Exit Lines: Dean R. O'Hare recently stepped down as Chubb's chairman, leaving behind a legacy of global expansion and underwriting profits. (Property/Casualty).

Chubb Corp. was more global, more specialized and still focused on making an underwriting profit on Nov. 30, 2002, when Dean R. O'Hare stepped down after 14 years as its chairman and chief executive officer.

Speaking of his legacy with Best's Review a few days earlier, O'Hare stressed the importance of the global expansion to the company's future. India, where Chubb recently launched a joint venture with Indian financial-services company HDFC, and China are the two most important international growth spots for insurers, he said.

"You're not going to make huge amounts of money in either of those places this year or next year, but 10 or 15 years out, if you were there early on, you're going to make a lot of money," he said. "If you want to be a global company and play in a global economy, you can't do it if you ignore what represents 57% of the world's population.

"I view China as a country that will be a major competitor of the United States in 10 to 15 years. They have the resources both financial and human to give us a run for our money," O'Hare said.

That's in sharp contrast to 1978, the first time he set foot in China. "People were in the fields plowing with oxen. The nearest thing they had to a machine was a bicycle with a gas-powered motor on it. There was only one TV and one telephone in a village I visited."

Chubb's revenue from outside the United States amounted to only about 3% of the total in 1988, when O'Hare became chairman. Now it is more than 20% of total revenues and growing.

Dominating Niches

Mergers and acquisitions have recast the property/casualty industry over the past 15 years, a fate O'Hare said Chubb avoided because he pushed hard for the company to steer clear of commodity products and carve out niches, particularly the upscale homeowners market.

"I'm delighted that during my stewardship we retained our independence," he said. "It is important because if you are independent you can create the kind of culture that is best for your organization.

"Chubb has a claims paying reputation that is second to none. We consciously overpay our claims because we want our upscale people to be very comfortable they are going to be treated well. If we were part of some conglomerate I don't think they would let us do that. We are the dominant force in the upscale personal-lines business. The reason for that is our claims philosophy. When people have a claim they feel they are treated more fairly than they have a right to expect."

Corporate Governance

O'Hare's last year at Chubb was fraught with challenges brought on by the terrorist attacks of Sept. 11, 2001, and high-profile corporate bankruptcies that are revamping business practices.

As a byproduct of those bankruptcies, several companies, including Chubb, have decided to account for the fair value of their stock options. "When handing out stock options you are potentially reducing your shareholders' up side because there will be more shares," O'Hare said. "You are cutting into their ownership. That cost is something that should be recognized on the balance sheet. It does represent a corporation giving up something that has value and if it has value, it should have a cost attached to it."

"The Enrons, WorldComs and Tycos of the world and those types of organizations are not typical of American business," he said. "They are the exceptions to the rule. In a lot of respects, a lot that happened was pure and simple fraud. That's unfortunate. But as a result of what happened, the entire business world has been painted with a very unfair brush. That's going to pass, but one of the byproducts of that is that today you really have to have a corporate governance structure that is completely transparent."

It is possible to be transparent and competitive, but the Sarbanes-Oxley law, meant to protect investors, has tended to make corporate management focus inward at the expense of "going Out there and bringing in the business."

O'Hare expects that to have a negative short-term effect on the economy, but he thinks insurers should benefit. "We're going to have corporate governance that is much better and, from an insurance angle, will turn an area that has been a problem like directors and officers into a gold area because people are bending over backward to do the right thing," he said.

Looking Ahead

O'Hare expects Chubb to change under new leadership--possibly offering a broader range of financial services, because successor John Finnegan was chairman and president of General Motors Acceptance Corp., the financial-services arm of the car maker. But, he hopes the commitment to making an underwriting profit remains strong.

"Chubb is one of only a few organizations in the industry that can say since 1882 we have only had 13 or 14 years where we didn't write to an underwriting profit," he said, mentally revisiting some of those fateful years, including 2001 with the World Trade Center losses, the San Francisco earthquake of 1906 and World War II. "During the war years we had a lot of big marine losses because our then-chairman Hendon Chubb said as long as the American flag was flying on a ship we were willing to insure it, and the U-boats got a lot."

After spending the winter in Palm Beach, Fla., O'Hare intends to diversify his activities. He will become the chairman of the New York Hospital for Special Surgery. He intends to remain on the boards of directors of Heinz Corp. and Fluor Corp. and hopes to be selected for two other corporate boards.

A political appointment also might be in his future. "There are people who have talked to me about it," he said. "The right kind of appointed position would interest me. I'm not sure I want to get on the campaign trail, but an appointed position in an administration I admire would be very attractive to me."

Chubb Group of Insurance Cos.

Chubb grew significantly between 1987 and 2001 as it expanded
internationally and fine-tuned its product mix. In 2001, Chubb was the
13th largest property/casualty writer in the United States by net
premiums written.

                              % of Net Premiums
Top Lines 2001                          Written

Other Liability Claims Made                19.8
Homeowners                                 15.4
Commercial Multiperil                      14.5
Other Liability (Occurrence)                8.8
Workers' Comp                               7.2
Inland Marine                               5.8

2001                              ($ Thousands)

Direct Premiums Written              $6,376,437
Total Admitted Assets               $18,218,255

                         % of Net Premiums
Top Lines 1987                     Written

Other Liability                       27.6
Commercial Multiperil                 17.4
Homeowners                            11.6
Fidelity                               7.8
Inland Marine                          7.1
Worker's Camp                          6.4

1987                         ($ Thousands)

Direct Premiums Written         $3,298,193
Total Admitted Assets           $5,792,966

Source: A.M. Best Statement Files 1988; 2002 Best's Statement File on
CD-ROM