The Chubb Corporation

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The Chubb Corporation

15 Mountain View Road
Warren, New Jersey 07061
U.S.A.
(201) 580-2000
Fax: (201) 580-3544

Public Company
Incorporated: 1882 as Chubb & Son
Employees: 9,800
Assets: $11.18 billion
Stock Exchange: New York

The Chubb Corporation operates as a holding company and, through subsidiaries around the world, is engaged in property and casualty insurance. The company’s other business ventures include life and health insurance, real estate development, financing, and education. Chubb is able to offer various types of specialized coverage at higher prices than its competition because of its diverse experience and fine reputation. Chubb has continuously reported profit gains while maintaining very high reserves.

Chubb traces its roots to the partnership of Chubb & Son, a New York underwriter of cargo and ship insurance formed by Thomas Chubb and his son, Percy Chubb, in 1882. Soon after its formation, Chubb & Son was one of the 100 founders of the New York Marine Underwriters (NYMU). Chubb first operated as a representative of NYMU and Sea Insurance Company Limited of England. In 1901 NYMU, Chubb’s principal property and casualty affiliate, was reorganized as Federal Insurance Company.

During its first 40 years of business, Chubb & Son grew quickly, acting as an agent for several insurers. The company established itself as a respected underwriter of insurance for ships and cargo. During the 1920s the company explored new areas. In 1921 Chubb & Son began to represent U.S. Guarantee Company. Through that company, Chubb began to underwrite fidelity, surety, and casualty insurance. In 1923 Chubb opened its first branch, in Chicago. In March 1929 Chubb and another transportation insurance agent, the Marine Office of America, organized Associated Aviation Underwriters, the largest aviation insurance-underwriting group in the United States. Seven companies represented by Chubb and eight insurers represented by the Marine Office joined to form the association. During the Depression Chubb’s growth slowed as the insurance industry suffered. Nevertheless, in April 1930 Chubb & Son bought a 9,000-square-foot plot in Manhattan to house its companies and allow room for expansion. In 1939 Chubb founded Vigilant Insurance Company, a wholly owned fire and marine subsidiary. During World War II the economy recovered and Chubb & Son’s business began to grow more quickly.

In December 1941 Chubb gave employees with more than six months of service their first Christmas bonuses. The workers each received half of their bonus in cash, and half in war bonds. Also in December 1941, Chairman Charles A. Seibert, a 55-year veteran of the company, announced his retirement.

Chubb’s growth continued apace. The company acquired The Colonial Life Insurance Company of America in 1957, and in 1959 Chubb & Son reincorporated under the laws of New York. In 1967 the company’s management formed The Chubb Corporation to act as a holding company. Chubb & Son became a wholly owned subsidiary of The Chubb Corporation, as did Chubb & Son’s subsidiaries. The property and casualty companies within the Chubb group of insurance companies are managed by Chubb & Son, which handles domestic property and casualty insurance companies and U.S. branches of foreign insurers.

The primary property and casualty insurance company managed by Chubb & Son remains Federal Insurance Company. The Chubb Corporation saw many changes in the late 1960s. In July 1967 Chubb acquired Pacific Indemnity Corporation of Los Angeles. In November 1967 Pacific Indemnity president and chief executive officer Carl Fisher was elected senior vice president and director of Chubb.

In January 1969 First National City Corporation—now Citicorp—agreed to acquire The Chubb Corporation. In April 1969, however, the two corporations confirmed that the Department of Justice was examining the antitrust implications of the merger. Later that month, the two companies agreed to postpone the merger until the summer of 1969 in order to allow the Department of Justice to complete its study of the transaction. On June 13, 1969, the Department of Justice announced its intention to bring suit to bar the acquisition. Three hours later First National City Corporation canceled the planned merger.

In September 1969 William M. Rees, then president of The Chubb Corporation, was elected chief executive officer, and became responsible for all operations excluding investment. Investment responsibilities and general corporate policy and development remained with Chairman Percy Chubb II.

In 1970 Chubb acquired Bellemead Development Corporation, a Delaware real estate company with land holdings primarily in New Jersey and Florida. This acquisition was Chubb’s first major move into the real estate field. Chubb confirmed that its real estate consultants placed a value of more than $25 million on Bellemead’s properties, if sold individually on the open market.

In 1971 Chubb acquired United Life & Accident Insurance Company and founded Chubb Custom Market. Chubb Custom Market became involved heavily in the entertainment industry. The subsidiary specializes in insurance for the film industry, and insured E.T., The Extra-Terrestrial; Tootsie; The Verdict; and Missing in 1983. When Dustin Hoffman developed laryngitis and was unable to perform for three days during the filming of Tootsie, Chubb covered the additional expense. In addition to insuring films, Chubb Custom Market provides entertainment coverage for television productions, special entertainment events, and Broadway shows. In 1983 Chubb insured 75% of Broadway productions. Chubb’s coverage was popular because of its comprehensive nature, which included theft, injuries, and equipment failure.

On June 9, 1971, American Financial Corporation, a Cincinnati, Ohio-based financial holding company, sold 875,000 shares of Chubb stock to Salomon Brothers in a transaction valued at more than $54 million. American Financial had begun to acquire the stock in 1969, and had planned to attempt a buyout of Chubb. Salomon Brothers resold the shares, which represent a 14% stake in Chubb, to the public later in the day. In 1973 Chubb, through the international division of Chubb & Son, joined First National City Corporation’s subsidiary, FNC Comercio, in buying a majority interest in Companhia de Seguros Argos Fluminense, a Brazilian multiple-line insurance company.

The Chubb Corportion formed Chubb Life Insurance Company of America in 1978 to serve as an intermediate holding company for life insurance subsidiaries. In 1981 the company began to consolidate the activities of The Colonial Life Insurance Company of America and United Life & Accident Insurance Company at Chubb Life’s headquarters in Concord, New Hampshire. This consolidation was completed in 1984.

In 1983 The Chubb Corporation completed and relocated to a new head office on 185 acres in Warren, New Jersey. In 1984, Chubb focused its efforts on growth in its international division. The company sought to increase international property and casualty insurance business and to expand its worldwide coverage for U.S. multinationals. Chubb—which in 1984 considered itself the country’s fourth-largest insurer of U.S.-based multinationals—did not offer universal contracts or preformulated programs; instead the company created policies tailored to meet the needs of its clients. Chubb hoped to maintain 20% annual growth of its international business. Also in 1984, Chubb acquired Volunteer State Life Insurance Company of Chattanooga, Tennessee, and Chubb discontinued its money-losing medical-malpractice insurance policies.

During the summer of 1987 a nine-person delegation from the People’s Republic of China spent two days at the company’s New Jersey headquarters. The company’s relations with China date back to before World War II, when Chubb owned and operated the Cathay Insurance Company. The delegation, consisting of representatives from the People’s Insurance Company of China and government officials, studied Chubb’s safety and loss control problems. That year, Chubb acquired Sovereign Corporation, a life insurance holding company. Significantly higher catastrophe losses due to the Chicago rainstorms, Edmonton tornados, and a hurricane in Bermuda, lowered profits for 1987.

In May 1988 Chubb, through a New York firm called Good Weather International Incorporated, began advertising rain insurance in ten states. Drought insurance was also offered to midwestern farmers by the Chubb subsidiary, Federal Insurance. Chubb usually approves each policy that its independent agents sell, but in this case Good Weather was given the authority to approve Chubb policies. Because rain insurance is a small part of Chubb’s business—Chubb issued $5 million of coverage to approximately 200 farmers in 1987—the company set a total limit of $30 million of coverage.

Response was moderate until early June, when lack of rain threatened farmers with the most serious drought in over 50 years. On June 14 and June 15, 1988, Good Weather received over 6,600 applications seeking $275 million worth of coverage, and applications kept coming after the deadline. While farmers worried about the drought, Good Weather and Chubb worried about the flood of applications. The figures were not totaled until the end of June; in the confusion, agents had signed up at least $350 million of coverage for nearly 9,000 farmers. The drought continued, and on July 15, Chubb notified 7,616 farmers that they had been denied coverage. In a goodwill effort, Chubb offered to return double the original premiums to farmers who had applied on June 14 or 15. The effort was unsuccessful, and in 1991 there remained many lawsuits. Chubb decided to discontinue drought insurance.

In July 1988, Dean R. O’Hare, chairman and chief executive officer of The Chubb Corporation and Federal Insurance Company since May, was elected chairman and chief executive officer of Chubb & Son. In August 1988 Chubb agreed to let American National General Agencies Incorporated (ANGA) take over its entertainment insurance underwriting responsibilities on the East Coast. Headquartered in Los Angeles as a wholesale entertainment insurance broker, ANGA branched into New York to assume the underwriting function for production risks through Chubb Custom Market.

In 1989 Chubb took great strides in reestablishing goodwill. This time, its efforts were successful, and 1989 was a good year for the company overall. Chubb Life Insurance of America joined The Geese Theatre Company in April 1989 in establishing a theater residency program in Concord, New Hampshire. The Geese Company is a nonprofit touring theater company that works exclusively in prisons. Chubb generated more goodwill later that year when it won the Insurance Marketing Communications Association Special Award from Members. The competition recognizes and awards superior marketing communications work in the property and casualty industry.

In late 1989 Chubb reported increases in net income for the first nine months of 1989 compared to the previous year. The company’s net income for the nine months ending September 30, 1989, was $313.7 million compared to $275.7 million in 1988. Catastrophe losses in the third and fourth quarter, however, counterbalanced these increases in net income. Hurricane Hugo and the California earthquake had a significant impact on Chubb’s 1989 earnings. In 1989 revenues from international operations approached $500 million. Chubb worked to continue increasing its international activities. The company wanted international business to provide 25% of its business by the year 2000.

The drop in the property and casualty industry has affected Chubb less than some of its competitors. The company’s focus on specialty products has helped The Chubb Corporation overcome industry trends. Chubb showed great improvement in life and health insurance during 1989, and anticipated continued earnings increased as group health operating conditions improved. In 1991 modest but steady earnings advances were expected, with emphasis on product development and new-agent recruitment.

Principal Subsidiaries

Chubb & Son Inc.; Bellemead Development Corporation; Chubb Life Insurance Company of New Hampshire; Chubb Insurance Company of Canada; Chubb Insurance Company of Europe, S.A. (Belgium).