Chubb Reports Third Quarter Earnings

Warren, N.J., November 4, 1999 -- The Chubb Corporation [NYSE: CB] announced today lower third quarter earnings as a result of catastrophe losses from Hurricane Floyd and continued weakness in the standard commercial insurance segment.

Operating income in the current quarter was $74.8 million or $0.43 per share compared with $149.8 million or $0.90 pershare in 1998. Net income, which includes realized investment gains, was $77.3 million or $0.44 per share for the quarter compared with $173.4 million or $1.04 per share last year.

Nine month operating income totaled $404.7 million or $2.42 per share compared with $467.0 million or $2.75 per share in 1998. The 1998 results include a $26 million or $0.15 per share restructuring charge taken in the first quarter. Net income for the first nine months of 1999 was $457.5 million or $2.73 per share compared with $549.4 million or $3.24 per share last year.

Chubb's 1999 third quarter results include Executive Risk Inc., which was acquired in July of this year. Third quarter and nine month after-tax results are summarized below:

For the third quarter, net property and casualty premiums written increased 6.8% to $1.5 billion. The combined ratio of 110.4% compares with 101.2% last year. Catastrophe losses were $135.0 million, adding 9.4 percentage points to the combined ratio. In the third quarter of 1998, catastrophe losses were $68.8 million, representing 5.2 percentage points of the combined ratio.

For the first nine months, net premiums written increased 3.9% to $4.3 billion. The combined ratio was 103.4% in 1999 and 99.2% in 1998. Catastrophe losses were $221.9 million, adding 5.3 percentage points to the combined ratio. In the comparable period of 1998, catastrophe losses were $160.8 million or 4.1 percentage points of the combined ratio.

"Catastrophe losses hurt results in both personal and commercial lines," said Dean R. O'Hare, chairman and chief executive officer. "The vast majority of catastrophe losses for the 1999 third quarter are attributable to claims from Hurricane Floyd in New Jersey, New York, Pennsylvania and North Carolina. The large number of claims resulted in part from the broad protections offered by Chubb's commercial and Masterpiece® homeowners' insurance policies."

Standard commercial insurance performed poorly in the third quarter, recording a combined ratio of 130.4%, which included 10.1 percentage points of catastrophe losses. Net written premiums declined 7%, as the company continued to nonrenew accounts where it cannot achieve underwriting profitability. Chubb's pricing initiative continued to progress, as the average price increase on policies renewed in each month of the third quarter exceeded the average price increase of the previous month. Over the past year, average renewal rates on standard commercial policies improved from a rate decline of 5% a year ago to an increase of more than 5% in September.

"Most of the industry has followed our lead in insisting on higher prices rather than pricing for the sake of market-share gains," said Mr. O'Hare. "As a result, the outlook is considerably brighter than it was at the outset of 1999. While there is still some capacity in the market that continues to write business at rates that are certain to result in large losses, the size of that capacity is diminishing as the losses pile up. But it will take time for the benefits of the pricing initiative to reverse the losses from underpriced business written in the extremely competitive market of the past few years."

Commenting further on Chubb's property and casualty results, Mr. O'Hare said, "Personal lines turned in another outstanding quarter, with premium growth of 11.3% and a combined ratio of 86.4% excluding catastrophes." The combined ratio including catastrophes was 103.4%. For the first nine months, personal lines had a combined ratio of 92.5% including catastrophes and 83.5% excluding catastrophes. "An indication of the quality of this book of business is the fact that we were able to absorb significant catastrophe losses and still generate a substantial profit during the first nine months," said Mr. O'Hare. "We provide superior products and services, our agents and brokers know it, and our customers know it and are willing to pay for it."

Specialty commercial lines grew 15.8% in the third quarter, largely reflecting the acquisition of Executive Risk, and had a combined ratio of 98.9%. Excluding catastrophes, the combined ratio was 94.8%. Executive protection, which now represents half of Chubb's specialty commercial business, had a combined ratio of 84.9%.

Property and casualty investment income after taxes increased 12.1% to $179.0 million or $1.02 per share in the third quarter from $159.7 million or $0.96 per share last year. For the nine months, investment income increased 7.7% to $508.4 million or $3.04 per share from $472.1 million or $2.78 per share in 1998.

Chubb repurchased 345,000 shares of its common stock in the open market in the third quarter, bringing total 1999 stock purchases to 1.6 million shares as of the end of September.