The Continental Corporation Business Information, Profile, and History

History of The Continental Corporation

The Continental Corporation is a holding company for a group of insurance companies. Continental operates a number of other financial service companies in areas such as risk-management consulting, and credit, but its mainstay is commercial and personal property and casualty insurance. Incorporated in 1968 to manage a growing group of insurance companies, Continental's roots go back to 1853. Started as a single fire insurance company with capital of half a million dollars, Continental has assets of more than $13 billion.

On October 2, 1852, a group of 12 prominent New York businessmen met at the Metropolitan Bank to set up a new fire insurance company. Presiding was Henry C. Bowen, a dry goods merchant who, having found it difficult to get adequate fire protection from existing local companies, decided to organize a large company himself. With the help of his associate, Hiram Barney of the law firm Barney, Humphrey and Butler, Bowen rounded up enough investors to subscribe the $500,000 capital to start the new company. The men christened their new company the Metropolitan Insurance Company. When the group filed for a charter, however, they discovered that a similar name was already being used by another new fire insurer, so a new name was selected--the Continental Insurance Company.

Although Henry Bowen was an energetic and capable businessman, he recognized his lack of experience in the insurance field. He also had many other obligations that prevented him from assuming direct leadership of the company. At the board of directors meeting in December, Bowen nominated the former mayor of New York City, William V. Brady, as president of the company. Brady had the political ties and the business acumen to get the fledgling company off the ground, but he also lacked direct experience in the insurance business. For that reason, George T. Hope, former secretary of the Jefferson Fire Insurance Company and himself a volunteer fire fighter, became Continental's second in command.

Throughout the first half of the 19th century, large cities had no professional fire fighters. Volunteer fire brigades rushed to the scene of the fire as much out of sport--the first to arrive at the scene of a fire was customarily awarded a cash prize by the building's insurer--as out of concern. Firefighting equipment was primitive, usually consisting of hand-pump engines drawn by hand not horse. Fire codes were virtually nonexistent, and fire represented a constant threat to businesses and homes.

On January 7, 1853, the Continental Insurance Company issued its first policy. President Brady, Secretary Hope, and two clerks, A. Ransom and J. Vanderlip, worked in the company's first office in the basement of 6 Wall Street. Before long, a messenger and a full-time surveyor, P. Flender, were added to the payroll. Clients came to the office to apply for a policy, and their property was inspected before the company agreed to issue it. Coverage for $10,000 was considered sizable, and $20,000 was the largest line allowed. In April 1853, Continental expanded its business outside of New York City by appointing agents in other locations. The first agency was established in Cleveland, Ohio. By 1855 Continental was insuring property against fire in Boston; Chicago; Cincinnati, Ohio; Louisville, Kentucky; Baltimore, Maryland; and San Francisco, California.

On May 1, 1857, William V. Brady retired as president of the company and was replaced by George T. Hope. Hiram H. Lamport became secretary. George Hope's extensive experience in the insurance trade was a great asset to Continental. Even before becoming president, Hope had taken steps to ensure the company's success. In July 1856, Continental began issuing participating policies, which not only granted policyholders a part of the company's profits, but also made them liable to the same extent for any losses. After stockholders received their dividends, a share of the profits was paid to each participating policyholder according to their premiums, in the form of interest-bearing scrip that could be redeemed for cash at a specified date. Meanwhile, the cash was held as a special catastrophic reserve fund by the company. If the company's losses went beyond the usual reserve allotment, as they did after the Chicago fire of 1871, the scrip fund would be tapped to cover them. Despite its success, the scrip program was discontinued before the turn of the century.

In 1860 the Continental Insurance Company moved its offices from Wall Street to Broadway, and soon many other insurance companies did the same. Continental's new office operated under the austere conditions typical of the day. Hope's desk was elevated so he could oversee each worker's activities and deter any loafing. The president also had an electric switchboard with which he could summon any employee by ringing a bell on his desk.

In 1861 war broke out between the states. The Continental Insurance Company came out strongly in favor of the Union. Founders Bowen and Barney had supported Abraham Lincoln in the presidential election just a year before, and their anti-slavery views were widely known. During the war, Continental supported the cause by granting leaves of absence with full pay to three employees who volunteered for the Union Army. The company also donated $500 for the establishment of a local guard for the city's financial institutions while the militia was away fighting; that guard was called out in July 1863, when 50,000 demonstrators took to the streets to protest unfair draft laws. The ensuing riots resulted in 1,000 deaths and fire damage to 50 buildings.

Throughout the war, Continental continued to operate profitably and pay its dividend. In December 1864, Continental contributed $500 for the establishment of a full-time professional fire department in New York City. The department began to operate a steam fire engine company in 1865.

In 1868 Continental established an office in Brooklyn, and a year later Continental followed the newly complete railroads west to Chicago, where it set up its western department. R. J. Taylor headed the Chicago office and implemented several new procedures there, including acceptance of notes for premium payments at 10% interest and an installment plan, which covered property for five years with the total premium paid in five annual installments.

On October 8, 1871, the Great Chicago Fire erupted . Fanned by fierce winds, the blaze lasted for two days and wiped out 7,450 buildings on 2,000 acres. The total damage amounted to more than $200 million. Continental sent Special Agent Barrett to the scorched city to survey the damage. The home office in New York received a telegram from the western department's secretary, Jonas Oakley, with bad news: "Barrett's estimate--twelve hundred thousand" and the location of the company's new office, "Address Nine South Halsted St."

The company's losses from the Chicago Fire eventually totaled $1.7 million. Continental's $800,000 scrip fund was liquidated to cover the catastrophic losses, and the shareholders' surplus was wiped out as well. In response to the grave circumstances, director Abiel A. Low recommended an increase in the capital of the company from $500,000 to $1 million. Low, an importer of goods from Asia, spoke so enthusiastically at the October meeting of Continental's board that the whole amount of the capital increase was subscribed before the directors adjourned. While dozens of fire insurance companies went bankrupt as a result of the Chicago Fire, Continental remained in business.

Just a little over a year later, disaster struck again. Fire broke out in Boston's shopping district and 776 buildings were destroyed. Continental's losses were $700,000. Abiel Low again clamored to preserve the company, this time suggesting a 40% assessment on the $1 million capital. The action was approved by shareholders. About 30 fire insurers were bankrupted by the Boston fire. Continental's survival promoted its credibility with the public, and by the end of 1878 cash assets were $3.33 million, up almost $1 million from before the Chicago fire in 1871.

During the 1880s, Continental began issuing new kinds of insurance. In January 1882, the company began issuing marine insurance, and six months later it issued tornado insurance. In 1885 the company issued hail insurance on crops, but found the business to be unprofitable and dropped it two years later. In 1892, however, the coverage was reintroduced on a more limited basis when a number of Continental agents began offering competitors' hail insurance to its farm clients. At times the company had to subsidize unprofitable lines to maintain its market share in other areas.

On July 28, 1885, Continental's president, George T. Hope, died at the age of 67. During his 28 years as president, the company's assets grew from less than $1 million to more than $5 million. The company's vice president, Hiram H. Lamport, replaced Hope as president and served until 1889 when he was replaced by Francis C. Moore.

Moore set out to make risk assessment more reliable. He devised a system, the Universal Mercantile Schedule, to determine fire danger in any building. Moore constantly compiled statistics, and his book Guide to Agents, sold over 30,000 copies. In 1902 Moore retired, having boosted the company's assets to $13 million.

Moore's successor was his stepson, Henry Evans. Even before becoming president, Evans had made a mark on the company. In 1885, when President George T. Hope's death led to conflict over the succession, Evans devised his own reorganization plan and presented it to the board of directors. Among other things, Evans's plan called for Hiram H. Lamport's resignation. The board was impressed by the young Evans's boldness, and he was given more and more responsibilities, including reorganizing the company's operations in San Francisco. After a five-month stay in San Francisco, Evans returned to the home office and was put in charge of the entire agency department after only ten years with the company. Shortly thereafter Evans was elevated to second vice president, then to vice president, and in 1902 he assumed the presidency.

Two of Continental's greatest disasters occurred just a short time after the 42-year-old Evans took the helm. In February 1904, a fire destroyed 2,500 structures in Baltimore. Continental's losses totaled $925,000. Two years later the San Francisco earthquake and ensuing fire razed the city. The fire took a heavy toll: Continental paid $1.75 million in claims and lost the records of its Pacific Coast business, and 20 other companies went bankrupt.

Despite the huge losses experienced by Continental after the Baltimore and San Francisco fires, the company remained solvent. Evans hoped, in fact, to expand by operating a multitude of insurance companies under the Continental umbrella. Just two months after the San Francisco fire, Continental's board authorized $500,000 of the company's funds to capitalize a new company, The Fidelity Fire Insurance Company. In 1910 Evans merged Fidelity with the ailing Phenix Insurance Company of Brooklyn, creating the Fidelity-Phenix Fire Insurance Company of New York.

In 1911, Continental began issuing automobile insurance. Early policies insured against "loss by fire, explosion, self-ignition or lightning; also against loss or damage by collision, burning or derailment; or by stranding and sinking, including average salvage charges while the automobile is being transported in any conveyance by land or water; and against theft, robbery, or pilferage by any persons other than those in the employ of its owner; if the amount is $25 or more for any one occasion." In June 1914, Continental began offering coverage specifically designed to cover collision.

In 1915 Evans organized a third insurance company, the American Eagle Fire Insurance Company. Before World War I, foreign companies controlled about two-thirds of U.S. insurance business. Playing upon patriotic sentiment, Evans used the slogan "America Fore" in advertising the three companies--Continental, Fidelity-Phenix, and American Eagle. In 1918, the group adopted the slogan as its official name. The America Fore Group was the forerunner of today's Continental Corporation.

As the United States prepared to enter World War I, insurance companies were criticized for not insuring necessary high risks such as munitions plants. In 1915 Evans organized a meeting with the heads of several other insurance companies to discuss providing insurance for such operations, among them the Hercules Powder Company. Evans convinced the group to insure that company, which was later completely destroyed in an explosion. When it was discovered that Continental had no liability itself, Evans was criticized. His reply that his contribution had been getting the other insurers together showed that the president held to the same questionable ethical standards as other capitalists of his day.

During World War I Continental, for the most part, conducted business as usual. The company did, however, offer some new lines such as full war coverage insurance against possible damages from bombardment, explosion, and riots. A year after the war ended, the America Fore Group participated with seven other companies in the formation of a marine insurance company called the Marine Office of America (MOA). The MOA grew substantially through acquisition in the succeeding decades.

In 1920 Evans announced a reorganization of the America Fore Group and became chairman of the board of the whole organization. An Alabamian, Joseph E. Lopez, became the president of Continental and served for just 11 months. He was succeeded by Norman T. Robertson, who had previously headed the American Eagle Fire Insurance Company. Robertson resigned in 1924 after Henry Evans's death and joined a New York brokerage.

Continental shared in the country's good fortune in the 1920s. Chairman Ernest Sturm and President Paul Haid, both taking office in late 1924, led the company through the period of prosperity. Aviation and automobile insurance provided new sources of revenue, and the value of Continental's equity investments skyrocketed.

In 1929 the stock market crash wiped out millions of investors, seriously affecting Continental. The company's stock price plummeted from 104 1/2 to 46 1/2 between September and November 1929. Continental's losses on investments were so severe in the early depression that the company decreased its authorized capital from $20 million to $5 million. In many cases Continental, like other insurance companies in the Depression, offered financially troubled corporations very lenient terms for paying premiums, and thus it helped some companies stay in business. Despite the dismal economic outlook, Continental continued to pay its dividend throughout the Depression without interruption.

In 1932 Paul Haid resigned from Continental's presidency to head a new trade organization called the Insurance Executives Association. Haid had decided to move on because of disagreements with chairman Ernest Sturm. Bernard Culver, who came to the group with its 1927 acquisition of the Niagara Fire Insurance Company, became the new president and replaced Ernest Sturm as CEO in 1936. When the office of chairman was reinstated in 1946, Culver was elected by the board to that position, which he filled until poor health forced his retirement in 1950.

As the country emerged from the Depression, new hazards arose. By 1939 Europe was once again at war. Ships carrying cargoes through the war zones were at great risk, and by September 1939, Continental was once again offering full war coverage. Shortages of products, particularly those related to the automobile industry, disrupted Continental's business. Demand for automobile coverage declined as the war consumed rubber, steel, and gasoline, keeping consumer car production low.

In 1944, the United States Supreme Court ruled against price fixing in the insurance industry in U.S. v. Southeastern Underwriters Association. The insurance industry was upset with the ruling because most companies were too small to rely solely on their own experience in setting premiums. As a result of the industry's protests the federal government passed the McCarran-Ferguson Act, which exempted insurance rate fixing from the jurisdiction of the Sherman Antitrust Act and gave the power of insurance regulation to the states.

By the end of the war, Continental had recovered entirely from its pre-Depression losses. In February 1945, the company increased its outstanding capital to $20 million by transferring $15 million from the surplus. After the war, general prosperity accelerated Continental's growth, but a number of catastrophes, including a severe rain and wind storm that ripped through 11 northeastern states in November 1950, caused extensive damage. The "Big Blow," as it was called, resulted in claims of $13 million for the America Fore Group.

In 1951 Frank A. Christensen, president of the group since 1946, became chairman and CEO. One year later he proposed establishing a subsidiary that would finance premiums for businesses. The subsidiary, named AFCO, although it was not limited to financing premiums written by America Fore companies, got off to a slow start. Nonetheless, within three years a similar premium finance subsidiary was set up in Canada--CAFO.

In 1955 the America Fore Group spent $13 million to modernize its headquarters, which it had occupied since 1912. The upgrading was intended in part to boost employee morale, and consequently productivity.

In 1956 Continental participated in the Nuclear Energy Property Insurance Association, which was formed to deal with the extraordinary risks involved in building nuclear power facilities. The association could offer $50 million worth of coverage on each plant.

In 1957 J. Victor Herd, after a year as president of the group, replaced Frank Christensen as the company's chairman and CEO. Herd had begun his insurance career at the age of 15 as a map clerk and examiner for the American Central Insurance Company. He first came to the America Fore Group in 1929 with its acquisition of the Niagara Fire Insurance Company, but left a year later to join the Fire Association Group. In 1942, he returned to America Fore as a corporate secretary. He rose to vice president in 1944 and then executive vice president in 1951. In 1959 Nicholas Dekker took over as president, while Herd remained in the top job.

Under Herd, one of the company's most energetic leaders, the group made a number of important acquisitions in the late 1950s. They included the Firemen's Insurance Company of Newark, the companies of the Loyalty Group in 1957, and The Yorkshire Insurance Company of New York in 1958. In 1959 the Continental Insurance Company and Fidelity-Phenix merged through a stock conversion. A year later, Continental's stock, listed on the New York Exchange since 1916, was introduced on the Midwest and Pacific exchanges as well.

In 1960 the America Fore Loyalty Group, as it was then called, began a corporate restructuring to simplify its management. The group consisted of a dozen companies from three insurance families: the Continental Insurance Company, Niagara Fire Insurance Company, the Fidelity-Phenix Insurance Company, The Fidelity and Casualty Company of New York, and the Niagara Insurance Company (Bermuda) Limited on the America Fore side; Firemen's Insurance Company of Newark, Milwaukee Insurance Company of Milwaukee, Commercial Insurance Company of Newark, National-Ben Franklin Insurance Company of Pittsburgh, and Royal General Insurance Company of Canada on the Loyalty side; and The Yorkshire Insurance Company of New York and Seaboard Fire and Marine Insurance Company on the Yorkshire side. Under the new structure, President Nicholas Dekker took the newly created office of vice chairman, while Nathan H. Wentworth became president. The early years of the 1960s produced excellent earnings, based in part on exceptional performance of the group's equities and debt investment.

In 1962 Chairman J. Victor Herd proposed changing the name of America Fore Loyalty Group to the Continental Insurance Companies. Herd said, "The Continental Insurance Company . . . has an eminent 110-year history of its own, and a well-known service mark, the Continental soldier." The group then launched a sizable advertising campaign to promote its new name.

Continental's acquisitions continued in the 1960s both at home and overseas. In December 1962, Continental took over the American business of the Norwich Union Fire Insurance Society, Ltd., of Norwich, England. In January 1965, Continental bought the Buckeye Union Casualty Company along with its subsidiaries. At the same time, the company also acquired a major marine insurer, Appleton & Cox. In 1966 it bought the Boston Marine Insurance Company and became involved in the life insurance trade with the purchase of a substantial share of Franklin Life Insurance Company of Springfield, Illinois. In 1967 Continental acquired American Title Insurance, and in June 1968, the outstanding shares of the Glens Falls Insurance Company and its subsidiaries. Overseas, Continental bought a major interest in the Phoenix Assurance Company of London. Later the company set up a Belgian affiliate with the British company called Phoenix Continental S.A.

Continental also acquired several noninsurance businesses in the 1960s. In 1966 it purchased the Underwriters Adjusting Company, an independent property adjuster, and a 20% interest in Diners Club, the charge card concern; in 1966, Capital Financial Services of Columbus, Ohio, a consumer credit company. Continental also established its own data processing services company, INSCO, in 1968.

On September 9, 1965, Hurricane Betsy devastated New Orleans, Louisiana. More than 50 people were killed and estimated property and crop damage was about $1 billion. Continental's claims amounted to $9.5 million.

Civil unrest in the late 1960s led to increased damage claims. Riots spurred by racial tension in locations such as Detroit, Los Angeles, and Newark, New Jersey, resulted in millions of dollars worth of claims and a reluctance on the part of insurers to cover urban properties. Some insurance companies looked for federal guarantees on their risks in riot-affected areas, but Continental opposed such measures.

On August 5, 1968, a new holding company, The Continental Corporation, was established to oversee the increasingly diverse companies in the group. Advertisements in The New York Times and The Wall Street Journal featured a beleaguered stork carrying a jumbo sack and read, "The Continental Insurance Company is proud to announce the birth of its parent." J. Victor Herd assumed the roles of chairman and president of the new holding company in addition to his responsibilities at the Continental Insurance Company. He remained chairman and CEO until his retirement in 1970, after 53 years in the insurance business. Nathan Wentworth succeeded Herd, and Milton Mays became Continental president in 1971.

Chairman Wentworth's first task was to organize Continental's sprawling businesses. Two marine insurance subsidiaries, MOA and Appleton & Cox, were merged into the Marine Office-Appleton Cox--later renamed the Marine Office of America Corporation (MOAC), and in 1972 Operation Sacred Cow was initiated to streamline the company's operations. The program operated on the premise that no business practice, no matter how entrenched, was immune to change if it interfered with the company's goal of higher profits. The SUCCESS program, which was to determine the most efficient uses of staff, was also started in 1972. Continental hoped to save $7 million annually simply by achieving greater efficiency with its current staff.

In 1971 Continental introduced the first no-fault automobile coverage in 43 states. No-fault coverage was an improvement over ordinary liability insurance because it allowed accident victims to collect no matter who was at fault and eliminated the settlement delays that resulted from litigation.

Continental had introduced coverage called the Comprehensive Business Policy in 1963. In 1973 Wentworth adapted the plan to cover the needs of individuals. Called Personal Comprehensive Protection (PCP), the new line covered all of the basic family insurance needs in one policy. Continental marketed the coverage nationwide. In March 1975, Continental introduced what it called the Insurance Store, an ad campaign that sold the concept of the independent insurance agent, rather than individual lines of insurance. Both the PCP and the Insurance Store campaign were designed to simplify insurance and make it more appealing to the average consumer.

On April 3, 1974, a series of more than 100 tornadoes blasted through the area from Georgia to Michigan. Hundreds were killed in what the National Weather Service called the most severe tornado disaster since 1925. Xenia, Ohio, where the tornado cut a swath 100 yards wide and stretching the length of the town, was the hardest hit. Continental paid claims of $22 million in Xenia alone.

Continental's network of companies continued to grow during the 1970s. In 1973, Continental became the major shareholder in the Puerto Rican-American Insurance Company and purchased a 10% interest in the French multiple line insurer La Preservatrice. In 1974, Continental acquired the First Insurance Company of Hawaii, set up an Iranian joint venture--the Hafez Insurance Company--with the British Royal Insurance Company, Limited, and acquired 10% of and entered into an operating agreement with the West German Alte Leipziger group. In 1975 the company bought heavily in Latin American countries, including a controlling interest of the Guatemalan insurer, Commercial Aseguradora Suizo Americana, S.A., and minority interests in several companies in Brazil, Colombia, Guatemala, Argentina, and Venezuela. In 1976 Continental bought the Unionamerica Insurance Group, an insurer of specialized risks, and reorganized the companies into the Swett and Crawford Groups.

In 1976 Nathan H. Wentworth retired as chairman and was replaced by John B. Ricker Jr. as chairman and CEO. Ricker quickly announced a major reorganization of the company. The group's approximately 40 subsidiaries were divided into four primary operating units: property and casualty insurance, international insurance and reinsurance, life and health insurance, and financial services. Five support units were also set up: systems and procedures, investment and finance, human resources, corporate affairs, and administrative services. Ricker's reorganization of Continental reduced the number of executives reporting to the chairman from 25 to 7.

Chairman Ricker, a former navy man who had come up through Continental's marine insurance side, intended to cut back on the group's underwriting. He told Nation's Business, February 1978, "I felt we were writing too much insurance. . . . Besides, we were writing types of insurance that are the worst to make profits on--workers' compensation, general liability, and auto liability."

During 1974-1975 the property and casualty industry as a whole had suffered severe losses. Competition in the property and casualty areas, higher liability awards, and static premiums caused further damage to the already declining industry. Since Continental's property and casualty business accounted for about 80% of premiums written, losses in that area were a serious blow.

In 1977 property and casualty business rebounded somewhat and Continental's performance improved considerably after two consecutive losing years. A year later, earnings hit $5.66 per share, but the improvement was short-lived. When high interest rates brought increased return on equity and debt investments in 1979, property and casualty insurers lowered their premiums to gain market share, since the difference could be made up through investment gains. When the investment returns dropped in the early 1980s, the entire industry was hurt. Continental's combined loss and expense ratio was exceptionally bad compared to its competition. To make matters worse, stiff competition had eroded Continental's national market share from 3.5% to 2.5% between 1975 and 1981. With a number of subsidiaries, in the red, analysts blamed Continental's management for failing to move aggressively in the changing insurance environment. Yet despite the turmoil Continental continued to pay its dividend.

In the early 1980s the property and casualty industry continued to face unfavorable conditions. Continental took steps to streamline its operations and devise a clear strategy for the future. In 1981 Diners Club was sold to Citibank at a loss. Although Continental expressed a desire to remain in the life insurance business, it sold Franklin Life; Chairman Ricker told National Underwriter, June 5, 1981, that Continental would continue looking for a life insurance company that "complements and supplements our marketing strategy."

In 1981 Continental launched Continental Risk Services, a subsidiary intended to help companies manage risks. The new company marketed its services to companies that no longer accepted the need to spend a certain amount on liability losses. The aim was to minimize expenditures both before and after occurrence of losses.

In December 1982, John P. Mascotte replaced the retiring John Ricker as chairman and CEO of the Continental Corporation. Mascotte had been with the company only 19 months, having been lured from the Mutual Benefit Life Insurance Company. Although he had limited experience in Continental's primary business--property and casualty insurance--Mascotte brought keen marketing expertise to the job. At age 43 one of the youngest CEOs of a major financial corporation, Mascotte slashed overhead by 25%, eliminating Continental agents who did not come up to the company's new profitability standards. More than 1,700 of Continental's agents were either let go or induced to resign, and within two years Continental's profits began to improve considerably. Mascotte was pleased with the results of the measures, but acknowledged the unseen costs when he told Forbes magazine, December 31, 1984, "If there's one thing I had to do over, I wouldn't have called it shooting the stragglers," referring to a phrase he once used to describe the cost-cutting measures.

When Mascotte took over at Continental he intended to expand the company's life and health insurance operations. By the late 1980s, he had abandoned this plan. "Staying in the business as a marginal player made little sense; gearing up to be a market leader would have consumed too much capital," he said in the company's 1988 annual report. That year Continental sold National Life Insurance Company of Canada, Commercial Life, and Loyalty Life. In 1989 the company left life insurance entirely with the sale of the William Penn Companies.

Throughout the 1980s, Continental concentrated on establishing its overseas businesses. By 1986, 20% of the group's revenues were generated outside of the United States. The company's international strategy changed from holding minority interests in many companies to gaining control of a fewer number of companies. According to Business Insurance, November 24, 1986, Continental divested minority interests in 10 to 15 foreign affiliates between 1983 and 1986. The company planned to either own foreign subsidiaries outright or "have minority shareholdings in a few companies that offer reciprocal business to Continental."

Continental still suffered because of the poor insurance market in the late 1980s, but its performance relative to the industry as a whole showed marked improvement. Chairman Mascotte called 1988 a "very frustrating" year because of weak earnings, but he pointed out stronger loss reserves and improved managerial and financial controls as reasons for optimism. Hurricane Hugo and the California earthquake of 1989, however, brought extremely heavy losses and prompted Continental to raise premiums. Whether or not the increased premiums would improve the company's situation remained to be seen, as earlier attempts at rate increases had resulted in a loss of market share. Nevertheless, as the Continental Corporation entered the 1990s it was a fundamentally sounder company than it had been ten years earlier.

Principal Subsidiaries: AFCO Acceptance Corp.; AFCO Credit Corp.; American Loyalty Insurance Co.; Bayside Reinsurance Co., Ltd. (Bermuda); Boston Old Colony Insurance Co.; The Buckeye Union Insurance Co.; CAFO Inc. (Canada); Casualty Insurance Co.; CIC Acceptance Corp.; CIC Asset Management Corp.; Commercial Afianzadora, S.A. (Guatemala); Commercial Aseguradora Suizo Americana, S.A. (CASA)(Guatemala); Commercial Insurance Co. of Newark, N.J.; Commercial Life Insurance Co.; Continental Center Assoc.; Continental Equities Corp. of America; Continental Guaranty & Credit Corp.; The Continental Insurance Co.; The Continental Insurance Co. of Canada; The Continental Insurance Co. (Europe) Limited (U.K.); The Continental Insurance Co. of New Jersey; The Continental Insurance Co. (U.K.) Limited; Continental International Life Insurance Co.; Continental Life Insurance Public Limited Co. (U.K.) Continental Life (International) Limited (U.K); Continental Life Unit Trust Management Limited (U.K.); Continental National Life Insurance Co.; Continental Pensions PLC (U.K.); Continental P.H.I. Limited(U.K.); Continental Re Management Inc.; Continental Reinsurance Corp.; Continental Reinsurance Corp. Intl. (Bermuda) Limited; Continental Reinsurance Corp. (U.K.) Limited; Continental Reinsurance Management Co. Ltd. (U.K.); Continental Reinsurance Management Holding Co. Limited (U.K.); Continental Risk Services (Barbados), Ltd.; Continental Risk Services (Bermuda) Ltd.; The CPI Group Inc.; CPI Pension Services Inc.; CRB Management, Inc.; Ctek, Inc.; Deutsche Continental Reinsurance, A.G. (Germany); The Dominion Insurance Corp. (Canada); East River Group, Ltd. (Bermuda); East River Insurance Co. (Barbados) Ltd.; East River Insurance Co. (Bermuda) Ltd.; The Fidelity and Casualty Co. of New York; Firemen's Insurance Co. of Newark, New Jersey; First Benefit Insurance Producers, Inc.; First Benefit Services, Inc.; First Commercial Life Insurance Co.; First Fire & Casualty Insurance of Hawaii, Inc.; First Indemnity Insurance of Hawaii, Inc.; First Insurance Co. of Hawaii, Ltd. (60%); The Glens Falls Insurance Co.; Global Marine Services, Ltd. (Canada); Groupe Barthelemy, S.A. (France); Harbor Insurance Co.; Hull and Cargo Surveyors, Inc.; Insurnet, Inc.; Inter-Continental Seguradora S.A. (Brazil); International Central Bank & Trust Corp.; International Trust Corp. of Illinois; The Ivanhoe Reinsurance Co. Ltd. (Bermuda); The Ivanhoe Reinsurance Co. Ltd. (U.K.); Kansas City Fire and Marine Insurance Co.; Lombard Continental Insurance Co. PLC (U.K.); Lombard Group, Inc. (Hong Kong); Lombart Insurance Co., Ltd. (Hong Kong); Loyalty Life Insurance Co.; The Maiden Lane Syndicate Inc.; MOAC (Australasia) Limited; Marine Office of America Corp.; Marine Office of America Corp., Ltd. (Canada); Marine Office of America Corp. Italia, SpA ; Marine Office of America Corp. (U.K.) Limited; Marine Office of America (Deutschland) GmbH (Germany); Marine Office of Asia Ltd. (Hong Kong); The Mayflower Insurance Co., Ltd.; National-Ben Franklin Insurance Co. of Illinois; The National Life Assurance Co. of Canada; Niagara Fire Insurance Co.; Pacific Insurance Co.; Promotora Continental S.A. (Guatemala); Puerto Rican-American Insurance Co.; Security National Life Insurance Co. Puerto Rico); Servicios y Comisiones Continental, S.A. de C.V. (Mexico); Settlement Options, Inc.; The South Place Syndicate Inc.; Underwriters Adjusting Co.; Unionamerica Insurance Co.,Ltd. (U.K.); Unionamerica Management Co., Ltd. (U.K.); Unionamerica Management Co. Ltd. (U.K.); United States P & I Agency, Inc.; Workers Compensation and Indemnity Co. of California.