Chubb Net Up; CEO O'Hare Retiring

The company said that a committee of the board of directors, composed of outside directors and Mr. O'Hare, will begin searching for a replacement immediately, and that the search would include candidates from within and outside of the company.

Reporting that Chubb's operating earnings grew to $204.3 million, or $1.18 per share, Mr. O'Hare proclaimed: "The hard market has arrived. We helped bring it about."

Overall, Chubb's net written premiums grew 29 percent to $2.2 billion, while the overall combined ratio fell 4 points to 95.9.

"The flight to quality has turned into a stampede," Mr. O'Hare said, highlighting results for Chubb Commercial Insurance, which saw premium growth of 26 percent in the United States and 29 percent abroad.

The flight to quality, he said, resulted in Chubb Commercial selling three times more new business in first-quarter 2002 than in first-quarter 2001.

Referring to Chubb Commercial as the "shining star" of the group, Mr. O'Hare noted that the combined ratio on commercial business improved nearly 11 points to 95.7 and that premiums soared 35 percent. The premium growth, he said, reflected both rate growth and higher inforce policy counts.

Mr. O'Hare had less favorable reports to deliver regarding Chubb Specialty Insurance and Chubb Personal Insurance.

He noted that while net written premiums on specialty businesses?including employment practices liability and directors and officers liability?jumped 36 percent overall, the segment's combined ratio worsened 2.8 points to 94.4.

Mr. O'Hare said that Chubb is attacking issues in employment practices and directors and officers liability, not just with rate increases, but with a significant amount of limits management.

For public directors and officers liability business, he reported that renewal increases reached 59 percent. But "the bad news is that our pricing actuaries tell us we still need additional rate increases in public D&O, EP for large accounts and medical malpractice," he said, without quantifying the amount of additional rate need.

"In Chubb Specialty, it's a game of catch-up with rates. We're not there yet," he said.

Chubb Personal Insurance, with 17 percent premium growth and a combined ratio of 97.4, "showed some improvement," Mr. O'Hare said, with the "problem child of last year," Chubb's homeowners business, coming in with a 12-point improvement.

But Mr. O'Hare attributed much of the improvement to a lack of severe weather in the Northeast, adding that mold infestation and the cost of water damage remediation claims remain a concern for homeowners business. Mr. O'Hare said he is "not ready to declare the homeowners pricing problem solved," and added that with the hurricane season approaching, the combined ratio is not where it needs to be.

Referring to his reputation for being an "incurable optimistic," Mr. O'Hare said that, in spite of the issues he outlined for personal and specialty lines, he did not want to lose his reputation. In addition to stating that results for 2002 would be good?"but only as good as we already said it would be"?he forecast that 2003 would be even better, as the full benefit of rate increases in all three segments impact Chubb's results.

Mr. O'Hare also took the opportunity, as he had on earlier conference calls, to address the need for a federal terrorism backstop.

Noting that the insurance industry absorbed an estimated $30-to-$70 billion in losses related to 9/11, he suggested that if an identical attack occurred today, covered losses would be only $15 billion, because of terrorism capacity that disappeared. Noting the "ripple effect" that the uncovered losses would have on the economy, he said, a backstop is "not a bailout for the insurance industry, but a bailout for the economy."