FOR IMMEDIATE RELEASE
Chubb Reports 11% Increase In Second Quarter Operating Income Per Share
Warren, N.J., July 27, 1999 -- The Chubb Corporation [NYSE:CB] today reported an 11% increase in per share operating income for the second quarter of 1999. For the three months ended June 30, 1999, operating income, which excludes realized investment gains, was $163.5 million or $1.00 per share, compared with $154.4 million or $0.90 per share in the 1998 second quarter.
Net income, which includes realized investment gains, was $193.3 million or $1.18 per share in the second quarter of 1999, compared with $184.2 million or $1.08 per share in 1998.
For the six months ended June 30, 1999, operating income was $329.9 million or $2.02 per share compared with $317.2 million or $1.85 per share in the first six months of 1998. Results for the 1998 period include a first quarter restructuring charge of $26 million or $0.15 per share. Net income for the first half of 1999 was $380.2 million or $2.32 per share compared with 1998 first-half net income of $376.0 million or $2.20 per share.
Chubb's second quarter and six month after-tax results are summarized below:
Second Quarter Six Months
Millions of Dollars 1999 1998 1999 1998
Operating Income Before
Restructuring Charge $163.5 $154.4 $329.9 $343.2
Restructuring Charge - - - (26.0)
Operating Income After
Restructuring Charge 163.5 $154.4 $329.9 $317.2
Realized Investment Gains 29.8 29.8 50.3 58.8
Net Income $193.3 $184.2 $380.2 $376.0
Per Diluted Share
Operating Income Before
Restructuring Charge $1.00 $ .90 $2.02 $2.00
Restructuring Charge - - - (.15)
Operating Income After
Restructuring Charge 1.00 $ .90 $2.02 $1.85
Realized Investment Gains .18 .18 .30 .35
Net Income $1.18 $1.08 $2.32 $2.20
Effect of Catastrophe
Losses $ .19 $ .24 $ .35 $ .35
Net property and casualty premiums written in the second quarter of 1999 were flat at $1.4 billion. U.S. premiums declined 3.3%. Premiums written outside the U.S. grew 12.4%. In Europe, Chubb's largest non-U.S. market, premiums grew 18.9%. Net property and casualty premiums written in the first six months of 1999 increased 2.5% to $2.8 billion.
"Our globalization strategy is working beautifully," said Dean R. O'Hare, Chairman and Chief Executive Officer, "as we succeed in balancing the sluggish U.S. market with outstanding, profitable growth outside the U.S. Fully 20% of our premium is now generated outside the U.S., and in the second quarter of 1999 this business produced a combined ratio of 87.5%."
Chubb's worldwide combined loss and expense ratio for the second quarter was 100.3% in both 1999 and 1998. For the first half, the combined ratio was 99.7% in 1999 and 98.2% in 1998. Catastrophe losses for the 1999 second quarter and six months were $46.8 million and $86.9 million, respectively, adding 3.4 and 3.2 percentage points to the respective combined ratios for these periods. In the second quarter and first half of 1998, catastrophe losses were $62.3 million and $92.0 million, respectively, adding 4.7 and 3.5 percentage points to the respective combined ratios for these periods.
Chubb reported an underwriting loss after taxes of $6.3 million for the second quarter of 1999, compared with a loss of $10.8 million in the year-earlier quarter. Underwriting produced an after-tax loss of $2.5 million in the first half of 1999, compared with income of $18.0 million in the comparable 1998 period.
Property and casualty investment income after taxes for the second quarter increased 5.4% to $166.4 million or $1.01 per share from $157.9 million or $0.92 per share in 1998. For the first half of 1999, property and casualty investment income after taxes increased 5.4% to $329.4 million or $2.01 per share from $312.4 million or $1.82 per share in 1998.
Mr. O'Hare said that Chubb's cost reduction program continues to yield the expected benefits. The expense ratio for the second quarter was 32.7%, compared with 33.3% in the corresponding period of 1998. "We continue to identify new ways to eliminate expenses that no longer add value for customers or shareholders," said Mr. O'Hare. "At the same time, we have been able to avoid mindless, massive headcount reductions which would damage our unique service culture and the work/life balance of our remaining employees."
Personal lines premiums in the second quarter increased 11% to $405.7 million and produced a combined ratio of 84.7%. Mr. O'Hare said that Chubb's personal insurance lines are "motoring on all cylinders, as our superior coverages, limits, claim service and new products are succeeding in differentiating Chubb in a marketplace that for the most part treats these products as commodities. Chubb's record of integrity and service enables us to earn high returns for premier products. Adequate pricing and superior underwriting have enabled us to achieve outstanding profitability on these lines."
Specialty commercial lines premiums in the second quarter were flat at $572.7 million and produced a combined ratio of 92.4%. Modest growth in executive protection and financial institutions was offset by a decline in property and marine premiums, where significant amounts of business were not renewed because of adverse loss experience.
Standard commercial lines premiums in the second quarter declined 9% to $455.4 million and had a combined ratio of 120.8%. "We made continued progress in improving pricing in our standard commercial lines during the quarter," said Mr. O'Hare. "Our pricing initiative is building momentum, with rates on renewal business continuing to accelerate. We have retained business we want to keep at more attractive rates, while walking away from unprofitable or under-priced renewals. While some competitors continue to under-price business in order to capture market share with no regard to profitability, many of our largest competitors are also jettisoning inadequately priced business. This bodes well for the profitability of the responsible companies in the industry and ominously for the viability of those that are trying to postpone their day of reckoning.
"Given the moderate magnitude of rate increases in the early stages of the repricing program," said Mr. O'Hare, "it will take at least two renewal cycles to adequately reprice the entire standard commercial book, and during that time we will continue to have losses from non-renewed policies. Thus, while we have solid evidence that we have begun reversing the effects of the 12-year price war, it will be mid-2000 before the benefits of these actions significantly flow to the bottom line. Once the book is adequately repriced and pruned, we will benefit from a significant improvement in profitability from two sources: the full effect of earning higher rates on desirable business and the elimination of losses from unprofitable business which we will have not renewed."
Chubb's second quarter results do not include Executive Risk Inc., which Chubb acquired following the close of the quarter.
For more information contact: Gail E. Devlin
(908) 903-3245
Glenn A. Montgomery
(908) 903-2365
FORWARD LOOKING INFORMATION
Certain statements in this communication 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 words or phrases "will result", "is expected to", "will continue", "is anticipated", "estimate", or similar expressions. Such statements are subject to certain risks and uncertainties. The factors which could cause actual results to differ materially from those suggested by any such statements include but are not limited to those discussed or identified from time to time in the Corporation's public filings with the Securities & Exchange Commission and specifically to: risks or uncertainties associated with the Corporation's expectations with respect to profitability or business retention estimates overall and by region or by line of business, as well as its expectations with respect to its cost reduction and activity value analysis program, or 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 valuations, the occurrence of significant natural disasters, the development of major Year 2000 liabilities, the inability to reinsure certain risks economically, the adequacy of loss reserves, as well as general market conditions, competition, pricing and restructurings.
THE CHUBB CORPORATION PERIODS ENDED JUNE 30
Second Quarter Six Months 1999 1998 1999 1998 (in millions) Property and Casualty Underwriting Income (Loss) After Taxes $ (6.3) $(10.8) $ (2.5) $ 18.0 Investment Income After Taxes 166.4 157.9 329.4 312.4 Restructuring Charge After Taxes - - - (26.0) Property and Casualty Income 160.1 147.1 326.9 304.4 Corporate and Other Income After Taxes 3.4 7.3 3.0 12.8 Operating Income 163.5 154.4 329.9 317.2 Realized Investment Gains After Taxes 29.8 29.8 50.3 58.8 Net Income $193.3 $184.2 $380.2 $376.0PROPERTY AND CASUALTY PRODUCT MIX SIX MONTHS ENDED JUNE 30
Net Premiums Combined Loss and Written Expense Ratios 1999 1998 1999 1998 (in millions) Personal Insurance Automobile $ 166.5 $ 152.2 85.9% 87.5% Homeowners 396.7 351.9 94.6 94.0 Other 177.2 160.2 69.2 64.1 Total Personal 740.4 664.3 86.7 85.4 Commercial Insurance Multiple Peril 366.0 389.8 126.7 120.0 Casualty 431.7 460.7 114.9 117.5 Workers' Compensation 156.8 169.5 113.4 110.1 Total Standard Commercial 954.5 1,020.0 119.3 117.2 Property and Marine 261.5 285.3 102.6 109.6 Executive Protection 490.8 467.7 83.9 74.6 Financial Institutions 212.8 199.8 89.2 81.8 Other 179.7 132.7 91.8 95.2 Total Specialty Commercial 1,144.8 1,085.5 90.5 87.8 Total Commercial 2,099.3 2,105.5 104.2 102.3 Total $2,839.7 $2,769.8 99.7% 98.2%
QUARTER ENDED JUNE 30
Net Premiums Combined Loss and Written Expense Ratios 1999 1998 1999 1998 (in millions) Personal Insurance Automobile $ 89.3 $ 81.6 88.6% 86.0% Homeowners 218.8 197.1 88.4 102.1 Other 97.6 86.3 72.1 64.8 Total Personal 405.7 365.0 84.7 89.7 Commercial Insurance Multiple Peril 176.9 200.2 133.2 121.7 Casualty 217.7 228.9 113.0 120.8 Workers' Compensation 60.8 71.7 111.7 119.8 Total Standard Commercial 455.4 500.8 120.8 121.1 Property and Marine 133.8 157.3 106.9 103.2 Executive Protection 247.4 244.3 85.9 77.4 Financial Institutions 103.5 101.8 95.1 80.6 Other 88.0 69.1 85.4 94.5 Total Specialty Commercial 572.7 572.5 92.4 87.1 Total Commercial 1,028.1 1,073.3 105.9 103.7 Total $1,433.8 $1,438.3 100.3% 100.3%