The law firm of Milberg Weiss Bershard Hynes and Lerach announced that a class action lawsuit was filed on August 31 on behalf of purchasers of The Chubb Corporation common stock during the period between April 27, 1999 and October 15, 1999. Those purchasers include the former shareholders of Executive Risk Inc. who exchanged their Executive Risk shares for Chubb stock in the July 1999 merger.
The action arose out of an alleged scheme to make it appear that serious problems and increasingly large losses in Chubb’s standard commercial insurance business, which had badly hurt the company’s results in 1997-1998, were being overcome by a combination of rate increases and non-renewal of unprofitable standard commercial insurance business. This allegedly enabled Chubb to report better-than-expected first quarter 1999 earnings per share, thus artificially inflating Chubb’s stock in mid-1999. As a result, the lawsuit alleges that Chubb was able to successfully complete its acquisition of Executive Risk, a highly profitable underwriter of directors’ and officers’ liability insurance. In addition, the plaintiffs charge that the inflation of Chubb’s stock price reduced the number of shares Chubb had to issue to acquire Executive Risk, saving Chubb at least $300-$400 million, while enabling the top three insiders of Executive Risk to receive millions in special benefits and payments upon the sale of Executive Risk to Chubb.
Topics Chubb
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