<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 June 30, 1996
-------------------------
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
-------------
THE CHUBB CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-2595722
- ------------------------------- --------------------
(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 July 31, 1996 was
174,279,753.
<PAGE> 2
THE CHUBB CORPORATION
INDEX
Page Number
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995.......................... 1
Consolidated Statements of Income for the
Three Months and Six Months Ended June 30, 1996 and 1995..... 2
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995...................... 3
Notes to Consolidated Financial Statements.................... 4
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations.............. 7
Part II. Other Information:
Item 4 - Submission of Matters to a Vote of Security Holders.... 14
Item 6 - Exhibits and Reports on Form 8-K....................... 16
<PAGE> 3
Page 1
THE CHUBB CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
--------- ---------
(in millions)
<S> <C> <C>
Assets
Invested Assets
Short Term Investments............................... $ 540.7 $ 484.5
Fixed Maturities
Held-to-Maturity
Tax Exempt (market $2,697.8 and $3,004.8)......... 2,585.4 2,826.7
Taxable (market $406.1 and $433.9)................ 395.7 402.5
Available-for-Sale
Tax Exempt (cost $4,069.2 and $3,607.9)........... 4,207.5 3,860.6
Taxable (cost $5,680.0 and $5,282.7).............. 5,688.4 5,513.0
Equity Securities (cost $516.3 and $493.4)........... 618.5 587.8
Policy and Mortgage Loans............................ 219.5 212.3
--------- ---------
TOTAL INVESTED ASSETS......................... 14,255.7 13,887.4
Cash................................................... 6.4 11.9
Accrued Investment Income.............................. 233.6 245.3
Premiums Receivable.................................... 1,033.2 872.9
Reinsurance Recoverable on Property and Casualty
Unpaid Claims......................................... 1,753.9 1,973.7
Prepaid Reinsurance Premiums........................... 355.9 484.4
Funds Held for Asbestos-Related Settlement............. 828.3 1,038.1
Deferred Policy Acquisiton Costs
Property and Casualty Insurance...................... 586.2 558.7
Life and Health Insurance............................ 676.3 612.7
Real Estate Assets..................................... 1,754.0 1,742.6
Deferred Income Tax.................................... 271.5 159.7
Other Assets........................................... 1,270.5 1,409.1
--------- ---------
TOTAL ASSETS.................................. $23,025.5 $22,996.5
========= =========
Liabilities
Property and Casualty Unpaid Claims.................... $ 9,510.6 $ 9,588.2
Life and Health Policy Liabilities..................... 3,080.2 2,943.1
Unearned Premiums...................................... 2,560.0 2,570.7
Short Term Debt........................................ 243.5 187.6
Long Term Debt......................................... 1,079.9 1,156.0
Dividend Payable to Shareholders....................... 47.3 42.7
Accrued Expenses and Other Liabilities................. 1,229.0 1,245.5
--------- ---------
TOTAL LIABILITIES............................. 17,750.5 17,733.8
--------- ---------
Shareholders' Equity
Common Stock - $1 Par Value; 175,622,794 and
87,819,355 Shares (Note 5)............................ 175.6 87.8
Paid-In Surplus........................................ 686.7 778.2
Retained Earnings...................................... 4,437.7 4,206.5
Foreign Currency Translation Losses, Net of Income Tax. (16.1) (3.4)
Unrealized Appreciation of Investments, Net............ 154.6 345.9
Receivable from Employee Stock Ownership Plan.......... (110.7) (115.0)
Treasury Stock, at Cost - 1,248,278 and
518,468 Shares (Note 5)............................... (52.8) (37.3)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.................... 5,275.0 5,262.7
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $23,025.5 $22,996.5
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
Page 2
THE CHUBB CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
PERIODS ENDED JUNE 30
<TABLE>
<CAPTION>
Second Quarter Six Months
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
(in millions)
<S> <C> <C> <C> <C>
Revenues
Premiums Earned and Policy Charges.... $1,228.0 $1,177.3 $2,490.4 $2,351.1
Investment Income..................... 232.7 218.8 466.8 437.1
Real Estate........................... 51.0 79.4 217.4 148.0
Realized Investment Gains............. 15.1 50.3 37.1 53.7
-------- -------- -------- --------
Total Revenues................. 1,526.8 1,525.8 3,211.7 2,989.9
-------- -------- -------- --------
Benefits, Claims and Expenses
Insurance Claims and Policyholders'
Benefits............................. 815.9 788.4 1,707.7 1,575.3
Amortization of Deferred Policy
Acquisition Costs.................... 333.9 294.0 661.6 587.7
Other Insurance Operating Costs and
Expenses............................. 97.7 118.4 204.7 231.0
Real Estate Cost of Sales and Expenses 46.1 73.3 206.0 147.2
Investment Expenses................... 3.7 3.6 8.8 8.3
Corporate Expenses.................... 7.4 7.5 14.7 15.8
-------- -------- -------- --------
Total Benefits, Claims and
Expenses...................... 1,304.7 1,285.2 2,803.5 2,565.3
-------- -------- -------- --------
Income Before Federal and Foreign
Income Tax............................. 222.1 240.6 408.2 424.6
Federal and Foreign Income Tax.......... 47.8 55.6 82.5 92.9
-------- -------- -------- --------
Net Income.............................. $ 174.3 $ 185.0 $ 325.7 $ 331.7
======== ======== ======== ========
Average Common and Common Equivalent
Shares Outstanding (In Thousands)...... 180,416 179,756 180,436 179,646
PER SHARE DATA
- --------------
Net Income.............................. $ .98 $ 1.04 $ 1.83 $ 1.87
Dividends Declared...................... .27 .24 1/2 .54 .49
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
Page 3
THE CHUBB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(in millions)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income............................................. $ 325.7 $ 331.7
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Increase in Property and Casualty Unpaid Claims, Net. 142.2 286.7
Increase in Unearned Premiums, Net................... 117.8 107.1
Increase in Premiums Receivable...................... (160.3) (153.9)
Decrease (Increase) in Funds Held for Asbestos-
Related Settlement.................................. 209.8 (483.6)
Decrease in Medical Malpractice Reinsurance
Related Receivable.................................. 191.2 -
Increase in Deferred Policy Acquisiton Costs......... (56.9) (62.0)
Realized Investment Gains............................ (37.1) (53.7)
Other, Net........................................... (19.0) 52.7
--------- ---------
Net Cash Provided by Operating Activities.............. 713.4 25.0
--------- ---------
Cash Flows from Investing Activities
Proceeds from Sales of Fixed Maturities................ 2,049.0 1,786.8
Proceeds from Maturities of Fixed Maturities........... 702.5 324.9
Proceeds from Sales of Equity Securities............... 161.4 286.3
Purchases of Fixed Maturities.......................... (3,353.3) (2,609.9)
Purchases of Equity Securities......................... (157.4) (86.1)
Decrease (Increase) in Short Term Investments, Net..... (56.2) 224.6
Increase (Decrease) in Net Payable from Security
Transactions Not Settled.............................. (7.5) 119.1
Additions to Real Estate Assets, Net................... (20.0) (25.3)
Other, Net............................................. (54.6) (72.1)
--------- ---------
Net Cash Used in Investing Activities.................. (736.1) (51.7)
--------- ---------
Cash Flows from Financing Activities
Deposits Credited to Policyholder Funds................ 227.9 241.4
Withdrawals from Policyholder Funds.................... (82.8) (68.9)
Proceeds from Issuance of Long Term Debt............... 2.0 151.5
Repayment of Long Term Debt............................ (78.1) (269.7)
Increase in Short Term Debt, Net....................... 55.9 48.2
Dividends Paid to Shareholders......................... (89.9) (82.4)
Repurchase of Shares................................... (34.0) -
Other, Net............................................. 16.2 9.6
--------- ---------
Net Cash Provided by Financing Activities.............. 17.2 29.7
--------- ---------
Net Increase (Decrease) in Cash.......................... (5.5) 3.0
Cash at Beginning of Year................................ 11.9 5.6
--------- ---------
Cash at End of Period.................................. $ 6.4 $ 8.6
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
Page 4
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 1995
Annual Report to Shareholders.
2) Discontinued Operations
In the second quarter of 1996, the Corporation announced a
plan to exit the group health insurance business. A definitive
agreement was reached on May 31, 1996 with Healthsource Inc. under
which Healthsource will acquire the Corporation's 85% interest in
ChubbHealth, Inc., a health maintenance organization, for $25 million.
The sale is subject to regulatory approvals and is expected to be
completed no later than the second quarter of 1997. Also, the life and
health insurance subsidiaries discontinued the marketing of traditional
group health indemnity business. Due to various contractual and
regulatory requirements, group health indemnity coverages will be
renewed in certain jurisdictions until an orderly transition to another
carrier or termination of coverage can occur.
The group health insurance operations have been accounted for
as discontinued operations. However, the Corporation's results of
operations for periods prior to the second quarter of 1996 have not
been restated since amounts attributable to the group health insurance
business were not significant. It is expected that the sale of
ChubbHealth will result in an after tax gain of approximately $15
million which will be substantially offset by costs relating to the
life and health insurance subsidiaries' exit from the traditional
indemnity business. The discontinued group health business had
no effect on net income in the second quarter of 1996. Results of the
discontinued group health insurance operations included in the
consolidated statements of income were as follows:
<TABLE>
<CAPTION>
Periods Ended June 30
---------------------------------
Second Quarter Six Months
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
(in millions)
<S> <C> <C> <C>
Premiums earned........................ - $82.5 $57.5 $186.6
Net loss............................... - (1.9) (1.0) (6.1)
</TABLE>
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.
<PAGE> 7
Page 5
The net change in unrealized appreciation or depreciation of
investments carried at market value was as follows:
<TABLE>
<CAPTION>
Periods Ended June 30
----------------------------------------------------
Second Quarter Six Months
------------------- ----------------------
1996 1995 1996 1995
------- ------- ------- -------
(in millions)
<S> <C> <C> <C> <C>
Change in unrealized appreciation of
equity securities ................. $ 4.2 $ 1.9 $ 7.8 $ 43.9
Change in unrealized appreciation or
depreciation of fixed maturities .. (103.8) 166.7 (336.3) 427.3
Change in deferred policy acquisition
cost adjustment ................... 7.0 (30.7) 34.2 (60.0)
------- ------- ------- -------
(92.6) 137.9 (294.3) 411.2
Deferred income tax (credit), net of
change in valuation allowance ...... (32.4) 48.2 (103.0) 94.2
------- ------- ------- -------
Change in unrealized appreciation or
depreciation of investments, net ... $ (60.2) $ 89.7 $(191.3) $ 317.0
======= ======= ======= =======
</TABLE>
A valuation allowance of $49.6 million was provided at
December 31, 1994 related to future tax benefits on unrealized
depreciation of investments carried at market value. At March 31, 1995,
there was unrealized appreciation of such investments. Therefore, the
valuation allowance was eliminated in the first quarter of 1995. The
valuation allowance had no impact on net income.
4) Property and Casualty Unpaid Claims
A discussion of the 1993 Fibreboard asbestos-related
settlement is presented in Note 14 of the notes to consolidated
financial statements in the 1995 Annual Report to Shareholders. The
following developments during 1996 relate to the settlement.
In July 1996, the United States Court of Appeals for the Fifth
Circuit affirmed the 1995 judgment of the United States District Court
of the Eastern District of Texas, which approved the global settlement
agreement among Pacific Indemnity Company (a subsidiary of the
Corporation), Continental Casualty Company (a subsidiary of CNA
Financial Corporation), Fibreboard Corporation and attorneys
representing claimants against Fibreboard for all future
asbestos-related bodily injury claims against Fibreboard, which are
claims that were not filed in court before August 27, 1993. The Court
also affirmed the approval of the trilateral agreement among Pacific
Indemnity, Continental Casualty and Fibreboard to settle all pending
and future asbestos-related bodily injury claims resulting from
insurance policies that were, or may have been, issued to Fibreboard by
the two insurers. The trilateral agreement will be triggered if the
global settlement agreement is disapproved. The affirmation of these
agreements will have no effect on the amount of loss reserves provided
for the setttlement. While there may be a request for review by the
entire Fifth Circuit as well as an appeal to the United States Supreme
Court, management is optimistic that the approval of the settlement
will be upheld. However, if both the global settlement agreement and
the trilateral agreement are disapproved, there can be no assurance
that the loss reserves established for future claims would be
sufficient to pay all amounts which ultimately could become payable in
respect of future asbestos-related bodily injury claims against
Fibreboard.
<PAGE> 8
Page 6
5) Shareholders' Equity
On March 1, 1996, the Board of Directors approved a
two-for-one stock split payable to shareholders of record as of April
19, 1996. Accordingly, in the consolidated balance sheet at June 30,
1996, the shares of common stock issued and the shares held as treasury
stock reflect the effect of the stock split.
At the same time, the Board of Directors approved an increase
in the number of authorized shares of common stock of the Corporation
from 300 million shares to 600 million shares.
6) 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. The number of
shares and per share amounts have been retroactively adjusted to
reflect the two-for-one stock split.
<PAGE> 9
Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
1995 AND FOR THE QUARTERS ENDED JUNE 30, 1996 AND 1995
PROPERTY AND CASUALTY INSURANCE
Earnings from our property and casualty business were modestly lower in
the first six months of 1996 compared with the same period of 1995. The decrease
in 1996 was due in large part to higher catastrophe losses, resulting primarily
from the winter storms in the eastern part of the United States in the first
quarter. Investment income increased in 1996 compared with 1995. Property and
casualty income after taxes amounted to $269.9 million in the first six months
of 1996 and $149.6 million in the second quarter compared with $278.6 million
and $136.6 million, respectively, in 1995.
Net premiums written were $2.4 billion in the first six months of 1996
and $1.3 billion in the second quarter, representing increases of 12.5% and
10.4%, respectively, over the comparable periods of 1995. More than half of the
premium growth was due to changes in certain reinsurance agreements which are
discussed below. The marketplace continued to be competitive, particularly in
the commercial classes. Price increases continued to be difficult to achieve.
Substantial premium growth was achieved outside the United States from our
expanding international branch network.
Effective January 1, 1996, the agreements pertaining to the exchange of
reinsurance on a quota share basis with the Sun Alliance Group plc were amended
to reduce the portion of each company's business that is reinsured with the
other. The Corporation's property and casualty subsidiaries now retain a greater
portion of the business they write directly and assume less reinsurance from Sun
Alliance. As a result of these changes in retention, net premiums written in the
first six months of 1996 increased by $31.4 million for the personal classes and
$67.5 million for the commercial classes and decreased by $23.0 million for
reinsurance assumed. There was an additional impact on net premiums written in
the first quarter of 1996 due to the effect of the portfolio transfers of
unearned premiums as of January 1, 1996 resulting from these changes. The effect
of these portfolio transfers was an increase in net premiums written of $30.6
million for the personal classes and $61.0 million for the commercial classes
and a decrease of $65.2 million for reinsurance assumed.
Also, effective January 1, 1996, our casualty excess of loss reinsurance
program was modified, principally for excess liability and executive protection
coverages. The changes include an increase in the initial retention for each
loss from $5 million to $10 million and an increase in the initial aggregate
amount of losses retained for each year before reinsurance becomes available.
These changes in our casualty reinsurance program increased net premiums written
in the first six months of 1996 by approximately $55 million.
Underwriting results were profitable in 1996 and 1995. Our combined loss
and expense ratio was 98.8% in the first six months of 1996 and 96.3% in the
second quarter compared with 96.3% and 96.4%, respectively, in 1995.
<PAGE> 10
Page 8
The loss ratio was 66.6% for the first six months of 1996 and 64.3% for
the second quarter compared with 63.9% and 64.5%, respectively, in the prior
year. The loss ratios continue to reflect the favorable experience resulting
from the consistent application of our disciplined underwriting standards.
Catastrophe losses in the first six months of 1996 amounted to $83.9 million
which represented 3.7 percentage points of the loss ratio compared with $49.1
million or 2.5 percentage points in 1995. Catastrophe losses for the second
quarter of 1996 amounted to $10.9 million or 1.0 percentage point of the loss
ratio compared with $42.7 million or 4.2 percentage points in 1995.
Our expense ratio was 32.2% for the first six months of 1996 and 32.0%
for the second quarter compared with 32.4% and 31.9%, respectively, in 1995.
The discussion of underwriting results reflects certain
reclassifications to present results in a manner more consistent with the way
the property and casualty business is now managed. Prior period amounts have
been restated to conform with the new presentation.
Underwriting results during 1996 and 1995 by class of business were as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------------------
Net Premiums Combined Loss and
Written Expense Ratios
----------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C>
Personal Insurance
Automobile........................ $ 121.9 $ 99.4 85.5% 90.4%
Homeowners........................ 274.7 217.9 112.6 93.5
Other............................. 130.3 105.5 67.5 73.9
-------- -------- ----- -----
Total Personal................ 526.9 422.8 95.3 87.9
-------- -------- ----- -----
Commercial Insurance
Multiple Peril.................... 325.7 275.6 118.2 106.4
Casualty.......................... 421.8 375.1 111.2 111.2
Workers' Compensation............. 128.0 106.2 96.3 96.8
Property and Marine............... 255.2 214.6 93.0 87.5
Executive Protection.............. 381.6 319.3 81.6 81.9
Other............................. 275.8 248.0 87.4 100.8
-------- -------- ----- -----
Total Commercial.............. 1,788.1 1,538.8 99.0 98.3
-------- -------- ----- -----
Reinsurance Assumed................. 68.6 157.6 N/M 101.4
-------- -------- ----- -----
Total......................... $2,383.6 $2,119.2 98.8% 96.3%
======== ======== ===== =====
</TABLE>
The combined loss and expense ratio for Reinsurance Assumed was not meaningful
for the first six months of 1996 due to the effect of the portfolio transfer of
unearned premiums on the expense ratio.
<PAGE> 11
Page 9
<TABLE>
<CAPTION>
Quarter Ended June 30
----------------------------------------
Net Premiums Combined Loss and
Written Expense Ratios
----------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C>
Personal Insurance
Automobile........................ $ 62.3 $ 53.6 81.8% 90.3%
Homeowners........................ 144.6 123.5 98.2 99.6
Other............................. 65.4 57.5 69.6 71.9
-------- -------- ----- -----
Total Personal................ 272.3 234.6 87.5 90.7
-------- -------- ----- -----
Commercial Insurance
Multiple Peril.................... 167.2 152.2 117.4 112.2
Casualty.......................... 213.1 195.7 108.7 111.9
Workers' Compensation............. 55.1 50.1 97.0 95.8
Property and Marine............... 143.8 122.6 87.9 79.8
Executive Protection.............. 200.6 168.1 82.8 77.6
Other............................. 136.8 138.6 88.3 100.8
-------- -------- ----- -----
Total Commercial.............. 916.6 827.3 98.1 97.6
-------- -------- ----- -----
Reinsurance Assumed................. 66.9 75.4 107.6 101.3
-------- -------- ----- -----
Total......................... $1,255.8 $1,137.3 96.3% 96.4%
======== ======== ===== =====
</TABLE>
PERSONAL INSURANCE
Premiums from personal insurance coverages, which represent
approximately 22% of the premiums written by our property and casualty insurance
subsidiaries, increased 24.6% in the first six months of 1996 and 16.1% in the
second quarter compared with the similar periods in 1995. More than half of such
growth in the first six months of 1996 was due to the changes in the reinsurance
agreement with Sun Alliance which resulted in the portfolio transfer of unearned
premiums as of January 1, 1996 as well as an increase in our retention
percentage for these classes. Similarly, almost half of the growth in the second
quarter for these classes was due to the increase in our retention. Excluding
the effects of the changes in the reinsurance agreement, homeowners and other
non-automobile premiums increased due to further progress made to increase
premiums written in non-catastrophe prone areas and personal automobile premiums
increased as a result of an increase in the number of in-force policies for high
value automobiles.
Our personal insurance business produced less profitable underwriting
results in the first six months of 1996 than the highly profitable results in
the prior year due to the adverse effect of significant catastrophe losses in
the first quarter. The combined loss and expense ratios were 95.3% for the first
six months of 1996 and 87.5% for the second quarter compared with 87.9% and
90.7%, respectively, in 1995.
Homeowners results were unprofitable in the first six months of 1996
compared with profitable results in the same period in 1995. Significant
weather-related catastrophe losses adversely affected homeowners results in the
first six months of both years, but more so in 1996. Catastrophe losses for this
class represented 23.7 percentage points of the loss ratio for the first six
months of 1996 and 5.2 percentage points for the second quarter compared
<PAGE> 12
Page 10
with 12.9 and 21.9 percentage points, respectively, in the comparable 1995
periods. Homeowners results in 1995 also benefited from fewer large losses.
Other personal coverages, which include insurance for personal valuables and
excess liability, produced highly profitable results in 1996 and 1995 due to
continued favorable loss experience. Our automobile business produced profitable
results in 1996 and 1995 due primarily to stable loss frequency and severity.
COMMERCIAL INSURANCE
Premiums from commercial insurance, which represent approximately 75% of
our total writings, increased by 16.2% in the first six months of 1996 and 10.8%
in the second quarter compared with the similar periods in 1995. Approximately
half of the growth in premiums in the first six months of 1996 was due to the
changes in the reinsurance agreement with Sun Alliance which resulted in the
portfolio transfer of unearned premiums as of January 1, 1996 as well as an
increase in our retention percentage for these classes. Similarly, 40% of the
growth in the second quarter for these classes was due to the increase in our
retention. In addition, premium growth in 1996 for the excess liability
component of our casualty coverages and for our executive protection coverages
benefited from the changes in our casualty excess of loss reinsurance program.
Excluding the effects of the changes in our reinsurance agreements, premium
growth was due primarily to the selective writing of new accounts and exposure
growth on existing business. The competitive market has continued to place
significant pressure on prices and has made price increases difficult to achieve
for most coverages. Premium growth for property and marine, executive protection
and financial institution coverages was strong outside the United States.
Our commercial insurance business produced modestly profitable
underwriting results in 1996 and 1995. The combined loss and expense ratios were
99.0% for the first six months of 1996 and 98.1% for the second quarter compared
with 98.3% and 97.6%, respectively, in 1995.
Multiple peril results deteriorated substantially in 1996 compared with
1995 due in large part to an increase in catastrophe losses in the property
component of this business and an increase in the frequency of large losses in
the liability component. Catastrophe losses in the first six months of 1996
represented 5.1 percentage points of the loss ratio for this class compared with
only 1.6 percentage points in 1995.
Results for our casualty business were similarly unprofitable in 1996
and 1995. Casualty results were adversely affected in both years by increases in
loss reserves for asbestos-related and toxic waste claims. The excess liability
component of our casualty coverages has remained profitable due to favorable
loss experience in this class. Results in the automobile component were also
profitable in 1996 and 1995.
Workers' compensation results were profitable in 1996 and 1995. Results
in our voluntary business have benefited from reform of the benefit provisions
of workers' compensation laws in many states and the impact of medical cost
containment and disability management activities. Results from our share of the
involuntary pools and mandatory business in which we must participate by law
also benefited from these positive factors.
<PAGE> 13
Page 11
Property and marine results were profitable in 1996 and 1995. Results in
both years benefited from stable loss frequency and severity.
Executive protection results were highly profitable in 1996 and 1995 due
to favorable loss experience. Our financial institutions business produced more
profitable results in 1996 than in 1995. The financial fidelity portion of this
business was highly profitable in both years. The non-fidelity results were
adversely affected in 1995 by significant catastrophe losses in the second
quarter. Results in our other commercial classes improved in 1996 compared with
1995, but remained modestly unprofitable. The improvement was primarily in
surety results which were profitable in 1996 compared with unprofitable results
in 1995 due to several large losses.
REINSURANCE ASSUMED
Reinsurance assumed is treaty reinsurance assumed primarily from Sun
Alliance. The substantial decrease in premiums written in the first six months
of 1996 compared with the same period in 1995 was due to the effects of the
changes in the reinsurance agreement with Sun Alliance whereby the Corporation's
property and casualty subsidiaries assume less reinsurance from Sun Alliance.
The impact on net written premiums was particularly significant due to the first
quarter effect of the $65 million portfolio transfer of unearned premiums back
to Sun Alliance as of January 1, 1996.
Underwriting results for this segment were somewhat unprofitable in the
first six months of 1996 compared with near breakeven results in the prior year.
LOSS RESERVES
Loss reserves, net of reinsurance recoverable, increased by $142.2
million during the first six months of 1996. The increase would have been
greater except that loss reserves were reduced by $216.0 million in the
second quarter as the result of payments in that amount related to the 1993
Fibreboard asbestos-related settlement. Substantial reserve growth continued to
occur in those liability coverages, primarily excess liability and executive
protection, that are characterized by delayed loss reporting and extended
periods of settlement. Loss reserves also increased by approximately $35
million due to the net effect of the portfolio transfers of unpaid claims as of
January 1, 1996 resulting from the changes in the reinsurance agreements
between the Corporation's property and casualty subsidiaries and Sun Alliance.
Losses incurred related to asbestos and toxic waste claims were $76.9
million in the first six months of 1996 and $91.1 million for the same period in
1995.
A discussion of the 1993 Fibreboard asbestos-related settlement is
incorporated by reference from Item 7 of the Corporation's Form 10-K for the
year ended December 31, 1995. The following developments during 1996 relate to
the settlement. In July 1996, the United States Court of Appeals for the Fifth
Circuit affirmed the 1995 judgment of the United States District Court of the
Eastern District of Texas, which approved the global settlement agreement among
Pacific Indemnity Company (a subsidiary of the Corporation), Continental
Casualty Company (a subsidiary of CNA Financial Corporation), Fibreboard
Corporation and attorneys representing claimants against Fibreboard for all
future asbestos-related bodily injury claims against Fibreboard, which are
claims that were not filed in court before August 27, 1993. The Court also
affirmed the approval of the trilateral
<PAGE> 14
Page 12
agreement among Pacific Indemnity, Continental Casualty and Fibreboard to settle
all pending and future asbestos-related bodily injury claims resulting from
insurance policies that were, or may have been, issued to Fibreboard by the two
insurers. The trilateral agreement will be triggered if the global settlement
agreement is disapproved. The affirmation of these agreements will have
no effect on the amount of loss reserves provided for the settlement. While
there may be a request for review of either or both of these agreements by the
entire Fifth Circuit as well as an appeal to the United States Supreme Court,
management remains optimistic that the settlement will be upheld. However, if
both the global settlement agreement and the trilateral agreement are
disapproved, there can be no assurance that the loss reserves established for
future claims would be sufficient to pay all amounts which ultimately could
become payable in respect of future asbestos-related bodily injury claims
against Fibreboard.
INVESTMENTS
Investment income after deducting expenses and taxes increased by 7.2%
in the first six months of 1996 and 7.3% in the second quarter compared with the
same periods in 1995. The growth was due to an increase in invested assets since
the second quarter of 1995, reflecting strong cash flow from operations. The
effective tax rate on investment income was 15.5% in both the first six months
of 1996 and 1995.
In the first six months of 1996, new cash was invested in tax-exempt
bonds and taxable bonds. We maintain investments in highly liquid, short term
securities at all times to provide for immediate cash needs.
LIFE AND HEALTH INSURANCE
Life and health insurance earnings after taxes were $16.8 million for
the first six months of 1996 compared with $12.4 million in 1995.
Premiums and policy charges for personal insurance amounted to $167.1
million in the first six months of 1996, an increase of 9.6% over the comparable
period in 1995. Earnings from personal insurance were $17.8 million in the first
six months of 1996 compared with $18.5 million in 1995. The earnings decrease is
due to high mortality in 1996, particularly in the second quarter; this was
offset in part by operating efficiencies realized from the consolidation of
service centers in 1995.
In the second quarter of 1996, the Corporation announced a plan to exit
the group health insurance business. A definitive agreement was reached on May
31 with Healthsource Inc. under which Healthsource will acquire the
Corporation's 85% interest in ChubbHealth, Inc., a health maintenance
organization, for $25 million. The sale is subject to regulatory approvals and
is expected to be completed no later than the second quarter of 1997. Also, the
life and health insurance subsidiaries discontinued the marketing of traditional
group health indemnity business. Due to various contractual and regulatory
requirements, group health indemnity coverages will be renewed in certain
jurisdictions until an orderly transition to another carrier or termination of
coverage can occur.
<PAGE> 15
Page 13
The group health insurance operations have been accounted for as
discontinued operations. However, the Corporation's results of operations for
periods prior to the second quarter of 1996 have not been restated since amounts
attributable to the group health insurance business were not significant. It is
expected that the sale of ChubbHealth will result in an after tax gain of
approximately $15 million which will be substantially offset by costs relating
to our exit from the traditional indemnity business. The discontinued group
health business had no effect on net income in the second quarter of 1996.
Results of the discontinued group health insurance operations included in the
consolidated statements of income were as follows:
<TABLE>
<CAPTION>
Periods Ended June 30
---------------------------------------
Second Quarter Six Months
-------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C>
Premiums earned ............. - $82.5 $57.5 $186.6
Net loss ................... - (1.9) (1.0) (6.1)
</TABLE>
Gross investment income increased by 4.8% in the first six months of
1996 compared with the same period in 1995. Excluding investment income related
to the discontinued group health insurance operations, gross investment income
increased by 9.0% in the first six months of 1996. Such growth was due to an
increase in invested assets since the second quarter of 1995. The new cash
available for investment was due primarily to increases in deposits credited to
policyholder funds. In the first six months of 1996, new cash was invested
primarily in corporate bonds. To provide for liquidity, funds believed to be
sufficient to meet any unusual needs for cash have been maintained in short term
securities.
REAL ESTATE
Real estate earnings after taxes were $7.0 million for the first six
months of 1996 compared with $0.5 million in 1995. Real estate earnings in 1996
benefited from the sale of several rental properties in the first quarter.
Results in 1995 reflect a first quarter 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.
Revenues were $217.4 million in the first six months of 1996 compared
with $148.0 million in 1995. The increase in 1996 was due to the sale of rental
properties.
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. Net
investment gains before taxes of $37.1 million were realized in the first six
months of 1996 compared with net gains of $53.7 million for the same period in
1995.
<PAGE> 16
Page 14
PART II. OTHER INFORMATION
--------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Annual Meeting of Shareholders of The Chubb Corporation was held on
April 23, 1996. Matters submitted to Shareholders at the meeting were as
follows (the number of votes cast has not been adjusted to reflect the
two-for-one stock split effective April 19, 1996):
Votes were cast in the following manner in connection with the election
of each Director to serve until the next Annual Meeting of Shareholders.
Votes Against
Director Votes For or Withheld
- -------- --------- -----------
John C. Beck 75,306,310 25,864
James I. Cash, Jr. 75,284,974 47,200
Percy Chubb, III 75,008,414 323,760
Joel J. Cohen 75,007,222 324,952
David H. Hoag 75,305,793 26,381
Robert V. Lindsay 75,291,391 40,783
Thomas C. MacAvoy 75,299,710 32,464
Gertrude G. Michelson 75,295,845 36,329
Dean R. O'Hare 75,285,342 46,832
Warren B. Rudman 75,294,875 37,299
David G. Scholey 75,005,138 327,036
Raymond G. H. Seitz 75,008,384 323,790
Lawrence M. Small 75,305,300 26,874
Richard D. Wood 75,289,791 42,383
For each Director, there were 218,084 abstaining votes. There were no
broker non-votes cast.
Votes were cast in the following manner in connection with the proposal
to approve The Chubb Corporation Annual Incentive Compensation Plan (1996).
Votes For Votes Against
--------- -------------
72,339,258 2,279,126
There were 931,874 abstaining votes and no broker non-votes cast.
Votes were cast in the following manner in connection with the proposal
to approve The Chubb Corporation Long-Term Stock Incentive Plan (1996).
Votes For Votes Against
--------- -------------
55,112,802 14,690,450
There were 883,210 abstaining votes and 4,863,796 broker non-votes cast.
<PAGE> 17
Page 15
Votes were cast in the following manner in connection with the proposal
to approve The Chubb Corporation Stock Option Plan for Non-Employee Directors
(1996).
Votes For Votes Against
--------- -------------
64,957,063 4,685,191
There were 1,044,208 abstaining votes and 4,863,796 broker non-votes
cast.
Votes were cast in the following manner in connection with the proposal
to approve the selection of Ernst & Young LLP as the independent auditors of the
Registrant for the year 1996.
Votes For Votes Against
--------- -------------
75,241,626 141,330
There were 167,302 abstaining votes and no broker non-votes cast.
<PAGE> 18
Page 16
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
A. Exhibit 3.1 - Restated Certificate of Incorporation filed herewith
B. Exhibit 10.1 - Material Contracts
- The Chubb Corporation Annual Incentive Compensation Plan (1996)
incorporated by reference to Exhibit A of the registrant's definitive
proxy statement for the Annual Meeting of Shareholders held on April
23, 1996.
- The Chubb Corporation Long-Term Stock Incentive Plan (1996), as amended,
filed herewith.
- The Chubb Corporation Stock Option Plan for Non-Employee Directors
(1996) incorporated by reference to Exhibit C of the registrant's
definitive proxy statement for the Annual Meeting of Shareholders held
on April 23, 1996.
C. Exhibit 11.1 - Computation of earnings per share.
D. Reports on Form 8-K - There were no reports on Form 8-K filed for the three
months ended June 30, 1996.
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: August 14, 1996
<PAGE> 19
EXHIBIT INDEX
EXHIBIT NO DESCRIPTION
3.1 - Restated Certificate of Incorporation filed herewith
10.1 - Material Contracts
- The Chubb Corporation Annual Incentive Compensation Plan
(1996) incorporated by reference to Exhibit A of the registrant's
definitive proxy statement for the Annual Meeting of Shareholders
held on April 23, 1996.
- The Chubb Corporation Long-Term Stock Incentive Plan (1996), as
amended, filed herewith.
- The Chubb Corporation Stock Option Plan for Non-Employee
Directors (1996) incorporated by reference to Exhibit C of the
registrant's definitive proxy statement for the Annual Meeting
of Shareholders held on April 23, 1996.
11.1 - Computation of earnings per share.
27.1 - Financial Data Schedule.
<PAGE> 1
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE CHUBB CORPORATION
THIS IS TO CERTIFY that THE CHUBB CORPORATION, a New Jersey
corporation under and by virtue of the provisions of Title 14A of the Revised
Statutes of New Jersey and the several amendments thereof and supplements
thereto, does hereby restate and integrate its Certificate of Incorporation,
pursuant to Section 14A:9-5 of The New Jersey Business Corporation Act, as
follows:
FIRST: The name of the Corporation is THE CHUBB CORPORATION.
SECOND: The location of the current registered office in the
State of New Jersey is 15 Mountain View Road, Warren, New Jersey 07059, and the
name of the agent currently therein and in charge thereof upon whom process
against the Corporation may be served is Henry G. Gulick.
THIRD: The objects for which the Corporation is formed are as
follows:
(a) To purchase or otherwise acquire, and to own
and hold, shares of capital stock of corporations engaged in
any kind of business, including, without limitation, the
insurance business, the business of managing insurance
concerns, individual or corporate, and any other business
relating directly or indirectly to insurance; or of any
corporation owning shares of capital stock of any such
corporation; and to furnish to such corporations and concerns,
or to others, advisory, consulting or other services relating
to their businesses;
(b) To engage in any other business whatsoever,
either in addition to or in lieu of the foregoing;
(c) To act as principal, agent, partner or joint
adventurer, or in any other legal capacity, in any
transaction;
(d) To apply for, obtain, register, buy, lease,
or otherwise acquire, hold, use, own, sell, assign or
otherwise dispose of any trade marks, trade names, or
distinctive marks; any patents, inventions, improvements and
processes used in connection with or secured under letters
patent or similar letters or rights, of the United States or
any foreign country or government, and to use, develop, grant
licenses in respect of or otherwise turn to account the same;
(e) To lend and advance money or give credit to
such persons, firms, corporations or associations on such
terms as it may deem expedient;
(f) To acquire by purchase, exchange, lease,
rental, license or otherwise, to hold, develop, improve,
divide and
<PAGE> 2
subdivide, any property, real or personal, which it may deem
proper to accomplish the aforesaid purposes, and from time to
time to sell, lease, mortgage, exchange, license or otherwise
dispose of or encumber the same;
(g) To acquire and carry on all or any part of
the business or property of any corporation, association,
co-partnership or person, and to undertake in connection
therewith any liability of any corporation, association,
co-partnership or person possessed of property suitable for
any of the purposes of the Corporation or for carrying on any
business which the Corporation is authorized to carry on, and
to issue shares, stocks or obligations of the Corporation and
to pay cash as the consideration for the same, at such
valuation as the directors of the Corporation may determine;
(h) To acquire by purchase, subscription or
otherwise, and to hold, sell, assign, transfer, mortgage,
pledge or otherwise dispose of, shares of the capital stock
and bonds, debentures or other evidences of indebtedness
created by any other corporation or corporations, domestic or
foreign, and, while the holder thereof, to exercise all the
rights to vote thereon;
(i) To purchase, hold, and re-issue shares of its
capital stock;
(j) To borrow money, to make and issue promissory
notes, bills of exchange, bonds, debentures and obligations
and evidences of indebtedness of all kinds, whether secured by
mortgage, pledge or otherwise, without limit as to amount, and
to secure the same by mortgage, pledge, or otherwise;
(k) To enter into, make, perform and carry out
contracts of every sort and kind with any person, firm,
association, corporation, private, public or municipal, or
body politic and with the government of the United States or
any State, District of Columbia, territory, or Commonwealth
or possession thereof, or with any foreign government, or
any political subdivision thereof;
(l) To conduct its business in any of the States,
Commonwealths or possessions of the United States, in the
District of Columbia, and in any and all foreign countries; to
have one or more offices therein and to hold, purchase,
mortgage and convey real and personal property unlimitedly
therein;
(m) To aid by loan, guaranty or in any other
manner any corporation or association, any bonds, other
securities or evidences of indebtedness or shares of stock of
which are held by or for the Corporation or in which the
Corporation shall have any interest, and to do any other acts
or things designed to protect or enhance the value of any such
bonds,
2
<PAGE> 3
other securities or evidences of indebtedness or such shares
of stock or any other property of the Corporation;
(n) To do everything necessary, suitable,
convenient or proper for the accomplishment of any of the
purposes or the attainment of any one or more of the objects
herein enumerated or incidental to the powers herein named, or
which shall at any time appear conducive or expedient for the
protection or benefit of the Corporation, either as holder of
any interest in any property or otherwise, with all the powers
now or hereafter conferred by the laws of this State upon
corporations under the act hereinabove referred to.
The foregoing clauses shall be construed both as objects and
powers, and except where otherwise expressed, such objects and powers shall be
in no way limited or restricted by reference to or inference from the terms of
any other clauses in this Certificate of Incorporation, but the objects and
powers so specified shall be regarded as independent objects and powers, and it
is hereby expressly provided that the foregoing enumeration of specific objects
and powers shall not be held to limit or restrict in any manner the powers of
the Corporation.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is six hundred four million
(604,000,000) shares, of which six hundred million (600,000,000) shares, of the
par value of one dollar ($1) per share, amounting in the aggregate to six
hundred million dollars ($600,000,000) shall be Common Stock (hereinafter
called "Common Stock") and four million (4,000,000) shares, of the par value of
one dollar ($1) per share, amounting in the aggregate to four million dollars
($4,000,000), shall be Preferred Stock (hereinafter called "Preferred Stock").
SECTION A. PROVISIONS RELATING TO COMMON STOCK.
1. Each share of Common Stock shall have one vote and,
except as provided in Section B of this Article Fourth or by
an amendment to the Certificate of Incorporation adopted by
the Board of Directors establishing any series of Preferred
Stock, the exclusive voting power for all purposes shall be
fixed in the holders of the Common Stock.
2. Subject to the provisions of law and the
preference of the Preferred Stock, dividends may be paid on
the Common Stock of the Corporation at such time and in such
amounts as the Board of Directors may deem advisable.
3. In the event of any liquidation,
dissolution or winding up of the Corporation, whether
voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation
and the amounts to which the holders of the Preferred Stock
shall be entitled, the holders of the Common Stock shall be
entitled to share ratably in the remaining assets of the
Corporation.
SECTION B. PROVISIONS RELATING TO PREFERRED
STOCK. 1. The Preferred Stock may be issued, from time to
3
<PAGE> 4
time, in one or more series, each of such series to have such
designation and such relative voting, dividend, liquidation,
conversion and other rights, preferences and limitations as
are stated and expressed herein and in such amendment or
amendments to the Certificate of Incorporation establishing
such series as are adopted by the Board of Directors as
hereinafter provided and as are not inconsistent with this
Article Fourth.
2. Authority is hereby expressly vested in
and granted to the Board of Directors of the Corporation,
subject to the provisions of this paragraph 2, to adopt an
amendment or amendments to the Certificate of Incorporation
dividing the shares of Preferred Stock into one or more series
and, with respect to each such series, fixing the following:
(a) the number of shares to constitute such
series and the distinctive designation thereof;
(b) the annual dividend rate on the shares
of such series and the date or dates from which
dividends shall be accumulated as herein provided;
(c) the times when and the prices at which
shares of such series shall be redeemable, the
limitations and restrictions with respect to such
redemptions and the amount, if any, in addition to
any accumulated dividends thereon which the holders
of shares of such series shall be entitled to receive
upon the redemption thereof, which amount may vary at
different redemption dates and may differ in the case
of shares redeemed through the operation of any
purchase, retirement or sinking fund from the case of
shares otherwise redeemed;
(d) the amount, if any, in addition to any
accumulated dividends thereon which the holders of
shares of such series shall be entitled to receive
upon the liquidation, dissolution or winding up of
the Corporation, which amount may vary depending on
whether such liquidation, dissolution or winding up
is voluntary or involuntary and, if voluntary, may
vary at different dates;
(e) whether or not the shares of such series
shall be subject to the operation of a purchase,
retirement or sinking fund and, if so, the extent to
and manner in which such purchase, retirement or
sinking fund shall be applied to the purchase or
redemption of the shares of such series for
retirement or for other corporate purposes and the
terms and provisions relative to the operation of the
said fund or funds;
(f) whether or not the shares of such series
shall be convertible into shares of stock of any
other class or classes, or of any other series of
Preferred
4
<PAGE> 5
Stock or series of other class of shares, and if so
convertible, the price or prices, the rate or rates
of conversion and the method, if any, of adjusting
the same;
(g) the limitations and restrictions, if
any, to be effective while any shares of such series
are outstanding upon the payment of dividends or
making of other distribution on, and upon the
purchase, redemption or other acquisition by the
Corporation or any subsidiary of, the Common Stock,
or (with the exception of the Preferred Stock) any
other class or classes of stock of the Corporation
ranking on a parity with or junior to the shares of
such series either as to dividends or upon
liquidation;
(h) the conditions or restrictions, if any,
upon the creation of indebtedness of the Corporation
or of any subsidiary, or upon the issue of any
additional stock (including additional shares of such
series or of any other series or of any other class)
ranking on a parity with or prior to the shares of
such series either as to dividends or upon
liquidation;
(i) the voting powers, if any, of the series
in addition to the voting powers provided in
paragraph 12 hereof;
(j) such other preferences and relative,
participating, optional or other special rights, or
qualifications, limitations or restrictions, as shall
not be inconsistent with this Article Fourth.
The Board of Directors also shall have authority to change the
designation of shares, or the relative rights, preferences and
limitations of the shares, of any theretofore established
series of Preferred Stock, no shares of which have been
issued, and further, the Board shall have authority to
increase or decrease the number of shares of any series
previously determined by it (provided, however, that the
number of shares of any series shall not be decreased to a
number less than that of the shares of that series then
outstanding).
3. All shares of any one series of Preferred
Stock shall be identical with each other in all respects,
except that shares of any one series issued at different times
may differ as to the dates from which dividends thereon shall
be cumulative; and all series shall rank equally and be
identical in all respects, except as permitted by the
provisions of this Section B of this Article Fourth.
4. Subject to the provisions of paragraph 17
of this Section B of this Article Fourth, before any dividends
(other than dividends payable in Common Stock) on any class or
classes of stock of the Corporation ranking junior to the
Preferred Stock as to dividends shall be declared or paid or
5
<PAGE> 6
set apart for payment, the holders of shares of Preferred
Stock of each series shall be entitled to receive dividends,
but only when and as declared by the Board of Directors, at
the annual rate, and no more, fixed in the amendment to the
Certificate of Incorporation establishing such series, payable
in each year on such dates as may be fixed in such amendment
to the Certificate of Incorporation, to holders of record on
such respective dates as may be determined by the Board of
Directors in advance of the payment of each particular
dividend. With respect to each series of Preferred Stock such
dividends shall be cumulative from the date or dates fixed in
the amendment to the Certificate of Incorporation establishing
such series. No dividends shall be declared on any series of
Preferred Stock in respect of any dividend period unless there
shall likewise be or have been declared on all shares of
Preferred Stock of each other series at the time outstanding
like dividends for all dividend periods coinciding with or
ending before such dividend period, ratably in proportion to
the respective annual dividend rates fixed therefore as
hereinbefore provided. Accruals of dividends shall not bear
interest.
5. In the event of any liquidation,
dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution
of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of any class or
classes of stock of the Corporation ranking junior to the
Preferred Stock upon liquidation, the holders of each series
of shares of Preferred Stock shall be entitled to receive the
amount payable upon such liquidation, dissolution or winding
up for such series as fixed by the amendment to the
Certificate of Incorporation establishing such series, plus an
amount equal to all dividends accumulated to the date of final
distribution to such holders, but such holders shall not be
entitled to any further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of
the Corporation, or proceeds thereof, distributable among the
holders of shares of Preferred Stock shall be insufficient to
pay in full the preferential amount aforesaid, then such
assets, or the proceeds thereof, shall be distributed among
such holders ratably in accordance with the respective amounts
which would be payable on such shares if all amounts payable
thereon were paid in full. For the purposes of this paragraph
5, the voluntary sale, conveyance, lease, exchange or transfer
(for cash, shares of stock, securities or other consideration)
of all or substantially all the property or assets of the
Corporation or a consolidation or merger of the Corporation
with one or more other corporations (whether or not the
Corporation is the corporation surviving such consolidation or
merger) shall not be deemed to be a liquidation, dissolution
or winding up, voluntary or involuntary.
6. Subject to any requirements which may be
applicable to the redemption of any given series of Preferred
Stock as provided in the amendment or amendments to the
Certificate of Incorporation establishing such series
6
<PAGE> 7
of Preferred Stock, the Corporation may, at its option, except
as provided in paragraph 10 of this Section B of this Article
Fourth, redeem at any time the whole or from time to time any
part of the Preferred Stock of any series at the time
outstanding, at the redemption price or prices stated in said
amendment or amendments to the Certificate of Incorporation,
plus in every case an amount equal to all accumulated
dividends with respect to each share so to be redeemed (the
total sum so payable on any such redemption being herein
referred to as the "redemption price"). Notice of every such
redemption shall be mailed at least 30 days in advance of the
date designated for such redemption (herein called the
"redemption date") to the holders of record of shares of
Preferred Stock so to be redeemed at their respective
addresses as the same shall appear on the books of the
Corporation. In case of the redemption of a part only of any
series of Preferred Stock at the time outstanding, the shares
of such series so to be redeemed shall be selected by lot or
in such other manner as the Board of Directors may determine.
7. If said notice of redemption shall have
been given as aforesaid and if, on or before the redemption
date, the funds necessary for such redemption shall have been
set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the holders
of the shares so called for redemption, then, from and after
the redemption date, notwithstanding that any certificates for
shares of Preferred Stock so called for redemption shall not
have been surrendered for cancellation, the shares represented
thereby shall be deemed to be not issued and outstanding, the
right to receive dividends thereon shall cease to accrue from
and after the redemption date and all rights of holders of the
shares of Preferred Stock so called for redemption shall
forthwith, after the redemption date, cease and terminate,
excepting only the right to receive the redemption price
therefor but without interest. Any funds so set aside by the
Corporation, which shall not be required for such redemption
because of the exercise of any right of conversion subsequent
to the date such funds are set aside, shall revert to the
general funds of the Corporation, and any funds so set aside
by the Corporation and unclaimed at the end of six years from
the date fixed for such redemption shall revert to the general
funds of the Corporation after which reversion the holders of
such shares so called for redemption shall look only to the
Corporation for payment of the redemption price, and such
shares shall still be deemed to be not issued and outstanding.
8. If, on or before the redemption date, the
Corporation shall deposit in trust, with a bank or trust
company in the Borough of Manhattan, The City of New York,
having a capital and surplus of at least $5,000,000, the funds
necessary for the redemption of the shares of Preferred Stock
so called for redemption, to be applied to the redemption of
such shares, and if on or before such date the Corporation
shall have given notice of redemption as aforesaid or made
provision satisfactory to such bank or
7
<PAGE> 8
trust company for the timely giving thereof, then from and
after the date of such deposit all shares of Preferred Stock
so called for redemption shall be deemed to be not issued and
outstanding, and all rights of the holders of such shares of
Preferred Stock so called for redemption shall cease and
terminate, excepting only the right to receive the redemption
price therefor, but without interest, and the right to
exercise on or before the date fixed for redemption privileges
of conversion, if any, not theretofore otherwise expiring.
Any funds so deposited, which shall not be required for such
redemption because of the exercise of any such right of
conversion subsequent to the date of such deposit, shall be
returned to the Corporation. In case the holders of shares of
Preferred Stock which shall have been called for redemption
shall not, within one year after the redemption date, claim
the amount deposited with respect to the redemption thereof,
any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank
or trust company shall be relieved of all responsibility in
respect thereof to such holders and such holders shall look
only to the Corporation for the payment thereof. Any interest
accrued on funds so deposited shall be paid to the Corporation
from time to time. Any such unclaimed amounts paid over by
any such bank or trust company to the Corporation shall for a
period terminating six years after the date fixed for
redemption, be set aside and held by the Corporation in the
manner and with the same effect as if such unclaimed amounts
had been set aside under the preceding paragraph 7 of this
Section B of this Article Fourth.
9. Shares of Preferred Stock which have been
issued and reacquired in any manner by the Corporation
(excluding, until the Corporation elects to retire them,
shares which are held as treasury shares, but including shares
redeemed, shares purchased and retired, whether through the
operation of a retirement or sinking fund or otherwise, and
shares which, if convertible, have been converted into shares
of stock of any other class or classes or of any other series
of Preferred Stock or series of other class of shares) shall,
upon compliance with any applicable provisions of the New
Jersey Business Corporation Act, have the status of authorized
and unissued shares of Preferred Stock and may be reissued as
a part of the series of which they were originally a part (if
the terms of such series do not prohibit such reissue) or as
part of a new series of Preferred Stock to be established by
an amendment to the Certificate of Incorporation adopted by
the Board of Directors or as part of any other series of
Preferred Stock the terms of which do not prohibit such
reissue.
10. If at any time the Corporation shall
have failed to pay dividends in full on the Preferred Stock,
thereafter and until dividends in full, including all
accumulated and unpaid dividends to the next preceding
dividend payment date on the Preferred Stock outstanding,
shall have been declared and set apart for payment or paid,
(a) the Corporation, without the affirmative vote or consent
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<PAGE> 9
of the holders of at least 66-2/3% in interest of the
Preferred Stock at the time outstanding, given in person or by
proxy, either in writing or by resolution adopted either at a
meeting called for the purpose or at an annual meeting of
stockholders of the Corporation, the holders of the Preferred
Stock, regardless of series, consenting or voting (as the case
may be) separately as a class, shall not redeem less than all
the Preferred Stock at such time outstanding, other than in
accordance with paragraph 16 hereof, and (b) neither the
Corporation nor any subsidiary shall purchase any Preferred
Stock except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of
Directors) to all holders of Preferred Stock of all series
upon such terms as the Board of Directors, in their sole
discretion after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series, shall determine (which determination
shall be final and conclusive) will result in fair and
equitable treatment among the respective series; provided,
that (i) the Corporation, to meet the requirements of any
purchase, retirement or sinking fund provisions with respect
to any series, may use shares of such series acquired by it
prior to such failure and then held by it as treasury stock
and (ii) nothing shall prevent the Corporation from completing
the purchase or redemption of shares of Preferred Stock for
which a purchase contract was entered into for any purchase,
retirement or sinking fund purposes, or the notice of
redemption of which was initially published, prior to such
default.
11. So long as any of the Preferred Stock is
outstanding, the Corporation will not:
(a) Without the affirmative vote or consent
of the holders of at least 66-2/3% of all the
Preferred Stock at the time outstanding, given in
person or by proxy, either in writing or by
resolution adopted either at a meeting called for the
purpose or at an annual meeting of stockholders of
the Corporation, the holders of the Preferred Stock,
regardless of series, consenting or voting (as the
case may be) separately as a class, (i) create, or
increase the authorized number of shares of, any
class or classes of stock ranking prior to the
Preferred Stock, either as to dividends or upon
liquidation, or (ii) amend, alter or repeal any of
the provisions of this Article Fourth so as adversely
to affect the preferences, special rights or powers
of the Preferred Stock;
(b) Without the affirmative vote or consent
of the holders of at least 66-2/3% of any series of
the Preferred Stock at the time outstanding, given in
person or by proxy, either in writing or by
resolution adopted either at a special meeting called
for the purpose or at an annual meeting of
stockholders of the Corporation, the holders of such
series of the Preferred Stock consenting or voting
(as the case may be) separately as a class, amend,
alter or repeal any
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<PAGE> 10
of the provisions of the amendment or amendments to
the Certificate of Incorporation establishing such
series so as adversely to affect the preferences,
special rights or powers of the Preferred Stock of
such series;
(c) Without the affirmative vote or consent
of the holders of at least a majority of all the
Preferred Stock at the time outstanding, given in
person or by proxy, either in writing or by
resolution adopted either at a special meeting called
for the purpose or at an annual meeting of
stockholders of the Corporation, the holders of the
Preferred Stock, regardless of series, consenting or
voting (as the case may be) separately as a class,
(i) increase the authorized amount of the Preferred
Stock, or (ii) create, or increase the authorized
number of shares of, any other class or classes of
stock ranking on a parity with the Preferred Stock
either as to dividends or upon liquidation;
provided, however, that any vote or consent required by clause
(ii) of subparagraph (a) above may be given or made effective
by the filing of an appropriate amendment of the Corporation's
Certificate of Incorporation without obtaining the vote or
consent of the holders of the Common Stock of the Corporation
(the right to give such vote or consent being expressly waived
by holders of such Common Stock) unless the action to be taken
would adversely affect the preferences, rights or powers of
the Common Stock; and provided further that any vote or
consent required by subparagraph (b) above may be given and
made effective by the filing of an appropriate amendment of
the Corporation's Certificate of Incorporation without
obtaining the vote or consent of the holders of any other
series of the Preferred Stock or the holders of the Common
Stock of the Corporation (the right to give such vote or
consent being expressly waived by all holders of such other
series of Preferred Stock and the holders of the Common Stock)
unless the action to be taken would adversely affect the
preferences, rights or powers of such other series of
Preferred Stock or Common Stock, as the case may be.
12. Whenever, at any time or times,
dividends payable on the Preferred Stock shall be in default
in an aggregate amount equivalent to six full quarterly
dividends on any series of Preferred Stock at the time
outstanding, the number of directors then constituting the
Board of Directors of the Corporation shall ipso facto be
increased by two, and the outstanding Preferred Stock shall,
in addition to any other voting rights, have the exclusive
right, voting separately as a class and without regard to
series, to elect two directors of the Corporation to fill such
newly created directorships. Whenever such right of the
holders of the Preferred Stock shall have vested, such right
may be exercised initially either at a special meeting of such
holders of the Preferred Stock called as provided in paragraph
13 of this Section B of this Article Fourth or at any annual
meeting of stockholders held for the purpose of
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<PAGE> 11
electing directors, and thereafter at such annual meetings.
The right of the holders of the Preferred Stock, voting
separately as a class, to elect members of the Board of
Directors of the Corporation as aforesaid shall continue until
such time as all dividends accumulated on the Preferred Stock
to the dividend payment date next preceding the date of any
such determination shall have been paid in full, or declared
and set apart in trust for payment, at which time the right of
the holders of the Preferred Stock so to vote separately as a
class shall terminate, except as herein or by law expressly
provided, subject to revesting in the event of each and every
subsequent default of the character above mentioned. Upon
such termination the number of directors constituting the
Board of Directors shall be reduced as provided in paragraph
15 of this Section B.
13. At any time when the special voting
right shall have vested in the holders of the Preferred Stock
then outstanding as provided in the preceding paragraph 12 of
this Section B of this Article Fourth, and if such right shall
not already have been initially exercised, a proper officer of
the Corporation, upon the written request of the holders of
record of at least 10% in amount of the Preferred Stock then
outstanding, regardless of series, addressed to the secretary
of the Corporation shall call a special meeting of the holders
of the Preferred Stock and of any other class or classes of
stock having voting power with respect thereto, for the
purpose of electing directors. Such meeting shall be held at
the earliest practicable date upon the same form of notice as
is required for annual meetings of stockholders at the place
for the holding of annual meetings of stockholders of the
Corporation (or such other suitable place as is designated by
said officer). If such meeting shall not be called by the
proper officer of the Corporation within 20 days after the
personal service of such written request upon the secretary of
the Corporation, or within 20 days after mailing the same
within the United States of America, by registered mail
addressed to the secretary of the Corporation at its principal
office (such mailing to be evidenced by the registry receipt
issued by the postal authorities), then the holders of record
of at least 10% in amount of the Preferred Stock then
outstanding, regardless of series, may designate in writing
one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by such person so
designated upon the same form of notice as is required for
annual meetings of stockholders and shall be held at the place
for the holding of annual meetings of stockholders of the
Corporation (or such other suitable place as is designated by
such person). Any holder of Preferred Stock so designated
shall have access to the stock books of the Corporation for
the purpose of causing a meeting of stockholders to be called
pursuant to these provisions. Notwithstanding the provisions
of this paragraph 13, no such special meeting shall be called
during the period within 90 days immediately preceding the
date fixed for the next annual meeting of stockholders of the
Corporation.
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<PAGE> 12
14. At any meeting held for the purpose
of electing directors at which the holders of the Preferred
Stock shall have the special right, voting separately as a
class, to elect directors as provided in paragraph 12 of this
Section B of this Article Fourth, the presence, in person or
by proxy, of the holders of 33-1/3% of the Preferred Stock at
the time outstanding shall be required and be sufficient to
constitute a quorum of such class for the election of either
director pursuant to said paragraph 12. At any such meeting
or adjournment thereof, (a) the absence of a quorum of the
Preferred Stock shall not prevent the election of the
directors to be elected otherwise than pursuant to said
paragraph 12, and the absence of a quorum of stock other than
the Preferred Stock shall not prevent the election of the
directors to be elected pursuant to said paragraph 12, and (b)
in the absence of such quorum, either of the Preferred Stock
or of stock other than the Preferred Stock, or both, a
majority of the holders, present in person or by proxy, of the
class or classes of stock which lack a quorum shall have power
to adjourn the meeting for the election of directors whom they
are entitled to elect, from time to time without notice other
than announcement at the meeting, until a quorum shall be
present.
15. During any period when the holders
of the Preferred Stock have the right to vote as a class for
directors as provided in paragraph 12 of this Section B of
this Article Fourth, (a) the directors so elected by the
holders of the Preferred Stock shall continue in office until
their successors shall have been elected by such holders or
until termination of the right of the holders of the Preferred
Stock to vote as a class for directors, and (b) any vacancies
in the Board of Directors shall be filled only by vote of a
majority (even if that be only a single director) of the
remaining directors theretofore elected by the holders of the
class or classes of stock which elected the director whose
office shall have become vacant. Immediately upon any
termination of the right of holders of the Preferred Stock to
vote as a class for directors as provided in paragraph 12 of
this Section B of this Article Fourth, (a) the term of office
of the directors so elected by the holders of Preferred Stock
shall terminate, and (b) the number of directors shall be such
number as may be provided for in the by-laws irrespective of
any increase made pursuant to the provisions of said paragraph
12.
16. If in any case the amounts payable
with respect to any requirements to retire shares of the
Preferred Stock are not paid in full in the case of series
with respect to which such requirements exist, the number of
shares to be retired in each series shall be in proportion to
the respective amounts which would be payable on account of
such requirements if all amounts payable were met in full.
17. Whenever, at any time, full
cumulative dividends as aforesaid for all past dividend
periods and for the current dividend period shall have been
paid or declared
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<PAGE> 13
and set apart for payment on the then outstanding Preferred
Stock, and after complying with all the provisions with
respect to any purchase, retirement or sinking fund or funds
for any one or more series of Preferred Stock, the Board of
Directors may, subject to the provisions hereof with respect
to the payment of dividends on any other class or classes of
stock, declare dividends on any such other class or classes of
stock ranking junior to the Preferred Stock as to dividends
subject to the respective terms and provisions, if any,
applying thereto, and the Preferred Stock shall not be
entitled to share therein.
Upon any liquidation, dissolution or winding
up of the Corporation, after payment shall have been made in
full to the Preferred Stock as provided in paragraph 5 of this
Article Fourth, but not prior thereto, any other class or
classes of stock ranking junior to the Preferred Stock upon
liquidation shall, subject to the respective terms and
provisions, if any, applying thereto, be entitled to receive
any and all assets remaining to be paid or distributed, or the
proceeds thereof, and the Preferred Stock shall not be
entitled to share therein.
18. For the purposes of this Section B of
this Article Fourth and of any amendment or amendments to the
Certificate of Incorporation adopted by the Board of Directors
establishing any series of Preferred Stock and of any
certificate filed with the Secretary of State of New Jersey
(unless otherwise provided in any such amendment or
certificate):
(a) The amount of dividends "accumulated" on
any share of Preferred Stock of any series as at any
dividend date shall be deemed to be the amount of any
unpaid dividends accumulated thereon to and including
such dividend date, whether or not earned or
declared, and the amount of dividends "accumulated"
on any share of Preferred Stock of any series as at
any date other than a dividend date shall be
calculated as the amount of any unpaid dividends
accumulated thereon to and including the last
preceding dividend date, whether or not earned or
declared, plus an amount equivalent to the pro rata
portion of a dividend at the annual dividend rate
fixed for the shares of such series for the period
after such last preceding dividend date to and
including the date as of which the calculation is
made.
(b) Any class or classes of stock of the
Corporation shall be deemed to rank
(i) prior to the Preferred Stock
either as to dividends or upon liquidation
if the holders of such class or classes
shall be entitled to the receipt of
dividends or of amounts distributable upon
liquidation, dissolution or winding up, as
the case may be, in preference or priority
to the holders of the Preferred Stock;
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<PAGE> 14
(ii) on a parity with the Preferred
Stock either as to dividends or upon
liquidation, whether or not the dividend
rates, dividend payment dates, or redemption
or liquidation prices per share thereof be
different from those of the Preferred Stock,
if the holders of such class or classes of
stock shall be entitled to the receipt of
dividends or of amounts distributable upon
liquidation, dissolution or winding up, as
the case may be, in proportion to their
respective dividend rates or liquidation
prices, without preference or priority one
over the other with respect to the holders of
the Preferred Stock;
(iii) junior to the Preferred Stock
either as to dividends or upon liquidation if
the rights of the holders of such class or
classes shall be subject or subordinate to
the rights of the holders of the Preferred
Stock in respect of the receipt of dividends
or of amounts distributable upon liquidation,
dissolution or winding up, as the case may
be.
19. So long as any shares of Preferred
Stock shall be outstanding, the Common Stock shall be deemed
to rank junior to the Preferred Stocks as to dividends and
upon liquidation.
SECTION B-1. PROVISIONS RELATING TO SERIES A
PARTICIPATING CUMULATIVE PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The shares of
such series shall be designated as "Series A Participating
Cumulative Preferred Stock" and the number of shares
constituting such series shall be 500,000.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights
of the holders of any shares of any series of Preferred Stock
ranking prior and superior to the Series A Participating
Cumulative Preferred Stock with respect to dividends, the
holders of shares of Series A Participating Cumulative
Preferred Stock, in preference to the shares of Common Stock,
par value $1 per share, of the Company (the "Common Stock"),
and any other stock of the Company junior to the Series A
Participating Cumulative Preferred Stock with respect to
dividends, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash
on March 15, June 15, September 15 and December 15 in each
year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Participating Cumulative
Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject
to the provision for adjustment
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<PAGE> 15
hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or
other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Participating Cumulative
Preferred Stock. In the event the Company shall at any time
after June 2, 1989 (the "Rights Declaration Date") (i) declare
or pay any dividend on Common Stock payable in shares of
Common Stock (ii) subdivide the outstanding Common Stock (iii)
combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of
shares of Series A Participating Cumulative Preferred Stock
were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(B) Subject to the provisions of paragraph
17 of Section B of this Article Fourth, the Company shall
declare a dividend or distribution on the Series A
Participating Cumulative Preferred Stock as provided in
paragraph (A) above immediately after it declares a dividend
or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the
Series A Participating Cumulative Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Participating
Cumulative Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series
A Participating Cumulative Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for
the determination of holders of shares of Series A
Participating Cumulative Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to
accrue and be cumulative from such quarterly dividend payment
date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the
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<PAGE> 16
shares of Series A Participating Cumulative Preferred Stock in
an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A
Participating Cumulative Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which
record date shall be no more than 60 days prior to the date
fixed for the payment thereof.
3. VOTING RIGHTS. In addition to any other
voting rights required by law, the holders of shares of Series
A Participating Cumulative Preferred Stock shall have only the
following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Participating
Cumulative Preferred Stock shall entitle the holder thereof to
one vote on all matters submitted to a vote of the
shareholders of the Company, and each fractional share of
Series A Participating Cumulative Preferred Stock shall
entitle the holder thereof to a pro rata fractional vote. In
the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of
shares of Series A Participating Cumulative Preferred Stock
were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or
by law, the holders of shares of Series A Participating
Cumulative Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Company.
(C) (i) If at any time dividends on any
Series A Participating Cumulative Preferred Stock shall be in
arrears in an amount equal to six quarterly dividends thereon,
the occurrence of such contingency shall mark the beginning of
a period (herein called a "default period") which shall extend
until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current
quarterly dividend period on all shares of Series A
Participating Cumulative Preferred Stock then outstanding
shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock
(including holders of the Series A Participating Cumulative
Preferred Stock) with dividends in arrears in an amount equal
to six quarterly dividends thereon, voting as a class,
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<PAGE> 17
irrespective of series, shall have the right to elect two
Directors.
(ii) During any default period, such voting
right of the holders of Series A Participating Cumulative
Preferred Stock may be exercised initially at a special
meeting called pursuant to sub-paragraph (iii) of this
paragraph 3(C) or at any annual meeting of stockholders, and
thereafter at annual meetings of stockholders, provided that
neither such voting right nor the right of the holders of any
other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be
exercised unless the holders of 33-1/3 percent in number of
shares of Preferred Stock outstanding shall be present in
person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which
the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall
have the right, voting as a class, to elect Directors to fill
such vacancies, if any, in the Board of Directors as may then
exist up to two Directors or, if such right is exercised at an
annual meeting, to elect two Directors. If the number which
may be so elected at any special meeting does not amount to
the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of
Directors as shall be necessary to permit the election by them
of the required number. After the holders of the Preferred
Stock shall have exercised their right to elect Directors in
any default period and during the continuance of such period,
the number of Directors shall not be increased or decreased
except by vote of the holders of Preferred Stock as herein
provided or pursuant to the rights of any equity securities
ranking senior to or PARI PASSU with the Series A
Participating Cumulative Preferred Stock.
(iii) Unless the holders of Preferred Stock
shall, during an existing default period, have previously
exercised their right to elect Directors, the Board of
Directors may order, or any stockholder or stockholders owning
in the aggregate not less than ten percent of the total number
of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the
holders of Preferred Stock, which meeting shall thereupon be
called by the President, a Vice President or the Secretary of
the Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to
vote pursuant to this sub-paragraph (C) (iii) shall be given
to each holder of record of Preferred Stock by mailing a copy
of such notice to him at his last address as the same appears
on the books of the Corporation. Such meeting shall be called
for a time not earlier than 20 days and not later than 60 days
after such order or request or in default of the calling of
such meeting within 60 days after such order or request, such
meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten
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<PAGE> 18
percent of the total number of shares of Series A
Participating Cumulative Preferred Stock outstanding.
Notwithstanding the provisions of this sub-paragraph (C)(iii),
no such special meeting shall be called during the period
within 90 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, the holders of
Common Stock, and other classes of stock of the Corporation if
applicable, shall continue to be entitled to elect the whole
number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two (2) Directors voting
as a class, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Stock shall
continue in office until their successors shall have been
elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may
(except as provided in sub-paragraph (C)(ii) of this paragraph
3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of stock which
elected the Director whose office shall have become vacant.
(v) Immediately upon the expiration of a
default period, (x) the right of the holders of Preferred
Stock as a class to elect Directors shall cease, (y) the term
of any Directors elected by the holders of Preferred Stock as
a class shall terminate, and (z) the number of Directors shall
be such number as may be provided for in the certificate of
incorporation or by-laws irrespective of any increase made
pursuant to the provisions of sub-paragraph (C)(ii) of this
paragraph 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate
of incorporation or by-laws). Any vacancies in the Board of
Directors occurring after the expiration of a default period
shall be filled in the manner provided for in the certificate
of incorporation or by-laws.
(D) Except as set forth herein, holders of Series A
Participating Cumulative Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Series A
Participating Cumulative Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared,
on shares of Series A Participating Cumulative Preferred Stock
outstanding shall have been paid in full or set aside for
payment, the Company shall not:
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of
stock ranking
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<PAGE> 19
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A
Participating Cumulative Preferred Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on
a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A
Participating Cumulative Preferred Stock, except
dividends paid ratably on the Series A Participating
Cumulative Preferred Stock and all such parity stock
on which dividends are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A
Participating Cumulative Preferred Stock, provided
that the Company may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Company
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series
A Participating Cumulative Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Participating
Cumulative Preferred Stock, or any shares of stock
ranking on a parity with the Series A Participating
Cumulative Preferred Stock, except in accordance with
a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board
of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes,
shall determine in good faith will result in fair and
equitable treatment among the respective series or
classes.
(B) The Company shall not permit any
subsidiary of the Company to purchase or otherwise acquire for
consideration any shares of stock of the Company unless the
Company could, under paragraph (A) of this Section 4, purchase
or otherwise acquire such shares at such time and in such
manner.
5. REACQUIRED SHARES. Any shares of Series
A Participating Cumulative Preferred Stock purchase or
otherwise acquired by the Company in any manner whatsoever
shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on
issuance set forth in the Certificate of Incorporation.
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6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the
Company, no distribution shall be made (1) to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Participating Cumulative Preferred Stock unless, prior
thereto, the holders of shares of Series A Participating
Cumulative Preferred Stock shall have received $100.00 per
share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the
date of such payment, provided that the holders of shares of
Series A Participating Cumulative Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to
the provision for adjustment hereinafter set forth, of not
less than 100 times the aggregate amount to be distributed per
share to holders of Common Stock, or (2) to the holders of
stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A
Participating Cumulative Preferred Stock, except distributions
made ratable on the Series A Participating Cumulative
Preferred Stock and all other such parity stock in proportion
to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.
In the event the Company shall at any time after the Rights
Declaration Date declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such
case the aggregate amount to which holders of shares of Series
A Participating Cumulative Preferred Stock were entitled
immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
7. CONSOLIDATION, MERGER, ETC. In case the
Company shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such
case the shares of Series A Participating Cumulative Preferred
Stock shall at the same time be similarly exchanged or changed
in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged.
In the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number
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<PAGE> 21
of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of
shares of Series A Participating Cumulative Preferred Stock
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
8. NO REDEMPTION. The shares of Series A
Participating Cumulative Preferred Stock shall not be
redeemable.
9. RANK. The Series A Participating
Cumulative Preferred Stock shall rank junior with respect to
payment of dividends and on liquidation to all other series of
the Company's preferred stock outstanding on the date hereof
and to all such other series that may be issued after the date
hereof except to the extent that any such other series
specifically provides that it shall rank junior to the Series
A Participating Cumulative Preferred Stock.
10. AMENDMENT. The Restated Certificate of
Incorporation of the Corporation shall not be amended in any
manner which would materially alter or change the powers,
preferences or special rights of the Series A Participating
Cumulative Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series A Participating
Cumulative Preferred Stock, voting separately as a class.
11. FRACTIONAL SHARES. Series A
Participating Cumulative Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise
voting rights, to receive dividends thereon, and to
participate in any distribution of assets and to have the
benefit of all other rights of holders of Series A
Participating Cumulative Preferred Stock.
FIFTH: The names and addresses of the current fourteen
members of the Board of Directors are as follows:
NAMES ADDRESSES
John C. Beck 330 Madison Ave.
New York, NY 10017-5001
James I. Cash, Jr. Baker Library #187
Soldiers Field
Boston, MA 02163
Percy Chubb, III 15 Mountain View Road
Warren, NJ 07059
Joel J. Cohen 277 Park Avenue
New York, NY 10172
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David H. Hoag 25 West Prospect Avenue
Cleveland, OH 44115
Robert V. Lindsay R.R. #3, Box 219
Millbrook, NY 12545
Thomas C. MacAvoy Box 6550
Charlottesville, VA 22906
Gertrude G. Michelson Herald Square
New York, NY 10001
Dean R. O'Hare 15 Mountain View Road
Warren, NJ 07059
Warren B. Rudman 1615 L Street, NW
Washington, DC 20036
David G. Scholey One Finsbury Avenue
London EC2M 2PP, England
Raymond G. H. Seitz One Broadgate
London EC2M 7HA, England
Lawrence M. Small 3900 Wisconsin Ave., NW
Washington, DC 20016-2899
Richard D. Wood Lilly Corporate Center
Indianapolis, IN 46285
SIXTH: The duration of the Corporation shall be perpetual.
SEVENTH: Meetings of stockholders may be held in the State of
New Jersey or in the City of New York, State of New York, at such place therein
as may from time to time be designated by the directors and stated in the
notice of meeting. Election of directors need not be by ballot unless
otherwise provided in the By-laws. At all meetings of stockholders, every
stockholder entitled to vote thereat shall have one vote for each share
standing in his name on the books of the Corporation. Any action which at any
meeting of stockholders requires the vote, assent or consent of two-thirds in
interest of all of the stockholders, or of two-thirds in interest of each class
of stockholders having voting powers thereon, may be taken upon the vote,
assent or consent of two-thirds in interest of the stockholders present and
voting at such meeting in person or by proxy, or, where a vote, assent, or
consent by classes is required, may be taken upon the vote, assent or consent
of two-thirds in interest of the stockholders of each class so present and
voting.
EIGHTH: Except as otherwise provided by statute, the Board of
Directors shall exercise all corporate powers, and in addition thereto and to
all other powers now or hereafter conferred by law or by this Certificate of
Incorporation or the By-laws, shall have power:
(a) To hold meetings, to have one or more
offices, and to keep the books of the Corporation, except as
otherwise
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<PAGE> 23
expressly provided by law, at such places, whether within or
without the State of New Jersey, as may from time to time be
designated by the Board;
(b) To appoint an Executive Committee from among
its members, which Committee may, subject to the By-Laws,
exercise the power of the directors in the management of the
business, affairs and property of the Corporation during the
intervals between the meetings of the Board;
(c) To make, alter and repeal by-laws of the
Corporation, subject to the reserved power of the stockholders
to make, alter and repeal by-laws;
(d) To determine whether and to what extent, at
what times and places and under what conditions and
regulations, the accounts and books of the Corporation, or any
of them, shall be open to the inspection of the stockholders,
and no stockholder shall have any right to inspect any
account, record, book or document of the Corporation except as
conferred by statute of the State of New Jersey, or as
authorized by the Board;
(e) To fix and determine, from time to time, and
to vary, the amount of the working capital of the Corporation,
to appropriate or set apart reserves for any corporate
purpose, to determine what, if any, dividends shall be
declared and paid to stockholders out of the surplus or net
profits and to direct and determine the use and disposition of
any surplus or net profits over and above the capital of the
Corporation;
(f) In its discretion, to use or apply any funds
of the Corporation lawfully available therefor for the
purchase or acquisition of shares of the capital stock or
bonds or other securities of the Corporation, in the market or
otherwise, at such price as may be fixed by the Board, and to
such extent and in such manner and for such purposes and upon
such terms as the Board may deem expedient and as may be
permitted by law;
(g) In its discretion, to make any lawful
disposition of any paid-in or capital surplus, or create any
reserves out of the same, or charge to the same organization
expenses or other similar expenses properly chargeable to
capital account;
(h) From time to time in such manner and upon
such terms and conditions as may be determined by the Board,
to provide and carry out and recall, abolish, revise, alter or
change, one or more plan or plans for
(1) the issue or the purchase and sale of
its capital stock or granting of options therefor to
any or all of the employees, officers or directors of
the Corporation, or of any subsidiaries and the
payment for such stock in installments or at one
time, with or without the right to vote thereon
pending payment
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<PAGE> 24
therefor in full, and for aiding any such persons in
paying for such stock by contributions, compensation
for services, or otherwise;
(2) the participation by any or all of
the employees, officers or directors of the
Corporation or of any subsidiaries in the profits of
the Corporation or of any branch, division or
subsidiary thereof, as part of the Corporation's
legitimate expenses; and
(3) the furnishing to any or all of the
employees, officers or directors of the Corporation
or of any subsidiaries, at the expense, wholly or in
part, of the Corporation, of insurance against
accident, sickness, death, disability, unemployment
or other calamity or liability, pension or retirement
benefits, education, or other services and protection
for their relief or general welfare;
(i) From time to time to authorize and issue
obligations of the Corporation, secured or unsecured, to
include therein such covenants and restrictions and such
provisions as to redeemability, subordination, convertibility
or otherwise, and with such maturities, as the Board in its
sole discretion may determine, and to authorize the mortgaging
or pledging, as security therefor, of any part or all of the
property of the Corporation, real or personal, including
after-acquired property.
NINTH: No holder of any stock or other security of the
Corporation of any class now or hereafter authorized shall, as such holder, be
entitled as of right or have any preemptive right to purchase any shares of
capital stock of the Corporation now or hereafter authorized, or any securities
or other instruments evidencing the right to acquire any shares of capital
stock of the Corporation, whether such shares or securities or instruments be
unissued, or issued and thereafter acquired by the Corporation.
TENTH: No contract or other transaction between this
Corporation and any other corporation, and no act of this Corporation, shall in
any way be affected or invalidated by the fact that any of the directors of
this Corporation are pecuniarily or otherwise interested in or are directors or
officers of such other corporation; any director individually or any firm of
which any director may be a member may be a party to or may be pecuniarily or
otherwise interested in any contract or transaction of this Corporation,
provided that the fact that he or such firm is so interested shall be disclosed
or shall have been known to the Board of Directors or a majority thereof; and
any director of this Corporation who is also a director or officer of such
other corporation or who is so interested may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of this
Corporation which shall authorize any such contract or transaction and may vote
thereat to authorize any such contract or transaction with like force and
effect as if he were not such director or officer of such other corporation or
so interested.
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<PAGE> 25
ELEVENTH: From time to time any of the provisions of this
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of New Jersey at the time in
force may be added or inserted in the manner and at the time prescribed or
permitted by said laws; and all rights at any time conferred upon the
stockholders of the Corporation by this Certificate of Incorporation are
granted subject to the provisions of this Article ELEVENTH.
TWELFTH:
SECTION A. A Director or Officer of the Corporation shall not
be personally liable to the Corporation or its stockholders for damages for
breach of any duty owed to the Corporation or its stockholders, except for
liability for any breach of duty based upon an act or omission (i) in breach of
such Director's or Officer's duty of loyalty to the Corporation or
stockholders, (ii) not in good faith or involving a knowing violation of law or
(iii) resulting in receipt by such Director or Officer of an improper personal
benefit. The provisions of this section shall be effective as and to the
fullest extent that, in whole or in part, they shall be authorized or permitted
by the laws of the State of New Jersey. No repeal or modification of the
foregoing provisions of this Section A nor, to the fullest extent permitted by
law, any modification of law shall adversely affect any right or protection of
a Director or Officer of the Corporation which exists at the time of such
repeal or modification.
SECTION B.
l. As used in this Section B:
(a) "corporate agent" means any person who is or was
a director, officer of employee of the Corporation and any
person who is or was a director, officer, trustee or employee
of any other enterprise, serving, or continuing to serve, as
such at the written request of the Corporation, signed by the
Chairman or the President or pursuant to a resolution of the
Board of Directors, or the legal representative of any such
person;
(b) "other enterprise" means any domestic or foreign
corporation, other than the Corporation, and any partnership,
joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise, whether or not for profit, served by
a corporate agent;
(c) "expenses" means reasonable costs, disbursements
and counsel fees;
(d) "liabilities" means amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties;
(e) "proceeding" means any pending, threatened or
completed civil, criminal, administrative or arbitrative
action, suit or proceeding, and any appeal therein and any
inquiry or investigation which could lead to such action, suit
or proceeding, and shall include any proceeding as so
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<PAGE> 26
defined existing at or before, and any proceedings relating to
facts occurring or circumstances existing at or before, the
adoption of this Section B.
2. Each corporate agent shall be indemnified by the
Corporation against his expenses and liabilities in connection with any
proceeding involving the corporate agent by reason of his having been such
corporate agent to the fullest extent permitted by applicable law as the same
exists or may hereafter be amended or modified. The right to indemnification
conferred by this paragraph 2 shall also include the right to be paid by the
Corporation the expenses incurred in connection with any such proceeding in
advance of its final disposition to the fullest extent authorized by applicable
law as the same exists or may hereafter be amended or modified. The right to
indemnification conferred in this paragraph 2 shall be a contract right.
3. The Corporation may purchase and maintain insurance on
behalf of any corporate agent against any expenses incurred in any proceeding
and any liabilities asserted against him by reason of his having been a
corporate agent, whether or not the corporation would have the power to
indemnify him against such expenses and liabilities under applicable law as the
same exists or may hereafter be amended or modified. The Corporation may
purchase such insurance from, or such insurance may be reinsured in whole or in
part by, an insurer owned by or otherwise affiliated with the Corporation,
whether or not such insurer does business with other insureds.
The rights and authority conferred in this Section B shall not
exclude any other right to which any person may be entitled under this
Certificate of Incorporation, the By-Laws, any agreement, vote of stockholders
or otherwise. No repeal or modification of the foregoing provisions of this
Section B nor, to the fullest extent permitted by law, any modification of law,
shall adversely affect any right or protection of a corporate agent which
exists at the time of such repeal or modification.
IN WITNESS WHEREOF, The Chubb Corporation has executed this
Restated Certificate of Incorporation under its seal and the hand of its
Chairman, attested by its Vice President and Secretary, on this 1st day of May,
1996.
THE CHUBB CORPORATION
Attest:
By: /s/ Dean R. O'Hare
--------------------------
Dean R. O'Hare
Chairman
By: /s/ Henry G. Gulick
-----------------------------
Henry G. Gulick
Vice President and Secretary
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<PAGE> 27
CERTIFICATE OF ADOPTION
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
THE CHUBB CORPORATION
The undersigned, on behalf of THE CHUBB CORPORATION, does
hereby certify that:
1. The name of the corporation is THE CHUBB CORPORATION.
2. The RESTATED CERTIFICATE OF INCORPORATION OF THE
CHUBB CORPORATION attached hereto was duly adopted by the Board of Directors,
pursuant to Section 14A:9-5(2) of The New Jersey Business Corporation Act, at a
meeting duly convened and held on March 1, 1996.
3. This RESTATED CERTIFICATE OF INCORPORATION OF THE
CHUBB CORPORATION only restates and integrates but does not substantively amend
the provisions of the Certificate of Incorporation of THE CHUBB CORPORATION as
heretofore amended.
IN WITNESS WHEREOF, THE CHUBB CORPORATION has made this
Certificate under its seal and the hand of its Chairman, attested by its Vice
President and Secretary, on the 1st day of May, 1996.
THE CHUBB CORPORATION
Attest:
By: /s/ Dean R. O'Hare
-------------------------
Dean R. O'Hare
Chairman
By: /s/ Henry G. Gulick
-----------------------------
Henry G. Gulick
Vice President and Secretary
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<PAGE> 28
STATE OF NEW JERSEY }
}
COUNTY OF SOMERSET }
BE IT REMEMBERED, that on the 1st day of May, 1996, the
Subscriber, a Notary Public, personally appeared HENRY G. GULICK, Vice
President and Secretary of THE CHUBB CORPORATION, the corporation named in and
which executed the foregoing certificate, who being by me duly sworn, according
to law, does depose and say and make proof to my satisfaction that he is the
Vice President and Secretary of said corporation; that he saw said DEAN R.
O'HARE as such Chairman sign said certificate with said seal affixed thereto
and deliver said certificate as the voluntary act and deed of said corporation,
by its order and by authority of its Board of Directors for the uses and
purposes therein expressed; and that said HENRY G. GULICK signed his name
thereto at the same time as subscribing witness.
Subscribed and sworn to before me the day and year aforesaid.
- -----------------------------------
(Notarial Seal)
28
<PAGE> 1
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THE CHUBB CORPORATION
LONG-TERM STOCK INCENTIVE PLAN (1996)
------------------
(CHUBB LOGO)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As Approved By Shareholders on April 23, 1996 and As Amended on June 14, 1996
<PAGE> 2
THE CHUBB CORPORATION
LONG-TERM STOCK INCENTIVE PLAN (1996)
SECTION 1. Purpose
The purposes of The Chubb Corporation Long-Term Stock Incentive Plan (1996)
(the "Plan") are to promote the interests of The Chubb Corporation and its
shareholders by (i) attracting and retaining executive personnel and other key
employees of outstanding ability; (ii) motivating executive personnel and other
key employees, by means of performance-related incentives, to achieve
longer-range performance goals; and (iii) enabling such employees to participate
in the long-term growth and financial success of The Chubb Corporation.
SECTION 2. Definitions.
"Affiliate" shall mean any corporation or other entity which is not a
Subsidiary but as to which the Corporation possesses a direct or indirect
ownership interest and has representation on the board of directors or any
similar governing body.
"Award" shall mean a grant or award under Sections 6 through 9, inclusive,
of the Plan, as evidenced in a written document delivered to a Participant as
provided in Section 10(b).
"Board of Directors" shall mean the Board of Directors of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Organization & Compensation Committee of the
Board of Directors.
"Common Stock" or "Stock" shall mean the Common Stock, $1.00 par value, of
the Corporation.
"Corporation" shall mean The Chubb Corporation.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due the
Participant in the event of the Participant's death. In the absence of an
effective designation by the Participant, Designated Beneficiary shall mean the
Participant's estate.
"Employee" shall mean any key employee of the Employer.
"Employer" shall mean the Corporation and any Subsidiary or Affiliate.
"Fair Market Value" shall mean the average of the highest and lowest sales
prices reported for consolidated trading of issues listed on the New York Stock
Exchange on the date in question, or, if the Stock shall not have been traded on
such date, the average of such highest and lowest sales prices on the first day
prior thereto on which the Stock was so traded.
"Fiscal Year" shall mean the fiscal year of the Corporation.
"Incentive Stock Option" shall mean a stock option granted under Section 6
which is intended to meet the requirements of Section 422 of the Code.
"Nonstatutory Stock Option" shall mean a stock option granted under Section
6 which is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonstatutory Stock
Option and shall include a Restoration Option.
"Participant" shall mean an Employee who is selected by the Committee to
receive an Award under the Plan.
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<PAGE> 3
"Payment Value" shall mean the dollar amount assigned to a Performance
Share which shall be equal to the Fair Market Value of the Common Stock on the
day of the Committee's determination under Section 8(c)(1) with respect to the
applicable Performance Cycle.
"Performance Cycle" or "Cycle" shall mean the period of years selected by
the Committee during which the performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been earned.
"Performance Goals" shall mean the objectives established by the Committee
for a Performance Cycle, for the purpose of determining the extent to which
Performance Shares which have been contingently awarded for such Cycle are
earned.
"Performance Share" shall mean an award granted pursuant to Section 8 of
the Plan expressed as a share of Common Stock.
"Prior Plans" shall mean The Chubb Corporation Long-Term Stock Incentive
Plan (1992), Long-Term Stock Incentive Plan (1989) and the Stock Option Plan
(1984).
"Restoration Option" shall mean a stock option granted pursuant to Section
6(d).
"Restricted Period" shall mean the period of years selected by the
Committee during which a grant of Restricted Stock or Restricted Stock Units may
be forfeited to the Corporation.
"Restricted Stock" shall mean shares of Common Stock contingently granted
to a Participant under Section 9 of the Plan.
"Restricted Stock Unit" shall mean a fixed or variable dollar denominated
unit contingently awarded under Section 9 of the Plan.
"Stock Appreciation Right" shall mean a right granted under Section 7.
"Subsidiary" shall mean any business entity in which the Corporation
possesses directly or indirectly fifty percent (50%) or more of the total
combined voting power.
SECTION 3. Administration
The Plan shall be administered by the Committee. The Committee shall have
sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time deem advisable, and to interpret the terms and provisions of
the Plan. The Committee may delegate to one or more executive officers of the
Corporation the power to make Awards to Participants who are not executive
officers or directors of the Corporation provided the Committee shall fix the
maximum amount of such Awards for the group and a maximum for any one
Participant. The Committee's decisions shall be binding upon all persons,
including the Corporation, stockholders, an Employer, Employees, Participants
and Designated Beneficiaries.
SECTION 4. Eligibility
All Employees who, in the opinion of the Committee, have the capacity for
contributing in a substantial measure to the successful performance of the
Corporation are eligible to be Participants in the Plan.
SECTION 5. Maximum Amount Available for Awards
(a) The maximum number of shares of Stock in respect of which Awards may be
made under the Plan shall be 8,730,000 shares of Common Stock plus up to an
additional 5,270,000 shares of Common Stock to the extent shares of Common Stock
are reacquired by the Corporation, including shares purchased in the open
market, after April 23, 1996. Not more than 3,500,000 shares may be awarded as
Restricted Stock, Restricted Stock Units or Performance Shares and not more than
8,730,000 shares may be awarded as incentive stock options. Subject to the
foregoing, Shares of Common Stock may be made available from the authorized but
unissued shares of the Corporation or from shares reacquired by the Corporation,
including shares purchased in the open market. In the event that (i) an Option
or Stock Appreciation Right under the Plan or the Prior Plans is settled for
cash or expires or is terminated unexercised as to any shares of Common Stock
covered
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<PAGE> 4
thereby, or (ii) any Award under the Plan or the Prior Plans in respect of
shares is cancelled or forfeited for any reason without the delivery of shares
of Common Stock, such shares shall thereafter be again available for award
pursuant to the Plan. In the event that any Option or other Award granted is
exercised through the delivery of shares of Common Stock, the number of shares
of Common Stock available for Awards under the Plan shall be increased by the
number of shares so surrendered.
(b) No Employee may be granted under the Plan in any calendar year Options
or Stock Appreciation Rights on more than 300,000 shares of Common Stock and no
Employee may be granted in any calendar year more than 80,000 Performance Shares
or 80,000 shares of Restricted Stock or Restricted Stock Units.
(c) In the event that the Committee shall determine that any stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock at a price substantially below fair
market value, or other similar corporate event affects the Common Stock such
that an adjustment is required in order to preserve the benefits or potential
benefits intended to be made available under this Plan, then the Committee
shall, in its sole discretion, and in such manner as the Committee may deem
equitable, adjust any or all of (1) the number and kind of shares which
thereafter may be awarded or optioned and sold or made the subject of Stock
Appreciation Rights under the Plan, (2) the number and kind of shares subject to
outstanding Options and other Awards, and (3) the grant, exercise or conversion
price with respect to any of the foregoing and/or, if deemed appropriate, make
provision for a cash payment to a Participant or a person who has an outstanding
Option or other Award provided, however, that the number of shares subject to
any Option or other Award shall always be a whole number.
SECTION 6. Stock Options
(a) Grants. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom Options
shall be granted, the number of shares to be covered by each Option, the option
price therefor and the conditions and limitations applicable to the exercise of
the Option including but not limited to, whether, and to what extent and under
what circumstances amounts payable upon exercise of an Option shall be deferred
at the election of the holder of such Option. The Committee shall have the
authority to grant Incentive Stock Options, or to grant Nonstatutory Stock
Options, or to grant both types of options. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and comply
with such rules as may be prescribed by Section 422 of the Code, as from time to
time amended, and any implementing regulations.
(b) Option Price. The Committee shall establish the option price at the
time each Option is granted, which price shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of grant.
(c) Exercise. (1) Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award or thereafter, provided, however,
that in no event may any Option granted hereunder be exercisable after the
expiration of ten years from the date of such grant. The Committee may impose
such conditions with respect to the exercise of Options, including without
limitation, any relating to the application of federal or state securities laws,
as it may deem necessary or advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the
Corporation. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by exchanging shares of Common Stock
owned for at least six months by the optionee (which are not the subject of any
pledge or other security interest), or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair
Market Value of any such Common Stock so tendered to the Corporation, valued as
of the date of such tender, is at least equal to such option price.
(d) Restoration Options. In the event that any Participant delivers shares
of Common Stock in payment of the exercise price of any Option granted hereunder
in accordance with Section 6(c)(2), the Committee shall have the authority to
grant or provide for the automatic grant of a Restoration Option to such
3
<PAGE> 5
Participant. The grant of a Restoration Option shall be subject to the
satisfaction of such conditions or criteria as the Committee in its sole
discretion shall establish from time to time. A Restoration Option shall entitle
the holder thereof to purchase a number of shares of Common Stock equal to the
number of such shares so delivered upon exercise of the original Option and, in
the discretion of the Committee, the number of shares, if any, tendered to the
Corporation to satisfy any withholding tax liability arising in connection with
the exercise of the original Option. A Restoration Option shall have a per share
exercise price of not less than 100% of the per share Fair Market Value of the
Common Stock on the date of grant of such Restoration Option, a term not longer
than the remaining term of the original Option at the time of exercise thereof,
and such other terms and conditions as the Committee in its sole discretion
shall determine.
SECTION 7. Stock Appreciation Rights
(a) The Committee may, with sole and complete authority, grant Stock
Appreciation Rights in tandem with an Option, in addition to an Option, or
freestanding and unrelated to an Option. Stock Appreciation Rights granted in
tandem with or in addition to an Option may be granted either at the same time
as the Option or at a later time. Stock Appreciation Rights shall not be
exercisable earlier than six months after grant, shall not be exercisable after
the expiration of ten years from the date of grant and shall have an exercise
price of not less than 100% of the Fair Market Value of the Common Stock on the
date of grant.
(b) A Stock Appreciation Right shall entitle the Participant to receive
from the Corporation an amount equal to the excess of the Fair Market Value of a
share of Common Stock on the exercise of the Stock Appreciation Right over the
grant price thereof, provided that the Committee may for administrative
convenience determine that, for any Stock Appreciation Right which is not
related to an Incentive Stock Option which Stock Appreciation Right can only be
exercised during limited periods of time in order to satisfy the conditions of
certain rules of the Securities and Exchange Commission, the exercise of any
such Stock Appreciation Right for cash during such limited period shall be
deemed to occur for all purposes hereunder on the day during such limited period
on which the Fair Market Value of the Stock is the highest. Any such
determination by the Committee may be changed by the Committee from time to time
and may govern the exercise of Stock Appreciation Rights granted prior to such
determination as well as Stock Appreciation Rights thereafter granted. The
Committee shall determine upon the exercise of a Stock Appreciation Right
whether such Stock Appreciation Right shall be settled in cash, shares of Common
Stock or a combination of cash and shares of Common Stock.
SECTION 8. Performance Shares
(a) The Committee shall have sole and complete authority to determine the
Employees who shall receive Performance Shares and the number of such shares for
each Performance Cycle, and to determine the duration of each Performance Cycle
and the value of each Performance Share. There may be more than one Performance
Cycle in existence at any one time, and the duration of Performance Cycles may
differ from each other.
(b) The Committee shall establish Performance Goals for each Cycle based on
any one or more of the following: the operating earnings, net earnings, return
on equity, income, market share, shareholder return, combined ratio, level of
expenses or growth in revenue. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in recognition of unusual
or non-recurring events affecting the Corporation, changes in applicable tax
laws or accounting principles, or such other factors as the Committee may
determine, provided, however, that no such adjustment shall be applicable to the
extent such adjustment would result in a disallowance of a tax deduction
pursuant to Section 162(m) of the Code.
(c)(1) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established Performance
Goals.
(2) Payment Values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable after the expiration of
4
<PAGE> 6
the Performance Cycle and the Committee's determination under paragraph (1),
above. The Committee shall determine whether Payment Values are to be
distributed in the form of cash and/or shares of Common Stock.
SECTION 9. Restricted Stock and Restricted Stock Units
(a) Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom shares of Restricted
Stock and Restricted Stock Units shall be granted, the number of shares of
Restricted Stock and the number of Restricted Stock Units to be granted to each
Participant, the duration of the Restricted Period during which, and the
conditions under which, the Restricted Stock and Restricted Stock Units may be
forfeited to the Corporation, and the other terms and conditions of such Awards.
The Restricted Period shall consist of at least one year (which may be shortened
or waived by the Committee at any time in its discretion) with respect to one or
more Participants or Awards outstanding. In its discretion, the Committee may
establish performance conditions with respect to awards of Restricted Stock and
Restricted Stock Units based on one or more of the same items listed in Section
8(b) in respect of Performance Shares during a performance period selected by
the Committee.
(b) Shares of Restricted Stock and Restricted Stock Units may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as herein
provided, during the Restricted Period. Certificates issued in respect of shares
of Restricted Stock shall be registered in the name of the Participant and
deposited by such Participant, together with a stock power endorsed in blank,
with the Corporation. At the expiration of the Restricted Period, the
Corporation shall deliver such certificates to the Participant or the
Participant's legal representative. Payment for Restricted Stock Units shall be
made to the Corporation in cash and/or shares of Common Stock, as determined at
the sole discretion of the Committee.
SECTION 10. General Provisions
(a) Withholding. The Employer shall have the right to deduct from all
amounts paid to a Participant in cash (whether under this Plan or otherwise) any
taxes required by law to be withheld in respect of Awards under this Plan. In
the case of payments of Awards in the form of Common Stock, at the Committee's
discretion the Participant may be required to pay to the Employer the amount of
any taxes required to be withheld with respect to such Common Stock, or, in lieu
thereof, the Employer shall have the right to retain (or the Participant may be
offered the opportunity to elect to tender) the number of shares of Common Stock
whose Fair Market Value equals the amount required to be withheld.
(b) Awards. Each Award hereunder shall be evidenced in writing, delivered
to the Participant and shall specify the terms and conditions thereof and any
rules applicable thereto, including but not limited to the effect on such Award
of the death, retirement or other termination of employment of the Participant
and the effect thereon, if any, of a change in control of the Corporation.
(c) Non-transferability. (i) Except as provided in (ii) below, no Award
shall be assignable or transferable, and no right or interest of any Participant
shall be subject to any lien, obligation or liability of the Participant, except
by will or the laws of descent and distribution.
(ii) Notwithstanding subparagraph (i) above, the Committee may determine
that an Award may be transferred pursuant to a qualified domestic relations
order, as determined by the Committee or its designee or that an Option may be
transferred by an Employee to one or more members of the Employee's immediate
family, to a partnership of which the only partners are members of the
Employee's immediate family, or to a trust established by the Employee for the
benefit of one or more members of the Employee's immediate family. For this
purpose immediate family means the Employee's spouse, parents, children,
grandchildren and the spouses of such parents, children and grandchildren. A
transferee described in this subparagraph may not further transfer an Option. An
Option transferred pursuant to this subparagraph shall remain subject to all of
the applicable provisions of the Plan and the written option agreement.
(d) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Employer. Further, the
Employer expressly reserves the right at any time to dismiss a Participant free
from
5
<PAGE> 7
any liability, or any claim under the Plan, except as provided herein or in any
agreement entered into with respect to an Award.
(e) No Rights as Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she has become the holder thereof. Notwithstanding the
foregoing, in connection with each grant of Restricted Stock hereunder, the
applicable Award shall specify if and to what extent the Participant shall not
be entitled to the rights of a stockholder in respect of such Restricted Stock.
(f) Construction of the Plan. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with the
laws of New York.
(g) Effective Date. Subject to the approval of the stockholders of the
Corporation, the Plan shall be effective on April 23, 1996. No Options or Awards
may be granted under the Plan after December 31, 2001; provided, however, that
the authority for grant of Restoration Options hereunder in accordance with
Section 6(d) shall continue, subject to the provisions of Section 5, as long as
any Option granted hereunder remains outstanding.
(h) Amendment of Plan. The Board of Directors may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for these
purposes any approval requirement which is a prerequisite for exemptive relief
under Section 16(b) of the Securities Exchange Act of 1934 with which the
Committee has determined it is necessary or desirable to have the Corporation
comply. Notwithstanding anything to the contrary contained herein, the Committee
may amend the Plan in such manner as may be necessary so as to have the Plan
conform with local rules and regulations.
(i) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to payment or
exercise in any manner not inconsistent with the terms of the Plan, including
without limitation, (i) to change the date or dates as of which (A) an Option or
Stock Appreciation Right becomes exercisable; (B) a Performance Share is deemed
earned; (C) Restricted Stock becomes nonforfeitable; or (ii) to cancel and
reissue an Award under such different terms and conditions as it determines
appropriate, except that an outstanding stock option shall not be amended to
reduce its original exercise price other than in connection with a transaction
described in Section 5(c).
6
<PAGE> 1
Exhibit 11.1
THE CHUBB CORPORATION
COMPUTATION OF EARNINGS PER SHARE
PERIODS ENDED JUNE 30
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C>
Net income.................................. $174.3 $185.0 $325.7 $331.7
After-tax interest expense on 6% guaranteed
exchangeable subordinated notes............ 2.5 2.5 4.9 4.9
------ ------ ------ ------
Net income for computing earnings per share. $176.8 $187.5 $330.6 $336.6
====== ====== ====== ======
Average number of common shares outstanding. 174.6 174.0 174.6 173.8
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 23.256 shares of common stock........ 5.8 5.8 5.8 5.8
------ ------ ------ ------
Average number of common and common
equivalent shares assumed outstanding for
computing earnings per share.............. 180.4 179.8 180.4 179.6
====== ====== ====== ======
Net income per share........................ $ .98 $ 1.04 $ 1.83 $ 1.87
</TABLE>
The number of shares and per share amounts have been retroactively adjusted to
reflect the two-for-one stock split effective April 19, 1996.
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 9,896<F1>
<DEBT-CARRYING-VALUE> 2,981<F2>
<DEBT-MARKET-VALUE> 3,104<F3>
<EQUITIES> 619
<MORTGAGE> 10
<REAL-ESTATE> 0
<TOTAL-INVEST> 14,256
<CASH> 6
<RECOVER-REINSURE> 45<F4>
<DEFERRED-ACQUISITION> 1,263
<TOTAL-ASSETS> 23,026
<POLICY-LOSSES> 12,591<F5>
<UNEARNED-PREMIUMS> 2,560<F6>
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 1,323<F7>
<COMMON> 176
0
0
<OTHER-SE> 5,099<F8>
<TOTAL-LIABILITY-AND-EQUITY> 23,026
2,491
<INVESTMENT-INCOME> 467
<INVESTMENT-GAINS> 37
<OTHER-INCOME> 217<F9>
<BENEFITS> 1,708
<UNDERWRITING-AMORTIZATION> 662
<UNDERWRITING-OTHER> 205
<INCOME-PRETAX> 408
<INCOME-TAX> 82
<INCOME-CONTINUING> 326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 326
<EPS-PRIMARY> 1.83
<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 ($1,754) AND POLICY LIABILITIES ($194), AS PRESCRIBED BY
SFAS NO. 113. SUCH AMOUNTS ARE INCLUDED IN TOTAL ASSETS.
<F6>UNEARNED-PREMIUMS EXCLUDE THE REDUCTION FOR PREPAID REINSURANCE PREMIUMS
($356), AS PRESCRIBED BY SFAS NO. 113. THIS PREPAID AMOUNT IS INCLUDED IN
TOTAL ASSETS.
<F7>NOTES-PAYABLE INCLUDES SHORT-TERM DEBT OF $243 AND LONG-TERM DEBT OF $1,080.
<F8>OTHER-SE INCLUDES PAID-IN SURPLUS; RETAINED EARNINGS; FOREIGN CURRENCY
TRANSLATION LOSSES, 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>
