Chubb Reports 3rd Quarter Net Income of $259.8 Million or $1.37 per
Share; Premiums Grow 23%, Combined Ratio is 96.6% WARREN, N.J.,
Oct. 27 /PRNewswire-FirstCall/ -- The Chubb Corporation today
reported that net income in the third quarter of 2003 was $259.8
million or $1.37 per share, compared to a net loss of $242.1
million ($1.42 per share) in the third quarter of 2002. Operating
income, which the company defines as net income excluding after-
tax realized investment gains and losses, was $220.5 million or
$1.16 per share in the third quarter of 2003, compared to an
operating loss of $270.7 million or $1.59 per share in the third
quarter of 2002. The third quarter operating loss for 2002 included
a pre-tax charge of $625 million ($2.38 per share after-tax) for
the strengthening of asbestos and environmental (A&E) reserves.
Third quarter operating income for 2003 includes an after-tax loss
of $25.2 million or $0.14 per share from the non-insurance business
of Chubb Financial Solutions (CFS), compared to a loss of $26.3
million or $0.15 per share in the third quarter of 2002. Chubb
adopted the fair value method of accounting for stock-based
employee compensation as of January 1, 2003. The per-share amounts
for the third quarter of 2003 reflect an after-tax charge of $0.05
for the expensing of stock options, compared to no charge in 2002.
Property and casualty net premiums written in the third quarter of
2003 grew 23% to $2.8 billion. Premiums for Chubb Re nearly
tripled, accounting for 8 percentage points of this growth. U.S.
premiums grew 23%. Non-U.S. premiums grew 22%, or 15% in local
currencies. The combined loss and expense ratio for the third
quarter was 96.6% in 2003 and 130.0% in 2002. Excluding the A&E
charge, the combined ratio for the third quarter of 2002 was 99.9%.
Catastrophe losses in the 2003 third quarter were $96.0 million,
accounting for 3.7 percentage points of the combined ratio,
compared to $51.6 million (2.5 points) in the third quarter of
2002. The expense ratio for the third quarter was 30.9% in 2003 and
31.2% in 2002. Nine Month Results For the first nine months of
2003, net income was $736.5 million or $4.13 per share, compared
with $166.3 million or $0.96 per share for the first nine months of
2002. Operating income totaled a record $680.8 million or $3.82 per
share for the first nine months of 2003, compared with $117.2
million or $0.68 per share in the first nine months of 2002, which
reflects the third quarter A&E charge of $625 million ($2.34
per share after-tax). Results for the first nine months of 2003
include an after-tax loss of $19.9 million or $0.11 per share from
CFS, compared with a loss of $36.4 million or $0.21 per share in
the first nine months of 2002. The per-share amounts for the first
nine months of 2003 reflect an after-tax charge of $0.20 for the
expensing of stock options, compared to no charge in 2002. Property
and casualty net premiums written in the first nine months of 2003
increased 23% to $8.1 billion. Chubb Re accounted for 5 percentage
points of this growth. The combined ratio for the first nine months
was 95.8% in 2003 and 108.7% in 2002; excluding the A&E charge,
the combined ratio for the first nine months of 2002 was 98.0%.
Catastrophe losses for the first nine months were $261.5 million
(3.5 percentage points of the combined ratio) in 2003, compared to
$75.2 million (1.3 points) in 2002. Outlook for 2003 "Chubb had an
outstanding third quarter," said John D. Finnegan, President and
Chief Executive Officer, "with substantial premium growth, improved
underwriting profitability and higher investment income. "Based on
results for the first nine months and our expectations for the
fourth quarter," said Mr. Finnegan, "we are sufficiently confident
to modify full-year earnings guidance to a range of $5.10 to $5.30
per share. Consistent with our previous guidance, this estimate
excludes realized investment gains and losses. It also excludes CFS
results and assumes 3 percentage points of catastrophe losses in
the fourth quarter." The company's previous guidance for 2003
earnings per share was a range of $4.90 to $5.30. Operations Review
Chubb Commercial Insurance (CCI) premiums, which accounted for 36%
of Chubb's third-quarter net written premiums, grew 18% to $1.02
billion. The combined ratio improved to 90.6% from 175.6%.
Excluding the A&E charge, the combined ratio for the third
quarter of 2002 was 94.4%. Third quarter catastrophe losses
accounted for 2.9 percentage points of the combined ratio in 2003,
compared to 5.0 points in 2002. Average renewal rates in the U.S.
increased 10% for CCI, which retained 80% of the U.S. accounts that
came up for renewal. CCI wrote $235 million of new business in the
third quarter of 2003, compared to $276 million in the third
quarter of 2002. Premiums from new accounts exceeded nonrenewed
business by a 1.5-to-1 margin. Chubb Specialty Insurance (CSI)
premiums, which accounted for 40% of Chubb's total third quarter
premiums, grew 37% to $1.14 billion. The combined ratio was 100.6%,
compared to 106.1% in the third quarter of 2002. Executive
Protection (EP) net written premiums grew 19%, and the business had
a combined ratio of 104.2%. EP's results continued to be adversely
affected by directors & officers and errors & omissions
insurance experience. Average renewal rates in the U.S. for EP were
up 34%. Premium growth from rate increases was partially offset by
reduced exposures, which reflected the company's implementation of
tighter terms and conditions, including lower limits, higher
deductibles and coinsurance. Financial Institutions (FI) net
premiums grew 9% in the third quarter. Average renewal rates in the
U.S. for FI were up 32%. The combined ratio for FI was 111.4% for
the third quarter, reflecting adverse experience in D&O and
E&O, partially offset by favorable results in fidelity. For the
other specialty lines, premiums were up 97%, primarily driven by
190% growth at Chubb Re. The combined ratio for the other specialty
lines was 87.8%. Chubb Personal Insurance (CPI) premiums, which
accounted for 24% of Chubb's total premiums, grew 11% to $689
million. CPI's combined ratio was 99.9%, compared to 99.0% in the
third quarter of 2002. Catastrophe losses in the third quarter
increased to 10.7 percentage points of the combined ratio in 2003
from 2.2 percentage points in 2002. Excluding catastrophe losses,
CPI's combined ratio improved 7.6 points to 89.2% from 96.8%,
driven by improvement in homeowners insurance. The homeowners line
grew 14% due to rate increases and better insurance to value. The
combined ratio was 108.7%, which included 18.6 percentage points of
catastrophe losses. Excluding catastrophe losses, the combined
ratio was 90.1%. Personal automobile insurance grew 7% and had a
combined ratio of 96.4%, while other personal lines, which include
valuable articles, excess liability and yacht insurance, grew 7%
and had a combined ratio of 78.7%. Property and casualty investment
income after taxes for the third quarter increased 12.5% to $213.9
million from $190.1 million in 2002. For the first nine months of
2003, property and casualty investment income after taxes increased
9.3% to $619.1 million from $566.5 million. All financial results
herein are unaudited. Webcast Conference Call to be Held on October
28 Chubb's senior management will discuss the company's third
quarter performance with investors and analysts tomorrow, October
28, at 9 A.M. Eastern time. The conference call will be webcast
live on the Internet at http://www.chubb.com/ and archived later in
the day for replay. About Chubb Founded in 1882, the Chubb Group of
Insurance Companies provide property and casualty insurance for
personal and commercial customers worldwide through 8,000
independent agents and brokers. Chubb's global network includes
branches and affiliates throughout North America, Europe, Latin
America, Asia and Australia. Definitions of Key Terms Operating
Income Operating income, a non-GAAP financial measure, is net
income excluding after-tax realized investment gains and losses.
Management uses operating income, among other measures, to evaluate
its performance because the realization of investment gains and
losses in any given period is largely discretionary as to timing
and can fluctuate significantly, which could distort the analysis
of trends. Property and Casualty Investment Income After Income Tax
Management uses property and casualty investment income after
income tax, a non-GAAP financial measure, to evaluate its
investment performance because it reflects the impact of any change
in the proportion of the investment portfolio invested in
tax-exempt securities and is therefore more meaningful for analysis
purposes than investment income before income taxes. Book Value per
Common Share with Available-for-Sale Fixed Maturities at Amortized
Cost Book value per share represents the portion of consolidated
shareholders' equity attributable to one share of common stock
outstanding as of the balance sheet date. Consolidated
shareholders' equity includes, as part of accumulated other
comprehensive income, the after-tax appreciation or depreciation on
the Corporation's available-for-sale fixed maturities carried at
market value. The appreciation or depreciation on
available-for-sale fixed maturities is subject to fluctuation due
to changes in interest rates and therefore could distort the
analysis of trends. Management believes that book value per common
share with available-for-sale fixed maturities at amortized cost, a
non-GAAP financial measure, is an important measure of the
underlying equity attributable to one share of common stock.
Combined Ratio or Combined Loss and Expense Ratio The combined loss
and expense ratio, expressed as a percentage, is the key measure of
underwriting profitability. The Corporation evaluates the
performance of its insurance businesses by using the combined loss
and expense ratio calculated in accordance with statutory
accounting principles applicable to property and casualty insurance
companies. It is the sum of the ratio of losses to premiums earned
(loss ratio) plus the ratio of statutory underwriting expenses to
premiums written (expense ratio) after reducing both premium
amounts by dividends to policyholders. Statutory accounting
principles differ in certain respects from generally accepted
accounting principles (GAAP). Under statutory accounting
principles, policy acquisition and other underwriting expenses are
recognized immediately, not at the time premiums are earned. To
convert underwriting expenses to a GAAP basis, policy acquisition
expenses are deferred and recognized over the period in which the
related premiums are earned. FORWARD LOOKING INFORMATION Certain
statements in this document, and certain oral statements made by
management from time to time, are "forward-looking statements" as
that term is defined in the Private Securities Litigation Reform
Act of 1995 (PSLRA). These forward-looking statements are made
pursuant to the safe harbor provisions of the PSLRA and include
estimates and assumptions related to economic, competitive,
regulatory, judicial, legislative and other developments. These
include statements relating to trends in, or representing
management's beliefs about, our future strategies, operations and
financial results, as well as other statements that include words
such as "anticipate," "believe," "estimate," "expect," "intend,"
"may," "plan," "should," "will," or other similar expressions.
Forward-looking statements are made based upon management's current
expectations and beliefs concerning trends and future developments
and their potential effects on us. These statements are not
guarantees of future performance. Actual results may differ
materially from those suggested by forward-looking statements as a
result of risks and uncertainties, which include, among others,
those discussed or identified from time to time in our public
filings with the Securities and Exchange Commission and those
associated with: * the availability of primary and reinsurance
coverage, including the implications relating to terrorism
legislation and regulation; * global political conditions and the
occurrence of terrorist attacks, including any nuclear, biological
or chemical events; * the effects of the outbreak or escalation of
war or hostilities; * premium price increases and profitability or
growth estimates overall or by lines of business or geographic
area, and related expectations with respect to the timing and terms
of any required regulatory approvals; * adverse changes in loss
cost trends; * our ability to retain existing business; * material
differences between actual and expected assessments for guaranty
funds and mandatory pooling arrangements; * our expectations with
respect to cash flow projections and investment income and with
respect to other income; * the adequacy of loss reserves,
including: -- our expectations relating to reinsurance
recoverables; -- the effects of proposed asbestos liability
legislation, including the impact of claims patterns arising from
the possibility of legislation and those that may arise if
legislation is not passed; -- our estimates relating to ultimate
asbestos liabilities and related reinsurance recoverables; -- the
impact from the bankruptcy protection sought by various asbestos
producers and other related businesses; -- the willingness of
parties, including us, to settle disputes; -- developments in
judicial decisions or regulatory or legislative actions relating to
coverage and liability for asbestos, toxic waste and mold claims; *
the impact of the current economic climate on companies on whose
behalf we have issued surety bonds, and in particular, on those
companies that have filed for bankruptcy or otherwise experienced
deterioration in creditworthiness; * the effects of disclosures by,
and investigations of, public companies relating to possible
accounting irregularities, practices in the energy and securities
industries and other corporate governance issues, including: -- the
effects on the energy markets and the companies that participate in
them, and in particular as they may relate to concentrations of
risk in our surety business; -- the effects on the capital markets
and the markets for directors and officers and errors and omissions
insurance; -- claims and litigation arising out of actual or
alleged accounting or other corporate malfeasance by other
companies; -- claims and litigation arising out of investment
banking practices; -- legislative or regulatory proposals or
changes, including the changes in law and regulation implemented
under the Sarbanes-Oxley Act of 2002; * the occurrence of
significant weather-related or other natural or human-made
disasters; * any downgrade in our claims-paying, financial strength
or other credit ratings; * the ability of our subsidiaries to pay
us dividends; * general economic conditions including: -- changes
in interest rates, market credit spreads and the performance of the
financial markets, generally and as they relate to credit risks
assumed by our Chubb Financial Solutions unit in particular; -- the
effects of inflation; -- changes in domestic and foreign laws,
regulations and taxes; -- changes in competition and pricing
environments; -- regional or general changes in asset valuations;
-- the inability to reinsure certain risks economically; -- changes
in the litigation environment; -- general market conditions; and *
our ability to implement management's strategic plans and
initiatives. Our forward-looking statements speak only as of the
date made, and we undertake no obligation to update these
forward-looking statements. THE CHUBB CORPORATION SUPPLEMENTARY
FINANCIAL DATA (Unaudited) Periods Ended September 30 Third Quarter
Nine Months 2003 2002 2003 2002 (in millions) PROPERTY AND CASUALTY
INSURANCE Underwriting Net Premiums Written $2,845.5 $2,315.2
$8,137.5 $6,620.2 Increase in Unearned Premiums (237.3) (229.7)
(670.9) (751.4) Premiums Earned 2,608.2 2,085.5 7,466.6 5,868.8
Claims and Claim Expenses (a) 1,711.3 2,052.0 4,850.0 4,513.0
Operating Costs and Expenses 876.7 719.6 2,490.3 2,075.3 Increase
in Deferred Policy Acquisition Costs (56.4) (48.9) (133.7) (181.3)
Dividends to Policyholders 6.0 9.0 18.0 26.6 Underwriting Income
(Loss) 70.6 (646.2) 242.0 (564.8) Investments Investment Income
Before Expenses 274.1 241.3 794.2 709.1 Investment Expenses 4.5 8.0
17.5 17.8 Investment Income 269.6 233.3 776.7 691.3 Other Charges
(.9) (3.5) (22.6) (16.8) Property and Casualty Income (Loss) 339.3
(416.4) 996.1 109.7 CHUBB FINANCIAL SOLUTIONS NON-INSURANCE
BUSINESS (38.8) (40.4) (30.6) (55.9) CORPORATE AND OTHER (23.3)
(19.7) (102.4) (55.4) CONSOLIDATED OPERATING INCOME (LOSS) BEFORE
INCOME TAX 277.2 (476.5) 863.1 (1.6) Federal and Foreign Income Tax
(Credit) 56.7 (205.8) 182.3 (118.8) CONSOLIDATED OPERATING INCOME
(LOSS) 220.5 (270.7) 680.8 117.2 REALIZED INVESTMENT GAINS AFTER
INCOME TAX 39.3 28.6 55.7 49.1 CONSOLIDATED NET INCOME (LOSS) $
259.8 $ (242.1) $ 736.5 $ 166.3 PROPERTY AND CASUALTY INVESTMENT
INCOME AFTER INCOME TAX $ 213.9 $ 190.1 $ 619.1 $ 566.5 (a) Claims
and claim expenses include asbestos and toxic waste claims of
$625.0 million and $666.1 million in the third quarter and nine
months ended September 30, 2002, respectively. Effective January 1,
2003, the Corporation adopted the fair value method of accounting
for stock-based employee compensation plans using the modified
prospective method of transition. The change in accounting resulted
in a decrease in operating income before income tax of $15.4
million ($10.4 million after-tax) for the third quarter of 2003 and
$51.1 million ($35.7 million after-tax) for the nine months ended
September 30, 2003. Periods Ended September 30 Third Quarter Nine
Months 2003 2002 2003 2002 OUTSTANDING SHARE DATA (in millions)
Average Common and Potentially Dilutive Shares 189.4 170.6 178.4
173.3 Actual Common Shares at End of Period 187.7 171.0 187.7 171.0
DILUTED EARNINGS PER SHARE DATA Operating Income (Loss) $1.16
$(1.59) $3.82 $ .68 Realized Investment Gains .21 .17 .31 .28 Net
Income (Loss) $1.37 $(1.42) $4.13 $ .96 Effect of Catastrophe
Losses $(.33) $ (.20) $(.95) $ (.28) Effect of Asbestos and Toxic
Waste Losses $ - $(2.38) $ - $(2.50) Effect of Chubb Financial
Solution Non-Insurance Business $(.14) $ (.15) $(.11) $ (.21)
Effect of Expensing Stock Options $(.05) $ - $(.20) $ - Sept. 30
Dec. 31 2003 2002 BOOK VALUE PER COMMON SHARE $45.17 $40.06 BOOK
VALUE PER COMMON SHARE, with Available-for-Sale Fixed Maturities at
Amortized Cost 41.82 36.61 PROPERTY AND CASUALTY UNDERWRITING
RATIOS PERIODS ENDED SEPTEMBER 30 Third Quarter Nine Months 2003
2002 2003 2002 Losses to Premiums Earned 65.7% 98.8% 65.1% 77.2%
Expenses to Net Premiums Written 30.9 31.2 30.7 31.5 Combined Loss
and Expense Ratio 96.6% 130.0% 95.8% 108.7% The 2002 underwriting
ratios include the effect of losses of $625.0 million related to
asbestos and toxic waste claims recognized in the third quarter.
Excluding the effect of such losses, the losses to premiums earned
ratio was 68.7% for the third quarter of 2002 and 66.5% for the
nine months ended September 30, 2002 and the combined loss and
expense ratio was 99.9% and 98.0%, respectively. PROPERTY AND
CASUALTY CLAIMS AND CLAIM EXPENSES COMPONENTS PERIODS ENDED
SEPTEMBER 30 Third Quarter Nine Months 2003 2002 2003 2002 (in
millions) Paid Claims and Claim Expenses $1,337.4 $1,019.6 $3,708.9
$3,278.9 Increase in Unpaid Claims and Claim Expenses 373.9 1,032.4
1,141.1 1,234.1 Total Claims and Claim Expenses $1,711.3 $2,052.0
$4,850.0 $4,513.0 The increase in unpaid claims and claim expenses
for the third quarter and the first nine months of 2002 includes
$611.7 million and $617.5 million, respectively, related to
asbestos and toxic waste claims. PROPERTY AND CASUALTY PRODUCT MIX
Net Premiums Combined Loss and Written Expense Ratios 2003 2002
2003 2002 (in millions) NINE MONTHS ENDED SEPTEMBER 30 Personal
Insurance Automobile $ 443.6 $ 402.1 98.9% 98.5% Homeowners 1,114.2
971.1 106.6 105.7 Other 391.4 364.1 77.8 77.5 Total Personal
1,949.2 1,737.3 98.9 98.0 Commercial Insurance Multiple Peril 809.4
687.5 90.3 101.5 Casualty 1,010.0 834.7 88.7 185.8* Workers'
Compensation 475.9 350.3 92.2 92.6 Property and Marine 766.1 652.7
89.3 86.2 Total Commercial 3,061.4 2,525.2 89.6 124.7* Specialty
Insurance Executive Protection 1,526.0 1,214.3 104.0 105.8
Financial Institutions 603.4 508.3 111.5 103.3 Other 997.5 635.1
84.4 88.2 Total Specialty 3,126.9 2,357.7 99.8 100.9 Total $8,137.5
$6,620.2 95.8% 108.7%* QUARTER ENDED SEPTEMBER 30 Personal
Insurance Automobile $ 154.3 $ 144.0 96.4% 94.5% Homeowners 402.9
353.4 108.7 108.8 Other 132.1 123.3 78.7 78.3 Total Personal 689.3
620.7 99.9 99.0 Commercial Insurance Multiple Peril 276.6 235.1
92.7 103.0 Casualty 331.4 275.9 90.8 333.1* Workers' Compensation
158.4 116.4 94.1 91.8 Property and Marine 253.6 238.4 86.4 93.6
Total Commercial 1,020.0 865.8 90.6 175.6* Specialty Insurance
Executive Protection 525.0 442.8 104.2 112.3 Financial Institutions
182.8 168.2 111.4 115.7 Other 428.4 217.7 87.8 84.2 Total Specialty
1,136.2 828.7 100.6 106.1 Total $2,845.5 $2,315.2 96.6% 130.0%* *
The product mix for 2002 includes the effect of losses of $625.0
million related to asbestos and toxic waste claims recognized in
the third quarter. For the nine months ended September 30, 2002,
excluding the effect of such losses, the combined loss and expense
ratio was 96.5% for Casualty, 94.9% for Total Commercial and 98.0%
in total. For the third quarter of 2002, excluding the effect of
such losses, the combined loss and expense ratio was 88.5% for
Casualty, 94.4% for Total Commercial and 99.9% in total.
DATASOURCE: Chubb Corporation CONTACT: Investors - Glenn A.
Montgomery, +1-908-903-2365, or Media - Mark E. Greenberg,
+1-908-903-2682, both of Chubb Corporation Web site:
http://www.chubb.com/
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