Selected financial data for the five years ended December 31, 2000 are incorporated by reference from the Corporation's 2000 Annual Report to Shareholders, pages 38 through 41.
Operating income, which excludes realized investment gains and losses, was $681 million in 2000 compared with $565 million in 1999 and $615 million in 1998. Operating income in 1998 reflects a first quarter restructuring charge of $26 million after taxes related to the implementation of a cost control initiative.
Executive Risk shareholders received 1.235 shares of the Corporation's common stock for each outstanding common share of Executive Risk. In addition, outstanding Executive Risk stock options were assumed and adjusted as options to purchase common stock of the Corporation. Approximately 14.3 million shares of common stock of the Corporation were issued to Executive Risk shareholders
and an additional 1.8 million shares of common stock of the Corporation were reserved for issuance upon exercise of the assumed Executive Risk stock options.
The acquisition has been accounted for using the purchase method of accounting. Therefore, the results of operations of Executive Risk are included in the Corporation's consolidated results of operations from the date of acquisition. The assets and liabilities of Executive Risk were recorded at their estimated fair values at the date of acquisition. The value of the stock options assumed by the Corporation was included in the purchase price. The total purchase price was approximately $832 million. The excess of the purchase price over the estimated fair value of the net assets acquired, amounting to approximately $517 million, has been recorded as goodwill and is being amortized over 26 years.
Property and casualty income before taxes was $803 million in 2000 compared with $626 million in 1999 and $685 million in 1998. The higher earnings in 2000 were due primarily to an improvement in underwriting results, caused in large part by substantially lower catastrophe losses compared with the prior year. The decrease in earnings in 1999 was due to deterioration in underwriting results caused in large part by the effect of inadequate prices resulting from the prolonged soft market on our standard commercial results, which include multiple peril, casualty and workers' compensation, and, to a lesser extent, higher catastrophe losses compared with 1998. Investment income increased in both 2000 and 1999 compared with the respective prior years.
Catastrophe losses were $72 million in 2000, $225 million in 1999 and $173 million in 1998. The 1998 amount was net of reinsurance recoveries of approximately $130 million related to Hurricane Georges. We did not have any recoveries from our catastrophe reinsurance program during 2000 or 1999 since there were no individual catastrophes for which our losses exceeded the initial retention. Our initial retention level for each catastrophic event is approximately $100 million in the United States and generally $25 million outside the United States.
Personal coverages accounted for $1.7 billion or 27% of 2000 net premiums written, standard commercial coverages for $1.8 billion or 28% and specialty commercial coverages for $2.8 billion or 45%.
Premium growth in personal lines was strong in both 2000 and 1999. In commercial lines, competition in the worldwide marketplace has made profitable premium growth difficult. However, our strategy, begun in late 1998, to increase the pricing in the standard commercial classes and to not renew underperforming accounts where we could not attain price adequacy has shown increasing success throughout 1999 and 2000. Further, many of our competitors have also insisted on higher prices since the latter part of 1999. As a result, the pricing outlook in the standard commercial classes continues to be favorable.
Underwriting results were near breakeven in 2000 compared with unprofitable results in 1999 and near breakeven results in 1998. The combined loss and expense ratio, the common measure of underwriting profitability, was 100.4% in 2000 compared with 102.8% in 1999 and 99.8% in 1998.
Our expense ratio was 32.9% in 2000 compared with 32.5% in 1999 and 33.5% in 1998. The increase in the expense ratio in 2000 was due to overhead expenses growing at a somewhat higher rate than written premiums. The lower expense ratio in 1999 compared with the prior year was due to salary and overhead expenses decreasing due to a cost control initiative discussed below and a change in accounting that has resulted in the capitalization of certain costs incurred to develop computer software for internal use that were previously expensed.
Net premiums from standard commercial insurance decreased 3% in 2000 compared with an 8% decrease in 1999. The decrease in premiums in both years was the result of the strategy we put in place in late 1998 to renew good business at adequate prices and not renew underperforming business where we cannot attain price adequacy. As a result, retention levels declined during 1999 and 2000. On the business that has renewed, however, rates have increased steadily and such increases accelerated in 2000. The market remains firm and shows no signs of weakening.
Our strategy of working closely with our customers and our ability to bring new products to market and differentiate such products continue to enable us to renew a large percentage of our executive protection and financial institutions business. Excluding the effect of the Executive Risk acquisition, executive protection and financial institutions premiums increased in 2000 by 10% and 24%, respectively, substantial improvements over the 1999 growth. However, a competitive market continues to put prices under pressure, particularly for our executive protection business. Growth in our financial institutions business was particularly strong in 2000 due to new business as well as rate increases on the standard commercial component of this business.
Growth in property and marine premiums in 1999 and 2000 was restricted by the effect on retention levels of pricing initiatives and non-renewing certain unprofitable accounts. Growth in our other specialty commercial business was primarily from Chubb Re, our reinsurance business that began operations in 1999.
Our specialty commercial underwriting results were highly profitable in each of the last three years. The combined loss and expense ratio was 95.9% in 2000 compared with 93.6% in 1999 and 91.5% in 1998.
Loss reserves are our property and casualty subsidiaries' largest liability. At the end of 2000, gross loss reserves totaled $11.9 billion compared with $11.4 billion and $10.4 billion at year-end 1999 and 1998, respectively. Reinsurance recoverable on such loss reserves was $1.9 billion at year-end 2000 compared with $1.7 billion and $1.3 billion at the end of 1999 and 1998, respectively. The 2000 and 1999 gross loss reserves and reinsurance recoverable include amounts related to Executive Risk. Executive Risk has historically utilized reinsurance to a greater extent because its size limited the amount of risk it could retain.
assumed and the Fibreboard payments, loss reserves increased 7% in 1999. Reserve growth each year has occurred primarily in those liability classes that are characterized by delayed loss reporting and extended periods of settlement.
The process of establishing loss reserves is a complex and imprecise science that reflects significant judgmental factors. This is true because claim settlements to be made in the future will be impacted by changing rates of inflation and other economic conditions, changing legislative, judicial and social environments and changes in our claim handling procedures. In many liability cases, significant periods of time, ranging up to several years or more, may elapse between the occurrence of an insured loss, the reporting of the loss and the settlement of the loss. In fact, more than 60% of our net loss reserves at December 31, 2000 were for incurred but not reported (IBNR) losses -- claims that had not yet been reported to us, some of which were not yet known to the insured, and future development on reported claims.
Asbestos remains the most significant and difficult mass tort for the insurance industry in terms of claims volume and dollar exposure. In the past year, the continued flow of claims pushed about a half-dozen manufacturers and users of asbestos products into bankruptcy. To date, approximately 25 major companies have filed for bankruptcy as a result of asbestos liability. In part as a result of these bankruptcies, the volume and value of claims against viable asbestos defendants continue to increase.
Our other asbestos exposures are mostly peripheral defendants, including a mix of manufacturers, distributors and installers of certain products that contain asbestos as well as premises owners. Generally, these insureds are named defendants on a regional rather than a nationwide basis. As the financial resources of traditional asbestos defendants have been depleted, plaintiffs are targeting these peripheral parties with greater frequency and, in many cases, for larger awards. In addition, the plaintiffs bar continues to solicit new claimants through extensive advertising and through asbestos medical screenings. Class actions are then initiated even though many of the claimants have not manifested evidence of serious injury. Thus, new asbestos claims and new exposures on existing claims have continued unabated despite the fact that practically all manufacturing and usage of asbestos ended nearly two decades ago. Based on published projections, we expect that we will continue receiving asbestos claims at the current rate for at least the next several years.
A legislative solution to the asbestos claim litigation is being pursued by some insurers, including Chubb, and major corporate defendants. Any such solution would require the support of members of the plaintiffs bar. The new administration coupled with the rash of recent bankruptcies may create the best opportunity for such a legislative solution.
Toxic waste losses appear to be developing as expected due to relatively stable claim trends. In many cases, claims are being settled for less than initially anticipated due to various factors, including more efficient site remediation efforts. However, litigation remains a serious problem.
Management believes that the aggregate loss reserves of the property and casualty subsidiaries at December 31, 2000 were adequate to cover claims for losses that had occurred, including both those known to us and those yet to be reported. In establishing such reserves, management considers facts currently known and the present state of the law and coverage litigation. However, given the expansion of coverage and liability by the courts and the legislatures in the past and the possibilities of similar interpretations in the future, particularly as they relate to asbestos and toxic waste claims, as well as some continuing uncertainty in determining what scientific standards will be deemed acceptable for measuring hazardous waste site clean-up, additional increases in loss reserves may emerge which would adversely affect results in future periods. The amount cannot reasonably be estimated at the present time.
In 2000, we invested new cash primarily in mortgage-backed securities. In 1999, new cash was invested in tax-exempt bonds and corporate bonds. Also, during 1999, we reduced our equity securities portfolio by approximately $350 million with $145 million of the proceeds used to fund the purchase of a 28% interest in Hiscox plc, a U.K. personal and commercial specialty insurer. In 1998, new cash was invested primarily in tax-exempt bonds and, to a lesser extent, equity securities. In each year, we tried to achieve the appropriate mix in our portfolio to balance both investment and tax strategies.
The property and casualty subsidiaries maintain sufficient investments in highly liquid, short-term securities at all times to provide for immediate cash needs, and the Corporation maintains bank credit facilities that are available to respond to unexpected cash demands.
We own approximately $325 million of land which we expect will be developed in the future. In addition, we own approximately $190 million of commercial properties and land parcels under lease. We are continuing to explore the sale of certain of our remaining properties.
Sales of equity securities in 1999 and 1998 resulted in net realized investment gains due primarily to the significant appreciation in the United States equity markets. A primary reason for the sale of fixed maturities in each of the last three years has been to improve our after-tax portfolio return without sacrificing quality where market opportunities have existed to do so.
The main objectives in managing the investment portfolios of the Corporation and its property and casualty subsidiaries are to maximize after-tax investment income and total investment returns while minimizing credit risks in order to provide maximum support to the insurance underwriting operations. Investment strategies are developed based on many factors including underwriting results and our resulting tax position, regulatory requirements, fluctuations in interest rates and consideration of other market risks. Investment decisions are centrally managed by investment professionals based on guidelines established by management and approved by the boards of directors.
The table below provides information about our fixed maturity investments, which are sensitive to changes in interest rates. The table presents cash flows of principal amounts and related weighted average interest rates by expected maturity dates at December 31, 2000 and 1999. The cash flows are based on the earlier of the call date or the maturity date or, for mortgage-backed securities, expected payment patterns. Actual cash flows could differ from the expected amounts.
The Corporation and its property and casualty subsidiaries have consistently invested in high quality marketable securities. As a result, we believe that we have minimal credit quality risk. Taxable bonds in our domestic portfolio comprise U.S. Treasury, government agency, mortgage-backed and corporate securities. Approximately 60% of taxable bonds are issued by the U.S. Treasury or U.S. government agencies or rated AA or better by Moody's or Standard and Poor's. Of the tax-exempt bonds, approximately 95% are rated AA or better with more than 60% rated AAA. Only 1% of our bond portfolio is below investment grade. Taxable bonds have an average maturity of six years while tax- exempt bonds mature on average in eight years.
Interest rate risk also exists on our debt obligations. At December 31, 2000, the expected cash flow of principal amounts of such debt obligations were: a $10 million 7 1/2% term loan in 2001, $100 million of 6 7/8% notes in 2003, $300 million of 6.15% notes in 2005 and $342 million after 2005 with a weighted average interest rate of 7.7%.
The Corporation has outstanding $300 million of unsecured 6.15% notes due in 2005 and $100 million of unsecured 6.60% debentures due in 2018. Chubb Capital has outstanding $100 million of unsecured 6 7/8% notes due in 2003. The Chubb Capital notes are guaranteed by the Corporation.