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

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

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		(I. R. S. Employer
incorporation or organization)		Identification No.)

15 MOUNTAIN VIEW ROAD, WARREN, NEW JERSEY		07059
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES þ      NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company 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 March 31, 2010 was 326,772,038.

 

 

THE CHUBB CORPORATION
INDEX

		Page Number
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009			1
Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009			2
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2010 and 2009			3
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009			4
Notes to Consolidated Financial Statements			5
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 4 - Controls and Procedures			40
Part II. Other Information:
Item 1A – Risk Factors			41
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 6 - Exhibits			42
Signatures			42
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

Page 1

Part I. FINANCIAL INFORMATION

Item 1 — Financial Statements

THE CHUBB CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31

		2010				2009
		(in millions)
Revenues
Premiums Earned		$	2,782			$	2,826
Investment Income			410				402
Other Revenues			4				3
Realized Investment Gains (Losses), Net
Total Other-Than-Temporary Impairment Losses on Investments			—				(59	)
Other-Than-Temporary Impairment Losses on Investments Recognized in Other Comprehensive Income			(1	)			—
Other Realized Investment Gains (Losses), Net			128				(207	)
Total Realized Investment Gains (Losses), Net			127				(266	)
Total Revenues			3,323				2,965
Losses and Expenses
Losses and Loss Expenses			1,730				1,615
Amortization of Deferred Policy Acquisition Costs			740				728
Other Insurance Operating Costs and Expenses			115				103
Investment Expenses			10				9
Other Expenses			4				3
Corporate Expenses			76				77
Total Losses and Expenses			2,675				2,535
Income Before Federal and Foreign Income Tax			648				430
Federal and Foreign Income Tax			184				89
Net Income		$	464			$	341
Net Income Per Share
Basic		$	1.39			$	.96
Diluted			1.39				.95
Dividends Declared Per Share			.37				.35

See Notes to Consolidated Financial Statements.

Page 2

THE CHUBB CORPORATION

CONSOLIDATED BALANCE SHEETS

		Mar. 31,				Dec. 31,
		2010				2009
		(in millions)
Assets
Invested Assets
Short Term Investments		$	2,394			$	1,918
Fixed Maturities
Tax Exempt (cost $18,604 and $18,720)			19,462				19,587
Taxable (cost $16,184 and $16,470)			16,825				16,991
Equity Securities (cost $1,221 and $1,215)			1,497				1,433
Other Invested Assets			2,151				2,075
TOTAL INVESTED ASSETS			42,329				42,004
Cash			51				51
Accrued Investment Income			448				460
Premiums Receivable			2,031				2,101
Reinsurance Recoverable on Unpaid Losses and Loss Expenses			2,071				2,053
Prepaid Reinsurance Premiums			329				308
Deferred Policy Acquisition Costs			1,553				1,533
Deferred Income Tax			149				272
Goodwill			467				467
Other Assets			1,442				1,200
TOTAL ASSETS		$	50,870			$	50,449
Liabilities
Unpaid Losses and Loss Expenses		$	23,099			$	22,839
Unearned Premiums			6,149				6,153
Long Term Debt			3,975				3,975
Dividend Payable to Shareholders			121				118
Accrued Expenses and Other Liabilities			1,785				1,730
TOTAL LIABILITIES			35,129				34,815
Contingent Liabilities (Note 6)
Shareholders’ Equity
Common Stock — $1 Par Value; 371,980,460 Shares			372				372
Paid-In Surplus			158				224
Retained Earnings			16,578				16,235
Accumulated Other Comprehensive Income			812				720
Treasury Stock, at Cost — 45,208,422 and 39,972,796 Shares			(2,179	)			(1,917	)
TOTAL SHAREHOLDERS’ EQUITY			15,741				15,634
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	50,870			$	50,449

See Notes to Consolidated Financial Statements.

Page 3

THE CHUBB CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31

		2010				2009
		(in millions)
Net Income		$	464			$	341
Other Comprehensive Income (Loss), Net of Tax
Change in Unrealized Appreciation or Depreciation of Investments			107				327
Change in Unrealized Other-Than-Temporary Impairment Losses on Investments			3				—
Foreign Currency Translation Losses			(28	)			(113	)
Amortization of Net Loss and Prior Service Cost Included in Net Postretirement Benefit Costs			10				9
			92				223
Comprehensive Income		$	556			$	564

See Notes to Consolidated Financial Statements.

Page 4

THE CHUBB CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31

		2010				2009
		(in millions)
Cash Flows from Operating Activities
Net Income		$	464			$	341
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Increase in Unpaid Losses and Loss Expenses, Net			298				106
Decrease in Unearned Premiums, Net			(17	)			(83	)
Decrease in Premiums Receivable			70				98
Amortization of Premiums and Discounts on Fixed Maturities			46				47
Depreciation			16				15
Realized Investment Losses (Gains), Net			(127	)			266
Other, Net			(129	)			(240	)
Net Cash Provided by Operating Activities			621				550
Cash Flows from Investing Activities
Proceeds from Fixed Maturities
Sales			1,000				855
Maturities, Calls and Redemptions			634				610
Proceeds from Sales of Equity Securities			18				46
Purchases of Fixed Maturities			(1,342	)			(1,958	)
Purchases of Equity Securities			(15	)			—
Investments in Other Invested Assets, Net			8				(22	)
Increase in Short Term Investments, Net			(471	)			(104	)
Increase (Decrease) in Net Payable from Security Transactions Not Settled			(20	)			214
Purchases of Property and Equipment, Net			(13	)			(12	)
Other, Net			—				4
Net Cash Used in Investing Activities			(201	)			(367	)
Cash Flows from Financing Activities
Increase (Decrease) in Funds Held Under Deposit Contracts			25				(2	)
Proceeds from Issuance of Common Stock Under Stock-Based Employee Compensation Plans			24				14
Repurchase of Shares			(351	)			(77	)
Dividends Paid to Shareholders			(118	)			(118	)
Net Cash Used in Financing Activities			(420	)			(183	)
Net Increase in Cash			—				—
Cash at Beginning of Year			51				56
Cash at End of Period		$	51			$	56

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 (GAAP) and include the accounts of The Chubb Corporation (Chubb) and its subsidiaries (collectively, the Corporation). Significant intercompany transactions have been eliminated in consolidation.

     Effective April 1, 2009, the Corporation adopted new guidance issued by the Financial Accounting Standards Board (FASB) related to the recognition and presentation of other-than-temporary impairments. This guidance was not permitted to be retroactively applied to prior periods’ financial statements; accordingly, consolidated financial statements for periods prior to April 1, 2009 have not been restated for this change in accounting policy. This accounting change is further described in Note (3)(b).

     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 Annual Report on Form 10-K for the year ended December 31, 2009.

2) Adoption of New Accounting Pronouncement

     Effective January 1, 2010, the Corporation adopted new guidance issued by the FASB related to the accounting for a variable interest entity (VIE). A company would consolidate a VIE, as the primary beneficiary, when a company has both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Ongoing reassessment of whether a company is the primary beneficiary of a VIE is required. The new guidance replaces the quantitative-based approach previously required for determining which company, if any, has a controlling financial interest in a VIE. The adoption of this guidance did not have a significant effect on the Corporation’s financial position or results of operations.

     The Corporation is involved in the normal course of business with 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.

Page 6

3) Invested Assets

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

		March 31, 2010
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Appreciation				Depreciation				Value
		(in millions)
Fixed maturities
Tax exempt		$	18,604			$	916			$	58			$	19,462
Taxable
U.S. Government and government agency and authority obligations			776				16				9				783
Corporate bonds			6,170				352				17				6,505
Foreign government and government agency obligations			5,847				216				10				6,053
Residential mortgage-backed securities			1,706				75				16				1,765
Commercial mortgage-backed securities			1,685				39				5				1,719
			16,184				698				57				16,825
Total fixed maturities		$	34,788			$	1,614			$	115			$	36,287
Equity securities		$	1,221			$	314			$	38			$	1,497

		December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Appreciation				Depreciation				Value
		(in millions)
Fixed maturities
Tax exempt		$	18,720			$	933			$	66			$	19,587
Taxable
U.S. Government and government agency and authority obligations			756				12				10				758
Corporate bonds			6,287				327				24				6,590
Foreign government and government agency obligations			5,903				221				11				6,113
Residential mortgage-backed securities			1,850				69				20				1,899
Commercial mortgage-backed securities			1,674				6				49				1,631
			16,470				635				114				16,991
Total fixed maturities		$	35,190			$	1,568			$	180			$	36,578
Equity securities		$	1,215			$	261			$	43			$	1,433

Page 7

     At March 31, 2010 and December 31, 2009, the gross unrealized depreciation of fixed maturities included $12 million and $15 million, respectively, of unrealized other-than-temporary impairment losses recognized in accumulated other comprehensive income.

     The amortized cost and fair value of fixed maturities at March 31, 2010 by contractual maturity were as follows:

		Amortized				Fair
		Cost				Value
		(in millions)
Due in one year or less		$	1,279			$	1,303
Due after one year through five years			10,750				11,252
Due after five years through ten years			12,090				12,752
Due after ten years			7,278				7,496
			31,397				32,803
Residential mortgage-backed securities			1,706				1,765
Commercial mortgage-backed securities			1,685				1,719
		$	34,788			$	36,287

     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.

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

		March 31				December 31
		2010				2009
		(in millions)
Fixed maturities
Gross unrealized appreciation		$	1,614			$	1,568
Gross unrealized depreciation			115				180
			1,499				1,388
Equity securities
Gross unrealized appreciation			314				261
Gross unrealized depreciation			38				43
			276				218
			1,775				1,606
Deferred income tax liability			621				562
		$	1,154			$	1,044

     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 and also considers a number of other factors 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.

Page 8

     In determining whether fixed maturities are other than temporarily impaired, prior to April 1, 2009, the Corporation considered many factors including its intent and ability to hold a security for a period of time sufficient to allow for the recovery of the security’s cost. When an impairment was deemed other than temporary, the security was written down to fair value and the entire writedown was included in net income as a realized investment loss. Effective April 1, 2009, the Corporation adopted new guidance which modified the guidance on the recognition and presentation of other-than-temporary impairments of debt securities. Under this guidance, 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 debt security. Also under this guidance, 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, 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 collectability 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.

Page 9

     The following table summarizes, for all investment securities in an unrealized loss position at March 31, 2010, 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
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Depreciation				Value				Depreciation				Value				Depreciation
		(in millions)
Fixed maturities
Tax exempt		$	714			$	8			$	869			$	50			$	1,583			$	58
Taxable
U.S. Government and government agency and authority obligations			153				5				44				4				197				9
Corporate bonds			514				11				80				6				594				17
Foreign government and government agency obligations			943				10				—				—				943				10
Residential mortgage-backed securities			10				1				86				15				96				16
Commercial mortgage-backed securities			24				1				257				4				281				5
			1,644				28				467				29				2,111				57
Total fixed maturities			2,358				36				1,336				79				3,694				115
Equity securities			66				3				406				35				472				38
		$	2,424			$	39			$	1,742			$	114			$	4,166			$	153

     At March 31, 2010, approximately 550 individual fixed maturity and equity securities were in an unrealized loss position, of which approximately 510 were fixed maturities. 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 March 31, 2010.

Page 10

     The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2009, 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
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Depreciation				Value				Depreciation				Value				Depreciation
		(in millions)
Fixed maturities
Tax exempt		$	542			$	8			$	1,048			$	58			$	1,590			$	66
Taxable
U.S. Government and government agency and authority obligations			195				6				44				4				239				10
Corporate bonds			657				19				88				5				745				24
Foreign government and government agency obligations			809				11				—				—				809				11
Residential mortgage-backed securities			9				4				89				16				98				20
Commercial mortgage-backed securities			—				—				1,273				49				1,273				49
			1,670				40				1,494				74				3,164				114
Total fixed maturities			2,212				48				2,542				132				4,754				180
Equity securities			82				6				393				37				475				43
		$	2,294			$	54			$	2,935			$	169			$	5,229			$	223

     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:

		Three Months Ended
		March 31
		2010				2009
		(in millions)
Change in unrealized appreciation or depreciation of fixed maturities		$	111			$	556
Change in unrealized appreciation or depreciation of equity securities			58				(53	)
			169				503
Deferred income tax			59				176
		$	110			$	327

Page 11

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

		Three Months Ended
		March 31
		2010				2009
		(in millions)
Fixed maturities
Gross realized gains		$	38			$	36
Gross realized losses			(5	)			(6	)
Other-than-temporary impairment losses			(1	)			(8	)
			32				22
Equity securities
Gross realized gains			9				11
Other-than-temporary impairment losses			—				(51	)
			9				(40	)
Other invested assets			86				(248	)
		$	127			$	(266	)

(d) As of March 31, 2010 and December 31, 2009, 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 $19 million and $20 million, respectively, recognized in net income.

4) Fair Values of Financial Instruments

     Fair values of financial instruments are determined 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.

Page 12

     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 for fixed maturities are determined by management, utilizing prices obtained from an independent, nationally recognized pricing service or, in the case of securities for which prices are not provided by a pricing service, from independent 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 spreads 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 based on quoted market prices.
	(iv)		Fair values of long term debt issued by Chubb are determined by management, utilizing prices obtained from an independent, nationally recognized pricing service.

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

		March 31, 2010								December 31, 2009
		Carrying				Fair				Carrying				Fair
		Value				Value				Value				Value
		(in millions)
Assets
Invested assets
Short term investments		$	2,394			$	2,394			$	1,918			$	1,918
Fixed maturities			36,287				36,287				36,578				36,578
Equity securities			1,497				1,497				1,433				1,433
Liabilities
Long term debt			3,975				4,187				3,975				4,102

Page 13

     A pricing service provides 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 March 31, 2010 and December 31, 2009, the Corporation did not hold 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 assets.

     Level 2 – Other inputs that are observable for the asset, either directly or indirectly.

     Level 3 — Inputs that are unobservable.

     The fair value of fixed maturities and equity securities categorized based upon the lowest level of input that was significant to the fair value measurement was as follows:

		March 31, 2010
		Level 1				Level 2				Level 3				Total
		(in millions)
Fixed maturities
Tax exempt		$	—			$	19,454			$	8			$	19,462
Taxable
U.S. Government and government agency and authority obligations			—				783				—				783
Corporate bonds			—				6,380				125				6,505
Foreign government and government agency obligations			—				6,053				—				6,053
Residential mortgage-backed securities			—				1,765				—				1,765
Commercial mortgage-backed securities			—				1,719				—				1,719
			—				16,700				125				16,825
Total fixed maturities			—				36,154				133				36,287
Equity securities			1,274				—				223				1,497
		$	1,274			$	36,154			$	356			$	37,784

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		December 31, 2009
		Level 1				Level 2				Level 3				Total
		(in millions)
Fixed maturities
Tax exempt		$	—			$	19,578			$	9			$	19,587
Taxable
U.S. Government and government agency and authority obligations			—				725				33				758
Corporate bonds			—				6,482				108				6,590
Foreign government and government agency obligations			—				6,113				—				6,113
Residential mortgage-backed securities			—				1,898				1				1,899
Commercial mortgage-backed securities			—				1,631				—				1,631
			—				16,849				142				16,991
Total fixed maturities			—				36,427				151				36,578
Equity securities			1,207				—				226				1,433
		$	1,207			$	36,427			$	377			$	38,011

5) 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 run-off following the sale, in 2005, of the ongoing business to a Bermuda-based reinsurance company, Harbor Point Limited.

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

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

		Three Months Ended
		March 31
		2010				2009
		(in millions)
Revenues
Property and casualty insurance
Premiums earned
Personal insurance		$	925			$	907
Commercial insurance			1,152				1,198
Specialty insurance			701				701
Total insurance			2,778				2,806
Reinsurance assumed			4				20
			2,782				2,826
Investment income			396				386
Total property and casualty insurance			3,178				3,212
Corporate and other			18				19
Realized investment gains (losses), net			127				(266	)
Total revenues		$	3,323			$	2,965
Income (loss) before income tax
Property and casualty insurance
Underwriting
Personal insurance		$	(24	)		$	112
Commercial insurance			43				98
Specialty insurance			150				125
Total insurance			169				335
Reinsurance assumed			13				25
			182				360
Increase in deferred policy acquisition costs			22				16
Underwriting income			204				376
Investment income			387				379
Other income (charges)			(7	)			4
Total property and casualty insurance			584				759
Corporate and other loss			(63	)			(63	)
Realized investment gains (losses), net			127				(266	)
Total income before income tax		$	648			$	430

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6) Contingent Liabilities

     Chubb and certain of its subsidiaries have been involved in the investigations by various Attorneys General and other regulatory authorities of several states, the U.S. Securities and Exchange Commission, the U.S. Attorney for the Southern District of New York and certain non-U.S. regulatory authorities with respect to certain business practices in the property and casualty insurance industry including (1) potential conflicts of interest and anti-competitive behavior arising from 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 received subpoenas and other requests for information from various regulators. The Corporation has cooperated fully with these investigations. The Corporation has settled with several state Attorneys General and insurance departments all issues arising out of their investigations. The Attorney General of Ohio on August 24, 2007 filed an action in the Court of Common Pleas in Cuyahoga County, Ohio, against Chubb and certain of its subsidiaries, as well as several other insurers and one broker, as a result of the Ohio Attorney General’s business practices investigation. This action alleges violations of Ohio’s antitrust laws. In July 2008, the court denied the Corporation’s and the other defendants’ motions to dismiss the Ohio Attorney General’s complaint. Since then discovery has been on-going. Although no other Attorney General or regulator has initiated an action against the Corporation, it is possible that such an action may be brought against the Corporation with respect to some or all of the issues that were the focus of the business practice investigations.

     Individual actions and 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 federal and state 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 (N.J. District Court). 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. On September 28, 2007, the N.J. District Court dismissed the second amended complaint filed by the plaintiffs in the In re Insurance Brokerage Antitrust Litigation in its entirety. In so doing, the court dismissed the plaintiffs’ Sherman Act and RICO claims with prejudice for failure to state a claim, and it dismissed the plaintiffs’ state law claims without prejudice because it declined to exercise supplemental jurisdiction over them. The plaintiffs have appealed the dismissal of their second amended complaint to the U.S. Court of Appeals for the Third Circuit, and that appeal is currently pending.

Page 17

     Chubb and certain of its subsidiaries also have been named as defendants in other putative class actions relating or similar to the In re Insurance Brokerage Antitrust Litigation that have been filed in various state courts or in U.S. district courts between 2005 and 2007. These actions have been subsequently removed and ultimately transferred to the N.J. District Court for consolidation with the In re Insurance Brokerage Antitrust Litigation. These actions are currently stayed.

     In the various actions described above, the plaintiffs generally allege that the defendants unlawfully used contingent commission agreements and conspired to reduce competition in the insurance markets. The actions seek treble damages, injunctive and declaratory relief, and attorneys’ fees. The Corporation believes it has substantial defenses to all of the aforementioned legal proceedings and intends to defend the actions vigorously.

     The Corporation cannot predict at this time the ultimate outcome of the aforementioned ongoing investigations and legal proceedings, including any potential amounts that the Corporation may be required to pay in connection with them. Nevertheless, management believes that it is likely that the outcome will not have a material adverse effect on the Corporation’s results of operations or financial condition.

7) Earnings Per Share

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

		Three Months Ended
		March 31
		2010				2009
		(in millions, except
		for per share amounts)
Basic earnings per share:
Net income		$	464			$	341
Weighted average shares outstanding			332.8				355.3
Basic earnings per share		$	1.39			$	.96
Diluted earnings per share:
Net income		$	464			$	341
Weighted average shares outstanding			332.8				355.3
Additional shares from assumed exercise of stock-based compensation awards			2.2				3.0
Weighted average shares and potential shares assumed outstanding for computing diluted earnings per share			335.0				358.3
Diluted earnings per share		$	1.39			$	.95

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Item 2		— 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 March 31, 2010 compared with December 31, 2009 and the results of operations for the quarters ended March 31, 2010 and 2009. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes contained in this report and the consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009.

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; the number and severity of surety-related claims; the cost of reinsurance in 2010; the adequacy of the rates at which we renewed and wrote new business; premium volume, competition and other market conditions in 2010; the repurchase of common stock under our share repurchase program; our capital adequacy and funding of liquidity needs; and the impact of a downgrade in our credit or financial strength ratings. Forward-looking statements generally can be identified by words such as “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue,” or other similar expressions. 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;
•		our ability to retain existing business and attract new business;
•		our expectations with respect to cash flow and investment income and with respect to other income;

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•

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; and
	-		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;
•		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 file for bankruptcy or otherwise experience deterioration in creditworthiness;
•		the effects of disclosures by, and investigations of, companies relating to possible accounting irregularities, practices in the financial services industry, investment losses or other corporate governance issues, including:

	-		claims and litigation arising out of stock option “backdating,” “spring loading” and other equity 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;
	-		claims and litigation relating to uncertainty in the credit and broader financial markets; and
	-		legislative or regulatory proposals or changes;

•		the effects of changes in market practices in the U.S. property and casualty insurance industry arising from any legal or regulatory proceedings, related settlements and industry reform, including changes that have been announced and changes that may occur in the future;
•		the impact of legislative and regulatory developments on our business, including those relating to terrorism, catastrophes and the financial markets;
•		any downgrade in our claims-paying, financial strength or other credit ratings;
•		the ability of our subsidiaries to pay us dividends;

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•

general political, economic and market conditions, whether globally or in the markets in which we operate including:

	-		changes in 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; 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.

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 in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2009 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.

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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 $464 million in the first quarter of 2010 compared with $341 million in the same period of 2009. The higher net income in 2010 was due to net realized investment gains in the first quarter of 2010 compared with substantial net realized investment losses in the same period in 2009. Operating income, which we define as net income excluding realized investment gains and losses after tax, was lower in the first quarter of 2010 compared with 2009.
	•		Operating income was $381 million in the first quarter of 2010 compared with $514 million in the first quarter of 2009. The lower operating income in 2010 was due to lower underwriting income in our property and casualty insurance business. 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 profitable in the first quarter of both 2010 and 2009, but more so in 2009. Our combined loss and expense ratio was 93.6% in the first quarter of 2010 and 88.1% in the same period of 2009. The less profitable results in 2010 were due to a substantially higher impact of catastrophes offset in part by a higher amount of favorable prior year loss development and by a lower current accident year loss ratio excluding catastrophes. The impact of catastrophes accounted for 12.3 percentage points of the combined ratio in the first quarter of 2010 compared with 0.9 of a percentage point in 2009.
	•		During the first quarter of 2010, we estimate that we experienced overall favorable development of about $220 million on loss reserves established as of the previous year end, due primarily to favorable loss experience in the personal and commercial liability and professional liability classes. During the first quarter of 2009, we estimate that we experienced overall favorable development of about $130 million, primarily in the professional liability and commercial property classes.
	•		Total net premiums written increased by 1% in the first quarter of 2010 compared with the same period in 2009. The increase was attributable to the impact of currency fluctuation on business written outside the United States due to the weaker U.S. dollar in the first quarter of 2010 compared to the first quarter of 2009. Excluding the impact of currency fluctuation, net premiums written declined modestly, reflecting the ongoing impact of the general economic downturn and our continued emphasis on underwriting discipline in a market environment that remains competitive.
	•		Property and casualty investment income after tax increased by 2% in the first quarter of 2010. The increase was due primarily to the effects of currency fluctuation on income from our non-U.S. investments, in what continued to be a low yield investment environment. Management uses property and casualty investment income after tax, a non-GAAP financial measure, to evaluate its investment performance because it reflects the impact of any change in the proportion of the investment portfolio invested in tax exempt securities and is therefore more meaningful for analysis purposes than investment income before income tax.

•

Net realized investment gains before tax were $127 million ($83 million after tax) in the first quarter of 2010 compared with net realized losses before tax of $266 million ($173 million after tax) in the same period of 2009. The net realized gains in 2010 were primarily related to investments in limited partnerships, which are reported on a quarter lag, and to a lesser extent, sales of securities. The net realized losses in 2009 were primarily attributable to losses from investments in limited partnerships.

     A summary of our consolidated net income is as follows:

		Quarter Ended March 31
		2010				2009
		(in millions)
Property and casualty insurance		$	584			$	759
Corporate and other			(63	)			(63	)
Consolidated operating income before income tax			521				696
Federal and foreign income tax			140				182
Consolidated operating income			381				514
Realized investment gains (losses) after income tax			83				(173	)
Consolidated net income		$	464			$	341

Property and Casualty Insurance

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

		Quarter Ended March 31
		2010				2009
		(in millions)
Underwriting
Net premiums written		$	2,765			$	2,743
Decrease in unearned premiums			17				83
Premiums earned			2,782				2,826
Losses and loss expenses			1,730				1,615
Operating costs and expenses			862				843
Increase in deferred policy acquisition costs			(22	)			(16	)
Dividends to policyholders			8				8
Underwriting income			204				376
Investments
Investment income before expenses			396				386
Investment expenses			9				7
Investment income			387				379
Other income (charges)			(7	)			4
Property and casualty income before tax		$	584			$	759
Property and casualty investment income after tax		$	313			$	306