Chubb Corp (CB) SEC Annual Report (10-K) for 2013

We are subject to an extensive legal and regulatory framework in the United States. Compliance with current and future regulation may reduce our profitability and limit our growth. Moreover, our failure to comply with applicable laws and regulations could result in restrictions on our ability to do business, subject us to fines and penalties and have other adverse effects on our business.

Our insurance subsidiaries are subject to extensive regulation and supervision in the jurisdictions in the United States in which they conduct business. This regulation is generally designed to protect the interests of policyholders, and not necessarily the interests of insurers, their shareholders or other investors. The regulation relates to authorization for lines of business, capital and surplus requirements, investment limitations, underwriting limitations, limitations on transactions with affiliates, dividend limitations, changes in control, premium rates and a variety of other financial and nonfinancial components of an insurance company's business. Complying with applicable laws and regulations may increase our cost of doing business and limit our opportunities for business growth. Failure to comply with, or to obtain, appropriate authorizations and/or exemptions under any applicable laws and regulations could result in restrictions on our ability to do business or undertake activities that are regulated in one or more of the jurisdictions in which we conduct business and could subject us to fines and other sanctions.

Virtually all states in which the P&C Group operates require that we, together with other insurers licensed to do business in such states, bear a portion of the loss suffered by some insureds as the result of impaired or insolvent insurance companies. In addition, in various states, our insurance subsidiaries must participate in mandatory arrangements to provide various types of insurance coverage to individuals or entities that otherwise are unable to purchase that coverage from private insurers. A few states also require us to purchase reinsurance from mandatory reinsurance funds, which can create a credit risk for insurers if such funds are not adequately funded by the state. In addition, in some cases, the existence of a reinsurance fund could affect the prices we can charge for our policies. The effect of these and similar arrangements could reduce our profitability in any given period and/or limit our ability to grow our business.

In recent years, the regulatory framework in the United States has come under increased scrutiny, including scrutiny by federal officials, and some state legislatures have considered or enacted laws that may alter or increase state authority to regulate insurance companies as well as insurance holding companies. Further, the NAIC and state insurance regulators are continually reexamining existing laws and regulations, specifically focusing on modifications to statutory accounting principles, interpretations of existing laws and the development of new laws and regulations. The NAIC has undertaken a Solvency Modernization Initiative focused on updating the U.S. insurance solvency regulation framework, including capital requirements, governance and risk management, group supervision, accounting and financial reporting and reinsurance. Any proposed or future legislation or regulations, including NAIC initiatives, if adopted, may be more restrictive on our ability to conduct business than current legal and regulatory requirements or may result in higher costs or increased capital requirements.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in July 2010, two federal government bodies, the Federal Insurance Office (FIO) and the Financial Stability Oversight Council (FSOC), were created which may impact the regulation of insurance. Although the FIO is prohibited from directly regulating the business of insurance, it has authority to represent the United States in international insurance matters and has limited powers to preempt certain types of state insurance laws. The FIO also can recommend to the FSOC that it designate an insurer as an entity posing risks to U.S. financial stability in the event of the insurer's material financial distress or failure. An insurer so designated by FSOC could be subject to Federal Reserve supervision and heightened prudential standards. While we do not believe the P&C Group or any of its affiliated companies are systemically important financial institutions, it is possible the FSOC could conclude otherwise. If the FSOC were to designate the P&C Group or any of its affiliated companies for supervision by the Federal Reserve, it could place more restrictions on our ability to conduct business and may result in higher costs, increased capital requirements and/or lower profitability. Even if an insurance company is not designated as a systemically important financial institution, it still could be adversely impacted by new

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rules governing such institutions, as non-bank financial institutions may, under certain circumstances, be subject to possible assessment to fund the orderly resolution of a financially distressed systemically important financial institution.

Although the federal government and its regulatory authorities generally do not directly regulate the business of insurance, federal initiatives often have an impact on the insurance business in a variety of ways. Current and proposed federal measures that may significantly affect the P&C Group's business and the insurance market as a whole include measures concerning federal terrorism insurance, systemic risk regulation, tort law, natural catastrophes, corporate governance, ergonomics, health care reform, including containment of medical costs, privacy, cyber security practices, e-commerce, international trade, federal regulation of insurance companies and taxation of insurance companies.

The P&C Group is subject to regulation and supervision in jurisdictions outside the United States where we do business. Compliance with current and future laws and regulations in these jurisdictions may reduce our profitability and limit our growth. Our noncompliance with these laws and regulations also could result in restrictions on our business, subject us to fines or penalties or have other adverse effects.

Insurers in the P&C Group doing business outside the United States also are subject to regulation and supervision in the jurisdictions within which they operate. The extent of insurance regulation varies from country to country. Complying with applicable laws and regulations may increase our costs of doing business and limit our opportunities to grow our business. Moreover, failure to comply with all of the laws and regulations to which we are subject could result in restrictions on our ability to do business, subject us to fines or penalties or have other adverse effects on our business.

Regulators in many countries are working with the IAIS to consider changes to insurance company solvency standards and group supervision of companies in a holding company system, including noninsurance companies. Some IAIS initiatives are particularly focused on the supervision of internationally active insurance groups, such as the P&C Group. In addition to these IAIS initiatives, the European Union Solvency II directive will require regulated companies, such as the P&C Group's European operations, to meet new requirements in relation to risk and capital management. A U.S. parent company of a European Union subsidiary could be subject to certain requirements of the Solvency II directive if the U.S. state-based regulatory system is not deemed "equivalent" to Solvency II. The Solvency II directive is scheduled to be effective January 1, 2016. Regulators outside the European Union are considering similar risk and capital management requirements that could impact the P&C Group's operations. Such proposed or future legislation and regulatory initiatives in countries where we operate, if adopted, may be more restrictive on our ability to conduct business than current regulatory requirements or may result in higher costs, increased capital requirements and/or lower profitability.

The IAIS, working with the FSB, also has developed a process to designate globally systemically important insurers. Although certain insurance groups have been so designated, we do not believe the P&C Group or any of its affiliated companies are globally systemically significant insurers. However, it is possible the FSB, in the future, could conclude otherwise. The ramifications of a FSB globally systemically important insurer designation for the P&C Group or any of its affiliated companies are unknown at this time. It is, however, likely to result in greater regulatory scrutiny and could place more restrictions on our ability to conduct business, result in higher costs, increased capital requirements or lower profitability.

State regulators in the United States and regulatory authorities outside the United States are increasingly coordinating the regulation of multinational insurers. We cannot predict the impact that decisions of these coordinated regulatory efforts will have on our business.

State regulators in the United States and regulatory authorities outside the United States are increasingly coordinating the regulation of multinational insurers by conducting supervisory colleges. A supervisory college is a forum for key regulators of an insurance group to share information and promote the coordination of supervision of the group. It is intended to facilitate supervision of the group

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at the group-wide level, as well as to enhance supervision of each of the entities included in the group. In 2013, regulators of the P&C Group conducted a supervisory college. We cannot predict the impact that decisions of a supervisory college will have on our business.

We are subject to a number of risks associated with our business outside the United States.

A significant portion of our business is conducted outside the United States, including in Asia, Australia, Canada, Europe and Latin America. By doing business outside the United States, we are subject to a number of risks, including without limitation, dealing with jurisdictions, especially in emerging markets in Latin America and Asia, that may lack political, financial or social stability and/or a strong legal and regulatory framework, which may make it difficult to do business and comply with local laws and regulations in such jurisdictions. Failure to comply with local laws in a particular jurisdiction or doing business in a country that becomes increasingly unstable could have a significant adverse effect on our business and operations in that market as well as on our reputation generally.

Our business activities outside the Unites States are also subject to certain U.S. laws and regulations, such as the Foreign Corrupt Practices Act and U.S. economic sanction requirements. Although we have policies and other controls in place that are intended to foster compliance with these laws and regulations, if our employees or third parties through whom we conduct business do not comply with these laws and regulations, it could result in significant fines and related costs, which could have a material adverse effect on our results of operations, as well as adversely affect our business and our reputation.

As part of our international operations, we engage in transactions denominated in currencies other than the U.S. dollar. To reduce our exposure to currency fluctuation, we attempt to match the currency of the liabilities we incur under insurance policies with assets denominated in the same local currency. However, in the event that we underestimate our exposure, negative movements in the U.S. dollar versus the local currency will exacerbate the impact of the exposure on our results of operations and financial condition. In addition, holding local currencies subjects us to the monetary policies and currency controls of the issuing government. The devaluation of a currency we hold or the imposition of controls that prevent the export of such currency could negatively impact our business.

We report the results of our international operations on a consolidated basis with our U.S. business. These results are reported in U.S. dollars. A significant portion of the business we write outside the United States, however, is transacted in local currencies. Consequently, fluctuations in the relative value of local currencies in which the policies are written versus the U.S. dollar can mask the underlying trends in our international business.

The United States and other jurisdictions in which we operate have adopted various laws and regulations that may apply to the business we conduct outside of the United States, including those relating to antibribery and economic sanctions compliance. These laws and regulations often apply not only to our direct activities, but also to those activities we conduct through intermediaries, such as agents, brokers and other business partners. Although we have policies and controls in place that are designed to ensure compliance with these laws and regulations, it is possible that one or more of our employees or intermediaries could fail to comply with applicable laws and regulations. In such event, we could be exposed to civil penalties, criminal penalties and other sanctions. In addition, such violations could damage our business and/or our reputation. Such civil penalties, criminal penalties, other sanctions and damage to our business and/or reputation could have a material adverse effect on our results of operations or financial condition.

We cannot predict the impact that changing climate conditions, including legal, regulatory and social responses to those conditions, may have on our business.

Various scientists, environmentalists, international organizations, regulators and other commentators believe that global climate change has added, and will continue to add, to the unpredictability, frequency and severity of natural disasters (including, but not limited to, hurricanes, tornadoes, freezes,

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other storms and fires) in certain parts of the world. In response to this belief, a number of legal and regulatory measures as well as social initiatives have been introduced in an effort to reduce greenhouse gas and other carbon emissions which may be chief contributors to global climate change.

We cannot predict the impact that changing climate conditions, if any, will have on our results of operations or our financial condition. Moreover, we cannot predict how legal, regulatory and social responses to concerns about global climate change will impact our business.

The inability of our property and casualty insurance subsidiaries to pay dividends in sufficient amounts would limit our ability to meet our obligations, to pay future dividends and to repurchase shares of our common stock.

As a holding company, Chubb relies primarily on dividends from its property and casualty insurance subsidiaries to meet its obligations for payment of interest and principal on outstanding debt obligations, to pay dividends to shareholders and to repurchase shares of our common stock. The ability of our property and casualty insurance subsidiaries to pay dividends in the future will depend on their statutory surplus, on earnings and on regulatory restrictions. We are subject to regulation by some states as an insurance holding company system. Such regulation generally provides that transactions between companies within the holding company system must be fair and equitable. Transfers of assets among affiliated companies, certain dividend payments from property and casualty insurance subsidiaries and certain material transactions between companies within the system may be subject to prior notice to, or prior approval by, state and other regulatory authorities. The ability of our property and casualty insurance subsidiaries to pay dividends is also restricted by regulations that set standards of solvency that must be met and maintained, that limit investments and that limit dividends to shareholders. These regulations may affect Chubb's insurance subsidiaries' ability to provide Chubb with dividends.

We may experience reduced returns or losses on our investments especially during periods of heightened volatility, which could have a material adverse effect on our results of operations or financial condition.

The returns on our investment portfolio may be reduced or we may incur losses as a result of changes in general economic conditions, interest rates, real estate markets, fixed income markets, equity markets, alternative investment markets, credit markets, exchange rates, global capital market conditions and numerous other factors that are beyond our control.

During prolonged periods of low interest rates and investment returns, we may not be able to invest new money generated by our operations or reinvest funds at rates that generate the same level of investment income generated by our existing invested assets, which could have a material adverse effect on our results of operations or financial condition. In addition, during periods of rising interest rates, the market values of our existing fixed maturity securities will likely decline, which could decrease our book value and result in unrealized and/or realized losses that have a material adverse effect on our results of operations or financial condition.

The worldwide financial markets experience high levels of volatility during certain periods, which could have an increasingly adverse impact on the U.S. and foreign economies. If the financial market volatility and the resulting negative economic impact are prolonged, they could adversely affect our current investment portfolio, make it difficult to determine the value of certain assets in our portfolio and/or make it difficult for us to purchase suitable investments that meet our risk and return criteria. These factors could cause us to realize less than expected returns on invested assets, sell investments for a loss or write off or write down investments, any of which could have a material adverse effect on our results of operations or financial condition.

A significant portion of our investment portfolio is invested in obligations of states, municipalities and political subdivisions (often collectively referred to as municipal bonds). Issuers of municipal bonds can face decreasing revenue and tax bases in economic downturns, which could result in the risk of default or impairment of municipal bonds we hold that could adversely affect our results of operations or financial condition.

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Our investment portfolio includes commercial mortgage-backed securities, residential mortgage-backed securities, collateralized mortgage obligations and pass-through securities. Continuation of the prolonged stress in the U.S. housing market and/or financial market disruption could adversely impact these investments.

Our investment portfolio includes securities that may be more volatile than fixed maturity instruments and certain of these instruments may be illiquid.

Our investment portfolio includes equity securities and private equity limited partnership interests which may experience significant volatility in their investment returns and valuation. Moreover, our private equity limited partnership interests are subject to transfer restrictions and may be illiquid. If the investment returns or value of these investments decline, or if we are unable to dispose of these investments at their carrying value, it could have a material adverse effect on our results of operations or financial condition.

Changes to federal and/or state tax laws could adversely affect the value of our investment portfolio.

A significant portion of our investment portfolio consists of tax exempt securities and we receive certain tax benefits relating to such securities based on current laws and regulations. Our portfolio has also benefited from certain other laws and regulations, including without limitation, tax credits. Federal and/or state tax legislation could be enacted that would lessen or eliminate some or all of the tax advantages currently benefiting us and could negatively impact the value of our investment portfolio.

We are exposed to credit risk and foreign currency risk in our business operations and in our investment portfolio.

We are exposed to credit risk in several areas of our business operations, including, without limitation, credit risk relating to reinsurance, co-sureties on surety bonds, policyholders of certain of our insurance products, independent agents and brokers, issuers of securities, insurers of certain securities and certain other counterparties relating to our investment portfolio.

With respect to reinsurance coverages that we have purchased, our ability to recover amounts due from reinsurers may be affected by the creditworthiness and willingness of the reinsurers to pay. Although certain reinsurance we have purchased is collateralized, the collateral is exposed to credit risk of the counterparty that has guaranteed an investment return on such collateral.

It is customary practice in the surety business for multiple insurers to participate as co-sureties on large surety bonds, meaning that each insurer (each referred to as a co-surety) assumes its proportionate share of the risk and receives a corresponding percentage of the bond premium. Under these arrangements, the co-sureties' obligations are joint and several. Consequently, if a co-surety defaults on its obligations, the remaining co-surety or co-sureties are obligated to make up the shortfall to the beneficiary of the surety bond even though the non-defaulting co-sureties did not receive the premium for that portion of the risk. Therefore, we are subject to credit risk with respect to the insurers with whom we are co-sureties on surety bonds.

In accordance with industry practice, when insureds purchase our insurance products through independent agents and brokers, they generally pay the premiums to the agent or broker, which in turn is required to remit the collected premium to us. In many jurisdictions, we are deemed to have received payment upon the receipt of the payment by the agent or broker, regardless of whether the agent or broker actually remits payment to us. As a result, we assume credit risk associated with amounts due from independent agents and brokers.

The value of our investment portfolio is subject to credit risk from the issuers and/or guarantors of the securities in the portfolio, other counterparties in certain transactions and, for certain securities, insurers that guarantee specific issuer's obligations. Defaults by the issuer and, where applicable, an issuer's guarantor, insurer or other counterparties with regard to any of such investments could reduce our net investment income and net realized investment gains or result in investment losses.

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We report our financial results in U.S. dollars, but a significant amount of the business we write and expenses we incur outside the United States are denominated in currencies other than the U.S. dollar. In addition, a substantial portion of our investment portfolio is denominated in non-U.S. dollar currencies. As a result, changes in the strength of the U.S. dollar relative to these foreign currencies could adversely affect our results of operations and financial condition.

Our exposure to any of the above credit risks and foreign currency risk could have a material adverse effect on our results of operations or financial condition.

Changes in accounting principles and financial reporting requirements may impact the manner in which we present our results of operations and financial condition.

The Financial Accounting Standards Board and the Securities and Exchange Commission may issue from time to time new accounting and reporting standards or changes in the interpretation of existing standards. These new standards or changes in interpretation could have an effect on how we report our results of operations and financial condition in the future.

If we experience difficulties with outsourcing and similar third party relationships, our ability to conduct our business might be negatively impacted.

We outsource certain business and administrative functions and rely on third parties to perform certain services on our behalf. We may do so increasingly in the future. If we fail to develop and implement our outsourcing strategies or our third party providers fail to perform as anticipated, we may experience operational difficulties, increased costs, reputational damage and a loss of business that may have a material adverse effect on our results of operations or financial condition. By utilizing third parties to perform certain business and administrative functions, we may be exposed to greater risk of data security breaches. Any breach of data security could damage our reputation and/or result in monetary damages, which, in turn, could have a material adverse effect on our results of operations or financial condition.

The occurrence of certain events could have a materially adverse effect on our systems and could impact our ability to conduct business effectively.

Our computer, information technology and telecommunications systems, which we use to conduct our business, interface with and rely upon third party systems. Systems failures or outages could compromise our ability to perform business functions in a timely manner, which could harm our ability to conduct business and hurt our relationships with our business partners and customers.

In the event of a disaster such as a natural catastrophe, an industrial accident, a blackout, a computer virus, a terrorist attack or war, our systems may be inaccessible to our employees, customers or business partners for an extended period of time. Even if our employees or third party providers are able to report to work, they might be unable to perform their duties for an extended period of time if our computer, information technology or telecommunication systems were disabled or destroyed.

Our systems could be subject to physical break-ins, electronic hacking, and subject to similar disruptions from unauthorized access or tampering. This may impede or interrupt our business operations, and may result in monetary damages and/or damages to our reputation which could have a material adverse effect on our results of operations or financial condition.

Loss of sensitive data and other security breaches could damage our reputation and harm our business.

We routinely transmit, receive and store personal, confidential and proprietary information by email and other electronic means. Although we attempt to protect this confidential and proprietary information, we may be unable to do so in all events, especially with customers, business partners and other third parties who may not have or use appropriate controls to protect confidential information.

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In addition, we are subject to numerous data privacy laws, such as those enacted by the U.S. federal government, various state governments, the European Union and other jurisdictions in which we do business relating to the privacy of the information of clients, employees or others. A misuse or mishandling of confidential or proprietary information being sent to or received from a client, employee or third party could result in legal liability, regulatory action and reputational harm. Third parties to whom we outsource certain of our functions are also subject to these risks, and their failure to adhere to these laws and regulations could negatively impact us.

Like other companies, we have on occasion experienced, and will continue to experience, threats to our data and systems, including malicious codes and viruses, and other cyber-attacks. The number and complexity of these threats continue to increase over time. To date, we are not aware of any material cyber security breach with respect to our systems or data. We deploy administrative and technical controls designed to reduce the risk associated with these cyber security threats. Such controls may be insufficient to prevent events like physical and electronic break-ins, denial of service and other cyber-attacks or other security breaches to our computer systems and those of third parties upon which we may rely. In some cases, such events may not be immediately detected. Such events could compromise our personal, confidential and proprietary information as well as that of our customers and business partners, impede or interrupt our business operations and may result in other negative consequences including remediation costs, loss of revenue, additional regulatory scrutiny and fines, litigation and monetary and reputational damages. While we maintain cyber insurance providing first party and third party coverages, such insurance may not cover all costs associated with the consequences of personal and confidential and proprietary information being compromised. As a result, in the event of a material cyber security breach, our results of operations could be materially, adversely affected.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

The executive offices of the Corporation are in Warren, New Jersey. The administrative offices of the P&C Group are located in Warren and Whitehouse Station, New Jersey. The P&C Group maintains territory, branch and service offices in major cities throughout the United States and also has offices in Canada, Europe, Australia, Latin America and Asia. Office facilities are leased with the exception of buildings in Whitehouse Station, New Jersey and Simsbury, Connecticut. Management considers its office facilities suitable and adequate for the current level of operations.

Item 3.

Legal Proceedings

Chubb and its subsidiaries are defendants in various lawsuits arising out of their businesses. It is the opinion of management that the final outcome of these matters will not materially affect the consolidated financial position of the registrant.

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Executive Officers of the Registrant

		Age(a)					Year of Election(b)
John D. Finnegan, Chairman, President and Chief Executive Officer				65					2002
W. Brian Barnes, Senior Vice President and Chief Actuary of Chubb & Son, a division of Federal				51					2008
Maureen A. Brundage, Executive Vice President, General Counsel and Corporate Secretary				57					2005
Robert C. Cox, Executive Vice President of Chubb & Son, a division of Federal				56					2003
John J. Kennedy, Senior Vice President and Chief Accounting Officer				58					2008
Mark P. Korsgaard, Executive Vice President of Chubb & Son, a division of Federal				58					2010
Paul J. Krump, President of Personal Lines and Claims of Chubb & Son, a division of Federal				54					2001
Harold L. Morrison, Jr., Executive Vice President, Chief Global Field Officer and Chief Administrative Officer of Chubb & Son, a division of Federal				56					2008
Steven R. Pozzi, Executive Vice President of Chubb & Son, a division of Federal				57					2009
Dino E. Robusto, President of Commercial and Specialty Lines of Chubb & Son, a division of Federal				55					2006
Richard G. Spiro, Executive Vice President and Chief Financial Officer				49					2008
Kathleen M. Tierney, Executive Vice President of Chubb & Son, a division of Federal				45					2010

(a)

Ages listed above are as of April 29, 2014.

(b)

Date indicates year first elected or designated as an executive officer.

All of the foregoing officers serve at the pleasure of the Board of Directors of the Corporation and have been employees of the Corporation for more than five years.

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PART II.

Item 5.

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The common stock of Chubb is listed and principally traded on the New York Stock Exchange (NYSE) under the trading symbol "CB". The following are the high and low closing sale prices as reported on the NYSE Composite Tape and the quarterly dividends declared per share for each quarter of 2013 and 2012.

		2013
		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Common stock prices
High		$	87.53			$	90.60			$	90.10			$	97.34
Low			76.09				81.79				83.17				87.58
Dividends declared			.44				.44				.44				.44

		2012
		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Common stock prices
High		$	71.01			$	74.28			$	76.76			$	81.19
Low			66.90				68.82				68.83				73.83
Dividends declared			.41				.41				.41				.41

At February 14, 2014, there were approximately 7,500 common shareholders of record.

The declaration and payment of future dividends to Chubb's shareholders will be at the discretion of Chubb's Board of Directors and will depend upon many factors, including the Corporation's operating results, financial condition and capital requirements, and the impact of regulatory constraints discussed in Note (16)(e) of the Notes to Consolidated Financial Statements.

The following table summarizes Chubb's repurchases of its common stock during each month in the quarter ended December 31, 2013.

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(a)
														(in millions)
October 2013			642,300			$	91.11				642,300			$	374
November 2013			971,781				94.38				971,781				282
December 2013			1,855,005				94.28				1,855,005				107
Total			3,469,086			$	93.72				3,469,086

(a)

On January 31, 2013, the Board of Directors authorized the repurchase of up to $1.3 billion of Chubb's common stock. In January 2014, Chubb repurchased $107 million of Chubb's common stock remaining under the January 31, 2013 authorization. On January 30, 2014, the Board of Directors authorized the repurchase of up to $1.5 billion of Chubb's common stock. The January 30, 2014 authorization has no expiration date.

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Stock Performance Graph

The following performance graph compares the performance of Chubb's common stock during the five-year period from December 31, 2008 through December 31, 2013 with the performance of the Standard & Poor's 500 Index and the Standard & Poor's Property & Casualty Insurance Index. The graph plots the changes in value of an initial $100 investment over the indicated time periods, assuming all dividends are reinvested.

Cumulative Total Return
Based upon an initial investment of $100 on December 31, 2008
with dividends reinvested

		December 31
		2008				2009				2010				2011				2012				2013
Chubb		$	100			$	99			$	124			$	148			$	164			$	215
S&P 500			100				126				146				149				172				228
S&P 500 Property & Casualty Insurance			100				112				122				122				147				203

Our filings with the Securities and Exchange Commission (SEC) may incorporate information by reference, including this Form 10-K. Unless we specifically state otherwise, the information under this heading "Stock Performance Graph" shall not be deemed to be "soliciting materials" and shall not be deemed to be "filed" with the SEC or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

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Item 6.

Selected Financial Data

		2013				2012				2011				2010				2009
		(in millions except for per share amounts)
FOR THE YEAR
Revenues
Property and Casualty Insurance
Premiums Earned		$	12,066			$	11,838			$	11,644			$	11,215			$	11,331
Investment Income			1,436				1,518				1,598				1,590				1,585
Other Revenues			-				-				-				-				2
Corporate and Other			43				46				55				88				75
Realized Investment Gains, Net			402				193				288				426				23
Total Revenues		$	13,947			$	13,595			$	13,585			$	13,319			$	13,016
Income
Property and Casualty Insurance
Underwriting Income		$	1,675			$	548			$	574			$	1,222			$	1,631
Investment Income			1,391				1,482				1,562				1,558				1,549
Other Income (Charges)			6				10				21				2				(3	)
Property and Casualty Insurance Income			3,072				2,040				2,157				2,782				3,177
Corporate and Other			(237	)			(237	)			(246	)			(220	)			(238	)
Realized Investment Gains, Net			402				193				288				426				23
Income Before Income Tax			3,237				1,996				2,199				2,988				2,962
Federal and Foreign Income Tax			892				451				521				814				779
Net Income		$	2,345			$	1,545			$	1,678			$	2,174			$	2,183
Per Share
Net Income		$	9.04			$	5.69			$	5.76			$	6.76			$	6.18
Dividends Declared on Common Stock			1.76				1.64				1.56				1.48				1.40
AT DECEMBER 31
Total Assets		$	50,433			$	52,184			$	50,445			$	49,976			$	50,176
Long Term Debt			3,300				3,575				3,575				3,975				3,975
Total Shareholders' Equity			16,097				15,827				15,301				15,257				15,361
Book Value Per Share			64.83				60.45				56.15				51.32				46.27

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Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations addresses the financial condition of the Corporation as of December 31, 2013 compared with December 31, 2012 and the results of operations for each of the three years in the period ended December 31, 2013. This discussion should be read in conjunction with the consolidated financial statements and related notes and the other information contained in this report.

INDEX

		PAGE
Cautionary Statement Regarding Forward-Looking Information			30
Critical Accounting Estimates and Judgments			32
Overview			32
Property and Casualty Insurance			34
Underwriting Operations			35
Underwriting Results			35
Net Premiums Written			35
Ceded Reinsurance			37
Profitability			39
Review of Underwriting Results by Business Unit			41
Personal Insurance			41
Commercial Insurance			42
Specialty Insurance			44
Reinsurance Assumed			46
Catastrophe Risk Management			46
Natural Catastrophes			46
Terrorism Risk and Legislation			47
Loss Reserves			48
Estimates and Uncertainties			49
Reserves Other than Those Relating to Asbestos and Toxic Waste Claims			50
Reserves Relating to Asbestos and Toxic Waste Claims			53
Asbestos Reserves			54
Toxic Waste Reserves			57
Reinsurance Recoverable			58
Prior Year Loss Development			58
Investment Results			62
Other Income and Charges			62
Corporate and Other			62
Realized Investment Gains and Losses			63
Capital Resources and Liquidity			64
Capital Resources			64
Ratings			66
Liquidity			66
Contractual Obligations and Off-Balance Sheet Arrangements			68
Invested Assets			69
Fair Values of Financial Instruments			70
Pension and Other Postretirement Benefits			71
Subsequent Events			71

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this document are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements are made pursuant to the safe harbor provisions of the PSLRA and include statements regarding our loss reserve and reinsurance recoverable estimates; asbestos and toxic waste liabilities and related developments; the impact of the economy on our business; the impact of changes to our reinsurance program in 2013 and the cost of reinsurance in 2014; the adequacy of the rates at which we renewed and wrote new business; premium volume, pricing and competition in 2014; property and casualty investment income during 2014; cash flows generated by our fixed income investments; currency rate fluctuations; the repurchase of common stock under our share repurchase program; our capital adequacy and funding of liquidity needs; the funding and timing of loss payments; and the redemption of our capital securities. Forward-looking statements are made based upon management's current expectations and beliefs concerning trends and future developments and their potential effects on us. These statements are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties, which include, among others, those discussed or identified from time to time in our public filings with the Securities and Exchange Commission and those associated with:

•

global political, economic and market conditions, particularly in the jurisdictions in which we operate and/or invest, including:

•

changes in credit ratings, interest rates, market credit spreads and the performance of the financial markets;

•

currency fluctuations;

•

the effects of inflation;

•

changes in domestic and foreign laws, regulations and taxes;

•

changes in competition and pricing environments;

•

regional or general changes in asset valuations;

•

the inability to reinsure certain risks economically; and

•

changes in the litigation environment;

•

the effects of the outbreak or escalation of war or hostilities;

•

the occurrence of terrorist attacks, including any nuclear, biological, chemical or radiological events;

•

premium pricing and profitability or growth estimates overall or by lines of business or geographic area, and related expectations with respect to the timing and terms of any required regulatory approvals;

•

adverse changes in loss cost trends;

•

our ability to retain existing business and attract new business at acceptable rates;

•

our expectations with respect to cash flow and investment income and with respect to other income;

•

the adequacy of our loss reserves, including:

•

our expectations relating to reinsurance recoverables;

•

the willingness of parties, including us, to settle disputes;

•

developments in judicial decisions or regulatory or legislative actions relating to coverage and liability, in particular, for asbestos, toxic waste and other mass tort claims;

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•

development of new theories of liability;

•

our estimates relating to ultimate asbestos liabilities; and

•

the impact from the bankruptcy protection sought by various asbestos producers and other related businesses;

•

the availability and cost of reinsurance coverage;

•

the occurrence of significant weather-related or other natural or human-made disasters, particularly in locations where we have concentrations of risk or changes to our estimates (or the assessments of rating agencies and other third parties) of our potential exposure to such events;

•

the impact of economic factors on companies on whose behalf we have issued surety bonds, and in particular, on those companies that file for bankruptcy or otherwise experience deterioration in creditworthiness;

•

the effects of disclosures by, and investigations of, companies we insure, particularly with respect to our lines of business that have a longer time span, or tail, between the incidence of a loss and the settlement of the claim;

•

the impact of legislative, regulatory, judicial and similar developments on companies we insure, particularly with respect to our longer tail lines of business;

•

the impact of legislative, regulatory, judicial and similar developments on our business, including those relating to insurance industry reform, terrorism, catastrophes, the financial markets, solvency standards, capital requirements, accounting guidance and taxation;

•

any downgrade in our claims-paying, financial strength or other credit ratings;

•

the ability of our subsidiaries to pay us dividends;

•

our plans to repurchase shares of our common stock, including as a result of changes in:

•

our financial position and financial results;

•

our capital position and/or capital adequacy levels required to maintain our existing ratings from independent rating agencies;

•

our share price;

•

investment opportunities;

•

opportunities to profitably grow our property and casualty insurance business; and

•

corporate and regulatory requirements; and

•

our ability to implement management's strategic plans and initiatives.

Chubb assumes no obligation to update any forward-looking information set forth in this document, which speak as of the date hereof.

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CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The consolidated financial statements include amounts based on informed estimates and judgments of management for transactions that are not yet complete. Such estimates and judgments affect the reported amounts in the financial statements. Those estimates and judgments that were most critical to the preparation of the financial statements involved the determination of loss reserves and the recoverability of related reinsurance recoverables and the evaluation of whether a decline in value of any investment is temporary or other than temporary. These estimates and judgments, which are discussed within the following analysis of our results of operations, require the use of assumptions about matters that are highly uncertain and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements.

OVERVIEW

The following highlights do not address all of the matters covered in the other sections of Management's Discussion and Analysis of Financial Condition and Results of Operations or contain all of the information that may be important to Chubb's shareholders or the investing public. This overview should be read in conjunction with the other sections of Management's Discussion and Analysis of Financial Condition and Results of Operations.

•

Net income was $2.3 billion in 2013, $1.5 billion in 2012 and $1.7 billion in 2011. The increase in net income in 2013 compared with 2012 was due to higher operating income and higher net realized investment gains. The decrease in net income in 2012 compared with 2011 was due to lower operating income and lower net realized investment gains. We define operating income as net income excluding realized investment gains and losses after tax.

•

Operating income was $2.1 billion in 2013, $1.4 billion in 2012 and $1.5 billion in 2011. The higher operating income in 2013 compared with 2012 was due to substantially higher underwriting income in our property and casualty insurance business, offset in part by a decrease in property and casualty investment income. The modestly lower operating income in 2012 compared with 2011 was due primarily to lower property and casualty investment income. The underwriting income of our property and casualty insurance business was similar in both 2012 and 2011. Management uses operating income, a non-GAAP financial measure, among other measures, to evaluate its performance because the realization of investment gains and losses in any period could be discretionary as to timing and can fluctuate significantly, which could distort the analysis of operating trends.

•

Underwriting results were highly profitable in 2013 compared with profitable results in 2012 and 2011. Our combined loss and expense ratio was 86.1% in 2013 and 95.3% in 2012 and 2011. The more profitable underwriting results in 2013 compared with 2012 and 2011 were primarily due to a substantially lower impact of catastrophes and, to a lesser extent, a lower current accident year loss ratio excluding catastrophes. The impact of catastrophes accounted for 3.4 percentage points of the combined ratio in 2013 compared with 9.6 percentage points in 2012 and 8.9 percentage points in 2011.

•

During 2013, 2012 and 2011, we experienced overall favorable development of $712 million, $614 million and $767 million, respectively, on loss reserves established as of the previous year end. In each year we experienced favorable prior year loss development in each segment of our insurance business.

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•

Total net premiums written increased by 3% in 2013 and 1% in 2012. The effect of foreign currency translation on total net premium growth was insignificant in 2013 compared with a slightly negative impact in 2012. Net premiums written in the United States increased by 4% in 2013 and 2% in 2012. Net premiums written outside the United States were flat in 2013 and decreased by 3% in 2012. When measured in local currencies, such premiums grew modestly in 2013 and grew slightly in 2012. In both years, premium growth both inside and outside the United States was limited by our emphasis on underwriting discipline in a highly competitive market and our focus on rate adequacy and profitability for both renewal and new business.

•

Property and casualty investment income after tax decreased by 5% in both 2013 and 2012 compared with the respective prior year, due to a decline in the average yield on our investment portfolio. Management uses property and casualty investment income after tax, a non-GAAP financial measure, to evaluate its investment results because it reflects the impact of any change in the proportion of tax exempt investment income to total investment income and is therefore more meaningful for analysis purposes than investment income before income tax.

•

Net realized investment gains before tax were $402 million ($261 million after tax) in 2013 compared with $193 million ($125 million after tax) in 2012 and $288 million ($187 million after tax) in 2011. In 2013, net realized investment gains included the recognition of a gain in connection with the business combination of an issuer in which we held equity securities and warrants. The remaining net realized gains in 2013 were primarily related to investments in limited partnerships, which generally are reported on a quarter lag, and sales of equity securities. The net realized gains in 2012 were primarily related to sales of fixed maturities and investments in limited partnerships. The net realized gains in 2011 were primarily related to investments in limited partnerships.

A summary of our consolidated net income is as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Property and casualty insurance		$	3,072			$	2,040			$	2,157
Corporate and other			(237	)			(237	)			(246	)
Consolidated operating income before income tax			2,835				1,803				1,911
Federal and foreign income tax			751				383				420
Consolidated operating income			2,084				1,420				1,491
Realized investment gains after income tax			261				125				187
Consolidated net income		$	2,345			$	1,545			$	1,678

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PROPERTY AND CASUALTY INSURANCE

A summary of the results of operations of our property and casualty insurance business is as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Underwriting
Net premiums written		$	12,224			$	11,870			$	11,758
Increase in unearned premiums			(158	)			(32	)			(114	)
Premiums earned			12,066				11,838				11,644
Losses and loss expenses			6,520				7,507				7,407
Operating costs and expenses			3,893				3,756				3,695
Increase in deferred policy acquisition costs			(59	)			(3	)			(63	)
Dividends to policyholders			37				30				31
Underwriting income			1,675				548				574
Investments
Investment income before expenses			1,436				1,518				1,598
Investment expenses			45				36				36
Investment income			1,391				1,482				1,562
Other income			6				10				21
Property and casualty income before tax		$	3,072			$	2,040			$	2,157
Property and casualty investment income after tax		$	1,138			$	1,204			$	1,265

Property and casualty income before tax was higher in 2013 than in 2012, due to substantially higher underwriting income, offset in part by a decline in investment income. The increase in underwriting income in 2013 was primarily attributable to a substantially lower impact of catastrophes and, to a lesser extent, a lower current accident year loss ratio excluding catastrophes. Property and casualty income before tax in 2012 was modestly lower than in 2011, due primarily to a decrease in investment income. Underwriting income was similar in 2012 and 2011.

The profitability of our property and casualty insurance business depends on the results of both our underwriting and investment operations. We view these as two distinct operations since the underwriting functions are managed separately from the investment function. Accordingly, in assessing our performance, we evaluate underwriting results separately from investment results.

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Underwriting Operations

Underwriting Results

We evaluate the underwriting results of our property and casualty insurance business in the aggregate and for each of our business units.

Net Premiums Written

Net premiums written were $12.2 billion in 2013, $11.9 billion in 2012 and $11.8 billion in 2011. Net premiums written by business unit were as follows:

		Years Ended December 31
		2013				% Increase 2013 vs.  2012				2012				% Increase (Decrease) 2012 vs. 2011				2011
		(dollars in millions)
Personal insurance		$	4,322				5%			$	4,125				4%			$	3,977
Commercial insurance			5,273				2				5,174				2				5,051
Specialty insurance			2,633				3				2,568				(6)				2,720
Total insurance			12,228				3				11,867				1				11,748
Reinsurance assumed			(4	)			*				3				*				10
Total		$	12,224				3			$	11,870				1			$	11,758

*	The change in net premiums written is not presented for this business unit since it is in runoff.

Net premiums written increased by 3% in 2013 compared with 2012 and 1% in 2012 compared with 2011. Net premiums written in the United States, which in 2013 represented 75% of our total net premiums, increased by 4% in 2013 and 2% in 2012 compared with the respective prior year. Net premiums written outside the United States, expressed in U.S. dollars, were flat in 2013 and decreased by 3% in 2012. In both 2013 and 2012, foreign currency translation had a negative impact on growth of net premiums written outside the United States, reflecting the impact of the stronger U.S. dollar relative to several currencies in which we wrote business in each year compared to the respective prior year. Measured in local currencies, net premiums written outside the United States grew modestly in 2013 and grew slightly in 2012. The countries outside the United States which were significant contributors to net premiums written in recent years were the United Kingdom, Canada, Brazil, Australia and Germany.

We classify business as written in the United States or outside the United States based on the location of the risks associated with the underlying policies. The method of determining location of risk varies by class of business. Location of risk for property classes is typically based on the physical location of the covered property, while location of risk for liability classes may be based on the main location of the insured, or in the case of the workers' compensation class, the primary work location of the covered employee.

Growth in net premiums written in the United States in 2013 occurred in each segment of our insurance business, with the most significant growth occurring in our personal insurance segment. Net premiums written in the United States increased modestly in our commercial insurance segment as well as in our specialty insurance segment, of which the predominant component is our professional liability business. Growth in our personal insurance segment was attributable to new business, strong retention of existing business as well as higher rates and insured exposures upon renewal. Growth in our commercial insurance segment and our professional liability business, while reflecting higher rates and continued strong retention, remained constrained by our underwriting actions and judicious approach to new business in the highly competitive market.

Net premiums written in the United States increased in 2012 as a result of growth in our personal and commercial insurance segments. Net premiums written in the United States for our specialty insurance segment decreased in 2012. Growth in our personal insurance business was attributable to new business, strong retention of existing business as well as higher rates and insured exposures upon renewal. While the pricing environment was positive during 2012 in both the commercial and

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professional liability classes, continuing a trend that began during 2011, the positive trend had a more significant impact on growth in our commercial insurance business.

Premium growth in our professional liability business remained constrained in 2012 by the continuing effects of the economic downturn and our focus on rate adequacy and profitability in the highly competitive marketplace.

Average renewal rates for our personal insurance business in the United States were up modestly in 2013 and up slightly in 2012 compared with expiring rates, driven in both years by our homeowners business. We continued to retain a high percentage of our customers in both years.

Overall, average renewal rates in 2013 and 2012 in the United States were up significantly in both our commercial and professional liability businesses in comparison to expiring rates. The amounts of coverage purchased or the insured exposures, both of which are bases upon which we calculate the premiums we charge, were down slightly in 2013 and flat in 2012 compared with the respective prior year. We continued to retain a high percentage of our existing business in our commercial and professional liability classes in both years. Renewal retention levels in our commercial insurance business were similar in 2013 and 2012 but lower than those in 2011. Renewal retention levels in our professional liability business were slightly higher in 2013 after declining in 2012. Renewal retention levels reflected our continued efforts to seek renewal rate increases in most of the classes within these businesses, and to take underwriting actions to improve profitability, particularly in some of the professional liability classes. The overall level of new business was down in our commercial insurance business in 2013 and 2012 compared with the respective prior year. New business was up modestly in our professional liability business in 2013 after declining in 2012. The levels of new business reflected the competitive market as well as our underwriting discipline.

Net premiums written outside the United States were flat in 2013, as modest growth in our specialty insurance segment was offset by a slight decrease in our personal insurance segment, due to the negative effect of foreign currency translation. Net premiums written in our commercial insurance segment were flat.

Net premiums written outside the United States decreased modestly in 2012, as slight growth in our personal insurance segment was more than offset by decreases in our commercial and specialty insurance segments. The lack of growth in our business outside the United States was primarily due to a lower level of new business in a weak rate environment for commercial and specialty insurance products and, to a lesser extent, the negative impact of foreign currency translation.

Average renewal rates for our personal insurance business outside the United States were modestly higher in 2013 and close to flat in 2012 compared with expiring rates. We continued to retain a high percentage of our customers in both years.

Overall, average renewal rates outside the United States were up slightly in 2013 and 2012 in both the commercial and professional liability components of our business in comparison to expiring rates. The amounts of coverage purchased or the insured exposures were down modestly in our commercial business in 2013 and remained flat in 2012 compared with the respective prior year. For our professional liability business, the amounts of coverage purchased were down modestly in both years. We continued to retain a high percentage of our existing commercial and professional liability business in both years. Retention levels in 2013, as compared with 2012, were similar in our commercial insurance business, but increased modestly in our professional liability business. Renewal retention levels for both our commercial and professional liability business were lower in 2012 than those in 2011. In 2013, the overall level of new business was up slightly in our commercial insurance business but down in the professional liability business compared with 2012. The overall level of new business was down in 2012 compared with 2011 for both our commercial and professional liability business.

The reinsurance assumed business has been in runoff since the sale of our ongoing reinsurance assumed business in 2005. Most of our insurance policies are issued on a direct basis to personal, commercial or specialty insurance customers, but we do opportunistically participate in the business of

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other insurance carriers for some lines of business. The business that is assumed from other insurance carriers is included within the personal, commercial and specialty insurance business results. Information regarding the amount of business written on a direct and assumed basis is presented in Note (8) of the Notes to Consolidated Financial Statements.

We expect that a positive pricing environment in the United States, which began in 2011 and continued throughout 2012 and 2013, will continue into 2014. However, the rate increases in 2014 in some of our commercial and professional liability classes may not be at the same levels we achieved in 2013, as portions of our business have approached rate adequacy during this period, as well as due to competitive market conditions. Outside the United States, we expect that a slightly positive pricing environment will continue in 2014. While there have been signs in recent years that areas of the global economy have been improving, the improvement has been inconsistent across geographies and industries. If the economies in the United States and other countries in which we operate improve in 2014, that should have a positive impact on premiums, although there is typically a lag between an economic recovery and any resulting growth in premiums. We expect our net written premiums overall will be modestly higher in 2014 compared with 2013, assuming average foreign currency to U.S. dollar exchange rates in 2014 remain similar to 2013 year-end levels.

Ceded Reinsurance

Our premiums written are net of amounts ceded to reinsurers who assume a portion of the risk under the insurance policies we write that are subject to reinsurance. Most of our ceded reinsurance arrangements consist of excess of loss and catastrophe contracts that protect against a specified part or all of certain types of losses over stipulated amounts arising from any one occurrence or event. Therefore, unless we incur losses that exceed our initial retention under these contracts, we do not receive any loss recoveries. As a result, in some years, we cede premiums to reinsurers and receive few, if any, loss recoveries related to these contracts. However, in a year in which there is a significant catastrophic event, such as Storm Sandy in 2012, or a series of large individual losses, we may receive substantial loss recoveries. The impact of ceded reinsurance on net premiums written and net premiums earned and on net losses and loss expenses incurred for the three years ended December 31, 2013 is presented in Note (8) of the Notes to Consolidated Financial Statements.

The most significant component of our ceded reinsurance program is property reinsurance. We purchase two main types of property reinsurance: catastrophe and property per risk.

For property risks in the United States and Canada we purchase traditional catastrophe reinsurance, including our primary treaty, which we refer to as our North American catastrophe treaty, as well as supplemental catastrophe reinsurance that provides additional coverage for our exposures in the northeast United States. For certain exposures in the United States, we have also arranged for the purchase of multi-year, collateralized reinsurance funded through the issuance of collateralized risk-linked securities, known as catastrophe bonds. For events outside the United States, we also purchase traditional catastrophe reinsurance.

The North American catastrophe treaty has an initial retention of $500 million and provides coverage for exposures in the United States and Canada of approximately 34% of losses (net of recoveries from other available reinsurance) between $500 million and $900 million and approximately 72% of losses (net of recoveries) between $900 million and $1.65 billion. For certain catastrophic events in the northeast United States or along the southern U.S. coastline, the combination of the North American catastrophe treaty, supplemental catastrophe reinsurance and/or the catastrophe bond arrangements provide additional coverages as discussed below.

The catastrophe bond arrangements provide reinsurance coverage for specific types of losses in specific geographic locations. They are generally designed to supplement coverage provided under the North American catastrophe treaty. We currently have two catastrophe bond arrangements in effect. We have a $475 million reinsurance arrangement, a portion of which expires in March 2014 and the remainder in March 2015, that provides coverage for our exposure to homeowners and commercial

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losses related to certain hurricane, earthquake, severe thunderstorm and winter storm loss events in twelve states in the northeast United States and the District of Columbia. We also have a $150 million reinsurance arrangement that expires in March 2016 that provides coverage for homeowners-related hurricane and severe thunderstorm losses in eight states along the southern U.S. coastline.

For the indicated catastrophic events in the northeast United States, the combination of the North American catastrophe treaty, the supplemental catastrophe reinsurance and the $475 million catastrophe bond arrangement provides additional coverage of approximately 65% of losses (net of recoveries from other available reinsurance) between $1.65 billion and $3.65 billion.

For hurricane and severe thunderstorm events along the southern U.S. coastline, the $150 million catastrophe bond arrangement provides additional coverage of approximately 50% of homeowners-related hurricane and severe thunderstorm losses (net of recoveries from other available reinsurance) between $860 million and $1.16 billion.

For hurricane events in Florida, in addition to the coverage provided by the North American catastrophe treaty and the $150 million catastrophe bond arrangement discussed above, we have reinsurance from the Florida Hurricane Catastrophe Fund, which is a state-mandated fund designed to reimburse insurers for a portion of their residential catastrophic hurricane losses. Our participation in this program, for which the most recent annual period began on June 1, 2013, provides coverage of 90% of homeowners-related hurricane losses in Florida in excess of our initial retention of $160 million per event. Under the terms of the program, our aggregate recoveries during the annual coverage period are limited to approximately $380 million, based on our current level of participation.

Our primary property catastrophe treaty for events outside the United States, including Canada, provides coverage of approximately 75% of losses (net of recoveries from other available reinsurance) between $100 million and $350 million. For catastrophic events in Australia and Canada, additional reinsurance provides coverage of 80% of losses (net of recoveries from other available reinsurance) between $350 million and $475 million.

Our commercial property per risk treaty provides coverage for property exposures both inside and outside the United States. Depending upon the currency in which the covered insurance policy was issued, the treaty provides coverage per risk of approximately $555 million to $835 million in excess of our initial retention, which is generally between $25 million and $35 million.

In addition to our major property catastrophe and property per risk treaties, we purchase several smaller property treaties that only provide coverage for specific classes of business or locations having concentrations of risk.

Recoveries under our property reinsurance treaties are subject to certain coinsurance requirements that affect the interaction of some elements of our reinsurance program.

Our property reinsurance treaties generally contain terrorism exclusions for acts perpetrated by foreign terrorists, and for nuclear, biological, chemical and radiological loss causes whether such acts are perpetrated by foreign or domestic terrorists.

As a result of changes in coverage we made in 2013 upon renewal of the major components of our program, the overall cost of our property reinsurance program was modestly lower in 2013 than in 2012. For the North American catastrophe treaty, we incurred a slight increase in cost upon renewal. However, the renewal costs associated with the catastrophe treaty that covers events outside the United States and the commercial property per risk treaty were lower. We do not expect the changes we made to our property reinsurance program during 2013 to have a material effect on the Corporation's results of operations, financial condition or liquidity.

Our major, traditional property reinsurance treaties expire on April 1, 2014. Due to the decrease in catastrophe losses incurred by the industry in 2013, particularly in the United States, we expect that reinsurance rates for property risks will decline in 2014. The final structure of our reinsurance program and amount of coverage purchased, including the mixture of traditional catastrophe reinsurance and collateralized reinsurance coverage funded through the issuance of collateralized risk linked securities, is still being determined and will affect our total reinsurance costs in 2014.

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Profitability

The combined loss and expense ratio (or combined ratio), expressed as a percentage, is the key measure of underwriting profitability traditionally used in the property and casualty insurance business. Management evaluates the performance of our underwriting operations and of each of our business units using, among other measures, the combined loss and expense ratio calculated in accordance with U.S. statutory accounting principles. It is the sum of the ratio of losses and loss expenses to premiums earned (loss ratio) plus the ratio of statutory underwriting expenses to premiums written (expense ratio) after reducing both premium amounts by dividends to policyholders. When the combined ratio is under 100%, underwriting results are generally considered profitable; when the combined ratio is over 100%, underwriting results are generally considered unprofitable.

Statutory accounting principles applicable to U.S. property and casualty insurance companies differ in certain respects from generally accepted accounting principles in the United States (GAAP). Under statutory accounting principles, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned. Management uses underwriting results determined in accordance with GAAP, among other measures, to assess the overall performance of our underwriting operations. To convert statutory underwriting results to a GAAP basis, certain policy acquisition expenses are deferred and amortized over the period in which the related premiums are earned. Underwriting income determined in accordance with GAAP is defined as premiums earned less losses and loss expenses incurred and GAAP underwriting expenses incurred.

An accident year is the calendar year in which a loss is incurred or, in the case of claims-made policies, the calendar year in which a loss is reported. The total losses and loss expenses incurred for a particular calendar year include current accident year losses and loss expenses as well as any increases or decreases to our estimates of losses and loss expenses that occurred in all prior accident years, which we refer to as prior year loss development.

Underwriting results were highly profitable in 2013 and profitable in 2012 and 2011. The combined loss and expense ratio for our overall property and casualty insurance business was as follows:

		Years Ended December 31
		2013				2012				2011
Loss ratio			54.2	%			63.6	%			63.8	%
Expense ratio			31.9				31.7				31.5
Combined loss and expense ratio			86.1	%			95.3	%			95.3	%

The loss ratio was lower in 2013 compared with 2012 due primarily to a substantially lower impact of catastrophes and, to a lesser extent, a lower current accident year loss ratio excluding catastrophes. The current accident year loss ratio excluding catastrophes was lower in 2013 for each of our insurance segments. The loss ratio in 2012 was similar to 2011, as a lower amount of favorable prior year loss development and a slightly higher impact of catastrophes in 2012 were offset by a decrease in the current accident year loss ratio excluding catastrophes. The decrease in 2012 in the current accident year loss ratio excluding catastrophes was driven by better results in our personal and commercial insurance segments.

While the loss ratio in each of the last three years included an adverse impact from catastrophes, which were particularly significant in 2012 and 2011, it also reflected favorable loss experience excluding catastrophes that we believe resulted from our disciplined underwriting in recent years. The loss ratio in each of the last three years also benefited from relatively moderate loss trends and the positive impact on premiums earned of rate increases in most classes of business. Results in all three years also benefited from favorable prior year loss development. For more information on prior year loss development, see "Property and Casualty Insurance - Loss Reserves, Prior Year Loss Development ."

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Our underwriting profitability in any given period will be affected by the impact of catastrophes in that period. We define a catastrophe as an event that is estimated to cause $25 million or more in industry-wide insured property losses and affects a significant number of policyholders and insurers.

In 2013, the net impact of catastrophes was $412 million, which represented 3.4 percentage points of the combined ratio. A significant portion of the catastrophe losses in 2013 related to flooding in Alberta, Canada, as well as several severe storms in the central United States and flooding in Ontario, Canada. In 2012, the net impact of catastrophes was $1.1 billion, which represented 9.6 percentage points of the combined ratio. We incurred just under $1.1 billion of catastrophe losses and $53 million of related reinsurance reinstatement premium costs. Most of the impact of catastrophes in 2012 was due to Storm Sandy, but there were also catastrophe losses related to other events, including several severe hail and wind storms in the United States. In 2011, the net impact of catastrophes was $1.0 billion, which represented 8.9 percentage points of the combined ratio. A significant portion of the catastrophe losses in 2011 related to tornadoes and other storms in the United States, including Hurricane Irene, as well as flooding in Australia.

The individually significant events that contributed to catastrophe costs, including losses and any related reinsurance reinstatement premiums, during the years ended December 31, 2013, 2012 and 2011 were as follows:

		(in millions)
2013
Flooding - Alberta, Canada		$	85
Other events			327
Total		$	412
2012
Storm Sandy - U.S. Northeast and Southern Atlantic states		$	882
Other events			258
Total		$	1,140
2011
Hurricane Irene - U.S. Northeast and Southern Atlantic states		$	301
Hail, wind and tornado - U.S. Southwest and Southern Central states			102
Tornado - Joplin, Missouri			101
Other events			526
Total		$	1,030

At the end of 2012, we estimated that net losses from Storm Sandy were $829 million and our reinsurance reinstatement premium costs related to the storm were $53 million. Our estimated gross losses from Storm Sandy were about $1.1 billion, with almost all of the losses from property claims, both commercial and homeowners, and only a modest impact from automobile and other claims. Our net losses of $829 million were lower than the gross amount due primarily to our traditional property catastrophe treaty and, to a much lesser extent, per risk and quota share reinsurance treaties as well as facultative reinsurance placed on an individual risk basis. During 2013, a large percentage of our claims related to Storm Sandy were settled. Our overall estimate of net losses related to Storm Sandy did not change significantly during 2013. We do not expect that any change to our estimate of ultimate net losses related to Storm Sandy in the future would have a material effect on the Corporation's consolidated financial condition or liquidity.

The only reinsurance recoverable we had from our primary catastrophe reinsurance treaties during the three year period ended December 31, 2013 was that related to Storm Sandy because there was no other individual catastrophe event for which our losses exceeded our initial retention under the treaties.

Our expense ratio increased only slightly in 2013 and 2012 compared with the respective prior year.

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Review of Underwriting Results by Business Unit

Personal Insurance

Net premiums written from personal insurance, which represented 35% of our premiums written in 2013, increased by 5% in 2013 and 4% in 2012 compared with the respective prior year. Net premiums written for the classes of business within the personal insurance segment were as follows:

		Years Ended December 31
		2013				% Increase 2013 vs.  2012				2012				% Increase 2012 vs.  2011				2011
		(dollars in millions)
Automobile		$	731				6%			$	691				1%			$	682
Homeowners			2,662				4				2,554				3				2,477
Other			929				6				880				8				818
Total personal		$	4,322				5			$	4,125				4			$	3,977

Growth in net premiums written in our personal insurance business in 2013 occurred in all classes of this business, driven by growth inside the United States. Net premiums written outside the United States decreased slightly in 2013, due to the negative impact of foreign currency translation. Overall growth in net premiums written in our personal insurance business in 2012 occurred both inside and outside the United States, but growth was more significant in the United States than growth outside the United States, which reflected the negative impact of foreign currency translation. The overall growth in our personal insurance business in both years was attributable to new business, strong retention of existing business as well as higher rates and higher insured exposures upon renewal. Personal automobile premiums increased significantly in 2013 and slightly in 2012 compared with the respective preceding year. Premium growth in our personal automobile business in 2013 was more significant in the United States. Growth in the United States in 2013 was attributable to existing personal lines customers adding automobile coverage, higher average renewal rates as well as new customers. Growth for personal automobile business written outside the United States was modest in 2013 and near flat in 2012, with both years reflecting a negative impact of foreign currency translation. Approximately 40% of our personal automobile net premiums written in 2013 were written outside the United States, with more than half written in Brazil. Premiums from our homeowners business increased modestly in both years, driven by growth inside the United States. Net premiums written outside the United States for our homeowners business decreased modestly in 2013 after increasing slightly in 2012, compared with the respective prior year. Growth both inside and outside the United States in both years reflected higher renewal rates as well as increases in coverage on existing policies. Premiums from our other personal business, which includes accident and health, excess liability and yacht coverages, increased significantly in both 2013 and 2012. In our excess liability business, which is predominantly written in the United States, growth occurred in both years, but more so in 2012. Growth also occurred in both years in our accident and health business. In 2013, growth in our accident and health business was significant inside the United States, but premiums written for this business decreased outside the United States due to the non-renewal of a large account. In 2012, growth in our accident and health business occurred both inside and outside the United States.

Our personal insurance business produced highly profitable underwriting results in 2013 compared with profitable results in 2012 and 2011. Results were more profitable in 2013 compared with 2012 due to better results in our homeowners business, driven primarily by a lower impact of catastrophes. Results were more profitable in 2012 compared with 2011, also due to better results in our homeowners business, driven mainly by improvement in the current accident year loss ratio excluding catastrophes. The impact of catastrophes accounted for 7.2 percentage points of the combined loss and expense ratio for our personal insurance business in 2013, compared with 13.7 percentage points in 2012 and 13.1 percentage points in 2011. A significant portion of the catastrophe losses in 2013 related to water damage associated with flooding in Alberta and Ontario, Canada as well as other weather-related events in the

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central United States. Most of the catastrophe losses in 2012 related to storms in the United States, particularly Storm Sandy. A significant portion of the catastrophe losses in 2011 also related to storms in the United States, including Hurricane Irene. The combined loss and expense ratios for the classes of business within the personal insurance segment were as follows:

		Years Ended December 31
		2013				2012				2011
Automobile			94.8	%			93.4	%			94.4	%
Homeowners			82.3				94.2				100.2
Other			94.8				95.6				95.7
Total personal			87.0				94.4				98.3

Our personal automobile results were profitable in each of the past three years. Results in all three years benefited from moderate claim frequency and favorable prior year loss development.

Homeowners results were highly profitable in 2013, profitable in 2012 and breakeven in 2011. The more profitable results in 2013 compared with 2012 were due in large part to a lower impact from catastrophes and, to a lesser extent, a lower current accident year loss ratio excluding catastrophes. The more profitable results in 2012 compared with 2011 were due to a lower current accident year loss ratio excluding catastrophes, due in part to lower non-catastrophe weather-related losses. The impact of catastrophes accounted for 11.5 percentage points of the combined loss and expense ratio for this class in 2013 compared with 21.0 percentage points in 2012 and 20.6 percentage points in 2011.

Our other personal business produced similarly profitable results in each of the past three years. Results for our excess liability business were profitable in all three years, but modestly less so in 2012. Results for this component of our other personal business benefited from favorable prior year loss development in each year, mainly as a result of better than expected claim severity. Our accident and health business produced slightly profitable results in 2013 and 2012 compared with near breakeven results in 2011. Our yacht business was highly profitable in each of the past three years.

Commercial Insurance

Net premiums written from commercial insurance, which represented 43% of our premiums written in 2013, increased by 2% in both 2013 and 2012 compared with the respective prior year. Net premiums written for the classes of business within the commercial insurance segment were as follows:

		Years Ended December 31
		2013				% Increase (Decrease) 2013 vs. 2012				2012				% Increase (Decrease) 2012 vs. 2011				2011
		(dollars in millions)
Multiple peril		$	1,113				(1	)%		$	1,119				(2	)%		$	1,136
Casualty			1,635				-				1,641				-				1,639
Workers' compensation.			1,091				8				1,014				18				860
Property and marine			1,434				2				1,400				(1	)			1,416
Total commercial		$	5,273				2			$	5,174				2			$	5,051

In both 2013 and 2012, overall premium growth in our commercial insurance business was driven by an increase in business written in the United States. Net premiums written outside the United States were flat in 2013 and decreased modestly in 2012 compared with the respective prior year. The decrease in 2012 was due in part to the negative impact of foreign currency translation. Premium growth for our commercial insurance business in both years reflected higher rates, particularly in the United States. Premium growth was limited in most classes of business, however, by a market that remained highly competitive and offered only limited attractive new business opportunities. In both 2013 and 2012, significant growth occurred in the workers' compensation class as a result of a high level of rate increases, a high retention level as well as new business opportunities. Growth in the workers' compensation class in 2012 also reflected the positive impact of higher audit premiums. The positive

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overall rate environment in the commercial insurance business in the United States, which began in 2011, continued throughout 2012 and 2013. Average renewal rates in the United States were up significantly in both 2013 and 2012, with increases occurring in all major classes of our business. Average renewal rates outside the United States increased only slightly in both 2013 and 2012.

Retention levels of our existing policyholders both inside and outside the United States remained strong in 2013 and 2012, but were down from the levels in 2011. The decline in retention was largely due to both our effort to increase rates in several classes of business and our non-renewal of some underperforming or catastrophe-exposed accounts. The average renewal exposure change was down slightly in 2013 and close to flat in 2012, both inside and outside the United States. The amount of new business was down in both 2013 and 2012 compared with the respective prior year as we continued to maintain our underwriting discipline and our focus on obtaining adequate rates in the competitive market. The amount of new business was down in both years inside the United States. Outside the United States, the amount of new business was up slightly in 2013 but down in 2012.

Our commercial insurance business produced highly profitable underwriting results in 2013 compared with near breakeven underwriting results in 2012 and 2011. The more profitable results in 2013 compared with 2012 and 2011 were due in large part to a lower impact of catastrophes. The impact of catastrophes accounted for 2.1 percentage points of the combined loss and expense ratio for our commercial insurance business in 2013, compared with 11.4 percentage points in 2012 and 10.5 percentage points in 2011. Results in all three years benefited from favorable prior year loss development. Results in both 2013 and 2012 benefited from a lower current accident year loss ratio excluding catastrophes compared with the respective prior year. The benefit of the lower current accident year loss ratio excluding catastrophes in 2012 compared with 2011 was largely offset by a lower amount of favorable prior year loss development.

The combined loss and expense ratios for the classes of business within the commercial insurance segment were as follows:

		Years Ended December 31
		2013				2012				2011
Multiple peril			83.3	%			93.7	%			101.5	%
Casualty			97.3				92.1				87.9
Workers' compensation			89.6				93.7				93.2
Property and marine			74.6				115.0				114.7
Total commercial			86.5				99.0				99.3

Multiple peril results were highly profitable in 2013 compared with profitable results in 2012 and slightly unprofitable results in 2011. The more profitable results in 2013 compared with 2012 were due primarily to a lower impact of catastrophes in the property component of this business. Results for the liability component were similarly profitable in both 2013 and 2012. The profitable results in 2012 compared with the unprofitable results in 2011 were due primarily to a lower impact of catastrophes and a lower current accident year loss ratio excluding catastrophes in the property component of this business, offset in part by less profitable results in the liability component. The impact of catastrophes accounted for 3.3 percentage points of the combined loss and expense ratio for the multiple peril class in 2013 compared with 10.9 percentage points in 2012 and 15.1 percentage points in 2011. The property component reflected moderate non-catastrophe losses in all three years.

Results for our casualty business were profitable in each of the past three years, but decreasingly so in each successive year. Results for the automobile component of our casualty business were modestly profitable in 2013 compared with near breakeven results in 2012 and profitable results in 2011. Automobile results were more profitable in 2011 compared with 2012 and 2013 mainly due to a higher amount of favorable prior year loss development. Results for the primary liability component of the casualty business were unprofitable in 2013 and 2012 compared with profitable results in 2011. Primary liability results deteriorated in 2013 and 2012 compared with 2011 partly due to an increase in the frequency of large reported losses, many of which related to prior accident years. Conversely, results in 2011 benefited from a significant amount of favorable prior year loss development. Results for the excess

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liability component were highly profitable in each of the past three years, but more so in 2012. Excess liability results in all three years benefited from substantial favorable prior year loss development mainly due to lower than expected claim severity. Results for our casualty business were adversely affected in each of the last three years by incurred losses related to toxic waste claims and asbestos claims. Our analysis of these exposures resulted in increases in the estimate of our ultimate liabilities. Such losses represented 5.1 percentage points of the combined ratio for this business in 2013, 3.4 percentage points in 2012 and 4.0 percentage points in 2011.

Workers' compensation results were profitable in each of the past three years, but more so in 2013 due to a lower current accident year loss ratio compared with 2012 and 2011. Results in each year reflected improved pricing and our disciplined risk selection during the past several years. Results in 2013 and 2011 benefited from modest favorable prior year loss development.

Property and marine results were highly profitable in 2013 compared with highly unprofitable results in 2012 and 2011. The significant improvement in results in 2013 compared with the results in 2012 and 2011 was primarily due to a significantly lower impact of catastrophes. The impact of catastrophes accounted for 4.3 percentage points of the combined loss and expense ratio in 2013 compared with 31.6 percentage points in 2012 and 24.9 percentage points in 2011. Excluding the impact of catastrophes, the combined ratio was 70.3%, 83.4% and 89.8% in 2013, 2012 and 2011, respectively. On this basis, the improved results in 2013 and 2012 compared with the respective prior year reflected a lower current accident year loss ratio excluding catastrophes, partly due to improved pricing and a lower impact from large losses. Results in 2013 also reflected a significant amount of favorable prior year loss development.

Specialty Insurance

Net premiums written from specialty insurance, which represented 22% of our premiums written in 2013, increased by 3% in 2013 and decreased by 6% in 2012 compared with the respective prior year. Net premiums written for the classes of business within the specialty insurance segment were as follows:

		Years Ended December 31
		2013				% Increase 2013 vs.  2012				2012				% Decrease 2012 vs.  2011				2011
		(dollars in millions)
Professional liability.		$	2,319				2%			$	2,273				(5)%			$	2,388
Surety			314				6				295				(11)				332
Total specialty		$	2,633				3			$	2,568				(6)			$	2,720

Net premiums written in our professional liability business increased by 2% in 2013 and decreased by 5% in 2012 compared with the respective prior year. Net premiums written increased modestly in 2013, both inside and outside the United States. Net premiums written decreased in 2012, both inside and outside the United States, but to a greater extent outside the United States. Premium growth in 2013 was due in part to the positive effect of our decision to not renew a reinsurance treaty that expired July 1, 2013. Premium growth in our professional liability business remained constrained in both years by our focus on profitability in the pricing of renewal policies and the limited opportunities to write suitably-priced new business, in what has remained a highly competitive market place. Nevertheless, beginning in late 2011 and continuing through 2013, the overall rate environment improved, particularly in the United States. During this period, we pursued rate increases to improve the profitability of our professional liability business. Retention levels for this business remained strong. Retention levels were similar in 2013 and 2012 inside the United States but were modestly lower compared with those in the preceding years as a result of our rate increase initiative. Retention levels increased modestly in 2013 outside the United States following a modest decline in 2012. New business increased in 2013 but declined in 2012 in the United States. New business declined outside the United States in both years. Renewal retention levels and new business volume reflected the selective reduction of our exposure in some customer segments where rate levels were not attractive, as well as our commitment to maintaining underwriting discipline in this environment.

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Average renewal rates for our professional liability business were up significantly in the United States in both 2013 and 2012. The most significant increases in both years occurred in the directors and officers liability and employment practices liability lines of business. Average renewal rates outside the United States were up slightly in both years.

Net premiums written in our surety business increased in 2013 and decreased significantly in 2012 compared with the respective prior year. In 2013, net premiums written increased both inside and outside the United States. In 2012, net premiums written decreased inside the United States, due to the effects of the weak economic conditions that resulted in fewer contracts requiring a surety bond being awarded to our existing customers that operate in the construction industry, but increased outside the United States. The growth in net premiums written outside the United States in both 2013 and 2012 was driven by growth in Latin America.

Our specialty insurance business produced highly profitable underwriting results in 2013 and 2011 compared with profitable results in 2012. The combined loss and expense ratios for the classes of business within the specialty insurance segment were as follows:

		Years Ended December 31
		2013				2012				2011
Professional liability			89.3	%			96.7	%			89.9	%
Surety			47.2				51.4				49.1
Total specialty			84.3				91.3				85.1

Our professional liability business produced highly profitable results in 2013 and 2011 and profitable results in 2012. The more profitable results in 2013 and 2011 compared with 2012 were due to a lower current accident year combined ratio and to a higher amount of favorable prior year loss development. The fiduciary liability class produced highly profitable results in each of the past three years. Results for the directors and officers liability class were also highly profitable in all three years, but more so in 2013 and 2011. Results for both the fiduciary liability and directors and officers liability classes reflected favorable prior year loss development in each of the past three years. For the fidelity class, results were breakeven in 2013, unprofitable in 2012 and slightly profitable in 2011. Results for this class in recent years reflected large loss activity resulting from alleged third party and insured-employee criminal activity. Results for the employment practices liability class were highly unprofitable in 2013 and 2012 compared with near breakeven results in 2011. The less profitable results in 2013 and 2012 in this class were due to higher current accident year loss ratios relative to 2011. Results in 2013 and 2012 also reflected unfavorable prior year loss development. Employment practices liability claims have been more numerous and protracted in recent years due primarily to the lingering effect of the economic downturn and resulting unemployment levels. Our errors and omissions liability business produced highly unprofitable results in each of the past three years, reflecting unfavorable prior year loss development, mostly outside the United States.

Collectively, the results for the professional liability classes benefited from favorable prior year loss development in the past three years driven by positive loss experience related to accident years 2010 and prior. The current accident year combined ratio in our professional liability business was slightly below breakeven in 2013, slightly above breakeven in 2012 and near breakeven in 2011. The higher current accident year combined ratio in 2012 was attributable to adverse loss trends in certain classes within this component of our business.

Our surety business produced highly profitable results in each of the past three years due to favorable loss experience. Our surety business tends to be characterized by losses that are infrequent but have the potential to be highly severe. When losses occur, they are sometimes mitigated by recovery rights to the customer's assets, contract payments, collateral and bankruptcy recoveries.

The majority of our surety obligations are intended to be performance-based guarantees. We manage our exposure by individual account and by specific bond type. We have substantial commercial and construction surety exposure for current and prior customers, including exposures related to surety bonds issued on behalf of companies that have experienced deterioration in creditworthiness since we

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issued bonds to them. We therefore may experience an increase in filed claims and may incur high severity losses, especially in light of ongoing economic conditions. Such losses would be recognized if and when claims are filed and determined to be valid, and could have a material adverse effect on the Corporation's results of operations.

Reinsurance Assumed

In 2005, we transferred our ongoing reinsurance assumed business and certain related assets, including renewal rights, to a reinsurance company. The reinsurer generally did not assume our reinsurance liabilities relating to reinsurance contracts incepting prior to December 31, 2005. We retained those liabilities and the related assets. For a transition period of about two years, the same reinsurer underwrote specific reinsurance business on our behalf. We retained a portion of this business and ceded the balance to the reinsurer.

As this business is in runoff, net premiums written from our reinsurance assumed business were not significant during the past three years. Results for this business were profitable in each of the past three years, but less so in 2013. The profitable results in each year were due to favorable prior year loss development.

Catastrophe Risk Management

Our property and casualty subsidiaries have exposure to losses caused by natural perils such as hurricanes and other windstorms, earthquakes, severe winter weather and brush fires as well as from man-made catastrophic events such as terrorism. The frequency and severity of catastrophes are inherently unpredictable.

Natural Catastrophes

The extent of losses from a natural catastrophe is a function of both the total amount of insured exposure in an area affected by the event and the severity of the event. We regularly assess our concentrations of risk in natural catastrophe exposed areas globally and have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints, and through the purchase of catastrophe reinsurance coverage. We use catastrophe modeling and a risk concentration management tool to monitor and control our accumulations of potential losses in natural catastrophe exposed areas in the United States, such as California and the gulf and east coasts, as well as in natural catastrophe exposed areas in other countries. The information provided by the catastrophe modeling and the risk concentration management tool has resulted in our non-renewing some accounts and refraining from writing others.

A new version of one of the third party catastrophe models that we and others in the insurance industry utilize for estimating potential losses from natural catastrophes was released in the second quarter of 2013. On a preliminary basis, the new version of the model indicates lower risk estimates in certain catastrophe exposed geographical areas where we have exposures to natural catastrophes, including the northeast United States and Florida. We are currently in the process of further analyzing the model. At this time, we have not concluded if the new model will result in any significant change in how we manage our risk aggregations related to catastrophes.

Catastrophe modeling generally relies on multiple inputs based on experience, science, engineering and history, and the selection of those inputs requires a significant amount of judgment. The modeling results may also fail to account for risks that are outside the range of normal probability or are otherwise unforeseen. Because of this, actual results may differ materially from those derived from our modeling exercises.

We also continue to actively explore and analyze credible scientific evidence, including the potential impact of global climate change, that may affect our ability to manage our exposure under the insurance policies we issue as well as the impact that laws and regulations intended to combat climate change may have on us.

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Despite our efforts to manage our catastrophe exposure, the occurrence of one or more severe natural catastrophic events could have a material effect on the Corporation's results of operations, financial condition or liquidity.

Terrorism Risk and Legislation

The September 11, 2001 attack changed the way the property and casualty insurance industry views catastrophic risk. That tragic event demonstrated that numerous classes of business we write are subject to terrorism related catastrophic risks in addition to the catastrophic risks related to natural occurrences. This, together with the limited availability of terrorism reinsurance, required us to change how we identify and evaluate risk accumulations. We have licensed a terrorism model that provides loss estimates under numerous event scenarios.

Actual results may differ materially from those suggested by the model. The risk concentration management tool referred to above also enables us to identify locations and geographic areas that are exposed to risk accumulations. The information provided by the terrorism model and the risk concentration management tool has resulted in our non-renewing some accounts, subject to regulatory constraints, and refraining from writing others.

The Terrorism Risk Insurance Act of 2002, and more recently the Terrorism Risk Insurance Program Reauthorization Act of 2007 (collectively TRIA), are limited duration programs under which the U.S. federal government has agreed to share the risk of loss arising from certain acts of terrorism with the insurance industry. The current program, which will terminate on December 31, 2014, is applicable only to select lines of commercial business and excludes, among others, commercial automobile, surety and professional liability insurance, other than directors and officers liability. The current program provides protection from all foreign and domestic acts of terrorism.

As a precondition to recovery under TRIA, insurance companies with direct commercial insurance exposure in the United States for TRIA lines of business are required to make insurance for covered acts of terrorism available under their policies. In the event of an act of terrorism, each insurer has a separate deductible that it must meet before federal assistance becomes available. The deductible is based on a percentage of direct U.S. premiums earned for the covered lines of business in the previous calendar year. For 2014, that deductible is 20% of direct premiums earned in 2013 for these lines of business. For losses above the deductible, the federal government will pay for 85% of covered losses, while the insurer retains 15%. There is a combined annual aggregate limit for the federal government and all insurers of $100 billion. If acts of terrorism result in covered losses exceeding the $100 billion annual limit, insurers are not liable for additional losses. While we expect the provisions of TRIA will mitigate our exposure in the event of a large-scale terrorist attack, our deductible is substantial, approximating $1.0 billion in 2014.

For certain classes of business, such as workers' compensation, terrorism coverage is mandatory. For those classes of business where it is not mandatory, policyholders may choose not to purchase terrorism coverage, which would, subject to other statutory or regulatory restrictions, reduce our exposure.

We also have exposure outside the United States to risk of loss from acts of terrorism. In some jurisdictions, we have access to government mechanisms that would mitigate our exposure.

We will continue to manage this type of catastrophic risk by monitoring terrorism risk aggregations. If TRIA is not extended beyond its current December 31, 2014 termination date and a robust reinsurance market for terrorism risks does not develop so we can continue to mitigate our exposure to a large scale terrorism attack, we may not renew some policies in some locations and we may curtail new business writing in some major U.S. cities and other geographic areas where our exposure aggregations could become unacceptable. Given the unpredictability of the targets, frequency and severity of potential terrorist events, and notwithstanding measures we have taken or may take to mitigate terrorism exposure as well as the programs that governmental entities provide, however limited, to cover some of that exposure (including any extension of TRIA), the occurrence of a terrorist event could have a material adverse effect on the Corporation's results of operations, financial condition or liquidity.

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Loss Reserves

Unpaid losses and loss expenses, also referred to as loss reserves, are the largest liability of our property and casualty insurance subsidiaries.

Our loss reserves include case estimates for claims that have been reported and estimates for claims that have been incurred but not reported at the balance sheet date as well as estimates of the expenses associated with processing and settling all reported and unreported claims, less estimates of anticipated salvage and subrogation recoveries. Estimates are based upon past loss experience modified for current trends as well as prevailing economic, legal and social conditions. Our loss reserves are not discounted to present value.

We regularly review our loss reserves using a variety of actuarial techniques. We update the reserve estimates as historical loss experience develops, additional claims are reported and/or settled and new information becomes available. Any changes in estimates are reflected in operating results in the period in which the estimates are changed.

Incurred but not reported (IBNR) reserve estimates are generally calculated by first projecting the ultimate cost of all claims that have occurred and then subtracting reported losses and loss expenses. Reported losses include cumulative paid losses and loss expenses plus case reserves. The IBNR reserve includes a provision for claims that have occurred but have not yet been reported to us, some of which are not yet known to the insured, as well as a provision for future development on reported claims. A relatively large proportion of our net loss reserves, particularly for long tail liability classes, are reserves for IBNR losses. In fact, about 70% of our aggregate net loss reserves at December 31, 2013 were for IBNR losses.

Our gross case and IBNR loss reserves and related reinsurance recoverable by class of business were as follows:

		Gross Loss Reserves												Reinsurance Recoverable				Net Loss Reserves
December 31, 2013		Case				IBNR				Total
		(in millions)
Personal insurance
Automobile		$	265			$	141			$	406			$	16			$	390
Homeowners			414				357				771				56				715
Other			345				713				1,058				90				968
Total personal			1,024				1,211				2,235				162				2,073
Commercial insurance
Multiple peril			598				1,190				1,788				43				1,745
Casualty			1,565				5,398				6,963				387				6,576
Workers' compensation			1,023				2,047				3,070				277				2,793
Property and marine			834				492				1,326				440				886
Total commercial			4,020				9,127				13,147				1,147				12,000
Specialty insurance
Professional liability			1,390				5,842				7,232				343				6,889
Surety			19				56				75				4				71
Total specialty			1,409				5,898				7,307				347				6,960
Total insurance			6,453				16,236				22,689				1,656				21,033
Reinsurance assumed			169				288				457				146				311
Total		$	6,622			$	16,524			$	23,146			$	1,802			$	21,344

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		Gross Loss Reserves												Reinsurance Recoverable				Net Loss Reserves
December 31, 2012		Case				IBNR				Total
		(in millions)
Personal insurance
Automobile		$	265			$	146			$	411			$	24			$	387
Homeowners			437				589				1,026				128				898
Other			369				687				1,056				130				926
Total personal			1,071				1,422				2,493				282				2,211
Commercial insurance
Multiple peril			598				1,257				1,855				56				1,799
Casualty			1,504				5,339				6,843				358				6,485
Workers' compensation			963				1,862				2,825				218				2,607
Property and marine			825				940				1,765				449				1,316
Total commercial			3,890				9,398				13,288				1,081				12,207
Specialty insurance
Professional liability			1,440				6,095				7,535				385				7,150
Surety			28				59				87				4				83
Total specialty			1,468				6,154				7,622				389				7,233
Total insurance			6,429				16,974				23,403				1,752				21,651
Reinsurance assumed			193				367				560				189				371
Total		$	6,622			$	17,341			$	23,963			$	1,941			$	22,022

Loss reserves, net of reinsurance recoverable, decreased by $678 million or 3% in 2013. Loss reserves related to our insurance business decreased by $618 million, including $526 million related to catastrophe losses and $96 million related to the effect of foreign currency translation, due to a stronger U.S. dollar at December 31, 2013 compared with December 31, 2012. Loss reserves related to our reinsurance assumed business, which is in runoff, decreased by $60 million.

Total gross loss reserves related to our insurance business decreased by $714 million in 2013, all of which was a decrease in IBNR reserves. The overall decrease in gross IBNR reserves was due in large part to decreases in the reserves of the property classes of business, particularly homeowners and property and marine, primarily as a result of case and paid activity on catastrophe-related claims, especially from Storm Sandy. A significant decrease in gross IBNR reserves also occurred in the professional liability classes, due to reported loss activity, favorable prior year loss development and reduced exposures. Increases in gross IBNR reserves occurred in the casualty and workers' compensation classes, where case reserves increased as well, partly due to increased exposures. Reinsurance recoverable related to our insurance business decreased by $96 million in 2013, driven in large part by recoveries received from reinsurers related to Storm Sandy in the homeowners and property and marine classes of business.

In establishing the loss reserves of our property and casualty subsidiaries, we consider facts currently known and the present state of the law and coverage litigation. Based on all information currently available, we believe that the aggregate loss reserves at December 31, 2013 were adequate to cover claims for losses that had occurred as of that date, including both those known to us and those yet to be reported. However, as described below, there are significant uncertainties inherent in the loss reserving process. It is therefore possible that management's estimate of the ultimate liability for losses that had occurred as of December 31, 2013 may change, which could have a material effect on the Corporation's results of operations and financial condition.

Estimates and Uncertainties

The process of establishing loss reserves is complex and imprecise as it must take into consideration many variables that are subject to the outcome of future events. As a result, informed subjective estimates and judgments as to our ultimate exposure to losses are an integral component of our loss reserving process.

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Given the inherent complexity of the loss reserving process and the potential variability of the assumptions used, the actual emergence of losses could vary, perhaps substantially, from the estimate of losses included in our financial statements, particularly in those instances where settlements do not occur until well into the future. Our net loss reserves at December 31, 2013 were $21.3 billion. Therefore, a relatively small percentage change in the estimate of net loss reserves would have a material effect on the Corporation's results of operations.

Reserves Other than Those Relating to Asbestos and Toxic Waste Claims. Our loss reserves include amounts related to short tail and long tail classes of business. "Tail" refers to the time period between the occurrence of a loss and the settlement of the claim. The longer the time span between the incidence of a loss and the settlement of the claim, the more the ultimate settlement amount can vary.

Short tail classes consist principally of homeowners, commercial property and marine business. For these classes, claims are generally reported and settled shortly after the loss occurs and the claims usually relate to tangible property. Consequently, the estimation of loss reserves for these classes is less complex.

Most of our loss reserves relate to long tail liability classes of business. Long tail classes include directors and officers liability, errors and omissions liability and other professional liability coverages, commercial primary and excess liability, workers' compensation and other liability coverages. For many liability claims significant periods of time, ranging up to several years or even decades, may elapse between the occurrence of the loss, the reporting of the loss to us and the settlement of the claim. As a result, loss experience in the more recent accident years for the long tail liability classes has limited statistical credibility because a relatively small proportion of losses in these accident years are reported claims and an even smaller proportion are paid losses.

An accident year is the calendar year in which a loss is incurred or, in the case of claims-made policies, the calendar year in which a loss is reported. Liability claims are also more susceptible to litigation and can be significantly affected by changing contract interpretations and the legal and economic environment. Consequently, the estimation of loss reserves for these classes is more complex and typically subject to a higher degree of variability than for short tail classes. As a result, the role of judgment is much greater for these reserve estimates.

Most of our reinsurance assumed business is long tail casualty reinsurance. Reserve estimates for this business are therefore subject to the variability caused by extended loss emergence periods. The estimation of loss reserves for this business is further complicated by delays between the time the claim is reported to the ceding insurer and when it is reported by the ceding insurer to us and by our dependence on the quality and consistency of the loss reporting by the ceding company.

Our actuaries perform a comprehensive review of loss reserves for each of the numerous classes of business we write at least once a year. The timing of such review varies by class of business and, for some classes, the jurisdiction in which the policy was written. The review process takes into consideration the variety of trends that impact the ultimate settlement of claims in each particular class of business. Additionally, each quarter our actuaries review the emergence of paid and reported losses relative to expectations and, as necessary, conduct reserve reviews for particular classes of business.

The loss reserve estimation process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is an appropriate basis for predicting future outcomes. As part of that process, our actuaries use a variety of actuarial methods that analyze experience, trends and other relevant factors. The principal standard actuarial methods used by our actuaries in the loss reserve reviews include loss development factor methods, expected loss ratio methods, Bornheutter-Ferguson methods and frequency/severity methods.

Loss development factor methods generally assume that the losses yet to emerge for an accident year are proportional to the paid or reported loss amounts observed so far. Historical patterns of the development of paid and reported losses by accident year can be predictive of the expected future patterns that are applied to current paid and reported losses to generate estimated ultimate losses by accident year.

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Expected loss ratio methods use loss ratios for prior accident years, adjusted to reflect our evaluation of recent loss trends, the current risk environment, changes in our book of business and changes in our pricing and underwriting, to determine the appropriate expected loss ratio for a given accident year. The expected loss ratio for each accident year is multiplied by the premiums earned for that year to calculate estimated ultimate losses.

Bornheutter-Ferguson methods are combinations of an expected loss ratio method and a loss development factor method, where the loss development factor method is given more weight as an accident year matures.

Frequency/severity methods first project ultimate claim counts (using one or more of the other methods described above) and then multiply those counts by an estimated average claim cost to calculate estimated ultimate losses. The average claim costs are often estimated through a regression analysis of historical severity data. Generally, these methods work best for high frequency, low severity classes of business.

In completing their loss reserve analysis, our actuaries are required to determine the most appropriate actuarial methods to employ for each class of business. Within each class, the business is further segregated by accident year and, where appropriate, by jurisdiction. Each estimation method has its own pattern, parameter and/or judgmental dependencies, with no estimation method being better than the others in all situations. The relative strengths and weaknesses of the various estimation methods when applied to a particular class of business can also change over time, depending on the underlying circumstances. In many cases, multiple estimation methods will be valid for the particular facts and circumstances of the relevant class of business. The manner of application and the degree of reliance on a given method will vary by class of business, by accident year and by jurisdiction based on our actuaries' evaluation of the above dependencies and the potential volatility of the loss frequency and severity patterns. The estimation methods selected or given weight by our actuaries at a particular valuation date are those that are believed to produce the most reliable indication for the loss reserves being evaluated. These selections incorporate input from claims personnel, pricing actuaries and underwriting management on loss cost trends and other factors that could affect the reserve estimates.

For short tail classes, the emergence of paid and incurred losses generally exhibits a reasonably stable pattern of loss development from one accident year to the next. Thus, for these classes, the loss development factor method is generally relatively straightforward to apply and usually requires only modest extrapolation. For long tail classes, applying the loss development factor method often requires more judgment in selecting development factors as well as more significant extrapolation. For those long tail classes with high frequency and relatively low per-loss severity (e.g., workers' compensation), volatility will often be sufficiently modest for the loss development factor method to be given significant weight, except in the most recent accident years.

For certain long tail classes of business, however, anticipated loss experience is less predictable because of the small number of claims and erratic claim severity patterns. These classes include directors and officers liability, errors and omissions liability and commercial excess liability, among others. For these classes, the loss development factor methods may not produce a reliable estimate of ultimate losses in the most recent accident years since many claims either have not yet been reported to us or are only in the early stages of the settlement process. Therefore, the actuarial estimates for these accident years are based on less extrapolatory methods, such as expected loss ratio and Bornheutter-Ferguson methods. Over time, as a greater number of claims are reported and the statistical credibility of loss experience increases, loss development factor methods are given increasingly more weight.

Using all the available data, our actuaries select an indicated loss reserve amount for each class of business based on the various assumptions, projections and methods. The total indicated reserve amount determined by our actuaries is an aggregate of the indicated reserve amounts for the individual classes of business. The ultimate outcome is likely to fall within a range of potential outcomes around this indicated amount, but the indicated amount is not expected to be precisely the ultimate liability.

Senior management meets with our actuaries at the end of each quarter to review the results of the latest loss reserve analysis. Based on this review, management determines the carried reserve for each

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class of business. In making the determination, management considers numerous factors, such as changes in actuarial indications in the period, the maturity of the accident year, trends observed over the recent past and the level of volatility within a particular class of business. In doing so, management must evaluate whether a change in the data represents credible actionable information or an anomaly. Such an assessment requires considerable judgment. Even if a change is determined to be permanent, it is not always possible to determine the extent of the change until sometime later. As a result, there can be a time lag between the emergence of a change and a determination that the change should be reflected in the carried loss reserves. In general, changes are made more quickly to more mature accident years and less volatile classes of business.

Among the numerous factors that contribute to the inherent uncertainty in the process of establishing loss reserves are the following:

•

changes in the inflation rate for goods and services related to covered damages such as medical care and home repair costs,

•

changes in the judicial interpretation of policy provisions relating to the determination of coverage,

•

changes in the general attitude of juries in the determination of liability and damages,

•

legislative actions,

•

changes in the medical condition of claimants,

•

changes in our estimates of the number and/or severity of claims that have been incurred but not reported as of the date of the financial statements,

•

changes in our book of business,

•

changes in our underwriting standards, and

•

changes in our claim handling procedures.

In addition, we must consider the uncertain effects of emerging or potential claims and coverage issues that arise as legal, judicial and social conditions change. These issues have had, and may continue to have, a negative effect on our loss reserves by either extending coverage beyond the original underwriting intent or by increasing the number or size of claims. Examples of such issues include professional liability claims arising out of the recent crisis in the financial markets, directors and officers liability and errors and omissions liability claims arising out of accounting and other corporate malfeasance, and exposure to claims asserted for bodily injury as a result of long term exposure to harmful products or substances. As a result of issues such as these, the uncertainties inherent in estimating ultimate claim costs on the basis of past experience have grown, further complicating the already complex loss reserving process.

As part of our loss reserving analysis, we take into consideration the various factors that contribute to the uncertainty in the loss reserving process. Those factors that could materially affect our loss reserve estimates include loss development patterns and loss cost trends, rate and exposure level changes, the effects of changes in coverage and policy limits, business mix shifts, the effects of regulatory and legislative developments, the effects of changes in judicial interpretations, the effects of emerging claims and coverage issues and the effects of changes in claim handling practices. In making estimates of reserves, however, we do not necessarily make an explicit assumption for each of these factors. Moreover, all estimation methods do not utilize the same assumptions and typically no single method is determinative in the reserve analysis for a class of business. Consequently, changes in our loss reserve estimates generally are not the result of changes in any one assumption. Instead, the variability will be affected by the interplay of changes in numerous assumptions, many of which are implicit to the approaches used.

For each class of business, we regularly adjust the assumptions and actuarial methods used in the estimation of loss reserves in response to our actual loss experience as well as our judgments regarding changes in trends and/or emerging patterns. In those instances where we primarily utilize analyses of

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historical patterns of the development of paid and reported losses, this may be reflected, for example, in the selection of revised loss development factors. In those long tail classes of business that comprise a majority of our loss reserves and for which loss experience is less predictable due to potential changes in judicial interpretations, potential legislative actions and potential claims issues, this may be reflected in a judgmental change in our estimate of ultimate losses for particular accident years.

The future impact of the various factors that contribute to the uncertainty in the loss reserving process is extremely difficult to predict. There is potential for significant variation in the development of loss reserves, particularly for long tail classes of business. We do not derive statistical loss distributions or outcome confidence levels around our loss reserve estimate. Actuarial ranges of reasonable estimates are not a true reflection of the potential volatility between carried loss reserves and the ultimate settlement amount of losses incurred prior to the balance sheet date. This is due, among other reasons, to the fact that actuarial ranges are developed based on known events as of the valuation date whereas the ultimate disposition of losses is subject to the outcome of events and circumstances that were unknown as of the valuation date.

The following discussion includes disclosure of possible variation from current estimates of loss reserves due to a change in certain key assumptions for particular classes of business. These impacts are estimated individually, without consideration for any correlation among such assumptions or among lines of business. Therefore, it would be inappropriate to take the amounts and add them together in an attempt to estimate volatility for our loss reserves in total. We believe that the estimated variation in reserves detailed below is a reasonable estimate of the possible variation that may occur in the future. However, if such variation did occur, it would likely occur over a period of several years and therefore its impact on the Corporation's results of operations would be spread over the same period. It is important to note, however, that there is the potential for future variation greater than the amounts discussed below.

Two of the larger components of our loss reserves relate to the professional liability classes other than fidelity and to commercial excess liability. The respective reported loss development patterns are key assumptions in estimating loss reserves for these classes of business, both as applied directly to more mature accident years and as applied indirectly (e.g., via Bornheutter-Ferguson methods) to less mature accident years.

Reserves for the professional liability classes other than fidelity were $6.4 billion, net of reinsurance, at December 31, 2013. Based on a review of our loss experience, if the loss development factor for each accident year changed such that the cumulative loss development factor for the most recent accident year changed by 10%, we estimate that the net reserves for professional liability classes other than fidelity would change by approximately $625 million, in either direction. This degree of change in the reported loss development pattern is within the historical variation around the averages in our data.

Reserves for commercial excess liability (excluding asbestos and toxic waste claims) were $3.1 billion, net of reinsurance, at December 31, 2013. These reserves are included within commercial casualty. Based on a review of our loss experience, if the loss development factor for each accident year changed such that the cumulative loss development factor for the most recent accident year changed by 20%, we estimate that the net reserves for commercial excess liability would change by approximately $400 million, in either direction. This degree of change in the reported loss development pattern is within the historical variation around the averages in our data.

Reserves Relating to Asbestos and Toxic Waste Claims. The estimation of loss reserves relating to asbestos and toxic waste claims on insurance policies written many years ago is subject to greater uncertainty than other types of claims due to inconsistent court decisions as well as judicial interpretations and legislative actions that in some instances have tended to broaden coverage beyond the original intent of such policies and in others have expanded theories of liability. The insurance industry as a whole is engaged in extensive litigation over coverage, accident year allocation and liability issues and is thus confronted with a continuing uncertainty in its efforts to quantify these exposures.

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Reserves for asbestos and toxic waste claims cannot be estimated with traditional actuarial loss reserving techniques that rely on historical accident year loss development factors. Instead, we rely on an exposure-based analysis that involves a detailed review of individual policy terms and exposures. Because each policyholder presents different liability and coverage issues, we generally evaluate our exposure on a policyholder-by-policyholder basis, considering a variety of factors that are unique to each policyholder. Quantitative techniques have to be supplemented by subjective considerations including management's judgment.

We establish case reserves and expense reserves for costs of related litigation where sufficient information has been developed to indicate the involvement of a specific insurance policy. In addition, IBNR reserves are established to cover additional exposures on both known and unasserted claims.

We believe that the loss reserves carried at December 31, 2013 for asbestos and toxic waste claims were adequate. However, given the judicial decisions and legislative actions that have broadened the scope of coverage and expanded theories of liability in the past and the possibilities of similar interpretations in the future, it is possible that our estimate of loss reserves relating to these exposures may increase in future periods as new information becomes available and as claims develop.

Asbestos Reserves. Asbestos remains the most significant and difficult mass tort for the insurance industry in terms of claims volume and dollar exposure. Asbestos claims relate primarily to bodily injuries asserted by those who came in contact with asbestos or products containing asbestos. Tort theory affecting asbestos litigation has evolved over the years. Early court cases established the "continuous trigger" theory with respect to insurance coverage. Under this theory, insurance coverage is deemed to be triggered from the time a claimant is first exposed to asbestos until the manifestation of any disease. This interpretation of a policy trigger can involve insurance policies over many years and increases insurance companies' exposure to liability. Generally, judicial interpretations and legislative actions have attempted to maximize insurance availability from both a coverage and liability standpoint.

New asbestos claims and new exposures on existing claims have continued despite the fact that usage of asbestos has declined since the mid-1970s. Many claimants were exposed to multiple asbestos products over an extended period of time. As a result, claim filings typically name dozens of defendants. The plaintiffs' bar has solicited new claimants through extensive advertising and through asbestos medical screenings. A vast majority of asbestos bodily injury claims have been filed by claimants who do not show any signs of asbestos related disease. New asbestos cases are often filed in those jurisdictions with a reputation for judges and juries that are sympathetic to plaintiffs.

Approximately 100 manufacturers and distributors of asbestos products have filed for bankruptcy protection as a result of asbestos related liabilities. A bankruptcy sometimes involves an agreement to a plan between the debtor and its creditors, including the creation of a trust to pay current and future asbestos claimants for their injuries. Although the debtor is negotiating in part with its insurers' money, insurers are generally given only limited opportunity to be heard. In addition to contributing to the overall number of claims, bankruptcy proceedings not only result in increased settlement demands against remaining solvent defendants, but also create the potential for recoveries from multiple trusts by the same claimant for the same alleged injuries.

There have been some positive legislative and judicial developments in the asbestos environment over the past several years:

•

Various challenges to the mass screening of claimants have been mounted, which have led to higher medical evidentiary standards. For example, several asbestos injury settlement trusts have suspended their acceptance of claims that were based on the diagnosis of specific physicians or screening companies. Further investigations of the medical screening process for asbestos claims are underway.

•

A number of states have implemented legislative and judicial reforms that focus the courts' resources on the claims of the most seriously injured. Those who allege serious injury and can present credible evidence of their injuries are receiving priority trial settings in the courts, while

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those who have not shown any credible disease manifestation are having their hearing dates delayed or placed on an inactive docket, which preserves the right to pursue litigation in the future.

•

A number of key jurisdictions have adopted venue reform that requires plaintiffs to have a connection to the jurisdiction in order to file a complaint.

•

In recognition that many aspects of bankruptcy plans are unfair to certain classes of claimants and to the insurance industry, these plans are being more closely scrutinized by the courts and rejected when appropriate.

•

A number of jurisdictions have passed or are considering legislation that will require fuller disclosure by plaintiffs of amounts received from asbestos bankruptcy trusts.

Our most significant individual asbestos exposures involve products liability on the part of "traditional" defendants who were engaged in the manufacture, distribution or installation of asbestos products. We wrote excess liability and/or general liability coverages for these insureds. While these insureds are relatively few in number, their exposure has become substantial due to the increased volume of claims, the erosion of the underlying limits and the bankruptcies of target defendants.

Our other asbestos exposures involve products and non-products liability on the part of "peripheral" defendants, including a mix of manufacturers, distributors and installers of certain products that contain asbestos in small quantities and owners or operators of properties where asbestos was present. 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 viable peripheral parties with greater frequency and, in many cases, for large awards.

Asbestos claims against the major manufacturers, distributors or installers of asbestos products were typically presented under the products liability section of primary general liability policies as well as under excess liability policies, both of which typically had aggregate limits that capped an insurer's exposure. In recent years, a number of asbestos claims by insureds are being presented as "non-products" claims, such as those by installers of asbestos products and by property owners or operators who allegedly had asbestos on their property, under the premises or operations section of primary general liability policies. Unlike products exposures, these non-products exposures typically had no aggregate limits on coverage, creating potentially greater exposure. Further, in an effort to seek additional insurance coverage, some insureds with installation activities who have substantially eroded their products coverage are presenting new asbestos claims as non-products operations claims or attempting to reclassify previously settled products claims as non-products claims to restore a portion of previously exhausted products aggregate limits. It is difficult to predict whether insureds will be successful in asserting claims under non-products coverage or whether insurers will be successful in asserting additional defenses. Accordingly, the ultimate cost to insurers of the claims for coverage not subject to aggregate limits is uncertain.

In establishing our asbestos reserves, we evaluate the exposure presented by each insured. As part of this evaluation, we consider a variety of factors including: the available insurance coverage; limits and deductibles; the jurisdictions involved; the number of claimants; the disease mix exhibited by the claimants; the past settlement values of similar claims; the potential role of other insurance, particularly underlying coverage below our excess liability policies; potential bankruptcy impact; relevant judicial interpretations; and applicable coverage defenses, including asbestos exclusions.

Various U.S. federal proposals to solve the ongoing asbestos litigation crisis have been considered by the U.S. Congress over the years, but none have yet been enacted. The prospect of federal asbestos reform legislation remains uncertain. As a result, we have assumed a continuation of the current legal environment with no benefit from any federal asbestos reform legislation.

Our actuaries and claim personnel perform periodic analyses of our asbestos related exposures. The analyses performed in each of the past three years noted modest adverse developments mostly related to a small number of existing insureds and a slower than expected decline in the number of insureds

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reporting asbestos claims for the first time. Based on these developments, we increased our net asbestos loss reserves by $51 million in 2013, $28 million in 2012 and $22 million in 2011.

The following table presents a reconciliation of the beginning and ending loss reserves related to asbestos claims.

		Years Ended December 31
		2013				2012				2011
		(in millions)
Gross loss reserves, beginning of year		$	608			$	627			$	658
Reinsurance recoverable, beginning of year			19				22				27
Net loss reserves, beginning of year			589				605				631
Net incurred losses			51				28				22
Net losses paid			74				44				48
Net loss reserves, end of year			566				589				605
Reinsurance recoverable, end of year			20				19				22
Gross loss reserves, end of year		$	586			$	608			$	627

At December 31, 2013, $334 million of the net asbestos loss reserves were IBNR reserves.

The following table presents the number of policyholders with open claims and the related net loss reserves at December 31, 2013 as well as the net losses paid during 2013 by component.

		Number of Policyholders				Net Loss Reserves				Net Losses Paid
						(in millions)
Traditional defendants			12			$	121			$	18
Peripheral defendants and all other			374				320				56
Future claims from unknown policyholders							125
						$	566			$	74

Significant uncertainty remains as to our ultimate liability related to asbestos related claims. This uncertainty is due to several factors including:

•

the long latency period between asbestos exposure and disease manifestation and the resulting potential for involvement of multiple policy periods for individual claims;

•

plaintiffs' expanding theories of liability and increased focus on peripheral defendants;

•

the volume of claims by unimpaired plaintiffs and the extent to which they can be precluded from making claims;

•

the volume of claims by severely impaired plaintiffs, such as those with mesothelioma, and the size of settlements and judgments received by those plaintiffs;

•

the volume of claims by plaintiffs suffering from other malignancies such as lung cancer and their ability to establish a causal link between their disease and exposure to asbestos;

•

the efforts by insureds to claim the right to non-products coverage not subject to aggregate limits;

•

the number of insureds seeking bankruptcy protection as a result of asbestos related liabilities;

•

the ability of claimants to bring a claim in a state in which they have no residency or exposure;

•

the impact of the exhaustion of primary limits and the resulting increase in claims on excess liability policies we have issued;

•

inconsistent court decisions and diverging legal interpretations; and

•

the possibility, however remote, of federal legislation that would address the asbestos problem.

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These significant uncertainties are not likely to be resolved in the near future.

Toxic Waste Reserves. Toxic waste claims relate primarily to pollution and related cleanup costs. Our insureds have two potential areas of exposure - hazardous waste dump sites and pollution at the insured site primarily from underground storage tanks and manufacturing processes.

The U.S. federal Comprehensive Environmental Response Compensation and Liability Act of 1980 (Superfund) has been interpreted to impose strict, retroactive and joint and several liability on potentially responsible parties (PRPs) for the cost of remediating hazardous waste sites. Most sites have multiple PRPs.

Most PRPs named to date are parties who have been generators, transporters, past or present landowners or past or present site operators. These PRPs had proper government authorization in many instances. However, relative fault has not been a factor in establishing liability. While the volume of new claims is significantly reduced from the activity in the 1980s, PRPs continue to tender claims to insurers on newly identified hazardous waste sites. Insurance policies issued to PRPs were not intended to cover claims arising from gradual pollution. Since 1986, most policies have specifically excluded such exposures.

Environmental remediation claims tendered by PRPs and others to insurers have frequently resulted in disputes over insurers' contractual obligations with respect to pollution claims. The resulting litigation against insurers extends to issues of liability, coverage and other policy provisions.

There is substantial uncertainty involved in estimating our liabilities related to these claims. First, the liabilities of the claimants are extremely difficult to estimate. At any given waste site, the allocation of remediation costs among governmental authorities and the PRPs varies greatly depending on a variety of factors. Second, different courts have addressed liability and coverage issues regarding pollution claims and have reached inconsistent conclusions in their interpretation of several issues. These significant uncertainties are not likely to be resolved definitively in the near future.

Uncertainties also remain as to the Superfund law itself. Superfund's taxing authority expired on December 31, 1995 and has not been re-enacted. Federal legislation appears to be at a standstill. At this time, it is not possible to predict the direction that any reforms may take, when they may occur or the effect that any changes may have on the insurance industry.

Without federal movement on Superfund reform, the enforcement of Superfund liability has occasionally shifted to the states. States are being forced to reconsider state-level cleanup statutes and regulations. As individual states move forward, the potential for conflicting state regulation becomes greater. In a few states, we have seen cases brought against insureds or directly against insurance companies for environmental pollution and natural resources damages. To date, only a few natural resource claims have been filed and they are being vigorously defended. Significant uncertainty remains as to the cost of remediating the state sites. Because of the large number of state sites, such sites could prove even more costly in the aggregate than Superfund sites.

In establishing our toxic waste reserves, we evaluate the exposure presented by each insured. As part of this evaluation, we consider a variety of factors including: the probable liability, available insurance coverage, allocation of potential loss to the appropriate accident year, past settlement values of similar claims, relevant judicial interpretations, applicable coverage defenses as well as facts that are unique to each insured.

In each of the past three years, the analysis of our toxic waste exposures indicated that some of our insureds had become responsible for the remediation of additional polluted sites and that, as clean up standards continue to evolve as a result of technology advances, the estimated cost of remediation of certain sites had increased. Defense costs associated with some of these cases have also increased. Based on these developments, we increased our net toxic waste loss reserves by $55 million in both 2013 and 2012 and $50 million in 2011.

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The following table presents a reconciliation of our beginning and ending loss reserves, net of reinsurance recoverable, related to toxic waste claims. Reinsurance recoverable related to these claims is minimal.

		Years Ended December 31
		2013				2012				2011
		(in millions)
Reserves, beginning of year		$	268			$	261			$	248
Incurred losses			55				55				50
Losses paid			31				48				37
Reserves, end of year		$	292			$	268			$	261

At December 31, 2013, $214 million of the net toxic waste loss reserves were IBNR reserves.

Reinsurance Recoverable. Reinsurance recoverable is the estimated amount recoverable from reinsurers related to the losses we have incurred. At December 31, 2013, reinsurance recoverable included $142 million recoverable with respect to paid losses and loss expenses, which is included in other assets, and $1.8 billion recoverable on unpaid losses and loss expenses, including reinsurance losses incurred but not reported. Approximately $155 million of reinsurance recoverable on unpaid losses and loss expenses at December 31, 2013 related to losses associated with Storm Sandy. None of the reinsurance recoverable on unpaid losses and loss expenses is currently due for collection from reinsurers.

Reinsurance recoverable on unpaid losses and loss expenses represents an estimate of the portion of our gross loss reserves that will be recovered from reinsurers. Such reinsurance recoverable is estimated as part of our loss reserving process using assumptions that are consistent with the assumptions used in estimating the gross loss reserves. Consequently, the estimation of reinsurance recoverable is subject to similar judgments and uncertainties as the estimation of gross loss reserves.

Ceded reinsurance contracts do not relieve us of our primary obligation to our policyholders. Consequently, an exposure exists with respect to reinsurance recoverable to the extent that any reinsurer is unable to meet its obligations or disputes the liabilities we believe it has assumed under the reinsurance contracts.

We are selective in regard to our reinsurers, placing reinsurance with only those reinsurers that we believe have strong balance sheets and superior underwriting ability. We monitor the financial strength of our reinsurers and our concentration of risk with reinsurers on an ongoing basis. We obtain collateral from certain of our reinsurers in the form of letters of credit, trust agreements and cash advances, in order to mitigate potential collectibility exposure. The total amount of collateral held at December 31, 2013 related to reinsurance recoverable on paid and unpaid losses and loss expenses was $584 million. As of December 31, 2013, the largest amount of reinsurance recoverable on paid and unpaid losses and loss expenses from any individual reinsurer represented one percent of shareholders' equity. Nevertheless, in recent years, certain of our reinsurers have experienced financial difficulties or exited the reinsurance business. In addition, we may become involved in coverage disputes with our reinsurers. A provision for estimated uncollectible reinsurance is recorded based on periodic evaluations of balances due from reinsurers, the financial condition of the reinsurers, coverage disputes and other relevant factors, including collateral held.

Prior Year Loss Development

Changes in loss reserve estimates are unavoidable because such estimates are subject to the outcome of future events. Loss trends vary and time is required for changes in trends to be recognized and confirmed. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development or reserve releases.

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A reconciliation of our beginning and ending loss reserves, net of reinsurance, for the three years ended December 31, 2013 is as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Net loss reserves, beginning of year		$	22,022			$	21,329			$	20,901
Net incurred losses and loss expenses related to
Current year			7,232				8,121				8,174
Prior years			(712	)			(614	)			(767	)
			6,520				7,507				7,407
Net payments for losses and loss expenses related to
Current year			2,150				2,323				2,746
Prior years			4,952				4,493				4,300
			7,102				6,816				7,046
Foreign currency translation effect			(96	)			2				67
Net loss reserves, end of year		$	21,344			$	22,022			$	21,329

During 2013, we experienced overall favorable prior year development of $712 million, which represented 3.2% of the net loss reserves as of December 31, 2012. This compares with favorable prior year development of $614 million during 2012, which represented 2.9% of the net loss reserves at December 31, 2011, and favorable prior year development of $767 million during 2011, which represented 3.7% of the net loss reserves at December 31, 2010. Such favorable development was reflected in operating results in these respective years.

The following table presents the overall prior year loss development for the three years ended December 31, 2013 by accident year.

		Calendar Year (Favorable) Unfavorable Development
Accident Year		2013				2012				2011
		(in millions)
2012		$	(138	)
2011			(33	)		$	26
2010			(83	)			(49	)		$	44
2009			(111	)			(89	)			(91	)
2008			(101	)			(131	)			(181	)
2007			(142	)			(147	)			(184	)
2006			(52	)			(115	)			(178	)
2005			(57	)			(56	)			(98	)
2004			(43	)			(68	)			(78	)
2003 and prior			48				15				(1	)
		$	(712	)		$	(614	)		$	(767	)

The net favorable development of $712 million in 2013 was due to various factors. The most significant factors were:

•

We experienced favorable development of about $265 million in the aggregate, including $30 million related to catastrophes, in the personal and commercial property classes, mostly related to the 2012 and 2011 accident years. The severity and frequency of late developing property claims that emerged during 2013 were lower than expected, including those related to catastrophes, and the development of existing case reserves was more favorable than expected. Because the incidence of large property losses is subject to a considerable element of fortuity, reserve estimates for these claims are based on an analysis of past loss experience on average over a

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period of years. Due to the cumulative favorable recent experience, however, this lower emergence was reflected in our determination of carried loss reserves for these classes at December 31, 2013.

•

We experienced overall favorable development of about $260 million in the professional liability classes other than fidelity. This favorable development was driven by the directors and officers liability and fiduciary liability classes, partially offset by adverse development in the errors and omissions liability and employment practices liability classes. Overall, the reported loss activity was less than expected, with aggregate favorable emergence from accident years 2010 and prior. This development was recognized as one among many factors in the determination of carried loss reserves for these classes at December 31, 2013. Among other important factors were the continued uncertainty from the crisis in the financial markets and its aftermath, the effects of the ensuing economic downturn and other recent litigation dynamics, as well as the positive pricing trends experienced in the last two years.

•

We experienced favorable development of about $160 million in the aggregate in the personal and commercial liability classes. The most significant favorable development occurred in the excess liability classes, particularly in accident years 2010 and prior. There was some offsetting adverse development in other liability classes, most notably due to $106 million of incurred losses related to asbestos and toxic waste claims in older accident years. Overall, prior period liability claims were lower than expected, particularly the severity of such claims, and the effects of underwriting changes that affected these years have been more positive than expected. These factors were reflected in the determination of the carried loss reserves for these classes at December 31, 2013.

•

We experienced unfavorable development of about $50 million in the fidelity class due to higher than expected reported loss emergence, related mostly to accident years subsequent to 2007. Loss reserve estimates at the end of 2012 included an expectation of less prior year loss activity than actually occurred in 2013. This activity was driven by unfavorable development on a relatively small number of claims related to the recent economic and financial environment. This continued adverse development was reflected in the determination of carried loss reserves for this class at December 31, 2013.

•

We experienced favorable development of about $35 million in the personal automobile business due primarily to more favorable case reserve development and lower severity of prior period claims than expected. This factor was reflected in our determination of carried loss reserves for this class at December 31, 2013.

•

We experienced favorable development of about $30 million in the surety business due to lower than expected loss emergence in recent accident years. Loss reserve estimates at the end of 2012 included an expectation of more late reported losses than actually occurred in 2013. However, since the experience in this business is volatile and we would still expect such losses to occur over time, the favorable development in 2013 was given only modest weight in the determination of carried loss reserves for this class at December 31, 2013.

The net favorable development of $614 million in 2012 was also due to various factors. The most significant factors were:

•

We experienced favorable development of about $250 million in the aggregate in the personal and commercial liability classes. The most significant favorable development occurred in accident years 2006 to 2009, which more than offset adverse development in accident years 2002 and prior, which included $83 million of incurred losses related to asbestos and toxic waste claims. The overall frequency and severity of prior period liability claims were lower than expected and the effects of underwriting changes that affected these years have been more positive than expected, especially in the commercial excess liability class.

•

We experienced overall favorable development of about $200 million in the professional liability classes other than fidelity. This favorable development was driven by the directors and officers

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liability and fiduciary liability classes, partially offset by adverse development in the errors and omissions liability and employment practices liability classes. Overall, the reported loss activity was less than expected, with aggregate favorable emergence from accident years 2008 and prior partly offset by some adverse emergence in the more recent accident years.

•

We experienced favorable development of about $125 million, including $50 million related to catastrophes, in the aggregate in the personal and commercial property classes, mostly related to the 2007 through 2011 accident years. The severity and frequency of late developing property claims that emerged during 2012 were lower than expected, including those related to catastrophes, and the development of existing case reserves was more favorable than expected.

•

We experienced unfavorable development of about $60 million in the fidelity class due to higher than expected reported loss emergence, related mostly to accident years 2008 through 2010.

•

We experienced favorable development of about $45 million in the runoff of our reinsurance assumed business due primarily to better than expected reported loss activity from cedants.

•

We experienced favorable development of about $40 million in the personal automobile business due primarily to lower than expected frequency of prior period claims.

•

We experienced favorable development of about $25 million in the surety business due to lower than expected loss emergence in recent accident years.

The net favorable development of $767 million in 2011 was also due to various factors. The most significant factors were:

•

We experienced favorable development of about $355 million in the aggregate in the personal and commercial liability classes. Favorable development in the more recent accident years, particularly in accident years 2004 to 2009, more than offset adverse development in accident years 2001 and prior, which included $72 million of incurred losses related to asbestos and toxic waste claims. The overall frequency and severity of prior period liability claims were lower than expected and the effects of underwriting changes that affected these years have been more positive than expected, especially in the commercial excess liability class.

•

We experienced overall favorable development of about $310 million in the professional liability classes other than fidelity. The most significant amount of favorable development occurred in the directors and officers liability class, particularly from our business outside the United States, with additional favorable development in the fiduciary liability class, partially offset by adverse development in the errors and omissions liability class. The aggregate reported loss activity related to accident years 2008 and prior was less than expected.

•

We experienced favorable development of about $80 million in the aggregate in the personal and commercial property classes, primarily related to the 2009 and 2010 accident years. The severity and frequency of late developing property claims that emerged during 2011 were lower than expected.

•

We experienced unfavorable development of about $70 million in the fidelity class due to higher than expected reported loss emergence, related to the 2010 accident year and, to a lesser extent, the 2009 accident year.

•

We experienced favorable development of about $30 million in the personal automobile business due primarily to lower than expected frequency of prior year claims.

•

We experienced favorable development of about $30 million in the runoff of our reinsurance assumed business due primarily to better than expected reported loss activity from cedants.

•

We experienced favorable development of about $15 million in the surety business due to lower than expected loss emergence in recent accident years.

In Item 1 of this report, we present an analysis of our consolidated loss reserve development on a calendar year basis for each of the ten years prior to 2013. The variability in reserve development over

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the ten year period illustrates the uncertainty of the loss reserving process. Conditions and trends that have affected reserve development in the past will not necessarily recur in the future. It is not appropriate to extrapolate future favorable or unfavorable reserve development based on amounts experienced in prior years.

Our U.S. property and casualty insurance subsidiaries are required to file annual statements with insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities. These annual statements include an analysis of loss reserves, referred to as Schedule P, that presents accident year loss development information for the nine years prior to 2013. It is our intention to post the Schedule P for our combined U.S. property and casualty insurance subsidiaries on our website as soon as it becomes available.

Investment Results

Property and casualty investment income before taxes decreased by 6% in 2013 compared with 2012 and decreased by 5% in 2012 compared with 2011. In 2013, the decrease was due to a decline in the average yield of our property and casualty subsidiaries' investment portfolio, partially offset by the impact of an increase in our average invested assets. In 2012, the decrease was primarily due to a decline in the average yield of our investment portfolio. In 2013 and 2012, the decrease in the average yield of our investment portfolio primarily resulted from lower reinvestment yields on securities that we purchased to replace fixed maturity securities that matured, were redeemed by the issuer or were sold during the year. While the property and casualty subsidiaries generated substantial operating cash during each of the past three years, average invested assets in the three years were impacted by substantial dividends distributed by the property and casualty subsidiaries to Chubb during the period. Growth in property and casualty investment income before taxes was limited as a result of our property and casualty subsidiaries holding only a slightly higher amount of average invested assets in 2013 compared with 2012 and holding a similar amount of average invested assets in 2012 compared with 2011.

The effective tax rate on our investment income was 18.2% in 2013 compared with 18.8% in 2012 and 19.0% in 2011. The effective tax rate fluctuates as the proportion of tax exempt investment income relative to total investment income changes from period to period.

On an after-tax basis, property and casualty investment income decreased by 5% in both 2013 and 2012 compared with the respective prior year. The after-tax annualized yield on our property and casualty investment portfolio was 2.88% in 2013 compared with 3.12% in 2012 and 3.25% in 2011.

We expect that property and casualty investment income after taxes will decline in 2014, assuming the average yield on fixed maturity securities available in the market and the average foreign currency to U.S. dollar exchange rates in 2014 are both similar to 2013 year-end levels. This expected decline results from the effect of investing funds from securities that matured in 2013 in securities with yields lower than the yields of the maturing securities, and the expectation that this pattern will continue in 2014. The expected decline in property and casualty investment income after taxes in 2014 reflects an assumption that average invested assets in 2014 will be similar to the level in 2013, based on our expectations of cash flows during the year.

Other Income and Charges

Other income and charges, which includes miscellaneous income and expenses of the property and casualty subsidiaries, was income of $6 million in 2013 compared with income of $10 million and $21 million in 2012 and 2011, respectively. The income in 2013, 2012 and 2011 primarily included income from several small property and casualty insurance companies in which we have an interest.

CORPORATE AND OTHER

Corporate and other comprises investment income earned on corporate invested assets, interest expense and other expenses not allocated to our operating subsidiaries and the results of our non-insurance subsidiaries.

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Corporate and other produced a loss before taxes of $237 million in 2013 and 2012 compared with a loss of $246 million in 2011. Corporate and other loss was the same in 2013 and 2012 as a decline in interest expense resulting from the repayment of $275 million of outstanding notes upon maturity in April 2013 was offset by a decline in investment income. The lower loss in 2012 compared with 2011 was primarily due to lower interest expense resulting from the repayment of $400 million of outstanding notes upon maturity in November 2011.

REALIZED INVESTMENT GAINS AND LOSSES

Net realized investment gains and losses were as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Net realized gains
Fixed maturities		$	20			$	104			$	31
Equity securities			203				68				73
Other invested assets			190				66				207
			413				238				311
Other-than-temporary impairment losses
Fixed maturities			(2	)			(5	)			(1	)
Equity securities			(9	)			(40	)			(22	)
			(11	)			(45	)			(23	)
Realized investment gains before tax		$	402			$	193			$	288
Realized investment gains after tax		$	261			$	125			$	187

Decisions to sell equity securities and fixed maturities are governed principally by considerations of investment opportunities and tax consequences. As a result, realized gains and losses on the sale of these investments may vary significantly from period to period. However, such gains and losses generally have little, if any, impact on shareholders' equity as all of these investments are carried at fair value, with the unrealized appreciation or depreciation after tax reflected in accumulated other comprehensive income.

The net realized gains of equity securities and other invested assets in 2013 included $74 million and $10 million, respectively, related to the exchange of our holdings of common stock and warrants of Alterra Capital Holdings Limited for common stock of Markel Corporation and cash as a result of a business combination that took place during the second quarter of 2013.

The net realized gains and losses of other invested assets include primarily the aggregate of realized gain distributions to us from the limited partnerships in which we have an interest and changes in our equity in the net assets of those partnerships based on valuations provided to us by the manager of each partnership. Due to the timing of our receipt of valuation data from the investment managers, the value of these investments and any related realized gains and losses are generally reported on a one quarter lag.

The net realized gains of the limited partnerships reported in 2013 primarily reflected the positive performance of the global equity and high yield investment markets in the first and third quarters of 2013 and the fourth quarter of 2012. The net realized gains of the limited partnerships reported in 2012 primarily reflected the strong performance of the U.S. equity and high yield investment markets in the first and third quarters of 2012, partially offset by the negative performance of several non-U.S. equity markets, particularly in Asia, in the fourth quarter of 2011 and the global equity markets in the second quarter of 2012. The net realized gains of the limited partnerships reported in 2011 reflected the strong performance of the equity and high yield investment markets in the fourth quarter of 2010 and in the first quarter of 2011.

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We regularly review invested assets that have a fair value less than cost to determine if an other-than-temporary decline in value has occurred. We have a monitoring process overseen by a committee of investment and accounting professionals that is responsible for identifying those securities to be specifically evaluated for a potential other-than-temporary impairment.

The determination of whether a decline in value of any investment is temporary or other than temporary requires the judgment of management. The assessment of other-than-temporary impairment of fixed maturities and equity securities is based on both quantitative criteria and qualitative information. A number of factors are considered including, but not limited to, the length of time and the extent to which the fair value has been less than the cost, the financial condition and near term prospects of the issuer, whether the issuer is current on contractually obligated interest and principal payments, general market conditions and industry or sector specific factors. The decision to recognize a decline in the value of a security carried at fair value as other than temporary rather than temporary has no impact on shareholders' equity.

In determining whether fixed maturities are other than temporarily impaired, we are required to recognize an other-than-temporary impairment loss when we conclude that we have the intent to sell or it is more likely than not that we will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value or it is likely we will not recover the entire amortized cost value of an impaired security. If we have the intent to sell or it is more likely than not that we will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value, the security is written down to fair value and the entire amount of the writedown is included in net income as a realized investment loss. For all other impaired fixed maturities, when the impairment is determined to be other than temporary, the impairment loss is separated into the amount representing the credit loss and the amount representing the loss related to all other factors. The amount of the impairment loss that represents the credit loss is included in net income as a realized investment loss and the amount of the impairment loss that relates to all other factors is included in other comprehensive income.

In determining whether equity securities are other than temporarily impaired, we consider our intent and ability to hold a security for a period of time sufficient to allow us to recover our cost. If a decline in the fair value of an equity security is deemed to be other than temporary, the security is written down to fair value and the amount of the writedown is included in net income as a realized investment loss.

During each of the last three years, the fair value of some of our investments were at a level below our cost. Some of these investments were deemed to be other than temporarily impaired. In 2013 and 2012, about 85% and 65%, respectively, of the other-than-temporary impairment losses recognized for equity securities related to issuers in the financial services industry. The remainder of the other-than-temporary impairment losses in 2013 and 2012 and the other-than-temporary impairment losses in 2011 related to issuers that were not concentrated within any individual industry or sector.

Information related to investment securities in an unrealized loss position at December 31, 2013 and 2012 is included in Note (2)(b) of the Notes to Consolidated Financial Statements.

CAPITAL RESOURCES AND LIQUIDITY

Capital resources and liquidity represent a company's overall financial strength and its ability to generate cash flows, borrow funds at competitive rates and raise new capital to meet operating and growth needs.

Capital Resources

Capital resources provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks and facilitate continued business growth. At December 31, 2013, the Corporation had shareholders' equity of $16.1 billion and total debt of $3.3 billion.

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In April 2013, Chubb repaid $275 million of outstanding 5.2% notes upon maturity.

Chubb has outstanding $600 million of 5.75% notes and $100 million of 6.6% debentures due in 2018, $200 million of 6.8% debentures due in 2031, $800 million of 6% notes due in 2037 and $600 million of 6.5% notes due in 2038, all of which are unsecured.

Chubb also has outstanding $1.0 billion of unsecured junior subordinated capital securities that will become due on April 15, 2037, the scheduled maturity date, but only to the extent that Chubb has received sufficient net proceeds from the sale of certain qualifying capital securities. Chubb must use its commercially reasonable efforts, subject to certain market disruption events, to sell enough qualifying capital securities to permit repayment of the capital securities on the scheduled maturity date or as soon thereafter as possible. Any remaining outstanding principal amount will be due on March 29, 2067, the final maturity date. The capital securities bear interest at a fixed rate of 6.375% through April 14, 2017. Thereafter, the capital securities will bear interest at a rate equal to the three-month LIBOR rate plus 2.25%. Subject to certain conditions, Chubb has the right to defer the payment of interest on the capital securities for a period not exceeding ten consecutive years. During any such period, interest will continue to accrue and Chubb generally may not declare or pay any dividends on or purchase any shares of its capital stock.

In connection with the issuance of the capital securities, Chubb entered into a replacement capital covenant in which it agreed that it will not repay, redeem or purchase the capital securities before March 29, 2047, unless, subject to certain limitations, it has received proceeds from the sale of specified replacement capital securities. Subject to the replacement capital covenant, the capital securities may be redeemed, in whole or in part, at any time on or after April 15, 2017 at a redemption price equal to the principal amount plus any accrued interest on or prior to April 15, 2017 at a redemption price equal to the greater of (i) the principal amount or (ii) a make-whole amount, in each case plus any accrued interest.

Management regularly monitors the Corporation's capital resources. In connection with our long term capital strategy, Chubb from time to time contributes capital to its property and casualty subsidiaries. In addition, in order to satisfy capital needs as a result of any rating agency capital adequacy or other future rating issues, or in the event we were to need additional capital to make strategic investments in light of market opportunities, we may take a variety of actions, which could include the issuance of additional debt and/or equity securities. We believe that our strong financial position and current debt level provide us with the flexibility and capacity to obtain funds externally through debt or equity financings on both a short term and long term basis.

In December 2010, the Board of Directors authorized the repurchase of up to 30,000,000 shares of common stock. In January 2012, the Board of Directors authorized the repurchase of up to $1.2 billion of Chubb's common stock. In January 2013, the Board of Directors authorized the repurchase of up to $1.3 billion of Chubb's common stock, which authorization replaced the January 2012 authorization.

Pursuant to these authorizations, Chubb repurchased shares of its common stock in open market transactions as follows: in 2011, repurchased 27,582,889 shares at a cost of $1,718 million; in 2012, repurchased 13,094,640 shares at a cost of $935 million; and in 2013, repurchased 14,887,701 shares at a cost of $1,300 million.

As of December 31, 2013, $107 million remained under the January 2013 share repurchase authorization.

On January 30, 2014, the Board of Directors authorized the repurchase of up to $1.5 billion of Chubb's common stock. The authorization has no expiration date. We expect to complete the repurchase of shares under this authorization by the end of January 2015, subject to market conditions and other factors.

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Ratings

Chubb and its property and casualty insurance subsidiaries are rated by major rating agencies. These ratings reflect the rating agency's opinion of our financial strength, operating performance, strategic position and ability to meet our obligations to policyholders.

Credit ratings assess a company's ability to make timely payments of interest and principal on its debt. The following table presents Chubb's credit ratings as determined by the major independent rating organizations as of February 26, 2014.

A.M. Best

Standard & Poor's

Moody's

Fitch

Senior unsecured debt

aa-

A+

A2

A+

Junior subordinated capital securities

a

A-

A3

A-

Commercial paper

AMB-1+

A-1

P-1

F1+

Financial strength ratings assess an insurer's ability to meet its financial obligations to policyholders. The following table presents our property and casualty subsidiaries' financial strength ratings as determined by the major independent rating organizations as of February 26, 2014.

A.M. Best

Standard & Poor's

Moody's

Fitch

Financial strength

A++

AA

Aa2

AA

Ratings are an important factor in establishing our competitive position in the insurance markets. There can be no assurance that our ratings will continue for any given period of time or that they will not be changed.

It is possible that one or more of the rating agencies may raise or lower our existing ratings in the future. If our credit ratings were downgraded, we might incur higher borrowing costs and might have more limited means to access capital. A downgrade in our financial strength ratings could adversely affect the competitive position of our insurance operations, including a possible reduction in demand for our products in certain markets.

Liquidity

Liquidity is a measure of a company's ability to generate sufficient cash flows to meet the short and long term cash requirements of its business operations.

The Corporation's liquidity requirements in the past have generally been met by funds from operations and we expect that funds from operations will continue to be sufficient to meet such requirements in the future. Liquidity requirements could also be met by funds received upon the maturity or sale of marketable securities in our investment portfolio. The Corporation also has the ability to borrow under its $500 million credit facility and we believe we could issue debt or equity securities.

Our property and casualty operations provide liquidity in that insurance premiums are generally received months or even years before losses are paid under the policies purchased by such premiums. Cash receipts from operations, consisting of insurance premiums and investment income, provide funds to pay losses, operating expenses and dividends to Chubb. Cash receipts in excess of required cash outflows can be used to build the investment portfolio with the expectation of generating additional investment income in the future.

Our strong underwriting and investment results generated substantial operating cash flows in each of the last three years. In 2013, cash provided by the property and casualty subsidiaries' operating activities decreased approximately $530 million compared with 2012 primarily as a result of higher tax payments and higher loss payments. The higher tax payments in 2013 are attributable to improved profitability compared with 2012. The higher amount of loss payments in 2013 compared with 2012 reflected substantially higher catastrophe-related payments during the year, including payments related to Storm Sandy. In 2013, cash provided by the property and casualty subsidiaries' operating activities exceeded cash used for financing activities by the property and casualty subsidiaries (primarily the

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payment of dividends to Chubb) by approximately $300 million. In 2013, dividends paid to Chubb by the property and casualty subsidiaries decreased by $196 million compared with 2012. In 2012, cash provided by the property and casualty subsidiaries' operating activities increased approximately $370 million compared with 2011 primarily as a result of higher premium collections and lower loss payments. In 2012, cash provided by the property and casualty subsidiaries' operating activities exceeded the cash used for financing activities by the property and casualty subsidiaries (primarily the payment of dividends to Chubb) by approximately $650 million. In 2012, dividends paid to Chubb by the property and casualty subsidiaries decreased by $940 million compared with 2011. In 2011, the cash used by the property and casualty subsidiaries for financing activities (primarily the payment of dividends to Chubb) exceeded the cash provided by the property and casualty subsidiaries' operating activities by approximately $650 million.

Our property and casualty subsidiaries maintain substantial investments in highly liquid, short term marketable securities. Accordingly, we do not anticipate selling long term fixed maturity investments to meet any liquidity needs.

Chubb's liquidity requirements primarily include the payment of dividends to shareholders and interest and principal on debt obligations. The declaration and payment of future dividends to Chubb's shareholders will be at the discretion of Chubb's Board of Directors and will depend upon many factors, including our operating results, financial condition, capital requirements and any regulatory constraints.

As a holding company, Chubb's ability to continue to pay dividends to shareholders and to satisfy its debt obligations relies on the availability of liquid assets, which is dependent in large part on the dividend paying ability of its property and casualty subsidiaries. The timing and amount of dividends paid by the property and casualty subsidiaries to Chubb may vary from year to year. In the United States, our property and casualty subsidiaries are subject to laws and regulations in the jurisdictions in which they operate that restrict the amount and timing of dividends they may pay within twelve consecutive months without the prior approval of regulatory authorities. The restrictions are generally based on net income and on certain levels of policyholders' surplus as determined in accordance with statutory accounting practices. Dividends in excess of such thresholds are considered "extraordinary" and require prior regulatory approval.

The maximum dividend distributions that the property and casualty subsidiaries could have paid to Chubb during 2013, 2012 and 2011 without prior approval were approximately $1.6 billion, $1.8 billion and $2.0 billion, respectively. During 2013, 2012 and 2011 these subsidiaries paid dividends to Chubb of $1.6 billion, $1.8 billion and $2.7 billion, respectively. Included in the dividends paid in 2012 and 2011 were $830 million and $2.5 billion, respectively, of dividends deemed to be extraordinary under applicable insurance regulations due to the limitation on the amount of dividends that may be paid within twelve consecutive months. Regulatory approval was required and obtained for the payment of these dividends. Whether any dividends the property and casualty subsidiaries may pay in 2014 require regulatory approval will depend on the amount and timing of the dividend payments. The maximum aggregate dividend distribution that may be made by the subsidiaries to Chubb during 2014 without prior regulatory approval is approximately $2.0 billion.

Chubb has a revolving credit agreement with a syndicate of banks that provides for up to $500 million of unsecured borrowings. The revolving credit facility is available for general corporate purposes. The agreement has a maturity date of September 24, 2017. Various interest rate options are available to Chubb, all of which are based on market interest rates. The agreement contains customary restrictive covenants, including a covenant to maintain a minimum adjusted consolidated shareholders' equity. At December 31, 2013, Chubb was in compliance with all such covenants. Chubb is permitted to request an increase in the credit available under the agreement, no more than two times per year, up to a maximum facility amount of $750 million. Chubb is permitted to request on two occasions, at any time during the term of the agreement, an extension of the maturity date for an additional one year period. There have been no borrowings under this agreement. On the maturity date of the agreement, any borrowings then outstanding become payable.

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Contractual Obligations and Off-Balance Sheet Arrangements

The following table provides our future payments due by period under contractual obligations as of December 31, 2013, aggregated by type of obligation.

		2014				2015 and 2016				2017 and 2018				Thereafter				Total
		(in millions)
Principal due under long term debt		$	-			$	-			$	700			$	2,600			$	3,300
Interest payments on long term debt (a)			205				411				336				2,287				3,239
Purchase obligations (b)			121				169				132				6				428
Future minimum rental payments under operating leases			67				106				69				74				316
			393				686				1,237				4,967				7,283
Loss and loss expense reserves (c)			4,861				5,555				3,009				9,721				23,146
Total		$	5,254			$	6,241			$	4,246			$	14,688			$	30,429

(a)

Junior subordinated capital securities of $1 billion bear interest at a fixed rate of 6.375% through April 14, 2017 and at a rate equal to the three-month LIBOR rate plus 2.25% thereafter. For purposes of the above table, interest after April 14, 2017 was calculated using the three-month LIBOR rate as of December 31, 2013. The table includes future interest payments through the scheduled maturity date, April 15, 2037. Interest payments for the period from the scheduled maturity date through the final maturity date, March 29, 2067, would increase the contractual obligation by $748 million. It is our expectation that the capital securities will be redeemed at the end of the fixed interest rate period.

(b)	Includes agreements with vendors to purchase various goods and services such as information technology, human resources and administrative services.

(c)

There is typically no stated contractual commitment associated with property and casualty insurance loss reserves. The obligation to pay a claim arises only when a covered loss event occurs and a settlement is reached. The vast majority of our loss reserves relate to claims for which settlements have not yet been reached. Our loss reserves therefore represent estimates of future payments. These estimates are dependent on the outcome of claim settlements that will occur over many years. Accordingly, the payment of the loss reserves is not fixed as to either amount or timing. The estimate of the timing of future payments is based on our historical loss payment patterns. The ultimate amount and timing of loss payments will likely differ from our estimate and the differences could be material. We expect that these loss payments will be funded, in large part, by future cash receipts from operations.

The above table excludes certain commitments totaling approximately $660 million at December 31, 2013 to fund limited partnership investments. These commitments can be called by the partnerships (generally over a period of five years or less), if and when needed by the partnerships to fund certain partnership expenses or the purchase of investments. It is uncertain whether and, if so, when we will be required to fund these commitments. There is no predetermined payment schedule.

The Corporation does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the Corporation's financial condition, results of operations, liquidity or capital resources, other than as disclosed in Note (12) of the Notes to Consolidated Financial Statements.

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INVESTED ASSETS

The main objectives in managing our investment portfolios are to maximize after-tax investment income and total investment return while managing credit risk and interest rate risk in order to ensure that funds will be available to meet our insurance obligations. 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 of Chubb and its respective operating companies.

Our investment portfolio primarily comprises high quality bonds, principally tax exempt securities, corporate bonds, mortgage-backed securities and U.S. Treasury securities, as well as foreign government and corporate bonds that support our operations outside the United States. The portfolio also includes equity securities, primarily publicly traded common stocks, and other invested assets, primarily private equity limited partnerships, all of which are held with the primary objective of capital appreciation.

Limited partnership investments by their nature are less liquid and may involve more risk than other investments. We actively manage our risk through type of asset class and domestic and international diversification. At December 31, 2013, we had investments in about 85 separate partnerships. We review the performance of these investments on a quarterly basis and we obtain audited financial statements annually.

During 2013 and 2012, we increased our holdings of corporate bonds and we reduced our holdings of tax exempt fixed maturities, mortgage-backed securities and private equity limited partnerships. During 2011, cash used for financing activities exceeded cash provided by operating activities. As a result, our holdings of tax exempt fixed maturities and mortgage-backed securities both decreased slightly during the year, partly offset by a slight increase in our holdings of corporate bonds. Our objective is to achieve the appropriate mix of taxable and tax exempt securities in our portfolio to balance both investment and tax strategies. At December 31, 2013, 62% of our U.S. fixed maturity portfolio was invested in tax exempt securities compared with 65% and 68% at December 31, 2012 and December 31, 2011, respectively.

We classify our fixed maturity securities, which may be sold prior to maturity to support our investment strategies, such as in response to changes in interest rates and the yield curve or to maximize after-tax returns, as available-for-sale. Fixed maturities classified as available-for-sale are carried at fair value.

Changes in the general interest rate environment affect the returns available on new fixed maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the fair value of existing fixed maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new investments but increases the fair value of existing investments, creating the opportunity for realized investment gains on disposition.

The net unrealized appreciation before tax of our fixed maturities and equity securities carried at fair value was $1.9 billion at December 31, 2013, $3.1 billion at December 31, 2012 and $2.7 billion at December 31, 2011. Such unrealized appreciation is reflected in accumulated other comprehensive income, net of applicable deferred income taxes.

In 2013, market yields on fixed maturity investments increased, resulting in a decrease in the fair value of many of our fixed maturity investments. In 2012, market yields on fixed maturity investments declined, resulting in an increase in the fair value of many of our fixed maturity investments.

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FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair values of financial instruments are determined by management using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical assets or liabilities or other inputs, such as quoted prices for similar assets or liabilities that are observable, either directly or indirectly. In those instances where observable inputs are not available, fair values are measured using unobservable inputs for the asset or liability. Unobservable inputs reflect our own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1			-			Unadjusted quoted prices in active markets for identical financial instruments.
Level 2			-			Other inputs that are observable for the financial instrument, either directly or indirectly.
Level 3			-			Significant unobservable inputs.

The methods and assumptions used to estimate the fair values of financial instruments are as follows:

The carrying value of short term investments approximates fair value due to the short maturities of these investments.

Fair values of fixed maturities are determined by management, utilizing prices obtained from a third party, nationally recognized pricing service or, in the case of securities for which prices are not provided by a pricing service, from third party brokers. For fixed maturities that have quoted prices in active markets, market quotations are provided. For fixed maturities that do not trade on a daily basis, the pricing service and brokers provide fair value estimates using a variety of inputs including, but not limited to, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, reference data, prepayment rates and measures of volatility. Management reviews on an ongoing basis the reasonableness of the methodologies used by the relevant pricing service and brokers. In addition, management, using the prices received for the securities from the pricing service and brokers, determines the aggregate portfolio price performance and reviews it against applicable indices. If management believes that significant discrepancies exist, it will discuss these with the relevant pricing service or broker to resolve the discrepancies.

Fair values of equity securities are determined by management, utilizing quoted market prices.

Fair values of warrants are determined by management, utilizing an option pricing model.

Fair values of long term debt issued by Chubb are determined by management, utilizing prices obtained from a third party, nationally recognized pricing service.

At December 31, 2013 and December 31, 2012, a pricing service provided fair value amounts for approximately 99% of our fixed maturities. The prices we obtain from a pricing service and brokers generally are non-binding, but are reflective of current market transactions in the applicable financial instruments. At December 31, 2013 and December 31, 2012, we held an insignificant amount of financial instruments in our investment portfolio for which a lack of market liquidity impacted our determination of fair value.

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The methods and assumptions used to estimate the fair value of the Corporation's pension plan and other postretirement benefit plan assets, other than assets invested in pooled funds, are similar to the methods and assumptions used for our other financial instruments. The fair value of pooled funds is based on the net asset value of the funds. At December 31, 2013 and December 31, 2012, approximately 99% of the pension plan and other postretirement benefit plan assets were categorized as Level 1 or Level 2 in the fair value hierarchy.

PENSION AND OTHER POSTRETIREMENT BENEFITS

In 2013, the liability related to our pension and other postretirement plans decreased, primarily as a result of actuarial gains attributable to the increase in the discount rates used to value our pension and other postretirement obligations and an increase in the fair value of the assets held by our pension and other postretirement benefit plans in excess of the expected return on plan assets. Postretirement benefits costs not recognized in net income decreased by $715 million before tax, which was reflected in other comprehensive income, net of applicable deferred income taxes.

In 2012, the liability related to our pension and other postretirement benefit plans increased, primarily as a result of actuarial losses attributable to the decline in the discount rates used to value our pension and other postretirement obligations, partially offset by an increase in the fair value of the assets held by our pension and other postretirement benefit plans in excess of the expected return on plan assets. In 2011, the liability related to our pension and other postretirement benefit plans increased, primarily as a result of actuarial losses attributable to the decline in the discount rates used to value our pension and other postretirement obligations, and, to a lesser extent, lower than expected return on plan assets. Postretirement benefit costs not recognized in net income increased by $45 million before tax in 2012 and $329 million before tax in 2011, which were reflected in other comprehensive income, net of applicable deferred income taxes.

Employee benefits are discussed further in Note (10) of the Notes to Consolidated Financial Statements.

SUBSEQUENT EVENTS

In January 2014, severe winter weather occurred in the United States. That weather resulted in two declared catastrophes related to the freezing and winter storms that occurred between January 3 and January 8 in 19 states. In January, we announced that we estimated the aggregate losses from these catastrophes to be $150 million to $200 million before tax. The impact of these catastrophes will be reflected in our first quarter 2014 results.

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Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments. Our primary exposure to market risks relates to our investment portfolio, which is sensitive to changes in interest rates and, to a lesser extent, credit quality, prepayment, foreign currency exchange rates and equity prices. We also have exposure to market risks through our debt obligations. Analytical tools and monitoring systems are in place to assess each of these elements of market risk.

INVESTMENT PORTFOLIO

Interest Rate Risk

Interest rate risk is the price sensitivity of a security that promises a fixed return to changes in interest rates. When market interest rates rise, the fair value of our fixed income securities decreases. We view the potential changes in price of our fixed income investments within the overall context of asset and liability management. Our actuaries estimate the payout pattern of our liabilities, primarily our property and casualty loss reserves, to determine their duration. Expressed in years, duration is the weighted average payment period of cash flows, where the weighting is based on the present value of the cash flows. We set duration targets for our fixed income investment portfolios after consideration of the estimated duration of these liabilities and other factors, which allows us to prudently manage the overall effect of interest rate risk for the Corporation.

The following table provides information about our fixed maturity securities, 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, 2013 and 2012. Consideration is given to the call dates of securities trading above par value and the expected prepayment patterns of mortgage-backed securities. Actual cash flows could differ from the expected amounts, primarily due to future changes in interest rates.

		At December 31, 2013
																										Total
		2014				2015				2016				2017				2018				Thereafter				Amortized Cost				Fair Value
		(in millions)
Tax exempt		$	2,118			$	2,036			$	1,831			$	1,656			$	1,265			$	8,902			$	17,808			$	18,421
Average interest rate			4.1	%			4.0	%			4.2	%			4.3	%			4.5	%			3.7	%
Taxable - other than mortgage-backed securities			1,563				2,153				1,837				2,841				2,183				5,958				16,535				17,006
Average interest rate			3.9	%			3.1	%			3.0	%			3.1	%			3.2	%			3.7	%
Mortgage-backed securities			723				311				194				104				55				229				1,616				1,664
Average interest rate			5.2	%			5.1	%			4.9	%			4.4	%			4.0	%			3.8	%
Total		$	4,404			$	4,500			$	3,862			$	4,601			$	3,503			$	15,089			$	35,959			$	37,091

		At December 31, 2012
																										Total
		2013				2014				2015				2016				2017				Thereafter				Amortized Cost				Fair Value
		(in millions)
Tax exempt		$	3,050			$	2,020			$	2,097			$	1,907			$	1,735			$	7,601			$	18,410			$	19,913
Average interest rate			4.1	%			4.0	%			4.1	%			4.2	%			4.4	%			4.0	%
Taxable - other than mortgage-backed securities			1,483				1,863				2,311				1,628				2,607				5,026				14,918				15,984
Average interest rate			3.6	%			3.8	%			2.9	%			3.5	%			3.3	%			4.1	%
Mortgage-backed securities			842				440				311				203				112				162				2,070				2,179
Average interest rate			5.2	%			5.1	%			5.1	%			5.0	%			4.4	%			4.2	%
Total		$	5,375			$	4,323			$	4,719			$	3,738			$	4,454			$	12,789			$	35,398			$	38,076

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At December 31, 2013, our tax exempt fixed maturity portfolio had an average expected maturity of about five years. Our taxable fixed maturity portfolio had an average expected maturity of about four years.

Credit Risk

Credit risk is the potential loss resulting from adverse changes in an issuer's ability to repay its debt obligations. We have consistently invested in high quality marketable securities. At December 31, 2013, less than 2% of our fixed maturity portfolio was below investment grade. Our investment portfolio did not have any direct exposure to either sub-prime mortgages or collateralized debt obligations.

Our decisions to acquire and hold specific tax exempt fixed maturities and taxable fixed maturities are primarily based on an initial and ongoing evaluation of the underlying characteristics, including credit quality, sector, structure and liquidity of the issuer, performed by our internal investment professionals. Third party credit ratings are also used by our investment professionals to help assess the relative credit quality of the issuer and manage the overall credit risk of our fixed maturity portfolio. About 95% of the third party credit ratings of our fixed maturity portfolio are obtained from Moody's Investors Service.

Our tax exempt fixed maturities comprise bonds issued by states, municipalities and political subdivisions within the United States. Our holdings consist of: special revenue bonds issued by state and local government agencies; state, municipal and political subdivision general obligation bonds; and pre-refunded bonds for which an irrevocable trust containing U.S. government or government agency obligations has been established to fund the remaining payment of principal and interest.

Our evaluation of a special revenue bond includes analyzing key credit factors such as the structure of the revenue pledge, the rate covenant, debt service reserve fund, margin of debt service coverage and the issuer's historic financial performance. Our evaluation of a general obligation bond issued by a state, municipality or political subdivision includes analyzing key credit factors such as the economic and financial condition of the issuer and its ability and commitment to service its debt.

At December 31, 2013, about 70% of our tax exempt securities were rated Aa or better with about 20% rated Aaa. The average rating of our tax exempt securities was Aa. While about 20% of our tax exempt securities were insured, the effect of insurance on the average credit rating of these securities was insignificant. The insured tax exempt securities in our portfolio have been selected based on the quality of the underlying credit and not the value of the credit insurance enhancement.

At December 31, 2013, 4% of our taxable fixed maturity portfolio was invested in U.S. government and government agency and authority obligations other than mortgage-backed securities and had an average rating of Aa. About 50% of the U.S. government and government agency and authority obligations other than mortgage-backed securities were U.S. Treasury securities with an average rating of Aaa and the remainder were taxable bonds issued by states, municipalities and political subdivisions within the United States with an average rating of Aa.

At December 31, 2013, 50% of our taxable fixed maturity portfolio consisted of corporate bonds that were issued by a diverse group of U.S. and foreign issuers and had an average rating of A. About 55% of our corporate bonds were issued by U.S. companies and about 45% were issued by foreign companies. Our foreign corporate bonds included $54 million, $13 million and $10 million issued by companies, including banks, in Ireland, Spain and Italy, respectively. We held no bonds issued by companies in Greece or Portugal.

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At December 31, 2013, 37% of our taxable fixed maturity portfolio was invested in foreign government and government agency obligations, which had an average rating of Aa. The foreign government and government agency obligations consisted of high quality securities, primarily issued by national governments and, to a lesser extent, government agencies, regional governments and supranational organizations. The five largest sovereign issuers within our portfolio were Canada, Germany, the United Kingdom, Australia and Brazil, which collectively accounted for about 75% of our total foreign government and government agency obligations. Another 8% of our total foreign government and government agency obligations were issued by supranational organizations. We held no sovereign securities issued by Portugal, Ireland, Italy, Greece or Spain. We did not hold any foreign government or government agency fixed maturities that have third party guarantees.

At December 31, 2013, 9% of our taxable fixed maturity portfolio was invested in mortgage-backed securities. About 95% of the mortgage-backed securities were rated Aaa. About half of the remaining 5% were below investment grade. Of the Aaa rated securities, 86% were call protected, commercial mortgage-backed securities (CMBS). All of our CMBS were senior securities with the highest level of subordination. The other 14% of the Aaa rated securities were residential mortgage-backed securities, consisting of government agency pass-through securities guaranteed by a government agency or a government sponsored enterprise (GSE), GSE collateralized mortgage obligations (CMOs) and other CMOs, all backed by single family home mortgages. The majority of our CMOs are actively traded in liquid markets.

Prepayment risk refers to the changes in prepayment patterns related to decreases and increases in interest rates that can either shorten or lengthen the expected timing of the principal repayments and thus the average life of a security, potentially reducing or increasing its effective yield. Such risk exists primarily within our portfolio of residential mortgage-backed securities. We monitor such risk regularly.

Foreign Currency Risk

Foreign currency risk is the sensitivity to foreign exchange rate fluctuations of the fair value and investment income related to foreign currency denominated financial instruments. The functional currency of our foreign operations is generally the currency of the local operating environment since business is primarily transacted in such local currency. We seek to mitigate the risks relating to currency fluctuations by generally maintaining investments in those foreign currencies in which our property and casualty subsidiaries have loss reserves and other liabilities, thereby limiting exchange rate risk to the net assets denominated in foreign currencies.

At December 31, 2013, the property and casualty subsidiaries held foreign currency denominated investments of $7.4 billion supporting our international operations. The principal currencies creating foreign exchange rate risk for the property and casualty subsidiaries were the Canadian dollar, the British pound sterling, the euro and the Australian dollar. The following table provides information about those fixed maturity securities that are denominated in these currencies. The table presents cash flows of principal amounts in U.S. dollar equivalents by expected maturity dates at December 31, 2013. Actual cash flows could differ from the expected amounts.

		At December 31, 2013
																										Total
		2014				2015				2016				2017				2018				Thereafter				Amortized Cost				Fair Value
		(in millions)
Canadian dollar		$	195			$	313			$	316			$	228			$	257			$	571			$	1,880			$	1,921
British pound sterling			193				250				150				222				185				685				1,685				1,717
Euro			109				178				146				209				160				646				1,448				1,496
Australian dollar			92				56				104				194				35				539				1,020				1,074

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Equity Price Risk

Equity price risk is the potential loss in fair value of our equity securities resulting from adverse changes in stock prices. In general, equities have more year-to-year price variability than intermediate term high grade bonds. However, returns over longer time frames have generally been higher. Our publicly traded equity securities are high quality, diversified across industries and readily marketable. A hypothetical decrease of 10% in the market price of each of the equity securities held at December 31, 2013 and 2012 would have resulted in a decrease of $181 million and $166 million, respectively, in the fair value of the equity securities portfolio.

All of the above risks are monitored on an ongoing basis. A combination of in-house systems and proprietary models and externally licensed software are used to analyze individual securities as well as each portfolio. These tools provide the portfolio managers with information to assist them in the evaluation of the market risks of the portfolio.

DEBT

Interest Rate Risk

We also have interest rate risk on our debt obligations. The following table presents expected cash flow of principal amounts and related weighted average interest rates by maturity date of our long term debt obligations at December 31, 2013.

		At December 31, 2013
		2014				2015				2016				2017				2018				Thereafter				Total				Fair Value
		(in millions)
Expected cash flows of principal amounts		$	-			$	-			$	-			$	-			$	700			$	2,600			$	3,300			$	3,806
Average interest rate			-				-				-				-				5.9	%			6.3	%

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Item 8.

Consolidated Financial Statements and Supplementary Data

Consolidated financial statements of the Corporation at December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013 and the report thereon of our independent registered public accounting firm, and the Corporation's unaudited quarterly financial data for the two-year period ended December 31, 2013 are listed in Item 15(a) of this report.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

As of December 31, 2013, an evaluation of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, was performed under the supervision and with the participation of the Corporation's management, including Chubb's chief executive officer and chief financial officer. Based on that evaluation, the chief executive officer and chief financial officer concluded that the Corporation's disclosure controls and procedures were effective as of December 31, 2013.

During the three month period ended December 31, 2013, there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.

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Management's Report on Internal Control over Financial Reporting

Management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. The Corporation's internal control over financial reporting is a process designed under the supervision of and with the participation of the Corporation's management, including Chubb's chief executive officer and chief financial officer, to provide reasonable assurance regarding the reliability of the Corporation's financial reporting and the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an assessment of the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2013. In making this assessment, management used the framework set forth in Internal Control - Integrated Framework issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that, as of December 31, 2013, the Corporation's internal control over financial reporting is effective.

The Corporation's internal control over financial reporting as of December 31, 2013 has been audited by Ernst & Young LLP, the independent registered public accounting firm who also audited the Corporation's consolidated financial statements. Their attestation report on the Corporation's internal control over financial reporting is shown on the following page.

Item 9B.

Other Information

None.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

The Chubb Corporation

We have audited The Chubb Corporation's internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). The Chubb Corporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, The Chubb Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Chubb Corporation as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2013, and our report dated February 28, 2014 expressed an unqualified opinion thereon.

/s/ E RNST  & Y OUNG LLP

New York, New York

February 28, 2014

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PART III.

Item 10.

Directors, Executive Officers and Corporate Governance

Information regarding Chubb's directors is incorporated by reference from Chubb's definitive Proxy Statement for the 2014 Annual Meeting of Shareholders under the caption "Our Board of Directors." Information regarding Chubb's executive officers is included in Part I of this report under the caption "Executive Officers of the Registrant." Information regarding Section 16 reporting compliance of Chubb's directors, executive officers and 10% beneficial owners is incorporated by reference from Chubb's definitive Proxy Statement for the 2014 Annual Meeting of Shareholders under the caption "Section 16(a) Beneficial Ownership Reporting Compliance." Information regarding Chubb's Code of Ethics for CEO and Senior Financial Officers is included in Item 1 of this report under the caption "Business - General." Information regarding the Audit Committee of Chubb's Board of Directors and its Audit Committee financial experts is incorporated by reference from Chubb's definitive Proxy Statement for the 2014 Annual Meeting of Shareholders under the captions "Corporate Governance - Audit Committee," "Audit Committee Report" and "Committee Assignments."

Item 11.

Executive Compensation

Incorporated by reference from Chubb's definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, under the captions "Corporate Governance - Compensation Committee Interlocks and Insider Participation," "Corporate Governance - Directors' Compensation," "Compensation Committee Report," "Compensation Discussion and Analysis" and "Executive Compensation."

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference from Chubb's definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information."

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference from Chubb's definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, under the captions "Corporate Governance - Director Independence," "Corporate Governance - Related Person Transactions" and "Certain Transactions and Other Matters."

Item 14.

Principal Accountant Fees and Services

Incorporated by reference from Chubb's definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, under the caption "Proposal 3: Ratification of Appointment of Independent Auditor."

PART IV.

Item 15.

Exhibits, Financial Statements and Schedules

The financial statements and schedules listed in the accompanying index to financial statements and financial statement schedules are filed as part of this report.

The exhibits listed in the accompanying index to exhibits are filed as part of this report.

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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.

T HE C HUBB C ORPORATION
(Registrant)

February 27, 2014

By		/ S / J OHN D. F INNEGAN
		(John D. Finnegan Chairman, President and
		Chief Executive 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:

Signature		Title		Date
/ S / J OHN D. F INNEGAN (John D. Finnegan)		Chairman, President, Chief Executive Officer and Director		February 27, 2014
/ S / Z OË B AIRD B UDINGER (Zoë Baird Budinger)		Director		February 27, 2014
/ S / S HEILA P. B URKE (Sheila P. Burke)		Director		February 27, 2014
/ S / J AMES I. C ASH , J R . (James I. Cash, Jr.)		Director		February 27, 2014
/ S / T IMOTHY P. F LYNN (Timothy P. Flynn)		Director		February 27, 2014
/ S / K AREN M. H OGUET (Karen M. Hoguet)		Director		February 27, 2014
/ S / L AWRENCE W. K ELLNER (Lawrence W. Kellner)		Director		February 27, 2014
/ S / M ARTIN G. M C G UINN (Martin G. McGuinn)		Director		February 27, 2014
/ S / L AWRENCE M. S MALL (Lawrence M. Small)		Director		February 27, 2014
/ S / J ESS S ØDERBERG (Jess Søderberg)		Director		February 27, 2014

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Signature		Title		Date
/ S / D ANIEL E. S OMERS (Daniel E. Somers)		Director		February 27, 2014
/ S / W ILLIAM C. W ELDON (William C. Weldon)		Director		February 27, 2014
/ S / J AMES M. Z IMMERMAN (James M. Zimmerman)		Director		February 27, 2014
/ S / A LFRED W. Z OLLAR (Alfred W. Zollar)		Director		February 27, 2014
/ S / R ICHARD G. S PIRO (Richard G. Spiro)		Executive Vice President and Chief Financial Officer		February 27, 2014
/ S / J OHN J. K ENNEDY (John J. Kennedy)		Senior Vice President and Chief Accounting Officer		February 27, 2014

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THE CHUBB CORPORATION

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

(Item 15(a))

				Form 10-K Page
Report of Independent Registered Public Accounting Firm					F-2
Consolidated Statements of Income for the Years Ended December 31, 2013, 2012, 2011					F-3
Consolidated Statements of Comprehensive Income for the Years Ended December  31, 2013, 2012, 2011					F-4
Consolidated Balance Sheets at December 31, 2013 and 2012					F-5
Consolidated Statements of Shareholders' Equity for the Years Ended December  31, 2013, 2012, 2011					F-6
Consolidated Statements of Cash Flows for the Years Ended December  31, 2013, 2012, 2011					F-7
Notes to Consolidated Financial Statements
(1) – Summary of Significant Accounting Policies					F-8
(2) – Invested Assets and Related Income					F-12
(3) – Deferred Policy Acquisition Costs					F-17
(4) – Property and Equipment					F-17
(5) – Unpaid Losses and Loss Expenses					F-18
(6) – Debt and Credit Arrangements					F-23
(7) – Federal and Foreign Income Tax					F-25
(8) – Reinsurance					F-26
(9) – Stock-Based Employee Compensation Plans					F-27
(10) – Employee Benefits					F-29
(11) – Comprehensive Income					F-32
(12) – Commitments and Contingent Liabilities					F-33
(13) – Segments Information					F-34
(14) – Fair Value of Financial Instruments					F-36
(15) – Earnings Per Share					F-39
(16) – Shareholders' Equity					F-40
Supplementary Information (unaudited)
Quarterly Financial Data					F-42
Schedules:
I -		Consolidated Summary of Investments -  Other than Investments in Related Parties at December 31, 2013			S-1
II -		Condensed Financial Information of Registrant at December  31, 2013 and 2012 and for the Years Ended December 31, 2013, 2012 and 2011			S-2
III -		Consolidated Supplementary Insurance Information at and for the Years Ended December  31, 2013, 2012 and 2011			S-5

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

The Chubb Corporation

We have audited the accompanying consolidated balance sheets of The Chubb Corporation as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Chubb Corporation at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Chubb Corporation's internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 28, 2014 expressed an unqualified opinion thereon.

/s/ E RNST  & Y OUNG LLP

New York, New York

February 28, 2014

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THE CHUBB CORPORATION

Consolidated Statements of Income

		In Millions, Except For Per Share Amounts Years Ended December 31
		2013				2012				2011
Revenues
Premiums Earned		$	12,066			$	11,838			$	11,644
Investment Income			1,465				1,556				1,644
Other Revenues			14				8				9
Realized Investment Gains (Losses), Net
Total Other-Than-Temporary Impairment Losses on Investments			(11	)			(40	)			(22	)
Other-Than-Temporary Impairment Losses on Investments Recognized in Other Comprehensive Income			-				(5	)			(1	)
Other Realized Investment Gains, Net			413				238				311
Total Realized Investment Gains, Net			402				193				288
TOTAL REVENUES			13,947				13,595				13,585
Losses and Expenses
Losses and Loss Expenses			6,520				7,507				7,407
Amortization of Deferred Policy Acquisition Costs			2,454				2,411				2,330
Other Insurance Operating Costs and Expenses			1,411				1,362				1,312
Investment Expenses			49				38				39
Other Expenses			22				11				11
Corporate Expenses			254				270				287
TOTAL LOSSES AND EXPENSES			10,710				11,599				11,386
INCOME BEFORE FEDERAL AND FOREIGN INCOME TAX			3,237				1,996				2,199
Federal and Foreign Income Tax			892				451				521
NET INCOME		$	2,345			$	1,545			$	1,678
Net Income Per Share
Basic		$	9.08			$	5.73			$	5.80
Diluted			9.04				5.69				5.76

See accompanying notes.

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Table of Contents

THE CHUBB CORPORATION

Consolidated Statements of Comprehensive Income

		In Millions Years Ended December 31
		2013				2012				2011
Net Income		$	2,345			$	1,545			$	1,678
Other Comprehensive Income (Loss), Net of Tax
Change in Unrealized Appreciation of Investments			(788	)			275				615
Change in Unrealized Other-Than-Temporary Impairment Losses on Investments			-				2				1
Change in Postretirement Benefit Costs Not Yet Recognized in Net Income			464				(30	)			(215	)
Foreign Currency Translation Gains (Losses)			(72	)			(11	)			4
			(396	)			236				405
COMPREHENSIVE INCOME		$	1,949			$	1,781			$	2,083

See accompanying notes.

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THE CHUBB CORPORATION

Consolidated Balance Sheets

		In Millions
		December 31
		2013				2012
Assets
Invested Assets
Short Term Investments		$	2,114			$	2,528
Fixed Maturities (cost $35,959 and $35,398)			37,091				38,076
Equity Securities (cost $1,057 and $1,244)			1,810				1,663
Other Invested Assets			1,598				1,954
TOTAL INVESTED ASSETS			42,613				44,221
Cash			52				50
Accrued Investment Income			418				424
Premiums Receivable			2,284				2,185
Reinsurance Recoverable on Unpaid Losses and Loss Expenses			1,802				1,941
Prepaid Reinsurance Premiums			290				337
Deferred Policy Acquisition Costs			1,255				1,206
Deferred Income Tax			47				-
Goodwill			467				467
Other Assets			1,205				1,353
TOTAL ASSETS		$	50,433			$	52,184
Liabilities
Unpaid Losses and Loss Expenses		$	23,146			$	23,963
Unearned Premiums			6,423				6,361
Long Term Debt			3,300				3,575
Dividend Payable to Shareholders			110				108
Deferred Income Tax			-				162
Accrued Expenses and Other Liabilities			1,357				2,188
TOTAL LIABILITIES			34,336				36,357
Commitments and Contingent Liabilities (Note 5 and 12)
Shareholders' Equity
Preferred Stock - Authorized 8,000,000 Shares; $1 Par Value; Issued - None			-				-
Common Stock - Authorized 1,200,000,000 Shares; $1 Par Value; Issued 371,980,460 Shares			372				372
Paid-In Surplus			171				178
Retained Earnings			21,902				20,009
Accumulated Other Comprehensive Income			1,035				1,431
Treasury Stock, at Cost - 123,673,969 and 110,217,445 Shares			(7,383	)			(6,163	)
TOTAL SHAREHOLDERS' EQUITY			16,097				15,827
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	50,433			$	52,184

See accompanying notes.

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THE CHUBB CORPORATION

Consolidated Statements of Shareholders' Equity

		In Millions
		Years Ended December 31
		2013				2012				2011
Preferred Stock
Balance, Beginning and End of Year		$	-			$	-			$	-
Common Stock
Balance, Beginning and End of Year			372				372				372
Paid-In Surplus
Balance, Beginning of Year			178				190				208
Changes Related to Stock-Based Employee Compensation (includes tax benefit of $28, $27 and $24)			(7	)			(12	)			(18	)
Balance, End of Year			171				178				190
Retained Earnings
Balance, Beginning of Year			20,009				18,903				17,670
Net Income			2,345				1,545				1,678
Dividends Declared (per share $1.76, $1.64 and $1.56)			(452	)			(439	)			(445	)
Balance, End of Year			21,902				20,009				18,903
Accumulated Other Comprehensive Income (Loss)
Unrealized Appreciation of Investments Including Unrealized Other-Than-Temporary Impairment Losses
Balance, Beginning of Year			2,013				1,736				1,120
Change During Year, Net of Tax			(788	)			277				616
Balance, End of Year			1,225				2,013				1,736
Postretirement Benefit Costs Not Yet Recognized in Net Income
Balance, Beginning of Year			(717	)			(687	)			(472	)
Change During Year, Net of Tax			464				(30	)			(215	)
Balance, End of Year			(253	)			(717	)			(687	)
Foreign Currency Translation Gains
Balance, Beginning of Year			135				146				142
Change During Year, Net of Tax			(72	)			(11	)			4
Balance, End of Year			63				135				146
Accumulated Other Comprehensive Income, End of Year			1,035				1,431				1,195
Treasury Stock, at Cost
Balance, Beginning of Year			(6,163	)			(5,359	)			(3,783	)
Repurchase of Shares			(1,300	)			(935	)			(1,718	)
Shares Issued Under Stock-Based Employee Compensation Plans			80				131				142
Balance, End of Year			(7,383	)			(6,163	)			(5,359	)
TOTAL SHAREHOLDERS' EQUITY		$	16,097			$	15,827			$	15,301

See accompanying notes.

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THE CHUBB CORPORATION

Consolidated Statements of Cash Flows

		In Millions
		Years Ended December 31
		2013				2012				2011
Cash Flows from Operating Activities
Net Income		$	2,345			$	1,545			$	1,678
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Increase (Decrease) in Unpaid Losses and Loss Expenses, Net			(582	)			691				361
Increase in Unearned Premiums, Net			158				32				114
Increase in Premiums Receivable			(99	)			(24	)			(63	)
Change in Income Tax Payable or Recoverable			93				(53	)			(102	)
Amortization of Premiums and Discounts on Fixed Maturities			183				163				147
Depreciation			55				54				58
Realized Investment Gains, Net			(402	)			(193	)			(288	)
Other, Net			(20	)			84				(27	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			1,731				2,299				1,878
Cash Flows from Investing Activities
Proceeds from Fixed Maturities
Sales			2,449				2,271				1,730
Maturities, Calls and Redemptions			4,909				4,290				3,540
Proceeds from Sales of Equity Securities			545				160				167
Purchases of Fixed Maturities			(8,275	)			(7,247	)			(5,014	)
Purchases of Equity Securities			(113	)			(112	)			(95	)
Investments in Other Invested Assets, Net			498				293				285
Decrease (Increase) in Short Term Investments, Net			383				(629	)			11
Change in Receivable or Payable from Security Transactions not Settled, Net			(86	)			45				8
Purchases of Property and Equipment, Net			(52	)			(43	)			(52	)
Other, Net			(6	)			-				-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			252				(972	)			580
Cash Flows from Financing Activities
Repayment of Long Term Debt			(275	)			-				(400	)
Increase (Decrease) in Funds Held under Deposit Contracts			(6	)			(12	)			7
Proceeds from Issuance of Common Stock Under Stock-Based Employee Compensation Plans			38				74				80
Repurchase of Shares			(1,288	)			(959	)			(1,707	)
Dividends Paid to Shareholders			(450	)			(438	)			(450	)
NET CASH USED IN FINANCING ACTIVITIES			(1,981	)			(1,335	)			(2,470	)
Net Increase (Decrease) in Cash			2				(8	)			(12	)
Cash at Beginning of Year			50				58				70
CASH AT END OF YEAR		$	52			$	50			$	58

See accompanying notes.

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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies

(a)	Basis of Presentation

The Chubb Corporation (Chubb) is a holding company with subsidiaries principally engaged in the property and casualty insurance business. The property and casualty insurance subsidiaries (the P&C Group) underwrite most lines of property and casualty insurance in the United States, Canada, Europe, Australia and parts of Latin America and Asia. The geographic distribution of property and casualty business in the United States is broad with a particularly strong market presence in the Northeast.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of Chubb and its subsidiaries (collectively, the Corporation). Significant intercompany transactions have been eliminated in consolidation. The results of our operations in Australia, Brazil and other smaller foreign locations are recorded on a three month lag in our consolidated financial statements. Specific events having significant financial impact that occur during the lag period are included in the current period results.

The consolidated financial statements include amounts based on informed estimates and judgments of management for transactions that are not yet complete. Such estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain amounts in the consolidated financial statements for prior years have been reclassified to conform with the 2013 presentation.

(b)	Invested Assets

Short term investments, which have an original maturity of one year or less, are carried at amortized cost, which approximates fair value.

Fixed maturities, which include taxable and tax exempt bonds, are classified as available-for-sale and carried at fair value as of the balance sheet date. Taxable bonds include U.S. government and government agency and authority obligations, including taxable bonds issued by states, municipalities and political subdivisions within the United States, and foreign government and government agency obligations, corporate bonds and mortgage-backed securities. Corporate bonds include redeemable preferred stocks. Tax exempt bonds consist of bonds issued by states, municipalities and political subdivisions within the United States. Fixed maturities are purchased to support the investment strategies of the Corporation. These strategies are developed based on many factors including rate of return, maturity, credit risk, tax considerations and regulatory requirements. Fixed maturities may be sold prior to maturity to support the investment strategies of the Corporation.

Premiums and discounts arising from the purchase of fixed maturities are amortized using the interest method over the estimated remaining term of the securities. For mortgage-backed securities, prepayment assumptions are reviewed periodically and revised as necessary.

Equity securities, which include common stocks and non-redeemable preferred stocks, are carried at fair value as of the balance sheet date.

Unrealized appreciation or depreciation, including unrealized other-than-temporary impairment losses, of fixed maturities and equity securities carried at fair value is excluded from net income and is included, net of applicable deferred income tax, in other comprehensive income.

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(1)  Summary of Significant Accounting Policies (continued)

Other invested assets primarily include private equity limited partnerships which are carried at the Corporation's equity in the net assets of the partnerships based on valuations provided by the manager of each partnership. As a result of the timing of the receipt of valuation data from the investment managers, these investments are generally reported on a three month lag. Changes in the Corporation's equity in the net assets of the partnerships are included in net income as realized investment gains or losses. Other invested assets also include warrants, which are carried at fair value as of the balance sheet date. Changes in the fair value of warrants are included in net income as realized investment gains or losses.

Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold and are included in net income.

When the fair value of an investment is lower than its cost, an assessment is made to determine whether the decline is temporary or other than temporary. The assessment of other-than-temporary impairment of fixed maturities and equity securities is based on both quantitative criteria and qualitative information. A number of factors are considered including, but not limited to, the length of time and the extent to which the fair value has been less than the cost, the financial condition and near term prospects of the issuer, whether the issuer is current on contractually obligated interest and principal payments, general market conditions and industry or sector specific factors.

In determining whether fixed maturities are other than temporarily impaired, the Corporation is required to recognize an other-than-temporary impairment loss when it concludes it has the intent to sell or it is more likely than not it will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value or it is likely it will not recover the entire amortized cost value of an impaired security. If the Corporation has the intent to sell or it is more likely than not that the Corporation will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value, the security is written down to fair value and the entire amount of the writedown is included in net income as a realized investment loss. For all other impaired fixed maturities, when the impairment is determined to be other than temporary, the impairment loss is separated into the amount representing the credit loss and the amount representing the loss related to all other factors. The amount of the impairment loss that represents the credit loss is included in net income as a realized investment loss and the amount of the impairment loss that relates to all other factors is included in other comprehensive income.

For fixed maturities, the split between the amount of other-than-temporary impairment losses that represents credit losses and the amount that relates to all other factors is principally based on assumptions regarding the amount and timing of projected cash flows. For fixed maturities other than mortgage-backed securities, cash flow estimates are based on assumptions regarding the probability of default and estimates regarding the timing and amount of recoveries associated with a default. For mortgage-backed securities, cash flow estimates are based on assumptions regarding future prepayment rates, default rates, loss severity and timing of recoveries. The Corporation has developed the estimates of projected cash flows using information based on historical market data, industry analyst reports and forecasts and other data relevant to the collectibility of a security.

In determining whether equity securities are other than temporarily impaired, the Corporation considers its intent and ability to hold a security for a period of time sufficient to allow for the recovery of cost. If the decline in the fair value of an equity security is deemed to be other than temporary, the security is written down to fair value and the amount of the writedown is included in net income as a realized investment loss.

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Table of Contents

(1)  Summary of Significant Accounting Policies (continued)

(c)	Premium Revenues and Related Expenses

Insurance premiums are earned on a monthly pro rata basis over the terms of the policies and include estimates of audit premiums and premiums on retrospectively rated policies. Assumed reinsurance premiums are earned over the terms of the reinsurance contracts. Unearned premiums represent the portion of direct and assumed premiums written applicable to the unexpired terms of the insurance policies and reinsurance contracts in force.

Ceded reinsurance premiums are reflected in operating results over the terms of the reinsurance contracts. Prepaid reinsurance premiums represent the portion of premiums ceded to reinsurers applicable to the unexpired terms of the reinsurance contracts in force.

Reinsurance reinstatement premiums are recognized in the same period as the loss event that gave rise to the reinstatement premiums.

Acquisition costs that are directly related to the successful acquisition of new or renewal insurance contracts are deferred and amortized over the period in which the related premiums are earned. Such costs include commissions, premium taxes and certain other underwriting and policy issuance costs. Commissions received related to reinsurance premiums ceded are considered in determining net acquisition costs eligible for deferral. Deferred policy acquisition costs are reviewed to determine whether they are recoverable from future income. If such costs are deemed to be unrecoverable, they are expensed. Anticipated investment income is considered in the determination of the recoverability of deferred policy acquisition costs.

(d)	Unpaid Losses and Loss Expenses

Unpaid losses and loss expenses (also referred to as loss reserves) include the accumulation of individual case estimates for claims that have been reported and estimates of claims that have been incurred but not reported as well as estimates of the expenses associated with processing and settling all reported and unreported claims, less estimates of anticipated salvage and subrogation recoveries. Estimates are based upon past loss experience modified for current trends as well as prevailing economic, legal and social conditions. Loss reserves are not discounted to present value.

Loss reserves are regularly reviewed using a variety of actuarial techniques. Reserve estimates are updated as historical loss experience develops, additional claims are reported and/or settled and new information becomes available. Any changes in estimates are reflected in operating results in the period in which the estimates are changed.

Reinsurance recoverable on unpaid losses and loss expenses represents an estimate of the portion of gross loss reserves that will be recovered from reinsurers. Amounts recoverable from reinsurers are estimated using assumptions that are consistent with those used in estimating the gross losses associated with the reinsured policies. A provision for estimated uncollectible reinsurance is recorded based on periodic evaluations of balances due from reinsurers, the financial condition of the reinsurers, coverage disputes and other relevant factors.

(e)	Financial Products

Derivatives are carried at fair value as of the balance sheet date. Changes in fair value are recognized in net income in the period of the change and are included in other revenues.

Assets and liabilities related to the derivatives are included in other assets and other liabilities.

(f)

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of net assets acquired. Goodwill is tested for impairment at least annually.

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(1)  Summary of Significant Accounting Policies (continued)

(g)	Property and Equipment

Property and equipment used in operations, including certain costs incurred to develop or obtain computer software for internal use, are capitalized and carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Property and equipment are included in other assets.

(h)	Real Estate

Real estate properties are carried at cost less accumulated depreciation and any writedowns for impairment. Real estate properties are reviewed for impairment whenever events or circumstances indicate that the carrying value of such properties may not be recoverable. Measurement of such impairment is based on the fair value of the property. Real estate properties are included in other assets.

(i)	Income Taxes

Deferred income tax assets and liabilities are recognized for the expected future tax effects attributable to temporary differences between the financial reporting and tax bases of assets and liabilities, based on enacted tax rates and other provisions of tax law. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in net income in the period in which such change is enacted. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.

The Corporation does not consider the earnings of its foreign subsidiaries to be permanently reinvested. Accordingly, provision has been made for the expected U.S. federal income tax liabilities applicable to undistributed earnings of foreign subsidiaries.

(j)	Stock-Based Employee Compensation

The fair value method of accounting is used for stock-based employee compensation plans. Under the fair value method, compensation cost is measured based on the fair value of the award at the grant date and recognized over the requisite service period.

(k)	Foreign Exchange

Assets and liabilities relating to foreign operations are translated into U.S. dollars using current exchange rates as of the balance sheet date. Revenues and expenses are translated into U.S. dollars using the average exchange rates during the year.

The functional currency of foreign operations is generally the currency of the local operating environment since business is primarily transacted in such local currency. Translation gains and losses, net of applicable income tax, are excluded from net income and are credited or charged directly to other comprehensive income.

(l)	Cash Flow Information

In the statement of cash flows, short term investments are not considered to be cash equivalents. The effect of changes in foreign exchange rates on cash balances was insignificant.

In 2013, the Corporation exchanged its holdings of common stock and warrants of Alterra Capital Holdings Limited, with a cost basis of $177 million and a carrying value of $63 million, respectively, for common stock of Markel Corporation, valued at $226 million, and cash of $98 million, as a result of a business combination. The noncash portions of the transaction have been excluded from the statement of cash flows.

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(2)  Invested Assets and Related Income

(a)  The amortized cost and fair value of fixed maturities and equity securities were as follows:

		December 31, 2013
		Amortized Cost				Gross Unrealized Appreciation				Gross Unrealized Depreciation				Fair Value
		(in millions)
Fixed maturities
Tax exempt		$	17,808			$	802			$	189			$	18,421
Taxable
U.S. government and government agency and authority obligations			784				27				9				802
Corporate bonds			9,032				370				88				9,314
Foreign government and government agency obligations			6,719				206				35				6,890
Residential mortgage-backed securities			277				23				1				299
Commercial mortgage-backed securities			1,339				29				3				1,365
			18,151				655				136				18,670
Total fixed maturities		$	35,959			$	1,457			$	325			$	37,091
Equity securities		$	1,057			$	756			$	3			$	1,810

		December 31, 2012
		Amortized Cost				Gross Unrealized Appreciation				Gross Unrealized Depreciation				Fair Value
		(in millions)
Fixed maturities
Tax exempt		$	18,410			$	1,522			$	19			$	19,913
Taxable
U.S. government and government agency and authority obligations			973				66				-				1,039
Corporate bonds			7,331				609				3				7,937
Foreign government and government agency obligations			6,614				395				1				7,008
Residential mortgage-backed securities			421				36				2				455
Commercial mortgage-backed securities			1,649				76				1				1,724
			16,988				1,182				7				18,163
Total fixed maturities		$	35,398			$	2,704			$	26			$	38,076
Equity securities		$	1,244			$	453			$	34			$	1,663

The following table summarizes the fair value of the tax exempt fixed maturities at December 31, 2013 and 2012:

		2013				2012
		(in millions)
Special revenue bonds		$	11,717			$	12,233
State general obligation bonds			2,292				2,246
Municipal and political subdivision general obligation bonds			2,220				2,505
Pre-refunded bonds			2,192				2,929
		$	18,421			$	19,913

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Table of Contents

(2)  Invested Assets and Related Income (continued)

Special revenue bonds are supported by income streams generated in a broad range of sectors, primarily highways, hospitals, water and sewer utilities, electric utilities, airports, universities and housing, as well as specifically pledged tax revenues. The special revenue bond holdings are well-diversified and spread relatively evenly over these sectors. An irrevocable trust containing U.S. government or government agency obligations has been established to fund the remaining principal and interest payments of the pre-refunded bonds.

The following table summarizes the fair value and amortized cost of the tax exempt fixed maturities other than pre-refunded bonds held at December 31, 2013 and 2012, for the five states having the largest concentration of issuers within the tax exempt fixed maturity portfolio. The remainder of tax exempt fixed maturities were issued by a broad range of other states and municipalities and political subdivisions within those states. In the following table, "state" identifies the issuer or the location of the issuing municipality or political subdivision within a state.

		December 31, 2013
		Fair Value
State		Special Revenue Bonds				Municipal and  Political Subdivision General Obligations				State General Obligations				Total				Amortized Cost
		(in millions)
Texas		$	930			$	830			$	230			$	1,990			$	1,904
New York			1,611				197				31				1,839				1,809
California			859				82				198				1,139				1,093
Illinois			577				483				56				1,116				1,094
Florida			757				38				108				903				877

		December 31, 2012
		Fair Value
State		Special Revenue Bonds				Municipal and Political Subdivision General Obligations				State General Obligations				Total				Amortized Cost
		(in millions)
Texas		$	1,041			$	1,053			$	267			$	2,361			$	2,171
New York			1,401				169				33				1,603				1,487
Illinois			683				518				59				1,260				1,161
California			888				107				194				1,189				1,089
Florida			771				27				114				912				844

At December 31, 2013 and 2012, foreign government and government agency fixed maturities consisted of high quality fixed maturities primarily issued by national governments and, to a lesser extent, government agencies, regional governments and supranational organizations.

The following table summarizes the fair value and amortized cost of the foreign government and government agency fixed maturities held at December 31, 2013 and 2012, for the five countries having the largest concentration of issuers within the foreign government and government agency fixed maturity portfolio. In the following table, "country" identifies the issuer or the location of the issuing government agency or regional government within a country.

		2013								2012
Country		Fair Value				Amortized Cost				Fair Value				Amortized Cost
		(in millions)
Canada		$	1,993			$	1,953			$	2,157			$	2,060
Germany			1,241				1,211				1,127				1,070
United Kingdom			1,026				1,004				1,024				939
Australia			739				700				742				663
Brazil			270				270				310				310

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(2)  Invested Assets and Related Income (continued)

At December 31, 2013 and 2012, the foreign government and government agency fixed maturities also included $547 million and $517 million, respectively, of fixed maturities issued by supranational organizations.

The fair value and amortized cost of fixed maturities at December 31, 2013 by contractual maturity were as follows:

		Fair Value				Amortized Cost
		(in millions)
Due in one year or less		$	2,241			$	2,212
Due after one year through five years			13,769				13,202
Due after five years through ten years			11,743				11,294
Due after ten years			7,674				7,635
			35,427				34,343
Residential mortgage-backed securities			299				277
Commercial mortgage-backed securities			1,365				1,339
		$	37,091			$	35,959

Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations.

The Corporation's equity securities comprise a diversified portfolio of primarily U.S. publicly-traded common stocks.

The Corporation is involved in the normal course of business with variable interest entities (VIEs) primarily as a passive investor in residential mortgage-backed securities, commercial mortgage-backed securities and private equity limited partnerships issued by third party VIEs. The Corporation is not the primary beneficiary of these VIEs. The Corporation's maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the Corporation's consolidated balance sheet and any unfunded partnership commitments.

(b)  The components of unrealized appreciation or depreciation, including unrealized other-than-temporary impairment losses, of investments carried at fair value were as follows:

		December 31
		2013				2012
		(in millions)
Fixed maturities
Gross unrealized appreciation		$	1,457			$	2,704
Gross unrealized depreciation			325				26
			1,132				2,678
Equity securities
Gross unrealized appreciation			756				453
Gross unrealized depreciation			3				34
			753				419
			1,885				3,097
Deferred income tax liability			660				1,084
		$	1,225			$	2,013

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(2)  Invested Assets and Related Income (continued)

The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2013, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.

		Less Than 12 Months								12 Months or More								Total
		Fair Value				Gross Unrealized Depreciation				Fair Value				Gross Unrealized Depreciation				Fair Value				Gross Unrealized Depreciation
		(in millions)
Fixed maturities
Tax exempt		$	3,417			$	144			$	307			$	45			$	3,724			$	189
Taxable
U.S. government and government agency and authority obligations			213				6				35				3				248				9
Corporate bonds			2,526				76				222				12				2,748				88
Foreign government and government agency obligations			1,735				32				75				3				1,810				35
Residential mortgage-backed securities			4				-				14				1				18				1
Commercial mortgage-backed securities			153				1				39				2				192				3
			4,631				115				385				21				5,016				136
Total fixed maturities			8,048				259				692				66				8,740				325
Equity securities			41				3				-				-				41				3
		$	8,089			$	262			$	692			$	66			$	8,781			$	328

At December 31, 2013, approximately 1,160 individual fixed maturities and 10 individual equity securities were in an unrealized loss position. The Corporation does not have the intent to sell and it is not more likely than not that the Corporation will be required to sell these fixed maturities before the securities recover to their amortized cost value. In addition, the Corporation believes that none of the declines in the fair values of these fixed maturities relate to credit losses. The Corporation has the intent and ability to hold the equity securities in an unrealized loss position for a period of time sufficient to allow for the recovery of cost. The Corporation believes that none of the declines in the fair value of these fixed maturities and equity securities were other than temporary at December 31, 2013.

The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2012, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.

		Less Than 12 Months								12 Months or More								Total
		Fair Value				Gross Unrealized Depreciation				Fair Value				Gross Unrealized Depreciation				Fair Value				Gross Unrealized Depreciation
		(in millions)
Fixed maturities
Tax exempt		$	344			$	6			$	104			$	13			$	448			$	19
Taxable
U.S. government and government agency and authority obligations			28				-				20				-				48				-
Corporate bonds			289				2				14				1				303				3
Foreign government and government agency obligations			429				1				13				-				442				1
Residential mortgage-backed securities			1				-				19				2				20				2
Commercial mortgage-backed securities			105				1				3				-				108				1
			852				4				69				3				921				7
Total fixed maturities			1,196				10				173				16				1,369				26
Equity securities			182				21				63				13				245				34
		$	1,378			$	31			$	236			$	29			$	1,614			$	60

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(2)  Invested Assets and Related Income (continued)

The change in unrealized appreciation or depreciation of investments carried at fair value, including the change in unrealized other-than-temporary impairment losses, was as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Change in unrealized appreciation of fixed maturities		$	(1,546	)		$	256			$	964
Change in unrealized appreciation of equity securities			334				171				(17	)
			(1,212	)			427				947
Deferred income tax (credit)			(424	)			150				331
		$	(788	)		$	277			$	616

(c)  The sources of net investment income were as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Fixed maturities		$	1,380			$	1,465			$	1,549
Equity securities			38				40				34
Short term investments			16				18				16
Other			31				33				45
Gross investment income			1,465				1,556				1,644
Investment expenses			49				38				39
		$	1,416			$	1,518			$	1,605

(d)  Realized investment gains and losses were as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Fixed maturities
Gross realized gains		$	62			$	124			$	70
Gross realized losses			(42	)			(20	)			(39	)
Other-than-temporary impairment losses			(2	)			(5	)			(1	)
			18				99				30
Equity securities
Gross realized gains			204				68				74
Gross realized losses			(1	)			-				(1	)
Other-than-temporary impairment losses			(9	)			(40	)			(22	)
			194				28				51
Other invested assets			190				66				207
		$	402			$	193			$	288

(e)  As of December 31, 2013 and 2012, fixed maturities still held by the Corporation for which a portion of their other-than-temporary impairment losses were recognized in other comprehensive income had cumulative credit-related losses of $20 million and $22 million, respectively, recognized in net income.

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(3)  Deferred Policy Acquisition Costs

Policy acquisition costs deferred and the related amortization reflected in operating results were as follows:

		Years Ended December 31
		2013				2012				2011
						(in millions)
Balance, beginning of year		$	1,206			$	1,210			$	1,142
Costs deferred during year
Commissions and brokerage			1,979				1,919				1,910
Premium taxes and assessments			263				247				235
Underwriting and policy issuance costs			271				248				248
			2,513				2,414				2,393
Foreign currency translation effect			(10	)			(7	)			5
Amortization during year			(2,454	)			(2,411	)			(2,330	)
Balance, end of year		$	1,255			$	1,206			$	1,210

(4)  Property and Equipment

Property and equipment included in other assets were as follows:

		December 31
		2013				2012
		(in millions)
Cost		$	501			$	517
Accumulated depreciation			243				248
		$	258			$	269

Depreciation expense related to property and equipment was $55 million, $54 million and $58 million for 2013, 2012, and 2011, respectively.

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(5)  Unpaid Losses and Loss Expenses

(a)  The process of establishing loss reserves is complex and imprecise as it must take into consideration many variables that are subject to the outcome of future events. As a result, informed subjective estimates and judgments as to the P&C Group's ultimate exposure to losses are an integral component of the loss reserving process. The loss reserve estimation process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is an appropriate basis for predicting future outcomes.

Most of the P&C Group's loss reserves relate to long tail liability classes of business. For many liability claims, significant periods of time, ranging up to several years or more, may elapse between the occurrence of the loss, the reporting of the loss and the settlement of the claim. The longer the time span between the incidence of a loss and the settlement of the claim, the more the ultimate settlement amount can vary.

There are numerous factors that contribute to the inherent uncertainty in the process of establishing loss reserves. Among these factors are changes in the inflation rate for goods and services related to covered damages such as medical care and home repair costs; changes in the judicial interpretation of policy provisions relating to the determination of coverage; changes in the general attitude of juries in the determination of liability and damages; legislative actions; changes in the medical condition of claimants; changes in the estimates of the number and/or severity of claims that have been incurred but not reported as of the date of the financial statements; and changes in the P&C Group's book of business, underwriting standards and/or claim handling procedures.

In addition, the uncertain effects of emerging or potential claims and coverage issues that arise as legal, judicial and social conditions change must be taken into consideration. These issues have had, and may continue to have, a negative effect on loss reserves by either extending coverage beyond the original underwriting intent or by increasing the number or size of claims. As a result of such issues, the uncertainties inherent in estimating ultimate claim costs on the basis of past experience have grown, further complicating the already complex loss reserving process.

Management believes that the aggregate loss reserves of the P&C Group at December 31, 2013 were adequate to cover claims for losses that had occurred as of that date, including both those known 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 significant uncertainties inherent in the loss reserving process, it is possible that management's estimate of the ultimate liability for losses that had occurred as of December 31, 2013 may change, which could have a material effect on the Corporation's results of operations and financial condition.

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(5)  Unpaid Losses and Loss Expenses (continued)

(b)  A reconciliation of the beginning and ending liability for unpaid losses and loss expenses, net of reinsurance recoverable, and a reconciliation of the net liability to the corresponding liability on a gross basis is as follows:

		2013				2012				2011
		(in millions)
Gross liability, beginning of year		$	23,963			$	23,068			$	22,718
Reinsurance recoverable, beginning of year			1,941				1,739				1,817
Net liability, beginning of year			22,022				21,329				20,901
Net incurred losses and loss expenses related to
Current year			7,232				8,121				8,174
Prior years			(712	)			(614	)			(767	)
			6,520				7,507				7,407
Net payments for losses and loss expenses related to
Current year			2,150				2,323				2,746
Prior years			4,952				4,493				4,300
			7,102				6,816				7,046
Foreign currency translation effect			(96	)			2				67
Net liability, end of year			21,344				22,022				21,329
Reinsurance recoverable, end of year			1,802				1,941				1,739
Gross liability, end of year		$	23,146			$	23,963			$	23,068

Changes in loss reserve estimates are unavoidable because such estimates are subject to the outcome of future events. Loss trends vary and time is required for changes in trends to be recognized and confirmed. During 2013, the P&C Group experienced overall favorable development of $712 million on net unpaid losses and loss expenses established as of the previous year end. This compares with favorable prior year development of $614 million in 2012 and $767 million in 2011. Such favorable development was reflected in operating results in these respective years.

The net favorable development of $712 million in 2013 was due to various factors. Favorable development of about $265 million in the aggregate, including $30 million related to catastrophes, was experienced in the personal and commercial property classes, mostly related to the 2012 and 2011 accident years. The severity and frequency of late developing property claims that emerged during 2013 were lower than expected, including those related to catastrophes, and the development of existing case reserves was more favorable than expected. Overall favorable development of about $260 million was experienced in the professional liability classes other than fidelity. This favorable development was driven by the directors and officers liability and fiduciary liability classes, partially offset by adverse development in the errors and omissions liability and employment practices liability classes. The reported loss activity was less than expected, with aggregate favorable emergence from accident years 2010 and prior. Favorable development of about $160 million in the aggregate was experienced in the personal and commercial liability classes. The most significant favorable development occurred in the excess liability classes, particularly in accident years 2010 and prior. There was some offsetting adverse development in other liability classes, most notably due to $106 million of incurred losses related to asbestos and toxic waste claims in older accident years. Overall, prior period liability claims were lower than expected, particularly the severity of such claims, and the effects of underwriting changes that affected these years have been more positive than expected. Unfavorable development of about $50 million was experienced in the fidelity class due to higher than expected reported loss emergence, related mostly to accident years subsequent to 2007. Favorable development of about $35 million was experienced in the personal automobile business due primarily to more favorable case reserve development and lower severity of prior period claims than expected. Favorable development of about $30 million was experienced in the surety business due to lower than expected loss emergence in recent accident years.

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(5)  Unpaid Losses and Loss Expenses (continued)

The net favorable development of $614 million in 2012 was due to various factors. Favorable development of about $250 million in the aggregate was experienced in the personal and commercial liability classes. The most significant favorable development occurred in accident years 2006 to 2009, which more than offset adverse development in accident years 2002 and prior, which included $83 million of incurred losses related to asbestos and toxic waste claims. The overall frequency and severity of prior period liability claims were lower than expected and the effects of underwriting changes that affected these years have been more positive than expected, especially in the commercial excess liability class. Overall favorable development of about $200 million was experienced in the professional liability classes other than fidelity. This favorable development was driven by the directors and officers liability and fiduciary liability classes, partially offset by adverse development experienced in the errors and omissions liability and employment practices liability classes. The reported loss activity was less than expected, with aggregate favorable emergence from accident years 2008 and prior partly offset by some adverse emergence in the more recent accident years. Favorable development of about $125 million in the aggregate was experienced in the personal and commercial property classes, mostly related to the 2007 through 2011 accident years. The severity and frequency of late developing property claims that emerged during 2012 were lower than expected, including those related to catastrophes, and the development of existing case reserves was more favorable than expected. Unfavorable development of about $60 million was experienced in the fidelity class due to higher than expected reported loss emergence, related mostly to accident years 2008 through 2010. Favorable development of about $45 million was experienced in the runoff of our reinsurance assumed business due primarily to better than expected reported loss activity from cedants. Favorable development of about $40 million was experienced in the personal automobile business due primarily to lower than expected frequency of prior period claims. Favorable development of about $25 million was experienced in the surety business due to lower than expected loss emergence in recent accident years.

The net favorable development of $767 million in 2011 was due to various factors. Favorable development of about $355 million in the aggregate was experienced in the personal and commercial liability classes. Favorable development in the more recent accident years, particularly in accident years 2004 to 2009, more than offset adverse development in accident years 2001 and prior, which included $72 million of incurred losses related to asbestos and toxic waste claims. The overall frequency and severity of prior period liability claims were lower than expected and the effects of underwriting changes that affected these years have been more positive than expected, especially in the commercial excess liability class. Overall favorable development of about $310 million was experienced in the professional liability classes other than fidelity. The most significant amount of favorable development occurred in the directors and officers liability class, particularly from our business outside the United States, with additional favorable development in the fiduciary liability class, partially offset by adverse development experienced in the errors and omissions liability class. The aggregate reported loss activity related to accident years 2008 and prior was less than expected. Favorable development of about $80 million in the aggregate was experienced in the personal and commercial property classes, primarily related to the 2009 and 2010 accident years. The severity and frequency of late developing property claims that emerged during 2011 were lower than expected. Unfavorable development of about $70 million was experienced in the fidelity class due to higher than expected reported loss emergence, related to the 2010 accident year and, to a lesser extent, the 2009 accident year. Favorable development of about $30 million was experienced in the personal automobile business due primarily to lower than expected frequency of prior year claims. Favorable development of about $30 million was experienced in the runoff of the reinsurance assumed business due primarily to better than expected reported loss activity from cedants. Favorable development of about $15 million was experienced in the surety business due to lower than expected loss emergence in recent accident years.

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(5)  Unpaid Losses and Loss Expenses (continued)

(c)  The estimation of loss reserves relating to asbestos and toxic waste claims on insurance policies written many years ago is subject to greater uncertainty than other types of claims due to inconsistent court decisions as well as judicial interpretations and legislative actions that in some instances have tended to broaden coverage beyond the original intent of such policies and in others have expanded theories of liability. The insurance industry as a whole is engaged in extensive litigation over coverage, accident year allocation and liability issues and is thus confronted with a continuing uncertainty in its efforts to quantify these exposures.

Asbestos remains the most significant and difficult mass tort for the insurance industry in terms of claims volume and dollar exposure. Asbestos claims relate primarily to bodily injuries asserted by those who came in contact with asbestos or products containing asbestos. Tort theory affecting asbestos litigation has evolved over the years. Early court cases established the "continuous trigger" theory with respect to insurance coverage. Under this theory, insurance coverage is deemed to be triggered from the time a claimant is first exposed to asbestos until the manifestation of any disease. This interpretation of a policy trigger can involve insurance policies over many years and increases insurance companies' exposure to liability.

New asbestos claims and new exposures on existing claims have continued despite the fact that usage of asbestos has declined since the mid-1970s. Many claimants were exposed to multiple asbestos products over an extended period of time. As a result, claim filings typically name dozens of defendants. The plaintiffs' bar has solicited new claimants through extensive advertising and through asbestos medical screenings. A vast majority of asbestos bodily injury claims have been filed by claimants who do not show any signs of asbestos related disease. New asbestos cases are often filed in those jurisdictions with a reputation for judges and juries that are sympathetic to plaintiffs.

Approximately 100 manufacturers and distributors of asbestos products have filed for bankruptcy protection as a result of asbestos related liabilities. A bankruptcy sometimes involves an agreement to a plan between the debtor and its creditors, including the creation of a trust to pay current and future asbestos claimants for their injuries. Although the debtor is negotiating in part with its insurers' money, insurers are generally given only limited opportunity to be heard. In addition to contributing to the overall number of claims, bankruptcy proceedings not only result in increased settlement demands against remaining solvent defendants, but also create the potential for recoveries from multiple trusts by the same claimant for the same alleged injuries.

There have been some positive legislative and judicial developments in the asbestos environment over the past several years. Various challenges to the mass screening of claimants have been mounted which have led to higher medical evidentiary standards. Also, a number of states have implemented legislative and judicial reforms that focus the courts' resources on the claims of the most seriously injured. Those who allege serious injury and can present credible evidence of their injuries are receiving priority trial settings in the courts, while those who have not shown any credible disease manifestation are having their hearing dates delayed or placed on an inactive docket, which preserves the right to pursue litigation in the future. Further, a number of key jurisdictions have adopted venue reform that requires plaintiffs to have a connection to the jurisdiction in order to file a complaint. In recognition that many aspects of bankruptcy plans are unfair to certain classes of claimants and to the insurance industry, these plans are being more closely scrutinized by the courts and rejected when appropriate. Finally, a number of jurisdictions have passed or are considering legislation that will require fuller disclosure by plaintiffs of amounts received from asbestos bankruptcy trusts.

The P&C Group's most significant individual asbestos exposures involve products liability on the part of "traditional" defendants who were engaged in the manufacture, distribution or installation of asbestos products. The P&C Group wrote excess liability and/or general liability coverages for these insureds. While these insureds are relatively few in number, their exposure has become substantial due to the increased volume of claims, the erosion of the underlying limits and the bankruptcies of target defendants.

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(5)  Unpaid Losses and Loss Expenses (continued)

The P&C Group's other asbestos exposures involve products and non-products liability on the part of "peripheral" defendants, including a mix of manufacturers, distributors and installers of certain products that contain asbestos in small quantities and owners or operators of properties where asbestos was present. 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 viable peripheral parties with greater frequency and, in many cases, for large awards.

Asbestos claims against the major manufacturers, distributors or installers of asbestos products were typically presented under the products liability section of primary general liability policies as well as under excess liability policies, both of which typically had aggregate limits that capped an insurer's exposure. In recent years, a number of asbestos claims by insureds are being presented as "non-products" claims, such as those by installers of asbestos products and by property owners or operators who allegedly had asbestos on their property, under the premises or operations section of primary general liability policies. Unlike products exposures, these non-products exposures typically had no aggregate limits on coverage, creating potentially greater exposure. Further, in an effort to seek additional insurance coverage, some insureds with installation activities who have substantially eroded their products coverage are presenting new asbestos claims as non-products operations claims or attempting to reclassify previously settled products claims as non-products claims to restore a portion of previously exhausted products aggregate limits. It is difficult to predict whether insureds will be successful in asserting claims under non-products coverage or whether insurers will be successful in asserting additional defenses. Accordingly, the ultimate cost to insurers of the claims for coverage not subject to aggregate limits is uncertain.

Various U.S. federal proposals to solve the ongoing asbestos litigation crisis have been considered by the U.S. Congress over the years, but none have yet been enacted. The prospect of federal asbestos reform legislation remains uncertain.

In establishing asbestos reserves, the exposure presented by each insured is evaluated. As part of this evaluation, consideration is given to a variety of factors including the available insurance coverage; limits and deductibles; the jurisdictions involved; the number of claimants; the disease mix exhibited by the claimants; the past settlement values of similar claims; the potential role of other insurance, particularly underlying coverage below excess liability policies; potential bankruptcy impact; relevant judicial interpretations; and applicable coverage defenses, including asbestos exclusions.

Significant uncertainty remains as to the ultimate liability of the P&C Group related to asbestos related claims. This uncertainty is due to several factors including the long latency period between asbestos exposure and disease manifestation and the resulting potential for involvement of multiple policy periods for individual claims; plaintiffs' expanding theories of liability and increased focus on peripheral defendants; the volume of claims by unimpaired plaintiffs and the extent to which they can be precluded from making claims; the volume of claims by severely impaired plaintiffs, such as those with mesothelioma, and the size of settlements and judgments received by those plaintiffs; the volume of claims by plaintiffs suffering from other malignancies such as lung cancer and their ability to establish a causal link between their disease and exposure to asbestos; the efforts by insureds to claim the right to non-products coverage not subject to aggregate limits; the number of insureds seeking bankruptcy protection as a result of asbestos related liabilities; the ability of claimants to bring a claim in a state in which they have no residency or exposure; the impact of the exhaustion of primary limits and the resulting increase in claims on excess liability policies that the P&C Group has issued; inconsistent court decisions and diverging legal interpretations; and the possibility, however remote, of federal legislation that would address the asbestos problem. These significant uncertainties are not likely to be resolved in the near future.

Toxic waste claims relate primarily to pollution and related cleanup costs. The P&C Group's insureds have two potential areas of exposure: hazardous waste dump sites and pollution at the insured site primarily from underground storage tanks and manufacturing processes.

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(5)  Unpaid Losses and Loss Expenses (continued)

The U.S. federal Comprehensive Environmental Response Compensation and Liability Act of 1980 (Superfund) has been interpreted to impose strict, retroactive and joint and several liability on potentially responsible parties (PRPs) for the cost of remediating hazardous waste sites. Most sites have multiple PRPs.

Most PRPs named to date are parties who have been generators, transporters, past or present landowners or past or present site operators. Insurance policies issued to PRPs were not intended to cover claims arising from gradual pollution. Environmental remediation claims tendered by PRPs and others to insurers have frequently resulted in disputes over insurers' contractual obligations with respect to pollution claims. The resulting litigation against insurers extends to issues of liability, coverage and other policy provisions.

There is substantial uncertainty involved in estimating the P&C Group's liabilities related to these claims. First, the liabilities of the claimants are extremely difficult to estimate. At any given waste site, the allocation of remediation costs among governmental authorities and the PRPs varies greatly depending on a variety of factors. Second, different courts have addressed liability and coverage issues regarding pollution claims and have reached inconsistent conclusions in their interpretation of several issues. These significant uncertainties are not likely to be resolved definitively in the near future.

Uncertainties also remain as to the Superfund law itself. Superfund's taxing authority expired on December 31, 1995 and has not been re-enacted. Federal legislation appears to be at a standstill. At this time, it is not possible to predict the direction that any reforms may take, when they may occur or the effect that any changes may have on the insurance industry.

Without federal movement on Superfund reform, the enforcement of Superfund liability has occasionally shifted to the states. States are being forced to reconsider state-level cleanup statutes and regulations. As individual states move forward, the potential for conflicting state regulation becomes greater. In a few states, cases have been brought against insureds or directly against insurance companies for environmental pollution and natural resources damages. To date, only a few natural resource claims have been filed and they are being vigorously defended. Significant uncertainty remains as to the cost of remediating the state sites. Because of the large number of state sites, such sites could prove even more costly in the aggregate than Superfund sites.

In establishing toxic waste reserves, the exposure presented by each insured is evaluated. As part of this evaluation, consideration is given to a variety of factors including: the probable liability, available insurance coverage, allocation of potential loss to the appropriate accident year, past settlement values of similar claims, relevant judicial interpretations, applicable coverage defenses as well as facts that are unique to each insured.

Management believes that the loss reserves carried at December 31, 2013 for asbestos and toxic waste claims were adequate. However, given the judicial decisions and legislative actions that have broadened the scope of coverage and expanded theories of liability in the past and the possibilities of similar interpretations in the future, it is possible that the estimate of loss reserves relating to these exposures may increase in future periods as new information becomes available and as claims develop.

(6)  Debt and Credit Arrangements

(a)   Long term debt consisted of the following:

		December 31
		2013				2012
		(in millions)
5.2% notes due April 1, 2013		$	-			$	275
5.75% notes due May 15, 2018			600				600
6.6% debentures due August 15, 2018			100				100
6.8% debentures due November 15, 2031			200				200
6% notes due May 11, 2037			800				800
6.5% notes due May 15, 2038			600				600
6.375% capital securities due March 29, 2067			1,000				1,000
		$	3,300			$	3,575

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(6)  Debt and Credit Arrangements (continued)

All of the outstanding notes and debentures are unsecured obligations of Chubb. Chubb generally may redeem some or all of the notes and debentures prior to maturity in accordance with the terms of each debt instrument.

Chubb has outstanding $1.0 billion of unsecured junior subordinated capital securities. The capital securities will become due on April 15, 2037, the scheduled maturity date, but only to the extent that Chubb has received sufficient net proceeds from the sale of certain qualifying capital securities. Chubb must use its commercially reasonable efforts, subject to certain market disruption events, to sell enough qualifying capital securities to permit repayment of the capital securities on the scheduled maturity date or as soon thereafter as possible. Any remaining outstanding principal amount will be due on March 29, 2067, the final maturity date. The capital securities bear interest at a fixed rate of 6.375% through April 14, 2017. Thereafter, the capital securities will bear interest at a rate equal to the three-month LIBOR rate plus 2.25%. Subject to certain conditions, Chubb has the right to defer the payment of interest on the capital securities for a period not exceeding ten consecutive years. During any such period, interest will continue to accrue and Chubb generally may not declare or pay any dividends on or purchase any shares of its capital stock.

In connection with the issuance of the capital securities, Chubb entered into a replacement capital covenant in which it agreed that it will not repay, redeem, or purchase the capital securities before March 29, 2047, unless, subject to certain limitations, it has received proceeds from the sale of specified replacement capital securities. The replacement capital covenant is not intended for the benefit of holders of the capital securities and may not be enforced by them. The replacement capital covenant is for the benefit of holders of one or more designated series of Chubb's indebtedness, which will initially be its 6.8% debentures due November 15, 2031.

Subject to the replacement capital covenant, the capital securities may be redeemed, in whole or in part, at any time on or after April 15, 2017 at a redemption price equal to the principal amount plus any accrued interest or prior to April 15, 2017 at a redemption price equal to the greater of (i) the principal amount or (ii) a make-whole amount, in each case plus any accrued interest.

The amounts of long term debt due annually during the five years subsequent to December 31, 2013 are as follows:

Years Ending December 31		(in millions)
2014		$	-
2015			-
2016			-
2017			-
2018			700

(b)  Interest costs of $213 million, $224 million and $245 million were incurred in 2013, 2012 and 2011, respectively. Interest paid was $213 million, $220 million and $244 million in 2013, 2012 and 2011, respectively.

(c)  Chubb has a revolving credit agreement with a syndicate of banks that provides for up to $500 million of unsecured borrowings. The revolving credit facility is available for general corporate purposes. The agreement has a maturity date of September 24, 2017. Various interest rate options are available to Chubb, all of which are based on market interest rates. The agreement contains customary restrictive covenants, including a covenant to maintain a minimum adjusted consolidated shareholders' equity. At December 31, 2013, Chubb was in compliance with all such covenants. Chubb is permitted to request an increase in the credit available under the agreement, no more than two times per year, up to a maximum facility amount of $750 million. Chubb is permitted to request on two occasions, at any time during the term of the agreement, an extension of the maturity date for an additional one year period. There have been no borrowings under this agreement. On the maturity date of the agreement, any borrowings then outstanding become payable.

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(7)  Federal and Foreign Income Tax

(a)  Income tax expense and taxes paid consisted of the following components:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Income tax expense
Current tax
United States		$	791			$	276			$	260
Foreign			91				143				236
Deferred tax, principally United States			10				32				25
		$	892			$	451			$	521
Federal and foreign income taxes paid		$	789			$	472			$	598

Income before federal and foreign income taxes from U.S. operations was $2,766 million, $1,373 million and $1,666 million in 2013, 2012 and 2011, respectively. Income before federal and foreign income taxes from foreign operations was $471 million, $623 million and $533 million in 2013, 2012 and 2011, respectively.

(b)  The effective income tax rate is different than the statutory federal corporate tax rate. The reasons for the different effective tax rate were as follows:

		Years Ended December 31
		2013								2012								2011
		Amount				% of Pre-Tax Income				Amount				% of Pre-Tax Income				Amount				% of Pre-Tax Income
		(in millions)
Income before federal and foreign income tax		$	3,237							$	1,996							$	2,199
Tax at statutory federal income tax rate		$	1,133				35.0	%		$	699				35.0	%		$	770				35.0	%
Tax exempt interest income			(222	)			(6.8	)			(233	)			(11.7	)			(243	)			(11.0	)
Other, net			(19	)			(.6	)			(15	)			(.7	)			(6	)			(.3	)
Federal and foreign income tax		$	892				27.6	%		$	451				22.6	%		$	521				23.7	%

(c)  The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities were as follows:

		December 31
		2013				2012
		(in millions)
Deferred income tax assets
Unpaid losses and loss expenses		$	524			$	605
Unearned premiums			350				341
Foreign tax credits			867				870
Employee compensation			142				119
Postretirement benefits			95				324
Other-than-temporary impairment losses			291				294
Total			2,269				2,553
Deferred income tax liabilities
Deferred policy acquisition costs			356				341
Unremitted earnings of foreign subsidiaries			970				951
Unrealized appreciation of investments			660				1,084
Other invested assets			184				225
Other, net			52				114
Total			2,222				2,715
Net deferred income tax asset (liability)		$	47			$	(162	)

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(7)  Federal and Foreign Income Tax (continued)

Deferred income tax assets were established related to the expected future U.S. tax benefit of losses incurred by a foreign subsidiary of the Corporation. Realization of these deferred tax assets depends on the subsidiary's ability to generate sufficient taxable income in future periods. A valuation allowance of $13 million and $12 million was recorded at December 31, 2013 and 2012, respectively, to reflect management's assessment that the realization of a portion of the deferred tax assets is uncertain due to the inability of the foreign subsidiary to generate sufficient taxable income in the near term. Although realization of the remaining deferred tax assets is not assured, management believes it is more likely than not that such deferred tax assets will be realized.

(d)  Chubb and its U.S. subsidiaries file a consolidated federal income tax return with the U.S. Internal Revenue Service (IRS). The Corporation also files income tax returns with various state and foreign tax authorities. The U.S. income tax returns for years prior to 2010 are no longer subject to examination by the IRS. The examination of the U.S. income tax returns for 2010 and 2011 is expected to be completed in 2014. Management does not anticipate any assessments for tax years that remain subject to examination that would have a material effect on the Corporation's financial position or results of operations.

(8)  Reinsurance

In the ordinary course of business, the P&C Group assumes and cedes reinsurance with other insurance companies. Reinsurance is ceded to provide greater diversification of risk and to limit the P&C Group's maximum net loss arising from large risks or catastrophic events.

A large portion of the P&C Group's ceded reinsurance is effected under contracts known as treaties under which all risks meeting prescribed criteria are automatically covered. Most of these arrangements consist of excess of loss and catastrophe contracts that protect against a specified part or all of certain types of losses over stipulated amounts arising from any one occurrence or event. In certain circumstances, reinsurance is also effected by negotiation on individual risks.

Ceded reinsurance contracts do not relieve the P&C Group of the primary obligation to its policyholders. Thus, an exposure exists with respect to reinsurance ceded to the extent that any reinsurer is unable or unwilling to meet its obligations assumed under the reinsurance contracts. The P&C Group monitors the financial strength of its reinsurers on an ongoing basis.

Premiums earned and insurance losses and loss expenses are reported net of reinsurance in the consolidated statements of income.

The effect of reinsurance on the premiums written and earned of the P&C Group was as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Direct premiums written		$	12,804			$	12,647			$	12,452
Assumed reinsurance			503				423				398
Ceded reinsurance			(1,083	)			(1,200	)			(1,092	)
Net premiums written		$	12,224			$	11,870			$	11,758
Direct premiums earned		$	12,717			$	12,596			$	12,387
Assumed reinsurance			476				422				365
Ceded reinsurance			(1,127	)			(1,180	)			(1,108	)
Net premiums earned		$	12,066			$	11,838			$	11,644

Ceded losses and loss expenses, which reduce losses and loss expenses incurred, were $400 million, $586 million and $308 million in 2013, 2012, and 2011, respectively.

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(9)  Stock-Based Employee Compensation Plans

The Corporation has a stock-based employee compensation plan, The Chubb Corporation Long-Term Incentive Plan. The compensation cost with respect to the plan was $89 million, $84 million and $82 million in 2013, 2012 and 2011, respectively. The total income tax benefit included in net income with respect to the stock-based compensation arrangement was $31 million in 2013 and $29 million in both 2012 and 2011.

As of December 31, 2013, there was $80 million of unrecognized compensation cost related to nonvested awards. That cost is expected to be reflected in operating results over a weighted average period of 1.8 years.

The Long-Term Incentive Plan provides for the granting of restricted stock units, restricted stock, performance units, stock options and other stock-based awards to the Corporation's employees. The maximum number of shares of Chubb's common stock with respect to which stock-based awards may be granted under the plan most recently approved by shareholders is 8,650,000 shares. Additional shares of Chubb's common stock may also become available for grant in connection with the cancellation, forfeiture and/or settlement of awards previously granted. At December 31, 2013, 6,891,434 shares were available for grant.

Restricted Stock Units, Performance Units and Restricted Stock

Restricted stock unit awards are payable in cash, in shares of Chubb's common stock or in a combination of both. Restricted stock units are not considered to be outstanding shares of common stock, have no voting rights and are subject to forfeiture during the restriction period. Holders of restricted stock units may receive dividend equivalents. Performance unit awards are based on the achievement of performance goals over three year performance periods. Performance unit awards are payable in cash, in shares of Chubb's common stock or in a combination of both. Restricted stock awards consist of shares of Chubb's common stock granted at no cost to the employees. Shares of restricted stock become outstanding when granted, receive dividends and have voting rights. The shares are subject to forfeiture and to restrictions that prevent their sale or transfer during the restriction period.

An amount equal to the fair value at the date of grant of restricted stock unit awards and performance unit awards is expensed over the vesting period. The weighted average fair value per share of the restricted stock units granted was $83.75, $68.64 and $60.58 in 2013, 2012 and 2011, respectively. The weighted average fair value per share of the performance units granted was $98.46, $63.38 and $64.34 in 2013, 2012 and 2011, respectively.

Additional information with respect to restricted stock units and performance units is as follows:

		Restricted Stock Units								Performance Units*
		Number of Shares				Weighted Average Grant Date Fair Value				Number of Shares				Weighted Average Grant Date Fair Value
Nonvested, January 1, 2013			2,418,946			$	59.54				973,909			$	63.88
Granted			668,754				83.75				408,989				98.46
Vested**			(852,786	)			51.42				(500,409	)			64.34
Forfeited			(107,267	)			63.00				(21,348	)			70.58
Nonvested, December 31, 2013			2,127,647				70.23				861,141				79.87

*

The number of shares earned may range from 0% to 200% of the performance units shown in the table above.

**

The performance units earned in 2013 were 132.6% of the vested shares shown in the table, or 663,542 shares.

The total fair value of restricted stock units that vested during 2013, 2012 and 2011 was $72 million, $74 million and $59 million, respectively. The total fair value of performance units that vested during 2013, 2012 and 2011 was $64 million, $70 million and $47 million, respectively.

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(9)  Stock-Based Employee Compensation Plans (continued)

Stock Options

Stock options are granted at exercise prices not less than the fair value of Chubb's common stock on the date of grant. The terms and conditions upon which options become exercisable may vary among grants. Options expire no later than ten years from the date of grant.

An amount equal to the fair value of stock options at the date of grant is expensed over the vesting period. The weighted average fair value per stock option granted during 2013, 2012 and 2011 was $14.95, $11.95 and $11.55, respectively. The fair value of each stock option was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

		2013				2012				2011
Risk-free interest rate			.9%				1.0%				2.4%
Expected volatility			24.4%				24.6%				24.2%
Dividend yield			2.1%				2.4%				2.6%
Expected average term (in years)			5.5				5.5				5.5

Additional information with respect to stock options is as follows:

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term				Aggregate Intrinsic Value
										(in years)				(in millions)
Outstanding, January 1, 2013			520,575			$	40.24
Granted			71,903				83.89
Exercised			(317,256	)			32.48
Forfeited			(23,535	)			39.94
Outstanding, December 31, 2013			251,687				62.52				6.6			$	9
Exercisable, December 31, 2013			127,475				48.93				4.7				6

The total intrinsic value of the stock options exercised during 2013, 2012 and 2011 was $16 million, $40 million and $35 million, respectively. The Corporation received cash of $10 million, $47 million and $53 million during 2013, 2012 and 2011, respectively, from the exercise of stock options. The tax benefit realized with respect to the exercise of stock options was $5 million, $13 million and $11 million during 2013, 2012 and 2011, respectively.

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(10) Employee Benefits

(a)  The Corporation has several non-contributory defined benefit pension plans covering substantially all employees. Prior to 2001, benefits were generally based on an employee's years of service and average compensation during the last five years of employment. Effective January 1, 2001, the Corporation changed the formula for providing pension benefits from the final average pay formula to a cash balance formula. Under the cash balance formula, a notional account is established for each employee, which is credited semi-annually with an amount equal to a percentage of eligible compensation based on age and years of service plus interest based on the account balance. Employees hired prior to 2001 will generally be eligible to receive vested benefits based on the higher of the final average pay or cash balance formulas.

The Corporation's funding policy is to contribute amounts that meet regulatory requirements plus additional amounts determined by management based on actuarial valuations, market conditions and other factors. This may result in no contribution being made in a particular year.

The Corporation also provides certain other postretirement benefits, principally health care and life insurance, to retired employees and their beneficiaries and covered dependents. Substantially all employees hired before January 1, 1999 may become eligible for these benefits upon retirement if they meet minimum age and years of service requirements. Health care coverage is contributory. Retiree contributions vary based upon a retiree's age, type of coverage and years of service with the Corporation. Life insurance coverage is non-contributory.

The Corporation funds a portion of the health care benefits obligation where such funding can be accomplished on a tax effective basis. Benefits are paid as covered expenses are incurred.

The funded status of the pension and other postretirement benefit plans at December 31, 2013 and 2012 was as follows:

		Pension Benefits								Other Postretirement Benefits
		2013				2012				2013				2012
		(in millions)
Benefit obligation, beginning of year		$	2,894			$	2,494			$	470			$	454
Service cost			95				88				13				12
Interest cost			125				124				19				20
Actuarial loss (gain)			(261	)			256				(97	)			(4	)
Benefits paid			(75	)			(74	)			(11	)			(12	)
Foreign currency translation effect			(1	)			6				-				-
Benefit obligation, end of year			2,777				2,894				394				470
Plan assets at fair value			2,717				2,305				130				96
Funded status at end of year, included in other liabilities		$	60			$	589			$	264			$	374

Net actuarial loss (gain) and prior service cost included in accumulated other comprehensive income that were not yet recognized as components of net benefit costs at December 31, 2013 and 2012 were as follows:

		Pension Benefits								Other Postretirement Benefits
		2013				2012				2013				2012
		(in millions)
Net actuarial loss (gain)		$	396			$	989			$	(13	)		$	108
Prior service cost			16				18				1				-
		$	412			$	1,007			$	(12	)		$	108

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(10) Employee Benefits (continued)

The accumulated benefit obligation for the pension plans was $2,381 million and $2,479 million at December 31, 2013 and 2012, respectively. The accumulated benefit obligation is the present value of pension benefits earned as of the measurement date based on employee service and compensation prior to that date. It differs from the pension benefit obligation in the table on the previous page in that the accumulated benefit obligation includes no assumptions regarding future compensation levels.

The weighted average assumptions used to determine the benefit obligations were as follows:

		Pension Benefits								Other Postretirement Benefits
		2013				2012				2013				2012
Discount rate			5.2	%			4.4	%			5.2	%			4.4	%
Rate of compensation increase			4.5				4.5				-				-

The Corporation made pension plan contributions of $74 million and $98 million during 2013 and 2012, respectively. The Corporation made other postretirement benefit plan contributions of $10 million during both 2013 and 2012.

The components of net pension and other postretirement benefit costs reflected in net income and other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31, 2013, 2012 and 2011 were as follows:

		Pension Benefits												Other Postretirement Benefits
		2013				2012				2011				2013				2012				2011
		(in millions)
Costs reflected in net income
Service cost		$	95			$	88			$	79			$	13			$	12			$	11
Interest cost			125				124				120				19				20				22
Expected return on plan assets			(165	)			(155	)			(140	)			(7	)			(6	)			(5	)
Amortization of net actuarial loss and prior service cost and other			90				80				68				3				3				3
		$	145			$	137			$	127			$	28			$	29			$	31
Changes in plan assets and benefit obligations recognized in other comprehensive income
Net actuarial loss (gain)		$	(505	)		$	139			$	355			$	(117	)		$	(11	)		$	45
Amortization of net actuarial loss and prior service cost and other			(90	)			(80	)			(68	)			(3	)			(3	)			(3	)
		$	(595	)		$	59			$	287			$	(120	)		$	(14	)		$	42

The estimated aggregate net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive income into net benefit costs during 2014 for the pension and other postretirement benefit plans is $34 million.

The weighted average assumptions used to determine net pension and other postretirement benefit costs were as follows:

		Pension Benefits												Other Postretirement Benefits
		2013				2012				2011				2013				2012				2011
Discount rate			4.4%				5.0%				5.75%				4.4%				5.0%				5.75%
Rate of compensation increase			4.5				4.5				4.5				-				-				-
Expected long term rate of return on plan assets			7.5				7.75				7.75				7.5				7.75				7.75

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(10) Employee Benefits (continued)

The weighted average health care cost trend rate assumptions used to measure the expected cost of medical benefits were as follows:

		December 31
		2013				2012
Health care cost trend rate for next year			7.6	%			7.9	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)			4.5				4.5
Year that the rate reaches the ultimate trend rate			2028				2028

The health care cost trend rate assumption has a significant effect on the amount of the accumulated other postretirement benefit obligation and the net other postretirement benefit cost reported. To illustrate, a one percent increase in the trend rate for each year would increase the accumulated other postretirement benefit obligation at December 31, 2013 by approximately $67 million and the aggregate of the service and interest cost components of net other postretirement benefit cost for the year ended December 31, 2013 by approximately $6 million. A one percent decrease in the trend rate for each year would decrease the accumulated other postretirement benefit obligation at December 31, 2013 by approximately $53 million and the aggregate of the service and interest cost components of net other postretirement benefit cost for the year ended December 31, 2013 by approximately $5 million.

The long term objective of the pension plan is to provide sufficient funding to cover expected benefit obligations, while assuming a prudent level of portfolio risk. The assets of the pension plan are invested, either directly or through pooled funds, in a diversified portfolio of predominately U.S. equity securities and fixed maturities. The Corporation seeks to obtain a rate of return that over time equals or exceeds the returns of the broad markets in which the plan assets are invested. The target allocation of plan assets is 55% to 65% invested in equity securities, with the remainder primarily invested in fixed maturities. The Corporation rebalances its pension assets to the target allocation as market conditions permit. The Corporation determined the expected long term rate of return assumption for each asset class based on an analysis of the historical returns and the expectations for future returns. The expected long term rate of return for the portfolio is a weighted aggregation of the expected returns for each asset class.

The fair values of the pension plan assets were as follows:

		December 31
		2013				2012
		(in millions)
Short term investments		$	37			$	33
Fixed maturities
U.S. government and government agency and authority obligations			224				239
Corporate bonds			371				321
Foreign government and government agency obligations			104				80
Mortgage-backed securities			217				174
Total fixed maturities			916				814
Equity securities			1,718				1,404
Other assets			46				54
		$	2,717			$	2,305

At December 31, 2013 and 2012, pension plan assets invested in pooled funds had a fair value of $1,425 million and $1,200 million, respectively.

At December 31, 2013 and 2012, other postretirement benefit plan assets were invested in pooled funds and had a fair value of $130 million and $96 million, respectively.

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(10) Employee Benefits (continued)

The estimated benefits expected to be paid in each of the next five years and in the aggregate for the following five years are as follows:

Years Ending December 31		Pension Benefits				Other Postretirement Benefits
		(in millions)
2014		$	99			$	12
2015			104				13
2016			114				15
2017			149				16
2018			130				18
2019-2023			803				114

(b)  The Corporation has a defined contribution benefit plan, the Capital Accumulation Plan, in which substantially all employees are eligible to participate. Under this plan, the employer makes an annual matching contribution equal to 100% of each eligible employee's pre-tax elective contributions, up to 4% of the employee's eligible compensation. Contributions are invested at the election of the employee in Chubb's common stock or in various other investment funds. The expense recognized with respect to the plan was $29 million, $26 million and $27 million in 2013, 2012 and 2011, respectively.

(11)  Comprehensive Income

Comprehensive income is defined as all changes in shareholders' equity, except those arising from transactions with shareholders. Comprehensive income includes net income and other comprehensive income or loss, which for the Corporation consists of changes in unrealized appreciation or depreciation of investments carried at fair value, changes in unrealized other-than-temporary impairment losses of fixed maturities, changes in postretirement benefit costs not yet recognized in net income and changes in foreign currency translation gains or losses.

The components of other comprehensive income or loss were as follows:

		Years Ended December 31
		2013												2012												2011
		Before Tax				Income Tax				Net of Tax				Before Tax				Income Tax				Net of Tax				Before Tax				Income Tax				Net of Tax
														(in millions)
Net unrealized holding gains (losses) arising during the year		$	(1,000	)		$	(350	)		$	(650	)		$	556			$	195			$	361			$	1,029			$	359			$	670
Unrealized other-than-temporary impairment losses arising during the year			-				-				-				(2	)			(1	)			(1	)			(1	)			-				(1	)
Reclassification adjustment for net realized gains included in net income			212				74				138				127				44				83				81				28				53
Net unrealized gains (losses) recognized in other comprehensive income or loss			(1,212	)			(424	)			(788	)			427				150				277				947				331				616
Postretirement benefit gain (loss) not yet recognized in net income arising during the year			622				218				404				(128	)			(45	)			(83	)			(400	)			(140	)			(260	)
Reclassification adjustment for the amortization of net actuarial loss and prior service cost included in net income (a)			(93	)			(33	)			(60	)			(83	)			(30	)			(53	)			(71	)			(26	)			(45	)
Net change in postretirement benefit costs not yet recognized in net income			715				251				464				(45	)			(15	)			(30	)			(329	)			(114	)			(215	)
Foreign currency translation gains (losses)			(111	)			(39	)			(72	)			(16	)			(5	)			(11	)			6				2				4
Total other comprehensive income (loss)		$	(608	)		$	(212	)		$	(396	)		$	366			$	130			$	236			$	624			$	219			$	405

(a)	Postretirement benefit costs recognized in net income during the period are included among several of the loss and expense components presented in the consolidated statements of income.

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(12)  Commitments and Contingent Liabilities

(a)  Chubb Financial Solutions (CFS), a wholly owned subsidiary of Chubb, participated in derivative financial instruments and has been in runoff since 2003. At December 31, 2013, CFS's remaining derivative contracts were insignificant.

CFS's aggregate exposure, or retained risk, from its derivative contracts is referred to as notional amount. Notional amounts are used to calculate the exchange of contractual cash flows and are not necessarily representative of the potential for gain or loss. Notional amounts are not recorded on the balance sheet. The notional amount of future obligations under CFS's derivative contracts at December 31, 2013 and 2012 was approximately $80 million and $90 million, respectively.

Future obligations with respect to the derivative contracts are carried at fair value at the balance sheet date and are included in other liabilities. The fair value of future obligations under CFS's derivative contracts at both December 31, 2013 and 2012 was approximately $2 million.

(b)  A property and casualty insurance subsidiary issued a reinsurance contract to an insurer that provides financial guarantees on debt obligations. At December 31, 2013, the aggregate principal commitments related to this contract for which the subsidiary was contingently liable amounted to approximately $380 million. These commitments expire by 2023.

(c)  The Corporation occupies office facilities under lease agreements that expire at various dates through 2029; such leases are generally renewed or replaced by other leases. Most facility leases contain renewal options for increments ranging from two to ten years. The Corporation also leases data processing, office and transportation equipment. All leases are operating leases.

Rent expense was as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Office facilities		$	71			$	71			$	73
Equipment			13				11				10
		$	84			$	82			$	83

At December 31, 2013, future minimum rental payments required under non-cancellable operating leases were as follows:

Years Ending December 31		(in millions)
2014		$	67
2015			59
2016			47
2017			37
2018			32
After 2018			74
		$	316

(d)  The Corporation had commitments totaling $660 million at December 31, 2013 to fund limited partnership investments. These commitments can be called by the partnerships (generally over a period of 5 years or less) to fund certain partnership expenses or the purchase of investments.

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(13)  Segments Information

The principal business of the Corporation is the sale of property and casualty insurance. The profitability of the property and casualty insurance business depends on the results of both underwriting operations and investments, which are viewed as two distinct operations. The underwriting operations are managed and evaluated separately from the investment function.

The P&C Group underwrites most lines of property and casualty insurance. Underwriting operations consist of four separate business units: personal insurance, commercial insurance, specialty insurance and reinsurance assumed. The personal segment targets the personal insurance market. The personal classes include automobile, homeowners and other personal coverages. The commercial segment includes those classes of business that are generally available in broad markets and are of a more commodity nature. Commercial classes include multiple peril, casualty, workers' compensation and property and marine. The specialty segment includes those classes of business that are available in more limited markets since they require specialized underwriting and claim settlement. Specialty classes include professional liability coverages and surety. The reinsurance assumed business has been in runoff since the transfer of the ongoing reinsurance assumed business to a reinsurance company in 2005.

Corporate and other includes investment income earned on corporate invested assets, corporate expenses and the results of the Corporation's non-insurance subsidiaries.

Performance of the property and casualty underwriting segments is measured based on statutory underwriting results. Statutory underwriting profit is arrived at by reducing premiums earned by losses and loss expenses incurred and statutory underwriting expenses incurred. Under statutory accounting principles applicable to property and casualty insurance companies, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned.

Management uses underwriting results determined in accordance with GAAP to assess the overall performance of the underwriting operations. Underwriting income determined in accordance with GAAP is defined as premiums earned less losses and loss expenses incurred and GAAP underwriting expenses incurred. To convert statutory underwriting results to a GAAP basis, certain policy acquisition expenses are deferred and amortized over the period in which the related premiums are earned.

Investment income performance is measured based on investment income net of investment expenses, excluding realized investment gains and losses.

Distinct investment portfolios are not maintained for each underwriting segment. Property and casualty invested assets are available for payment of losses and expenses for all classes of business. Therefore, such assets and the related investment income are not allocated to underwriting segments.

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(13)  Segments Information (continued)

Revenues, income before income tax and assets of each operating segment were as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Revenues
Property and casualty insurance
Premiums earned
Personal insurance		$	4,214			$	4,024			$	3,917
Commercial insurance			5,237				5,144				4,945
Specialty insurance			2,618				2,666				2,769
Total insurance			12,069				11,834				11,631
Reinsurance assumed			(3	)			4				13
			12,066				11,838				11,644
Investment income			1,436				1,518				1,598
Total property and casualty insurance			13,502				13,356				13,242
Corporate and other			43				46				55
Realized investment gains, net			402				193				288
Total revenues		$	13,947			$	13,595			$	13,585
Income (loss) before income tax
Property and casualty insurance
Underwriting
Personal insurance		$	509			$	192			$	47
Commercial insurance			692				44				1
Specialty insurance			406				262				427
Total insurance			1,607				498				475
Reinsurance assumed			9				47				36
			1,616				545				511
Increase in deferred policy acquisition costs			59				3				63
Underwriting income			1,675				548				574
Investment income			1,391				1,482				1,562
Other income			6				10				21
Total property and casualty insurance			3,072				2,040				2,157
Corporate and other			(237	)			(237	)			(246	)
Realized investment gains, net			402				193				288
Total income before income tax		$	3,237			$	1,996			$	2,199

		December 31
		2013				2012				2011
		(in millions)
Assets
Property and casualty insurance		$	48,278			$	49,441			$	48,017
Corporate and other			2,248				2,830				2,513
Adjustments and eliminations			(93	)			(87	)			(85	)
Total assets		$	50,433			$	52,184			$	50,445

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(13)  Segments Information (continued)

The international business of the property and casualty insurance segments is conducted primarily through subsidiaries that operate solely outside of the United States. Their assets and liabilities are located principally in the countries where the insurance risks are written. International business is also written by branch offices of a U.S. subsidiary.

Revenues of the P&C Group by geographic area were as follows:

		Years Ended December 31
		2013				2012				2011
		(in millions)
Revenues
United States		$	10,205			$	9,996			$	9,831
International			3,297				3,360				3,411
Total		$	13,502			$	13,356			$	13,242

(14)  Fair Values of Financial Instruments

(a)  Fair values of financial instruments are determined by management using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical assets or liabilities or other inputs, such as quoted prices for similar assets or liabilities, that are observable either directly or indirectly. In those instances where observable inputs are not available, fair values are measured using unobservable inputs for the asset or liability. Unobservable inputs reflect the Corporation's own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange. Certain financial instruments, particularly insurance contracts, are excluded from fair value disclosure requirements.

The methods and assumptions used to estimate the fair values of financial instruments are as follows:

(i)  The carrying value of short term investments approximates fair value due to the short maturities of these investments.

(ii)  Fair values of fixed maturities are determined by management, utilizing prices obtained from a third party, nationally recognized pricing service or, in the case of securities for which prices are not provided by a pricing service, from third party brokers. For fixed maturities that have quoted prices in active markets, market quotations are provided. For fixed maturities that do not trade on a daily basis, the pricing service and brokers provide fair value estimates using a variety of inputs including, but not limited to, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, reference data, prepayment rates and measures of volatility. Management reviews on an ongoing basis the reasonableness of the methodologies used by the relevant pricing service and brokers. In addition, management, using the prices received for the securities from the pricing service and brokers, determines the aggregate portfolio price performance and reviews it against applicable indices. If management believes that significant discrepancies exist, it will discuss these with the relevant pricing service or broker to resolve the discrepancies.

(iii)  Fair values of equity securities are determined by management, utilizing quoted market prices.

(iv)  Fair values of warrants included in other invested assets are determined by management, utilizing an option pricing model.

(v)  Fair values of long term debt issued by Chubb are determined by management, utilizing prices obtained from a third party, nationally recognized pricing service.

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(14)  Fair Values of Financial Instruments (continued)

The carrying values and fair values of financial instruments were as follows:

		December 31
		2013								2012
		Carrying Value				Fair Value				Carrying Value				Fair Value
		(in millions)
Assets
Invested assets
Short term investments		$	2,114			$	2,114			$	2,528			$	2,528
Fixed maturities (Note 2)			37,091				37,091				38,076				38,076
Equity securities			1,810				1,810				1,663				1,663
Other invested assets			-				-				46				46
Liabilities
Long term debt (Note 6)			3,300				3,806				3,575				4,372

At December 31, 2013 and 2012, a pricing service provided fair value amounts for approximately 99% of the Corporation's fixed maturities. The prices obtained from a pricing service and brokers generally are non-binding, but are reflective of current market transactions in the applicable financial instruments.

At December 31, 2013 and 2012, the Corporation held an insignificant amount of financial instruments in its investment portfolio for which a lack of market liquidity impacted the determination of fair value.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 -		Unadjusted quoted prices in active markets for identical financial instruments.
Level 2 -		Other inputs that are observable for the financial instrument, either directly or indirectly.
Level 3 -		Significant unobservable inputs.

The fair value of financial instruments categorized based upon the lowest level of input that was significant to the fair value measurement was as follows:

		December 31, 2013
		Level 1				Level 2				Level 3				Total
		(in millions)
Assets
Short term investments		$	399			$	1,715			$	-			$	2,114
Fixed maturities
Tax exempt			-				18,416				5				18,421
Taxable
U.S. government and government agency and authority obligations			-				802				-				802
Corporate bonds			-				9,179				135				9,314
Foreign government and government agency obligations			-				6,881				9				6,890
Residential mortgage-backed securities			-				293				6				299
Commercial mortgage-backed securities			-				1,345				20				1,365
			-				18,500				170				18,670
Total fixed maturities			-				36,916				175				37,091
Equity securities			1,803				-				7				1,810
		$	2,202			$	38,631			$	182			$	41,015
Liabilities
Long term debt		$	-			$	3,806			$	-			$	3,806

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(14)  Fair Values of Financial Instruments (continued)

		December 31, 2012
		Level 1				Level 2				Level 3				Total
		(in millions)
Assets
Short term investments		$	182			$	2,346			$	-			$	2,528
Fixed maturities
Tax exempt			-				19,907				6				19,913
Taxable
U.S. government and government agency and authority obligations			-				1,039				-				1,039
Corporate bonds			-				7,779				158				7,937
Foreign government and government agency obligations			-				7,008				-				7,008
Residential mortgage-backed securities			-				446				9				455
Commercial mortgage-backed securities			-				1,724				-				1,724
			-				17,996				167				18,163
Total fixed maturities			-				37,903				173				38,076
Equity securities			1,655				-				8				1,663
Other invested assets			-				-				46				46
		$	1,837			$	40,249			$	227			$	42,313
Liabilities
Long term debt		$	-			$	4,372			$	-			$	4,372

(b)  The methods and assumptions used to estimate the fair value of the Corporation's pension plan and other postretirement benefit plan assets, other than assets invested in pooled funds, are similar to the methods and assumptions used for the Corporation's other financial instruments. The fair value of pooled funds is based on the net asset value of the funds.

Based on the fair value hierarchy, the fair value of the Corporation's pension plan assets categorized based upon the lowest level of input that was significant to the fair value measurement was as follows:

		December 31, 2013
		Level 1				Level 2				Level 3				Total
		(in millions)
Short term investments		$	-			$	37			$	-			$	37
Fixed maturities
U.S. government and government agency and authority obligations			-				224				-				224
Corporate bonds			-				370				1				371
Foreign government and government agency obligations			-				104				-				104
Mortgage-backed securities			-				211				6				217
Total fixed maturities			-				909				7				916
Equity securities			573				1,145				-				1,718
Other assets			21				14				11				46
		$	594			$	2,105			$	18			$	2,717

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(14)  Fair Values of Financial Instruments (continued)

		December 31, 2012
		Level 1				Level 2				Level 3				Total
		(in millions)
Short term investments		$	-			$	33			$	-			$	33
Fixed maturities
U.S. government and government agency and authority obligations			-				238				1				239
Corporate bonds			-				321				-				321
Foreign government and government agency obligations			-				79				1				80
Mortgage-backed securities			-				174				-				174
Total fixed maturities			-				812				2				814
Equity securities			457				947				-				1,404
Other assets			29				9				16				54
		$	486			$	1,801			$	18			$	2,305

The fair value of the Corporation's other postretirement benefit plan assets was $130 million and $96 million at December 31, 2013 and 2012, respectively. Based on the fair value hierarchy, the fair value of these assets was categorized as Level 1 based upon the lowest level of input that was significant to the fair value measurement.

(15)  Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average shares outstanding during the year. The computation of diluted earnings per share reflects the potential dilutive effect, using the treasury stock method, of outstanding awards under stock-based employee compensation plans.

The following table sets forth the computation of basic and diluted earnings per share:

		Years Ended December 31
		2013				2012				2011
		(in millions except for per share amounts)
Basic earnings per share:
Net income		$	2,345			$	1,545			$	1,678
Weighted average shares outstanding			258.2				269.5				289.3
Basic earnings per share		$	9.08			$	5.73			$	5.80
Diluted earnings per share:
Net income		$	2,345			$	1,545			$	1,678
Weighted average shares outstanding			258.2				269.5				289.3
Additional shares from assumed issuance of shares under stock-based compensation awards			1.2				1.9				2.1
Weighted average shares and potential shares assumed outstanding for computing diluted earnings per share			259.4				271.4				291.4
Diluted earnings per share		$	9.04			$	5.69			$	5.76

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(16)  Shareholders' Equity

(a)  The authorized but unissued preferred shares may be issued in one or more series and the shares of each series shall have such rights as fixed by the Board of Directors.

(b)  The activity of Chubb's common stock was as follows:

		Years Ended December 31
		2013				2012				2011
		(number of shares)
Common stock issued
Balance, beginning and end of year			371,980,460				371,980,460				371,980,460
Treasury stock
Balance, beginning of year			110,217,445				99,519,509				74,707,547
Repurchase of shares			14,887,701				13,094,640				27,582,889
Share activity under stock-based employee compensation plans			(1,431,177	)			(2,396,704	)			(2,770,927	)
Balance, end of year			123,673,969				110,217,445				99,519,509
Common stock outstanding, end of year			248,306,491				261,763,015				272,460,951

(c)  As of December 31, 2013, $107 million remained under the share repurchase authorization that was approved by the Board of Directors on January 31, 2013. On January 30, 2014, the Board of Directors authorized the repurchase of up to $1.5 billion of Chubb's common stock. These authorizations have no expiration date.

(d)  The property and casualty insurance subsidiaries are required to file annual statements with insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis). For such subsidiaries, statutory accounting practices differ in certain respects from GAAP.

A comparison of shareholders' equity on a GAAP basis and policyholders' surplus on a statutory basis is as follows:

		December 31
		2013								2012
		GAAP				Statutory				GAAP				Statutory
		(in millions)
P&C Group		$	17,398			$	15,024			$	16,833			$	14,117
Corporate and other			(1,301	)							(1,006	)
		$	16,097							$	15,827

A comparison of GAAP and statutory net income (loss) is as follows:

		Years Ended December 31
		2013								2012								2011
		GAAP				Statutory				GAAP				Statutory				GAAP				Statutory
		(in millions)
P&C Group		$	2,480			$	2,485			$	1,791			$	1,936			$	1,915			$	1,824
Corporate and other			(135	)							(246	)							(237	)
		$	2,345							$	1,545							$	1,678

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(16)  Shareholders' Equity (continued)

At December 31, 2013, the aggregate statutory capital and surplus of the property and casualty insurance subsidiaries was $15.0 billion, of which $14.7 billion related to Federal Insurance Company (Federal). Federal is a direct subsidiary of Chubb and is the direct or indirect parent of most of Chubb's other insurance subsidiaries. A risk-based capital formula is used by U.S. state regulatory authorities to identify insurance companies that may be undercapitalized and that may merit regulatory attention. The risk-based capital requirement level is calculated as two times the authorized control level risk-based capital and is the level at or below which company or state regulatory action would be required. At December 31, 2013, the risk-based capital requirement level for Federal was $4.9 billion.

(e)  As a holding company, Chubb's ability to continue to pay dividends to shareholders and to satisfy its obligations, including the payment of interest and principal on debt obligations, relies on the availability of liquid assets, which is dependent in large part on the dividend paying ability of its property and casualty insurance subsidiaries. The Corporation's property and casualty insurance subsidiaries are subject to laws and regulations in the jurisdictions in which they operate that restrict the amount of dividends they may pay without the prior approval of regulatory authorities. The restrictions are generally based on net income and on certain levels of policyholders' surplus as determined in accordance with statutory accounting practices. Dividends in excess of such thresholds are considered "extraordinary" and require prior regulatory approval. During 2013, these subsidiaries paid dividends of $1.6 billion to Chubb.

The maximum dividend distribution that may be made by the property and casualty insurance subsidiaries to Chubb during 2014 without prior regulatory approval is approximately $2.0 billion.

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QUARTERLY FINANCIAL DATA

Summarized unaudited quarterly financial data for 2013 and 2012 are shown below. In management's opinion, the interim financial data contain all adjustments, consisting of normal recurring items, necessary to present fairly the results of operations for the interim periods.

		Three Months Ended
		March 31								June 30								September 30								December 31
		2013				2012				2013				2012				2013				2012				2013				2012(a)
		(in millions except for per share amounts)
Revenues		$	3,517			$	3,410			$	3,551			$	3,423			$	3,403			$	3,362			$	3,476			$	3,400
Losses and expenses			2,601				2,731				2,755				2,896				2,664				2,635				2,690				3,337
Federal and foreign income tax (credit)			260				173				217				123				198				194				217				(39	)
Net income		$	656			$	506			$	579			$	404			$	541			$	533			$	569			$	102
Basic earnings per share		$	2.49			$	1.85			$	2.22			$	1.49			$	2.11			$	1.99			$	2.25			$	.39
Diluted earnings per share		$	2.48			$	1.83			$	2.21			$	1.48			$	2.10			$	1.98			$	2.24			$	.38
Underwriting ratios
Losses to premiums earned			52.3	%			58.0	%			56.7	%			62.5	%			53.0	%			53.8	%			54.7	%			80.3	%
Expenses to premiums written			32.3				32.2				32.1				31.3				32.7				32.5				30.8				30.9
Combined			84.6	%			90.2	%			88.8	%			93.8	%			85.7	%			86.3	%			85.5	%			111.2	%

(a)

In the fourth quarter of 2012, revenues were reduced by reinsurance reinstatement premium costs of $53 million and losses and expenses included net losses of $829 million related to Storm Sandy. Net income for the quarter was reduced by $573 million, or $2.15 of diluted earnings per share ($2.16 of basic earnings per share), for the after–tax effect of the net costs. Excluding the impact of Storm Sandy, the losses to premiums earned ratio was 50.9%, the expenses to premiums written ratio was 30.4% and the combined ratio was 81.3%.

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THE CHUBB CORPORATION

Schedule I

CONSOLIDATED SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

(in millions)

December 31, 2013

Type of Investment		Cost or Amortized Cost				Fair Value				Amount at Which Shown in the Balance Sheet
Short term investments		$	2,114			$	2,114			$	2,114
Fixed maturities
United States Government and government agencies and authorities			401				414				414
States, municipalities and political subdivisions			18,191				18,809				18,809
Foreign government and government agencies			6,719				6,890				6,890
Public utilities			1,186				1,273				1,273
All other corporate bonds			7,846				8,041				8,041
Residential mortgage-backed securities			277				299				299
Commercial mortgage-backed securities			1,339				1,365				1,365
Total fixed maturities			35,959				37,091				37,091
Equity securities
Common stocks
Public utilities			114				170				170
Banks, trusts and insurance companies			88				156				156
Industrial, miscellaneous and other			846				1,468				1,468
Total common stocks			1,048				1,794				1,794
Non-redeemable preferred stocks			9				16				16
Total equity securities			1,057				1,810				1,810
Other invested assets			1,598				1,598				1,598
Total invested assets		$	40,728			$	42,613			$	42,613

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THE CHUBB CORPORATION

Schedule II

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

BALANCE SHEETS - PARENT COMPANY ONLY

(in millions)

December 31

		2013				2012
Assets
Invested Assets
Short Term Investments		$	856			$	941
Taxable Fixed Maturities (cost $1,095 and $1,273)			1,110				1,309
Equity Securities (cost $ - and $176)			2				215
Other Invested Assets			-				46
TOTAL INVESTED ASSETS			1,968				2,511
Investment in Consolidated Subsidiaries			17,455				16,900
Other Assets			165				190
TOTAL ASSETS		$	19,588			$	19,601
Liabilities
Long Term Debt		$	3,300			$	3,575
Dividend Payable to Shareholders			110				108
Accrued Expenses and Other Liabilities			81				91
TOTAL LIABILITIES			3,491				3,774
Shareholders' Equity
Preferred Stock - Authorized 8,000,000 Shares; $1 Par Value; Issued - None			-				-
Common Stock - Authorized 1,200,000,000 Shares; $1 Par Value; Issued 371,980,460 Shares			372				372
Paid-In Surplus			171				178
Retained Earnings			21,902				20,009
Accumulated Other Comprehensive Income			1,035				1,431
Treasury Stock, at Cost - 123,673,969 and 110,217,445 Shares			(7,383	)			(6,163	)
TOTAL SHAREHOLDERS' EQUITY			16,097				15,827
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	19,588			$	19,601

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto.

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THE CHUBB CORPORATION

Schedule II

(continued)

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF INCOME - PARENT COMPANY ONLY

(in millions)

Years Ended December 31

		2013				2012				2011
Revenues
Investment Income		$	29			$	38			$	46
Other Revenues			6				-				-
Realized Investment Gains (Losses), Net			99				(6	)			9
TOTAL REVENUES			134				32				55
Expenses
Corporate Expenses			262				268				285
Investment Expenses			4				2				3
Other Expenses			8				-				-
TOTAL EXPENSES			274				270				288
Loss before Federal and Foreign Income Tax and Equity in Net Income of Consolidated Subsidiaries			(140	)			(238	)			(233	)
Federal and Foreign Income Tax			-				4				1
Loss before Equity in Net Income of Consolidated Subsidiaries			(140	)			(242	)			(234	)
Equity in Net Income of Consolidated Subsidiaries			2,485				1,787				1,912
NET INCOME			2,345				1,545				1,678
Other Comprehensive Income (Loss), Net of Tax			(396	)			236				405
COMPREHENSIVE INCOME		$	1,949			$	1,781			$	2,083

Chubb and its U.S. subsidiaries file a consolidated federal income tax return. The federal income tax provision represents an allocation under the Corporation's tax allocation agreements.

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto.

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THE CHUBB CORPORATION

Schedule II

(continued)

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

STATEMENTS OF CASH FLOWS - PARENT COMPANY ONLY

(in millions)

Years Ended December 31

		2013				2012				2011
Cash Flows from Operating Activities
Net Income		$	2,345			$	1,545			$	1,678
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities
Equity in Net Income of Consolidated Subsidiaries			(2,485	)			(1,787	)			(1,912	)
Realized Investment Losses (Gains), Net			(99	)			6				(9	)
Other, Net			21				57				(28	)
NET CASH USED IN OPERATING ACTIVITIES			(218	)			(179	)			(271	)
Cash Flows from Investing Activities
Proceeds from Fixed Maturities
Sales			227				24				2
Maturities, Calls and Redemptions			150				673				456
Proceeds from Sales of Equity Securities			296				-				9
Purchases of Fixed Maturities			(198	)			(1,046	)			(257	)
Investments in Other Invested Assets, Net			22				-				-
Decrease (Increase) in Short Term Investments, Net			85				89				(219	)
Dividends Received from Consolidated Insurance Subsidiaries			1,564				1,760				2,700
Distributions Received from Consolidated Non-Insurance Subsidiaries			1				1				1
Other, Net			46				1				56
NET CASH PROVIDED BY INVESTING ACTIVITIES			2,193				1,502				2,748
Cash Flows from Financing Activities
Repayment of Long Term Debt			(275	)			-				(400	)
Proceeds from Issuance of Common Stock Under Stock-Based Employee Compensation Plans			38				74				80
Repurchase of Shares			(1,288	)			(959	)			(1,707	)
Dividends Paid to Shareholders			(450	)			(438	)			(450	)
NET CASH USED IN FINANCING ACTIVITIES			(1,975	)			(1,323	)			(2,477	)
Net Increase in Cash			-				-				-
Cash at Beginning of Year			-				-				-
CASH AT END OF YEAR		$	-			$	-			$	-

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto.

In 2013, Chubb exchanged its holdings of common stock and warrants of Alterra Capital Holdings Limited, with a cost basis of $177 million and a carrying value of $63 million, respectively, for common stock of Markel Corporation, valued at $226 million, and cash of $98 million, as a result of a business combination. The noncash portions of the transaction have been excluded from the statement of cash flows.

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THE CHUBB CORPORATION

Schedule III

CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION

(in millions)

		December 31												Year Ended December 31
Segment		Deferred Policy Acquisition Costs				Unpaid Losses				Unearned Premiums				Premiums Earned				Net Investment Income (a)				Insurance Losses				Amortization of Deferred Policy Acquisition Costs				Other Insurance Operating Costs and Expenses (b)				Premiums Written
2013
Property and Casualty Insurance
Personal		$	505			$	2,235			$	2,216			$	4,214							$	2,224			$	982			$	465			$	4,322
Commercial			493				13,147				2,792				5,237								2,891				970				665				5,273
Specialty			257				7,307				1,412				2,618								1,417				502				287				2,633
Reinsurance Assumed			-				457				3				(3	)							(12	)			-				-				(4	)
Investments																		$	1,391
		$	1,255			$	23,146			$	6,423			$	12,066			$	1,391			$	6,520			$	2,454			$	1,417			$	12,224
2012
Property and Casualty Insurance
Personal		$	477			$	2,493			$	2,133			$	4,024							$	2,417			$	942			$	458			$	4,125
Commercial			477				13,288				2,794				5,144								3,512				970				620				5,174
Specialty			252				7,622				1,429				2,666								1,622				499				293				2,568
Reinsurance Assumed			-				560				5				4								(44	)			-				1				3
Investments																		$	1,482
		$	1,206			$	23,963			$	6,361			$	11,838			$	1,482			$	7,507			$	2,411			$	1,372			$	11,870
2011
Property and Casualty Insurance
Personal		$	466			$	2,241			$	2,048			$	3,917							$	2,508			$	900			$	436			$	3,977
Commercial			475				12,422				2,746				4,945								3,366				929				617				5,051
Specialty			269				7,677				1,519				2,769								1,558				501				278				2,720
Reinsurance Assumed			-				728				9				13								(25	)			-				2				10
Investments																		$	1,562
		$	1,210			$	23,068			$	6,322			$	11,644			$	1,562			$	7,407			$	2,330			$	1,333			$	11,758

(a)	Property and casualty assets are available for payment of losses and expenses for all classes of business; therefore, such assets and the related investment income have not been allocated to the underwriting segments.

(b)	Other insurance operating costs and expenses does not include other income and charges.

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Table of Contents

THE CHUBB CORPORATION

EXHIBITS INDEX

(Item 15(a))

Exhibit Number		Description
		- Articles of incorporation and by-laws
3.1		Restated Certificate of Incorporation incorporated by reference to Exhibit (3) of the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
3.2		Certificate of Amendment to the Restated Certificate of Incorporation incorporated by reference to Exhibit (3) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1998.
3.3		Certificate of Correction of Certificate of Amendment to the Restated Certificate of Incorporation incorporated by reference to Exhibit (3) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1998.
3.4		Certificate of Amendment to the Restated Certificate of Incorporation incorporated by reference to Exhibit (3.1) of the registrant's Current Report on Form 8-K filed on April 18, 2006.
3.5		Certificate of Amendment to the Restated Certificate of Incorporation incorporated by reference to Exhibit (3.1) of the registrant's Current Report on Form 8-K filed on April 30, 2007.
3.6		By-Laws incorporated by reference to Exhibit (3.1) of the registrant's Current Report on Form 8-K filed on December 10, 2010.
		- Instruments defining the rights of security holders, including indentures
		The registrant is not filing any instruments evidencing any indebtedness since the total amount of securities authorized under any single instrument does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. Copies of such instruments will be furnished to the Securities and Exchange Commission upon request.
		- Material contracts
10.1		Schedule of Salary Actions for Named Executive Officers incorporated by reference to Exhibit (10.1) of the registrant's Current Report on Form 8-K filed on March 1, 2013.
10.2		The Chubb Corporation Annual Incentive Compensation Plan (2011) incorporated by reference to Annex A of the registrant's definitive proxy statement for the Annual Meeting of Shareholders held on April 26, 2011.
10.3		The Chubb Corporation Long-Term Incentive Plan (2009) incorporated by reference to Exhibit 99.1 of the registrant's registration statement on Form S-8 filed on April 28, 2009 (File No. 333-158841).
10.4		Form of Performance Unit Award Agreement under The Chubb Corporation Long-Term Incentive Plan (2009) incorporated by reference to Exhibit (10.2) of the registrant's Current Report on Form 8-K filed on February 28, 2012.
10.5		Form of Performance Unit Award Agreement under The Chubb Corporation Long-Term Incentive Plan (2009) incorporated by reference to Exhibit (10.6) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2009.
10.6		Form of Restricted Stock Unit Agreement under The Chubb Corporation Long-Term Incentive Plan (2009) incorporated by reference to Exhibit (10.2) of the registrant's Current Report on Form 8-K filed on March 1, 2013.
10.7		Form of Restricted Stock Unit Agreement under The Chubb Corporation Long-Term Incentive Plan (2009) incorporated by reference to Exhibit (10.7) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2009.
10.8		Form of Non-Statutory Stock Option Award Agreement under The Chubb Corporation Long-Term Incentive Plan (2009) incorporated by reference to Exhibit (10.8) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2009.

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Table of Contents

Exhibit Number		Description
10.9		Form of Deferred Stock Unit Agreement (for Non-Employee Directors) under The Chubb Corporation Long-Term Incentive Plan (2009) incorporated by reference to Exhibit (10.2) of the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
10.10		The Chubb Corporation Long-Term Stock Incentive Plan (2004) incorporated by reference to Annex B of the registrant's definitive proxy statement for the Annual Meeting of Shareholders held on April 27, 2004.
10.11		Amendment to The Chubb Corporation Long-Term Stock Incentive Plan (2004) incorporated by reference to Exhibit (10.8) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.12		Form of Restricted Stock Unit Agreement under The Chubb Corporation Long-Term Stock Incentive Plan (2004) (for recipients of restricted stock unit awards other than Chief Executive Officer, Vice Chairmen, Executive Vice Presidents and certain Senior Vice Presidents) incorporated by reference to Exhibit (10.10) of the registrant's Current Report on Form 8-K filed on March 7, 2007.
10.13		Amendment to The Chubb Corporation Long-Term Stock Incentive Plan (2004) 2005, 2006, 2007, and 2008 Outstanding Restricted Stock Unit Agreements incorporated by reference to Exhibit (10.7) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.14		Form of Non-Statutory Stock Option Award Agreement under The Chubb Corporation Long-Term Stock Incentive Plan (2004) (three year vesting schedule) incorporated by reference to Exhibit (10.7) of the registrant's Current Report on Form 8-K filed on March 9, 2005.
10.15		Form of Non-Statutory Stock Option Award Agreement under The Chubb Corporation Long-Term Stock Incentive Plan (2004) (four year vesting schedule) incorporated by reference to Exhibit (10.8) of the registrant's Current Report on Form 8-K filed on March 9, 2005.
10.16		The Chubb Corporation Long-Term Stock Incentive Plan for Non-Employee Directors (2004) incorporated by reference to Annex C of the registrant's definitive proxy statement for the Annual Meeting of Shareholders held on April 27, 2004.
10.17		Amendment No. 1 to The Chubb Corporation Long-Term Stock Incentive Plan for Non-Employee Directors (2004) incorporated by reference to Exhibit (10.12) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.18		The Chubb Corporation Stock Option Plan for Non-Employee Directors (2001) incorporated by reference to Exhibit C of the registrant's definitive proxy statement for the Annual Meeting of Shareholders held on April 24, 2001.
10.19		The Chubb Corporation Long-Term Stock Incentive Plan (2000) incorporated by reference to Exhibit A of the registrant's definitive proxy statement for the Annual Meeting of Shareholders held on April 25, 2000.
10.20		The Chubb Corporation Asset Managers Incentive Compensation Plan (2005) incorporated by reference to Exhibit (10.1) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2004.
10.21		Amendment No. 1 to The Chubb Corporation Asset Managers Incentive Compensation Plan (2005) incorporated by reference to Exhibit (10.2) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.22		Amendment No. 2 to The Chubb Corporation Asset Managers Incentive Compensation Plan (2005) incorporated by reference to Exhibit (10.33) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2009.
10.23		The Chubb Corporation Key Employee Deferred Compensation Plan (2005) incorporated by reference to Exhibit (10.9) of the registrant's Current Report on Form 8-K filed on March 9, 2005.

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Table of Contents

Exhibit Number		Description
10.24		Amendment One to The Chubb Corporation Key Employee Deferred Compensation Plan (2005) incorporated by reference to Exhibit (10.1) of the registrant's Current Report on Form 8-K filed on September 12, 2005.
10.25		Amendment No. 2 to The Chubb Corporation Key Employee Deferred Compensation Plan (2005) incorporated by reference to Exhibit (10.20) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.26		Amendment No. 3 to The Chubb Corporation Key Employee Deferred Compensation Plan (2005) incorporated by reference to Exhibit (10.32) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2012.
10.27		The Chubb Corporation Executive Deferred Compensation Plan incorporated by reference to Exhibit (10) of the registrant's Annual Report on Form 10-K for the year ended December 31, 1998.
10.28		The Chubb Corporation Deferred Compensation Plan for Directors, as amended, incorporated by reference to Exhibit (10.1) of the registrant's Current Report on Form 8-K filed on December 11, 2006.
10.29		Amendment No. 1 to The Chubb Corporation Deferred Compensation Plan for Directors, incorporated by reference to Exhibit (10.23) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.30		Corporate Aircraft Policy incorporated by reference to Exhibit (10.12) of the registrant's Current Report on Form 8-K filed on March 9, 2005.
10.31		Post-Employment Health Policy of The Chubb Corporation (and its subsidiaries) incorporated by reference to Exhibit (10.37) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2012.
10.32		The Chubb Corporation Estate Enhancement Program incorporated by reference to Exhibit (10.1) of the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
10.33		The Chubb Corporation Estate Enhancement Program for Non-Employee Directors incorporated by reference to Exhibit (10.2) of the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
10.34		Employment Agreement, dated as of January 21, 2003, between The Chubb Corporation and John D. Finnegan, incorporated by reference to Exhibit (10.1) of the registrant's Current Report on Form 8-K filed on January 21, 2003.
10.35		Amendment, dated as of December 1, 2003, to Employment Agreement, dated as of January 21, 2003, between The Chubb Corporation and John D. Finnegan, incorporated by reference to Exhibit (10.1) of the registrant's Current Report on Form 8-K filed on December 2, 2003.
10.36		Amendment No. 2, dated as of September 4, 2008, to Employment Agreement, dated as of January 21, 2003, between The Chubb Corporation and John D. Finnegan, incorporated by reference to Exhibit (10.34) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.37		Amendment No. 3, dated as of February 23, 2012, to Employment Agreement, dated as of January 21, 2003, between The Chubb Corporation and John D. Finnegan, incorporated by reference to Exhibit (10.3) of the registrant's Current Report on Form 8-K filed on February 28, 2012.
10.38		Change in Control Employment Agreement, dated as of January 21, 2003, between The Chubb Corporation and John D. Finnegan, incorporated by reference to Exhibit (10.2) of the registrant's Current Report on Form 8-K filed on January 21, 2003.
10.39		Amendment, dated as of December 1, 2003, to Change in Control Employment Agreement, dated as of January 21, 2003, between The Chubb Corporation and John D. Finnegan, incorporated by reference to Exhibit (10.2) of the registrant's Current Report on Form 8-K filed on December 2, 2003.

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Table of Contents

Exhibit Number		Description
10.40		Amendment No. 2, dated as of September 4, 2008, to Change in Control Employment Agreement, dated as of January 21, 2003, between The Chubb Corporation and John D. Finnegan, incorporated by reference to Exhibit (10.28) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.41		Offer Letter to Richard G. Spiro dated September 5, 2008, incorporated by reference to Exhibit (10.1) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.
10.42		Change in Control Agreement, dated as of October 1, 2008, between The Chubb Corporation and Richard G. Spiro, incorporated by reference to Exhibit (10.29) of the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.
10.43		Five Year Revolving Credit Agreement dated as of September 24, 2012 incorporated by reference to Exhibit (10.1) of the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.
11.1		Computation of earnings per share included in Note (15) of the Notes to Consolidated Financial Statements.
12.1		Computation of ratio of consolidated earnings to fixed charges filed herewith.
21.1		Subsidiaries of the registrant filed herewith.
23.1		Consent of Independent Registered Public Accounting Firm filed herewith.
		- Rule 13a-14(a)/15d-14(a) Certifications.
31.1		Certification by John D. Finnegan filed herewith.
31.2		Certification by Richard G. Spiro filed herewith.
		- Section 1350 Certifications.
32.1		Certification by John D. Finnegan filed herewith.
32.2		Certification by Richard G. Spiro filed herewith.
		- Interactive Data File
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

E-4