THE CHUBB CORPORATION

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 ü. No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes ü. No .

The aggregate market value of common stock held by non-affiliates of the registrant was $11,203,724,340 as of June 30, 2003, computed on the basis of the closing sale price of the common stock on that date.

Portions of the definitive Proxy Statement for the 2004 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

The Chubb Corporation (Chubb) was incorporated as a business corporation under the laws of the State of New Jersey in June 1967. Chubb and its subsidiaries are referred to collectively as the Corporation. Chubb is a holding company for a family of property and casualty insurance companies known informally as the Chubb Group of Insurance Companies (the P&C Group). Since 1882, the P&C Group has provided property and casualty insurance to businesses and individuals around the world. According to A.M. Best, the P&C Group is the 12th largest U.S. property and casualty insurance group based on 2002 net written premiums.

Chubb Financial Solutions (CFS) was organized in 2000 to develop and provide customized risk-financing services through both the capital and insurance markets. CFS’s non-insurance business was primarily structured credit derivatives, principally as a counterparty in portfolio credit default swaps. In the second quarter of 2003, the Corporation implemented a plan to exit the credit derivatives business and is running off the financial products portfolio of CFS. Additional information related to CFS’s operations is presented in the Chubb Financial Solutions section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

At December 31, 2003, the Corporation had total assets of $38.4 billion and shareholders’ equity of $8.5 billion. Revenues, income before income tax and assets for each operating segment for the three years ended December 31, 2003 are included in Note (15) of the Notes to Consolidated Financial Statements. The Corporation employed approximately 12,300 persons worldwide on December 31, 2003.

The Corporation’s principal executive offices are located at 15 Mountain View Road, Warren, New Jersey 07061-1615, and our telephone number is (908) 903-2000.

The Corporation’s internet address is www.chubb.com. The Corporation’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge on this website as soon as reasonably practicable after they have been electronically filed with or furnished to the Securities and Exchange Commission. The Corporation’s Corporate Governance Guidelines, charters of certain key committees of its Board of Directors, Restated Certificate of Incorporation, By-Laws, Code of Business Conduct and Code of Ethics for CEO and Senior Financial Officers are also available on the Corporation’s website or by writing to the Corporation’s Corporate Secretary.

The P&C Group is divided into three strategic business units. Chubb Commercial Insurance offers a full range of commercial customer insurance products, including coverage for multiple peril, casualty, workers’ compensation and property and marine. Chubb Commercial Insurance is known for writing niche business, where our expertise can add value for our agents, brokers and policyholders. Chubb Specialty Insurance offers a wide variety of specialized executive protection and professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations. Chubb Specialty Insurance also includes our surety and accident businesses, as well as our reinsurance assumed business produced by Chubb Re. Chubb Personal Insurance offers products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies.

The P&C Group provides insurance coverages principally in the United States, Canada, Europe, Australia, and parts of Latin America and Asia. Revenues of the P&C Group by geographic area for the three years ended December 31, 2003 are included in Note (15) of the Notes to Consolidated Financial Statements.

The principal members of the P&C Group are Federal Insurance Company (Federal), Pacific Indemnity Company (Pacific Indemnity), Vigilant Insurance Company (Vigilant), Great Northern Insurance Company (Great Northern), Chubb Custom Insurance Company (Chubb Custom), Chubb

National Insurance Company (Chubb National), Chubb Indemnity Insurance Company (Chubb Indemnity), Chubb Insurance Company of New Jersey (Chubb New Jersey), Texas Pacific Indemnity Company, Northwestern Pacific Indemnity Company, Executive Risk Indemnity Inc. (Executive Risk Indemnity), Executive Risk Specialty Insurance Company (Executive Risk Specialty) and Quadrant Indemnity Company (Quadrant) in the United States, as well as Chubb Atlantic Indemnity Ltd. (a Bermuda company), Chubb Insurance Company of Canada, Chubb Insurance Company of Europe, S.A., Chubb Insurance Company of Australia Limited, Chubb Argentina de Seguros, S.A. and Chubb do Brasil Companhia de Seguros.

Federal is the manager of Vigilant, Pacific Indemnity, Great Northern, Chubb National, Chubb Indemnity, Chubb New Jersey, Executive Risk Indemnity, Executive Risk Specialty and Quadrant. Federal also provides certain services to other members of the P&C Group. Acting subject to the supervision and control of the Boards of Directors of the members of the P&C Group, Federal provides day to day executive management and operating personnel and makes available the economy and flexibility inherent in the common operation of a group of insurance companies.

A summary of the P&C Group’s premiums written during the past three years is shown in the following table:

The net premiums written during the last three years for major classes of the P&C Group’s business are included in the Property and Casualty Insurance Results — Underwriting Results section of MD&A.

One or more members of the P&C Group are licensed and transact business in each of the 50 states of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, Canada, Europe, Australia, and parts of Latin America and Asia. In 2003, approximately 82% of the P&C Group’s direct business was produced in the United States, where the P&C Group’s businesses enjoy broad geographic distribution with a particularly strong market presence in the Northeast. The four states accounting for the largest amounts of direct premiums written were New York with 12%, California with 10%, Texas with 6% and New Jersey with 5%. No other state accounted for 5% of such premiums. Approximately 10% of the P&C Group’s direct premiums written was produced in Europe and 4% was produced in Canada.

A frequently used industry measurement of property and casualty insurance underwriting results is the combined loss and expense ratio. The P&C Group uses the combined loss and expense ratio calculated in accordance with statutory accounting principles. This ratio is the sum of the ratio of incurred losses and related loss adjustment expenses to premiums earned (loss ratio) plus the ratio of 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. Investment income is not reflected in the combined ratio. The profitability of property and casualty insurance companies depends on the results of both underwriting operations and investments.

The combined loss and expense ratios during the last three years in total and for the major classes of the P&C Group’s business are included in the Property and Casualty Insurance Results — Underwriting Results section of MD&A.

Another frequently used measurement in the property and casualty insurance industry is the ratio of statutory net premiums written to policyholders’ surplus. At December 31, 2003 and 2002, such ratio for the P&C Group was 1.74 and 2.00, respectively.

In the United States and Canada, the P&C Group is represented by approximately 5,000 independent agencies and accepts business on a regular basis from an estimated 1,000 insurance brokers. In most instances, these agencies and brokers also represent other companies that compete with the P&C Group. The P&C Group’s branch and service offices assist these agencies and brokers in producing and servicing the P&C Group’s business. In addition to the administrative offices in Warren and Whitehouse Station, New Jersey, the P&C Group has seven zone offices and branch and service offices throughout the United States and Canada.

The P&C Group’s overseas business is developed by its foreign agencies and brokers through local branch offices of the P&C Group and by its United States and Canadian agencies and brokers. In conducting its overseas business, the P&C Group reduces the risks relating to currency fluctuations by maintaining investments in those foreign currencies in which the P&C Group has loss reserves and other liabilities. Such investments have characteristics similar to liabilities in those currencies. The net asset or liability exposure to the various foreign currencies is regularly reviewed.

Business for the P&C Group is also produced through participation in certain underwriting pools and syndicates. Such pools and syndicates provide underwriting capacity for risks which an individual insurer cannot prudently underwrite because of the magnitude of the risk assumed or which can be more effectively handled by one organization due to the need for specialized loss control and other services.

In accordance with the normal practice of the insurance industry, the P&C Group assumes and cedes reinsurance with other insurers or reinsurers. Reinsurance is ceded to provide greater diversification of risk and to limit the P&C Group’s maximum net loss arising from large risks or from hazards of potential catastrophic events.

Ceded reinsurance contracts do not relieve the P&C Group of its primary obligation to the policyholders. Thus, a credit exposure exists with respect to reinsurance ceded to the extent that any reinsurer is unable to meet the obligations assumed under the reinsurance contracts. The collectibility of reinsurance is subject to the solvency of the reinsurers and other factors. The P&C Group is selective in regard to its reinsurers, placing reinsurance with only those reinsurers with strong balance sheets and superior underwriting ability. The P&C Group monitors the financial strength of its reinsurers on an ongoing basis. As a result, uncollectible amounts have not been significant.

A large portion of the P&C Group’s ceded reinsurance is effected under contracts known as treaties under which all risks meeting prescribed criteria are automatically covered. Most of the P&C Group’s treaty reinsurance arrangements consist of excess of loss and catastrophe contracts with other insurers or reinsurers which protect against a specified part or all of certain types of losses over stipulated amounts arising from any one occurrence or event. In certain circumstances, reinsurance is also effected by negotiation on individual risks. The amount of each risk retained by the P&C Group is subject to maximum limits which vary by line of business and type of coverage. Retention limits are continually reviewed and are revised periodically as the P&C Group’s capacity to underwrite risks changes.

For a further discussion of the cost and availability of reinsurance, see the Property and Casualty Insurance Results — Underwriting Results section of MD&A.

Unpaid Losses and Loss Adjustment Expenses and Related Amounts Recoverable from Reinsurers

Insurance companies are required to establish a liability in their accounts for the ultimate costs (including loss adjustment expenses) of claims that have been reported but not settled and of claims that have been incurred but not reported. Insurance companies are also required to report as assets the portion of such liability that will be recovered from reinsurers.

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

The P&C Group’s estimates of losses for reported claims are established judgmentally on an individual case basis. Such estimates are based on the P&C Group’s particular experience with the type of risk involved and its knowledge of the circumstances surrounding each individual claim. These estimates are reviewed on a regular basis or as additional facts become known. The reliability of the estimation process is monitored through comparison with ultimate settlements.

The P&C Group’s estimates of losses for unreported claims are principally derived from analyses of historical patterns of the development of paid and reported losses by accident year for each class of business. This process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is an appropriate basis for predicting future outcomes. For certain classes of business where anticipated loss experience is less predictable because of the small number of claims and/or erratic claim severity patterns, the P&C Group’s estimates are based on both expected and actual reported losses. Salvage and subrogation estimates are developed from patterns of actual recoveries.

The P&C Group’s estimates of unpaid loss adjustment expenses are based on analyses of the relationship of projected ultimate loss adjustment expenses to projected ultimate losses for each class of business. Claim staff has discretion to override these expense formulas where judgment indicates such action is appropriate.

The P&C Group’s estimates of reinsurance recoverable related to reported and unreported losses and loss adjustment expenses represent the portion of such liabilities that will be recovered from reinsurers. Amounts recoverable from reinsurers are recognized as assets at the same time and in a manner consistent with the liabilities associated with the reinsured policies.

Estimates are continually reviewed and updated. Any changes in estimates are reflected in operating results in the period in which the estimates are changed.

The anticipated effect of inflation is implicitly considered when estimating liabilities for unpaid losses and loss adjustment expenses. Estimates of the ultimate value of all unpaid losses are based in part on the development of paid losses, which reflect actual inflation. Inflation is also reflected in the case estimates established on reported open claims which, when combined with paid losses, form another basis to derive estimates of reserves for all unpaid losses. There is no precise method for subsequently evaluating the adequacy of the consideration given to inflation, since claim settlements are affected by many factors.

Additional information related to the P&C Group’s estimates related to unpaid losses and loss adjustment expenses and the uncertainties in the estimation process is presented in the Property and Casualty Insurance Results — Loss Reserves section of MD&A.

The P&C Group continues to emphasize early and accurate reserving, inventory management of claims and suits, and control of the dollar value of settlements. The number of outstanding claims at

The significant uncertainties relating to asbestos and toxic waste claims on insurance policies written many years ago are discussed in the Property and Casualty Insurance Results — Loss Reserves section of MD&A.

One master claim is generally established for all similar asbestos claims and lawsuits involving an insured. A counted claim can have from one to thousands of claimants. Generally, a toxic waste claim is established for each lawsuit, or alleged equivalent, against an insured where potential liability has been determined to exist under a policy issued by a member of the P&C Group. Management does not believe the following claim count data is meaningful for analysis purposes.

There were approximately 800 asbestos claims outstanding at December 31, 2003 compared with 900 asbestos claims outstanding at December 31, 2002 and 1,000 asbestos claims outstanding at December 31, 2001. In 2003, approximately 200 claims were opened and 300 claims were closed. In 2002, approximately 300 claims were opened and 400 claims were closed. In 2001, approximately 200 claims were opened and 300 claims were closed. Indemnity payments per claim have varied over time due primarily to variations in insureds, policy terms and types of claims. Management cannot predict whether indemnity payments per claim will increase, decrease or remain the same.

There were approximately 600 toxic waste claims outstanding at December 31, 2003 and 2002, compared with 650 toxic waste claims outstanding at December 31, 2001. Approximately 300 claims were opened in 2003 and 250 claims were opened in both 2002 and 2001. There were approximately 300 claims closed in both 2003 and 2002, and 250 claims closed in 2001. Because payments to date for toxic waste claims have varied from claim to claim, management cannot determine whether past claims experience will prove to be representative of future claims experience.

The table on page 9 presents the subsequent development of the estimated year-end liability for unpaid losses and loss adjustment expenses, net of reinsurance recoverable, for the ten years prior to 2003. The Corporation acquired Executive Risk Inc. in 1999. The amounts in the table for the years ended December 31, 1993 through 1998 do not include Executive Risk’s unpaid losses and loss adjustment expenses.

The top line of the table shows the estimated net liability for unpaid losses and loss adjustment expenses recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of losses and loss adjustment expenses for claims arising in all prior years that are unpaid at the balance sheet date, including losses that had been incurred but not yet reported to the P&C Group.

The upper section of the table shows the reestimated amount of the previously recorded net liability based on experience as of the end of each succeeding year. The estimate is increased or decreased as more information becomes known about the frequency and severity of claims for each individual year. The increase or decrease is reflected in operating results in the year the estimate is changed. The “cumulative deficiency (redundancy)” as shown in the table represents the aggregate change in the reserve estimates from the original balance sheet dates through December 31, 2003. The amounts noted are cumulative in nature; that is, an increase in a loss estimate that is related to a prior period occurrence generates a deficiency in each intermediate year. For example, a deficiency recognized in 2003 relating to losses incurred prior to December 31, 1993 would be included in the cumulative deficiency amount for each year in the period 1993 through 2002. Yet, the deficiency would be reflected in operating results only in 2003. The effect of changes in estimates of the liabilities for losses occurring in prior years on income before income taxes in each of the past three years is shown in the reconciliation of the beginning and ending liability for unpaid losses and loss adjustment expenses in the Property and Casualty Insurance Results — Loss Reserves section of MD&A.

In each of the years 1993 through 2002, there was substantial unfavorable development related to asbestos and toxic waste claims. The cumulative net deficiencies experienced related to asbestos and

toxic waste claims were the result of: (1) an increase in the actual number of claims filed; (2) an increase in the number of potential claims estimated; (3) an increase in the severity of actual and potential claims; (4) an increasingly adverse litigation environment; and (5) an increase in litigation costs associated with such claims. In addition to the unfavorable development related to asbestos and toxic waste claims in 2001 and 2002, there was unfavorable development in the executive protection classes, principally directors and officers liability and errors and omissions liability, due to adverse loss trends related to the corporate failures and allegations of management misconduct and accounting irregularities in recent years. In the years 1993 through 2000, the unfavorable development related to asbestos and toxic waste claims was offset in varying degrees by favorable loss experience for certain executive protection coverages, particularly directors and officers liability and fiduciary liability, and commercial excess liability.

Conditions and trends that have affected development of the liability for unpaid losses and loss adjustment expenses in the past will not necessarily recur in the future. Accordingly, it is not appropriate to extrapolate future redundancies or deficiencies based on the data in this table.

The middle section of the table on page 9 shows the cumulative amount paid with respect to the reestimated liability as of the end of each succeeding year. For example, in the 1993 column, as of December 31, 2003 the P&C Group had paid $5,037.8 million of the currently estimated $6,594.1 million of losses and loss adjustment expenses that were unpaid at the end of 1993; thus, an estimated $1,556.3 million of losses incurred through 1993 remain unpaid as of December 31, 2003, approximately 80% of which relates to asbestos and toxic waste claims.

The lower section of the table on page 9 shows the gross liability, reinsurance recoverable and net liability recorded at each year-end and the reestimation of these amounts as of December 31, 2003.

The liability for unpaid losses and loss adjustment expenses, net of reinsurance recoverable, reported in the accompanying consolidated financial statements prepared in accordance with generally accepted accounting principles (GAAP) comprises the liabilities of U.S. and foreign members of the P&C Group as follows:

Members of the P&C Group are required to file annual statements with insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis). There is no difference between the liability for unpaid losses and loss expenses reported in the statutory basis financial statements of the U.S. members of the P&C Group and such liability reported on a GAAP basis in the consolidated financial statements.

The amounts for the years 1993 through 1998 do not include Executive Risk’s unpaid losses and loss adjustment expenses. Executive Risk was acquired in 1999.

Investment decisions are centrally managed by investment professionals based on guidelines established by management and approved by the respective boards of directors for each member of the P&C Group.

Additional information about the investment portfolio of the Corporation as well as the Corporation’s approach to managing risks is presented in the Invested Assets section of MD&A, the Investment Portfolio section of Quantitative and Qualitative Disclosures About Market Risk and Note (6) of the Notes to Consolidated Financial Statements.

The investment results of the P&C Group for each of the past three years are shown in the following table.


	(b)	Investment income after deduction of investment expenses, but before applicable income tax.

Bellemead Development Corporation and its subsidiaries (Bellemead) are involved in commercial development activities primarily in New Jersey and residential development activities primarily in central Florida. Additional information related to the Corporation’s real estate operations is included in the Corporate and Other — Real Estate section of MD&A.

Chubb is a holding company with subsidiaries primarily engaged in the property and casualty insurance business and is therefore subject to regulation by certain states as an insurance holding company. All states have enacted legislation which regulates insurance holding company systems such as the Corporation. This legislation generally provides that each insurance company in the system is required to register with the department of insurance of its state of domicile and furnish information concerning the operations of companies within the holding company system which may materially affect the operations, management or financial condition of the insurers within the system. All transactions within a holding company system affecting insurers must be fair and equitable. Notice to the insurance commissioners is required prior to the consummation of transactions affecting the ownership or control of an insurer and of certain material transactions between an insurer and any person in its holding company system and, in addition, certain of such transactions cannot be consummated without the commissioners’ prior approval.

The P&C Group is subject to regulation and supervision in the states in which it does business. In general, such regulation is for the protection of policyholders rather than shareholders. The extent of such regulation varies but generally has its source in statutes which delegate regulatory, supervisory and administrative powers to a department of insurance. The regulation, supervision and administration relate to, among other things, the standards of solvency which must be met and maintained; the

licensing of insurers and their agents; restrictions on insurance policy terminations; unfair trade practices; the nature of and limitations on investments; premium rates; restrictions on the size of risks which may be insured under a single policy; deposits of securities for the benefit of policyholders; approval of policy forms; periodic examinations of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of companies or for other purposes; limitations on dividends to policyholders and shareholders; and the adequacy of provisions for unearned premiums, unpaid losses and loss adjustment expenses, both reported and unreported, and other liabilities.

The extent of insurance regulation on business outside the United States varies significantly among the countries in which the P&C Group operates. Some countries have minimal regulatory requirements, while others regulate insurers extensively. Foreign insurers in many countries are subject to greater restrictions than domestic competitors. In certain countries, the P&C Group has incorporated insurance subsidiaries locally to improve its position.

The National Association of Insurance Commissioners has a risk-based capital requirement for property and casualty insurance companies. The risk-based capital formula is used by state regulatory authorities to identify insurance companies which may be undercapitalized and which merit further regulatory attention. The formula prescribes a series of risk measurements to determine a minimum capital amount for an insurance company, based on the profile of the individual company. The ratio of a company’s actual policyholders’ surplus to its minimum capital requirement will determine whether any state regulatory action is required. At December 31, 2003, each member of the P&C Group had more than sufficient capital to meet the risk-based capital requirement.

Regulatory requirements applying to premium rates vary from state to state, but generally provide that rates not be “excessive, inadequate or unfairly discriminatory.” Rates for many lines of business, including automobile and homeowners insurance, are subject to prior regulatory approval in many states. However, in certain states, prior regulatory approval of rates is not required for most lines of insurance which the P&C Group underwrites. Ocean marine insurance rates are exempt from regulation.

Subject to regulatory requirements, the P&C Group’s management determines the prices charged for its policies based on a variety of factors including loss and loss adjustment expense experience, inflation, tax law and rate changes, and anticipated changes in the legal environment, both judicial and legislative. Methods for arriving at prices vary by type of business, exposure assumed and size of risk. Underwriting profitability is affected by the accuracy of these assumptions, by the willingness of insurance regulators to approve changes in those rates which they control and by such other matters as underwriting selectivity and expense control.

The property and casualty insurance industry is highly competitive both as to price and service. Members of the P&C Group compete not only with other stock companies but also with mutual companies, other underwriting organizations and alternative risk sharing mechanisms. Some competitors obtain their business at a lower cost through the use of salaried personnel rather than independent agents and brokers. Rates are not uniform for all insurers and vary according to the types of insurers and methods of operation. The P&C Group competes for business not only on the basis of price, but also on the basis of availability of coverage desired by customers and quality of service, including claim adjustment service. The P&C Group’s products and services are generally designed to serve specific customer groups or needs and to offer a degree of customization that is of value to the insured. The P&C Group continues to work closely with its customers and to reinforce with them the stability, expertise and added value the P&C Group provides.

There are approximately 3,300 property and casualty insurance companies in the United States operating independently or in groups and no single company or group is dominant. The relatively large size and underwriting capacity of the P&C Group provide opportunities not available to smaller companies.

In all states, insurers authorized to transact certain classes of property and casualty insurance are required to become members of an insolvency fund. In the event of the insolvency of a licensed insurer writing a class of insurance covered by the fund in the state, members are assessed to pay certain claims against the insolvent insurer. Generally, fund assessments are proportionately based on the members’ written premiums for the classes of insurance written by the insolvent insurer. In certain states, a portion of these assessments is recovered through premium tax offsets and policyholder surcharges. In 2003, assessments to the members of the P&C Group amounted to $11 million. The amount of future assessments cannot be reasonably estimated.

State insurance regulation requires insurers to participate in assigned risk plans, reinsurance facilities and joint underwriting associations, which are mechanisms that generally provide applicants with various basic insurance coverages when they are not available in voluntary markets. Such mechanisms are most prevalent for automobile and workers’ compensation insurance, but a majority of states also mandate participation in Fair Plans or Windstorm Plans, which provide basic property coverages. Some states also require insurers to participate in facilities that provide homeowners, crime and other classes of insurance where periodic market constrictions may occur. Participation is based upon the amount of a company’s voluntary written premiums in a particular state for the classes of insurance involved. These involuntary market plans generally are underpriced and produce unprofitable underwriting results.

In several states, insurers, including members of the P&C Group, participate in market assistance plans. Typically, a market assistance plan is voluntary, of limited duration and operates under the supervision of the insurance commissioner to provide assistance to applicants unable to obtain commercial and personal liability and property insurance. The assistance may range from identifying sources where coverage may be obtained to pooling of risks among the participating insurers.

Although the federal government and its regulatory agencies generally do not directly regulate the business of insurance, federal initiatives often have an impact on the business in a variety of ways. Current and proposed federal measures which may significantly affect the insurance business include federal terrorism insurance, asbestos liability reform measures, tort reform, corporate governance including the expansion of the Securities and Exchange Commission’s oversight authority over public companies and public accounting firms, ergonomics, health care reform including the containment of medical costs, medical malpractice reform and patients’ rights, privacy, e-commerce, international trade, federal regulation of insurance companies and the taxation of insurance companies.

Insurance companies are also affected by a variety of state and federal legislative and regulatory measures as well as by decisions of their courts that define and extend the risks and benefits for which insurance is provided. These include redefinitions of risk exposure in areas such as water damage, including mold; products liability and commercial general liability; extension and protection of employee benefits, including workers’ compensation and disability benefits; and credit scoring.

Legislative and judicial developments pertaining to asbestos and toxic waste exposures are discussed in the Property and Casualty Insurance Results — Loss Reserves section of MD&A.

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

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2002, a purported class action complaint was filed in the United States District Court for the District of New Jersey on August 31, 2000 by the California Public Employees’ Retirement System. The complaint alleges that the Corporation and one current officer, Henry B. Schram, and two former officers, Dean R. O’Hare and David B. Kelso, and Executive Risk Inc. and three of its former officers, Stephen J. Sills, Robert H. Kullas and Robert V. Deutsch, are liable for certain misrepresentations and omissions regarding, among other matters, disclosures made between April 27, 1999 and October 15, 1999 relating to the improved pricing in the Corporation’s standard commercial insurance business and relating to the offer of the Corporation’s securities to, and solicitation of votes from, the former shareholders of Executive Risk Inc. in connection with the Corporation’s acquisition of Executive Risk Inc. On August 11, 2003, the trial court dismissed the entire action with prejudice. On September 10, 2003, the plaintiffs filed a Notice of Appeal to the United States Court of Appeals for The Third Circuit. The Corporation is defending the action vigorously.

As previously disclosed, beginning in December 2002, Chubb Indemnity was served with a number of complaints related to a series of actions commenced by various plaintiffs against Chubb Indemnity and other non-affiliated insurers in the District Courts of Nueces and Bexar Counties in Texas. As of December 31, 2003, Chubb Indemnity has been served with a total of thirty-nine complaints in Texas. Since July 2003, the trial court has ordered dismissal of fifteen of the Nueces County cases and five Nueces County cases have been voluntarily dismissed by plaintiffs. Also, beginning in June 2003, Chubb Indemnity was served with similar cases in Cuyahoga County, Ohio. As of December 31, 2003, Chubb Indemnity has been served in eleven cases in Ohio. The allegations and the damages sought in the Ohio actions are substantially similar to those in the Texas actions. Chubb Indemnity is vigorously defending all of these actions.

Information regarding certain litigation to which the P&C Group is a party is included in the Property and Casualty Insurance Results — Loss Reserves section of MD&A.

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

No matters were submitted to a vote of the shareholders during the last quarter of the year ended December 31, 2003.

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

Before joining the Corporation in 2002, Mr. Finnegan was Executive Vice President of General Motors Corporation and Chairman, President and Chief Executive Officer of General Motors Acceptance Corporation (GMAC). Previously, he had also served as President, Vice President and Group Executive of GMAC.

Prior to joining the Corporation in 1999, Ms. Bober was Senior Vice President, General Counsel and Secretary of General Signal Corporation since 1997. Previously, she was a partner in the law firm of Jones, Day, Reavis & Pogue.

Item 5. Market for the Registrant’s Common Stock and Related Security Holder Matters

The common stock of the Corporation is listed and principally traded on the New York Stock Exchange (NYSE) under the trading symbol “CB”. The following are the high and low closing sale prices as reported on the NYSE Composite Tape and the quarterly dividends declared per share for each quarter of 2003 and 2002.

At February 27, 2004, there were approximately 5,800 common shareholders of record.

The declaration and payment of future dividends to the Corporation’s shareholders will be at the discretion of the Corporation’s Board of Directors and will depend upon many factors, including the Corporation’s operating results, financial condition and capital requirements, and the impact of regulatory constraints discussed in Note (20)(f) of the Notes to Consolidated Financial Statements.

(a)

Underwriting income has been reduced by net losses of $250.0 million ($162.5 million after-tax or $0.90 per share) in 2003, $741.1 million ($481.7 million after-tax or $2.79 per share) in 2002, $60.9 million ($39.6 million after-tax or $0.22 per share) in 2001, $31.0 million ($20.2 million after-tax or $0.11 per share) in 2000, and $46.8 million ($30.4 million after-tax or $0.18 per share) in 1999, related to asbestos and toxic waste claims.

(b)

Underwriting income in 2001 has been reduced by net surety bond losses of $220.0 million ($143.0 million after-tax or $0.81 per share) related to the bankruptcy of Enron Corp. Underwriting income in 2002 and 2003 has been increased by reductions in net surety bond losses related to Enron of $88.0 million ($57.2 million after-tax or $0.33 per share) and $17.0 million ($11.1 million after-tax or $0.06 per share), respectively.


(c)	Underwriting income has been reduced by net costs of $635.0 million and other charges included costs of $10.0 million (in the aggregate, $420.0 million after-tax or $2.39 per share) related to the September 11 attack.


(d)	Federal and foreign income tax in 2002 included a $40.0 million ($0.23 per share) charge to establish a tax valuation allowance from not being able to recognize, for accounting purposes, certain U.S. tax benefits related to European losses. Federal and foreign income tax in 2003 included a $40.0 million ($0.22 per share) credit for the reversal of the tax valuation allowance established in 2002.


(e)	Amounts in years prior to 2003 have been restated to reflect the accounting changes prescribed by Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations addresses the financial condition of The Chubb Corporation and its subsidiaries as of December 31, 2003 compared with December 31, 2002 and the results of operations for each of the three years in the period ended December 31, 2003. This discussion should be read in conjunction with the consolidated financial statements and related notes and the other information contained in this report.

Certain statements in this report 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 estimates and assumptions related to economic, competitive, regulatory, judicial, legislative and other developments. These include statements relating to trends in, or representing management’s beliefs about, our future strategies, operations and financial results, as well as other statements that include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “should,” “will,” 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:


	•	the availability of primary and reinsurance coverage, including the implications relating to terrorism legislation and regulation;

	•	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 price increases 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;

	•	material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;

	•	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 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;

	—	our estimates relating to ultimate asbestos liabilities and related reinsurance recoverables;

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

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

	—	developments in judicial decisions or regulatory or legislative actions relating to coverage and liability for asbestos, toxic waste and mold claims;


	•	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 energy and securities industries and other corporate governance issues, including:


	—	the effects on the energy markets and the companies that participate in them, and in particular as they may relate to concentrations of risk in our surety business;

	—	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 investment banking practices;

	—	legislative or regulatory proposals or changes, including the changes in law and regulation implemented under the Sarbanes-Oxley Act of 2002;


	•	the occurrence of significant weather-related or other natural or human-made disasters;

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

	•	the ability of our subsidiaries to pay us dividends;

	•	general economic conditions including:


	—	changes in interest rates, market credit spreads and the performance of the financial markets, generally and as they relate to credit risks assumed by our Chubb Financial Solutions unit in particular;

	—	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;

	—	general market conditions; and

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

The consolidated financial statements include amounts based on informed estimates and judgments of management for those 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 adequacy of loss reserves and the recoverability of related reinsurance recoverables, the fair value of future obligations under financial products contracts and the recoverability of the carrying value of real estate properties. These estimates and judgments, which are discussed within the following analysis of our results of operations, require the use of assumptions about matters that are highly uncertain and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements.

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 the Corporation’s shareholders or the investing public. This


	•	Net income was $809 million in 2003 compared with $223 million in 2002 and $112 million in 2001.

	•	The fundamentals of our property and casualty insurance business are strong. Premium growth was 22% in 2003 and 30% in 2002. Rate increases have been substantial in recent years, often with more favorable policy terms and conditions.

	•	Our underwriting results in the past three years were adversely affected by losses related to asbestos and toxic waste claims, the September 11, 2001 attack in the United States and surety losses arising from the bankruptcy of Enron Corp.


	•	Asbestos and toxic waste losses were $250 million in 2003, $741 million in 2002 and $61 million in 2001.

	•	Results in 2001 were adversely affected by net costs of $645 million related to the September 11 attack.

	•	Results in 2001 were adversely affected by net surety losses of $220 million related to Enron. Results in 2002 and 2003 benefited from reductions in net surety losses related to Enron of $88 million and $17 million, respectively.


	•	Our combined loss and expense ratio, as adjusted to exclude the effects of asbestos and toxic waste losses, the September 11 attack and the Enron surety losses and related benefits, was 95.7% in 2003 compared with 98.6% in 2002 and 99.6% in 2001.

	•	During 2003, we experienced overall unfavorable development of $397 million on loss reserves established as of the previous year end, due primarily to two factors.


	•	We strengthened asbestos loss reserves by $250 million in the fourth quarter.

	•	We experienced unfavorable development of about $140 million in our executive protection classes, principally directors and officers liability and errors and omissions liability, as adverse loss trends in recent accident years related to corporate failures and allegations of management misconduct and accounting irregularities more than offset favorable loss experience in older accident years.


	•	Property and casualty investment income after taxes increased by 11% in 2003 compared with growth of 2% in 2002.

	•	The non-insurance business of Chubb Financial Solutions (CFS) produced a loss before taxes of $127 million in 2003 compared with a loss of $70 million in 2002 and income of $9 million in 2001. As announced in April 2003, we are exiting this business and are running off the financial products portfolio of CFS. We reduced our aggregate notional exposure by $14 billion during 2003 to approximately $25 billion at year end.

	•	Because of substantially improved results in Chubb Europe throughout 2003, we eliminated a $40 million tax valuation allowance in the fourth quarter that was established in the fourth quarter of 2002.

	•	We began expensing the cost of stock options in 2003, which resulted in a reduction in net income of $46 million.

Net income included realized investment gains after taxes of $55 million in 2003, $22 million in 2002 and $1 million in 2001. Decisions to sell securities are governed principally by considerations of investment opportunities and tax consequences. As a result, realized gains and losses on the sale of investments may vary significantly from period to period.

Our property and casualty business produced income before taxes of $1,133 million in 2003 compared with income of $278 million in 2002 and a loss of $53 million in 2001.

Asbestos and toxic waste losses, costs related to the September 11 attack and Enron-related surety losses and related benefits are significant components in understanding and assessing our financial performance. However, these items, which are discussed below, had a distorting effect on our results.

As adjusted, property and casualty earnings in 2003 were significantly higher than in the prior two years due primarily to a substantial improvement in underwriting results. Earnings in 2003 also benefited from a significant increase in investment income.

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

We evaluate the underwriting results of our property and casualty insurance business in the aggregate and also for each of our three separate business units: personal insurance, commercial insurance and specialty insurance.

The combined loss and expense ratio, expressed as a percentage, is the key measure of underwriting profitability traditionally used in the property and casualty business. We evaluate the performance of our underwriting operations and of each of our business units using the combined loss and expense ratio calculated in accordance with statutory accounting principles. It is the sum of the ratio of losses to premiums earned (loss ratio) plus the ratio of 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 differ in certain respects from generally accepted accounting principles (GAAP). Under statutory accounting principles applicable to property and casualty insurance companies, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned. We use underwriting results determined in accordance with GAAP, among other measures, to assess the overall performance of the underwriting operations. To convert 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 (loss) determined in accordance with GAAP is defined as premiums earned less losses incurred and GAAP underwriting expenses incurred.

Net premiums written amounted to $11.1 billion in 2003, an increase of 22% over 2002. Net premiums written increased 30% in 2002 compared with 2001. Premiums written in 2001 included net reinsurance reinstatement premium revenue of $30 million related to the September 11 attack.

About 80% of our net premiums written are in the United States. Premium growth in the U.S. was 22% in 2003 and 31% in 2002. Substantial premium growth was also achieved outside the United States in 2003 and 2002. Reported non-U.S. premiums grew 25% in 2003 and 27% in 2002. In local currencies, such premiums grew 15% and 24% in 2003 and 2002, respectively.

Premium growth in 2002 and 2003 in all segments of our business was due primarily to higher rates. Premium growth was particularly strong in the commercial and specialty classes. Premium growth in our other specialty insurance business was primarily from Chubb Re, our reinsurance business that began operations in 1999.

In the wake of heavy insurance industry losses in recent years, exacerbated by the tragic event of September 11, 2001, many insurance companies sought substantial price increases, raised deductibles, reduced coverage limits or declined outright to renew coverage. In this environment, we have taken advantage of the opportunities to write new business and have retained more of our existing accounts. During 2002, we experienced substantial rate increases on business we wrote, often with more favorable policy terms and conditions. In 2003, we continued to get rate increases on much of the business we wrote, although the size of such increases decelerated throughout the year. We expect that rate increases will continue into 2004, although the size of rate increases will continue to decelerate.

Our premiums written are net of amounts ceded to reinsurers who assume a portion of the risk under the insurance policies that are subject to the reinsurance. As a result of the substantial losses incurred by reinsurers in recent years, the cost of reinsurance in the marketplace has increased significantly and reinsurance capacity for certain coverages, such as terrorism, is limited and expensive.

In 2002, we did not renew a workers’ compensation catastrophe treaty that had substantially reduced our net losses from the September 11 attack because the terms and price that were offered were uneconomical.

Our property reinsurance program renews each April. The 2002 renewal of the property per risk treaty and property catastrophe treaties in the aggregate cost approximately $120 million more on an

annualized basis, with more restrictive terms, including terrorism exclusions. Our property per risk retention increased from $10 million to $15 million. Our catastrophe treaty for events in the United States was modified to increase our initial retention, to increase the reinsurance coverage at the top and to reduce our participation in certain layers of the program.

Our 2003 reinsurance program was similar to that in 2002. Reinsurance costs increased in line with the higher premiums on the policies reinsured. We discontinued some lower limit treaties that we believed were no longer economical and increased our participation in certain layers of the treaties renewed. Our property catastrophe treaty for events in the United States was again modified in 2003 to increase the reinsurance coverage at the top due to our increased exposure in certain catastrophe exposed areas. The program now provides coverage for individual catastrophe events of approximately 86% of losses between $150 million and $850 million, with additional coverage above $850 million that varies depending on geographic location.

It is expected that reinsurance costs will increase in 2004 in line with the higher premiums on the policies reinsured. In January 2004, we discontinued a casualty per risk treaty that responded primarily to excess liability exposures over $25 million, due to a reduction in the number of such exposures that we believed made this treaty no longer economical. Our executive protection per risk treaty was renewed on terms similar to the prior year, except our initial deductible on directors and officers liability losses was increased.

Underwriting results in 2003, 2002 and 2001 were adversely affected by incurred losses of $250 million, $741 million and $61 million, respectively, related to asbestos and toxic waste claims. Underwriting results in 2001 were adversely affected by net costs of $635 million related to the September 11 attack and Enron related surety losses of $220 million. Results in 2002 and 2003 benefited from reductions in surety losses related to Enron of $88 million and $17 million, respectively.

The combined loss and expense ratio, as reported and as adjusted to exclude the effects of the asbestos and toxic waste losses, the September 11 attack and the Enron surety losses and related benefits, was as follows:

The loss ratio, as adjusted, improved in 2003 despite higher catastrophe losses, reflecting the favorable experience resulting from our disciplined underwriting standards in recent years. Losses from catastrophes other than the September 11 attack were $294 million in 2003 which represented 2.9 percentage points of the loss ratio compared with $98 million or 1.2 percentage points in 2002 and $114 million or 1.7 percentage points in 2001. Other than reinsurance recoveries related to the September 11 attack, we did not have any recoveries from our catastrophe reinsurance program during the three year period since there were no other individual catastrophes for which our losses exceeded the initial retention. Our initial retention level for each catastrophic event in the United States was

Our expense ratio decreased in 2002 and again in 2003 due in large part to premiums written growing at a substantially higher rate than overhead expenses. The improvement in 2003 was achieved despite an approximate 0.4 of a percentage point adverse impact of expensing stock options.

Asbestos and Toxic Waste Losses. In October 2002, our actuaries and claim personnel together with our outside actuarial consultants completed their periodic ground-up exposure based analysis of our asbestos related liabilities. Upon completion of the analysis and assessment of the results, we increased our net loss reserves by $625 million in the third quarter. In the fourth quarter of 2002, we reduced our previous estimate of reinsurance recoverable on potential asbestos claims, resulting in an additional increase in our net loss reserves of $75 million. Prior to the completion of the analysis, we had incurred asbestos and toxic waste net losses of $41 million in the first half of 2002 and $61 million during all of 2001.

In the fourth quarter of 2003, our actuaries and claim personnel together with our outside actuarial consultants performed a rigorous update of the 2002 ground-up analysis of our asbestos related liabilities. Upon completion of the update, we increased our net loss reserves by an additional $250 million. Our asbestos and toxic waste exposure is further discussed under “Loss Reserves.”

Enron-Related Surety Losses. Our surety losses arising from the Enron bankruptcy relate to bonds issued to various obligees in connection with Enron commitments. Although certain of these surety bonds were the subject of litigation, we recognized our maximum exposure of $220 million, net of reinsurance, in the fourth quarter of 2001. As of the end of 2002, the litigation was settled, resulting in an $88 million reduction in our surety net loss reserves. Results in 2003 benefited from a $17 million recovery from the sale of a bankruptcy claim against various Enron entities.

September 11 Attack. The pre-tax costs of $645 million related to the September 11 attack had three components. First, in our insurance business, we incurred estimated net losses and loss expenses of $555 million plus reinsurance reinstatement costs of $50 million, for an aggregate cost of $605 million. Each of our underwriting segments was affected by the September 11 attack. However, the impact was by far the greatest on our financial institutions business. Second, in our reinsurance business written through Chubb Re, we incurred estimated net losses and loss expenses of $110 million and recognized reinstatement premium revenue of $80 million, for a net cost of $30 million. Finally, we recorded a $10 million charge, included in other charges, as our share of the losses publicly estimated by Hiscox plc, a U.K. insurer in which we had a 28% interest during 2001.

We estimate that our gross losses and loss expenses from the September 11 attack were about $3.2 billion. Most of the losses were from property exposure and business interruption losses. We also had significant workers’ compensation losses. Our net losses and loss expenses of $665 million were significantly lower than the gross amount due to various reinsurance agreements. Our property exposures were protected by facultative reinsurance, property per risk treaties that limited our net loss per risk, and our property catastrophe treaties. Our workers’ compensation losses were protected by a casualty catastrophe treaty and a casualty “clash” treaty that operates like a catastrophe treaty.

Certain of our reinsurers questioned our interpretation and/or application of some provisions of our property per risk reinsurance agreements with regard to the September 11 losses. The questions raised generally involved the applicable limit of reinsurance coverage available to us, the definition of what constitutes one risk, our accumulation of exposure in the various buildings destroyed or damaged and our adherence to our underwriting guidelines. During 2003, we resolved all of the questions that had been raised by our property per risk reinsurers. That resolution will result in our collecting an amount of reinsurance that confirms our estimate of net costs of $645 million related to the September 11 attack.

It is possible that our estimate of ultimate losses related to the September 11 attack may change in the future, and that the change in estimate could have a material effect on the Corporation’s results of

Net premiums from personal insurance, which represent 23% of the premiums written by our property and casualty subsidiaries, increased by 12% in 2003 compared with a 17% increase in 2002. In both years, premium growth occurred in all classes. Premium growth was particularly significant in our homeowners business due primarily to higher rates and increased insurance-to-value. Homeowners premiums were up 14% and 22% in 2003 and 2002, respectively, while the in-force policy count remained flat in 2003 after being up slightly in 2002.

Our personal insurance business produced modestly profitable underwriting results in 2003 and 2002 compared with slightly unprofitable results in 2001. Results in 2001 included net costs of $20 million related to the September 11 attack. The combined loss and expense ratios for the classes of business within the personal insurance segment, as reported and as adjusted to exclude the effects of the September 11 attack, were as follows:

Homeowners results were similarly unprofitable in 2003 and 2002 as higher catastrophe losses in 2003 were offset by a decrease in non-catastrophe losses and the impact of improved pricing. Results in 2003 benefited from a decline in fire and water damage losses. Results improved in 2002 compared with 2001. The improvement in 2002 was due to a decrease in the frequency of both catastrophe and non-catastrophe losses. Results in 2002 and 2001 were adversely affected by an increase in the severity of water damage claims, including those related to mold, particularly in Texas. Losses from catastrophes other than the September 11 attack represented 13.4 percentage points of the loss ratio for this class in 2003 compared with 2.9 percentage points in 2002 and 5.4 percentage points in 2001. Homeowners results were modestly profitable in Europe in 2003 compared with unprofitable results in 2002 and 2001. We are in the process of exiting our personal lines business in Continental Europe, with the exception of the ultra high net worth market segment.

Our remediation plan relating to our homeowners business in the United States, which began in the latter part of 2001, is on track. We have made substantial progress in implementing rate increases in states where rates have been deficient. While the impact of losses related to water damage, including mold, decreased in 2003 compared with the prior two years, we remain concerned about the potential for such claims. We have made regulatory filings in most states to introduce contract changes that would enable us to treat mold as a separate peril available at an appropriate price. These changes have been implemented in 41 states, including Texas, California, Florida and New York, and approved in four other states.

Our personal automobile business was modestly profitable in each of the last three years. Results in each year benefited from stable loss severity.

Other personal coverages, which include insurance for personal valuable articles and excess liability, produced highly profitable results in each of the past three years, as favorable loss experience has continued.

Net premiums from commercial insurance, which represent 37% of our total writings, increased by 21% in 2003 compared with a 37% increase in 2002. The substantial premium growth in both years, which occurred in all segments of this business, was due in large part to significantly higher rates as well as an increase in our in-force policy count. Rates increased substantially in 2002 and 2003, although the level of rate increases in 2003 declined from 2002 levels as we experienced more competition in the U.S. marketplace across most lines of business. Despite this, retention levels have remained steady. New business accelerated toward the end of 2001. During 2002, we wrote more than two dollars of new business for every dollar of business we lost; during 2003, this ratio was about 1.7 to 1. The substantial growth in new business was produced with the same tightened underwriting discipline that existed over the past several years. We expect that rates will continue to rise but that the level of rate increases will continue to decline.

Our commercial insurance results were adversely affected by incurred losses of $250 million in 2003, $741 million in 2002 and $61 million in 2001 related to asbestos and toxic waste claims. Results in 2001 were also adversely affected by net costs of $103 million related to the September 11 attack. The combined loss and expense ratios for the classes of business within commercial insurance, as reported and as adjusted to exclude the effects of the asbestos and toxic waste losses and the September 11 attack, were as follows:

On an as adjusted basis, our commercial insurance business produced highly profitable results in 2003 and 2002 compared with unprofitable results in 2001. Results, as adjusted, have shown substantial improvement in each succeeding year. The improvement has been due in large part to the cumulative effect of price increases, better terms and conditions and more stringent risk selection in recent years.

Multiple peril results were highly profitable in 2003 compared with near breakeven results in 2002. The improved results were driven by the property component of this business where incurred losses were flat. Results in 2002 showed modest improvement over 2001 results, as adjusted, due to highly profitable overseas results. Losses from catastrophes other than the September 11 attack represented

Results for our casualty business, as adjusted, were highly profitable in 2003 and 2002 compared with unprofitable results in 2001. The improvement was due to higher rates and the culling of business where we could not attain price adequacy. In particular, the automobile component showed substantial improvement, producing highly profitable results in 2003 and 2002 compared with unprofitable results in 2001. Results for the primary liability component were profitable in all three years, improving in each succeeding year. The excess liability component produced near breakeven results in 2003 and 2002 compared with unprofitable results in 2001.

Workers’ compensation results were profitable in each of the past three years. The strong results were due to higher rates as well as our disciplined risk selection during the past several years.

Property and marine results were highly profitable in 2003 and 2002 compared with highly unprofitable results in 2001. Results in 2003 and 2002 benefited from improved pricing, higher deductibles, better terms and conditions and a low number of severe losses. The strong results in 2003 were achieved despite a $25 million loss that resulted from an adverse arbitration decision rendered against an insurance pool in which we were formerly a 5.5% participant. The decision related to a fire that occurred in 1995. Results in 2001 were adversely affected by a high frequency of large losses, both in the United States and overseas. Losses from catastrophes other than the September 11 attack represented 6.3 percentage points of the loss ratio for this class in 2003 compared with 6.6 percentage points in 2002 and 5.4 percentage points in 2001.

Net premiums from specialty insurance, which represent 40% of our total writings, increased by 31% in 2003 compared with a 34% increase in 2002. Premiums in 2001 included net reinsurance reinstatement premiums of $35 million related to the September 11 attack, primarily consisting of $80 million of premium revenue in our reinsurance business offset in part by costs of $40 million in our financial institutions business.

The growth in 2002 and 2003 in executive protection and the professional liability component of our financial institutions business was primarily attributable to higher rates. In response to claim severity trends, we initiated a program in the latter half of 2001 to increase pricing and improve policy terms and to not renew business that did not meet our underwriting criteria. We have implemented tighter terms and conditions, including lower policy limits and higher deductibles. We have continued to reprofile our book of business, generating most of our new business from small and middle market customers. Rate increases moderated during the latter half of 2003 due to increased competition in the marketplace. In the fidelity and standard commercial components of our financial institutions business, rate increases have begun to moderate as well.

Growth in our other specialty insurance business was primarily from Chubb Re, our reinsurance assumed business. We write only treaty reinsurance, primarily casualty reinsurance. Premiums produced by Chubb Re amounted to $984 million in 2003 compared with $488 million in 2002 and $199 million in 2001, excluding the net reinstatement premium revenue of $80 million.

Our specialty insurance results in 2001 were adversely affected by net costs of $512 million related to the September 11 attack and Enron-related surety losses of $220 million. Results in 2002 and 2003 benefited from reductions in surety losses related to Enron of $88 million and $17 million, respectively. The combined loss and expense ratios for the classes of business within specialty insurance, as reported and as adjusted to exclude the effects of the September 11 attack and the Enron surety losses and related benefits, were as follows:

Our specialty insurance underwriting results, as adjusted, were near breakeven in 2003 compared with unprofitable results in 2002 and profitable results in 2001.

Executive protection results were unprofitable in 2003 and 2002 compared with profitable results in 2001. Results in 2003 and 2002 were adversely affected by directors and officers liability and errors and omissions liability claim experience, particularly from claims that have arisen due to the corporate failures and allegations of management misconduct and accounting irregularities in recent years. The improvement in 2003 was in our European operations where results in 2002 were particularly unprofitable due to deteriorating loss trends caused by an increase in litigation, often involving European companies being sued in U.S. courts for securities fraud.

Our financial institutions business produced similarly unprofitable results in 2003 and 2002. Results in 2001, as adjusted, were profitable. The fidelity component of this business was highly profitable in each of the last three years due to favorable loss experience. Results for the professional liability component were highly unprofitable in 2003 and 2002 compared with modestly unprofitable results in 2001. The deterioration was due to the same adverse directors and officers liability and errors and omissions liability claim trends experienced in our executive protection business. Financial institutions continue to be the focus of scrutiny by regulators and the plaintiffs’ bar related to investment banking and mutual fund scandals. The standard commercial business written on financial institutions produced profitable results in all three years, reflecting the rate increases and more stringent risk selection in recent years.

Other specialty results, as adjusted, were highly profitable in 2003 and 2002 compared with near breakeven results in 2001. As adjusted, our surety results were highly profitable in each of the past three years. Our reinsurance assumed business generated by Chubb Re and our accident business were both profitable in 2003 and 2002 compared with modestly unprofitable results in 2001.

As a result of disarray in the surety reinsurance market caused by several years of declining prices and high losses, the availability of surety reinsurance in the near term has been significantly reduced. As a result, our future surety results could be more volatile.

Our surety business tends to be characterized by infrequent but potentially high severity losses. Since the end of 2001, we have been reducing our exposure on an absolute basis and by specific bond

Notwithstanding our efforts to manage and reduce our surety exposure, we continue to have substantial commercial surety exposure for outstanding bonds. In that regard, we have exposures related to commercial surety bonds issued on behalf of companies that have experienced deterioration in creditworthiness, including several gas forward purchase surety bonds. We therefore may experience an increase in filed claims and may incur high severity losses. Such losses would be recorded if and when claims are filed and determined to be valid, and could have a material adverse effect on the Corporation’s results of operations and liquidity.

In particular, we have in force $520 million of gas forward purchase surety bonds with one principal, Aquila, Inc. Our exposure under these bonds will decline over the terms of the bonds, which extend until 2012. These surety bonds, which are uncollateralized, secure Aquila’s obligation to supply gas under long-term forward purchase agreements. Under the terms of these bonds, our entire obligation to pay could be triggered if Aquila failed to provide gas under its forward purchase contracts or was the subject of a bankruptcy filing. There is currently no reinsurance in place covering our exposure under these bonds. Aquila continues to perform its obligations under the related gas forward purchase agreements.

A property and casualty subsidiary issued a reinsurance contract to an insurer who provides financial guarantees on debt obligations. At December 31, 2003, the amount of aggregate principal commitments related to this contract was approximately $350 million, net of reinsurance. These commitments expire by 2023.

Loss reserves, which are our property and casualty subsidiaries’ largest liability, include significant amounts related to asbestos and toxic waste claims, the September 11 attack and our Enron surety exposure. The components of our loss reserves were as follows:

The loss reserves related to asbestos and toxic waste claims, the September 11 attack and our Enron surety exposure are significant components of our total loss reserves, but they distort the growth trend in our loss reserves. Adjusted to exclude such loss reserves, our loss reserves, net of reinsurance recoverable, increased by $2,070 million or 19% in 2003 compared with $1,098 million or 11% in 2002.

Loss reserves for each of our business segments increased in 2002 and again in 2003. The increase was most significant in specialty insurance, due in large part to directors and officers and errors and omissions claim activity and the strong growth in our reinsurance assumed business. There was minimal loss reserve growth in commercial insurance in 2002, reflecting the exposure reductions over the several years prior to 2002.

Loss reserves include estimates for claims that have been reported and claims that have not been reported and include estimates of all expenses associated with settling those claims. Estimates are based upon past claim experience modified for current trends as well as prevailing economic, legal and social conditions.

We continually review and update our loss reserves. Based on all information currently available, we believe that the aggregate loss reserves of the property and casualty subsidiaries at December 31, 2003 were adequate to cover claims for losses that had occurred, including both those known to us and those yet to be reported. In establishing such reserves, we consider facts currently known and the present state of the law and coverage litigation. However, given the judicial decisions and legislative actions that have broadened the scope of coverage and expanded theories of liability in the past and the possibilities of similar interpretations in the future, particularly as they relate to asbestos claims and, to a lesser extent, toxic waste claims, additional liabilities may emerge in future periods for amounts in excess of carried reserves. Such increases in estimates could have a material adverse effect on the Corporation’s future operating results. However, management does not expect that any such increases would have a material effect on the Corporation’s consolidated financial condition or liquidity.

Because loss reserve estimates are subject to the outcome of future events, changes in estimates are unavoidable given that loss trends vary and time is required for changes in trends to be recognized and confirmed. As a result, the actual emergence of losses could vary, perhaps substantially, from the estimate of losses included in our financial statements, particularly when settlements may not occur until well into the future. Estimates are continually reviewed and updated as loss experience develops and new information becomes available. Any changes in estimates are reflected in operating results in the period in which the estimates are changed. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development or reserve releases.

A reconciliation of the beginning and ending loss reserves, net of reinsurance, for the three years ended December 31, 2003 is as follows:

During 2003, we experienced overall unfavorable development of $397 million on loss reserves established as of the previous year end. This compares with unfavorable one year development of $790 million in 2002 and favorable development of $196 million in 2001. Such development was reflected in operating results in these respective years.

The unfavorable development in 2003 was due primarily to two factors. First, we strengthened asbestos loss reserves by $250 million in the fourth quarter. Second, we experienced unfavorable development of about $140 million in our executive protection classes, principally directors and officers liability and errors and omissions liability, as adverse loss trends in recent accident years more than offset favorable loss experience in older accident years. The adverse development was due in large part to claims related to the corporate failures and allegations of management misconduct and accounting irregularities in recent years.

The unfavorable development in 2002 was due primarily to our strengthening asbestos and toxic waste loss reserves by $741 million during the year. In addition, we experienced unfavorable development of about $100 million in the homeowners class due to the increase in the severity of water damage and related mold claims. In the executive protection classes, the adverse loss trends in Europe and the United States in the more recent accident years more than offset favorable loss experience in the United States in older accident years, resulting in unfavorable development of about $50 million during 2002. Offsetting the unfavorable development somewhat was the $88 million reduction in surety loss reserves related to the Enron settlement.

The favorable development in 2001 was due primarily to favorable loss experience in our commercial excess liability and executive protection coverages, offset in part by losses incurred related to asbestos and toxic waste claims.

In Item 1 of this report, we present an analysis of our consolidated loss reserve development on a calendar year basis for each of the ten years prior to 2003.

Our U.S. property and casualty subsidiaries are required to file annual statements with insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities. These annual statements include an analysis of loss reserves, referred to as Schedule P, that presents accident year loss development information by line of business for the nine years prior to 2003. It is our intention to post the Schedule P for our combined U.S. property and casualty subsidiaries on our website as soon as it becomes available.

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

We analyze loss reserves in two components: (1) reserves relating to all claims other than asbestos and toxic waste claims and (2) reserves relating to asbestos and toxic waste claims. Within the first component, we review each of the numerous classes of business as part of our overall analysis of loss reserves, taking into consideration the variety of trends that impact the ultimate settlement of claims in each particular class of business. Due to the multitude of such classes and the volume of detail for each, it would not be possible to provide complete quantitative actuarial claim data for all such classes, nor do we believe that such disclosure by class of business would be meaningful or useful to the reader.

Reserves Relating to Claims Other than Asbestos and Toxic Waste Claims. Our loss reserves include amounts related to short tail and long tail classes of business. Short tail classes consist principally of homeowners, commercial property and marine business. For these classes, the estimation of loss reserves is less complex because claims are generally reported and settled shortly after the loss occurs and the claims relate to tangible property.

Long-tail classes include directors and officers liability, errors and omissions liability and other executive protection coverages, commercial excess liability, and other liability classes. Most of our loss reserves relate to long tail liability classes of business. For many liability claims significant periods of time, ranging up to several years or more, may elapse between the occurrence of the loss, the reporting of the loss and the settlement of the claim. The longer the time span between the incidence of a loss and the settlement of the claim, the more the ultimate settlement amount can vary. For the long tail liability classes, a relatively small proportion of net losses in the more recent accident years are reported claims and an even smaller proportion are paid losses. Therefore, a relatively large proportion of our net losses for these classes are reserves for incurred but not reported (IBNR) losses — claims that had not yet been reported to us, some of which were not yet known to the insured, and future development on reported claims. In fact, approximately 60% of our aggregate net loss reserves at December 31, 2003 were for IBNR.

To estimate loss reserves, we use a variety of complex actuarial methods that analyze experience trends and other relevant factors. These methods generally utilize analyses of historical patterns of the development of paid and reported losses by accident year by class of business. This process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is an appropriate basis for predicting future outcomes. For certain long tail classes of business where anticipated loss experience is less predictable because of the small number of claims and/or erratic claim severity patterns, estimates are based on both expected losses and actual reported losses. These classes include directors and officers liability, errors and omissions liability and commercial excess liability, among others. For these classes, we judgmentally set ultimate losses for each accident year based on our evaluation of loss trends and the current risk environment. The expected ultimate losses are adjusted as the accident years mature.

Our loss reserve review process does not calculate a range of loss reserve estimates. Using the various complex actuarial methods and different underlying assumptions, management selects the carried reserve for each class of business.

The inherent uncertainty in the process of establishing loss reserves arises from a number of factors. These factors include but are not limited to:


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


	•	Changes in the judicial environment regarding the interpretation of policy provisions relating to the determination of coverage,

	•	Changes in the general attitude of juries in the determination of liability and damages,

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

	•	Changes in our underwriting standards and

	•	Any changes in our claim handling procedures.

In addition, we must consider the uncertain effects of emerging or potential claims and coverage issues. These issues can have a negative effect on our loss reserves by either extending coverage beyond the original underwriting intent or by increasing the number or size of claims. Examples of emerging or potential claims and coverage issues include increases in the number and size of water damage claims related to remediation of mold conditions and increases in the number and size of directors and officers liability and errors and omissions liability claims arising out of investment banking practices and accounting and other corporate malfeasance. As a result of issues such as these, the uncertainties inherent in estimating ultimate claim costs on the basis of past experience have become increasingly unpredictable, further complicating the already complex loss reserving process. The future impact of these issues and other unforeseen emerging or potential claims and coverage issues is extremely hard to predict and could materially adversely affect the adequacy of our loss reserves.

Reserves Relating to Asbestos and Toxic Waste Claims. The uncertainties relating to asbestos and toxic waste claims on insurance policies written many years ago are exacerbated by inconsistent court decisions as well as judicial interpretations and legislative actions that in some cases have tended to broaden coverage beyond the original intent of such policies and in others have expanded theories of liability. The industry as a whole is engaged in extensive litigation over these coverage and liability issues and is thus confronted with a continuing uncertainty in its efforts to quantify these exposures.

Reserves for asbestos and toxic waste claims cannot be estimated with traditional actuarial techniques that rely on historical accident year loss development factors. Quantitative techniques have to be supplemented by subjective considerations including management judgment. It is therefore not possible to determine the future development of asbestos and toxic waste claims with the same degree of reliability as is the case for other types of claims. Such development will be affected by the extent to which courts and legislatures continue to expand the intent of the policies and the scope of the coverage. We establish case reserves and expense reserves for costs of related litigation where sufficient information has been developed to indicate the involvement of a specific insurance policy. In addition, IBNR reserves are established to cover additional exposures on both known and unasserted claims.

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

The plaintiffs’ bar continues to solicit new claimants through extensive advertising and through asbestos medical screenings. Litigation is then initiated even though many of the claimants do not show any signs of asbestos-related disease. Thus, new asbestos claims and new exposures on existing claims have continued unabated despite the fact that usage of asbestos has declined since the mid-1970’s. Based on published projections, we expect that we will continue receiving asbestos claims at the current rate for at least the next several years.

To date, approximately 70 manufacturers and distributors of asbestos products have filed for bankruptcy protection as a result of asbestos liabilities. The rapid increase in both the frequency and severity of claims in recent years accelerated the pace at which these bankruptcies were filed.

Our most significant individual asbestos exposures involve product liability on the part of “traditional” defendants who manufactured, distributed or installed asbestos products. We wrote excess liability and/or general liability coverages for these insureds. While these insureds are relatively few in number, such exposure has increased in recent years due to the increased volume of claims, the erosion of much of the underlying limits and the bankruptcies of target defendants.

Our other asbestos exposures involve product and non-product liability on the part of “peripheral” defendants, including a mix of manufacturers, distributors and installers of certain products that contain asbestos in small quantities and owners of properties on which asbestos exists. Generally, these insureds are named defendants on a regional rather than a nationwide basis. As the financial resources of traditional asbestos defendants have been depleted, plaintiffs are targeting these viable peripheral parties with greater frequency and, in many cases, for larger awards.

Asbestos claims against the major manufacturers, distributors or installers of asbestos products were presented under the products liability section of primary general liability policies as well as under excess liability policies, both of which typically had aggregate limits that capped an insurer’s liability. In recent years, a number of asbestos claims by insureds are being presented as “non-products” claims, such as those by installers of asbestos products and by property owners who allegedly had asbestos on their property, under the premises or operations section of primary general liability policies. Unlike products exposures, these non-products exposures typically had no aggregate limits, creating potentially greater exposure. Further, in an effort to seek additional insurance coverage, some insureds with installation activities who have substantially eroded their products coverage are presenting new asbestos claims as non-products operations claims or attempting to reclassify previously settled products claims as non-products claims to restore a portion of previously exhausted products aggregate limits. It is difficult to predict whether insureds will be successful in asserting claims under non-products coverage or whether insurers will be successful in asserting additional defenses. Therefore, the impact of such efforts on insurers is uncertain.

The expanded focus of asbestos litigation beyond asbestos manufacturers and distributors to installers and premises owners has created, in some instances, conflicts among insureds, primary insurers and excess insurers, mainly involving questions regarding allocation of indemnity and expense costs and exhaustion of policy limits. These issues are generating costly coverage litigation with the potential for inconsistent results.

In establishing our asbestos reserves, we evaluate the exposure presented by each insured. As part of this evaluation, we consider the available insurance coverage; limits and deductibles; the jurisdictions involved; past settlement values of similar claims; the potential role of other insurance, particularly underlying coverage below our excess liability policies; and applicable coverage defenses, including asbestos exclusions.

We have assumed a continuing unfavorable legal environment with no benefit from any federal asbestos reform legislation. A recent proposal, which envisioned a sizable trust funded primarily by defendants and insurers, appears highly unlikely to pass.

In the third quarter of 2002, our actuaries and claim personnel together with our outside actuarial consultants commenced their periodic ground-up exposure-based analysis of our asbestos related liabilities. As part of this analysis, they considered the following adverse trends:


	•	Estimates of the ultimate liabilities for traditional asbestos defendants have increased as the number of plaintiff claims has surged over the past few years. The notable increase in claimants as well as potential future claimants has resulted in large settlements of asbestos related litigation. As a result, it now appears more likely that many of these traditional defendants will


		access higher excess layers of insurance coverage as well as more years of coverage than previously anticipated.

	•	Claims have been more aggressively pursued against peripheral asbestos defendants in recent years, partly in response to the bankruptcy or exhaustion of insurance coverage for many of the major traditional defendants.

	•	The number of claims filed under the non-aggregate premises or operations section of general liability policies has increased, creating potentially greater exposure.

	•	The litigation environment has become increasingly adverse. More than half of lawsuits filed in recent years have been filed in five plaintiff oriented states, where significant verdicts historically have been rendered against commercial defendants.

	•	The number of asbestos defendants in bankruptcy has increased, resulting in an increase in the number and cost of declaratory judgment lawsuits to resolve coverage disputes and to effect settlements in the bankruptcy courts.

Upon completion of the analysis and assessment of the results, we increased our net asbestos loss reserves by $545 million in the third quarter of 2002. Following a thorough review in the fourth quarter by our internal actuarial, claim and reinsurance personnel, we reduced our estimate of reinsurance recoverable on potential asbestos claims. As a result, our net asbestos loss reserves increased by an additional $75 million.

In the fourth quarter of 2003, our actuaries and claim personnel together with our outside actuarial consultants performed a rigorous update of their 2002 ground-up exposure-based analysis of our asbestos related liabilities. The review noted the same adverse trends observed during the 2002 analysis, particularly a further increase in estimates of the ultimate liabilities for several of our traditional asbestos defendants. In addition, the number of insureds for whom we established reserves and the average severity of claims were both higher than anticipated. Upon completion of the update, we increased our net asbestos loss reserves by $250 million.

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

Significant uncertainty remains as to our ultimate liability relating to asbestos related claims. This uncertainty is due to such factors as the long latency period between asbestos exposure and disease manifestation and the resulting potential for involvement of multiple policy periods for individual claims as well as the increase in the volume of claims by unimpaired plaintiffs and the increase in claims filed under the non-aggregate premises or operations section of general liability policies. There is also the possibility, however remote, of federal legislation that would address the asbestos problem.

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

Under the federal “Superfund” law and similar state statutes, when potentially responsible parties (PRPs) fail to handle the clean-up at a hazardous waste site, regulators have the work done and then attempt to establish legal liability against the PRPs. Most sites have multiple PRPs.

Most PRPs named to date are parties who have been generators, transporters, past or present landowners or past or present site operators. The PRPs disposed of toxic materials at a waste dump site or transported the materials to the site. These PRPs had proper government authorization in many instances. Insurance policies issued to PRPs were not intended to cover the clean-up costs of pollution and, in many cases, did not intend to cover the pollution itself. Pollution was not a recognized hazard at the time many of these policies were written. In more recent years, however, policies specifically exclude such exposures.

As the costs of environmental clean-up became substantial, PRPs and others increasingly filed claims with their insurance carriers. Litigation against insurers extends to issues of liability, coverage and other policy provisions.

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

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

Without federal movement on Superfund reform, the enforcement of Superfund liability is shifting to the states. States are being forced to reconsider state-level cleanup statutes and regulations. As individual states move forward, the potential for conflicting state regulation becomes greater. Significant uncertainty remains as to the cost of remediating the state sites. Because of the large number of state sites, such sites could prove even more costly in the aggregate than Superfund sites.

In establishing our toxic waste reserves, we evaluate the exposure presented by each insured. As part of this evaluation, we consider the probable liability, available insurance coverage, past settlement values of similar exposures as well as facts that are unique to each insured.

Uncertainty remains as to our ultimate liability relating to toxic waste claims. However, toxic waste losses appear to be developing as expected due to relatively stable claim trends. In many cases, claims are being settled for less than initially anticipated due to more efficient site remediation efforts. In other cases, we have been successful at buying back our policies.

Despite the stable claim trends, we increased our toxic waste loss reserves by $80 million in the third quarter of 2002 based on the estimate of our actuaries and actuarial consultants as to our ultimate exposure.

The following table presents a reconciliation of the beginning and ending loss reserves, net of reinsurance recoverable, related to toxic waste claims. There are virtually no reinsurance recoveries related to these claims.


x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
		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 No. 1-8661


New Jersey		13-2595722
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15 Mountain View Road, P.O. Box 1615
Warren, New Jersey		07061-1615
(Address of principal executive offices)		(Zip Code)


(Title of each class)		(Name of each exchange on which registered)
Common Stock, par value $1 per share		New York Stock Exchange
Series B Participating Cumulative		New York Stock Exchange
	Preferred Stock Purchase Rights
Common Stock Purchase Warrants¹		New York Stock Exchange
4% Senior Notes Due 2007¹		New York Stock Exchange
Common Stock Purchase Contracts²		New York Stock Exchange
2.25% Senior Notes due 2008²		New York Stock Exchange


	ITEM		DESCRIPTION	PAGE

PART I		1	Business		3
		2	Properties		13
		3	Legal Proceedings		13
		4	Submission of Matters to a Vote of Security Holders		14
PART II		5	Market for the Registrant’s Common Stock and Related Security Holder Matters		15
		6	Selected Financial Data		16
		7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
		7A	Quantitative and Qualitative Disclosures About Market Risk		49
		8	Consolidated Financial Statements and Supplementary Data		53
		9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		53
		9A	Controls and Procedures		53
PART III		10	Directors and Executive Officers of the Registrant		54
		11	Executive Compensation		54
		12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		54
		13	Certain Relationships and Related Transactions		54
		14	Principal Accountant Fees and Services		54
PART IV		15	Exhibits, Financial Statements, Schedules and Reports on Form 8-K		55
			Signatures		56
			Index to Financial Statements and Financial Statement Schedules		F-1
			Exhibits Index		E-1


	Direct		Reinsurance		Reinsurance		Net
	Premiums		Premiums		Premiums		Premiums
Year	Written		Assumed(a)		Ceded(a)		Written


	(in millions)
2001	$	7,534.3	$	525.2	$	1,098.0	$	6,961.5
2002		9,799.3		806.1		1,558.1		9,047.3
2003		11,337.7		1,266.0		1,535.8		11,067.9



	December 31

	2003		2002


	(in millions)
U.S. subsidiaries	$	12,477.4	$	11,093.3
Foreign subsidiaries		2,043.8		1,548.3

	$	14,521.2	$	12,641.6



		December 31

Year Ended		1993		1994			1995			1996			1997			1998			1999			2000		2001		2002		2003


		(in millions)
Net Liability for Unpaid Losses and Loss Adjustment Expenses		$	6,450.0	$	6,932.9		$	7,614.5		$	7,755.9		$	8,564.6		$	9,049.9		$	9,748.8		$	10,051.3	$	11,009.7	$	12,641.6	$	14,521.2

Net Liability Reestimated as of:
	One year later		6,420.3		6,897.1			7,571.7			7,690.6			8,346.2			8,854.8			9,518.8			9,855.8		11,799.4		13,038.9
	Two years later		6,363.1		6,874.5			7,520.9			7,419.6			7,899.8			8,516.5			9,094.5			10,550.7		12,143.3
	Three years later		6,380.4		6,829.8			7,256.8			6,986.2			7,564.8			8,058.0			9,652.9			10,761.5
	Four years later		6,338.1		6,605.4			6,901.5			6,719.4			7,145.0			8,527.1			9,739.7
	Five years later		6,150.1		6,352.2			6,692.1			6,409.4			7,570.7			8,655.7
	Six years later		5,904.9		6,191.4			6,476.7			6,886.9			7,693.7
	Seven years later		5,751.4		6,044.5			7,035.9			7,051.5
	Eight years later		5,692.2		6,655.4			7,253.8
	Nine years later		6,346.4		6,870.1
	Ten years later		6,594.1

Total Cumulative Net Deficiency (Redundancy)			144.1		(62.8	)		(360.7	)		(704.4	)		(870.9	)		(394.2	)		(9.1	)		710.2		1,133.6		397.3

Cumulative Net Deficiency Related to Asbestos and Toxic Waste Claims (Included in Above Total)			1,770.5		1,655.3			1,473.5			1,322.8			1,197.6			1,129.8			1,083.0			1,052.0		991.1		250.0

Cumulative Amount of Net Liability Paid as of:
	One year later		1,272.0		1,250.7			1,889.4			1,418.3			1,797.7			2,520.1			2,482.7			2,793.7		3,084.5		3,398.8
	Two years later		1,985.7		2,550.7			2,678.2			2,488.2			3,444.2			3,707.8			4,079.3			4,668.7		5,354.1
	Three years later		3,015.8		3,073.7			3,438.8			3,757.0			4,160.6			4,653.1			5,285.8			5,981.4
	Four years later		3,264.5		3,589.8			4,457.6			4,194.8			4,710.9			5,351.1			6,138.9
	Five years later		3,624.2		4,444.4			4,755.4			4,555.6			5,132.9			5,894.3
	Six years later		4,367.9		4,683.3			5,010.6			4,857.2			5,481.1
	Seven years later		4,545.5		4,896.6			5,251.0			5,137.4
	Eight years later		4,738.2		5,068.1			5,480.9
	Nine years later		4,883.6		5,234.5
	Ten years later		5,037.8

Gross Liability, End of Year		$	8,235.4	$	8,913.2		$	9,588.2		$	9,523.7		$	9,772.5		$	10,356.5		$	11,434.7		$	11,904.6	$	15,514.9	$	16,713.1	$	17,947.8
Reinsurance Recoverable, End of Year			1,785.4		1,980.3			1,973.7			1,767.8			1,207.9			1,306.6			1,685.9			1,853.3		4,505.2		4,071.5		3,426.6

Net Liability, End of Year		$	6,450.0	$	6,932.9		$	7,614.5		$	7,755.9		$	8,564.6		$	9,049.9		$	9,748.8		$	10,051.3	$	11,009.7	$	12,641.6	$	14,521.2


Reestimated Gross Liability		$	8,626.5	$	9,035.7		$	9,332.9		$	8,832.0		$	8,918.0		$	10,082.8		$	11,857.1		$	13,149.3	$	17,399.7	$	17,353.7
Reestimated Reinsurance Recoverable			2.032.4		2,165.6			2,079.1			1,780.5			1,224.3			1,427.1			2,117.4			2,387.8		5,256.4		4,314.8

Reestimated Net Liability		$	6,594.1	$	6,870.1		$	7,253.8		$	7,051.5		$	7,693.7		$	8,655.7		$	9,739.7		$	10,761.5	$	12,143.3	$	13,038.9


Cumulative Gross Deficiency (Redundancy)		$	391.1	$	122.5		$	(255.3	)	$	(691.7	)	$	(854.5	)	$	(273.7	)	$	422.4		$	1,244.7	$	1,884.8	$	640.6



	Average				Percent Earned
	Invested		Investment
Year	Assets(a)		Income(b)		Before Tax			After Tax


	(in millions)
2001	$	15,800.9	$	902.6		5.71	%		4.74	%
2002		17,665.9		929.4		5.26			4.31
2003		22,168.5		1,058.4		4.77			3.80


	(a)	Average of amounts for the years presented with fixed maturity securities at amortized cost and equity securities at market value.


			Year of
	Age(a)		Election(b)

John D. Finnegan, Chairman, President and Chief Executive Officer		55		2002
Joanne L. Bober, Senior Vice President and General Counsel		51		1999
Robert C. Cox, Executive Vice President of Chubb & Son, a division of Federal		45		2003
John J. Degnan, Vice Chairman and Chief Administrative Officer		59		1994
Paul J. Krump, Executive Vice President of Chubb & Son, a division of Federal		44		2001
Michael J. Marchio, Executive Vice President of Chubb & Son, a division of Federal		56		2002
Andrew A. McElwee, Jr., Executive Vice President of Chubb & Son, a division of Federal		49		1997
Thomas F. Motamed, Vice Chairman and Chief Operating Officer		55		1997
Michael O’Reilly, Vice Chairman and Chief Financial Officer		60		1976
Henry B. Schram, Senior Vice President		57		1985



		2003

		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter

Common stock prices
	High	$	57.60	$	65.01	$	69.09	$	69.24
	Low		42.45		44.81		59.24		62.99
Dividends declared			.36		.36		.36		.36


					Page

Cautionary Statement Regarding Forward-Looking Information						18
Critical Accounting Estimates and Judgments						19
Executive Summary						19
Property and Casualty Insurance Results						21
	Underwriting Results					22
		*Net Premiums Written*				22
		*Reinsurance*				23
		*Profitability*				24
			*Asbestos and Toxic Waste Losses*			25
			*Enron-Related Surety Losses*			25
			*September 11 Attack*			25
	Review of Underwriting Results by Business Unit					26
		*Personal Insurance*				26
		*Commercial Insurance*				27
		*Specialty Insurance*				28
	Loss Reserves					30
		*Prior Year Loss Development*				31
		*Estimates and Uncertainties*				33
			*Reserves Relating to Claims Other than Asbestos and Toxic Waste Claims*			33
			*Reserves Relating to Asbestos and Toxic Waste Claims*			34
				*Asbestos Reserves*		34
				*Toxic Waste Reserves*		37
	Catastrophe Risk Management					38
		*Terrorism Risk and Legislation*				38
	Investment Results					39
	Other Charges					39
Chubb Financial Solutions						39
Corporate and Other						42
	Real Estate					42
Realized Investment Gains and Losses						43
Income Taxes						43
Capital Resources and Liquidity						44
	Capital Resources					44
	Ratings					45
	Contractual Obligations and Off Balance Sheet Arrangements					46
	Liquidity					46
Invested Assets						47
Changes in Accounting Principles						48


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



			Years Ended December 31

			2003			2002			2001


			(in millions)
Property and casualty insurance
	Underwriting
		Net premiums written	$	11,067.9		$	9,047.3		$	6,961.5
		Increase in unearned premiums		(885.4	)		(962.0	)		(305.1	)

		Premiums earned		10,182.5			8,085.3			6,656.4

		Losses and loss expenses		6,867.2			6,064.6			5,357.4
		Operating costs and expenses		3,356.3			2,822.6			2,260.8
		Increase in deferred policy acquisition costs		(168.3	)		(212.5	)		(86.8	)
		Dividends to policyholders		22.8			36.5			28.5

		Underwriting income (loss)		104.5			(625.9	)		(903.5	)

	Investments
		Investment income before expenses		1,082.9			952.2			914.7
		Investment expenses		24.5			22.8			12.1

		Investment income		1,058.4			929.4			902.6

	Other charges			(29.5	)		(25.3	)		(52.3	)

	Property and casualty income (loss)			1,133.4			278.2			(53.2	)
Chubb Financial Solutions non-insurance business				(126.9	)		(69.8	)		9.2
Corporate and other				(157.3	)		(73.9	)		(22.8	)
Realized investment gains				84.4			33.9			.8

Consolidated income (loss) before income tax				933.6			168.4			(66.0	)
Federal and foreign income tax (credit)				124.8			(54.5	)		(177.5	)

Consolidated net income			$	808.8		$	222.9		$	111.5

Property and casualty investment income after income tax			$	843.1		$	760.6		$	749.1


				2003			2002			2001			2000			1999


				(in millions except for per share amounts)
FOR THE YEAR
Revenues
Property and Casualty Insurance
		Premiums Earned		$	10,182.5		$	8,085.3		$	6,656.4		$	6,145.9		$	5,652.0
		Investment Income			1,082.9			952.2			914.7			890.8			832.6
	Corporate and Other				44.2			68.9			182.1			163.3			157.6
	Realized Investment Gains				84.4			33.9			.8			51.5			87.4

			Total Revenues	$	11,394.0		$	9,140.3		$	7,754.0		$	7,251.5		$	6,729.6

Income
Property and Casualty Insurance
		Underwriting Income (Loss)(a)(b)		$	104.5		$	(625.9	)	$	(903.5	)(c)	$	(23.6	)	$	(178.8	)
		Investment Income			1,058.4			929.4			902.6			879.2			821.0
		Other Charges			(29.5	)		(25.3	)		(52.3	)(c)		(52.2	)		(16.0	)

	Property and Casualty Insurance Income (Loss)				1,133.4			278.2			(53.2	)		803.4			626.2
	Chubb Financial Solutions Non-Insurance Business				(126.9	)		(69.8	)		9.2			2.8			—
	Corporate and Other				(157.3	)		(73.9	)		(22.8	)		(6.7	)		(3.5	)
	Realized Investment Gains				84.4			33.9			.8			51.5			87.4

	Income (Loss) Before Income Tax				933.6			168.4			(66.0	)		851.0			710.1
	Federal and Foreign Income Tax (Credit)(d)				124.8			(54.5	)		(177.5	)		136.4			89.0

	Net Income			$	808.8		$	222.9		$	111.5		$	714.6		$	621.1

Per Share
	Net Income			$	4.46		$	1.29		$	.63		$	4.01		$	3.66
	Dividends Declared on Common Stock				1.44			1.40			1.36			1.32			1.28
AT DECEMBER 31
Total Assets (e)				$	38,360.6		$	34,080.9		$	29,415.5		$	24,993.2		$	23,503.5
Long Term Debt					2,813.9			1,959.1			1,351.0			753.8			759.2
Total Shareholders’ Equity (e)					8,522.0			6,825.7			6,491.8			6,948.2			6,238.3
Book Value Per Share (e)					45.33			39.87			38.17			39.72			35.55


	Net Premiums Written



			Years Ended December 31

			2003		2002		2001


			(in millions)
Personal insurance
	Automobile		$	590.0	$	536.1	$	480.2
	Homeowners			1,485.4		1,299.0		1,065.4
	Other			514.9		478.6		435.5

		Total personal		2,590.3		2,313.7		1,981.1

Commercial insurance
	Multiple peril			1,088.6		930.1		767.4
	Casualty			1,362.1		1,119.0		799.8
	Workers’ compensation			625.9		458.2		355.1
	Property and marine			1,032.4		897.4		568.5

		Total commercial		4,109.0		3,404.7		2,490.8

Specialty insurance
	Executive protection			2,113.6		1,702.4		1,348.7
	Financial institutions			830.0		680.3		534.2
	Other			1,425.0		946.2		606.7

		Total specialty		4,368.6		3,328.9		2,489.6

		Total	$	11,067.9	$	9,047.3	$	6,961.5


	Reinsurance