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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

[x]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                  For the Fiscal Year Ended December 31, 1993

                                       OR

[ ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From  ____________  to _____________

Commission File Number 1-6541


                               LOEWS CORPORATION
             (Exact name of registrant as specified in its charter)

         Delaware                                                13-2646102
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

                 667 Madison Avenue, New York, N.Y. 10021-8087
              (Address of principal executive offices) (Zip Code)

                                 (212) 545-2000
              (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:

                                                        Name of each exchange on
 Title of each class                                        which registered
 -------------------                                    ------------------------

Common Stock, par value $1.00 per share                  New York Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x].
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                Yes    X                         No
                    --------                        --------

  As at February 25, 1994, 61,519,700 shares of Common Stock of the Registrant
were outstanding and the aggregate market value of voting stock held by non-
affiliates was approximately $4,080,845,000.

                      Documents Incorporated by Reference:

  Portions of the Loews Corporation Notice of Annual Meeting of Stockholders and
Proxy Statement dated March 24, 1994 are incorporated by reference into Part
III. (Registrant intends to file a definitive proxy statement with the
Commission prior to April 30, 1994.)

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                               LOEWS CORPORATION

                           INDEX TO ANNUAL REPORT ON
                            FORM 10-K FILED WITH THE
                       SECURITIES AND EXCHANGE COMMISSION

                      For the Year Ended December 31, 1993


Item                                                                        Page
 No.                                PART I                                   No.
- ----                                                                        ----

  1   BUSINESS ............................................................   2
          CNA Financial Corporation .......................................   2
          Lorillard, Inc. .................................................  17
          Loews Hotels Holding Corporation ................................  21
          Bulova Corporation ..............................................  22
          Diamond Offshore Drilling, Inc. .................................  23
          Other Interests .................................................  25
  2   PROPERTIES ..........................................................  26
  3   LEGAL PROCEEDINGS ...................................................  26
  4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .................  29
      EXECUTIVE OFFICERS OF THE REGISTRANT ................................  29

                                    PART II

  5   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
       MATTERS ............................................................  30
  6   SELECTED FINANCIAL DATA .............................................  30
  7   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
       RESULTS OF OPERATIONS ..............................................  31
  8   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .........................  40
  9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE ...............................................  41

                                    PART III

        Information called for by Part III has been omitted as Registrant
      intends to file with the Securities and Exchange Commission not later
      than 120 days after the close of its fiscal year a definitive Proxy
      Statement pursuant to Regulation 14A.

                                    PART IV

 14   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
       ON FORM 8-K ........................................................  41

                                       1

                                     PART I

Item 1. Business.

  Loews Corporation is a holding company. Its subsidiaries are engaged in the
following lines of business: property, casualty and life insurance (CNA
Financial Corporation, an 83% owned subsidiary); the production and sale of
cigarettes (Lorillard, Inc., a wholly owned subsidiary); the operation of hotels
(Loews Hotels Holding Corporation, a wholly owned subsidiary); the distribution
and sale of watches and the production and sale of other timing devices (Bulova
Corporation, a 97% owned subsidiary); and the operation of oil and gas drilling
rigs (Diamond Offshore Drilling, Inc., a wholly owned subsidiary). In addition,
a wholly owned subsidiary owns approximately 20% of the outstanding common stock
of CBS Inc.

  Unless the context otherwise requires, the terms "Company" and "Registrant" as
used herein mean Loews Corporation and its subsidiaries, on a consolidated
basis.

  Information relating to the major business segments from which the Company's
consolidated revenues and income are derived is contained in Note 17 of the
Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K.

                           CNA FINANCIAL CORPORATION

  CNA Financial Corporation ("CNA") and its consolidated subsidiaries constitute
the ninth largest insurance company in the United States as measured by 1992
statutory premium volume. CNA was incorporated in 1967 as the parent company of
Continental Casualty Company ("CCC"), incorporated in 1897, and Continental
Assurance Company ("CAC") incorporated in 1911. In 1975, CAC became a wholly
owned subsidiary of CCC. CNA's property and casualty insurance operations are
conducted by CCC and its property and casualty insurance affiliates, and its
life insurance operations are conducted by CAC and its life insurance
affiliates. CNA's principal business conducted through its insurance
subsidiaries is insurance. As multiple-line insurers, the insurance companies
underwrite property, casualty, life, and accident and health coverages. Their
principal market for insurance is the United States. Foreign operations are not
significant.

  The following provides information regarding CNA's property and casualty
insurance and life insurance operations.

                        PROPERTY AND CASUALTY INSURANCE

  CNA's property and casualty operations market commercial and personal lines of
property and casualty insurance through independent agents and brokers.

  CCC and its property and casualty insurance subsidiaries write primarily
commercial lines coverages. Customers include large national corporations, small
and medium-sized businesses, groups and associations, and professionals.
Coverages are written primarily through traditional insurance contracts, under
which risk is transferred to the insurer. Many commercial account policies are
written under retrospectively-rated contracts, which are experience-rated.
Premiums for such contracts may be adjusted, subject to limitations set by
contract, based on loss experience of the insureds. Other experience-rated
policies include provisions for adjustments to dividends based on loss
experience. Experience-rated contracts reduce risk to the insurer. Approximately
40% of CNA's property and casualty insurance is written on an experience-rated
basis.

  CNA also provides loss control, policy administration and claim administration
services under service contracts for fees. Such services are provided primarily
in the workers' compensation market, where retention of risk through self
insurance or high deductible programs has become increasingly prevalent.

                                       2

  Commercial business includes such lines as workers' compensation, general
liability, professional and specialty, multiple peril, and accident and health
coverages. Professional and specialty coverages include liability coverage for
architects and engineers, lawyers, accountants, medical and dental
professionals; directors and officers liability; and other specialized
coverages. CNA also assumes commercial risks from other insurers. CNA's primary
lines are workers' compensation, general liability and professional and
specialty coverages, which accounted for 29%, 18% and 13%, respectively, of 1993
premiums earned, including premiums for involuntary risks. Premiums for
involuntary risks result from mandatory participation in residual markets. CNA
is required by the various states in which it does business to provide coverage
for risks that would not otherwise be considered under CNA's underwriting
standards. CNA's share of involuntary risks is generally a function of its share
of the voluntary market by line of insurance in each state.

  CNA also markets personal lines of insurance, primarily automobile and
homeowners coverages sold to individuals under monoline and package policies.

  The following table sets forth supplemental data for the property and casualty
business:

Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- (In millions of dollars) Commercial Premiums Earned: Workers' compensation .............. $ 1,501.5 $ 1,669.2 $ 1,920.4 General liability .................. 1,154.5 1,176.0 1,292.6 Professional and specialty ......... 798.9 741.5 763.9 Reinsurance and other .............. 712.2 556.0 482.0 Accident and health ................ 428.3 352.6 294.2 Multiple peril ..................... 368.5 374.9 397.2 -------------------------------------- $ 4,963.9 $ 4,870.2 $ 5,150.3 ====================================== Personal Premiums Earned: Personal lines packages ............ $ 510.7 $ 447.3 $ 335.6 Monoline automobile and property coverages ......................... 343.5 395.0 470.7 Accident and health ................ 85.6 88.6 88.8 ------------------------------------- $ 939.8 $ 930.9 $ 895.1 ===================================== Involuntary Risks Premiums Earned (a): Workers' compensation .............. $ 292.3 $ 451.4 $ 499.5 Commercial passenger ............... 50.3 44.9 66.6 Private passenger .................. 23.2 52.5 39.2 Property and multiple peril ........ 5.5 3.7 4.6 ------------------------------------- $ 371.3 $ 552.5 $ 609.9 ===================================== Net Investment Income and Other Income: Commercial ......................... $ 979.8 $ 1,087.3 $ 1,131.3 Personal ........................... 156.1 165.3 160.1 Involuntary risks .................. 75.7 83.6 78.5 ------------------------------------- $ 1,211.6 $ 1,336.2 $ 1,369.9 ===================================== Underwriting Income (Loss): Commercial ......................... $(1,535.6) $(2,505.9) $ (707.1) Personal ........................... (99.7) (152.8) (172.1) Involuntary risks .................. (156.5) (340.9) (345.5) ------------------------------------- $(1,791.8) $(2,999.6) $(1,224.7) ===================================== 3 Years Ended December 31, -------------------------------------- 1993 1992 1991 -------------------------------------- (In millions of dollars) Trade Ratios (b): Loss ratio ........................ 96.8% 116.7% 88.1% Expense ratio ...................... 27.3% 26.2% 25.8% Combined ratio (before policyholder dividends) ........................ 124.1% 142.9% 113.9% Policyholder dividend ratio ........ 2.3% 1.9% 2.4% Trade Ratios-Statutory Basis (b): Loss ratio ......................... 96.4% 116.3% 88.2% Expense ratio ...................... 27.1% 25.6% 25.6%* Combined ratio (before policyholder dividends) ........................ 123.5% 141.9% 113.8%* Policyholder dividend ratio ........ 3.1% 2.4% 2.7% Other Data-Statutory Basis (c): Statutory capital and surplus ...... $3,598.4 $3,135.8 $3,927.5 Written to surplus ratio ........... 1.7 2.0 1.7* - ---------------- * In 1991, CNA changed its statutory method of accounting for property and casualty written premium on indeterminate premium products (policies subject to exposure audits). This new method defers the recognition of written premium and acquisition expenses generally until billed. The effect of this change in 1991 was a one-time reduction in written premium and related acquisition expenses of $864 and $78 million, respectively. In order to provide comparability, the Other Data and Trade Ratios for 1991 shown above do not reflect the one-time impact of this statutory accounting change. (a) Property and casualty involuntary risks include mandatory participation in residual markets, statutory assessments for insolvencies of other insurers and other involuntary charges. (b) Trade ratios reflect the results of CCC and its property and casualty insurance subsidiaries. Trade ratios are industry measures of property and casualty underwriting results. The loss ratio is the percentage of incurred claims and claims adjustment expenses to premiums earned. Under generally accepted accounting principles, the expense ratio is the percentage of underwriting expenses, including the change in deferred acquisition costs, to premiums earned. Under statutory accounting principles, the expense ratio is the percentage of underwriting expenses (with no deferral of acquisition costs) to premiums written. The combined ratio is the sum of the loss ratio and the expense ratio. The policyholder dividend ratio is the ratio of dividends incurred to premiums earned. (c) Other data is determined on the basis of statutory accounting principles and reflects capital contributions from CNA of $475 million in 1993. In addition, dividends of $150, $100 and $130 million were paid to CNA by CCC in 1993, 1992 and 1991, respectively. Property and casualty insurance subsidiaries have received, or will receive, reimbursement from CNA for general management and administrative expenses, unallocated loss adjustment expenses and investment expenses in the amounts of $167.5, $141.1 and $133.8 million in 1993, 1992, and 1991, respectively.
4 The following table displays the distribution of domestic written premium by state:
State Years Ended December 31, ----- ------------------------- 1993 1992 ------------------------- California ......................................... 12.1% 11.8% New York ........................................... 8.4 8.0 Pennsylvania ....................................... 5.9 6.1 Texas .............................................. 6.2 5.7 Illinois ........................................... 5.1 5.1 Florida ............................................ 4.1 3.3 New Jersey ......................................... 3.3 3.1 All other states (a) ............................... 43.1 41.5 Reinsurance assumed: Voluntary ........................................ 6.9 7.9 Involuntary ...................................... 4.9 7.5 ----- ----- 100.0% 100.0% ===== ===== (a) No other state accounts for more than 3.0% of direct written premium.
The growth and profitability of CNA's property and casualty insurance business is dependent on many factors, including competitive and regulatory influences, the efficiency and costs of operations, underwriting quality, the level of natural disasters, and investment results. In recent years, CNA's growth and earnings have been impacted by a prolonged cycle of inadequate commercial lines pricing, particularly in the workers' compensation market. CNA has intensified efforts in the political sphere on behalf of a more predictable and equitable insurance marketing climate. CNA has taken a leadership role in seeking workers' compensation reform in several states. Among CNA's marketing strategies during this difficult time are to emphasize responsible pricing over premium growth and to aggressively adapt to changes in certain markets such as those in which self insurance has become important. CNA has also initiated wide-scale cost management measures. CNA has continued actions to reduce or stabilize the costs of doing business, including costs of health care, fraud and tort liability. Programs include managed health care programs and formation of a department devoted exclusively to fighting fraud. Workers' compensation has been a difficult line of business during the past several years. Despite rapidly escalating loss costs, state regulators have been unwilling to allow premium rate increases sufficient for insurers to earn a profit. Unlike other insurance carriers, CNA has remained in this market in most states. It continues to believe that workers' compensation is a critical product to its customers, and with its proven expertise in this line, that there is a profit potential over the long term. During this current industry downcycle, CNA has restricted its exposure to workers' compensation and has taken other steps to mitigate the underwriting losses in workers' compensation. These steps include increasing conservatism of underwriting standards, continuing migration of guaranteed cost policies to experience-rated contracts, and as mentioned previously, aggressive cost containment programs geared to reduce frequency and severity of claims. During 1993, 65% of workers' compensation insurance was written on an experience-rated basis. As a result of these steps, the past year's experience has been encouraging as accident year loss ratios have improved slightly. After factoring in the investment income related to projected cash flows, this line of business produced a positive economic return in the 1992 and 1993 accident years. CNA believes that further improvement in workers' compensation results will occur as its many efforts toward this objective continue. The state of California is CNA's largest market, accounting for 12% of its premium volume in 1993. Workers' compensation is the largest line of business in California accounting for approximately 40% of premiums written in 1993. As noted in the discussion of countrywide strategies for workers' compensation, approximately 87% of California's workers' compensation business was written via loss sensitive contracts. 5 Profitability trends are slightly more favorable in this state than countrywide primarily as a result of recently enacted major workers' compensation reform legislation which included improved benefit provisions and open premium rating. As a result, favorable profitability trends in workers' compensation are expected to continue. Other major lines of business in California, including commercial multiple peril, commercial automobile and general liability, are producing less favorable results than countrywide. CNA is aggressively seeking adequate premium rates for these lines within the confines of the current regulatory constraints. Property/Casualty Claims and Claims Expense: Property/casualty claims and claims expense reserves, except reserves for structured settlements, workers' compensation lifetime claims and accident and health disability claims are based on (a) case basis estimates for losses reported on direct business, adjusted in the aggregate for ultimate loss expectations, (b) estimates of unreported losses based upon past experience, (c) estimates of assumed insurance, (d) estimates of future expenses to be incurred in settlement of claims and (e) estimates of claim recoveries. Loss reserve calculations are based on quantitative techniques which utilize historical trends to project future payments. Other factors, including mix of business, the anticipated effects of inflation, and other current conditions and trends, are implicit in the estimation process. The schedule on page 3 provides information on mix of business. Structured settlements have been negotiated for certain liability claims under commercial automobile, personal automobile, workers' compensation, professional liability and other liability coverages. Structured settlements are agreements to provide periodic payments to claimants, which are fixed and determinable as to the amount and time of payment. Certain structured settlements are funded by annuities purchased from CAC. Related annuity obligations are carried in future policy benefits reserves. Obligations for structured settlements not funded by annuities are carried at discounted values which approximate the alternative cost of annuity purchases. Such reserves, discounted at interest rates ranging from 6.3% to 7.5%, totaled $749, $663 and $555 million at December 31, 1993, 1992 and 1991, respectively. Ultimate payouts under all existing contracts at December 31, 1993 will approximate $2.2 billion. In 1992 CNA changed its accounting for claim reserves related to workers' compensation lifetime claims and accident and health disability claims. Reserving practices under both statutory and generally accepted accounting principles allow discounting of reserves for fixed and determinable claim obligations. Reserve discounting for these types of claims is common industry practice. These claim reserves are discounted at interest rates ranging from 3.5% to 5.5% with mortality and morbidity assumptions reflecting current industry experience. At December 31, 1993, such discounted reserves totaled $970 million; ultimate payouts for these claims are estimated to be $1.4 billion. Claims and claims expense reserves are based on estimates and the ultimate liability may vary significantly from such estimates. Any adjustments that are made to the reserves are reflected in operating income in the year such adjustments are made. In 1993, CNA adopted Statement of Financial Accounting Standards ("SFAS") No. 113 which requires that balances pertaining to reinsurance transactions be reported "gross" on the balance sheet rather than as reductions of reserves for claims and claims expenses. As a result of this change in reporting, the reserve balances reported in the financial statements prepared in accordance with generally accepted accounting principles and those prepared under statutory accounting practices differ by the amount of ceded reserves of $2.9 and $2.5 billion at December 31, 1993 and 1992, respectively. The retention limits of CNA's property/casualty business vary by type of coverage and are based on individual risks underwritten. In general, retention limits have been increased with the growth in underwriting capacity. There have been no reinsurance transactions, such as portfolio reserve transfers or swaps of reserves, that have had a material impact on net income. 6 Asbestos-related and environmental pollution claims Reserves include estimated amounts for exposures to asbestos-related and environmental pollution claims. Reserving for such claims involves significant uncertainties for both CNA and the industry, characterized by complex and costly litigation and further compounded by the tendency of the courts to broadly reinterpret contracts beyond their original intent. A summary of asbestos-related and environmental pollution claims and claims expense activity follows:
Claims and Claims Expense -------------------------------------------------- Reserves, Net of Reinsurance Payments December 31, Years Ended -------------------- --------------------------- 1993 1992 1993 1992 1991 -------------------- --------------------------- (In millions) Asbestos-related............ $2,080 $1,683 $204 $112 $39 Environmental pollution..... 433 59 72 38 49 ----------------------------------------------- Total .................... $2,513 $1,742 $276 $150 $88 ===============================================
A major portion of CNA's asbestos-related claim exposure involves litigation with Fibreboard Corporation, as discussed in Note 16 of Notes to Consolidated Financial Statements. Adverse reserve developments for asbestos-related claims totaled $601, $1,689 and $48 million in 1993, 1992 and 1991, respectively. Potential exposures also exist for claims involving environmental pollution, including toxic waste clean-up. Environmental pollution clean-up is the subject of both federal and state regulation. By some estimates there are thousands of potential waste sites subject to clean-up. The insurance industry is involved in extensive litigation regarding coverage issues. Judicial interpretations in many cases have expanded the scope of coverage and liability beyond the original intent of the policies. Reserve development for environmental pollution claims totaled $446, $48 and $47 million in 1993, 1992 and 1991, respectively, including litigation costs of $28, $25 and $21 million. Adverse development for 1993 primarily resulted from the allocation of approximately $340 million of reserves for unreported claims. The results of operations in future years may continue to be adversely affected by environmental pollution claims and claims expenses. Management will continue to monitor potential liabilities and make further adjustments as warranted. See Note 16 of Notes to Consolidated Financial Statements. Reserves for property/casualty claims and claims expense The following table provides a reconciliation between beginning and ending claims and claims expense reserve balances for 1993, 1992 and 1991. In 1992, beginning and ending reserve balances were restated to retroactively reflect the accounting change for discounting discussed previously. Not included in the following table is premium development related to certain insurance policies subject to retroactive premium adjustments, based on various factors including loss experience. As a result, CNA also recorded premium and dividend related development to prior years of $(127), $50 and $(43) million in 1993, 1992 and 1991, respectively. 7
Changes in Reserves for Property/Casualty Claims and Claims Expense Years Ended December 31, ------------------------------------- 1993 1992 1991 ------------------------------------- (In millions) Reserves at beginning of year: Gross .............................. $20,034 $17,712 $16,530 Ceded reinsurance .................. 2,867 3,297 3,440 ----------------------------------- Net .............................. 17,167 14,415 13,090 ----------------------------------- Net incurred claims and claims expense: Provision for insured events of current year ...................... 5,388 5,708 5,811 Increase (decrease) in provision for insured events of prior years ..... 590 1,617 (106) Amortization of discounts .......... 94 104 89 ----------------------------------- Total net incurred ............... 6,072 7,429 5,794 ----------------------------------- Net payments: Attributable to current year events 1,202 1,260 1,177 Attributable to prior year events .. 3,706 3,411 3,285 Amortization of discounts .......... 10 6 7 ----------------------------------- Total net payments ............... 4,918 4,677 4,469 ----------------------------------- Net reserves at end of year .......... $18,321 $17,167 $14,415 =================================== Gross reserves at beginning of year .. $20,034 $17,712 $16,530 ----------------------------------- Gross incurred claims and claims expense: Provision for insured events of current year ...................... 5,817 6,382 6,320 Increase (decrease) in provision for insured events of prior years ..... 305 1,487 (174) Amortization of discounts .......... 94 104 89 ----------------------------------- Total gross incurred ............. 6,216 7,973 6,235 ----------------------------------- Gross payments: Attributable to current year events 1,278 1,348 1,245 Attributable to prior year events .. 4,150 4,297 3,801 Amortization of discounts .......... 10 6 7 ----------------------------------- Total gross payments ............. 5,438 5,651 5,053 ----------------------------------- Gross reserves at end of year ........ $20,812 $20,034 $17,712 ===================================
8 The following table displays the development of financial statement claims and claims expense reserves for 1983 through 1993. In this table, development of reserves is included in each calendar year between the date of loss and the date of reestimation. Therefore, the deficiencies of the original estimates of required reserves that are reflected below are cumulative and should not be summed. All reserve data has been restated to retroactively reflect the accounting change for discounting discussed previously.
Schedule of Property/Casualty Loss Reserve Development Years Ended December 31, 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 - ------------------------------------------------------------------------------------------------------------- (In millions of dollars) Gross reserves for unpaid claims and claims expense .... - - - - - - - 16,530 17,712 20,034 20,812 Ceded recoverable ... - - - - - - - 3,440 3,297 2,867 2,491 --------------------------------------------------------------------------------------- Net reserves for unpaid claims and claims expense ..... 3,309 3,931 4,873 6,243 8,045 9,552 11,267 13,090 14,415 17,167 18,321 Net Paid (Cumulative) as of: One year later .... 1,074 1,330 1,594 1,335 1,763 2,040 2,670 3,285 3,411 3,706 - Two years later ... 1,624 1,936 2,932 2,383 2,961 3,622 4,724 5,623 6,024 - - Three years later . 2,066 2,493 3,022 3,197 4,031 4,977 6,294 7,490 - - - Four years later .. 2,469 2,963 3,642 3,963 5,007 6,078 7,534 - - - - Five years later .. 2,759 3,407 4,175 4,736 5,801 6,960 - - - - - Six years later ... 3,084 3,766 4,735 5,339 6,476 - - - - - - Seven years later . 3,330 4,156 5,233 5,880 - - - - - - - Eight years later . 3,625 4,512 5,668 - - - - - - - - Nine years later .. 3,914 4,901 - - - - - - - - - Ten years later ... 4,243 - - - - - - - - - - Net Reserves Reestimated as of: End of initial year 3,309 3,931 4,873 6,243 8,045 9,552 11,267 13,090 14,415 17,167 18,321 One year later .... 3,367 3,985 5,047 6,642 8,086 9,737 11,336 12,984 16,032 17,757 - Two years later ... 3,477 4,122 5,573 6,763 8,345 9,781 11,371 14,693 16,810 - - Three years later . 3,599 4,659 5,788 6,989 8,424 9,796 13,098 15,737 - - - Four years later .. 3,981 4,855 6,170 7,166 8,516 11,471 14,118 - - - - Five years later .. 4,127 5,171 6,422 7,314 10,196 12,496 - - - - - Six years later ... 4,359 5,395 6,566 9,022 11,239 - - - - - - Seven years later . 4,534 5,486 8,317 10,070 - - - - - - - Eight years later . 4,629 7,215 9,365 - - - - - - - - Nine years later .. 6,351 8,270 - - - - - - - - - Ten years later ... 7,362 - - - - - - - - - - --------------------------------------------------------------------------------------- Total net deficiency (4,053) (4,339) (4,492) (3,827) (3,194) (2,944) (2,851) (2,647) (2,395) (590) - ======================================================================================= Reconciliation to Gross Reestimated Reserves: Net reserves reestimated ........ - - - - - - - 15,737 16,810 17,757 - Reestimated ceded recoverable ........ - - - - - - - 3,221 3,060 2,582 - --------------------------------------------------------------------------------------- Total gross reestimated reserves - - - - - - - 18,958 19,870 20,339 - ======================================================================================= Net Deficiency related to: Asbestos-related claims ........... (2,608) (2,606) (2,640) (2,682) (2,635) (2,577) (2,476) (2,338) (2,290) (601) - Environmental ..... (595) (601) (599) (597) (582) (577) (550) (539) (493) (446) - Other ............. (850) (1,132) (1,253) (548) 23 210 175 230 388 457 - --------------------------------------------------------------------------------------- Total net deficiency (4,053) (4,339) (4,492) (3,827) (3,194) (2,944) (2,851) (2,647) (2,395) (590) - =======================================================================================
9 As the above table illustrates, most of the unfavorable reserve development is due to asbestos claims. A discussion of CNA's litigation with Fibreboard Corporation regarding asbestos-related bodily injury claims can be found in Note 16 of the Notes to Consolidated Financial Statements in Item 8. In addition to the asbestos and environmental reserve developments noted on page 8, the unfavorable reserve developments relate primarily to accident years 1986 and prior and are comprised of the following lines of business: product liability, medical malpractice, other liability, professional liability, reinsurance, and workers' compensation. In the early to mid-1980's, frequency and severity trends exceeded expectations, resulting in reserve deficiencies in 1986 and prior accident years. For accident years 1987 and subsequent, frequency and severity trends have noticeably moderated. In calendar year 1993, positive severity experience in professional liability lines and improvement in involuntary workers' compensation experience resulted in favorable development in accident years 1987 through 1992. LIFE INSURANCE CNA's life insurance operations markets individual and group insurance products through licensed agents, most of whom are independent contractors, who sell life insurance for CNA and for other companies on a commission basis. Individual insurance products include life, accident and health and annuity products, and are sold to individuals and small businesses. The individual life products currently being marketed consist primarily of term, universal life and participating policies. Included in the universal life category is a salary allotment product marketed through employers as a supplement to employers' benefit plans. Premiums are collected from employees through payroll deduction. The individual accident and health product currently being marketed is long-term disability. Individual annuity products are primarily periodic payment plans. Group insurance products include life, accident and health and pension products, and are sold to employers, employer associations and trusts ranging in size from small local employers to large multinational corporations. The group accident and health plans are primarily major medical and hospitalization. Most of the major medical and hospitalization plans are written under experience- rated contracts or contracts to provide claim administrative services only. CNA's products are designed and priced using assumptions CNA management believes to be reasonably conservative for mortality, morbidity, persistency, expense levels and investment results. Underwriting practices that CNA management believes are prudent are followed in selecting the risks that will be insured. Further, actual experience related to pricing assumptions is monitored closely so that adjustments to these assumptions may be implemented as necessary. CNA mitigates the risk related to persistency by including surrender charge provisions in its ordinary life and annuity policies in the first five to ten years, thus providing for the recovery of acquisition expenses. Investment portfolios supporting interest sensitive products, including universal life and individual annuities, are segregated from other investments and managed so as to minimize the liquidity and interest rate risks. Profitability in the life insurance business has decreased over the past two years as a result of declining investment income, reflecting lower interest rates and a large investment in short-term investments. Further, results continue to be impacted by intense competition and rising medical costs. CNA has aggressively pursued expense reduction through increases in automation and other productivity improvements. Increasing costs of health care have resulted in a continued market shift away from traditional forms of health coverage toward managed care products and experience-rated plans. CNA's ability to compete in this market will be increasingly dependent on its ability to control costs through managed care techniques, innovation, and quality customer-focused service in order to properly position CNA in the evolving health care environment. The federal government's initiative to control health care costs and provide universal access to health care was presented in 1993. The impact of potential health care reform cannot be determined at this time. Such reform may 10 affect both CNA's individual and group accident and health business. CNA has urged a meaningful role for the private sector in any proposed plan. The present health care system is clearly in need of reform, and CNA has emphasized that the competitive strengths of the insurance industry must be an integral part of a workable solution. The following table sets forth supplemental data for the life insurance business:
Years Ended December 31, ------------------------------------- 1993 1992 1991 ------------------------------------- (In millions of dollars) Individual Premiums: Life and annuities ................. $ 312.1 $ 294.7 $ 287.9 Accident and health ................ 30.9 27.1 24.3 ------------------------------------ $ 343.0 $ 321.8 $ 312.2 ==================================== Group Premiums: Life ............................... $ 107.2 $ 100.7 $ 90.8 Accident and health (a) ............ 1,983.0 1,957.5 1,887.0 Annuities .......................... 9.0 57.7 24.3 ------------------------------------ $2,099.2 $2,115.9 $2,002.1 ==================================== Net Investment Income and Other Income: Individual ......................... $ 154.2 $ 163.0 $ 162.5 Group .............................. 142.8 156.6 185.4 ------------------------------------ $ 297.0 $ 319.6 $ 347.9 ==================================== Income Excluding Realized Capital Gains, Before Income Tax: Individual ........................ $ 14.5 $ 22.5 $ 13.8 Group ............................. 51.9 56.1 76.0 ------------------------------------ $ 66.4 $ 78.6 $ 89.8 ==================================== Gross Life Insurance in Force: Individual (c) ..................... $ 76,835 $ 75,569 $ 71,539 Group .............................. 35,413 29,643 27,139 ------------------------------------ $112,248 $105,212 $ 98,678 ==================================== Other Data (b): Statutory capital and surplus ...... $1,022.0 $1,003.0 $ 968.4 Statutory capital and surplus- percent of total liabilities ...... 30.1% 33.4% 29.9% Participating policyholders'-percent of gross life insurance in force .. 1.1% 1.2% 1.6% - -------------- (a) Group accident and health premiums include contracts involving U.S. Government employees and their dependents amounting to approximately $1.7, $1.6 and $1.5 billion in 1993, 1992 and 1991, respectively. (b) Other Data is determined on the basis of statutory accounting principles. Life insurance subsidiaries have received, or will receive, reimbursement from CNA for general management and administrative expenses and investment expenses in the amounts of $25.6, $24.5 and $25.7 million in 1993, 1992 and 1991, respectively. Statutory capital and surplus as a percent of total liabilities is determined after excluding Separate Account liabilities and reclassifying the Asset Valuation and Interest Maintenance Reserves as surplus. (c) Lapse ratios as measured by surrenders and withdrawals as a percentage of average ordinary life insurance in force were 9.7%, 8.6%, and 10.4% in 1993, 1992, and 1991, respectively.
11 Annuities and guaranteed investment contracts CAC writes the majority of its annuities and guaranteed investment contracts ("GIC's") in a fixed or non-variable Separate Account, which is permitted by Illinois Insurance statutes. This treatment affords the contractholders additional security, in the form of CAC's general account surplus, which supports any principal and/or guaranteed interest payment shortfalls of the Separate Account. CNA manages the liquidity and interest rate risks on the GIC portfolio by matching the GIC assets and liabilities on the basis of duration and maintaining market value surrender adjustments on the majority of the contracts. The following table illustrates the matching of the duration of assets and liabilities for the GIC portfolio, the investment yield, the weighted average interest crediting rates and withdrawal characteristics.
December 31, ----------------------------------- 1993 1992 1991 ----------------------------------- Duration in years: Assets ............................. 2.68 3.04 2.85 Liabilities ........................ 2.73 2.69 2.54 --------------------------------- Mismatch ........................ (.05) .35 .31 ================================= Weighted average investment yield .... 7.11% 8.05% 9.38% ================================= Weighted average interest crediting rates ............................... 7.74% 8.32% 8.84% ================================= Withdrawal Characteristics: With market value adjustment ....... 81% 83% 85% Non-withdrawable ................... 13 12 11 Without market value adjustment .... 6 5 4 --------------------------------- Total ........................... 100% 100% 100% =================================
As shown above, the investment yield at December 31, 1993 and 1992 was less than the average crediting rate. However, this occurred because of security sales resulting in realized capital gains. Although the sales proceeds were invested at lower yields, the asset base was increased. At December 31, 1993 and 1992, the GIC estimated market value of assets exceeded the estimated market value of contract liabilities and expenses. INVESTMENTS CNA's general account investment portfolio is managed to maximize after-tax investment return, while minimizing credit risks with investments concentrated in high quality securities to support its insurance underwriting operations. At December 31, 1993, approximately 20% of CNA's general account portfolio is invested in long-term state and municipal bonds in order to maximize after-tax yield and provide for a more stable yield on the portfolio with a higher quality of investment than may otherwise be available. CNA has the capacity to hold its fixed income portfolio to maturity. However, securities may be sold as part of CNA's asset/liability strategies or to take advantage of investment opportunities generated by changing interest rates, prepayments, tax and credit considerations, or other similar factors. Accordingly, the fixed income securities are classified as available for sale. CNA's portfolio is managed based on the following investment strategies: (i) diversification is used to limit exposures to any one issue or issuer, and (ii) in general, the public market is used in order to provide liquidity. 12 Historically, CNA has maintained short-term assets at a level that provided for liquidity to meet its short-term obligations, principally anticipated claim payout patterns. Throughout 1992 and 1993 the level of short-term investments increased beyond that needed for short-term liquidity. This resulted in a decline in investment income in 1993. Management believes, however, that the increased concentration in short-term investments will reduce the impact that a rise in interest rates would have on its fixed income portfolio. The following summarizes CNA's distribution of general account investments:
December 31, ------------------------ 1993 1992 ------------------------ (In millions) Fixed maturities (1): Tax exempt bonds ................................ $ 5,015 $ 9,502 Taxable bonds ................................... 12,145 7,286 Redeemable preferred stocks ..................... 448 568 Equity securities: Common stocks ................................... 508 348 Non-redeemable preferred stocks ................. 9 Mortgage loans .................................... 58 85 Policy loans ...................................... 174 179 Short-term investments ............................ 6,944 4,444 Real estate and other invested assets ............. 71 57 ---------------------- Total investments at carrying value ............. $25,363 $22,478 ====================== (1) Fixed maturity securities are reported at fair value in 1993.
As noted in Management's Discussion and Analysis of Financial Condition and Results of Operations, in 1993 CNA began a program of realigning its portfolio which resulted in realizing substantial gains. For the year ended December 31, 1993, CNA's property and casualty insurance subsidiaries sold approximately $35.4 billion of fixed income and equity securities realizing pre-tax net gains of $741.3 million. Of the securities sold, approximately $5.8 billion was from the tax-exempt municipal bond portfolio. Most of the proceeds from those sales have been invested in short-term securities, primarily U.S. Treasury bills and high-grade commercial paper. In addition to reducing the impact that a rise in interest rates would have on the fixed income portfolio, the increase in taxable short-term securities and the decrease in tax-exempt investments will allow CNA to minimize additional alternative minimum tax credit generated in 1992 and 1993. CNA's general account fixed income portfolio has consistently been of high quality as illustrated in the following table using the Standard & Poor's ratings convention (see note).
December 31, ----------------------- 1993 1992 ----------------------- AAA ............................................... 77% 73% AA ................................................ 8 10 A ................................................. 7 10 BBB ............................................... 5 3 Below BBB ......................................... 3 4 --------------------- Total ........................................ 100% 100% =====================
13 CNA's Separate Account investment portfolio is managed to specifically support the underlying insurance products (see the discussion of annuities and GIC's in "Life Insurance" above). Approximately 86% or $5.6 billion of Separate Account investments are used to fund GIC's; the remaining investments are funding variable products. Approximately 97% of the GIC investment portfolio is comprised of taxable fixed income securities. The quality of the GIC fixed income portfolio using the Standard & Poor's ratings convention (see note) is as follows:
December 31, ----------------------- 1993 1992 ----------------------- AAA ............................................... 44% 50% AA ................................................ 6 9 A ................................................. 18 18 BBB ............................................... 13 10 Below BBB ......................................... 19 13 --------------------- Total ........................................ 100% 100% =====================
Note: The bond ratings shown in the two tables above are primarily from Standard & Poor's (94% of the general account portfolio and 93% of the GIC portfolio in 1993). In the case of private placements and other unrated securities, comparable internal ratings are developed by CNA. These ratings are derived by management using available information on the issuer to assess the credit risk. Reference also may be made to similar instruments of the issuer that are rated by Standard & Poor's. In the case of unrated municipal bonds, a AAA rating may be assigned to issues with financial guarantee insurance. CNA actively manages its high yield bonds and maintains the level of such investments at prudent levels, as illustrated above. In 1993, the level of high yield investment increased $261 million to $1,068 million at year end. This increase is a result of the relative attractiveness of the high yield investment market in comparison to other investment opportunities during the year. Although the level of high yield investments has increased, the components of the high yield portfolio have shifted toward lower risk issues, with B and BB rated bonds comprising 91% of the high yield portfolio at December 31, 1993, compared to 82% at the end of 1992. High yield securities generally involve a greater degree of risk than that of investment grade securities. Expected returns should, however, compensate for the added risk. The risk is also considered in the interest rate assumptions in the underlying insurance products. Further, CNA's investment in real estate and mortgage loans amounted to less than one-half of one percent of its total assets, substantially below industry averages. Included in CNA's 1993 AAA-rated fixed income securities (general and GIC portfolios) are $4.4 billion of asset-backed securities, consisting of approximately 47% in collateralized mortgage obligations ("CMO's"), 47% in U.S. Government agency pass through certificates and 6% in corporate asset-backed obligations. The majority of CMO's held are U.S. Government agency pass-through certificates, are actively traded in liquid markets and are priced monthly by broker-dealers. At December 31, 1993, market value exceeded amortized cost by approximately $87 million. CNA limits the risks associated with interest rate fluctuations and prepayments by concentrating its CMO investments in early planned amortization classes with wide bands and relatively short principal repayment windows. OTHER Competition: All aspects of the insurance business are highly competitive. CNA's insurance operations compete with a large number of stock and mutual insurance companies and other entities for both producers and customers and must continuously allocate resources to refine and improve insurance products and services. Based on net statutory premiums written in 1992, CCC is ranked as the sixth largest property/casualty insurance organization among approximately 3,900 companies writing property and casualty insurance in the United States, about 900 of which operate in all or most states. CAC is ranked as the seventeenth largest consolidated life 14 insurance organization among approximately 2,000 companies selling life insurance (including health insurance and pension products) in the United States, based on statutory premium revenue in 1992. Dividends by Insurance Subsidiaries: The payment of dividends to CNA by its insurance affiliates without prior approval of the Illinois Insurance Department ("IID") is limited to formula amounts determined in accordance with the accounting practices prescribed or permitted by the IID. The current formula limits dividends, without approval of the insurance commissioner, to the greater of 10% of prior year statutory surplus or prior year statutory net income (excluding realized gains in excess of 20% of the cumulative unrealized gains position). For 1994, approximately $360 million in dividends could be paid to CNA by its insurance affiliates without prior approval. The National Association of Insurance Commissioners ("NAIC") Financial Regulation Standards and Accreditation Committee approved the Illinois dividend formula as complying with the NAIC Model Dividend Law. All dividends must be reported to the insurance department within five business days of declaration and ten days prior to payment. Regulation: The insurance industry is subject to comprehensive and detailed regulation and supervision throughout the United States. Each state has established supervisory agencies with broad administrative power relative to licensing insurers and agents, approving policy forms, establishing reserve requirements, maintaining guarantee funds, fixing minimum interest rates for accumulation of surrender values and maximum interest rates of policy loans, prescribing the form and content of statutory financial reports and regulating solvency and the type and amount of investments permitted. Regulatory powers also extend to premium rate regulation which require that rates not be excessive, inadequate or unfairly discriminatory. In addition to regulation of dividends by insurance subsidiaries discussed above, intercompany transfers of assets may be subject to prior notice or approval, depending on the size of such transfers and payments in relation to the financial position of the insurance affiliates making the transfer. The trend for legislation and voter initiatives continues, particularly for personal lines products, directly impacting insurance rate development, rate application and the ability of insurers to cancel or renew insurance policies. Restrictions on the consideration of certain expenses, limits on services provided by advisory organizations, and politically suppressed workers' compensation rates in certain states continue to be of concern. Insurers are also required by the states to provide coverage to risks which would not otherwise be considered eligible by the insurers. Each state dictates the types of insurance and the level of coverage which must be provided to such involuntary risks. CNA's insurance subsidiaries share of these involuntary risks is generally a function of its share of the voluntary market, by line of insurance, in each state. In recent years, insolvencies of a few large insurers previously believed to be on solid financial ground by many rating agencies and state regulators have led to increased scrutiny of state regulated insurer solvency requirements by members of the U.S. Congress. Legislation has been introduced which, if passed, would subject insurers to federal solvency regulation. In response to this challenge the NAIC has developed new industry minimum Risk Based Capital ("RBC") requirements, established a formal state accreditation process designed to minimize the diversity of approved statutory accounting and actuarial practices, and has increased the annual statutory statement disclosure requirements. RBC requirements are effective for life insurers in 1993 and for property and casualty insurers in 1994. The RBC formulas were designed to identify an insurer's minimum capital requirements based upon the inherent risks (e.g., asset default, credit and insurance) of its operations. In addition to the minimum capital requirements, the RBC formula and related regulations identify various levels of capital adequacy and corresponding action that the state insurance departments should initiate. The highest such level of capital adequacy above which insurance departments would take no action is defined as the Company Action Level. As of December 31, 1993, CNA's life insurance affiliates, Continental Assurance Company and Valley Forge Life Insurance Company, had adjusted capital amounts in excess of NAIC Company Action Levels. The new property/casualty RBC formula was adopted in December, 1993. Absent significant changes in the industry experience components of the formula, 15 CNA's property/casualty domestic insurers have adjusted capital amounts in excess of NAIC Company Action Levels. In addition to the newly established minimum capital requirements, the NAIC still maintains the Insurance Regulatory Information System ("IRIS"), which assists the state insurance departments in overseeing the financial condition of both life and property/casualty insurers. These tests are in the form of ratios, and have a range of results characterized as "usual" by the NAIC. The NAIC IRIS user guide regarding these ratios specifically states that "Falling outside the usual range is not considered a failing result..." and "...in some years it may not be unusual for financially sound companies to have several ratios with results outside the usual range." It is important, therefore, that IRIS ratio test results be reviewed carefully in conjunction with all other financial information. CCC had three IRIS ratios with unusual values in 1993, four in 1992 and none in 1991. The three ratios with unusual values in 1993 were the two year overall operating, investment yield, and the two year reserve development ratios. The four IRIS ratios with unusual values in 1992 were the two year overall operating, the change in surplus, and both the one and two year reserve development ratios. Catastrophe losses and reserve increases associated with potential exposure to asbestos-related bodily injury cases recognized in 1992 triggered all the unusual values generated in 1992. These same events were primarily responsible for the unusual values for the two year overall operating and development ratios in 1993. Additionally, lower interest rates in the capital markets in 1993, coupled with the maintenance of a large short term investment portfolio, triggered the unusual value for the investment yield ratio. CAC had two IRIS ratios with unusual values in 1993, net gain to total income and change in net written premium. CAC had one unusual value for IRIS ratios in 1992, net gain to total income, and none in 1991. CAC's reported statutory net income was adversely affected in both 1993 and 1992 by the transfer of significant realized capital gains to the Interest Maintenance Reserve (IMR) and depressed investment earnings. The unusual value for the change in premium ratio primarily relates to decreases in the Separate Account annuity products fund deposits. Federal measures which may significantly affect the insurance business include proposals for directly regulating insurance company solvency as well as repeal of the McCarran-Ferguson Act, which exempts certain aspects of insurance from federal regulation to the extent regulated by the states. The potential for federal health care reform has been widely publicized and debated over the past year. Although legislative reforms could come as soon as 1994, the impact of such reforms are as yet unknown. Among the options discussed has been a single comprehensive health care program that would provide access for all Americans, while attempting to reduce cost via enactment of various cost containment measures and tort reforms. If implemented, such reforms may impact both individual and group accident and health, workers' compensation, automobile liability and medical malpractice lines of business currently underwritten by CNA. Although courts and legislatures are often asked to expand liability, there is a growing trend among business and professional organizations to wage campaigns, which in several instances have been successful, aimed at limiting their liability risks. Several states have adopted and some are considering "tort reform" measures which, among other things, limit non-economic and punitive damages and otherwise limit damage awards in product liability and malpractice cases. Reinsurance: CNA's insurance subsidiaries assume and cede insurance with other insurers and reinsurers and members of various reinsurance pools and associations. CNA utilizes reinsurance arrangements to limit its maximum loss, to provide greater diversification of risk and to minimize exposures on larger risks. The reinsurance coverages are tailored to the specific risk characteristics of each product line with CNA's retained amount varying by type of coverage. Generally, reinsurance coverage for property risks is on an excess of loss, per risk basis. Liability coverages are generally reinsured on a quota share basis in excess of CNA's retained risk. In addition, CNA has catastrophe coverage for certain types of losses over stipulated amounts arising from any one occurrence or event. 16 The ceding of insurance does not discharge the primary liability of the original insurer. It had been the practice of insurers to account for the portion of the risks which have been reinsured with other companies as though they were risks for which the original insurer is not liable. In December 1992, the Financial Accounting Standards Board issued SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-duration and Long-duration Contracts." SFAS No. 113 sets forth new requirements for accounting and reporting of reinsurance contracts. The provisions of this statement are effective in 1993 and did not have a material impact on the income or stockholders' equity of CNA as all material reinsurance arrangements are prospective and provided for the transfer of risk. CNA places reinsurance with other carriers only after careful review of the nature of the contract and a thorough assessment of the reinsurers' credit quality and claim settlement performance. Further, for carriers that are not authorized reinsurers in Illinois, CNA receives collateral primarily in the form of bank letters of credit securing a large portion of the recoverables. Reinsurance recoverables on paid and unpaid claims were $2.9, $3.2, and $3.7 billion at year end 1993, 1992 and 1991, respectively. Of the $2.9 billion recoverable at December 31, 1993, approximately $351 million was due from unauthorized reinsurers, approximately $155 million of which was collateralized by letters of credit. Despite best efforts to ensure collection of reinsurance recoverables, the long-tail nature of many of these recoverables inevitably results in some credit risk. In estimating CNA's allowance for doubtful accounts, reinsurance recoverables are carefully analyzed. CNA's largest recoverable at December 31, 1993 was $484 million due from Lloyd's of London. The recoverable from Lloyd's of London is dispersed among thousands of individual members who have unlimited liability, many of which are Illinois authorized reinsurers. Although Lloyd's of London has recently reported large underwriting losses, it continues to carry substantial reserves, including $9 billion in premium trust funds, $6 billion in member trust funds and policyholder surplus of $381 million. Accordingly, the credit risk associated with these recoverable balances appears to be minimal. Premiums of $58 million were ceded to Lloyd's of London in 1993. Properties: CNA Plaza, owned by CAC, is a 1,097,000 square foot office complex located at 333 S. Wabash, Chicago, Illinois. The forty-five story office building serves as the home office for CNA and its insurance subsidiaries. CNA Plaza and the adjacent building (a 454,000 square foot building located at 55 E. Jackson Blvd.) are partially situated on grounds under leases expiring in 2058 and 2067. Approximately 35% of the adjacent building is rented to non- affiliates. CNA also maintains four regional offices and forty branch offices in major cities throughout the United States. This office space is leased except for offices located in four CNA owned buildings. LORILLARD, INC. The Company's wholly owned subsidiary, Lorillard, Inc. ("Lorillard"), is engaged, through its subsidiaries, in the production and sale of cigarettes. The principal cigarette brand names of Lorillard are Newport, Kent and True. Lorillard's largest selling brands are the Newport and Kent brands, which accounted for approximately 69% and 15%, respectively, of Lorillard's sales in 1993. Substantially all of Lorillard's sales are in the United States. Lorillard's major trademarks outside of the United States were sold in 1977. Lorillard accounted for 13.95%, 15.96%, and 14.75% of the Company's total revenue for the fiscal years ended December 31, 1993, 1992 and 1991, respectively. Smoking and Health and Related Matters: For a number of years reports of the alleged harmful health effects of cigarette smoking have engendered significant adverse publicity for the cigarette industry, have caused a decline in the social acceptability of cigarette smoking and have resulted in the implementation of numerous restrictions on the marketing, advertising and use of cigarettes. Along with significant increases in federal and 17 state excise taxes on cigarettes, these actions have, and are likely to continue to have, an adverse effect on cigarette sales. The Federal Comprehensive Smoking Education Act, which became effective in 1985, requires the use on cigarette packaging and advertising of one of the following four warning statements, on a rotating basis: (1) "SURGEON GENERAL'S WARNING: Smoking Causes Lung Cancer, Heart Disease, Emphysema, and May Complicate Pregnancy." (2) "SURGEON GENERAL'S WARNING: Quitting Smoking Now Greatly Reduces Serious Risks to Your Health." (3) "SURGEON GENERAL'S WARNING: Smoking By Pregnant Women May Result in Fetal Injury, Premature Birth, and Low Birth Weight." (4) "SURGEON GENERAL'S WARNING: Cigarette Smoke Contains Carbon Monoxide." Four shortened versions of these statements are required, on a rotating basis, for use on billboards. This law also requires that each person who manufactures, packages or imports cigarettes shall annually provide to the Secretary of Health and Human Services a list of the ingredients added to tobacco in the manufacture of cigarettes. Such list of ingredients may be submitted in a manner which does not identify the company which uses the ingredients or the brand of cigarettes which contains the ingredients. Prior to the effective date of the Comprehensive Smoking Education Act, federal law had, since 1965, required that cigarette packaging bear a warning statement which from 1971 to 1985 was as follows: "Warning: The Surgeon General Has Determined That Cigarette Smoking Is Dangerous To Your Health." In addition, in 1972 Lorillard and other cigarette manufacturers had agreed, pursuant to consent orders entered into with the Federal Trade Commission ("FTC"), to include this health warning statement in print advertising, on billboards and on certain categories of point-of-sale display materials relating to cigarettes. In addition, advertising of cigarettes has been prohibited on radio and television since 1971. Studies with respect to the alleged health risk to nonsmokers of environmental tobacco smoke ("ETS") have received significant publicity. In 1986, the Surgeon General of the United States and the National Academy of Sciences reported that ETS puts nonsmokers at an increased risk of lung cancer and respiratory illness. In January 1993, the United States Environmental Protection Agency released a report (the "EPA Risk Assessment") concluding that ETS is a human lung carcinogen in adults, and causes increased respiratory tract disease and middle ear disorders and increases the severity and frequency of asthma in children. In recent years, many federal, state, local and municipal governments and agencies, as well as private businesses, have adopted legislation or regulations which prohibit or restrict, or are intended to discourage, smoking, including legislation or regulations prohibiting or restricting smoking in various places such as public buildings and facilities, stores and restaurants, on domestic airline flights and in the workplace, and the sale of cigarettes in vending machines. This trend has increased significantly since the release of the EPA Risk Assessment. Additional laws, regulations and policies intended to prohibit, restrict or discourage smoking are being proposed or considered by various federal, state and local governments, agencies and private businesses with increasing frequency. A 1984 federal law established a Technical Study Group to conduct a study and report to the Congress regarding the technical and commercial feasibility of developing cigarettes that will have a minimum propensity to ignite upholstered furniture or mattresses. The Technical Study Group concluded in 1987 that it was technically feasible and may be commercially feasible to develop such cigarettes. In accordance with a 1990 federal law the Consumer Product Safety Commission issued a report in August 1993, concluding that, while it is practicable to develop a performance standard to reduce cigarette ignition propensity, it is unclear that such a standard will effectively address the number of cigarette ignited fires. Several states also are considering legislation in this area. From time to time, bills have been introduced in Congress, among other things, to end or limit the price supports for leaf tobacco; to prohibit all tobacco advertising and promotion; to require new health warnings on cigarette packages and advertising; to subject cigarettes to regulation in various ways by the U.S. Department of Health and Human Services; to subject cigarettes generally to regulation under the Consumer Products Safety Act; to authorize the establishment of various anti-smoking education programs; to provide that current federal smoking legislation should not be construed to relieve any person of liability under common or state law; to 18 permit state and local governments to restrict the sale and distribution of cigarettes and the placement of billboard and transit advertising of tobacco products; to provide that cigarette advertising not be a deductible business expense; to tax cigarettes on the basis of their "tar" and nicotine content; to require the FTC to promulgate standards establishing maximum acceptable levels of "tar," nicotine and "other incriminated agents" in cigarettes; to prohibit the mailing of unsolicited samples of cigarettes; to impose an additional excise tax on cigarettes; and to require that cigarettes be manufactured in a manner that will cause them, under certain circumstances, to be self-extinguishing. Additional laws, regulations and policies intended to prohibit, restrict or discourage smoking being proposed or considered by various federal, state and local governments and agencies could, if adopted, have a material adverse effect on the financial condition and results of operations of the Company. The Company does not believe there are any additional such laws, regulations or policies likely to be adopted in the next year which would have such a material adverse effect. As a result of the growing concern over the asserted health effects of smoking, in recent years the number of lawsuits against tobacco companies seeking damages related to health effects alleged to have resulted from cigarette smoking or exposure to cigarette smoking has increased. For additional discussion of legal proceedings relating to Lorillard and the tobacco industry, see Item 3 below. Advertising and Sales Promotion: Lorillard's principal brands are advertised and promoted extensively. Introduction of new brands, brand extensions and packings require the expenditures of substantial sums for advertising and sales promotion, with no assurance of consumer acceptance. The advertising media presently used by Lorillard include magazines, newspapers, out-of-home advertising and point-of-sale display materials. Sales promotion activities are conducted by distribution of samples and store coupons, point-of-sale display advertising, advertising of promotions in print media, and personal contact with distributors, retailers and consumers. Distribution Methods: Lorillard distributes its products through direct sales to distributors, who in turn service retail outlets, and through chain store organizations and vending machine operators, many of whom purchase their requirements directly, and by direct sales to the U.S. Armed Forces. Lorillard's tobacco products are stored in public warehouses throughout the country to provide for rapid distribution to customers. Lorillard has approximately 1,700 direct customers and is not dependent on any one customer or group of customers. Lorillard does not have any backlog orders. Tobacco and Tobacco Prices: The two main classes of tobacco grown in the United States are flue-cured tobacco, grown mostly in Virginia, North Carolina, South Carolina, Georgia and Florida; and burley, grown mostly in Kentucky and Tennessee. Lorillard purchases flue-cured tobacco and burley tobacco for use in cigarettes. Most of the tobacco of these classes used by Lorillard is purchased by commission buyers at tobacco auctions. Lorillard also purchases various types of Near Eastern tobacco, grown in Turkey and eight other Near Eastern countries. In addition, Lorillard purchases substantial quantities of aged tobacco from various sources, including cooperatives financed under the Commodity Credit Corporation program, to supplement tobacco inventories. Due to the varying size and quality of annual crops and other economic factors, tobacco prices in the past have been subject to fluctuation. Among the economic factors are federal government control of acreage and poundage in the flue-cured producing areas and poundage control in the burley areas. These controls together with support prices have substantially affected the market prices of tobacco. Pursuant to authorizations contained in federal legislation enacted in 1986, the price support levels were reduced in 1986 with the intent of making U.S.-produced tobacco more competitive. The approximate average auction prices per pound for flue-cured tobacco was $1.728 in 1992 and $1.687 in 1993 and for burley tobacco was $1.815 in 1992 and $1.817 in 1993. The prices paid by Lorillard have generally been consistent with this trend. Lorillard believes that its current leaf inventories are adequately balanced for its present production requirements. Because the process of aging tobacco 19 normally requires approximately two years, Lorillard at all times has on hand large quantities of leaf tobacco. See Note 1 of the Notes to Consolidated Financial Statements, under Item 8 below, for inventory costing method. Prices: During 1993, the wholesale price of Lorillard's king size and 100/120 millimeter cigarettes decreased by the net amount of $13.05 and $14.55 per thousand, respectively. On January 1, 1993 the wholesale price was increased $2.10 per thousand cigarettes in relation to the increase in the federal excise tax. For additional information on changes in cigarette pricing see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Taxes: Federal excise taxes included in the price of cigarettes were increased from $10.00 to $12.00 per thousand cigarettes effective January 1, 1993. Excise taxes, which are levied upon and paid by the distributors, are also in effect in the fifty states, the District of Columbia and many municipalities. The state taxes generally range from 2.5 cents to 75 cents per package of twenty cigarettes. Properties: The properties of Lorillard are employed principally in the processing and storage of tobacco and in the manufacture and storage of cigarettes. Its principal properties are owned in fee. With minor exceptions, all machinery used by Lorillard is owned by it. All properties are in good condition. Lorillard's manufacturing plant is located on approximately 79 acres in Greensboro, North Carolina. This 942,600 square foot plant contains modern high speed cigarette manufacturing machinery. Lorillard also has facilities for receiving, processing and storing leaf tobacco in Danville, Virginia, containing approximately 1,500,000 square feet. A modern research facility containing approximately 82,000 square feet is also located at Greensboro. Lorillard leases a corporate office in Orangeburg, New York, an executive office in New York City and sales offices in major cities throughout the United States. Competition: Substantially all of Lorillard's products are sold within the United States in highly competitive markets where its principal competitors are the five other major U.S. cigarette manufacturers (Philip Morris, R.J. Reynolds ("RJR"), Brown & Williamson, American Brands and Liggett Group). For the calendar year 1993, Lorillard ranked fourth in the industry with a 7.1% share of the market based upon the Maxwell Consumer Report, a quarterly statistical survey of the cigarette industry. Philip Morris and RJR account for approximately 42.2% and 30.6%, respectively, of the U.S. cigarette market, according to the Maxwell Consumer Report. The following table sets forth cigarette sales in the United States by the industry and by Lorillard, as reported in the Maxwell Consumer Report. This table indicates the relative position of Lorillard in the industry:
Lorillard to Industry Lorillard Industry Calendar Year (000) (000) - -------------------------------------------------------------------------------- 1993 ................................. 461,180,000 32,650,000 7.1% 1992 ................................. 506,950,000 36,540,000 7.2% 1991 ................................. 509,100,000 36,940,000 7.3%
- --------------- The Bureau of Alcohol, Tobacco and Firearms reports Lorillard's share of total taxable factory removals of all cigarettes to be 7.2% and 7.5% for 1992 and 1991, respectively. Data for 1993 is not currently available. The Maxwell Consumer Report divides the cigarette market into two price segments, the premium price segment and the discount or reduced price segment. According to the Maxwell Consumer Report the reduced price segment increased in 1993 to approximately 37% from approximately 30% of the market. Virtually all of Lorillard's sales are in the premium price segment where Lorillard's share increased from 10.0% in 1992 to 10.7% in 1993, according to the Maxwell Consumer Report. 20 LOEWS HOTELS HOLDING CORPORATION The subsidiaries of Loews Hotels Holding Corporation ("Loews Hotels"), a wholly owned subsidiary of the Company, presently operate the following 14 hotels:
Number of Rooms (Year Name and Location Type Opened) Owned,Leased or Managed - ----------------------------------------------------------------------------------------------------------------- Loews Anatole Luxury 1,620 Management contract expiring 2000 (3) Dallas, Texas Convention Hotel (1979) Loews Annapolis Luxury Hotel 217 Owned Annapolis, Maryland (1986(2)) Loews Coronado Bay Resort Luxury Hotel 450 Management contract expiring 2011, San Diego, California (1991) with renewal options for 10 years (3) Loews Giorgio Luxury Hotel 197 Owned Denver, Colorado (1986(2)) Howard Johnson Hotel (1) Commercial Hotel 300 Owned New York, New York (1962) Loews Le Concorde Luxury Hotel 424 Land lease expiring 2069 Quebec City, Canada (1974(2)) Loews L'Enfant Plaza Luxury Hotel 372 Management contract expiring 2003 (3) Washington, D.C. (1973) Loews Monte Carlo Resort Hotel 622 Lease expiring 2002, with renewal Monte Carlo, Monaco (1975) options for 20 years (4) Loews New York First Class Hotel 765 Owned New York, New York (1961) Days Hotel (1) Commercial Hotel 366 Owned New York, New York (1962) Regency Luxury Hotel 496 Land Lease expiring 2013, with New York, New York (1963) renewal options for 47 years. Loews Santa Monica Beach Luxury Hotel 350 Management contract expiring 2007, Santa Monica, California (1989) with renewal options for 10 years. Loews Vanderbilt Plaza Luxury Hotel 342 Owned Nashville, Tennessee (1984(2)) Loews Ventana Canyon Resort Resort Hotel 398 Management contract expiring 2004, Tucson, Arizona (1984) with renewal options for 10 years (3) - ------------- (1) Operated by Loews Hotels under license agreements pursuant to which Loews Hotels pays royalty fees on sales, as defined in the agreements, for the use of the respective trade names, trademarks and other rights. (2) The Le Concorde, Giorgio, Vanderbilt Plaza and Annapolis Hotels were acquired by Loews Hotels in 1987, 1989, 1989 and 1990, respectively. (3) These management contracts are subject to termination rights. 21 (4) An arbitration proceeding is pending concerning this lease in relation to, among other things, rent payable under the lease and a contention by the ground lessor that the lease was not properly renewed for periods subsequent to 1990.
The Monte Carlo hotel includes a casino in which coin operated gaming devices are operated by a joint venture in which Loews Hotels is a co-venturer. In addition, the hotels which are operated by Loews Hotels contain shops, a variety of restaurants and lounges, and some contain parking facilities, swimming pools, tennis courts and access to golf courses. The hotels owned by Loews Hotels (including those owned and leased to third parties) are subject to mortgage indebtedness aggregating approximately $72,653,000 at December 31, 1993 with interest rates ranging from 8.1% to 11%, and maturing between 1996 and 1999. In addition, certain hotels are held under leases which are subject to formula derived rental increases, with rentals aggregating approximately $9,300,000 for the year ended December 31, 1993. Loews Hotels has leased to a joint venture the Sheraton New York and the Sheraton Manhattan, in New York City, for terms expiring in 2002 and 2000, respectively. The leases, which contain purchase options on the part of lessees, are guaranteed by American Airlines, Inc. and Sheraton Corporation and provide for payment of fixed aggregate annual rent and a percentage rental with provisions for maximum fixed annual and percentage rents. Competition from other hotels, motor hotels and inns, including facilities owned by local interests and by national and international chains, is vigorous in all areas in which Loews Hotels operates. The demand for hotel rooms in many areas is seasonal and dependent on general and local economic conditions. Loews Hotels properties also compete with facilities offering similar services in locations other than those in which the company's hotels are located. Competition among luxury hotels is based primarily on location and service. Competition among resort and commercial hotels is based on price as well as location and service. However, the current oversupply of hotel rooms and the reduced demand for hotel rooms due to weak economic conditions has intensified the level of competition in all hotel categories, particularly with respect to price. Because of the competitive nature of the industry, hotels must continually make expenditures for updating, refurnishing and repairs and maintenance, in order to prevent competitive obsolescence. Loews Hotels accounted for 1.35%, 1.47% and 1.48% of the Company's total revenue for the fiscal years ended December 31, 1993, 1992 and 1991, respectively. BULOVA CORPORATION Bulova Corporation ("Bulova") is engaged in two lines of business. Bulova's consumer products segment distributes and sells watches, clocks and watch parts for consumer use. Its industrial and defense products segment manufactures and sells electronic and mechanical time fuzes and electronic mine sensors for national defense, as well as certain industrial products. Bulova accounted for 1.12%, 1.32%, and 1.21% of the Company's total revenue for the fiscal years ended December 31, 1993, 1992 and 1991, respectively. Consumer Products: Bulova distributes and sells analog and analog-digital quartz crystal watches, jewelry and various types of clocks. All watch movements and cases and other components and all clocks are purchased from foreign and domestic suppliers. Watches are sold by Bulova principally in the United States and Canada. In most other areas of the world Bulova has appointed licensees who market watches under Bulova's trademarks in return for a royalty. The consumer products business is seasonal, with the greatest sales coming in the third and fourth quarters in expectation of the holiday selling season. The consumer products business is intensely competitive. The principal methods of competition are price, styling, aftersale service, warranty and product performance. Defense Products: Defense sales account for approximately 84% of this segment's sales and approximately 24% of Bulova's total sales in 1993. The principal products of this segment are precision mechanical, electronic and electro-mechanical timing devices. Approximately 68% of these sales were made to the United States 22 government and approximately 16% of sales were made to foreign governments. The Department of Defense continued to purchase mechanical fuzes during 1993, however, Bulova understands that the Department of Defense has made the decision to phase out mechanical time fuzes, which had been this segment's principal product for many years. Competition for contracts to produce electronic fuzes is expected to be intense. Accordingly, no assurance can be given as to whether Bulova will be awarded additional contracts or as to the profitability of any additional contracts which may be awarded to it. To offset the decline in U.S. government defense spending, Bulova is seeking to increase non-defense and commercial and industrial business by employing its precision manufacturing capabilities. During 1993, non-defense industrial products accounted for approximately 16% of this segment's sales, as compared to 4% in 1992. Industrial products included surgical instruments and printed wiring boards. The backlog of defense products sales amounted to $44.6 and $56.0 million as of December 31, 1993 and 1992, respectively. Approximately 76% of the current backlog is expected to be filled during 1994. Any backlog for commercial orders is not believed to be significant. The decrease in U.S. government spending has materially increased the level of competition for defense business. The principal methods of competition are price and product performance. Defense business represents mostly competitive fixed- price contracts awarded by the United States government. Bulova competes with a small number of competitors with respect to defense contracts, several of whom have substantially greater resources and capabilities. In addition, Bulova competes with former defense manufacturers as well as commercial companies for its non-defense business. Patents, Research and Development: Bulova has various United States and foreign patents expiring between 1994 and 2006 and various pending patent applications. Properties: Bulova leases the primary facilities for its consumer products segment which consist of an 80,000 square foot plant in Woodside, New York for its principal executive and sales office, watch distribution, service and warehouse purposes, a 71,000 square foot plant in Maspeth, New York for clock service and warehouse purposes and a 25,000 square foot plant in Toronto, Canada for watch and clock sales and service. Bulova's primary facility for its defense products segment consists of its owned plant in Lancaster, Pennsylvania aggregating 290,000 square feet. This facility is subject to mortgage indebtedness of approximately $3,066,000 at December 31, 1993 with interest at the prime rate, and maturing in the year 1997. Bulova also leases a 100,000 square foot warehouse located in Lancaster, Pennsylvania and 18.5 acres of land for the storage of defense products located in West Willow, Pennsylvania. DIAMOND OFFSHORE DRILLING, INC. The Company's wholly owned subsidiary, Diamond Offshore Drilling Inc. ("Diamond Offshore"), is engaged, through its subsidiaries, in the business of owning and operating drilling rigs that are used primarily in drilling of oil and gas wells on a contract basis for companies engaged in exploration and production of hydrocarbons. The Company entered the drilling business in 1989 through the acquisition of 10 offshore rigs. Land rigs were acquired in 1990. An additional 40 offshore rigs were acquired in January 1992 through the acquisition of Odeco Drilling, Inc. ("Odeco"). Diamond Offshore accounted for 2.11%, 1.59%, and 0.47% of the Company's total revenue for the fiscal years ended December 31, 1993, 1992 and 1991, respectively. Drilling Units and Equipment: Diamond Offshore currently owns and operates 39 mobile offshore drilling rigs (16 jackup rigs, 22 semisubmersible rigs and a drillship), 19 land rigs and related equipment. An additional two offshore rigs, which are inactive, are currently held for sale. Offshore rigs are mobile units that can be relocated via either self propulsion or by the use of tugs enabling them to be repositioned based on market demand. Jackup rigs stand on the ocean floor with their drilling platforms "jacked up" on support legs above the water. They are best suited for drilling in water depths of less than 300 feet. Nine of Diamond Offshore's jackup rigs 23 are cantilevered rigs capable of over platform development drilling and workover as well as exploratory drilling. Of Diamond Offshore's 16 jackup rigs, 14 are located in the Gulf of Mexico and two are currently in South America. Semisubmersible rigs are supported by large pontoons and are partially submerged during drilling for greater stability. They are generally designed for deep water depths of up to 6,000 feet. Diamond Offshore operates three of the world's thirteen fourth-generation semisubmersible rigs. These rigs are equipped with advanced drilling equipment, are capable of operations in ultra deep waters in severe weather environments, and command high premiums from operators. Of Diamond Offshore's 22 semisubmersible rigs, 11 are currently located in the Gulf of Mexico, four are currently located in the North Sea, three are currently located in Brazil, three are currently located in Australia and one is currently located in the Black Sea. Diamond Offshore's drillship is self-propelled and designed to drill in deep water. Shaped like a conventional vessel, it is the most mobile of the major rig types. Diamond Offshore's drillship is located in Indonesia. Diamond Offshore's land rigs are all located in the United States and are also capable of mobilizing to different drilling sites. Drilling Contracts and Rig Utilization: Contracts for Diamond Offshore's drilling rigs are offered worldwide for either a fixed term, which may range from a few months to several years, or on a well-to-well basis. The following table sets forth the size and utilization rate of Diamond Offshore's fleet for the years ended December 31, 1993, 1992 and 1991. Data for 1991 does not include the rigs acquired from Odeco in January 1992. The utilization rate for a period is based on the ratio of days in the period during which the rigs were earning revenues to the total days in the period during which the rigs were available to work.
Years Ended December 31, ------------------------------------- 1993 1992 1991 ------------------------------------- Jackups Rigs in fleet at year-end .......... 16 19 5 Utilization during the year ........ 79.6% 57.9% 71.7% Semisubmersibles Rigs in fleet at year-end .......... 22 26 5 Utilization during the year ........ 71.9% 51.2% 73.3% Land Rigs in fleet at year-end .......... 19 19 32 Utilization during the year ........ 44.3% 22.5% 32.7%
The following table shows, for each of Diamond Offshore's four types of drilling rigs, the number of contract months available and the number of contract months committed for 1994. Contract months available are based on rigs that were marketed at December 31, 1993. Contract months committed are determined on the basis of executed contracts at December 31, 1993 and do not include customer option periods.
------------------------- Rig Rig Contract Contract Months Months Available Committed ------------------------- Jackups ........................................... 192 24 Semisubmersibles .................................. 264 66 Drillship ......................................... 12 4 Land .............................................. 108 3
24 Competition: The oil and gas drilling business is dependent on the drilling requirements of petroleum producers and is competitive in all of its phases. Diamond Offshore competes with a large number of drilling contractors and must continually allocate resources for technological changes, repairs and maintenance. Diamond Offshore's rigs are generally of modern design and equipped with the latest technology. Companies in the industry compete primarily on the basis of equipment day-rates and mobilization fees, personnel competence and equipment suitability and availability. Although utilization rates increased in 1993 with the rise in natural gas prices in the Gulf of Mexico, the oversupply of drilling rigs and low crude oil prices continue to depress conditions in the drilling industry. In view of the worldwide oversupply of rigs and the surplus of oil, Diamond Offshore expects that demand and compensation rates for its rigs could remain at depressed levels in 1994 and continue to have a material adverse impact on its operations. Operating Risks and Regulation: Diamond Offshore's operations are subject to the usual hazards incident to the drilling of oil and gas wells, such as blowouts, cratering and fires. Diamond Offshore's offshore operations are also subject to perils peculiar to marine operations, such as capsizing, collision, grounding and adverse weather and seas. Any of these hazards can seriously damage or destroy equipment, suspend drilling operations, and, through oil spillage, cause pollution damage to offshore or inland waters or the property of others. Diamond Offshore currently maintains insurance covering these risks, including expropriation, confiscation and nationalization of certain equipment in foreign waters. There is no assurance that insurance coverage will continue to be available at rates considered reasonable or that the insurance will be adequate to protect against liability and loss or damage resulting from all the consequences of a significant incident. Diamond Offshore is subject to stringent laws relating to the equipment and operation of vessels and drilling practices and methods. Additional governmental legislation and regulations involving the petroleum industry could significantly affect Diamond Offshore's operations. Properties: Diamond Offshore owns an 18,000 square foot building and 20 acres of land in New Iberia, Louisiana for its offshore drilling warehouse and storage facility, a 13,000 square foot building and 5 acres of land in Dyce, Scotland for its North Sea operations and a 15,000 square foot building and 10 acres of land in Alice, Texas for its onshore drilling office, warehouse and storage facility. Diamond Offshore also leases 50,000 square feet of office space for its corporate headquarters located in Houston, Texas and various warehouse and storage facilities in Scotland and Brazil for its offshore drilling operations. OTHER INTERESTS The Company owns approximately 20% of the outstanding common stock of CBS Inc. ("CBS"). Laurence A. Tisch, Chairman of the Board of Directors and Co-Chief Executive Officer of the Company, is Chairman, President and Chief Executive Officer of CBS. Preston R. Tisch, President and Co-Chief Executive Officer of the Company, is also a director of CBS. The Company also owns a 49 percent common stock interest in a joint venture which is engaged in the business of owning and operating six large crude oil tankers that are used primarily to transport crude oil from the Persian Gulf to a limited number of ports in the Far East, Northern Europe and the United States. In addition, the Company owns a 161,000 square foot first class office building which is leased to third parties. 25 EMPLOYEE RELATIONS The Company, inclusive of its operating subsidiaries as described below, employed approximately 27,100 persons at December 31, 1993 and considers its employee relations to be satisfactory. Lorillard employed approximately 3,800 persons at December 31, 1993. Approximately 1,600 of these employees are represented by labor unions under separate contracts with many local unions expiring at varying times and severally renegotiated and renewed. Lorillard has collective bargaining agreements covering hourly rated production and service employees at various Lorillard plants with the Tobacco Workers International Union, the International Brotherhood of Firemen and Oilers, and the International Association of Machinists. Lorillard has a retirement plan, a deferred profit sharing plan, and other benefits for its hourly paid employees who are represented by the foregoing unions. Loews Hotels employed approximately 2,500 persons at December 31, 1993, approximately 1,550 of whom are union members covered under collective bargaining agreements. Loews Hotels has experienced satisfactory labor relations and provides comprehensive benefit plans for its hourly paid employees. The Company maintains a retirement plan, group life, disability and health insurance program and a savings plan for salaried employees. Lorillard and Loews Hotels salaried employees also participate in these benefit plans. Diamond Offshore employed approximately 2,600 persons at December 31, 1993, approximately 300 of whom are union members. Diamond Offshore has experienced satisfactory labor relations and provides comprehensive benefit plans for its employees. CNA and its subsidiaries employ approximately 16,800 persons and have experienced satisfactory labor relations. CNA and its subsidiaries have comprehensive benefit plans for substantially all of their employees including a retirement plan, a savings plan, a disability program, a group life program and a group health care program. Bulova and its subsidiaries employ approximately 1,000 persons, approximately 600 of whom are union members. Bulova and its subsidiaries have experienced satisfactory labor relations. Bulova has comprehensive benefit plans for substantially all employees. Item 2. Properties. Information relating to the properties of Registrant and its subsidiaries is contained under Item 1. Item 3. Legal Proceedings. 1. CNA is involved in various lawsuits involving environmental pollution claims and litigation with Fibreboard Corporation. Information involving such lawsuits is incorporated by reference to Note 16 of the Notes to Consolidated Financial Statements in Item 8. 2. A number of lawsuits have been filed against Lorillard and other manufacturers of tobacco products seeking damages for cancer and other health effects claimed to have resulted from the use of cigarettes or from exposure to tobacco smoke. Presently, forty-three such cases are pending in the United States federal and state courts against manufacturers of tobacco products generally; Lorillard is a named defendant in fourteen of these cases. Eighteen of these cases, including four against Lorillard, have been commenced since January 1, 1993. Plaintiffs have asserted claims based on, among other things, theories of negligence, fraud, misrepresentation, strict liability, breach of warranty, enterprise liability, civil conspiracy, intentional infliction of harm, and failure to warn of the allegedly harmful and/or addictive nature of tobacco products. Plaintiffs seek unspecified amounts in compensatory and punitive damages in many cases, and in other cases damages are stated to amount to as much 26 as $100,000,000 in compensatory damages and $5,000,000,000 in punitive damages. Two of these cases are set for trial in 1994. One such case has been tried during 1994 in which the jury returned a verdict in favor of Lorillard. That verdict is currently on appeal. One pending case, Broin v. Philip Morris Companies, Inc., et al. (Circuit Court Dade County, Florida, filed October 31, 1991), is a purported class action brought by thirty-one plaintiffs against Lorillard and other named defendants, including other manufacturers of tobacco products, on behalf of flight attendants claiming injury as a result of exposure to environmental tobacco smoke in the cabins of aircraft. Plaintiffs seek an unspecified amount in compensatory damages and $5,000,000,000 in punitive damages. The class action allegations in the complaint were dismissed by the trial court, but this ruling has been reversed by a Florida court of appeals and remanded to the trial court for further consideration. Plaintiffs may now seek formal certification of a class action. In addition to the foregoing cases, one pending case, Cordova v. Liggett Group, Inc., et al. (Super. Ct. San Diego County, California, filed May 12, 1992), alleges that Lorillard and other named defendants, including other manufacturers of tobacco products, engaged in unfair and fraudulent business practices in connection with activities relating to the Council for Tobacco Research-USA, Inc., of which Lorillard is a sponsor, in violation of a California state consumer protection law by misrepresenting to or concealing from the public information concerning the health aspects of smoking. Plaintiff seeks an injunction ordering defendants to undertake a "corrective advertising campaign" in California to warn consumers of the health hazards associated with smoking, to provide restitution to the public for funds "unlawfully, unfairly, or fraudulently" obtained by defendants, and to "disgorge" all revenues and profits acquired as a result of defendants' "unlawful, unfair and/or fraudulent business practices." An adverse development in this case could encourage the filing of additional actions in other states with consumer protection laws similar to California's. Several additional cases have been filed against Lorillard seeking damages for cancer and other health effects claimed to have resulted from exposure to asbestos fibers which were incorporated, for a limited period of time, almost forty years ago, into the filter material used in one of the brands of cigarettes manufactured by Lorillard. Presently eleven such cases are pending in federal and state courts against Lorillard. Six such cases have been filed since January 1, 1993. Allegations of liability against Lorillard include negligence, strict liability, fraud, misrepresentation and breach of warranty. Plaintiffs seek unspecified amounts in compensatory and punitive damages in many cases, and in other cases damages are stated to amount to as much as $10,000,000 in compensatory damages and $100,000,000 in punitive damages. Two of these cases are currently set for trial in 1994. One such case has been tried during 1994 in which the jury returned a defense verdict. Another pending case, Lacey v. Lorillard Tobacco, Inc., et al. (Circuit Court, Fayette County, Alabama, filed in March 1994), alleges that the defendants, Lorillard and two other cigarette manufacturers, did not disclose to the plaintiff or other cigarette smokers in the State of Alabama the nature, type, extent and identity of additives, additions, or additional substances that the defendants allegedly caused or allowed to be made a part of cigarettes or cigarette components. Plaintiff seeks certification of the case as a class action, with the members of the class to be comprised of individuals who have smoked or are continuing to smoke cigarettes manufactured for sale and sold in the State of Alabama. Plaintiff requests injunctive relief requiring defendants to list the additives, additions or additional substances that defendants have caused or allowed to be placed onto or within cigarettes or cigarette components manufactured for sale and sold in the State of Alabama. Plaintiff seeks monetary damages on behalf of his individual claim and on behalf of each member of the purported class arising out of the complaint's allegations not to exceed $48,500 for the individual claim or for any individual member of the class. One of the defenses raised by Lorillard in certain cases is preemption by the Federal Cigarette Labeling and Advertising Act (the "Labeling Act"). Cipollone v. Liggett Group, Inc., et al., was tried against Lorillard and two other tobacco companies in the Unites States District Court, District of New Jersey, in 1988. The trial resulted in a verdict in favor of Lorillard and another tobacco company. A verdict of $400,000 was rendered in favor of the plaintiff against the third defendant, Liggett Group, Inc., on a breach of express warranty claim. The United States Court of Appeals for the Third Circuit later reversed this judgment in favor of the plaintiff and remanded the case for a new trial. The case was appealed to the United States Supreme Court where, on June 27 24, 1992, the Court reversed in part, and affirmed in part, the Third Circuit ruling concerning the extent to which the Labeling Act preempts certain tort claims. The Supreme Court held in a plurality opinion that the Labeling Act, as enacted in 1965, does not preempt common law damage claims but that the Labeling Act, as amended in 1969, does preempt claims against tobacco companies arising after July 1, 1969 which assert that the tobacco companies failed to adequately warn of the alleged health risks of cigarettes, sought to undermine or neutralize the Labeling Act's mandatory health warnings, or concealed material facts concerning the health effects of smoking in their advertising and promotion of cigarettes. The Supreme Court held that claims against tobacco companies based on fraudulent misrepresentation, breach of express warranty, or conspiracy to misrepresent material facts concerning the alleged health effects of smoking are not preempted by the Labeling Act. The Supreme Court in so holding did not consider whether such common law damage actions were valid under state law. The effect of the Supreme Court's decision on pending and future cases against Lorillard and other tobacco companies will likely be the subject of further legal proceedings. The Cipollone case, however, will not be retried. On November 5, 1992, a consent order dismissing the Cipollone case with prejudice and without costs was entered by the District Court. Additional litigation involving claims such as those held to be preempted by the Supreme Court in Cipollone could be encouraged if legislative proposals to eliminate the federal preemption defense, pending in Congress since 1991, are enacted. It is not possible to predict whether any such legislation will be enacted. In addition to the defenses based on preemption under the Supreme Court decision referred to above, Lorillard believes that it has a number of other valid defenses to pending cases. These defenses, where applicable, include, among others, statutes of limitations or repose, assumption of the risk, comparative fault, the lack of proximate causation, and the lack of any defect in the product alleged by a plaintiff. Lorillard believes, and has been so advised by counsel, that some or all of these defenses may, in any of the pending or anticipated cases, be found by a jury or court to bar recovery by a plaintiff. In one recent smoking and health case in which Lorillard is not a defendant, Horton v. The American Tobacco Company, et al. (Circuit Court Lafayette County, Mississippi), a jury found in favor of plaintiffs but awarded no damages against the defendant. The judgment in this case is under appeal by both parties. In another smoking and health case in which Lorillard is not a defendant, Wilks v. The American Tobacco Company, et al. (Circuit Court Washington County, Mississippi), the trial court found that cigarettes are, as a matter of law, "defective and unreasonably dangerous for human consumption" and held that the defendant cigarette manufacturer would be absolutely liable for any injuries caused by smoking. The court also struck all available state law defenses based on decedent's conduct. However, the trial of this case resulted in a defense verdict because the jury found that smoking was not the cause of plaintiff's injury. Plaintiffs' motions for new trial and for judgment notwithstanding the verdict were denied. Plaintiffs have filed a notice of appeal which is currently pending. Smoking and health related litigation has been brought by plaintiffs against Lorillard and other manufacturers of tobacco products for many years. While Lorillard intends to defend vigorously all such actions which may be brought against it, it is not possible to predict the outcome of any of this litigation. Based upon the foregoing, however, management believes that the outcome of all pending litigation should not have a material adverse effect on the financial condition or results of operations of the Company. Any adverse development in any of the foregoing matters, whether or not Lorillard is a party, could prompt the filing of additional cases against Lorillard. A Grand Jury investigation is presently being conducted by the United States Attorney's office for the Eastern District of New York regarding possible fraud by Lorillard and other tobacco companies relating to smoking and health research undertaken or administered by the Council for Tobacco Research-USA, Inc. Lorillard is unable to predict the outcome of this investigation. An adverse outcome in this investigation could result in criminal, administrative or other proceedings against Lorillard. Lorillard received a Civil Investigative Demand ("CID") dated January 11, 1994, from the Antitrust Division of the United States Department of Justice. The CID, which requests the production of certain documents, was issued in the course of an antitrust investigation to determine whether Section 1 of the Sherman Act, 15 U.S.C. Section 1, may have been violated by joint activity to restrain competition in the manufacture and sale of 28 cigarettes, including joint activity to limit or restrain research and development of fire safe or self extinguishing cigarettes or product innovation. Lorillard is presently scheduled to respond to the CID on May 9, 1994. This investigation is in its preliminary stages and it is impossible at this time to predict its ultimate outcome. An adverse outcome in this investigation could result in civil or other proceedings against Lorillard. Management believes that the outcome of these pending investigations should not have a material adverse effect upon the financial condition or results of operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders. None.
EXECUTIVE OFFICERS OF THE REGISTRANT First Became Name Position and Offices Held Age Officer - -------------------------------------------------------------------------------- Kenneth Abrams .... Vice President-Personnel 60 1975 Gary W. Garson .... Vice President and Assistant Secretary 47 1988 Robert J. Hausman . Vice President 70 1973 Barry Hirsch ...... Senior Vice President and Secretary 60 1971 Herbert C. Hofmann Senior Vice President 51 1979 John J. Kenny ..... Treasurer 56 1991 Guy A. Kwan ....... Controller 51 1987 John G. Malino .... Vice President-Real Estate 54 1985 Stuart B. Opotowsky Vice President-Tax 59 1987 Richard E. Piluso . Vice President-Internal Audit 55 1990 Roy E. Posner ..... Senior Vice President and Chief Financial Officer 60 1973 Dennis Smith ...... Vice President-Management Information Services 47 1990 James S. Tisch .... Executive Vice President 41 1981 Jonathan M. Tisch . Vice President 40 1987 Laurence A. Tisch . Chairman of the Board and Co-Chief Executive Officer 71 1959 Preston R. Tisch .. President and Co-Chief Executive Officer 67 1960
Laurence A. Tisch and Preston R. Tisch are brothers. Andrew H. Tisch and James S. Tisch are sons of Laurence A. Tisch and Jonathan M. Tisch is a son of Preston R. Tisch. None of the other officers or directors of Registrant is related to any other. All executive officers of Registrant have been engaged actively and continuously in the business of Registrant for more than the past five years. Officers are elected and hold office until their successors are elected and qualified, and are subject to removal by the Board of Directors. 29 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. Price Range of Common Stock Loews Corporation's common stock is listed on the New York Stock Exchange. The following table sets forth the reported consolidated tape high and low sales prices in each calendar quarter of 1993 and 1992:
1993 1992 -------------------------------------------------------- High Low High Low - -------------------------------------------------------------------------------- First Quarter ......... $120.25 $98.13 $114.50 $105.50 Second Quarter ........ 110.88 92.75 118.63 103.50 Third Quarter ......... 98.63 86.75 126.50 110.63 Fourth Quarter ........ 98.50 90.50 125.25 109.00
Item 6. Selected Financial Data.
Years Ended December 31, ----------------------------------------------------------------------------- 1993 1992 1991 1990 1989 - ----------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Results of Operations: Revenues .................. $13,686,777 $13,691,454 $13,620,264 $12,636,925 $11,436,722 Income (loss) before cumulative effect of changes in accounting principles ............... 594,121 (22,097) 904,338 804,650 907,141 Per share ................. 9.27 (.33) 13.14 11.01 12.07 Net income ................ 594,121 122,614 904,338 804,650 907,141 Per share ................. 9.27 1.87 13.14 11.01 12.07 Financial Position: Total assets (a) .......... 45,849,752 43,555,514 42,684,157 38,359,766 34,651,369 Long-term debt ............ 2,195,670 1,759,595 1,944,710 1,826,378 1,865,552 Shareholders' equity ...... 6,127,198 5,526,990 5,667,072 5,043,397 4,813,994 Cash dividends per share .. 1.00 1.00 1.00 1.00 1.00 Book value per share ...... 99.59 84.90 84.18 72.13 64.14 Shares of common stock outstanding ............. 61,525 65,099 67,320 69,917 75,059 (a) Restated for change in accounting for reinsurance contracts in 1993. In 1993 the Company changed its method of accounting for reinsurance contracts and certain investments in debt and equity securities. In 1992 the Company changed its method of accounting for postretirement benefits, income taxes and certain workers' compensation and disability claims. See Note 1 of Notes to Consolidated Financial Statements.
30 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources: Insurance Property and casualty and life insurance operations are wholly owned subsidiaries of CNA Financial Corporation ("CNA"). CNA is an 83% owned subsidiary of the Company- For the year ended December 31, 1993, CNA reported a $251.7 million operating loss net of tax (exclusive of realized gains/losses and accounting changes), compared to $897.8 million for the prior year. In each of the last two years, results were adversely affected by substantial additions to reserves for asbestos-related bodily injury claims. The 1993 operating loss reflects a third quarter $500 million addition to Continental Casualty Company's ("Casualty") claim reserves, which resulted in a $270.1 million charge, or $4.21 per share, against the Company's net income. In 1992 Casualty also increased its claim reserves with respect to asbestos-related bodily injury cases by $1.5 billion, resulting in an after-tax charge of $822.7 million, or $12.53 per share. These reserving actions were taken in recognition of Casualty's litigation with Fibreboard Corporation ("Fibreboard"), a former asbestos manufacturer. In February 1993, CNA reported that Casualty intended to discuss a global agreement to settle third party asbestos-related bodily injury claims with Fibreboard. An agreement in principle was reached in August 1993 and executed in December 1993 with Fibreboard, Pacific Indemnity Company (a subsidiary of Chubb Corporation) and a negotiating committee of asbestos claimant attorneys. CNA worked aggressively throughout the year with all involved parties to reach this settlement. Assuming final court approval, the Fibreboard agreement removes a major source of financial uncertainty for CNA and enables management to focus even more attention and resources on strengthening the economic value of CNA's businesses. No material reserve increases are anticipated to fulfill CNA's obligations in regard to Fibreboard liabilities. See Note 16 of the Notes to Consolidated Financial Statements for a further discussion of Fibreboard. While CNA's 1993 and 1992 results were affected most significantly by the Fibreboard litigation, they also reflect the impact of serious external pressures on profitability throughout the insurance industry. Foremost among these are the long standing cycle of inadequate pricing in property and casualty commercial lines and low investment yields due to declining interest rates. In addition, complex and costly litigation has been continuing, fueled by the tendency of the courts to interpret insurance contracts beyond their stated intent. CNA's commercial lines remain subject to an industry downcycle that has lasted over seven years and has seriously depressed profitability. CNA cannot predict when the current negative cycle will turn. The current phase of the downcycle has been characterized by a difficult pricing environment caused by strong market competitiveness, a trend toward alternative risk mechanisms such as self- insurance and regulatory constraints on adequate premium rates, especially in the workers' compensation line of business. Profitability for the life segment remains stable, although negatively affected by intense competition, high health care costs and weak investment yields. Increasing costs of health care have resulted in a continued market shift away from traditional forms of health coverage toward managed care products. The federal government's initiative to control health care costs and provide universal access to health care was presented in 1993. The impact of potential health care reform cannot be determined at this time. Such reform may impact both individual and group accident and health, workers' compensation, automobile liability and medical malpractice business of CNA. CNA has urged a meaningful role for the private sector in any proposed plan. The present health care system is clearly in need of reform, and CNA has emphasized that the competitive strengths of the insurance industry must be an integral part of a workable solution. CNA's ability to compete in this market will be increasingly dependent on its ability to control costs through managed care techniques, innovation, and quality customer focused service. While CNA's strong financial position continues to represent a major competitive advantage, CNA continues to take a number of initiatives to respond to the many uncertainties and changes impacting the insurance environment. One of these has been to continue to focus on the risk characteristics and premium rates in commercial lines. CNA will continue to seek business in lines where it his sizable market share, 31 substantial experience, and foresees clear profit potential over the long term. The emphasis is on reasonable rates rather than volume growth. One of CNA's primary goals has been to provide more efficient and responsive quality service to our customers. These actions include working closely with insureds to reduce claims costs through loss control and fraud prevention; providing professional services to self insured accounts and other alternative markets; implementing medical and workers' compensation cost management programs; and reinforcing business partnerships with the independent agents who represent CNA and equipping them with new or upgraded products tailored to specific customer needs. Additionally, CNA has increased the flexibility, productivity, and customer focus of its employee force through less centralized decision making and more widespread use of automation tools. CNA also continues to devote time and effort to legislative concerns in the interests of a more equitable and stable insurance marketing climate. It has enjoyed some success in enlisting support for workers' compensation reform in several states and opposing unnecessary restrictions on the insurance industry in others. CNA's property and casualty insurance subsidiaries' statutory surplus had grown from $2.7 billion five years ago to $3.9 billion in 1991. In 1992, property and casualty surplus declined to $3.1 billion, primarily due to the $1.5 billion in asbestos reserves discussed above. In 1993 property and casualty surplus rose to approximately $3.6 billion despite another $500 million increase in asbestos reserves. Statutory surplus of CNA's life insurance subsidiaries grew from $637 million at December 31, 1988 to over $1 billion at December 31, 1993. Included in the property and casualty surplus increases are capital contributions from CNA to Casualty of $475 and $120 million in 1993 and 1990, respectively. Dividends of $150, $100 and $130 million were paid to CNA by Casualty in 1993, 1992 and 1991, respectively. Life statutory surplus includes capital contributions from Casualty of $100 million in 1990. CNA's general account investment portfolio is managed to maximize after tax investment return, while minimizing credit risks, with investments concentrated in high quality securities. CNA has the capacity to hold its fixed income portfolio to maturity. However, securities may be sold as part of CNA's asset/liability strategies or to take advantage of investment opportunities generated by changing interest rates, prepayments, tax and credit considerations, or other similar factors. Accordingly, the fixed income securities are classified as available for sale. During 1993, CNA's consolidated investments increased by $2.9 billion, to $25.4 billion. This increase is primarily due to investment of operating cash flow and realized gains on sales of securities, $504 million of unrealized appreciation due to reporting debt securities at fair value, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, and $495 million in net proceeds from borrowings. Consolidated investments consist primarily of fixed income securities, which include bonds and redeemable preferred stocks. The general account portfolio consists primarily of high quality marketable debt securities, 96% of which are rated as investment grade primarily by nationally recognized rating agencies. At December 31, 1993, tax-exempt securities and short-term investments comprised approximately 19% and 28%, respectively, of the general account's total investment portfolio compared to 42% and 20%, respectively, at December 31, 1992. Historically, CNA has maintained short-term assets at a level that provided for liquidity to meet its short-term obligations, principally anticipated claim payout patterns. Throughout 1992 and 1993, the level of short-term investments has increased beyond that needed for short-term liquidity. Though expected to result in a decline in investment income in the near term, management believes that the increased concentration in short-term investments will reduce the impact that a rise in interest rates would have on its fixed income portfolio. At December 31, 1993, the major components of the short-term investment portfolio were approximately $1.2 billion of U.S. Treasury bills and $4.5 billion of high grade commercial paper. As of December 31, 1993, in accordance with SFAS No. 115, CNA's general account investments in bonds and redeemable preferred stocks were carried at a fair value of $17.6 billion. In both 1992 and 1991 these securities were carried at the lower of amortized cost or market value which amounted to $17.4 and $18.8 billion, respectively. This compares to fair values of $18.2 and $19.7 billion on those respective dates. At December 31, 1993, fixed income securities unrealized gains amounted to approximately $504 million, after realizing $741 million in capital gains from the bond portfolio during the year. This compares to $846 and $931 million of unrealized gains at December 31, 1992 and 1991, respectively. The gross unrealized gains 32 and losses for the fixed income securities portfolio at December 31, 1993, were $564 and $60 million, respectively, compared to $931 and $85 million, respectively, at December 31, 1992. Net unrealized gains on general account bonds at December 31, 1993 include net unrealized gains on high yield securities of $15 million, compared to $44 million at December 31, 1992. High yield securities are bonds rated as below investment grade by bond rating agencies, plus private placements and other unrated securities which, in the opinion of management, are below investment grade. Carrying values of high yield securities in the general account were $727 million (fair value) at December 31, 1993, compared to $704 million (amortized cost) at December 31, 1992. At December 31, 1993, total separate account investments amounted to $6.5 billion with taxable debt securities representing approximately 96% of the separate accounts portfolio. Approximately 86% of separate account investments are used to fund guaranteed investment contracts ("GIC's") for which CNA's life insurance affiliate guarantees principal and a specified return to the contractholders. At December 31, 1993, all fixed income securities in the GIC portfolio were carried at fair value in accordance with SFAS No. 115 and amounted to $5.4 billion. In both 1992 and 1991, these securities were carried at the lower of amortized cost or market which amounted to $5.8 and $5.4 billion, respectively. This compares to market values of $6.0 and $5.6 billion on those respective dates. At December 31, 1993, fixed income securities unrealized gains amounted to approximately $148 million. This compares to $158 million in unrealized gains at December 31, 1992 and $203 million at December 31, 1991. The gross unrealized gains and losses for the fixed income securities portfolio at December 31, 1993, were $163 and $15 million, respectively, compared to $184 and $26 million, respectively, at December 31, 1992. At December 31, 1993 high yield securities in the GIC portfolio were carried at fair value and amounted to $1,068 million. In 1992 and 1991, these securities were carried at the lower of amortized cost or market value which amounted to $779 and $809 million, respectively. Net unrealized gains on high yield securities held in such separate accounts were $56 million at December 31, 1993, compared to $28 million at December 31, 1992 and unrealized losses of $14 million at December 31, 1991. High yield securities generally involve a greater degree of risk than that of investment grade securities. Expected returns should, however, compensate for the added risk. The risk is also considered in the interest rate assumptions in the underlying insurance products. At December 31, 1993, CNA's concentration in high yield bonds, including separate accounts, was approximately 4.3% of its total assets. In addition, CNA's exposure to the risks of the commercial mortgage loan and real estate markets is substantially less than the industry average. CNA's concentration in mortgage loans and real estate was less than 1% of its total assets. Included in CNA's fixed income securities at December 31, 1993 (general and GIC portfolios) are $4.4 billion of asset-backed securities, consisting of approximately 47% in U.S. Government agency issued pass-through certificates, 47% in collateralized mortgage obligations ("CMO's"), and 6% in corporate asset- backed obligations. The majority of CMO's held are U.S. Government agency issues, which are actively traded in liquid markets and are priced monthly by broker-dealers. At December 31, 1993, the fair value of asset-backed securities exceeded amortized cost by approximately $87 million compared to $172 million for the comparable period a year ago. CNA limits the risks associated with interest rate fluctuations and prepayment by concentrating its CMO investments in early planned amortization classes with wide bands and relatively short principal repayment windows. Over the last few years, concern has been raised regarding the quality of insurance company invested assets. At December 31, 1993, 52% of the general account's debt securities portfolio was invested in U.S. Government and affiliated securities, 25% in other AAA rated securities and 15% in AA and A rated securities. DNA's GIC fixed income portfolio is comprised of 30% U.S. Government and affiliated securities, 14% other AAA rated securities and 24% in AA and A rated securities. These ratings are primarily from nationally recognized rating agencies (94% of the general account portfolio and 93% of the GIC portfolio). The liquidity requirements of CNA are met primarily by funds generated from operations. The principal operating cash flow sources of CNA's property and casualty and life insurance subsidiaries are premiums and investment income. The primary operating cash flow uses are payments of claims, policy benefits and operating expenses. For the year ended December 31, 1993, CNA's operating activities generated net cash flows of $1.3 billion, compared to $1.0 and $1.8 billion in 1992 and 1991, respectively. The increase in cash flow, as compared 33 with 1992 is due primarily to federal income tax recoveries of $294 million offset by a decrease of approximately $96 million in investment income received. CNA believes that future liquidity needs will be met primarily from operations. Additional sources of cash flow include sales and maturities of investments, and financing activities. CNA's debt position in relation to total capital is low which allowed it to take advantage of the current borrowing opportunities at favorable rates in the capital markets. As a result, on October 25, 1993, CNA filed a shelf registration statement with the Securities and Exchange Commission which made $900 million of debt securities available for issuance from time to time. In addition $100 million from a previous shelf registration remained available for issuance. In November 1993, CNA sold $250 million principal amount of 6.3% notes, due 2003, and $250 million principal amount of 7.3% debentures, due 2023, at an effective rate per annum of 6.4% and 7.3%, respectively. CNA contributed $475 million of the proceeds from this offering to the capital of Casualty. An additional $500 million of debt securities and/or preferred stock remains available for issuance under the shelf registration statement. Net cash flows are invested in marketable securities. Investment strategies employed by CNA's insurance subsidiaries consider the cash flow requirements of the insurance products sold and the tax attributes of the various types of marketable investments. Cigarettes Lorillard, Inc. and subsidiaries ("Lorillard")- Funds from operations continue to exceed operating requirements. Lorillard generated net cash flow from operations of approximately $538 million for the year ended December 31, 1993, compared to $595 million for the prior year. No material capital expenditures are anticipated during 1994. For a number of years through 1992 leading cigarette marketers, including Lorillard, had increased the price of their premium brands. For the period 1982 to 1992 the annual price increase for Lorillard's premium brands averaged approximately 10%. Lorillard's cash flows from operations during this period benefited significantly from these price increases since virtually all of Lorillard's sales are in the premium priced segment, with Newport accounting for more than two-thirds of Lorillard's total unit sales. On April 2, 1993, Philip Morris USA, the largest marketer of premium priced cigarettes in the United States, announced significant changes in pricing policies for its premium priced brands, including a decision to reduce the average price of its Marlboro brand through various price promotions. Philip Morris stated that it "expects to forego further price increases on premium brands for the foreseeable future." R.J. Reynolds Tobacco Co., the second largest U.S. marketer of premium priced cigarettes, announced that it would take appropriate steps to maintain its competitive position. Philip Morris and R.J. Reynolds subsequently announced new lower pricing policies to replace these promotions. Effective August 9, 1993 Lorillard reduced its premium brand wholesale cigarette unit prices by approximately 25% to maintain its competitive position. These price moves have established two price tiers for the industry, eliminating much of the price confusion in the market place, and substantially narrowing the price gap between premium and discount cigarettes. These developments may tend to stabilize volume and perhaps slow the rapid growth of discount cigarettes. While promotional spending can be reduced, the overall impact of the new lower pricing will substantially reduce Lorillard's revenues, income contribution and cash flow. In November 1993, Philip Morris, R.J. Reynolds and Lorillard announced a price increase of $2.00 per thousand cigarettes. Forty-four lawsuits are pending in U.S. federal and state courts against cigarette manufacturers seeking damages for cancer or other health effects claimed to have resulted from the use of or exposure to cigarettes or other tobacco products. Lorillard is a defendant in 14 such cases. Lorillard is also a defendant in 10 lawsuits seeking damages for health effects claimed to have resulted from exposure to asbestos fibers which were incorporated, for a limited period of time almost forty years ago, into the filter material used in one brand of cigarettes manufactured by Lorillard. Plaintiffs seek unspecified amounts of compensatory and punitive damages in many cases, and in other cases damages are stated to amount to as much as $100 million in compensatory damages and as much as $5 billion in punitive damages. 34 To date, no lawsuit has resulted in damages being awarded against Lorillard. Two cases, tried in late 1993 and January 1994, resulted in verdicts in favor of Lorillard. However, the fact that a cigarette manufacturer prevails in a case does not necessarily mean that a cigarette manufacturer will prevail in future cases; likewise, a loss in any of the pending cases would not necessarily mean that additional cases will be lost. Lorillard intends to defend vigorously all product liability lawsuits filed against it. Hotels Loews Hotels Holding Corporation and subsidiaries- Funds from operations continue to exceed operating requirements. Funds for future capital expenditures and working capital requirements are expected to be provided from operations. Watches and Other Timing Devices Bulova Corporation and subsidiaries ("Bulova"). Bulova is a 97% owned subsidiary of the Company. Competition and oversupply of watch products continue to adversely affect Bulova. The defense products segment continues to be adversely impacted by the contraction of defense spending by the United States government. Bulova may require additional working capital advances from the Company from time to time. While the Company has no obligation to enter into or maintain arrangements for any further funding requirements, it is anticipated that it would be provided through various arrangements with Bulova. Drilling Diamond Offshore Drilling, Inc. and subsidiaries ("Diamond Offshore")- Oversupply of drilling rigs and low crude oil prices continue to depress conditions in the drilling industry and to adversely impact Diamond Offshore. In 1993 drilling activity in the Gulf of Mexico increased due primarily to higher natural gas prices. This improvement enabled Diamond Offshore to generate sufficient funds from operations to meet its operating requirements. Although funds for future capital expenditures and working capital requirements are expected to be provided from operations, Diamond Offshore may require additional advances from the Company due to the cyclical nature of the industry. Parent Company During 1993 the Company purchased 3,574,000 shares of its outstanding Common Stock at an aggregate cost of approximately $336.3 million. The funds required for such purchases were provided from working capital. Depending on market conditions, the Company, from time to time, may purchase additional shares in the open market or otherwise. In February 1993 the Company redeemed, at par, its outstanding 10% subordinated notes due 1996. In April 1993 the Company redeemed, at 105.8%, its outstanding 9% senior sinking fund debentures due 2016. The aggregate cost of these redemptions totaled $368 million and was provided from internally generated funds. In June 1993 the Company sold $300 million principal amount of 7.6% senior notes due 2023 at an effective rate of 7.8% per annum. In October 1993 the Company sold $400 million principal amount of 7% senior notes due 2023 (the "7% Notes") at an effective rate of 7.2% per annum. The Company currently has an aggregate $300 million of debt securities and/or preferred stock available for issuance under a shelf registration statement. In November 1993 the Company redeemed all of its currently outstanding zero coupon convertible subordinated notes due 2004 for an aggregate redemption price of approximately $411 million. The Company used the net proceeds received from the sale of the 7% Notes, together with general corporate funds, to redeem these notes. 35 Results of Operations: Revenues declined by $4.7 million and increased by $66.5 million as compared to 1992 and 1991, respectively. Income before accounting changes increased by $616.2 million and decreased by $310.2 million, as compared to 1992 and 1991, respectively. Insurance Property and casualty revenues increased by $211.0 million and decreased by $319.4 million, or 2.7% and 3.8%, as compared to 1992 and 1991, respectively. Property and casualty premium revenues decreased by $78.5 and $380.2 million, or 1.2% and 5.7%, as compared to 1992 and 1991, respectively. The decrease from 1992 was principally attributable to increased utilization of a high deductible program for large commercial accounts. This accounted for $235 million in reduced premiums. Involuntary risks premiums were $182 million below the prior year primarily due to a decline in involuntary workers' compensation premiums recorded for the current and previous years. Small commercial accounts premiums declined by $70 million. These declines were partially offset by growth in professional and specialty lines and commercial reinsurance assumed premiums of $217 million, group accident and health of $75 million and personal lines packages premiums of $63 million. Property and casualty investment income was down 13.4% from $1,224 million reported in 1992 and down 17.4% from 1991. Investment income decreased primarily due to the continuing general decline in interest rates and an increase in short-term investments (excluding investments relating to loaned securities) from $3.0 billion at December 31, 1992 to $5.1 billion at December 31, 1993. Life insurance revenues increased by $6.8 and $190.9 million, or 0.2% and 7.3%, as compared to 1992 and 1991, respectively. Life premium revenues for 1993 were approximately the same as 1992, and increased by approximately $122.7 million, or 5.4%, as compared to 1991. Property and casualty underwriting losses were $1,791.8 million in 1993, compared to $2,999.6 and $1,224.7 million in 1992 and 1991, respectively. The combined ratio is the sum of the loss ratio and the expense ratio. The loss ratio is the percentage of incurred claims and claims adjustment expense to premiums earned. The expense ratio is the percentage of underwriting expenses, including the change in deferred acquisition costs, to premiums earned. The combined ratio was 126.4 for 1993 compared with 144.8 and 116.3 for 1992 and 1991, respectively. As previously discussed, the primary reason for the 1993 and 1992 poor operating results was the addition of $500 million in underwriting losses related to Fibreboard in the third quarter of 1993 and $1.5 billion in the fourth quarter of 1992. Catastrophe losses for 1993 were approximately $74 million, compared with $270 million in 1992. CNA's 1992 catastrophe losses related primarily to Hurricane Andrew. For the Los Angeles area earthquake and winter storms occurring in the first quarter of 1994, CNA has recorded losses on reported claims of approximately $65 million. Further loss development related to unreported claims, including assumed reinsurance, is estimated at approximately $35 million. Property and casualty pre-tax results include losses for involuntary risks of $80.8 million in 1993. Involuntary risk charges were $257.3 and $267.0 million in 1992 and 1991, respectively. Involuntary risks include mandatory participation in residual markets, statutory assessments for insolvencies of other insurers and other involuntary charges. CNA's share of involuntary risks is generally a function of its share of the voluntary market by line of insurance in each state. CNA records the estimated effects of its mandatory participation in residual markets on an accrual basis. These estimates are adjusted as premium, claim and expense activity is received from the residual markets' administrators. CNA records assessments for insolvencies as they are paid rather than on an accrual basis. Such an accrual process would be very difficult, as past experience is not a reliable indicator of future activity. Further, information currently available from all the states' life and property and casualty guarantee funds is fairly limited and would not provide reliable data on which to base an estimated liability. Many states allow recovery of insolvency assessments by a direct offset to premium taxes or a separate policy surcharge. In addition, some states assess prospectively based on current premiums written. Thus, it would be unclear whether or not future assessments should be accrued on a current basis as they do not necessarily represent a liability until assessed. In any event, CNA believes that any potential estimated necessary liability would not be material. 36 Property and casualty underwriting losses include reserve increases (decreases) related to prior years, net of reinsurance recoverable, of $590, $1,617 and $(106) million for the years 1993, 1992 and 1991, respectively. This reserve development includes $601, $1,689 and $48 million for asbestos claims, primarily representing reserve additions related to the Fibreboard litigation as discussed above. Adverse reserve development for reported environmental pollution claims and claims expenses totaled $107, $48 and $47 million, respectively. In 1993, CNA allocated approximately $340 million of claim reserves for unreported environmental pollution claims. Adverse reserve developments for asbestos and environmental pollution claims were offset, in part, by favorable development in other lines. For 1993, favorable trends were represented primarily by positive severity experience in professional liability lines and improvement in involuntary workers' compensation experience, resulting in reserve decreases of $182 and $148 million, respectively. See Note 16 of the Notes to Consolidated Financial Statements for further discussion of asbestos and environmental pollution exposures. In early 1993, CNA began a program of realigning its portfolio, which resulted in realizing gains in its investment portfolio that increased Casualty's statutory surplus. Casualty sold approximately $35.4 billion of fixed income and equity securities in 1993, realizing pre-tax net gains of $741.3 million. Of the $35.4 billion of securities sold, approximately $11.5, $13.5 and $5.8 billion were from the U.S. Treasury, Government mortgage-backed and tax-exempt municipal bond portfolios, respectively. The $2.1 billion increase in short-term securities since December 31, 1992 has been invested primarily in U.S. Treasury bills and high grade commercial paper. In addition to reducing the impact that a rise in interest rates would have on the fixed income portfolio, the increase in taxable short-term securities and the decrease in tax-exempt investments will allow the Company to minimize additional alternative minimum tax credit. Since the portfolio is extremely liquid, CNA has the flexibility to shift quickly into higher yielding investments, as the economic environment warrants. Cigarettes Revenues decreased by $276.5 and $100.6 million, or 12.7% and 5.0%, as compared to 1992 and 1991, respectively. Income before accounting changes decreased by $183.9 and $89.5 million, or 35.1% and 20.8%, as compared to 1992 and 1991, respectively. Revenues decreased, as compared to 1992, by approximately $106.0 million, or 4.9%, due to a reduction in unit prices as well as a decline of approximately $235.5 million, or 10.8%, due to lower unit sales volume, partially offset by higher federal excise taxes amounting to $65.0 million, or 3.0%. Compared to 1991, revenues declined by approximately $229.6 million, or 11.4%, due to lower unit sales volume, partially offset by an increase of approximately $129.0 million, or 6.4%, due to price increases. The price increases over 1991 include approximately $65.0 million, or 3.2%, from the increase of federal excise taxes of $2.00 per thousand cigarettes on January 1, 1993. Lorillard's sales volume has declined 10.4% and 11.4% as compared to 1992 and 1991, respectively. Unit sales volume of the U.S. cigarette industry has declined by 9.0% and 9.4% over the same period. Lorillard's declining sales volume reflects a continuing trend of lower consumer cigarette consumption as well as an increase in industry discount brand sales. The discount brand category's share of industry sales had increased from an average of 30% during 1991 to an average of 37% during 1993. As at December 31, 1993, discount brands represented 33% of industry sales. Virtually all of Lorillard's sales are in the premium brand category. Newport, a premium brand which accounts for two-thirds of Lorillard's unit sales, declined 7.8% as compared to 6.1% versus 1991. As a result of the accelerated growth of discount brands and continued decline in consumption during the first seven months of 1993, Newport and other Lorillard premium brand unit sales were affected. With the industry-wide list price reduction of premium price brands, effective August 9, 1993, the growth rate of discount brands appears to have slowed and Lorillard's product line has benefited modestly in terms of unit sales. These pricing changes have reduced industry profit margins. Although Newport declined in unit sales, this decrease was less than the overall industry decline, and resulted in a share of total industry sales of 4.91% versus 4.85% in 1992, an increase of .06%. On an overall basis, Lorillard's premium brands compared favorably with the industry's rate of decline for this segment, a loss of 17.7% for the industry versus 11.2% for Lorillard. 37 It is expected that lower consumer cigarette consumption will continue to influence overall industry unit volume and the discount category will be a significant influence in overall sales. U.S. federal excise taxes on cigarettes increased $2.00 per thousand effective January 1, 1993. The current administration's efforts to reduce the federal deficit and to enact health care reform has led to further proposals to increase the excise tax. The effects of any additional federal tax increases, as well as increases by state and local taxing authorities, or manufacturers' price increases cannot be determined, but it is likely they would add to the overall industry decline and the growth in the discount category. Hotels Revenues decreased by $16.2 and $15.7 million, or 8.0% and 7.8%, as compared to 1992 and 1991, respectively. Results from operations before accounting changes declined $3.7 and $6.6 million, as compared to 1992 and 1991, respectively. Oversupply of hotel rooms and the highly competitive nature of the hotel industry continue to adversely affect average room rates. Although demand has increased in some areas, it has not compensated for the lower average room rates. Revenues declined due primarily to lower occupancy rates at the Loews Monte Carlo Hotel resulting from the depressed general economic conditions in southern Europe as well as the impact of a weak Italian Lira and resulting absence of Italian tourist business on the Riviera. In addition, average room rates declined at North American properties, partially offset by increased occupancy rates. Results from operations before accounting changes declined due primarily to the lower revenues. The prior year included a charge of $3.7 million relating to renegotiation of a hotel land lease. Watches and Other Timing Devices Revenues decreased by $27.8 and $10.8 million, or 15.4% and 6.5%, as compared to 1992 and 1991, respectively. Results from operations before accounting changes decreased by $2.0 and increased by $0.5 million, as compared to 1992 and 1991, respectively. Revenues and results from operations declined due primarily to lower industrial and defense sales volume related to a $19.5 million payment by the U.S. government in 1992 in relation to a favorable settlement of defense contract claims. This benefit was partially offset by a charge of approximately $2.4 million for the write-off of parts inventory and equipment related to these contracts, as well as a continuing decline of defense business. Watch and clock unit sales volume also declined in 1993, partially offset by a gain on sale of an inactive defense manufacturing facility and accrual of environmental costs in 1992. Results from operations increased, as compared to 1991, due to the gain from asset dispositions and lower interest expense, partially offset by lower results from Bulova's consumer products division. Drilling Revenues increased by $70.5 and $223.7 million, as compared to 1992 and 1991, respectively. Net loss decreased by $34.6 million and increased by $5.4 million, as compared to 1992 and 1991, respectively. Revenues increased and net loss declined, as compared to 1992, due to Gulf of Mexico jackup rigs achieving nearly 98% utilization due to higher natural gas prices and deployment to Mexico of jackup rigs under long term contracts. This caused revenues and operating income to increase by approximately $38 million as compared to 1992. Since this recovery, a number of jackup rigs have been mobilized to the Gulf of Mexico from foreign locations. To date, the market has been able to absorb this increase in supply but Diamond Offshore faces a risk that rates and utilization can decline if the number of rigs available exceeds demand. This risk is magnified since most Gulf of Mexico employment is short term, on a well to well basis. Higher rig utilization and day rates in the Gulf of Mexico were partially offset by adverse market conditions in the North Sea due primarily to changes in the United Kingdom Petroleum Revenue Tax. In addition, regulatory changes will require substantial capital expenditures for older rigs in order to obtain licensing for 38 operations in the North Sea. Diamond Offshore believes that it may be necessary to mobilize its older rigs to new markets during the next year. It is likely that the costs of these relocations will not be fully reimbursed by customers. Diamond Offshore anticipates its three newest units will not require major modifications and may continue to operate in this market. Results from operations also benefited from the parent company to retire intercompany debt. Revenues increased in 1993 as compared to 1991, due primarily to the acquisition of 40 offshore drilling rigs in January 1992. Net loss increased due primarily to the corresponding increase in intercompany interest and higher depreciation expenses related to the additional rigs. Other Revenues increased by $27.5 and $98.4 million, as compared to 1992 and 1991, respectively. Results from operations decreased by $6.9 million and increased by $77.7 million, as compared to 1992 and 1991, respectively. Other operations consist primarily of investment income of non-insurance companies and the Company's investment in CBS Inc. Revenues increased due primarily to higher earnings (accounted for under the equity method) of CBS Inc. and higher realized investment gains, partially offset by lower investment income. Results from operations before accounting changes declined, as compared to 1992, due to increased interest expense relating to the write off of unamortized discount for the early retirement of debt, partially offset by the increased revenues. Results from operations increased, as compared to 1991, due to the increased revenues, and lower interest expense. Accounting Developments: In November 1992, the Financial Accounting Standards Board ("FASB") issued SFAS No.112, "Employers' Accounting for Postemployment Benefits." This Statement establishes accounting standards for employers who provide benefits to former or inactive employees after employment but before retirement (postemployment benefits). Postemployment benefits include salary continuation, supplemental unemployment benefits, severance benefits, disability-related benefits, job training and counseling and continuation of benefits such as health care benefits and life insurance coverage. This Statement applies to financial statements for fiscal years beginning after December 15, 1993. This Statement will not have a significant impact on the Company. In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." This Statement addresses the accounting by creditors for impairment of certain loans. It is applicable to all creditors and to all loans, uncollateralized as well as collateralized, except large groups of smaller- balance homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value or at the lower of cost or fair value, leases, and debt securities. The Statement requires that applicable loans be treated as impaired when it is probable that a creditor will be unable to collect all amounts (both principal and interest) contractually due. It requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. Impairment may be measured at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. In early 1994, the FASB began deliberating certain amendments to this Statement. This Statement applies to financial statements for fiscal years beginning after December 15, 1994. This Statement will not have a significant impact on the Company. 39 Item 8. Financial Statements and Supplementary Data. Loews Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS
December 31, -------------------------------- (Amounts in thousands of dollars) 1993 1992 - ------------------------------------------------------------------------------------------------------ (Restated) Assets: Investments (Notes 1, 2, 3 and 4): Fixed maturities available for sale, amortized cost of $17,132,086 and market value of $18,295,953, respectively ...... $17,657,856 $17,414,480 Equity securities available for sale, cost of $1,028,733 and market value of $902,455, respectively ......................... 1,240,256 859,879 Mortgage loans and notes receivable ............................. 121,439 152,328 Policy loans .................................................... 173,606 177,811 Other investments ............................................... 72,085 59,524 Short-term investments .......................................... 8,025,201 5,712,212 ------------------------------- Total investments ............................................ 27,290,443 24,376,234 Cash .............................................................. 155,703 105,308 Receivables (Note 1): Reinsurance ..................................................... 2,951,644 3,249,849 Other insurance ................................................. 3,657,048 3,995,103 Less allowance for doubtful accounts ............................ (117,324) (110,420) Security sales .................................................. 467,329 137,054 Federal income taxes (Note 8) ................................... 96,623 301,009 Other, less allowance for doubtful accounts and cash discounts of $12,418 and $20,860 ............................................ 419,413 516,790 Inventories (Notes 1 and 6) ....................................... 241,287 260,019 Investment in associated companies (Note 5) ....................... 490,654 422,941 Property, plant and equipment-net (Notes 1 and 7) ................. 1,038,179 1,002,251 Deferred income taxes (Note 8) .................................... 1,074,410 1,109,532 Other assets (Notes 13 and 14) .................................... 564,600 467,498 Deferred policy acquisition costs of insurance subsidiaries (Note 1) 979,166 887,004 Separate Account business (Notes 1 and 3) ......................... 6,540,557 6,835,342 ------------------------------- Total assets ................................................. $45,849,752 $43,555,514 =============================== See Notes to Consolidated Financial Statements. 40 December 31, -------------------------------- 1993 1992 - ------------------------------------------------------------------------------------------------------ (Restated) Liabilities and Shareholders' Equity: Insurance reserves (Note 1): Claims and claims expense ....................................... $21,670,202 $20,733,438 Future policy benefits .......................................... 2,735,691 2,486,279 Unearned insurance premiums ..................................... 2,556,015 2,422,149 Policyholders' funds ............................................ 477,095 538,373 ------------------------------- Total insurance reserves ..................................... 27,439,003 26,180,239 Accounts payable and accrued liabilities .......................... 705,034 598,726 Payable for securities purchased .................................. 190,138 113,960 Securities sold under repurchase agreements (Note 2) .............. 613,250 610,987 Accrued taxes (Note 8) ............................................ 290,861 205,520 Long-term debt, less unamortized discount (Notes 3 and 9) ......... 2,195,670 1,759,595 Deferred credits and other liabilities (Note 13) .................. 635,667 612,826 Separate Account business (Notes 1 and 3) ......................... 6,540,557 6,835,342 Participating policyholders' equity (Note 1) ...................... 160,100 177,568 ------------------------------- Total liabilities ............................................ 38,689,280 37,094,763 ------------------------------- Minority interest ................................................. 1,033,274 933,761 ------------------------------- Commitments and contingent liabilities (Notes 1, 2, 4, 8, 9, 13, 14, 15 and 16) Shareholders' equity (Notes 1, 2, 5, 9, 11 and 13): Common stock, $1 par value: Authorized-200,000,000 shares Issued and outstanding-61,524,700 and 65,098,700 shares ....... 61,525 65,099 Additional paid-in capital ...................................... 210,289 163,076 Earnings retained in the business ............................... 5,476,660 5,266,983 Unrealized appreciation ......................................... 406,736 31,832 Pension liability adjustment .................................... (28,012) ------------------------------- Total shareholders' equity ................................... 6,127,198 5,526,990 ------------------------------- Total liabilities and shareholders' equity ................... $45,849,752 $43,555,514 ===============================
41 Loews Corporation and Subsidiaries STATEMENTS OF CONSOLIDATED INCOME
Years Ended December 31, --------------------------------------------------- (Amounts in thousands, except per share data) 1993 1992 1991 - ----------------------------------------------------------------------------------------------------- Revenues (Note 1): Insurance premiums: Property and casualty (net of insurance premiums ceded of $508,098, $487,381 and $481,709) ............................ $ 6,273,654 $ 6,352,166 $ 6,653,846 Life (net of insurance premiums ceded of $40,053, $41,884 and $25,869) ............ 2,392,027 2,392,690 2,269,320 Investment income, net of expenses (Note 2) . 1,377,754 1,584,321 1,736,806 Realized investment gains (Note 2) .......... 862,797 407,247 412,155 Manufactured products (including excise taxes of $379,361, $355,816 and $358,993) ........ 2,055,084 2,363,431 2,167,410 Other (Note 5) .............................. 725,461 591,599 380,727 --------------------------------------------------- Total .................................... 13,686,777 13,691,454 13,620,264 --------------------------------------------------- Expenses (Note 1): Insurance benefits and underwriting expenses (net of reinsurance ceded of $177,550, $570,208 and $473,161) ..................... 9,271,536 10,697,227 9,076,444 Amortization of deferred policy acquisition costs ...................................... 1,193,421 1,067,689 1,112,857 Cost of manufactured products sold (Note 6) . 864,115 878,465 886,340 Selling, operating, advertising and administrative expenses..................... 1,506,049 1,417,696 1,169,915 Interest .................................... 162,298 148,843 163,559 --------------------------------------------------- Total .................................... 12,997,419 14,209,920 12,389,115 --------------------------------------------------- 689,358 (518,466) 1,231,149 --------------------------------------------------- Income taxes (benefits) (Note 8) ............ 46,567 (388,691) 217,458 Minority interest ........................... 48,670 (107,678) 109,353 --------------------------------------------------- Total .................................... 95,237 (496,369) 326,811 --------------------------------------------------- Income (loss) before cumulative effect of changes in accounting principles ............. 594,121 (22,097) 904,338 Cumulative effect of changes in accounting principles-net (Note 1) ...................... 144,711 --------------------------------------------------- Net income .................................... $ 594,121 $ 122,614 $ 904,338 =================================================== Earnings Per Share (Note 11): Income (loss) before cumulative effect of changes in accounting principles ........... $9.27 $ (.33) $13.14 Cumulative effect of changes in accounting principles-net ............................. 2.20 --------------------------------------------------- Net income ............................... $9.27 $1.87 $13.14 =================================================== See Notes to Consolidated Financial Statements.
42 Loews Corporation and Subsidiaries STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Additional Earnings Unrealized Pension Common Common Paid-In Retained in Appreciation Liability Stock Held (Amounts in thousands) Stock Capital the Business (Depreciation) Adjustment in Treasury - ------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1990 .......... $69,917 $130,301 $4,860,494 $(17,315) Net income ........................ 904,338 Dividends paid, $1 per share ...... (68,923) Purchases of common stock ........ $ 264,182 Retirement of common stock held in treasury ..................... (2,359) (5,685) (231,873) (239,917) Net unrealized appreciation ...... 14,896 Equity in certain transactions of subsidiary companies (Note 5) ... 37,546 ------------------------------------------------------------------------- Balance, December 31, 1991 ......... 67,558 162,162 5,464,036 (2,419) 24,265 Net income ....................... 122,614 Dividends paid, $1 per share ..... (65,810) Purchases of common stock ........ 238,223 Retirement of common stock held in treasury ........................ (2,459) (6,172) (253,857) (262,488) Net unrealized appreciation....... 34,251 Equity in certain transactions of subsidiary companies ............ 7,086 ------------------------------------------------------------------------- Balance, December 31, 1992 ......... 65,099 163,076 5,266,983 31,832 Net income ....................... 594,121 Dividends paid, $1 per share ..... (64,289) Purchases of common stock ........ 336,297 Retirement of common stock held in treasury ........................ (3,574) (12,568) (320,155) (336,297) Accounting change (Note 1) ....... 367,928 Net unrealized appreciation ...... 6,976 Pension liability adjustment (Note 13) ....................... $(28,012) Equity in certain transactions of subsidiary companies (Note 5) ... 59,781 ------------------------------------------------------------------------- Balance, December 31, 1993 ......... $61,525 $210,289 $5,476,660 $406,736 $(28,012) ========================================================================= See Notes to Consolidated Financial Statements.
43 Loews Corporation and Subsidiaries STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended December 31, ---------------------------------------------------- (Amounts in thousands) 1993 1992 1991 - ------------------------------------------------------------------------------------------------------ ------------(Restated)---------- Operating Activities: Net income .................................. $ 594,121 $ 122,614 $ 904,338 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of changes in accounting principles .................... (144,711) Undistributed (earnings) losses from unconsolidated affiliates ................ (50,045) (26,170) 22,589 Distribution of CBS equity earnings ....... 3,787 3,029 417,597 Provision for minority interest ........... 48,670 (107,678) 109,353 Amortization of investments ............... (95,262) (127,416) (144,697) Depreciation and amortization ............. 135,101 138,370 99,701 Realized investment gains ................. (862,797) (407,247) (412,155) Provision for deferred income taxes ....... (181,601) (382,691) (220,207) Changes in assets and liabilities-net: Reinsurance receivables ................... 298,185 457,892 213,036 Other receivables ......................... 349,971 (327,966) 250,208 Deferred policy acquisition costs ......... (92,162) (34,065) (27,263) Insurance reserves and claims ............. 1,229,486 2,496,282 1,419,342 Accounts payable and accrued liabilities .. 403,027 (28,336) 102,754 Other-net ................................. (119,803) 26,704 (52,871) ---------------------------------------------------- 1,660,678 1,658,611 2,681,725 ---------------------------------------------------- Investing Activities: Purchases of fixed maturities ............... (42,893,379) (32,343,428) (38,115,486) Proceeds from sales of fixed maturities ..... 41,339,798 32,854,377 32,039,457 Proceeds from maturities of fixed maturities 2,349,370 1,414,987 2,751,185 Purchases of equity securities .............. (957,846) (574,478) (419,347) Proceeds from sales of equity securities .... 874,460 435,147 654,403 Return of investment from CBS tender offer... 12,666 Purchases of property and equipment ......... (159,480) (123,658) (90,216) Proceeds from sales of property and equipment 20,276 17,184 22,411 Securities sold under repurchase agreements . 2,263 (789,248) 1,381,439 Change in short-term investments ............ (2,259,348) (1,841,219) (293,957) Change in other investments ................. 8,146 151,821 (110,336) Purchase of business-net of cash acquired ... (372,242) ----------------------------------------------------- (1,675,740) (1,170,757) (2,057,781) ----------------------------------------------------- Financing Activities: Dividends paid to shareholders .............. (64,289) (65,810) (68,923) Purchases of treasury shares ................ (336,297) (238,223) (264,182) Principal payments on long-term debt ........ (745,163) (210,662) (303,717) Issuance of long-term debt .................. 1,181,910 1,517 397,461 Net decrease in short-term debt ............. (399,429) Receipts credited to policyholders .......... 47,481 47,293 45,204 Withdrawals of policyholder account balances (18,185) (18,476) (11,581) ---------------------------------------------------- 65,457 (484,361) (605,167) ----------------------------------------------------- Net change in cash ............................ 50,395 3,493 18,777 Cash, beginning of year ....................... 105,308 101,815 83,038 ---------------------------------------------------- Cash, end of year ............................. $ 155,703 $ 105,308 $ 101,815 ==================================================== See Notes to Consolidated Financial Statements.
44 Loews Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies- Principles of Consolidation-The consolidated financial statements include all significant subsidiaries and all material intercompany accounts and transactions have been eliminated. The equity method of accounting is used for investments in associated companies in which the Company has an interest of 20% to 50%. Accounting Changes-Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 113, "Accounting and Reporting for Reinsurance of Short-duration and Long-duration Contracts." This Statement establishes the conditions required for a contract to be accounted for as reinsurance, prescribes accounting and reporting standards for those contracts, and requires that balances pertaining to reinsurance transactions be reported "gross" on the balance sheet rather than reductions of reserves for claims and claims expense, policy benefits of unearned premiums. At December 31, 1993, reinsurance recoverables on insurance claim and policy benefits reserves of $2,500,000,000 and ceded unearned premiums of $167,000,000 are reported as assets. Prior years' amounts have been restated. As a result, assets and liabilities at December 31, 1992 were each increased by $3,100,000,000. The provisions of SFAS No. 113 that pertain to risk transfer and recognition of revenues and costs did not impact the Company's income or shareholders' equity as all material reinsurance arrangements are prospective and provided for the transfer of risk. Effective December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This Statement requires that investments in debt and equity securities classified as available: for sale be carried at fair value. Previously, fixed income securities classified as available for sale were carried at the lower of aggregate amortized cost or fair value. Unrealized gains and losses are reflected as a separate component of shareholders' equity, net of deferred income taxes, participating policyholders' and minority interests. The effect of adopting this Statement was to increase shareholders' equity by $367,928,000 (net of $293,973,000 in deferred income taxes, participating policyholders' and minority interests). The adoption of this Statement did not impact net income. In accordance with the Statement, prior period financial statements have not been restated. Separate Account assets invested in debt securities have also been classified as available for sale and are now carried at fair value. As a result, Separate Account investments were increased by $189,000,000 with a corresponding increase to Separate Account liabilities. In 1992 the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes." CBS Inc. has also adopted SFAS Nos. 106 and 109 as well as SFAS No. 112, "Employers' Accounting for Postemployment Benefits" which requires accrual of benefits to be provided to former or inactive employees after employment, but before retirement. In addition, CNA Financial Corporation ("CNA") changed its method of accounting from reporting ultimate reserves for fixed and determinable claims reserves related to workers' compensation lifetime claims and accident and health disability claims to discounting such reserves consistent with accounting practices on other similar fixed and determinable claims. The cumulative effect as of January 1, 1992 of adopting these accounting changes is as follows:
In thousands Per Share ------------ --------- Postretirement benefits other than pensions (net of income tax benefit of $102,005) ............... $(201,131) $(3.06) Accounting for income taxes ....................... 128,991 1.96 Discounting for certain workers' compensation and disability claims (net of income tax expense of $135,200) ..................................... 218,132 3.32 Postemployment benefits of CBS Inc. (net of income tax benefit of $94) .............................. (1,281) (.02) --------- ------ $ 144,711 $ 2.20 ========= ======
45 Investments-Investments in securities, which are held principally by insurance subsidiaries of CNA, are carried as follows: The Company believes it has the ability to hold all fixed income investments until maturity. However, securities may be sold to take advantage of investment opportunities generated by changing interest rates, prepayments, tax and credit considerations, as part of the Company's asset/liability strategy, or for other similar factors. As a result, the Company considers its fixed maturity securities (bonds and redeemable preferred stocks) and equity securities as available for sale and they are carried at fair value. In prior years, fixed maturity securities were also considered as available for sale, but were carried at the lower of aggregate amortized cost or fair value; in accordance with guidance promulgated by the Securities and Exchange Commission. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Mortgage loans are carried at unpaid principal balances, adjusted for amortization of premium or discount. Policy loans are carried at unpaid balances. Short-term investments are carried at amortized cost, which approximates market value. The cost of securities sold is determined by the identified certificate method. The unrealized gain or loss on investments which are revalued to current market values is net of applicable deferred income taxes and participating policyholders' and minority interests and is reflected as part of shareholders' equity in unrealized appreciation. Investments are written down to estimated realizable values and losses are charged to income when a decline in value is considered to be other than temporary. Insurance Operations-Premium revenue-Insurance premiums on property/casualty and health insurance contracts (included in life premiums) are earned ratably over the terms of the policies after provision for estimated adjustments on retrospectively rated policies and deductions for ceded insurance. Revenues on universal life-type contracts are comprised of contract charges and fees which are recognized over the coverage period when assessed against the policyholders' account balances. Other life insurance premiums are recognized as revenue when due after deductions for ceded insurance. Claims and claims expense reserves-Claims and claims expense reserves, except reserves for structured settlements, workers' compensation lifetime claims and accident and health disability claims, are based on (a) case basis estimates for losses reported on direct business, adjusted in the aggregate for ultimate loss expectations, (b) estimates of unreported losses based upon past experience, (c) estimates of assumed insurance, (d) estimates of future expenses to be incurred in settlement of claims, and (e) estimates of claim recoveries. In establishing these estimates, consideration is given to current conditions and trends as well as past company and industry experience. Structured settlements have been negotiated for claims on certain property/casualty insurance policies. Structured settlements are agreements to provide periodic payments to claimants, which are fixed and determinable as to the amount and time of payment. Certain structured settlements are funded by annuities purchased from CNA's life insurance subsidiary. Related annuity obligations are carried in future policy benefits reserves. Obligations for structured settlements not funded by annuities are carried at discounted values which approximate the alternative cost of annuity purchases. Such reserves, discounted at interest rates ranging from 6.3 % to 7.5 %, totaled $748,900,000 and $662,600,000 at December 31, 1993 and 1992, respectively. Workers' compensation lifetime claims and accident and health disability claim reserves are discounted at interest rates ranging from 3.5% to 5.5% with mortality and morbidity assumptions reflecting current industry experience. Such discounted reserves totaled $969,800,000 and $911,100,000 at December 31, 1993 and 1992 respectively. Amounts assuming the changes in accounting for discounting certain workers' compensation and disability claims were applied retroactively to the year ended December 31, 1991, in thousands of dollars except per share data, are as follows:
Pro forma consolidated net income ............................... $941,730 Per share ..................................................... 13.69 Net income per share as previously reported ................... 13.14
46 Claims and claims expense reserves are based on estimates and the ultimate liability may vary significantly from such estimates. Any adjustments that are made to the reserves are reflected in operating income in the year such adjustments are made. Future policy benefits reserves-Reserves for traditional life insurance products are computed based upon net level premium methods using actuarial assumptions as to interest rates, mortality, morbidity, withdrawals and expenses. Actuarial assumptions include a margin for adverse deviations and generally vary by plan, age at issue and policy duration. Interest rates range from 3% to 10.5%, and mortality, morbidity and withdrawal assumptions reflect CNA and industry experience prevailing at the time of issue. Renewal expense estimates include the estimated effects of inflation and expenses beyond the premium paying period. Reinsurance-CNA assumes and cedes insurance with other insurers and reinsurers and members of various reinsurance pools and associations. CNA utilizes reinsurance arrangements to limit its maximum loss, to provide greater diversification of risk and to minimize exposures on larger risks. The reinsurance coverages are tailored to the specific risk characteristics of each product line with CNA's retained amount varying by type of coverage. Generally, reinsurance coverage for property risks is on excess of loss, per risk basis. Liability coverages are generally reinsured on a quota share basis in excess of CNA's retained risk. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Deferred policy acquisition costs-Costs of acquiring insurance business, which vary with and are primarily related to the production of such business, are deferred. Such costs include commissions, premium taxes, and certain underwriting and policy issuance costs. Property/casualty acquisition costs are amortized ratably over the period the related premiums are recognized. Anticipated investment income is considered in the determination of the recoverability of deferred policy acquisition costs. Life acquisition costs are capitalized and amortized based on assumptions consistent with those used for computing policy benefit reserves. Acquisition costs on ordinary life business are amortized over the assumed premium paying periods. Universal life and investment annuity acquisition costs are amortized in proportion to the present value of estimated gross profits over the products' assumed durations, which are regularly evaluated and adjusted, as appropriate. To the extent that unrealized gains or losses on available for sale securities would result in an adjustment of deferred policy acquisition costs had those gains or losses actually been realized, the related unamortized deferred policy acquisition costs are recorded as an adjustment of the unrealized gains or losses included in shareholders' equity. Restricted investments-On December 30, 1993, CNA deposited $986,800,000 in an escrow account, pursuant to the Fibreboard Global Settlement Agreement, as discussed in Note 16. The funds are included in short-term investments and are invested in U.S. treasury securities. The escrow account is the prefunding mechanism to the trust fund for future claimants. Participating business-Participating business represented 1.1%, 1.2% and 1.6% of CNA's gross life insurance in force and 1.1%, 1.2% and 1.4% of life insurance premium income for 1993, 1992 and 1991, respectively. Participating policyholders' equity is determined by allocating 90% of related net income or loss and unrealized investment gains or losses to such business, less dividends determined by CNA's Board of Directors. In the accompanying Statements of Consolidated Income, revenues and benefits and expenses include amounts related to participating policies; the net income or loss allocated to participating policyholders' equity is a component of insurance claims and policyholders' benefits. Separate Account business-CNA's life insurance subsidiary, Continental Assurance Company ("CAC"), issues certain investment and annuity contracts, the assets and liabilities of which are legally segregated and reflected in the accompanying Consolidated Balance Sheets as assets and liabilities of Separate Account business. CAC guarantees principal and a specified return to the contractholders of approximately 86% of the Separate Account business. Substantially all assets of the Separate Accounts are carried at fair value. Separate Account liabilities are carried at the higher of contract value or the fair value of the underlying assets. Investment income and gains and losses for the Separate Account accrue to the contractholders and are therefore not included in the Statements of Consolidated Income or Cash Flows except for funding which may be required under the guarantees. Revenues to CNA from the Separate Account business consist principally of administration fees. 47 Statutory capital and surplus-Statutory capital and surplus and net income (loss), determined in accordance with accounting practice prescribed or permitted by the Illinois Insurance Department, for property/casualty and life insurance subsidiaries are as follows:
Statutory Capital and Surplus Statutory Net Income (Loss) ---------------------- ---------------------------------- December 31, Years Ended December 31, ---------------------- ---------------------------------- 1993 1992 1993 1992 1991 ---------------------------------------------------------- (In thousands) Property/casualty .... $3,598,415 $3,135,847 $120,710 $(1,043,050) $716,950 Life ............... 1,021,970 1,002,985 99 11,831 113,288
Inventories-Tobacco products-These inventories, aggregating $174,377,000 and $186,986,000 at December 31, 1993 and 1992, respectively, are stated at the lower of cost or market, using the last-in, first-out (LIFO) method. Watches and other timing devices-These inventories, aggregating $52,109,000 and $59,322,000 at December 31, 1993 and 1992, respectively, are stated at the lower of cost or market, using the first-in, first-out (FIFO) method. Property, Plant and Equipment-Property, plant and equipment is carried at cost less accumulated depreciation. Depreciation is computed principally by the straight-line method over the estimated useful lives of the various classes of properties. Leaseholds and leasehold improvements are depreciated or amortized over the terms of the related leases (including optional renewal periods where appropriate) or the estimated lives of improvements, if less than the lease term. The principal service lives used in computing provisions for depreciation are as follows:
Years -------- Buildings and building equipment ................................. 40 Building fixtures ................................................ 10 to 20 Machinery and equipment .......................................... 5 to 12 Hotel equipment .................................................. 4 to 12 Drilling equipment ............................................... 10 to 25
Research and Development Costs-Research and development costs are charged to expense as incurred and amounted to $11,866,000, $11,521,000 and $11,476,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Reclassification-Certain amounts applicable to prior periods have been reclassified to conform to the classifications followed in 1993. 48 2. Investments- Investment income consisted of:
Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- (In thousands) Investment income: Fixed maturities: Bonds: Tax exempt .................... $ 504,896 $ 728,031 $ 638,110 Taxable ....................... 539,695 622,967 811,016 Redeemable preferred stocks ..... 21,231 11,207 13,734 Equity securities ................. 16,441 19,068 19,392 Mortgage loans .................... 15,410 13,001 15,799 Policy loans ...................... 10,413 10,587 10,520 Security repurchase transactions .. 6,249 18,627 44,373 Short-term investments ............ 281,401 177,923 217,676 Other ............................. 12,138 22,586 25,848 --------------------------------------- Total investment income ........ 1,407,874 1,623,997 1,796,468 Investment expenses ................. 30,120 39,676 59,662 --------------------------------------- Investment income-net .......... $1,377,754 $1,584,321 $1,736,806 ======================================= Realized investment gains (losses) are as follows: Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- (In thousands) Fixed maturities .................... $ 765,848 $ 303,622 $ 441,858 Equity securities ................... 118,774 45,339 3,762 Guaranteed separate accounts ........ 35,496 (39,675) Other ............................... (21,825) 22,790 6,210 --------------------------------------- 862,797 407,247 412,155 Income taxes ........................ (300,002) (132,980) (140,607) Allocated to participating policyholders ...................... (13,142) (12,140) (20,055) Minority interest ................... (87,752) (39,785) (48,411) --------------------------------------- Realized investment gains-net .. $ 461,901 $ 222,342 $ 203,082 =======================================
Securities sold under agreements to repurchase represent the amounts of securities which will be reacquired subsequently by certain insurance and non- insurance subsidiaries as specified in the agreements. Proceeds from these transactions have been invested in short-term investments (principally commercial paper and government securities) with maturities which correspond to the repurchase dates. The carrying value of investments (other than equity securities) that have not produced income for the last twelve months is $134,188,000 at December 31, 1993. Investment gains of $1,005,538,000 and losses of $120,916,000 were realized on securities available for sale for the year ended December 31, 1993. Total investment gains of $459,000,000 and $614,307,000 and losses of $155,378,000 and $172,449,000 were realized on sales of fixed maturities for the years ended December 31, 1992 and 1991, respectively. 49 The amortized cost and market values of securities available for sale are as follows:
Unrealized Amortized ------------------------------ Market Cost Gains Losses Value ------------------------------------------------------------- (In thousands) December 31, 1993 ----------------- United States government and obligations of government agencies .......................... $ 6,482,814 $ 80,070 $ 8,405 $ 6,554,479 Asset-backed .................................. 2,514,596 42,073 9,373 2,547,296 States, municipalities and political subdivisions-tax exempt ...................... 4,725,384 316,717 27,260 5,014,841 Corporate ..................................... 1,800,548 64,042 12,768 1,851,822 Other debt .................................... 1,163,454 80,033 2,053 1,241,434 Redeemable preferred stocks ................... 445,290 3,493 799 447,984 ------------------------------------------------------------- Total fixed maturities ................... 17,132,086 586,428 60,658 17,657,856 Equity securities ............................. 1,028,733 229,806 18,283 1,240,256 ------------------------------------------------------------- $18,160,819 $ 816,234 $ 78,941 $18,898,112 ============================================================= December 31, 1992 ----------------- United States government and obligations of government agencies .......................... $ 2,878,835 $ 28,639 $ 7,427 $ 2,900,047 Asset-backed .................................. 2,132,976 94,942 14,055 2,213,863 States, municipalities and political subdivisions-tax exempt ...................... 9,501,741 712,962 52,276 10,162,427 Corporate ..................................... 1,161,965 75,185 10,765 1,226,385 Other debt .................................... 1,171,407 52,748 2,295 1,221,860 Redeemable preferred stocks ................... 567,556 4,427 612 571,371 ------------------------------------------------------------- Total fixed maturities ................... 17,414,480 968,903 87,430 18,295,953 Equity securities ............................. 813,779 106,911 18,235 902,455 ------------------------------------------------------------- $18,228,259 $1,075,814 $105,665 $19,198,408 =============================================================
The amortized cost and market value of fixed maturities at December 31, 1993 and 1992 are shown below by contractual maturity. Actual maturities differ from contractual maturities because securities may be called or prepaid with or without call or prepayment penalties.
December 31, -------------------------------------------------------- 1993 1992 -------------------------------------------------------- Amortized Market Amortized Market Cost Value Cost Value -------------------------------------------------------- (In thousands) Due in one year or less ...................... $ 687,704 $ 702,683 $ 819,504 $ 831,731 Due after one year through five years ........ 7,500,849 7,597,198 4,810,388 4,953,451 Due after five years through ten years ....... 1,466,050 1,520,597 2,248,911 2,362,085 Due after ten years .......................... 4,962,887 5,290,082 7,402,701 7,934,823 Asset-backed securities not due at a single maturity date ............................... 2,514,596 2,547,296 2,132,976 2,213,863 -------------------------------------------------------- $17,132,086 $17,657,856 $17,414,480 $18,295,953 ========================================================
50 3. Fair Value of Financial Instruments- SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values may be based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. Accordingly, the estimates presented herein are subjective in nature and are not necessarily indicative of the amounts that the Company could realize in a current market exchange. SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments such as real estate and insurance reserves from fair value disclosure. Thus, the aggregate fair value amounts cannot be summed to determine the underlying economic value of the Company. The carrying amounts and estimated fair values of the Company's financial instruments are as follows:
December 31, -------------------------------------------------------- 1993 1992 -------------------------------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------------------------------------------------------- (In thousands) Financial Assets: Investments: Fixed maturities available for sale ...... $17,657,856 $17,657,856 $17,414,480 $18,295,953 Equity securities available for sale ..... 1,240,256 1,240,256 859,879 902,455 Mortgage loans and notes receivable ...... 74,816 77,914 103,018 104,937 Policy loans ............................. 173,606 163,566 177,811 167,894 Other investments ........................ 67,891 70,664 54,294 54,901 Separate Account assets: Fixed maturities available for sale ........ 6,234,964 6,234,964 6,507,127 6,693,943 Equity securities available for sale ....... 145,663 145,663 112,511 112,594 Other ...................................... 159,930 168,570 215,704 215,727 Financial Liabilities: Premium deposits and annuity contracts ..... 544,669 534,948 519,758 511,027 Long-term debt ............................. 2,182,210 2,284,651 1,742,799 1,826,894 Separate Account liabilities: Guaranteed investment contracts .......... 4,875,440 5,178,817 5,531,806 5,782,639 Deferred annuities........................ 66,458 81,433 64,284 78,600 Variable separate accounts................ 222,780 222,780 148,970 148,970 Other..................................... 887,440 887,440 685,390 685,390
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: The carrying amounts reported in the balance sheet for short-term investments and securities sold under repurchase agreements approximates fair value, because of the short maturity of those investments. As such, these financial instruments are not shown in the table above. Fixed maturity securities, equity securities and separate account securities are based on quoted market prices, where available. For securities not actively traded, fair values are estimated using values obtained from independent pricing services or quoted market prices of comparable instruments adjusted for differences between the quoted instruments and the instruments being valued. Fair value for mortgage loans and notes receivable and policy loans are estimated using discounted cash flow analyses, at interest rates currently being offered for similar loans to borrowers with comparable credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. Other investments and other Separate Account assets consist of investments in limited partnerships, short term securities and various miscellaneous assets. Valuation techniques to determine fair value consist of discounted cash flows and quoted market prices of (a) the investments, (b) comparable instruments and (c) underlying assets of the investments. The fair value of certain assets contained above approximates their carrying value. 51 Premium deposit and annuity contracts are valued based on cash surrender values and the outstanding fund balances. Guaranteed investment contracts and deferred annuities of the separate accounts are estimated using discounted cash flow calculations, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The fair value of the liabilities for variable separate accounts are based on the quoted market values of the underlying assets of each variable separate account. The fair value of other separate account liabilities approximates carrying value. Fair value of long-term debt traded on securities exchanges is based on quoted market prices. The fair values for other long-term debt are based on quoted market prices of comparable instruments adjusted for differences between the quoted instruments and the instruments being valued or are estimated using discounted cash flow analyses, based on current incremental borrowing rates for similar types of borrowing arrangements. 4. Off-Balance-Sheet Financial Instruments- The Company enters into various transactions involving off-balance-sheet financial instruments through a variety of futures, swaps, options, forward and other contracts (the "contracts") as part of its investing activities. Entering into these contracts involves not only the risk of dealing with counterparties and their ability to meet the terms of the contracts but also the market risk associated with unmatched positions. Notional or contractual amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. In addition, the amounts subject to credit loss are substantially mitigated by collateral requirements of the contracts. These contracts are marked to market and gains or losses are included in realized investment gains or losses. The Company's investments in off-balance-sheet financial instruments are as follows:
December 31, ----------------------------------------------------------- 1993 1992 ----------------------------------------------------------- Contractual/ Estimated Contractual/ Estimated Notional Fair Value Notional Fair Value ----------------------------------------------------------- (In thousands) Interest rate swaps ........................... $ 75,000 $ (8,005) $ 325,000 $(3,435) Commitments to purchase government and municipal securities ......................... 211,000 137 299,500 3,071 Options written on: Intermediate term United States Treasury securities ................................. 1,000,000 6,239 Equities and equity index ................... 133,712 (6,572) 89,974 268 Financial futures ............................. 803,313 2,557 444,451 (2,568) Commodity: Swaps ....................................... 344,870 (32,277) 272,890 (5,081) Futures ..................................... 19,921 980 17,737 (446) Forward ..................................... 96,453 4,188 Purchase obligations ........................ 87,990 (9,870) 87,990 Other ......................................... 4,688 14 10,818 (2,685)
The estimated fair values approximate carrying values and are generally equivalent to the gains or losses on these financial instruments. Fair values are based on quoted market prices, where available. For securities not actively traded, fair values are estimated using values obtained from independent pricing services, quoted market prices of comparable instruments or present value models. Through August 1, 1989, CNA's property/casualty operations wrote financial guarantee insurance contracts. These contracts primarily represent industrial development bond guarantees and equity guarantees typically extending from ten to thirteen years. For these guarantees CNA received an advance premium which is recognized over the exposure period and in proportion to the underlying exposure insured. 52 At December 31, 1993 and 1992, gross exposure of financial guarantee insurance amounted to $792,000,000 and $1,000,000,000, respectively. The degree of risk attached to this exposure is substantially reduced through reinsurance, collateral requirements and diversification of exposures. At December 31, 1993 and 1992, collateral consisting of letters of credit and debt service reserves amounted to $48,000,000 and $60,000,000, respectively. In addition, security interests in real estate are also obtained. Approximately 38% of the risks were ceded to reinsurers at December 31, 1993 and 1992. Total exposure, net of reinsurance, amounted to $492,000,000 and $603,000,000 at December 31, 1993 and 1992, respectively. Gross unearned premium reserves for financial guarantee contracts were $33,000,000 and $51,000,000 at December 31, 1993 and 1992, respectively. Gross claims and claims expense reserves totaled $320,000,000 and $197,000,000 at December 31, 1993 and 1992, respectively. The fair values of the liability for financial guarantee contracts were $350,000,000 and $235,000,000 at December 31, 1993 and 1992, respectively. Fair values are based on discounted cash flows utilizing interest rates currently being offered for similar contracts and spot interest rates. 5. Investments in Associated Companies- Investments in associated companies consisted of:
December 31, ------------------------- 1993 1992 ------------------------- (In thousands) CBS Inc. (market value $873,975 and $569,423)... $473,483 $358,500 Other........................................... 17,171 64,441 ------------------------ $490,654 $422,941 ========================
Equity in earnings (losses) of associated companies, included in other revenues, amounted to $53,395,000, $26,743,000 and $(13,802,000) for the years ended December 31, 1993, 1992 and 1991, respectively. CBS Inc.-The Company held approximately 20% of the outstanding common shares of CBS Inc. ("CBS") at December 31, 1993 and accounts for CBS on the equity method. In 1992, CBS adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 112, "Employers' Accounting for Postemployment Benefits," effective January 1, 1992. The cumulative effect of these accounting changes resulted in recognition by Loews of a charge of $17.4 million, or $.27 per share, in relation to its investment in CBS. The Company's equity in the earnings (losses) of CBS after giving effect to purchase value adjustments amounted to $58,990,000, $27,012,000 and $(24,533,000) before taxes and $52,641,000, $24,717,000 and $(22,904,000) after taxes for the years ended December 31, 1993, 1992 and 1991, respectively. Dividends received amounted to $3,787,000, $3,029,000 and $3,029,000 for the respective periods. In May 1993, $389.6 million of CBS 5% convertible debentures were converted for 1,947,975 shares of common stock. The difference between the amount of debt converted and the average cost of the treasury shares issued, net of unamortized issue costs related to this debt, was credited to additional paid-in capital. As a result, the Company's ownership in CBS decreased from approximately 23% to 20% and the Company's additional paid-in capital increased by $58,942,000. In February 1991, CBS completed a cash tender offer at an amount exceeding its net book value per share for repurchase of its common stock aggregating approximately $2 billion or 44% of its common shares. The Company tendered its shares and received cash amounting to $537,234,000, comprised of $414,568,000 realization of previously undistributed earnings and $122,666,000 representing a return of the Company's investment. As a result of the tender, the Company's ownership in CBS decreased from approximately 25% to 23% and the Company's additional paid-in capital increased by $37,880,000. 53 Summarized financial information for CBS is as follows:
December 31, -------------------------- 1993 1992 -------------------------- (In thousands) Current assets ................................... $1,677,500 $1,480,500 Non-current assets ............................... 1,741,200 1,694,500 -------------------------- Total assets ................................ 3,418,700 3,175,000 -------------------------- Current liabilities .............................. 1,038,900 1,117,300 Long-term debt ................................... 590,300 870,000 Other liabilities ................................ 651,500 740,900 -------------------------- Total liabilities ........................... 2,280,700 2,728,200 -------------------------- Shareholders' equity ............................. $1,138,000 $ 446,800 ========================== Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- (In thousands) Net sales .......................... $3,510,100 $3,503,000 $3,035,000 ====================================== Cost of sales ...................... $2,688,800 $2,906,500 $2,938,000 ====================================== Income (loss) before discontinued operations and cumulative effect of changes in accounting principles .. $ 326,200 $ 162,500 $ (98,700) ====================================== Net income (loss) .................. $ 326,200 $ 81,000 $ (85,800) ======================================
6. Inventories-
December 31, -------------------------- 1993 1992 -------------------------- (In thousands) Leaf tobacco ..................................... $145,259 $162,093 Manufactured stock ............................... 76,946 77,537 Materials, supplies, etc. ........................ 19,082 20,389 ----------------------- Total ....................................... $241,287 $260,019 =======================
If the average cost method of accounting had been used for tobacco inventories instead of the LIFO method, such inventories would have been $211,227,000 and $211,198,000 higher at December 31, 1993 and 1992, respectively. 7. Property, Plant and Equipment-
December 31, -------------------------- 1993 1992 -------------------------- (In thousands) Land ............................................. $ 33,482 $ 35,187 Buildings and building equipment ................. 395,748 387,250 Machinery and equipment .......................... 1,189,062 1,096,244 Leaseholds and leasehold improvements ............ 32,008 30,355 ------------------------- Total, at cost............................... 1,650,300 1,549,036 Less accumulated depreciation and amortization ... 612,121 546,785 ------------------------- Property, plant and equipment-net ........... $1,038,179 $1,002,251 =========================
54 Depreciation and amortization expense and capital expenditures, by business segment, are as follows:
Years Ended December 31, ------------------------------------------------------------------------ 1993 1992 1991 ------------------------------------------------------------------------ Depr. & Capital Depr. & Capital Depr. & Capital Amort. Expend. Amort. Expend. Amort. Expend. ------------------------------------------------------------------------ (In thousands) Property and casualty insurance .... $ 24,431 $ 84,100 $ 8,030 $ 18,315 $ 8,820 $ 4,191 Life insurance ..................... 21,931 5,372 32,644 13,604 29,960 27,534 Cigarettes ......................... 21,973 26,996 18,314 23,205 22,938 26,397 Hotels ............................. 15,940 18,110 15,479 11,550 14,004 10,842 Watches and other timing devices ... 2,248 1,310 5,608 3,617 3,681 780 Drilling ........................... 43,938 70,276 52,550 471,067 14,545 14,431 ----------------------------------------------------------------------- Total business segments ....... 130,461 206,164 132,625 541,358 93,948 84,175 Corporate .......................... 4,640 1,343 5,745 3,472 5,753 6,041 ----------------------------------------------------------------------- Total ......................... $135,101 $207,507 $138,370 $544,830 $99,701 $90,216 =======================================================================
8. Income Taxes-
Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- (In thousands) Income taxes (benefits): Operations: Federal: Current ......................... $ 175,705 $ (67,809) $ 388,158 Deferred ........................ (181,601) (382,691) (220,207) State, city and other, principally current .......................... 52,463 61,809 49,507 -------------------------------------- 46,567 (388,691) 217,458 Cumulative effect of changes in accounting principles .............. 118,209 -------------------------------------- Total ............................ $ 46,567 $(270,482) $ 217,458 ======================================
Deferred tax assets (liabilities) are as follows:
December 31, ---------------------------- January 1, 1993 1992 1992 --------------------------------------- (In thousands) Insurance reserves: Property/casualty claim reserve discounting ....................... $ 990,206 $ 861,323 $ 714,320 Unearned premium reserves .......... 125,560 147,874 134,239 Life reserve differences ........... 144,078 140,120 108,535 Others ............................. (12,126) 4,747 15,111 Deferred policy acquisition costs..... (310,228) (280,902) (282,073) Employee benefits..................... 144,566 128,127 117,292 Property, plant and equipment......... (132,750) (148,541) (154,714) Investments........................... 143,342 61,280 46,455 Alternative minimum tax credit........ 165,200 151,000 Other-net............................. 44,371 55,590 38,762 -------------------------------------- 1,302,219 1,120,618 737,927 Unrealized (appreciation) depreciation (257,764) (15,601) 186 Other-net............................. 29,955 4,515 387 -------------------------------------- Deferred tax assets-net.......... $1,074,410 $1,109,532 $ 738,500 ======================================
55 Gross deferred tax assets amounted to $1,895,689,000 and $1,595,083,000 and liabilities amounted to $821,279,000 and $485,551,000, for the years ended December 31, 1993 and 1992, respectively. No valuation allowance for deferred tax assets is necessary due to the Company's election to designate its 1988 through 1991 tax payments as Special Estimated Tax Payments as permitted under the Technical and Miscellaneous Revenue Act of 1988, which should assure realization of a substantial portion of deferred tax assets arising from the discounting of property/casualty loss reserves and the Company's past history of profitability and anticipated continued profitability. Deferred Federal income taxes (benefits) have been provided for the tax effects of items reported in different periods for financial and income tax reporting purposes. The sources of these differences for the year ended December 31, 1991, in thousands of dollars, were as follows:
Insurance reserves ............................................... $(149,076) Utilization of alternative minimum tax credit .................... 41,000 Deferred income .................................................. (50,393) Investment write-downs ........................................... (57,865) Deferred policy acquisition costs ................................ (7,183) Provisions deductible in different years ......................... 14,307 Other ............................................................ (10,997) --------- Total ....................................................... $(220,207) =========
Total income tax expense (benefit) for the years ended December 31, 1993, 1992 and 1991 was different than the amounts of $241,275,000, $(176,278,000) and $418,591,000, computed by applying the statutory U.S. federal income tax rate of 35%, 34% and 34%, respectively to income (loss) before income taxes and minority interest for each of the years. The reasons for variances from the statutory rate are as follows:
Percent of Pre-tax Income Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- Statutory rate ...................... 35 % (34)% 34 % (Decrease) increase in income tax rate resulting from: Tax rate change .................... (5) Exempt interest and dividends received deduction ................ (28) (44) (16) Special deduction-salvage and subrogation ....................... (2) (3) (2) Fresh start adjustments ............ (3) State and city income taxes ........ 7 8 3 Other .............................. (2) 2 -------------------------------- Effective income tax rate........... 7 % (75)% 18 % ================================
Federal, foreign, state and local income tax payments, net of refunds, amounted to approximately $10,263,000, $355,853,000 and $346,856,000 for the years ended December 31, 1993, 1992 and 1991, respectively. The Tax Reform Act of 1986 enacted a new separate parallel tax system referred to as the Alternative Minimum Tax ("AMT") system. AMT is based on a flat rate applied to a broader tax base. It is calculated separately from the regular federal income tax and the higher of the two taxes is paid. The excess of the AMT over regular tax is a tax credit, which can be carried forward indefinitely to reduce regular tax liabilities of future years. As a result of a carryback of 1992 tax losses, the Company received a tax refund of approximately $32,000,000. At December 31, 1993 the AMT credit totaled approximately $165,200,000. 56 The Company has entered into separate tax allocation agreements with Bulova and CNA, majority-owned subsidiaries in which its ownership exceeds 80% (the "Subsidiaries"). Each agreement provides that the Company will (i) pay to the Subsidiary the amount, if any, by which the Company's consolidated federal income tax is reduced by virtue of inclusion of the Subsidiary in the Company's return, or (it) be paid by the Subsidiary an amount, if any, equal to the federal income tax which would have been payable by the Subsidiary if it had filed a separate consolidated return. Under these agreements, the federal income tax benefit (expense) to CNA amounted to approximately $17,000,000, $350,000,000 and $(82,000,000) for the years ended December 31, 1993, 1992 and 1991, respectively, and the federal income tax benefit (expense) to Bulova amounted to approximately $2,500,000, $(3,300,000) and $1,900,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Each agreement may be cancelled by either of the parties upon thirty days' written notice. The Company's federal income tax returns have been examined through 1988 and settled through 1983, and the years 1989 and 1990 are currently under examination. While tax liabilities for subsequent years are subject to audit and final determination, in the opinion of management the amount accrued in the consolidated balance sheet is believed to be adequate to cover any additional assessments which may be made by federal, state and local tax authorities and should not have a material effect on the financial condition of the Company. The Revenue Reconciliation Act of 1990 (the "1990 Act") requires property/casualty insurance companies to accrue estimated salvage and subrogation recoverable for tax purposes as of January 1, 1990. Under a transition provision of the 1990 Act, for companies that had anticipated salvage and subrogation in determining loss reserves, 87% of such accrual as of January 1, 1990 was forgiven. This special deduction is to be taken ratably over four taxable years beginning in 1990. CNA recognized a tax benefit of approximately $17,000,000, $17,000,000 and $33,000,000 for the years ended December 31, 1993, 1992 and 1991, respectively. The 1991 amount recognizes tax benefit for the 1990 year. The Omnibus Budget Reconciliation Act of 1993, enacted in August 1993, among other things, increased the corporate tax rate from 34% to 35 % effective January 1, 1993. In accordance with SFAS No. 109 deferred tax assets have been adjusted for the effect of the change in tax rates in the period enacted. As a result, the Company has recorded a tax benefit in 1993 of approximately $31,636,000 to increase its deferred tax asset. 57 9. Long-Term Debt-
December 31, 1993 ------------------------------------------------------------ Senior Unamortized Current Debt Discount Net Maturities ------------------------------------------------------------ (In thousands) By company: Loews Corporation ............................ $1,208,573 $23,529 $1,185,044 $1,252 CNA .......................................... 920,777 7,498 913,279 1,699 Bulova ....................................... 4,282 4,282 943 Other ........................................ 93,065 93,065 4,647 -------------------------------------------------------- Total ................................... $2,226,697 $31,027 $2,195,670 $8,541 ======================================================== Long-term debt, net of notes and debentures held by the Company (a), consists of: December 31, ------------------------- 1993 1992 ------------------------- (In thousands) Senior debt: Loews Corporation (Parent Company): 8.5% notes due 1998 (effective interest rate of 8.6%) (authorized, $125,000) .................. $ 117,832 $ 117,832 8.3% debentures due 2007 (effective interest rate of 8.4%) (authorized, $200,000) (b) ...... 200,000 200,000 8.9% debentures due 2011 (effective interest rate of 9.0%) (authorized, $175,000) .......... 175,000 175,000 9% senior sinking fund debentures due 2016 ..... 158,700 7.6% notes due 2023 (effective interest rate of 7.8%) (authorized, $300,000) (c) .............. 300,000 7% notes due 2023 (effective interest rate of 7.2%) (authorized, $400,000) (d) .............. 400,000 Note payable (effective interest rate of 10%) .. 15,741 16,879 CNA Financial Corporation: 8.6% notes due 1996 (effective interest rate of 8.8%) (authorized, $250,000) .................. 250,000 250,000 8.9% notes due 1998 (effective interest rate of 9.2%) (authorized, $150,000) .................. 150,000 150,000 6.3% notes due 2003 (effective interest rate of 6.4%) (authorized, $250,000) .................. 250,000 7.3% debentures due 2023 (effective interest rate of 7.3%) (authorized, $250,000) .......... 250,000 Other senior debt (effective interest rates approximate 4.6%) ............................. 20,777 16,096 Other senior debt, principally mortgages (effective interest rates approximate 8.9%) .... 97,347 103,476 ------------------------- 2,226,697 1,187,983 Less unamortized discount ......................... 31,027 11,042 ------------------------- Senior debt-net .............................. 2,195,670 1,176,941 ------------------------- Subordinated debt: Loews Corporation (Parent Company): 10% subordinated notes due 1996 ................ 200,000 Zero coupon convertible subordinated notes due 2004, net of discount of $393,293 ......... 390,138 ------------------------- 590,138 Less unamortized discount ......................... 7,484 ------------------------- Subordinated debt-net ....................... 582,654 ------------------------- Long-term debt, less unamortized discount ... $2,195,670 $1,759,595 =========================
58 (a) Amounts of notes and debentures held by the Company are:
December 31, ------------------------- 1993 1992 ------------------------- 8.5%, due 1998 .................................... $7,168 $ 7,168 Zero coupon, due 2004, net of discount of $146,372 145,197 9%, due 2016 ...................................... 41,300
(b) Redeemable in whole or in part at January 15, 1997 at 104%, and decreasing percentages thereafter. (c) Redeemable in whole or in part at June 1, 2003 at 104%, and decreasing percentages thereafter. (d) Redeemable in whole or in part at October 15, 2003 at 102%, and decreasing percentages thereafter. The aggregate of long-term debt maturing in each of the next five years is approximately as follows: $8,541,000 in 1994, $6,815,000 in 1995, $282,499,000 in 1996, $21,512,000 in 1997 and $273,283,000 in 1998. The Company paid interest expenses of approximately $219,099,000, $127,689,000 and $146,659,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Payment of dividends by insurance subsidiaries of CNA without prior regulatory agency approval is limited to certain formula-derived amounts. At December 31, 1993, $2,089,629,000 of retained earnings of subsidiaries was not available for dividends to the Company. 10. Purchase of Business- In January 1992 Diamond Offshore Drilling, Inc., a wholly owned subsidiary, acquired all of the outstanding common stock of Odeco Drilling, Inc. ("Odeco") at a purchase price of $372,242,000 in cash. Odeco owned and operated 40 offshore drilling rigs that were used in drilling oil and gas wells. The acquisition has been accounted for by the purchase method and the results of operations are included in the Company's financial statements as of January 1, 1992. Had this acquisition occurred on January 1, 1991, consolidated results of operations for the year ended December 31, 1991 would not have been materially different. 11. Capital Stock and Earnings Per Share- In addition to its common stock, the Company has authorized 25,000,000 shares of preferred stock, $.10 par value. Earnings per share, assuming no dilution, are based on the weighted average number of shares outstanding during each year (64,108,000, 65,659,000 and 68,807,000 for the years ended December 31, 1993, 1992 and 1991, respectively). Fully diluted earnings per share assumes conversion of the zero coupon convertible subordinated notes and elimination of the related interest charges, net of taxes. Fully diluted earnings per share are not presented for the years ended December 31, 1992 and 1991 since such dilution is not material. 59 12. Quarterly Financial Data (Unaudited)-
1993 Quarters Ended 1992 Quarters Ended ------------------------------------------------------------------------------------------------- Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31 ------------------------------------------------------------------------------------------------- (In thousands, except per share data) Total revenues ........ $3,351,634 $3,416,934 $3,375,079 $3,543,130 $3,433,430 $3,419,039 $3,442,358 $3,396,627 Income (loss) before cumulative effect of changes in accounting principles ........... 138,403 (89,615) 203,643 341,690 (620,691) 122,326 266,179 210,089 Per share ........... 2.20 (1.40) 3.16 5.25 (9.53) 1.88 4.06 3.14 Net income (loss) ..... 138,403 (89,615) 203,643 341,690 (620,691) 122,326 266,179 354,800 Per share ........... 2.20 (1.40) 3.16 5.25 (9.53) 1.88 4.06 5.30
13. Retirement Plans- Pension Plans-The Company and its subsidiaries have several non-contributory defined benefit plans for eligible employees. The benefits for certain plans which cover salaried employees and certain union employees are based on formulas which include among others, years of service and average pay. The benefits for one plan which covers union workers under various union contracts and certain salaried employees are based on years of service multiplied by a stated amount. Pension cost includes the following components:
Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- (In thousands) Service cost-benefits earned ........ $ 37,141 $ 34,292 $ 29,672 Interest cost ....................... 81,811 76,814 69,715 Return on plan assets-actual ........ (54,079) (55,446) (95,262) Net amortization and deferrals ...... (7,163) (598) 49,722 ------------------------------------- Net pension cost .................. $ 57,710 $ 55,062 $ 53,847 =====================================
The following table sets forth the pension plans' funded status:
December 31, ------------------------------------------------------------ 1993 1992 ------------------------------------------------------------ Overfunded Underfunded Overfunded Underfunded Plans Plans Plans Plans ------------------------------------------------------------ (In thousands) Actuarial present value of benefit obligations: Accumulated benefit obligation ............. $ 450,751 $512,907 $ 534,041 $261,216 ======================================================= Accumulated vested benefit obligation ...... $ 409,399 $473,030 $ 473,042 $244,372 ======================================================= Projected benefit obligation ................. $ 619,001 $565,127 $ 733,121 $264,512 Plan assets at fair value .................... 483,774 361,285 616,655 158,865 ------------------------------------------------------- Projected benefit obligation over plan assets 135,227 203,842 116,466 105,647 Unrecognized prior service cost .............. (16,273) (17,587) (22,628) (18,785) Unrecognized net asset (obligation), January 1 22,330 (39,756) 22,437 (40,387) Unrecognized net loss ........................ (159,594) (96,156) (103,651) (23,610) Adjustment required to recognize minimum liability ................................... 102,343 83,713 ------------------------------------------------------- Net pension (asset) liability recognized in the balance sheet ......................... $ (18,310) $152,686 $ 12,624 $106,578 =======================================================
60 At December 31, 1993, the Company's adjustment required to recognize its minimum pension liability exceeded its unrecognized prior service cost and net transition obligation by $43,095,000. This excess is recorded as a reduction to shareholders' equity of $28,012,000, net of tax benefits of $15,083,000, in accordance with SFAS No. 87, "Employers' Accounting for Pensions." The rates used in the actuarial assumptions were:
Years Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- Discount rate ...................... 7.3% to 7.5% 8.3% to 8.5% 8.5% to 9.0% Rate of compensation increase....... 4.5% to 5.8% 5.3% to 5.5% 5.8% to 6.3% Expected long-term rate of return on assets ............................ 7.5% to 8.5% 9.0% 9.3% to 9.5%
The Company's funding policy is to make contributions in accordance with applicable governmental regulatory requirements. The assets of the plans are invested primarily in interest-bearing obligations and for one plan with an insurance subsidiary of the Company, in its Separate Account business. Other Postretirement Benefit Plans-The Company and its subsidiaries have several postretirement benefit plans covering eligible employees and retirees. Participants generally become eligible after reaching age 55 with required years of service. Actual requirements for coverage vary by plan. Benefits for retirees who were covered by bargaining units vary by each unit and contract. Benefits for certain retirees are in the form of a company health care account which can have a maximum of $4,500 per year, with an equal amount for a spouse in the same age grouping. Benefits for retirees reaching age 65 are generally integrated with Medicare. Benefits for certain retirees are in the form of a company health care account which can have a maximum value of $1,500 per year, with an equal amount for a spouse in the same age grouping. Other retirees, based on plan provisions, must use Medicare as their primary coverage, with the Company reimbursing a portion of the unpaid amount; or are reimbursed for the Medicare Part B premium or have no company coverage. The benefits provided by the Company are basically health, and for certain retirees, life insurance type benefits. The Company does not fund any of these benefit plans and accrues postretirement benefits during the active service of those employees who would become eligible for such benefits when they retire. The rates used in the actuarial assumptions were:
December 31 ------------------------- 1993 1992 ------------------------- Net periodic postretirement benefit cost .......... 8.3% to 8.5% 8.5% to 9.0% Accumulated postretirement benefit liability ...... 7.3% to 7.5% 8.3% to 8.5%
61 The following table sets forth the postretirement plans' status:
December 31, -------------------------- 1993 1992 -------------------------- (In thousands) Accumulated postretirement benefit obligation: Retirees ........................................ $134,502 $136,493 Fully eligible active plan participants ......... 57,376 61,369 Other active plan participants .................. 128,992 125,170 ----------------------- 320,870 323,032 Unrecognized prior service cost ................. 736 Unrecognized net gain (loss) .................... 21,869 (11,216) ----------------------- Accrued postretirement benefit liability ........ $343,475 $311,816 ======================= Years Ended December 31, -------------------------- 1993 1992 -------------------------- (In thousands) Postretirement benefit cost includes the following components: Service costs ................................... $ 10,892 $ 10,807 Interest costs .................................. 25,238 24,919 ----------------------- Net periodic postretirement benefit cost ........ $ 36,130 $ 35,726 =======================
Prior to 1992 the Company recognized the expense as amounts were paid. Such costs amounted to approximately S10,441,000 for 1991. For measurement purposes, a trend rate of 14.5% to 15% pre-65 and 11.5% post- 65, for covered costs was used. These trend rates are expected to decrease gradually to 6% and 7% at rates from 0.5% to 1.0% per annum. An increase of one percentage point in assumed health care cost trend rates would increase the accumulated postretirement benefit obligation by approximately $28,685,000 and the net periodic postretirement benefit cost by approximately $3,900,000. 14. Reinsurance- CNA assumes and cedes insurance with other insurers and reinsurers and members of various reinsurance pools and associations. CNA utilizes reinsurance arrangements to limit its maximum loss, to provide greater diversification of risk and to minimize exposures on larger risks. The reinsurance coverages are tailored to the specific risk characteristics of each product line with CNA's retained amount varying by type of coverage. Generally, reinsurance coverage for property risks is on excess of loss, per risk basis. Liability coverages are generally reinsured on a quota share basis in excess of CNA's retained risk. In addition, CNA has catastrophe coverage for certain types of losses over stipulated amounts arising from any one occurrence or event. The ceding of insurance does not discharge the primary liability of the original insurer. CNA places reinsurance with other carriers only after careful review of the nature of the contract and a thorough assessment of the reinsurers' credit quality and claim settlement performance. Further, for carriers that are not authorized reinsurers in Illinois, CNA receives collateral primarily in the form of bank letters of credit, securing a large portion of the recoverables. At December 31, 1993, such collateral totaled approximately $155,000,000. CNA's largest recoverable, including prepaid reinsurance premiums, at December 31, 1993 was approximately $484,000,000 with Lloyd's of London. The recoverable from Lloyd's of London is dispersed among thousands of individual reinsurers and other names who have unlimited liability. 62 The effects of reinsurance on written premiums and earned premiums are as follows:
Written Premiums ----------------------------------------------------------- Direct Ceded Assumed Net ----------------------------------------------------------- (In thousands) Year Ended December 31, 1993 Long Duration Contracts ...................... $ 422,700 $ 23,000 $ 141,600 $ 541,300 Short Duration Contract ...................... 7,654,900 540,100 1,168,400 8,283,200 ------------------------------------------------------- Total ................................... $8,077,600 $563,100 $1,310,000 $8,824,500 ======================================================= Year Ended December 31, 1992 Long Duration Contracts ...................... $ 413,800 $ 23,200 $ 146,500 $ 537,100 Short Duration Contracts ..................... 7,325,800 506,500 1,367,500 8,186,800 ------------------------------------------------------- Total ................................... $7,739,600 $529,700 $1,514,000 $8,723,900 ======================================================= Year Ended December 31, 1991 Long Duration Contracts ...................... $ 366,000 $ 19,700 $ 161,700 $ 508,000 Short Duration Contracts ..................... 7,623,500 491,800 1,294,700 8,426,400 ------------------------------------------------------- Total ................................... $7,989,500 $511,500 $1,456,400 $8,934,400 ======================================================= Earned Premiums ------------------------------------------------------------ Year Ended December 31, 1993 Long Duration Contracts ...................... $ 350,100 $ 23,000 $ 140,900 $ 468,000 Short Duration Contracts ..................... 7,603,200 525,100 1,142,700 8,220,800 -------------------------------------------------------- Total ................................... $7,953,300 $548,100 $1,283,600 $8,688,800 ======================================================== Year Ended December 31, 1992 Long Duration Contracts ...................... $ 376,400 $ 23,200 $ 146,500 $ 499,700 Short Duration Contracts ..................... 7,570,500 506,100 1,203,900 8,268,300 -------------------------------------------------------- Total ................................... $7,946,900 $529,300 $1,350,400 $8,768,000 ======================================================== Year Ended December 31, 1991 Long Duration Contracts ...................... $ 324,100 $ 19,700 $ 161,700 $ 466,100 Short Duration Contracts ..................... 7,741,700 487,900 1,226,500 8,480,300 -------------------------------------------------------- Total ................................... $8,065,800 $507,600 $1,388,200 $8,946,400 ========================================================
15. Leases- The Company's hotels in some instances are constructed on leased land or are leased. Other leases cover central office facilities, computer equipment and operating service offices. Rent expense amounted to $84,946,000, $85,400,000 and $84,429,000 for the years ended December 31, 1993, 1992 and 1991, respectively. It is expected, in the normal course of business, that leases which expire will be renewed or replaced by leases on other properties; therefore, it is believed that future minimum annual rental commitments will not be less than the amount of rental expense incurred in 1993. At December 31, 1993 future aggregate minimum rental payments approximated $282,805,000. 63 16. Legal Proceedings and Contingent Liabilities- Pending litigation includes claims seeking damages for cancer and other health effects claimed to have resulted from use of tobacco products. It is not possible to predict the outcome of pending litigation; however, on the basis of the facts presently known to it, management does not believe the actions pending will have a material adverse effect upon the financial condition or results of operations of the Company. Should additional facts arise in the future indicating a probable adverse determination of any such actions, such ultimate determination might have a material adverse effect upon the Company's financial condition. Fibreboard Litigation--CNA's primary property/casualty subsidiary, Continental Casualty Company ("Continental"), is party to litigation with Fibreboard Corporation ("Fibreboard") involving coverage for certain asbestos-related claims and defense costs (San Francisco Superior Court, Judicial Council Coordination Proceeding 1072). As described below, Continental, Fibreboard, another insurer ("Pacific Indemnity"), a subsidiary of the Chubb Corporation, and a negotiating committee of asbestos claimant attorneys have reached a Global Settlement (the "Global Settlement") to resolve all future asbestos-related bodily injury claims involving Fibreboard. Continental, Fibreboard and Pacific Indemnity have also reached an agreement, which is subject to court approval, (the "Trilateral Agreement") on a settlement to resolve the coverage litigation in the event the Global Settlement does not obtain final court approval. The implementation of the Global Settlement or the Trilateral Agreement would have the effect of settling Continental's litigation with Fibreboard. Pending final court approval of either the Global Settlement or the Trilateral Agreement, at the request of Continental, Fibreboard and Pacific Indemnity, the California Court of Appeal withheld its ruling on the issues discrete to Continental and Pacific Indemnity in the appeal in that litigation. Coverage Litigation--Between 1928 and 1971, Fibreboard manufactured insulation products containing asbestos. Since the 1970's, thousands of claims have been filed against Fibreboard by individuals claiming bodily injury as a result of asbestos exposure. Continental insured Fibreboard under a comprehensive general liability policy between May 4, 1957 and March 15, 1959. Fibreboard disputed the coverage positions taken by its insurers and, in 1979, Fireman's Fund, another of Fibreboard's insurers, brought suit with respect to coverage for defense and indemnity costs. In January 1990, the San Francisco Superior Court (Judicial Council Coordination Proceeding 1072) rendered a decision against the insurers including Continental and Pacific Indemnity. The court held that the insurers owed a duty to defend and indemnify Fibreboard for certain of the asbestos- related bodily injury claims asserted against Fibreboard (in the case of Continental, for all claims involving exposure to Fibreboard's asbestos products if there was exposure to asbestos at any time prior to 1959 including years prior to 1957, regardless of when the claims were asserted or injuries manifested) and that the policies contained no aggregate limit of liability in relation to such claims. The judgment was appealed. The Court of Appeal entered an opinion on November 15, 1993, as modified on December 13, 1993, which substantially affirmed the lower court's decisions on scope of coverage and trigger of coverage issues, as described below. The Court of Appeal withheld its ruling on the issues discrete to Continental and Pacific Indemnity pending final court approval of either the Global Settlement or the Trilateral Agreement described below. On January 27, 1994, the California Supreme Court granted a Petition for Review, filed by several insurers, including Continental, of, among other things, the trigger and scope of coverage issues. The order granting review has no effect on the Court of Appeal's order severing the issues unique to Continental and Pacific Indemnity. Continental cannot predict the time frame within which the issues before the California Supreme Court may be resolved. If neither the Global Settlement nor the Trilateral Agreement is approved, it is anticipated that Continental and Pacific Indemnity will resume the appeal process. Continental's appeal of the coverage judgment raises many legal issues. Key issues on appeal under the policy are trigger of coverage, scope of coverage, dual coverage requirements and number of occurrences: .The trial court adopted a continuous trigger of coverage theory under which all insurance policies in effect at any time from first exposure to asbestos until the date of the claim filing or death are triggered. The Court of Appeal endorsed the continuous trigger theory, but modified the ruling to provide that policies are triggered by a claimant's first exposure to the policyholder's products, as opposed to the first exposure to any asbestos product. Therefore, an insurance policy is not triggered if a claimant's first 64 exposure to the policyholder's product took place after the policy period. The court, however, placed the burden on the insurer to prove the claimant was not exposed to its policyholder's product before or during the policy period. The trigger of coverage issue is now on appeal to the California Supreme Court. Continental's position is that its policy is triggered under California law by manifestation of appreciable harm. The bodily injury cannot be said to occur within the meaning of the policy until actual physical symptoms and associated functional impairment manifest themselves. Thus, Continental's position is that if existing California law were applied, there would be no coverage under Continental's policy. .The scope of coverage decision imposed a form of "joint and several" liability that makes each triggered policy liable in whole for each covered claim, regardless of the length of the period the policy was in effect. This decision was affirmed by the Court of Appeal, and is now on appeal to the California Supreme Court. Continental's position is that liability for asbestos claims should be shared not jointly, but severally and on a pro data basis between the insurers and insured. Under this theory, Continental would only be liable for that proportion of the bodily injury that occurred during the 22-month period its policy was in force. .Continental maintains that both the occurrence and the injury resulting therefrom must happen during the policy period for the policy to be triggered. Consequently, if the court holds that the occurrence is exposure to asbestos, Continental's position is that coverage under the Continental policy is restricted to those who actually inhaled Fibreboard asbestos fibers and suffered injury from May 4, 1957 to March 15, 1959. .Continental's policy had a $1 million per occurrence limit. Continental contends the number of occurrences under California law must be determined by the general cause of the injuries, not the number of claimants, and that the cause of the injury was the continuous sale and manufacture of the product. Because the manufacture and sale proceeded from two locations, Continental maintains that there were only two occurrences and thus only $2 million of coverage under the policy. However, the per occurrence limit was interpreted by the trial court to mean that each claim submitted by each individual constituted a separate occurrence. The Court of Appeal withheld ruling on this issue, as noted above. Under various reinsurance agreements, Continental has asserted a right to reimbursement for a portion of its potential exposure to Fibreboard. The reinsurers have disputed Continental's right to reimbursement and have taken the position that any claim by Continental is subject to arbitration under provisions in the reinsurance agreement. A Federal court has ruled that the dispute must be resolved by arbitration. There can be no assurance that Continental will be successful in obtaining a recovery under its reinsurance agreements. Interim Agreement--While the state court action in regard to the coverage issues was pending, Continental and Fibreboard entered into an Interim Agreement in 1988 under which Continental agreed to fund Fibreboard's defense costs and certain settlements up to specified dollar limits through 1992. Continental funded approximately $96 million in defense costs under the Interim Agreement. Assignments--Beginning in 1991, Fibreboard unilaterally reached settlements with various classes of claimants by purporting to assign to plaintiffs potential proceeds from its insurance policy with Continental disputed Fibreboard's right to make such settlements and assignments, asserted that they violated the terms of the policy and the Interim Agreement described above and asserted that the settlement amounts were unreasonable and excessive. In June 1992 a California trial court ruled in one case that Fibreboard could make such settlements and assignments since, in its view, Continental was not fully defending Fibreboard against the claims. Continental is appealing this decision. The trial court did rule that Continental could challenge the reasonableness of individual settlements and assignments. Following that ruling, Continental agreed to fund Fibreboard's reasonable defense costs without limitation as to amount pending resolution of Continental's appeal. Fibreboard continued to make settlements and assignments following such agreement, and Continental vigorously disputed Fibreboard's right to do so. This settlement and assignment process by Fibreboard escalated significantly in the fourth quarter of 1992. Through December 31, 1992, Fibreboard entered into unilateral assignment agreements covering 31,100 claims for a total of $400 million or an average of $12,800 per claim. Of these claims, approximately 30,000 were settled and assigned by Fibreboard in the month of December, 1992. 65 Settlement Negotiations--Based on the facts and circumstances of the Fibreboard case prior to the fourth quarter of 1992, including the strength of Continental's legal arguments, a material loss to Continental was not known or believed to be probable. Significant fourth quarter developments, including the assignments noted above, and the continuing trend for court decisions to expand liability of policies beyond their original intent, led management to consider negotiation of an all-inclusive settlement of Continental's asbestos-related bodily injury litigation with Fibreboard. On April 9, 1993, Continental and Fibreboard entered into an agreement pursuant to which, among other things, the parties agreed to use their best efforts to negotiate and finalize a global class action settlement with asbestos-related bodily injury and death claimants. Through December 31, 1993, Continental, Fibreboard and plaintiff attorneys had reached settlements with respect to approximately 95,000 claims, subject to resolution of the coverage issues, for a maximum settlement amount of approximately $1.2 billion. If neither the Global Settlement nor the Trilateral Agreement receive final court approval, Continental's obligation to pay under all settlements will be partially subject to the results of the pending appeal in the coverage litigation. Minimum amounts payable under all such agreements, regardless of the outcome of coverage litigation, total approximately $560 million, of which $193 million was paid through December 31, 1993. Continental may negotiate other agreements with various classes of claimants including groups who may have previously reached agreement with Fibreboard. Continental will continue to pursue its appeals in respect of the coverage litigation and all other litigation involving Fibreboard if a Global Settlement or the Trilateral Agreement cannot be implemented. Global Settlement--On August 27, 1993, Continental, Pacific Indemnity, Fibreboard and a negotiating committee of asbestos claimant attorneys reached an agreement in principle for an omnibus settlement to resolve all future asbestos- related bodily injury claims involving Fibreboard. The Global Settlement was executed on December 23, 1993. The agreement calls for contribution by Continental and Pacific Indemnity of an aggregate of $1.525 billion to a trust fund for a class of all future asbestos claimants, defined generally as those persons whose claims against Fibreboard were neither filed nor settled on or before August 27, 1993. An additional $10 million is to be contributed to the fund by Fibreboard. The Global Settlement is subject to court approval and possible appeals. As noted below, there is limited precedent with settlements which determine the rights of future claimants to seek relief. Subsequent to the announcement of the agreement in principle, Continental, Fibreboard and Pacific entered into the Trilateral Agreement which sets forth the parties' obligations in the event the Global Settlement is not approved by the court. In such case, Continental and Pacific would contribute to a settlement fund an aggregate of $2 billion, less certain adjustments. Such fund would be devoted to the payment of Fibreboard's asbestos liabilities other than liabilities in respect of previously settled claims. Continental's share of such fund would be $1.46 billion, reduced by a portion of the additional payment of $635 million, which Pacific Indemnity has agreed to pay in respect of unsettled present claims and previously settled claims. Continental has agreed that if either the Global Settlement or the Trilateral Agreement is approved, it will assume responsibility for the claims that had been settled and paid on or before August 27, 1993. A portion of the additional $635 million payment by Pacific Indemnity would be applied to the payment of such claims as well. As a part of the Global Settlement and the Trilateral Agreement, Continental would be released by Fibreboard from any further liability under the comprehensive general liability policy written for Fibreboard by Continental, including but not limited to liability for asbestos-related claims against Fibreboard. The Trilateral Agreement is subject to court approval and possible appeals. Continental and Fibreboard have entered into a supplemental agreement (the "Supplemental Agreement") which governs the interim arrangements and obligations between the parties until such time as the Global Settlement is either approved or disapproved by the court and also governs certain obligations between the parties in the event the Global Settlement is approved, including the payment of present claims which have been filed or settled and not included in the Global Settlement. In addition, Continental and Pacific Indemnity have entered into an agreement (the "Continental Pacific Agreement") which sets forth the parties' agreement with respect to the means for allocating among themselves responsibility for payments arising out of the Fibreboard insurance policies whether or not the Global Settlement or the Trilateral Agreement is approved. Under the Continental-Pacific Agreement, Continental and Pacific Indemnity have agreed to pay 64.71% and 35.29%, respectively, of the $1.525 billion plus interest and expenses to be used to satisfy the claims of future claimants. If neither the Global 66 Settlement nor the Trilateral Agreement is approved, Continental and Pacific Indemnity would share, in the same percentages, most but not all liabilities and costs of either insurer including, but not limited to, liabilities in respect of unsettled present claims and presently settled claims. If either the Trilateral Agreement or the Global Settlement is approved by the court, Pacific Indemnity's share for unsettled present claims and presently settled claims will be $635 million. Reserves--In the fourth quarter of 1992, Continental increased its reserve with respect to potential exposure to asbestos-related bodily injury cases by $1.5 billion. In connection with the agreement in principle announced on August 27, 1993, Continental determined to add $500 million to such claim reserve. The Fibreboard litigation represents the major portion of Continental's asbestos- related claim exposure. There are inherent uncertainties in establishing a reserve for complex litigation of this type. Courts have tended to impose joint and several liability, and because the number of manufacturers who remain potentially liable for asbestos-related injuries has diminished on account of bankruptcies, as has the potential number of insurers due to operation of policy limits, the liability of the remaining defendants is difficult to estimate. Further, a recent trend by courts to consolidate like cases into mass tort trials limits the discovery ability of insurers, generally does not allow for individual claim adjudication, restricts the identification of appropriate allocation methods and thereby results in an increasing likelihood for fraud and disproportionate and potentially excessive judgments. Additionally, management believes that recent court decisions would appear to be based on social of other considerations irrespective of the facts and legal issues involved. The Global Settlement and the Trilateral Agreement are subject to court approval. There is limited precedent with settlements which determine the rights of future claimants to seek relief. It is extremely difficult to assess the magnitude of Continental's potential liability in respect of such future claimants if the Global Settlement and the Trilateral Agreement are not approved and upheld, keeping in mind that Continental's potential liability is limited to persons exposed to asbestos prior to the termination of the policy in 1959. Projections by experts of future trends differ widely, based upon different assumptions with respect to a host of complex variables. Some recently published studies, not specifically related to Fibreboard, conclude that the number of future asbestos-related bodily injury claims against asbestos manufacturers could be several times the number of claims brought to date. Such studies include claims asserted against asbestos manufacturers for all years, including claims filed or projected to be filed in respect of periods after 1959. As indicated above Continental, Fibreboard and plaintiff attorneys have reached settlements with respect to approximately 95,000 claims, subject to the resolution of coverage issues. Such amount does not include presently pending or unsettled claims, previously dismissed or claims settled pursuant to agreements to which Continental is not a party. Another aspect of the complexity in establishing a reserve arises from the widely disparate values that have been ascribed to claims by courts and in the context of settlements. Under the terms of a settlement reached with plaintiff counsel in August 1993, the expected settlement for approximately 34,000 claims for exposure to asbestos prior to 1959 is expected to be $445 million, or an average of $13,000 per claim. Based on reports by Fibreboard, since September 1988, Fibreboard resolved approximately 40,000 claims (other than by the assignment process noted above), approximately 45% of which involved no cost to Fibreboard other than defense costs, with the remaining claims involving the payment of approximately $11,000 per claim. On the other hand, a trial court in Texas in 1990 rendered a verdict in which Fibreboard's liability in respect of 2,300 claims was found to be approximately $310,000 per claim including interest and punitive damages. Fibreboard entered into a settlement of such claims by means of an assignment of its potential proceeds from its policy with Continental. Continental intervened and settled these claims in 1992 for approximately $77,000 on average, subject to resolution of the coverage appeal. Continental believes that as a result of the proposed Global Settlement and the Trilateral Agreement it has greatly reduced the uncertainty of its exposure with respect to the Fibreboard matter. However, if neither the Global Settlement nor the Trilateral Agreement are approved and upheld, in light of the factors discussed herein, the range of Continental's potential liability cannot be meaningfully estimated and there can be no assurance that the reserves established would be sufficient to pay all amounts which ultimately could become payable in respect of asbestos-related bodily injury liabilities. While it is possible that the ultimate outcome of this matter could have a material adverse impact on the equity of CNA, management does not believe that a further loss material to equity is probable. Management will continue to monitor the potential liabilities with respect to asbestos-related bodily injury claims and will make adjustments to the claim reserves if warranted. 67 Environmental Pollution-Potential exposures exist for claims involving environmental pollution, including toxic waste clean-up. Environmental pollution clean-up is the subject of both federal and state regulation. By some estimates, there are thousands of potential waste sites subject to clean-up. The insurance industry is involved in extensive litigation regarding coverage issues. Judicial interpretations in many cases have expanded the scope of coverage and liability beyond the original intent of the policies. Under federal regulation, the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("Superfund") governs the clean-up and restoration of abandoned toxic waste sites and formalizes the concept of legal liability for clean-up and restoration by "Potentially Responsible Parties" ("PRP's"). Superfund establishes a mechanism to pay for clean-up of waste sites if PRP's fail to do so, and to assign liability to PRP's. The extent of liability to be allocated to a PRP is dependent on a variety of factors. Further, the number of waste sites subject to clean-up is unknown. To date, approximately 1,300 clean-up sites have been identified by the Environmental Protection Agency ("EPA"). On the other hand, the Congressional Budget Office is estimating that there will be 4,500 National Priority List sites and other estimates run as high as 30,000 sites that will require clean-up. Very few sites have been subject to clean-up to date. The extent of clean-up necessary and the assignment of liability has not been established. CNA and the insurance industry are disputing coverage for many such claims. Key coverage issues include whether Superfund response cost are considered damages under the policies, trigger of coverage, applicability of pollution exclusions, the potential for joint and several liability and definition of an occurrence. Similar coverage issues exist for clean-up of waste sites not covered under Superfund. To date, courts have been inconsistent in their rulings on these issues. The Superfund legislation must be reauthorized in 1994. A number of proposals to reform Superfund have been made by various parties including the EPA, the Treasury Department, congressional delegates and the Keystone Commission, a broad based national coalition which includes community, industry and insurance representatives. It is too early to determine the future impact of these proposals on CNA and the insurance industry. Due to the inherent uncertainties described above, including the inconsistency of court decisions, the number of waste sites subject to clean-up, and the standards for clean-up and liability, the exposure to CNA for environmental pollution claims cannot be meaningfully quantified. Prior to 1993, no specific allocation of reserves was made for unreported claims or for litigation expenses. CNA identified reserves only for reported environmental pollution claims. In 1993, CNA allocated approximately $340 million of claims and claims expense reserves for unreported environmental pollution claims in addition to the $94 million of reserves recorded for reported claims. Claims and claims expense reserves represent management's estimates of ultimate liabilities based on currently available facts and law. However, in addition to the uncertainties previously discussed, additional issues related to, among other things, specific policy provisions, multiple insurers and allocation of liability among insurers, consequences of conduct by the insured, missing policies and proof of coverage make quantification of liabilities exceptionally difficult. The number of claims filed for environmental pollution coverage continues to increase. Approximately 2,700 claims were reported in 1993 and approximately 19,200 claims have been reported to date. Pending claims total approximately 10,600, 10,800, and 9,300 at December 31, 1993, 1992 and 1991, respectively. Approximately 8,600 claims were closed through December 31, 1993, of which approximately 7,800 claims were settled without payment, except for claim expenses of $18 million. Settlements for the remaining 800 claims totaled $76 million, plus claim expenses of $21 million. Reserve development for environmental claims totaled $446, $48, and $47 million in 1993, 1992 and 1991, respectively, including litigation costs of $28, $25 and $21 million. As noted above, adverse development for 1993 primarily resulted from the allocation of $339 million of reserves for unreported claims. The results of operations in future years may continue to be adversely affected by environmental pollution claims and claims expenses. Management will continue to monitor potential liabilities and make further adjustments as warranted. 68 17. Business Segment Data- The Company's subsidiaries are engaged primarily in insurance (property, casualty and life), the production and sale of cigarettes, the operation of hotels and oil and gas drilling rigs, the distribution of watches and the production and sale of other timing devices. The following table sets forth the major sources of the Company's consolidated revenues, income and assets.
Years Ended December 31, -------------------------------------------------------- 1993 1992 1991 -------------------------------------------------------- (In thousands) Revenues (a): Property and casualty insurance ........... $ 8,159,851 $ 7,948,867 $ 8,479,267 Life insurance (b) ........................ 2,823,314 2,816,471 2,632,368 Cigarettes ................................ 1,908,903 2,185,448 2,009,545 Hotels .................................... 185,268 201,436 200,924 Watches and other timing devices .......... 153,543 181,388 164,301 Drilling .................................. 288,251 217,713 64,571 Investment income-net (c) ................. 120,000 117,189 69,463 Equity in income of CBS Inc. .............. 58,990 27,012 (24,533) Other and eliminations-net ................ (11,343) (4,070) 24,358 --------------------------------------------------- $13,686,777 $13,691,454 $13,620,264 =================================================== Income contribution (a) (d): Property and casualty insurance ........... $ (33,136) $(1,495,498) $ 529,391 Life insurance ............................ 177,392 159,600 75,037 Cigarettes ................................ 592,368 914,973 771,636 Hotels .................................... 14,216 19,127 25,400 Watches and other timing devices .......... 6,274 12,470 7,299 Drilling .................................. 4,866 (48,911) (14,838) Investment income-net (c) ................. 116,062 116,076 69,463 Equity in income of CBS Inc. .............. 58,990 27,012 (24,533) Other ..................................... (17,207) (7,279) 19,115 --------------------------------------------------- $ 919,825 $ (302,430) $ 1,457,970 =================================================== Net income (a): Property and casualty insurance ........... $ 145,757 $ (623,243) $ 490,394 Life insurance ............................ 94,288 85,227 36,619 Cigarettes ................................ 340,689 524,546 430,219 Hotels .................................... (1,785) 1,911 4,809 Watches and other timing devices .......... 2,413 4,366 1,880 Drilling .................................. (16,576) (51,174) (11,221) Investment income-net (c) ................. 71,476 75,858 45,324 Equity in income of CBS Inc. .............. 52,641 24,717 (22,904) Interest expense and other-net (e) ........ (94,782) (64,305) (70,782) Cumulative effect of changes in accounting principles-net ........................... 144,711 --------------------------------------------------- $ 594,121 $ 122,614 $ 904,338 =================================================== 69 December 31, -------------------------------------------------------- 1993 1992 1991 -------------------------------------------------------- (In thousands) Identifiable assets: Property and casualty insurance ........... $29,630,328 $27,247,756 $26,867,628 Life insurance ............................ 12,225,641 12,355,269 12,137,393 Cigarettes ................................ 547,063 623,936 616,920 Hotels .................................... 199,288 205,900 207,870 Watches and other timing devices .......... 158,609 166,482 155,520 Drilling .................................. 550,622 538,792 107,719 Investment income ......................... 1,966,655 1,917,614 2,098,439 Investment in CBS Inc. .................... 473,483 358,500 345,842 Other ..................................... 56,046 96,013 114,099 Corporate ................................. 42,017 45,252 32,727 --------------------------------------------------- $45,849,752 $43,555,514 $42,684,157 ===================================================
(a) Realized investment gains (losses) included in Revenues, income contribution and Net income are as follows:
Years Ended December 31, ---------------------------------------- 1993 1992 1991 ---------------------------------------- Revenues: Property and casualty insurance ... $674,452 $262,658 $456,541 Life insurance .................... 125,813 95,433 7,434 Investment income-net ............. 62,532 49,156 (51,820) ------------------------------------- $862,797 $407,247 $412,155 ===================================== Income contribution: Property and casualty insurance ... $674,452 $262,658 $456,541 Life insurance .................... 112,671 83,293 (12,622) Investment income-net ............. 62,532 49,156 (51,820) ------------------------------------- $849,655 $395,107 $392,099 ===================================== Net income: Property and casualty insurance ... $362,917 $146,466 $248,490 Life insurance .................... 60,256 44,592 (11,085) Investment income-net ............. 38,728 31,284 (34,323) ------------------------------------- $461,901 $222,342 $203,082 =====================================
(b) Includes $1,700,000, $1,600,000 and $1,500,000 under contracts covering U.S. government employees and their dependents for the respective periods. (c) Consists of investment income of non-insurance operations. Investment income of insurance operations is included in the Revenues, Income contribution and Net income of the related insurance operations. (d) Consists of income before minority interest, cumulative effect of changes in accounting principles and allocation for financial reporting purposes of interest expense, corporate expense and income taxes. (e) Includes interest expense, net of tax benefits, of $83,127, $71,499 and $91,306 for the respective periods. 70 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Information called for by Part III has been omitted as Registrant intends to file with the Securities and Exchange Commission not later than 120 days after the close of its fiscal year a definitive Proxy Statement pursuant to regulation 14A. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) 1. Financial Statements: The financial statements appear above under Item 8. The following additional financial data should be read in conjunction with those financial statements. Schedules not included with these additional financial data have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes to consolidated financial statements.
Page 2. Financial Statement Schedules: Number ------- Independent Auditors' Report ........................................ L-1 Loews Corporation and Subsidiaries: Schedule I-Summary of investments-other than investments in related parties at December 31, 1993 ...................................... L-2 Schedule III-Condensed financial information of Registrant for the years ended December 31, 1993, 1992 and 1991 ...................... L-3 Schedule VIII-Valuation and qualifying accounts for the years ended December 31, 1993, 1992 and 1991 .................................. L-8 Schedule IX-Short-term borrowings for the years ended December 31, 1993, 1992 and 1991 ............................................... L-9 Schedule XIV-Supplemental information concerning property/casualty insurance operations for the years ended December 31, 1993, 1992 and 1991 .......................................................... L-10 3. Exhibits: Exhibit Description Number ------------ -------- (3) Articles of Incorporation and By-Laws Restated Certificate of Incorporation of the Registrant, incorporated herein by reference to Exhibit 3 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1987 .... 3.01 By-Laws of the Registrant as amended to date, incorporated herein by reference to Exhibit 4.6 to Registrant's Registration Statement No. 33-31432 .......................................... 3.02 71 Exhibit Description Number ------------ -------- (4) Instruments Defining the Rights of Security Holders, Including Indentures The Registrant hereby agrees to furnish to the Commission upon request copies of instruments with respect to long-term debt, pursuant to Item 601(b)(4)(iii) of Regulation S-K. (10) Material Contracts Employment Agreement between Registrant and Laurence A. Tisch dated March 1, 1971 as amended through October 22, 1992 is incorporated herein by reference to Exhibit 10.01 to Registrant's Reports on Form 10-K for the years ended December 31, 1981, December 31, 1983, December 31, 1984, December 31, 1985, December 31, 1986, December 31, 1988, December 31, 1989 and December 31, 1992 ............................................... 10.01 Employment Agreement dated as of March 1, 1988 between Registrant and Preston R. Tisch as amended through October 22, 1992 is incorporated herein by reference to Exhibit 10.05 to Registrant's Report on Form 10-K for the years ended December 31, 1987, December 31, 1989 and December 31, 1992 .......................... 10.02 Continuing Service Agreement between a subsidiary of Registrant and Edward J. Noha, dated February 27, 1991 incorporated herein by reference to Exhibit 10.04 to Registrant's Report on Form 10-K for the year ended December 31, 1990 ............................ 10.03 Loews Corporation Benefits Equalization Plan dated January 10, 1994, amended and restated as of December 31, 1993 .. 10.04* Loews Corporation Deferred Compensation Plan is incorporated herein by reference to Exhibit 10.07 to Registrant's Report on Form 10-K for the year ended December 31, 1988 .................. 10.05 Agreement between Fibreboard Corporation and Continental Casualty Company, dated April 9, 1993 is incorporated herein by reference to Exhibit A to Registrant's Report on Form 8-K filed April 12, 1993 ............................................................ 10.06 Settlement Agreement entered into on October 12, 1993 by and among Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company together the "Parties" is incorporated herein by reference to Exhibit 99.1 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1993 .............. 10.07 Continental-Pacific Agreement entered into on October 12, 1993 between Continental Casualty Company and Pacific Indemnity Company is incorporated herein by reference to Exhibit 99.2 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1993 .............................................. 10.08 Global Settlement Agreement among Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company, Pacific Indemnity Company and the Settlement Class dated December 23, 1993 ........................ 10.09* 72 Exhibit Description Number ------------ -------- Glossary of Terms in Global Settlement Agreement, Trust Agreement, Trust Distribution Process and Defendant Class Settlement Agreement as of December 23, 1993 .................... 10.10* Fibreboard Asbestos Corporation Trust Agreement dated December 23, 1993 ............................................... 10.11* Trust Distribution Process - Annex A to the Trust Agreement as of December 23, 1993 ............................................... 10.12* Defendant Class Settlement Agreement dated December 23, 1993 .... 10.13* Escrow Agreement among Continental Casualty Company, Pacific Indemnity Company and the First National Bank of Chicago dated December 23, 1993 ............................................... 10.14* (11) Statement Re Computation of Per Share Earnings Computation of earnings per common share assuming full dilution for the years ended December 31, 1992 and 1991 .................. 11.01* (21) Subsidiaries of the Registrant List of subsidiaries of Registrant .............................. 21.01* (23) Consents of Experts and Counsel Consent of Deloitte & Touche .................................... 23.01* (28) Information from Reports furnished to State Insurance Regulatory Authorities Reconciliation of Property/Casualty Reserves as shown on Schedule P to Reserves for Unpaid Claims and Claims Expense as shown in the Form 10-K for the year ended December 31, 1993 ..... 28.01* Schedule P of Annual Statements to state regulatory authorities by property/casualty insurance subsidiaries for the year ended December 31, 1993 ............................................... 28.02*
* Filed herewith (b) Reports on Form 8-K: During the three months ended December 31, 1993, Registrant filed a Current Report on Form 8-K, dated October 20, 1993, reporting under Item 5, Other Events, with respect to the issuance by the Company of $400,000,000 aggregate principal amount of the Company's 7% Senior Notes due October 15, 2023 (the "Notes") and the call for redemption on November 19, 1993, of the entire principal amount of the Company's outstanding Liquid Yield Option Notes due 2004 (the "LYONS") for an aggregate redemption price of approximately $411 million. The Company used the net proceeds received from the sale of the Notes, together with general corporate funds, to redeem the LYONS. 73 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LOEWS CORPORATION Dated: March 24, 1994 By Roy E. Posner -------------------------------- (Roy E. Posner, Senior Vice President and Chief Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Dated: March 24, 1994 By Laurence A. Tisch -------------------------------- (Laurence A. Tisch, Chairman of the Board and Principal Executive Officer) Dated: March 24, 1994 By Roy E. Posner -------------------------------- (Roy E. Posner, Senior Vice President and Chief Financial Officer) Dated: March 24, 1994 By Guy A. Kwan -------------------------------- (Guy A. Kwan, Controller) Dated: March 24, 1994 By Charles B. Benenson -------------------------------- (Charles B. Benenson, Director) Dated: March 24, 1994 By John Brademas -------------------------------- (John Brademas, Director) By -------------------------------- (Bernard Myerson, Director) Dated: March 24, 1994 By Edward J. Noha -------------------------------- (Edward J. Noha, Director) Dated: March 24, 1994 By Lester Pollack -------------------------------- (Lester Pollack, Director) 74 By -------------------------------- (Gloria R. Scott, Director) Dated: March 24, 1994 By Andrew H. Tisch -------------------------------- (Andrew H. Tisch, Director) Dated: March 24, 1994 By James S. Tisch -------------------------------- (James S. Tisch, Director) Dated: March 24, 1994 By Jonathan M. Tisch -------------------------------- (Jonathan M. Tisch, Director) Dated: March 24, 1994 By Preston R. Tisch -------------------------------- (Preston R. Tisch, Director) 75 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of Loews Corporation: We have audited the accompanying consolidated balance sheets of Loews Corporation and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a)2. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Loews Corporation and its subsidiaries at December 31, 1993 and 1992 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, the Company changed its methods of accounting for reinsurance and certain investments in debt and equity securities in 1993 and its methods of accounting for postretirement benefits, income taxes and certain workers' compensation and disability claims in 1992. Deloitte & Touche New York, New York February 16, 1994 L-1 SCHEDULE I LOEWS CORPORATION AND SUBSIDIARIES Summary of Investments - Other than Investments in Related Parties at December 31, 1993
Quoted Market Carrying Cost Value Value --------------------------------------- (In thousands) Fixed maturities available for sale: Bonds and notes: United States government and government agencies and authorities $ 8,551,503 $ 8,688,293 $ 8,688,293 States, municipalities and political subdivisions-tax exempt ........... 4,724,041 5,014,841 5,014,841 Foreign governments ................ 420,948 423,356 423,356 Public utilities ................... 235,366 256,502 256,502 Convertibles and bonds with warrants attached .......................... 188,583 193,943 193,943 All other corporate ................ 2,489,849 2,632,937 2,632,937 Redeemable preferred stocks ......... 445,291 447,984 447,984 --------------------------------------- Total fixed maturities available for sale ....................... 17,055,581 $17,657,856 17,657,856 --------------===========-------------- Equity securities available for sale: Common stocks: Public utilities .................. 21,634 $21,810 21,810 Banks, trusts and insurance companies ........................ 57,784 56,695 56,695 Industrial, miscellaneous and all other ............................ 949,196 1,161,751 1,161,751 --------------------------------------- Total equity securities ......... 1,028,614 $ 1,240,256 1,240,256 ---------------===========------------- Mortgage loans and notes receivable .. 128,934 125,402 ----------- ----------- Loans to life insurance policyholders 174,006 173,606 ----------- ----------- Other long-term investments .......... 69,375 68,121 ----------- ----------- Short-term investments ............... 8,025,201 8,025,201 ----------- ----------- Total investments ............... $26,481,711 $27,290,442 =========== ===========
L-2 SCHEDULE III Condensed Financial Information of Registrant LOEWS CORPORATION BALANCE SHEETS ASSETS
December 31, -------------------------- 1993 1992 -------------------------- (In thousands) (Restated) Current assets: Cash and cash equivalents ....................... $ 11,140 $ 508,468 Investment in U.S. government securities ........ 762,639 561,844 Income tax receivable (c) ....................... 96,623 301,009 Receivables ..................................... 82,504 11,159 Deferred income taxes ........................... 3,264 ------------------------- Total current assets ......................... 956,170 1,382,480 Investments in securities ......................... 782,228 572,681 ------------------------- Total current assets and investments ......... 1,738,398 1,955,161 Investments in capital stocks of subsidiaries, at equity ........................................... 5,356,871 4,968,120 Advances to subsidiaries .......................... 415,114 Other assets ...................................... 20,954 22,211 ------------------------- Total assets ................................. $7,531,337 $6,945,492 ========================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities ........ $ 159,805 $ 47,625 Accrued taxes ................................... 8,121 14,089 Securities sold under repurchase agreements ..... 100,125 Current maturities of long-term debt (b) ........ 1,252 201,138 ------------------------- Total current liabilities .................... 169,178 362,917 Long-term debt, less current maturities (b) ....... 1,183,792 1,042,020 Deferred income tax ............................... 51,169 2,260 Advances from subsidiaries ........................ 11,245 ------------------------- Total liabilities ............................ 1,404,139 1,418,502 ------------------------- Shareholders' equity (a): Common stock, $1 par value Authorized-200,000,000 shares Issued and outstanding-61,524,700 and 65,098,700 shares ............................ 61,525 65,099 Additional paid-in capital ...................... 210,289 163,076 Earnings retained in the business ............... 5,476,660 5,266,983 Unrealized appreciation ......................... 406,736 31,832 Pension liability adjustment .................... (28,012) ------------------------- Total shareholders' equity ................... 6,127,198 5,526,990 ------------------------- Total liabilities and shareholders' equity ... $7,531,337 $6,945,492 =========================
L-3 SCHEDULE III (Continued) Condensed Financial Information of Registrant LOEWS CORPORATION STATEMENTS OF INCOME
Years Ended December 31, -------------------------------------- 1993 1992 1991 -------------------------------------- (In thousands) -(Restated)- Revenues: Equity in income (loss) of subsidiaries (d) .................. $585,039 $(63,448) $ 942,203 Realized investment gains .......... 46,184 39,377 14,602 Interest and other ................. 46,103 95,009 94,510 ------------------------------------- Total ........................... 677,326 70,938 1,051,315 ------------------------------------- Expenses: Administrative ..................... 5,119 6,990 6,139 Interest ........................... 86,239 101,129 106,795 ------------------------------------- Total ........................... 91,358 108,119 112,934 ------------------------------------- 585,968 (37,181) 938,381 ------------------------------------- (Benefit) provision for income taxes (c): Federal ............................ (13,853) (16,464) 22,987 State .............................. 5,700 1,380 11,056 ------------------------------------- Total ........................... (8,153) (15,084) 34,043 ------------------------------------- Income (loss) before cumulative effect of changes in accounting principles . 594,121 (22,097) 904,338 Cumulative effect of changes in accounting principles-net ........... 144,711 ------------------------------------- Net income ........................... $594,121 $122,614 $ 904,338 =====================================
L-4 SCHEDULE III (Continued) Condensed Financial Information of Registrant LOEWS CORPORATION STATEMENTS OF CASH FLOWS
Years Ended December 31, ---------------------------------------- 1993 1992 1991 ---------------------------------------- (In thousands) -(Restated)- Operating Activities: Net income ......................... $ 594,121 $ 122,614 $ 904,338 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of changes in accounting principles ........... (144,711) Undistributed (earnings) losses of affiliates ................... (52,819) 626,733 (273,829) Realized investment gains ........ (46,184) (39,377) (14,602) Changes in assets and liabilities-net: Receivables ...................... (71,829) 3,624 33,224 Accounts payable and accrued liabilities ..................... 38,015 3,744 (19,601) Federal income taxes ............. 204,386 (382,949) 14,663 Other-net ........................ (14,743) 46,799 (1,175) -------------------------------------- 650,947 236,477 643,018 -------------------------------------- Investing Activities: Purchases of securities ............ (263,476) (142,292) (237,839) Proceeds from sales of securities .. 262,918 124,032 159,673 Investments in and advances to subsidiaries-net .................. (426,359) (82,441) 373,054 Net (increase) decrease in U.S. government securities ............. (201,086) 440,345 (251,274) Securities sold under agreements to repurchase ........................ (100,125) 100,125 Change in other investments ........ 39,082 98,444 (98,443) -------------------------------------- (689,046) 538,213 (54,829) -------------------------------------- Financing Activities: Dividends paid to shareholders ..... (64,289) (65,810) (68,923) Purchases of treasury shares ....... (336,297) (238,223) (264,182) Principal payments on long-term debt (739,893) (17,207) (294,975) Issuance of long-term debt ......... 681,250 -------------------------------------- (459,229) (321,240) (628,080) -------------------------------------- Net change in cash and cash equivalents (497,328) 453,450 (39,891) Cash and cash equivalents, beginning of year ............................. 508,468 55,018 94,909 -------------------------------------- Cash and cash equivalents, end of year $ 11,140 $ 508,468 $ 55,018 ======================================
L-5 SCHEDULE III (Continued) Condensed Financial Information of Registrant - -------------- Notes: (a) In addition to its common stock, the Company has authorized 25,000,000 shares of preferred stock, $.10 par value. (b) Long-term debt consisted of:
December 31, -------------------------- 1993 1992 -------------------------- (In thousands) 8.5% notes due 1998 (effective interest rate of 8.6%) (authorized, $125,000) .................. $ 117,832 $ 117,832 8.3% debentures due 2007 (effective interest rate of 8.4%) (authorized, $200,000) (1) ...... 200,000 200,000 8.9% debentures due 2011 (effective interest rate of 9.0%) (authorized, $175,000) .......... 175,000 175,000 9% senior sinking fund debentures due 2016 (effective interest rate of 9.2%)(authorized, $200,000) ..................................... 158,700 7.6% notes due 2023 (effective interest rate of 7.8%) (authorized, $300,000) (2) .............. 300,000 7% notes due 2023 (effective interest rate of 7.2%) (authorized, $400,000) (3) .............. 400,000 Notes payable due 2002 (effective interest rate of 10.0%) ..................................... 15,741 16,879 10% subordinated notes due 1996 ................ 200,000 Zero coupon convertible subordinated notes due 2004, net of discount of $393,293 ............. 390,138 ------------------------- 1,208,573 1,258,549 Less: unamortized discount ..................... 23,529 15,391 current maturities ....................... 1,252 201,138 ------------------------- $1,183,792 $1,042,020 ========================= (1) Redeemable in whole or in part at January 15, 1997 at 104%, and decreasing percentages thereafter. (2) Redeemable in whole or in part at June 1, 2003 at 104%, and decreasing percentages thereafter. (3) Redeemable in whole or in part at October 15, 2003 at 102%, and decreasing percentages thereafter. The aggregate of long-term debt maturing in each of the next five years is approximately as follows: $1,252,000; $1,380,000; $1,527,000; $1,680,000 and $119,685,000. L-6 (c) The Company is included in a consolidated federal income tax return with certain of its subsidiaries and, accordingly, participates in the allocation of certain components of the consolidated provision for federal income taxes. Such taxes are generally allocated on a separate return bases. The Company has entered into separate tax allocation agreements with Bulova and CNA, majority-owned subsidiaries in which its ownership exceeds 80% (the "Subsidiaries"). Each agreement provides that the Company will (i) pay to the Subsidiary the amount, if any, by which the Company's consolidated federal income tax is reduced by virtue of inclusion of the Subsidiary in the Company's return, or (ii) be paid by the Subsidiary an amount, if any, equal to the federal income tax which would have been payable by the Subsidiary if it had filed a separate consolidated return. Under these agreements, the federal income tax benefit (expense) to CNA amounted to approximately $17,000,000, $350,000,000 and $(82,000,000) for the years ended December 31, 1993, 1992 and 1991, respectively, and the federal income tax benefit (expense) to Bulova amounted to approximately $2,500,000, $(3,300,000) and $1,900,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Each agreement may be cancelled by either of the parties upon thirty days' written notice. See Note 8 to the Notes to Consolidated Financial Statements of Loews Corporation and subsidiaries. (d) Cash dividends paid to the Company by affiliates amounted to $505,739,000, $553,592,000 and $654,741,000 for the years ended December 31, 1993, 1992 and 1991, respectively.
L-7 SCHEDULE VIII LOEWS CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts
Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions -------------------- Balance at Charge to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period - -------------------------------------------------------------------------------- (In thousands) For the Year Ended December 31, 1993 Deducted from assets: Allowance for discounts ........ $ 5,277 $ 69,754 $72,494(1) $ 2,537 Allowance for doubtful accounts 126,003 11,137 9,935 127,205 ---------------------------------------------------------- Total ......... $131,280 $ 80,891 $82,429 $129,742(2) ========================================================== For the Year Ended December 31, 1992 Deducted from assets: Allowance for discounts ........ $ 5,124 $ 75,546 $75,393(1) $ 5,277 Allowance for doubtful accounts 112,880 33,179 20,056 126,003 ---------------------------------------------------------- Total ......... $118,004 $108,725 $95,449 $131,280(2) ========================================================== For the Year Ended December 31, 1991 Deducted from assets: Allowance for discounts ........ $ 5,089 $ 71,374 $71,339(1) $ 5,124 Allowance for doubtful accounts 89,629 39,104 15,853 112,880 ---------------------------------------------------------- Total ......... $ 94,718 $110,478 $87,192 $118,004(2) ========================================================== - ----------- Notes: (1) Discounts allowed. (2) Shown in the following captions in the accompanying consolidated balance sheets: 1993 1992 1991 ------------------------------------ Receivables: Insurance ..................... $117,324 $110,420 $100,382 Other ......................... 12,418 20,860 17,622 ------------------------------------ Total ...................... $129,742 $131,280 $118,004 ====================================
L-8 SCHEDULE IX LOEWS CORPORATION AND SUBSIDIARIES Short-Term Borrowings
Weighted Maximum Average average Category of Weighted amount amount interest aggregate Balance average outstanding outstanding rate short-term at end of interest during the during the during the borrowings period rate period period (a) period (b) - -------------------------------------------------------------------------------- (In thousands of dollars) Year Ended December 31, 1993 Banks $2,000 4.00% $ 2,000 $ 2,000 4.43% Year Ended December 31, 1992 Banks $2,000 5.13% $ 2,101 $ 2,040 5.52% Year Ended December 31, 1991 Banks (c) $2,011 6.02% $288,577 $107,399 6.61% - ---------- Notes: (a) Average amounts outstanding during the period are calculated by an average of end of month balances. (b) Weighted average interest rate during the period is calculated by dividing short-term interest expense by the average amount outstanding for the period. (c) CNA entered into master note agreements and loan participation certificates ("LPC") with several banks and a money market fund that provided short-term borrowing facilities. Master notes represent borrowings on a demand basis arranged generally with trust departments of certain banks. LPC's are bank loans that are immediately sold to other institutions; they are similar in nature to commercial paper.
L-9 SCHEDULE XIV LOEWS CORPORATION AND SUBSIDIARIES Supplemental Information Concerning Property/Casualty Insurance Operations
Consolidated Property/Casualty Entities ---------------------------------------- Years Ended December 31, ---------------------------------------- 1993 1992 1991 ---------------------------------------- (In thousands) --------(Restated)-------- Deferred policy acquisition costs .... $ 562,029 $ 507,487 $ 494,010 Reserves for unpaid claims and claims expense ............................. 20,811,955 20,033,647 18,200,170 Discount, if any, deducted above (based on interest rates ranging from 3.5% to 7.5%) ....................... 1,886,532 1,787,348 1,126,024 Unearned premiums .................... 2,556,015 2,425,105 2,507,955 Earned premiums ...................... 6,275,018 6,353,574 6,655,318 Net investment income ................ 1,059,796 1,224,120 1,282,736 Claims and claims expense related to current year ........................ 5,387,947 5,708,216 5,833,016 Claims and claims expense related to prior years ......................... 589,959 1,617,433 (12,255) Amortization of deferred policy acquisition costs ................... 1,172,362 1,032,556 1,056,753 Paid claims and claims expense ....... 4,916,888 4,676,600 4,468,924 Premiums written ..................... 6,382,326 6,286,197 6,620,099
L-10
                                                                   EXHIBIT 11.01

                       LOEWS CORPORATION AND SUBSIDIARIES

     Statement Re Computation of Per Share Earnings Assuming Full Dilution

Years Ended December 31, -------------------------- 1992 1991 -------------------------- (In thousands, except per share data) Computation of Fully Diluted Net Income: Net Income ..................................... $122,614 $904,338 Reduction of interest and debt discount expenses related to notes assumed converted, net of applicable federal income taxes ................ 14,924 15,693 ------------------------ Fully diluted net income ........................ $137,538 $920,031 ======================== Computation of Fully Diluted Shares: Weighted average shares outstanding ............. 65,659 68,807 Add shares assumed to be issued upon conversion of notes ....................................... 2,154 2,405 ------------------------ Fully diluted shares ............................ 67,813 71,212 ======================== Net Income Per Share Assuming Full Dilution ....... $ 2.03 $ 12.92 ========================
L-11
                                                                   Exhibit 21.01

                               LOEWS CORPORATION

                         Subsidiaries of the Registrant

                               December 31, 1993

                                          Organized Under
            Name of Subsidiary                Laws of            Business Names
            ------------------            ---------------        --------------

CNA Financial Corporation .............      Delaware      )
 Continental Casualty Company .........      Illinois      )
  Continental Assurance Company .......      Illinois      )
  National Fire Insurance Company of                       )
   Hartford ...........................      Connecticut   )       CNA Insurance
  American Casualty Company of Reading,                    )
   Pennsylvania .......................      Pennsylvania  )
  CNA Management Company Limited ......      United Kingdom)

Lorillard, Inc. .......................      New York      )
 Lorillard Tobacco Company ............      Delaware      )       Lorillard


  The names of certain subsidiaries which, if considered as a single subsidiary,
would not constitute a "significant subsidiary" as defined in Regulation S-X,
have been omitted.



                                                                   EXHIBIT 23.01

                         INDEPENDENT AUDITORS' CONSENT


  We consent to the incorporation by reference in Registration Statement No. 33-
60342 of Loews Corporation on Form S-3 of our report dated February 16, 1994,
appearing in this Annual Report on Form 10-K of Loews Corporation for the year
ended December 31, 1993.




Deloitte & Touche

New York, New York
March 24, 1994



                                                                   EXHIBIT 28.01

                       LOEWS CORPORATION AND SUBSIDIARIES

      Reconciliation of Property/Casualty Reserves as shown on Schedule P
                to Reserves for Unpaid Claims and Claims Expense

                               December 31, 1993

  A reconciliation of property/casualty reserves as shown on Schedule P to
reserves for unpaid claims and claims expense, as shown in the Form 10-K
follows. Schedule P is from Continental Casualty Company's 1993 consolidated
annual statutory statement provided to state insurance regulatory authorities.
Statutory claims and claims expense reserves are present net of ceded
reinsurance reserve. Under generally accepted accounting principles such
reserves are recorded "gross" of reinsurance. Ceded reinsurance recoverables are
recorded as assets.

Property/Casualty Reserve Reconciliation Statutory Basis to Generally Accepted Accounting Principles - -------------------------------------------------------------------------------- (In thousands) Total claims and claims expense per Schedule P .................. $17,962,503 Non-domestic affiliates ......................................... 358,778 Ceded claims and claims expense ................................. 2,490,674 ----------- Reserve for claims and claims expense-gross ................ $20,811,955 ===========









                                  LOEWS CORPORATION

                              BENEFIT EQUALIZATION PLAN

                    amended and restated as of December 31, 1993







































                                                           January 10, 1994

                                      FOREWORD

          Effective as of January 1, 1987, Loews Corporation, Marcus Loew
          Booking Agency and Lorillard, Inc. have adopted the Loews
          Corporation Benefit Equalization Plan (the "Plan") for the
          benefit of certain of their executives.  The Plan has been
          amended and restated, as hereinafter set forth, effective as of
          January 1, 1989.  It is intended that the "excess benefits"
          provided under the Plan be an "excess benefits plan" as that term
          is defined in Section 3(36) of the Employee Retirement Income
          Security Act of 1974, and that the "supplemental benefits",
          "pension supplement benefits", "savings supplement benefits",
          and/or "deferred compensation benefits" provided under the Plan
          be a deferred compensation plan for "a select group of management
          or highly compensated employees" as that term is used in the
          Employee Retirement Income Security Act of 1974.

          The purpose of the Plan is to:

               (1)  provide retired participants and their surviving
                    spouses, contingent annuitants and beneficiaries under
                    the Retirement Plan for Employees of Loews Corporation
                    ("Retirement Plan") with the amount of company-provided
                    benefits that would have been provided under the
                    Retirement Plan but for

                    (i)   the limitations on benefits imposed under Section
                          415 of the Internal Revenue Code,

                    (ii)  the limitation on compensation for purposes of
                          the Retirement Plan imposed by Section 401(a)(17)
                          of such Code, and/or

                    (iii) the fact that the participant elected to defer
                          compensation that otherwise would be payable
                          currently by reason of an election to defer such
                          compensation under the Loews Corporation Deferred
                          Compensation Plan,

               (2)  provide certain participants in the Loews Corporation
                    Employees Savings Plan ("Savings Plan") with the
                    "pension supplement benefits" (as defined in Section
                    1.7 of this Plan) that would have been credited to
                    their accounts under the Savings Plan were it not for
                    the limitation on compensation for purposes of the
                    Savings Plan imposed by Section 401 (a)(17) of the
                    Internal Revenue Code and/or the fact that such
                    participants may have elected to defer compensation
                    that would otherwise have been payable currently in
                    accordance with the Loews Corporation Deferred
                    Compensation Plan, and

               (3)  provide certain participants in the Loews Corporation
                    Employees Savings Plan ("Savings Plan") with the
                    "savings supplement benefits" (as defined in Section
                    1.11 of this Plan) that would have been credited to
                    their accounts under the Savings Plan were it not for
                    the fact that such participants may have elected to
                    defer compensation that would otherwise have been
                    payable currently in accordance with the Loews
                    Corporation Deferred Compensation Plan.

                                          i

          In addition, additional and/or modified benefits under this Plan
          may be provided to an employee in accordance with the terms of an
          Agreement between such employee and the Company.  If and to the
          extent the provisions of any such Agreement are inconsistent with
          any Plan provision, such provisions of such Agreement (i) shall
          be deemed to modify the terms of the Plan with respect to the
          employee to whom the Agreement applies, and (ii) shall in all
          events control and govern, notwithstanding any Plan provision to
          the contrary.

          Except to the extent otherwise indicated, and to the extent
          otherwise inappropriate, the Retirement Plan and the provisions
          thereof and the Savings Plan and the provisions thereof are
          hereby incorporated by reference.

                                         ii

                                     SECTION ONE
                                     -----------

                                     Definitions
                                     -----------


          1.1    Except to the extent otherwise indicated herein, and to the
                extent otherwise inappropriate in the context, the
                definitions contained in Article 1 of the Retirement Plan
                are applicable under the Plan.

          1.2   "Agreement" means a written agreement between an executive
                of the Company and the Company which modifies the
                provisions of the Plan insofar as such provisions relate to
                such executive.

          1.3   "Board of Directors" means the Board of Directors of Loews
                Corporation.

          1.4   "Company" means Loews Corporation or any successor by
                merger, purchase or otherwise, with respect to its
                employees; Marcus Loew Booking Agency with respect to its
                employees; Lorillard, Inc. with respect to its employees;
                or any other company participating in the Plan as provided
                in Section 4.3 with respect to its employees.

          1.5   "Deferred Compensation Benefit" means, except as is
                otherwise provided in an Agreement, the excess, if any, of
                (i) the retirement allowance which would have been payable
                to or with respect to a participant under the Retirement
                Plan had he not elected to defer compensation that would
                have otherwise been payable to him currently in accordance
                with the provisions of the Loews Corporation Deferred
                Compensation Plan over (ii) the retirement allowance
                payable to or with respect to the participant under the
                Retirement Plan.

          1.6   "Excess Benefit" means, except as is otherwise provided in
                an Agreement, the excess, if any, of (i) the retirement
                allowance which would have been payable to or with respect
                to a participant under the Retirement Plan had the
                limitations on benefits imposed by Section 4.08 of the
                Retirement Plan not been applicable over (ii) the
                retirement allowance payable to or with respect to the
                participant under the Retirement Plan.

          1.7   "Pension Supplement Benefit" means, except as is otherwise
                provided in an Agreement, in the case of an individual who
                is a participant in the Savings Plan and whose employment
                with the Company commenced prior to January 1, 1982, the
                sum of:

                (i)  the following percentage of such person's compensation
                     for each year based on his age as of the first day of
                     each such year to the extent such compensation (a)
                     exceeds the limitation on compensation imposed by
                     Section 401(a)(17) of the Code, or (b) is not
                     currently received by reason of an election to defer
                     compensation in accordance with the Loews Corporation
                     Deferred Compensation Plan:

                                          1

              Age at Beginning of Year      Percentage of Compensation
              ------------------------      --------------------------

                     Under age 28                        0%
                          28                           .04%
                          29                           .07%
                          30                           .09%
                          31                           .12%
                          32                           .14%
                          33                           .17%
                          34                           .20%
                          35                           .22%
                          36                           .25%

                          37                           .28%
                          38                           .31%
                          39                           .34%
                          40                           .37%
                          41                           .40%

                          42                           .44%
                          43                           .47%
                          44                           .51%
                          45                           .54%
                          46                           .58%

                          47                           .61%
                          48                           .65%
                          49                           .69%
                          50                           .73%
                          51                           .77%

                          52                           .81%
                          53                           .85%
                          54                           .89%
                          55                           .94%
                          56                           .98%

                          57                          1.03%
                          58                          1.08%
                          59                          1.12%
                          60                          1.17%
                          61                          1.21%

                          62                          1.25%
                     63 and older                     1.30%

                                          2

                plus

                (ii) interest on such amount equal to the aggregate
                     investment experience that would have been credited
                     with respect to such amount if it had been credited to
                     the participant's account in the Money Market/
                     Government Securities Fund of the Savings Plan were it
                     not for (a) the limitation on the amount of
                     compensation recognized under the Savings Plan by
                     reason of Section 401(a)(17) of the Code, or (b) the
                     fact that such compensation is not payable currently
                     due to a deferral election in accordance with the
                     Loews Corporation Deferred Compensation Plan.

          1.8   "Plan" means the Loews Corporation Benefit Equalization
                Plan as set forth herein and as from time to time in
                effect.

          1.9   "Retirement Plan" means the Retirement Plan for Employees
                of Loews Corporation.

          1.10  "Savings Plan" means the Loews Corporation Employees
                Savings Plan.

          1.11  "Savings Supplement Benefit" means, except as is otherwise
                provided in an Agreement, in the case of an individual who
                is a participant in the Savings Plan, the sum of:

                (i)  1% of that portion of the first $100,000 of such
                     person's compensation for each year to the extent such
                     compensation is not currently received by reason of an
                     election to defer compensation in accordance with the
                     Loews Corporation Deferred Compensation Plan; plus

                (ii) interest on such amount equal to the aggregate
                     investment experience that would have been credited
                     with respect to such amount if it had been credited to
                     the participant's account in the Money Market/
                     Government Securities Fund of the Savings Plan were it
                     not for the fact that such compensation is not payable
                     currently due to a deferral election in accordance
                     with the Loews Corporation Deferred Compensation Plan.

          1.12  "Supplemental Benefit" means, except as is otherwise
                provided in an Agreement, the excess, if any, of (i) the
                retirement allowance that would have been payable to or
                with respect to a participant under the Retirement Plan had
                the amount of the participant's total annual compensation
                paid by the Company and the amount deferred under the Loews
                Corporation Deferred Compensation Plan been included in the
                term "Compensation" under the Retirement Plan over (ii) the
                sum of (a) the retirement allowance payable to or with
                respect to the participant under the Retirement Plan, (b)
                any Excess Benefit payable under this Plan, and (c) any
                Deferred Compensation Benefit payable under this Plan.

                                          3

                                     SECTION TWO
                                     -----------

                                    Participation
                                    -------------


          Except as is otherwise provided in an Agreement, participation in
          the Plan shall be limited to

                (1)  those participants in the Retirement Plan and their
                     surviving spouses, contingent annuitants and
                     beneficiaries who, as a result of

                     (i)   the limitations on benefits that may be paid or
                           accrued under the Retirement Plan by reason of
                           Section 415 of the Internal Revenue Code,

                     (ii)  the limitation on compensation which may be
                           taken into account under the Retirement Plan by
                           reason of Section 401(a)(17) of such Code,
                           and/or

                     (iii) the deferral of the receipt of compensation that
                           would have otherwise have been payable currently
                           pursuant to an election to defer such
                           compensation in accordance with the Loews
                           Corporation Deferred Compensation Plan,

                     receive or will receive a lesser amount of retirement
                     income under the Retirement Plan than otherwise would
                     be paid or payable in the absence of such limitations
                     and/or such election to defer,

                (2)  those participants in the Savings Plan whose
                     employment with the Company commenced prior to January
                     1, 1982 (and the surviving spouses and other
                     beneficiaries of such individuals) who, as a result of
                     the limitation on compensation which may be taken into
                     account under the Savings Plan by reason of Section
                     401(a)(17) of the Internal Revenue Code and/or the
                     fact that such participants may have elected to defer
                     compensation that would otherwise have been payable
                     currently in accordance with the Loews Corporation
                     Deferred Compensation Plan, receive or will receive a
                     lesser amount of benefits in accordance with Section
                     3.1(b) of the Savings Plan (or any successor to such
                     section) than otherwise would be receivable, and

                (3)  those participants in the Savings Plan who, as a
                     result of their deferral of compensation that would
                     otherwise be recognized under such Savings Plan
                     pursuant to an election to defer in accordance with
                     the Loews Corporation Deferred Compensation Plan,
                     receive or will receive a lesser allocation in
                     accordance with Section 3.1(a) of the Savings Plan (or
                     any successor to such section) than otherwise would be
                     allocated.

                                          4

                                    SECTION THREE
                                    -------------

                                      Benefits
                                      --------


          3.1   Excess Benefits
                ---------------

                The aggregate amount of Excess Benefit payable to or with
                respect to a participant shall be paid directly to such
                participant, or to his surviving spouse, contingent
                annuitant or beneficiary, as applicable, from the general
                assets of the Company in accordance with Section 3.6.

          3.2   Supplemental Benefits
                ---------------------

                The aggregate amount of Supplemental Benefit payable to or
                with respect to a participant shall be paid directly to
                such participant, or to his surviving spouse, contingent
                annuitant or beneficiary, as applicable, from the general
                assets of the Company in accordance with Section 3.6.

          3.3   Deferred Compensation Benefits
                ------------------------------

                The aggregate amount of Deferred Compensation Benefit
                payable to or with respect to a participant shall be paid
                directly to such participant, or to his surviving spouse,
                contingent annuitant or beneficiary, as applicable, from
                the general assets of the Company in accordance with
                Section 3.6.

          3.4   Pension Supplement Benefits
                ---------------------------

                The aggregate amount of Pension Supplement Benefits payable
                to or with respect to a participant shall be paid directly
                to such participant, or to his surviving spouse or
                beneficiary, as applicable, from the general assets of the
                Company in accordance with Section 3.6.

          3.5   Savings Supplement Benefits
                ---------------------------

                The aggregate amount of Savings Supplement Benefits payable
                to or with respect to a participant shall be paid directly
                to such participant, or to his surviving spouse or
                beneficiary, as applicable, from the general assets of the
                Company in accordance with Section 3.6.

          3.6   General Provisions
                ------------------

                (a)  The Company shall make no provision for the funding of
                     any Excess Benefits, Supplemental Benefits, Deferred
                     Compensation Benefits, Pension Supplement Benefits, or
                     Savings Supplement Benefits payable hereunder.

                                          5

                (b)  In the event that the Company shall decide to
                     establish an advance accrual reserve on its books
                     against the future expense of Excess Benefit payments,
                     Supplemental Benefit payments, Deferred Compensation
                     Benefit payments, Pension Supplement Benefit payments,
                     or Savings Supplement Benefit payments, such reserve
                     shall not under any circumstances be deemed to be an
                     asset of this Plan but, at all times, shall remain a
                     part of the general assets of the Company, subject to
                     claims of the Company's creditors.

                (c)  A person entitled to an Excess Benefit, Supplemental
                     Benefit, Deferred Compensation Benefit, Pension
                     Supplement Benefit, or Savings Supplement Benefit
                     shall have a claim upon the Company only to the extent
                     of the monthly payments thereof, if any, due up to and
                     including the then current month and shall not have a
                     claim against the Company for any subsequent monthly
                     payment unless and until such payment shall become due
                     and payable.

                (d)  Except as is otherwise provided in an Agreement and in
                     the case of an active participant over age 70-1/2 who
                     is receiving required payments, the Excess Benefit,
                     Supplemental Benefit, and Deferred Compensation
                     Benefit with respect to a participant shall be paid to
                     the participant, his surviving spouse, contingent
                     annuitant or beneficiary in the same form and at the
                     same time as the retirement allowance to or with
                     respect to the participant under the Retirement Plan.
                     An active participant over age 70-1/2 will not receive
                     payments under this Plan until his or her termination
                     of employment.  Except as is otherwise provided in an
                     Agreement, the Pension Supplement Benefit and Savings
                     Supplement Benefit with respect to a participant shall
                     be paid to the participant, his surviving spouse, or
                     beneficiary in a cash lump sum payment to be made as
                     soon as is practicable following the date of the
                     participant's termination of employment.

                (e)  Except as is otherwise provided in an Agreement, to
                     the extent that any supplemental retirement benefits
                     (other than Pension Supplement Benefits and Savings
                     Supplement Benefits) are payable to a participant
                     under an employment or other agreement between the
                     participant and the Company (other than the Loews
                     Corporation Deferred Compensation Plan), the amount of
                     such payments shall be deducted from Excess Benefit,
                     Supplemental Benefit, and/or Deferred Compensation
                     Benefit payable hereunder.

                (f)  Except as is otherwise provided in an Agreement, in
                     the event that the Retirement Plan shall be terminated
                     in accordance with Section 8.01 thereof, Excess
                     Benefits, Supplemental Benefits, and Deferred
                     Compensation Benefits shall continue to be paid
                     directly by the Company but only to the same extent
                     and for the same duration as that part of the payee's
                     benefit from the Trust fund of the Retirement Plan,
                     which is directly related to such Excess
                     Benefit, supplemental Benefit, or Deferred Compensation
                     Benefit is continued to be provided by the assets of the
                     Trust fund of the Retirement Plan; but such continued
                     payment of Excess Benefit, Supplemental Benefit, or
                     Deferred Compensation Benefit shall still be subject
                     to the conditions specified in subsections (a), (b),
                     (c), (d) and (e) above.  Except as is otherwise
                     provided in an Agreement, in the event that the
                     Savings Plan shall be terminated, Pension


                                          6

                     Supplement Benefits Savings Supplement Benefits shall be
                     paid at such time and in such manner as related accounts
                     under the Savings Plan are paid.


          3.7   Minimum Benefits:
                -----------------

                Effective with respect to participants who terminate
                employment for any reason after December 31, 1993, there
                shall be certain minimum benefits payable, as follows:

                (a)  The minimum Excess Benefit, as defined in Section 1.6,
                     payable at age 65 or later retirement, shall be 75%
                     (90% for active Loews participants age 65 or older at
                     December 31, 1993) of the Excess Benefit determined as
                     if the participant had terminated employment on
                     December 31, 1993 and elected to receive this benefit
                     at age 65 (age at December 31, 1993, if older), but
                     recognizing the 1994 limitation under Section 4.08 of
                     the Retirement Plan.

                (b)  The minimum Pension Supplement Benefit, as defined in
                     Section 1.7, shall be the December 31, 1993 account
                     balance.

                (c)  The minimum Savings Supplement Benefit, as defined in
                     Section 1.11, shall be the December 31, 1993 account
                     balance.

                (d)  The minimum Supplemental Benefit, as defined in
                     Section 1.12, payable at age 65 or later retirement,
                     shall be 75% (90% for active Loews participants age 65
                     or older at December 31, 1993) of the Supplemental
                     Benefit determined as if the participant had
                     terminated employment on December 31, 1993 and elected
                     to receive this benefit at age 65 (age at December 31,
                     1993, if older), but recognizing the 1994 limitation
                     under Section 4.08 of the Retirement Plan for purposes
                     of computing the Excess Benefit.

                                          7

                                    SECTION FOUR
                                    ------------

                                   Administration
                                   --------------

          4.1   Plan Administrator
                ------------------

                Loews Corporation shall be the "administrator" of the Plan
                within the meaning of ERISA.

          4.2   Retirement Committee
                --------------------

                Subject to the provisions of Section 4.1, the Retirement
                Committee of the Retirement Plan shall be vested with the
                general administration of the Plan.  The Retirement
                Committee shall have the exclusive right to interpret the
                Plan.  The decisions, actions and records of the Retirement
                Committee shall be conclusive and binding upon the Company
                and all persons having or claiming to have any right or
                interest in or under the Plan.

          4.3   Participation by Subsidiary
                ---------------------------

                If any company is now or hereafter becomes a subsidiary or
                affiliated company of the Company and becomes a
                participating company under the Retirement Plan or the
                Savings Plan, the Board of Directors may authorize such
                subsidiary or affiliated company to participate in this
                Plan upon appropriate action by such company necessary to
                adopt the Plan.

                                          8

                                    SECTION FIVE
                                    ------------

                              Amendment and Termination
                              -------------------------


          5.1   Amendment of the Plan
                ---------------------

                Subject to the provisions of Section 5.3, the Plan may be
                wholly or partially amended or otherwise modified at any
                time by the Board of Directors.

          5.2   Termination of the Plan
                -----------------------

                Subject to the provisions of Section 5.3, the Plan may be
                terminated at any time by the Board of Directors.

          5.3   No Impairment of benefits
                -------------------------

                Notwithstanding the provisions of Sections 5.1 and 5.2, no
                amendment to or termination of the Plan shall impair any
                rights to benefits which have accrued hereunder.

                                          9
                                                                   EXHIBIT 10.09






                           IN THE UNITED STATES DISTRICT COURT
                            FOR THE EASTERN DISTRICT OF TEXAS
                                      TYLER DIVISION


     GERALD AHERN, JAMES DENNIS, and         )
     CHARLES W. JEEP, On Behalf of           )
     Themselves and Others                   )
     Similarly Situated                      )
                                             )
               Plaintiffs,                   )
                                             )
          v.                                 )
                                             )
     FIBREBOARD CORPORATION                  )        Civil Action No. 6:93cv526
                                             )
               Defendant                     )
                                             )
     CONTINENTAL CASUALTY COMPANY            )
     and                                     )
     PACIFIC INDEMNITY COMPANY               )
                                             )
               Intervenors                   )


                        SUBMISSION OF GLOBAL SETTLEMENT AGREEMENT
                       -----------------------------------------

          COMES NOW Continental Casualty Company ("Continental"), together with
     Fibreboard Corporation, CNA Casualty Company of California, Columbia
     Casualty Company, Pacific Indemnity Company, and the Settlement Class,
     provisionally certified by this Court, and submit the following Global
     Settlement Agreement, together with Exhibits A-E.

     Dated:  December 23, 1993

                                                 Respectfully submitted,

                                                 IRELAND, CARROLL & KELLEY, P.C.
                                                 6101 S. Broadway, Suite 500
                                                 Tyler, Texas 75703
                                                 (903) 561-1600
                                                 (903) 581-1071 Facsimile


                                                  BY:      Bill Parker
                                                  -----------------------------
                                                           BILL PARKER






                          GLOBAL SETTLEMENT AGREEMENT
                                     AMONG
                            FIBREBOARD CORPORATION,
                         CONTINENTAL CASUALTY COMPANY,
                      CNA CASUALTY COMPANY OF CALIFORNIA,
                           COLUMBIA CASUALTY COMPANY,
                           PACIFIC INDEMNITY COMPANY,
                                      AND
                              THE SETTLEMENT CLASS


                               TABLE OF CONTENTS
                               -----------------

                                                                           Page
                                                                           ----

ARTICLE 1 DEFINITIONS ...................................................    8

     SECTION 1.1     Certain Defined Terms ..............................    8

ARTICLE 2 SETTLEMENT ....................................................    8

     SECTION 2.1     Settlement .........................................    8
     SECTION 2.2     Exclusive Rights Against the Trust .................    8
     SECTION 2.3     Payments ...........................................    9
     SECTION 2.4     Additional Fibreboard Obligations ..................   11
     SECTION 2.5     Releases ...........................................   14
     SECTION 2.6     Final Settlement of the Insurance Policies .........   16
     SECTION 2.7     Indemnity Obligation of the Trust After Global
                     Approval Judgment ..................................   17
     SECTION 2.8     Fibreboard Corporation's Indemnity and Related
                     Obligations ........................................   17

ARTICLE 3 ACTIONS TO BE TAKEN TO IMPLEMENT THIS AGREEMENT ...............   19

     SECTION 3.1     Applications for Initial Court Orders, Settlement
                     Class Order, Defendant Class Order and Global
                     Approval Judgment ..................................   19
     SECTION 3.2     Effect of Class Certification ......................   19
     SECTION 3.3     Execution and Delivery of Escrow Instructions ......   20

ARTICLE 4 TERMINATION ...................................................   23

     SECTION 4.1     Termination ........................................   23

ARTICLE 5 SETTLEMENT TRUST ..............................................   24

     SECTION 5.1     Trust Agreement ....................................   24
     SECTION 5.2     Continuing Jurisdiction of the Court ...............   24
     SECTION 5.3     Preservation of Funds ..............................   25

ARTICLE 6 THIRD PARTY CLAIMS ............................................   25

     SECTION 6.1     Bar Orders .........................................   25
     SECTION 6.2     Judgment Reduction and Subrogation Rights ..........   25
     SECTION 6.3     Actions Necessary to Obtain Discharges and Bar
                     Orders .............................................   26

                                     - i -


                                                                           Page
                                                                           ----

ARTICLE 7 INTERIM CLAIM LIQUIDATION PROCEDURES ..........................   28

     SECTION 7.1     Interim Claims .....................................   28
     SECTION 7.2     Processing Interim Claims ..........................   29
     SECTION 7.3     Payment of Exigent and Extreme Hardship Claims .....   32
     SECTION 7.4     Payment of Interim Claims Other Than Exigent Health
                     Claims and Extreme Hardship Claims .................   32
     SECTION 7.5     Sources of Payment of Liquidated Amounts for Interim
                     Claims .............................................   34
     SECTION 7.6     Miscellaneous Interim Claim Provisions .............   35

ARTICLE 8 MISCELLANEOUS .................................................   36

     SECTION 8.1     Designated or Qualified Settlement Fund ............   36
     SECTION 8.2     Counsel ............................................   38
     SECTION 8.3     No Oral Representations ............................   38
     SECTION 8.4     Payment of Costs ...................................   38
     SECTION 8.5     Modification and Waiver ............................   39
     SECTION 8.6     Further Actions ....................................   39
     SECTION 8.7     Effectiveness of Agreement Notwithstanding
                     Developments .......................................   40
     SECTION 8.8     No Admission or Use ................................   40
     SECTION 8.9     No Breach of Other Obligations .....................   41
     SECTION 8.10    Third Party Beneficiaries ..........................   41
     SECTION 8.11    Rights and Obligations of Fibreboard Corporation and
                     the Insurers Under the Settlement Agreement and
                     Related Agreements .................................   41
     SECTION 8.12    Headings ...........................................   42
     SECTION 8.13    Notices ............................................   42
     SECTION 8.14    Counterparts .......................................   47

                                     - ii -


                          UNITED STATES DISTRICT COURT
                           EASTERN DISTRICT OF TEXAS
                                 TYLER DIVISION



GERALD AHEARN, JAMES DENNIS and    )
CHARLES W. JEEP, On Behalf of      )
Themselves and Others Similarly    )
Situated,                          )
                                   )
          Plaintiffs,              )
                                   )
     vs.                           )
                                   )
FIBREBOARD CORPORATION,            )         Civil Action No. 6:93 cv 526
                                   )
          Defendant,               )
                                   )
CONTINENTAL CASUALTY COMPANY       )
                                   )
     and                           )
                                   )
PACIFIC INDEMNITY COMPANY,         )
                                   )
          Intervenors.             )
___________________________________)



                          GLOBAL SETTLEMENT AGREEMENT
                          ---------------------------

          This Agreement is made and entered into as of August 27, 1993, by and

among the Representative Plaintiffs as representatives of the Settlement Class,

acting by and through Class Counsel; Fibreboard Corporation, a Delaware

corporation; Continental Casualty Company, an Illinois corporation; CNA Casualty

Company of California, a California corporation; Columbia Casualty Company, an

Illinois corporation; and Pacific Indemnity Company, a California corporation,

together the "Parties."



                                    RECITALS
                                   ---------

          A.  The Representative Plaintiffs have filed a class action complaint

in the Class Action on behalf of the Settlement Class against Fibreboard

Corporation in the Global Court, and the Court has provisionally certified that

class under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure for

settlement purposes only. Continental and Pacific have been allowed to intervene

as parties to the Class Action.

          B.  For more than fifteen years, thousands of individuals exposed to

asbestos or asbestos-containing products have filed lawsuits alleging personal

injury and damage in the state and federal courts against Fibreboard Corporation

and against many other defendants.

          C.  These lawsuits have resulted in extensive discovery concerning the

potential liability of Fibreboard Corporation and other defendants, as well as

full consideration of the legal and factual bases, including medical issues,

underlying each individual asbestos plaintiff's personal injury lawsuit.

          D.  The vast majority of the asbestos personal injury lawsuits brought

against Fibreboard Corporation and others in the past fifteen years have been

settled without trial, although a small percentage have been tried to verdict,

with plaintiffs prevailing in some cases and Fibreboard Corporation and other

defendants prevailing in other cases.

          E.  Despite significant success in reducing litigation costs through a

variety of mechanisms, plaintiffs and defendants have spent, and continue to

spend,

                                     - 2 -


enormous resources contesting both liability and damages, allocating

responsibility among the parties, and litigating issues of insurance coverage.

          F.  Continental, CNA Casualty, Columbia and Pacific issued certain

Insurance Policies to Fibreboard.

          G.  Fibreboard Corporation and certain of the Insurers have been and

are engaged in litigation in several actions involving disputed questions of

insurance coverage, the first of which was filed in 1979 in the Superior Court

of the State of California in and for the City and County of San Francisco

entitled Fireman's Fund Insurance Company v.  Fibreboard Corporation et al., No.
         -------------------------------------------------------------------

753885, and is an included action in the Coverage Case.

          H.  In the Coverage Case, Fibreboard Corporation contends that certain

of the Insurers are obligated to defend and indemnify Fibreboard Corporation

against certain of Fibreboard Corporation's liabilities for claims for asbestos

personal injury or death and for related claims.  These Insurers contend that

they have no further obligation to defend or indemnify Fibreboard Corporation

for any such claims.  A judgment in favor of Fibreboard Corporation was rendered

by Judge Ira Brown in the Coverage Case on January 24, 1990, and that judgment

is currently on appeal.  The Parties' contentions are, inter alia, set forth in

the pleadings in the Coverage Case and in the briefs before the Court of Appeal.

          I.  In addition to the tens of thousands of claims for asbestos

personal injury or death that have been filed and resolved against Fibreboard

Corporation and other defendants in jurisdictions throughout the United States,

tens of thousands of filed claims remain pending and thousands more are expected

to be

                                     - 3 -


filed in the future.  Litigating the asbestos-related personal injury lawsuits

is depleting Fibreboard Corporation's resources, including insurance resources,

available to compensate claimants.  Absent substantial insurance resources,

Fibreboard Corporation could not satisfy the claims for asbestos personal injury

pending against it.

          J.  The expenditures necessary to process and resolve asbestos

lawsuits have contributed to more than ten major asbestos defendants filing for

bankruptcy reorganization.  Because some of these defendants represent a

significant portion of the traditional liability share for asbestos personal

injury cases, and many jurisdictions apply the principle of joint and several

liability, these bankruptcy filings have increased costs substantially, caused

significant delays to plaintiffs and created financial pressures on the

remaining defendants.

          K.  Continental and Fibreboard Corporation entered into an agreement,

dated April 9, 1993, pursuant to which Continental and Fibreboard Corporation

agreed, among other things, upon terms and conditions set forth therein, to use

their best efforts jointly to negotiate and finalize a global class action

settlement with personal injury claimants, and Continental agreed, whether or

not a global settlement was reached, to pay certain defense and other costs of

certain asbestos-related claims on an interim basis.

          L.  On or about August 22, 1993 and August 29, 1993, Continental and

Pacific entered into agreements, which agreements have been superseded by the

Continental-Pacific Agreement, dated as of October 12, 1993, whereby Continental

                                     - 4 -


and Pacific settled the dispute between them and agreed upon terms for the

sharing of liabilities of each of them with respect to certain asbestos-related

claims.

          M.  Fibreboard Corporation, Continental, CNA Casualty, Columbia and

Pacific entered into the Settlement Agreement, dated October 12, 1993, pursuant

to which they agreed, among other things, to settle and compromise all claims

and potential claims against the Insurers under the Insurance Policies.

          N.  Fibreboard Corporation has invested substantial sums in pursuing

its insurance coverage for certain asbestos-related personal injury claims

asserted against Fibreboard Corporation.  Although Fibreboard Corporation has

been successful in this litigation to date, it is still subject to risks and

uncertainties.  These include the risks associated with the Coverage Case and

the continuing effect on Fibreboard Corporation's corporate operations created

by asbestos-related personal injury claims and Fibreboard Corporation's

unresolved insurance coverage with respect thereto.  The Settlement Class

Members are also subject to the risks associated with the Coverage Case since

their ability to collect upon any judgments they may obtain against Fibreboard

Corporation is largely dependent upon the existence and extent of Fibreboard

Corporation's insurance coverage.  Continental and Pacific are similarly

subjected to the risks and uncertainties presented by the Coverage Case and the

potential liabilities Continental and Pacific may have with respect to asbestos

- -related personal injury claims.  Absent this Agreement, the results in the

Coverage Case likely would be severely prejudicial to either Continental and

Pacific, on the one hand, or Fibreboard Corporation and the Settlement Class

Members, on the other hand.

                                      - 5-


          O.  Counsel for the Representative Plaintiffs each has a decade or

more of experience in the litigation of asbestos-related personal injury cases.

They have conducted a thorough investigation into the law and facts relating to

matters set forth in the class action complaint.

          P.  In light of the uncertainties associated with the pending,

unresolved issues enumerated above, there are substantial risks that

adjudications with respect to certain asbestos-related personal injury claims by

Settlement Class Members will, as a practical matter, be dispositive of the

claims and interests of certain other Settlement Class Members not yet

adjudicated or will substantially impair or impede the ability of such other

Settlement Class Members to protect their interests.

          Q.  The primary purpose of this Agreement is to create a fund to

compensate the Settlement Class Members, free of the risks of the pending

Coverage Case litigation between Fibreboard Corporation and the Insurers, and to

apply the fund thus created to an equitable settlement of the claims of the

Settlement Class Members.  The mechanism for accomplishing this purpose is

creation of the Trust, to which the claims of all Settlement Class Members

against Fibreboard Corporation or the Insurers shall be directed.

          R.  The settlement contemplated by this Agreement would provide a

fair, flexible, speedy, cost-effective and assured method of compensating

claimants who have been exposed to asbestos or asbestos-containing products for

which Fibreboard Corporation may bear legal liability and who have contracted or

will in the future contract an asbestos-related condition.  Thus, this Agreement

provides

                                     - 6 -


considerable benefit to the Settlement Class, while avoiding costly litigation

of difficult and contentious issues.

          S.  Based on extensive analysis of the law and facts at issue in the

Class Action, the other factors and considerations enumerated above concerning

asbestos litigation, and the fair, flexible, speedy, cost-effective and assured

procedures set forth in this Agreement and its exhibits for compensating the

Settlement Class, each Party has determined that settlement on the terms set

forth below would be fair, adequate and reasonable, and thus in its best

interests.

          T.  Third Party Claims are litigated infrequently in asbestos

litigation.  The vast majority of asbestos personal injury, death and related

cases are settled before trial.  In those cases where trials result in judgments

against nonsettling defendants, the law in most jurisdictions protects settling

defendants against claims for contribution by judgment debtors.  Nevertheless,

because the potential for Third Party Claims would remain, absent provision for

them, this Agreement sets forth a fair, flexible, speedy, cost-effective and

assured procedure for resolving Third Party Claims.

          NOW, THEREFORE, in consideration of the foregoing and the mutual

covenants contained herein, the Parties hereby agree as follows:

                                     - 7 -


                                   ARTICLE 1

                                  DEFINITIONS

          SECTION 1.1     Certain Defined Terms.
                          ---------------------

          Capitalized terms used herein and not defined herein shall have the

definitions for such terms set forth in the Glossary annexed as Exhibit A hereto

and incorporated herein.

                                   ARTICLE 2

                                   SETTLEMENT

          SECTION 2.1     Settlement.
                          ----------

          Effective upon Global Approval Judgment, Representative Plaintiffs, on

their own behalf and on behalf of all Settlement Class Members, hereby

compromise and settle, finally and fully, all of the Class Member Claims with

Fibreboard Corporation, Continental, CNA Casualty, Columbia and Pacific on the

terms and conditions set forth herein; provided, however, that nothing in this

Agreement or in any exhibit hereto shall discharge the Insurers from liability

predicated on policies other than the Insurance Policies.

          SECTION 2.2     Exclusive Rights Against the Trust.
                          ----------------------------------

          A.  Effective upon Global Approval Judgment, all Class Member Claims

are finally and fully settled by this Agreement, and none of such claims or any

Third Party Claim shall be prosecuted in any way against any of the Fibreboard,

Continental or Pacific Releasees.  All Class Member Claims, except claims for

punitive or exemplary damages (which are dismissed and shall not be

enforceable), are hereby directed to the Trust for disposition pursuant to the

Trust Agreement and

                                     - 8 -


Trust Distribution Process.  Third Party Claims shall be treated as provided in

Article 6 of this Agreement.  The Court shall retain jurisdiction over this

Agreement and shall use its equitable powers to enforce this Section.

          B.  The claims of Persons providing workers compensation benefits to

Settlement Class Members shall be directed to the Trust, instead of Fibreboard

Corporation or the Insurers, and disposed of pursuant to the Trust Agreement and

the Trust Distribution Process.  Such Persons providing workers compensation

benefits shall have existing remedies, whether by way of lien rights against a

Settlement Class Member's Claim against the Trust, subrogation, direct action,

or otherwise, against the Trust (instead of Fibreboard Corporation or the

Insurers), subject only to the provisions of the Trust Agreement and Trust

Distribution Process.  Only payment of funds pursuant to a Settlement Class

Member's individual settlement with the Trust, and not this Agreement (or the

resulting Global Approval Judgment, dismissal and release), shall trigger the

notice, approval and forfeiture provisions of the Longshore and Harbor Workers

Compensation Act (33 USC Section 933) and other similar state and federal

workers compensation provisions.

          SECTION 2.3     Payments.
                          --------

          A.  After execution of this Agreement, Continental and Pacific shall

(1) pay, on December 30, 1993, an aggregate amount of $1,525,000,000 into an

escrow account (the "Escrow Fund") and (2) pay the class notice costs, court

costs and other incidental expenses associated with obtaining Global Approval

Judgment and Settlement Agreement Approval Judgment.  Of the foregoing amounts,

Continental shall pay 64.71% and Pacific shall pay 35.29%.  Such payment

                                     - 9 -


obligations of Continental and Pacific shall be several and not joint.  The

Escrow Fund shall be held in the manner provided in the Escrow Agreement that is

substantially in the form of Exhibit D to this Agreement.

          B.  Upon Global Approval Judgment:

          (1)  The amount in the Escrow Fund shall be transferred to the Trust.

          (2)  Fibreboard Corporation shall pay $10,000,000 into the Trust, plus

               simple interest at the rate of 3.085% from August 27, 1993;

               provided that, with respect to interest owed on the sum of

               $9,892,223 (of the $10,000,000 referred to above) from September

               23, 1993, Fibreboard Corporation's obligation shall be fully

               discharged and satisfied by delivery of an assignment (in the

               form attached hereto as Exhibit E) from Fibreboard Corporation to

               the Trust of Fibreboard Corporation's rights against Home

               Insurance Company to payment of such interest and to damages

               arising from bad faith or other tortious conduct for failure to

               pay the $9,892,223 in a timely fashion and to pay such interest.

               Before Global Approval Judgment Fibreboard Corporation will pay

               the costs of its exercise of reasonable diligence in cooperation

               with Class Counsel in pursuing such assigned claims on its own

               behalf and on behalf of the Settlement Class.  After Global

               Approval Judgment Fibreboard will pay the reasonable costs of

               pursuing such assigned claims.

                                     - 10 -


          (3)  Continental shall pay 64.71% and Pacific shall pay 35.29% of (i)

               the fees of Class Counsel as determined and approved by the Court

               up to a maximum of 3% of the sum set forth in Section 2.3(A) and

               (ii) the reasonable expenses of Class Counsel as determined and

               approved by the Court.  The payment obligations of Continental

               and Pacific under this subsection (B)(3) shall be several and not

               joint.

          SECTION 2.4     Additional Fibreboard Obligations.
                          ---------------------------------

          A.  Fibreboard Corporation shall provide for intake, maintenance and

processing (but not evaluation) of Class Member Claims for a period of five

years from August 27, 1993 or one year from Global Approval Judgment, whichever

occurs later (unless the obligation is earlier terminated, at the election of

the Trustees).  The Parties anticipate that Fibreboard Corporation and the Trust

will subsequently refine the scope of Fibreboard Corporation's obligation under

this paragraph.

          B.  At the end of the period referred to in subsection (A) above,

Fibreboard Corporation shall transfer without charge the data and (to the extent

transferrable) software with respect to its case management system (including a

perpetual, non-exclusive license to use the case management system software

exclusively for the purpose of processing Class Member Claims and Third Party

Claims), but not including equipment or other hard assets associated therewith,

to the Trust.  Thereafter, Fibreboard Corporation shall have no further

responsibility with respect to Class Member and Third Party Claims.  The Trust

shall allow

                                     - 11 -


Trustors access to and use of the case management system thereafter for use in

connection with Settled Claims and Unsettled Claims.  The Trust shall establish

any necessary procedures to be followed by the Trustors to facilitate this

arrangement and shall be reimbursed for the actual cost of providing information

or data to the Trustors.  The Trust shall not disclose any information it may

obtain relating to Settled Claims or Unsettled Claims except as required by

court order.  The Trust shall promptly advise the Trustors of any request for

such information and afford them an opportunity to object to disclosure of any

such information.

          C.  Fibreboard Corporation shall cooperate by providing existing

information and evidence to the Trust as is reasonably necessary to evaluate,

defend and resolve Class Member Claims and Third Party Claims, including, but

not limited to, information and evidence concerning Fibreboard's products and

their distribution, the history of the conduct of Fibreboard's business,

Fibreboard's defenses and the history of Fibreboard's settlements in asbestos

- -related personal injury lawsuits.  All such information and evidence shall be

used only for such purposes.  Fibreboard Corporation shall not withhold such

information or evidence from the Trust on any grounds, including attorney

- -client, work product or any other privilege; provided, however, that Fibreboard

Corporation shall provide information and evidence which is subject to an

express claim of privilege to the Trust only on the basis that such information

and evidence remains privileged and confidential, and that the Trust shall keep

all such information and evidence privileged and confidential and shall not

waive the privileged and confidential status of such information and evidence

without Fibreboard Corporation's written consent.  With respect to Trust

requests


                                     - 12 -


for information or evidence possessed by Fibreboard Corporation which is subject

to a shared ownership, shared work product or shared attorney-client privilege

with a Defendant Class Member, the Trust shall be deemed the successor-in

- -interest to Fibreboard Corporation, but any such Defendant Class Member

affected by the proposed transfer of information shall receive reasonable notice

of, and may object to, any proposed transfer of such shared information or

evidence.

          D.  Effective upon Global Approval Judgment, Fibreboard Corporation,

except as provided in Section H of the Trust Distribution Process, transfers to

the Trust its rights, if any, to all claims for contribution or indemnity

against other joint tortfeasors arising from (i) Class Member Claims, (ii)

Personal Injury Asbestos Claims that were settled against Fibreboard Corporation

before August 27, 1993 and remain settled thereafter and (iii) judgments against

Fibreboard Corporation that became final before August 27, 1993.  Effective upon

Global Approval Judgment, to the extent that Continental, CNA Casualty, Columbia

or Pacific has been subrogated to the foregoing rights of Fibreboard to

contribution or indemnity claims, each such subrogee transfers these rights to

the Trust; provided, however, that such transfer shall not include the rights of

any of the Insurers to any contribution, indemnity or reinsurance claims against

other insurance, reinsurance or indemnity entities or syndicates.

          E.  Fibreboard Corporation agrees that to the extent Fibreboard

obtains insurance proceeds from companies other than the Insurers for asbestos

- -related personal injury claims that are not applied to asbestos-related

                                     - 13 -


indemnity or defense costs and are no longer needed by Fibreboard for such

purposes, such residual proceeds shall be made available to the Trust.

          SECTION 2.5     Releases.
                          --------

          Effective upon Global Approval Judgment:

          A.  The Representative Plaintiffs, on behalf of themselves and as

representatives of the Settlement Class, release each of the Fibreboard,

Continental and Pacific Releasees from each and every Class Member Claim.

          B.  Fibreboard Corporation, on behalf of itself and its Subsidiaries,

releases Continental, CNA Casualty and Columbia, their parents, Subsidiaries,

Affiliates, directors, employees, officers, agents and attorneys (the

"Continental Releasees") from any and all claims of whatsoever description by

Fibreboard Corporation and its Subsidiaries, including bad faith claims, except

that such release shall not include any claims arising out of this Agreement,

the Settlement Agreement (or the related agreements referred to therein) or any

obligation of a Party pursuant to an agreement or agreements entered into after

this Agreement is executed.  Notwithstanding the foregoing exceptions, such

release shall include any and all claims arising from paragraphs 1 and 2 of the

April 9 Agreement.  Nothing herein shall affect the validity or effectiveness of

the releases provided for in the April 9 Agreement, all of which are hereby

ratified by Fibreboard Corporation, Continental, CNA Casualty and Columbia.

          C.  Fibreboard Corporation, on behalf of itself and its Subsidiaries,

releases Pacific, its parents, Subsidiaries, Affiliates, directors, employees,

officers, agents and attorneys (the "Pacific Releasees") from any and all claims

of whatsoever

                                     - 14 -


description by Fibreboard Corporation and its Subsidiaries, including bad faith

claims, except that such release shall not include any claims arising out of

this Agreement, the Settlement Agreement (or the related agreements referred to

therein) or any obligation of a Party pursuant to an agreement or agreements

entered into after this Agreement is executed.  Nothing herein shall affect the

validity or effectiveness of the releases provided for in the Pacific Indemnity

Agreement, all of which are hereby ratified by Fibreboard Corporation and

Pacific.

          D.  Continental, CNA Casualty and Columbia, on behalf of themselves

and their Subsidiaries, release Fibreboard Corporation, its parents,

Subsidiaries, Affiliates, directors, employees, officers, agents and attorneys

from any and all claims of whatsoever description by Continental, CNA Casualty

and Columbia and their Subsidiaries, except that such release (i) shall not

include any claims arising out of this Agreement, the Settlement Agreement (or

the related agreements referred to therein) or any obligation of a Party

pursuant to an agreement or agreements entered into after this Agreement is

executed, and (ii) shall not prevent Continental, CNA Casualty or Columbia from

raising any defenses to claims brought against them by any person or entity

claiming an interest in the Insurance Policies, including, without limitation,

defenses against the validity or enforceability of assignments or settlements to

which Continental, CNA Casualty or Columbia is not a party.  Notwithstanding the

foregoing exceptions, such release shall include any and all claims arising from

paragraphs 1 and 2 of the April 9 Agreement.  Nothing herein shall affect the

validity or effectiveness of the releases

                                     - 15 -


provided for in the April 9 Agreement, all of which are hereby ratified by

Fibreboard Corporation, Continental, CNA Casualty and Columbia.

          E.  Pacific, on behalf of itself and its Subsidiaries, releases

Fibreboard Corporation, its parents, Subsidiaries, Affiliates, directors,

employees, officers, agents and attorneys from any and all claims of whatsoever

description by Pacific and its Subsidiaries, except that such release (i) shall

not include any claims arising out of this Agreement, the Settlement Agreement

(or the related agreements referred to therein) or any obligation of a Party

pursuant to an agreement or agreements entered into after this Agreement is

executed, and (ii) shall not prevent Pacific from raising any defenses to claims

brought against Pacific by any person or entity claiming an interest in the

Insurance Policies.  Nothing herein shall affect the validity or effectiveness

of the releases provided for in the Pacific Indemnity Agreement, all of which

are hereby ratified by Fibreboard Corporation and Pacific.

          F.  The releases required by Sections 2.5(A)-(E) above shall be

effective as a bar to each and every claim, demand and cause of action

encompassed thereby and shall include, as necessary to effectuate that purpose,

waivers by the Parties of any and all benefits conferred on any of them by

Section 1542 of the California Civil Code or similar provisions in other

jurisdictions.

          SECTION 2.6     Final Settlement of the Insurance Policies.
                          ------------------------------------------

          Fibreboard Corporation and the Insurers agree that upon Global

Approval Judgment, except for obligations that an Insurer has specifically

assumed or preserved under this Agreement, or under the Settlement Agreement (or

the related agreements referred to therein), the Insurers shall be discharged

from any


                                     - 16 -


and all of their obligations (whether direct or indirect) under or in connection

with the Insurance Policies, including any obligations imposed by judgment,

decree, statute, regulation or common law.  Upon Global Approval Judgment,

Fibreboard Corporation shall execute and deliver a stipulation for the dismissal

with prejudice of the Coverage Case as to Continental, CNA Casualty, Columbia

and Pacific.

          SECTION 2.7     Indemnity Obligation of the Trust After Global
                          Approval Judgment.
                          ----------------------------------------------

          A.  Except as provided in Section 2.4(A) as to Fibreboard Corporation,

the Trust shall defend and indemnify the Fibreboard, Continental and Pacific

Releasees against, and hold them harmless from, any costs, fees, claims,

liabilities, settlements or judgments incurred or occurring after Global

Approval Judgment and resulting, directly or indirectly, from the assertion

against any of them of any Class Member Claim or Third Party Claim.  This

obligation shall include, without limitation, any such claim to the extent that,

after Global Approval Judgment, that claim attacks the validity or

enforceability of the Global Approval Judgment.  Fibreboard Corporation and the

Insurers may, at their own expense, elect to participate with the Trust in the

defense of any such action or claim.

          B.  The Trust shall reimburse any Person entitled to reimbursement out

of the Escrow Fund pursuant to Section 3.3(A) to the extent that such Person did

not receive reimbursement from the Escrow Fund.

          SECTION 2.8     Fibreboard Corporation's Indemnity and Related
                          Obligations.
                          ----------------------------------------------

          Upon Global Approval Judgment, the Continental and Pacific Releasees

shall not have any liability for, and Fibreboard Corporation shall


                                     - 17 -


indemnify the Continental and Pacific Releasees against, and hold them harmless

from, any and all costs, fees, claims or liabilities relating to Personal Injury

Asbestos Claims and Additional Policy Claims of whatsoever kind, including those

attacking the validity or enforceability of the Global Approval Judgment, (a)

except for costs, claims or liabilities that the Insurers have specifically

undertaken to pay under this Agreement, the Settlement Agreement (or the related

agreements referred to therein), and (b) except for Defense Costs directly

attributable to an actual or threatened attack on the validity or enforceability

of the Global Approval Judgment ("Collateral Attack").  As to claims asserted

against Fibreboard Corporation that (a) would not be covered by the foregoing

indemnity (e.g., claims unrelated to asbestos) and (b) could be claimed to give

rise to a direct action against any of the Insurers, Fibreboard Corporation

agrees to reasonably and diligently defend and promptly pay or bond judgments so

as to preclude any such direct action claims.  In the event of a Collateral

Attack, Continental and Pacific shall pay Fibreboard Corporation the reasonable

costs incurred by Fibreboard Corporation in defending against a Collateral

Attack to the extent not paid by the Trust (provided that Continental's and

Pacific's obligation shall extend only to those costs directly attributable to

litigation with respect to the validity and enforceability of the Global

Approval Judgment, not to those attributable to litigation with respect to any

underlying claims).  Continental, Pacific and Fibreboard Corporation shall

jointly defend against a Collateral Attack and will cooperate reasonably with

one another in this regard.

                                     - 18 -


                                   ARTICLE 3

                ACTIONS TO BE TAKEN TO IMPLEMENT THIS AGREEMENT

          SECTION 3.1     Applications for Initial Court Orders, Settlement
                          Class Order, Defendant Class Order and Global
                          Approval Judgment.
                          -------------------------------------------------

          Promptly upon the execution of this Agreement, the Parties shall, by

joint motions, in form and substance satisfactory to counsel for each of the

Parties:

          A.  request entry of an order (i) preliminarily approving this

Agreement and the settlement contemplated by this Agreement for the purpose of

the Rule 23 Notice and settlement hearing contemplated therein, (ii)

preliminarily approving the Defendant Class Settlement Agreement and the

settlement contemplated by that agreement, and (iii) approving the contents and

methods for the dissemination of the Rule 23 Notice (which notice shall be in

form and substance satisfactory to the above counsel; and

          B.  request (i) entry of the Settlement Class Order and the Defendant

Class Order and (ii) entry of Global Approval Judgment.

          SECTION 3.2     Effect of Class Certification.
                          -----------------------------

          The certification of the Settlement Class pursuant to this Agreement

shall be binding if Global Approval Judgment is entered.  In the event this

Agreement is terminated prior to Global Approval Judgment, Fibreboard

Corporation and the Insurers shall retain their right to object to the continued

prosecution of the Class Action as a class action under Rule 23.  Neither this

                                     - 19 -


Agreement, nor its exhibits, nor the settlement negotiations, nor the

proceedings seeking approval of the settlement, may be used (i) in support of

any application for a determination that the Class Action or any other action

shall proceed as a class action except for the purposes of the settlement in

accordance with this Agreement or (ii) as evidence in any litigation (other than

an action to enforce the terms of this Agreement or any of its exhibits) or

proceeding against Fibreboard Corporation, Continental, CNA Casualty, Columbia

or Pacific in any court at any time.

          SECTION 3.3     Execution and Delivery of Escrow Instructions.

          A.  Class Counsel (or, after appointment of the Trustees, the

Trustees), Fibreboard Corporation, Continental and Pacific shall each execute

and deliver from time to time to the Escrow Agent instructions sufficient to

order the disbursement from the Escrow Fund of funds needed to pay the following

obligations:

          (1)  To pay sums payable out of the Escrow Fund pursuant to Article 7

               of this Agreement.

          (2)  To reimburse monthly to any of the Fibreboard, Continental or

               Pacific Releasees amounts, if any, paid by any of them for costs,

               fees, claims, liabilities, settlements, arbitration awards or

               judgments with respect to (i) Class Member Claims or Third Party

               Claims which receive approval from the Court during the Interim

               Period to proceed to trial or (ii) Interim Claims.

          (3)  To reimburse monthly any cost or expenses of the Trust incurred

               during the Interim Period, including the fees and expenses of the

               Interim Trustee, the Trustees or Class Counsel's

                                     - 20 -


               designee to the Interim Committee and other reasonable

               expenditures.

          (4)  To reimburse monthly any cost or expense of the SCB (in their

               capacity as such, and not in their capacity as Class Counsel)

               incurred during the Interim Period and determined by the Court or

               agreed by the Trustees to be reasonable.

          B.  Notwithstanding the provisions of Section 3.3(A)(2), (i) the cost

of compliance with Fibreboard Corporation's obligations under Section 2.4(A),

the cost of any in-house employees of Fibreboard or the Insurers, and the use of

more outside personnel than are reasonably necessary in connection with the

economical defense or settlement of a claim shall not be reimbursed, and (ii)

any non-indemnity fees or costs subject to reimbursement shall be reasonably

necessary for the resolution of an Interim Claim, Class Member Claim or Third

Party Claim as determined by the Court or agreed by the Trustees or their

designee.  Until the third anniversary after Global Approval Judgment, the Trust

may seek reimbursement from any Person to whom amounts were disbursed from the

Escrow Fund pursuant to Section 3.3(A)(2) which the Trust alleges, based on the

actual experience of the Trust in processing and resolving claims, were in fact

unreasonable and thus improperly paid from the Escrow Fund.  After a hearing on

notice to all of the Parties, the Court shall finally determine the eligibility

of any contested expenditure for reimbursement under Section 3.3(A)(2).

          C.  Fibreboard Corporation, the Insurers and the SCB agree to keep

separate billing accounts for all fees and expenses subject to reimbursement

                                     - 21 -


pursuant to Section 3.3(A)(2) or 3.3(A)(4) and, if requested by the Trustees or

Class Counsel's designee to the Interim Committee, submit them to the Court for

a determination as to the reasonableness and eligibility for reimbursement.

          D.  Class Counsel, Fibreboard Corporation, Continental and Pacific

shall each execute and deliver a written notice of termination of the Escrow

Agreement and execute and deliver escrow instructions to the Escrow Agent

sufficient to order distribution of the balance of the Escrow Fund to the

following persons upon occurrence of the following events:

          (1)  to the Trust upon occurrence of Global Approval Judgment

               (including Global Approval Judgment as to which an effective

               waiver of one or more elements has been given);

          (2)  to the trust or other entity described in Section 2.3(c) of the

               Settlement Agreement if (i) Settlement Agreement Approval

               Judgment occurs and Global Court Disapproval occurs, and (ii) the

               conditions to the establishment of such trust or other entity set

               forth in Section 2.3(c) of the Settlement Agreement are satisfied

               in the opinion of counsel for Fibreboard Corporation, Continental

               and Pacific;

          (3)  to Continental and Pacific in the percentages of 64.71% and

               35.29%, respectively, if (i) Settlement Agreement Approval

               Judgment occurs and Global Court Disapproval occurs, and (ii) the

               conditions to the establishment of such trust or other entity set

               forth of Section 2.3(c) of the Settlement Agreement are not

                                     - 22 -


               satisfied in the opinion of counsel for Fibreboard Corporation,

               Continental and Pacific; or

          (4)  to Continental and Pacific in the percentages of 64.71% and

               35.29%, respectively, if both Settlement Agreement Court

               Disapproval and Global Court Disapproval occur.

                                   ARTICLE 4

                                  TERMINATION

          SECTION 4.1     Termination.
                          -----------

          This Agreement shall automatically terminate without any further

action by any of the Parties, upon Global Court Disapproval or upon a

stipulation terminating this Agreement signed by all parties and filed with this

Court.  Upon such termination, the Settlement Class Members and the other

Parties shall, as far as may be practicable, be restored to their respective

positions, rights and obligations that existed as if this Agreement had not been

entered into.  Notwithstanding the foregoing, the following provisions of this

Agreement and the Trust Distribution Process, and the rights, obligations, and

liabilities created therewith shall survive such termination:  Sections 3.2,

3.3, 4.1, 8.2, 8.3, 8.4, 8.5, 8.8, 8.9, 8.10, 8.11, 8.13 and Article 7 of this

Agreement and section D.2.f(i) of the Trust Distribution Process.

                                     - 23 -


                                   ARTICLE 5

                                SETTLEMENT TRUST

          SECTION 5.1     Trust Agreement.
                          ---------------

          A Trust shall be created in accordance with the provisions of the

Trust Agreement attached as Exhibit B hereto.  The funds in the Trust shall be

invested and expended in accordance with the terms of the Trust Agreement and

Trust Distribution Process.  The Trust shall be separate and independent from

Fibreboard Corporation.  Neither the Trust nor Fibreboard Corporation shall be

bound by any adjudications rendered in any litigation (other than the Class

Action, the related class action respecting the Defendant Class and any future

litigation to which both the Trust and Fibreboard Corporation are parties) to

which one, but not the other, has been a party or privy.  Neither Fibreboard

Corporation nor the Trust shall be bound by any stipulations or agreements

entered into by the other.

          SECTION 5.2     Continuing Jurisdiction of the Court.
                          ------------------------------------

          The Court shall retain continuing jurisdiction over the maintenance,

administration and distribution of the Trust and the funds contained therein,

subject to and in accordance with the provisions of the Trust Agreement, the

Trust Distribution Process, and the Defendant Class Settlement Agreement.

However, the Court shall not have such continuing jurisdiction of Settlement

Class Members, Defendant Class Members, Fibreboard Corporation or the Insurers

beyond that necessary to enforce this Agreement, the Trust Agreement, the Trust

Distribution Process, and the Defendant Class Settlement Agreement.

                                     - 24 -


          SECTION 5.3     Preservation of Funds.
                          ---------------------

          To ensure that adequate Trust funds remain available to pay claims of

all Settlement Class Members, the Parties agree that they will support the goals

and purposes of the Trust and that they will cooperate in taking such steps as

may be appropriate from time to time to require the Trustees to comply with the

spending limitations, budgeting requirements, financial reporting, accounting

and audit requirements set forth in the Trust Agreement and Trust Distribution

Process.
                                   ARTICLE 6

                               THIRD PARTY CLAIMS

          SECTION 6.1     Bar Orders.
                          ----------

          All Third Party Claims shall be barred and permanently enjoined from

prosecution against any of the Fibreboard, Continental and Pacific Releasees in

any proceeding or court.  Third Party Claims against the Trust in its own

capacity or in Fibreboard Corporation's stead shall be governed by section H of

the Trust Distribution Process and the Defendant Class Settlement Agreement.

          SECTION 6.2     Judgment Reduction and Subrogation Rights.
                          -----------------------------------------

          Defendant Class Members shall have such rights to obtain credits, set

- -offs, judgment reductions and subrogation to claims of Settlement Class Members

as are provided for in the Defendant Class Settlement Agreement and the Trust

Distribution Process.

                                     - 25 -


          SECTION 6.3     Actions Necessary to Obtain Discharges and Bar Orders.
                          -----------------------------------------------------

          A.  In exchange for the subrogation and the credit and set-off rights

accorded them under the Trust Distribution Process, the Defendant Class Members

in the Defendant Class Settlement Agreement are releasing all Third Party Claims

against the Fibreboard, Continental and Pacific Releasees and have agreed that

those releases be enforced by the Global Approval Judgment.  Notwithstanding the

provisions of the Defendant Class Settlement Agreement, and except as set forth

in Section 6.3(C) below, in the event that Global Approval Judgment cannot be

obtained because of failure to obtain the discharge of, or an injunction

against, one or more Express Indemnity or Additional Policy Claims, then each

and every such Express Indemnity or Additional Policy Claim against the

Fibreboard, Continental and Pacific Releasees shall (as a sole and exclusive

remedy, in lieu of any claims or remedies at law or in equity against the

Fibreboard, Continental and Pacific Releasees, which claims or remedies are and

will be forever barred and enjoined) be resolved with and compensated by the

Trust as Residual Claims under the provisions of the Trust Distribution Process.


          B.  Except as set forth in Section 6.3(C) below, in the event the

Parties receive notice that notwithstanding the right to compensation under the

provisions of Section 6.3(A) above, Global Approval Judgment cannot be obtained

because of failure to obtain the discharges of, or injunctions against, any

Third Party Claim against the Fibreboard, Continental and Pacific Releasees,

Settlement Class Members agree to reduce judgments in their favor against

Defendant Class Members

                                     - 26 -


in such amounts as may be necessary to obtain the discharges of and injunctions

against Third Party Claims as against the Fibreboard, Continental and Pacific

Releasees which are required for the entry of Global Approval Judgment.  Any

such reduction of judgment may be up to (but may not exceed) the full amount

that a Defendant Class Member would have been entitled to recover from any of

the Fibreboard, Continental and/or Pacific Releasees in the event that a valid

Third Party Claim arising from the judgment or payment thereof could have been

brought against any of them in the absence of Global Approval Judgment.

          C.  The Parties believe that there are no valid Express Indemnity

Claims or Additional Policy Claims arising from the distribution of asbestos or

asbestos-containing materials or products manufactured by Fibreboard and sold or

distributed under a label, trade name or brand name of a Person unaffiliated

with Fibreboard pursuant to an agreement with Fibreboard.  Fibreboard

Corporation represents that, except as disclosed to the Insurers and to Class

Counsel in writing, it knows of no Persons unaffiliated with Fibreboard who sold

or distributed such materials or products.  In the event the Parties receive

notice that Global Approval Judgment cannot be obtained because of failure to

obtain the discharge of, or an injunction against, any Express Indemnity Claim

or Additional Policy Claim asserted by any Person listed in the writing referred

to in the second sentence of this Section 6.3(C), then (i) the obligations

imposed on Settlement Class Members set forth in Section 6.3(B) do not apply to

those claims, (ii) Continental, Pacific and Fibreboard Corporation may advise

Class Counsel within seven days of receipt of such notice that they have waived

such failure to obtain the discharge of, or

                                     - 27 -


injunction against, such claim or claims, and (iii) in the event that

Continental, Pacific and Fibreboard Corporation have not so advised Class

Counsel, then the Attorney Ad Litem shall for 14 days following expiration of

the seven-day period have the option, but not the obligation, to elect to have

Section 6.3(B) apply to such claim or claims.  If Continental and Pacific elect

pursuant to the foregoing sentence to waive failure to obtain the discharge of,

or an injunction against, any of the Express Indemnity Claims or Additional

Policy Claims described in the preceding sentence, Fibreboard Corporation shall

be deemed to have waived such failure if Continental and Pacific agree to

indemnify and hold harmless Fibreboard Corporation against any cost or liability

resulting from the assertion of any such claims against Fibreboard Corporation.

                                   ARTICLE 7

                      INTERIM CLAIM LIQUIDATION PROCEDURES

          SECTION 7.1     Interim Claims.
                          --------------

          The provisions of this Article 7 specify the procedures to be followed

in handling certain Class Member Claims presented during the "Interim Period,"

which is the period commencing at the later of January 1, 1994 or the execution

of this Global Settlement Agreement, and ending at Global Approval Judgment or

Global Court Disapproval.  Third Party Claims of Defendant Class Members arising

out of Interim Claims shall be resolved in accordance with the terms of the

Defendant Class Settlement Agreement.  An "Interim Committee," consisting of a

designee of Class Counsel, a designee of Fibreboard Corporation, and a designee

of

                                     - 28 -


the Insurers, shall perform the functions specified for it in this Article in

connection with Liquidation of Interim Claims.

          An "Interim Claim" is a Class Member Claim which a Settlement Class

Member seeks to Liquidate during the Interim Period and which meets one of the

following criteria:

          A.  it is an Exigent Health Claim;

          B.  it is an Extreme Hardship Claim; or

          C.  the Settlement Class Member establishes to the satisfaction of the

Interim Committee that his or her asbestos-related personal injury claim in the

tort system against a Defendant Class Member will be tried to judgment during

the Interim Period and that the trial will adjudicate issues unique to that

Settlement Class Member (e.g., damages, legal causation), as distinguished from

issues common to a number of plaintiffs (e.g., negligence, strict liability,

punitive damages).

          SECTION 7.2     Processing Interim Claims.
                          -------------------------

          A.  Any Settlement Class Member electing to submit an Interim Claim

shall forward a notice of Interim Claim and a proof of claim to the Interim

Committee, on forms to be prescribed by the Interim Committee.

          B.  Interim Claims shall be processed in accordance with the claims

procedures set forth in the Trust Distribution Process, except as follows:

          (1)  Negotiations and any arbitration with respect to any Interim

               Claim shall be between the Interim Claimant, on the one hand, and

               Fibreboard Corporation and the Insurers (and not the Trust), on

 the other hand.

                                     - 29 -


          (2)  Each Interim Claimant asserting an Exigent Health Claim or

               Extreme Hardship Claim shall present a written demand within

               seven days of submitting the notice of Interim Claim and

               properly completed proof of claim.  Fibreboard Corporation and

               the Insurers shall evaluate such Interim Claim.  Fibreboard

               Corporation and the Insurers shall jointly respond with a written

               offer in no more than seven days from receipt of the written

               demand.  If settlement negotiations fail to produce a settlement

               within 14 days from receipt of the initial offer, such Interim

               Claimant may proceed to binding arbitration.  The arbitration

               shall be held within 30 days after arbitration is requested by

               such Interim Claimant.

          (3)  Each Interim Claimant asserting an Interim Claim other than an

               Exigent Health Claim or Extreme Hardship Claim shall within seven

               days of receipt of a trial date submit a properly completed proof

               of claim form and a notice of the date that trial is  scheduled

               to commence.  A settlement demand shall also be submitted by such

               Interim Claimant at that time.  Fibreboard Corporation and the

               Insurers shall evaluate such Interim Claim.  Fibreboard

               Corporation and the Insurers shall jointly respond with a written

               offer in no more than 28 days from receipt of the written demand.

               The parties shall negotiate in good faith, and, if a settlement

               is not reached by 14 days prior to trial, such

                                     - 30 -


               Interim Claim shall be set for binding arbitration to be

               conducted and concluded prior to entry of judgment in the trial

               court; provided, however, that such Interim Claimant may, as

               early as 30 days prior to the scheduled trial date, request

               binding arbitration.

          (4)  The arbitration shall consist of an abbreviated hearing which may

               be conducted by conference call, with the award based upon the

               oral presentations, and any written submissions, of the parties'

               respective settlement positions.  Neither party may submit any

               evidence in the arbitration that was not submitted to the other

               party at least seven days prior to the earlier of the

               commencement of the arbitration or the submission of its final

               offer or demand.  The written demands and offers required by

               subsections (B) (2) and (B) (3) above shall be included in such

               submissions.

          (5)  The Interim Committee shall establish and maintain a list of

               Qualified Arbitrators.  An arbitrator shall be told the amount of

               the final offer and the amount of the Interim Claimant's final

               demand at the commencement of arbitration.  The arbitrator shall

               only have discretion to award one of those two amounts.

           C.  Any settlement of an Interim Claim shall be with the consent of

               Class Counsel's designee, which consent shall not be unreasonably

               withheld.

                                     - 31 -


          SECTION 7.3     Payment of Exigent and Extreme Hardship Claims.
                          ----------------------------------------------

          Interim Claims that are Exigent Health Claims or Extreme Hardship

Claims shall be paid as follows:

          A.  50% of the amount for which such Interim Claim has been Liquidated

shall be paid 30 days after the Interim Claim is Liquidated.

          B.  The remaining 50% of such amount shall be paid 60 days after the

first to occur of (i) Global Approval Judgment, (ii) Settlement Agreement

Approval Judgment or (iii) entry of the Final Decision in the Coverage Case;

provided that (x) any amount to be paid under this Section 7.3(B) by reason of

the fact that the Final Decision is the first to occur of the foregoing

triggering events shall be paid 60 days after that event only to the extent of

the Insurer's coverage obligations as determined by the Final Decision and (y)

any portion of such amount that remains unpaid after that time shall be paid 60

days after the first to occur of (a) any of the other triggering events or (b)

both Global Court Disapproval and Settlement Agreement Court Disapproval.

          SECTION 7.4     Payment of Interim Claims Other Than Exigent Health
                          Claims and Extreme Hardship Claims.
                          ---------------------------------------------------

          Interim Claims other than Exigent Health Claims or Extreme Hardship

Claims shall be paid as follows:

          A.  If Global Approval Judgment is entered on or before June 30, 1996,

these Interim Claims shall be paid in accordance with the Trust Distribution

Process in the same manner as other Class Member Claims.

                                     - 32 -


           B.  If Global Approval Judgment has not been entered on or before

June 30, 1996,

          (1)  50% of the amount for which such Interim Claim has been

               Liquidated shall be paid upon the later of (i) the first to occur

               of November 30, 1996 or 30 days after Settlement Agreement

               Approval Judgment, or (ii) 60 days after receipt by the Insurers

               and Fibreboard Corporation of a declaration or affidavit stating

               that the case against a Defendant Class Member has been tried to

               judgment or has been settled against all non-bankrupt defendants

               in such case, unless both Global Court Disapproval and Settlement

               Agreement Court Disapproval have occurred by such time.

          (2)  Any unpaid balance of such amount shall be paid 60 days after the

               first to occur of (i) Global Approval Judgment, (ii) Settlement

               Agreement Approval Judgment or (iii) entry of the Final Decision

               in the Coverage Case; provided that (x) any amount to be paid

               under this Section 7.4(B)(2) by reason of the fact that the Final

               Decision is the first to occur of the foregoing triggering events

               shall be paid 60 days after that event only to the extent of the

               Insurer's coverage obligations as determined by the Final

               Decision and (y) any portion of such amount that remains unpaid

               after that time shall be paid 60 days after the first to occur of

               (a) any of the other triggering events or

                                     - 33 -


               (b) both Global Court Disapproval and Settlement Court Agreement

               Disapproval.

          (3)  Notwithstanding the provisions of subsections B(1) and B(2)

               above, if an Interim Claim against one or more Defendant Class

               Members is consolidated for trial with the claims of more than 50

               other Settlement Class Members, (i) the Interim Committee, at the

               request of the Trustees, shall pay amounts payable out of the

               Escrow Fund with respect to such Interim Claims in such manner

               and over such a longer time period (not to exceed 10 years) as

               the Trustees shall determine is in the best interests of the

               Trust and the Beneficiaries and (ii) the Trustees shall have

               discretion to pay amounts payable by the Trust with respect to

               such Interim Claims in such manner and over such a longer time

               period (not to exceed 10 years) as the Trustees shall determine

               is in the best interests of the Trust and the Beneficiaries.

          SECTION 7.5     Sources of Payment of Liquidated Amounts for Interim
                          Claims.
                          ----------------------------------------------------

          The amounts due for payment under Sections 7.3 and 7.4 shall be paid:

          A.  by the Trust if Global Approval Judgment has been entered by the

date payment is due;

          B.  by Fibreboard Corporation if both Settlement Agreement Approval

Judgment and Global Court Disapproval have occurred by the date payment is due;

                                     - 34 -


          C.  by the Insurers to the extent of their coverage obligations as

determined by the Final Decision in the Coverage Case, with any remaining

balance paid by Fibreboard Corporation, if each of Global Court Disapproval,

Settlement Agreement Court Disapproval and the Final Decision has occurred by

the date payment is due; and

          D.  out of the Escrow Fund if neither (A), (B), nor (C) is applicable

by the date a payment is due.

          SECTION 7.6     Miscellaneous Interim Claim Provisions.
                          --------------------------------------

          Any Interim Committee decision shall require the unanimous approval of

all members of the Interim Committee.  In the event that unanimity cannot be

achieved, disputes over the handling of Interim Claims shall be submitted to the

Court for resolution.  Class Counsel's designee shall not disclose any

privileged or confidential information supplied to such designee by Fibreboard

Corporation or the Insurers except as required by court order and shall promptly

notify the Party which designated such information as privileged or confidential

upon receipt of any subpoena or other formal request for such information.  The

members of the Interim Committee shall not disclose any settlement information

with respect to Interim Claims to anyone other than Fibreboard Corporation,

Continental, Pacific or the Trust, except as required by court order and upon

reasonable prior notice to Fibreboard Corporation, Continental, Pacific and the

Trust.

                                     - 35 -


                                   ARTICLE 8

                                 MISCELLANEOUS

          SECTION 8.1     Designated or Qualified Settlement Fund.
                          ---------------------------------------

          Fibreboard Corporation's, Continental's, CNA Casualty's, Columbia's

and Pacific's obligation to proceed with this Agreement are expressly

conditioned upon the receipt by Fibreboard Corporation and the Insurers of a

letter ruling from the Internal Revenue Service pursuant to which the Internal

Revenue Service confirms that the Trust will be treated either (i) as a

Designated Settlement Fund or (ii) as a Qualified Settlement Fund.  In the event

that the Internal Revenue Service has not issued such a ruling within twelve

months after execution of this Agreement and has not expressed substantial

concerns about the merits of the ruling request, then Fibreboard Corporation's

and the Insurers' obligations to proceed are expressly conditioned upon receipt

of a written opinion reasonably satisfactory to Fibreboard Corporation no later

than twelve months after the date of this Agreement from an independent and

distinguished professional tax advisor that either (i) the Trust will be treated

either as a Designated Settlement Fund or as a Qualified Settlement Fund or (ii)

Fibreboard Corporation will not recognize any net taxable income as a result of

the Global Approval Judgment and the transactions contemplated thereby,

establishment of the Trust, or any payments (other than those paid to Fibreboard

Corporation) made by the Trust for Trust Expenses, Class Member Claims or Third

Party Claims.  Fibreboard Corporation and the Insurers shall use good faith

efforts to obtain such a ruling or advice, as the case may be, as promptly as

practicable after

                                     - 36 -


the date of this Agreement.  Class Counsel shall be kept fully informed about,

and may participate in, the efforts to obtain such a ruling.

          The tax advisor will be selected in the following manner.  Fibreboard

Corporation shall name three tax advisors.  Within 5 days of receipt of such

names, Class Counsel or the Insurers may notify Fibreboard Corporation that

either of them objects to any such person on the ground that he or she is not an

independent and distinguished professional tax advisor.  Fibreboard Corporation

shall select the final tax advisor from those persons remaining.  If no persons

remain, Fibreboard Corporation may name a substitute or substitutes, or may

apply to Judge Patrick H. Higginbotham for (i) his binding determination that

any of the persons objected to is an independent and distinguished professional

tax advisor, and if he determines that any of the persons selected is an

independent and distinguished tax advisor Fibreboard Corporation shall select

the final tax advisor, from those persons remaining, and (ii) if he determines

that none of the persons remaining is an independent and distinguished tax

advisor, he will give his determination how any future naming of candidates by

Fibreboard Corporation and objections by Class Counsel and the Insurers will

proceed.  If Fibreboard Corporation names a substitute or substitutes, within

five days of receipt of such name(s), Class Counsel or the Insurers may notify

Fibreboard Corporation that either of them objects to any such person on the

ground that he or she is not an independent and distinguished professional tax

advisor.  Objections to any such substitute may be brought to Judge Higginbotham

as described above.

                                     - 37 -


          SECTION 8.2     Counsel.
                          -------

          Any act or consent required by or which may be given by Representative

Plaintiffs pursuant to this Agreement may be accomplished by Class Counsel

acting on behalf of all Representative Plaintiffs.  Class Counsel may act or

give their consent with the approval of any three or more of Class Counsel and,

in such event, the Representative Plaintiffs shall be deemed to have so acted or

consented.  Continental, Pacific, CNA Casualty, Columbia and Fibreboard

Corporation shall be entitled to rely upon such act or consent by Class Counsel

in any case where the act or consent is evidenced in a writing reflecting the

approval of any three of Class Counsel.

          SECTION 8.3     No Oral Representations.
                          -----------------------

          This Agreement, together with its accompanying exhibits, supersedes

and renders unenforceable all earlier oral representations, warranties or

promises made by any Party to any other Party with respect to the subject matter

of this Agreement.

          SECTION 8.4     Payment of Costs.
                          ----------------

          Except as otherwise agreed, each of Fibreboard Corporation,

Continental, CNA Casualty, Columbia and Pacific shall pay its own legal and

other costs and expenses incurred in connection with the preparation,

negotiation, execution and delivery of this Agreement and the consummation of

the settlement contemplated hereby.

                                     - 38 -


          SECTION 8.5     Modification and Waiver.
                          -----------------------

          A.  Subject to any necessary court approvals, this Agreement and any

of the exhibits hereto may be amended, supplemented or modified from time to

time by a writing executed by each of the Parties or, in the case of

Representative Plaintiffs, by Class Counsel (prior to Global Approval Judgment)

or the SCB (after Global Approval Judgment); provided, however, that the Trust

Agreement and the exhibits thereto, including the Trust Distribution Process,

may be amended only in accordance with the requirements and procedures contained

therein.

          B.  Fibreboard Corporation, Continental, CNA Casualty, Columbia,

Pacific or the Representative Plaintiffs (on behalf of the Settlement Class), as

the case may be, may from time to time by written instrument waive any provision

of this Agreement or any of the exhibits hereto which inures to its or their

benefit; provided, however, that the provisions of the Trust Agreement and

exhibits thereto, including the Trust Distribution Process, may be waived only

in accordance with the requirements and procedures contained therein.  Any such

waiver or consent shall be effective only in the specific instance, for the

specific provision of this Agreement or exhibit hereto and for the specific

purpose for which it is given.

          SECTION 8.6     Further Actions.
                          ---------------

          Each of Fibreboard Corporation, Continental, CNA Casualty, Columbia,

Pacific and the Representative Plaintiffs and their respective counsel shall

take such actions and execute such additional documents as may be reasonably

necessary or appropriate to consummate or implement the settlement contemplated

by this Agreement.


                                     - 39 -


          SECTION 8.7     Effectiveness of Agreement Notwithstanding
                          Developments.
                          ------------------------------------------

          The Parties understand and contemplate that during the period

necessary to obtain Global Approval Judgment there will almost certainly be

developments that bear on the issues being resolved and compromised by this

Agreement, including but not limited to, decisions on issues common to other

parties in the Coverage Case, controlling decisions by the California Supreme

Court issued in other cases, changes in estimates as to volume and severity of

future asbestos personal injury claims, procedural rulings or legislative

actions that may make it easier or more difficult successfully to prosecute

claims against asbestos defendants or their insurers and changes in the

financial condition of other asbestos defendants, any of which may appear to

have a bearing on the settlement of issues resolved herein.  The Parties have

carefully weighed potential developments of this nature and have taken them into

account in reaching the compromise recited on the record on August 27, 1993 and

reflected in this Agreement and no such event subsequent to that date shall be

the basis for modifying this Agreement or relieving any of the Parties from any

of its terms.  The fairness and reasonableness of this Agreement shall be

assessed as of August 27, 1993.

          SECTION 8.8     No Admission or Use.
                          -------------------

          This Agreement and the provisions thereof, whether or not Global

Approval Judgment is entered, shall in no event be offered as or be deemed to be

evidence or an admission or a concession on the part of any of the Parties of or

with respect to any claim or any fault, liability or damages whatsoever.  This

Agreement

                                     - 40 -


and the settlement provided for herein, whether or not consummated, and any

actions or proceedings taken to enter into or pursuant to this Agreement or

otherwise, are not, and shall not in any event be construed, interpreted or used

as evidence of a presumption, concession or admission by any Party of the truth

of any fact alleged or the validity of any claim or defense which has, could

have been or could be asserted in any litigation, or of any deficiency in any

claim or defense which was, could have been or could be asserted in any

litigation, or of any liability, fault or dereliction of duty or breach of

contract of any Party.  Notwithstanding the foregoing, any Party shall be

entitled to introduce this Agreement in evidence for the purpose of enforcing

its terms.  Nothing herein is intended to suggest that any asbestos-related

personal injury claim may be asserted against Fibreboard, the Settlement Trust

or the Insurers by a person who cannot prove exposure to asbestos-containing

materials manufactured by Fibreboard.

          SECTION 8.9     No Breach of Other Obligations.
                          ------------------------------

          Neither this Agreement nor any acts, statements or omissions of the

Parties in connection with the negotiation, execution or performance thereof

shall be claimed to constitute a breach of any contract, policy of insurance or

law or the basis for any claim of bad faith.  Nothing in this Agreement calls

for or obligates any of the Parties in any way to violate or breach its

obligations under any agreement and no term or provision of this Agreement shall

be so construed.

          SECTION 8.10     Third Party Beneficiaries.
                           -------------------------

          There shall be no third party beneficiaries of this Agreement other

than the non-Party Releasees hereunder.  No Person other than the Parties


hereto,

                                     - 41 -


the Settlement Class Members and the Releasees hereunder, shall have any right

or claim under or in respect of this Agreement.

          SECTION 8.11     Rights and Obligations of Fibreboard Corporation and
                           the Insurers Under the Settlement Agreement and
                           Related Agreements.
                           ----------------------------------------------------

          This Agreement shall not abridge or in any way modify or affect the

rights or obligations of Fibreboard Corporation, Pacific, Continental, CNA

Casualty or Columbia in relation to each other under the Settlement Agreement or

related agreements referred to therein.  All such rights and obligations shall

be in addition to those created by this Agreement even where they pertain to the

same subject matter.  The definitions contained in the Glossary and in the

provisions of this Global Settlement Agreement and its exhibits shall have no

application to the Settlement Agreement or the related agreements referred to

therein unless incorporated explicitly by written addendum to such agreements.

          SECTION 8.12     Headings.
                           --------

          The section headings contained in this Agreement and its exhibits are

inserted for convenience only and shall not affect in any way the meaning or

interpretation of this Agreement or its exhibits.

          SECTION 8.13     Notices.
                           -------

          All notices, requests, demands, claims and other communications

hereunder shall be in writing.  Any notice, request, demand, claim or other

communication hereunder shall be deemed duly given if it is sent by registered

or certified mail, postage prepaid, or sent by prepaid overnight courier or

confirmed telecopier, and addressed to the intended recipient as set forth

below:

                                     - 42 -


               If to Fibreboard Corporation, addressed to:

                    Fibreboard Corporation
                    2121 North California Blvd.
                    Walnut Creek, CA  94596
                    Attention: Michael R. Douglas
                               Senior Vice President and
                               General Counsel
                    Telecopier:  (510) 274-0714

                                       and

                    BROBECK, PHLEGER & HARRISON
                    Spear Street Tower
                    One Market Plaza
                    San Francisco, California  94105
                    Attention:  Stephen M. Snyder, Esq.
                    Telecopier:  (415) 442-1020

               If to Continental, addressed to:

                    Continental Casualty Co.
                    Specialty Claims Office, 12th Floor
                    50 Fremont Street
                    San Francisco, CA  94105
                    Attention:  Claim Manager
                    Telecopier:  (415) 512-4899

                                       and

                    WACHTELL, LIPTON, ROSEN & KATZ
                    51 West 52nd St.
                    New York, New York  10019
                    Attention:  Herbert M. Wachtell, Esq.
                    Telecopier:  (212) 403-2000

                                       and

                    CARROLL, BURDICK & McDONOUGH
                    44 Montgomery St., Suite 400
                    San Francisco, CA  94104
                    Attention:  Rodney L. Eshelman, Esq.
                    Telecopier:  (415) 989-0932

                                     - 43 -


               If to Columbia, addressed to:

                    Columbia Casualty Company
                    c/o Continental Casualty Co.,
                    Specialty Claims Office, 12th Floor
                    50 Fremont Street
                    San Francisco, CA  94105
                    Attention:  Claim Manager
                    Telecopier:  (415) 512-4899

                                       and

                    WACHTELL, LIPTON, ROSEN & KATZ
                    51 West 52nd St.
                    New York, New York  10019
                    Attention:  Herbert M. Wachtell, Esq.
                    Telecopier:  (212) 403-2000

                                       and

                    CARROLL, BURDICK & McDONOUGH
                    44 Montgomery St., Suite 400
                    San Francisco, CA  94104
                    Attention:  Rodney L. Eshelman, Esq.
                    Telecopier:  (415) 989-0932

               If to CNA Casualty, addressed to:

                    CNA Casualty Company of California
                    c/o Continental Casualty Co.
                    Specialty Claims Office, 12th Floor
                    50 Fremont Street
                    San Francisco, CA  94105
                    Attention:  Claim Manager
                    Telecopier:  (415) 512-4899

                                       and

                    WACHTELL, LIPTON, ROSEN & KATZ
                    51 West 52nd St.
                    New York, New York  10019
                    Attention:  Herbert M. Wachtell, Esq.
                    Telecopier:  (212) 403-2000

                                     - 44 -




                                       and

                    CARROLL, BURDICK & McDONOUGH
                    44 Montgomery St., Suite 400
                    San Francisco, CA  94104
                    Attention:  Rodney L. Eshelman, Esq.
                    Telecopier:  (415) 989-0932

               If to Pacific, addressed to:

                    Pacific Indemnity Company
                    Chubb & Son Inc.
                    15 Mountain View Road
                    P.O. Box 1615
                    Warren, NJ  07061-1615
                    Attention:  Malcolm B. Burton
                    Telecopier:  (908) 580-3030

                                       and

                    WHITE & CASE
                    1155 Avenue of the Americas
                    New York, NY 10036 
                    Attention:  Paul J. Bschorr, Esq.
                    Telecopier:  (212) 354-8113

               If to the Representative Plaintiffs, addressed to:

                    NESS, MOTLEY, LOADHOLT,
                     RICHARDSON & POOLE
                    151 Meeting Street, Suite 600
                    P.O. Box 1137
                    Charleston, South Carolina  29402
                    Attention:      Joseph F. Rice, Esq.
                                    Joseph B. Cox, Jr., Esq.
                    Telecopier:  (803) 577-7513

                    CARTWRIGHT, SLOBODIN, BOKELMAN, BOROWSKY,
                     WARTNICK, MOORE & HARRIS, INC.
                    101 California Street, Suite 2600
                    San Francisco, California  94111
                    Attention:  Harry F. Wartnick, Esq.
                    Telecopier:  (415) 391-5845

                                     - 45 -

                    KAZAN, McCLAIN, EDISES & SIMON
                    171 Twelfth Street, Suite 300
                    Oakland, California  94607
                    Attention:  Steven Kazan, Esq.
                    Telecopier:  (510) 835-4913

                    CAPLIN & DRYSDALE, CHARTERED
                    399 Park Avenue
                    New York, New York  10022
                    Attention:  Elihu Inselbuch, Esq.
                    Telecopier:  (212) 644-6755


Such communications shall be effective when they are received by the addressee

thereof.  Any party may change the address to which notices, requests, 

demands, claims, and other communications hereunder are to be delivered by 

giving the other party notice in the manner herein set forth.

                                     - 46 -


          SECTION 8.14     Counterparts.
                           ------------

          This Agreement may be executed in one or more counterparts, each of

which shall be deemed an original but all of which together will constitute one

and the same instrument.

          IN WITNESS WHEREOF, this Agreement has been executed on December

23, 1993 by the undersigned, thereunto duly authorized.

On behalf of the

Representative Plaintiffs


        By:                      Joseph Rice
           ----------------------------------------------------------------
                               Joseph Rice, Esq.


        By:                     Joseph B. Cox
           ----------------------------------------------------------------
                            Joseph B. Cox, Jr., Esq.


        By:                   Harry F. Wartnick
           ----------------------------------------------------------------
                            Harry F. Wartnick, Esq.


        By:                      Steven Kazan
           ----------------------------------------------------------------
                               Steven Kazan, Esq.


        By:                    Elihu Inselbuch
           ----------------------------------------------------------------
                             Elihu Inselbuch, Esq.

                                     - 47 -


FIBREBOARD CORPORATION



     By:                        Michael R. Douglas
        -------------------------------------------------------------------
     Title            Senior Vice President & General Counsel
          -----------------------------------------------------------------


CONTINENTAL CASUALTY COMPANY



     By:                          Laurens F. Terry
        -------------------------------------------------------------------
     Title                         Vice President
          -----------------------------------------------------------------


CNA CASUALTY COMPANY OF CALIFORNIA



     By:                          Laurens F. Terry
        -------------------------------------------------------------------
     Title                         Vice President
          -----------------------------------------------------------------


COLUMBIA CASUALTY COMPANY



     By:                          Laurens F. Terry
        -------------------------------------------------------------------
     Title          Vice President-Continental Casualty Company

                                     - 48 -


PACIFIC INDEMNITY COMPANY



     By:                          John J. Degnan
        -------------------------------------------------------------------
     Title                    Senior Vice President
          -----------------------------------------------------------------

                                     - 49 -
                                                                   EXHIBIT 10.10

                                                                       EXHIBIT A












                               GLOSSARY OF TERMS
                                       IN
                          GLOBAL SETTLEMENT AGREEMENT,
                                TRUST AGREEMENT,
                          TRUST DISTRIBUTION PROCESS,
                                      AND
                      DEFENDANT CLASS SETTLEMENT AGREEMENT



                               TABLE OF CONTENTS

Additional Policy Claim ....................................................   1
Affiliate ..................................................................   1
April 9 Agreement ..........................................................   1
Asbestos Lung Disease I or ALD-1 ...........................................   2
Asbestos Lung Disease II or ALD-2 ..........................................   3
Attorney Ad Litem ..........................................................   4
Beneficiary ................................................................   4
B-reader Report ............................................................   4
Claimant ...................................................................   4
Claims Resolution Facility .................................................   4
Class Action ...............................................................   4
Class Counsel ..............................................................   5
Class Member Claim .........................................................   5
CNA Casualty ...............................................................   5
Columbia ...................................................................   5
Continental ................................................................   5
Continental-Pacific Agreement ..............................................   5
Continental Releasees ......................................................   6
Court ......................................................................   6
Coverage Case ..............................................................   6
Defendant Class ............................................................   6
Defendant Class Counsel ....................................................   6
Defendant Class Member .....................................................   7
Defendant Class Order ......................................................   7
Defendant Class Settlement Agreement .......................................   7
Defense Costs ..............................................................   7
Designated Settlement Fund or DSF ..........................................   7
Distributable Amount .......................................................   7
Distribution Date ..........................................................   8
Earnings Amount ............................................................   8
Escrow Agent ...............................................................   8
Escrow Agreement ...........................................................   8
Escrow Fund ................................................................   8
Exigent Health Claim .......................................................   8
Expedited Review Claim .....................................................   9
Exposed Person .............................................................   9
Express Indemnity Claim ....................................................   9
Extreme Hardship Claim .....................................................   9
Fibreboard .................................................................  10
Fibreboard Releasees .......................................................  10
FIFO .......................................................................  11
Final Decision .............................................................  11

                                      -i-


Fiscal Year ................................................................  11
Fund I .....................................................................  12
Fund II ....................................................................  12
Fund III ...................................................................  12
Global Approval Judgment ...................................................  12
Global Court ...............................................................  16
Global Court Disapproval ...................................................  16
Global Settlement Agreement ................................................  16
Glossary ...................................................................  17
Increased Principal Amount .................................................  17
Initial Trustee ............................................................  17
Insurance Policies .........................................................  17
Insurers ...................................................................  18
Interim Claim ..............................................................  18
Interim Claimant ...........................................................  18
Interim Committee ..........................................................  18
Interim Period .............................................................  18
Judgment Forum Law .........................................................  18
Liquidation ................................................................  18
Lung Cancer ................................................................  19
Malignancy Claim ...........................................................  19
Medical Report .............................................................  19
Mesothelioma ...............................................................  19
Non-Malignancy Claim .......................................................  20
Other Cancer ...............................................................  20
Other Claims Resolution Facility ...........................................  20
Pacific ....................................................................  20
Pacific Indemnity Agreement ................................................  20
Pacific Releasees ..........................................................  20
Permitted Investments ......................................................  21
Person .....................................................................  21
Personal Injury Asbestos Claim .............................................  21
PFT Report .................................................................  22
Principal Amount ...........................................................  22
Qualified Arbitrator and Qualified Mediator ................................  24
Qualified Settlement Fund or QSF ...........................................  24
Released Parties ...........................................................  24
Representative Defendant ...................................................  24
Representative Plaintiffs ..................................................  25
Reserve Account ............................................................  25
Residual Claim .............................................................  25
Rule 23 Notice .............................................................  25
Select Counsel for the Beneficiaries .......................................  25
Schedule Category ..........................................................  26

                                      -ii-


Scheduled Disease ..........................................................  26
Second Injury Claim ........................................................  26
Settled Claims .............................................................  26
Settlement Agreement .......................................................  27
Settlement Agreement Approval Judgment .....................................  27
Settlement Agreement Court Disapproval .....................................  27
Settlement Class ...........................................................  27
Settlement Class Member ....................................................  30
Settlement Class Order .....................................................  30
Settlement Conference Designee .............................................  30
Subsidiary .................................................................  30
Surplus ....................................................................  30
Termination Date ...........................................................  31
Third Party Claim ..........................................................  31
Third Party Claimant .......................................................  31
Trust ......................................................................  31
Trust Agreement ............................................................  31
Trust Distribution Process .................................................  31
Trust Estate ...............................................................  31
Trust Expenses .............................................................  32
Trustees ...................................................................  32
Trustors ...................................................................  32
Unreimbursed Borrowings ....................................................  32
Unsettled Claims ...........................................................  33

                                     -iii-


          1.  "Additional Policy Claim" means each and every claim, demand,
               ------------------------

action or suit of any kind (i) which arises under, pursuant to or related to the

Insurance Policies by any person or entity, whether directly or indirectly

asserted against the Insurers or any third party, or arising under any term or

terms or alleged coverage provided by the Insurance Policies and (ii) which

arises directly or indirectly from personal injury resulting from exposure to

asbestos or asbestos-containing materials for which Fibreboard may bear legal

liability.

          2.  "Affiliate" of a Person means (i) a Subsidiary of such Person,
              -----------

(ii) a Person which owns, either alone or with or through one or more

Affiliates, directly or indirectly, securities or other ownership interests

having ordinary voting power to elect a majority of the board of directors or

other persons performing similar functions of such Person, and (iii) a

Subsidiary of any Affiliate of such Person.

          3.  "April 9 Agreement" means the agreement between Continental and
              -------------------

Fibreboard Corporation dated April 9, 1993, as it has been amended, pursuant to

which Continental and Fibreboard Corporation agreed, among other things, upon

terms and conditions set forth therein, to use their best efforts jointly to

negotiate and finalize a global class action settlement with personal injury

claimants and Continental agreed, whether or not a global settlement was

reached, to pay certain defense and other costs of certain asbestos-related

claims on an interim basis.

                                      -1-


          4.  "Asbestos Lung Disease I" or "ALD-1" means either:
              -------------------------     ------

               (1)  a diagnosis of pulmonary asbestosis by a board-certified

     internist or pulmonary specialist based on the following minimum objective

     criteria:

                    (i)  Chest X-rays for which a B-reader report is furnished

          showing small irregular opacities of ILO Grade 1/0 and pulmonary
                                                             ---

          function testing and physical examination that shows either:

                         a.  FVC <80% of predicted with FEV-1/FVC >75% (actual
                                                   ----           -

                          value);

                              or
                              --

                         b.  TLC <80% of predicted, with either DLCO <76% of
                                                    ----              -

               predicted or bilateral basilar crackles, and also the absence of
                         --                             ---

               any probable explanation for this DLCO result or bilateral

               basilar crackles finding other than the presence of asbestos lung

               disease; or

                    (ii)  Chest X-rays for which a B-reader report is furnished

          showing small irregular opacities of ILO Grade 1/1 or greater; and

                                                                         ---

          pulmonary function testing that shows either:

                                      -2-


                         a.FVC <80% of predicted with FEV-1/FVC >72% (actual
                                                 ----           -

               value) or, if the individual tested is at least 68 years old at

               the time of the testing, with FEV-1/FVC >65% (actual value);
                                        ----           -

                              or
                              --

                         b.  TLC <80% of predicted.

                              or
                              --

               (2)  A statement by a board-certified pathologist that more than

     one representative section of lung tissue otherwise uninvolved with any

     other process (e.g., cancer or emphysema) demonstrates a pattern of

     peribronchiolar or parenchymal scarring in the presence of characteristic

     asbestos bodies, and also that there is no other more likely explanation
                      ---

     for the presence of the fibrosis.

          5.  "Asbestos Lung Disease II" or "ALD-2" means a diagnosis by a
              --------------------------    -------

qualified physician that indicates other abnormalities of the parenchyma or

pleura attributed to prior asbestos exposure, including pleural plaques, pleural

thickening, pleural encasement and mild parenchymal fibrosis not meeting the

definition of ALD-1.

                                      -3-


          6.  "Attorney Ad Litem" means Professor Eric Green of Boston
              -------------------

University Law School or such successor as may be appointed by the Court.

          7.  "Beneficiary" means any Settlement Class Member who asserts a
              -------------

Class Member Claim, now or at any time in the future.

          8.  "B-reader Report" means a report of a B-reader certified at the
              -----------------

time the report is prepared (or of an individual who at one time was a certified

B-reader and who has not subsequently failed the examination for certification

or recertification as a B-reader) based on chest x-rays of an Exposed Person.

          9.  "Claimant" means any Person, or legal representative of a Person,
              ----------

who seeks recovery from the Trust for a Personal Injury Asbestos Claim of any

kind.

          10.  "Claims Resolution Facility" means a facility that establishes a
               ----------------------------

method for the liquidation and resolution of claims that is administered by the

Trust.

          11.  "Class Action" means Ahearn et al. v. Fibreboard Corp. et al.,
               --------------       ----------------------------------------

6:93 cv 526 (E.D. Tex.), filed by Representative Plaintiffs in the Global Court

on behalf of themselves and the Settlement Class against Fibreboard Corporation

on September 9, 1993.

                                      -4-


          12.  "Class Counsel" means Joseph F. Rice and Joseph B. Cox, Jr., of
               ---------------

the firm of Ness, Motley, Loadholt, Richardson & Poole, P.C.; Harry F. Wartnick,

of the firm of Cartwright, Slobodin, Bokelman, Borowsky, Wartnick, Moore &

Harris, Inc.; and Steven Kazan, of the firm of Kazan, McClain, Edises & Simon;

or successors of the foregoing individuals.

          13.  "Class Member Claim" means any Personal Injury Asbestos Claim of
               --------------------

a Settlement Class Member.

          14.  "CNA Casualty" means CNA Casualty Company of California, a
               --------------

California corporation.

          15.  "Columbia" means Columbia Casualty Company, an Illinois
               ----------

Corporation.

          16.  "Continental" means Continental Casualty Company, an Illinois
               -------------

Corporation.

          17.  "Continental-Pacific Agreement" means the agreement between
               -------------------------------

Continental and Pacific dated as of October 12, 1993 pursuant to which

Continental and Pacific settled the dispute between them and agreed upon terms

for the sharing of liabilities of each of them with respect to certain asbestos-

related claims.

                                      -5-


          18.  "Continental Releasees" are as defined in Section 2.5(B) of the
               -----------------------

Global Settlement Agreement.

          19.  "Court" means the Honorable Robert M. Parker, now the Chief Judge
               -------

for the United States District Court for the Eastern District of Texas.  In the

event that for any reason Judge Parker ceases to be a Judge of the United States

as defined in Article III of the United States Constitution or otherwise cannot

fulfill the responsibilities of the Court, the term "Court" shall mean any

United States Circuit or District Judge designated by the Chief Judge of the

United States Court of Appeals of the Fifth Circuit to exercise continuing

jurisdiction over the Trust and the Global Settlement Agreement.

          20.  "Coverage Case" means the action bearing the caption Asbestos
               ---------------                                      --------

Insurance Coverage Cases, Judicial Council Coordination Proceeding No. 1072,
- ------------------------

which was pending as of the date of the Global Settlement Agreement in the Court

of Appeal of the State of California, First Appellate District, Division One,

Nos. A049419 et al.
             -----

          21.  "Defendant Class" means all Persons with Third Party Claims.
               -----------------

          22.  "Defendant Class Counsel" means Richard Josephson of Baker &
               -------------------------

Botts and R. Bruce Shaw of Nelson, Mullins, Riley & Scarborough or their

successors.

                                      -6-


          23.  "Defendant Class Member" means any Person who or which is a
               ------------------------

member of the Defendant Class.

          24.  "Defendant Class Order" means an order of the Court finally
               -----------------------

certifying the Defendant Class as a class for settlement purposes under Rule

23(b)(1) and/or (b)(2) of the Federal Rules of Civil Procedure.

          25.  "Defendant Class Settlement Agreement" means the agreement
               --------------------------------------

annexed to the Global Settlement Agreement as Exhibit C.

          26.  "Defense Costs" mean Fibreboard Corporation's defense fees and
               ---------------

costs, including case management system fees and costs, as more fully defined in

the Settlement Agreement.

          27.  "Designated Settlement Fund" or "DSF" as defined in Section 468B
               ----------------------------    -----

of the Internal Revenue Code of 1986.

          28.  "Distributable Amount" means, with respect to Fund I, Fund II or
               ----------------------

Fund III, for any Fiscal Year, the sum of the Earnings Amount for that Fund for

that Fiscal Year plus (i) the Principal Amount or (ii) in the event that the

provisions of Appendix 1 to the Trust Distribution Process apply, the Increased

Principal Amount, for that Fiscal Year.

                                      -7-


          29.  "Distribution Date" is as defined in paragraph E.4 of the Trust
               -------------------

Distribution Process.

          30.  "Earnings Amount" means, with respect to Fund I, Fund II or Fund
               -----------------

III, as the case may be, all elements of current periodic income from such Fund

(other than any such income on the amounts in the Reserve Account), including

interest, periodic dividends (but not special, liquidating or wasting

dividends), rent, royalty and other similar payments which represent earnings or

profit on an asset, and do not represent elements of appreciation or gain or

depreciation or loss (whether realized or unrealized) on an asset, all

determined on an accrual basis in accordance with generally accepted accounting

principles.

          31."Escrow Agent" means the Person acting as escrow agent pursuant to
             --------------

the Escrow Agreement.

          32."Escrow Agreement" means an Escrow Agreement substantially in the
             ------------------

form attached to the Global Settlement Agreement as Exhibit D.

          33.  "Escrow Fund" means the escrow account established pursuant to
               -------------

Section 2.3(A) of the Global Settlement Agreement.

          34.  "Exigent Health Claim" means a Class Member Claim that is
               ----------------------

supported by an affidavit or declaration made under penalty of perjury from a

physician who has examined the Settlement Class Member within 120 days of the

                                      -8-


date of the affidavit or declaration, which states that the physician believes

that because of asbestos-related disease there is substantial medical doubt that

the Settlement Class Member will survive beyond six months from the date of the

declaration or affidavit.

          35.  "Expedited Review Claim" is as defined in Section B.2 of the
               ------------------------

Trust Distribution Process.

          36.  "Exposed Person" means the individual whose exposure to asbestos
               ----------------

results in a Personal Injury Asbestos Claim.

          37.  "Express Indemnity Claim" means a Third Party Claim (i) which
               -------------------------

asserts that Fibreboard is liable to indemnify or reimburse the holder of such

claim for payments made or liabilities, expenses or costs incurred by such claim

holder on account of an asbestos-related personal injury claim asserted against

such claim holder by a Settlement Class Member and (ii) which would not be

barred under applicable law by a court determination that a settlement between

Fibreboard (or the Trust) and the Settlement Class Member asserting such

asbestos-related personal injury claim was made in good faith.

          38.  "Extreme Hardship Claim" means a Class Member Claim as to which
               ------------------------

the Interim Committee (if the Class Member Claim is submitted during the Interim

Period) or the Trust (if the Class Member Claim is submitted after entry of

                                      -9-


Global Approval Judgment), in its sole discretion, determines that because of an

asbestos-related disease the Settlement Class Member is suffering a severe

financial hardship.

          39.  "Fibreboard" means Fibreboard Corporation; Fibreboard Paper
               ------------

Products Corporation; Fibreboard Products, Incorporated; Paraffine Companies,

Incorporated; Plant Rubber & Asbestos Works; Pabco Products, Incorporated; and

Pabco Insulation Corporation; and each of their respective predecessors,

Subsidiaries and divisions, and with regard to Fibreboard Corporation's

liability only, each of their respective successors in interest.

          40.  "Fibreboard Releasees" mean the following entities, each of their
               ----------------------

respective predecessors, Subsidiaries, divisions, current and former attorneys,

officers, directors and employees, and, with regard to Fibreboard Corporation's

liability only, each of their respective successors in interest:

          (i)  Fibreboard Corporation; Fibreboard Paper Products Corporation;

                Fibreboard Products, Incorporated; Paraffine Companies,

                Incorporated; Plant Rubber & Asbestos Works; Pabco Products,

                Incorporated; and Pabco Insulation Corporation;

                                      -10-


         (ii)   Louisiana-Pacific Corporation (other than for asbestos-related

                claims against Louisiana-Pacific which (a) state a basis for

                liability by Louisiana-Pacific wholly independent of any

                relationship between Louisiana-Pacific and Fibreboard

                Corporation or any act or omission in connection with such a

                relationship, and (b) as to which there is no basis for any

                claim against Fibreboard Corporation by the claimant or by

                Louisiana-Pacific).

         41.  "FIFO" means first in, first out.
              ------

         42.  "Final Decision" means the final decision or decisions obtained
              ----------------

when all the issues that are pending in the Coverage Case by Fibreboard

Corporation against certain of the Insurers have been finally resolved and no

further appellate review or remand proceedings are possible with respect to such

claims.

          43.  "Fiscal Year" means the calendar year, except that the first
               -------------

Fiscal Year shall be that portion of a calendar year commencing with the date of

execution of the Trust Agreement and ending on the last day of the calendar year

in which such execution occurs, and references to a number of Fiscal Years after

Global Approval Judgment shall be determined based on the assumption that the

first Fiscal Year after Global Approval Judgment shall be the Fiscal Year during

which Global Approval Judgment occurs.

                                      -11-


          44.  "Fund I" is as defined in paragraph E of the Trust Distribution

               --------

Process.

          45.  "Fund II" is as defined in paragraph E of the Trust Distribution
               ---------

Process.

          46.  "Fund III" is as defined in paragraph E of the Trust Distribution
               ----------

Process.

          47.  "Global Approval Judgment" means a judgment, order or other
               --------------------------

decree issued and entered by the Global Court in an action in which Fibreboard

Corporation, Continental, CNA Casualty, Columbia, Pacific, the Settlement Class

and all persons having or who may have Third Party Claims have been made

parties, either directly or in a representative capacity, as to which judgment,

order or decree any appeal (and subsequent remand, if any) has been finally

decided and no further appeal or petition for certiorari can be taken or granted

and which judgment, order or decree:

          (a)  approves the terms and provisions of the Global Settlement

               Agreement, including the releases and indemnities contained

               therein;

          (b)  approves the Trust Agreement and the Trust Distribution Process

               incorporated in the Global Settlement Agreement;

                                      -12-


          (c)  orders the parties to implement the Global Settlement Agreement;

          (d)  determines and awards the fees and expenses of Class Counsel;

          (e)  declares that the settlement reflected by the Global Settlement

               Agreement, with respect to both Class Member Claims and Third

               Party Claims, is fair, reasonable and adequate and was entered

               into in good faith;

          (f)  declares that the Settlement Class Members and the Defendant

               Class Members have received adequate notice of the settlement

               contemplated by the Global Settlement Agreement and Rule 23 of

               the Federal Rules of Civil Procedure;

          (g)  declares that the Settlement Class Members have been adequately,

               professionally and ethically represented by Class Counsel;

          (h)  orders all Class Member Claims, except for claims for punitive or

               exemplary damages, directed to the Trust for disposition pursuant

               to the Trust Agreement and Trust Disposition Process;

                                      -13-


          (i)  declares that, as provided in Section 2.2(B) of the Global

               Settlement Agreement, only payment of funds pursuant to the

               Settlement Class Members' individual settlements with the Trust

               shall trigger the notice, approval and forfeiture provisions of

               the Longshore and Harbor Workers Compensation Act and other

               similar state and federal workers compensation provisions;

          (j)  orders dismissal on the merits, without costs and with prejudice,

               of the Class Action and all of the Class Member Claims (including

               all punitive and exemplary damage claims) against the Fibreboard,

               Continental and Pacific Releasees;

          (k)  declares the provision contained in the Global Settlement

               Agreement whereby Fibreboard Corporation and the Insurers agree

               that the Insurers shall be discharged from any further obligation

               under or in connection with the Insurance Policies, except as an

               Insurer has specifically assumed under the Global Settlement

               Agreement or has preserved under the Settlement Agreement (and

               the related agreements referred to therein), to be fair,

               reasonable and non-collusive;

                                      -14-


          (l)  discharges the Fibreboard, Continental and Pacific Releasees from

               any further liability with respect to any Class Member Claim or

               Third Party Claim;

          (m)  permanently enjoins Fibreboard Corporation from asserting any

               claim released or discharged under the Global Settlement

               Agreement against any Continental or Pacific Releasee;

          (n)  permanently enjoins any Settlement Class Member or Third Party

               Claimant from asserting any claim released or discharged under

               the Global Settlement Agreement against any Fibreboard,

               Continental or Pacific Releasee;

          (o)  approves the provisions set forth in the Global Settlement

               Agreement and the Trust Distribution Process for the resolution

               of Third Party Claims; and

          (p)  retains exclusive jurisdiction in the Court rendering such

               judgment, order or decree (1) to enforce the provisions of such

               judgment, order or decree, (2) to resolve any disputes as to the

               performance or interpretation of the Global Settlement Agreement,

               or such judgment, order or

                                      -15-


               decree, (3) to adjudicate any attempt by any person to challenge

               such judgment, order or decree in any respect, and (4) over the

               maintenance, administration and distribution of the Trust and the

               funds contained therein, subject to and in accordance with the

               provisions of the Trust Agreement and the Trust Distribution

               Process incorporated therein;

provided that Global Approval Judgment shall not be deemed to have been entered

unless and until either Settlement Agreement Approval Judgment has been entered

or Settlement Agreement Court Disapproval occurs.

          48.  "Global Court" means the United States District Court for the
               --------------

Eastern District of Texas.

          49.  "Global Court Disapproval" means a judgment, order or other
               --------------------------

decree of the Global Court or other court of competent jurisdiction in an action

in which Fibreboard Corporation, Continental, CNA Casualty, Columbia, Pacific

and the Settlement Class have been made parties, as to which judgment, order or

decree any appeal (and subsequent remand, if any) has been finally decided and

no further appeal or petition for certiorari can be taken or granted and which

judgment, order or decree disapproves or declines to approve the Global

Settlement Agreement.

          50.  "Global Settlement Agreement" means the settlement agreement as
               -----------------------------

of August 27, 1993 among Continental, CNA Casualty, Columbia, Pacific,

                                      -16-


Fibreboard Corporation and the Representative Plaintiffs as representatives of

the Settlement Class.

          51.  "Glossary" means this Exhibit A to the Global Settlement
               ----------

Agreement.

          52.  "Increased Principal Amount," (i) for any of the third through
               -----------------------------

the twelfth Fiscal Years after Global Approval Judgment, means 125% of the

Principal Amount for such Fiscal Year and (ii) for any of the sixteenth through

the twentieth Fiscal Years after Global Approval Judgment, means 112.5% of the

Principal Amount for such Fiscal Year.

          53.  "Initial Trustee"  is as defined in Section 7.18 of the Trust
               -----------------

Agreement.

          54.  "Insurance Policies" mean policy number CLP 3197650 issued by
               --------------------

Continental effective May 4, 1957, in favor of Fibreboard Corporation under its

former name, Fibreboard Paper Products Corporation, policy number RD 951 90 81

issued by Continental, policy number RDU 975 65 87 issued by CNA Casualty and an

endorsement thereto issued by Continental, policy number RDU 186 27 82 issued by

Columbia, policy number RDU 186 30 62 issued by Columbia, policy number RDU 365

32 19 issued by Columbia, the policy that was alleged by Fibreboard Corporation

to have been issued by Continental in the period 1954-1956, and policy number

LAC 88700 found to have been issued by Pacific to Fibreboard Corporation

                                      -17-


effective May 4, 1956, and any other policies that were, or may be alleged to

have been, issued to Fibreboard Corporation by any of the Insurers, including

those set forth in the Pacific Indemnity Agreement.

          55.  "Insurers" mean (i) Continental, CNA Casualty, Columbia and all
                ---------

insurance or indemnity companies controlling, controlled by or under common

control with any of them and (ii) Pacific and all insurance or indemnity

companies controlling, controlled by or under common control with it.

          56.  "Interim Claim" is as defined in Section 7.1 of the Global
               ---------------

Settlement Agreement.

          57.  "Interim Claimant" is a Person asserting an Interim Claim.
               ------------------

          58.  "Interim Committee" is as defined in Section 7.1 of the Global
               -------------------

Settlement Agreement.

          59.  "Interim Period" is as defined in Section 7.1 of the Global
               ----------------

Settlement Agreement.

          60.  "Judgment Forum Law" is as defined in Section H.1.a of the Trust
               --------------------

Distribution Process.

          61.  "Liquidation" occurs with respect to any Class Member Claim or
               -------------

Third Party Claim on the date on which the validity and amount thereof is

finally

                                      -18-


determined pursuant to the Trust Distribution Process or the date on which a

final, nonappealable judgment is entered against the Trust with respect to such

Class Member Claim or Third Party Claim.

          62.  "Lung Cancer" means a diagnosis by a qualified physician of a
               -------------

malignant primary tumor of any cell type, originating within the lung, caused or

contributed to by exposure to asbestos.

          63.  "Malignancy Claim" means a claim for Mesothelioma, Lung Cancer,
               ------------------

or Other Cancer as defined in this Glossary.

          64.  "Medical Report" means a written narrative report by a physician
               ----------------

confirming that (i) an Exposed Person has an asbestos-related personal injury or

disease, based on a physical examination (as reflected in medical records or

performed by the physician preparing the narrative report) of the Exposed

Person, or (ii) following review of pertinent medical records and information,

that an asbestos-related personal injury or disease caused or substantially

contributed to the death of an Exposed Person.

          65.  "Mesothelioma" means a diagnosis by a board certified pathologist
               --------------

of a malignant tumor caused or contributed to by exposure to asbestos

originating in the mesothelial cells of the pleura, peritoneum or like tissue,

or

                                      -19-


reasonable equivalent clinical diagnosis in the absence of adequate tissue for

pathological diagnosis.

          66.  "Non-Malignancy Claim" means a claim for ALD-1 or ALD-2 as
               ----------------------

defined in this Glossary.

          67.  "Other Cancer" means a diagnosis by a qualified physician that
               --------------

indicates a malignant tumor originating in the larynx, pharynx, stomach,

esophagus, colon or rectum, caused or contributed to by exposure to asbestos.

          68.  "Other Claims Resolution Facility" means a facility that
               ----------------------------------

establishes a method for the liquidation and resolution of asbestos-related

personal injury claims administered by a Person other than the Trust.

          69.  "Pacific" means Pacific Indemnity Company, a California
               ---------

corporation.

          70.  "Pacific Indemnity Agreement" collectively means the Agreement
               -----------------------------

and a Rescission of Insurance Policies, both dated March 27, 1992, between

Fibreboard Corporation and Pacific, pursuant to which Pacific and Fibreboard

Corporation agreed to settle their insurance coverage dispute.

          71.  "Pacific Releasees" are as defined in Section 2.5(C) of the
               -------------------

Global Settlement Agreement.

                                      -20-


          72.  "Permitted Investments" are as defined in Section 4.3 of the

                -----------------------

Trust Agreement.

          73.  "Person" means any individual, corporation, partnership or
               --------

association, whether or not incorporated, and any federal, state or local

government or agency thereof, or any other entity and his, her or its legal

representative.

          74.  "Personal Injury Asbestos Claim" means:
               --------------------------------

          (i)  each and every claim, demand, action or suit of any kind for

          personal injury arising, directly or indirectly, from exposure to

          asbestos-containing products (including, without limitation, any

          direct action claim, wrongful death claim, punitive or exemplary

          damages claim, loss of consortium claim, fear of disease claim, bad

          faith claim, or surviving personal injury claim), and whether such

          injury manifested itself heretofore or hereafter, or (ii) any claim,

          demand, action or suit of any kind arising, directly or indirectly,

          from any such claim, demand, action or suit referred to in (i) above

          (including without limitation any bad faith claim, contribution claim,

          indemnity claim, warranty claim, direct action claim or Additional

          Policy Claim)

against Fibreboard, against the Insurance Policies or against the Insurers in

any way predicated on obligations created by the Insurance Policies; provided,

however, that

                                      -21-


a Personal Injury Asbestos Claim shall not include any claim for benefits

brought by an employee or his or her personal representative under any federal

or state workers compensation statute (including, but not limited to, the United

States Longshore and Harbor Workers Compensation Act and the Federal Employees

Compensation Act), but shall include any subrogation, contribution or indemnity

claim arising from such claim for benefits.

          75.  "PFT Report" means a report by a pulmonary specialist or a board-
               ------------

certified internist interpreting the results of pulmonary function testing of an

Exposed Person.

          76.  "Principal Amount" means, for any Fiscal Year after Global
               ------------------

Approval Judgment:

     (i)  (a) (x) the aggregate fair market value of all of the investment

          assets contained in the Fund for which the Distributable Amount is

          being determined (excluding the then outstanding balance of the

          Reserve Account) at the close of business on the last business day of

          the Fiscal Year for which the calculation is made, minus (y) the
                                                             -----

          Earnings Amount for such Fiscal Year, plus (z) all amounts, if any,
                                                 ----

          paid during such Fiscal Year for Trust Expenses, Class Member Claims,

          Third Party Claims and payments made pursuant to Section 7.16 of the

          Trust Agreement, in each case for such Fiscal Year (other than any

          such payments made out of the Reserve Account), minus
                                                          -----

          (b) for any Fiscal Year prior to the 21st Fiscal Year after Global

          Approval Judgment, the greater of (i) Zero and (ii) the lesser of (Y)

          the aggregate Surplus for all prior Fiscal Years and (Z) Zero minus

          Unreimbursed Borrowings; multiplied by
                                   -------------

     (ii)  a fraction, the numerator of which is one and the denominator of

          which is the number of Fiscal Years that will occur from the beginning

                                      -22-


          of the Fiscal Year for which the calculation is made through and

          including the end of the 25th Fiscal Year after Global Approval

          Judgment in the case of Fund I, the 20th Fiscal Year after the end of

          Fund I (or, if the Trustees have determined to delay the transfer of

          the remaining balance in Fund II beyond the twentieth Fiscal Year

          after the end of Fund I pursuant to Section E.2.c(ii) of the Trust

          Distribution Process, the end of Fund II so determined by the

          Trustees) in the case of Fund II and the 15th Fiscal Year after the

          end of Fund II in the case of Fund III (so that, for example, for the

          Principal Amount applicable to the tenth Fiscal Year after Global

          Approval Judgment, such denominator would be 16);

provided, however, that

     (1) for the first Fiscal Year after Global Approval Judgment (a) the

     numerator in the fraction stated in clause (ii) above shall be a fraction

     in which the numerator is the number of full weeks in such Fiscal Year (but

     not less than one) and the denominator is 52 (to adjust for the length of

     such Fiscal Year) and (b) the Principal Amount determined as provided

     above, including as set forth in clause (1)(a) of this proviso shall be

     multiplied by 0.4;

     (2) for the second Fiscal Year after Global Approval Judgment the Principal

     Amount shall be the sum of (A) the Principal Amount otherwise determined as

     provided in this definition of Principal Amount multiplied by 0.4, plus (B)

     the Principal Amount with respect to the first Fiscal Year after Global

     Approval Judgment as determined in clause (1) above multiplied by 0.75; and

                                      -23-


     (3) for each of the twenty-first through the twenty-fifth Fiscal Years

     after Global Approval Judgment, the Distributable Amount may be increased

     by the Trustees up to an amount not in excess of the Principal Amount and

     the Earnings Amount that was in effect for the twentieth Fiscal Year after

     Global Approval Judgment.

          77.  "Qualified Arbitrator" and "Qualified Mediator" shall each be an
               ----------------------     --------------------

impartial, neutral person.  No person shall serve as an arbitrator or mediator

if he/she has any financial or personal interest in the proceedings or, except

when otherwise agreed by the parties, in any asbestos-related matters.  Prior to

accepting an appointment, the prospective arbitrator or mediator shall disclose

any circumstances likely to create a reasonable inference of bias or prevent a

prompt hearing or conference with the parties.

          78.  "Qualified Settlement Fund" or "QSF" is as defined in the
               ---------------------------    -----

Treasury Regulations under Section 468.B of the Internal Revenue Code of 1986.

          79.  "Released Parties" collectively, and "Released Party"
               ------------------                   ----------------

individually, mean the Fibreboard, Continental and Pacific Releasees.

          80.  "Representative Defendant" means Owens-Illinois, Inc., a Delaware
               --------------------------

corporation, or such other Person or Persons as may be certified by the Global

Court, in the capacity as representative(s) of the Defendant Class Members.

                                      -24-


          81.  "Representative Plaintiffs" mean Gerald Ahearn, James Dennis and
               ---------------------------

Charles W. Jeep, the named plaintiffs in the Class Action, or such other, lesser

or greater number of Representative Plaintiffs as may be certified by the Global

Court, in their capacities as representatives of the interests of the Settlement

Class Members.

          82.  "Reserve Account" means the reserve (which shall be part of Fund
               -----------------

I) in the original principal amount described on Appendix I to the Trust

Distribution Process as such amount may be increased or decreased from time to

time in accordance with the provisions described on Appendix 1 to the Trust

Distribution Process and by earnings, capital gains or losses or other similar

items.

          83.  "Residual Claim" means any Express Indemnity Claim or Additional
               ----------------

Policy Claim, the disposition of which becomes the responsibility of the Trust

pursuant to the Global Approval Judgment.

          84.  "Rule 23 Notice" means the notice to be given to the Settlement
               ----------------

Class Members and Defendant Class Members pursuant to Rule 23 of the Federal

Rules of Civil Procedure.

          85.  "Select Counsel for the Beneficiaries" or "SCB" means four
               --------------------------------------    -----

lawyers, initially:  Joseph B. Cox, Jr., Steven Kazan, Joseph F. Rice and Harry

F.

                                      -25-


Wartnick, and a fifth to be selected unanimously by the other four lawyers as

provided in Section 6.1 of the Trust Agreement.

          86.  "Schedule Category" means:  1) Mesothelioma and Lung Cancer; 2)
               -------------------

ALD-1 and Other Cancer; 3) ALD-2; and 4) Residual Claims.

          87.  "Scheduled Disease" means Mesothelioma, Lung Cancer, Other
               -------------------

Cancer, Asbestos Lung Disease I and Asbestos Lung Disease II.

          88.  "Second Injury Claim" is a Malignancy Claim by a Claimant who
               ---------------------

settled a Non-Malignancy Claim in exchange for a limited release which allowed

subsequent Malignancy Claims.

          89.  "Settled Claims" mean claims of individuals for asbestos-related
               ----------------

personal injuries (a) that are not Class Member Claims and (b) that as of August

27, 1993 had been settled (by Fibreboard Corporation or by Fibreboard

Corporation and Continental) or were the subject of a verdict or judgment.

          For the purposes of this definition, a claim included within the terms

of a settlement agreement (whether written, oral or placed on a court record)

prior to August 27, 1993 shall be deemed to have been settled before August 27,

1993 even if (i) an opt-out right with respect to that claim has been or is

exercised, or (ii) the settlement is subsequently repudiated by the Plaintiff;

provided, however, that no claim which was included within the terms of a

settlement agreement and

                                      -26-


which was not filed prior to August 27, 1993 shall be deemed settled unless it

was eligible to be processed and liquidated prior to August 27, 1993.

          90.  "Settlement Agreement" means the agreement among Fibreboard
               ----------------------

Corporation, Continental, CNA Casualty, Columbia and Pacific dated as of October

12, 1993 pursuant to which they agreed, among other things, to settle and

compromise all claims and potential claims against the Insurers under the

Insurance Policies.

          91.  "Settlement Agreement Approval Judgment" is as defined in the
               ----------------------------------------

Settlement Agreement.

          92.  "Settlement Agreement Court Disapproval" is as defined in the
               ----------------------------------------

Settlement Agreement.

          93.  "Settlement Class" means:
               ------------------

          (a)  All persons (or their legal representatives) who prior to August

               27, 1993 were exposed, directly or indirectly (including but not

               limited to exposure through the exposure of a spouse, household

               member or any other person), to asbestos or to asbestos-

               containing products for which Fibreboard may bear legal liability

               and who have not, before August 27, 1993, (i) filed a lawsuit for

               any asbestos related personal injury, or damage, or

                                      -27-


               death arising from such exposure in any court against Fibreboard

               or persons or entities for whose actions or omissions Fibreboard

               bears legal liability;  or (ii) settled a claim for any asbestos-

               related personal injury, or damage, or death arising from such

               exposure with Fibreboard or with persons or entities for whose

               actions or omissions Fibreboard bears legal liability;

          (b)  All persons (or their legal representatives) exposed to asbestos

               or to asbestos-containing products, directly or indirectly

               (including but not limited to exposure through the exposure of a

               spouse, household member or any other person), who dismissed an

               action prior to August 27, 1993 without prejudice against

               Fibreboard, and who retain the right to sue Fibreboard upon

               development of a nonmalignant disease process or a malignancy;

               provided, however, that the Settlement Class does not include

               persons who filed and, for cash payment or some other negotiated

               value, dismissed claims against Fibreboard, and whose only

               retained right is to sue Fibreboard upon development of an

               asbestos-related malignancy; and

          (c)  All past, present and future spouses, parents, children and other

               relatives (or their legal representatives) of the class members

                                      -28-


               described in paragraphs (a) and (b) above, except for any such

               person who has, before August 27, 1993, (i) filed a lawsuit for

               the asbestos-related personal injury, or damage, or death of a

               class member described in paragraph (a) or (b) above in any court

               against Fibreboard (or against entities for whose actions or

               omissions Fibreboard bears legal liability), or (ii) settled a

               claim for the asbestos-related personal injury, or damage, or

               death of a class member described in (a) or (b) above with

               Fibreboard (or with entities for whose actions or omissions

               Fibreboard bears legal liability).

          For the purposes of this definition, a claim included within the terms

of a settlement agreement (whether written, oral, or placed on a court record)

prior to August 27, 1993 shall be deemed to have been settled before August 27,

1993 even if (i) an opt-out right with respect to that claim has been or is

exercised, or (ii) the settlement is subsequently repudiated by the Plaintiff;

provided, however, that no claim which was included within the terms of a

settlement agreement and which claim was not filed prior to August 27, 1993

shall be deemed settled unless it was eligible to be processed and liquidated

prior to August 27, 1993.

          94. "Settlement Class Member" means any Person who is a member of the
              -------------------------

Settlement Class.

                                      -29-


          95.  "Settlement Class Order" means an order of the Court finally
                ------------------------

certifying the Settlement Class as a class under Rule 23(b)(1)(B) of the Federal

Rules of Civil Procedure for settlement purposes.

          96.  "Settlement Conference Designee" is as defined in paragraph D.1
               --------------------------------

of the Trust Distribution Process.

          97.  "Subsidiary" means, with respect to any Person, any corporation
               ------------

or other entity in which that Person owns, directly or indirectly, securities or

other ownership interest having ordinary voting power to elect a majority of the

board of directors or other Persons performing similar functions.

          98.  "Surplus" means, as of any Distribution Date:
               ---------

               (i)  the Distributable Amount for the prior Fiscal Year, minus

               (ii)  the aggregate amounts (other than payments from the Reserve

Account) actually paid by the Trust for Trust Expenses, Class Member Claims,

Third Party Claims and payments made pursuant to Section 7.16 of the Trust

Agreement, in each case for such prior Fiscal Year.

               99.  "Termination Date" is as defined in Section 7.2 of the Trust
                    ------------------

Agreement.

                                      -30-


          100.  "Third Party Claim" shall mean any Personal Injury Asbestos
                -------------------

Claim that is not a Class Member Claim, except for Settled Claims, Unsettled

Claims or any claims arising directly or indirectly from any such Settled Claims

or Unsettled Claims.

          101.  "Third Party Claimant" shall mean any Person having a Third
                ----------------------

Party Claim.

          102.  "Trust" means the trust referred to in Article V of the Global
                -------

Settlement Agreement.

          103.  "Trust Agreement" means the Fibreboard Asbestos Compensation
                -----------------

Trust Agreement among Continental, CNA Casualty, Columbia, Pacific, Fibreboard

Corporation and the Trustees attached as Exhibit B to the Global Settlement

Agreement.

          104.  "Trust Distribution Process" means Annex A to the Trust
                ----------------------------

Agreement.

          105.  "Trust Estate" at any time means all assets of the Trust at such
                --------------

time.

          106.  "Trust Expenses" means all expenses of the Trust (including,
                ----------------

without limitation, compensation, legal, accounting and other professional fees,

                                      -31-


expenses relating to the operation of a Claims Resolution Facility, an Other

Claims Resolution Facility, disbursements and related expenses, administrative

expenses, taxes and related expenses, the cost of liability insurance and

reimbursement and indemnification payments), other than payments in respect of

Class Member Claims and Third Party Claims and payments made pursuant to Section

7.16 of the Trust Agreement.

          107.  "Trustees" are as defined in Section 7.18 of the Trust
                ----------

Agreement.

          108.  "Trustors" mean Continental, CNA Casualty, Columbia, Pacific and
                ----------

Fibreboard Corporation.

          109.  "Unreimbursed Borrowings" means, as of any Distribution Date:
                -------------------------

          (a)  the aggregate of the Principal Amounts (not including any

Increased Principal Amounts) and Earnings Amounts for all Fiscal Years prior to

the Fiscal Year to which such Distribution Date relates, minus

          (b)  the aggregate amounts (other than payments from the Reserve

Account) actually paid by the Trust for Trust Expenses, Class Member Claims and

Third Party Claims for all such prior Fiscal Years.

                                      -32-


          110.  "Unsettled Claims" shall mean claims of individuals for
                ------------------

asbestos-related personal injuries brought against Fibreboard in lawsuits filed

prior to August 27, 1993 and that are not Settled Claims.  For purposes of this

definition, "Unsettled Claims" shall include claims of persons who filed and for

cash payment or some other negotiated value dismissed claims against Fibreboard

and whose only retained right is to sue Fibreboard upon development of an

asbestos-related malignancy.

                                      -33-



                                                                   EXHIBIT 10.11
                                                                       EXHIBIT B

- --------------------------------------------------------------------------------
                        FIBREBOARD ASBESTOS COMPENSATION
                                TRUST AGREEMENT
- --------------------------------------------------------------------------------


                               TABLE OF CONTENTS

                                                                           Page

     ARTICLE I     DEFINITIONS .........................................     1
                                                                           
     ARTICLE II    DECLARATION OF TRUST .................................    1
                   2.1     Name .........................................    1
                   2.2     Purposes .....................................    1
                   2.3     Transfer of Assets ...........................    2
                   2.4     Acceptance of Assets and Assumption of
                           Liabilities ..................................    2
                   2.5     Maintenance of Trustor Privileges and
                           Confidences ..................................    2

     ARTICLE III   POWERS; TRUST ADMINISTRATION .........................    3
                   3.1     Powers .......................................    3
                   3.2     Administration ...............................   10
                   3.3     Actions by Trustors ..........................   14
                   3.4     Protection of Confidential Information from
                           Disclosure to the Beneficiaries ..............   14

     ARTICLE IV    FUNDS, PAYMENTS AND INVESTMENTS ......................   14
                   4.1     Funds ........................................   14
                   4.2     Payments .....................................   16
                   4.3     Investments ..................................   16
                   4.4     Source of Payments ...........................   20

     ARTICLE V     TRUSTEES .............................................   21
                   5.1     Number .......................................   21
                   5.2     Term of Service ..............................   21
                   5.3     Appointment of Successor Trustees ............   22
                   5.4     Liability of Trustees, Officers and Employees    23
                   5.5     Compensation and Expenses of Trustees ........   23
                   5.6     Indemnification of Trustees, Officers and
                           Employees ....................................   24
                   5.7     Trustees' Employment of Experts ..............   24

     ARTICLE VI    SELECT COUNSEL FOR THE BENEFICIARIES ................   25
                   6.1     Formation; Duties ............................   25
                   6.2     Term of Office ...............................   26
                   6.3     Appointment of Successor .....................   26

                                     - i -


                   6.4     Compensation, Expenses and Liability of SCB
                           Members ......................................   27
                   6.5     Resolution of Disputes Involving Approval of
                           the Select Counsel for the Beneficiaries .....   28

     ARTICLE VII   GENERAL PROVISIONS ...................................   29
                   7.1     Irrevocability ...............................   29
                   7.2     Termination ..................................   29
                   7.3     Amendments ...................................   30
                   7.4     Severability .................................   30
                   7.5     Notices ......................................   31
                   7.6     Counterparts .................................   31
                   7.7     Successors and Assigns .......................   31
                   7.8     No Waiver ....................................   32
                   7.9     Headings; Section References .................   32
                   7.10    Governing Law ................................   32
                   7.11    Dispute Resolution ...........................   33
                   7.12    Enforcement and Administration ...............   33
                   7.13    Settlement of Trustees' Accounts .............   33
                   7.14    No Bond Required .............................   33
                   7.15    Service of Process ...........................   34
                   7.16    Lawsuits Against Trustors ....................   34
                   7.17    No Disqualification of SCB ...................   35
                   7.18    Initial Trustee; Powers ......................   35

                                     - ii -


                        FIBREBOARD ASBESTOS COMPENSATION
                                TRUST AGREEMENT


          Trust Agreement ("Trust Agreement") dated as of December 23, 1993,

among Continental, CNA Casualty, Columbia, Pacific, and Fibreboard Corporation,

as Trustors and Francis McGovern, as Initial Trustee as provided in Section

7.18.

          NOW, THEREFORE, THIS TRUST AGREEMENT WITNESSETH AND IT IS HEREBY

DECLARED as follows:


                                   ARTICLE I

                                  DEFINITIONS

          1.1  Capitalized terms used in this Trust Agreement are defined herein

or in the Glossary.


                                   ARTICLE II

                              DECLARATION OF TRUST

          2.1  Name.  The Trust shall be known as the "Fibreboard Asbestos
               ----

Compensation Trust," and the Trustees may transact the business and affairs of

the Trust in that name.

          2.2  Purposes.  The purposes of the Trust are:
               --------

               (a)  to use the assets in the Trust Estate efficiently to deliver

fair and equitable compensation to all qualified Beneficiaries consistent with

Trust resources, without overpaying or underpaying any Beneficiary and with

settlement to be preferred

                                     - 1 -


over mediation, mediation to be preferred over arbitration, and arbitration to

be preferred over resort to the tort system, all pursuant to the provisions of

this Trust Agreement and the Trust Distribution Process;

               (b)  to enhance and preserve the Trust Estate;

               (c)  otherwise to carry out the provisions of this Trust

Agreement and the Trust Distribution Process.

          2.3  Transfer of Assets.  On the date of Global Approval Judgment, the
               ------------------

Trustors shall transfer and assign to the Trust the amounts provided for in

Section 2.3(B) of the Global Settlement Agreement, having heretofore taken any

and all steps necessary and prerequisite to such transfer.

          2.4  Acceptance of Assets and Assumption of Liabilities.  In
               --------------------------------------------------

connection with and in furtherance of its purposes, and subject to Section 5.4,

the Trustees hereby agree to accept on behalf of the Trust the transfer of the

assets described in Section 2.3 above and hereby further expressly agree on

behalf of the Trust to assume liability or undertake responsibility for all

Class Member Claims and those Third Party Claims for which the Trust is

responsible under the Global Settlement Agreement and Trust Distribution

Process.  Except as otherwise provided in the Trust Distribution Process, the

Trust shall have all defenses, cross claims, and rights to liens, offsets and

recoupment that Fibreboard or any other Trustor would have had under applicable

law with respect to the Class Member Claims and Third Party Claims to be assumed

by the Trust.

          2.5  Maintenance of Trustor Privileges and Confidences.  The Trust
               -------------------------------------------------

shall maintain as privileged and confidential all information expressly

designated as such

                                     - 2 -


which is provided to it by or on behalf of Fibreboard Corporation or any other

Trustor, including without limitation information relating to Fibreboard's

products and their distribution, the history of the conduct of Fibreboard's or

any other Trustor's business, and Fibreboard's or any other Trustor's defenses

and the history of Fibreboard's settlements in asbestos-related personal injury

lawsuits.  The Trust will not waive the privileged and confidential status of

such information without the prior written consent of the Trustor which

designated such information privileged and confidential.  The Trust shall

promptly upon receipt of any subpoena or other formal request for such

information notify the Trustor which designated such information as privileged

or confidential.


                                  ARTICLE III

                          POWERS; TRUST ADMINISTRATION

          3.1  Powers.
               ------

               (a)  Subject to the limitations set forth in this Trust Agreement

and the Trust Distribution Process, the Trustees shall have the powers to take

any and all actions as in the judgment of the Trustees are necessary or

convenient to effectuate the purposes of the Trust, including, without

limitation, each power expressly granted in Subsection (b) below and any power

reasonably incidental thereto.  Unless otherwise specified in this Trust

Agreement or the Trust Distribution Process, the Trustees may act by the vote of

a majority.  All actions by the Trustees shall be taken at a meeting (which may

be by conference telephone call at which all participants may hear, and be heard

by,

                                     - 3 -


each other) of all Trustees or by unanimous written consent that a particular

action may be taken without a meeting; provided, however, that any such meeting

at which at least two Trustees are present shall be deemed to satisfy the

requirement of this sentence if notice of such meeting was given to all Trustees

not less than five business days' prior thereto, or if all Trustees have

executed, at or prior to such meeting, a waiver of such notice, and all Trustees

are given the opportunity to participate in person or by such a conference

telephone call.

               (1)  The following actions may be taken only with the unanimous

     consent of the Trustees:

                    (i)  Joining in, engaging in or disengaging from an Other

          Claims Resolution Facility pursuant to Section 3.1(b)(iii), except

          that this action shall also require SCB approval.

                    (ii)  Appointment or removal of the chief executive officer,

          chief financial officer or general counsel pursuant to Section

          3.1(b)(ix).

                    (iii)  Taking of structural or other actions to minimize tax

          on the Trust Estate pursuant to Section 3.2(b)(iv), except that this

          action shall also require SCB approval.

                    (iv)  Approval of annual and quarterly financial statements

          of the Trust pursuant to Sections 3.2(c)(i) and (ii); provided,

          however, that after a good faith effort to act unanimously, a majority

          of the Trustees may grant approval in a writing that shall include

          either comments of the Trustee who did not join in the approval

          reflecting the reasons for his or

                                     - 4 -


          her failure to join in the approval or, if such Trustee is not willing

          to provide such comments, comments from the other Trustee or Trustees

          reflecting their understanding as to such reasons.

                    (v)  Approval of reports of claims dispositions pursuant to

          Section 3.2(c)(iii); provided, however, that after a good faith effort

          to act unanimously, a majority of the Trustees may grant approval in a

          writing that shall include either comments of the Trustee who did not

          join in the approval reflecting the reasons for his or her failure to

          join in the approval or, if such Trustee is not willing to provide

          such comments, comments from the other Trustee or Trustees reflecting

          their understanding as to such reasons.

                    (vi)  Approval of budgets and cash flow projections pursuant

          to Section 3.2(d); provided, however, that after a good faith effort

          to act unanimously, a majority of the Trustees may grant approval in a

          writing that shall include either comments of the Trustee who did not

          join in the approval reflecting the reasons for his or her failure to

          join in the approval or, if such Trustee is not willing to provide

          such comments, comments from the other Trustee or Trustees reflecting

          their understanding as to such reasons.

                    (vii)  Amendment or waiver of the Trust Agreement other than

          Sections 2.2, 2.3, 2.4, 2.5, 3.1, 3.2, 3.3, 4.1, 4.2, 4.3, 4.4, 5.1,

          5.2, 5.3, 5.4, 5.6, 5.7, 7.1, 7.2, 7.3, 7.4, 7.7, 7.8, 7.11, 7.12,

          7.13, 7.16, 7.17 and 7.18, except

                                     - 5 -


          that any amendment or waiver of any provision of Article VI shall also

          require SCB approval.

                    (viii)  Approval of the fixed cash payment for Expedited

          Review Claims pursuant to Trust Distribution Process Section B.2.

                    (ix)  Approval of additional categories of Expedited Review

          Claims pursuant to Trust Distribution Process Section B.2, except that

          this action shall also require SCB approval.

                    (x)  Elimination or suspension of the Expedited Review

          Option for one or more categories of Class Member Claims pursuant to

          Trust Distribution Process Section B.2.

                    (xi)  Increase in the amount distributable in any Fiscal

          Year from the Principal Amount to the Increased Principal Amount in

          accordance with Appendix 1 to the Trust Distribution Process.

                    (xii)  Amendment or waiver of Section B.6 of the Trust

          Distribution Process (but only as to the amounts referred to therein,

          and except that any such amendment or waiver shall also require SCB

          approval) or Section F.3.a of the Trust Distribution Process (provided

          that no such amendment or waiver can advance the time for any payments

          referred to therein for any Fiscal Year in which any of the Increased

          Principal Amount was utilized).

                                     - 6 -


                    (xiii)  Permitting another Person to join in any claims

          resolution facility established pursuant to Section 3.1(b)(ii), except

          that this action shall also require SCB approval.

               (2)  The following actions shall require the approval of a

     majority of the Trustees and, unless the unanimous approval of the Trustees

     has been obtained, shall also require the approval of the SCB pursuant to

     Section 6.1:

                    (i)   Approval of the claim forms pursuant to Trust

          Distribution Process Section B.1.

                    (ii)  Approval of the Expedited Review Claim form pursuant

          to Trust Distribution Process Section B.2.

                    (iii)  Approval of form of release pursuant to Trust

          Distribution Process Section B.4.

                    (iv)  Requirement that Beneficiaries submit additional kinds

          of medical evidence in support of Class Member Claims pursuant to

          Trust Distribution Process Section B.4.

                    (v)  Selection of locations for mediations and arbitrations

          pursuant to Trust Distribution Process Section C.3.

               (3)  Any provision of the Trust Agreement, the Trust Distribution

     Process, or the Glossary not expressly described above in Sections

     3.1(a)(1) and (2) may be amended or waived with the unanimous approval of

     each of the Trustors and the Trustees, the approval of a majority of the

     SCB, and the approval of the Court, and not otherwise.

                                     - 7 -


               (b)  Without limiting the generality of Subsection (a) above, the

Trustees shall have the power to:

                    (i)  receive and hold the Trust Estate, and invest monies

          held from time to time therein;

                    (ii)  establish, supervise and administer a Claims

          Resolution Facility;

                    (iii)  join in or with or engage an Other Claims Resolution

          Facility to reduce the costs of liquidating Class Member Claims and

          Third Party Claims;

                    (iv)  pay Trust Expenses, Class Member Claims and Third

          Party Claims Liquidated in accordance with the Trust Distribution

          Process;

                    (v)  borrow money and issue notes and other evidences of

          indebtedness (which notes or other evidences of indebtedness may

          exonerate the Trustees from personal liability with respect thereto)

          in the ordinary course of operations in order to finance the

          acquisition of equipment or to pay Trust Expenses; provided, however,

          that no such borrowing shall be for a term in excess of five years or

          for an amount in excess of $2 million outstanding at any time;

                    (vi)  take all actions contemplated hereunder with respect

          to the Funds of the Trust and establish such reserves and accounts

          within such Funds as may be useful in carrying out the purposes of the

          Trust;

                                     - 8 -


                    (vii)  sue and be sued and participate, as a party or

          otherwise, in any judicial, administrative, arbitration or other

          proceeding, including, without limitation, in connection with any

          Claims Resolution Facility administered by or for the Trust;

                    (viii)  adopt and amend bylaws to govern the affairs of the

          Trust which are consistent with this Trust Agreement, the Trust

          Distribution Process and the Global Settlement Agreement;

                    (ix)  appoint such officers, including a chief executive

          officer, chief financial officer and general counsel, hire such

          employees and engage such legal, financial and other advisors and

          agents as the business of the Trust requires, pay the Trustees and the

          SCB subject to Sections 5.5 and 6.4 and pay such officers, employees,

          advisors and agents reasonable compensation;

                    (x)  enter into such other arrangements with third parties

          as are deemed by the Trustees to be useful in carrying out the

          purposes of the Trust (including, without limitation, engaging a

          Person to act as paying agent, depositary or custodian and pay such

          third parties reasonable compensation);

                    (xi)  enter into the indemnification agreements referred to

          in Sections 5.6, 6.4(c) and 7.16;

                    (xii)  enter into any contract or otherwise engage in any

          transaction with any Trustee or any Person affiliated with any

          Trustee,

                                     - 9 -


          provided that such contract or such transaction is approved by the

          unanimous vote of the Trustees who are not parties to or otherwise

          involved in, and do not have an interest in, such contract or

          transaction; it being understood that the usual rules prohibiting

          fiduciaries from dealing with themselves as individuals or from

          dealing with respect to any matter in which they have a personal

          interest shall apply to the Trustees; and

                    (xiii)  make such elections and determinations with respect

          to taxes as are deemed by the Trustees to be useful in carrying out

          the purposes of the Trust.

               (c)  The Trustees shall not have the power to guarantee or

assume, directly or indirectly, any debt or borrowings of other Persons.

          3.2  Administration.
               --------------

               (a)  The accounting period for the Trust shall be the Fiscal

Year.  The first Fiscal Year shall begin on the date of this Agreement and end

on December 31 of the same year.  The Trust shall use the accrual method of

accounting under generally accepted accounting principles.

               (b)  (i)  The Trustees shall timely file such income tax and

          other returns and statements, and shall provide for and pay such Trust

          taxes, as are required to comply with applicable provisions of the

          Internal Revenue Code and of any state or local law and the

          regulations promulgated thereunder.

                                     - 10 -


                    (ii)  For federal income tax purposes, the Trustees and the

          Trustors intend that the Trust will be taxable either as a Qualified

          Settlement Fund or a Designated Settlement Fund.  Trustors agree to

          cooperate in providing such information or documents as the Trustees

          determine are useful for the preparation and filing of tax returns by

          the Trust.  Each of the Trustors agrees to do such other and further

          things as may be reasonably requested by the Trustees in connection

          with the tax affairs of the Trust which shall not result in any tax

          liability or other material liability to any of the Trustors.

                    (iii)  The Trustees are hereby designated as the

          "administrator" of the Qualified Settlement Fund or Designated

          Settlement Fund for federal income tax purposes within the meaning of

          Treasury Regulations section 1.468B-2(k)(3).  For federal income tax

          purposes, the taxable year of the Trust shall be the calendar year and

          the Trust shall use an accrual method of accounting.

                    (iv)  The Trustees are authorized to take such structural

          changes or other actions, as the Trustees deem prudent and appropriate

          in reducing or minimizing the effect of taxes on the Trust Estate,

          provided that such changes or actions do not result in any additional

          tax liability or other material liability to any of the Trustors or

          directly or indirectly amend any provision of this Agreement or the

          Trust Distribution Process that cannot be amended except pursuant to

          Section 3.1(a)(3).

                                     - 11 -


               (c)  (i)  The Trustees shall cause to be prepared, and file with

          the Court, as soon as available and in any event within 90 days

          following the end of each Fiscal Year, an annual report containing

          financial statements of the Trust (including, without limitation, a

          balance sheet of the Trust as of the end of such Fiscal Year and a

          statement of operations for such Fiscal Year) audited by a nationally

          recognized firm of independent public accountants selected by the

          Trustees and certified by such firm.

                    (ii)  The Trustees shall cause to be prepared and file with

          the Court as soon as available and in any event within 45 days

          following the end of each of the first three quarters of each Fiscal

          Year, a quarterly report containing financial statements of the Trust

          (including, without limitation, an unaudited balance sheet of the

          Trust as of the end of such quarter and a statement of operations for

          such quarter), certified, subject to normal year-end adjustments

          (including without limitation as to consistency with the prior Fiscal

          Year's audited financial statements), by an appropriate officer of the

          Trust.

                    (iii)  Simultaneously with delivery of each set of financial

          statements referred to in Subsections (i) and (ii) above, the Trustees

          shall cause to be prepared, approve and file with the Court a report

          containing a summary (in reasonable detail) of the following

          information with respect to the period covered by the financial

          statement:

                                     - 12 -


                    (1)  the number of Class Member Claims Liquidated;

                    (2)  the amount of investment income earned by the Trust and

          the fair market value of the assets of the Trust as of the last

          business day of the applicable accounting period;

                    (3)  the amount of Trust Expenses incurred by the Trust; and

                    (4)  a certification as to compliance with the Trust

          Agreement and Trust Distribution Process, specifically identifying any

          lack of compliance.

               (d)  The Trustees shall cause to be prepared and approve not

     later than 30 days nor more than 60 days prior to the commencement of each

     Fiscal Year annual budgets and cash flow projections for the next five

     years of the Trust and budgets and cash flow projections for the remaining

     life of the Trust.  The budgets and cash flow projections shall be based on

     the actual number and type of claims filed against the Trust, the income,

     expense and claims payment history of the Trust to date as well as

     projected trends in such items.

               (e)  A copy of all financial statements, reports, budgets and

     cash flow projections (including any general historical information upon

     which such budgets and projections are based) prepared by the Trustees

     pursuant to this Section 3.2 shall be delivered to the SCB and each of the

     Trustors or their successors and assigns at the time of filing with the

     Court or, if not filed with the Court, at the time such documents are

     prepared.  The Trustees shall petition the Court each year for approval of

     the annual

                                     - 13 -


     financial statements and reports required by Section 3.2(c).  The SCB and

     any of the Trustors shall have standing to object to and be heard on such

     financial statements and reports.  The Trust will provide to any of the

     Insurers information which it may need in order to pursue any reinsurance

     claim.

          3.3  Actions by Trustors.  All actions by the Trustors shall be taken
               -------------------

by unanimous vote, unless otherwise provided to the contrary in this Trust

Agreement or the Trust Distribution Process.

           3.4  Protection of Confidential Information from Disclosure to the
                -------------------------------------------------------------

Beneficiaries.  Consistent with the purposes of the Trust, the Trustees have the
- -------------

authority and power to keep confidential from the Beneficiaries such information

as the Trust may determine should be protected from disclosure in order to avoid

prejudicing the Trust's position in negotiation, mediation, arbitration or

litigation of claims presented to the Trust.  Nothing contained in this Section

3.4 shall affect the right of the SCB, the Trustees or the Trustors to receive

any such confidential information, provided that they shall only use such

confidential information for the purpose of conducting their activities in such

capacities.


                                   ARTICLE IV

                        FUNDS, PAYMENTS AND INVESTMENTS

          4.1  Funds.
               -----

               (a)  There are hereby created within the Trust Estate three

Funds, Fund I, Fund II and Fund III.

                                     - 14 -


               (b)  Fund I shall consist of all of the assets transferred to the

Trust (including all accrued interest) less $210,000,000 which will be

segregated and allocated to Funds II and III.  The Trust shall invest the

amounts in Fund I subject to the limitations set forth in Section 4.3.

               (c)  Fund II shall consist of $200,000,000 segregated from the

assets transferred to the Trust.  The Trust shall invest the $200,000,000

subject to the limitations set forth in Section 4.3.  No payments of any kind

may be made from Fund II until at least 21 years after Global Approval Judgment.

               (d)  Fund III shall consist of $10,000,000 segregated from the

assets transferred to the Trust.  The Trust shall invest the $10,000,000,

subject to the limitations set forth in Section 4.3.  No payments of any kind

may be made from Fund III until at least 41 years after Global Approval

Judgment.

               (e)  Subject to Section 2.2 hereof, the Trustees may, from time

to time, create additional reserves and accounts (all of which shall remain part

of the Fund from which such amounts were created) within the Trust Estate as

they may deem necessary, prudent or useful in order to provide for the payment

of Trust Expenses, Class Member Claims and Third Party Claims assumed by the

Trust, and may, with respect to any such reserve or account, restrict the use of

monies therein.

               (f)  Any investment earnings received with respect to, or other

proceeds of, any asset held within any Fund (including any reserve or account

which is a part thereof) created hereby or pursuant hereto shall be credited to,

and shall be a part of, such Fund.

                                     - 15 -


          4.2  Payments.  Payments of Trust Expenses, Class Member Claims and
               --------

Third Party Claims shall be made from Funds I, II and III and such other

reserves or accounts as the Trustees may from time to time establish pursuant to

Section 4.1(e).  The maximum annual payments which may be made from such Funds

for such Trust Expenses, Class Member Claims and Third Party Claims are set

forth in Section E of the Trust Distribution Process.

          4.3  Investments.  Investment of monies held in the Trust Estate shall
               -----------

be administered in the manner in which individuals of ordinary prudence,

discretion and judgment would act in the management of their own affairs with

the goal of constructing a reasonably conservative portfolio which minimizes

volatility.  The Trust shall retain at least two nationally recognized,

independent, professional investment advisers or managers to assist in investing

the Trust Estate subject to the limitations contained in this Section 4.3.  The

Trust's investments shall be subject to each and every one of the following

limitations and provisions, and, notwithstanding anything to the contrary in

this Trust Agreement, the Trust shall not purchase or otherwise acquire the

equity, debt obligations or other securities of, assets of, or any interest in

any Person, or otherwise extend any credit to or make any investments in any

Person other than the investments described below ("Permitted Investments"):

               (a)  The Trust shall not (i) acquire, directly or indirectly, any

equity interest in any Person if, immediately following such acquisition, the

Trust would hold more than 5% of the equity in such Person or business

enterprise, or (ii) hold, directly or indirectly, more than 10% of the equity

interest in any Person.

                                     - 16 -


               (b)  The Trust may acquire and hold commercial paper if such

commercial paper is rated "Prime-1" or higher by Moody's Investors Service, Inc.

("Moody's"), "A-1" or higher by Standard and Poor's Corporation ("S&P") or has

been given an equivalent rating by another nationally recognized statistical

rating agency.

               (c)  The Trust may acquire and hold other corporate debt

securities if such securities are rated "A1" or higher by Moody's, "A+" or

higher by S&P, or have been given an equivalent investment grade rating by

another nationally recognized statistical rating agency.

               (d)  The Trust may acquire and hold equity securities

constituting preferred stock if such preferred stock is rated "a1" or higher by

Moody's, "A+" or higher by S&P or has been given an equivalent investment grade

rating by another nationally recognized statistical rating agency.

               (e)  The Trust shall not acquire or hold any equity securities of

any Person unless such equity is in the form of securities which are traded on a

national securities exchange in the United States or over the National

Association of Securities Dealers Automated Quotation System.

               (f)  The Trust may acquire and hold any equity securities

constituting common stock if the long-term debt securities of the issuer are

rated "A1" or higher by Moody's, or "A+" or higher by S&P or have been given an

equivalent rating by another nationally recognized statistical rating agency.

               (g)  The Trust may acquire and hold certificates of deposit

issued by and bankers' acceptances of and interest bearing deposits with any

U.S. commercial

                                     - 17 -


bank or any branch or agency of a non-U.S. bank licensed to conduct business in

the U.S. having combined capital and surplus of not less than $1,000,000,000, if

all publicly held long-term debt securities, if any, of such bank and the

holding company, if any, of which such bank is a Subsidiary meet the standards

set forth in Section 4.3(c).

               (h)  The Trust may acquire and hold repurchase obligations if (1)

in the opinion of the Trustees, they are adequately collateralized, (2) the

collateral constitutes investment instruments that would otherwise constitute

Permitted Investments hereunder and (3) such obligations are entered into with

either a nationally recognized investment banking firm or a commercial bank

meeting the requirements set forth in Section 4.3(g).

               (i)  The Trust may acquire and hold marketable direct obligations

issued or unconditionally guaranteed by the United States government or issued

by any agency or instrumentality thereof.

               (j)  The Trust may acquire and hold marketable direct obligations

issued by any state of the United States or any political subdivision of any

such state or any public instrumentality thereof if such securities are rated

"A1" or higher by Moody's, "A+" or higher S&P, or have been given an equivalent

rating by another nationally recognized statistical rating agency.

               (k)  The Trust may acquire and hold equity, bond, money market

and other funds organized under the laws of the United States or any state

thereof that invest solely in any of the foregoing investments permitted under

Sections 4.3(b) through (j).

                                     - 18 -


               (l)  The Trust may enter into futures and options arrangements,

and interest rate and currency swap agreements, cap, floor and collar

agreements, interest rate insurance, currency spot and forward contracts and

other agreements or arrangements solely for the purposes of protecting against

fluctuations in the principal of, or interest or currency exchange rates on, the

Trust's investments, provided that the net obligations of the Trust in respect

thereof shall not exceed 5% of the Trust Estate at any time.

               (m)  The Trust shall not acquire or hold any obligations or

securities denominated in a currency other than U.S. Dollars without

substantially hedging against fluctuations in such currency, provided that the

net obligations of the Trust in respect thereof shall not exceed 5% of the Trust

Estate at any time.

               (n)  The Trust shall not acquire or hold any equity, debt

securities or other instruments or obligations of any Person (other than debt

securities or other debt instruments described in Section 4.3(i) or any fund

described in Section 4.3(k) investing solely in the foregoing) if the aggregate

market value of all equity, debt securities and other instruments and

obligations of such Person held by the Trust would exceed 5% of the aggregate

value of the Trust Estate.

               (o)  The Trust shall not (i) acquire any equity securities of any

Person if, following such acquisition, the aggregate market value of all equity

securities held by the Trust would exceed 50% of the aggregate value of the

Trust Estate, or (ii) hold any equity securities to the extent that the

aggregate market value of all equity

                                     - 19 -


securities held by the Trust would exceed 60% of the aggregate value of the

Trust Estate.

               (p)  The Trust may acquire and hold mutual funds investing in

"baskets" of securities designed to track the performance of the S&P 500 stock

index or the Lehman Brothers Aggregate Bond Index, provided that the aggregate

obligations of the Trust in respect thereof, together with the aggregate market

value of all equity securities held by the Trust, shall not exceed 60% of the

aggregate value of the Trust Estate at any time.

               (q)  The Trust may acquire and hold investments of a type not

permitted under Subsections (b)-(l) or (p) above in an aggregate amount not to

exceed 5% of the aggregate value of the Trust Estate at any time.

          4.4  Source of Payments.  All Trust Expenses and payments in respect
               ------------------

of Class Member Claims and Third Party Claims shall be payable solely out of the

Trust Estate.  Neither the Trustees nor any officer, agent or employee of the

Trust nor any of the Trustors nor any of their Subsidiaries nor any Affiliate,

director, officer, employee or agent of the Trustors or any of their

Subsidiaries nor any member of the SCB shall be liable for the payment of any

Trust Expense, Class Member Claim or Third Party Claim or other liability of or

on account of the Trust, and no Person shall look to any of the foregoing

Persons for payment of any such expense or liability.

                                     - 20 -



                                   ARTICLE V

                                    TRUSTEES

          5.1  Number.  Prior to the appointment of the Trustees hereunder, the
               ------

provisions of Section 7.18 shall govern.  Thereafter, there shall be three

Trustees at all times (other than during the period contemplated by Section

5.3(b)), described as the Class A, B and C Trustees.  Each Trustee shall be an

individual who has substantial professional experience related to one or more of

the purposes of the Trust and who is able to devote the necessary time and

resources to his or her duties hereunder, it being understood that whenever

possible any person named to serve as a Trustee will have experience concerning

asbestos litigation, although failure to have such experience will not in and of

itself disqualify any Person from service as a Trustee.  No Trustee may

simultaneously hold another office or position in the Trust.

          5.2  Term of Service.
               ---------------

               (a)  The initial term of the Class A, B and C Trustees are four,

five and six years, respectively.  Thereafter, each Trustee shall serve a five-

year term.  In each case the term of the Trustee shall be terminated upon death,

resignation pursuant to Subsection (b) below or removal pursuant to Subsection

(c) below.

               (b)  Any Trustee may resign at any time by written notice to each

of the remaining Trustees.  Such notice shall specify a date when such

resignation shall take effect, which shall not be less than 90 days after the

date such notice is given unless all of the Persons entitled to appoint the

resigning Trustee's successor under Section 5.3(a) consent to a different date.

                                     - 21 -


               (c)  Any Trustee may be removed for cause by the Court upon

application of any of the Trustors or a majority of the SCB.

               (d)  Any Trustee may be reappointed for additional terms.

               (e)  Any successor Trustee filling an unexpired term shall serve

until the end of such term.

          5.3  Appointment of Successor Trustees.
               ---------------------------------

               (a)  In the event of a vacancy in the position of a Trustee, the

vacancy shall be filled by the SCB in the case of a Class A or Class B Trustee

or by the Trustors in the case of the Class C Trustee.

               (b)  If the SCB or the Trustors, as the case may be, fail to

appoint a successor Trustee pursuant to Subsection (a) above who accepts such

appointment in writing within 90 days after the occurrence of the vacancy in the

position of a Trustee, the remaining Trustees shall apply to the Court, which

shall appoint a successor Trustee or successor Trustees.  For a period of 10

days after the occurrence of the vacancy in the position of a Trustee, no vote

on any action requiring the unanimous consent of the Trustees shall be permitted

to occur.

               (c)  Immediately upon the appointment of any successor Trustee,

all rights, titles, duties, powers and authority of the predecessor Trustee

hereunder shall be vested in and undertaken by the successor Trustee without any

further act.  No successor Trustee shall be liable personally for any act or

omission of his or her predecessor, or for any Trust act or omission which

occurred prior to his or her

                                     - 22 -


appointment, unless such act or omission is expressly ratified by the successor

Trustee after his or her appointment.

          5.4  Liability of Trustees, Officers and Employees.  No Trustee,
               ---------------------------------------------

officer or employee of the Trust shall be liable to the Trust, any Beneficiary

or any other Person except for his own gross negligence or willful misconduct.

No Trustee, officer or employee of the Trust shall be liable for any act or

omission of any other officer, agent or employee of the Trust unless the

Trustee, officer or employee acted with gross negligence or willful misconduct

in the selection or retention of such officer, agent or employee.

          5.5  Compensation and Expenses of Trustees.
               -------------------------------------

               (a)  Each of the Trustees shall receive compensation from the

Trust for his or her services as Trustee in the amount of $100,000 per annum

plus, after the first 12 days during which the Trustee has performed the

services described below in this sentence, $1,000 per diem for each meeting of

the Trustees or any committee or subcommittee thereof attended by such Trustee,

reduced proportionately to account for any fraction of a day spent on such

duties in the case of any such meeting not attended in person, or for special

duties performed by such Trustee on behalf of the Trust, reduced

proportionately to account for any fraction of a day spent on such duties, and

$500 for each day of substantial travel in connection with attendance at any

such meeting or performance of any such special duties.  Such compensation

amounts shall be increased or decreased annually at the rate of the Consumer

Price Index for urban wage earners and clerical workers (U.S. City Average)

unadjusted for seasonal variation,

                                     - 23 -


published by the Bureau of Labor Statistics of the United States Department of

Labor, or otherwise by the Trustees with the approval of the Court.  In the

event that at any time the Trustees determine that the amount of time required

to perform their duties as Trustees has substantially decreased, they shall in

good faith determine whether a reduction in their compensation is warranted.

               (b)  All reasonable out-of-pocket costs and expenses incurred by

the Trustees in connection with the performance of their duties hereunder shall

be paid by the Trust or, if paid by a Trustee, shall be promptly reimbursed to

such Trustee by the Trust.

          5.6  Indemnification of Trustees, Officers and Employees.  The
               ---------------------------------------------------

Trustees, officers and employees of the Trust shall be indemnified by the Trust

to the fullest extent permitted under applicable law against any and all

liabilities, expenses, claims, damages or losses incurred by them in the

performance of their duties hereunder, except any liability, expense, claim,

damage or loss as to which they are liable under Section 5.4.  The Trustees,

officers and employees of the Trust shall be entitled to advancement of

attorneys' fees and expenses from the Trust for the purposes set forth in this

Section 5.6 to the fullest extent permitted under applicable law.

          5.7  Trustees' Employment of Experts.  The Trustees may, but shall not
               -------------------------------

be required to, consult with independent, outside counsel, accountants,

appraisers, investment bankers and other parties reasonably selected and

determined in good faith by the Trustees to be qualified as experts on the

matters submitted to them, except as otherwise expressly provided in this Trust

Agreement, and the opinion of any such

                                     - 24 -


parties on any matters submitted to them by the Trustees shall be full and

complete justification for any action taken or not taken by the Trustees

hereunder in good faith and in reasonable reliance upon the written opinion of

any such expert.


                                   ARTICLE VI

                      SELECT COUNSEL FOR THE BENEFICIARIES

          6.1  Formation; Duties.  The SCB shall consist of five lawyers chosen
               -----------------

to represent the interests of the Beneficiaries, and the initial four SCB

lawyers shall be Joseph Rice; Joseph Cox; Harry Wartnick; and Steven Kazan.  The

fifth SCB lawyer shall be selected unanimously by the initial four lawyers on or

before January 14, 1994.  If the initial four SCB members are unable to reach

unanimous agreement on the identity of the fifth SCB member, the four SCB

members shall appear in Court on January 17, 1994, and with the assistance of

the Court, work day to day until agreement is reached.  In giving their approval

or in acting pursuant to this Agreement the members of the SCB shall act in the

best interest of the Beneficiaries and consistent with the purposes of the

Trust.  The SCB shall hold an annual meeting to which all lawyers who have

submitted a Class Member Claim to the Trust during the past five years shall be

invited and be entitled to be present.  The SCB shall give a report to the

annual meeting describing the activities of the Trust for the prior year,

including any approvals given by the SCB pursuant to this Agreement and/or the

Trust Distribution Process and all matters on which the Trustees have indicated

that they intend to seek the approval of the SCB during the following year.  In

giving approval to the Trustees, the SCB shall

                                     - 25 -


consider in good faith all recommendations made at such annual meeting.  The

Trustees shall consult with the SCB on the implementation and administration of

the Trust Distribution Process.  The Trustees may consult with the SCB on any

matter affecting the Trust, and, as provided in Section 3.1(a), certain actions

by the Trustees shall require the prior approval of the SCB.  All approvals of

the SCB shall be by majority vote.

          6.2  Term of Office.
               --------------

               (a)  Each member of the SCB shall serve for the duration of the

Trust, subject to the earlier of his or her death, resignation, or removal.

               (b)  Subject to Section 6.3(a) hereof, any member of the SCB may

resign at any time by written notice to each of the remaining members specifying

the date when such resignation shall become effective.

               (c)  Any member of the SCB may be removed for cause by the

Court upon joint application of all of the other SCB members.

          6.3  Appointment of Successor.
               ------------------------

               (a)  A vacancy in the SCB caused by the resignation of an SCB

member shall be filled with an individual nominated by the resigning SCB member

and approved by the unanimous vote of all SCB members.  The resigning SCB

member's resignation shall not be effective until such approval is obtained and

the successor SCB member has accepted the appointment.

               (b)  In the event of a vacancy in the membership of the SCB other

than one caused by resignation as aforesaid, the vacancy shall be filled by the

unanimous vote of the remaining member(s) of the SCB.

                                     - 26 -


          6.4  Compensation, Expenses and Liability of SCB Members.
               ---------------------------------------------------

               (a)  Each member of the SCB shall receive compensation from the

Trust for his or her services in the amount of $1,000 per diem for travel

related to and attendance at the SCB meetings attended in person by such member,

and $1,000 per diem (adjusted proportionately to account for any fraction of a

day spent on, or in travel in connection with, such duties) for work done by the

members of the SCB (other than attending SCB meetings in person) in carrying out

their duties and responsibilities under the Trust Agreement.  Such compensation

shall be payable as determined the Trustees, but not less frequently than

quarterly.  Such per diem amount shall be increased or decreased annually pro

rata with the amount that the per diem for meetings paid to the Trustees is

increased or decreased pursuant to Section 5.5.

               (b)  The reasonable out-of-pocket costs and expenses incurred by

SCB members in connection with the performance of their duties hereunder,

together with the reasonable fees and expenses of their counsel, shall be paid

by the Trust or, if paid by a member of the SCB, shall be promptly reimbursed to

such member by the Trust.

               (c)  Liability of SCB.  No present or former member of the SCB
                    ----------------

shall be liable to the Trust, any Beneficiary or any other Person except for his

own gross negligence or willful misconduct.  All present or former members of

the SCB shall be indemnified by the Trust to the fullest extent permitted under

applicable law against any and all liabilities, expenses, claims, damages or

losses incurred by them in the performance of their duties hereunder or in

serving as Class Counsel, except any liability,

                                     - 27 -


expense, claim, damage or loss as to which they are liable under this Section.

No present or former member of the SCB shall be liable personally for any act or

omission of his or her predecessor, or for any act or omission of the SCB which

occurred prior to his or her appointment, unless such act or omission is

expressly ratified by such person after his or her appointment.  The present and

former members of the SCB shall be entitled to advancement of attorneys' fees

and expenses from the Trust for the purposes set forth in this subsection (c)

to the fullest extent permitted under applicable law.

          6.5  Resolution of Disputes Involving Approval of the Select Counsel

               for the Beneficiaries.
               ---------------------------------------------------------------

               (a)  Approval Procedures.  In any circumstance arising under this
                    -------------------

Trust Agreement or the Trust Distribution Process where the Trust makes a

decision with respect to matters which require the approval of the SCB, the

Trust shall:

                    (i)  provide the SCB with reasonable access to experts

          retained by the Trust and to Trust staff during such time as the

          decision is being made;

                    (ii)  bring the proposed decision to the attention of the

          SCB; and

                    (iii)  unless the circumstances prevent, provide the SCB no

          fewer than 10 days to comment with respect to such proposed decision.

          In the event the SCB disagree with the Trust's decision, they shall

express their view as fully as possible to the Trust and make such

counterproposal as may be appropriate.  The Trust and the SCB shall thereupon

consult in an effort to reach agreement.

                                     - 28 -


               (b)  Approval in Writing.  The approval of the SCB, when required
                    -------------------

under the Trust Agreement or the Trust Distribution Process, must be in writing

to be effective; provided, however, that in the event the SCB fails to approve

or disapprove an action requiring SCB approval pursuant to Section 3.1(a) within

30 days of notice of proposed action by the Trust, the SCB shall be deemed to

have approved such action.

               (c)  Access to Financial Information.  Subject to entry into an
                    -------------------------------

appropriate confidentiality agreement where applicable, the Trust shall make

available to the SCB any investment banking or other financial, accounting or

statistical information available to the Trust relating to issues to be

discussed and/or as to which the approval of the SCB is required.


                                  ARTICLE VII

                               GENERAL PROVISIONS

          7.1  Irrevocability.  The Trust is irrevocable.
               --------------

          7.2  Termination.
               -----------

               (a)  The Trust shall terminate on the date (the "Termination

Date") which is the earlier of (1) the first date on which all Class Member

Claims and Third Party Claims filed with or against the Trust have been

resolved, 24 consecutive months have elapsed during which no such claim has been

filed with the Trust and approval of such termination by the Court has been

obtained upon joint application of all of the Trustees and a majority of the

SCB; or (2) 21 years less 91 days pass after the

                                     - 29 -


death of the last survivor of any of the descendants of Joseph P. Kennedy living

on the date hereof.

               (b)  On the Termination Date, after payment of all liabilities of

the Trust have been provided for, the Trust shall be dissolved, and all of the

Trust's assets shall be applied to such charitable purposes as the Trustees in

their reasonable discretion, after consultation with the SCB, shall determine,

which charitable purposes, if practicable, shall relate to occupational health.

          7.3  Amendments.
               ----------

               (a)  This Trust Agreement may only be amended or waived as 

provided in Section 3.1(a).  Thirty days' advance written notice of any proposed

amendment or waiver shall be given to the SCB and the Trustors.

               (b)  The Trust Distribution Process may only be amended or waived

as provided in Section 3.1(a) of this Trust Agreement and, where applicable,

Section H.7 of the Trust Distribution Process.  Thirty days' advance written

notice of any proposed amendment or waiver of the Trust Distribution Process

shall be given to the SCB, the Trustors and, where appropriate, the

Representative Defendant.

               (c)  The definitions used in this Trust Agreement or in the Trust

Distribution Process and contained in the Glossary may be amended or waived only

if and in the same manner as the Section of this Trust Agreement or the Trust

Distribution Process in which such definition is used may be amended or waived.

          7.4  Severability.  Should any provision of this Trust Agreement or
               ------------

the Trust Distribution Process be determined to be unenforceable, such

determination shall

                                     - 30 -


in no way limit or affect the enforceability and operative effect of any and all

other provisions of this Trust Agreement or the Trust Distribution Process.

          7.5  Notices.  Notices to Persons asserting claims shall be given at
               -------

the address of such Person, or, where applicable, such Person's legal

representative, in each case as provided on such Person's proof of claim.  Any

notices or other communications required or permitted hereunder shall be in

writing and (a) delivered at, or sent by telex or telecopy to, the addresses

designated in Section 8.13 of the Global Settlement Agreement or, in the case of

the Trustees, the addresses provided by the Trustees to the Trust, the SCB and

the Trustors, or (b) mailed by registered or certified mail, return receipt

requested, postage prepaid, addressed as aforesaid, or to such other address or

addresses as may hereafter be furnished by any of the Trustors, the Trust or the

Trustees or the SCB to the others.

          All such notices and communications shall be effective when delivered

at the designated addresses or when the telex or telecopy communication is

received at the designated addresses and confirmed by the recipient by return

telex or telecopy in conformity with the provisions hereof.

          7.6  Counterparts.  This Trust Agreement may be executed in any number
               ------------

of counterparts, each of which shall constitute an original, but such

counterparts shall together constitute but one and the same instrument.

          7.7  Successors and Assigns.  The provisions of this Trust Agreement
               ----------------------

shall be binding upon and inure to the benefit of the Trustors, the Trust, the

Trustees, the SCB and their respective successors and assigns, except that

neither the Trustors nor

                                     - 31 -


the Trust nor any Trustee, nor the SCB members may assign or otherwise transfer

any of its, his or her rights or obligations under this Trust Agreement except,

in the case of the Trust and the Trustees, as contemplated by Section 7.2.

          7.8  No Waiver.  No failure to exercise or delay in exercising any
               ---------

right, power or privilege hereunder or under the Trust Distribution Process

shall operate as a waiver thereof, nor shall any single or partial exercise of

any right, power or privilege hereunder or under the Trust Distribution Process

preclude any further exercise thereof or of any other right, power or privilege.

The rights and remedies provided herein or in the Trust Distribution Process are

cumulative and are not exclusive of rights under law or in equity.

          7.9  Headings; Section References.  The headings used in this Trust
               ----------------------------

Agreement and in the Trust Distribution Process are inserted for convenience

only and neither constitute a portion of this Trust Agreement or the Trust

Distribution Process nor in any manner affect the construction of the provisions

of this Trust Agreement or the Trust Distribution Process.  All references in

this Trust Agreement or in the Trust Distribution Process to "Sections," unless

otherwise expressly indicated, shall be deemed to refer to sections of the

document in which such reference appears.

          7.10  Governing Law.  This Trust Agreement and the Trust Distribution
                -------------

Process shall be governed by, administered under and construed in accordance

with, the laws of the State of Texas.

                                     - 32 -

          7.11  Dispute Resolution.  Any disputes which arise under this Trust
                ------------------

Agreement or the Trust Distribution Process shall be resolved by the Court,

except as otherwise provided herein or in the Trust Distribution Process.

          7.12  Enforcement and Administration.  The provisions of this Trust
                ------------------------------

Agreement and the Trust Distribution Process shall be enforced and administered

by the Court.

          7.13  Settlement of Trustees' Accounts.  Notwithstanding any state law
                --------------------------------

to the contrary, the Court shall have exclusive jurisdiction over the settlement

of the accounts of the Trustees, whether such account is rendered by the

Trustees themselves or is sought by any Beneficiary or other Person.  The

Trustees shall render successive accounts covering periods of not more than one

Fiscal Year, commencing on the first completed Fiscal Year of the Trust or the

last day of the prior accounting period, as the case may be, except that an

account shall be rendered for the period ending on the date of the death,

resignation, removal or retirement of any Trustee.  Upon the acceptance of any

such account by the Court after hearing on notice to the SCB, the Trustors and

such other parties as the Court shall designate, the Trustees shall be

discharged from any further liability or responsibility to any Beneficiary or

other Person as to all matters embraced in such account.

          7.14  No Bond Required.  Notwithstanding any state law to the
                ----------------

contrary, each Trustee (including any successor Trustee) shall be exempt from

giving any bond or other security in any jurisdiction.


                                     - 33 -


          7.15  Service of Process.  Service of process upon any of the Trustees
                ------------------

in an action or proceeding under Sections 7.11, 7.12 or 7.13 shall be effective

upon delivery to the address set forth in Section 7.5.  Successor Trustees, by

acceptance of their appointment as such, shall be deemed to have approved this

method of service.

          7.16  Lawsuits Against Trustors.  Except as provided in Section 2.4(a)
                -------------------------

of the Global Settlement Agreement as to Fibreboard Corporation, the Trust shall

defend and indemnify the Fibreboard, Continental and Pacific Releasees against

and hold them harmless from any costs, fees, claims, liabilities, settlements or

judgments incurred or occurring after Global Approval Judgment and resulting,

directly or indirectly, from the assertion against any of them of any Class

Member Claim or Third Party Claim.  This obligation shall include without

limitation any such claim to the extent that, after Global Approval Judgment,

that claim attacks the validity or enforceability of the Global Approval

Judgment, but shall exclude any Additional Policy Claims or Express Indemnity

Claims that are the subject of a waiver by the Insurers or Fibreboard under

Section 6.3(C) of the Global Settlement Agreement.  The defense of any such

lawsuit will be tendered to the Trust and any defense costs or indemnity

obligation will be paid by the Trust for so long as funds remain in Funds I, II

and III.  The Trustors may, at their own expense, elect to participate with the

Trust in the defense of any such action or claim.  Amounts paid to or on behalf

of the Fibreboard, Continental and Pacific Releasees pursuant to this Section

shall not be limited in any manner, including by the provisions of Section E of

the Trust Distribution Process.  The provisions of this

                                     - 34 -


Section 7.16 shall only be applicable after Global Approval Judgment, subject to

Section 2.7(B) of the Global Settlement Agreement.

          7.17  No Disqualification of SCB.  No member of the SCB shall be
                --------------------------

disqualified solely by reason of his or her service as an SCB member from

serving as counsel for any Class Member in connection with the submission of any

Class Member Claim to the Trust, nor shall service as such counsel be deemed to

create a conflict of interest with respect to service to the Trust as an SCB

member.  No SCB member shall take any action in his or her capacity as such that

would prefer the interests of his or her clients over the interests of similarly

situated Beneficiaries generally.

          7.18  Initial Trustee; Powers.  In the event that as of the date of
                -----------------------

execution of the Global Settlement Agreement, the Trustees have not been

selected, then:

               (a)  On that date, the Trustors shall contribute $100 to the

Trust.  Francis McGovern shall be the sole initial trustee ("Initial Trustee").

The Initial Trustee shall have only the power to take those ministerial and

administrative actions necessary or desirable to apply for a letter ruling from

the Internal Revenue Service pursuant to Section 8.1 of the Global Settlement

Agreement and preserve the existence of the Trust until Trustees are appointed

hereunder.  The Initial Trustee shall not have authority to make any

discretionary decisions, waivers or amendments to the Trust Agreement.

               (b)  No later than January 14, 1994, the Trustors and the Class

Counsel (as defined in the Global Settlement Agreement) shall select three

trustees, who shall be the original Class A, Class B and Class C Trustees (such

persons, and their successors appointed pursuant to Section 5.3, being referred

to as the "Trustees").

                                     - 35 -


Trustors and Class Counsel have agreed to confer to attempt to reach joint

agreement as to the selection of all three original Trustees.  If Trustors and

Class Counsel cannot agree, Class Counsel will unanimously select the Class A

and B Trustees and Trustors will unanimously select the Class C Trustee.  Absent

agreement among Class Counsel as to the selection of the Class A and B Trustees,

or among Trustors as to the selection of the Class C Trustee, all Class Counsel

and/or all Trustors agree to appear in Court on January 17, 1994, and with the

assistance of the Court, to work from day to day until agreement on the

selection of the Trustee(s) for whom they are responsible is reached.  Upon

acceptance of this Trust Agreement by the original Class A, Class B and Class C

Trustees, the Initial Trustee shall resign.

          IN WITNESS WHEREOF, the parties have executed this Trust Agreement on

this 23rd day of December, 1993.


                                             TRUSTORS:

                                        FIBREBOARD CORPORATION


                                        By:         Michael R. Douglas
                                               -----------------------------

                                        Title: Senior V.P. & General Counsel
                                               -----------------------------

                                        COLUMBIA CASUALTY COMPANY


                                        By:         Laurens F. Terry
                                               -----------------------------

                                        Title: V.P. Continental Casualty Co.
                                               -----------------------------

                                        CONTINENTAL CASUALTY COMPANY


                                        By:           Laurens F. Terry
                                               -----------------------------

                                        Title:          Vice President
                                               -----------------------------

                                     - 36 -


                                        CNA CASUALTY COMPANY OF
                                        CALIFORNIA


                                        By:           Laurens F. Terry
                                               -----------------------------

                                        Title:         Vice President
                                               -----------------------------

                                        PACIFIC INDEMNITY COMPANY


                                        By:            John J. Degnan
                                               -----------------------------

                                        Title:      Senior Vice President
                                               -----------------------------

                                        INITIAL TRUSTEE:


                                                  Francis McGovern
                                        ------------------------------------


                                     - 37 -

                                                                   Exhibit 10.12











                           TRUST DISTRIBUTION PROCESS

                         Annex A to the Trust Agreement



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
A.  Overview ..............................................................    1

B.  The Claim Procedure ...................................................    3
    1.  Submitting a Claim ................................................    3
    2.  Expedited Review Option ...........................................    4
    3.  Ordering of Claims for Processing .................................    5
    4.  Initial Evaluation of Claims ......................................    6
    5.  Further Claims Processing .........................................    7
    6.  Second (Malignant) Injury Claims ..................................    8
    7.  Audit Procedures ..................................................    8
    8.  Exigent Health and Extreme Hardship Claims ........................    9
    9.  Withdrawal of Claims ..............................................   10

C.  ADR Procedures ........................................................   10
    1.  Mediation .........................................................   10
    2.  Arbitration .......................................................   11
    3.  Location for ADR Procedures .......................................   13

D.  Litigation ............................................................   13
    1.  Mandatory Settlement Conference ...................................   14
    2.  Procedural Rules ..................................................   15

E.  Funds for Payment of Claims ...........................................   17
    1.  Fund I ............................................................   19
        a.  Commencement of Payments ......................................   19
        b.  Distributable Amount ..........................................   19
        c.  Distribution of Remaining Balance .............................   20
    2.  Fund II ...........................................................   20
        a.  Commencement of Payments ......................................   20
        b.  Distributable Amount ..........................................   21
        c.  Distribution of Remaining Balance .............................   21
    3.  Fund III ..........................................................   21
        a.  Commencement of Payments ......................................   21
        b.  Distributable Amount ..........................................   21
        c.  Distribution of Remaining Balance .............................   22
    4.  Determination of Distributable Amount for Each Fund ...............   22

F.  Order, Timing and Limitations on Payments of Claims ...................   22
    1.  Eligibility for Payment ...........................................   22
    2.  Order of Payment ..................................................   23

                                      -i-

    3.  Terms of Payment ..................................................   25
        a.  Claims Resolved Outside the Tort System .......................   25
        b.  Claims Resolved in the Tort System ............................   25
     4.  Deferral of Payments .............................................   26
     5.  Limitation on Payment of Claims ..................................   27

G.  All Claims Resolved Pursuant to the Trust Distribution Process ........   27

H.  Defendant Class Member Procedures .....................................   27
    1.  Claims Liquidated Before Judgment Against Defendant Class Members .   29
        a.  Calculation of Set-Off Amount..................................   29
        b.  Status of the Trust at Trial ..................................   30
        c.  Discovery and Informational Issues ............................   31
    2.  Claims Not Liquidated When Verdict or Judgment Obtained Against
        Defendant Class Members ...........................................   31
        a.  Effect of Verdict or Judgment .................................   31
        b.  Retention of Several Liability Claim ..........................   32
        c.  Payment of Verdict or Judgment ................................   32
    3.  Tort System Claims Against the Trust ..............................   33
    4.  Litigation Between Defendant Class Members and Settlement Class
        Members ...........................................................   34
    5.  Pursuit of Third Party Claims .....................................   35
        a.  Defendant Class Member to Stand in Settlement Class Members'
            Stead .........................................................   35
        b.  Resolution of Claims ..........................................   36
        c.  Processing and Payment of Claims ..............................   37
        d.  Multiple Claims or Multiple Third Party Claims ................   37
    6.  Cooperation for Court Approvals ...................................   40
    7.  No Modification Without Consent ...................................   40

I.  Attorneys' Fees .......................................................   41

J.  Amendment .............................................................   41

APPENDIX 1 TO THE TRUST DISTRIBUTION PROCESS ..............................  A-1

SCHEDULE A ................................................................  B-1

                                      -ii-


                           TRUST DISTRIBUTION PROCESS

                         Annex A to the Trust Agreement


          This Trust Distribution Process creates the procedures for submitting,


processing and paying Class Member Claims and Third Party Claims.  Capitalized


terms used in this Trust Distribution Process are defined herein or in the


Glossary.



A.  Overview.

    --------


          The primary goal of the Trust is fair and equitable treatment for all


Beneficiaries consistent with Trust resources. This Trust Distribution Process


furthers that goal by establishing procedures that are intended to process and


evaluate Class Member Claims of Beneficiaries impartially, pay all Class Member


Claims over time, and maintain reasonable reserves for any Class Member Claims


in excess of projections. The Trustees shall implement and administer this Trust


Distribution Process in accordance with their duties under the Trust Agreement.


          The claims resolution process begins with a proof of claim.  The Trust


then makes a determination whether the claim meets the criteria for any of the


five Scheduled Diseases:  Mesothelioma, Lung Cancer, Other Cancer, Asbestos Lung


Disease I ("ALD-1") and Asbestos Lung Disease II ("ALD-2").  If the claim meets


the criteria for a Scheduled Disease, it will be evaluated based on factors that


have significance in the resolution of similar claims by settlement or trial,


including but not limited to the factors set forth in Schedule A hereto.  If the


claim does not meet the criteria for one of the


                                      -1-


Scheduled Diseases, the Trust will evaluate whether it nonetheless asserts a


compensable claim for an asbestos-related injury.


          After evaluation, the Trust will make a good faith settlement offer or


advise the Beneficiary of the reasons for rejecting the claim. The Beneficiary


may either accept or reject that offer or negotiate further with the Trust. If


the Beneficiary rejects the Trust's offer, he or she may submit supplemental


information to the Trust and have his or her claim reevaluated by the Trust


and/or negotiate further with the Trust. If negotiation with the Trust fails,


the Beneficiary shall, if he or she wishes to pursue the claim, proceed to


mediation and then to binding or nonbinding arbitration.  Beneficiaries may


bring an action against the Trust in the tort system only after they have


participated in good faith in both mediation and nonbinding arbitration and have


rejected the award in a nonbinding arbitration.


          Beneficiaries must also appear at a mandatory settlement conference


under the auspices of the Court before proceeding to the tort system.  If a


Beneficiary rejects settlement following the settlement conference, he or she


may elect immediate binding arbitration or exit to the tort system.  No punitive


damages, pre-judgment or post-judgment interest, damages for risk of cancer, or


compensatory damages beyond Fibreboard's own share will be allowable in the tort


system.  Judgments may be collected only as provided in this Trust Distribution


Process.


          Similar claims-handling procedures (described in Section H below)


apply to certain Third Party Claims including those of Defendant Class Members


who succeed to Class Member Claims.


                                      -2-


          Class Member Claims and Third Party Claims will be eligible for


payment once they are Liquidated, whether by settlement, arbitration, or


judgment.  Judgments or claims settled after exit to the tort system will


normally be paid out over a five-year period, while claims resolved without


resort to the tort system will normally be paid over a three-year period.  Total


payments from the Trust in each year for Trust Expenses, Class Member Claims and


Third Party Claims are limited to the amounts set forth in Section E.  While the


Trust is expected to be able to pay all claims as Liquidated yearly, if amounts


available are insufficient to make all payments due on Liquidated claims in any


year, claims for Mesothelioma and Lung Cancer will be paid first, then Other


Cancer and ALD-1 claims, then ALD-2 claims, and then Residual Claims, whether


any such claims have been Liquidated by settlement, arbitration or judgment.


Within each of those categories, claims will be paid in the order of the date on


which a release is received by the Trust (for settled claims), an arbitration


ruling is rendered (for claims resolved through arbitration) or a judgment


becomes final (for claims resolved in the tort system).  Class Member Claims and


Third Party Claims which cannot be paid because the amount available for that


year is insufficient to make all payments due on such claims will be deferred


for payment (FIFO within their payment categories) until the following year.


B.  The Claim Procedure.

    -------------------


     1.  Submitting a Claim.  Other than Interim Claims submitted pursuant to

         ------------------


Article 7 of the Global Settlement Agreement, commencing on February 14, 1994,


any Beneficiary may submit a claim to the Trust.  To do so, the Beneficiary


shall provide to


                                      -3-


the Trust, on forms approved by the Trustees and the SCB, a proof of claim


including at least the following information concerning the Exposed Person:


name, address, social security number, date of birth, date of death (if


applicable), marital status and number and age of dependents, spouse's name and


social security number, occupation, smoking history, year of first exposure to


any asbestos or asbestos-containing products, identification and source of


identification of asbestos-containing products manufactured or supplied by


Fibreboard to which the Exposed Person was exposed, the work sites where the


Exposed Person was exposed to asbestos or to Fibreboard asbestos, the years of


such exposures including specific descriptive comments concerning the duration


and intensity of such exposure, the status of related workers compensation or


civil litigation regarding asbestos exposure, and the Scheduled Disease, if any,


for which the Beneficiary believes the claim qualifies or a statement of the


disease or injury the Beneficiary asserts he or she has if he or she does not


believe he or she qualifies for a Scheduled Disease.  In addition, the


Beneficiary shall provide the Trust with a Medical Report, a PFT Report and a B-


reader Report, and, in Malignancy Claims, a pathology report (where available).


     2.  Expedited Review Option.  The Trust may establish a process for
         ------------------------


expedited review of ALD-2 claims by persons desiring an accelerated settlement


of their claim at a fixed amount ("Expedited Review Claims").  A Beneficiary


seeking such expedited review shall submit an abbreviated proof of claim for


expedited review by the Trust.  The abbreviated proof of claim shall provide the


following information concerning the Exposed Person:  name, address, social


security number, date of birth, date of death (if applicable), marital status,


spouse's name and social security number, occupation, the


                                      -4-


Scheduled Disease for which the Beneficiary believes the claim qualifies, the


work sites where the Exposed Person was exposed to asbestos or to Fibreboard


asbestos and such information requested by the Trust that adequately


demonstrates exposure to asbestos or asbestos-containing products and to


Fibreboard asbestos or asbestos-containing products.  In addition, the


Beneficiary shall supply the Trust with a Medical Report.  The Trust will


expeditiously review the abbreviated proof of claim and may, but is not required


to, offer to settle such Expedited Review Claims for a single fixed cash payment


of an amount and on a time schedule established from time to time by the Trust.


If the Trust determines not to offer to settle an Expedited Review Claim, the


Beneficiary may submit a proof of claim as set forth in Section B.1.


          The Trust may establish additional categories of Expedited Review


Claims with differing fixed cash payments and differing information


requirements.  In addition, the Trust may eliminate or suspend the Expedited


Review Claim option for one or more categories of Class Member Claims if it


determines that such option is encouraging the filing of claims that would not


otherwise be eligible for payment under these procedures or is using a


disproportionate share of the Trust's assets.


     3.  Ordering of Claims for Processing.  Claims shall be ordered for
         ---------------------------------


processing by the Trust in the manner described in this Section.  As a general


practice, the Trust shall review its claims files on a regular basis and notify


all Beneficiaries whose claims are likely to be processed in the near future.  A


Beneficiary's position in the FIFO queue for processing will be determined by


the date of receipt by the Trust of a properly completed proof of claim form,


and among claims received the same day, by the date of


                                      -5-


diagnosis of the disease on which the claim is based.  Where the Beneficiary has


filed an incomplete proof of claim, the Trust shall notify the Beneficiary of


the need for additional information and shall not process the claim until the


file is complete.  A Beneficiary shall not receive a position in the FIFO


processing queue until his or her proof of claim is properly completed.


     4.  Initial Evaluation of Claims.  As a proof of claim is reached in the
         ----------------------------


FIFO queue, the Trust shall evaluate it to determine whether the claim qualifies


as one of the five Scheduled Diseases.  A Beneficiary's right to assert a valid


claim for an asbestos-related injury or disease is in no way prejudiced by


failure of his or her asbestos-related injury or disease to qualify as one of


the Scheduled Diseases.  If a Scheduled Disease is determined to exist, the


Trust shall evaluate the Beneficiary's claim using factors relevant to the


resolution of asbestos claims for that Scheduled Disease by settlement or trial,


including the factors set forth in Schedule A hereto.  If the Trust concludes


that the Beneficiary's injury or disease does not meet the criteria for a


Scheduled Disease, it shall determine whether the Beneficiary nonetheless


asserts a meritorious claim for an asbestos-related injury or disease and shall


evaluate the claim using factors relevant to the resolution of similar claims by


settlement or trial.  If the Trust accepts for disposition a claim with respect


to a disease which is not a Scheduled Disease, the Trust shall place it in a


Schedule Category based on which Scheduled Disease it most closely resembles.


          In addition to the medical evidence which Beneficiaries are required


to submit with the initial proof of claim or submit as part of any supplemental


information


                                      -6-


provided to the Trust, the Trust may require that additional kinds of medical


evidence be provided.  The Trust may obtain additional medical evidence which it


believes necessary to evaluate any claim.


          Once its evaluation is completed, the Trust shall make a written good


faith offer of settlement based upon such evaluation or advise the Beneficiary


of the reasons for rejecting the claim.  Such responses shall be sent to the


Beneficiary's counsel or representative, if any, or to the Beneficiary.  The


claim shall not be processed further until the Trust receives a response from


the Beneficiary.  The Beneficiary and the Trust shall then negotiate in good


faith toward a resolution of the claim.  Once the Trust receives confirmation of


resolution of the claim, it shall forward an appropriate form of release


approved by the Trust to the Beneficiary's counsel or representative, or to the


Beneficiary.  The claim's eligibility for payment under Section F shall be based


on the date the executed release with respect to a resolved claim is received by


the Trust.


     5.  Further Claims Processing.  If the Beneficiary rejects the Trust's
         -------------------------


initial offer, he or she may elect to negotiate further with the Trust and may


submit additional information to the Trust in support of the claim.


Alternatively, he or she may proceed to mediation as set forth below.  The Trust


shall evaluate claims based on the medical evidence submitted to the Trust as


part of the Beneficiary's proof of claim.  A Beneficiary may, but need not,


supple ment this information from time to time with additional medical evidence.


If he or she does so, the Beneficiary's legal representative or, if he or she


has no legal representative, the Beneficiary shall submit an affidavit or


declaration under penalty of perjury, in a form acceptable to the Trust, stating


that he or


                                      -7-


she has submitted to the Trust all medical reports relating to any alleged


asbestos-related condition other than those subject to attorney work product


privilege.  If the Beneficiary submits supplemental information to the Trust,


the Trust shall reevaluate the claim and either make a written good faith


settlement offer or reject the claim.  The Beneficiary shall then reject or


accept any offer based on reevaluation using the procedures outlined above for


rejection or acceptance of the Trust's initial offer.  If the Beneficiary


rejects such offer, he or she may elect to negotiate further with the Trust or


shall proceed to mediation.


     6.  Second (Malignant) Injury Claims.  The Trust shall offer to settle Non-
         --------------------------------


Malignancy Claims on two alternative bases:  1) in exchange for a general


release; or 2) in exchange for a limited release covering all asbestos-related


personal injury claims other than subsequent Malignancy Claims.  The Trust's


settlement offer for a limited release shall be the amount of its offer for the


general release minus the lesser of:  1) half of its settlement offer for the


general release; and 2) $1,750.  If a Beneficiary accepts the Trust's offer of a


limited release, the Trust shall account for the monetary difference between its


settlement offer for the general release and its settlement offer for the


limited release in a separate account.  A Second Injury Claim shall be ordered


in the FIFO queue for processing based upon the date of receipt by the Trust of


the Second Injury Claim, and shall be treated as a new claim under this Trust


Distribution Process.


     7.  Audit Procedures.  In all cases, the Trust may require that medical
         ----------------


x-rays, tests, laboratory examinations and other medical evidence comply with


recognized medical standards regarding equipment, testing methods, and


procedures to assure that


                                      -8-


such evidence is reliable.  The Trust may develop methods for auditing the


reliability of all data submitted in support of claims, including product


identification and medical evidence, and may require independent interpretation


of CT scans, X-rays, pathology specimens or other physical evidence.  If its


audits show an unacceptable level of reliability for evidence submitted from


specific individuals or institutions, the Trust may refuse to accept evidence


from them.  In addition, the Trust may develop methods for auditing other types


of evidence necessary to support a claim.


     8.  Exigent Health and Extreme Hardship Claims.  Notwithstanding the FIFO
         ------------------------------------------


order processing rules described in Sections B.2 through B.4, the Trust may


process and Liquidate Extreme Hardship Claims and Exigent Health Claims at any


time.


          The Trust shall establish procedures to expedite its processing,


evaluation and negotiation of Exigent Health Claims and Extreme Hardship Claims


as well as the ADR procedures the Beneficiary asserting such a claim shall be


required to follow under Section C.  Such expedited procedures shall be designed


to allow all Exigent Health Claims to be Liquidated within six months of


presentation of a properly completed proof of claim to the Trust, and to ensure,


to the maximum extent practicable, that in jurisdictions in which Beneficiaries


can obtain accelerated trial dates for Exigent Health Claims, the Trust's


negotiation process and the ADR procedures can be completed before a trial of an


Exigent Health claimant's case against Defendant Class Members.


          If the Trust determines, in its sole discretion, that a Beneficiary


asserting an Extreme Hardship Claim needs greater financial assistance than


would be afforded by the payout scheme set forth in Section F.3, the Trust may


accelerate payment to the


                                      -9-


Beneficiary of part or all of the amount for which that claim has been


Liquidated as the Trust deems appropriate.  Payments with respect to Exigent


Health Claims shall be made only in accordance with the payout scheme set forth


in Section F.3.


     9.  Withdrawal of Claims.  If the Beneficiary does not respond to the
         --------------------


Trust's offer on initial evaluation or reevaluation within 30 days, the Trust's


offer and the claim shall be deemed to be withdrawn without prejudice unless the


Beneficiary has requested in writing one or more extensions of time, not to


exceed six months in the aggregate, within which to respond to the offer.  If


the Beneficiary still has not responded to the Trust's offer at the end of the


extension period, the Trust's offer and the claim shall then be deemed to be


withdrawn without prejudice.  A Beneficiary may also elect to withdraw a claim


at any time without prejudice.  A claim that is withdrawn or deemed to have been


withdrawn may be resubmitted at any time, and shall be reordered in the FIFO


queue for processing based on the date of receipt by the Trust of a properly


completed proof of claim with respect to the refiled claim.


C.  ADR Procedures.
    --------------



     1.  Mediation.  If the Beneficiary chooses not to submit supplemental
         ---------


information or rejects the Trust's offer based on its evaluation of such


supplemental information and elects not to negotiate further with the Trust, the


Beneficiary's claim shall be referred to mediation.  The Trust shall establish


and maintain a list of Qualified Mediators, compensated by the Trust.  The Trust


shall refer claims to Qualified Mediators from the list in rotation as soon as


practicable after being notified by the claimant that he wishes to proceed to


mediation.


                                      -10-


          Claims shall be handled by each mediator in the order received by him


or her, to the extent practicable.  Any party may be represented by legal


counsel.  The mediator shall confer with the parties and/or their legal


representatives, individually and jointly.  Such conference may be in person or


by telephone, at the claimant's election.  The Beneficiary and a representative


of the Trust with settlement authority must personally participate in the


conference unless, in the judgment of the mediator, the Beneficiary's physical


or psychological condition precludes such participation.  Such conference shall


be in the nature of a settlement conference.  The mediator shall review the


claim and the positions of the parties, the prior negotiations between the


parties, the offer(s) and demand(s), such information as the parties may wish to


submit as to a fair and equitable settlement, and all documents and medical


reports relevant to the claim.  At least five days prior to the mediation


conference, Beneficiary and the Trust shall each submit to the mediator a


concise, confidential statement outlining the Beneficiary's medical condition,


exposure to Fibreboard products and each party's position on settlement value.


The mediator shall work with both sides toward reaching an acceptable,


reasonable settlement.  The mediator does not have the authority to impose a


settlement on the parties.


     2.  Arbitration.  If the Beneficiary is unable to settle his or her claim
         -----------


with the Trust within 30 days of the mediation conference, the Beneficiary


shall, if he or she wishes to pursue the claim, proceed to arbitration of the


claim.  The arbitration shall be commenced by a written demand for arbitration


by the Beneficiary served on the Trust within 45 days of the mediation


conference.  Such arbitration shall be binding or


                                      -11-


nonbinding at the election of the Beneficiary, which election must be made in


the Beneficiary's written demand for arbitration.  The Trust and the Beneficiary


shall bear their own fees and costs, except that the Trust shall pay the


administrative fees and costs of conducting the arbitration unless the


arbitrator in his or her sole discretion assesses such administrative fees and


costs against any Beneficiary for delaying or abusing the arbitration


procedures.


          The Trust shall maintain a list of Qualified Arbitrators.


Arbitrations shall be conducted by a single Qualified Arbitrator.  The


Beneficiary and the Trust shall attempt to agree on a Qualified Arbitrator who


will preferably, but not necessarily, be selected from the list maintained by


the Trust.  If the parties cannot agree on a Qualified Arbitrator, a Qualified


Arbitrator shall be selected pursuant to the procedures of an independent


arbitration facility to be selected by the Trust or by such other procedures as


may be adopted by the Trust.  The parties shall provide the Qualified Arbitrator


and each other with copies of all relevant materials concerning the claim and


any supplementary information they wish the Qualified Arbitrator to consider not


less than 30 days prior to the date of the arbitration hearing.  The Qualified


Arbitrator may require the parties to submit such additional information as he


or she deems necessary.  The Qualified Arbitrator shall conduct a hearing on the


claim at which testimony may be offered, unless both parties agree to waive such


hearing.  In nonbinding arbitrations, the Beneficiary must attend the hearing in


person, unless in the judgment of the Qualified Arbitrator his or her physical


or psychological condition makes such attendance impossible.  The Qualified


Arbitrator shall issue an award promptly but in no event later


                                      -12-


than 120 days from the date on which he or she receives the last submission of


information from either of the parties relevant to the claim, unless the parties


agree to extend such time.  The Award shall be based on the same factors used by


the Trust in evaluating claims.


          If the Beneficiary elected binding arbitration at the time of the


demand, neither party shall have the right to appeal the award other than on


grounds set forth in the Federal Arbitration Act.  If the Beneficiary elected


nonbinding arbitration at the time of the demand, the award shall become final


and binding if the Beneficiary does not reject the award by so notifying the


Trust in writing within 30 days after receipt of the award.  If the Beneficiary


does not reject the award as provided above, he or she shall be deemed to have


accepted it.  If the Beneficiary rejects the award, the award shall not be


binding on either party and the Beneficiary may proceed to the tort system under


the procedures set forth below.


     3.  Location for ADR Procedures.  The Trust shall establish procedures to
         ---------------------------


conduct mediations and arbitrations at scheduled intervals at such locations


around the United States as the Trust determines will be convenient to the


largest numbers of claimants and will not impose undue burden on the Trust.


D.  Litigation.
    ----------


          A Beneficiary may not proceed to litigate his or her claim against the


Trust in the tort system unless he or she has in good faith:  (1) submitted a


proof of claim and rejected the resulting settlement offer from the Trust; (2)


participated in a mediation conference and failed to settle his or her claim;


(3) participated in nonbinding arbitration


                                      -13-


and rejected the resulting arbitration award; and (4) participated in a


mandatory settlement conference as described below.  The following procedures


shall govern any Beneficiary who elects to litigate in the tort system his or


her claim against the Trust.


     1.  Mandatory Settlement Conference.  Before any Beneficiary may proceed to
         -------------------------------


the tort system, the Beneficiary must request the Court to conduct a mandatory


settlement conference with respect to the claim.  This mandatory settlement


conference may be conducted by the Court, or by another judge or a neutral


special master designated by the Court, or, if both the Beneficiary and the


Trust agree, by a mutually selected, neutral third party other than the Court


(the "Settlement Conference Designee").  The settlement conference may be


conducted by telephone unless the Court or the Settlement Conference Designee


determines, on application by the Trust or the Beneficiary, that the conference


should be conducted in person.  If the Court or the Settlement Conference


Designee so determines, the settlement conference must be attended in person by


the Beneficiary, unless in the judgment of the Court or the Settlement


Conference Designee his or her physical or psychological condition makes such


attendance impossible, and by a representative of the Trust with settlement


authority at such location as the Court or the Settlement Conference Designee


shall determine.  If no settlement is reached within 30 days of the mandatory


settlement conference, the Beneficiary and the Trust shall submit to each other


on that date a written settlement offer that will remain in effect for an


additional 30 days.  If neither party accepts the other party's settlement offer


during this period, then the Beneficiary may, upon certification from the Court


or the Settlement Conference Designee that the


                                      -14-


Beneficiary has completed the settlement conference process and otherwise has


complied with the requirements of the preceding paragraph of this Section D,


commence a lawsuit against the Trust in the tort system or elect binding


arbitration.


     2.  Procedural Rules.
         ----------------


          a.  Any Beneficiary who elects binding arbitration following the


mandatory settlement conference shall follow the procedures set forth in Section


C.2 above.  Payment of any resulting award shall, however, be governed by


Section F of this Trust Distribution Process.


          b.  Any Beneficiary who elects to resolve a claim through the tort


system may pursue the claim in any appropriate forum, subject to the procedures


set forth herein.  Payment of any resulting judgment shall, however, be governed


by Section F of this Trust Distribution Process.


          c.  The Trust may assert any and all defenses available to it or which


would have been available to any Trustor against which the claim could have been


asserted absent Global Approval Judgment with respect to Beneficiaries who elect


to resolve their claims through the tort system.


          d.  In no event shall a Beneficiary be permitted to seek or recover


from the Trust in a lawsuit in the tort system any punitive or exemplary damages


of any sort.  Nor may any claimant seek or recover compensatory damages in


excess of Fibreboard's actual share of responsibility or for the actual


percentage risk of contracting cancer.  Finally, no Beneficiary may seek or


recover pre-judgment interest in a suit in the tort


                                      -15-


system.  Any other damages available under the applicable law shall remain


recoverable except as provided in Section D.2.e below.


          e.  In no event shall the Trust or any other Person be required to


post a bond to stay collection of a judgment in the tort system.  Judgments


shall be paid by the Trust in the order set forth in Section F below, and no


Beneficiary shall be permitted to take any steps to collect a judgment from the


Trust except as set forth in this Trust Distribution Process.  The Trust shall


not be responsible to pay post-judgment interest; in lieu thereof, the


procedures set forth in the last sentence of Section F.1 shall apply.


          f.  (i) The death of a Beneficiary after he or she has filed a proof


of claim with the Trust shall not eliminate compensable elements of his or her


claim accruing prior to the date of death, by, for example, eliminating any


claim for damages for pain and suffering occurring prior to the date of death or


by creating an offset to a lost earnings award for personal consumption


occurring prior to the date of death, notwithstanding applicable state law to


the contrary.  (ii) However, such compensable elements may not be recovered


after exit to the tort system unless the Beneficiary shows that he or she could


have recovered such damages absent compliance with the requirements of the Trust


Distribution Process.


          g.  At trial the defendant shall be the Trust and the Trust and


Beneficiary shall jointly request that the Trust be introduced to the trier of


fact (judge or jury as the case may be) in the following fashion or in another


substantially similar fashion as the trial court may direct, in addition to any


other evidence permitted by the Court about the Trust's identity, goals and


operations:


                                      -16-


               Members of the jury, this is an action for damages for

          [personal injury/ wrongful death] brought by plaintiff[s]

          against [various defendants, including] the Fibreboard

          Asbestos Compensation Trust.

               The Fibreboard Asbestos Compensation Trust was created

          by Order of a United States District Court to provide fair

          and equitable treatment for persons with asbestos injury for

          which Fibreboard Corporation might bear legal liability.

          The Trust has a fixed amount of money with which to

          compensate all persons with an asbestos injury to whom

          Fibreboard is found to be legally liable.  This sum of money

          must cover all victims, past and future.  Under no

          circumstances may you award any sum designed or intended to

          punish or make an example of Fibreboard or the Trust.

               If you should find that Fibreboard or products

          manufactured by Fibreboard were a legal cause of injury to

          plaintiff[s], any payment of damages awarded with respect to

          Fibreboard's products will be made by the Trust, not by

          Fibreboard itself.  The fact that a trust exists is in no

          way an indication that you should impose any liability on

          the Trust.  No sum you might award will be paid by either

          Fibreboard or by insurance; any award will be paid only by

          the Trust.

          h.  Any Beneficiary who elects to resolve a claim through the tort


system shall provide the Trust (without cost to the Trust) with copies of all


pleadings, discovery materials, evaluations, and other similar nonprivileged


documentation requested by the Trust in connection with its defense of the claim


in the tort system, so that the Trust may efficiently and economically prepare


for trial.


E.  Funds for Payment of Claims.
    ---------------------------


          As set forth in the Trust Agreement, the Trust shall administer three


funds, for payment of Trust Expenses, Class Member Claims and Third Party


Claims, to be known as "Fund I," "Fund II," and "Fund III."  Fund I is primarily


intended to pay expenses of, and claims against, the Trust during the first 25


years after Global Approval


                                      -17-


Judgment.  Fund II is primarily intended to pay expenses of, and claims against,


the Trust commencing 26 years after Global Approval Judgment, although it is


available to pay expenses and claims commencing 21 years after Global Approval


Judgment, if Fund I is insufficient for that purpose.  Fund III is primarily


intended to pay any expenses and claims not paid from Fund I or Fund II,


commencing 46 years after Global Approval Judgment, although it is available to


pay expenses and claims commencing 41 years after Global Approval Judgment if


Fund II is exhausted prior to 46 years after Global Approval Judgment.


          In order to assure that, to the maximum extent feasible, Trust


resources are preserved and fairly allocated among all Beneficiaries (i.e.,


those who will have claims in the future as well as those who have claims now)


Appendix 1 describes in detail how Trust surpluses realized in any Fiscal Year


are to be preserved and limits amounts that can be spent in any Fiscal Year to


pay claims from Funds I, II or III.  In general, Appendix 1 specifies that


payments for Trust Expenses, Class Member Claims and Third Party Claims may not


exceed annual earnings on the assets within the relevant Fund plus a portion of


the remaining principal (calculated by allocating remaining Fund principal


equally over the years remaining in the Fund then in use).  If any Surplus


remains after payment of all Trust Expenses, Class Member Claims and Third Party


Claims and certain indemnity expenses for a Fiscal Year (and after restoration


of any increases in Principal Amount used in prior years as described below),


such Surplus will either increase the Reserve Account or build Trust principal.


This Reserve Account will be used to pay expenses or claims for any later year


before Trustees may access any


                                      -18-


Increased Principal Amount to be used in that year.  If, however, in any of the


Fiscal Years 3 through 12 or 16 through 20 after Global Approval Judgment, the


Earnings Amount and Principal Amount together with the funds contained in the


Reserve Account in excess of $10,000,000 are not sufficient to pay Trust


Expenses and to make all payments with respect to Class Member Claims or Third


Party Claims for the first two Schedule Categories that are due or all payments


with respect to Class Member Claims or Third Party Claims for the third Schedule


Category that were due and unpaid on four consecutive prior Distribution Dates,


the Trust may increase the usable portion of the Fund principal by up to 25% for


any of Fiscal Years 3 through 12 after Global Approval Judgment or 12.5% for any


of Fiscal Years 16 through 20 after Global Approval Judgment.


     1.  Fund I.
         ------


          a.  Commencement of Payments.  The Trust shall not pay any Class
              ------------------------


Member Claim or Third Party Claim (other than Extreme Hardship Claims and


Expedited Review Claims) from Fund I until the Distribution Date first occurring


after the end of the first Fiscal Year after Global Approval Judgment.


          b.  Distributable Amount.  Total payments for Trust Expenses, Class
              --------------------


Member Claims and Third Party Claims made from Fund I for any Fiscal Year (i.e.,


payments for Trust Expenses, Extreme Hardship Claims and Expedited Review Claims


made during that Fiscal Year, together with payments for Class Member Claims and


Third Party Claims for that Fiscal Year made on the Distribution Date


immediately following that Fiscal Year) (other than any payments made from the


Reserve Account)


                                      -19-


shall not exceed the Distributable Amount for that Fiscal Year.  For the first


Fiscal Year after Global Approval Judgment the Earnings Amount for Fund I shall


be calculated from the date of Global Approval Judgment.


          c.  Distribution of Remaining Balance.  The transfer from Fund I to
              ---------------------------------


Fund II of any remaining balance in Fund I shall occur on the earlier of (i) the


day after the Distribution Date for the twenty-fifth Fiscal Year after Global


Approval Judgment, or (ii) the day before the Distribution Date for the first


Fiscal Year occurring after the twentieth Fiscal Year after Global Approval


Judgment in which the maximum possible Distributable Amount is less than the


Earnings Amount and the Principal Amount that were in effect for Fund I for the


twentieth Fiscal Year after Global Approval Judgment, the Trust shall transfer


such remaining balance and the remaining balance of the Reserve Account to Fund


II, at which time payments out of Fund II shall commence as provided in Section


E.2.


     2.  Fund II.
         --------



          a.  Commencement of Payments.  No payments shall be made from Fund II
              ------------------------


until the Distribution Date for the twenty-first Fiscal Year after Global


Approval Judgment.  If at that time Fund I still has money left to pay Trust


Expenses, Class Member Claims or Third Party Claims, no payments shall be made


from Fund II until the earlier of:  (1) the day after the Distribution Date for


the twenty-fifth Fiscal Year after Global Approval Judgment; or (2) the Fiscal


Year in which the Distribution Date referred to in Section E.1.c.(ii) occurs.


                                      -20-


          b.  Distributable Amount.  The total amount of payments for Trust
              --------------------


Expenses, Class Member Claims and Third Party Claims made from Fund II for any


Fiscal Year is limited to the Distributable Amount for that Fiscal Year.


          c.  Distribution of Remaining Balance.  The transfer from Fund II to
              ---------------------------------


Fund III of any remaining balance in Fund II shall occur on (i) the day after


the Distribution Date for the twentieth Fiscal Year after the transfer of the


balance in Fund I to Fund II pursuant to Section E.1.c, or (ii) such later date


as the Trustees determine would be in the best interests of all Beneficiaries,


both present and future (but in no event later than the day after the


Distribution Date for the forty-fifth Fiscal Year after Global Approval


Judgment); at which time payments out of Fund III shall commence as provided in


Section E.3.


     3.  Fund III.
         --------

          a.  Commencement of Payments.  No payments shall be made from Fund III
              ------------------------


until the Distribution Date for the forty-first Fiscal Year after Global


Approval Judgment.  If at that time Fund II still has money left to pay Trust


Expenses, Class Member Claims or Third Party Claims, no payments shall be made


from Fund III until the date Fund II is exhausted or the balance of Fund II has


been transferred into Fund III pursuant to Section E.2.c.


          b.  Distributable Amount. The total amount of payments for Trust
              --------------------


Expenses, Class Member Claims and Third Party Claims made from Fund III for any


Fiscal Year is limited to the Distributable Amount for that Fiscal Year.


                                      -21-


          c.  Distribution of Remaining Balance.  If there is a remaining
              ---------------------------------


balance in Fund III on the day after the Distribution Date for the sixty-first


Fiscal Year after Global Approval Judgment, and there are then, or are


anticipated by the Trustees to be in the future, any Trust Expenses, Class


Member Claims, Third Party Claims and other obligations of the Trust which have


not yet been liquidated and/or fully paid, the Trust shall use the remaining


balance of Fund III to pay such Trust Expenses, Class Member Claims, Third Party


Claims and other obligations of the Trust.  Upon the occurrence of the


Termination Date, the Trust shall apply any remaining balance of Fund III to


such charitable purposes as the Trustees in their reasonable discretion, after


consultation with the SCB, shall determine, which charitable purposes, if


practicable, shall be related to occupational health.


     4.  Determination of Distributable Amount for Each Fund.  Within 90 days
         ---------------------------------------------------


following the end of each Fiscal Year after Global Approval Judgment, the Trust


shall determine the Distributable Amount for such Fiscal Year, which


Distributable Amount (after payment of Trust Expenses, Extreme Hardship Claims


and Expedited Review Claims for such Fiscal Year) shall be distributed to pay


Class Member Claims and Third Party Claims, in the order set forth in Section


F.2, on a date, no later than 120 days following the end of each such Fiscal


Year, chosen by the Trust (the "Distribution Date").


F.  Order, Timing and Limitations on Payments of Claims.
    ---------------------------------------------------

     1.  Eligibility for Payment.  All Class Member Claims and Third Party
         -----------------------


Claims become eligible to begin receiving payments from the Trust on the


Distribution Date


                                      -22-


immediately following the Fiscal Year in which such Class Member Claims or Third


Party Claims are Liquidated, provided that in the case of settled Class Member


Claims the Trust has received the release required by Section B.4.  Judgments


obtained in the tort system shall be eligible for payment in the same order as


Claims Liquidated by settlement or arbitration, except as provided in Section


F.3.b, and shall be treated as having been Liquidated on the date the claimant


obtains a final, nonappealable judgment, except that upon an unsuccessful appeal


by the Trust, the date of Liquidation shall be the date of the trial court


judgment.


     2.  Order of Payment.  On each Distribution Date, the Trust shall make
         ----------------


payments on Liquidated Class Member Claims and Third Party Claims in the


following order:  (1) claims for Mesothelioma and Lung Cancer; (2) claims for


Other Cancer and Asbestos Lung Disease I; (3) the first payment on claims for


Asbestos Lung Disease II which was due and unpaid on four or more consecutive


prior Distribution Dates, (4) the second payment on claims for Asbestos Lung


Disease II which was originally due and unpaid on four or more consecutive prior


Distribution Dates; (5) the third payment for claims on Asbestos Lung Disease II


which was originally due and unpaid on four or more consecutive prior


Distribution Dates; (6) any other payments on claims for Asbestos Lung Disease


II; and (7) Residual Claims.  While it is anticipated that the Trust will be


able to pay all Liquidated Class Member Claims and Third Party Claims on each


Distribution Date, all payments due on Liquidated claims for Mesothelioma and


Lung Cancer must be made before any payments due on Liquidated claims for


Asbestos Lung Disease I and Other Cancer may be made, all payments due on


Liquidated claims


                                      -23-


for Asbestos Lung Disease I and Other Cancer must be made before any payments


due on Liquidated claims for Asbestos Lung Disease II may be made, the first


payment on Liquidated claims for Asbestos Lung Disease II which was due and


unpaid on four or more consecutive prior Distribution Dates must be made before


any other payments for other Liquidated claims for Asbestos Lung Disease II may


be made, the second payment on Liquidated claims for Asbestos Lung Disease II


which was originally due and unpaid on four or more consecutive prior


Distribution Dates must be made before any other payments for other Liquidated


claims for Asbestos Lung Disease II may be made, the third payment on Liquidated


claims for Asbestos Lung Disease II which was originally due and unpaid on four


or more consecutive prior Distribution Dates must be made before any other


payments for other Liquidated claims for Asbestos Lung Disease II and all other


payments due on Liquidated claims for Asbestos Lung Disease II must be made


before any payments due on Liquidated Residual Claims may be made.  Within each


of the seven categories, payments due on Class Member Claims and Third Party


Claims shall be made in FIFO order based on when the Class Member Claims and


Third Party Claims were Liquidated, whether by settlement, arbitration or


judgment, except that settled Class Member Claims shall be ordered within each


such category according to when the release required by Section B.4 is received


by the Trust.  Other than by virtue of subrogation to a Class Member Claim


pursuant to Section H.5.a, no contribution claim brought by a Defendant Class


Member shall be paid inasmuch as resolution of a Class Member Claim against the


Trust gives rise to a right of set-off or reduction under


                                      -24-


Section H.1.a of the Trust Distribution Process sufficient to satisfy, and bar


the assertion of, any such contribution claim against the Trust.


     3.  Terms of Payment.
         ----------------

          a.  Claims Resolved Outside the Tort System.  Class Member Claims
              ---------------------------------------


resolved without filing an action against the Trust in the tort system and all


Third Party Claims shall be eligible for payment over a three-year period, 40%


due on the Distribution Date immediately following the Fiscal Year in which such


claim was Liquidated and 30% due on each of the next two Distribution Dates,


except for Expedited Review Claims paid pursuant to Section B.2 and Extreme


Hardship Claims paid pursuant to Section B.8 of this Trust Distribution Process.


          b.  Claims Resolved in the Tort System.
              ----------------------------------


               (i)  Class Member Claims resolved after the filing of an action


against the Trust in the tort system shall be eligible for payment on the


following schedule.  On the Distribution Date following the Fiscal Year in which


such a claim was Liquidated, the Beneficiary shall be eligible to receive the


lesser of:  (1) 100% of the last settlement offer made by the Trust before the


Beneficiary filed an action against the Trust in the tort system, or 100% of the


proposed Award in nonbinding arbitration with the Trust pursuant to Section C,


whichever is greater; and (2) 40% of the amount of the judgment or settlement


after the action was filed.  The remaining balance of the judgment or settlement


shall be eligible for payment on the Distribution Dates following the next four


Fiscal Years in equal installments so long as each such installment does not


exceed $50,000.  In the event that each such installment would exceed $50,000,


the


                                      -25-


Beneficiary shall be eligible to receive $50,000 per year until the Class Member


Claim is fully paid.  In the event that any resulting judgment is less than the


proposed Award in nonbinding arbitration with the Trust pursuant to Section C,


the Trust shall be entitled to recover as a cost of litigation and deduct from


the judgment its cost of mediation and arbitration pursuant to the procedures


set forth in Section C.


               (ii)  Notwithstanding the foregoing, in order to prevent evasion


or abuse of the ADR provisions of this Trust Distribution Process, to conserve


the assets of the Trust for the benefit of all Beneficiaries, and to manage


prudently the cash flow of the Trust in a manner consistent with Section E of


this Trust Distribution Process, the Trustees shall have the discretion, in any


instance in which the Beneficiaries' judgments against the Trust result from a


trial of the claims of more than 15 such Beneficiaries, to pay such judgments in


such manner and over such a longer time period (not to exceed 10 years) as the


Trustees shall determine is in the best interests of the Trust and of all


Beneficiaries.


     4.  Deferral of Payments.  All Class Member Claims or Third Party Claims
         --------------------


eligible for a payment on a Distribution Date which do not receive that payment


on that Date because the Distributable Amount for the Fiscal Year has been


exhausted shall have that payment deferred until the following Distribution


Date.  Any payment obligation so deferred shall retain its position in the FIFO


queue as set forth in Section F.2 and shall be accorded priority as set forth in


Section F.2.  Deferrals may continue from year to year until the Distributable


Amount is sufficient to make the payments due on deferred obligations.


                                      -26-


     5.  Limitation on Payment of Claims.  Aggregate payments on account of
         -------------------------------


Class Member Claims and Third Party Claims arising from any one individual's


exposure to asbestos shall not total more than $500,000, whether the Class


Member Claim or Third Party Claim is Liquidated through settlement, mediation,


arbitration or in the tort system.  Any individual with asbestos-related disease


shall be deemed to be a separate exposure for purposes of this section.


G.  All Claims Resolved Pursuant to the Trust Distribution Process.
    --------------------------------------------------------------


          In order to conserve the assets of the Trust, all Claimants are


enjoined from filing future litigation based on or arising out of a Class Member


Claim or Third Party Claim against the Fibreboard, Continental or Pacific


Releasees.  Any such claim may only be pursued against the Trust as provided in


this Trust Distribution Process.


H.  Defendant Class Member Procedures.
    ---------------------------------


          Pursuant to the Defendant Class Settlement Agreement, and except as


otherwise provided herein, (a) Defendant Class Members are releasing Third Party


Claims against the Trust, Fibreboard Releasees, Continental Releasees and


Pacific Releasees (except that nothing in this Trust Distribution Process or the


Defendant Class Settlement Agreement shall be read as releasing, or be deemed to


release, any claims whatsoever Defendant Class Members may have against the


Continental Releasees and Pacific Releasees other than those arising out of, or


in any way predicated upon obligations created by, the Insurance Policies); (b)


Fibreboard Corporation and the Trust are releasing contribution and indemnity


claims arising out of Class Member Claims; and (c) the Continental Releasees and


Pacific Releasees are releasing any claims (except for


                                      -27-


reinsurance claims) arising out of Class Member Claims they may have against


Defendant Class Members; provided, however, that Defendant Class Members shall


have rights against the Trust and the Trust shall succeed to Fibreboard's rights


against Defendant Class Members to the extent provided for under this Trust


Distribution Process.  Without enlarging any substantive rights accorded them by


this Trust Distribution Process, Defendant Class Members shall have such


procedural rights (relating to procedural issues not expressly dealt with by


this Trust Distribution Process) reasonably necessary to pursue or defend rights


accorded them by this Trust Distribution Process.  Class Member Claims against


the Trust to which Defendant Class Members succeed shall be governed by this


Section H of the Trust Distribution Process.  Settlement Class Members,


Fibreboard Corporation, Continental, Pacific and the Trust are bound by the


terms of this Section and must abide by the following procedures in connection


with suits by Settlement Class Members for asbestos-related injury or disease


against Defendant Class Members.


     1.  Claims Liquidated Before Judgment Against Defendant Class Members.
          -----------------------------------------------------------------


          a.  Calculation of Set-Off Amount.  If a Settlement Class Member
              -----------------------------


Liquidates his or her Class Member Claim against the Trust before judgment is


rendered in litigation between the Settlement Class Member and Defendant Class


Member(s), the Trust (itself or in Fibreboard Corporation's stead) shall be


deemed, in such ongoing litigation, to be (i) a settled defendant within the


meaning of the law which governs the judgment entered by the trial court (or any


underlying verdict) (the "Judgment Forum Law") and (ii) a legally responsible


joint tortfeasor under Judgment Forum Law, without


                                      -28-


introduction of further proof.  Any judgment obtained by a Settlement Class


Member against Defendant Class Member(s) shall be reduced or set off to reflect


the Settlement Class Member's settlement with the Trust in the manner (whether


pro tanto, pro rata, jury allocation or apportionment or otherwise), and in the


amount provided for under Judgment Forum Law.  Where the dollar amount of the


settlement between the Trust and the Settlement Class Member is relevant to the


calculation of any such reduction or set off, that dollar amount shall be the


total amount agreed to by the Settlement Class Member and the Trust in


settlement of the Class Member Claim, including all sums paid and agreed to be


paid, without any reduction to present value for claims paid or to be paid


within three years of Liquidation.  For that portion of any claim not to be paid


within three years of Liquidation, the amount of reduction or set off will be


calculated at present value as of the end of that three year period.  Trust


estimates as to the length of time likely to elapse before future payments will


be made will be binding on Defendant Class Members and Settlement Class Members


alike.  Where the judgment against the Defendant Class Member(s) resolves only a


portion of the Class Member Claim or potential Class Member Claim that the Class


Member has settled with the Trust (for example, personal injury as distinct from


wrongful death claims), the dollar amount of the settlement between the Trust


and the Settlement Class Member used in calculation of any reduction or set off


shall reflect any apportionment made by the Trust and the Settlement Class


Member reasonably and in good faith with regard to rights of the Defendant Class


Members under this Trust Distribution Process, provided (i) that Defendant Class


Members shall retain any rights available to them under Judgment


                                      -29-


Forum Law to challenge such apportionment, and (ii) that wherever Judgment Forum


Law calls for apportionment of economic and non-economic damages, the value


assigned to the Trust's settlement of a Class Member Claim shall be allocated


between economic and non-economic damages in the same proportion that the


subsequent judgment or underlying verdict against Defendant Class Member(s)


allocates such damages, notwithstanding any apportionment set forth in the


settlement documents.


          b.  Status of the Trust at Trial.  The Settlement Class Member and the
              ----------------------------


Trust shall consent to any procedures required in order to enable the trial


court to establish the amount of any judgment reduction or set off in respect of


a Trust settlement as if the Trust, itself or in Fibreboard Corporation's stead,


had been a party to the litigation prior to set tlement.  Should a trial court


require that the Trust or Fibreboard Corporation be a party in order to


establish such amount, no objection shall be made by the Trust or the Settlement


Class Member to the filing by Defendant Class Member(s) of a third-party


complaint or to the joinder of the Trust, for itself or in Fibreboard


Corporation's stead, as a party for this limited purpose only.  The Trust, if


made a party, shall not be required to enter an appearance, be subject to


discovery as a party, or be subject to default or other trial court process or


procedure.  Under no circumstances shall Fibreboard Corporation or the Insurers


be made parties for any purpose.


          c.  Discovery and Informational Issues.  The Trust shall comply with
              ----------------------------------


the rules of discovery under Judgment Forum Law concerning requests for product


exposure and disease information provided by the Settlement Class Member


pertaining



                                      -30-


to such Class Member Claim.  In response to a Defendant Class Member request,


the Trust and the Settlement Class Member shall promptly verify, no later than


the start of jury selection in the trial of an action by the Settlement Class


Member against the Defendant Class Member, the fact of the settlement; and in


accordance with Judgment Forum Law, also shall provide information regarding the


amount and terms of any such settlement of a Class Member Claim.  Without waiver


by the Trust or Settlement Class Members of their rights to object to discovery


of such information, neither product exposure nor disease information provided


pursuant to this Subsection H.1.c shall be considered inadmissible at trial


based on Rule 408 of the Federal Rules of Evidence or any of its state law


counterparts.


     2.  Claims Not Liquidated When Verdict or Judgment Obtained Against
         Defendant Class Members.
         ---------------------------------------------------------------


          a.  Effect of Verdict or Judgment.  Except as provided in Section
              -----------------------------


H.2.b and Section H.3, if a Settlement Class Member goes to judgment or verdict


against one or more Defendant Class Members without having Liquidated his or her


Class Member Claim against the Trust, the Settlement Class Member forever waives


and releases that portion of his or her Class Member Claim against the Trust


which would have been determined (under principles of Judgment Forum Law


unaffected by Global Approval Judgment) by the verdict or judgment had the Trust


for itself or in Fibreboard Corporation's stead been a judgment defendant.


          b.  Retention of Several Liability Claim.  Notwithstanding any other
              ------------------------------------


provision of Section H.2, where (under principles of Judgment Forum Law


unaffected by Global Approval Judgment) the Trust's liability to a Settlement


Class Member would be



                                      -31-


several only, or where the Trust's liability as to a particular category of


damages (for example, non-economic damages) would be several only, a Settlement


Class Member shall retain that several-only aspect of his or her claim against


the Trust, even if the Settlement Class Member goes to judgment or verdict


against a Defendant Class Member without having Liquidated his or her Class


Member Claim.  However, no aspect of the Class Member Claim to which principles


of joint or joint and several liability would apply shall be so retained.


Should the Trust thereafter settle with the Settlement Class Member based only


on the Trust's several liability, the release shall state that Third Party


Claims based on joint, or joint and several, liability are not barred by virtue


of the several liability settlement and may be pursued in accordance with the


provisions of this Trust Distribution Process.


          c.  Payment of Verdict or Judgment.  Upon payment of a verdict or
              ------------------------------


judgment returned prior to Liquidation of the underlying Class Member Claim, the


Defendant Class Member(s) shall succeed in all respects to that portion of the


Class Member Claim against the Trust which would have been determined (under


principles of Judgment Forum Law unaffected by Global Approval Judgment) by the


judgment in the action against the Defendant Class Member had the Trust for


itself or Fibreboard Corporation's stead been a judgment defendant, except to


the extent provided in Sections H.2.b and H.5 hereof, and may pursue such Class


Member Claim in accordance with this Trust Distribution Process.


Notwithstanding any contrary provisions of Judgment Forum Law, a Class Member


Claim to which a Defendant Class Member may succeed under this subsection upon


payment of a verdict or judgment shall not be lost or extinguished


                                      -32-


by virtue of a Defendant Class Member's settlement with a Settlement Class


Member reached after a contested trial resulting in verdict, or a verdict or


jury or court fact finding as to damages or judgment.


     3.  Tort System Claims Against the Trust.  Should a Settlement Class Member
         ------------------------------------


proceed to litigation against the Trust pursuant to Section D of this Trust


Distribution Process, no objection shall be made in such tort system cases by


the Trust or the Settlement Class Member to the filing by Defendant Class


Member(s) of a third-party or cross-complaint against the Trust as successor to


Fibreboard Corporation under the Global Approval Judgment.  Without in any way


waiving or limiting the provisions of this Trust Distribution Process limiting


the Trust's liabilities with respect to Class Member Claims and Third Party


Claims when a Class Member Claim proceeds to litigation against the Trust in the


tort system pursuant to Section D, Defendant Class Members shall retain against


the Trust whatever rights of contribution and/or indemnification they otherwise


would have had against Fibreboard Corporation under Judgment Forum Law and the


Trust shall retain whatever Fibreboard Corporation rights of contribution and/or


indemnification it would have had against Defendant Class Members under Judgment


Forum Law.  In the event that after a verdict or judgment against a Defendant


Class Member, the Defendant Class Member upon assertion of its rights is


determined to have a valid contribution claim or indemnity claim against


Fibreboard or the Trust under Judgment Forum Law, the Settlement Class Member's


verdict or judgment against the Defendant Class Member shall be reduced or set


off in the amount necessary under Judgment Forum Law to satisfy such Defendant


Class Member's claim for contribution


                                      -33-


or indemnity against Fibreboard or the Trust.  Nothing in this Section H.3 or in


Section H.2.a shall prevent the Settlement Class Member from liquidating and


collection pursuant to other provisions of Section D of this Trust Distribution


Process his or her claim against the Trust based on the verdict or judgment


referred to in this Section H.3.


     4.  Litigation Between Defendant Class Members and Settlement Class

         Members.
         ---------------------------------------------------------------


          In any litigation between Defendant Class Members and Settlement Class


Members each shall retain their respective rights under Judgment Forum Law to


introduce evidence at trial.


          Under no circumstances (other than the commencement by the Trust of


formal bankruptcy or insolvency proceedings) shall the Trust (or Fibreboard


Corporation) be treated as a bankrupt or insolvent defendant, nor shall the


Trust (or Fibreboard Corporation) be considered, for purposes of litigation


between Defendant Class Members and Settlement Class Members only, a Person who


cannot be made a party for lack of personal jurisdiction, or otherwise a party


over whom a Settlement Class Member is unable to obtain jurisdiction.


     5.  Pursuit of Third Party Claims.
         -----------------------------

          a.  Defendant Class Member to Stand in Settlement Class Members'

              Stead.
              ------------------------------------------------------------


          In pursuing any Class Member Claim against the Trust to which a


Defendant Class Member has succeeded under subsection H.2.c above, (i) the


Defendant Class Member shall stand in the stead of the Settlement Class Member


in respect of whose Class Member Claim the Defendant Class Member has succeeded,


(ii) such Class


                                      -34-


Member Claim shall be resolved by Defendant Class Members under this Trust


Distribution Process in the same manner as such Class Member Claim would have


been resolved had it been asserted by the Settlement Class Member, and (iii) it


shall be evaluated on the same basis as if the Settlement Class Member directly


presented his or her Class Member Claim to the Trust, without any enhancement,


discount or limitation because it is asserted by a Defendant Class Member.


Defendant Class Members must present evidence of such Class Member Claims in the


same manner as Settlement Class Members; provided, however, that Defendant Class


Members are not required to provide information unavailable to them because such


information is solely within the control of the Settlement Class Member.  In any


event, however, Defendant Class Member Claims are to be evaluated by the same


standards as Class Member Claims.  For the limited purpose of pursuing Class


Member Claims, or otherwise in respect of assertion of other rights specifically


granted under this Trust Distribution Process, Defendant Class Members shall be


treated as beneficiaries of the Trust; provided, however, that under no


circumstances shall Section H.6 below apply to Class Member Claims to which


Defendant Class Members have succeeded.


          b.  Resolution of Claims.  Notwithstanding any other provision of this
              --------------------

subsection, Class Member Claims to which Defendant Class Members have succeeded


under Section H.2.c hereof or Residual Claims shall be decided by binding


arbitration under Section C.2 of this Trust Distribution Process, if not settled


previously, and may not exit to the tort system.  In such arbitrations and in


its negotiations with Defendant Class Members, the Trust shall not assert any


Fibreboard Corporation defenses based on


                                      -35-


the state of the art, or failure to show negligence or product defect (whether


based upon design, manufacture or failure to warn), except in those


circumstances under which the Trust would also have asserted those defenses


against the Settlement Class Member to whose Class Member Claim the Defendant


Class Member has succeeded.  Moreover, the Trust shall not assert failure to


show negligence or product defect as a defense where a Class Member Claim to


which the Defendant Class Member has succeeded is brought by a former


manufacturer and/or distributor of asbestos-containing high-temperature pipe and


block insulation, if the issues of product defect or negligence (as the case may


be) covering such pipe and block insulation were fully litigated to an adverse


result against that Defendant Class Member at trial of the underlying asbestos-


related personal injury action.  Under no other circumstances shall the results


of such trial be given preclusive effect in any such arbitration.  Any


arbitration under this subsection shall be confidential, and no statement made,


or contention advanced, at such arbitration shall be introduced as evidence or


otherwise used against the maker or proponent of such statement or contention in


the course of any proceeding other than arbitrations under this Trust


Distribution Process.


          c.  Processing and Payment of Claims.  Class Member Claims to which
              --------------------------------


Defendant Class Members have succeeded shall be included in the FIFO queue


established pursuant to this Trust Distribution Process.  For purposes of


processing, the position of a Class Member Claim to which a Defendant Class


Member has succeeded in the FIFO queue shall be determined by the earlier of (a)


the date the Settlement Class Member filed with the Trust the underlying Class


Member Claim or (b) the date on


                                      -36-


which the Defendant Class Member paid the Settlement Class Member with respect


to the judgment or verdict.  For purposes of payment, a Class Member Claim to


which a Defendant Class Member has succeeded will be placed within the


appropriate Schedule Category set forth in Section F.2 and, within such


category, in FIFO order, based on the date on which the Defendant Class Member


paid the Settlement Class Member in respect to the judgment or verdict.  Class


Member Claims to which Defendant Class Members have succeeded, shall be paid


under the terms set forth in Section F.3.a.  Prior to receiving payment the


Defendant Class Member shall have provided a release as described in Section


B.4.


          d.  Multiple Claims or Multiple Third Party Claims.  Where Defendant
              ----------------------------------------------


Class Members succeed to a portion of a Class Member Claim by virtue of payment


with respect to any verdict or judgment where a Beneficiary retains an interest


in the several liability aspect of the same Class Member Claim (regardless of


the number of Defendant Class Members who may have succeeded to portions of the


Class Member Claim) ("Partial Claims"), Settlement Class Members and Defendant


Class Members shall comply with procedures established by the Trust to ensure


that all persons with rights under this Trust Distribution Process in respect of


the same Class Member Claim coordinate their effort so that all such Partial


Claims can be processed and Liquidated in a single proceeding, designed to


resolve all elements of such claims, whether malignancy or non-malignancy, and


all causes of action, whether for personal injury, death, loss of consortium, or


otherwise against the Trust; provided, however, that nothing in the foregoing


shall prevent the Trust, a Settlement Class Member or a Defendant Class


                                      -37-


Member, as the case may be, from electing to give or take a limited, non-


malignancy release under this Trust Distribution Process.  In evaluating Partial


Claims in the course of such a single proceeding, the Trust shall not


differentiate among the aspects of such claims based on whether the right to


payment is asserted by a Settlement Class Member or Defendant Class Member.  In


those circumstances where different parties (whether Settlement Class Member and


Defendant Class Member(s), or more than one Defendant Class Member) assert


rights under this Trust Distribution Process in respect of the same Class Member


Claim, any disputes regarding such Class Member Claim shall be presented in a


single arbitration.  Should more than one Defendant Class Member be entitled to


payment from a single settlement or award by the Trust, the Defendant Class


Members shall share such amount in the same proportion that each made payments


to the Settlement Class Member.  Notwithstanding the above or any other


provision of this Trust Distribution Process, (i) a Settlement Class Member


shall not be entitled to take to the tort system a Class Member Claim if any


portion of that claim was resolved as to a Defendant Class Member by settlement


or in binding arbitration pursuant to Section H.5.b of this Trust Distribution


Process; and (ii) Settlement Class Members retain all rights to resolve their


Partial Claims with the Trust after the verdict or judgment against the


Defendant Class Member and before one or more Defendant Class Member's related


Partial Claim(s) is submitted to the Trust in writing for resolution; provided,


however, that the Settlement Class Member's resolution of his or her Partial


Claim shall not bind any Defendant Class Members or the Trust with respect to


any Defendant Class


                                      -38-


Member's related Partial Claim.  The Trust shall settle Partial Claims only in


accordance with Section H.5.d-g.


          e.  If a Settlement Class Member resolves his or her Partial Claim


pursuant to Section H.5.d, the Trust or arbitrator will apportion the settlement


or award among all elements of the claims that are being resolved (for example,


personal injury, wrongful death, loss of consortium, etc.).  Until such time as


the Partial Claim of a Defendant Class Member has been Liquidated and paid or


denied, the related Partial Claim of a Settlement Class Member Liquidated under


Section H.5.d(ii) shall only be entitled to payment of


          (i)  that portion of the Settlement Class Member's Partial Claim


allocated to resolved claims which were not included in the verdict or judgment


against the Defendant Class Member, plus


          (ii)  $500,000 minus the amount in (i) above, multiplied by the ratio


of (x) the several liability portion of the verdict or judgment against the


Defendant Class Member to (y) the total underlying verdict or judgment against


the Defendant Class Member.  Any award of punitive or exemplary damages will be


excluded from the verdict or judgment against the Defendant Class Member when


calculating (x) or (y).


          f.  The provisions of Section H.5.e shall not apply if the underlying


total verdict or judgment in favor of a Settlement Class Member against one or


more Defendant Class Members (excluding any award for punitive or exemplary


damages) is $500,000 or less.


                                      -39-


          g.  The provisions of Section H.5.e will cease to apply if the Partial


Claim of a Settlement Class Member plus the related Partial Claims of all


Defendant Class Members are Liquidated for a total of $500,000 or less.


          h.  The provisions of Section H.5.e will cease to apply as to any


Partial Claim of a Defendant Class Member which is not submitted to the Trust


and served on the Settlement Class Member, or his attorney, if any, within three


months of the date on which the underlying judgment against the Defendant Class


Member becomes final.


     6.  Cooperation for Court Approvals.  Upon liquidation of his or her Class
         -------------------------------


Member Claim, each Beneficiary shall cooperate with the Trust in seeking any


needed trial court approval under Judgment Forum Law of the settlement.


     7.  No Modification Without Consent.  Neither the terms of this Section H
         -------------------------------


nor as they apply to Defendant Class Members the provisions of this Trust


Distribution Process as to arbitration may be modified without the written


concurrence of the Representative Defendant.  Other provisions of the Trust


Distribution Process may be modified (after prior notice to the Representative


Defendant) without the concurrence of the Representative Defendant unless the


modification (i) has an adverse effect on Defendant Class Members and (ii)


discriminates against them vis-a-vis Settlement Class Members, in which case the


modification shall require the written concurrence of the Representative


Defendant.


I.  Attorneys' Fees.
    ---------------


          Attorneys' fees payable in connection with Class Member Claims


Liquidated and paid through this Trust Distribution Process, whether as a result


of


                                      -40-


settlement, an arbitration award, or a judgment obtained in the tort system, and


whether or not calculated as a percentage of recovery, shall be the lower of the


fee provided in the contract between the Beneficiary and counsel and 25%.  Costs


related to the prosecution of the claim shall be subtracted from the recovery


before calculating the attorney's fee.  Legal fees shall be paid pro rata from


the payments due to the Beneficiaries as such payments are made by the Trust.


J.  Amendment.
    ---------


          No amendments or waivers of this Trust Distribution Process will be


permitted except as set forth in Section 3.1 of the Trust Agreement.


                               APPENDIX 1 TO THE


                           TRUST DISTRIBUTION PROCESS
                           --------------------------


     1.  Increased Principal Amount.  The Trustees may increase the Principal
         --------------------------


Amount for any of the third Fiscal Year through the twelfth Fiscal Year after


Global Approval Judgment or the sixteenth Fiscal Year through the twentieth


Fiscal Year after Global Approval Judgment up to the Increased Principal Amount


for that year, if


          (i)  the Distributable Amount (if not increased as provided in this


sentence) for that Fiscal Year, plus the amount, if any, by which the balance


(on the last business day of that Fiscal Year) of the Reserve Account exceeds


$10 million, is insufficient to pay all Trust Expenses for such Fiscal Year plus


all Class Member Claims and Third Party Claims included in any of the first two


Schedule Categories due and payable on the Distribution Date immediately


following that Fiscal Year, or any payments with respect to Class Member Claims


or Third Party Claims included in the third Schedule Category that were due and


unpaid on four or more consecutive Distribution Dates prior to the Distribution


Date immediately following that Fiscal Year, and


          (ii) the Trustees conclude that increasing the Principal Amount would


be in the best interests of all Beneficiaries, both present and future, and that


the sum of the Earnings Amount for Fund I, such amount in the Reserve Account in


excess of $10 million and the amount of the Increased Principal Amount does not


exceed the amount required to pay all such Trust Expenses and Class Member


Claims and Third Party Claims included in the first two Schedule Categories and


any payments with respect to


                                     -A-1-


 Class Member Claims or Third Party Claims included in the third Schedule


Category that were due and unpaid on four or more consecutive Distribution Dates


prior to such Distribution Date.


     2.  Reserve Account.  The Reserve Account shall initially be credited with
         ---------------


the full amount transferred to the Trust pursuant to Section 2.3(B) of the


Global Settlement Agreement, minus the sum of


          (a)  $1.340 billion of the starting balance of Fund I,


          (b)  $200 million, the starting balance of Fund II, and


          (c)  $10 million, the starting balance of Fund III.


The Reserve Account is part of Fund I.


     The Reserve Account shall be increased on each Distribution Date by


          (x)  100%, until the balance of the Reserve Account equals $25


               million,


          (y)  50%, after the balance of the Reserve Account equals $25 million


               and until the balance of the Reserve Account equals the sum of


               the Principal Amount and Earnings Amount for the prior Fiscal


               Year, and


          (z)  0%, after the balance of the Reserve Account equals the sum of


               the Principal Amount and Earnings Amount for the prior Fiscal


               Year,


of either


               (i)    if the Unreimbursed Borrowings as of such date is zero or


                      a positive number, then the Surplus as of such date, or


                                     -A-2-


               (ii)   if the Unreimbursed Borrowings as of such date is a


                      negative number, but such Unreimbursed Borrowings plus the


                      Surplus as of such date is a positive number, then such


                      positive number, or


               (iii)  if Unreimbursed Borrowings as of such date plus the


                      Surplus as of such date is zero or a negative number, then


                      zero (so that this calculation shall not result in a


                      decrease in the Reserve Account).


          The Reserve Account shall be used to pay all Trust Expenses, Class


Member Claims, Third Party Claims and payments made pursuant to Section 7.16 of


the Trust Agreement (it being understood that such payments pursuant to Section


7.16 shall not be limited by the amounts in the Reserve Account) for any Fiscal


Year in which the Principal Amount and the Earnings Amount is insufficient for


such purpose; provided, that the provisions of this sentence shall not be


applied to require the reduction of the balance of the Reserve Account below $10


million.  Notwithstanding the foregoing, during the first Fiscal Year after


Global Approval Judgment, the Trustees shall create and thereafter maintain an


appropriate reserve (to be taken out of the amounts otherwise included in the


Reserve Account) for required payments in later Fiscal Years for Class Member


Claims and Third Party Claims presented in such first Fiscal Year or before,


which reserve shall not be otherwise available for the purposes of the


immediately preceding sentence.  The Trustees shall have the discretion to


utilize any


                                     -A-3-


and all amounts in the Reserve Account to pay Trust Expenses, Class Member


Claims, Third Party Claims and payments pursuant to Section 7.16 of the Trust


Agreement.


                                     -A-4-


                                   SCHEDULE A
                                   ----------


Injury                        Factor
- ------                        ------
Mesothelioma                  Fibreboard share
                              age at diagnosis of mesothelioma
                              venue and status of litigation
                              amount of lost income
                              claimant alive or deceased
                              number of dependents

Lung Cancer                   Fibreboard share
                              year of diagnosis
                              venue and status of litigation
                              degree of functional impairment
                              industry of most significant exposure
                              amount of lost income
                              number of dependents
                              current or former smoker
                              ILO x-ray reading

Other Cancer                  Fibreboard share
                              age at diagnosis of cancer
                              venue and status of litigation
                              degree of functional impairment
                              time since first exposure
                              prior claim of less severe injury
                              employment status
                              number of minor dependents

Asbestos Lung
 Disease I                    Fibreboard share
                              venue and status of litigation
                              degree of functional impairment
                              industry of most significant exposure
                              disputed claim
                              claimant alive or deceased
                              claimant housebound and sedentary
                              claim for lost wages
                              ILO x-ray reading

Asbestos Lung
 Disease II                   Fibreboard share
                              venue and status of litigation
                              degree of functional impairment
                              ILO x-ray reading


                                     -B-1-

                                                                   EXHIBIT 10.13

                                DEFENDANT CLASS
                              SETTLEMENT AGREEMENT
                              --------------------

          This Defendant Class Settlement Agreement is made and entered into as

of December 22, 1993, by and among Owens-Illinois, Inc., a Delaware corporation

("Representative Defendant"), as representative of the Defendant Class, acting

by and through Defendant Class Counsel; Fibreboard Corporation, a Delaware

corporation; the Representative Plaintiffs as representatives of the Settlement

Class, acting by and through Class Counsel; Continental Casualty Company, an

Illinois corporation ("Continental"); CNA Casualty Company of California, a

California corporation ("CNA Casualty"); Columbia Casualty Company, an Illinois

corporation ("Columbia"); and Pacific Indemnity Company, a California

corporation ("Pacific"), together the "Parties."

                                R E C I T A L S
                                ---------------

          A.  On August 27, 1993, Class Counsel, Fibreboard Corporation,

Continental, CNA Casualty, Columbia, and Pacific announced an agreement in

principle to settle all future asbestos-related personal injury claims against

Fibreboard (the "Global Settlement").  The Global Settlement is set forth in the

transcript of a hearing before the Honorable Robert Parker, Chief Judge, United

States District Court for the Eastern District of Texas (the "Global Court").

The Global Settlement, as announced, was subject to the execution of definitive

agreements and final court approval, among other conditions.

          B.  In connection with implementing the Global Settlement,

Representative Plaintiffs, on behalf of themselves and the Settlement Class,

filed the Class Action on

                                     - 1 -


September 9, 1993.  On September 9, 1993, the Court provisionally certified the

Settlement Class as a mandatory, non-opt out class under Federal Rules of Civil

Procedure, Rule 23(b)(1)(B), and entered a temporary restraining order

preventing any member of the Settlement Class from initiating any asbestos

- -related claims against Fibreboard.  The relief afforded by the temporary

restraining order was extended by the entry of a preliminary injunction on

September 27, 1993, which shall remain in effect pending notice to the

Settlement Class and the hearing and determination of the fairness,

reasonableness, and adequacy of the proposed settlement of the Class Action.

          C.  In December, 1993 Representative Plaintiffs on behalf of

themselves and as representatives of the Settlement Class, Fibreboard

Corporation, Continental, CNA Casualty, Columbia, and Pacific, entered into a

definitive agreement to implement the Global Settlement (the "Global Settlement

Agreement").  A copy of the Global Settlement Agreement (including exhibits

thereto) is attached as Exhibit A hereto.

          D.  The expenditures necessary to process and resolve asbestos

lawsuits have contributed to more than ten major asbestos defendants filing for

bankruptcy reorganization.  Because some of these defendants represented a

significant portion of the traditional liability share for asbestos personal

injury cases, and since many jurisdictions apply the principle of joint and

several liability, these bankruptcy filings have increased costs substantially

and have caused significant delays to plaintiffs.

          E.  Claims for contribution and/or indemnification are infrequently

litigated in asbestos personal injury cases.  The vast majority of asbestos

- -related personal injury cases are settled by all defendants before trial.  In

those cases where trials result in


                                     - 2 -

judgments against non-settling defendants, the law in most jurisdictions

protects settling defendants against claims for contribution and/or indemnity by

judgment debtors.  Nevertheless, the potential remains for litigation of

contribution and/or indemnity claims.  The parties to the Global Settlement

Agreement and the members of the Defendant Class all have strong and common

interests in preventing a Fibreboard Corporation insolvency, in Fibreboard

Corporation funding a Global Settlement, in Fibreboard Corporation paying its

unfunded settlement obligations and in resolving potential Third Party Claims by

Defendant Class Members without the delay, expense, and uncertainty of

litigating such claims.  Although Defendant Class Members are numerous and

include, among others, manufacturers, distributors, shipowners, premises owners

and/or occupiers, and so-called "peripheral" defendants, any differing interests

that may exist among Defendant Class Members are outweighed by the benefits to

the Defendant Class as a whole afforded by the funds to be provided by the

success of the Global Settlement Agreement.

          F.  Fibreboard Corporation has been engaged in insurance coverage

litigation with Continental and Pacific for a number of years.  Although

Fibreboard Corporation was awarded coverage under a trial court judgment, the

insurers appealed that judgment and the outcome of the appeal remains uncertain.

The interests of the Defendant Class are served by the Global Settlement

Agreement, which provides over $1.5 billion to compensate Settlement Class

members for asbestos-related personal injuries for which Fibreboard Corporation

may bear legal liability, while eliminating the risk that Fibreboard Corporation

may lose insurance coverage, and which also may enable Fibreboard Corporation to

fund existing unfunded settlement obligations totalling over $1.0 billion.


                                     - 3 -

Absent the funds that will be made available by and as a result of the Global

Settlement Agreement, Defendant Class Members could bear a proportionately

greater share of the overall liability for asbestos-related personal injuries.

          G.  Representative Defendant adequately represents the interests of

the Defendant Class, in that Representative Defendant is a publicly held

corporation that has been sued in thousands of asbestos-related personal injury

lawsuits in jurisdictions throughout the country.

          H.  Defendant Class Counsel have extensive experience in asbestos

- -related litigation.  Defendant Class Counsel have reviewed the Global

Settlement Agreement (including the exhibits thereto) and have been advised of

the record to date in the Class Action, and have otherwise conducted a thorough

investigation of the facts and law relevant to the matters set forth herein.

Based upon this experience and investigation, Defendant Class Counsel have

determined that this Agreement is in the best interests of the Defendant Class.

          NOW, THEREFORE, in consideration of the foregoing and the mutual

covenants contained herein, the Parties hereby agree as follows:

                                I.  DEFINITIONS
                                    -----------

          Capitalized terms used, and not otherwise defined, herein are defined

in the Glossary of Terms attached as Exhibit A to the Global Settlement

Agreement.

                   II.  RESOLUTION OF DEFENDANT CLASS CLAIMS

          A.  Defendant Class Members hereby release the Released Parties from

any and all Third Party Claims and agree that the Global Approval Judgment shall

bar and

                                     - 4 -


enjoin permanently Defendant Class Members from prosecution of any Third Party

Claims against any of the Released Parties in any proceeding or court.

          B.  Fibreboard Corporation, Continental, CNA Casualty, Columbia,

Pacific and the Trust release contribution and/or indemnity claims against

Defendant Class Members as set forth in the Trust Distribution Process.

          C.  Defendant Class Members shall have the rights described in Section

H of the Trust Distribution Process.

                   III.  ACTIONS TO IMPLEMENT THIS AGREEMENT
                         -----------------------------------

          A.  Fibreboard Corporation shall commence, as a third-party claim or

other appropriate pleading in the Class Action, a mandatory, non-opt out class

action against the Defendant Class pursuant to Federal Rules of Civil Procedure,

Rule 23(b)(1) and (2) (the "Defendant Class Action").

          B.  The Parties shall join in motions, in form and substance

satisfactory to counsel for each of the Parties, to certify provisionally the

Defendant Class for settlement purposes only, to preliminarily enjoin the

prosecution of any Third Party Claim during the pendency of the Defendant Class

Action and for entry of the Defendant Class Order and Global Approval Judgment.

Should the motions to certify provisionally the Defendant Class for settlement

purposes only and to preliminarily enjoin the prosecution of any Third Party

Claims be granted, while the orders granting those motions are in effect before

entry of Global Approval Judgment, Section H of the Trust Distribution Process

and this Defendant Class Settlement Agreement shall govern -- as if they were

fully operative -- the rights and liabilities of the Parties with respect to

claims of Defendant Class Members arising out of

                                     - 5 -

Interim Claims resolved under Section 7 of the Global Settlement Agreement;


provided that during the Interim Period Fibreboard, the Insurers, the Interim

Committee and the Escrow Fund shall have (as appropriate and consistent with

Section 7 of the Global Settlement Agreement) the rights and responsibilities

assigned to the Trust in Section H of the Trust Distribution Process.  Should

Global Court Disapproval occur, Defendant Class Members shall be restored to any

rights they may have under applicable law to pursue claims otherwise released

under this Defendant Class Settlement Agreement.

          C.  Notice shall be given to the Defendant Class in form and substance

satisfactory to counsel for each of the Parties and approved by the Court.

Pursuant to such notice, a hearing shall be held pursuant to Federal Rules of

Civil Procedure, Rule 23 (e), to determine the fairness and reasonableness of

the settlement contemplated by this Defendant Class Settlement Agreement.

          D.  The certification of the Defendant Class pursuant to this

Defendant Class Settlement Agreement shall be binding if Global Approval

Judgment is entered.

          E.  In the event either (i) Global Court Disapproval occurs; (ii)

Class Counsel move to convert the Class Action or the Defendant Class Action to

a litigation class action; (iii) either the Court or the Global Court enters an

order over objection by the Representative Defendant converting the Class Action

or the Defendant Class Action to a litigation class action; or (iv) before

Global Approval Judgment or Global Court Disapproval, the Trust Distribution

Process is amended without complying with Section H.7 of the Trust Distribution

Process, then the order certifying the Defendant Class shall be vacated, and

Fibreboard Corporation and Representative Defendant shall stipulate to the

                                     - 6 -

dismissal of the Defendant Class Action without prejudice, and the Parties shall


return in all respects to the status quo ante, including, but not limited to,
                              ------ --- ----

the revocation of any releases given in this document or in the Trust

Distribution Process.  The Defendant Class shall retain any and all rights to

object to the continued prosecution of such action as a litigation class action

under Rule 23.  Neither this Defendant Class Settlement Agreement, nor its

exhibits, nor the settlement negotiations, nor the proceedings seeking approval

of the settlement, may be used in support of any application for a determination

that such action or any other action shall proceed as a class action except for

the purposes of the settlement in accordance with this Defendant Class

Settlement Agreement, or as evidence in any litigation or proceeding against any

of the Parties other than an action or proceeding to enforce the provisions of

this Defendant Class Settlement Agreement.

                               IV.  MISCELLANEOUS
                                    -------------

          A.  Amendments.  No amendment of any provision of this Defendant Class
              ----------

Settlement Agreement (or to Section H of the Trust Distribution Process) shall

be valid unless the same shall be in writing and signed by all Parties hereto

and, upon the request of any of them, approved by the Court.

          B.  Counterparts.  This Defendant Class Settlement Agreement may be
              ------------

executed in one or more counterparts, each of which shall be deemed an original

but all of which together will constitute one and the same instrument.

          C.  Further Actions.  The parties shall take such reasonable actions
              ---------------

as may be necessary or appropriate to consummate or implement this Defendant

Class Settlement Agreement.

                                     - 7 -


          D.  The Representative Defendant shall not be responsible for any cost

or expenses (including the expense of any class notice) associated with

obtaining any necessary Court approvals of this Defendant Class Settlement

Agreement.  In the event of Global Approval Judgment, Representative Defendant

may apply to the Court for approval of reimbursement of its own reasonable costs

and expenses, including the reasonable cost and expenses of its counsel, in an

amount not to exceed $250,000, incurred in connection with negotiating and

obtaining any necessary approvals of this Defendant Class Settlement Agreement.

In the event of Global Court Disapproval, Fibreboard and the Insurers will

negotiate in good faith with the Representative Defendant regarding whether, and

to what extent, reimbursement of Representative Defendant's expenses is

appropriate.

          E.  Defendant Class shall not change the identity of Representative

Defendant without consent of Class Counsel, Fibreboard Corporation, Continental

and Pacific without approval of the Court.

          IN WITNESS WHEREOF, this Agreement has been executed as of the date

first above written by the Parties hereto, thereunto duly authorized.

                                             ON BEHALF OF DEFENDANT CLASS


                                             By        Philip McWeeny
                                                ----------------------------
                                                Philip McWeeny


                                             FIBREBOARD CORPORATION


                                             By      Michael R. Douglas
                                                ----------------------------
                                                Title:  Sr. Vice President and
                                                        General Counsel

                                     - 8 -

                                             CONTINENTAL CASUALTY COMPANY



                                             By       Laurens F. Terry
                                                ----------------------------
                                                Title: Vice President

                                             CNA CASUALTY COMPANY OF CALIFORNIA


                                             By       Laurens F. Terry
                                                ----------------------------
                                                Title: Vice President


                                             COLUMBIA CASUALTY COMPANY


                                             By       Laurens F. Terry
                                                ----------------------------
                                                Title: Vice President
                                                       Continental Casualty Co.


                                             PACIFIC INDEMNITY COMPANY


                                             By        John J. Degnan
                                                ----------------------------
                                                Title: Senior Vice President

                                             ON BEHALF OF SETTLEMENT CLASS


                                             By       Joseph F. Rice
                                                ----------------------------
                                                Joseph F. Rice, Esq.


                                             By       Joseph B. Cox
                                                ----------------------------
                                                Joseph B. Cox, Jr., Esq.


                                             By        Steven Kazan
                                                ----------------------------
                                                Steven Kazan, Esq.


                                             By      Harry F. Wartnick
                                                ----------------------------
                                                Harry F. Wartnick, Esq.

                                     - 9 -
                                                                   EXHIBIT 10.14

                                                                       EXHIBIT D

                                ESCROW AGREEMENT


     ESCROW AGREEMENT made this 23rd day of December, 1993, by and among


Continental Casualty Company, an Illinois corporation ("Continental"), Pacific


Indemnity Company, a California corporation ("Pacific"), and The First National


Bank of Chicago (the "Escrow Agent").




     WHEREAS, Continental, Pacific and Fibreboard Corporation, a Delaware


corporation, have entered into an Agreement dated as of October 12, 1993 (as the


same may be amended from time to time, the "Settlement Agreement") relating to


the settlement of lawsuits relating to questions of insurance coverage, all as


described in the Settlement Agreement;




     WHEREAS, Fibreboard Corporation, Continental, Pacific, the Representative


Plaintiffs (acting by and through Class Counsel) (as such terms are defined in


the Glossary attached to the Global Settlement Agreement (as defined below) as


Exhibit A (the "Glossary")) entered into a Global Settlement Agreement as of


August 27, 1993 (as the same may be amended from time to time, the "Global


Settlement Agreement"), relating to the settlement, inter alia, of personal
                                                    ----- ----


injury lawsuits and lawsuits relating to questions of insurance coverage, all as


described in the Global Settlement Agreement;


                                      -1-


     WHEREAS, the Global Settlement Agreement provides for payment of an


aggregate amount of $1,525,000,000 by Continental and Pacific into an escrow


account pending further distribution of such funds; and




     WHEREAS, the parties desire to arrange for such escrow and appoint Escrow


Agent as the escrow agent in accordance with the terms hereof.




     NOW, THEREFORE, in consideration of the mutual promises contained herein


and for other good and valuable consideration, the receipt and sufficiency of


which is hereby acknowledged, and intending to be legally bound, the parties


agree as follows:




     1.  Interpretation and Definitions.  This Escrow Agreement is being

         ------------------------------


executed and delivered pursuant to Section 2.3 of the Global Settlement


Agreement and the Escrow Account created pursuant to this Escrow Agreement is


the Escrow Fund referred to therein.  The provisions of this Escrow Agreement


shall not in any event be construed so as to enlarge or diminish the rights of


any party under the Global Settlement Agreement.  Capitalized terms used and not


defined herein have the meanings given to them in the Glossary.




     2.  Appointment and Compensation of Escrow Agent.  Escrow Agent is hereby

         --------------------------------------------


appointed to act as escrow agent in accordance with the terms hereof, and


                                      -2-


Escrow Agent hereby accepts such appointment.  Escrow Agent shall have all the


rights, powers, duties and obligations provided herein.  All persons dealing


with the Escrow Agent are released from inquiry into the decision or authority


of the Escrow Agent and from seeing to the application of any monies, securities


or other property paid or delivered to the Escrow Fund.  Escrow Agent shall be


entitled to charge the Escrow Account for its fees, as determined in accordance


with the fee letter attached hereto as Exhibit A, and for reimbursement of


reasonable costs and expenses suffered or incurred by Escrow Agent in connection


with the performance of its duties and obligations hereunder including, but not


limited to, any suit in interpleader brought by Escrow Agent.




     3.  Deposit and Investment of Funds.  (a)  On December 30, 1993,

         -------------------------------


Continental shall deliver $986,827,500, and Pacific shall deliver $538,172,500,


for an aggregate amount of $1,525,000,000 (collectively, the "Funds") to Escrow


Agent, by wire transfer of immediately available funds to such account of Escrow


Agent that Escrow Agent identifies in a writing delivered to Continental and


Pacific.




          (b)  On or before the date hereof, Escrow Agent shall establish at the


office of its corporate trust department in Chicago, Illinois and, at all times


thereafter until the escrow created by this Escrow Agreement shall have


terminated pursuant to Section 6 hereof (the "Escrow Termination Date"), shall


maintain a separate account entitled the "Fibreboard Asbestos Claimants Escrow


Account" (the "Escrow Account").


                                      -3-


All funds, securities and other property held by the Escrow Agent (collectively,


the "Escrow Assets") at any time pursuant to this Escrow Agreement, including


the Funds and all investments, interest, earnings and proceeds thereof and


thereon, shall be held in the Escrow Account.  No property other than the Escrow


Assets shall be held in the Escrow Account.  Escrow Agent shall make and


maintain, at all times until the Escrow Termination Date, appropriate entries in


its books and records to reflect that all of the Escrow Assets existing from


time to time are held in the Escrow Account.




          (c)  During the term of this Escrow Agreement, Escrow Agent shall


invest and reinvest the Escrow Assets from time to time in obligations backed by


the full faith and credit of the United States of America which have a maturity


date which is not more than three months from the date of acquisition ("Eligible


Treasury Securities"); provided, however, that pending investment or prompt


distribution Escrow Agent may invest funds in an aggregate amount at any time


not exceeding the lesser of $10,000,000 or 5% of the amount of the Escrow Assets


in (i) a money market fund or funds sponsored by an Eligible Institution (as


defined below) or (ii) repurchase agreements with an Eligible Institution with a


term of not more than one day for Eligible Treasury Securities, with respect to


which such Eligible Treasury Securities are held by Escrow Agent in its account


with a Federal Reserve Bank and maintained on its books and records in the


Escrow Account.  An Eligible Institution shall mean a commercial bank having a


combined capital and surplus of at least Five Hundred Million Dollars


                                      -4-


($500,000,000) and which is well capitalized or adequately capitalized (as such


terms are defined in applicable federal regulations).




     The Escrow Agent shall liquidate investments in order to comply with the


provisions of this Escrow Agreement without liability for any resulting losses.


Any losses incurred from an investment shall be borne by the Escrow Account.




     4.  Accrued Interest on the Escrow Assets.  All interest and earnings of

         -------------------------------------


the Escrow Assets shall be added to and become part of the Escrow Assets, and


shall be held by Escrow Agent under this Escrow Agreement.




     5.  Payments of Amounts Held in Escrow Account.  (a) Subject to Sections

         ------------------------------------------


5(b) and 5(c) hereof, upon termination of the Escrow Agreement pursuant to


Section 6 hereof, Escrow Agent shall distribute all amounts held in the Escrow


Account pursuant to (i) written payment instructions executed by each of


Continental, Pacific, Fibreboard Corporation, Class Counsel (acting on behalf of


the Settlement Class), and, after appointment of the Trustees, the Trustees or


(ii) an order obtained after a hearing held on notice to each of Continental,


Pacific, Fibreboard Corporation and Class Counsel (a "Court Order") of the


United States District Court for the Eastern District of Texas.


                                      -5-


     (b)  At any time and from time to time during the term of this Escrow


Agreement, Escrow Agent shall (i) at the written direction of each of


Continental, Pacific, Fibreboard Corporation, Class Counsel, and, after


appointment of the Trustees, the Trustees distribute such amount or amounts to


such person or persons and at such time or times as each of Continental,


Pacific, Fibreboard Corporation, Class Counsel, and, after appointment of the


Trustees, the Trustees shall direct in an Interim Payment Direction or (ii) in


accordance with a Court Order, distribute such amount or amounts to such person


or persons and at such time or times as is specified in the Court Order.  Any


payment instructions to the Escrow Agent shall include the mailing address and


taxpayer identification number of the person or persons receiving the


distribution hereunder.




          (c)  Notwithstanding any contrary provision of this Escrow Agreement,


within the 30-day period following the end of each calendar quarter, Escrow


Agent shall pay to Continental 64.71% and to Pacific 35.29% of 5% of the income


earned by the Escrow Account during such calendar quarter.




     6.  Termination.  Escrow Agent shall maintain the Escrow Account and hold

         -----------


the Escrow Assets in escrow pursuant to this Escrow Agreement until receipt of


written notice of termination from each of Continental, Pacific, Fibreboard


Corporation, Class Counsel, and, after appointment of the Trustees, the


Trustees.


                                      -6-


     7.  Escrow Agent Qualifications.  Escrow Agent shall at all times be (i) a

         ---------------------------


bank, savings and loan association or trust company in good standing, organized


and doing business under the laws of the United States or a state of the United


States or a United States branch of a foreign bank, (ii) have combined capital


and surplus of not less than Five Hundred Million Dollars ($500,000,000) and be


well capitalized or adequately capitalized (as such terms are defined in


applicable federal regulations) and (iii) be authorized under the laws governing


its organization to exercise corporate trust powers and be authorized under such


laws to enter into and perform this Escrow Agreement.  If Escrow Agent shall at


any time cease to have the foregoing qualifications, Escrow Agent shall give


notice of resignation to Continental and Pacific as provided in Section 10


hereof and Continental and Pacific agree to thereupon promptly appoint a


qualified successor escrow agent in accordance with Section 11.




     8.  Limitations on Liability of Escrow Agent.

         ----------------------------------------


          (a)  Escrow Agent may act upon any written notice, certificate,


instrument, request, waiver, consent, paper or other document that Escrow Agent


in good faith reasonably believes to be genuine and to have been made, sent,


signed, prescribed, or presented by the proper person or persons acting on


behalf of the parties named in paragraph 5(a) and 5(b).  Escrow Agent shall not


be liable for any action taken or omitted by it in connection with the


performance of its duties and obligations hereunder, except for its own gross


negligence or willful misconduct.  Escrow Agent shall be under no obligation to


institute or defend any action, suit or legal proceeding in connection


                                      -7-

with this escrow or this Escrow Agreement unless it is indemnified to its


satisfaction by the party or parties who desire that it undertake such action.




          (b)  Escrow Agent shall be under no obligation or liability for


failure to inform Continental, Pacific, Fibreboard Corporation or Class Counsel


regarding any transaction or facts within Escrow Agent's knowledge, even though


the same may concern the matters described herein, provided they do not prevent


or interfere with Escrow Agent's compliance with this Escrow Agreement, nor


shall Escrow Agent be liable for the sufficiency, correctness or genuineness as


to form, manner of execution or validity of any instrument deposited, nor as to


identity, authority, or rights of any person executing the same, except as above


provided.




          (c)  Should Escrow Agent during or after the term of the escrow


receive or become aware of any conflicting demands or claims with respect to the


Escrow Account, Escrow Assets or the rights of any of the parties hereto,


Fibreboard Corporation or Class Counsel, Escrow Agent shall have the right to


discontinue any or all further acts on its part until such conflict is resolved


to its satisfaction, and Escrow Agent shall have the further right to commence


or defend any action or proceeding for the determination of such conflict.  In


the event Escrow Agent should file suit in interpleader and deposit the Escrow


Assets in dispute in a court of competent jurisdiction, it shall be fully


released and discharged from all further obligations under this Escrow


                                      -8-


Agreement with respect to such Escrow Assets (but such release and discharge


shall not relieve Escrow Agent from any liability incurred prior to such event).




          (d)  Escrow Agent may consult with legal counsel satisfactory to it in


connection with any dispute, the construction of any provision of this Escrow


Agreement or the duties and obligations of Escrow Agent under this Escrow


Agreement.




     9.  Accounts and Release of Escrow Agent.  (a)  The retention and

         ------------------------------------


distribution of the Escrow Assets in accordance with the terms and provisions of


this Escrow Agreement shall fully and completely release Escrow Agent from any


obligations or liabilities assumed under this Escrow Agreement with respect to


the Escrow Assets.  Nothing in this Escrow Agreement shall be interpreted as


depriving the Escrow Agent, Continental, Pacific, Fibreboard Corporation or


Class Counsel of the right to have a judicial settlement of the Escrow Agent's


accounts, and upon any proceeding for a judicial settlement of the Escrow


Agent's accounts or for instructions the only necessary parties thereto will be


the Escrow Agent, Continental, Pacific, Fibreboard Corporation and Class


Counsel.




          (b)  The Escrow Agent shall keep accurate and detailed records of all


investments, receipts, disbursements, and all other transactions required to be


done, including such specific records as shall be agreed upon in writing between


Continental, Pacific and the Escrow Agent.  Within ten (10) days following the


close of each calendar


                                      -9-

month, the Escrow Agent shall deliver to Continental, Pacific, Fibreboard


Corporation and Class Counsel a written account of its administration of the


escrow during such month and cumulatively for the period from the date hereof


through the end of such month, setting forth all investments, receipts,


disbursements and other transactions effected by it, including a description of


all investments purchased and sold with the cost or net proceeds of such


purchases or sales (accrued interest paid or received being shown separately),


showing all cash, securities and other property held in the Escrow Account at


the end of such month and the book and fair market value of all Escrow Assets.




          (c)  All accounts, books and records maintained pursuant to this


Section shall be opened to inspection and audit at all reasonable times by


Continental, Pacific, Fibreboard Corporation and Class Counsel and their


respective representatives.




          (d)  The fair market value of the Escrow Assets shall be determined by


the Escrow Agent whenever required pursuant to the Escrow Agreement, but in any


event not less than monthly.  The Escrow Agent may base such determination upon


such sources of information as it may deem reliable including, but not limited


to, information reported in (i) newspapers of general circulation, (ii),


standard financial periodicals or publications, (iii) statistical and valuation


services, (iv) the records of securities exchanges or brokerage firms deemed by


the Escrow Agent to be reliable, or any combination thereof.  The Escrow Agent


shall promptly inform Continental, Pacific,


                                      -10-


Fibreboard Corporation and Class Counsel of any such valuation and provide them


with complete copies thereof.




     10.  Resignation and Removal of Escrow Agent.  Escrow Agent may be removed

          ---------------------------------------


by the joint action of Continental and Pacific, with or without cause, at any


time upon 15 days' prior written notice to Escrow Agent, which notice may be


waived by Escrow Agent.  Escrow Agent may resign at any time upon 60 days' prior


written notice to Continental, Pacific, Fibreboard Corporation and Class


Counsel.




     Notwithstanding any resignation or removal of Escrow Agent pursuant to


Section 7 hereof or this Section 10, such resignation or removal shall not be


effective and Escrow Agent shall continue to serve in its capacity as Escrow


Agent until (i)  a successor escrow agent is appointed in accordance with the


provisions of Section 11 hereof and has accepted such appointment and (ii) the


Escrow Assets together with such records and documents as may be reasonably


required to enable the successor escrow agent to properly administer the Escrow


Fund have been transferred to and received by such successor escrow agent.


Continental and Pacific shall promptly take the necessary action to appoint a


successor escrow agent in accordance with the provisions of Section 11 hereof.




     11.  Appointment of Successor Escrow Agent.  If at any time Escrow Agent

          -------------------------------------


shall resign, be removed or otherwise become incapable of acting as Escrow Agent


                                      -11-


pursuant to this Escrow Agreement, or if at any time a vacancy shall occur in


the office of Escrow Agent for any other cause, a successor Escrow Agent that


meets the qualifications set forth in Section 7 shall be appointed jointly by


Continental and Pacific by a written instrument delivered to the successor


Escrow Agent with a copy delivered to the Escrow Agent.  If no successor Escrow


Agent is appointed (i) within 30 days after the time Escrow Agent becomes


incapable of acting or a vacancy occurred in the office of Escrow Agent or (ii)


within 60 days of Escrow Agent's giving notice of resignation, any party hereto


may petition a court of competent jurisdiction for an appointment of a successor


Escrow Agent.  Upon the appointment and acceptance of any successor Escrow Agent


hereunder, Escrow Agent shall transfer the Escrow Assets to its successor.  Upon


receipt by the successor Escrow Agent of the Escrow Assets, Escrow Agent shall


be discharged from any continuing duties or obligations under this Escrow


Agreement, but such discharge shall not relieve Escrow Agent from any liability


incurred prior to such event, and the successor Escrow Agent shall be vested


with all rights, powers, duties and obligations of Escrow Agent under this


Agreement.




          12.  IRS Filings and Examinations.  (a) For federal income tax

               -----------------------------


purposes, the parties expect that Continental will be allocated 64.71% of the


income, gains and deductions of the Escrow Fund and that Pacific will be


allocated 35.29% of the income, gains and deductions of the Escrow Fund and that


Continental and Pacific will each be required to include those items of taxable


income, gains and deductions of the Escrow Fund which are attributable to them


in computing their separate taxable income and this


                                      -12-

Escrow Agreement shall be construed accordingly.  Notwithstanding the foregoing,


Escrow Agent shall timely file such tax and other returns and statements for the


Escrow Account (collectively "Returns"), and shall provide for and pay such


taxes, as are required to comply with applicable provisions of the Internal


Revenue Code of 1986, as amended, and of any state or local law and the


regulations promulgated thereunder.  The Escrow Agent shall provide all


completed Returns to Continental and Pacific at least 10 days in advance of the


due date for such Returns and shall obtain the consent of Continental and


Pacific to all Returns before they are filed.  The Escrow Agent is authorized to


employ such agents and independent contractors as it deems necessary in its best


judgment in order to perform the federal and state tax reporting required by


this paragraph.  Continental and Pacific will advise the Escrow Agent of the


party who will sign any required federal and state tax returns on behalf of the


Escrow Account.




          (b)  The Escrow Agent agrees that Continental and Pacific shall have


the sole and exclusive responsibility for handling any income tax examinations


relating to the Escrow Fund.  All costs and expenses of any income tax


examination relating to potential tax liability of the Escrow Fund, including


the expense of defending any adjustments or proposed adjustments, shall be


charged to the Escrow Fund.



          (c)  Escrow Agent agrees that it will inform Continental and Pacific


promptly of all questions raised by agents conducting an income tax examination


of the Escrow Account and shall cooperate with accountants, tax advisers and


counsel retained


                                      -13-

by Continental and Pacific in working with the income tax agents and in


responding to any questions and proposed tax adjustments.




          13.  Notices.  Any notice or other communication hereunder must be

               -------


given in writing and either (a) delivered in person, (b) transmitted by telex,


telefax or other telecopy mechanism, provided that any notice so given is also


mailed as provided in clause (c), or (c) mailed, postage prepaid, receipt


requested, as follows:




     If to Continental, addressed to:




          Continental Casualty Co.

          Specialty Claims Office, 12th Floor

          50 Fremont Street

          San Francisco, CA  94105

          Attention:  Claim Manager

          Telecopier:  (415) 512-4899




               and




          WACHTELL, LIPTON, ROSEN & KATZ

          51 West 52nd Street

          New York, New York  10019

          Attention:  Herbert M. Wachtell, Esq.

          Telecopier:  (212) 403-2000




               and




          CARROLL, BURDICK & McDONOUGH

          44 Montgomery Street, Suite 400

          San Francisco, CA  94104

          Attention:  Rodney L. Eshelman, Esq.

          Telecopier:  (415) 989-0932


                                      -14-


        If to Pacific, addressed to:




          Pacific Indemnity Company

          Chubb & Son Inc.

          15 Mountain View Road

          P.O. Box 1615

          Warren, NJ  07061-1615

          Attention:  Malcolm B. Burton

          Telecopier:  (908) 580-3030




                    and




          WHITE & CASE

          1155 Avenue of the Americas

          New York, NY  10036

          Attention:  Paul J. Bschorr, Esq.

          Telecopier:  (212) 354-8113




        If to Fibreboard, addressed to:




          FIBREBOARD CORPORATION

          2121 North California Blvd.

          Walnut Creek, CA  94596

          Attention:  Michael R. Douglas

                     Senior Vice President and

                      General Counsel

          Telecopier:  (510) 274-0714




                    and




          BROBECK, PHLEGER & HARRISON

          Spear Street Tower

          One Market Plaza

          San Francisco, CA  94105

          Attention:  Stephen M. Snyder, Esq.

          Telecopier:  (415) 442-1020





        If to the Class Counsel, addressed to:




          CAPLIN & DRYSDALE, CHARTERED

          399 Park Avenue

          New York, New York  10022

          Attention:  Elihu Inselbuch
          Telecopier:  (212) 644-6755



                                      -15-





        If to Escrow Agent, addressed to:




          The First National Bank of Chicago

          One First National Plaza, Suite 0126

          Chicago, IL 60670-0126

          Attention:  Joseph Cahill

          Telecopier:  (312) 407-1708




or to such other address or to such other person as either party shall have last


designated by such notice to the other party.  Each such notice or other


communication shall be effective (i) if given by telecommunication, when


transmitted to the applicable number so specified in (or pursuant to) this


Section 13 and an appropriate answer back is received, (ii) if given by mail,


three business days after such communication is deposited in the mails with


first class postage prepaid, addressed as aforesaid or (iii) if given by any


other means, when actually delivered at such address.




          14.  Amendments; Waivers.  This Escrow Agreement may be amended only

               -------------------


by (i) an agreement in writing executed by Escrow Agent, Continental, Pacific,


Fibreboard Corporation and Class Counsel, or (ii) pursuant to a Court Order.  No


waiver of any provisions nor consent to any exception to the terms of this


Escrow Agreement shall be effective unless in writing and signed by the party to


be bound, and then only to the specific purpose, extent and in stance as so


provided.




          15.  Counterparts.  This Escrow Agreement and any other agreement (or

               ------------


document) delivered pursuant hereto may be executed in one or more counterparts


and


                                      -16-


by different parties in separate counterparts.  All of such counterparts shall


constitute one and the same agreement and shall become effective when one or


more counterparts of this Escrow Agreement have been signed by each party, and


delivered to the other parties.




          16.  Assignment.  Neither this Escrow Agreement nor any rights or

               ----------


obligations under it are assignable.




          17.  Governing Law.  This Escrow Agreement and the legal relations

               -------------


among the parties shall be governed by and construed in accordance with the laws


of the State of Illinois applicable to contracts made and performed in such


state without regard to conflicts of law doctrines, except to the extent that


certain matters are preempted by federal law or are governed by the law of the


jurisdiction of organization of the respective parties.




          18.  Integration.  This Escrow Agreement constitutes the entire

               -----------


agreement and understanding of Continental, Pacific, Fibreboard Corporation and


Class Counsel on the one hand and Escrow Agent on the other with respect to the


subject matter of this Escrow Agreement and supersedes all prior agreements and


understandings with respect thereto.


                                      -17-


          19.  Severability.  If any provision of this Escrow Agreement is held

               ------------


invalid by any court, governmental agency or regulatory body, the other


provisions shall remain in full force and effect.




          20.  Parties in Interest.  This Escrow Agreement shall be binding upon

               -------------------


and inure to the benefit of each party, Fibreboard Corporation and Class


Counsel, and nothing in this Escrow Agreement, express or implied, is intended


to confer upon any other person any rights or remedies of any nature whatsoever


by, under or by reason of this Escrow Agreement.  Nothing in this Escrow


Agreement is intended to relieve or discharge the obligation of any third person


to, or to confer any right of subrogation or action over against, any party to


this Escrow Agreement or Fibreboard Corporation or Class Counsel or Class


Counsel.




          21.  Headings.  The descriptive headings of the Sections of this

               --------


Escrow Agreement are for convenience only and do not constitute a part of this


Escrow Agreement.


                                      -18-


          IN WITNESS WHEREOF, each of the parties hereto has caused this


Agreement to be executed on the day and year first above written.




                                        CONTINENTAL CASUALTY COMPANY




                                        By        Laurens F. Terry
                                           ---------------------------------

                                        Title  Vice President
                                               -----------------------------




                                        PACIFIC INDEMNITY CORPORATION




                                        By          John J. Degnan
                                           ---------------------------------

                                        Title  Senior Vice President
                                               -----------------------------




                                        THE FIRST NATIONAL BANK OF CHICAGO




                                        By
                                           ---------------------------------

                                        Title
                                               -----------------------------




AGREED TO:




FIBREBOARD CORPORATION




By       Michael R. Douglas
   ---------------------------------

Title  Senior Vice President and
        General Counsel

       -----------------------------



CLASS COUNSEL



By           Joseph Rice
   ---------------------------------

          Joseph Rice, Esq.



By          Joseph Cox
   ---------------------------------

          Joseph Cox, Esq.



By           Harry Wartnick
   ---------------------------------

          Harry Wartnick, Esq.



By          Steven Kazan
   ---------------------------------

          Steven Kazan, Esq.


                                      -19-



Form 2                                                            EXHIBIT 28.02

 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE
 CONTINENTAL CASUALTY COMPANY - CONSOLIDATED
 ...........................................
                 (Name)


      SCHEDULE P - ANALYSIS OF LOSSES AND LOSS EXPENSES

                                              Notes to Schedule P
 (1) The Parts of Schedule P:
    Part 1 - detailed information on losses and loss expenses.
    Part 2 - history of incurred losses and allocated expenses.
    Part 3 - history of loss and allocated expense payments.
    Part 4 - history of bulk and incurred-but-not reported reserves.
    Schedule P Interrogatories

 (2) Lines of business A through M and R are groupings of the lines of business
     used on Page 14, the state page.

 (3) Reinsurance A, B, C, and D (lines N to Q) are:
     Reinsurance A = nonproportional property (1988 and subsequent)
     Reinsurance B = nonproportional liability (1988 and subsequent)
     Reinsurance C = financial lines (1988 and subsequent)
     Reinsurance D = old Schedule O line 30 (1987 and prior)

 (4) The Instructions to Schedule P contain directions necessary for filling
     out Schedule P.


                                  SCHEDULE P - PART 1 - SUMMARY
(000 omitted) -------------------------------------------------------------------------------------------------------------------- | | Premiums Earned | Loss and Loss Expense | | 1 |------------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 304,164 | 48,439 | 99,060 | 5,911 | | 2. 1984.....| 1,972,550 | 251,064 | 1,721,486 | 1,718,025 | 322,406 | 262,790 | 45,095 | | 3. 1985.....| 2,756,886 | 425,772 | 2,331,114 | 2,259,526 | 587,368 | 306,759 | 39,434 | | 4. 1986.....| 4,300,449 | 550,592 | 3,749,857 | 2,096,005 | 311,551 | 314,112 | 29,692 | | 5. 1987.....| 4,915,810 | 665,280 | 4,250,529 | 2,341,964 | 334,228 | 273,173 | 12,982 | | 6. 1988.....| 5,399,645 | 613,422 | 4,786,223 | 2,761,739 | 343,647 | 291,235 | 16,501 | | 7. 1989.....| 5,768,987 | 549,762 | 5,219,225 | 3,345,300 | 344,621 | 295,604 | 19,201 | | 8. 1990.....| 6,595,234 | 454,185 | 6,141,049 | 3,244,754 | 182,895 | 273,915 | 8,275 | | 9. 1991.....| 6,891,720 | 425,638 | 6,466,082 | 2,701,737 | 148,931 | 184,187 | 6,734 | |10. 1992.....| 6,535,769 | 434,065 | 6,101,704 | 2,138,580 | 176,908 | 84,153 | 4,834 | |11. 1993.....| 6,404,755 | 454,555 | 5,950,200 | 966,538 | 73,897 | 23,537 | 1,531 | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 23,878,333 | 2,874,891 | 2,408,526 | 190,190 | -------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. SCHEDULE P - PART 1 - SUMMARY - (CONTINUED) --------------------------------------------------------------------------- | |Payments | | | 1 |---------------------------------------------| 12 | | Years | 9 | 10 | 11 | | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|---------------|---------------| | | | | | | | | 1. Prior ...| 8,685 | 4,544 | 353,419 | X X X X | | 2. 1984.....| 60,367 | 75,702 | 1,689,016 | X X X X | | 3. 1985.....| 67,693 | 91,787 | 2,031,271 | X X X X | | 4. 1986.....| 72,640 | 115,504 | 2,184,378 | X X X X | | 5. 1987.....| 63,611 | 129,481 | 2,397,408 | X X X X | | 6. 1988.....| 164,867 | 152,894 | 2,845,720 | X X X X | | 7. 1989.....| 146,989 | 184,707 | 3,461,789 | X X X X | | 8. 1990.....| 87,595 | 190,299 | 3,517,798 | X X X X | | 9. 1991.....| 119,841 | 193,098 | 2,923,357 | X X X X | |10. 1992.....| 68,429 | 179,934 | 2,220,924 | X X X X | |11. 1993.....| 119,228 | 153,236 | 1,067,884 | X X X X | |-------------|--------------|--------------|---------------|---------------| |12. Totals ..| 979,945 | 1,471,186 | 24,692,964 | X X X X | --------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpaid| | Years |---------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|----------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|--------------|--------------|-------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 878,775 | 213,722 | 2,722,911 | 199,116 | 0 | 0 | 43,214 | | 2. 1984.....| 186,423 | 27,043 | 106,347 | 22,261 | 0 | 0 | 17,331 | | 3. 1985.....| 206,441 | 35,257 | 182,710 | 26,435 | 0 | 0 | 26,127 | | 4. 1986.....| 269,220 | 28,839 | 236,977 | 23,741 | 0 | 0 | 44,507 | | 5. 1987.....| 332,114 | 37,723 | 279,893 | 35,749 | 0 | 0 | 61,626 | | 6. 1988.....| 461,651 | 33,439 | 369,280 | 69,356 | 0 | 0 | 76,584 | | 7. 1989.....| 627,807 | 51,015 | 426,054 | 62,814 | 0 | 0 | 111,645 | | 8. 1990.....| 943,114 | 51,907 | 680,064 | 120,339 | 0 | 0 | 192,202 | | 9. 1991.....| 1,040,354 | 57,790 | 1,288,800 | 158,056 | 0 | 0 | 284,729 | |10. 1992.....| 1,076,401 | 35,068 | 1,903,538 | 213,145 | 0 | 0 | 357,554 | |11. 1993.....| 900,547 | 65,653 | 2,985,885 | 229,084 | 0 | 0 | 416,424 | |-------------|-------------|--------------|--------------|-------------|--------------|--------------|--------------| |12. Totals ..| 6,922,847 | 637,456 | 11,182,458 | 1,160,096 | 0 | 0 | 1,631,943 | -------------------------------------------------------------------------------------------------------------------- SCHEDULE P - PART 1 - SUMMARY - (CONTINUED) ------------------------------------------------------------------------------------------ | | | | | | | | Years |--------------| 21 | 22 | 23 | 24 | | in Which | + IBNR | | | | Number of | |Premiums Were|--------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | and Assumed | |-------------|--------------|---------------|---------------|---------------|-------------| | | | | | | | | | 1. Prior ...| 6,723 | 34,973 | 7,915 | 3,233,254 | X X X X | | 2. 1984.....| 2,894 | 7,110 | 2,168 | 260,071 | X X X X | | 3. 1985.....| 4,840 | 14,622 | 2,430 | 351,176 | X X X X | | 4. 1986.....| 4,251 | 15,780 | 3,776 | 497,649 | X X X X | | 5. 1987.....| 5,183 | 15,043 | 6,338 | 601,316 | X X X X | | 6. 1988.....| 8,369 | 23,696 | 7,022 | 803,373 | X X X X | | 7. 1989.....| 9,939 | 34,351 | 8,382 | 1,050,120 | X X X X | | 8. 1990.....| 14,049 | 53,711 | 12,593 | 1,641,678 | X X X X | | 9. 1991.....| 18,229 | 67,353 | 19,027 | 2,398,835 | X X X X | |10. 1992.....| 16,142 | 81,757 | 27,129 | 3,100,267 | X X X X | |11. 1993.....| 24,896 | 103,346 | 41,542 | 4,024,765 | X X X X | |-------------|--------------|---------------|---------------|---------------|-------------| |12. Totals ..| 115,515 | 451,742 | 138,322 | 17,962,504 | X X X X | ------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------------------------- | Years | Total Losses and | Loss and Loss Expense Percentage | Discount| | in Which | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value of| |Premiums Were|------------------------------------------|--------------------------------------------|---------------| | Earned and | 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|---------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 2,368,786 | 419,699 | 1,949,087 | 120.1 | 167.2 | 113.2 | 0 | | 3. 1985.....| 3,075,780 | 693,334 | 2,382,446 | 111.6 | 162.8 | 102.2 | 0 | | 4. 1986.....| 3,080,101 | 398,074 | 2,682,027 | 71.6 | 72.3 | 71.5 | 0 | | 5. 1987.....| 3,424,589 | 425,865 | 2,998,724 | 69.7 | 64.0 | 70.5 | 0 | | 6. 1988.....| 4,120,405 | 471,312 | 3,649,093 | 76.3 | 76.8 | 76.2 | 0 | | 7. 1989.....| 4,999,499 | 487,590 | 4,511,909 | 86.7 | 88.7 | 86.4 | 0 | | 8. 1990.....| 5,536,941 | 377,465 | 5,159,476 | 84.0 | 83.1 | 84.0 | 0 | | 9. 1991.....| 5,711,932 | 389,740 | 5,322,192 | 82.9 | 91.6 | 82.3 | 0 | |10. 1992.....| 5,767,289 | 446,097 | 5,321,192 | 88.2 | 102.8 | 87.2 | 0 | |11. 1993.....| 5,487,709 | 395,061 | 5,092,648 | 85.7 | 86.9 | 85.6 | 0 | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|---------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | --------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1 - SUMMARY - (CONTINUED) --------------------------------------------------------------------------- | Years |for Time | | Net Balance Sheet Reserves | | in Which | Money | 33 | After Discount | |Premiums Were|--------------|Inter-Company |-------------------------------| | Earned and | 32 | Pooling | 34 | 35 | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|----------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 3,188,848 | 44,406 | | 2. 1984.....| 0 | 0.0 | 243,466 | 16,605 | | 3. 1985.....| 0 | 0.0 | 327,459 | 23,717 | | 4. 1986.....| 0 | 0.0 | 453,616 | 44,032 | | 5. 1987.....| 0 | 0.0 | 538,534 | 62,781 | | 6. 1988.....| 0 | 0.0 | 728,137 | 75,237 | | 7. 1989.....| 0 | 0.0 | 940,031 | 110,088 | | 8. 1990.....| 0 | 0.0 | 1,450,932 | 190,746 | | 9. 1991.....| 0 | 0.0 | 2,113,309 | 285,527 | |10. 1992.....| 0 | 0.0 | 2,731,726 | 368,541 | |11. 1993.....| 0 | 0.0 | 3,591,695 | 433,070 | |-------------|--------------|--------------|----------------|--------------| |12. Totals ..| 0 | X X X X | 16,307,753 | 1,654,750 | ---------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 2 - SUMMARY
--------------------------------------------------------------------------------------------------------------------------- | 1 | Incurred Losses and Allocated Expenses Reported At Year End (000 | | Years in Which |-------------------------------------------------------------------------------------------------------| | Losses Were | 2 | 3 | 4 | 5 | 6 | 7 | 8 | | Incurred | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | 1990 | |-------------------|----------------|-------------|--------------|-------------|-------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ......| 2,338,933 * | 2,454,076 | 2,566,981 | 2,919,734 | 3,085,482 | 3,324,720 | 3,492,509 | | 2. 1984........| 1,508,144 | 1,490,738 | 1,508,155 | 1,659,625 | 1,715,717 | 1,803,022 | 1,848,457 | | 3. 1985........| X X X X | 2,036,469 | 2,105,231 | 2,094,082 | 2,119,566 | 2,191,704 | 2,212,837 | | 4. 1986........| X X X X | X X X X | 3,034,038 | 2,915,814 | 2,824,448 | 2,672,855 | 2,595,606 | | 5. 1987........| X X X X | X X X X | X X X X | 3,056,861 | 3,004,221 | 3,045,014 | 2,942,054 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | 3,674,384 | 3,616,713 | 3,575,399 | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | X X X X | 4,225,774 | 4,245,052 | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 5,082,895 | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | |---------------------------------------------------------------------------------------------------------------------------| | 12. Totals ............................................................................................................| --------------------------------------------------------------------------------------------------------------------------- *Reported reserves only. Subsequent development relates only to subsequent payments and reserves. **Current year less first or second prior year, showing (redundant) or adverse. SCHEDULE P - PART 2 - SUMMARY - (CONTINUED) ------------------------------------------------------------------------------------------ | 1 |omitted) | Development** | | Years in Which |------------------------------------------|---------------------------| | Losses Were | 9 | 10 | 11 | 12 | 13 | | Incurred | 1991 | 1992 | 1993 | One Year | Two Year | |-------------------|--------------|-------------|-------------|-------------|-------------| | | | | | | | | | 1. Prior ......| 3,605,121 | 5,347,424 | 6,376,184 | 1,028,759 | 2,771,063 | | 2. 1984........| 1,847,357 | 1,856,201 | 1,871,217 | 15,016 | 23,860 | | 3. 1985........| 2,266,914 | 2,289,475 | 2,288,229 | (1,246)| 21,316 | | 4. 1986........| 2,603,601 | 2,561,578 | 2,562,747 | 1,169 | (40,854)| | 5. 1987........| 2,897,060 | 2,870,274 | 2,862,904 | (7,370)| (34,156)| | 6. 1988........| 3,506,208 | 3,504,812 | 3,489,178 | (15,634)| (17,031)| | 7. 1989........| 4,272,963 | 4,322,588 | 4,318,820 | (3,769)| 45,856 | | 8. 1990........| 4,954,751 | 4,932,462 | 4,956,585 | 24,123 | 1,834 | | 9. 1991........| 5,461,255 | 5,369,712 | 5,110,068 | (259,645)| (351,188)| | 10. 1992........| X X X X | 5,264,857 | 5,114,128 | (150,729)| X X X X | | 11. 1993........| X X X X | X X X X | 4,897,871 | X X X X | X X X X | |--------------------------------------------------------------|-------------|-------------| | 12. Totals ...............................................| 630,675 | 2,420,701 | ------------------------------------------------------------------------------------------
SCHEDULE P - PART 3 - SUMMARY
---------------------------------------------------------------------------------------------------------------------------- | 1 | Cumulative Paid Losses and Allocated Expenses At Year End (000 | | Years in Which |--------------------------------------------------------------------------------------------------------| | Losses Were | 2 | 3 | 4 | 5 | 6 | 7 | 8 | | Incurred | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | 1990 | | | | | | | | | | |-------------------|--------------- |--------------|--------------|-------------|-------------|--------------|--------------| | | | | | | | | | | | 1. Prior ......| 0 | 516,822 | 949,048 | 1,334,725 | 1,635,347 | 1,957,064 | 2,204,591 | | 2. 1984........| (28,063) | 701,748 | 848,913 | 997,651 | 1,177,489 | 1,293,517 | 1,403,568 | | 3. 1985........| X X X X | (39,769)| 868,516 | 1,092,877 | 1,240,564 | 1,414,678 | 1,585,980 | | 4. 1986........| X X X X | X X X X | 467,087 | 947,280 | 1,263,953 | 1,420,288 | 1,651,606 | | 5. 1987........| X X X X | X X X X | X X X X | 547,999 | 1,201,193 | 1,563,459 | 1,748,920 | | 6. 1988........| X X X X | X X X X | X X X X | X X X X | 651,625 | 1,428,893 | 1,886,171 | | 7. 1989........| X X X X | X X X X | X X X X | X X X X | X X X X | 789,063 | 1,827,085 | | 8. 1990........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 918,597 | | 9. 1991........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | | 10. 1992........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | ---------------------------------------------------------------------------------------------------------------------------- Note: Net of salvage and subrogation received. SCHEDULE P - PART 3 - SUMMARY - (CONTINUED) ------------------------------------------------------------------------------------------- | | | 12 | 13 | | 1 |omitted) | Number of | Number of | | Years in Which |-------------------------------------------| Claims | Claims | | Losses Were | 9 | 10 | 11 | Closed With | Closed | | Incurred | 1991 | 1992 | 1993 | Loss |Without Loss | | | | | | Payment | Payment | |-------------------|--------------|--------------|-------------|-------------|-------------| | | | | | | | | | 1. Prior ......| 2,505,698 | 2,801,970 | 3,150,845 | X X X X | X X X X | | 2. 1984........| 1,493,715 | 1,560,866 | 1,613,314 | X X X X | X X X X | | 3. 1985........| 1,752,074 | 1,887,316 | 1,939,483 | X X X X | X X X X | | 4. 1986........| 1,861,599 | 1,963,470 | 2,068,874 | X X X X | X X X X | | 5. 1987........| 1,950,264 | 2,137,487 | 2,267,927 | X X X X | X X X X | | 6. 1988........| 2,188,695 | 2,490,999 | 2,692,826 | X X X X | X X X X | | 7. 1989........| 2,507,948 | 2,925,775 | 3,277,082 | X X X X | X X X X | | 8. 1990........| 2,061,339 | 2,802,747 | 3,327,500 | X X X X | X X X X | | 9. 1991........| 997,430 | 2,012,959 | 2,730,259 | X X X X | X X X X | | 10. 1992........| X X X X | 1,004,297 | 2,040,990 | X X X X | X X X X | | 11. 1993........| X X X X | X X X X | 914,648 | X X X X | X X X X | -------------------------------------------------------------------------------------------
SCHEDULE P - PART 4 - SUMMARY
--------------------------------------------------------------------------------------------------------------- | 1 | Bulk and Incurred But Not Reported Reserves on Losses and Allocated | | Years in Which | ----------------------------------------------------------------------------------------| | Losses | 2 | 3 | 4 | 5 | 6 | 7 | | Were Incurred | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | |--------------------|--------------|---------------|--------------|--------------|-------------|--------------| | | | | | | | | | | 1. Prior .....| 873,964 | 649,519 | 491,275 | 580,826 | 561,553 | 473,323 | | 2. 1984.......| 1,164,329 | 427,252 | 278,463 | 297,143 | 209,779 | 221,474 | | 3. 1985.......| X X X X | 1,610,921 | 781,359 | 557,294 | 437,921 | 419,052 | | 4. 1986.......| X X X X | X X X X | 2,048,934 | 1,417,507 | 1,057,062 | 771,057 | | 5. 1987.......| X X X X | X X X X | X X X X | 1,964,787 | 1,207,755 | 910,368 | | 6. 1988.......| X X X X | X X X X | X X X X | X X X X | 2,335,680 | 1,457,537 | | 7. 1989.......| X X X X | X X X X | X X X X | X X X X | X X X X | 2,596,516 | | 8. 1990.......| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | | 9. 1991.......| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | | 10. 1992.......| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | | 11. 1993.......| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | --------------------------------------------------------------------------------------------------------------- SCHEDULE P - PART 4 - SUMMARY - (CONTINUED) - ------------------------------------------------------------------------------- | 1 |Expenses at Year End (000 omitted) | | Years in Which |---------------------------------------------------------| | Losses | 8 | 9 | 10 | 11 | | Were Incurred | 1990 | 1991 | 1992 | 1993 | |--------------------|--------------|--------------|-------------|-------------| | | | | | | | | 1. Prior .....| 479,150 | 395,468 | 1,898,880 | 2,560,286 | | 2. 1984.......| 191,724 | 130,513 | 93,114 | 98,523 | | 3. 1985.......| 309,281 | 244,302 | 202,851 | 177,562 | | 4. 1986.......| 520,491 | 391,556 | 305,341 | 253,492 | | 5. 1987.......| 671,384 | 500,199 | 368,650 | 300,587 | | 6. 1988.......| 957,875 | 646,699 | 469,139 | 368,139 | | 7. 1989.......| 1,503,631 | 882,306 | 602,913 | 464,946 | | 8. 1990.......| 3,251,645 | 1,746,567 | 1,046,699 | 737,878 | | 9. 1991.......| X X X X | 3,433,404 | 2,202,453 | 1,397,244 | | 10. 1992.......| X X X X | X X X X | 3,344,444 | 2,031,805 | | 11. 1993.......| X X X X | X X X X | X X X X | 3,148,329 | - -------------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS
(000 omitted) --------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense | | |------------------------------------------|------------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|------------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|---------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 209 | 0 | 35 | 0 | | 2. 1984.....| 69,369 | 1,307 | 68,063 | 45,753 | 694 | 2,130 | 13 | | 3. 1985.....| 79,932 | 5,347 | 74,585 | 59,538 | 0 | 3,198 | 0 | | 4. 1986.....| 90,407 | 970 | 89,437 | 53,997 | 1 | 2,879 | 0 | | 5. 1987.....| 110,990 | 1,029 | 109,960 | 65,414 | 16 | 4,769 | 0 | | 6. 1988.....| 147,610 | 759 | 146,851 | 85,099 | (5)| 4,072 | 0 | | 7. 1989.....| 169,394 | 1,244 | 168,150 | 123,772 | 262 | 5,975 | 5 | | 8. 1990.....| 188,947 | 517 | 188,430 | 144,028 | 237 | 6,117 | 10 | | 9. 1991.....| 203,426 | 2,272 | 201,154 | 138,661 | 442 | 4,560 | 28 | |10. 1992.....| 216,699 | 681 | 216,018 | 175,088 | 10,923 | 4,343 | 15 | |11. 1993.....| 223,351 | 299 | 223,053 | 99,073 | 24 | 2,247 | 3 | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|---------------| |12. Totals ..| X X X X | X X X X | X X X X | 990,632 | 12,594 | 40,325 | 74 | --------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS - (CONTINUED) ------------------------------------------------------------------------- | 1 |Payments | | | |--------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 3 | 6 | 250 | X X X X | | 2. 1984.....| 1,218 | 508 | 47,683 | 35,760 | | 3. 1985.....| 923 | 1,628 | 64,363 | 44,723 | | 4. 1986.....| 848 | 4,377 | 61,252 | 38,493 | | 5. 1987.....| 798 | 5,822 | 75,989 | 45,207 | | 6. 1988.....| 1,512 | 6,221 | 95,398 | 49,533 | | 7. 1989.....| 1,803 | 7,991 | 137,470 | 67,666 | | 8. 1990.....| 2,369 | 9,294 | 159,192 | 72,498 | | 9. 1991.....| 1,527 | 11,941 | 154,692 | 80,160 | |10. 1992.....| 963 | 13,823 | 182,316 | 80,675 | |11. 1993.....| 562 | 14,021 | 115,313 | 62,634 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 12,526 | 75,632 | 1,093,921 | X X X X | ------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpaid| | Years |---------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|----------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 591 | 0 | 0 | 0 | 0 | 0 | 0 | | 2. 1984.....| 855 | 0 | 98 | 0 | 0 | 0 | 0 | | 3. 1985.....| 691 | 0 | 277 | 0 | 0 | 0 | 16 | | 4. 1986.....| 660 | 0 | 300 | 0 | 0 | 0 | 0 | | 5. 1987.....| 1,390 | 0 | 334 | 0 | 0 | 0 | 177 | | 6. 1988.....| 2,921 | 0 | 1,432 | 0 | 0 | 0 | 52 | | 7. 1989.....| 3,799 | 0 | 1,473 | 32 | 0 | 0 | 260 | | 8. 1990.....| 5,804 | 0 | 1,794 | 6 | 0 | 0 | 587 | | 9. 1991.....| 8,975 | 0 | 6,537 | 1,210 | 0 | 0 | 2,878 | |10. 1992.....| 10,784 | 647 | 16,475 | 93 | 0 | 0 | 3,967 | |11. 1993.....| 21,713 | 0 | 45,686 | 82 | 0 | 0 | 4,442 | |-------------|-------------|--------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 58,182 | 647 | 74,406 | 1,423 | 0 | 0 | 12,379 | -------------------------------------------------------------------------------------------------------------------- SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS - (CONTINUED) ---------------------------------------------------------------------------------------- | | | | | | | | Years |--------------| 21 | 22 | 23 | 24 | | in Which |+ IBNR | | | | Number of | |Premiums Were|--------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|---------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 1 | 0 | 591 | 5 | | 2. 1984.....| 0 | 24 | 4 | 957 | 7 | | 3. 1985.....| 0 | 11 | 6 | 990 | 9 | | 4. 1986.....| 0 | 12 | 9 | 969 | 22 | | 5. 1987.....| 0 | 75 | 21 | 1,922 | 27 | | 6. 1988.....| 0 | 319 | 52 | 4,457 | 52 | | 7. 1989.....| 0 | 686 | 72 | 5,572 | 114 | | 8. 1990.....| 0 | 1,457 | 118 | 8,297 | 145 | | 9. 1991.....| 0 | 1,448 | 317 | 17,497 | 342 | |10. 1992.....| 3 | 2,939 | 600 | 31,082 | 615 | |11. 1993.....| 0 | 2,739 | 1,351 | 73,110 | 3,984 | |-------------|--------------|---------------|--------------|--------------|-------------| |12. Totals ..| 3 | 9,712 | 2,550 | 145,444 | 5,322 | ---------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value of| | in Which |-----------------------------------------|--------------------------------------------|----------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|----------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 49,348 | 707 | 48,641 | 71.1 | 54.1 | 71.5 | 0 | | 3. 1985.....| 65,354 | 0 | 65,354 | 81.8 | 0.0 | 87.6 | 0 | | 4. 1986.....| 62,222 | 1 | 62,221 | 68.8 | 0.1 | 69.6 | 0 | | 5. 1987.....| 77,927 | 16 | 77,911 | 70.2 | 1.6 | 70.9 | 0 | | 6. 1988.....| 99,849 | (5)| 99,854 | 67.6 | (0.7)| 68.0 | 0 | | 7. 1989.....| 143,342 | 299 | 143,043 | 84.6 | 24.0 | 85.1 | 0 | | 8. 1990.....| 167,742 | 253 | 167,489 | 88.8 | 48.9 | 88.9 | 0 | | 9. 1991.....| 173,869 | 1,680 | 172,189 | 85.5 | 73.9 | 85.6 | 0 | |10. 1992.....| 225,080 | 11,681 | 213,399 | 103.9 | 1,715.3 | 98.8 | 0 | |11. 1993.....| 188,533 | 109 | 188,424 | 84.4 | 36.5 | 84.5 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|----------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | --------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS - (CONTINUED) ------------------------------------------------------------------------- | |for Time | | Net Balance Sheet Reserves| | Years |Money | 33 | After Discount | | in Which |--------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| 0 | X X X X | 591 | 0 | | 2. 1984.....| 0 | 0.0 | 953 | 4 | | 3. 1985.....| 0 | 0.0 | 968 | 22 | | 4. 1986.....| 0 | 0.0 | 960 | 9 | | 5. 1987.....| 0 | 0.0 | 1,724 | 198 | | 6. 1988.....| 0 | 0.0 | 4,353 | 104 | | 7. 1989.....| 0 | 0.0 | 5,240 | 332 | | 8. 1990.....| 0 | 0.0 | 7,592 | 705 | | 9. 1991.....| 0 | 0.0 | 14,302 | 3,195 | |10. 1992.....| 0 | 0.0 | 26,518 | 4,564 | |11. 1993.....| 0 | 0.0 | 67,317 | 5,793 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 130,518 | 14,926 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|---------------|-------------| | | 1. Prior ...| X X X X | X X X X | X X X X | 1,942 | 212 | 226 | 12 | | 2. 1984.....| 129,306 | 3,006 | 126,300 | 121,343 | 3,617 | 8,950 | 85 | | 3. 1985.....| 146,068 | 10,748 | 135,320 | 136,303 | 2,775 | 10,131 | 37 | | 4. 1986.....| 170,619 | 6,847 | 163,772 | 154,882 | 8,231 | 11,837 | 190 | | 5. 1987.....| 202,239 | 12,200 | 190,039 | 184,373 | 11,519 | 13,441 | 293 | | 6. 1988.....| 260,594 | 18,142 | 242,452 | 211,440 | 15,141 | 13,663 | 537 | | 7. 1989.....| 308,866 | 19,341 | 289,524 | 247,105 | 15,965 | 15,212 | 412 | | 8. 1990.....| 356,704 | 11,055 | 345,650 | 254,679 | 8,579 | 15,601 | 278 | | 9. 1991.....| 378,037 | 6,068 | 371,969 | 226,370 | 4,402 | 10,128 | 101 | |10. 1992.....| 410,684 | 6,450 | 404,233 | 179,556 | 4,587 | 4,741 | 49 | |11. 1993.....| 418,598 | 5,705 | 412,893 | 76,939 | 1,009 | 1,348 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|---------------|-------------| |12. Totals ..| X X X X | X X X X | X X X X | 1,794,933 | 76,035 | 105,277 | 1,993 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL - (CONTINUED) ------------------------------------------------------------------------- | 1 |Payments | | | |--------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 1,307 | 68 | 2,012 | X X X X | | 2. 1984.....| 3,414 | 5,325 | 131,915 | 61,428 | | 3. 1985.....| 5,797 | 7,751 | 151,374 | 62,470 | | 4. 1986.....| 4,360 | 10,940 | 169,238 | 66,322 | | 5. 1987.....| 5,668 | 11,680 | 197,682 | 76,365 | | 6. 1988.....| 6,735 | 15,594 | 225,020 | 83,598 | | 7. 1989.....| 6,648 | 19,123 | 265,063 | 92,421 | | 8. 1990.....| 6,004 | 17,816 | 279,240 | 96,465 | | 9. 1991.....| 4,654 | 17,768 | 249,763 | 94,290 | |10. 1992.....| 2,866 | 17,824 | 197,485 | 91,072 | |11. 1993.....| 1,004 | 17,139 | 94,417 | 73,422 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 48,457 | 141,029 | 1,963,211 | X X X X | ------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpaid| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|----------------------------|---------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|-------------|---------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 3,871 | 631 | 5,781 | 0 | 0 | 0 | 303 | | 2. 1984.....| 2,844 | 0 | 2,356 | 0 | 0 | 0 | 192 | | 3. 1985.....| 4,470 | 0 | 3,042 | 0 | 0 | 0 | 338 | | 4. 1986.....| 8,773 | 0 | 2,395 | 0 | 0 | 0 | 1,250 | | 5. 1987.....| 9,713 | 50 | 4,236 | 0 | 0 | 0 | 2,017 | | 6. 1988.....| 14,591 | 60 | 6,676 | 0 | 0 | 0 | 2,429 | | 7. 1989.....| 30,378 | 582 | 14,355 | 0 | 0 | 0 | 5,828 | | 8. 1990.....| 45,186 | 358 | 29,383 | 0 | 0 | 0 | 9,684 | | 9. 1991.....| 66,947 | 727 | 50,786 | 0 | 0 | 0 | 16,860 | |10. 1992.....| 99,171 | 1,576 | 103,747 | 0 | 0 | 0 | 22,134 | |11. 1993.....| 87,848 | 1,776 | 200,144 | 1,852 | 0 | 0 | 17,216 | |-------------|-------------|-------------|-------------|--------------|--------------|-------------|---------------| |12. Totals ..| 373,794 | 5,761 | 422,901 | 1,852 | 0 | 0 | 78,251 | ------------------------------------------------------------------------------------------------------------------- SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL - (CONTINUED) ---------------------------------------------------------------------------------------- | | | | | | | | Years |--------------| 21 | 22 | 23 | 24 | | in Which |+ IBNR | | | | Number of | |Premiums Were|--------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses| Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|---------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 179 | 95 | 9,419 | 105 | | 2. 1984.....| 0 | 95 | 48 | 5,440 | 38 | | 3. 1985.....| 0 | 55 | 53 | 7,903 | 44 | | 4. 1986.....| 0 | 88 | 90 | 12,508 | 86 | | 5. 1987.....| 0 | 192 | 109 | 16,025 | 133 | | 6. 1988.....| 0 | 512 | 147 | 23,783 | 248 | | 7. 1989.....| 0 | 949 | 387 | 50,366 | 639 | | 8. 1990.....| 0 | 2,598 | 765 | 84,660 | 1,383 | | 9. 1991.....| 0 | 3,808 | 1,279 | 135,145 | 2,826 | |10. 1992.....| 0 | 5,058 | 2,075 | 225,551 | 6,650 | |11. 1993.....| 1 | 5,448 | 4,130 | 305,709 | 17,653 | |-------------|--------------|---------------|--------------|--------------|-------------| |12. Totals ..| 1 | 18,981 | 9,178 | 876,510 | 29,805 | ---------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value of| | in Which |-----------------------------------------|--------------------------------------------|----------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|----------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 141,058 | 3,702 | 137,356 | 109.1 | 123.2 | 108.8 | 0 | | 3. 1985.....| 162,088 | 2,812 | 159,276 | 111.0 | 26.2 | 117.7 | 0 | | 4. 1986.....| 190,167 | 8,421 | 181,746 | 111.5 | 123.0 | 111.0 | 0 | | 5. 1987.....| 225,569 | 11,862 | 213,707 | 111.5 | 97.2 | 112.5 | 0 | | 6. 1988.....| 264,540 | 15,738 | 248,802 | 101.5 | 86.7 | 102.6 | 0 | | 7. 1989.....| 332,388 | 16,959 | 315,429 | 107.6 | 87.7 | 108.9 | 0 | | 8. 1990.....| 373,114 | 9,215 | 363,899 | 104.6 | 83.4 | 105.3 | 0 | | 9. 1991.....| 390,138 | 5,230 | 384,908 | 103.2 | 86.2 | 103.5 | 0 | |10. 1992.....| 429,248 | 6,212 | 423,036 | 104.5 | 96.3 | 104.7 | 0 | |11. 1993.....| 404,764 | 4,638 | 400,126 | 96.7 | 81.3 | 96.9 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|----------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | --------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL - (CONTINUED) ------------------------------------------------------------------------- | |for Time | | Net Balance Sheet Reserves| | Years |Money | 33 | After Discount | | in Which |--------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| 0 | X X X X | 9,021 | 398 | | 2. 1984.....| 0 | 0.0 | 5,200 | 240 | | 3. 1985.....| 0 | 0.0 | 7,512 | 391 | | 4. 1986.....| 0 | 0.0 | 11,168 | 1,340 | | 5. 1987.....| 0 | 0.0 | 13,899 | 2,126 | | 6. 1988.....| 0 | 0.0 | 21,207 | 2,576 | | 7. 1989.....| 0 | 0.0 | 44,151 | 6,215 | | 8. 1990.....| 0 | 0.0 | 74,211 | 10,449 | | 9. 1991.....| 0 | 0.0 | 117,006 | 18,139 | |10. 1992.....| 0 | 0.0 | 201,342 | 24,209 | |11. 1993.....| 0 | 0.0 | 284,364 | 21,345 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 789,082 | 87,428 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 1,480 | 545 | 168 | 2 | | 2. 1984.....| 127,994 | 14,501 | 113,493 | 140,029 | 13,133 | 14,267 | 458 | | 3. 1985.....| 221,827 | 39,207 | 182,619 | 174,080 | 27,186 | 19,879 | 1,350 | | 4. 1986.....| 403,419 | 95,375 | 308,043 | 235,218 | 64,104 | 26,648 | 352 | | 5. 1987.....| 508,426 | 139,851 | 368,576 | 302,656 | 94,173 | 32,236 | 584 | | 6. 1988.....| 522,888 | 127,960 | 394,928 | 315,449 | 85,339 | 32,197 | 560 | | 7. 1989.....| 523,927 | 96,218 | 427,708 | 320,264 | 49,869 | 29,787 | 445 | | 8. 1990.....| 536,387 | 63,618 | 472,769 | 304,094 | 30,559 | 25,104 | 322 | | 9. 1991.....| 586,500 | 59,306 | 527,195 | 227,339 | 20,584 | 16,409 | 378 | |10. 1992.....| 546,403 | 49,741 | 496,661 | 132,493 | 11,527 | 6,338 | 181 | |11. 1993.....| 533,280 | 38,265 | 495,015 | 57,472 | 1,879 | 1,581 | 10 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 2,210,574 | 398,898 | 204,613 | 4,640 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL - (CONTINUED) ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 846 | 15 | 1,114 | X X X X | | 2. 1984.....| 2,764 | 6,304 | 147,009 | 61,813 | | 3. 1985.....| 2,256 | 7,460 | 172,882 | 75,705 | | 4. 1986.....| 1,684 | 8,895 | 206,306 | 94,664 | | 5. 1987.....| 1,961 | 11,346 | 251,481 | 106,320 | | 6. 1988.....| 2,978 | 11,986 | 273,733 | 106,884 | | 7. 1989.....| 2,491 | 12,871 | 312,609 | 104,752 | | 8. 1990.....| 2,936 | 12,735 | 311,053 | 96,764 | | 9. 1991.....| 2,793 | 13,024 | 235,810 | 87,109 | |10. 1992.....| 1,502 | 12,908 | 140,031 | 71,105 | |11. 1993.....| 882 | 14,798 | 71,963 | 58,630 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 23,094 | 112,342 | 2,123,991 | X X X X | ------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 12,817 | 0 | 7,583 | 205 | 0 | 0 | 938 | | 2. 1984.....| 11,625 | 17 | 3,743 | 2 | 0 | 0 | 795 | | 3. 1985.....| 13,121 | 313 | 5,483 | 9 | 0 | 0 | 2,193 | | 4. 1986.....| 28,039 | 920 | 14,732 | 8 | 0 | 0 | 4,206 | | 5. 1987.....| 37,098 | 2,011 | 6,918 | 107 | 0 | 0 | 6,288 | | 6. 1988.....| 57,680 | 3,837 | 12,005 | 612 | 0 | 0 | 7,252 | | 7. 1989.....| 63,788 | 7,303 | 16,415 | 198 | 0 | 0 | 14,395 | | 8. 1990.....| 80,321 | 5,963 | 49,780 | 2,166 | 0 | 0 | 24,532 | | 9. 1991.....| 101,928 | 13,708 | 133,834 | 2,785 | 0 | 0 | 28,621 | |10. 1992.....| 118,303 | 7,054 | 205,816 | 13,403 | 0 | 0 | 39,350 | |11. 1993.....| 82,696 | 5,289 | 278,947 | 19,630 | 0 | 0 | 39,224 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 607,417 | 46,416 | 735,256 | 39,125 | 0 | 0 | 167,794 | ------------------------------------------------------------------------------------------------------------------- SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL - (CONTINUED) --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 12 | 108 | 21,241 | 67 | | 2. 1984.....| 0 | 19 | 22 | 16,166 | 39 | | 3. 1985.....| 0 | 40 | 42 | 20,517 | 81 | | 4. 1986.....| 0 | 16 | 114 | 46,163 | 188 | | 5. 1987.....| 0 | 17 | 692 | 48,877 | 283 | | 6. 1988.....| 0 | 213 | 821 | 73,309 | 474 | | 7. 1989.....| 2 | 366 | 982 | 88,078 | 852 | | 8. 1990.....| 6 | 715 | 873 | 147,371 | 1,497 | | 9. 1991.....| 2 | 1,354 | 1,253 | 249,140 | 2,577 | |10. 1992.....| 442 | 1,959 | 1,229 | 343,799 | 4,542 | |11. 1993.....| 632 | 1,933 | 2,405 | 377,721 | 12,532 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 1,084 | 6,645 | 8,541 | 1,432,383 | 23,132 | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 176,785 | 13,610 | 163,175 | 138.1 | 93.9 | 143.8 | 0 | | 3. 1985.....| 222,258 | 28,858 | 193,400 | 100.2 | 73.6 | 105.9 | 0 | | 4. 1986.....| 317,852 | 65,384 | 252,468 | 78.8 | 68.6 | 82.0 | 0 | | 5. 1987.....| 397,234 | 96,875 | 300,359 | 78.1 | 69.3 | 81.5 | 0 | | 6. 1988.....| 437,390 | 90,348 | 347,042 | 83.6 | 70.6 | 87.9 | 0 | | 7. 1989.....| 458,502 | 57,817 | 400,685 | 87.5 | 60.1 | 93.7 | 0 | | 8. 1990.....| 497,439 | 39,016 | 458,423 | 92.7 | 61.3 | 97.0 | 0 | | 9. 1991.....| 522,408 | 37,457 | 484,951 | 89.1 | 63.2 | 92.0 | 0 | |10. 1992.....| 516,437 | 32,607 | 483,830 | 94.5 | 65.6 | 97.4 | 0 | |11. 1993.....| 477,123 | 27,440 | 449,683 | 89.5 | 71.7 | 90.8 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------- ----------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL - (CONTINUED) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 20,195 | 1,046 | | 2. 1984.....| 0 | 0.0 | 15,349 | 817 | | 3. 1985.....| 0 | 0.0 | 18,282 | 2,235 | | 4. 1986.....| 0 | 0.0 | 41,843 | 4,320 | | 5. 1987.....| 0 | 0.0 | 41,897 | 6,980 | | 6. 1988.....| 0 | 0.0 | 65,236 | 8,073 | | 7. 1989.....| 0 | 0.0 | 72,703 | 15,375 | | 8. 1990.....| 0 | 0.0 | 121,972 | 25,399 | | 9. 1991.....| 0 | 0.0 | 219,268 | 29,872 | |10. 1992.....| 0 | 0.0 | 303,662 | 40,137 | |11. 1993.....| 0 | 0.0 | 336,724 | 40,997 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 1,257,132 | 175,251 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1D - WORKERS' COMPENSATION
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 33,952 | 6,477 | 2,121 | 59 | | 2. 1984.....| 473,454 | 39,695 | 433,759 | 378,596 | 35,564 | 19,082 | 220 | | 3. 1985.....| 583,337 | 68,397 | 514,940 | 488,588 | 47,864 | 26,243 | 255 | | 4. 1986.....| 965,342 | 95,101 | 870,241 | 664,932 | 85,094 | 33,922 | 131 | | 5. 1987.....| 1,162,512 | 134,836 | 1,027,676 | 863,310 | 129,824 | 40,789 | 100 | | 6. 1988.....| 1,494,062 | 111,679 | 1,382,383 | 1,082,547 | 95,051 | 47,577 | 148 | | 7. 1989.....| 1,619,759 | 57,453 | 1,562,305 | 1,255,153 | 21,747 | 50,842 | 92 | | 8. 1990.....| 2,256,388 | 10,031 | 2,246,356 | 1,372,201 | 3,314 | 53,647 | 261 | | 9. 1991.....| 2,446,769 | 22,557 | 2,424,211 | 994,629 | 5,282 | 41,754 | 205 | |10. 1992.....| 2,158,130 | 17,929 | 2,140,202 | 588,501 | 5,804 | 21,306 | 136 | |11. 1993.....| 1,856,803 | 20,230 | 1,836,573 | 169,561 | 2,574 | 5,764 | 44 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 7,891,970 | 438,594 | 343,048 | 1,651 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. SCHEDULE P - PART 1D - WORKERS' COMPENSATION - (CONTINUED) ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 4,734 | 790 | 30,327 | X X X X | | 2. 1984.....| 10,528 | 34,300 | 396,194 | 205,359 | | 3. 1985.....| 12,118 | 38,712 | 505,423 | 239,026 | | 4. 1986.....| 13,853 | 48,914 | 662,543 | 287,916 | | 5. 1987.....| 17,791 | 50,744 | 824,920 | 308,936 | | 6. 1988.....| 18,539 | 60,774 | 1,095,699 | 338,690 | | 7. 1989.....| 18,159 | 76,138 | 1,360,294 | 327,505 | | 8. 1990.....| 14,729 | 80,813 | 1,503,085 | 341,219 | | 9. 1991.....| 6,778 | 77,300 | 1,108,196 | 323,327 | |10. 1992.....| 3,472 | 65,925 | 669,792 | 274,976 | |11. 1993.....| 260 | 38,583 | 211,291 | 232,795 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 120,960 | 572,993 | 8,367,764 | X X X X | ------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 257,889 | 59,004 | 96,298 | 7,569 | 0 | 0 | 6,209 | | 2. 1984.....| 40,203 | 7,538 | 15,641 | 1,515 | 0 | 0 | 1,305 | | 3. 1985.....| 61,784 | 9,973 | 11,300 | 2,995 | 0 | 0 | 3,005 | | 4. 1986.....| 88,231 | 12,382 | 14,675 | 4,702 | 0 | 0 | 6,536 | | 5. 1987.....| 125,801 | 25,131 | 29,804 | 8,132 | 0 | 0 | 11,460 | | 6. 1988.....| 183,936 | 17,165 | 52,024 | 11,734 | 0 | 0 | 13,538 | | 7. 1989.....| 242,279 | 9,980 | 81,920 | 5,322 | 0 | 0 | 11,553 | | 8. 1990.....| 343,648 | 7,777 | 158,609 | 6,987 | 0 | 0 | 21,295 | | 9. 1991.....| 394,420 | 2,407 | 548,551 | 10,547 | 0 | 0 | 34,385 | |10. 1992.....| 383,948 | 6,322 | 772,624 | 15,347 | 0 | 0 | 43,091 | |11. 1993.....| 278,777 | 6,080 | 987,801 | 11,732 | 0 | 0 | 46,571 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 2,400,916 | 163,759 | 2,769,247 | 86,582 | 0 | 0 | 198,948 | ------------------------------------------------------------------------------------------------------------------- SCHEDULE P - PART 1D - WORKERS' COMPENSATION - (CONTINUED) --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 101 | 17,563 | 2,080 | 295,801 | 3,484 | | 2. 1984.....| 37 | 3,071 | 456 | 48,515 | 532 | | 3. 1985.....| 118 | 2,919 | 783 | 63,786 | 721 | | 4. 1986.....| 544 | 4,373 | 1,196 | 93,010 | 1,227 | | 5. 1987.....| 1,270 | 8,590 | 2,731 | 135,263 | 1,785 | | 6. 1988.....| 1,477 | 13,953 | 2,587 | 221,709 | 2,911 | | 7. 1989.....| 602 | 20,368 | 1,885 | 321,733 | 4,463 | | 8. 1990.....| 2 | 32,978 | 2,699 | 511,484 | 8,396 | | 9. 1991.....| 120 | 36,552 | 4,807 | 969,089 | 13,713 | |10. 1992.....| 517 | 39,858 | 6,229 | 1,183,707 | 19,848 | |11. 1993.....| 702 | 31,202 | 6,638 | 1,301,273 | 52,250 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 5,490 | 211,427 | 32,091 | 5,145,370 | 109,330 | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 489,583 | 44,874 | 444,709 | 103.4 | 113.0 | 102.5 | 0 | | 3. 1985.....| 630,415 | 61,205 | 569,210 | 108.1 | 89.5 | 110.5 | 0 | | 4. 1986.....| 858,406 | 102,853 | 755,553 | 88.9 | 108.2 | 86.8 | 0 | | 5. 1987.....| 1,124,639 | 164,457 | 960,182 | 96.7 | 122.0 | 93.4 | 0 | | 6. 1988.....| 1,442,983 | 125,575 | 1,317,408 | 96.6 | 112.4 | 95.3 | 0 | | 7. 1989.....| 1,719,770 | 37,743 | 1,682,027 | 106.2 | 65.7 | 107.7 | 0 | | 8. 1990.....| 2,032,912 | 18,341 | 2,014,571 | 90.1 | 182.8 | 89.7 | 0 | | 9. 1991.....| 2,095,846 | 18,561 | 2,077,285 | 85.7 | 82.3 | 85.7 | 0 | |10. 1992.....| 1,881,624 | 28,126 | 1,853,498 | 87.2 | 156.9 | 86.6 | 0 | |11. 1993.....| 1,533,695 | 21,132 | 1,512,563 | 82.6 | 104.5 | 82.4 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1D - WORKERS' COMPENSATION - (CONTINUED) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 0 | X X X X | 287,613 | 8,188 | | 2. 1984.....| 0 | 0.0 | 46,791 | 1,724 | | 3. 1985.....| 0 | 0.0 | 60,116 | 3,670 | | 4. 1986.....| 0 | 0.0 | 85,822 | 7,188 | | 5. 1987.....| 0 | 0.0 | 122,342 | 12,921 | | 6. 1988.....| 0 | 0.0 | 207,061 | 14,648 | | 7. 1989.....| 0 | 0.0 | 308,897 | 12,836 | | 8. 1990.....| 0 | 0.0 | 487,492 | 23,992 | | 9. 1991.....| 0 | 0.0 | 930,017 | 39,072 | |10. 1992.....| 0 | 0.0 | 1,134,904 | 48,803 | |11. 1993.....| 0 | 0.0 | 1,248,766 | 52,507 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 4,919,821 | 225,549 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1E - COMMERCIAL MULTIPLE PERIL
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 2,404 | (17)| 2,918 | 20 | | 2. 1984.....| 201,916 | 22,558 | 179,359 | 148,520 | 10,703 | 26,885 | 272 | | 3. 1985.....| 314,626 | 21,298 | 293,328 | 175,242 | 3,256 | 29,733 | 423 | | 4. 1986.....| 457,243 | 18,707 | 438,536 | 152,394 | 2,495 | 34,703 | 112 | | 5. 1987.....| 542,854 | 16,282 | 526,572 | 178,993 | 2,783 | 36,449 | 130 | | 6. 1988.....| 596,503 | 15,753 | 580,749 | 203,137 | 2,338 | 41,358 | 84 | | 7. 1989.....| 658,911 | 22,097 | 636,814 | 336,080 | 36,355 | 46,637 | 2,264 | | 8. 1990.....| 721,512 | 23,907 | 697,605 | 275,050 | 4,825 | 42,268 | 247 | | 9. 1991.....| 743,264 | 19,148 | 724,116 | 278,850 | 5,585 | 28,043 | 134 | |10. 1992.....| 722,128 | 23,724 | 698,403 | 311,714 | 32,086 | 13,025 | 333 | |11. 1993.....| 748,413 | 20,392 | 728,021 | 153,331 | 13,564 | 4,873 | 102 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 2,215,715 | 113,973 | 306,892 | 4,122 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| 111 | 98 | 5,418 | X X X X | | 2. 1984.....| 5,112 | 3,685 | 168,115 | 54,182 | | 3. 1985.....| 4,312 | 4,906 | 206,203 | 56,619 | | 4. 1986.....| 6,695 | 6,667 | 191,158 | 52,291 | | 5. 1987.....| 5,201 | 12,904 | 225,434 | 53,483 | | 6. 1988.....| 5,306 | 16,205 | 258,278 | 63,468 | | 7. 1989.....| 6,813 | 20,620 | 364,717 | 83,793 | | 8. 1990.....| 6,318 | 20,147 | 332,393 | 91,441 | | 9. 1991.....| 5,307 | 19,892 | 321,065 | 91,742 | |10. 1992.....| 4,585 | 18,293 | 310,613 | 82,720 | |11. 1993.....| 1,306 | 21,607 | 166,145 | 68,138 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 51,067 | 145,025 | 2,549,537 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1E - COMMERCIAL MULTIPLE PERIL - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 14,740 | 456 | 4,113 | 727 | 0 | 0 | 1,087 | | 2. 1984.....| 9,681 | 0 | 2,185 | 0 | 0 | 0 | 419 | | 3. 1985.....| 6,346 | 0 | 3,063 | 0 | 0 | 0 | 119 | | 4. 1986.....| 11,185 | 0 | 3,911 | 384 | 0 | 0 | 616 | | 5. 1987.....| 21,907 | 0 | 4,875 | 203 | 0 | 0 | 1,144 | | 6. 1988.....| 30,062 | 0 | 14,202 | 0 | 0 | 0 | 3,704 | | 7. 1989.....| 56,821 | 5 | 12,471 | 0 | 0 | 0 | 5,908 | | 8. 1990.....| 76,102 | 0 | 33,052 | 1,130 | 0 | 0 | 18,721 | | 9. 1991.....| 90,316 | 11 | 60,486 | 1,356 | 0 | 0 | 42,519 | |10. 1992.....| 87,703 | 1,026 | 137,123 | 18,310 | 0 | 0 | 60,323 | |11. 1993.....| 90,287 | 1,414 | 288,012 | 7,961 | 0 | 0 | 74,056 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 495,150 | 2,912 | 563,493 | 30,071 | 0 | 0 | 208,616 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 133 | 356 | 236 | 18,859 | 1,702 | | 2. 1984.....| 0 | 236 | 278 | 12,563 | 110 | | 3. 1985.....| 0 | 199 | 125 | 9,653 | 113 | | 4. 1986.....| 10 | 411 | 170 | 15,488 | 286 | | 5. 1987.....| 8 | 596 | 293 | 28,008 | 423 | | 6. 1988.....| 0 | 1,131 | 267 | 48,235 | 638 | | 7. 1989.....| 0 | 2,520 | 489 | 75,684 | 1,309 | | 8. 1990.....| 23 | 3,619 | 772 | 127,494 | 2,271 | | 9. 1991.....| 40 | 4,917 | 1,035 | 192,949 | 3,477 | |10. 1992.....| 577 | 8,034 | 1,674 | 266,910 | 4,749 | |11. 1993.....| 290 | 11,592 | 1,962 | 444,652 | 12,271 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 1,081 | 33,611 | 7,301 | 1,240,496 | 27,349 | --------------------------------------------------------------------------------------- SCHEDULE P - PART 1E - COMMERCIAL MULTIPLE PERIL - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 191,653 | 10,975 | 180,678 | 94.9 | 48.7 | 100.7 | 0 | | 3. 1985.....| 219,534 | 3,679 | 215,855 | 69.8 | 17.3 | 73.6 | 0 | | 4. 1986.....| 209,646 | 3,001 | 206,645 | 45.9 | 16.0 | 47.1 | 0 | | 5. 1987.....| 256,565 | 3,124 | 253,441 | 47.3 | 19.2 | 48.1 | 0 | | 6. 1988.....| 308,935 | 2,422 | 306,513 | 51.8 | 15.4 | 52.8 | 0 | | 7. 1989.....| 479,026 | 38,624 | 440,402 | 72.7 | 174.8 | 69.2 | 0 | | 8. 1990.....| 466,112 | 6,225 | 459,887 | 64.6 | 26.0 | 65.9 | 0 | | 9. 1991.....| 521,141 | 7,126 | 514,015 | 70.1 | 37.2 | 71.0 | 0 | |10. 1992.....| 629,855 | 52,332 | 577,523 | 87.2 | 220.6 | 82.7 | 0 | |11. 1993.....| 634,128 | 23,331 | 610,797 | 84.7 | 114.4 | 83.9 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 0 | X X X X | 17,669 | 1,190 | | 2. 1984.....| 0 | 0.0 | 11,866 | 697 | | 3. 1985.....| 0 | 0.0 | 9,409 | 244 | | 4. 1986.....| 0 | 0.0 | 14,712 | 776 | | 5. 1987.....| 0 | 0.0 | 26,579 | 1,429 | | 6. 1988.....| 0 | 0.0 | 44,264 | 3,971 | | 7. 1989.....| 0 | 0.0 | 69,287 | 6,397 | | 8. 1990.....| 0 | 0.0 | 108,024 | 19,470 | | 9. 1991.....| 0 | 0.0 | 149,435 | 43,514 | |10. 1992.....| 0 | 0.0 | 205,490 | 61,420 | |11. 1993.....| 0 | 0.0 | 368,924 | 75,728 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 1,025,660 | 214,836 | ------------------------------------------------------------------------- Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| X X X X | X X X X | X X X X | 17,785 | 5,221 | 1,584 | 197 | | 2. 1984.....| 99,848 | 13,442 | 86,406 | 84,607 | 7,947 | 40,063 | 546 | | 3. 1985.....| 142,103 | 19,829 | 122,274 | 67,197 | 2,812 | 30,618 | (14)| | 4. 1986.....| 195,700 | 18,078 | 177,622 | 68,577 | 2,390 | 26,884 | 309 | | 5. 1987.....| 151,511 | 10,257 | 141,254 | 24,433 | 3,038 | 11,721 | 373 | | 6. 1988.....| 47,559 | 10,725 | 36,834 | 4,769 | 2,047 | 5,094 | 765 | | 7. 1989.....| 24,074 | 10,451 | 13,624 | 4,748 | 5,095 | 4,086 | 1,174 | | 8. 1990.....| 38,788 | 10,291 | 28,497 | 6,784 | 1,007 | 2,366 | 479 | | 9. 1991.....| 37,194 | 11,325 | 25,869 | 1,936 | 1,476 | 1,202 | 210 | |10. 1992.....| 34,442 | 13,049 | 21,393 | 734 | 53 | 219 | 49 | |11. 1993.....| 40,982 | 21,238 | 19,744 | 32 | 1 | 12 | 3 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 281,603 | 31,088 | 123,848 | 4,091 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| (56)| 185 | 14,136 | X X X X | | 2. 1984.....| 11,145 | 3,386 | 119,562 | 7,291 | | 3. 1985.....| 4,046 | 2,920 | 97,937 | 6,811 | | 4. 1986.....| 1,650 | 2,848 | 95,610 | 5,707 | | 5. 1987.....| 517 | 1,477 | 34,221 | 3,308 | | 6. 1988.....| 168 | 1,835 | 8,885 | 1,608 | | 7. 1989.....| 23 | 697 | 3,262 | 1,640 | | 8. 1990.....| 32 | 545 | 8,210 | 1,867 | | 9. 1991.....| 10 | 445 | 1,897 | 1,230 | |10. 1992.....| 0 | 488 | 1,339 | 797 | |11. 1993.....| 0 | 1,377 | 1,416 | 280 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 17,534 | 16,203 | 386,475 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 52,968 | 8,738 | 49,471 | 24,286 | 0 | 0 | 8,200 | | 2. 1984.....| 25,213 | 1,802 | 11,474 | 3,029 | 0 | 0 | 5,406 | | 3. 1985.....| 16,319 | 0 | 12,843 | 1,771 | 0 | 0 | 5,959 | | 4. 1986.....| 17,472 | 0 | 20,806 | 3,730 | 0 | 0 | 5,787 | | 5. 1987.....| 14,943 | 1,940 | 13,687 | 1,046 | 0 | 0 | 5,840 | | 6. 1988.....| 9,078 | 1,228 | 31,612 | 808 | 0 | 0 | 2,948 | | 7. 1989.....| 7,956 | 1,623 | 14,180 | 348 | 0 | 0 | 3,539 | | 8. 1990.....| 9,837 | 2,067 | 28,619 | 3,879 | 0 | 0 | 4,832 | | 9. 1991.....| 12,493 | 1,736 | 18,168 | 5,771 | 0 | 0 | 5,357 | |10. 1992.....| 6,079 | 469 | 31,856 | 12,547 | 0 | 0 | 6,862 | |11. 1993.....| 1,036 | 202 | 31,975 | 11,406 | 0 | 0 | 6,674 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 173,392 | 19,806 | 264,691 | 68,621 | 0 | 0 | 61,404 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 1,447 | 1,928 | 651 | 76,819 | 187 | | 2. 1984.....| 109 | 1,021 | 336 | 37,489 | 248 | | 3. 1985.....| 336 | 2,395 | 358 | 33,372 | 158 | | 4. 1986.....| 475 | 1,481 | 476 | 40,336 | 185 | | 5. 1987.....| 313 | 768 | 320 | 31,492 | 141 | | 6. 1988.....| 661 | 811 | 159 | 41,099 | 117 | | 7. 1989.....| 1,313 | 1,510 | 123 | 22,514 | 149 | | 8. 1990.....| 1,784 | 1,009 | 199 | 35,757 | 228 | | 9. 1991.....| 2,546 | 886 | 254 | 26,220 | 317 | |10. 1992.....| 2,178 | 677 | 336 | 29,939 | 213 | |11. 1993.....| 2,783 | 525 | 275 | 25,568 | 101 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 13,945 | 13,012 | 3,487 | 400,603 | 2,044 | --------------------------------------------------------------------------------------- SCHEDULE P - PART 1F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 170,485 | 13,433 | 157,052 | 170.7 | 99.9 | 181.8 | 0 | | 3. 1985.....| 136,214 | 4,905 | 131,309 | 95.9 | 24.7 | 107.4 | 0 | | 4. 1986.....| 142,850 | 6,904 | 135,946 | 73.0 | 38.2 | 76.5 | 0 | | 5. 1987.....| 72,421 | 6,710 | 65,711 | 47.8 | 65.4 | 46.5 | 0 | | 6. 1988.....| 55,495 | 5,509 | 49,986 | 116.7 | 51.4 | 135.7 | 0 | | 7. 1989.....| 35,329 | 9,553 | 25,776 | 146.8 | 91.4 | 189.2 | 0 | | 8. 1990.....| 53,182 | 9,216 | 43,966 | 137.1 | 89.6 | 154.3 | 0 | | 9. 1991.....| 39,855 | 11,739 | 28,116 | 107.2 | 103.7 | 108.7 | 0 | |10. 1992.....| 46,574 | 15,296 | 31,278 | 135.2 | 117.2 | 146.2 | 0 | |11. 1993.....| 41,381 | 14,395 | 26,986 | 101.0 | 67.8 | 136.7 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 69,415 | 7,404 | | 2. 1984.....| 0 | 0.0 | 31,856 | 5,633 | | 3. 1985.....| 0 | 0.0 | 27,391 | 5,981 | | 4. 1986.....| 0 | 0.0 | 34,548 | 5,788 | | 5. 1987.....| 0 | 0.0 | 25,645 | 5,847 | | 6. 1988.....| 0 | 0.0 | 38,653 | 2,446 | | 7. 1989.....| 0 | 0.0 | 20,165 | 2,349 | | 8. 1990.....| 0 | 0.0 | 32,510 | 3,247 | | 9. 1991.....| 0 | 0.0 | 23,155 | 3,065 | |10. 1992.....| 0 | 0.0 | 24,919 | 5,020 | |11. 1993.....| 0 | 0.0 | 21,402 | 4,166 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 349,657 | 50,946 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 5. 1987.....| 77,440 | 9,388 | 68,052 | 32,077 | 435 | 8,233 | 34 | | 6. 1988.....| 193,675 | 17,218 | 176,457 | 35,759 | 5,356 | 16,379 | 504 | | 7. 1989.....| 238,793 | 20,745 | 218,048 | 55,482 | 5,212 | 22,194 | 583 | | 8. 1990.....| 243,443 | 19,349 | 224,094 | 51,627 | 3,507 | 22,239 | 337 | | 9. 1991.....| 213,034 | 17,383 | 195,652 | 44,859 | 672 | 16,135 | 92 | |10. 1992.....| 206,764 | 17,799 | 188,965 | 26,852 | 146 | 8,788 | 47 | |11. 1993.....| 221,483 | 16,867 | 204,616 | 5,937 | 1,305 | 1,126 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 252,593 | 16,632 | 95,094 | 1,598 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| 0 | 0 | 0 | X X X X | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 135 | 2,309 | 42,150 | 1,222 | | 6. 1988.....| 368 | 2,810 | 49,088 | 3,057 | | 7. 1989.....| 761 | 4,453 | 76,334 | 4,229 | | 8. 1990.....| 312 | 4,811 | 74,832 | 4,621 | | 9. 1991.....| 171 | 4,275 | 64,506 | 4,981 | |10. 1992.....| 196 | 3,844 | 39,291 | 6,020 | |11. 1993.....| 27 | 2,889 | 8,647 | 5,558 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 1,969 | 25,390 | 354,848 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 5. 1987.....| 5,053 | 2,336 | 5,941 | 386 | 0 | 0 | 1,480 | | 6. 1988.....| 22,286 | 923 | 10,711 | 2,672 | 0 | 0 | 5,679 | | 7. 1989.....| 38,306 | 234 | 19,137 | 4,321 | 0 | 0 | 9,047 | | 8. 1990.....| 39,912 | 261 | 27,456 | 9,000 | 0 | 0 | 18,532 | | 9. 1991.....| 50,550 | 1,108 | 47,466 | 10,463 | 0 | 0 | 24,492 | |10. 1992.....| 60,028 | 1,007 | 61,557 | 12,191 | 0 | 0 | 33,160 | |11. 1993.....| 34,981 | 44 | 143,479 | 11,034 | 0 | 0 | 43,330 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 251,116 | 5,913 | 315,747 | 50,067 | 0 | 0 | 135,720 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | 0 | | 5. 1987.....| 109 | 180 | 122 | 9,765 | 15 | | 6. 1988.....| 752 | 221 | 294 | 34,623 | 67 | | 7. 1989.....| 811 | 1,191 | 594 | 61,718 | 151 | | 8. 1990.....| 2,191 | 840 | 832 | 75,279 | 320 | | 9. 1991.....| 2,560 | 2,664 | 1,528 | 109,905 | 658 | |10. 1992.....| 2,108 | 2,841 | 2,106 | 141,545 | 1,313 | |11. 1993.....| 2,916 | 3,932 | 3,099 | 210,896 | 2,882 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 11,447 | 11,870 | 8,575 | 643,731 | 5,406 | --------------------------------------------------------------------------------------- SCHEDULE P - PART 1F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 5. 1987.....| 55,215 | 3,300 | 51,915 | 71.3 | 35.2 | 76.3 | 0 | | 6. 1988.....| 93,918 | 10,207 | 83,711 | 48.5 | 59.3 | 47.4 | 0 | | 7. 1989.....| 149,213 | 11,161 | 138,052 | 62.5 | 53.8 | 63.3 | 0 | | 8. 1990.....| 165,409 | 15,296 | 150,113 | 67.9 | 79.1 | 67.0 | 0 | | 9. 1991.....| 189,305 | 14,895 | 174,410 | 88.9 | 85.7 | 89.1 | 0 | |10. 1992.....| 196,335 | 15,499 | 180,836 | 95.0 | 87.1 | 95.7 | 0 | |11. 1993.....| 234,841 | 15,299 | 219,542 | 106.0 | 90.7 | 107.3 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 0 | X X X X | 0 | 0 | | 2. 1984.....| 0 | 0.0 | 0 | 0 | | 3. 1985.....| 0 | 0.0 | 0 | 0 | | 4. 1986.....| 0 | 0.0 | 0 | 0 | | 5. 1987.....| 0 | 0.0 | 8,272 | 1,493 | | 6. 1988.....| 0 | 0.0 | 29,402 | 5,221 | | 7. 1989.....| 0 | 0.0 | 52,888 | 8,830 | | 8. 1990.....| 0 | 0.0 | 58,106 | 17,173 | | 9. 1991.....| 0 | 0.0 | 86,445 | 23,460 | |10. 1992.....| 0 | 0.0 | 108,387 | 33,158 | |11. 1993.....| 0 | 0.0 | 167,383 | 43,513 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 510,883 | 132,848 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY)
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 643 | 38 | 56 | 33 | | 2. 1984.....| 32,014 | 20,126 | 11,888 | 13,379 | 6,644 | 1,194 | 801 | | 3. 1985.....| 29,949 | 20,650 | 9,299 | 13,055 | 9,351 | 1,468 | 809 | | 4. 1986.....| 46,208 | 29,411 | 16,797 | 20,797 | 9,784 | 1,536 | 917 | | 5. 1987.....| 59,993 | 33,400 | 26,592 | 17,561 | 9,758 | 1,649 | 1,082 | | 6. 1988.....| 46,236 | 25,138 | 21,097 | 11,555 | 2,925 | 3,191 | 2,456 | | 7. 1989.....| 37,990 | 19,020 | 18,970 | 27,917 | 17,353 | 2,456 | 1,653 | | 8. 1990.....| 25,046 | 15,403 | 9,643 | 25,067 | 14,267 | 2,568 | 1,903 | | 9. 1991.....| 28,231 | 12,396 | 15,835 | 26,311 | 16,578 | 2,013 | 1,468 | |10. 1992.....| 29,224 | 13,155 | 16,069 | 19,535 | 12,098 | 1,301 | 986 | |11. 1993.....| 38,887 | 18,715 | 20,173 | 11,826 | 8,381 | 483 | 351 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 187,647 | 107,177 | 17,915 | 12,458 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY) - (CONTINUED) ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 628 | X X X X | | 2. 1984.....| 38 | 194 | 7,323 | 0 | | 3. 1985.....| 71 | 91 | 4,455 | 0 | | 4. 1986.....| 59 | 136 | 11,768 | 0 | | 5. 1987.....| 36 | 222 | 8,592 | 0 | | 6. 1988.....| 52 | 157 | 9,521 | 0 | | 7. 1989.....| 80 | 165 | 11,532 | 0 | | 8. 1990.....| 129 | 170 | 11,635 | 0 | | 9. 1991.....| 91 | 192 | 10,470 | 0 | |10. 1992.....| 100 | 229 | 7,982 | 0 | |11. 1993.....| 16 | 292 | 3,869 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 671 | 1,848 | 87,776 | X X X X | ------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 1,697 | 1,266 | 66 | 66 | 0 | 0 | 0 | | 2. 1984.....| 34 | 15 | 333 | 333 | 0 | 0 | 0 | | 3. 1985.....| 241 | 132 | 701 | 701 | 0 | 0 | 0 | | 4. 1986.....| 164 | 78 | 2,075 | 2,075 | 0 | 0 | 1 | | 5. 1987.....| 491 | 293 | 3,686 | 3,686 | 0 | 0 | 6 | | 6. 1988.....| 1,916 | 272 | 13,785 | 13,501 | 0 | 0 | 9 | | 7. 1989.....| 1,962 | 927 | 4,104 | 3,787 | 0 | 0 | 57 | | 8. 1990.....| 4,355 | 2,706 | 7,063 | 6,541 | 0 | 0 | 9 | | 9. 1991.....| 1,882 | 811 | 11,298 | 10,845 | 0 | 0 | 178 | |10. 1992.....| 4,099 | 1,424 | 4,966 | 3,649 | 0 | 0 | 844 | |11. 1993.....| 8,221 | 6,500 | 15,240 | 7,428 | 0 | 0 | 2,278 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 25,062 | 14,424 | 63,317 | 52,612 | 0 | 0 | 3,382 | ------------------------------------------------------------------------------------------------------------------- SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY) - (CONTINUED) --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 1 | 0 | 431 | 55 | | 2. 1984.....| 0 | 0 | 0 | 18 | 12 | | 3. 1985.....| 0 | 0 | 0 | 109 | 19 | | 4. 1986.....| 0 | 0 | 0 | 87 | 19 | | 5. 1987.....| 0 | 0 | 0 | 204 | 21 | | 6. 1988.....| 0 | 1 | 0 | 1,937 | 59 | | 7. 1989.....| 0 | 3 | 0 | 1,409 | 87 | | 8. 1990.....| 0 | 10 | 8 | 2,188 | 109 | | 9. 1991.....| 0 | 27 | 0 | 1,702 | 86 | |10. 1992.....| 186 | 33 | 5 | 4,655 | 137 | |11. 1993.....| 1,373 | 134 | 34 | 10,472 | 175 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 1,559 | 209 | 47 | 23,214 | 779 | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 15,134 | 7,793 | 7,341 | 47.3 | 38.7 | 61.8 | 0 | | 3. 1985.....| 15,556 | 10,993 | 4,563 | 51.9 | 53.2 | 49.1 | 0 | | 4. 1986.....| 24,709 | 12,854 | 11,855 | 53.5 | 43.7 | 70.6 | 0 | | 5. 1987.....| 23,615 | 14,819 | 8,796 | 39.4 | 44.4 | 33.1 | 0 | | 6. 1988.....| 30,613 | 19,154 | 11,459 | 66.2 | 76.2 | 54.3 | 0 | | 7. 1989.....| 36,661 | 23,720 | 12,941 | 96.5 | 124.7 | 68.2 | 0 | | 8. 1990.....| 39,240 | 25,417 | 13,823 | 156.7 | 165.0 | 143.3 | 0 | | 9. 1991.....| 41,874 | 29,702 | 12,172 | 148.3 | 239.6 | 76.9 | 0 | |10. 1992.....| 30,979 | 18,343 | 12,636 | 106.0 | 139.4 | 78.6 | 0 | |11. 1993.....| 38,374 | 24,033 | 14,341 | 98.7 | 128.4 | 71.1 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY) - (CONTINUED) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 0 | X X X X | 431 | 0 | | 2. 1984.....| 0 | 0.0 | 18 | 0 | | 3. 1985.....| 0 | 0.0 | 109 | 0 | | 4. 1986.....| 0 | 0.0 | 86 | 1 | | 5. 1987.....| 0 | 0.0 | 198 | 6 | | 6. 1988.....| 0 | 0.0 | 1,928 | 9 | | 7. 1989.....| 0 | 0.0 | 1,352 | 57 | | 8. 1990.....| 0 | 0.0 | 2,171 | 17 | | 9. 1991.....| 0 | 0.0 | 1,524 | 178 | |10. 1992.....| 0 | 0.0 | 3,992 | 663 | |11. 1993.....| 0 | 0.0 | 9,533 | 939 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 21,344 | 1,870 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 219,105 | 31,119 | 95,240 | 4,263 | | 2. 1984.....| 282,070 | 71,380 | 210,690 | 360,049 | 160,409 | 105,364 | 27,038 | | 3. 1985.....| 442,435 | 107,492 | 334,943 | 679,666 | 420,301 | 130,455 | 27,775 | | 4. 1986.....| 846,355 | 133,251 | 713,104 | 329,139 | 87,139 | 117,511 | 23,652 | | 5. 1987.....| 493,711 | 28,380 | 465,331 | 139,425 | 5,524 | 46,164 | 1,015 | | 6. 1988.....| 464,192 | 36,984 | 427,208 | 141,725 | 9,167 | 50,403 | 1,264 | | 7. 1989.....| 407,460 | 48,217 | 359,243 | 135,709 | 9,955 | 47,869 | 835 | | 8. 1990.....| 464,249 | 44,621 | 419,628 | 121,641 | 9,802 | 41,144 | 377 | | 9. 1991.....| 408,354 | 46,989 | 361,365 | 88,359 | 15,019 | 21,188 | 762 | |10. 1992.....| 386,504 | 60,883 | 325,621 | 33,139 | 3,835 | 5,069 | 615 | |11. 1993.....| 487,556 | 72,961 | 414,595 | 17,071 | 3,458 | 1,053 | 105 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 2,265,027 | 755,728 | 661,457 | 87,702 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| 1,149 | 2,977 | 281,940 | X X X X | | 2. 1984.....| 3,245 | 11,111 | 289,077 | 35,564 | | 3. 1985.....| 12,316 | 13,256 | 375,300 | 35,371 | | 4. 1986.....| 9,519 | 10,627 | 346,487 | 43,366 | | 5. 1987.....| 2,189 | 7,736 | 186,785 | 40,960 | | 6. 1988.....| 1,613 | 10,214 | 191,910 | 41,808 | | 7. 1989.....| 1,581 | 9,940 | 182,729 | 43,253 | | 8. 1990.....| 1,251 | 8,823 | 161,427 | 49,777 | | 9. 1991.....| 1,407 | 8,840 | 102,605 | 43,898 | |10. 1992.....| 249 | 7,432 | 41,189 | 31,742 | |11. 1993.....| 101 | 12,116 | 26,677 | 25,336 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 34,620 | 103,071 | 2,186,125 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1H - SECTION 1 - OTHER LIABILITY - OCCURRENCE - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 367,305 | 124,760 | 2,519,816 | 161,332 | 0 | 0 | 24,417 | | 2. 1984.....| 47,412 | 13,233 | 40,860 | 15,875 | 0 | 0 | 8,234 | | 3. 1985.....| 58,665 | 22,326 | 58,577 | 17,135 | 0 | 0 | 12,299 | | 4. 1986.....| 68,241 | 14,815 | 60,381 | 10,142 | 0 | 0 | 20,233 | | 5. 1987.....| 28,237 | 271 | 53,306 | 4,992 | 0 | 0 | 15,298 | | 6. 1988.....| 41,219 | 1,796 | 87,802 | 13,713 | 0 | 0 | 13,893 | | 7. 1989.....| 70,896 | 5,234 | 86,636 | 13,607 | 0 | 0 | 15,573 | | 8. 1990.....| 85,856 | 4,797 | 120,583 | 22,163 | 0 | 0 | 35,333 | | 9. 1991.....| 76,908 | 9,868 | 170,167 | 37,319 | 0 | 0 | 52,339 | |10. 1992.....| 54,837 | 4,628 | 243,768 | 49,056 | 0 | 0 | 61,978 | |11. 1993.....| 38,003 | 1,687 | 309,108 | 64,591 | 0 | 0 | 59,987 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 937,579 | 203,417 | 3,751,004 | 409,925 | 0 | 0 | 319,584 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 3,993 | 13,971 | 3,797 | 2,625,250 | 14,716 | | 2. 1984.....| 2,329 | 1,903 | 697 | 65,766 | 543 | | 3. 1985.....| 3,927 | 7,522 | 716 | 86,868 | 801 | | 4. 1986.....| 3,055 | 7,036 | 1,106 | 121,948 | 871 | | 5. 1987.....| 76 | 3,680 | 759 | 92,260 | 606 | | 6. 1988.....| 352 | 4,317 | 1,129 | 128,181 | 669 | | 7. 1989.....| 785 | 4,453 | 1,586 | 155,065 | 1,227 | | 8. 1990.....| 991 | 6,652 | 2,507 | 216,328 | 2,160 | | 9. 1991.....| 1,358 | 9,943 | 3,246 | 254,115 | 3,174 | |10. 1992.....| 3,662 | 8,514 | 4,142 | 307,379 | 3,438 | |11. 1993.....| 4,018 | 8,099 | 5,229 | 342,031 | 5,976 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 24,546 | 76,090 | 24,914 | 4,395,193 | 34,181 | --------------------------------------------------------------------------------------- SCHEDULE P - PART 1H - SECTION 1 - OTHER LIABILITY - OCCURRENCE - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 573,727 | 218,884 | 354,843 | 203.4 | 306.6 | 168.4 | 0 | | 3. 1985.....| 953,634 | 491,464 | 462,170 | 215.5 | 457.2 | 138.0 | 0 | | 4. 1986.....| 607,238 | 138,803 | 468,435 | 71.7 | 104.2 | 65.7 | 0 | | 5. 1987.....| 290,925 | 11,878 | 279,047 | 58.9 | 41.9 | 60.0 | 0 | | 6. 1988.....| 346,385 | 26,292 | 320,093 | 74.6 | 71.1 | 74.9 | 0 | | 7. 1989.....| 368,209 | 30,416 | 337,793 | 90.4 | 63.1 | 94.0 | 0 | | 8. 1990.....| 415,887 | 38,130 | 377,757 | 89.6 | 85.5 | 90.0 | 0 | | 9. 1991.....| 421,047 | 64,326 | 356,721 | 103.1 | 136.9 | 98.7 | 0 | |10. 1992.....| 410,365 | 61,796 | 348,569 | 106.2 | 101.5 | 107.0 | 0 | |11. 1993.....| 442,567 | 73,859 | 368,708 | 90.8 | 101.2 | 88.9 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 2,601,029 | 24,221 | | 2. 1984.....| 0 | 0.0 | 59,164 | 6,602 | | 3. 1985.....| 0 | 0.0 | 77,780 | 9,088 | | 4. 1986.....| 0 | 0.0 | 103,664 | 18,284 | | 5. 1987.....| 0 | 0.0 | 76,279 | 15,981 | | 6. 1988.....| 0 | 0.0 | 113,511 | 14,670 | | 7. 1989.....| 0 | 0.0 | 138,691 | 16,374 | | 8. 1990.....| 0 | 0.0 | 179,479 | 36,849 | | 9. 1991.....| 0 | 0.0 | 199,888 | 54,227 | |10. 1992.....| 0 | 0.0 | 244,921 | 62,458 | |11. 1993.....| 0 | 0.0 | 280,832 | 61,198 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 4,075,241 | 319,952 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense P| | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| X X X X | X X X X | X X X X | 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 5. 1987.....| 485,410 | 119,663 | 365,747 | 110,973 | 28,086 | 46,103 | 4,751 | | 6. 1988.....| 500,957 | 115,402 | 385,555 | 126,018 | 31,355 | 44,714 | 4,510 | | 7. 1989.....| 534,973 | 113,421 | 421,552 | 184,873 | 80,060 | 43,941 | 7,254 | | 8. 1990.....| 455,514 | 109,190 | 346,325 | 113,646 | 31,694 | 43,717 | 2,364 | | 9. 1991.....| 481,319 | 90,083 | 391,236 | 79,865 | 5,604 | 27,310 | 223 | |10. 1992.....| 430,719 | 87,990 | 342,729 | 22,507 | 89 | 10,085 | 221 | |11. 1993.....| 361,502 | 103,639 | 257,863 | 3,701 | 2 | 1,048 | 57 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | 641,584 | 176,891 | 216,919 | 19,379 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 ayments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| 0 | 0 | 0 | X X X X | | 2. 1984.....| 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | | 5. 1987.....| 1,626 | 4,997 | 129,236 | 5,025 | | 6. 1988.....| 1,766 | 3,627 | 138,495 | 5,113 | | 7. 1989.....| 349 | 3,994 | 145,493 | 5,034 | | 8. 1990.....| 429 | 3,915 | 127,221 | 5,791 | | 9. 1991.....| 207 | 3,930 | 105,278 | 6,246 | |10. 1992.....| 323 | 3,487 | 35,769 | 6,460 | |11. 1993.....| 14 | 2,216 | 6,905 | 6,070 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 4,716 | 26,165 | 688,397 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 5. 1987.....| 20,740 | 3,492 | 28,916 | 13,714 | 0 | 0 | 10,053 | | 6. 1988.....| 30,489 | 5,968 | 36,444 | 20,905 | 0 | 0 | 17,825 | | 7. 1989.....| 64,871 | 18,790 | 46,019 | 23,223 | 0 | 0 | 31,085 | | 8. 1990.....| 87,831 | 25,301 | 103,541 | 54,619 | 0 | 0 | 44,992 | | 9. 1991.....| 101,016 | 23,424 | 112,096 | 59,957 | 0 | 0 | 60,232 | |10. 1992.....| 73,526 | 2,614 | 157,952 | 63,242 | 0 | 0 | 67,986 | |11. 1993.....| 43,351 | 295 | 231,326 | 61,326 | 0 | 0 | 94,178 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 421,823 | 79,883 | 716,294 | 296,986 | 0 | 0 | 326,351 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | 0 | | 2. 1984.....| 0 | 0 | 0 | 0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0 | 0 | | 5. 1987.....| 3,051 | 4 | 585 | 40,037 | 174 | | 6. 1988.....| 4,181 | 9 | 539 | 54,243 | 305 | | 7. 1989.....| 5,135 | 22 | 987 | 95,814 | 446 | | 8. 1990.....| 7,291 | 77 | 1,626 | 150,779 | 808 | | 9. 1991.....| 9,775 | 179 | 1,918 | 182,106 | 1,412 | |10. 1992.....| 3,648 | 361 | 2,514 | 232,474 | 2,330 | |11. 1993.....| 10,176 | 1,986 | 2,267 | 299,325 | 4,121 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 43,257 | 2,638 | 10,436 | 1,054,778 | 9,596 | --------------------------------------------------------------------------------------- SCHEDULE P - PART 1H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | in Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984.....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 3. 1985.....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 4. 1986.....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 5. 1987.....| 222,367 | 53,094 | 169,273 | 45.8 | 44.4 | 46.3 | 0 | | 6. 1988.....| 259,656 | 66,919 | 192,737 | 51.8 | 58.0 | 50.0 | 0 | | 7. 1989.....| 375,770 | 134,462 | 241,308 | 70.2 | 118.6 | 57.2 | 0 | | 8. 1990.....| 399,268 | 121,269 | 277,999 | 87.7 | 111.1 | 80.3 | 0 | | 9. 1991.....| 386,367 | 98,983 | 287,384 | 80.3 | 109.9 | 73.5 | 0 | |10. 1992.....| 338,057 | 69,814 | 268,243 | 78.5 | 79.3 | 78.3 | 0 | |11. 1993.....| 378,087 | 71,856 | 306,231 | 104.6 | 69.3 | 118.8 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves| | Years f Money | 33 | After Discount | | in Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | Loss | | Losses Were | Loss |Participation | Losses | Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | | | | 1. Prior ...| 0 | X X X X | 0 | 0 | | 2. 1984.....| 0 | 0.0 | 0 | 0 | | 3. 1985.....| 0 | 0.0 | 0 | 0 | | 4. 1986.....| 0 | 0.0 | 0 | 0 | | 5. 1987.....| 0 | 0.0 | 32,450 | 7,587 | | 6. 1988.....| 0 | 0.0 | 40,060 | 14,183 | | 7. 1989.....| 0 | 0.0 | 68,877 | 26,937 | | 8. 1990.....| 0 | 0.0 | 111,452 | 39,327 | | 9. 1991.....| 0 | 0.0 | 129,731 | 52,375 | |10. 1992.....| 0 | 0.0 | 165,622 | 66,852 | |11. 1993.....| 0 | 0.0 | 213,056 | 86,269 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 761,248 | 293,530 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT)
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense | | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 13,740 | 4,470 | 1,486 | 405 | | 2. 1992.....| 179,956 | 70,306 | 109,651 | 128,918 | 62,113 | 2,786 | 1,282 | | 3. 1993.....| 193,799 | 71,866 | 121,933 | 45,042 | 25,190 | 1,328 | 696 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 187,699 | 91,773 | 5,600 | 2,382 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 Payments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 6,969 | 212 | 10,564 | X X X X | | 2. 1992.....| 405 | 2,433 | 70,741 | X X X X | | 3. 1993.....| 165 | 2,677 | 23,161 | X X X X | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 7,540 | 5,322 | 104,466 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT) - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpaid| | Years |--------------------------------------------------------|--------------------------------------------| | Which | Case Basis | Bulk + IBNR | Case Basis | Bulk | |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 13,320 | 2,828 | 29,816 | 15,143 | 0 | 0 | 5,753 | | 2. 1992.....| 17,137 | 3,518 | 20,294 | 10,611 | 0 | 0 | 3,484 | | 3. 1993.....| 70,774 | 38,453 | 29,506 | 8,865 | 0 | 0 | 4,201 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 101,231 | 44,799 | 79,616 | 34,619 | 0 | 0 | 13,438 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expense | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | 1. Prior ...| 15 | 2,689 | 137 | 31,040 | 688 | | 2. 1992.....| 1,578 | 2,402 | 110 | 25,318 | 344 | | 3. 1993.....| 738 | 2,597 | 362 | 56,787 | 1,077 | |-------------|--------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 2,331 | 7,688 | 609 | 113,145 | 2,109 | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1992.....| 175,162 | 79,102 | 96,060 | 97.3 | 112.5 | 87.6 | 0 | | 3. 1993.....| 153,890 | 73,942 | 79,948 | 79.4 | 102.9 | 65.6 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY AND THEFT) - (CONTINUED) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves | | Years f Money | 33 | After Discount | | Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 25,165 | 5,875 | | 2. 1992.....| 0 | 0.0 | 23,302 | 2,016 | | 3. 1993.....| 0 | 0.0 | 52,962 | 3,825 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | X X X X | 101,429 | 11,716 | -------------------------------------------------------------------------
SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense | | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| X X X X | X X X X | X X X X | 2,752 | (20)| 1,888 | 53 | | 2. 1992.....| 393,174 | 11,491 | 381,683 | 185,113 | 4,539 | 2,846 | 23 | | 3. 1993.....| 362,501 | 6,771 | 355,730 | 159,678 | 3,164 | 1,912 | 7 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 347,543 | 7,684 | 6,646 | 83 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 Payments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 3,683 | (124)| 4,484 | X X X X | | 2. 1992.....| 32,809 | 20,399 | 203,794 | 185,594 | | 3. 1993.....| 17,545 | 16,229 | 174,649 | 153,975 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 54,037 | 36,505 | 382,927 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpaid| | Years |--------------------------------------------------------|--------------------------------------------| | Which | Case Basis | Bulk + IBNR | Case Basis | Bulk | |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 0 | 0 | 0 | 0 | 0 | 0 | 1,751 | | 2. 1992.....| 1,259 | 13 | 20,580 | 1,563 | 0 | 0 | 2,084 | | 3. 1993.....| 11,032 | 247 | 35,807 | 2,283 | 0 | 0 | 11,127 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 12,291 | 260 | 56,387 | 3,846 | 0 | 0 | 14,962 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expense | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | 1. Prior ...| 0 | 3,848 | 169 | 13,345 | 310 | | 2. 1992.....| 27 | 5,330 | 635 | 22,955 | 156 | | 3. 1993.....| 99 | 31,402 | 1,800 | 57,137 | 5,217 | |-------------|--------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 126 | 40,579 | 2,604 | 93,437 | 5,683 | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1992.....| 232,916 | 6,165 | 226,751 | 59.2 | 53.7 | 59.4 | 0 | | 3. 1993.....| 237,585 | 5,800 | 231,785 | 65.5 | 85.7 | 65.2 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | -------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE - (CONTINUED) --------------------------- --------------------------------------------- | for Time | | Net Balance Sheet Reserves | | Years f Money | 33 | After Discount | | Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 11,425 | 1,920 | | 2. 1992.....| 0 | 0.0 | 20,263 | 2,692 | | 3. 1993.....| 0 | 0.0 | 44,309 | 12,828 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | X X X X | 75,997 | 17,440 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense | | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | 9,566 | 9,200 | 2,721 | 4,070 | | 2. 1992.....| 121,630 | 24,714 | 96,915 | 22,018 | 1,928 | 1,748 | 361 | | 3. 1993.....| 127,118 | 20,304 | 106,814 | 53,968 | 10,277 | 355 | 8 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 85,552 | 21,406 | 4,824 | 4,438 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 Payments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 53,772 | 148 | (835)| X X X X | | 2. 1992.....| 20,901 | 553 | 22,030 | X X X X | | 3. 1993.....| 97,322 | 558 | 44,596 | X X X X | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 171,994 | 1,259 | 65,791 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpaid| | Years |--------------------------------------------------------|--------------------------------------------| | Which | Case Basis | Bulk + IBNR | Case Basis | Bulk | |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 31,700 | 8,341 | 77,062 | 30,803 | 0 | 0 | 16,670 | | 2. 1992.....| 3,393 | 1,494 | 28,211 | 8,085 | 0 | 0 | 2,778 | | 3. 1993.....| 1,513 | 225 | 29,928 | 4,165 | 0 | 0 | 4,412 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 36,607 | 10,060 | 135,201 | 43,053 | 0 | 0 | 23,860 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expense | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | 1. Prior ...| 6,733 | 8,116 | 958 | 80,513 | 1,062 | | 2. 1992.....| 1,046 | 3,055 | 77 | 23,835 | 251 | | 3. 1993.....| 707 | 890 | 281 | 31,038 | 202 | |-------------|--------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 8,486 | 12,062 | 1,316 | 135,386 | 1,515 | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1992.....| 58,778 | 12,914 | 45,864 | 48.3 | 52.3 | 47.3 | 0 | | 3. 1993.....| 91,015 | 15,382 | 75,633 | 71.6 | 75.8 | 70.8 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY - (CONTINUED) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves | | Years f Money | 33 | After Discount | | Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 69,618 | 10,895 | | 2. 1992.....| 0 | 0.0 | 22,026 | 1,809 | | 3. 1993.....| 0 | 0.0 | 27,052 | 3,986 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | X X X X | 118,696 | 16,690 | -------------------------------------------------------------------------
SCHEDULE P - PART 1L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense | | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| X X X X | X X X X | X X X X | 72,090 | 1,397 | 4 | 0 | | 2. 1992.....| 441,805 | 13,828 | 427,977 | 169,634 | 6,446 | 61 | 3 | | 3. 1993.....| 512,288 | 13,503 | 498,785 | 102,825 | 2,690 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | 344,549 | 10,533 | 65 | 3 | -------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 Payments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ...| 0 | 2,518 | 73,216 | X X X X | | 2. 1992.....| 0 | 10,824 | 174,069 | X X X X | | 3. 1993.....| 0 | 7,469 | 107,604 | X X X X | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | 20,811 | 354,889 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH) - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpaid| | Years |--------------------------------------------------------|--------------------------------------------| | Which | Case Basis | Bulk + IBNR | Case Basis | Bulk | |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| 286,727 | 4,333 | 3,013 | 832 | 0 | 0 | 309 | | 2. 1992.....| 101,821 | 343 | 2,481 | 657 | 0 | 0 | 114 | | 3. 1993.....| 108,651 | 3,037 | 136,928 | 3,163 | 0 | 0 | 52 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 497,199 | 7,714 | 142,422 | 4,652 | 0 | 0 | 475 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expense | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | 1. Prior ...| 11 | 0 | 6,028 | 290,901 | 4 | | 2. 1992.....| 67 | 0 | 4,715 | 108,064 | 6 | | 3. 1993.....| 9 | 0 | 10,962 | 250,384 | 24 | |-------------|--------------|--------------|--------------|--------------|-------------| | 4. Totals ..| 87 | 0 | 21,705 | 649,349 | 34 | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ...| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1992.....| 289,650 | 7,516 | 282,134 | 65.6 | 54.4 | 65.9 | 0 | | 3. 1993.....| 366,887 | 8,899 | 357,988 | 71.6 | 65.9 | 71.8 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH) - (CONTINUED) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves | | Years f Money | 33 | After Discount | | Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ...| 0 | X X X X | 284,575 | 6,326 | | 2. 1992.....| 0 | 0.0 | 103,302 | 4,762 | | 3. 1993.....| 0 | 0.0 | 239,379 | 11,005 | |-------------|--------------|--------------|--------------|--------------| | 4. Totals ..| 0 | X X X X | 627,256 | 22,093 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1M - INTERNATIONAL
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | | Premiums Earned | Loss and Loss Expense | | 1 |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | in Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ..| X X X X | X X X X | X X X X | 0 | 0 | 0 | 0 | | 2. 1984....| (646)| 0 | (646)| (1,522)| 0 | 0 | 0 | | 3. 1985....| 0 | (131)| 131 | 0 | 0 | 0 | 0 | | 4. 1986....| 0 | (131)| 131 | 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 8. 1990....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 9. 1991....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | |10. 1992....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | |11. 1993....| 183 | 0 | 183 | 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | (1,522)| 0 | 0 | 0 | ------------------------------------------------------------------------------------------------------------------- Note: For "prior," report amounts paid or received in current year only. Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | Payments | | | 1 ---------------------------------------------| 12 | | Years | 9 | 10 | 11 | | | in Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | 1. Prior ..| 0 | 0 | 0 | X X X X | | 2. 1984....| 0 | 0 | (1,522)| X X X X | | 3. 1985....| 0 | 0 | 0 | X X X X | | 4. 1986....| 0 | 0 | 0 | X X X X | | 5. 1987....| 0 | 0 | 0 | X X X X | | 6. 1988....| 0 | 0 | 0 | X X X X | | 7. 1989....| 0 | 0 | 0 | X X X X | | 8. 1990....| 0 | 0 | 0 | X X X X | | 9. 1991....| 0 | 0 | 0 | X X X X | |10. 1992....| 0 | 0 | 0 | X X X X | |11. 1993....| 0 | 0 | 0 | X X X X | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | (1,522)| X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1M - INTERNATIONAL - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | in Which | Case Basis | Bulk + IBNR | Case Basis | Bulk| |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ..| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 2. 1984....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 3. 1985....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 8. 1990....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 9. 1991....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | |10. 1992....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | |11. 1993....| 0 | 0 | 0 | 0 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | 0 | 0 | 0 | 0 | 0 | 0 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | in Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expenses | and Expenses | Direct | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | and Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | 1. Prior ..| 0 | 0 | 0 | 0 | 0 | | 2. 1984....| 0 | 0 | 0 | 0 | 0 | | 3. 1985....| 0 | 0 | 0 | 0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0 | 0 | | 8. 1990....| 0 | 0 | 0 | 0 | 0 | | 9. 1991....| 0 | 0 | 0 | 0 | 0 | |10. 1992....| 0 | 0 | 0 | 0 | 0 | |11. 1993....| 0 | 0 | 0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------|-------------| |12. Totals ..| 0 | 0 | 0 | 0 | 0 | --------------------------------------------------------------------------------------- SCHEDULE P - PART 1M - INTERNATIONAL - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | Years | Total Losses and | Loss and Loss Expense Percentage | Discount| | in Which | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| |Premiums Were|-----------------------------------------|--------------------------------------------|--------------| | Earned and | 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. Prior ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | | 2. 1984....| (1,522)| 0 | (1,522)| 235.6 | 0.0 | 235.6 | 0 | | 3. 1985....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 4. 1986....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 5. 1987....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 6. 1988....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 7. 1989....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 8. 1990....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | | 9. 1991....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | |10. 1992....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | |11. 1993....| 0 | 0 | 0 | 0.0 | 0.0 | 0.0 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| |12. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ------------------------------------------------------------------------- | Years for Time | | Net Balance Sheet Reserves | | in Which f Money | 33 | After Discount | |Premiums Were---------------|Inter-Company |-----------------------------| | Earned and | 32 | Pooling | 34 | 35 | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. Prior ..| 0 | X X X X | 0 | 0 | | 2. 1984....| 0 | 0.0 | 0 | 0 | | 3. 1985....| 0 | 0.0 | 0 | 0 | | 4. 1986....| 0 | 0.0 | 0 | 0 | | 5. 1987....| 0 | 0.0 | 0 | 0 | | 6. 1988....| 0 | 0.0 | 0 | 0 | | 7. 1989....| 0 | 0.0 | 0 | 0 | | 8. 1990....| 0 | 0.0 | 0 | 0 | | 9. 1991....| 0 | 0.0 | 0 | 0 | |10. 1992....| 0 | 0.0 | 0 | 0 | |11. 1993....| 0 | 0.0 | 0 | 0 | |-------------|--------------|--------------|--------------|--------------| |12. Totals ..| 0 | X X X X | 0 | 0 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1N - REINSURANCE A
(000 omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense | | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. 1988.....| 18,107 | 2,084 | 16,022 | (8,536)| 113 | 260 | 2 | | 2. 1989.....| 30,323 | 5,188 | 25,136 | 76,534 | 27,493 | 202 | 1 | | 3. 1990.....| 52,398 | 8,887 | 43,511 | 38,177 | 12,667 | 130 | 0 | | 4. 1991.....| 53,594 | 8,599 | 44,995 | 35,811 | 3,072 | 235 | 2 | | 5. 1992.....| 71,214 | 6,982 | 64,231 | 130,165 | 18,150 | 121 | 58 | | 6. 1993.....| 88,237 | 7,979 | 80,258 | 5,307 | 19 | 20 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | 277,458 | 61,515 | 968 | 64 | ------------------------------------------------------------------------------------------------------------------- NOTE: Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. ------------------------------------------------------------------------- | 1 Payments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. 1988.....| 0 | (1)| (8,392)| X X X X | | 2. 1989.....| 0 | 0 | 49,242 | X X X X | | 3. 1990.....| 0 | 0 | 25,640 | X X X X | | 4. 1991.....| 0 | 0 | 32,972 | X X X X | | 5. 1992.....| 0 | 0 | 112,078 | X X X X | | 6. 1993.....| 0 | 143 | 5,451 | X X X X | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 142 | 216,991 | X X X X | ------------------------------------------------------------------------- SCHEDULE P - PART 1N - REINSURANCE A - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai | Years |--------------------------------------------------------|-------------------------------------------- | Which | Case Basis | Bulk + IBNR | Case Basis | Bulk | |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. 1988.....| 4,978 | 0 | 11,202 | 0 | 0 | 0 | 0 | | 2. 1989.....| 10,245 | 1,884 | 8,049 | 3,548 | 0 | 0 | 0 | | 3. 1990.....| 10,817 | 549 | 9,442 | 710 | 0 | 0 | 0 | | 4. 1991.....| 4,895 | 201 | 2,497 | 1,900 | 0 | 0 | 0 | | 5. 1992.....| 16,671 | 2,548 | 2,574 | 1,461 | 0 | 0 | 0 | | 6. 1993.....| 6,256 | 72 | 54,567 | 4,069 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 53,861 | 5,255 | 88,331 | 11,688 | 0 | 0 | 0 | ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expense | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | 1. 1988.....| 0 | 0 | 0 | 16,180 | X X X X | | 2. 1989.....| 0 | 0 | 0 | 12,862 | X X X X | | 3. 1990.....| 0 | 0 | 0 | 19,000 | X X X X | | 4. 1991.....| 0 | 0 | 0 | 5,290 | X X X X | | 5. 1992.....| 0 | 0 | 0 | 15,236 | X X X X | | 6. 1993.....| 0 | 0 | 0 | 56,681 | X X X X | |-------------|--------------|--------------|--------------|--------------|-------------| | 7. Totals ..| 0 | 0 | 0 | 125,249 | X X X X | --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. 1988.....| 7,903 | 115 | 7,788 | 43.6 | 5.5 | 48.6 | 0 | | 2. 1989.....| 95,030 | 32,926 | 62,104 | 313.4 | 634.7 | 247.1 | 0 | | 3. 1990.....| 58,566 | 13,926 | 44,640 | 111.8 | 156.7 | 102.6 | 0 | | 4. 1991.....| 43,438 | 5,175 | 38,263 | 81.1 | 60.2 | 85.0 | 0 | | 5. 1992.....| 149,531 | 22,217 | 127,314 | 210.0 | 318.2 | 198.2 | 0 | | 6. 1993.....| 66,293 | 4,160 | 62,133 | 75.1 | 52.1 | 77.4 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------- ----------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) SCHEDULE P - PART 1N - REINSURANCE A - (CONTINUED) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves | | Years f Money | 33 | After Discount | | Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. 1988.....| 0 | 0.0 | 16,180 | 0 | | 2. 1989.....| 0 | 0.0 | 12,862 | 0 | | 3. 1990.....| 0 | 0.0 | 19,000 | 0 | | 4. 1991.....| 0 | 0.0 | 5,290 | 0 | | 5. 1992.....| 0 | 0.0 | 15,236 | 0 | | 6. 1993.....| 0 | 0.0 | 56,681 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 0 | X X X X | 125,249 | 0 | ------------------------------------------------------------------------- SCHEDULE P - PART 1O - REINSURANCE B (000 Omitted) ------------------------------------------------------------------------------------------------------------------- | 1 | Premiums Earned | Loss and Loss Expense | | |-----------------------------------------|-----------------------------------------------------------| | Years | 2 | 3 | 4 | Loss Payments | Allocated Loss | | Which | | | | | Expense Payments | |Premiums Were| | | |-----------------------------|-----------------------------| | Earned and | Direct | | Net | 5 | 6 | 7 | 8 | | Losses Were | and | Ceded | (2 - 3) | Direct | | Direct | | | Incurred | Assumed | | | and Assumed | Ceded | and Assumed | Ceded | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. 1988.....| 68,483 | (3,131)| 71,614 | 5,237 | 142 | 461 | 7 | | 2. 1989.....| 112,647 | 743 | 111,904 | 14,135 | 93 | 529 | 4 | | 3. 1990.....| 105,662 | 626 | 105,037 | 8,340 | 209 | 543 | 3 | | 4. 1991.....| 115,392 | 734 | 114,657 | 29,587 | 227 | 562 | (2)| | 5. 1992.....| 107,906 | 1,450 | 106,456 | 6,849 | 1,676 | 150 | 60 | | 6. 1993.....| 111,104 | 138 | 110,966 | 1,465 | (30)| 8 | 26 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | 65,613 | 2,318 | 2,252 | 97 | ------------------------------------------------------------------------------------------------------------------- NOTE: Report cumulative amounts paid or received for specific years. Report loss payments net of salvage and subrogation received. SCHEDULE P - PART 1O - REINSURANCE B - (CONTINUED) ------------------------------------------------------------------------- | 1 Payments | | | ---------------------------------------------| | | Years | 9 | 10 | 11 | 12 | | Which | | | | Number of | |Premiums Were| Salvage | Unallocated | Total | Claims | | Earned and | and | Loss | Net Paid | Reported - | | Losses Were | Subrogation | Expense | (5 - 6 + 7 | Direct and | | Incurred | Received | Payments | - 8 + 10) | Assumed | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. 1988.....| 0 | 0 | 5,549 | X X X X | | 2. 1989.....| 0 | 0 | 14,566 | X X X X | | 3. 1990.....| 0 | 0 | 8,671 | X X X X | | 4. 1991.....| 0 | 0 | 29,924 | X X X X | | 5. 1992.....| 0 | 0 | 5,262 | X X X X | | 6. 1993.....| 0 | 0 | 1,477 | X X X X | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 0 | 0 | 65,449 | X X X X | ------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- | | Losses Unpaid | Allocated Loss Expenses Unpai| | Years |--------------------------------------------------------|--------------------------------------------| | Which | Case Basis | Bulk + IBNR | Case Basis | Bulk | |Premiums Were|---------------------------|----------------------------|-----------------------------|--------------| | Earned and | 13 | 14 | 15 | 16 | 17 | 18 | 19 | | Losses Were | Direct | | Direct | | Direct | | Direct | | Incurred | and Assumed | Ceded | and Assumed | Ceded | and Assumed | Ceded | and Assumed | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | 1. 1988.....| 11,517 | 18 | 48,808 | 0 | 0 | 0 | 0 | | 2. 1989.....| (22,023)| 50 | 71,667 | 0 | 0 | 0 | 0 | | 3. 1990.....| 74,096 | 0 | 51,712 | 49 | 0 | 0 | 0 | | 4. 1991.....| 26,410 | 338 | 49,852 | 207 | 0 | 0 | 0 | | 5. 1992.....| 27,996 | 2 | 59,085 | 814 | 0 | 0 | 0 | | 6. 1993.....| 10,886 | 30 | 117,653 | 110 | 0 | 0 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 128,883 | 437 | 398,777 | 1,180 | 0 | 0 | 0 | ------------------------------------------------------------------------------------------------------------------- ---------------------------- ----------------------------------------------------------- | d | | | | | | Years ---------------| 21 | 22 | 23 | 24 | | Which + IBNR | | | | Number of | |Premiums Were---------------| Salvage | Unallocated | Total | Claims | | Earned and | 20 | and | Loss | Net Losses |Outstanding -| | Losses Were | | Subrogation | Expense | and Expenses | Direct and | | Incurred | Ceded | Anticipated | Unpaid | Unpaid | Assumed | |-------------|--------------|--------------|--------------|--------------|-------------| | | | | | | | | | 1. 1988.....| 0 | 0 | 0 | 60,308 | X X X X | | 2. 1989.....| 0 | 0 | 0 | 49,594 | X X X X | | 3. 1990.....| 0 | 0 | 0 | 125,759 | X X X X | | 4. 1991.....| 0 | 0 | 0 | 75,717 | X X X X | | 5. 1992.....| 0 | 0 | 0 | 86,266 | X X X X | | 6. 1993.....| 0 | 0 | 0 | 128,399 | X X X X | |-------------|--------------|--------------|--------------|--------------|-------------| | 7. Totals ..| 0 | 0 | 0 | 526,043 | X X X X | ---------------------------- ----------------------------------------------------------- SCHEDULE P - PART 1O - REINSURANCE B - (CONTINUED) ------------------------------------------------------------------------------------------------------------------- | | Total Losses and | Loss and Loss Expense Percentage | Discount| | Years | Loss Expenses Incurred | (Incurred/Premiums Earned) | Value o| | Which |-----------------------------------------|--------------------------------------------|--------------| |Premiums Were| 25 | 26 | 27 | 28 | 29 | 30 | 31 | | Earned and | | | | | | | | | Losses Were | Direct | | | Direct | | | | | Incurred | and Assumed | Ceded | Net * | and Assumed | Ceded | Net | Loss | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | | | | | | | | | | | 1. 1988.....| 66,023 | 167 | 65,856 | 96.4 | (5.3)| 92.0 | 0 | | 2. 1989.....| 64,308 | 147 | 64,161 | 57.1 | 19.8 | 57.3 | 0 | | 3. 1990.....| 134,691 | 261 | 134,430 | 127.5 | 41.7 | 128.0 | 0 | | 4. 1991.....| 106,411 | 770 | 105,641 | 92.2 | 104.9 | 92.1 | 0 | | 5. 1992.....| 94,080 | 2,552 | 91,528 | 87.2 | 176.0 | 86.0 | 0 | | 6. 1993.....| 130,012 | 136 | 129,876 | 117.0 | 98.6 | 117.0 | 0 | |-------------|-------------|-------------|-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| X X X X | X X X X | X X X X | X X X X | X X X X | X X X X | 0 | ------------------------------------------------------------------------------------------------------------------- *Net = (25 - 26) = (11 + 23) ------------------------------------------------------------------------- | for Time | | Net Balance Sheet Reserves | | Years f Money | 33 | After Discount | | Which ---------------| |-----------------------------| |Premiums Were| 32 |Inter-Company | 34 | 35 | | Earned and | | Pooling | | | | Losses Were | Loss |Participation | Losses |Loss Expenses | | Incurred | Expense | Percentage | Unpaid | Unpaid | |-------------|--------------|--------------|--------------|--------------| | | | | | | | | 1. 1988.....| 0 | 0.0 | 60,308 | 0 | | 2. 1989.....| 0 | 0.0 | 49,594 | 0 | | 3. 1990.....| 0 | 0.0 | 125,759 | 0 | | 4. 1991.....| 0 | 0.0 | 75,717 | 0 | | 5. 1992.....| 0 | 0.0 | 86,266 | 0 | | 6. 1993.....| 0 | 0.0 | 128,399 | 0 | |-------------|--------------|--------------|--------------|--------------| | 7. Totals ..| 0 | X X X X | 526,043 | 0 | -------------------------------------------------------------------------
Form 2 ANNUAL STATEMENT FOR THE YEAR 1993 OF THE CONTINENTAL CASUALTY COMPANY - CONSOLIDATED ........................................... (Name) SCHEDULE P - PART 1P - REINSURANCE C