Chartwell RE Corporation reports record operating earnings for 1996.

STAMFORD, Conn.--(BUSINESS WIRE)--February 5, 1997--Chartwell Re Corporation ("Chartwell") (NYSE: CWL) reported record after-tax operating income of $6,172,000 for the three months ended December 31, 1996, excluding net realized capital gains on the sale of investments, compared with $727,000 for the same period last year. On a per share basis, after-tax operating income increased 237% to $0.64 per share for the three months ended December 31, 1996 compared to $0.19 per share for the same period in 1995. For the year ended December 31, 1996, after-tax operating income amounted to $22,110,000 compared to $4,160,000 reported for the same period in 1995. On a per share basis, after-tax operating income increased 119% to $2.43 per share from $1.11 per share for the comparable period in 1995. Net income before extraordinary items of $22,863,000 for the year ended December 31, 1996 is more than triple the comparable figure for 1995 and, on a per share basis, increased 52% to $2.52 from $1.66 reported a year ago. Net income for the year ended December 31, 1996 included an extraordinary charge of $1,874,000, or $0.21 per share, attributable to the redemption of 35% of Chartwell Re Holdings Corporation's 10 1/4% Senior Notes which occurred on April 8, 1996. Total revenues for the year increased 83% to a record $264,475,000 from $144,459,000 reported last year. The 1996 results include the effects of the December 1995 merger (the "Merger") with Piedmont Management Company Inc. and the resulting acquisition of its principal operating subsidiary, The Insurance Corporation of New York ("INSCORP") (formerly, The Reinsurance Corporation of New York).

Richard E. Cole, Chairman and Chief Executive Officer of Chartwell, said that "We are gratified to report our fourth consecutive quarter of record operating earnings. We hope to sustain this positive trend through our continued commitment to a disciplined underwriting strategy combined with our ability to identify and complete strategic transactions such as the recently completed acquisition of Archer Group Holdings plc. On a pro forma basis, combining the 1996 premium capacity managed by Archer of over $600 million with the approximately $200 million of premium capacity of New London Capital plc, which is advised by Chartwell Advisers Limited, and Chartwell's own consolidated premiums written of well over $200 million, total annual premiums managed, written or advised by Chartwell now exceeds $1.0 billion.

"In view of the increasing importance of the service operations segment to our overall financial results, we have altered the format of the attached statement of operations to better reflect the dynamics of our business. The Underwriting Operations segment includes the underwriting and investment results of Chartwell Reinsurance Company and The Insurance Corporation of New York. The Service Operations segment includes the results of the Company's various service operations such as Chartwell Advisers Limited, High Ridge Capital LLC, the minority investments in several program administrators that produce and manage business for the Controlled Source Underwriting unit, the minority investments in Lloyd's corporate capital vehicles and, beginning with the first quarter of 1997, the results of Archer Group Holdings plc. Corporate Operations consists primarily of interest expense on debt and interest income on invested cash balances. We believe that this presentation provides readers with a clearer picture of our results."

Underwriting Operations:

Gross premiums written increased 108% to $263,838,000 for the year ended December 31, 1996 from $126,968,000 recorded for the same period in 1995. The composite underwriting result (defined as earned premium less losses and loss adjustment expenses and policy acquisition expenses) improved 52% to $6,852,000 for the year compared to $4,519,000 for the same period in 1995. Catastrophe losses were insignificant in both periods. Net investment income increased 127% to $42,995,000 for the year ended December 31, 1996 compared to $18,917,000 reported a year ago. Net Underwriting income before taxes increased to $35,179,000 for the year compared to $16,851,000 for 1995, an increase of 109%.

The combined ratio, a measure of performance that excludes investment income, increased slightly to 104.0% for the fourth quarter of 1996 from 103.4% reported for last year. For the year ended December 31, 1996, the combined ratio amounted to 104.2%, consistent with 1995. Chartwell's loss ratio for the fourth quarter increased to 71.1% from 70.6% reported for the same period last year. For the full year the loss ratio improved to 71.9% from 72.3% recorded in 1995. The acquisition expense ratio for the three months ended December 31, 1996 increased to 25.8% from 24.9% last year and, for the year ended December 31, 1996, the acquisition expense ratio increased to 24.8% from 23.9% last year due primarily to a larger component of proportional business. The overhead expense ratio for the three and twelve months ended December 31, 1996 improved to 7.1% and 7.5%, respectively, compared to 7.9% and 8.0% for 1995. These improvements reflect the operating efficiencies of the Merger. On a pro forma basis, as if the Merger occurred on January 1, 1995, the total expense ratio (acquisition expense and overhead expense ratios) decreased to 32.3 % for the year ended December 31, 1996 compared to 34.9% for 1995.

Service Operations:

Service and other revenue increased 788% to $9,726,000 for the year ended December 31, 1996 compared to $1,095,000 for the comparable period in 1995, principally attributable to increases in both advisory fees and equity in the earnings of investee companies, and a gain of $2,802,000 on a foreign exchange option entered into to protect the Company from the increasing value of the Pound Sterling during the period commencing from the initiation of the offer for Archer to the closing of the transaction. During that period, the Pound Sterling appreciated by approximately 6% relative to the U.S. Dollar. Exclusive of this gain, service and other revenue increased 532% to $6,924,000 for the year . Service income before taxes amounted to $7,502,000 for the year ended December 31, 1996 compared to $83,000 for the same period in 1995.

Corporate Operations:

Interest and amortization expense increased to $10,135,000 for the year ended December 31, 1996 from $7,820,000 for 1995. The increase was due principally to accrued interest and amortization on the Contingent Interest Notes of $2,226,000 and to interest and amortization related to the Archer Acquisition of $399,000.

Stockholders' equity increased 48% to $225,990,000 at December 31, 1996 from $152,482,000 at December 31, 1995. GAAP book value per share increased to $23.58 at December 31, 1996 from $22.16 at September 30, 1996 and $22.23 at December 31, 1995. Chartwell's ratio of long-term debt to total capitalization amounted to 32.2% at December 31, 1996, an improvement from 38.4 % reported at December 31, 1995 but higher than the 24.5% reported at September 30, 1996 due to the Archer acquisition financing.

The Company's Board of Directors declared a quarterly cash dividend of $0.04 per share, payable on March 5, 1997 to stockholders of record as of February 19, 1997.

Statutory policyholders' surplus of Chartwell Reinsurance Company increased from $188,037,000 at December 31, 1995 to an all-time high of $238,271,000 at December 31, 1996. The principal reasons for the increase were the contribution by Chartwell, in the first quarter of 1996, of $20,000,000 to Chartwell Reinsurance Company's statutory surplus and the strong earnings of Chartwell Reinsurance Company's wholly-owned subsidiary, INSCORP, which increased its statutory surplus by 31% to $98,685,000 at December 31, 1996 from $75,562,000 at December 31, 1995.

For the year ended December 31, 1996, consolidated net investment income increased 121% to $44,089,000 compared to $19,907,000 for the same period last year. After-tax net investment income for the year amounted to $30,051,000 or $3.31 per share, compared to $13,482,000 or $3.59 per share in 1995. The average annual tax equivalent yield on invested assets, before investment expenses, increased to 6.62% for the year compared to 6.60% for 1995. Chartwell realized net capital gains of $1,157,000 for the year compared to gains of $3,199,000 for the same period in 1995. The 1996 gains were realized principally to reposition certain sectors of the investment portfolio and to modify the portfolio to improve credit quality without sacrificing yield. The Company's invested asset base increased 3% to $724,694,000 at December 31, 1996 from $705,448,000 at December 31, 1995, resulting primarily from the net proceeds provided by the public stock offering in the first half of the year, as well as continued positive cash flow from operations of $12,235,000 offset by a decline in the value of marked to market investments of $10,024,000.

Chartwell Re Corporation conducts business principally through its four wholly-owned subsidiaries, Chartwell Reinsurance Company, The Insurance Corporation of New York, Archer Group Holdings plc and Chartwell Advisers Limited. Chartwell Reinsurance Company writes property, casualty, marine and aviation reinsurance for specialty, regional and global ceding companies. INSCORP writes property and casualty insurance for specialty program administrators. Chartwell Reinsurance Company and INSCORP are rated A (Excellent) and A- (Excellent), respectively, by A.M. Best Company and are assigned an A- claims paying ability rating by Standard & Poor's. Archer Group Holdings plc is the parent company of Archer Managing Agents Limited, which is one of the largest at Lloyd's of London managing 10 Lloyd's syndicates with a total underwriting capacity for 1997 of 380 million Pounds Sterling. Chartwell Advisers Limited provides advisory services to New London Capital plc, a publicly traded company which provides capital to select syndicates at Lloyd's of London. -0-

Following is a comparative table for the fourth quarter (dollars in
thousands):

                            Three Month Periods   Twelve Month Periods
                             Ended December 31,     Ended December 31,
                             1996      1995 (1)     1996      1995 (1)
                             ----      -------      ----      -------
Gross premiums written       $67,758   $31,287    $263,838    $126,968
Ceded premiums written        16,467       349      71,587       3,654
                             $51,291   $30,938    $192,251    $123,314
                             =======   =======    ========    ========
Underwriting Operations:

Premiums earned              $56,317   $32,903   $209,503     $120,258
Net losses incurred           40,028    23,237    150,621       86,949
Net acquisition expenses      14,519     8,192     52,030       28,790
 Composite underwriting
 result                        1,770     1,474      6,852        4,519
Overhead expenses              4,015     2,648     15,774        9,694
  Total underwriting result   (2,245)   (1,174)    (8,922)     (5,175)

Net investment income         10,406     4,947     42,995       18,917
Net realized capital gains       156     1,387      1,106        3,109
  Total investment income     10,562     6,334     44,101       22,026
 Underwriting income before
  taxes                        8,317     5,160     35,179       16,851

Service Operations:

Service and other revenue      4,658       299      9,726        1,095
Net investment income              4        29          9           44
Overhead expenses              1,455       266      2,233        1,056

Service income before taxes    3,207        62      7,502           83

Corporate Operations:

Net investment income            310       189      1,085          946
Net realized capital gains                 105         51           90
Overhead expenses                 39     1,201      1,162        1,211
Interest and amortization      2,679     2,071     10,135        7,820

Corporate operations before
  taxes                       (2,408)   (2,978)   (10,161)      (7,995)

Consolidated income before
  taxes and extraordinary
  item                         9,116     2,244     32,520        8,939
Income tax expense             2,840       548      9,657        2,700
Net income before
  extraordinary item           6,276     1,696     22,863        6,239
Extraordinary item, net of tax                     (1,874)

Net income                     $6,276    $1,696    $20,989      $6,239
                               ======    ======    =======      ======
Per Share Data:
Net income before extraordinary
  item                          $0.65     $0.45      $2.52       $1.66
Extraordinary item, net of
  income tax                                         (0.21)

Net income  per common share   $0.65      $0.45      $2.31       $1.66
                              ======     ======      =====      ======
Weighted average shares
  outstanding              9,853,811  3,755,312   9,081,867  3,755,312
                           =========  =========   =========  =========

Cash flow from operations     $4,995     $1,540     $12,235    $22,978
                           =========  =========   =========  =========

GAAP Combined Ratio:
Loss and loss adjustment
  expenses                      71.1%     70.6%       71.9%      72.3%
Policy acquisition costs        25.8%     24.9%       24.8%      23.9%
Other expenses                   7.1%      7.9%        7.5%       8.0%
GAAP Combined Ratio            104.0%    103.4%      104.2%     104.2%
                           ========== =========   =========  =========

(1) Includes the results of Chartwell prior to the merger with
Piedmont Management Company, Inc. because the transaction occurred
in December 1995.
-0-
Balance Sheet information (dollars in thousands, except per share
amounts):

                                             December 31,
                                          1996          1995
                                          ----          ----

Total investments and cash              $724,694      $705,448
Total assets                           1,257,864     1,132,838
Reserves for loss and loss
  adjustment expenses                    747,858       741,467
Long-term debt                           107,297        95,000
Common stockholders' equity              225,990       152,482
Book value per common share                23.58         22.23
Statutory policyholders' surplus:
  Chartwell Reinsurance Company          238,271       188,037
  The Insurance Corporation of New York  $98,685       $75,562

CONTACT: Steven J. Bensinger

President

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or

Charles E. Meyers

Chief Financial Officer

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