SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report October 29, 1998
(Date of earliest event reported)
The Chubb Corporation
(Exact name of registrant as specified in its charter)
New Jersey 1-8661 13-2595722
- --------------- ---------------- -------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
15 Mountain View Road
P. O. Box 1615
Warren, New Jersey 07061-1615
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code . . (908) 903-2000
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 5. Other Information
On October 29, 1998, The Chubb Corporation (the "Registrant") issued the press
release attached as Exhibit 20.1 to this report and incorporated herein by
reference.
Certain statements in this Report on Form 8-K and the exhibit hereto 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 "is expected to," "plan to," "intends" or other
similar expressions. 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 & Exchange Commission and specifically to
risks or uncertainties associated with the Corporation's expectations with
respect to premium price increases or the non-renewal of underpriced insurance
accounts, 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 valuation, 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.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(c) Exhibits.
20.1. Registrant's press release dated October 29, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE CHUBB CORPORATION
Date: October 29, 1998 By: /s/ Robert Rusis
-------------------------------
Name: Robert Rusis
Title: Senior Vice President
and General Counsel
EXHIBIT INDEX
Exhibit Description of Exhibit
20.1 Registrant's press release, dated October 29, 1998.
EXHIBIT 20.1
FOR IMMEDIATE RELEASE
Chubb Reports Third Quarter Earnings
WARREN, N.J., October 29, 1998 -- The Chubb Corporation today announced
lower earnings for the third quarter and first nine months of 1998, owing
principally to more significant catastrophe losses and continued severe pricing
pressure in standard commercial lines.
Operating income in the current quarter was $149.8 million or $.90 per
share compared with $175.1 million or $1.00 per share in 1997. Net income, which
includes realized investment gains, was $173.4 million or $1.04 per share for
the quarter compared with $194.0 million or $1.10 per share last year. All per
share amounts are calculated on a diluted basis.
Nine month operating income totaled $493.0 million or $2.90 per share
before the $26 million or $.15 per share restructuring charge taken in the first
quarter. This compares with $526.6 million or $2.99 per share in 1997. Net
income was $549.4 million or $3.24 per share for the first nine months of 1998
compared with $574.8 million or $3.26 per share last year.
Chubb's third quarter and nine month after-tax results are summarized
below:
Third Quarter Nine Months
--------------- ----------------
Millions of Dollars 1998 1997 1998 1997
- ------------------- ------ ------ ------ -------
Operating Income Before
Restructuring Charge $149.8 $175.1 $493.0 $526.6
Restructuring Charge - - (26.0) -
------ ------ ------ ------
Operating Income After
Restructuring Charge 149.8 175.1 467.0 526.6
Realized Investment Gains 23.6 18.9 82.4 48.2
------ ------ ------ ------
Net Income $173.4 $194.0 $549.4 $574.8
====== ====== ====== ======
Per Diluted Share
- -----------------
Operating Income Before
Restructuring Charge $ .90 $1.00 $2.90 $2.99
Restructuring Charge - - (.15) -
----- ----- ----- -----
Operating Income After
Restructuring Charge .90 1.00 2.75 2.99
Realized Investment Gains .14 .10 .49 .27
----- ----- ----- -----
Net Income $1.04 $1.10 $3.24 $3.26
===== ===== ===== =====
Effect of Catastrophe
Losses $ .27 $ .10 $ .62 $ .21
"Catastrophe losses, particularly from Hurricane Georges but also from
other storms, hurt results especially in commercial lines," said Dean R. O'Hare,
chairman and chief executive officer. "Of much greater concern, however, are our
underwriting results in standard commercial lines where competitive pressures
are driving prices to increasingly unprofitable levels. Rate increases are an
absolute necessity if we are to attain underwriting profitability."
Mr. O'Hare said that premiums in standard commercial lines, including
workers' compensation, casualty and commercial multi-peril, declined 3% in the
quarter. "We must put profitability ahead of growth and not renew underpriced
business. Our priorities in the coming months will be to renew good business at
adequate rates and to move off of accounts where we cannot achieve underwriting
profitability," he said.
Commenting further on Chubb's property and casualty results, Mr. O'Hare
said, "Personal lines turned in another outstanding quarter with premium growth
of 9.3% and a combined ratio of 87.2%. Results were excellent across the board.
Specialty commercial lines continue to perform well in tough market conditions.
We continued to grow at double-digit rates in Europe, our largest international
market."
Net property and casualty premiums written in the third quarter
increased 1.7% to $1.4 billion. For the nine months, reported net premiums
written were flat at $4.1 billion. Reported growth for the nine months was
affected by non-recurring transactions related to the termination of Chubb's
reinsurance agreements with Royal & Sun Alliance Insurance Group plc. After
adjusting for these transactions, which inflated reported premiums in the first
quarter of 1997, core premium growth was 4.4% for the nine months. Third quarter
premium growth was unaffected by these transactions.
The combined ratio of 101.2% for the third quarter compares with 97.5%
last year. For the first nine months, Chubb recorded combined ratios of 99.2% in
1998 and 96.4% in 1997. Catastrophe losses for the 1998 third quarter and nine
months were $68.8 million and $160.8 million, respectively, adding 5.2 and 4.1
percentage points to the respective combined ratios for these periods. In the
comparable periods of 1997, catastrophe losses were $28.0 million, representing
2.2 percentage points of the combined ratio for the quarter, and $56.5 million
or 1.5 percentage points of the combined ratio for the nine months.
Chubb reported an underwriting loss after taxes for the quarter of
$15.0 million compared with underwriting income of $13.2 million last year.
Underwriting income for the first nine months totaled $3.0 million in 1998 and
$66.8 million in 1997.
Property and casualty investment income after taxes increased 7.0% to
$159.7 million or $.96 per share in the third quarter from $149.2 million or
$.85 per share last year. For the nine months, investment income increased 7.5%
to $472.1 million or $2.78 per share from $439.3 million or $2.48 per share in
1997.
Chubb repurchased 3.9 million shares of its common stock in the open
market in the third quarter, bringing aggregate 1998 stock purchases to 7.1
million shares as of the end of September.
THE CHUBB CORPORATION
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PERIODS ENDED SEPTEMBER 30
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Third Quarter Nine Months
1998 1997 1998 1997
---- ---- ---- ----
(in millions)
Property and Casualty
Underwriting Income (Loss)
After Taxes $(15.0) $ 13.2 $ 3.0 $ 66.8
Investment Income After Taxes 159.7 149.2 472.1 439.3
------ ------ ------ ------
Property and Casualty
Income 144.7 162.4 475.1 506.1
Corporate and Other Income
After Taxes 5.1 12.7 17.9 20.5
------ ------ ------ ------
Operating Income Before
Restructuring Charge 149.8 175.1 493.0 526.6
Restructuring Charge
After Taxes - - (26.0) -
------ ------ ------ ------
Operating Income After
Restructuring Charge 149.8 175.1 467.0 526.6
Realized Investment Gains
After Taxes 23.6 18.9 82.4 48.2
------ ------ ------ ------
Net Income $173.4 $194.0 $549.4 $574.8
====== ====== ====== ======
For further information contact: Gail E. Devlin
(908) 903-3245
Glenn A. Montgomery
(908) 903-2365
<PAGE>
PROPERTY AND CASUALTY PRODUCT MIX
---------------------------------
NINE MONTHS ENDED SEPTEMBER 30
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Net Premiums Combined Loss and
Written Expense Ratios
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
(in millions)
Personal Insurance
Automobile $ 233.1 $ 228.5 87.7% 86.5%
Homeowners 551.1 533.1 93.3 92.1
Other 242.9 239.5 67.8 66.5
-------- -------- ----- -----
Total Personal 1,027.1 1,001.1 86.0 84.7
-------- -------- ----- -----
Commercial Insurance
Multiple Peril 576.9 611.6 122.1 115.2
Casualty 673.3 687.3 114.9 112.4
Workers' Compensation 238.0 225.6 113.1 106.4
Property and Marine 414.5 447.5 112.0 105.7
Executive Protection 709.1 663.1 75.6 73.4
Financial Institutions 296.2 300.2 83.8 89.1
Other 201.4 200.4 102.3 83.8
-------- -------- ----- -----
Total Commercial 3,109.4 3,135.7 103.5 99.4
-------- -------- ----- -----
Total Before
Reinsurance Assumed 4,136.5 4,136.8 99.2 96.0
Reinsurance Assumed - (3.8) - N/M
-------- -------- ----- -----
Total $4,136.5 $4,133.0 99.2% 96.4%
======== ======== ===== =====
Effective January 1, 1997, the agreements pertaining to the exchange of
reinsurance with Royal & Sun Alliance Insurance Group plc were terminated.
Premiums written in the first quarter of 1997 included $170.8 million of
non-recurring net premiums related to the reinsurance relationship with Sun
Alliance.
QUARTER ENDED SEPTEMBER 30
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Net Premiums Combined Loss and
Written Expense Ratios
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
(in millions)
Personal Insurance
Automobile $ 80.9 $ 75.5 88.1% 87.8%
Homeowners 199.2 180.5 92.3 90.5
Other 82.7 75.8 74.9 69.0
-------- -------- ----- -----
Total Personal 362.8 331.8 87.2 84.8
-------- -------- ----- -----
Commercial Insurance
Multiple Peril 187.1 198.5 126.3 122.8
Casualty 212.6 215.3 109.9 108.6
Workers' Compensation 68.5 68.5 119.8 110.4
Property and Marine 129.2 144.6 116.8 103.4
Executive Protection 241.4 226.9 77.6 74.8
Financial Institutions 96.4 95.7 87.9 101.9
Other 68.7 63.2 116.3 86.2
-------- -------- ----- -----
Total Commercial 1,003.9 1,012.7 105.9 101.4
-------- -------- ----- -----
Total $1,366.7 $1,344.5 101.2% 97.5%
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