<PAGE> 1
PRELIMINARY PROOF - JANUARY 8, 1998
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
THE CHUBB CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
LOGO
THE CHUBB CORPORATION
15 MOUNTAIN VIEW ROAD, P.O. BOX 1615, WARREN, NEW JERSEY 07061-1615
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of The Chubb Corporation will be held at
15 Mountain View Road, Warren, New Jersey on April 28, 1998 at 11:00 A.M., local
time, for the following purposes:
1. To elect 15 Directors to serve until the next Annual Meeting of
Shareholders and until their respective successors are elected and shall
qualify.
2. To approve the selection of independent auditors for the year
1998.
3. To transact such other business as may properly be brought before
the meeting and any adjournment thereof.
Shareholders of record at the close of business on March 9, 1998 will be
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
By order of the Board of Directors,
HENRY G. GULICK
Vice President and Secretary
Dated: March 17, 1998
- --------------------------------------------------------------------------------
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE FILL IN, SIGN, DATE
AND RETURN THE PROXY SUBMITTED HEREWITH, IN THE ENCLOSED ADDRESSED ENVELOPE. THE
GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE SUCH PROXY BY
APPROPRIATE WRITTEN NOTICE OR TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO
ATTEND THE MEETING.
<PAGE> 3
LOGO
THE CHUBB CORPORATION
15 MOUNTAIN VIEW ROAD, P.O. BOX 1615, WARREN, NEW JERSEY 07061-1615
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PROXY STATEMENT
------------------
March 17, 1998
The Proxy accompanying this Proxy Statement is solicited by the Board of
Directors of The Chubb Corporation to be voted at the Annual Meeting of
Shareholders on April 28, 1998 and at any adjournment thereof. The Proxy may be
revoked by appropriate written notice at any time before it is exercised. See
"Voting, Solicitation of Proxies and Shareholder Proposals."
A copy of the Corporation's Annual Report to Shareholders for 1997
accompanies this Proxy Statement and Proxy which are first being mailed to
Shareholders on March 17, 1998.
As of March 9, 1998, the record date for the determination of Shareholders
entitled to vote at the Annual Meeting, 168,518,126 shares of Common Stock of
the Corporation were issued and outstanding. Each share of Common Stock entitles
the holder to one vote on all matters brought before the Annual Meeting.
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, TO ANY RECORD HOLDER OR
BENEFICIAL OWNER OF ITS COMMON STOCK ON SUCH RECORD DATE, UPON RECEIPT OF A
WRITTEN REQUEST, A COPY OF ITS ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K. WRITTEN REQUESTS SHOULD BE DIRECTED TO THE CHUBB
CORPORATION TO THE ATTENTION OF HENRY G. GULICK, VICE PRESIDENT AND SECRETARY,
15 MOUNTAIN VIEW ROAD, P.O. BOX 1615, WARREN, NEW JERSEY 07061-1615.
The Corporation is a holding company with subsidiaries principally engaged
in the businesses of property and casualty insurance and real estate. Its
principal subsidiaries are Federal Insurance Company ("Federal"), Pacific
Indemnity Company ("Pacific"), Vigilant Insurance Company ("Vigilant"), Great
Northern Insurance Company ("Great Northern"), Chubb Insurance Company of Canada
("Chubb Canada"), Chubb Insurance Company of Australia, Limited, Chubb Insurance
Company of Europe, S.A. and Bellemead Development Corporation ("Bellemead").
ELECTION OF DIRECTORS
The following persons have been nominated by the Board of Directors to
serve as Directors until the next Annual Meeting of Shareholders and until their
respective successors shall be elected and shall qualify. All of the nominees
were elected as members of the Board of Directors at the 1997 Annual Meeting
except James M. Cornelius and James M. Zimmerman who were elected Directors by
the Board of Directors at its regular meeting on March 6, 1998. Pursuant to the
provisions of the By-Laws, the Board of Directors has fixed the number of
Directors to be elected at 15. In the event that any of the nominees should be
unable or unwilling to serve as a Director, it is intended that the Proxy will
be voted for such person, if any, as shall be designated by the Board of
Directors. However, the Board of Directors has no reason to believe that any
nominee will be unable or unwilling to serve as a Director.
<PAGE> 4
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NAME AGE(1)
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<S> <C>
John C. Beck 66
Senior Member, Beck, Mack & Oliver LLC, an investment
counselling firm. Mr. Beck has been associated with
Beck, Mack & Oliver since 1958 and first became a
partner in 1962. He first became a Director of the
Corporation in 1988. Mr. Beck is also a Director of
Russell Reynolds Associates, Inc.
Sheila P. Burke 47
Executive Dean and Lecturer in Public Policy of the
John F. Kennedy School of Government, Harvard
University. For the ten years prior to her appointment
as Executive Dean in 1996, Ms. Burke served as Chief
of Staff to the United States Senate Majority Leader
Bob Dole. Ms. Burke first became a Director of the
Corporation in 1997. She serves on the Board of
Directors of Picker Institute, Boston, MA and
Wellpoint Health Networks Inc. She is a Trustee of
Marymount University, Arlington, VA and the University
of San Francisco and a Member of the Commission on
Women's Health Commonwealth Foundation and the Kaiser
Foundation Commission on Medicaid and the Uninsured.
James I. Cash, Jr. 50
The James E. Robison Professor of Business
Administration, Harvard University. Professor Cash has
been a member of the Harvard Business School faculty
since 1976. Professor Cash first became a Director of
the Corporation in 1996. He is also a Director of
Cambridge Technology Partners, Inc., General Electric
Company, Knight-Ridder, Inc., State Street
Corporation, The Tandy Corporation and WinStar
Communications, Inc. He is a Trustee of the
Massachusetts Computer Software Council and
Massachusetts General Hospital. Professor Cash is also
an overseer for the Boston Museum of Science and The
Gardner Museum.
Percy Chubb, III 63
Former Vice Chairman of the Corporation. Mr. Chubb
retired as an officer of the Corporation and employee
on February 1, 1997. He continues to serve as a
consultant. Prior to his retirement he had served as
Vice Chairman since June 1986. Prior to his election
as Vice Chairman, Mr. Chubb had been an Executive Vice
President since 1981. He had also served as Vice
Chairman of Bellemead, a Senior Vice President of
Federal and Chairman of Chubb Canada. Mr. Chubb had
been associated with Chubb & Son since 1958. He first
became a Director of the Corporation in 1978.
Joel J. Cohen 60
Managing Director, Investment Banking Department, and
Director, Mergers and Acquisitions, Donaldson, Lufkin
& Jenrette Securities Corporation since October 1989.
Mr. Cohen was a consultant from February 1988 until
October 1989. Mr. Cohen had been General Counsel:
Presidential Task Force on Market Mechanisms from
November 1987 through January 1988 and a Partner of
Davis Polk & Wardwell, attorneys, until September
1987. He had been associated with Davis Polk &
Wardwell from 1963 until September 1987 and became a
Partner in 1969. He first became a Director of the
Corporation in 1984. Mr. Cohen is also a Director of
Maersk, Inc.
James M. Cornelius 54
Chairman, Guidant Corporation. Mr. Cornelius has been
associated with Guidant Corporation since 1994. From
1986 to 1994 he was Vice President of Finance and
Chief Financial Officer of Eli Lilly and Company. In
September 1994, he was elected Chairman of the Board
of Directors of Guidant Corporation. Mr. Cornelius is
currently a Director of Guidant Corporation and Lilly
Industries and he serves as a Trustee of the Indiana
Repertoire Theater, Indianapolis Art Museum and the
University of Indianapolis. Mr. Cornelius was elected
a Director of the Corporation by the Board of
Directors on March 6, 1998.
David H. Hoag 58
Chairman and Chief Executive Officer, The LTV
Corporation since January 1991 and President and Chief
Executive Officer of LTV Steel Company from 1983 until
1990. He continues as Chief Executive Officer of LTV
Steel Company. Mr. Hoag has been associated with The
LTV Corporation since 1960. He first became a Director
of the Corporation in 1994. Mr. Hoag is also a
Director of Karrington Health Inc., The LTV
Corporation and Lubrizol Corporation.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AGE(1)
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<S> <C>
Thomas C. MacAvoy 70
Professor of Business Administration, Darden Graduate
School of Business Administration, University of
Virginia since 1988. He is a former Vice Chairman and
Director of Corning, Inc. Mr. MacAvoy had been
associated with Corning, Inc. from 1957 until his
retirement in 1987. He first became a Director of the
Corporation in 1981. Mr. MacAvoy is also a Director of
Quaker Oats Company.
Dean R. O'Hare 55
Chairman and Chief Executive Officer of the Corporation
since September 1996. Prior to September 1996, Mr.
O'Hare had been Chairman, President and Chief
Executive Officer of the Corporation since January
1995. Prior to January 1995, Mr. O'Hare had been
Chairman and Chief Executive Officer since June 1988.
Mr. O'Hare had been President from 1986 until 1988, an
Executive Vice President since 1985 and a Senior Vice
President since 1979. He is Chairman and President of
Federal, Vigilant and Great Northern, and Chairman of
Bellemead, Pacific and Chubb & Son, a division of
Federal Insurance Company ("Chubb & Son"). Mr. O'Hare
has been associated with Chubb since 1963. He first
became a Director of the Corporation in 1984. Mr.
O'Hare is also a Director of the Fluor Corporation.
Warren B. Rudman 67
Partner, Paul, Weiss, Rifkind, Wharton & Garrison,
attorneys, since January 1993. Prior to January 1993,
Senator Rudman had been a United States Senator from
New Hampshire since 1980. Senator Rudman first became
a Director of the Corporation in 1993. He is also a
Director of Allied Waste, Collins & Aikman, Prime
Succession and Raytheon Company and a Director of
eighteen funds in the Dreyfus Family of Mutual Funds.
Senator Rudman is also Chairman of the President's
Foreign Intelligence Advisory Board, Co-Chairman of
the Concord Coalition and serves on the Senior
Advisory Board of the Institute of Politics of the
John F. Kennedy School of Government at Harvard
University.
Sir David G. Scholey, CBE 62
Senior Advisor, SBC Warburg Dillon Read since September
1997. Prior to September 1997, Sir David had been
Chairman of the International Advisory Council, Swiss
Bank Corporation since November 1995. He had been
Chairman of SBC Warburg, the investment banking
division of Swiss Bank Corporation, from February 1995
until November 1995. Prior to February 1995, Sir David
had been Executive Chairman of S.G. Warburg Group plc
since 1984. He first became a Director of the
Corporation in 1991. Sir David is also a Governor of
the British Broadcasting Corporation and a Director of
J Sainsbury plc and The Vodafone Group plc. He is also
a Trustee of the Glyndebourne Arts Trust and a Trustee
of The National Portrait Gallery.
Raymond G.H. Seitz 57
Vice Chairman, Lehman Bros. International (Europe)
since April 1995. Ambassador Seitz had been a
Professional Writer since May 1994, following his
retirement as Ambassador of the United States of
America to the Court of St. James's. Previously he was
Assistant Secretary of State for European and Canadian
Affairs from 1989 to 1991. Ambassador Seitz had served
in the United States Foreign Service since 1966
wherein he held many positions in the U.S. and abroad.
He first became a Director of the Corporation in 1994.
Ambassador Seitz is also a Director of British Airways
plc, Cable & Wireless Co. plc, The General Electric
Company plc, Hong Kong Telecommunications, Rio Tinto
and Shandwick plc. He is a Trustee of the National
Gallery, the Royal Academy and the World Monument Fund
and a member of the Advisory Board of Stanford
University.
Lawrence M. Small 56
President and Chief Operating Officer, Fannie Mae since
September 1991. Prior to September 1991, when Mr.
Small joined Fannie Mae, he had served as Vice
Chairman and Chairman of the Executive Committee,
Citicorp and Citibank, N.A. since January 1990. Prior
to assuming that position, Mr. Small had been Sector
Executive since 1985, responsible for Citicorp's and
Citibank's Institutional Bank. He had been associated
with Citibank since 1964. He first became a Director
of the Corporation in 1989. Mr. Small is also a
Director of Fannie Mae, Marriott International, Inc.,
the National Building Museum and the New York City's
Spanish Repertory Theatre. He also serves as Chairman
of the Financial Advisory Committee of Trans-Resources
International. He is a Trustee of Morehouse College,
the New York University Health System and the New York
University Hospitals Center, a Trustee-Emeritus of
Brown University and a member of the U.S. Holocaust
Memorial Council.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME AGE(1)
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<S> <C>
Richard D. Wood 71
Former Chairman of the Board, Eli Lilly and Company
from 1973 until his retirement in June 1993. Mr. Wood
also served as President and Chief Executive Officer
until November 1991. Eli Lilly and Company is a
research-based pharmaceutical company and a global
leader in the pharmaceutical industry. Mr. Wood had
been associated with Eli Lilly and Company since 1950.
He first became a Director of the Corporation in 1990.
Mr. Wood is a retired Director of Amoco Corporation,
The Chase Manhattan Corporation and Dow Jones &
Company, Inc. He is Vice Chairman of the Advisory
Board of CID Equity Partners and is also a Trustee of
DePauw University and is Chairman of the Indianapolis
Museum of Art. He is a Director of the Indiana State
Symphony Society.
James M. Zimmerman 54
Chairman and Chief Executive Officer of Federated
Department Stores, Inc. He has been associated with
Federated Department Stores, Inc. since 1965. Mr.
Zimmerman was elected to his present position in May
1997. Prior to that he had been President and Chief
Operating Officer since March 1988. He was first
elected a Director of the Corporation by the Board of
Directors on March 6, 1998.
</TABLE>
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(1) As of April 28, 1998.
4
<PAGE> 7
BENEFICIAL SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table lists Chubb stock-based holdings, including the
beneficial ownership of the Corporation's Common Stock by Directors, the Chief
Executive Officer, the four most highly compensated executive officers other
than the Chief Executive Officer and Directors and executive officers as a
group, in accordance with the definitions adopted by the Securities and Exchange
Commission under Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the "Act"). No Director or officer beneficially owns as much as one half of 1%
of the outstanding Common Stock, except for Mr. Chubb, whose beneficial
ownership reflected in the table is .75%.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NAME MARCH 9, 1998(1) DEFERRAL PLAN(2) TOTAL
---- ------------------- ---------------- -----
<S> <C> <C> <C>
John C. Beck............................ 90,640 11,747 102,387(3)(22)
Sheila P. Burke......................... 4,100 -- 4,100(4)
James I. Cash, Jr. ..................... 8,200 -- 8,200(5)
Percy Chubb, III........................ 1,279,130 -- 1,279,130(6)(22)
Joel J. Cohen........................... 40,900 9,434 50,334(7)
James M. Cornelius...................... 1,000 -- 1,000
David H. Hoag........................... 13,000 2,545 15,545(8)
Thomas C. MacAvoy....................... 24,900 288 25,188(9)
Dean R. O'Hare.......................... 395,205 -- 395,205(10)(20)(22)
Warren B. Rudman........................ 20,200 873 21,073(11)
Sir David G. Scholey, CBE............... 25,000 1,126 26,126(12)(22)
Raymond G. H. Seitz..................... 12,200 596 12,796(13)
Lawrence M. Small ...................... 52,000 2,116 54,116(14)(22)
Richard D. Wood......................... 29,035 5,454 34,489(15)
James M. Zimmerman...................... 100 -- 100
Robert P. Crawford, Jr. ................ 151,389 -- 151,389(16)(20)
John J. Degnan.......................... 101,705 -- 101,705(17)(20)(22)
David B. Kelso.......................... 26,846 -- 26,846(18)(20)
Michael O'Reilly........................ 122,360 -- 122,360(19)(20)(22)
Directors and Executive Officers as a
group ................................ 3,042,764 -- 3,042,764(21)(22)
</TABLE>
- ---------------
(1) Each person has sole voting and investment power with respect to the
shares listed, unless otherwise indicated.
(2) Includes compensation allocated to the Market Value Account of the
Deferred Compensation Plan for Non-Employee Directors (See "Directors'
Compensation" on page 8). The value of units allocated to this account is based
upon the market value of the Corporation's Common Stock.
(3) Includes 49,640 shares held in accounts managed by Beck, Mack & Oliver
LLC, for which Mr. Beck disclaims beneficial ownership, 1,000 shares held in a
trust for Mr. Beck's benefit and 36,000 shares that may be purchased within 60
days pursuant to The Chubb Corporation Stock Option Plans for Non-Employee
Directors.
(4) Includes 4,000 shares that may be purchased within 60 days pursuant to
The Chubb Corporation Stock Option Plan for Non-Employee Directors (1996).
(5) Includes 8,000 shares that may be purchased within 60 days pursuant to
The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(6) Includes 19,084 shares owned by a member of Mr. Chubb's family who
lives in his home, 1,404 shares held in trusts of which a member of Mr. Chubb's
family who lives in his home is trustee, 1,017,474 shares owned by the Victoria
Foundation Inc., of which Mr. Chubb is President and one of thirteen trustees,
64,464 shares which Mr. Chubb has a right to purchase within 60 days under The
Chubb Corporation Long-Term Stock Incentive Plans and 4,000 shares that may be
purchased within 60 days pursuant to The Chubb Corporation Stock Option Plan for
Non-Employee Directors (1996). Mr. Chubb disclaims beneficial ownership of
1,037,962 of such shares.
5
<PAGE> 8
(7) Includes 32,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(8) Includes 12,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(9) Includes 18,253 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(10) Includes 4,647 shares held by a family limited partnership of which
Mr. O'Hare disclaims beneficial ownership of 4,127 of such shares, 256,076
shares which Mr. O'Hare has the right to purchase within 60 days under The Chubb
Corporation Long-Term Stock Incentive Plans and 473 shares which Mr. O'Hare has
the right to purchase within 60 days under the Stock Purchase Plan (1989).
(11) Includes 20,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(12) Includes 100 shares owned by a member of Sir David Scholey's family
who lives in his home, of which Sir David disclaims beneficial ownership, and
24,000 shares that may be purchased within 60 days pursuant to The Chubb
Corporation Stock Option Plans for Non-Employee Directors.
(13) Includes 12,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(14) Includes 200 shares held by Mr. Small as Custodian for his daughter
who lives in his home, 3,000 shares held in a trust of which Mr. Small is a
trustee and 32,000 shares that may be purchased within 60 days pursuant to The
Chubb Corporation Stock Option Plans for Non-Employee Directors. Mr. Small
disclaims beneficial ownership of 3,200 of such shares.
(15) Includes 35 shares held by Mr. Wood under the Corporation's Dividend
Reinvestment Plan and 28,000 shares that may be purchased within 60 days
pursuant to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(16) Includes 106,947 shares which Mr. Crawford has the right to purchase
within 60 days under The Chubb Corporation Long-Term Stock Incentive Plans. Mr.
Crawford retired as an executive officer of the Corporation on December 31,
1997.
(17) Includes 432 shares held by members of Mr. Degnan's family who live in
his home, 83,680 shares which Mr. Degnan has the right to purchase within 60
days under The Chubb Corporation Long-Term Stock Incentive Plans, 350 shares
which Mr. Degnan has the right to purchase within 60 days under the Stock
Purchase Plan (1989) and 3,317 shares in the Corporation Stock Fund of the
Capital Accumulation Plan of The Chubb Corporation, Chubb & Son Inc. and
Participating Affiliates. Mr. Degnan disclaims beneficial ownership of 432 of
such shares.
(18) Includes 23,001 shares which Mr. Kelso has the right to purchase
within 60 days under The Chubb Corporation Long-Term Stock Incentive Plan
(1996).
(19) Includes 627 shares held by a member of Mr. O'Reilly's family who
lives in his home, 90,465 shares which Mr. O'Reilly has the right to purchase
within 60 days under The Chubb Corporation Long-Term Stock Incentive Plans and
473 shares which Mr. O'Reilly has the right to purchase within 60 days under the
Stock Purchase Plan (1989). Mr. O'Reilly disclaims beneficial ownership of 627
of such shares.
(20) Includes 1,983, 1,555, 239, 2,388 and 2,395 shares which were
allocated to Messrs. Crawford, Degnan, Kelso, O'Hare, and O'Reilly,
respectively, pursuant to The Chubb Corporation Employee Stock Ownership Plan
(the "ESOP").
(21) Includes 900 shares held by Mrs. Michelson, a Director not standing
for re-election, in a trust for her benefit and 40,000 shares that may be
purchased within 60 days pursuant to The Chubb Corporation Stock Option Plans
for Non-Employee Directors.
(22) Such shares include the shares reflected above as to which Messrs.
Beck, Chubb, Degnan, O'Hare, O'Reilly, Scholey and Small disclaim beneficial
ownership, 21,584 shares which executive officers other than those listed in the
table above disclaim beneficial ownership, 26,094 shares which were allocated to
executive officers other than those listed in the table above pursuant to the
ESOP, 425,383 shares which executive officers other than those listed in the
table above have the right to purchase within 60 days under the Stock Option
Plan (1984) and The Chubb Corporation Long-Term Stock Incentive Plans, 2,092
shares which executive officers other than those listed in the table above have
the right to purchase within 60 days under the
6
<PAGE> 9
Stock Purchase Plan (1989) and 1,000 shares in the Corporation Stock Fund of the
Capital Accumulation Plan of The Chubb Corporation, Chubb & Son Inc. and
Participating Affiliates which are beneficially owned by one executive officer
other than those listed in the table above. All Directors and executive officers
as a group own 1.8% of the outstanding Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by Securities and Exchange Commission rules, the Corporation
notes that during 1997, Donn H. Norton, an Executive Vice President, was late in
reporting two sales of Common Stock on February 11, 1997 for 6,228 and 706
shares. The sales were reported on a Form 4 on April 8, 1997.
CERTAIN SHAREHOLDERS
As of March 9, 1998, the Royal & Sun Alliance Insurance Group plc ("Royal &
Sun Alliance") at 1 Bartholomew Lane, London, EC2N 2AB, England held 9,023,916
shares of Common Stock of the Corporation (approximately 5.4% of the outstanding
Common Stock at March 9, 1998). Royal & Sun Alliance has reported that it holds
such shares for the purpose of investment.
The Board of Directors knows of no other beneficial owner of five percent
or more of the Corporation's Common Stock nor does it know of any arrangement
which may at a subsequent date result in a change in control of the Corporation.
See "Transactions with Certain Shareholders."
AUDIT, ORGANIZATION & COMPENSATION AND NOMINATING COMMITTEES
The Board of Directors has, among other Committees, an Audit Committee, an
Organization & Compensation Committee and a Nominating Committee.
The Audit Committee is composed of Messrs. Cohen (Chairman), Cash, Hoag,
Seitz, and Wood and Ms. Burke and Mrs. Michelson, a Director not standing for
re-election. No officer of the Corporation or of any of its subsidiaries may
serve on the Audit Committee. In 1997, the Committee met four times. The
functions of the Audit Committee include reviewing the accounting principles and
practices employed by the Corporation and, to the extent the Committee deems
appropriate, of the Corporation's subsidiaries; meeting with the Corporation's
independent auditors to review their reports on their audits of the
Corporation's accounts, their comments on the internal accounting controls and
internal audit procedures of the Corporation and the action taken by management
with regard to such comments; and recommending annually to the Board of
Directors the appointment of the Corporation's independent auditors. The
Committee has the power at its discretion to order interim and surprise audits
and to perform such other duties as may be assigned to it from time to time by
the Board of Directors.
The Organization & Compensation Committee is composed of Messrs. Small
(Chairman), Hoag, Rudman and Wood and Mrs. Michelson, a Director not standing
for re-election. Robert V. Lindsay, a Director who retired effective December
31, 1997, was a member of the Committee prior to his retirement. No officer of
the Corporation or any of its subsidiaries may serve on the Organization &
Compensation Committee. In 1997, the Committee met six times. The Committee
monitors the performance and oversees the promotion of the senior executive
officers of the Corporation and its principal operating subsidiaries and
periodically consults with the Chief Executive Officer and other members of
senior management regarding the development of qualified replacements to succeed
key executives and other aspects of succession planning. The Committee
determines overall compensation policy for senior management of the Corporation,
recommending to the Board of Directors new compensation programs or changes in
existing programs which the Committee finds appropriate. Any action to be taken
with regard to the salary of any employee of the Corporation or any of its
subsidiaries, which is in excess of certain amounts, is subject to ratification
by the Committee. In addition, the Committee performs administrative functions
pursuant to The Chubb Corporation Director's Charitable Award Program, The Chubb
Corporation Long-Term Stock Incentive Plan (1992), The Chubb Corporation
Long-Term Stock Incentive Plan (1996) (the "Long-Term Stock Incentive Plans"),
7
<PAGE> 10
the Annual Incentive Compensation Plan (1996) (the "Annual Incentive
Compensation Plan"), The Profit Sharing Plan of The Chubb Corporation, Chubb &
Son Inc. and Participating Affiliates (1987) (the "Profit Sharing Plan (1987)"),
The Chubb Corporation Investment Department/Chubb Asset Managers, Inc. Incentive
Compensation Plan, the Stock Purchase Plan (1989) of The Chubb Corporation (the
"Stock Purchase Plan (1989)") and The Chubb Corporation Stock Option Plan (1984)
(the "Stock Option Plan (1984)") and ratifies certain awards made pursuant to
incentive or bonus plans of subsidiaries of the Corporation.
The Nominating Committee is composed of Mrs. Michelson (Chairperson), a
Director not standing for re-election, and Messrs. Cohen, Hoag and Rudman. The
Committee seeks out, evaluates and recommends qualified nominees for election as
Directors, considers Director performance before recommending re-election and
makes recommendations concerning the size and composition of the Board. In 1997,
the Committee met two times. The Committee will consider Shareholder
recommendations for Director nominees upon receipt of appropriate biographical
information and confirmation of the proposed nominee's bona fide intent to serve
on the Board of Directors if nominated and elected. For additional information
on this process, Shareholders should write to Henry G. Gulick, Vice President
and Secretary, The Chubb Corporation, 15 Mountain View Road, P.O. Box 1615,
Warren, New Jersey 07061-1615.
DIRECTORS' ATTENDANCE
In fiscal year 1997, there were four meetings of the Board of Directors of
the Corporation. All of the incumbent Directors attended 75% or more of the
aggregate of their respective Board and Committee meetings, except David G.
Scholey.
DIRECTORS' COMPENSATION
All Directors of the Corporation are also directors of Federal. Certain of
the Corporation's Directors are also directors of other subsidiaries of the
Corporation. It is the practice of the Corporation's Board of Directors to hold
concurrent meetings with the Board of Directors of Federal.
Each Director receives an annual stipend in the amount of $35,000, all of
which is paid by the Corporation. In addition, a meeting fee of $1,500 is paid
to Directors for each meeting of the Board of Directors attended. Directors
receive a fee of $1,500 for each Committee meeting attended. In those instances
where the Boards or Committees of the Corporation and Federal meet concurrently,
each shares proportionately in the payment of the fees. In addition, members of
the Finance Committee, the Executive Committee, the Organization & Compensation
Committee, the Audit Committee, the Nominating Committee and the Pension &
Profit Sharing Committee receive an annual stipend from the Corporation of
$7,500. The Chairmen of the Audit Committee and of the Organization &
Compensation Committee receive annual stipends from the Corporation of $15,000
for service on those Committees in lieu of the foregoing Committee stipends. As
members of the International Advisory Board of The Chubb Corporation, Messrs.
O'Hare and Scholey received meeting fees of $5,000 each in 1997. Directors who
are officers of the Corporation receive meeting fees for attendance at
Directors' meetings only and do not receive stipends or fees for Committee
meetings.
For the year 1997, Mr. O'Hare also received Directors' fees from certain
subsidiaries of the Corporation totalling $2,000.
Pursuant to the Deferred Compensation Plan for Non-Employee Directors
adopted by the Corporation in 1987, Directors may elect to defer, until a date
specified, receipt of all or a portion of their compensation. This plan provides
that, in addition to a Cash Account upon which amounts deferred earn interest
compounded quarterly, at the prime rate of Citibank, N.A. in effect on certain
specified dates, amounts deferred may also be allocated to a Market Value
Account, the value of which is based upon the market value of the Corporation's
Common Stock from time to time, a Shareholder's Equity Account, the value of
which is based
8
<PAGE> 11
upon the book value of the Corporation's Common Stock established on an annual
basis, or a combination of such accounts. At its regular Board meeting in
December 1995, the Board of Directors adopted guidelines suggesting that
eligible Non-Employee Directors voluntarily defer 50% of all stipends into the
Market Value Account starting in 1996. At March 9, 1998, deferred compensation
accounts were maintained for 10 Directors, all of whom are currently deferring
compensation pursuant to this plan. For 1997, Directors deferred $444,125 of
compensation from the Corporation and its subsidiaries. At December 31, 1997,
the aggregate account values reflecting Directors' deferrals and earnings on
such deferrals were as follows: $3,503,762 for the Market Value Account,
$688,465 for the Shareholder's Equity Account and $74,216 for the Cash Account.
DIRECTOR'S CHARITABLE AWARD PROGRAM
Effective January 1, 1992, the Corporation established the Director's
Charitable Award Program. Under the Program, which is administered by the
Organization & Compensation Committee, each Non-Employee Director following his
or her first election to the Board of Directors by Shareholders may recommend
that the Corporation direct one or more charitable contributions totalling
$500,000 to eligible tax exempt organizations. Generally, eligible Directors are
paired, and contributions are made to the organizations selected by a Director
upon the death of the second paired Director. At March 9, 1998, 12 eligible
Directors were participating in the Program. The Program may be funded by the
Corporation through, among other vehicles, the purchase of life insurance
policies on the lives of the Directors. Individual Directors derive no financial
benefit from this Program since all charitable deductions accrue solely to the
Corporation. The Program may be terminated at any time by the Organization &
Compensation Committee.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Chubb Corporation Stock Option Plan for Non-Employee Directors (1988)
was adopted by the Board of Directors and approved by Shareholders in 1988 and
was amended, extended and renamed The Chubb Corporation Stock Option Plan for
Non-Employee Directors (1992) by the Board of Directors and approved by
Shareholders in 1992. Upon the recommendation of the Board of Directors, it was
again extended, amended and approved by Shareholders in 1996 as The Chubb
Corporation Stock Option Plan for Non-Employee Directors (1996) (the "1996
Non-Employee Directors Plan"). The 1996 Non-Employee Directors Plan provides
that an aggregate of 400,000 shares of Common Stock of the Corporation be
available for issuance upon exercise of options granted thereunder. The 1996
Non-Employee Directors Plan shall terminate on the day following the 2001 Annual
Meeting of Shareholders.
The 1996 Non-Employee Directors Plan is administered by the Board of
Directors. Only Eligible Directors, as defined, may receive options under the
1996 Non-Employee Directors Plan. There are currently 13 Eligible Directors.
Following the election of Directors, as of the date of each Annual Meeting that
occurs while the 1996 Non-Employee Directors Plan is in effect, each individual
who is then an Eligible Director will be granted an option to purchase 4,000
shares of Common Stock of the Corporation. The purchase price per share of the
Common Stock deliverable upon exercise of the option shall be 100% of the fair
market value per share of Common Stock on the day the option is granted.
Options granted under the 1996 Non-Employee Directors Plan are
non-statutory options. The options shall be exercisable in whole or in part at
all times after the date of grant. All outstanding options held by an optionee
shall be automatically canceled upon termination of the optionee's service as an
Eligible Director, except for terminations due to retirement and under certain
other specified circumstances.
In the case of certain mergers, consolidations or combinations of the
Corporation with or into other corporations, or in the event of a Change of
Control of the Corporation, as defined, the holder of each option then
outstanding shall have, unless the Board of Directors determines otherwise, the
right to receive on the date or effective date of such event a cash payment in
an amount calculated as set forth in the Non-Employee Directors Plans.
9
<PAGE> 12
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- -----------------------
AWARDS PAYOUTS
---------- ----------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
STOCK OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) AWARDS(3) SARS(4) PAYOUTS(5) SATION(6)
- --------------------------- ---- --------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dean R. O'Hare........... 1997 $882,001 $1,542,400 $327,642 99,250 $673,920 $216,669
Chairman and 1996 837,732 1,268,267 180,747 117,650 379,506 181,187
Chief Executive Officer 1995 803,116 1,227,390 0 40,080 342,810 141,631
John J. Degnan........... 1997 312,693 615,254 204,608 33,000 240,697 77,569
President 1996 287,693 455,917 90,402 27,360 120,327 58,487
1995 260,001 456,482 0 13,600 111,443 44,092
David B. Kelso........... 1997 362,500 528,750 204,608 30,000 0 28,610
Executive Vice President 1996 175,000 200,000 57,855 16,000 0 0
Robert P. Crawford, Jr.... 1997 332,001 568,440 0 33,000 369,100 85,661
Executive Vice President 1996 313,001 507,430 108,471 32,830 185,136 72,807
1995 295,001 568,321 0 18,520 124,313 57,316
Michael O'Reilly......... 1997 334,062 437,081 204,608 18,000 307,364 58,619
Executive Vice President 1996 316,155 185,762 0 16,730 228,852 57,590
1995 293,432 195,113 0 14,600 182,863 51,799
</TABLE>
- ---------------
(1) Includes directors fees for 1997, 1996 and 1995 of $12,000, $11,000 and
$11,000 for Mr. O'Hare.
(2) Includes for Messrs. O'Hare, Degnan, Kelso and Crawford amounts paid for
such years under the Annual Incentive Compensation Plan and under the Profit
Sharing Plan (1987) and for Mr. O'Reilly amounts paid for 1997 under the
Annual Incentive Compensation Plan, amounts paid for 1995 and 1996 under the
annual segment of The Chubb Corporation Investment Department/Chubb Asset
Managers, Inc. Incentive Compensation Plan (the "Investment Department
Incentive Plan") and amounts paid for 1997, 1996 and 1995 under the Profit
Sharing Plan (1987) and also includes for Messrs. O'Hare, Degnan and
Crawford amounts paid for 1995 in settlement of equity share awards under
the Long-Term Stock Incentive Plan and includes for 1995 for Mr. Degnan an
award of unrestricted shares of Common Stock of the Corporation under the
Long-Term Stock Incentive Plan. Payments in settlement of equity share
awards were made in cash for 1995. All outstanding convertible debentures
were called and converted to shares in 1996. If the executive terminates
employment prior to five years after the issuance of a debenture, the
converted shares are forfeited except for certain specified terminations.
The converted shares are also non-transferable (except in the case of death)
for a period of five years after the date of conversion.
(3) For 1997, represents the fair market value of performance based restricted
stock awarded at 100% of fair market value as of the March 5, 1998 award
date ($78.9688 per share) without diminution in value attributable to the
restrictions on such stock under the Long-Term Stock Incentive Plan. The
awards generally become vested three years after the date of grant, but may
vest earlier upon death, disability, retirement or other termination with
the consent of the Organization & Compensation Committee. Dividends declared
on the common stock of the Corporation are paid on outstanding restricted
stock awards. For the purposes of the Securities and Exchange Commission's
compensation reporting rules, outstanding performance share awards are
treated as equivalent to restricted stock units. The total number and value
(based on a per share price at December 31, 1997 of $75.625) of performance
shares outstanding for the three year periods ending December 1998 and 1999
are 27,400 ($2,072,125) for Mr. O'Hare, 11,225 ($848,891) for Mr. Degnan,
11,425 ($864,016) for Mr. Kelso, 12,225 ($924,516) for Mr. Crawford and
7,625 ($576,641) for Mr. O'Reilly. The total outstanding nonvested
Restricted
10
<PAGE> 13
Stock award balances as of March 5, 1998 were 7,320 shares ($567,449) for
Mr. O'Hare, 4,177 shares ($324,549) for Mr. Degnan, 3,606 shares ($281,367)
for Mr. Kelso, 1,903 shares ($143,914) for Mr. Crawford and 2,591 shares
($204,608) for Mr. O'Reilly. Dollar values are based on a value per share of
$75.625 on December 31, 1997 for awards outstanding on such date and
$78.9688 per share on March 5, 1998 for awards granted on such date.
(4) Includes options granted in such years under the Long-Term Stock Incentive
Plan.
(5) Includes payments made in settlement of performance share awards for Messrs.
O'Hare, Degnan, Crawford and O'Reilly for the three year periods ended
December 31, 1996 and 1997 and for the two year period ended December 31,
1995. Also includes for Mr. O'Reilly deferred payments under the long-term
segment of the Investment Department Incentive Plan paid in 1995, 1996 and
1997 for performance periods ended December 31, 1991, 1992 and 1993,
respectively.
(6) Includes allocations for 1997, 1996 and 1995 under the qualified Capital
Accumulation Plan and the Capital Accumulation Excess Benefit Plan of
$84,733, $73,069 and $53,885 for Mr. O'Hare, $30,508, $23,668 and $17,284
for Mr. Degnan, $33,334, $29,720 and $22,364 for Mr. Crawford and $23,975,
$23,046 and $20,150 for Mr. O'Reilly and allocations for 1997, 1996 and 1995
under the ESOP qualified plan and the ESOP excess plan of $131,936, $108,118
and $87,746 for Mr. O'Hare, $47,061, $34,819 and $26,808 for Mr. Degnan,
$52,327, $43,087 and $34,952 for Mr. Crawford and $34,644, $34,544 and
$31,649 for Mr. O'Reilly. Includes for Mr. Kelso allocations for 1997 under
the qualified Capital Accumulation Plan and the Capital Accumulation Excess
Benefit Plan of $7,442 and allocations for 1997 under the ESOP qualified
plan and the ESOP excess plan of $21,168.
II. OPTIONS/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZED
% OF VALUE
TOTAL AT ASSUMED
NUMBER OF OPTIONS/ ANNUAL RATES
SECURITIES SARS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS/ EMPLOYEES OR BASE OPTION TERM(3)
SARS IN FISCAL PRICE -----------------------
NAME GRANTED(1) YEAR(2) PER SHARE EXPIRATION DATE 5% 10%
---- ---------- ---------- --------- --------------- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
Dean R. O'Hare................ 99,250 3.8% $60.75 March 5, 2007 $3,791,876 $9,609,375
1,314 .05% 76.0625 June 3, 2002 27,613 61,018
John J. Degnan................ 33,000 1.3% 60.75 March 5, 2007 1,260,775 3,195,057
David B. Kelso................ 30,000 1.2% 60.75 March 5, 2007 1,146,159 2,904,597
Robert P. Crawford, Jr. ...... 33,000 1.3% 60.75 March 5, 2007 1,260,775 3,195,057
965 .04% 70.50 June 3, 2002 18,796 41,535
Michael O'Reilly.............. 18,000 .69% 60.75 March 5, 2007 687,696 1,742,758
</TABLE>
- ---------------
(1) The number of shares for each person represents a stock option granted under
the Long-Term Stock Incentive Plan without a related stock appreciation
right. The options that expire on March 5, 2007 are exercisable for 50% of
the number of shares shown on March 6, 1998, and 100% on March 6, 1999. The
exercise price for each stock option is not less than the fair market value
of the Corporation's Common Stock on the date of grant. There is an option
restoration feature with each option which provides that the optionee can
receive a separate option grant when previously owned shares are exchanged
in a stock-for-stock exercise if the market price on date of exercise is at
least 25% higher than the exercise price. The restoration option will be a
non-statutory option, the number of option shares will equal the number of
exchanged shares used to exercise the original option, the exercise price
will be the fair market value on the grant date of the restoration option,
the term will be for the length of time remaining in the original option and
the restoration option will be immediately exercisable. A restoration option
grant for Mr. O'Hare in the amount of 1,314 shares was effective on December
31, 1997 and a restoration option grant for Mr. Crawford in the amount of
965 shares was effective on September 17, 1997.
(2) Based on total grants in 1997 of 2,599,460 shares.
11
<PAGE> 14
(3) The assumed 5% and 10% annual rates of stock price appreciation used in the
table are prescribed by the proxy rules and are not intended to forecast
possible future appreciation in the price of the Corporation's Common Stock.
III. AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END
OPTION/SAR VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END(1)
------------ ------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- ------------- --------------------
<S> <C> <C> <C> <C>
Dean R. O'Hare........... 5,768 $238,858 188,451/158,075 $6,259,587/$3,057,266
John J. Degnan........... -- -- 59,680/46,680 2,140,248/858,525
David B. Kelso........... -- -- 8,001/37,999 225,528/671,722
Robert P. Crawford,
Jr. ................... 6,330 209,383 65,826/49,415 2,188,797/932,028
Michael O'Reilly......... 2,100 93,975 75,765/26,365 3,031,676/492,559
</TABLE>
- ---------------
(1) Based on a value per share at December 31, 1997 of $75.625.
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
NUMBER OF OTHER PERIOD UNDER NON-STOCK PRICE-BASED
SHARES, UNITS UNTIL PLANS (UNITS OR $)
OR OTHER MATURATION OR -----------------------------
NAME RIGHTS(1) PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- -------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Dean R. O'Hare............................... 12,400 1997-99 6,200 12,400 18,600
John J. Degnan............................... 5,625 1997-99 2,812 5,625 8,437
David B. Kelso............................... 5,425 1997-99 2,712 5,425 8,137
Robert P. Crawford, Jr....................... 5,625 1997-99 2,812 5,625 8,437
Michael O'Reilly............................. 3,625 1997-99 1,812 3,625 5,437
$15,000(2) 1997-00 -- $15,000 --
</TABLE>
- ---------------
(1) Includes performance share awards granted under the Corporation's Long-Term
Stock Incentive Plan in 1997 with respect to the three year performance
cycle ending December 31, 1999. The number of shares earned is dependent on
the achievement of a specified earnings per share target established by the
Organization & Compensation Committee for the three year period. Settlement
of the awards may be in shares or cash or a combination of both at the
discretion of the Organization & Compensation Committee.
(2) Includes for Mr. O'Reilly a deferred award granted in 1997 under the
long-term segment of the Investment Department Incentive Plan. This award is
based on investment results for the five year period ended December 31, 1996
and is scheduled to be paid in the year 2000.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Performance Graph and the Organization & Compensation Committee Report on pages
13 through 17 shall not be incorporated by reference into any such filings.
12
<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG THE CORPORATION'S COMMON STOCK,
THE STANDARD & POOR'S 500 STOCK INDEX AND THE STANDARD & POOR'S
PROPERTY AND CASUALTY INDEX
FIVE YEAR COMPARISON
<TABLE>
<CAPTION>
Chubb Corp. S&P 500(R) S&P(R) Property-Casualty
Insurance Index
<S> <C> <C> <C>
1992 100 100 100
1993 89 110 96
1994 91 112 103
1995 116 153 140
1996 132 189 170
1997 188 252 247
</TABLE>
TEN YEAR COMPARISON
<TABLE>
<CAPTION>
Chubb Corp. S&P 500(R) S&P(R) Property-Casualty
Insurance Index
<S> <C> <C> <C>
1987 100 100 100
1988 108 117 103
1989 182 154 151
1990 213 149 147
1991 310 194 184
1992 385 209 216
1993 327 230 212
1994 333 233 223
1995 426 321 301
1996 483 384 366
1997 692 526 533
</TABLE>
- ---------------
* Assumes, for the five and ten year graphs, that the investment in the
Corporation's Common Stock and each index was $100 on December 31, 1992 and
December 31, 1987, respectively, and that all dividends were reinvested.
** Because of its May 23, 1997 sale of Chubb Life Insurance Company of America,
the Corporation no longer includes the Standard & Poor's Multi-line Insurance
Index in the performance graph.
Making the same comparison of cumulative total return for the past one year
period ended December 31, 1997, an investment of $100 in the Corporation's
Common Stock, the Standard & Poor's 500 Stock Index and the Standard & Poor's
Property and Casualty Index would have yielded the following: Chubb, $143; S&P
500 Index, $133; and S&P Property and Casualty Index, $145.
13
<PAGE> 16
ORGANIZATION & COMPENSATION COMMITTEE REPORT
EXECUTIVE OFFICER COMPENSATION POLICIES
The Corporation's executive compensation program is designed to align
Shareholder interests with business strategy, company values and management
initiatives. It is based on the following four principles: (i) to link the
interests of management with those of Shareholders by making a substantial
portion of executive compensation depend upon the Corporation's financial
performance and by encouraging stock ownership in the Corporation, (ii) to
attract and retain superior executives by providing them with the opportunity to
earn total compensation packages that are among the most competitive in the
industry, (iii) to reward individual results by recognizing performance through
salary, annual cash incentive and long-term incentives and (iv) to manage
compensation based on the level of skill, knowledge, effort and responsibility
needed to perform the job successfully.
A position evaluation program establishes pay levels among all positions
reflecting the importance and value of similar positions to the Corporation. A
position's pay level determines a range of values within which the executive's
compensation is administered.
Executive officers' compensation includes: annual cash compensation
(consisting of base salary and annual incentive awards paid in cash) and
long-term incentive awards, as well as additional features which are available
to most other employees of the Corporation and its subsidiaries, including
profit sharing plans, pension plans, a stock purchase plan and an employee stock
ownership plan, all of which allocate payments generally based on an
individual's level of annual cash compensation.
It is the general policy of the Corporation that executive officer
compensation qualify for tax deductibility pursuant to the regulations under
Section 162(m) of the Internal Revenue Code. Under these regulations, which
became effective January 1, 1994, in order to qualify for tax deductibility,
payment of compensation in excess of $1 million to the chief executive officer
and the four other highest paid executive officers must be made in accordance
with performance criteria disclosed to and approved by Shareholders and pursuant
to pre-established arrangements which, among other things, limit the exercise of
discretion to increase the awards beyond the limits initially set. The Committee
believes that mathematical formulas cannot always anticipate and fairly address
every situation which may arise. For this reason, the Committee has historically
retained the authority to adjust compensation awarded in light of extraordinary,
unusual or non-recurring events. The Committee continues to believe that this
reservation of authority, and its exercise under appropriate circumstances,
operates in the best interests of the Corporation and its Shareholders even
though in exercising such authority, compensation might not be deductible.
The cornerstone of the Corporation's compensation program is to pay for
performance. Other than base salary, all major elements of the Corporation's
executive compensation programs vary directly with both corporate and individual
performance. As part of that, the Committee sets difficult performance targets
for executives. The Committee also sets total compensation targets for
executives to be superior to industry peers, contingent upon superior
performance. Executives have substantial portions of their compensation at risk
for annual and long-term performance, with the largest portion at risk for the
most senior executives.
In 1997, the Committee requested a nationally recognized executive
compensation consultant to provide a comprehensive annual update of the
executive officer compensation strategy and competitive position. This review
resulted in affirmation by the Committee that the executive compensation program
and strategy are appropriate and working as intended to pay for performance. The
Committee firmly endorsed the concept that for competitive analysis and
financial comparison the Corporation's peer group is first and foremost the
industry comparison group referenced in the discussion on Annual Cash
Compensation below. A second peer group of 21 companies in the insurance,
financial services and banking industries, referenced in the discussion on
Long-Term Incentive Awards below, is also used to more broadly measure the
competitive position of the compensation potentially available to executive
officers of the Corporation.
14
<PAGE> 17
ANNUAL CASH COMPENSATION
Amounts paid as base salary, including merit salary increases, are
determined by the executive's performance, placement in the salary range
established for the executive's position and the salaries offered in the
industry for comparable positions. Outside independent consultants are
periodically used to gather and analyze industry comparisons of salary data to
ensure that the salary ranges used in the compensation program are competitive
for comparable positions. The Committee monitors and approves changes in base
salary for senior executive officers (including the executive officers named in
the Summary Compensation Table). Promotional salary increases reflect the
executive's movement from one pay level to another and are granted when earned.
The Committee sets and approves the formulas which establish the amounts
available for annual incentive awards. For 1997, incentive awards paid to most
executive officers were determined under the Annual Incentive Compensation Plan
(1996). This plan's formula measures the Corporation's performance, including
combined loss and expense ratio ("combined ratio"), net income and operating
income return on equity against the results of an industry comparison group. Net
income under this formula is the Corporation's investment income arising from
the property and casualty insurance business and underwriting profit or loss
from that business. Each year the Committee approves goals for the combined
ratio and net income based on the outlook for business conditions that year.
After the close of business each year, the formula takes into account how well
the Corporation performed against its own goals and how well it performed
against an industry comparison group's average combined ratio and operating
income return on equity. Included in this industry comparison group are three
out of the seven companies which, along with the Corporation, comprise the
Standard & Poor's Property and Casualty Index used in the Performance Graphs on
page 13 as well as five other insurance companies against which the Corporation
has over time compared itself.
The annual incentive pool actually paid is determined by weighing the
combined ratio result as well as the net income and operating income return on
equity results to generate a total award pool under the Plan. A percent is
applied to the target dollar award pool for each job grade to develop a final
cash award pool. The pool can range from 0% to 200% of the target dollar award
for all participants covered by the Plan.
Amounts actually paid for annual incentive awards to executives are based
on the executive's individual performance and salary grade midpoint. Where
applicable, individual performance is judged on the following considerations:
profit, growth, expense control, productivity, leadership, staff development,
diversity management, performance/compensation management, innovation,
collaboration and internal/external customer service. Awards are approved by the
Committee based upon recommendations by management after year end. Over the past
several years, annual cash compensation has been administered to slow the growth
in base salaries and place a greater proportion of the executive's annual cash
compensation at risk through the variable amounts available for an annual
incentive award.
Other annual cash incentive plans in which certain executive officers
participate include the Bellemead Development Corporation Incentive Compensation
Plan (the "Bellemead Incentive Plan"), The Chubb Corporation Investment
Department/Chubb Asset Managers, Inc. Incentive Compensation Plan (the
"Investment Department Incentive Plan"), The Profit Sharing Plan (1987) and The
Bellemead Profit Sharing Plan. The Bellemead Incentive Plan is based on a
formula which measures the achievement of actual net income against planned net
income. The Investment Department Incentive Plan provides both annual and
long-term cash awards which are competitive with those provided by similar
financial institutions, including property and casualty insurance companies and
banks. Such awards are granted to the Corporation's investment professionals and
are based on results measured against market indices which represent standards
of investment performance regularly used by investment analysts to compare and
analyze the performance of investment professionals responsible for managing a
particular asset class. The Profit Sharing Plan (1987) provides employees of the
Corporation and its participating subsidiaries with cash awards on a sliding
scale of 0% to 4% of a participant's eligible compensation based on a schedule
relating to the consolidated return on premiums earned by the property and
casualty insurance subsidiaries of the Corporation. The Bellemead Profit
15
<PAGE> 18
Sharing Plan provides for cash awards on a sliding scale of 0% to 3% of a
participant's annual compensation depending upon the relationship of planned to
actual net income for the year.
LONG-TERM INCENTIVE AWARDS
Long-term incentive awards are made under the Long-Term Stock Incentive
Plan. The Long-Term Stock Incentive Plan, which is administered by the
Committee, is an omnibus plan and provides stock based awards to eligible
employees which include most levels of management as well as the Corporation's
executive officers. The Plan was designed in consultation with a nationally
recognized executive compensation consulting firm and periodically the Committee
obtains the advice of such consulting firms with regard to the ongoing
administration of the Plan. Awards granted to executive officers include stock
options, performance share awards and restricted stock awards.
Stock option awards are based on guidelines that provide for larger awards
commensurate with position levels that reflect competitive grant practices
within a broad peer group of companies in the insurance, financial services and
banking industries. Included in the peer group are five of the seven companies
which, along with the Corporation, comprise the Standard & Poor's Property and
Casualty Index, and eight additional insurance companies against which the
Corporation has over time compared itself. The peer group also contains one
insurance brokerage and seven financial services and banking companies,
reflecting the fact that the Corporation also operates generally within the
broader financial services industry.
Performance share awards are generally granted annually and are earned
based on earnings per share targets or other selected corporate financial goals
for three year performance periods. As with options, the number of performance
shares granted is based on position level and the executive's most recent level
of performance. Payment values are dependent on the Corporation's stock price at
the end of the performance period, thus linking executives' interests directly
with Shareholders, as well as the achievement of selected corporate financial
goals. In 1997, a performance goal was established for the three year
performance period ending in 1999 reflecting a cumulative operating earnings per
share target for such period. In connection with the previously announced sales
activities involving Bellemead Development Corporation, the Committee determined
that it would be appropriate to adjust the calculation of operating income for
the three year performance period ended December 31, 1997 so that the intended
benefit of such awards, as initially proposed, was preserved.
The Committee in 1997 established an overall pool and, for selected senior
executives, individual maximum awards for performance based restricted stock
awards. The overall pool established for the performance cycle ending December
31, 1999 was set not to exceed 15% of the number of performance shares deemed
earned for the performance share cycle concluding on such date. Allocations for
selected senior executives were based on their potential performance and long
range contributions to the Corporation.
Regular restricted stock awards are generally granted as an alternative to
performance shares to a limited number of executive officers in positions
requiring specialized skills and knowledge that do not entail the broad
management responsibilities most appropriately tied to performance share grants
and performance based restricted stock grants.
CEO COMPENSATION
Mr. O'Hare is a participant in all of the aforementioned components of the
compensation program except regular restricted stock awards. The value of his
compensation from each component of the program is a direct reflection of both
his individual performance and the Corporation's performance as described below.
Mr. O'Hare's salary was reviewed in March 1998 under the Corporation's
normal merit guidelines. Based upon the Committee's judgment that his
performance was excellent during the 15 month review period, Mr. O'Hare received
an increase of 6.3%. The principal performance criteria considered by the
Committee were the Corporation's strong performance in key financial measures
such as growth in earnings per share, net
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<PAGE> 19
income, operating income, return on equity and revenue against established
targets. Also considered were Mr. O'Hare's achievements in 1997 of the sale of
its subsidiary, Chubb Life Insurance Company of America, and the sale of
substantially all the commercial real estate assets of Bellemead Development
Corporation, in addition to his initiation of a major expense reduction program.
Additional criteria considered were global expansion, industry leadership,
corporate citizenship and succession planning.
Mr. O'Hare's annual cash incentive award for 1997 was $1,500,000 which
represents an increase of 20% from the incentive award paid for 1996. The
Corporation achieved a combined loss and expense ratio of 96.9%, which
outperformed the combined ratio average of 103.0% for the industry comparison
group referred to above under the discussion concerning Annual Cash
Compensation. In addition, the Corporation achieved 107.8% of its net income (as
defined) goal and recorded an operating earnings return on equity of 12.6%,
which surpassed the industry comparison group's average of 11.0%. The Committee
determined that Mr. O'Hare's leadership skills and financial management talent
contributed substantially to these results and reflected this in the incentive
award paid to him. Mr. O'Hare, as did all other eligible employees, received a
payment of two percent (2%) of eligible compensation for the 1997 plan year
pursuant to the terms of the Profit Sharing Plan (1987).
In March 1997, Mr. O'Hare was granted 12,400 performance shares for the
three year performance period ending December 1999 and was granted stock options
for 99,250 shares. The Committee recognized that the Corporation achieved
excellent results in 1996 as measured by, among other things, the principal
performance criteria described above. The Committee decided to award grants that
were very competitive within the peer group described under the general
discussion concerning Long-Term Incentive Awards.
With respect to performance shares granted in June 1995 for the three year
performance period which ended December 1997, the cumulative earnings per share,
as adjusted, during this performance period were slightly above the target
established by the Committee in 1995. On this basis, Mr. O'Hare earned
performance shares having a value of $673,920, compared with the performance
share award payment made last year of $379,506.
On March 5, 1998, Mr. O'Hare was awarded 4,149 shares of performance based
restricted stock for 1997 results. The shares had a fair market value on the
award date of $327,642 (without regard to any diminution in value attributable
to the restrictions on the shares). This compares with his performance based
restricted stock award for 1996 of $180,747. The Committee believes that the
percentage of the performance based restricted stock pool awarded to Mr. O'Hare
reflects his contribution to the Corporation's results and directly relates to
the financial interests of Shareholders, management and employees.
The foregoing report has been furnished by the following members of the
Board of Directors of the Corporation who, along with Robert V. Lindsay who
retired from the Board of Directors on December 31, 1997, comprised the
Organization & Compensation Committee:
<TABLE>
<S> <C>
Lawrence M. Small (Chairman) G. G. Michelson
David H. Hoag Warren B. Rudman
Richard D. Wood
</TABLE>
PENSION PROGRAM
Eligible employees of the Corporation and certain of its subsidiaries
participate in The Pension Plan of The Chubb Corporation, Chubb & Son Inc. and
Participating Affiliates (the "Pension Plan"). As in effect during 1997, the
Pension Plan provides to each such employee annual retirement income beginning
at age 65 equal to the product of (x) the total number of years of participation
in the Pension Plan (but not more than 35 years) and (y) the difference between
(i) 1 3/4% of average compensation for the five years in the last ten years of
participation prior to retirement during which the employee was most highly paid
("final average earnings") and (ii) an amount related to the employee's primary
Social Security benefit.
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<PAGE> 20
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Internal Revenue Code of 1986, as amended (the "Code"), impose maximum
limitations on the annual amount of a pension which may be paid under a funded
defined benefit plan such as the Pension Plan. The Pension Plan complies with
these limitations. The Board of Directors adopted, effective as of January 1,
1976, an unfunded benefit equalization plan of the type permitted by ERISA which
will provide annual payments to persons who are participants under the Pension
Plan and their beneficiaries. Such payments will be equal to the difference
between (a) the benefits which would be payable to such persons under the
Pension Plan, without taking into consideration the limitations imposed by ERISA
and the Code, and (b) the maximum annual benefits to which such persons are
entitled under the Pension Plan by reason of such limitations.
The table which follows shows the estimated annual benefits payable upon
retirement to persons in specified remuneration and years-of-service
classifications under the Pension Plan and the unfunded benefit equalization
plan (referred to collectively as the "Pension Program"). The retirement
benefits shown are based upon retirement at the age of 65 and computed on the
basis of straight life annuity benefits. Such benefits, as shown in the
following table, are subject to an offset of an amount related to the primary
Social Security benefits in an amount approved by the Internal Revenue Service
in effect at the time of retirement.
ESTIMATED ANNUAL RETIREMENT BENEFITS PAYABLE AT AGE 65
STRAIGHT LIFE ANNUITY BASIS
TO AN EMPLOYEE RETIRING IN 1998
<TABLE>
<CAPTION>
FINAL
AVERAGE YEARS OF CREDITED SERVICE
EARNINGS --------------------------------------------------------------------
-------- 15 20 25 30 35 OR MORE
<C> <S> <C> <C> <C> <C> <C>
$ 100,000 ................. $ 26,250 $ 35,000 $ 43,750 $ 52,500 $ 61,250
200,000 ................. 52,500 70,000 87,500 105,000 122,500
300,000 ................. 78,750 105,000 131,250 157,500 183,750
400,000 ................. 105,000 140,000 175,000 210,000 245,000
500,000 ................. 131,250 175,000 218,750 262,500 306,250
600,000 ................. 157,500 210,000 262,500 315,000 367,500
700,000 ................. 183,750 245,000 306,250 367,500 428,750
800,000 ................. 210,000 280,000 350,000 420,000 490,000
900,000 ................. 236,250 315,000 393,750 472,500 551,250
1,000,000 ................. 262,500 350,000 437,500 525,000 612,500
1,100,000 ................. 288,750 385,000 481,250 577,500 673,750
1,300,000 ................. 341,250 455,000 568,750 682,500 796,250
1,500,000 ................. 393,750 525,000 656,250 787,500 918,750
1,600,000 ................. 420,000 560,000 700,000 840,000 980,000
1,700,000 ................. 446,250 595,000 743,750 892,500 1,041,250
1,800,000 ................. 472,500 630,000 787,500 945,000 1,102,500
1,900,000 ................. 498,750 665,000 831,250 997,500 1,162,750
2,000,000 ................. 525,000 700,000 875,000 1,050,000 1,225,000
2,100,000 ................. 551,250 735,000 918,750 1,102,500 1,286,250
2,200,000 ................. 577,500 770,000 962,500 1,155,000 1,347,500
2,300,000 ................. 603,750 805,000 1,006,250 1,207,500 1,408,750
2,400,000 ................. 630,000 840,000 1,050,000 1,260,000 1,470,000
2,500,000 ................. 656,250 875,000 1,093,750 1,312,500 1,531,250
2,600,000 ................. 682,500 910,000 1,137,500 1,365,000 1,592,500
2,700,000 ................. 708,750 945,000 1,181,250 1,417,500 1,653,750
2,800,000 ................. 735,000 980,000 1,225,000 1,470,000 1,715,000
</TABLE>
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<PAGE> 21
Remuneration covered by the Pension Program includes salary (including
salary contributed to the Capital Accumulation Plan of The Chubb Corporation,
Chubb & Son Inc. and Participating Affiliates), overtime and awards under The
Chubb Corporation Annual Incentive Compensation Plans, the Bellemead Incentive
Plan, the Investment Department Incentive Plan and the Profit Sharing Plan
(1987) in the year paid rather than the year earned and, effective January 1,
1992, includes awards under the Bellemead Profit Sharing Plan.
With respect to the individuals named in the Summary Compensation Table on
page 10, Messrs. Crawford, Degnan, Kelso, O'Hare and O'Reilly have, for the
purposes of the Pension Program, 36 1/2, 6, 1/2, 33 1/2 and 27 years of
credited service, respectively, and their 1997 remuneration for purposes of the
Pension Program was $839,431, $768,610, $187,500, $2,138,268, and $609,824,
respectively. In connection with his retirement, Mr. Crawford received a lump
sum payment of his benefit under the Benefit Equalization Plan.
EXECUTIVE SEVERANCE AGREEMENTS
Pursuant to a recommendation by the Organization & Compensation Committee
and authorization by the Board of Directors, the Corporation has in force
severance agreements with five executive officers of the Corporation. Each
agreement becomes operative only upon a "Change in Control" that occurs when the
officer is in the employ of the Corporation. Under the agreements, a "Change in
Control" occurs if (a) following a tender or exchange offer for voting
securities of the Corporation, a proxy contest for election of the directors, or
a merger or consolidation or sale of all or substantially all of its business or
assets, its directors immediately prior to such event cease to constitute a
majority of the Board of Directors when such event occurs or within one year
thereafter or (b) any person or group acquires 25% or more of the outstanding
voting securities of the Corporation without prior approval by a majority of the
Directors then in office. Such agreements have an initial term of two years and
are automatically extended for successive two year periods unless the
Corporation gives one year's prior notice that it is terminating an agreement at
the end of the then current two year period.
If a change in control occurs and the officer's employment with the
Corporation terminates within two years thereafter (other than by reason of
death, disability, retirement at normal retirement age, discharge for cause, or
voluntary termination by the officer except for Good Reason), the officer
becomes entitled to the severance benefits described below. Termination for
"Good Reason" means termination because of, among other things, the involuntary
assignment of such officer to duties inconsistent with the officer's position
prior to such change in control; reduction of the officer's base salary or
bonus; the Corporation acting with adverse effect upon the officer's benefits
under any benefit plans in which the officer is participating at the time of
such change in control; or a determination made by the officer in good faith
that as a result of such change in control the officer cannot discharge the
officer's duties effectively.
Upon such termination, the officer's severance benefits shall equal a
multiple of 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 of the officer's annual
awards under the Corporation's and Bellemead's incentive compensation plans for
the three years preceding such change in control. The multiple is four in the
case of Mr. O'Hare and two in the case of the other officers. Also, the
Corporation must maintain in force the insurance and disability benefits
available to the officer immediately prior to the change in control, or their
equivalents, for two years after such termination or until the earlier
commencement of new, full-time employment by the officer. The officer is not
required to mitigate the amount of any payments by seeking other employment. The
Corporation must pay all legal fees and expenses incurred by the officer as a
result of such termination, including any incurred in seeking to enforce the
severance agreement.
As of March 9, 1998, payments to the officers with whom the Corporation has
severance agreements would have been as follows: Mr. John J. Degnan, $1,612,667;
Mr. David B. Kelso, $1,505,000; Mr. Donn H. Norton, $1,058,667; Mr. Dean R.
O'Hare, $8,700,000 and Mr. Michael O'Reilly, $1,557,000. The Corporation does
not believe that payment of these amounts would have a material adverse effect
on the financial or
19
<PAGE> 22
operating condition of the Corporation. The Long-Term Stock Incentive Plans
provide for the accelerated payment or vesting of awards granted under such
plans in the event of a Change in Control of the Corporation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Organization & Compensation Committee is composed of Messrs. Small
(Chairman), Hoag, Rudman and Wood and Mrs. Michelson, a Director not standing
for re-election. Robert V. Lindsay, a Director who retired effective December
31, 1997, was a member of the Committee prior to his retirement. No current or
former officers or employees of the Corporation or any of its subsidiaries
serves on the Organization & Compensation Committee. No executive officer of the
Corporation has served on the compensation committee of another corporation
except Mr. O'Hare who serves on the Organization and Compensation Committee of
the Fluor Corporation.
Mr. Lawrence M. Small is President and Chief Operating Officer of Fannie
Mae. The Corporation and its subsidiaries purchase, in the ordinary course of
business, debt securities guaranteed by Fannie Mae.
The Corporation believes that the above transactions were effected on terms
as favorable to the Corporation and its subsidiaries as could have been obtained
from other sources in view of the nature of the services rendered.
TRANSACTIONS WITH DIRECTORS AND THEIR ASSOCIATES
Mr. Percy Chubb, III retired as an officer of the Corporation and from
employment on February 1, 1997. Mr. Chubb continues as a consultant to the
Corporation for which he is paid $100,000 per annum in quarterly installments on
the last day of each calendar quarter.
Mr. Joel J. Cohen is a Managing Director of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), which firm provides securities brokerage
services to the Corporation and its subsidiaries. In addition, certain
subsidiaries of the Corporation participate as limited partners in an investment
partnership of which DLJ Merchant Banking Inc. is the managing general partner.
Mr. Lawrence M. Small is affiliated with an organization that guarantees
debt securities purchased by the Corporation and its subsidiaries during 1997.
See "Compensation Committee Interlocks and Insider Participation."
Sir David G. Scholey, CBE is Senior Advisor, SBC Warburg Dillion Read. A
division of Swiss Bank Corporation, SBC Warburg Dillon Read, an investment
banking firm, through its affiliate companies, during 1997 provided certain
securities transaction services to the Corporation and its subsidiaries.
Ambassador Raymond G. H. Seitz is a Vice Chairman of Lehman Bros.
International (Europe), which firm provides securities transaction services to
the Corporation and its subsidiaries.
The Corporation believes that the above transactions were effected on terms
as favorable to the Corporation and its subsidiaries as could have been obtained
from other sources in view of the nature of the services rendered.
In 1997, various subsidiaries of the Corporation had transactions in the
ordinary course of their business with certain Directors and officers of the
Corporation and their associates in connection with policies of insurance issued
to them by such subsidiaries. All employees of the Corporation and certain of
its subsidiaries are offered the opportunity to obtain property and casualty
personal insurance from various subsidiaries of the Corporation at a price
representing a maximum discount of 10% from the regular price.
TRANSACTIONS WITH CERTAIN SHAREHOLDERS
The Corporation has relationships with insurance companies which are
subsidiaries of Royal & Sun Alliance, an insurance holding company organized
under the laws of England (collectively, the "Sun Group"). As reported, the Sun
Group as of March 9, 1998 was the beneficial owner of approximately 5.4% of the
Corporation's Common Stock, acquired solely for the purpose of investment.
The Corporation's property and casualty insurance subsidiaries reinsured a
portion of their United States insurance business on a quota share basis with
one of the Sun Group companies. Pursuant to the contract
20
<PAGE> 23
which governed this relationship, this Sun Group company paid a profit
commission to the Corporation's property and casualty insurance subsidiaries
determined by the prior year's results of that business. In 1997, the payment
amounted to $4,856,000.
A wholly-owned subsidiary of the Corporation assumed reinsurance on a quota
share basis from members of the Sun Group with respect to certain of the Sun
Group's property and casualty insurance business. Members of the Sun Group
received profit commissions determined by the results of that business. In 1997,
a commission payment of approximately $564,000 was made.
Effective January 1, 1997, the agreements pertaining to the exchange of
reinsurance between the Corporation's property and casualty insurance
subsidiaries and members of the Sun Group were terminated. In 1997, the
Corporation's property and casualty insurance subsidiaries received
approximately $330,000,000 as the net result of the portfolio transfers of
unearned premiums and loss and expense reserves as of January 1, 1997 related to
the termination of the agreements. Due to the lag in the reporting of the
reinsurance assumed from members of the Sun Group, assumed premiums earned from
this business amounted to $94,898,000 in 1997.
Pursuant to an agreement effective January 1, 1992, Chubb & Son Inc.
provides staff for several of the Sun Group companies on a cost reimbursement
basis. The amount of the cost reimbursement for 1997 under this agreement was
approximately $160,000.
In the regular course of their international business, the Corporation's
property and casualty insurance subsidiaries may and do assume and cede
reinsurance to and from members of the Sun Group, as they do with other insurers
on similar terms and conditions.
The Corporation believes that such transactions are all on terms as
favorable to the Corporation as those available from unrelated third parties.
21
<PAGE> 24
APPROVAL OF SELECTION OF
INDEPENDENT AUDITORS
The Board of Directors, acting upon the recommendation of the Audit
Committee, recommends for approval by the Shareholders the selection of Ernst &
Young LLP ("Ernst & Young") as the independent auditors of the Corporation for
the year 1998. Ernst & Young has acted as such auditors for the Corporation for
many years.
In addition to its principal service of auditing the financial statements
of the Corporation and its subsidiaries, Ernst & Young provided certain
non-audit services for the Corporation and its subsidiaries during 1997, and
such services were reviewed by the Audit Committee. In reviewing such services,
the Audit Committee determined that the nature of the services and the estimated
fees to be charged would have no adverse effect on the independence of the
auditors.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting and to have the opportunity to make a statement should they desire to do
so and to be available to respond to appropriate questions.
22
<PAGE> 25
VOTING, SOLICITATION OF PROXIES AND SHAREHOLDER PROPOSALS
The Proxy, if returned properly executed and not subsequently revoked by
written notice delivered to the Secretary of the Corporation, will be voted in
accordance with the choice made by the Shareholder with respect to the proposals
listed thereon. If a choice is not made with respect to such proposals and
authority to vote for Directors is not withheld, the Proxy will be voted in
favor of such proposals and will be voted for the election of Directors as
described under "Election of Directors" above.
Under New Jersey law and the Corporation's By-Laws, each share of Common
Stock outstanding on the record date is entitled to one vote at the Annual
Meeting of Shareholders, and the presence in person or by proxy of the holders
of shares entitled to cast a majority of the votes constitutes a quorum. Votes
are tabulated by the Corporation's transfer agent using the transfer agent's
automated system. Under New Jersey law, Directors are elected by a plurality of
the votes cast at the meeting. Approval of the selection of independent auditors
requires the affirmative vote of a majority of the votes cast by Shareholders
entitled to vote at the Annual Meeting. Proxies submitted with abstentions and
broker non-votes are included in determining whether or not a quorum is present.
Votes withheld for the election of Directors have no impact on the election of
Directors, except that votes withheld may result in another individual receiving
a higher number of votes. Abstentions will not be counted in tabulating the
votes with respect to the approval of selection of independent auditors. Broker
non-votes will not be counted in tabulating the votes with respect to the
proposals presented to Shareholders.
The Board of Directors is aware of no matters other than those specifically
stated in the Notice of Annual Meeting which are to be presented for action at
the meeting. However, should any further matter requiring a vote of the
Shareholders arise, it is the intention of the persons named in the Proxy to
vote the Proxy in accordance with their judgment.
The cost of this solicitation of proxies is being borne by the Corporation.
In addition to the solicitation of proxies by use of the mails, the Corporation
may use the services of one or more Directors, officers or other regular
employees of the Corporation (who will receive no additional compensation for
their services in such solicitation) to solicit proxies personally and by
telephone. Arrangements will be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the shares held of record by such persons and the Corporation will
reimburse them for reasonable expenses actually incurred by them in so doing. In
addition, the Corporation has retained Georgeson & Company Inc., New York, New
York, to aid in the solicitation of proxies by mail, in person and by telephone
for a fee which is estimated not to exceed $12,500 plus out-of-pocket expenses.
Proposals by Shareholders intended to be presented at the 1999 Annual
Meeting must be received by the Corporation no later than November 17, 1998 in
order to be qualified for inclusion in the Corporation's Proxy Statement and
form of proxy for such meeting.
By order of the Board of Directors,
HENRY G. GULICK
Vice President and Secretary
March 17, 1998
23
<PAGE> 26
PROXY
THE CHUBB CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE CORPORATION FOR ANNUAL MEETING APRIL 28, 1998
The undersigned shareholder of THE CHUBB CORPORATION (the "Corporation")
acknowledges receipt of the Notice of the Annual Meeting of Shareholders and
Proxy Statement each dated March 17, 1998 and the undersigned revokes all prior
proxies and appoints DEAN R. O'HARE, HENRY G. GULICK and PHILIP J. SEMPIER, and
each of them, proxies for the undersigned to vote all shares of Common Stock of
the Corporation, which the undersigned would be entitled to vote at the Annual
Meeting of Shareholders to be held at 15 Mountain View Road, Warren, New Jersey
at 11:00 a.m. on April 28, 1998 and any adjournment or postponement thereof, on
all matters coming properly before said meeting.
Election of Directors, Nominees:
John C. Beck, Sheila P. Burke, James I. Cash, Jr., Percy Chubb, III,
Joel J. Cohen, James M. Cornelius, David H. Hoag, Thomas C. MacAvoy,
Dean R. O'Hare, Warren B. Rudman, Sir David G. Scholey, CBE,
Raymond G. H. Seitz, Lawrence M. Small, Richard D. Wood and James M.
Zimmerman.
PLEASE MARK, SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SEE REVERSE SIDE
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
/ X / PLEASE MARK YOUR VOTES AS THIS EXAMPLE 1816
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 and 2.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE CHUBB CORPORATION RECOMMENDS A VOTE FOR:
- --------------------------------------------------------------------------------
1. Election of Directors (see reverse)
FOR WITHHELD
/ / / /
For, except vote withheld from the following nominee(s):
- ----------------------------------------------------------------------------
2. Approval of Ernst & Young LLP as the independent auditors of the
Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
SIGNATURE(S) DATE
------------------------------------------------ --------------
NOTE: Please sign name exactly as printed hereon. Joint owners should each
sign. When signing as attorney, administrator, executor, guardian or
trustee, please give title as such.
