<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---
ACT OF 1934
For the quarterly period ended March 31, 1996
-------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---
ACT OF 1934
For the transition period from to
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Commission file number 1-8661
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THE CHUBB CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-2595722
- ------------------------------- --------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
15 MOUNTAIN VIEW ROAD, WARREN, NEW JERSEY 07061-1615
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 903-2000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
-------------- --------------
The number of shares of common stock outstanding as of April 30, 1996
was 174,740,971.
<PAGE> 2
THE CHUBB CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995......................... 1
Consolidated Statements of Income for the
Three Months Ended March 31, 1996 and 1995................... 2
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995................... 3
Notes to Consolidated Financial Statements.................... 4
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations.............. 6
Part II. Other Information:
Item 6 - Exhibits and Reports on Form 8-K....................... 12
</TABLE>
<PAGE> 3
Page 1
THE CHUBB CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1996 1995
--------- ---------
(in millions)
<S> <C> <C>
Assets
Invested Assets
Short Term Investments .............................. $ 689.5 $ 484.5
Fixed Maturities
Held-to-Maturity
Tax Exempt (market $2,825.6 and $3,004.8) ........ 2,691.7 2,826.7
Taxable (market $414.8 and $433.9) ............... 398.1 402.5
Available-for-Sale
Tax Exempt (cost $3,918.8 and $3,607.9) .......... 4,089.4 3,860.6
Taxable (cost $5,475.3 and $5,282.7) ............. 5,555.2 5,513.0
Equity Securities (cost $480.3 and $493.4) .......... 578.3 587.8
Policy and Mortgage Loans ........................... 215.6 212.3
--------- ---------
TOTAL INVESTED ASSETS ........................ 14,217.8 13,887.4
Cash .................................................. 10.1 11.9
Accrued Investment Income ............................. 227.6 245.3
Premiums Receivable ................................... 871.0 872.9
Reinsurance Recoverable on Property and Casualty
Unpaid Claims ........................................ 1,738.4 1,973.7
Prepaid Reinsurance Premiums .......................... 370.0 484.4
Funds Held for Asbestos-Related Settlement ............ 1,038.9 1,038.1
Deferred Policy Acquisiton Costs
Property and Casualty Insurance ..................... 560.7 558.7
Life and Health Insurance ........................... 655.8 612.7
Real Estate Assets .................................... 1,738.3 1,742.6
Deferred Income Tax ................................... 237.6 159.7
Other Assets .......................................... 1,262.9 1,409.1
--------- ---------
TOTAL ASSETS ................................. $22,929.1 $22,996.5
========= =========
Liabilities
Property and Casualty Unpaid Claims ................... $ 9,557.5 $ 9,588.2
Life and Health Policy Liabilities .................... 3,008.7 2,943.1
Unearned Premiums ..................................... 2,462.6 2,570.7
Short Term Debt ....................................... 243.6 187.6
Long Term Debt ........................................ 1,079.4 1,156.0
Dividend Payable to Shareholders ...................... 47.2 42.7
Accrued Expenses and Other Liabilities ................ 1,302.5 1,245.5
--------- ---------
TOTAL LIABILITIES ............................ 17,701.5 17,733.8
--------- ---------
Shareholders' Equity
Common Stock - $1 Par Value; 175,626,898 and
87,819,355 Shares (Note 3) ........................... 175.6 87.8
Paid-In Surplus ....................................... 689.3 778.2
Retained Earnings ..................................... 4,310.7 4,206.5
Foreign Currency Translation Losses, Net of Income Tax (11.0) (3.4)
Unrealized Appreciation of Investments, Net ........... 214.8 345.9
Receivable from Employee Stock Ownership Plan ......... (115.0) (115.0)
Treasury Stock, at Cost - 956,270 and
518,468 Shares (Note 3) .............................. (36.8) (37.3)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ................... 5,227.6 5,262.7
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ... $22,929.1 $22,996.5
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
Page 2
THE CHUBB CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1995
---- ----
(in millions)
<S> <C> <C>
Revenues
Premiums Earned and Policy Charges ................ $ 1,262.4 $ 1,173.8
Investment Income ................................. 234.1 218.3
Real Estate ....................................... 166.4 68.6
Realized Investment Gains ......................... 22.0 3.4
----------- -----------
Total Revenues ............................. 1,684.9 1,464.1
----------- -----------
Benefits, Claims and Expenses
Insurance Claims and Policyholders' Benefits ...... 891.8 786.9
Amortization of Deferred Policy Acquisition Costs . 327.7 293.7
Other Insurance Operating Costs and Expenses ...... 107.0 112.6
Real Estate Cost of Sales and Expenses ............ 159.9 73.9
Investment Expenses ............................... 5.1 4.7
Corporate Expenses ................................ 7.3 8.3
----------- -----------
Total Benefits, Claims and Expenses ........ 1,498.8 1,280.1
----------- -----------
Income Before Federal and Foreign Income Tax ........ 186.1 184.0
Federal and Foreign Income Tax ...................... 34.7 37.3
----------- -----------
Net Income .......................................... $ 151.4 $ 146.7
=========== ===========
Average Common and Common Equivalent Shares
Outstanding (In Thousands) ......................... 180,456 179,536
PER SHARE DATA
- --------------
Net Income .......................................... $ .85 $ .83
Dividends Declared .................................. .27 .24 1/2
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
Page 3
THE CHUBB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1995
---- ----
(in millions)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ............................................ $ 151.4 $ 146.7
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities
Increase in Property and Casualty Unpaid Claims, Net 204.6 115.9
Increase in Funds Held for Asbestos-Related
Settlement ......................................... (0.8) (488.1)
Decrease in Medical Malpractice Reinsurance
Related Receivable ................................. 191.2 -
Realized Investment Gains ........................... (22.0) (3.4)
Other, Net .......................................... 7.3 25.5
-------- --------
Net Cash Provided by (Used in) Operating Activities ... 531.7 (203.4)
-------- --------
Cash Flows from Investing Activities
Proceeds from Sales of Fixed Maturities ............... 1,745.6 995.2
Proceeds from Maturities of Fixed Maturities .......... 254.9 203.3
Proceeds from Sales of Equity Securities .............. 87.1 165.1
Purchases of Fixed Maturities ......................... (2,354.1) (869.5)
Purchases of Equity Securities ........................ (63.0) (51.2)
Increase in Short Term Investments, Net ............... (205.0) (139.9)
Increase (Decrease) in Net Payable from Security
Transactions Not Settled ............................. 30.6 (27.8)
Other, Net ............................................ (19.7) (69.2)
-------- --------
Net Cash Provided by (Used in) Investing Activities ... (523.6) 206.0
-------- --------
Cash Flows from Financing Activities
Deposits Credited to Policyholder Funds ............... 94.8 141.0
Withdrawals from Policyholder Funds ................... (38.1) (37.1)
Repayment of Long Term Debt ........................... (76.6) (101.0)
Increase in Short Term Debt, Net ...................... 56.0 30.8
Dividends Paid to Shareholders ........................ (42.7) (39.9)
Repurchase of Shares .................................. (9.9) (1.3)
Other, Net ............................................ 6.6 3.6
-------- --------
Net Cash Used in Financing Activities ................. (9.9) (3.9)
-------- --------
Net Decrease in Cash .................................... (1.8) (1.3)
Cash at Beginning of Year ............................... 11.9 5.6
-------- --------
Cash at End of Period ................................. $ 10.1 $ 4.3
======== ========
</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) 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.
The net change in unrealized appreciation or depreciation of
investments carried at market value was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
------ ------
(in millions)
<S> <C> <C>
Change in unrealized appreciation of equity
securities ..................................... $ 3.6 $ 42.0
Change in unrealized appreciation or depreciation
of fixed maturities ............................ (232.5) 260.6
Change in deferred policy acquisition cost
adjustment ..................................... 27.2 (29.3)
------- ------
(201.7) 273.3
Deferred income tax (credit), net of
change in valuation allowance .................. (70.6) 46.0
------- ------
Change in unrealized appreciation or depreciation
of investments, net ............................ $(131.1) $227.3
======= ======
</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.
<PAGE> 7
Page 5
3) 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 March 31, 1996, the shares of common
stock issued and the shares held as treasury stock have been adjusted to
reflect the effect of the stock split and an amount equal to the par value
of the additional shares of common stock to be issued has been transferred
from Paid-In Surplus to Common Stock.
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.
4) 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> 8
Page 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1996 AND 1995
PROPERTY AND CASUALTY INSURANCE
Earnings from our property and casualty business were lower in the first
quarter of 1996 compared with the same period of 1995. The decrease was due to a
decline in underwriting results caused by catastrophe losses of $73.0 million in
1996 compared with only $6.4 million in 1995. Investment income increased in the
first quarter of 1996 compared with 1995. Property and casualty income after
taxes amounted to $120.3 million in the first quarter of 1996 compared with
$142.0 million in 1995.
Net premiums written were $1,127.8 million in the first quarter of 1996,
an increase of 14.9% compared with the first quarter 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 quarter of 1996 increased by $14.4 million for the personal classes and
$32.4 million for the commercial classes and decreased by $14.0 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 quarter of 1996 by approximately $25 million.
Underwriting results were modestly unprofitable in the first quarter of
1996 compared with profitable results for the same quarter of 1995. Our combined
loss and expense ratio was 101.3% in the first quarter of 1996 compared with
96.3% in 1995.
The loss ratio deteriorated to 68.8% in the first quarter of 1996 from
63.3% in 1995. The loss ratio in the first quarter of 1996 was adversely
affected by catastrophe losses resulting primarily from the winter storms in the
eastern part of United States. Catastrophe losses during the first quarter of
1996 were 6.5 percentage points of the loss ratio compared with 0.6 of a
percentage point in 1995.
<PAGE> 9
Page 7
Our expense ratio was 32.5% in the first quarter of 1996 compared with
33.0% in 1995. The expense ratio in 1996 benefited from growth in net written
premiums at a somewhat greater rate than the increase in overhead expenses.
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>
Quarter Ended March 31
------------------------------------------------
Net Premiums Combined Loss and
Written Expense Ratios
--------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
(in millions)
<S> <C> <C> <C> <C>
Personal Insurance
Automobile .......... $ 59.6 $ 45.8 89.4% 90.4%
Homeowners .......... 130.1 94.4 127.4 87.3
Other ............... 64.9 48.0 65.4 76.0
-------- -------- -------- --------
Total Personal .. 254.6 188.2 103.4 85.1
-------- -------- -------- --------
Commercial Insurance
Multiple Peril ...... 158.5 123.4 119.1 101.2
Casualty ............ 208.7 179.4 113.6 110.6
Workers' Compensation 72.9 56.1 96.3 98.1
Property and Marine . 111.4 92.0 98.4 96.0
Executive Protection 181.0 151.2 80.5 86.2
Other ............... 139.0 109.4 86.5 101.0
-------- -------- -------- --------
Total Commercial 871.5 711.5 100.0 99.0
-------- -------- -------- --------
Reinsurance Assumed ... 1.7 82.2 N/M 101.7
-------- -------- -------- --------
Total ........... $1,127.8 $ 981.9 101.3% 96.3%
======== ======== ======== ========
</TABLE>
PERSONAL INSURANCE
Premiums from personal insurance coverages, which represent
approximately 23% of the premiums written by our property and casualty insurance
subsidiaries, increased 35.3% in the first quarter of 1996 compared with the
same quarter in 1995. Approximately two-thirds of such growth 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 levels for these classes. 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.
Underwriting results in our personal insurance business were
unprofitable in the first quarter of 1996 due to the adverse effect of
significant catastrophe losses. Underwriting results were highly profitable in
the same period of 1995. The combined loss and expense ratio was 103.4% in the
first quarter of 1996 compared with 85.1% in 1995.
<PAGE> 10
Page 8
Homeowners results in the first quarter of 1996 were adversely affected
by significant weather-related catastrophe losses. Catastrophe losses
represented 42.7 percentage points of the loss ratio for this class in the first
quarter of 1996 compared with only 3.8 percentage points in 1995. 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 77% of
our total writings, increased by 22.5% in the first quarter of 1996 compared
with the same period a year ago. More than half of the growth in premiums 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 levels for these classes. In addition, premium
growth 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 particularly strong outside the United States.
Our commercial insurance business produced near breakeven underwriting
results in the first quarter of 1996 and 1995. The combined loss and expense
ratio was 100.0% for the first quarter of 1996 compared with 99.0% in 1995.
Multiple peril results deteriorated substantially in 1996 compared with
1995 due 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 quarter of 1996 represented 9.1
percentage points of the loss ratio for this class compared with only 1.1
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.
Property and marine results deteriorated modestly in 1996 compared with
1995 due to higher catastrophe losses, but remained profitable. Catastrophe
losses represented 5.9 percentage points of the loss ratio for this class in the
first quarter of 1996 compared with virtually no catastrophe losses in 1995.
<PAGE> 11
Page 9
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. Both financial fidelity and non-
fidelity coverages contributed to such improvement. 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 huge decrease in premiums written in the first quarter 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 in the first quarter due to
the 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 near breakeven in the first
quarter of 1996 compared with similar results in 1995. The combined loss and
expense ratio for this business was not meaningful for the first quarter of 1996
due to the effect of the portfolio transfer of unearned premiums on the expense
ratio.
LOSS RESERVES
Loss reserves, net of reinsurance recoverable, increased by $204.6
million during the first quarter of 1996. 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. Unpaid claims related to catastrophes contributed
approximately $40 million to the increase in loss reserves in the first quarter
of 1996. Loss reserves also increased by approximately $35 million due to 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 $38.6
million in the first quarter of 1996 and $45.2 million 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.
INVESTMENTS
Investment income after deducting expenses and taxes increased by 7.2%
in the first quarter of 1996 compared with the same period in 1995. The growth
was due to an increase in invested assets since the first quarter of 1995,
reflecting strong cash flow from operations. The effective tax rate on
investment income was 15.7% in the first quarter of 1996 compared with 16.3% in
the first quarter of 1995.
<PAGE> 12
Page 10
In the first quarter of 1996, new cash was invested in tax-exempt bonds
and, to a lesser extent, taxable bonds. We maintain investments in highly
liquid, short term securities at all times to provide for immediate cash needs.
At March 31, 1996, such securities were at a higher than normal level due to
funds received related to the portfolio transfer of business previously ceded to
Sun Alliance back to the Corporation's property and casualty subsidiaries.
LIFE AND HEALTH INSURANCE
Life and health insurance earnings after taxes were $9.1 million for the
first quarter of 1996 compared with $3.5 million in 1995. Total life and health
insurance premiums and policy charges were $140.9 million in the first quarter
of 1996 compared with $178.3 million in 1995.
Premiums and policy charges for personal insurance amounted to $83.4
million in the first quarter of 1996, a 12.3% increase over the comparable
period in 1995. Earnings from personal insurance were $10.1 million in the first
quarter of 1996 compared with $7.7 million for the same period in 1995.
Operating efficiencies realized from the consolidation of service centers in
1995 contributed to the increase in earnings.
Premium revenue for group insurance was $57.5 million in the first
quarter of 1996 compared with $104.1 million in 1995, a decrease of 44.8%. The
decline in premium revenue, which was expected, resulted from the continuing
high level of non-renewals for traditional indemnity policies due to the
increased availability of alternative markets as well as our significant rate
increases in recent years. Group insurance operations resulted in a loss of $1.0
million in the first quarter of 1996 compared with a loss of $4.2 million in
1995. Results in both periods were adversely affected by a high level of claims
resulting from the increased cost of medical services and the increased
utilization of those services. Results in both periods benefited from rate
increases; this was offset in part by the adverse effect of premium revenue
decreasing at a greater rate than the decrease in expenses.
Gross investment income increased by 8.4% in the first quarter of 1996
compared with the same quarter in 1995. The growth was due to an increase in
invested assets since the first quarter of 1995. The new cash available for
investment was due primarily to increases in deposits credited to policyholder
funds. In the first quarter 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 amounted to $4.0 million in the first
quarter of 1996 compared with a loss of $3.0 million in 1995. Real estate
earnings in 1996 benefited from the sale of several rental properties and from
residential sales. The loss for the first quarter of 1995 reflects a charge of
$6.5 million after taxes resulting from the initial application of Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan, which established new criteria for measuring impairment of a loan.
Revenues were $166.4 million in the first quarter of 1996 compared with
$68.6 million in 1995. The increase in 1996 was due to the sale of rental
properties.
<PAGE> 13
Page 11
CORPORATE
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. 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.
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 vary significantly from period to period. Net
investment gains before taxes of $22.0 million were realized in the first
quarter of 1996 compared with net gains of $3.4 million for the same period in
1995.
<PAGE> 14
Page 12
PART II. OTHER INFORMATION
--------------------------
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
A. Exhibit 11.1 - Computation of earnings per share.
B. Reports on Form 8-K - The Registrant filed a current report on Form 8-K
dated March 1, 1996 with respect to the announcement on March 1, 1996 that
the Board of Directors of the Registrant had (1) declared a quarterly
dividend in the amount of $0.54 per share payable April 2, 1996 to
shareholders of record as of March 15, 1996, (2) declared a two-for-one
stock split payable to shareholders of record as of April 19, 1996 and (3)
approved an amendment to the Registrant's Certificate of Incorporation
increasing the authorized shares of common stock from 300 million shares to
600 million shares.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Chubb Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CHUBB CORPORATION
(Registrant)
By: /S/ Henry B. Schram
______________________________
Henry B. Schram
Senior Vice-President and
Chief Accounting Officer
Date: May 14, 1996
<PAGE> 1
Exhibit 11.1
THE CHUBB CORPORATION
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1995
------- -------
(in millions)
<S> <C> <C>
Net income ......................................... $ 151.4 $ 146.7
After-tax interest expense on 6% guaranteed
exchangeable subordinated notes ................... 2.4 2.4
------- -------
Net income for computing earnings per share ........ $ 153.8 $ 149.1
======= =======
Average number of common shares outstanding ........ 174.7 173.7
Additional shares from assumed conversion
of 6% guaranteed exchangeable subordinated
notes as if each $1,000 of principal
amount had been converted at issuance
into 23.256 shares of common stock ............... 5.8 5.8
------- -------
Average number of common and common
equivalent shares assumed outstanding for
computing earnings per share ..................... 180.5 179.5
======= =======
Net income per share ............................... $ .85 $ .83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THE CHUBB CORPORATION
Financial Data Schedule(*)
(*) This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and the Consolidated Statements of Income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 9,645<F1>
<DEBT-CARRYING-VALUE> 3,090<F2>
<DEBT-MARKET-VALUE> 3,240<F3>
<EQUITIES> 578
<MORTGAGE> 10
<REAL-ESTATE> 0
<TOTAL-INVEST> 14,218
<CASH> 10
<RECOVER-REINSURE> 39<F4>
<DEFERRED-ACQUISITION> 1,217
<TOTAL-ASSETS> 22,929
<POLICY-LOSSES> 12,566<F5>
<UNEARNED-PREMIUMS> 2,463<F6>
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 1,323<F7>
<COMMON> 176
0
0
<OTHER-SE> 5,052<F8>
<TOTAL-LIABILITY-AND-EQUITY> 22,929
1,263
<INVESTMENT-INCOME> 234
<INVESTMENT-GAINS> 22
<OTHER-INCOME> 166<F9>
<BENEFITS> 892
<UNDERWRITING-AMORTIZATION> 328
<UNDERWRITING-OTHER> 107
<INCOME-PRETAX> 186
<INCOME-TAX> 35
<INCOME-CONTINUING> 151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151
<EPS-PRIMARY> .85
<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 ($1,738) AND POLICY LIABILITIES ($202), AS PRESCRIBED BY
SFAS NO. 113. SUCH AMOUNTS ARE INCLUDED IN TOTAL ASSETS.
<F6>UNEARNED-PREMIUMS EXCLUDE THE REDUCTION FOR PREPAID REINSURANCE PREMIUMS
($370), AS PRESCRIBED BY SFAS NO. 113. THIS PREPAID AMOUNT IS INCLUDED IN
TOTAL ASSETS.
<F7>NOTES-PAYABLE INCLUDES SHORT-TERM DEBT OF $244 AND LONG-TERM DEBT OF $1,079.
<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>
