<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, 1997
---------------
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, 1997 was
172,467,338.
<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
June 30, 1997 and December 31, 1996.......................... 1
Consolidated Statements of Income for the
Three Months and Six Months Ended June 30, 1997 and 1996..... 2
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996...................... 3
Notes to Consolidated Financial Statements.................... 4
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations.............. 8
Part II. Other Information:
Item 4 - Submission of Matters to a Vote of Security Holders.... 16
Item 6 - Exhibits and Reports on Form 8-K....................... 17
</TABLE>
<PAGE> 3
Page 1
THE CHUBB CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, Dec. 31,
1997 1996
--------- ---------
(in millions)
<S> <C> <C>
Assets
Invested Assets
Short Term Investments............................... $ 1,100.5 $ 275.9
Fixed Maturities
Held-to-Maturity - Tax Exempt (market $2,465.1
and $2,573.4)..................................... 2,342.2 2,443.6
Available-for-Sale
Tax Exempt (cost $4,953.2 and $4,415.1)........... 5,173.2 4,622.6
Taxable (cost $3,880.3 and $4,038.7).............. 3,948.8 4,092.7
Equity Securities (cost $650.4 and $540.5)........... 793.1 646.3
--------- ---------
TOTAL INVESTED ASSETS......................... 13,357.8 12,081.1
Cash................................................... 7.8 4.7
Accrued Investment Income.............................. 196.6 195.3
Premiums Receivable.................................... 1,161.6 984.9
Reinsurance Recoverable on Unpaid Claims............... 1,280.3 1,767.8
Prepaid Reinsurance Premiums........................... 114.3 326.7
Funds Held for Asbestos-Related Settlement............. 593.2 599.9
Deferred Policy Acquisition Costs...................... 662.0 601.2
Real Estate Assets..................................... 1,629.4 1,604.0
Deferred Income Tax.................................... 377.4 365.6
Other Assets........................................... 585.9 564.3
Net Assets of Discontinued Operations.................. - 843.4
--------- ---------
TOTAL ASSETS.................................. $19,966.3 $19,938.9
========= =========
Liabilities
Unpaid Claims.......................................... $ 9,575.3 $ 9,523.7
Unearned Premiums...................................... 2,623.6 2,617.5
Short Term Debt........................................ 223.0 189.5
Long Term Debt......................................... 837.8 1,070.5
Dividend Payable to Shareholders....................... 50.3 47.2
Accrued Expenses and Other Liabilities................. 1,084.4 1,027.6
--------- ---------
TOTAL LIABILITIES............................. 14,394.4 14,476.0
--------- ---------
Shareholders' Equity
Common Stock - $1 Par Value; 176,060,309 and
176,084,173 Shares.................................... 176.1 176.1
Paid-In Surplus........................................ 609.2 695.7
Retained Earnings...................................... 4,811.6 4,530.5
Foreign Currency Translation Losses, Net of Income Tax. (20.5) (15.6)
Unrealized Appreciation of Investments, Net............ 280.4 238.7
Receivable from Employee Stock Ownership Plan.......... (101.6) (106.3)
Treasury Stock, at Cost - 2,984,733 and
1,223,182 Shares...................................... (183.3) (56.2)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.................... 5,571.9 5,462.9
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $19,966.3 $19,938.9
========= =========
</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
1997 1996 1997 1996
-------- -------- -------- --------
(in millions)
<S> <C> <C> <C> <C>
Revenues
Premiums Earned....................... $1,249.0 $1,144.3 $2,570.0 $2,265.8
Investment Income..................... 192.8 174.5 379.6 349.1
Real Estate........................... 47.5 51.0 91.8 217.4
Realized Investment Gains............. 20.3 12.2 45.1 31.3
-------- -------- -------- --------
Total Revenues................. 1,509.6 1,382.0 3,086.5 2,863.6
-------- -------- -------- --------
Claims and Expenses
Insurance Claims...................... 785.7 732.4 1,625.6 1,500.3
Amortization of Deferred Policy
Acquisition Costs.................... 337.5 312.0 699.2 616.9
Other Insurance Operating Costs and
Expenses............................. 83.2 73.5 161.7 140.1
Real Estate Cost of Sales and Expenses 58.3 46.1 100.6 206.0
Investment Expenses................... 2.6 2.9 5.9 7.5
Corporate Expenses.................... 2.9 7.4 8.6 14.7
-------- -------- -------- --------
Total Claims and Expenses...... 1,270.2 1,174.3 2,601.6 2,485.5
-------- -------- -------- --------
Income from Continuing Operations
Before Federal and Foreign Income Tax.. 239.4 207.7 484.9 378.1
Federal and Foreign Income Tax.......... 50.7 42.9 104.1 72.9
-------- -------- -------- --------
Income from Continuing Operations....... 188.7 164.8 380.8 305.2
Income from Discontinued Operations,
Net of Tax............................. - 9.5 - 20.5
-------- -------- -------- --------
Net Income.............................. $ 188.7 $ 174.3 $ 380.8 $ 325.7
======== ======== ======== ========
Average Common and Common Equivalent
Shares Outstanding (In Thousands)...... 174,311 180,416 176,566 180,436
PER SHARE DATA
Income from Continuing Operations....... $1.09 $.93 $2.18 $1.72
Income from Discontinued Operations..... - .05 - .11
----- ---- ----- -----
Net Income.............................. $1.09 $.98 $2.18 $1.83
===== ==== ===== =====
Dividends Declared...................... $ .29 $.27 $ .58 $ .54
</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>
1997 1996
--------- ---------
(in millions)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income............................................. $ 380.8 $ 325.7
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Increase in Unpaid Claims, Net....................... 539.1 142.2
Increase in Unearned Premiums, Net................... 218.5 117.8
Increase in Premiums Receivable...................... (176.7) (164.4)
Decrease in Medical Malpractice Reinsurance
Related Receivable.................................. - 191.2
Decrease in Funds Held for Asbestos-Related
Settlement.......................................... 6.7 209.8
Increase in Deferred Policy Acquisition Costs........ (60.8) (27.5)
Change in Deferred Federal Income Tax................ (36.6) (5.2)
Depreciation......................................... 32.7 28.7
Realized Investment Gains............................ (45.1) (31.3)
Income from Discontinued Operations, Net of Tax...... - (20.5)
Other, Net........................................... (31.5) (12.4)
--------- ---------
Net Cash Provided by Operating Activities.............. 827.1 754.1
--------- ---------
Cash Flows from Investing Activities
Proceeds from Sales of Fixed Maturities................ 1,991.1 1,866.3
Proceeds from Maturities of Fixed Maturities........... 312.0 617.5
Proceeds from Sales of Equity Securities............... 176.1 136.5
Proceeds from Sale of Discontinued Operations, Net..... 861.2 -
Purchases of Fixed Maturities.......................... (2,576.3) (3,018.6)
Purchases of Equity Securities......................... (249.6) (134.5)
Increase in Short Term Investments, Net................ (824.6) (31.8)
Increase (Decrease)in Net Payable from Security
Transactions Not Settled.............................. 49.0 (4.1)
Other, Net............................................. (49.9) (65.4)
--------- ---------
Net Cash Used in Investing Activities.................. (311.0) (634.1)
--------- ---------
Cash Flows from Financing Activities
Proceeds from Issuance of Long Term Debt............... 8.1 2.0
Repayment of Long Term Debt............................ (12.2) (77.7)
Increase in Short Term Debt, Net....................... 33.5 55.9
Dividends Paid to Shareholders......................... (96.6) (89.9)
Repurchase of Shares................................... (479.8) (34.0)
Other, Net............................................. 34.0 18.2
--------- ---------
Net Cash Used in Financing Activities.................. (513.0) (125.5)
--------- ---------
Net Increase (Decrease) in Cash.......................... 3.1 (5.5)
Cash at Beginning of Year................................ 4.7 11.9
--------- ---------
Cash at End of Period.................................. $ 7.8 $ 6.4
========= =========
</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 1996 Annual
Report to Shareholders.
2) Discontinued Operations
On May 13, 1997, the Corporation completed the sale of Chubb Life
Insurance Company of America and its subsidiaries to Jefferson-Pilot
Corporation for $875 million in cash, subject to closing related
adjustments. The life and health insurance subsidiaries have been
classified as discontinued operations.
<PAGE> 7
Page 5
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.
The net change in unrealized appreciation of investments carried
at market value was as follows:
<TABLE>
<CAPTION>
Periods Ended June 30
--------------------------------------------------
Second Quarter Six Months
--------------------- ---------------------
1997 1996 1997 1996
------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C>
Continuing Operations
Change in unrealized appreciation of
equity securities ................ $ 50.7 $ 7.7 $ 36.9 $ 10.5
Change in unrealized appreciation of
fixed maturities.................. 119.8 (79.5) 27.0 (252.7)
------ ------ ------ ------
170.5 (71.8) 63.9 (242.2)
Deferred income tax (credit)........ 59.5 (25.0) 22.2 (84.7)
------ ------ ------ ------
Change in unrealized appreciation... 111.0 (46.8) 41.7 (157.5)
Discontinued operations, net............. -- (13.4) -- (33.8)
------ ------ ------ ------
Change in unrealized appreciation of
investments, net....................... $111.0 $(60.2) $ 41.7 $(191.3)
====== ====== ====== ======
</TABLE>
4) Real Estate
In June 1997, a definitive agreement was reached to sell a
substantial portion of the Corporation's commercial real estate
properties to PW/MS Acquisition I, LLC, a joint venture company formed
by Paine Webber Real Estate Securities Inc. and Morgan Stanley Real
Estate Fund II, L.P. The purchase price of $758 million includes $649
million in cash and the assumption of $109 million in debt. The sale is
subject to various closing adjustments and other customary conditions.
The carrying value of certain real estate assets was reduced by $10.2
million in the second quarter of 1997 to reflect the terms of the
agreement. This charge is included in real estate cost of sales and
expenses in the consolidated statements of income.
The closings for the properties sold to PW/MS Acquisition I are
expected to occur by the end of 1997. Revenues from the sale will be
recognized at the time of the closings.
The Corporation is continuing to explore the sale of certain of
its residential, retail and remaining commercial properties.
<PAGE> 8
Page 6
5) 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 1996 Annual Report to Shareholders. The following
development during 1997 relates to the settlement.
In June 1997, the United States Supreme Court set aside the
ruling by the United States Court of Appeals for the Fifth Circuit that
had 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. The Supreme Court
ordered the Fifth Circuit Court to further consider the global
settlement agreement in light of a June 1997 ruling by the Supreme Court
that had rejected an unrelated settlement that included several former
asbestos manufacturers.
The trilateral agreement among Pacific Indemnity, Continental
Casualty and Fibreboard was not appealed to the Supreme Court and is
now final. The trilateral agreement will be triggered if the global
settlement agreement is ultimately disapproved. Since the trilateral
agreement is unaffected by the Supreme Court's recent action, management
continues to believe that the uncertainty of Pacific Indemnity's
exposure with respect to asbestos-related bodily injury claims against
Fibreboard has been eliminated.
6) Reinsurance
Effective January 1, 1997, the agreements pertaining to the
exchange of reinsurance on a quota share basis with Royal & Sun Alliance
Insurance Group plc were terminated. As a result, there were portfolio
transfers of unpaid claims, unearned premiums, reinsurance recoverable
on unpaid claims and prepaid reinsurance premiums. The effect of the
portfolio transfers, which were recorded in the first quarter of 1997,
was to decrease unpaid claims and unearned premiums by $183.8 million
and $93.6 million, respectively, and reinsurance recoverable on unpaid
claims and prepaid reinsurance premiums by $470.0 million and $174.6
million, respectively.
7) Exchangeable Subordinated Notes
At January 1, 1997, Chubb Capital Corporation had outstanding
$229.3 million of 6% exchangeable subordinated notes due May
15, 1998. In 1997, the holders of $228.6 million of the notes elected
the option to exchange each $1,000 of principal amount into 23.256
shares of common stock of the Corporation, resulting in the issuance of
5,316,565 shares of common stock. The remaining notes were redeemed at
101.7% of the principal amount plus accrued interest.
The exchange of the notes into common stock of the Corporation is
considered a noncash transaction which has been excluded from the
consolidated statements of cash flows.
<PAGE> 9
Page 7
8) Per Share Data
Earnings per share amounts are based on the weighted average
number of common and common equivalent shares outstanding. The 6%
exchangeable subordinated notes were considered to be common equivalent
shares during the period they were outstanding. The computation assumes
the addition to income of the after-tax interest expense applicable to
such notes.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per
Share, which establishes new standards for computing and presenting
earnings per share. SFAS No. 128 requires presentation of basic and
diluted earnings per share on the face of the statements of income.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997 and requires restatement of all prior
periods presented. Earlier adoption is not permitted. The adoption of
SFAS. No. 128 is not expected to have a significant effect on the
Corporation's earnings per share.
<PAGE> 10
Page 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
1996 AND FOR THE QUARTERS ENDED JUNE 30, 1997 AND 1996
PROPERTY AND CASUALTY INSURANCE
Earnings from our property and casualty business were substantially
higher in the first six months of 1997 compared with the same period of 1996.
The increase was due primarily to a significant improvement in underwriting
results in 1997. Underwriting results in 1996 were adversely affected by
substantially higher catastrophe losses in the first quarter. Investment income
increased in 1997 compared with 1996. Property and casualty income after taxes
amounted to $343.7 million in the first six months of 1997 and $173.8 million in
the second quarter compared with $269.9 million and $149.6 million,
respectively, in 1996.
Net premiums written were $2.8 billion in the first six months of 1997
and $1.4 billion in the second quarter representing increases of 17.0% and 8.8%,
respectively, over the comparable periods of 1996. A portion of the increase
in premiums written in the first six months of both 1996 and 1997 was due to
changes to the agreements pertaining to the exchange of reinsurance on a quota
share basis with the Sun Alliance Group plc. Effective January 1, 1996, these
agreements were amended to reduce the portion of each company's business
reinsured with the other. As a result of the 1996 merger of Sun Alliance with
Royal Insurance Holdings plc, these agreements were terminated effective January
1, 1997. The Corporation's property and casualty subsidiaries now retain a
greater portion of the business they write directly and no longer assume any
reinsurance from Sun Alliance.
Excluding the effects of the 1996 changes to the reinsurance agreements
with Sun Alliance and the 1997 termination of such agreements, net premiums
written increased by 9.1% in the first six months of 1997 and 6.6% in the
second quarter over the comparable periods in 1996. The marketplace continued
to be competitive, particularly in the commercial classes. Competitors
continued to place significant pressure on pricing as they attempted to
maintain or increase market share. As a result, price increases continued to be
difficult to achieve.
Underwriting results were profitable in 1997 and 1996. Our combined loss
and expense ratio was 95.8% in the first six months of 1997 and 95.3% in the
second quarter compared with 98.8% and 96.3%, respectively, in 1996.
The loss ratio was 63.6% for the first six months of 1997 and 63.3% for
the second quarter compared with 66.6% and 64.3%, respectively, in the prior
year. The loss ratios continue to reflect the favorable experience resulting
from the consistent application of our disciplined underwriting standards. The
loss ratio in the first six months of 1996 was adversely affected by catastrophe
losses in the first quarter, resulting primarily from the winter storms in the
eastern part of the United States. Catastrophe losses in the first six months of
1997 amounted to $28.5 million which represented 1.1 percentage points of the
loss ratio compared with $83.9 million or 3.7 percentage points in 1996.
Catastrophe losses for the second quarter of 1997 amounted to $18.1 million or
1.5 percentage points of the loss ratio compared with $10.9 million or 1.0
percentage point in 1996.
Our expense ratio was 32.2% for the first six months of both 1997 and
1996 and 32.0% for the second quarter of both years.
<PAGE> 11
Page 9
Underwriting results during 1997 and 1996 by class of business were as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------------------
Net Premiums Combined Loss and
Written Expense Ratios
------------------- ----------------
1997 1996 1997 1996
-------- -------- ------ ------
(in millions)
<S> <C> <C> <C> <C>
Personal Insurance
Automobile........................ $ 153.0 $ 121.9 85.9% 85.5%
Homeowners........................ 352.6 274.7 92.9 112.6
Other............................. 163.7 130.3 65.3 67.5
-------- -------- ----- -----
Total Personal................ 669.3 526.9 84.7 95.3
-------- -------- ----- -----
Commercial Insurance
Multiple Peril.................... 413.1 325.7 111.2 118.2
Casualty.......................... 472.0 421.8 114.4 111.2
Workers' Compensation............. 157.1 128.0 104.5 96.3
Property and Marine............... 302.9 255.2 107.0 93.0
Executive Protection.............. 436.2 381.6 72.7 81.6
Other............................. 341.7 275.8 82.8 87.4
-------- -------- ----- -----
Total Commercial.............. 2,123.0 1,788.1 98.4 99.0
-------- -------- ----- -----
Total Before Reinsurance
Assumed...................... 2,792.3 2,315.0 95.2 98.2
Reinsurance Assumed................. (3.8) 68.6 N/M N/M
-------- -------- ----- ----
Total......................... $2,788.5 $2,383.6 95.8% 98.8%
======== ======== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended June 30
----------------------------------------
Net Premiums Combined Loss and
Written Expense Ratios
------------------- ----------------
1997 1996 1997 1996
-------- -------- ------ ------
(in millions)
<S> <C> <C> <C> <C>
Personal Insurance
Automobile........................ $ 74.7 $ 62.3 83.4% 81.8%
Homeowners........................ 178.4 144.6 93.2 98.2
Other............................. 78.7 65.4 65.5 69.6
-------- -------- ----- -----
Total Personal................ 331.8 272.3 84.4 87.5
-------- -------- ----- -----
Commercial Insurance
Multiple Peril.................... 193.6 167.2 113.7 117.4
Casualty.......................... 230.7 213.1 114.1 108.7
Workers' Compensation............. 65.1 55.1 107.4 97.0
Property and Marine............... 154.6 143.8 108.2 87.9
Executive Protection.............. 223.6 200.6 71.8 82.8
Other............................. 167.3 136.8 81.9 88.3
-------- -------- ----- -----
Total Commercial.............. 1,034.9 916.6 98.7 98.1
-------- -------- ----- -----
Total Before Reinsurance
Assumed...................... 1,366.7 1,188.9 95.3 95.6
Reinsurance Assumed................. - 66.9 - 107.6
-------- -------- ----- -----
Total......................... $1,366.7 $1,255.8 95.3% 96.3%
======== ======== ===== =====
</TABLE>
<PAGE> 12
Page 10
PERSONAL INSURANCE
Premiums from personal insurance coverages, which represent
approximately 24% of the premiums written by our property and casualty
subsidiaries, increased by $142.4 million or 27.0% in the first six months of
1997 and $59.5 million or 21.9% in the second quarter compared with the same
periods in 1996. Of these increases, $67.7 million in the first six months of
1997 and $37.0 million in the second quarter were due to the increase in our
retention percentage for these classes resulting from the termination of the
reinsurance agreement with Sun Alliance. In addition, net premiums written for
the personal classes included $65.8 million and $30.6 million in the first
quarter of 1997 and 1996, respectively, due to the effect of the portfolio
transfer of unearned premiums as of January 1 of each year resulting from the
termination of the reinsurance agreement.
Excluding the effects of the termination of the reinsurance agreement
with Sun Alliance, premium growth for the personal classes was 8.0% in the first
six months of 1997 and 8.3% in the second quarter. We continued to grow our
homeowners and other non-automobile business in non-catastrophe prone areas.
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 substantially more profitable
underwriting results in the first six months of 1997 than in the prior year.
Underwriting results in 1996 were adversely affected by significant catastrophe
losses in the first quarter. Underwriting results were highly profitable in the
second quarter of both years. The combined loss and expense ratios were 84.7%
for the first six months of 1997 and 84.4% for the second quarter compared with
95.3% and 87.5%, respectively, in 1996.
Homeowners results were profitable in 1997, benefiting from stable loss
activity and fewer catastrophe losses. Results for this class in 1996 were
adversely affected by significant weather-related catastrophe losses in the
first quarter. Catastrophe losses represented 3.1 percentage points of the loss
ratio for this class in the first six months of 1997 and 5.2 percentage points
in the second quarter compared with 23.7 percentage points and 5.2 percentage
points, respectively, in 1996. Other personal coverages, which include insurance
for personal valuables and excess liability, produced highly profitable results
in 1997 and 1996 due to continued favorable loss experience. Our automobile
business produced profitable results in 1997 and 1996 due primarily to stable
loss frequency and severity.
COMMERCIAL INSURANCE
Premiums from commercial insurance, which represent approximately 76% of
our total writings, increased by $334.9 million or 18.7% in the first six months
of 1997 and $118.3 million or 12.9% in the second quarter compared with the same
periods a year ago. Of these increases, $124.5 million in the first six months
of 1997 and $62.1 million in the second quarter were due to the increase in our
retention percentage for these classes resulting from the termination of the
reinsurance agreement with Sun Alliance. In addition, net premiums written for
the commercial classes included $108.8 million and $61.0 million in the first
quarter of 1997 and 1996, respectively, due to the effect of the portfolio
transfer of unearned premiums as of January 1 of each year resulting from the
termination of the reinsurance agreement.
<PAGE> 13
Page 11
Excluding the effects of the termination of the reinsurance agreement
with Sun Alliance, premium growth for the commercial classes was 9.4% in the
first six months of 1997 and 6.1% in the second quarter. Such premium growth was
due primarily to the selective writing of new accounts, exposure growth on
existing business and the purchase of additional coverages by current customers.
The competitive market has continued to place significant pressure on prices and
has made price increases difficult to achieve for most coverages.
Our commercial insurance business produced modestly profitable
underwriting results in 1997 and 1996. The combined loss and expense ratios were
98.4% for the first six months of 1997 and 98.7% for the second quarter compared
with 99.0% and 98.1%, respectively, in 1996.
Multiple peril results improved in 1997 compared with 1996 but remained
unprofitable. The improvement was in the property component of this business due
to an absence of catastrophe losses and favorable loss experience. Catastrophe
losses in the first six months of 1997 represented only 1.5 percentage points
of the loss ratio for this class compared with 5.1 percentage points in 1996.
Results for our casualty business were somewhat more unprofitable in
1997 than in 1996 due primarily to deterioration in the automobile component.
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
unprofitable in 1997 compared with profitable results in 1996 due to an increase
in the frequency of large losses for this class.
Workers' compensation results were unprofitable in 1997 compared with
profitable results in 1996. Results in our voluntary business deteriorated due
primarily to the impact of price reductions. Results from our share of the
involuntary pools and mandatory business in which we must participate by law
also deteriorated in 1997.
Property and marine results were unprofitable in 1997 compared with
profitable results in 1996. Results in 1997 were adversely affected by an
increase in the frequency of large losses, including several large overseas
losses. Catastrophe losses in the first six months of 1997 represented 4.8
percentage points of the loss ratio for this class compared with 3.7 percentage
points in 1996.
Results for our executive protection business were highly profitable in
1997 and 1996 due to favorable loss experience. Our financial institutions
business also produced highly profitable results in 1997 and 1996. Lower profits
in the non-fidelity portion of this business in 1997 were substantially offset
by improvement in the financial fidelity results. Results in our other
commercial classes were profitable in 1997 compared with modestly unprofitable
results in 1996.
<PAGE> 14
Page 12
REINSURANCE ASSUMED
Reinsurance assumed is treaty reinsurance that was assumed from Sun
Alliance. The reinsurance agreement with Sun Alliance was terminated effective
January 1, 1997. However, due to the lag in our reporting of such business, net
premiums written in the first quarter of 1997 included $89.8 million related to
business we assumed from Sun Alliance for the second half of 1996. Net premiums
written for this segment were reduced by $93.6 million and $65.2 million in the
first quarter of 1997 and 1996, respectively, due to the effect of the portfolio
transfer of unearned premiums back to Sun Alliance as of January 1 of each year.
Underwriting results for this segment in 1997, which represent our share
of the Sun Alliance business for the last six months of 1996, were near
breakeven. Results for this segment were somewhat unprofitable in the first six
months of 1996. The combined loss and expense ratio for this business was not
meaningful for the first six months of both years due to the effect on the
expense ratio of the portfolio transfer of unearned premiums as of January 1 of
each year.
LOSS RESERVES
Gross loss reserves were $9,575.3 million and $9,523.7 million at June
30, 1997 and December 31, 1996, respectively. Reinsurance recoverables on such
loss reserves were $1,280.3 million and $1,767.8 million at June 30, 1997 and
December 31, 1996, respectively. As a result of the termination of the
reinsurance agreements with Sun Alliance, there were portfolio transfers of
gross loss reserves and reinsurance recoverables as of January 1, 1997. The
effect of these portfolio transfers was a decrease in gross loss reserves of
$183.8 million and a decrease in reinsurance recoverables of $470.0 million.
Excluding the effects of the portfolio transfers, loss reserves, net of
reinsurance recoverable, increased by $252.9 million during the first six months
of 1997. Substantial reserve growth continued to occur in those liability
classes, primarily excess liability and executive protection, that are
characterized by delayed loss reporting and extended periods of settlement.
Losses incurred related to asbestos and toxic waste claims were $63.6
million in the first six months of 1997 and $76.9 million for the same period in
1996.
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, 1996. The following development during 1997 relates to
the settlement. In June 1997, the United States Supreme Court set aside the
ruling by the United States Court of Appeals for the Fifth Circuit that had
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. The Supreme Court ordered the Fifth Circuit Court
to further consider the global settlement agreement in light of a June 1997
ruling by the Supreme Court that had rejected an unrelated settlement that
included several former asbestos manufacturers.
<PAGE> 15
Page 13
The trilateral agreement among Pacific Indemnity, Continental Casualty
and Fibreboard was not appealed to the Supreme Court and is now final. The
trilateral agreement will be triggered if the global settlement agreement is
ultimately disapproved. Since the trilateral agreement is unaffected by the
Supreme Court's recent action, management continues to believe that the
uncertainty of Pacific Indemnity's exposure with respect to asbestos-related
bodily injury claims against Fibreboard has been eliminated.
INVESTMENTS
Investment income after deducting expenses and taxes increased by 8.9%
in the first six months of 1997 and by 9.6% in the second quarter compared with
the same periods in 1996. The growth was due to an increase in invested assets
since the second quarter of 1996, reflecting strong cash flow from operations,
which was partially offset by lower yields on new investments. The effective tax
rate on investment income increased to 16.7% in the first six months of 1997
from 15.5% in the comparable period of 1996 due to holding a larger proportion
of our investment portfolio in taxable securities.
New cash available for investment in the first six months of 1997
included approximately $330 million received in late March as the net result of
the portfolio transfers of unearned premiums and loss reserves as of January 1,
1997 related to the termination of the reinsurance agreements with Sun Alliance.
New cash available for investment, together with the proceeds from the sale of
approximately $250 million of foreign bonds in the first quarter, was invested
in tax-exempt bonds and, to a lesser extent, mortgage-backed securities and
corporate bonds. The foreign bonds were sold due to the reduction in foreign
liabilities resulting from the termination of the reinsurance agreements with
Sun Alliance. We maintain investments in highly liquid, short term securities at
all times to provide for immediate cash needs.
REAL ESTATE
In June 1997, a definitive agreement was reached to sell a substantial
portion of our commercial real estate properties to PW/MS Acquisition I, LLC, a
joint venture company formed by Paine Webber Real Estate Securities Inc. and
Morgan Stanley Real Estate Fund II, L.P. The purchase price of $758 million
includes $649 million in cash and the assumption of $109 million in debt. The
sale is subject to various closing adjustments and other customary conditions.
To reflect the terms of the agreement, the carrying value of certain assets was
reduced by $10.2 million, or $6.6 million after tax, in the second quarter
of 1997.
Real estate operations resulted in a loss after taxes of $5.2 million in
the first six months of 1997 compared with income of $7.0 million in 1996. The
loss in 1997 reflects the $6.6 million after tax charge. Earnings in 1996
benefited from the sale of several rental properties. Revenues were $91.8
million in the first six months of 1997 compared with $217.4 million in 1996,
which included the revenues from the sale of the rental properties.
The closings for the properties sold to PW/MA Acquisition I are
expected to occur by the end of 1997. Revenues from the sale will be recognized
at the time of the closings.
We are continuing to explore the sale of certain of our residential,
retail and remaining commercial properties.
<PAGE> 16
Page 14
CORPORATE
Investment income earned on corporate invested assets and interest and
other expenses not allocable to the operating subsidiaries are reflected in the
corporate segment. Corporate income after taxes was $13.0 million in the first
six months of 1997 compared with $7.9 million in the same period of 1996. The
increase was due primarily to a reduction in interest expense.
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 $45.1 million were realized in the first six
months of 1997 compared with net gains of $31.4 million for the same period in
1996.
DISCONTINUED OPERATIONS - LIFE AND HEALTH INSURANCE
On May 13, 1997, the Corporation completed the sale of Chubb Life
Insurance Company of America to Jefferson-Pilot Corporation for $875 million in
cash, subject to closing related adjustments. The life and health insurance
subsidiaries have been classified as discontinued operations. The discontinued
life and health insurance operations did not affect the Corporation's net
income in the first six months of 1997 and will not affect net income in future
periods. Earnings from the discontinued life and health insurance operations
were $20.5 million in the first six months of 1996, including realized
investment gains of $3.7 million.
CAPITAL RESOURCES
In February 1994, the Board of Directors authorized the repurchase of up
to 10,000,000 shares of common stock. Through March 6, 1997, the Corporation
repurchased 6,851,600 shares under the 1994 share repurchase program, including
3,148,600 shares repurchased in the first quarter of 1997. On March 7, 1997, the
Board of Directors replaced the 1994 program with a new share repurchase
program, which authorized the repurchase of up to 17,500,000 shares of common
stock. Through June 30, 1997, the Corporation repurchased 4,825,200 shares under
the new repurchase program. In the aggregate, the Corporation repurchased
7,973,800 shares in open-market transactions in the first six months of 1997 at
a cost of $479.8 million. At June 30, 1997, an additional 12,674,800 shares may
be repurchased under the new authorization. The Corporation intends to use
a substantial portion of the proceeds from the sale of Chubb Life Insurance
Company of America, which were held in short term securities at June 30, 1997,
to repurchase shares of common stock.
At January 1, 1997, Chubb Capital Corporation had outstanding $229.3
million of 6% exchangeable subordinated notes due May 15, 1998. In the first
quarter of 1997, the holders of $14.1 million of the notes elected the option
to exchange them into shares of common stock of the Corporation, resulting in
the issuance of 327,207 shares of common stock. Chubb Capital called for
redemption on May 14, 1997 the remaining $215.2 million of the notes. Prior to
the redemption date, the holders of $214.5 million of the notes elected the
option to exchange them, resulting in the issuance of 4,989,358 shares of
common stock in the second quarter.
The cash proceeds from the sale of real estate properties to PW/MS
Acquisition I are expected to be applied to further debt reduction.
<PAGE> 17
Page 15
FORWARD LOOKING INFORMATION
Certain statements in this document may be considered to be "forward
looking statements" as that term is defined in the Private Securities Litigation
Reform Act of 1995, such as statements that include the words or phrases "will
likely result", "expected to", "will continue", "is anticipated", "estimate",
"project", "intends to" or similar expressions. In particular, this document
includes forward looking statements relating, but not limited to, the
Corporation's expectations of litigation developments and its recent and
ongoing sale activities relating to portions of its non-property and casualty
business and associated with its expectations of proceeds deployment. Such
statements are subject to certain risks and uncertainties. The factors which
could cause actual results to differ materially from those suggested by any
such statements include, but are not limited to, those discussed or identified
from time to time in the Corporation's public filings with the Securities and
Exchange Commission and specifically to: risks or uncertainties associated with
the Corporation's announced sale activities relating to portions of its
non-property and casualty businesses, or associated with its expectations of
proceeds deployment and, more generally, to: general economic conditions
including changes in interest rates and the performance of the financial
markets, changes in domestic and foreign laws, regulations and taxes, changes
in competition and pricing environments, regional or general changes in asset
valuations, the occurrence of significant natural disasters, the inability to
reinsure certain risks economically, the adequacy of loss reserves, as well as
general market conditions, competition, pricing and restructurings.
<PAGE> 18
Page 16
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 22, 1997. Matters submitted to Shareholders at the meeting were as
follows:
Votes were cast in the following manner in connection with the election
of each Director to serve until the next Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
Votes Against
Director Votes For or Withheld
- -------- --------- -----------
<S> <C> <C>
John C. Beck 148,541,928 71,004
Sheila P. Burke 148,547,628 65,304
James I. Cash, Jr 148,558,744 54,188
Percy Chubb, III 147,186,437 1,426,495
Joel J. Cohen 147,147,062 1,465,870
David H. Hoag 145,452,643 3,160,289
Robert V. Lindsay 148,451,884 161,048
Thomas C. MacAvoy 148,538,527 74,405
Gertrude G. Michelson 148,459,751 153,181
Dean R. O'Hare 148,295,837 317,095
Warren B. Rudman 147,154,346 1,458,586
David G. Scholey 147,183,563 1,429,369
Raymond G. H. Seitz 147,167,036 1,445,896
Lawrence M. Small 148,352,845 260,087
Richard D. Wood 148,515,462 97,470
</TABLE>
For each Director, there were 1,180,594 abstaining votes. There were no
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 1997.
<TABLE>
<CAPTION>
Votes For Votes Against
--------- -------------
<S> <C>
149,231,919 281,130
</TABLE>
There were 280,477 abstaining votes and no broker non-votes cast.
<PAGE> 19
Page 17
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 3 - Restated by-laws of the Corporation filed herewith.
Exhibit 10 - Material Contracts
- Executive severance agreement between Mr. Edward Dunlop and The Chubb
Corporation dated June 19, 1997.
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 May 13, 1997
with respect to the announcement on May 13, 1997 that the Registrant
completed the previously announced sale of all of the capital stock of
Chubb Life Insurance Company of America, a wholly owned subsidiary of
the Registrant, to Jefferson-Pilot Corporation for $875 million
in cash.
The Registrant filed a current report on Form 8-K dated June 12, 1997
with respect to the announcement on June 12, 1997 that Bellemead
Development Corporation, a wholly owned subsidiary of the Registrant,
reached a definitive agreement to sell a substantial portion of its
commercial real estate properties for $758 million to PW/MS Acquisition
I, LLC, a joint venture company formed by Paine Webber Real Estate
Securities Inc. and Morgan Stanley Real Estate Fund II, L.P.
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, 1997
<PAGE> 20
EXHIBIT INDEX
A. Exhibit 3 - Restated by-laws of the Corporation filed herewith
B. Exhibit 10 - Material Contracts
- Executive severance agreement between Mr. Edward Dunlop and The Chubb
Corporation dated June 19, 1997.
C. Exhibit 11.1 - Computation of earnings per share.
<PAGE> 1
By-Laws
OF
The Chubb Corporation
Incorporated under the Laws of the State of New Jersey
ADMINISTRATIVE OFFICES
15 Mountain View Road, P.O. Box 1615
Warren, N.J. 07061-1615
REVISED TO JUNE 13, 1997
<PAGE> 2
BY-LAWS
of
THE CHUBB CORPORATION
ARTICLE I
OFFICES
Section 1. The Corporation shall maintain a registered office in the
State of New Jersey as required by law. The Corporation may also have offices in
such other places as the Board of Directors may from time to time appoint or as
the business of the Corporation may require.
ARTICLE II
SEAL
Section 1. The seal of the Corporation shall be circular in form and
shall have the name of the Corporation on the circumference and the words and
numerals "Corporate Seal 1967 New Jersey" in the center.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of the stockholders of the Corporation shall be
held at such places in the State of New Jersey or in the City of New York, State
of New York, as may from time to time be designated by the Board of Directors
and stated in the Notice of Meeting.
Section 2. The Annual Meeting of the Stockholders of the Corporation
shall be held on such day in the month of April of each year, as shall be
designated by the Board of Directors and as stated in the notice of meeting, for
the election of Directors and for the transaction of such other business as may
be brought before the meeting. Any business which may properly be
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<PAGE> 3
brought before a meeting of the stockholders may be considered and transacted at
the Annual Meeting.
Section 3. Special meetings of the stockholders may be called on the
order of the Chairman, of the Chairman of the Executive Committee, if any, of a
majority of the Board of Directors or of the holder or holders of fifty percent
or more of the issued and outstanding Common Stock of the Corporation.
Section 4. Written notice of all meetings of the stockholders shall be
mailed to or delivered to each stockholder at least ten days prior to the
meeting. Notice of any special meeting shall state in general terms the purposes
for which the meeting is to be held.
Section 5. The holders of a majority of the issued and outstanding
shares of the Common Stock of the Corporation entitled to vote thereat, present
in person or represented by proxy, shall constitute a quorum for the transaction
of business at all meetings of the stockholders; but, if there be less than a
quorum, the holders of a majority of the stock so present or represented may
adjourn the meeting from time to time.
Section 6. At all meetings of the stockholders, every registered owner
of shares entitled to vote may vote in person or proxy and shall have one vote
for each such share standing in his name on the books of the Corporation.
Elections of directors need not be by ballot.
Section 7. The Chairman, or in his absence, the Vice-Chairman, or in
his absence, the President, or in his absence, the Chairman of the Executive
Committee, if any, shall preside at all meetings of the stockholders; and, in
the absence of all the foregoing officers, the stockholders present shall elect
a chairman by a plurality vote. The chairman presiding at any meeting of
stockholders shall have the power to appoint two or more persons to act as
inspectors or tellers to receive, canvass and report the votes cast by the
stockholders at such meeting; but no candidate for the office of director shall
be appointed as inspector or teller at any meeting for the election of
directors.
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<PAGE> 4
Section 8. The Secretary of the Corporation shall act as secretary of
all meetings of the stockholders; and in his absence, the Chairman shall appoint
a person to act as secretary of the meeting.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. The property, business and affairs of the Corporation shall
be managed and controlled by its Board of Directors. The number of directors
shall be such number, not less than seven nor more than thirty, as shall be
fixed from time to time by the Board of Directors. At each Annual Meeting the
stockholders shall elect the number of directors as fixed by the Board of
Directors (not less than seven nor more than thirty) and such directors shall
hold office until the next Annual Meeting, and until their successors are
elected and qualify. Any director may be removed from office at any time, with
or without cause, by the affirmative vote of the holders of a majority of the
stock present in person or represented by proxy at any meeting at which a quorum
is present.
Directors need not be residents of the State of New Jersey, but each
director shall at the time of his election be a stockholder of the Corporation
or of a corporation holding twenty-five percent (25%) or more of the Common
Stock of the Corporation.
Section 2. Whenever any vacancy shall occur in the Board of Directors,
by reason of death, resignation or increase in the number of directors or
otherwise, it may be filled by a majority of the remaining directors, though
less than a quorum, for the balance of the term.
Section 3. The Board of Directors may hold meetings and keep the books
of the Corporation (except the stock transfer books) outside of the State of New
Jersey.
Section 4. Regular meetings of the Board of Directors, shall be held
quarterly on the second Thursday of March, June, September and December (or if
such Thursday be a legal holiday, then on the next succeeding business day) at
the offices of the Corporation in New Jersey or at the offices of the
Corporation
3
<PAGE> 5
in the City of New York unless in the judgment of the Board or the Executive
Committee a regular meeting should be held on a different date or at a different
place. Written notice of regular meetings of the Board shall be given to each
director at least one full day in advance of the meeting.
Section 5. Special meetings of the Board of Directors may be called by
order of the Chairman, of the Chairman of the Executive Committee, if any, or by
two directors at the time in office. The Secretary shall give notice of each
special meeting by mailing the same at least two days before the meeting or by
telephoning or telegraphing the same at least one day before the meeting to each
director.
Section 6. At meetings of the Board of Directors the Chairman or
President, or in their absence, the Chairman of the Executive Committee, if any,
shall preside. The attendance of seven directors in office shall be necessary to
constitute a quorum for the transaction of business, but less than a quorum may
adjourn any meeting from time to time until a quorum shall be present, whereupon
the meeting may be held, as adjourned, without further notice.
Section 7. The directors shall receive such compensation for their
services as directors as may be prescribed by the Board of Directors and shall
be reimbursed by the Corporation for ordinary and reasonable expense incurred in
the performance of their duties.
ARTICLE V
COMMITTEES
Section 1. There shall be an Executive Committee consisting of the
Chairman, The Chairman of the Executive Committee, if any, and not less than two
nor more than seven other directors, to be appointed by the Board of Directors
which committee shall meet at the call of its Chairman or of any member thereof
and shall have authority to exercise, so far as may be permitted by law, all the
powers of the Board of Directors in the management of the business, property and
affairs of the Corporation during the intervals between the meetings of the
Board of Directors. A majority of the members of such committee
4
<PAGE> 6
shall constitute a quorum. The Executive Committee or a quorum thereof may act
from time to time on the basis of written approval of proposals without formal
meeting.
Section 2. There shall be a Finance Committee consisting of the
Chairman, the Chairman of the Executive Committee, if any, and not less than two
nor more than seven other directors to be appointed by the Board of Directors,
which committee shall have authority to direct and control the investment of
funds and the purchase and sale of securities by the Corporation. A majority of
the members of such committee shall constitute a quorum. The Finance Committee
or a quorum thereof may act from time to time on the basis of written approval
of proposals without formal meeting. Regular meetings of the Committee shall be
held quarterly at dates set by vote of the Committee. Special meetings may be
called at any time at the request of any member.
Section 3. There shall be an Audit Committee consisting of not less
than three, nor more than seven directors, to be appointed annually by the Board
of Directors who shall appoint one of the members of such Committee as Chairman.
The Committee shall review the accounting principles and practices
employed by the Corporation, and, to the extent it deems appropriate, of its
subsidiaries. It shall have authority to order interim and surprise audits and
to perform such other duties as may from time to time be assigned to it by the
Board.
The Committee shall meet with the Corporation's Independent Public
Accountants to review their report on their examination of the Corporation's
accounts, their comments on the internal accounting controls and audit
procedures of the Corporation, and the action taken by Management with regard to
such comments. The Committee shall also, to the extent it deems appropriate,
review the independent and internal audits, and the accounting procedures and
controls of the Corporation's subsidiaries. The Committee shall report to the
Board of Directors the results of its reviews and such recommendations as it may
deem appropriate.
5
<PAGE> 7
Meetings may be held at the call of the Chairman, and may be initiated
by any member of the Committee or by the Independent Public Accountants or an
appropriate officer of the Corporation, to deal with additional matters as they
may arise.
The Committee shall recommend annually to the Board of Directors the
appointment of the Corporation's Independent Public Accountants, which
appointment shall be submitted to the shareholders for ratification.
The Committee shall have authority to confer with the appropriate
officers of the corporation, or its subsidiaries, regarding the accounting
principles and practices employed by the Corporation and its subsidiaries. Any
reports issued by the Independent Public Accountants of the Corporation, or by
the Corporation, or by any of its subsidiaries, and any reports by Audit
Committees of its subsidiaries shall, at its request, be made available to the
Committee. The Committee may request the attendance of appropriate officers of
the Corporation or its subsidiaries, at its meetings.
No officer of the Corporation or any of its subsidiaries may serve on
the Audit Committee.
A majority of the members of such Committee shall constitute a quorum.
Section 4. The Board of Directors may appoint other committees which
shall have such powers and perform such duties as from time to time may be
prescribed by the Board.
Section 5. The Board shall have the power to fill vacancies in, to
change the membership of, or to dissolve any committee, and to appoint alternate
members of any committee, but in no event may an officer of the Corporation or
any of its subsidiaries serve as a member or as an alternate member of the Audit
Committee or of any committee which has powers or duties with respect to
compensation of the Corporation's officers. Directors appointed as alternate
members of any committee shall act in the absence or disability of members of
that committee with all of the powers of such absent or disabled members and
shall serve on such committee in the order established by resolution adopted by
a majority of the Board of Directors. Action taken by any committee shall be
reported at the meeting of the Board next succeeding such action,
6
<PAGE> 8
except that, when such meeting of the Board is held within two days after such
action, such report, if not made at the first meeting, shall be made to the
Board at its second meeting following such committee action.
ARTICLE VI
OFFICERS
Section 1. Elected Officers. The elected officers of the Corporation
shall be a Chairman, a President, one or more Vice Presidents, a Treasurer and a
Secretary. The Board of Directors may also elect a Vice Chairman, a Chairman of
the Executive Committee and may designate Vice Presidents as Executive or Senior
Vice Presidents and may elect from time to time, such other officers as it
considers necessary, each of whom shall hold office for such period, have such
authority, and perform such duties as the Board may from time to time determine.
Any person may hold two, but no more than two, offices. The Chairman, the Vice
Chairman, if any, and the Chairman of the Executive Committee, if any, shall be
chosen from among the directors.
Section 2. Appointed Officers. The Chairman may appoint as officers of
the Corporation such Assistant, Associate, Regional or Resident Officers and
such other subordinate officers as he may deem proper, and shall specify the
authority of and the duties to be performed by such officers, and may remove
them at any time with or without cause.
Section 3. Term of Office. The principal officers shall be chosen
annually by the Board of Directors at the first meeting of the Board following
the stockholders' annual meeting, or as soon thereafter as is conveniently
possible. Additional Vice Presidents may be elected from time to time. The term
of office of all Executive Officers shall be for one year and until their
respective successors are duly chosen and qualified, but any Executive Officer
may be removed, with or without cause, at any time by the Board.
7
<PAGE> 9
Section 4. Vacancies. Any vacancy in an office from any cause may be
filled for the unexpired portion of the term by the Board of Directors.
Section 5. Duties and Responsibilities.
(a) The Chairman shall be the chief executive officer of the
Corporation and shall exercise general supervision of the management of its
business and shall be responsible for the development of its policies and their
execution. He shall, in general, perform all duties incident to the office of
Chairman and such other duties as may be assigned to him by the Board of
Directors.
(b) The Vice Chairman, if any, shall have such powers and perform such
duties as the Chairman may delegate to him and, in the absence of the Chairman,
shall exercise the functions and duties of the Chairman.
(c) The President shall have such powers and perform such duties as the
Chairman may delegate to him and, in the absence of the Chairman and the Vice
Chairman, if any, shall exercise the functions and duties of the Chairman.
(d) The Chairman of the Executive Committee, if any, shall perform such
functions as may be assigned to him by the Board of Directors, the committees of
which he is chairman, or the Chairman of the Corporation.
(e) Each Vice President shall have such powers and perform such duties
as the Board of Directors or the Chairman, may from time to time prescribe. The
Vice Presidents in the order of priority designated by the Chairman or the Board
of Directors shall exercise the functions of the President in his absence.
(f) The Treasurer shall have the custody and care of all the funds and
securities of the Corporation, and shall deposit all funds to the credit of the
Corporation in such institution or institutions as the Board of Directors may
designate; he or an Assistant Treasurer or such other officer or officers or
appointee or appointees as may be authorized by the Board of Directors shall
endorse all instruments or documents requiring endorsement for or on behalf of
the Corporation; he shall perform all acts incident to the position of
Treasurer, subject to the control of the Board; he shall have such other powers
and perform such
8
<PAGE> 10
other duties as the Board of Directors or the President may from time to time
prescribe; and he may be required by the Board of Directors to give security for
the faithful discharge of his duties. He shall have custody of the stock
registers and transfer books of the Corporation.
(g) The Secretary shall keep the minutes of all meetings of the Board
of Directors and of the Stockholders, and shall attend to the giving of proper
notices to Directors and stockholders; he may sign, with the President or a
Senior Vice President, all authorized contracts, instruments or documents in the
name of the Corporation; he shall be the custodian of the seal of the
Corporation and shall attest such seal when required; he shall perform all the
duties incident to the office of Secretary, subject to the control of the Board
of Directors; he shall have such other powers and perform such other duties as
the Board of Directors or the President may from time to time prescribe or as
may be prescribed by these By-Laws.
(h) In case of the absence or disability of any officer of the
Corporation and of any person hereby authorized to act in his place during such
period of absence or disability, the Board of Directors may from time to time
delegate the powers and duties of such officer to any other officer, or any
director, or any other person whom it may select.
ARTICLE VII
CAPITAL STOCK
Section 1. Certificates for stock of the Corporation shall be in such
form as the Board of Directors may from time to time prescribe and shall be
signed by the Chairman or the Vice-Chairman or the President or a Vice-President
and by the Treasurer or an Assistant Treasurer.
Section 2. Shares of capital stock of the Corporation shall be
transferable on the books of the Corporation only by the holder of record
thereof in person or by duly authorized attorney, upon surrender and
cancellation of certificates for a like number of shares.
Section 3. In case any certificate for the capital stock of the
Corporation shall be lost, stolen or destroyed, the Corporation as a condition
9
<PAGE> 11
precedent to the issuance of a new certificate in place thereof, may require
such proof of the fact and such indemnity to be given to it as shall be deemed
necessary or advisable by it.
Section 4. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder thereof in fact and shall
not be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
Section 5. The Board of Directors shall have the power to close the
stock transfer books of the Corporation for a period not exceeding fifty (50)
days preceding the date of any meeting of stockholders or the date for payment
of any dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect;
provided, that in lieu of closing the stock transfer books as aforesaid, the
Board of Directors may fix in advance a date, not exceeding fifty (50) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of and
to vote at any such meetings or entitled to receive payment of any such
dividends, or any such allotment or rights, or to exercise the rights in
respect to any such change, conversion or exchange of capital stock, and, in
such case, only, stockholders of record on the date so fixed shall be entitled
to such notice of and to vote at such meetings, or to receive payment of such
dividends or any such allotment of rights, or to exercise such rights, in
respect to any such change, conversion or exchange of the capital stock as the
case may be, and notwithstanding any transfer of any stock on the books of the
Corporation after any such record date as fixed as aforesaid.
10
<PAGE> 12
ARTICLE VIII
MISCELLANEOUS
Section 1. The Board of Directors shall have power to fix, and from
time to time change, the fiscal year of the Corporation. Unless otherwise fixed
by the Board, the calendar year shall be the fiscal year.
Section 2. Any notice required to be given under the provisions of
these By-Laws or otherwise may be waived by the stockholder, director or officer
to whom such notice is required to be given, either before or after the meeting
or action of which notice is waived.
Section 3. Any notice required to be given to any stockholder, director
or officer under the provisions of these By-Laws or otherwise shall (subject to
the provisions of law and of the Certificate of Incorporation of the
Corporation) be deemed to be sufficiently given if such notice be written or
printed and be deposited in the post office addressed to such stockholder,
director or officer at his address as the name appears on the books or records
of the Corporation, or such notice may be sent by telegram or delivered in
person to such stockholder, director or officer and the mailing of such notice
or positing of such telegram or delivery of such notice, as the case may be,
shall constitute due and sufficient notice.
Section 4. The Corporation may lend money to, guarantee any obligation
of, or otherwise assist, any officer or other employee of the Corporation or of
any subsidiary, including an officer or other employee who is a director of the
Corporation, whenever, in the judgment of the Board of Directors, such loan,
guarantee or assistance may reasonably be expected to benefit the Corporation,
provided, however, that any such loan, guarantee or assistance to an officer or
other employee who is also a director of the Corporation shall be authorized by
a majority of the entire Board of Directors. The loan, guarantee or other
assistance may be made with or without interest, and may be unsecured, or
secured in such manner as the Board of Directors shall approve, and may be made
upon such other terms and conditions as the Board of Directors may determine.
11
<PAGE> 13
ARTICLE IX
INVESTMENTS AND MONEYS
Investment of the funds of the Corporation and the purchase and sale of
securities by the Corporation shall be made only as authorized or approved by
the Board of Directors or the Executive Committee or the Finance Committee or by
some other committee appointed by the Board of Directors and charged with the
duty of supervising or making such investments, purchases and sales.
Securities representing the invested funds of the Corporation shall be
placed for safekeeping in safe deposit vaults in the name of the Corporation, or
pursuant to a custodian account, in such Banks, Trust or Safe Deposit Companies
as shall be approved by the Board of Directors or the Executive Committee.
Access to the vaults shall be in accordance with procedure approved by
resolution of the Board of Directors or the Executive Committee and such
resolution shall be effective upon a copy thereof being lodged with the Bank,
Trust or Safe Deposit Company in which the securities are lodged. In the event
that the Board of Directors shall determine to establish a custodian account
with a Bank or Trust Company and shall provide that all or any part of the
securities now or hereafter representing the invested funds of the Corporation
shall be delivered to such Bank or Trust Company approved by the Board of
Directors or the Executive Committee, then and in that event such Bank or Trust
Company shall hold such securities so delivered in the custodian account in
accordance with the procedure and under the authority of the resolution approved
by the Board of Directors or the Executive Committee.
Any two of the following: The Chairman, the Vice Chairman, if any, the
President, the Chairman of the Executive Committee, if any, or any Vice
President acting jointly, or any one of them acting jointly with any Vice
President or the Secretary or the Treasurer or an Assistant Secretary or an
Assistant Treasurer, is authorized and empowered to sell, assign, exchange and
transfer any and all shares of stock, bonds and other securities owned by or
standing in the name of the Corporation, and to make, execute and deliver in the
name and as the act of the Corporation
12
<PAGE> 14
under its corporate seal any and all instruments in writing necessary or proper
to carry such sales, assignments, exchanges and transfers into effect.
Money received by the Corporation may be deposited to its credit in
such Trust Companies or Banks as the Board of Directors may designate.
The Chairman, or the Vice Chairman, if any, or the President, or the
Chairman of the Executive Committee, if any, or any Vice President shall have
authority to vote in person or by proxy any of the stock of any other
corporation which the Corporation may hold and to execute any and all consents
or other documents relating to such stocks.
ARTICLE X
Amendment
The Board of Directors shall have power to make, alter and repeal
By-Laws of the Corporation by a vote of a majority of all of the directors at
any regular or special meeting of the Board, provided that notice of the
proposed action shall have been given in the notice or waiver of notice of such
meeting of the Board. The By-Laws may be altered or repealed by the stockholders
by the vote of a majority of all of the stockholders at any meeting, provided
that notice of the proposed alteration or repeal shall have been given in the
notice or waiver of notice of such meeting of stockholders.
Certified to be a true copy.
Date Secretary
13
<PAGE> 1
June 19, 1997
Mr. Edward Dunlop
[address]
Dear Mr. Dunlop:
In order to induce you to remain in the employ of The Chubb Corporation
(the "Company") and in consideration of your continuing in the Company's employ,
the Company agrees to provide the severance benefits specified below on the
terms and subject to the conditions stated. However, in the absence of a Change
in Control of the Company, as defined below, nothing in this Agreement shall
affect the Company's normal right to terminate your employment or your right to
leave its employ.
1. Change in Control. For purposes of this Agreement a Change in
Control will be deemed to have occurred
(A) if following (i) a tender or exchange offer for voting
securities of the Company, (ii) a proxy contest for the election of Directors of
the Company or (iii) a merger or consolidation or sale of all or substantially
all of the business or assets of the Company, the Directors of the Company
immediately prior to the initiation of such event cease to constitute a majority
of the Board of Directors of the Company upon the occurrence of such event or
within one year after such event, or
(B) if any "person" or "group" (as defined under the
beneficial ownership rules of Sections 12(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934 and Rule 13d-3 thereunder) acquires ownership or control,
or power to control, 25% or more of the outstanding voting securities of the
Company without prior approval or ratification by a majority of the Company's
Directors in office at the time of such event.
2. Conditions to Severance Benefits. The benefits provided for in
Section 5 shall be payable or accrue to you if (a) a Change in Control has
occurred and (b) your employment with the Company has terminated within two
years after the Change in Control, other
<PAGE> 2
Mr. Edward Dunlop
June 19,1997
Page 2.
than termination by reason of (i) your death, (ii) your retirement at normal
retirement age ("Retirement") under the Company's pension plan as in effect
immediately prior to the Change in Control, (iii) your voluntary termination
other than for Good Reason, (iv) your retirement for Disability or (v) your
discharge for cause.
Termination by you of your employment for "Good Reason" shall mean
termination by you of your employment, subsequent to a Change in Control,
because of:
(A) the assignment to you, without your express written
consent, of any duties inconsistent with your positions, duties,
responsibilities, authority and status with the Company and its principal
subsidiaries immediately prior to such Change in Control, or a change in your
reporting responsibilities, titles or offices as in effect immediately prior to
the Change in Control, or any removal of you from or any failure to re-elect you
to any of such positions, except in connection with the termination of your
employment for Cause, Disability, Retirement, as a result of your death or by
you without Good Reason;
(B) a reduction by the Company in your base salary as in
effect at the time of such Change in Control;
(C) a failure by the Company to continue (or to replace with
equivalent plans) the Performance Share Plan, the Annual Incentive Compensation
Plan or any other Bonus Plan in which you participated for the year immediately
preceding such Change in Control (the "Bonus Plans") which are in effect at the
time of such Change in Control or a failure by the Company to continue you as a
participant in such Bonus Plans (or equivalent plans) on a basis which would
entitle you to receive under such Bonus Plans (or equivalent plans) amounts at
least equal to the average amounts you received pursuant to such Bonus Plans for
the three years preceding such Change in Control;
(D) the Company's requiring you to maintain your principal
office or conduct your principal activities anywhere other than at the Company's
principal executive offices in the New York Metropolitan area, including
Somerset County, New Jersey;
(E) the failure by the Company to continue in effect (or to
replace with equivalent plans) the Company's Capital Accumulation Plan or any
other compensation plan, any stock ownership plan, stock purchase plan, stock
option plan, life insurance plan, health and accident plan, financial services
plan, hospital-medical plan, dental plan, or disability plan in which you are
participating or eligible to participate at the time of such Change in Control,
or the taking of any action by the Company which would adversely affect your
participation in or materially reduce your benefits under any such plans (or
equivalent plans) or
<PAGE> 3
Mr. Edward Dunlop
June 19, 1997
Page 3.
deprive you of any material fringe benefit enjoyed or to be enjoyed by you at
the time of such Change in Control;
(F) the failure by the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as contemplated in Section
7 hereof;
(G) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the applicable
requirements with respect to such Notice; or
(H) a determination made by you in good faith, whether before
or after the date you are eligible for early retirement under the Company's
pension plan, that as a result of such Change in Control you are not able to
discharge your duties effectively; or
(I) any termination of this Agreement pursuant to Section 6
prior to the expiration of two years from the occurrence of the Change in
Control.
Termination of your employment for "Cause" shall mean termination
because of (A) the willful and continued failure by you substantially to perform
your duties with the Company and its principal subsidiaries (other than any such
failure resulting from your incapacity due to physical or mental illness), after
a demand for substantial performance is delivered to you by the Chief Executive
Officer of the Company, which specifically identifies the manner in which such
executive believes that you have not substantially performed your duties, or (B)
the willful engaging by you in misconduct which is materially injurious to the
Company, monetarily or otherwise. For purposes of this paragraph, no act, or
failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in or not opposed to the best interests of the
Company. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a Notice of Termination from the Chief Executive Officer of the Company
after reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before the Board of Directors, and a finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this paragraph and specifying the
particulars thereof in detail.
Termination of your employment for Disability shall mean termination in
accordance with the provisions of the Company's Long Term Disability Plan as in
effect immediately preceding the Change in Control.
3. Notice of Termination. Any purported termination of your employment
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific
<PAGE> 4
Mr. Edward Dunlop
June 19, 1997
Page 4.
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated. No purported
termination of your employment by the Company shall be effective if it is not
effected pursuant to a Notice of Termination satisfying the requirements of this
Section 3.
4. Date of Termination. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, 30 days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such 30-day period) and (B) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
5. Severance Benefits. Subject to the conditions in Section 2, on
termination of your employment you shall be entitled to the following benefits:
(A) You shall be entitled to an amount (the "Severance
Compensation") equal to 2 times the sum of (i) one year's salary at the annual
rate in effect at the time of the Change in Control and (ii) the average for the
three calendar years preceding such Change in Control of your bonuses under the
Annual Incentive Compensation Plan (1984) (or successor plan), provided,
however, that your Severance Compensation shall not be greater than the amount
you would have received as salary and such bonuses from the Company had you
remained in the employ of the Company from the Date of Termination until your
normal retirement date under the Company's pension plan (on the assumption that
your salary would remain at the same annual rate as in effect at the time of
Change in Control and that your annual bonuses would be the average for the
three calendar years preceding such Change in Control of such bonuses). The
Severance Compensation will be payable in full on the Date of Termination.
(B) The Company shall also pay to you an amount equal to all
legal fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce or retain any
right or benefit provided by this Agreement);
(C) The Company shall maintain in full force and effect, for
your continued benefit until the earlier of (a) two years after the Date of
Termination or, (b) your commencement of full time employment with a new
employer, all life insurance, hospital-medical, dental, health and accident, and
disability plans in which you were entitled to participate immediately prior to
such Change in Control, provided that your continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that your participation in any such plan or program is barred for any reason
whatsoever, the
<PAGE> 5
Mr. Edward Dunlop
June 19, 1997
Page 5.
Company shall arrange to provide you with benefits substantially similar to
those which you are entitled to receive under such plan or program;
(D) You shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 5 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination or otherwise.
6. Term of Agreement. This Agreement shall have an initial term of two
(2) years from the date hereof and shall be automatically extended at the
expiration of said two-year period for successive two (2) year periods unless
the Company gives you one year's prior written notice that it is terminating
this Agreement at the expiration of the then current two year period.
7. Successors; Binding Agreement.
(A) The Company will require any purchaser of all or
substantially all of the business or assets of the Company, by agreement in form
and substance satisfactory to you to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such purchase had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business or assets as aforesaid which executes and delivers the agreement
provided for in this Section 7(A) or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, divisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there be no such designee, to your estate.
8. Notices. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prep aid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the
Chairman of the Company, with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
<PAGE> 6
Mr. Edward Dunlop
June 19, 1997
Page 6.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement; provided, however that this Agreement shall not supersede or in any
way affect the rights, duties or obligations you may have under any other
written agreement with the Company. This Agreement shall be governed by, and
construed in accordance with, the laws (other than principles of conflicts of
laws) of the State of New York.
10. Validity. The invalidity or unenforceability of any provision of
this Agreement in any respect shall not affect the validity or enforceability of
such provision in any other respect or of any other provision of this Agreement,
all of which shall remain in full force and effect.
If the foregoing correctly sets forth our understanding on the subject
matter hereof kindly sign and return to the Company the enclosed copy hereof
which will thereupon become our binding agreement.
Sincerely,
THE CHUBB CORPORATION
/s/ Dean R. O'Hare
By_____________________
Dean R. O'Hare
Chairman
Agreed to this day
of July 13, 1997
/s/ Edward Dunlop
Edward Dunlop
<PAGE> 1
Exhibit 11.1
THE CHUBB CORPORATION
COMPUTATION OF EARNINGS PER SHARE
PERIODS ENDED JUNE 30
<TABLE>
<CAPTION>
Second Quarter Six Months
--------------- ---------------
1997 1996 1997 1996
------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C>
Net income.................................. $188.7 $174.3 $380.8 $325.7
After-tax interest expense on 6%
exchangeable subordinated notes............ 1.1 2.5 3.3 4.9
------ ------ ------ ------
Net income for computing earnings per share. $189.8 $176.8 $384.1 $330.6
====== ====== ====== ======
Weighted average number of common shares
outstanding................................ 172.3 174.6 172.9 174.6
Additional shares from assumed conversion
of 6% exchangeable subordinated notes
as if each $1,000 of principal amount
had been converted at issuance into
23.256 shares of common stock............. 2.0 5.8 3.7 5.8
------ ------ ------ ------
Weighted average number of common and common
equivalent shares assumed outstanding for
computing earnings per share.............. 174.3 180.4 176.6 180.4
====== ====== ====== ======
Net income per share........................ $ 1.09 $ .98 $ 2.18 $ 1.83
</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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 9,122<F1>
<DEBT-CARRYING-VALUE> 2,342<F2>
<DEBT-MARKET-VALUE> 2,465<F3>
<EQUITIES> 793
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 13,358
<CASH> 8
<RECOVER-REINSURE> 68<F4>
<DEFERRED-ACQUISITION> 662
<TOTAL-ASSETS> 19,966
<POLICY-LOSSES> 9,575<F5>
<UNEARNED-PREMIUMS> 2,624<F6>
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 1,061<F7>
<COMMON> 176
0
0
<OTHER-SE> 5,396<F8>
<TOTAL-LIABILITY-AND-EQUITY> 19,966
2,570
<INVESTMENT-INCOME> 380
<INVESTMENT-GAINS> 45
<OTHER-INCOME> 92<F9>
<BENEFITS> 1,626
<UNDERWRITING-AMORTIZATION> 699
<UNDERWRITING-OTHER> 162
<INCOME-PRETAX> 485
<INCOME-TAX> 104
<INCOME-CONTINUING> 381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381
<EPS-PRIMARY> 2.18
<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 (1,280) AS PRESCRIBED BY SFAS NO. 113. THIS AMOUNT IS
INCLUDED IN TOTAL ASSETS.
<F6>UNEARNED-PREMIUMS EXCLUDE THE REDUCTION FOR PREPAID REINSURANCE PREMIUMS
($114), AS PRESCRIBED BY SFAS NO. 113. THIS PREPAID AMOUNT IS INCLUDED IN
TOTAL ASSETS.
<F7>NOTES-PAYABLE INCLUDES SHORT-TERM DEBT OF $223 AND LONG-TERM DEBT OF $838.
<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>
