Financial Statements.................... 4
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations.............. 6
Part II. Other Information:
Item 6 - Exhibits and Reports on Form 8-K....................... 13
</TABLE>
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THE CHUBB CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1995 1994
-------- --------
(in millions)
<S> <C> <C>
Assets
Invested Assets
Short Term Investments............................... $ 950.8 $ 810.9
Fixed Maturities
Held-to-Maturity
Tax Exempt (market $3,175.1 and $3,177.1)......... 3,061.7 3,149.5
Taxable (market $616.8 and $604.1)................ 610.5 619.1
Available-for-Sale
Tax Exempt (cost $2,852.6 and $2,524.4)........... 2,972.5 2,530.2
Taxable (cost $4,031.3 and $4,604.2).............. 3,997.5 4,423.9
Equity Securities (cost $513.0 and $609.5)........... 587.6 642.1
Policy and Mortgage Loans............................ 202.1 202.7
--------- ---------
TOTAL INVESTED ASSETS......................... 12,382.7 12,378.4
Cash................................................... 4.3 5.6
Accrued Investment Income.............................. 207.2 215.7
Premiums Receivable.................................... 773.7 787.2
Reinsurance Recoverable on Property and Casualty
Unpaid Claims......................................... 1,967.7 1,980.3
Prepaid Reinsurance Premiums........................... 445.3 455.1
Funds Held for Asbestos-Related Settlement............. 1,046.2 558.1
Deferred Policy Acquisiton Costs
Property and Casualty Insurance...................... 522.3 529.5
Life and Health Insurance............................ 601.5 606.5
Real Estate Assets..................................... 1,741.1 1,740.3
Deferred Income Tax.................................... 267.5 314.7
Other Assets........................................... 1,180.8 1,151.7
--------- ---------
TOTAL ASSETS.................................. $21,140.3 $20,723.1
========= =========
Liabilities
Property and Casualty Unpaid Claims.................... $ 9,016.5 $ 8,913.2
Life and Health Policy Liabilities..................... 2,758.8 2,659.6
Unearned Premiums...................................... 2,359.2 2,382.6
Short Term Debt........................................ 184.1 153.3
Long Term Debt......................................... 1,184.6 1,285.6
Dividend Payable to Shareholders....................... 42.5 39.9
Accrued Expenses and Other Liabilities................. 1,007.3 1,041.9
--------- ---------
TOTAL LIABILITIES............................. 16,553.0 16,476.1
--------- ---------
Shareholders' Equity
Common Stock - $1 Par Value; 87,826,495 and
87,798,286 Shares..................................... 87.8 87.8
Paid-In Surplus........................................ 786.8 786.6
Retained Earnings...................................... 3,784.7 3,680.5
Foreign Currency Translation Gains, Net of Income Tax.. 12.4 9.8
Unrealized Appreciation (Depreciation) of
Investments, Net...................................... 103.0 (124.3)
Receivable from Employee Stock Ownership Plan.......... (123.0) (123.0)
Treasury Stock, at Cost - 894,705 and 977,580 Shares... (64.4) (70.4)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.................... 4,587.3 4,247.0
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $21,140.3 $20,723.1
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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THE CHUBB CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1995 1994
---- ----
(in millions)
<S> <C> <C>
Revenues
Premiums Earned and Policy Charges................. $1,173.8 $1,133.7
Investment Income.................................. 218.3 203.2
Real Estate........................................ 68.6 43.8
Realized Investment Gains.......................... 3.4 15.3
-------- --------
Total Revenues.............................. 1,464.1 1,396.0
-------- --------
Benefits, Claims and Expenses
Insurance Claims and Policyholders' Benefits....... 786.9 893.4
Amortization of Deferred Policy Acquisition Costs.. 293.7 271.4
Other Insurance Operating Costs and Expenses....... 112.6 103.2
Real Estate Cost of Sales and Expenses............. 73.9 44.4
Investment Expenses................................ 4.7 4.5
Corporate Expenses................................. 8.3 9.4
-------- --------
Total Benefits, Claims and Expenses......... 1,280.1 1,326.3
-------- --------
Income Before Federal and Foreign Income Tax........ 184.0 69.7
Federal and Foreign Income Tax (Credit)............. 37.3 (3.5)
-------- --------
Net Income.......................................... $ 146.7 $ 73.2
======== ========
Average Common and Common Equivalent Shares
Outstanding (In Thousands)......................... 89,768 90,627
PER SHARE DATA
- --------------
Net Income.......................................... $ 1.66 $ .83
Dividends Declared.................................. .49 .46
</TABLE>
See Notes to Consolidated Financial Statements.
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THE CHUBB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1995 1994
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(in millions)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income............................................. $ 146.7 $ 73.2
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities
Increase in Property and Casualty Unpaid Claims, Net. 115.9 231.0
Increase in Funds Held for Asbestos-Related
Settlement.......................................... (488.1) (4.1)
Other, Net........................................... 22.1 (2.0)
------- -------
Net Cash Provided by (Used in) Operating Activities.... (203.4) 298.1
------- -------
Cash Flows from Investing Activities
Proceeds from Sales of Fixed Maturities................ 995.2 920.4
Proceeds from Maturities of Fixed Maturities........... 203.3 182.3
Proceeds from Sales of Equity Securities............... 165.1 63.6
Purchases of Fixed Maturities.......................... (869.5) (845.6)
Purchases of Equity Securities......................... (51.2) (154.8)
Increase in Short Term Investments, Net................ (139.9) (267.2)
Decrease in Net Payable from Security
Transactions Not Settled.............................. (27.8) (194.1)
Additions to Real Estate Assets, Net................... (12.8) (12.2)
Other, Net............................................. (56.4) (24.8)
------- -------
Net Cash Provided by (Used in) Investing Activities.... 206.0 (332.4)
------- -------
Cash Flows from Financing Activities
Deposits Credited to Policyholder Funds................ 141.0 78.1
Withdrawals from Policyholder Funds.................... (37.1) (30.0)
Repayment of Long Term Debt............................ (101.0) (15.2)
Increase in Short Term Debt, Net....................... 30.8 43.3
Dividends Paid to Shareholders......................... (39.9) (37.7)
Other, Net............................................. 2.3 0.3
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Net Cash Provided by (Used in) Financing Activities.... (3.9) 38.8
------- -------
Net Increase (Decrease) in Cash.......................... (1.3) 4.5
Cash at Beginning of Year................................ 5.6 4.6
------- -------
Cash at End of Period.................................. $ 4.3 $ 9.1
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
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THE CHUBB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) General
The amounts included in this report are unaudited but include those
adjustments, consisting of normal recurring items, which management
considers necessary for a fair presentation. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes in the 1994 Annual Report to Shareholders.
2) Adoption of New Accounting Pronouncement
Effective January 1, 1995, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan. Under SFAS No. 114, a loan is considered impaired and
a valuation allowance is established when it is probable that a creditor
will be unable to collect all principal and interest amounts due according
to the contractual terms of the loan agreement. SFAS No. 114 requires
creditors to measure impairment of a loan based on the present value of
expected future cash flows discounted at the loan's effective interest rate
or, as a practical expedient, based on the market price of the loan or the
fair value of the collateral if the loan is collateral dependent. Prior to
1995, the Corporation measured impairment of a loan based on undiscounted
expected future cash flows. SFAS No. 114 may not be retroactively applied to
prior years' financial statements. The initial application of SFAS No. 114
resulted in an increase of $10 million to the allowance for uncollectible
amounts.
3) Investments
Short term investments, which have an original maturity of one year or
less, are carried at amortized cost which approximates market value. Fixed
maturities classified as held-to-maturity are carried at amortized cost.
Fixed maturities classified as available-for-sale and equity securities are
carried at market value as of the balance sheet date.
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The net change in unrealized appreciation or depreciation of
investments carried at market value was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
---- ----
(in millions)
<S> <C> <C>
Change in unrealized appreciation of equity
securities.......................................... $ 42.0 $ (83.8)
Change in unrealized appreciation or depreciation
of fixed maturities................................. 260.6 (275.0)
Change in deferred policy acquisition cost
adjustment.......................................... (29.3) 37.6
------ -------
273.3 (321.2)
Deferred income tax (credit), net of change in
valuation allowance................................. 46.0 (112.4)
------ -------
227.3 (208.8)
Cumulative effect, as of January 1, 1994,
of change in accounting principle, net.............. - 220.5
------ -------
Change in unrealized appreciation or depreciation
of investments, net................................. $227.3 $ 11.7
====== =======
</TABLE>
At December 31, 1994, there was a valuation allowance of $49.6 million
related to future tax benefits on unrealized depreciation of investments
carried at market value. At March 31, 1995, there was unrealized
appreciation of investments carried at market value. Therefore, the
valuation allowance was eliminated in the first quarter of 1995. Such
elimination was reflected in the deferred income tax provision for the first
quarter of 1995 and had no impact on net income.
4) Funds Held for Asbestos-Related Settlement
Funds held for asbestos-related settlement are assets of the
Corporation's property and casualty insurance subsidiaries that accrue
income for the benefit of participants in the class settlement of
asbestos-related bodily injury claims against Fibreboard Corporation. The
increase in funds held in the first quarter of 1995 was the result of a
February 1995 amendment to the 1993 agreement between Pacific Indemnity
Company, a subsidiary of the Corporation, and Continental Casualty Company
(a subsidiary of CNA Financial Corporation) for the handling of all
asbestos-related bodily injury claims pending on August 26, 1993 against
Fibreboard. Pacific Indemnity's payment obligations under this agreement
were to be completed by March 1, 1995. The amendment extends for several
years the period over which Pacific Indemnity will pay this remaining
obligation, plus interest, under the agreement.
5) Per Share Data
Earnings per share amounts are based on the weighted average number of
common and common equivalent shares outstanding. The 6% guaranteed
exchangeable subordinated notes are considered to be common equivalent
shares. The computation assumes the addition to income of the after-tax
interest expense applicable to such notes.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1995 AND 1994
PROPERTY AND CASUALTY INSURANCE
Earnings from our property and casualty business were substantially higher
in the first quarter of 1995 compared with the same period of 1994. The increase
was due to a significant improvement in underwriting results in 1995.
Underwriting results in the first quarter of 1994 were adversely affected by
substantially higher catastrophe losses. Investment income increased modestly in
the first quarter of 1995 compared with 1994. Property and casualty income after
taxes amounted to $142.0 million in the first quarter of 1995 compared with
$55.4 million in 1994.
Net premiums written were $981.9 million in the first quarter of 1995, an
increase of 7.5% compared with the first quarter of 1994. The marketplace
continued to be competitive, particularly in the commercial classes. Price
increases continued to be difficult to achieve. Premium growth was due primarily
to the selective writing of new business. A significant portion of premium
growth was achieved outside the United States, from both our expanding foreign
branch network and our increased participation in the business of the Sun
Alliance Group plc.
Underwriting results were profitable in the first quarter of 1995 compared
with unprofitable results in the same quarter of 1994. Our combined loss and
expense ratio was 96.3% in the first quarter of 1995 compared with 109.9% in
1994.
The loss ratio improved to 63.3% in the first quarter of 1995 from 76.6% in
1994. The loss ratio in the first quarter of 1994 was adversely affected by high
catastrophe losses resulting primarily from the earthquake in California and the
winter storms in the eastern and midwestern parts of the United States.
Catastrophe losses during the first quarter of 1995 were 0.6 of a percentage
point of the loss ratio compared with 16.3 percentage points in 1994.
Our expense ratio was 33.0% in the first quarter of 1995 compared with
33.3% in 1994. The decrease in 1995 was due primarily to growth in written
premiums at a somewhat greater rate than the increase in overhead expenses.
Expenses were reduced in the first quarter of 1994 by a contingent profit
sharing accrual of $2 million relating to a medical malpractice stop loss
reinsurance agreement.
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Underwriting results during 1995 and 1994 by class of business were as
follows:
<TABLE>
<CAPTION>
Quarter Ended March 31
--------------------------------------
Net Premiums Combined Loss and
Written Expense Ratios
---------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C>
Personal Insurance
Automobile............................ $ 45.5 $ 44.9 90.5% 95.2%
Homeowners............................ 93.1 95.2 87.1 154.3
Other................................. 43.9 44.4 78.7 97.4
------ ------ ----- -----
182.5 184.5 85.7 126.9
------ ------ ----- -----
Standard Commercial Insurance
Multiple Peril........................ 148.7 136.4 100.5 127.7
Casualty.............................. 141.9 136.1 120.5 103.6
Workers' Compensation................. 53.4 49.3 97.8 111.8
------ ------ ----- -----
344.0 321.8 107.9 115.1
------ ------ ----- -----
Specialty Commercial Insurance
Fidelity and Surety................... 168.6 153.8 88.0 83.4
Other................................. 203.8 189.1 92.5 106.9
------ ------ ----- -----
372.4 342.9 90.4 95.7
------ ------ ----- -----
Reinsurance Assumed..................... 83.0 63.8 101.6 105.4
------ ------ ----- -----
Total $981.9 $913.0 96.3% 109.9%
====== ====== ===== =====
</TABLE>
PERSONAL INSURANCE
Premiums from personal insurance coverages, which represent approximately
19% of the premiums written by our property and casualty insurance subsidiaries,
decreased 1.1% in the first quarter of 1995 compared with the same quarter in
1994. Our disciplined approach to pricing continues to make it difficult to
write new homeowners and other non-automobile business. Personal automobile
premiums were similar in both years, which is consistent with our plan to
control our exposure in this class.
Our personal insurance business produced highly profitable results in the
first quarter of 1995 compared with extremely unprofitable results in the same
period of 1994. Underwriting results in the first quarter of 1994 were adversely
affected by significant catastrophe losses. The combined loss and expense ratio
was 85.7% in the first quarter of 1995 compared with 126.9% in 1994. Homeowners
results were profitable in 1995, benefiting from disciplined pricing and the
absence of significant catastrophe losses. Results for this class in the first
quarter of 1994 were adversely affected by significant weather-related
catastrophe losses. Catastrophe losses represented only 3.8 percentage points of
the loss ratio for this class in the first quarter of 1995 compared with 52.4
percentage points in 1994. Other personal coverages, which include insurance for
personal valuables and excess liability, produced more profitable results in
1995 than in 1994. Results in the first quarter of 1994 were adversely affected
by losses of personal valuables resulting from the earthquake in California.
Catastrophe losses represented only 0.2 of a percentage point of the loss ratio
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for other personal coverages in the first quarter of 1995 compared with 20.3
percentage points in 1994. Our automobile business produced profitable results
in 1995 and 1994 due primarily to stable loss frequency and severity.
STANDARD COMMERCIAL INSURANCE
Premiums from standard commercial insurance, which includes coverages for
multiple peril, casualty and workers' compensation and which represent
approximately 35% of our total writings, increased by 6.9% in the first quarter
of 1995 compared with the same period a year ago. The competitive market has
continued to place significant pressure on prices. Premium growth was due
primarily to the selective writing of new accounts. Our multiple peril business
outside the United States experienced strong premium growth in the first quarter
of 1995.
Our standard commercial underwriting business improved in the first quarter
of 1995 compared with the same period in 1994 although results remained
unprofitable. The combined loss and expense ratio was 107.9% for the first
quarter of 1995 compared with 115.1% in 1994. Results in the multiple peril
class improved substantially in 1995 compared with 1994; results in the first
quarter of 1994 were adversely affected by significant catastrophe losses, due
primarily to the earthquake in California. Catastrophe losses in the first
quarter of 1995 represented only 0.8 of a percentage point of the loss ratio for
this class compared with 43.3 percentage points in 1994. Casualty results
deteriorated in 1995 compared with 1994. Casualty results in both years, but
more so in 1995, were adversely affected by increases in loss reserves for
asbestos-related and toxic waste claims. The profitability of the excess
liability component of our casualty coverages decreased modestly due to more
competitive prices. Results in the automobile component were profitable in 1995
and 1994. Workers' compensation results were profitable in 1995 compared with
unprofitable results in 1994. Results in our voluntary business have benefited
from rate increases and the impact of medical cost containment and disability
management activities. Results in this class were aggravated in the first
quarter of 1994 by our share of the significant losses incurred by the
involuntary pools and mandatory business in which we must participate by law.
SPECIALTY COMMERCIAL INSURANCE
Premiums from specialty commercial business, which represent approximately
38% of our total writings, increased by 8.6% in the first quarter of 1995
compared with the same period a year ago. Premium increases for our executive
protection and financial fidelity coverages were due primarily to new business
opportunities as significant competition has made price increases difficult to
achieve for most of these coverages. Our strategy of working closely with our
customers and our ability to differentiate our products have enabled us to renew
a large percentage of our business.
Our specialty commercial business produced substantial underwriting profits
in the first quarter of 1995 and 1994 with combined loss and expense ratios of
90.4% and 95.7%, respectively. Our executive protection results were highly
profitable in both periods due to favorable loss experience. Improvement in the
non-fidelity portion of our financial institutions business was substantially
offset by deterioration in fidelity results due to several large losses. Surety
results were unprofitable in 1995 due to several large losses compared with near
breakeven results in 1994. Marine results were profitable in 1995 compared with
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unprofitable results in 1994; results in the first quarter of 1994 were
adversely affected by significant catastrophe losses, resulting primarily from
the earthquake in California.
REINSURANCE ASSUMED
Premiums from reinsurance assumed, which is primarily treaty reinsurance
assumed from the Sun Alliance Group plc, represent approximately 8% of our total
premium writings. Premiums increased 30.1% in the first quarter of 1995 compared
with the same period in 1994 due primarily to an increase in our participation
in the business of Sun Alliance. Underwriting results for this segment improved
in the first quarter of 1995 compared with the same period in 1994, but remained
modestly unprofitable.
REGULATORY INITIATIVES
In 1988, voters in California approved Ballot Proposition 103, an insurance
reform initiative affecting most property and casualty insurers writing business
in the state. Provisions of Proposition 103 would have required insurers to roll
back property and casualty rates for certain lines of business to 20 percent
below November 1987 levels and would have required an additional 20 percent
reduction in automobile rates by November 1989. In 1989, the California Supreme
Court, ruling on the constitutional challenge to Proposition 103, held that an
insurer is entitled to a fair rate of return. In the years following the
approval of Proposition 103, the California Insurance Department established
regulations to implement its provisions. In 1994, the California Supreme Court
upheld these regulations after numerous legal challenges.
In May 1995, the property and casualty subsidiaries reached an agreement
with the California Department of Insurance to refund premiums (including
interest) of approximately $6.6 million related to business written during the
rollback period. The agreement settles all rollback refund obligations of the
property and casualty subsidiaries related to Proposition 103.
Under the California Insurance Code, the Insurance Commissioner has the
authority to grant an administrative hearing to consumer groups or other
interested parties who wish to object to the rollback settlement. It is not
known whether such a hearing will be requested, or whether the Commissioner will
grant such a request. Management believes that if a hearing is granted, the
settlement agreement will ultimately be upheld.
LOSS RESERVES
Loss reserves, net of reinsurance recoverable, increased by $115.9 million
during the first quarter of 1995.
In February 1995, the 1993 agreement between Pacific Indemnity Company, a
subsidiary of the Corporation, and Continental Casualty Company (a subsidiary of
CNA Financial Corporation) for the handling of all asbestos-related bodily
injury claims pending on August 26, 1993 against Fibreboard Corporation was
amended. The amendment extends for several years the period over which Pacific
Indemnity will pay its remaining obligation, plus interest, under the agreement.
Prior to such amendment, Pacific Indemnity's payment obligations under this
agreement were to have been completed by March 1, 1995. Pacific Indemnity's
obligation under this agreement is not expected to exceed $635 million, of which
<PAGE> 12
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approximately $477 million remained unpaid at March 31, 1995. A further
discussion of the Fibreboard settlement is incorporated by reference from Item 7
of the Corporation's Form 10-K for the year ended December 31, 1994.
Losses incurred related to asbestos and toxic waste claims were $45.2
million in the first quarter of 1995 and $25.0 million in 1994.
INVESTMENTS
Investment income after deducting expenses and taxes increased by 6.0% in
the first quarter of 1995 over the comparable period in 1994. The growth was due
to an increase in invested assets since the first quarter of 1994, reflecting
strong cash flow from operations. The effective tax rate on investment income
increased to 16.3% in the first quarter of 1995 from 14.7% in the first quarter
of 1994 due to holding a larger proportion of our investment portfolio in
taxable securities.
In the first quarter of 1995, new cash was invested primarily in tax-exempt
bonds. The level of purchases of taxable bonds approximated the level of sales
and maturities of such bonds in the first quarter of 1995. However, as the
result of the amendment to the agreement between Pacific Indemnity and
Continental Casualty, approximately $480 million of the taxable bonds purchased
during the first quarter of 1995 were included in funds held for asbestos-
related settlement rather than in invested assets since these assets accrue
income for the benefit of participants in the class settlement of
asbestos-related bodily injury claims against Fibreboard.
We maintain investments in highly liquid short term securities at all times
to provide for immediate cash needs. At March 31, 1995, such securities remained
at a higher than normal level. Such levels of liquidity will be somewhat lower
in future periods as the payout period of Fibreboard related amounts has been
extended.
LIFE AND HEALTH INSURANCE
The life and health insurance subsidiaries earnings after taxes were $3.5
million for the first quarter of 1995 compared with $8.1 million in 1994. Total
life and health insurance premiums and policy charges were $178.3 million in the
first quarter of 1995 compared with $224.3 million in 1994.
Premiums and policy charges for personal insurance amounted to $74.2
million in the first quarter of 1995, an increase of 19.3% from the same period
in 1994. Earnings from personal insurance were $7.7 million in the first quarter
of 1995 compared with $7.5 million in 1994.
Premium revenue for group insurance was $104.1 million in the first quarter
of 1995 compared with $162.1 million in 1994, a decrease of 35.8%. Due to
legislation which became effective in April 1993 in New York, which is our major
market, several insurers reduced their market share in the small group health
segment in 1993. We offered a competitive product and thus substantially
increased our sales in that market during 1993. The high premium revenue in the
first quarter of 1994 reflects the effect of that significant increase in sales
of new policies. Due to increased levels of competition in the small group
market as well as our significant rate increases in 1994 and in the first
quarter of 1995, many of the new policies written in 1993 were not renewed. The
decline in premium revenue in the first quarter of 1995 was expected due to this
<PAGE> 13
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increase in non-renewals. We anticipate that this trend will continue during
the remainder of 1995. Initial results of our efforts to reduce our traditional
indemnity medical business by offering managed care products through
ChubbHealth, Inc., a health maintenance organization, have been encouraging.
Group insurance operations resulted in a loss of $4.2 million in the first
quarter of 1995 compared with earnings of $0.6 million in 1994. Results were
adversely affected in both periods by a high level of claims resulting from the
increased cost of medical services and the increased utilization of those
services. Results in 1995 were also adversely affected by a decrease in premium
revenue at a greater rate than the decrease in expenses.
Gross investment income increased by 3.6% in the first quarter of 1995
compared with the same quarter of 1994. New cash was invested primarily in
mortgage-backed securities. To provide for liquidity, funds believed to be
sufficient to meet any unusual needs for cash have been maintained in short term
investments.
REAL ESTATE
Real estate operations resulted in a loss after taxes of $3.0 million for
the first quarter of 1995 compared with a loss of $0.5 million in 1994. The loss
for the first quarter of 1995 reflects a charge of $6.5 million after taxes
resulting from the initial application of Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a Loan, which
established new criteria for measuring impairment of a loan. This change in
accounting principle is discussed further in Note 2 of the Notes to Consolidated
Financial Statements.
Results were adversely affected in both periods by progressively higher
portions of interest being charged directly to expense rather than being
capitalized. Results in 1995 benefited from an increase in earnings from rental
operations and residential development.
Revenues were $68.6 million in the first quarter of 1995 compared with
$43.8 million in 1994. Revenue growth in 1995 was primarily due to higher levels
of rental revenues on owned properties and increased revenues from residential
development.
CORPORATE
Chubb Capital Corporation had outstanding $100 million of unsecured 8 5/8%
notes, the proceeds of which were loaned to our real estate subsidiaries. The
notes became due and were redeemed in January 1995. The $100 million loan to the
real estate subsidiaries from Chubb Capital was renewed.
In the first quarter of 1995, the Corporation further reduced its remaining
investment in Sun Alliance, with proceeds from the sales amounting to
approximately $63 million. These sales have not affected the ongoing business
relationship between the Corporation's property and casualty subsidiaries and
Sun Alliance.
<PAGE> 14
Page 12
INVESTMENT GAINS AND LOSSES
Decisions to sell securities are governed principally by considerations of
investment opportunities and tax consequences. As a result, realized investment
gains and losses may vary significantly from period to period. Investment gains
before taxes of $3.4 million were realized in the first quarter of 1995 compared
with gains of $15.3 million for the same period in 1994. The 1995 amount
reflects $16.1 million of investment gains from the Corporation's reduction of
its investment in Sun Alliance.
<PAGE> 15
Page 13
PART II. OTHER INFORMATION
--------------------------
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
A. Exhibit 11.1 - Computation of earnings per share.
B. Reports on Form 8-K - There were no reports on Form 8-K filed for the three
months ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Chubb Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CHUBB CORPORATION
(Registrant)
By:/s/ Henry B. Schram
------------------------------
Henry B. Schram
Senior Vice-President and
Chief Accounting Officer
Date: May 15, 1995
<PAGE> 16
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
Ex-11.1 Computation of earnings per share.
Ex-27 Financial Data Schedule
<PAGE> 1
Exhibit 11.1
THE CHUBB CORPORATION
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1995 1994
---- ----
(in millions)
<S> <C> <C>
Net income....................................... $146.7 $73.2
After-tax interest expense on 6% guaranteed
exchangeable subordinated notes................ 2.4 2.4
------ -----
Net income for computing earnings per share...... $149.1 $75.6
====== =====
Average number of common shares outstanding...... 86.9 87.7
Additional shares from assumed conversion of
6% guaranteed exchangeable subordinated
notes as if each $1,000 of principal
amount had been converted at issuance
into 11.628 shares of common stock............. 2.9 2.9
------ -----
Average number of common and common
equivalent shares assumed outstanding for
computing earnings per share................... 89.8 90.6
====== =====
Net income per share............................. $ 1.66 $ .83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THE CHUBB CORPORATION
Financial Data Schedule(*)
(*) This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and the Consolidated Statements of Income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 6,970<F1>
<DEBT-CARRYING-VALUE> 3,672<F2>
<DEBT-MARKET-VALUE> 3,792<F3>
<EQUITIES> 588
<MORTGAGE> 12
<REAL-ESTATE> 0
<TOTAL-INVEST> 12,383
<CASH> 4
<RECOVER-REINSURE> 40<F4>
<DEFERRED-ACQUISITION> 1,124
<TOTAL-ASSETS> 21,140
<POLICY-LOSSES> 11,775<F5>
<UNEARNED-PREMIUMS> 2,359<F6>
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 1,369<F7>
<COMMON> 88
0
0
<OTHER-SE> 4,499<F8>
<TOTAL-LIABILITY-AND-EQUITY> 21,140
1,174
<INVESTMENT-INCOME> 218
<INVESTMENT-GAINS> 3
<OTHER-INCOME> 69<F9>
<BENEFITS> 787
<UNDERWRITING-AMORTIZATION> 294
<UNDERWRITING-OTHER> 113
<INCOME-PRETAX> 184
<INCOME-TAX> 37
<INCOME-CONTINUING> 147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 0
<RESERVE-OPEN> 0<F10>
<PROVISION-CURRENT> 0<F10>
<PROVISION-PRIOR> 0<F10>
<PAYMENTS-CURRENT> 0<F10>
<PAYMENTS-PRIOR> 0<F10>
<RESERVE-CLOSE> 0<F10>
<CUMULATIVE-DEFICIENCY> 0<F10>
<FN>
<F1>DEBT-HELD-FOR-SALE REPRESENTS FIXED MATURITY INVESTMENTS CLASSIFIED AS
AVAILABLE-FOR-SALE AND CARRIED AT MARKET VALUE AS PRESCRIBED BY SFAS
NO. 115.
<F2>DEBT-CARRYING-VALUE REPRESENTS FIXED MATURITY INVESTMENTS CLASSIFIED AS
HELD-TO-MATURITY AND CARRIED AT AMORTIZED COST AS PRESCRIBED BY SFAS NO.
115.
<F3>DEBT-MARKET-VALUE REPRESENTS THE RELATED MARKET VALUE OF FIXED MATURITIES
CLASSIFIED AS HELD-TO-MATURITY.
<F4>RECOVER-REINSURE REPRESENTS REINSURANCE RECOVERABLE ON PAID CLAIMS.
<F5>POLICY-LOSSES EXCLUDE THE REDUCTIONS FOR REINSURANCE RECOVERABLES ON
UNPAID CLAIMS ($1,968) AND POLICY LIABILITIES ($192), AS PRESCRIBED BY
SFAS NO. 113. THESE AMOUNTS ARE INCLUDED IN TOTAL ASSETS.
<F6>UNEARNED-PREMIUMS EXCLUDE THE REDUCTION FOR PREPAID REINSURANCE PREMIUMS
($445), AS PRESCRIBED BY SFAS NO. 113. THIS AMOUNT IS INCLUDED IN
TOTAL ASSETS.
<F7>NOTES-PAYABLE INCLUDES SHORT-TERM DEBT OF $184 AND LONG-TERM DEBT OF $1,185
<F8>OTHER-SE INCLUDES PAID-IN SURPLUS; RETAINED EARNINGS; FOREIGN CURRENCY
TRANSLATION GAINS, NET OF INCOME TAX; UNREALIZED APPRECIATION OF
INVESTMENTS, NET; RECEIVABLE FROM ESOP AND TREASURY STOCK.
<F9>OTHER-INCOME REPRESENTS REVENUES FROM REAL ESTATE OPERATIONS.
<F10>AMOUNTS FOR SECURITIES ACT INDUSTRY GUIDE 6 AND EXCHANGE ACT INDUSTRY
GUIDE 4 DISCLOSURES ARE REQUIRED FOR ANNUAL FILINGS ONLY. ACCORDINGLY,
NO AMOUNTS WILL BE REPORTED FOR INTERIM FILINGS.
</FN>
</TABLE>
