UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

OR

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

For the transition period from                      to                     

Commission file number 1-8661

THE CHUBB CORPORATION

(Exact name of registrant as specified in its charter)

NEW JERSEY		13-2595722
(State or other jurisdiction of incorporation or organization)		(I. R. S. Employer Identification No.)
15 MOUNTAIN VIEW ROAD, WARREN, NEW JERSEY		07061-1615
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (908) 903-2000

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

     The number of shares of common stock outstanding as of September 30, 2006 was 411,645,538.

 

 

THE CHUBB CORPORATION
INDEX

		Page Number
Part I. Financial Information:
Item 1 — Financial Statements:
Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 2006 and 2005			1
Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005			2
Consolidated Statements of Comprehensive Income for the Three Months and Nine Months Ended September 30, 2006 and 2005			3
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005			4
Notes to Consolidated Financial Statements			5
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 4 — Controls and Procedures			37
Part II. Other Information:
Item 1 — Legal Proceedings			38
Item 1A — Risk Factors			38
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 6 — Exhibits			40
Signatures			40
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

Page 1

Part I. FINANCIAL INFORMATION

Item 1 — Financial Statements

THE CHUBB CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

PERIODS ENDED SEPTEMBER 30

		Third Quarter								Nine Months
		2006				2005				2006				2005
		(in millions except
		for per share amounts)
Revenues
Premiums Earned		$	2,974			$	3,043			$	8,963			$	9,097
Investment Income			399				356				1,172				1,039
Other Revenues			40				(19	)			81				47
Realized Investment Gains			38				99				186				197
Total Revenues			3,451				3,479				10,402				10,380
Losses and Expenses
Insurance Losses and Loss Expenses			1,687				2,260				4,984				5,914
Amortization of Deferred Policy Acquisition Costs			711				718				2,157				2,192
Other Insurance Operating Costs and Expenses			140				125				400				404
Investment Expenses			6				7				26				23
Other Expenses			29				20				73				106
Corporate Expenses			47				45				145				141
Total Losses and Expenses			2,620				3,175				7,785				8,780
Income Before Federal and Foreign Income Tax			831				304				2,617				1,600
Federal and Foreign Income Tax			227				58				743				389
Net Income		$	604			$	246			$	1,874			$	1,211
Net Income Per Share
Basic		$	1.47			$	.62			$	4.54			$	3.09
Diluted			1.43				.60				4.43				3.00
Dividends Declared Per Share			.25				.21	1/2			.75				.64	1/2

See Notes to Consolidated Financial Statements.

Page 2

THE CHUBB CORPORATION

CONSOLIDATED BALANCE SHEETS

		Sept. 30,				Dec. 31,
		2006				2005
		(in millions)
Assets
Invested Assets
Short Term Investments		$	1,337			$	1,899
Fixed Maturities
Held-to-Maturity — Tax Exempt (market $152 and $216)			144				205
Available-for-Sale
Tax Exempt (cost $16,747 and $15,449)			17,075				15,750
Taxable (cost $15,060 and $14,515)			15,000				14,568
Equity Securities (cost $2,886 and $2,088)			3,194				2,212
TOTAL INVESTED ASSETS			36,750				34,634
Cash			28				36
Securities Lending Collateral			2,081				2,077
Accrued Investment Income			414				391
Premiums Receivable			2,262				2,319
Reinsurance Recoverable on Unpaid Losses and Loss Expenses			2,784				3,769
Prepaid Reinsurance Premiums			315				244
Deferred Policy Acquisition Costs			1,497				1,445
Real Estate Assets			313				367
Investment in Partially Owned Company			—				260
Deferred Income Tax			427				623
Goodwill			467				467
Other Assets			1,777				1,429
TOTAL ASSETS		$	49,115			$	48,061
Liabilities
Unpaid Losses and Loss Expenses		$	22,542			$	22,482
Unearned Premiums			6,513				6,361
Securities Lending Payable			2,081				2,077
Long Term Debt			2,463				2,467
Dividend Payable to Shareholders			103				90
Accrued Expenses and Other Liabilities			1,851				2,177
TOTAL LIABILITIES			35,553				35,654
Contingent Liabilities (Note 8)
Shareholders’ Equity
Common Stock — $1 Par Value; 411,645,538 and 210,432,298 Shares			412				210
Paid-In Surplus			1,545				2,364
Retained Earnings			11,164				9,600
Accumulated Other Comprehensive Income
Unrealized Appreciation of Investments, Net of Tax			374				311
Foreign Currency Translation Gains, Net of Tax			67				57
Treasury Stock, at Cost — 1,393,900 Shares in 2005			—				(135	)
TOTAL SHAREHOLDERS’ EQUITY			13,562				12,407
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	49,115			$	48,061

See Notes to Consolidated Financial Statements.

Page 3

THE CHUBB CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

PERIODS ENDED SEPTEMBER 30

		Third Quarter								Nine Months
		2006				2005				2006				2005
		(in millions)
Net Income		$	604			$	246			$	1,874			$	1,211
Other Comprehensive Income (Loss)
Change in Unrealized Appreciation or Depreciation of Investments, Net of Tax			543				(254	)			63				(225	)
Foreign Currency Translation Gains (Losses), Net of Tax			4				10				10				(19	)
			547				(244	)			73				(244	)
Comprehensive Income		$	1,151			$	2			$	1,947			$	967

See Notes to Consolidated Financial Statements.

Page 4

THE CHUBB CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30

		2006				2005
		(in millions)
Cash Flows from Operating Activities
Net Income		$	1,874			$	1,211
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Increase in Unpaid Losses and Loss Expenses, Net			1,045				1,760
Increase in Unearned Premiums, Net			37				89
Decrease in Premiums Receivable			57				13
Increase in Reinsurance Recoverable on Paid Losses			(325	)			(22	)
Decrease in Liability Related to Principal and Interest Guarantee			—				(186	)
Change in Deferred Income Tax			147				111
Amortization of Premiums and Discounts on Fixed Maturities			174				161
Depreciation			64				69
Realized Investment Gains			(186	)			(197	)
Other, Net			(527	)			(38	)
Net Cash Provided by Operating Activities			2,360				2,971
Cash Flows from Investing Activities
Proceeds from Sales of Fixed Maturities			2,266				4,434
Proceeds from Maturities of Fixed Maturities			1,186				1,357
Proceeds from Sales of Equity Securities			431				555
Purchases of Fixed Maturities			(5,215	)			(8,346	)
Purchases of Equity Securities			(752	)			(604	)
Decrease (Increase) in Short Term Investments, Net			562				(71	)
Increase in Net Payable from Security Transactions Not Settled			47				40
Purchases of Property and Equipment, Net			(35	)			(30	)
Other, Net			—				97
Net Cash Used in Investing Activities			(1,510	)			(2,568	)
Cash Flows from Financing Activities
Repayment of Long Term Debt			—				(301	)
Decrease in Funds Held Under Deposit Contracts			(18	)			(277	)
Proceeds from Common Stock Issued Upon Settlement of Equity Unit Warrants			460				—
Proceeds from Issuance of Common Stock Under Stock-Based Employee Compensation Plans			172				414
Repurchase of Shares			(1,175	)			—
Dividends Paid to Shareholders			(297	)			(243	)
Net Cash Used in Financing Activities			(858	)			(407	)
Net Decrease in Cash			(8	)			(4	)
Cash at Beginning of Year			36				42
Cash at End of Period		$	28			$	38

See Notes to Consolidated Financial Statements.

Page 5

THE CHUBB CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1)

General

     The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of The Chubb Corporation (Chubb) and its subsidiaries (collectively, the Corporation). Significant intercompany transactions have been eliminated in consolidation.

     The amounts included in this report are unaudited but include those adjustments, consisting of normal recurring items, that management considers necessary for a fair presentation. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Notes to Consolidated Financial Statements included in the Corporation’s 2005 Annual Report on Form 10-K.

     Share and per share amounts have been retroactively adjusted to reflect the two-for-one stock split paid on April 18, 2006 to Chubb’s shareholders of record on March 31, 2006.

2)

Adoption of New Accounting Pronouncements

     Effective January 1, 2006, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment, which revised SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) requires companies to adopt the fair value method of accounting for stock-based employee compensation plans. The fair value method of accounting for stock-based employee compensation plans as defined in SFAS No. 123(R) is similar in most respects to the fair value method defined in SFAS No. 123. Since the Corporation had previously adopted the fair value method of accounting for stock-based employee compensation plans, the adoption of SFAS No. 123(R) did not have a significant effect on the Corporation’s financial position or results of operations.

     Effective January 1, 2006, the Corporation adopted Financial Accounting Standards Board Staff Position (FSP) Nos. 115-1 and 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The FSP addresses the determination as to when an investment is considered impaired, whether that impairment is other-than-temporary and the measurement of an impairment loss. The FSP clarifies that an investor shall recognize an impairment loss when the impairment is deemed to be other-than-temporary even if a decision to sell the impaired security has not been made. The FSP nullifies certain requirements and carries forward other requirements of Emerging Issues Task Force Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The implementation of the guidance in the FSP did not have a significant effect on the Corporation’s financial position or results of operations.

Page 6

3)

Accounting Pronouncements Not Yet Adopted

a) In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R). The Statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its balance sheet and to recognize changes in the funded status in comprehensive income in the year in which the changes occur.

     The provisions of SFAS No. 158 are effective for the Corporation as of December 31, 2006. Retrospective application is not permitted. Any required adjustment, net of tax, shall be reported as an adjustment of the ending balance of accumulated other comprehensive income. It is expected that the adoption of SFAS No. 158 will reduce the Corporation’s shareholders’ equity at December 31, 2006. The amount of such reduction, which is not expected to have a material adverse effect on the Corporation’s financial position, will be determined based on the funded status of the Corporation’s defined benefit postretirement plans as of December 31, 2006. Adoption of the Statement will not have an effect on the Corporation’s results of operations in 2006 or in future years.

b) In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for the Corporation for the year beginning January 1, 2007. The adoption of FIN 48 is not expected to have a material effect on the Corporation’s financial position or results of operations.

Page 7

4)

Investments

     Short term investments, which have an original maturity of one year or less, are carried at amortized cost which approximates market value. Fixed maturities classified as held-to-maturity are carried at amortized cost. Fixed maturities classified as available-for-sale and equity securities are carried at market value as of the balance sheet date.

     The net change in unrealized appreciation or depreciation of investments carried at market value was as follows:

		Periods Ended September 30
		Third Quarter								Nine Months
		2006				2005				2006				2005
		(in millions)
Change in unrealized appreciation of equity securities		$	164			$	(30	)		$	184			$	(12	)
Change in unrealized appreciation or depreciation of fixed maturities			581				(361	)			(86	)			(335	)
			745				(391	)			98				(347	)
Deferred income tax (credit)			202				(137	)			35				(122	)
Change in unrealized appreciation or depreciation of investments, net		$	543			$	(254	)		$	63			$	(225	)

5)

Investment in Partially Owned Company

     Investment in partially owned company included the Corporation’s minority interest in a corporate joint venture, Allied World Assurance Holdings, Ltd. The equity method of accounting was used for this investment.

     In July 2006, Allied World sold previously unissued shares of common stock through an initial public offering. As a result of the public offering, the Corporation no longer considers Allied World to be a corporate joint venture. Accordingly, the equity method of accounting is no longer used for this investment. Instead, the investment in Allied World is now classified as an equity security. As such, it is carried at market value as of the balance sheet date with unrealized appreciation or depreciation credited or charged to comprehensive income.

6)

Debt

     In June 2003, Chubb issued $460 million of unsecured 2.25% senior notes due August 16, 2008 and 18.4 million purchase contracts to purchase Chubb’s common stock. The notes and purchase contracts were issued together in the form of 7% equity units. Each equity unit initially represented one purchase contract and $25 principal amount of notes. In May 2006, the notes were successfully remarketed as required by their terms. The interest rate on the notes was reset to 5.472% from 2.25%, effective May 16, 2006. The remarketed notes are due on August 16, 2008. The purchase contracts, which were settled on August 16, 2006, are further discussed in Note (10).

Page 8

7)

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 property and casualty insurance subsidiaries (P&C Group) underwrite 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 is effectively in runoff following the sale, in December 2005, of the ongoing business to a Bermuda based reinsurance company, Harbor Point Limited. Harbor Point has the right for a transition period of up to two years to underwrite specific reinsurance business on the P&C Group’s behalf. The P&C Group retains a portion of this business and cedes the balance to Harbor Point.

     Corporate and other includes investment income earned on corporate invested assets, corporate expenses and the Corporation’s real estate and other non-insurance subsidiaries. The results of Chubb Financial Solutions (CFS), which were previously reported separately, are now included in corporate and other. CFS’s business was primarily structured credit derivatives, principally as a counterparty in portfolio credit default swaps. CFS has been in run-off since April 2003.

Page 9

     Revenues and income before income tax of the operating segments were as follows:

		Periods Ended September 30
		Third Quarter								Nine Months
		2006				2005				2006				2005
		(in millions)
Revenues
Property and casualty insurance
Premiums earned
Personal insurance		$	851			$	797			$	2,532			$	2,391
Commercial insurance			1,271				1,202				3,805				3,727
Specialty insurance			736				757				2,227				2,206
Total insurance			2,858				2,756				8,564				8,324
Reinsurance assumed			116				287				399				773
			2,974				3,043				8,963				9,097
Investment income			375				340				1,100				993
Total property and casualty insurance			3,349				3,383				10,063				10,090
Corporate and other			64				(3	)			153				93
Realized investment gains			38				99				186				197
Total revenues		$	3,451			$	3,479			$	10,402			$	10,380
Income (loss) before income tax
Property and casualty insurance
Underwriting
Personal insurance		$	116			$	27			$	454			$	294
Commercial insurance			192				(130	)			619				207
Specialty insurance			97				44				267				22
Total insurance			405				(59	)			1,340				523
Reinsurance assumed			20				(1	)			36				57
			425				(60	)			1,376				580
Increase in deferred policy acquisition costs			11				1				40				10
Underwriting income (loss)			436				(59	)			1,416				590
Investment income			370				334				1,076				972
Other income (charges)			—				(1	)			6				(3	)
Total property and casualty insurance			806				274				2,498				1,559
Corporate and other loss			(13	)			(69	)			(67	)			(156	)
Realized investment gains			38				99				186				197
Total income before income tax		$	831			$	304			$	2,617			$	1,600

Page 10

8)

Contingent Liabilities

     Chubb and certain of its subsidiaries are involved in the ongoing investigations of business practices in the property and casualty insurance industry relating to, among other things, (1) the payment of contingent commissions to brokers and agents and (2) loss mitigation and finite reinsurance arrangements. In connection with these investigations, Chubb and certain of its subsidiaries have received subpoenas and other information requests from the Attorneys General and insurance regulators of several states, as well as from several foreign regulatory authorities, the U.S. Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York. The Corporation is cooperating fully in such investigations. Although no regulatory action has been initiated against the Corporation, it is possible that one or more regulatory authorities will bring an action against the Corporation with respect to some or all of the issues that are the focus of these ongoing investigations. In May 2006, the Corporation was informed by the Attorney General of the State of Ohio that he intended to file an action against several industry participants, including the Corporation, with respect to certain of these issues. No such action has been filed to date.

     Purported class actions arising out of the investigations into the payment of contingent commissions to brokers and agents have been filed in a number of state and federal courts. On August 1, 2005, Chubb and certain of its subsidiaries were named in a putative class action entitled In re Insurance Brokerage Antitrust Litigation in the U.S. District Court for the District of New Jersey. This action, brought against several brokers and insurers on behalf of a class of persons who purchased insurance through the broker defendants, asserts claims under the Sherman Act and state law and the Racketeer Influenced and Corrupt Organizations Act (“RICO”) arising from the alleged unlawful use of contingent commission agreements. The complaint seeks treble damages, injunctive and declaratory relief, and attorneys’ fees.

     Chubb and certain of its subsidiaries have also been named as defendants in two purported class actions relating to allegations of unlawful use of contingent commission arrangements that were originally filed in state court. The first was filed on February 16, 2005 in Seminole County, Florida. The second was filed on May 17, 2005 in Essex County, Massachusetts. Both cases were removed to federal court and then transferred by the Judicial Panel on Multidistrict Litigation to the U.S. District Court for the District of New Jersey for consolidation with the In re Insurance Brokerage Antitrust Litigation. In December 2005, Chubb and certain of its subsidiaries were named in an action similar to the In re Insurance Brokerage Antitrust Litigation. The action is pending in the same court and has been assigned to the judge who is presiding over the In re Insurance Brokerage Antitrust Litigation. The complaint has not yet been served in this matter. Separately, in April 2006, Chubb and one of its subsidiaries were named in an action similar to the In re Insurance Brokerage Antitrust Litigation. This action is pending in the U.S. District Court for the Northern District of Georgia. In these actions, the plaintiffs generally allege that the defendants unlawfully used contingent commission agreements. The actions seek unspecified damages and attorneys’ fees.

     The Corporation believes it has substantial defenses to all of the aforementioned legal proceedings and intends to defend the actions vigorously.

Page 11

     The Corporation cannot at this time predict the ultimate outcome of the aforementioned investigations and legal proceedings, including any potential amounts that the Corporation may be required to pay in connection with them. However, it is possible that such payments could have a material adverse effect on the Corporation’s results of operations in particular quarterly or annual periods.

9)

Earnings Per Share

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

		Periods Ended September 30
		Third Quarter								Nine Months
		2006				2005				2006				2005
		(in millions
		except for per share amounts)
Basic earnings per share:
Net income		$	604			$	246			$	1,874			$	1,211
Weighted average number of common shares outstanding			410.9				397.4				412.8				392.2
Basic earnings per share		$	1.47			$	.62			$	4.54			$	3.09
Diluted earnings per share:
Net income		$	604			$	246			$	1,874			$	1,211
Weighted average number of common shares outstanding			410.9				397.4				412.8				392.2
Additional shares from assumed exercise of stock-based compensation awards			8.7				7.3				7.5				7.4
Additional shares from assumed issuance of common stock upon settlement of purchase contracts and mandatorily exercisable warrants			1.8				6.0				2.9				4.4
Weighted average number of common shares and potential common shares assumed outstanding for computing diluted earnings per share			421.4				410.7				423.2				404.0
Diluted earnings per share		$	1.43			$	.60			$	4.43			$	3.00

Page 12

10)

Shareholders’ Equity

     On February 8, 2006, the Board of Directors authorized the cancellation of all treasury shares, which were thereupon restored to the status of authorized but unissued common shares. The change had no effect on total shareholders’ equity.

     On March 3, 2006, the Board of Directors approved a two-for-one stock split payable to shareholders of record on March 31, 2006. In connection with the stock split, the Board of Directors approved a proportionate increase in the number of authorized shares of Chubb’s common stock from 600 million shares to 1.2 billion shares.

     The activity of Chubb’s common stock was as follows:

		Nine Months Ended
		September 30
		2006				2005
Common stock issued
Balance, beginning of year			210,432,298				195,803,824
Two-for-one stock split			210,432,298				—
Treasury shares cancelled			(7,887,800	)			—
Repurchase of shares			(18,720,732	)			—
Shares issued upon settlement of equity unit warrants			12,883,527				—
Share activity under stock-based employee compensation plans			4,505,947				4,106,967
Balance, end of period			411,645,538				199,910,791
Treasury stock
Balance, beginning of year			1,393,900				3,127,282
Two-for-one stock split			1,393,900				—
Repurchase of shares			5,100,000				—
Cancellation of shares			(7,887,800	)			—
Share activity under stock-based employee compensation plans			—				(3,127,282	)
Balance, end of period			—				—
Common stock outstanding, end of period			411,645,538				199,910,791

     In June 2003, Chubb issued 18.4 million purchase contracts to purchase its common stock and $460 million of 2.25% senior notes. The purchase contracts and notes were issued together in the form of 7% equity units. Each purchase contract obligated the holder to purchase, and obligated Chubb to sell, on or before the settlement date of August 16, 2006, for a settlement price of $25, a variable number of newly issued shares of Chubb’s common stock. The number of shares of Chubb’s common stock purchased was determined based on a formula that considered the market price of the common stock immediately prior to the time of settlement in relation to the $29.75 per share sale price of the common stock at the time the equity units were offered. Upon settlement of the purchase contracts, Chubb received proceeds of $460 million and issued 12,883,527 shares of common stock.

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Item 2		— Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended September 30, 2006 and 2005 and for the Quarters Ended September 30, 2006 and 2005

     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 our loss reserve and reinsurance recoverable estimates; the adequacy of the pricing for our insurance products relative to the exposures, reinsurance pricing; commercial insurance rates; the impact of regulatory investigations and developments on our business; our estimated CFS credit derivatives exposure; the possible recognition of additional impairment losses if real estate is not sold or does not perform as expected and the effect thereof on our results of operations; the repurchase of Chubb’s common stock under its share repurchase program; continuation of our financial strength and credit ratings; the funding of Chubb’s future capital and liquidity needs; and the impact of the adoption of Statement of Financial Accounting Standards No. 158 on our shareholders’ equity. 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 conditions and the occurrence of terrorist attacks, including any nuclear, biological, chemical or radiological events;
•		the effects of the outbreak or escalation of war or hostilities;
•		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;
•		the ability to retain existing business;
•		our expectations with respect to cash flow projections and investment income and with respect to other income;
•		the adequacy of 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;
	–		development of new theories of liability;
	–		our estimates relating to ultimate asbestos liabilities;
	–		the impact from the bankruptcy protection sought by various asbestos producers and other related businesses;
	–		the effects of proposed asbestos liability legislation, including the impact of claims patterns arising from the possibility of legislation and those that may arise if legislation is not passed;

•

the availability and cost of reinsurance coverage;

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•		the occurrence of significant weather-related or other natural or human-made disasters, particularly in locations where we have concentrations of risk;
•		the impact of economic factors on companies on whose behalf we have issued surety bonds, and in particular, on those companies that have filed for bankruptcy or otherwise experienced deterioration in creditworthiness;
•		the effects of disclosures by, and investigations of, public companies relating to possible accounting irregularities, practices in the financial services industry and other corporate governance issues, including:

	–		claims and litigation arising out of stock option “backdating,” “spring loading” and other option grant practices by public companies;
	–		the effects on the capital markets and the markets for directors and officers and errors and omissions insurance;
	–		claims and litigation arising out of actual or alleged accounting or other corporate malfeasance by other companies;
	–		claims and litigation arising out of practices in the financial services industry;
	–		legislative or regulatory proposals or changes;

•		the effects of investigations into market practices, in particular contingent commissions and loss mitigation and finite reinsurance arrangements, in the property and casualty insurance industry together with any legal or regulatory proceedings, related settlements and industry reform or other changes with respect to contingent commissions or otherwise arising therefrom;
•		the impact of legislative and regulatory developments on our business, including those relating to terrorism and large-scale catastrophes;
•		any downgrade in our claims-paying, financial strength or other credit ratings;
•		the ability of our subsidiaries to pay us dividends;
•		general economic and market conditions including:

	–		changes in interest rates, market credit spreads and the performance of the financial markets;
	–		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;
	–		changes in the litigation environment; and

•

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

     The Corporation 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 recoverability of the carrying value of real estate properties. These estimates and judgments, which are discussed in Item 7 of our 2005 Annual Report on Form 10-K as supplemented 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 $1.9 billion in the first nine months of 2006 and $604 million in the third quarter compared with $1.2 billion and $246 million, respectively, in the comparable periods of 2005. The increase in net income in the 2006 periods was driven by substantially higher underwriting income in our property and casualty insurance business.
	•		Results in the first nine months and third quarter of 2005 were adversely impacted by pre-tax costs of $511 million related to Hurricane Katrina, including estimated net losses of $415 million, net reinsurance reinstatement premium costs of $51 million and a $45 million charge, included in our corporate segment, representing Chubb’s share of the losses estimated by an insurer in which we have a minority interest.
	•		Total net premiums written decreased by 2% in the first nine months of 2006 and 1% in the third quarter. Net premiums written in our insurance business increased 2% in the first nine months of 2006 and 5% in the third quarter. Net premiums written in our reinsurance assumed business decreased 54% in the first nine months of 2006 and 66% in the third quarter, which was in line with our expectations following the sale of the ongoing business.
	•		Underwriting results were exceptionally profitable in the first nine months and third quarter of 2006 as evidenced by the combined loss and expense ratio of 84.5% and 85.5%, respectively, compared with 93.3% and 102.2%, respectively, in the corresponding periods of 2005. Underwriting results in the 2005 periods were adversely affected by catastrophes, particularly Hurricane Katrina.
	•		Property and casualty investment income after tax increased by 11% in the first nine months of 2006 and 10% in the third quarter. For more information on this non-GAAP financial measure, see “Property and Casualty Insurance – Investment Results.”

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          A summary of our consolidated net income is as follows:

		Periods Ended September 30
		Third Quarter								Nine Months
		2006				2005				2006				2005
		(in millions)
Property and Casualty Insurance		$	806			$	274			$	2,498			$	1,559
Corporate and Other			(13	)			(69	)			(67	)			(156	)
Realized Investment Gains			38				99				186				197
Consolidated Income Before Income Tax			831				304				2,617				1,600
Federal and Foreign Income Tax			227				58				743				389
Consolidated Net Income		$	604			$	246			$	1,874			$	1,211

Property and Casualty Insurance

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

		Periods Ended September 30
		Third Quarter								Nine Months
		2006				2005				2006				2005
		(in millions)
Underwriting
Net Premiums Written		$	2,994			$	3,017			$	9,000			$	9,186
Decrease (Increase) in Unearned Premiums			(20	)			26				(37	)			(89	)
Premiums Earned			2,974				3,043				8,963				9,097
Losses and Loss Expenses			1,687				2,260				4,984				5,914
Operating Costs and Expenses			854				836				2,580				2,584
Increase in Deferred Policy Acquisition Costs			(11	)			(1	)			(40	)			(10	)
Dividends to Policyholders			8				7				23				19
Underwriting Income (Loss)			436				(59	)			1,416				590
Investments
Investment Income Before Expenses			375				340				1,100				993
Investment Expenses			5				6				24				21
Investment Income			370				334				1,076				972
Other Income (Charges)			—				(1	)			6				(3	)
Property and Casualty Income Before Tax		$	806			$	274			$	2,498			$	1,559
Property and Casualty Investment Income After Tax		$	295			$	267			$	862			$	780

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          Income before tax from our property and casualty business was substantially higher in the first nine months and third quarter of 2006 compared with the comparable periods of 2005. The increase was driven by significantly higher underwriting income, due largely to substantially lower catastrophe losses and improvement in our specialty insurance business unit. Underwriting results in both 2005 periods were adversely affected by catastrophes. In particular, such results included estimated net losses of $415 million and net reinsurance reinstatement premium costs of $51 million related to Hurricane Katrina. Results in the 2006 periods also benefited from higher investment income.

          The profitability of the property and casualty insurance business depends on the results of both underwriting operations and investments. 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.

     Underwriting Results

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

          Catastrophe losses are a significant component in understanding and assessing the financial performance of our property and casualty insurance business. However, in periods in which there is a very large catastrophic event, such as Hurricane Katrina, its impact makes it difficult to assess the underlying trends in our property and casualty business. Management believes that a discussion of the impact of catastrophes is meaningful during such periods in order for investors to understand the variability in periodic earnings and to evaluate the underlying performance of our underwriting operations. Accordingly, we have presented in the discussion below premium growth percentages and combined loss and expense ratios, excluding the effects of catastrophes.

     Net Premiums Written

          Property and casualty net premiums written were $9.0 billion in the first nine months of 2006 and $3.0 billion in the third quarter, representing decreases of 2% and 1%, respectively, compared with the same periods of 2005.

          Net premiums written by business unit were as follows:

		Nine Months Ended												Quarters Ended
		Sept. 30									% Incr.			Sept. 30									% Incr.
		2006				2005					(Decr.)			2006				2005					(Decr.)
		(in millions)												(in millions)
Personal insurance		$	2,639			$	2,487				6	%		$	913			$	860				6	%
Commercial insurance			3,863				3,760				3				1,244				1,127				10
Specialty insurance			2,167				2,213				(2	)			748				771				(3	)
Total insurance			8,669				8,460				2				2,905				2,758				5
Reinsurance assumed			331				726				(54	)			89				259				(66	)
Total		$	9,000			$	9,186				(2	)		$	2,994			$	3,017				(1	)

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          Total net premiums written in the third quarter of 2005 reflected $51 million of net reinsurance reinstatement premium costs related to Hurricane Katrina. Total net premiums written in the first nine months of 2006 benefited from a $20 million reduction in the first quarter of previously accrued reinsurance reinstatement premium costs. Excluding the reinsurance reinstatement premium costs in both years, total net premiums written decreased by 3% and 2% in the first nine months and third quarter of 2006, respectively, compared with the same periods in 2005.

          Net premiums written from our insurance business increased 2% in the first nine months of 2006 and 5% in the third quarter compared with the same periods of 2005. Excluding reinsurance reinstatement premium costs of $102 million in the third quarter of 2005 related to Hurricane Katrina as well as the $20 million reduction in such costs in the first quarter of 2006, such growth was 1% and 2%, respectively. Premiums in the United States, which represent more than 75% of our insurance premiums, increased 2% in the first nine months of 2006 and 4% in the third quarter. Excluding the reinsurance reinstatement premium costs related to Hurricane Katrina in both years, premium growth in the U.S. was flat in the first nine months and third quarter. Premiums outside the U.S. increased 4% in the first nine months and 10% in the third quarter; in local currencies, such premiums grew 3% and 7%, respectively.

          The modest overall growth in net premiums written in our insurance business reflected our continued emphasis on underwriting discipline in a competitive market environment. Rates were generally stable, but were under competitive pressure in some classes of business. We continued to retain a high percentage of our existing customers and to renew these accounts at prices we believe to be appropriate relative to the exposures. In addition, while we continued to be selective, we found opportunities to write new business at acceptable rates.

          Net reinsurance assumed premiums written decreased by 54% in the first nine months of 2006 and 66% in the third quarter compared with the same periods of 2005. Excluding net reinstatement premium revenue of $51 million in the third quarter of 2005 related to Hurricane Katrina, premiums declined by 51% and 57%, respectively. The premium decline was in line with our expectations following the sale of the ongoing reinsurance assumed business in December 2005.

     Reinsurance Ceded

          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 the reinsurance.

          As a result of the substantial losses incurred by reinsurers from the catastrophes in the latter half of 2005, the cost of reinsurance has increased significantly, particularly for property coverages, and there is less reinsurance capacity in the marketplace. In addition, the availability of reinsurance for certain coverages, such as terrorism, continues to be limited and expensive.

          The major components of our reinsurance program were renewed in April 2006. On our casualty clash treaty, which operates like a catastrophe treaty, our initial retention remained at $75 million. We reduced the reinsurance coverage at the top of the program by $50 million and increased our participation in the program. This treaty now provides coverage of approximately 55% of losses between $75 million and $150 million per insured event.

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          On our commercial property per risk treaty, we increased our retention from $15 million to $25 million. This treaty now provides $425 million of coverage per risk in excess of our retention.

          Our property catastrophe treaty for events in the United States was modified to increase our initial retention from $250 million to $350 million and to increase our participation in the program. At the same time, we increased the reinsurance coverage in the northeastern part of the country by $400 million, enhancing our protection in the region where we have our greatest concentration of exposure. The program now provides coverage of approximately 75% of losses (net of recoveries from other available reinsurance) between $350 million and $1.3 billion, with additional coverage of 80% of losses between $1.3 billion and $2.05 billion in the northeastern part of the country.

          Our property catastrophe treaty for events outside the United States was modified to increase our initial retention from $50 million to $75 million. The treaty now provides coverage of approximately 90% of losses (net of recoveries from other available reinsurance) between $75 million and $275 million.

          Our property reinsurance treaties generally contain terrorism exclusions for acts perpetrated by foreign terrorists. Since September 2001, we have changed our underwriting strategies to address terrorism and the limited availability of terrorism reinsurance.

          While the cost of our U.S. property catastrophe treaty has increased, we expect that the overall ceded reinsurance premiums in 2006 for our insurance business will be about the same as those in 2005.

     Profitability

          The combined loss and expense 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 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 property and casualty insurance companies differ in certain respects from generally accepted accounting principles (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, 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.

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          Underwriting results were highly profitable in the first nine months and third quarter of 2006. Underwriting results were profitable in the first nine months of 2005 and modestly unprofitable in the third quarter of 2005. Results in the 2005 periods were adversely affected by catastrophes, particularly Hurricane Katrina. The combined loss and expense ratio for our overall property and casualty business was as follows:

		2006												2005
										Excluding												Excluding
						Impact of				Impact of								Impact of				Impact of
		Total				Catastrophes				Catastrophes				Total				Catastrophes				Catastrophes
NINE MONTHS ENDED SEPTEMBER 30
Loss ratio			55.8	%			1.5	%			54.3	%			65.1	%			5.9	%			59.2	%
Expense ratio			28.7				(.1	)			28.8				28.2				.2				28.0
Combined ratio			84.5	%			1.4	%			83.1	%			93.3	%			6.1	%			87.2	%
QUARTERS ENDED SEPTEMBER 30
Loss ratio			56.9	%			1.5	%			55.4	%			74.4	%			16.5	%			57.9	%
Expense ratio			28.6				—				28.6				27.8				.5				27.3
Combined ratio			85.5	%			1.5	%			84.0	%			102.2	%			17.0	%			85.2	%

          Catastrophe losses of $145 million in the first nine months of 2006 were offset in part by the $20 million reduction in previously accrued reinsurance reinstatement premium costs related to Hurricane Katrina. Catastrophe losses in the first nine months of 2005 were $513 million and net reinsurance reinstatement premium costs related to Hurricane Katrina were $51 million.

          Catastrophe losses were $44 million in the third quarter of 2006. In the third quarter of 2005, catastrophe losses amounted to $472 million, $415 million of which related to Hurricane Katrina, and net reinsurance reinstatement premium costs related to Hurricane Katrina were $51 million. In our insurance business, we incurred net losses of $335 million related to Hurricane Katrina as well as reinstatement premium costs of $102 million, for an aggregate cost of $437 million. In our reinsurance assumed business, we incurred net losses of $80 million and recognized net reinstatement premium revenue of $51 million, for a net cost of $29 million.

          The loss ratio, excluding the effect of catastrophes, improved significantly in the first nine months and third quarter of 2006 compared with the same periods in 2005, reflecting the favorable experience resulting from our disciplined underwriting in recent years.

          The expense ratio increased in the first nine months and third quarter of 2006 compared with the same periods in 2005 as net premiums written decreased whereas compensation and other operating costs increased.

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     Review of Underwriting Results by Business Unit

     Personal Insurance

          Net premiums written from personal insurance coverages, which represented 29% of premiums written in the first nine months of 2006, increased by 6% in both the first nine months and third quarter of 2006 compared with the same periods in 2005. Net premiums written for the classes of business within the personal insurance segment were as follows:

		Nine Months Ended												Quarters Ended
		Sept. 30												Sept. 30
		2006				2005				% Incr.				2006				2005				% Incr.
		(in millions)												(in millions)
Automobile		$	511			$	486				5%			$	174			$	169				3%
Homeowners			1,706				1,584				8				609				564				8
Other			422				417				1				130				127				2
Total personal		$	2,639			$	2,487				6			$	913			$	860				6

          Net premiums written in the homeowners business in the third quarter of 2005 reflected $18 million of reinsurance reinstatement premium costs related to Hurricane Katrina. Excluding the reinstatement premium costs, premium growth in 2006 for our personal insurance segment was 5% for the first nine months and 4% in the third quarter and growth in our homeowners business was 6% and 5%, respectively.

          Premiums from our personal automobile business increased as a result of selective growth initiatives outside the United States. Automobile premiums in the U.S. declined due to our maintaining underwriting discipline in a more competitive marketplace. Premium growth in our homeowners business was driven by increased insurance-to-value and slightly higher rates. The in-force policy count for this class was unchanged during the first nine months of 2006 compared with the same period in 2005. Our other personal business, which includes insurance for excess liability, yacht and accident coverages, had minimal growth in the first nine months of 2006 due to lower premiums in our accident business compared with the same period in 2005.

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          Our personal insurance business produced highly profitable underwriting results in the first nine months and third quarter of 2006. Results in the corresponding periods in 2005 were less profitable due in large part to a more adverse impact of catastrophes, particularly Hurricane Katrina. The combined loss and expense ratios for the classes of business within the personal insurance segment were as follows:

		2006												2005
										Excluding												Excluding
						Impact of				Impact of								Impact of				Impact of
		Total				Catastrophes				Catastrophes				Total				Catastrophes				Catastrophes
NINE MONTHS ENDED SEPTEMBER 30
Automobile			89.6	%			.4	%			89.2	%			97.7	%			1.1	%			96.6	%
Homeowners			74.3				6.6				67.7				81.5				9.4				72.1
Other			95.3				(.5	)			95.8				91.9				(.4	)			92.3
Total personal			80.8	%			4.2	%			76.6	%			86.5	%			6.1	%			80.4	%
QUARTERS ENDED SEPTEMBER 30
Automobile			93.1	%			.6	%			92.5	%			102.4	%			3.0	%			99.4	%
Homeowners			76.6				6.2				70.4				90.6				22.8				67.8
Other			102.8				—				102.8				97.9				.5				97.4
Total personal			84.1	%			4.1	%			80.0	%			94.3	%			15.4	%			78.9	%

          Our personal automobile business produced more profitable results in the first nine months and third quarter of 2006 compared with the corresponding periods in 2005. Results in 2006 benefited from lower claim frequency and modest favorable loss development related to prior accident years. Results in the third quarter of 2005 were adversely affected by reserve strengthening in the liability component related to prior accident years.

          Homeowners results were highly profitable in the first nine months and third quarter of 2006. Results were less profitable in the corresponding 2005 periods, which were adversely affected by catastrophes, particularly Hurricane Katrina. Results in both years benefited from better pricing and a reduction in water damage losses primarily through contract wording changes related to mold coverage and loss remediation measures that we have implemented over the past few years.

          Other personal coverages produced profitable results in the first nine months of 2006 and 2005, but more so in 2005. Results in the third quarter of 2006 were modestly unprofitable compared with profitable results in the same period of 2005. The less profitable results in the 2006 periods were due to deterioration in our excess liability business. The accident and yacht businesses continued to be profitable.

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     Commercial Insurance

          Net premiums written from commercial insurance, which represented 43% of our premiums written in the first nine months of 2006, increased by 3% in the first nine months of 2006 and 10% in the third quarter compared with the same periods a year ago. Net premiums written for the classes of business within the commercial insurance segment were as follows:

		Nine Months Ended												Quarters Ended
		Sept. 30									% Incr.			Sept. 30									% Incr.
		2006				2005					(Decr.)			2006				2005					(Decr.)
		(in millions)												(in millions)
Multiple peril		$	968			$	935				4	%		$	323			$	294				10	%
Casualty			1,303				1,321				(1	)			408				411				(1	)
Workers’ compensation			694				726				(4	)			222				230				(3	)
Property and marine			898				778				15				291				192				52
Total commercial		$	3,863			$	3,760				3			$	1,244			$	1,127				10