FILING ON FORM 10-K

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ü] No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [ü]

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ü]

The aggregate market value of common stock held by non-affiliates of the registrant was $16,942,712,627 as of June 30, 2005, computed on the basis of the closing sale price of the common stock on that date.

Portions of the definitive Proxy Statement for the 2006 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 10th largest U.S. property and casualty insurance group based on 2004 net written premiums.

At December 31, 2005, the Corporation had total assets of $48.1 billion and shareholders’ equity of $12.4 billion. Revenues, income before income tax and assets for each operating segment for the three years ended December 31, 2005 are included in Note (14) of the Notes to Consolidated Financial Statements. The Corporation employed approximately 10,800 persons worldwide on December 31, 2005.

The Corporation’s principal executive offices are located at 15 Mountain View Road, Warren, New Jersey 07059, 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 of 1934 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. Chubb’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 four 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 professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations. Chubb Specialty Insurance also includes our surety business. Chubb Personal Insurance offers products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies. Reinsurance Assumed includes the business produced by Chubb Re. In December 2005, the Corporation transferred its ongoing reinsurance assumed business to Harbor Point Limited. For a further discussion of this transaction, see the Property and Casualty Insurance — Transfer of Ongoing Reinsurance Assumed Business section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

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, 2005 are included in Note (14) 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 — 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 2005, approximately 80% 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 5% and New Jersey with 5%. No other state accounted for 5% of such premiums. Approximately 11% 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 losses and loss expenses to premiums earned (loss ratio) plus the ratio of statutory underwriting expenses to premiums written (expense ratio) after reducing both premium amounts by dividends to policyholders. When the combined ratio is under 100%, underwriting results are generally considered profitable; when the combined ratio is over 100%, underwriting results are generally considered unprofitable. 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 — Underwriting Operations 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, 2005 and 2004, the ratio for the P&C Group was 1.37 and 1.53, respectively.

The P&C Group does not utilize a significant in-house distribution model for its products. Instead, 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 approximately 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 zone, 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 generally 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 cedes reinsurance to other insurance companies. Reinsurance is ceded to provide greater diversification of risk and to limit the P&C Group’s maximum net loss arising from large risks or from catastrophic events.

A large portion of the P&C Group’s ceded reinsurance is effected under contracts known as treaties under which all risks meeting prescribed criteria are automatically covered. Most of the P&C Group’s treaty reinsurance arrangements consist of excess of loss and catastrophe contracts that protect against a specified part or all of certain types of losses over stipulated amounts arising from any one occurrence or event. 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 that vary by line of business and type of coverage. Retention limits are regularly reviewed and are revised periodically as the P&C Group’s capacity to underwrite risks changes. For a discussion of the cost and availability of reinsurance, see the Property and Casualty Insurance — Underwriting Results section of MD&A.

Ceded reinsurance contracts do not relieve the P&C Group of the primary obligation to its policyholders. Thus, an exposure exists with respect to reinsurance recoverable to the extent that any reinsurer is unable or unwilling to meet the obligations assumed under the reinsurance contracts. The collectibility of reinsurance is subject to the solvency of the reinsurers, coverage interpretations and other factors. The P&C Group is selective in regard to its reinsurers, placing reinsurance with only

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, informed subjective estimates and 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, estimates are based on both expected losses 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. The claim staff has discretion to override these expense estimates on reported claims 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 the gross liabilities that will be recovered from reinsurers. Amounts recoverable from reinsurers are estimated in a manner consistent with the gross losses associated with the reinsured policies.

Estimates are regularly reviewed and updated as appropriate. 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 — 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 table on page 8 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 2005. The Corporation acquired Executive Risk Inc. in 1999. The amounts in the table for the years 1995 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 years prior to the balance sheet date that were 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 losses for each individual year. The increase or decrease is reflected in operating results of the period in which 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, 2005. 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 2005 relating to losses incurred prior to December 31, 1995 would be included in the cumulative deficiency amount for each year in the period 1995 through 2004. Yet, the deficiency would be reflected in operating results only in 2005. 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 — Loss Reserves section of MD&A.

The subsequent development of the net liability for unpaid losses and loss adjustment expenses as of year-ends 1995 through 2004 was adversely affected by 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 the years 1995 through 1999, the unfavorable development related to asbestos and toxic waste claims was offset in varying degrees by favorable loss experience for certain professional liability coverages, particularly directors and officers liability and fiduciary liability, and for commercial excess liability. In the years 2000 through 2003, in addition to the unfavorable development related to asbestos and toxic waste claims, there was significant unfavorable development in the professional liability classes, principally directors and officers liability and errors and omissions liability, due in large part to adverse loss trends related to corporate failures and allegations of management misconduct and accounting irregularities.

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 8 shows the cumulative amount paid with respect to the reestimated net liability as of the end of each succeeding year. For example, in the 1995 column, as of December 31, 2005 the P&C Group had paid $5,916.0 million of the currently estimated $7,597.4 million of net losses and loss adjustment expenses that were unpaid at the end of 1995; thus, an estimated $1,681.4 million of net losses incurred through 1995 remain unpaid as of December 31, 2005, approximately 65% of which relates to asbestos and toxic waste claims.

The amounts for the years 1995 through 1998 do not include Executive Risk’s unpaid losses and loss adjustment expenses. Executive Risk was acquired in 1999.

The lower section of the table on page 8 shows the gross liability, reinsurance recoverable and net liability recorded at the balance sheet date for each of the indicated years and the reestimation of these amounts as of December 31, 2005.

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). The 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 is not significant.

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

Additional information about the Corporation’s investment portfolio as well as its 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 (3) 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.

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, product coverage and methods of operation. The P&C Group competes for business not only on the basis of price, but also on the basis of financial strength, 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

There are approximately 3,100 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.

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 that 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 that 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.

Companies within the P&C Group are subject to regulation and supervision in the respective states in which they do business. In general, such regulation is designed to protect the interests of policyholders, and not necessarily the interests of insurers, their shareholders and other investors. The extent of such regulation varies but generally has its source in statutes that delegate regulatory, supervisory and administrative powers to a department of insurance. The regulation, supervision and administration relate, among other things, to: the standards of solvency that 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 that 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 competitive position.

The National Association of Insurance Commissioners (NAIC) 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 that may be undercapitalized and that 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, 2005, each member of the P&C Group had more than sufficient capital to meet the risk-based capital requirement. The NAIC periodically reviews the risk-based capital formula and changes to the formula could be considered in the future.

Regulatory requirements applying to premium rates vary from state to state, but generally provide that rates not be “excessive, inadequate or unfairly discriminatory.” In many states, these regulatory

requirements can impact the P&C Group’s ability to change rates, particularly with respect to personal lines products such as automobile and homeowners insurance, without prior regulatory approval even where the current rates are inadequate to the assumed risk. However, in certain states, prior regulatory approval of rates is not required for most lines of insurance that the P&C Group underwrites.

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, anticipated changes in the legal environment, both judicial and legislative, and tax law and rate changes. 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 that they control and by such other matters as underwriting selectivity and expense control.

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, companies in the P&C Group, together with the other fund members, are assessed in order to provide the funds necessary 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, the P&C Group can recover a portion of these assessments through premium tax offsets and policyholder surcharges. In 2005, assessments of the members of the P&C Group amounted to $10 million. The amount of future assessments cannot be reasonably estimated.

Insurance regulation in certain states requires the companies in the P&C Group, together with other insurers operating in the state, 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 that insurers, such as the P&C Group, participate in Fair Plans or Windstorm Plans, which offer basic property coverages to insureds where not otherwise available. 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 that may significantly affect the P&C Group’s business and the market as a whole include federal terrorism insurance, asbestos liability reform measures, tort reform, corporate governance including the increasing focus on 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.

Companies in the P&C Group 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.

Another area of potential regulation and supervision of the P&C Group relates to the form of compensation paid to agents and brokers and the disclosure of such compensation. Several state Attorneys General and other regulatory agencies have entered into settlement agreements with a number of large insurance producers and at least one major property and casualty insurance carrier. Among other things, these settlements prohibit those parties from accepting or paying, as applicable, compensation in the form of contingent commissions for some or all lines of business. In addition, a number of states have announced that they are looking at compensation arrangements and considering regulatory action or reform in this area. The rules that would be imposed if these actions or reforms were adopted range in nature from disclosure requirements to prohibition of certain forms of compensation to imposition of new duties on insurance agents, brokers and/or carriers in dealing with customers. A small number of states have enacted compensation disclosure rules; however, in the majority of states, these proposals are still being developed. The Corporation cannot predict the potential impact of the foregoing on its business. For additional information see the Property and Casualty Insurance — Regulatory Developments section of MD&A.

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

The Corporation’s wholly owned subsidiary, Bellemead Development Corporation (Bellemead), and its subsidiaries 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 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 MD&A.

The Corporation’s business is subject to a number of risks, including those described below, that could have a material effect on the Corporation’s results of operations, financial condition or liquidity and that could cause our operating results to vary significantly from period to period. References to “we,” “us” and “our” appearing in this Form 10-K under this heading should be read to refer to the Corporation.

If our property and casualty loss reserves are insufficient, our results could be adversely affected.

The process of establishing loss reserves is complex and imprecise as it must take into consideration many variables that are subject to the outcome of future events. As a result, informed subjective estimates and judgments as to our ultimate exposure to losses are an integral component of our loss reserving process. Variations between our loss reserve estimates and the actual emergence of losses could be material and could have a material adverse effect on our results of operations.

A further discussion of the risk factors related to our property and casualty loss reserves is presented in the Property and Casualty Insurance-Loss Reserves section of MD&A.

The effects of emerging claim and coverage issues on our business are uncertain.

We price and establish the terms and conditions of policies based upon an intended scope of policy coverage. However, as industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until some time after we have issued the insurance policies that are affected by the changes. As a result, the full extent of liability under our insurance policies may not be known for many years after the policies are issued. Emerging claim and coverage issues could have an adverse effect on our results of operations and financial condition.

As a property and casualty insurance holding company, our insurance operations expose us to claims arising out of catastrophes. Catastrophes can be caused by various natural perils, including hurricanes and other windstorms, earthquakes, winter storms and brush fires. Catastrophes can also be man-made, such as a terrorist attack. The frequency and severity of catastrophes are inherently unpredictable. It is possible that both the frequency and severity of natural and man-made catastrophic events will increase.

The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to relatively small geographic areas; however, hurricanes and earthquakes may produce significant damage in larger areas, especially those that are heavily populated. Claims resulting from natural or man-made catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could materially reduce our profitability or harm our financial condition. Our ability to write new business could also be affected. We believe that increases in the value and geographic concentration of insured property and the effects of inflation could increase the severity of claims from catastrophic events in the future. In addition, states have from time to time passed legislation that has the effect of limiting the ability of insurers to manage catastrophe risk, such as legislation prohibiting insurers from withdrawing from catastrophe-exposed areas.

The occurrence of terrorist attacks in the geographic areas we serve could result in substantially higher claims under our insurance policies than we have anticipated. Private sector catastrophe reinsurance for terrorism losses is generally unavailable, especially for acts of terrorism involving nuclear, biological, chemical or radiological weapons. In addition, the continued threat of terrorism also could generally result in increased reinsurance prices and potentially cause us to retain more risk than we otherwise would retain if we were able to obtain reinsurance at lower prices. Terrorist attacks also could disrupt our operations centers in the U.S. or abroad. As a result, it is possible that any, or a combination of all, of these factors could have a material adverse effect on our business, results of operations, financial condition or liquidity.

A further discussion on the risk factors related to catastrophes is presented in the Property and Casualty Insurance — Catastrophe Risk Management section of MD&A.

The failure of the risk mitigation strategies we utilize could have a material adverse effect on our financial condition or results of operations.


	•	engaging in vigorous underwriting;

	•	carefully evaluating terms and conditions of our policies;

	•	focusing on our risk aggregations by geographic zones, industry type, credit exposure and other bases; and

	•	ceding reinsurance.

However, there are inherent limitations in all of these tactics and no assurance can be given that an event or series of unanticipated events will not result in loss levels in excess of our probable maximum loss models, which could have a material adverse effect on our financial condition or results of operations.

The availability of reinsurance coverage and our inability to collect amounts due from reinsurers could have a material adverse effect on our financial condition or results of operations.

The availability and cost of reinsurance are subject to prevailing market conditions. In recent years, for certain coverages, we have elected not to renew reinsurance treaties that we believed were no longer economical. We have also increased the amount of the risk we retain in many of the treaties that we have renewed. Accordingly, our net exposure to liability has increased, which, in turn, could have a material adverse effect on our financial condition or results of operations.

With respect to reinsurance coverages we have purchased, our ability to recover amounts due from reinsurers may be affected by the creditworthiness and willingness to pay of the reinsurers from whom we have purchased coverage. The inability or unwillingness of any of our reinsurers to meet their obligations to us could have a material adverse effect on our results of operations.

Cyclicality of the property and casualty insurance industry may cause fluctuations in our results.

The property and casualty insurance business historically has been cyclical, experiencing periods characterized by intense price competition, relatively low premium rates and less restrictive underwriting standards followed by periods of relatively low levels of competition, high premium rates and more selective underwriting standards. We expect this cyclicality to continue. The periods of intense price competition in the cycle could adversely affect our financial condition, profitability or cash flows.

A number of factors, including many that are volatile and unpredictable, can have a significant impact on cyclical trends in the property and casualty insurance industry and the industry’s profitability. These factors include:


	•	an apparent trend of courts to grant increasingly larger awards for certain damages;

	•	catastrophic hurricanes, windstorms, earthquakes and other natural disasters, as well as the occurrence of man-made disasters (e.g., a terrorist attack);

	•	availability, price and terms of reinsurance;

	•	fluctuations in interest rates;

	•	changes in the investment environment that affect market prices of and income and returns on investments; and

	•	inflationary pressures that may tend to affect the size of losses experienced by insurance companies.

We cannot predict whether or when market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to write insurance at rates that we consider appropriate relative to the risk assumed. If we cannot write insurance at appropriate rates, our ability to transact business would be materially and adversely affected.

A downgrade in our ratings could adversely impact the competitive positions of our operating businesses.

Ratings can be an important factor in establishing our competitive position in the insurance markets. There can be no assurance that our ratings will continue for any given period of time or that they will not be changed. If our credit ratings were downgraded in the future, we could incur higher borrowing costs and may have more limited means to access capital. In addition, a downgrade in our

Our businesses are heavily regulated, and changes in regulation may reduce our profitability and limit our growth.

Our insurance subsidiaries are subject to extensive regulation and supervision in the jurisdictions in which they conduct business. This regulation is generally designed to protect the interests of policyholders, and not necessarily the interests of insurers, their shareholders and other investors. The regulation relates to authorization for lines of business, capital and surplus requirements, investment limitations, underwriting limitations, transactions with affiliates, dividend limitations, changes in control, premium rates and a variety of other financial and nonfinancial components of an insurance company’s business.

Virtually all states in which we operate require us, together with other insurers licensed to do business in that state, to bear a portion of the loss suffered by some insureds as the result of impaired or insolvent insurance companies. In addition, in various states, our insurance subsidiaries must participate in mandatory arrangements to provide various types of insurance coverage to individuals or other entities that otherwise are unable to purchase that coverage from private insurers. The effect of these and similar arrangements could reduce our profitability in any given period or limit our ability to grow our business.

In recent years, the state insurance regulatory framework has come under increased scrutiny, including scrutiny by federal officials, and some state legislatures have considered or enacted laws that may alter or increase state authority to regulate insurance companies and insurance holding companies. Further, the NAIC and state insurance regulators are continually reexamining existing laws and regulations, specifically focusing on modifications to statutory accounting principles, interpretations of existing laws and the development of new laws and regulations. Any proposed or future legislation or NAIC initiatives, if adopted, may be more restrictive on our ability to conduct business than current regulatory requirements or may result in higher costs.

The property and casualty insurance industry is the subject of a number of investigations by state and federal authorities in the U.S., as well as by regulators in jurisdictions outside the U.S. We cannot predict the outcome of these investigations or the impact on our business or financial results.

As part of the ongoing investigations of market practices in the property and casualty insurance industry involving the payment of contingent commissions to brokers and agents, we have received subpoenas and requests for information from the Attorneys General of several states, as well as from various other regulatory agencies. We also have received subpoenas and requests for information as part of investigations by several state and federal regulators and enforcement agencies, including the U.S. Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York, relating to certain loss mitigation and finite reinsurance products. In addition, we have received and responded to similar regulatory inquiries in Canada, the United Kingdom and elsewhere. We may receive additional subpoenas and other information requests from Attorneys General or other regulatory agencies regarding similar issues. We are cooperating, and intend to continue to cooperate, fully with these investigations. Although no regulatory action has been initiated against the Corporation, it is possible that one or more regulatory agencies may pursue an action against the Corporation in the future on the issues currently under investigation or on similar issues. We cannot predict the ultimate outcome of these investigations or the impact on our business or results of operations.

Intense competition for our products could harm our ability to maintain or increase our profitability and premium volume.

The property and casualty insurance industry is highly competitive. We compete not only with other stock companies but also with mutual companies, other underwriting organizations and alternative risk sharing mechanisms. We compete for business not only on the basis of price, but also on the basis of financial strength, availability of coverage desired by customers and quality of service, including claim adjustment service. We may have difficulty in continuing to compete successfully on any of these bases in the future.

If competition limits our ability to write new business at adequate rates, our future results of operations would be adversely affected.

We are dependent on a network of independent insurance brokers and agents to distribute our products.

We generally do not use salaried employees to promote and distribute our insurance products. Instead, we rely on a large network of independent brokers and agents. Accordingly, our business is dependent on the willingness of these brokers and agents to recommend our products to their customers. We have agreements in place with insurance agents and brokers under which we agree to pay commissions that are contingent on the volume and/or the profitability of business placed with us. The relationship between insurance carriers and brokers and agents has come under increasing scrutiny by state regulators, which may affect the manner in which we can interact with and compensate our distribution network in the future. For example, since the New York Attorney General’s Office filed a civil complaint against Marsh & McLennan Companies, Inc. and Marsh, Inc. on October 14, 2004, several major brokers and some agents and, in at least one case, a major property and casualty insurance carrier have announced that they have discontinued the acceptance or payment, as applicable, of contingent commissions for some or all lines of business. Other industry participants may make similar, or different, determinations in the future. In addition, legislative, regulatory, business or other developments may require changes to market practices relative to contingent commissions. Changes to the manner in which we interact with and compensate insurance brokers and agents could have a material adverse impact on our ability to renew business or write new business, which, in turn, could have a material adverse impact on our results of operations.

Payment of obligations under surety bonds could adversely affect our future operating results.

The surety business tends to be characterized by infrequent but potentially high severity losses. The majority of our surety obligations are intended to be performance-based guarantees. When losses occur, they may be mitigated, at times, by the customer’s balance sheet, contract proceeds, collateral and bankruptcy recovery.

We have substantial commercial and construction surety exposure for current and prior customers. In that regard, we have exposures related to surety bonds issued on behalf of companies that have experienced or may experience deterioration in creditworthiness. If the economy were to worsen and impact any of these companies or if the financial results of these companies were otherwise adversely affected, we may experience an increase in filed claims and may incur high severity losses, which could have a material adverse effect on our future results of operations.

The inability of our insurance subsidiaries to pay dividends in sufficient amounts would harm our ability to meet our obligations and to pay future dividends.

As a holding company, Chubb relies primarily on dividends from its insurance subsidiaries to meet its obligations for payment of interest and principal on outstanding debt obligations and to pay dividends to shareholders. The ability of our insurance subsidiaries to pay dividends in the future will depend on their statutory surplus, on earnings and on regulatory restrictions. We are subject to regulation by some states as an insurance holding company system. Such regulation generally provides

that transactions between companies within the holding company system must be fair and equitable. Transfers of assets among affiliated companies, certain dividend payments from insurance subsidiaries and certain material transactions between companies within the system may be subject to prior notice to, or prior approval by, state regulatory authorities. The ability of our insurance subsidiaries to pay dividends is also restricted by regulations that set standards of solvency that must be met and maintained, the nature of and limitations on investments and the nature of and limitations on dividends to shareholders. These regulations may affect Chubb’s insurance subsidiaries’ ability to provide Chubb with dividends.

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, beginning in December 2002, Chubb Indemnity was named in a series of actions commenced by various plaintiffs against Chubb Indemnity and other non-affiliated insurers in the District Courts in Nueces, Travis and Bexar Counties in Texas. The plaintiffs generally allege that Chubb Indemnity and the other defendants breached duties to asbestos product end-users and conspired to conceal risks associated with asbestos exposure. The plaintiffs seek to impose liability on insurers directly. The plaintiffs seek unspecified monetary damages and punitive damages. Pursuant to the asbestos reform bill passed by the Texas legislature in May 2005, these actions were transferred to the Texas state asbestos Multidistrict Litigation on December 1, 2005. Chubb Indemnity is vigorously defending all of these actions and has been successful in getting a number of them dismissed through summary judgment, special exceptions, or voluntary withdrawal by the plaintiff.

Beginning in June 2003, Chubb Indemnity was also named in a number of similar cases in Cuyahoga, Mahoning, and Trumbull Counties in Ohio. The allegations and the damages sought in the Ohio actions are substantially similar to those in the Texas actions. In May 2005, the Ohio Court of Appeals sustained the trial court’s dismissal of a group of nine cases for failure to state a claim. Following the appellate court’s decision, Chubb Indemnity and other non-affiliated insurers were dismissed from the remaining cases filed in Ohio, except for a single case which had been removed to federal court and transferred to the federal asbestos Multidistrict Litigation. There has been no activity in that case since its removal.

As previously disclosed, as part of ongoing investigations of market practices in the insurance industry, in particular contingent commissions and loss mitigation and finite reinsurance arrangements, Chubb and certain of its subsidiaries have received subpoenas and other information requests from the Attorneys General and insurance regulators of several states, as well as from several foreign regulatory authorities, the U.S. Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York. Officials from other jurisdictions may initiate investigations into similar matters and, because the Corporation operates throughout the United States and in many jurisdictions outside the United States, the Corporation may receive additional subpoenas and requests for information in connection with such inquiries. The Corporation is cooperating, and intends to continue to cooperate, fully in such investigations.

Purported class actions arising out of the aforementioned investigations into market practices in the property and casualty insurance industry involving the payment of contingent commissions to brokers and agents have been filed in a number of state and federal courts. As previously disclosed, on August 1, 2005, Chubb and certain of its subsidiaries were named in a putative class action entitled In re Insurance Brokerage Antitrust Litigation in the U.S. District Court for the District of New Jersey. This action, brought against several brokers and insurers on behalf of a class of persons who purchased insurance through the broker defendants, asserts claims under the Sherman Act and state law and the Racketeer Influenced and Corrupt Organizations Act (“RICO”) arising from the unlawful use of contingent commission agreements. The complaint seeks treble damages, injunctive and declaratory relief, and attorneys’ fees. Chubb has also been named in two purported class actions in state court relating to allegations of unlawful use of contingent commission arrangements. The first was filed on February 16, 2005 in Seminole County, Florida. In October 2005, the Judicial Panel on Multidistrict Litigation issued an order transferring this case to the U.S. District Court for the District of New Jersey for consolidation with the In re Insurance Brokerage Antitrust Litigation. The second was filed on May 17, 2005 in Essex County, Massachusetts. In October 2005, the Judicial Panel on Multidistrict Litigation issued a Conditional Transfer Order conditionally transferring the case to the U.S. District Court for the District of New Jersey for consolidation with the In re Insurance Brokerage Antitrust Litigation. The plaintiff and one of Chubb’s unaffiliated co-defendants have filed motions to vacate the Conditional Transfer Order. Those motions have not yet been decided. In December 2005, Chubb and certain of its subsidiaries were named in an action similar to the In re Insurance Brokerage Antitrust Litigation. The action is pending in the same court and has been assigned to the judge who is presiding over the In re Insurance Brokerage Antitrust Litigation. The complaint has not yet been served in this matter. In these actions, the plaintiffs generally allege that the defendants unlawfully used contingent commission agreements. The actions seek unspecified damages and attorneys’ fees. The Corporation believes it has substantial defenses to all of the aforementioned lawsuits and intends to defend the actions vigorously.

It is reasonable to expect that, in the ordinary course of business, the Corporation may be involved in additional state litigation of this sort.

Information regarding certain litigation to which the P&C Group is a party is included in the Property and Casualty Insurance — 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 condition of the registrant.

No matters were submitted to a vote of the shareholders during the quarter ended December 31, 2005.

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. Brundage.

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.

Before joining the Corporation in 2005, Ms. Brundage was a partner in the law firm of White & Case LLP, where she headed the securities practice in New York and co-chaired its global securities practice.

The common stock of Chubb is listed and principally traded on the New York Stock Exchange (NYSE) under “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 2005 and 2004.

At February 28, 2006, there were approximately 5,200 common shareholders of record.

The declaration and payment of future dividends to Chubb’s shareholders will be at the discretion of Chubb’s Board of Directors and will depend upon many factors, including the Corporation’s operating results, financial condition and capital requirements, and the impact of regulatory constraints discussed in Note (18)(f) of the Notes to Consolidated Financial Statements.

The following table summarizes Chubb’s stock repurchased each month in the quarter ended December 31, 2005.


(a)	The stated amounts exclude 69,463 shares, 40,250 shares and 8,731 shares delivered to Chubb during the months of October 2005, November 2005 and December 2005, respectively, by employees of the Corporation in connection with the Corporation’s stock-based employee compensation plans.


(b)	On December 8, 2005, the Board of Directors replaced an existing share repurchase program with a new program, which authorized the repurchase of up to 14,000,000 shares of common stock. The authorization has no expiration date.

On March 3, 2006, the Board of Directors approved a two-for-one stock split payable to shareholders of record on March 31, 2006. The share and per share amounts in this Annual Report have not been adjusted to reflect the stock split.

(a)

Underwriting income has been reduced by net losses of $35.0 million ($22.8 million after-tax or $0.11 per share) in 2005, $75.0 million ($48.8 million after-tax or $0.25 per share) in 2004, $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 and $60.9 million ($39.6 million after-tax or $0.22 per share) in 2001 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 has been increased by a reduction in net surety bond losses of $88.0 million ($57.2 million after-tax or $0.33 per share) resulting from the settlement of litigation related to Enron Corp.


(c)	Underwriting income in 2001 has been reduced by net costs of $635.0 million ($412.8 million after-tax or $2.35 per share) related to the September 11 attack. Underwriting income in 2004 has been increased by a reduction in net losses of $80.0 million ($52.0 million after-tax or $0.27 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)	Underwriting income in 2005 has been reduced by net costs of $462.2 million ($300.4 million after-tax or $1.47 per share) related to Hurricane Katrina.

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 address the financial condition of the Corporation as of December 31, 2005 compared with December 31, 2004 and the results of operations for each of the three years in the period ended December 31, 2005. 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 document are “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements are made pursuant to the safe harbor provisions of the PSLRA and include statements regarding expectations as to the impact of future catastrophes on our financial condition and results of operations; the cost and availability of reinsurance in 2006; our loss reserve estimates and reinsurance recoverables, including our estimated gross and net losses from Hurricane Katrina; the impact of the 2005 hurricanes on the commercial insurance marketplace; competition and growth estimates; the impact of regulatory investigations and developments on our business; the number and severity of surety-related claims; our plans for exiting the reinsurance assumed business; our expected income stream from the transaction with Harbor Point Limited; the impact of asbestos liability developments; estimates with respect to our CFS credit derivatives exposure; and the possible recognition of additional impairment losses if real estate is not sold or does not perform as contemplated and the effect thereof on our results of operations. Forward-looking statements are made based upon management’s current expectations and beliefs concerning trends and future developments and their potential effects on us. These statements are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties, which include, among others, those discussed or identified from time to time in our public filings with the Securities and Exchange Commission and those associated with:


	•	global political conditions and the occurrence of terrorist attacks, including any nuclear, biological, chemical or radiological events;

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

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

	•	adverse changes in loss cost trends;

	•	the ability to retain existing business;

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

	•	the adequacy of loss reserves, including:


	•	our expectations relating to reinsurance recoverables;

	•	the 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;

	•	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;

	•	development of new theories of liability;


	•	the availability and cost of reinsurance coverage;

	•	the occurrence of significant weather-related or other natural or human-made disasters, particularly in locations where we have concentrations of risk;

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


	•	the effects of disclosures by, and investigations of, public companies relating to possible accounting irregularities, practices in the financial services industry and other corporate governance issues, including:


	•	the effects on the capital markets and the markets for directors and officers and errors and omissions insurance;

	•	claims and litigation arising out of actual or alleged accounting or other corporate malfeasance by other companies;

	•	claims and litigation arising out of practices in the financial services industry;

	•	legislative or regulatory proposals or changes;


	•	the effects of investigations into market practices, in particular contingent commissions and loss mitigation and finite reinsurance arrangements, in the U.S. property and casualty insurance industry and related settlements, industry reform and any legal or regulatory proceedings arising therefrom;

	•	the impact of legislative and regulatory developments on our business, including those relating to terrorism and large-scale catastrophes;

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

	•	the ability of our subsidiaries to pay us dividends;

	•	general economic and market conditions including:


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

	•	the effects of inflation;

	•	changes in domestic and foreign laws, regulations and taxes;

	•	changes in competition and pricing environments;

	•	regional or general changes in asset valuations;

	•	the inability to reinsure certain risks economically;

	•	changes in the litigation environment; and

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

The consolidated financial statements include amounts based on informed estimates and judgments of management for transactions that are not yet complete. Such estimates and judgments affect the reported amounts in the financial statements. Those estimates and judgments that were most critical to the preparation of the financial statements involved the determination of loss reserves and the recoverability of related reinsurance recoverables, 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 Chubb’s shareholders or the investing public. This overview should be read in conjunction with the other sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations.


	•	Net income was $1,826 million in 2005 compared with $1,548 million in 2004 and $809 million in 2003. The increase in net income in 2005 was driven by increases in both underwriting and investment income in our property and casualty insurance business.

	•	Underwriting results in 2005 were adversely affected by pre-tax costs of $462 million related to Hurricane Katrina, including estimated net losses of $403 million and net reinsurance reinstatement premium costs of $59 million. We also incurred a charge of about $45 million, included in our corporate segment, representing our share of the losses from Hurricane Katrina estimated by an insurer in which we have a minority interest.

	•	Despite the impact of Hurricane Katrina, underwriting results were highly profitable in 2005 as they were in 2004, compared with modestly profitable results in 2003. Our combined loss and expense ratio was 92.3% in both 2005 and 2004 compared with 98.0% in 2003.

	•	Premium growth was 2% in 2005 and 9% in 2004. Premiums in our insurance business grew 4% in 2005 and 8% in 2004. The lower growth in 2005 reflects our maintaining underwriting discipline in a more competitive market environment. Rates were generally stable, but were under competitive pressure in some classes of business. In our reinsurance assumed business, premiums decreased 21% in 2005 after increasing 16% in 2004. The decrease in 2005 was in line with our expectations as we had anticipated fewer attractive opportunities in the reinsurance market.

	•	During 2005, we experienced overall unfavorable development of $163 million on loss reserves established as of the previous year end, due primarily to unfavorable development in the professional liability classes of business, principally errors and omissions liability, and in excess liability and certain other commercial liability classes, offset in part by favorable development in the property classes and in fidelity and surety.

	•	Property and casualty investment income after taxes increased by 11% in 2005 and 13% in 2004.

	•	In December 2005, we completed a transaction involving a new reinsurance company, Harbor Point Limited. As part of the transaction, we transferred our continuing reinsurance assumed business and certain related assets, including renewal rights, to Harbor Point. The transaction resulted in the recognition of a pre-tax realized investment gain of $171 million in 2005.

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

Property and casualty income before tax in 2005 was higher than in 2004 which, in turn, was substantially higher than in 2003. Income in 2005 and 2004 benefited from highly profitable underwriting results. Underwriting income increased modestly in 2005 despite significantly higher catastrophe losses, primarily from Hurricane Katrina. Results in 2005 and 2004 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. We view these as two distinct 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 separate business units.

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

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

The reporting format for property and casualty underwriting results by business unit was changed in 2005 to more closely reflect the way the business is now managed. Prior year amounts have been reclassified to conform with the new presentation.


	•	Valuable articles results, which had been included in other personal, are now included in homeowners.


	•	Accident results, which had been included in other specialty, are now included in other personal.


	•	Commercial insurance results from our financial institutions business, which had been included in financial institutions results in specialty insurance, are now included in the appropriate commercial insurance lines.


	•	Executive protection results are now combined with the professional liability and financial fidelity results from our financial institutions business into a new professional liability line. Financial institutions results are no longer reported separately.


	•	Surety results, which had been included in other specialty, are now reported separately within specialty insurance.


	•	Reinsurance assumed results, which had been included in other specialty, are now reported as a separate business unit.

Net premiums written amounted to $12.3 billion in 2005, an increase of 2% over 2004. An increase in premiums from our insurance business was partially offset by a decline in premiums from our reinsurance business. Net premiums written increased 9% in 2004 compared with 2003, reflecting increases in premiums from both our insurance and reinsurance businesses.

Premiums from our insurance business grew 4% in 2005 and 8% in 2004. Premiums in 2005 reflected reinsurance reinstatement premium costs of $102 million related to Hurricane Katrina. Approximately 80% of our insurance premiums in 2005 were written in the United States. Insurance premiums in the U.S. grew by 3% in 2005 and 7% in 2004. Insurance premiums outside the U.S. grew 8% in 2005 and 12% in 2004. In local currencies, such growth was 6% and 4% in 2005 and 2004, respectively, reflecting the weakness of the U.S. dollar.

We experienced modest premium growth in our insurance business in 2005. In a more competitive market environment, we maintained underwriting discipline by continuing to get acceptable rates and appropriate terms and conditions on business written. Rates were generally stable, but were under competitive pressure in some classes of business. We continued to retain a high percentage of our existing customers and to renew these accounts at adequate prices. In addition, while we continued to be selective, we found opportunities to write new business at acceptable rates. The premium growth in 2004 was largely the result of our retaining a higher percentage of our existing customers compared with the prior year and attracting new customers. We did get rate increases in 2004 on a significant portion of the business we wrote, although the size of such increases decelerated throughout the year.

Reinsurance assumed premiums generated by Chubb Re decreased by 21% in 2005 after increasing by 16% in 2004. Premiums in 2005 included net reinstatement premium revenue of $43 million related to Hurricane Katrina. The premium decline in 2005 was in line with our expectations. As discussed below, we sold our ongoing reinsurance assumed business to Harbor Point Limited in December 2005.

Our premiums written are net of amounts ceded to reinsurers who assume a portion of the risk under the insurance policies we write that are subject to the reinsurance.

Our overall reinsurance costs in 2004 were similar to those in 2003. We discontinued a casualty per risk treaty that responded primarily to excess liability exposures over $25 million. Underwriting actions we have taken in recent years resulted in a reduction in the number of such exposures, which we believe made this treaty no longer economical. Our professional liability per risk treaty was renewed with coverage similar to the prior year. On our property per risk treaty, our retention remained at $15 million. Our property catastrophe treaty for events in the United States was modified to increase our initial retention and to increase the reinsurance coverage at the top.

Our overall reinsurance costs in 2005 were lower than those in 2004. We discontinued our professional liability per risk treaty. Underwriting actions we have taken in recent years have resulted in lower average limits on those large risks we write, which we believe made this treaty no longer economical. On our casualty clash treaty, which operates like a catastrophe treaty, we increased our retention from $50 million to $75 million. This treaty now provides $125 million of coverage in excess of $75 million per insured event. We did not renew a high excess surety per risk treaty as we believe the cost was not justified. On our commercial property per risk treaty, our retention remained at

$15 million. This treaty provides $435 million of coverage per risk in excess of our retention. Our property catastrophe treaty for events in the United States was modified to increase the coverage in the northeastern part of the country by $100 million. The program now provides coverage of approximately 85% of losses (net of recoveries from other available reinsurance) between $250 million and $1.25 billion, with additional coverage of 80% of losses between $1.25 billion and $1.6 billion in the northeastern part of the country. Our property catastrophe treaty for events outside the United States was modified to increase our retention from $25 million to $50 million. This treaty now provides coverage of 90% of losses between $50 million and $250 million. Our property reinsurance treaties generally contain terrorism exclusions for acts perpetrated by foreign terrorists. Since September 2001, we have changed our underwriting protocols to address terrorism and the limited availability of terrorism reinsurance.

Our 2006 reinsurance program has not been finalized. Our casualty clash treaty was extended through March 31, 2006 under its current terms. Our property reinsurance program renews on April 1. As a result of the substantial losses suffered by reinsurers from the catastrophes in the latter half of 2005, we are anticipating significant price increases on our property catastrophe treaties and our commercial property per risk treaty. The final structure and amount of coverage purchased will be determinants of our cost for these treaties. In addition, the availability of reinsurance for certain coverages, such as terrorism, will continue to be limited and expensive in 2006.

Underwriting results in 2005 and 2004 were highly profitable compared with modestly profitable results in 2003. The combined loss and expense ratio for our overall property and casualty business was as follows:

The loss ratio was modestly higher in 2005 than in 2004 due to higher catastrophe losses, primarily from Hurricane Katrina. The loss ratio improved in 2004 compared with the prior year, reflecting the favorable experience resulting from our disciplined underwriting in recent years as well as substantially lower incurred losses related to asbestos claims.

Our estimated net losses from Hurricane Katrina were $403 million and we incurred $59 million of net reinsurance reinstatement premium costs related to the hurricane. In our insurance business, we incurred net losses of $335 million as well as reinstatement premium costs of $102 million, for an aggregate cost of $437 million. In our reinsurance assumed business, we incurred net losses of $68 million and recognized net reinstatement premium revenue of $43 million, for a net cost of $25 million.

We estimate that our gross losses from Hurricane Katrina were about $1.2 billion. Almost all of the losses were from property exposure and business interruption claims. Our net losses of $403 million were significantly lower than the gross amount due to a property per risk treaty that limited our net loss per risk and our property catastrophe treaty. We still have about $400 million of reinsurance available for this event under our catastrophe treaty if our gross losses were higher than our current estimate. Therefore, while it is possible that our estimate of ultimate losses related to Hurricane Katrina may change in the future, we do not expect that any such change would have a material effect on the Corporation’s consolidated financial condition or liquidity.

Our total net catastrophe losses in 2005 were $630 million and related net reinsurance reinstatement premium costs were $59 million. The aggregate impact accounted for 5.5 percentage points of the

loss ratio. Losses from catastrophes were $270 million in 2004, which represented 2.3 percentage points of the loss ratio, and $294 million or 2.9 percentage points in 2003. The 2004 catastrophe loss amount reflects an $80 million reduction in loss reserves related to the September 11, 2001 attack, which reduced the impact of catastrophes on the loss ratio for the year by 0.7 of a percentage point. Other than the reinsurance recoverable related to Hurricane Katrina, we did not have any recoveries from our catastrophe reinsurance program during the three year period because there were no other individual catastrophes for which our losses exceeded our initial retention under the program.

Incurred losses related to asbestos claims were $35 million in 2005, $75 million in 2004 and $250 million in 2003, which represented 0.3, 0.6 and 2.5 percentage points, respectively, of the loss ratio.

Our expense ratio improved in 2004 and again in 2005. The lower expense ratio in 2004 was due to premiums written growing at a higher rate than overhead expenses, as we made progress in reducing our expense structure, and to lower contingent commission expenses.

The decrease in contingent commissions in 2004 was due to two factors that reduced producer compensation. First, we did not pay contingent commissions in the fourth quarter to those large brokers who elected to terminate such arrangements before year end. Second, the slowdown of premium growth in the second half of the year resulted in lower compensation to other producers whose commissions, in part, were contingent on the volume of business placed with us.

The decrease in the expense ratio in 2005 was due to lower contingent commission expenses and, to a lesser extent, flat overhead expenses compared with 2004, as we continued to make progress in reducing our cost structure through outsourcing and other initiatives, and the discontinuation of a professional liability per risk reinsurance treaty, which resulted in an increase in net premiums written without a commensurate increase in expenses.

Net premiums from personal insurance, which represented 27% of the premiums written by our property and casualty subsidiaries in 2005, increased by 6% in 2005 compared with a 9% increase in 2004. Net premiums written for the classes of business within the personal insurance segment were as follows:

In both 2005 and 2004, premium growth was driven by our homeowners business. The growth in our homeowners business in both years was due to increased insurance-to-value and, to a lesser extent, higher rates. The in-force policy count for this class had minimal growth in both years. Homeowners premiums in 2005 were reduced by reinsurance reinstatement premium costs of $17 million related to Hurricane Katrina. The low growth in our personal automobile business in 2005 was due to our maintaining underwriting discipline in a more competitive marketplace. Growth in our other personal business, which includes insurance for excess liability, yacht and accident coverages, was lower in 2005 than in the prior year. This was attributable to lower premiums in our U.S. accident business due to increased competition and the culling of our health care business.

Our personal insurance business produced profitable underwriting results in each of the last three years. Overall results have shown substantial improvement in each succeeding year, driven largely by our homeowners results. The combined loss and expense ratios for the classes of business within the personal insurance segment were as follows:

Homeowners results were profitable in each of the last three years and showed significant improvement in 2004 and again in 2005. The improvement was largely the result of better pricing and a reduction in water damage losses primarily through contract wording changes related to mold damage and loss remediation measures that we have implemented over the past few years. Results in 2005 also benefited from lower catastrophe losses. The impact of catastrophes accounted for 9.8 percentage points of the combined loss and expense ratio for this class in 2005 compared with 12.6 percentage points in 2004 and 11.2 percentage points in 2003.

Our personal automobile results were profitable in each of the past three years. Results in 2005 were slightly less profitable than in 2004 due to reserve strengthening in the liability component related to prior accident years. The improvement in 2004 was due to lower claim frequency and stable loss severity as well as modest rate increases.

Other personal business produced profitable results in each of the past three years. Results in 2005 and 2004 were less profitable than those in 2003 due to higher losses in the excess liability and yacht components in both years. The yacht losses in 2005 were primarily related to catastrophes. Our accident business was profitable in all three years.

Net premiums from commercial insurance, which represented 41% of our total writings in 2005, increased by 2% in 2005 compared with an 11% increase in 2004. Net premiums written for the classes of business within the commercial insurance segment were as follows:

Growth in 2004 occurred in all segments of this business but was particularly strong in the workers’ compensation and casualty classes. The premium growth was due in large part to higher rates as well as an increase in our in-force policy count. However, as expected, the level of rate increases declined throughout 2004 as we experienced more competition in the marketplace, particularly in the property classes. The low growth in 2005 was the result of increased competition in the marketplace. Rates decreased slightly in 2005 compared with 2004. Multiple peril and property and marine premiums in 2005 were reduced by reinsurance reinstatement premium costs of $19 million and $66 million, respectively, related to Hurricane Katrina. Excluding the reinsurance reinstatement

Retention levels of our existing customers were somewhat higher in 2004 compared with 2003 and remained steady in 2005. New business volume has steadily declined since 2003 due to decreased submission activity, the result of our competitors working to retain their better accounts. We have maintained our discipline in the competitive market by continuing to get acceptable rates and appropriate terms and conditions on business written.

It is uncertain how the hurricanes in 2005 will affect the commercial insurance marketplace. We have seen significant price increases and tighter terms and conditions on property business in catastrophe exposed areas. We expect this trend to continue in 2006. However, we expect that property business in non-catastrophe exposed areas and casualty business will remain competitive.

Our commercial insurance business produced profitable underwriting results in each of the past three years, particularly in 2004. These profitable results were due in large part to the cumulative effect of price increases, better terms and conditions and more stringent risk selection in recent years. Results in 2005 and 2004 also benefited from unusually low non-catastrophe property losses. Results in 2005 were less profitable than in 2004 largely due to higher catastrophe losses, primarily from Hurricane Katrina. Results in 2003 were adversely affected by incurred losses related to asbestos claims. Incurred losses related to asbestos claims were $35 million in 2005, $75 million in 2004 and $250 million in 2003.

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

Multiple peril results were highly profitable in each of the past three years, but more so in 2004. Results in 2005 were less profitable than in 2004 largely due to higher catastrophe losses. The property component of this business benefited from unusually low non-catastrophe losses in both years. Both the property and liability components of this business contributed to the substantial improvement in 2004 compared with 2003. The impact of catastrophes accounted for 9.1 percentage points of the combined loss and expense ratio for this class in 2005 and 3.4 percentage points in 2003. Catastrophe losses were negligible for this class in 2004 due to a $30 million reduction in net loss reserves related to the September 11, 2001 attack.

Results for our casualty business were profitable in 2005 compared with highly profitable results in 2004 and unprofitable results in 2003. Casualty results in each year were adversely affected by asbestos losses, particularly in 2003. Asbestos losses represented 1.2, 2.8 and 18.6 percentage points of the combined loss and expense ratio for casualty business in 2005, 2004 and 2003, respectively. The automobile component of our casualty business was highly profitable in each of the past three years. Excluding the effects of asbestos losses, results in the primary liability component were also highly profitable in each of the past three years while results in the excess liability component were unprofitable in 2005, profitable in 2004 and near breakeven in 2003. Excess liability results in 2005 were adversely affected by unfavorable loss development related to accident years prior to 1998 due to significant reported loss activity that caused us to extend the expected loss emergence period. Results in 2004 for this component benefited from a $30 million reduction in net loss reserves related to the September 11, 2001 attack.

Workers’ compensation results were highly profitable in each of the past three years. Results were more profitable in each succeeding year. Results in all three years benefited from our disciplined risk selection during the past several years.

Property and marine results were marginally profitable in 2005 compared with highly profitable results in the previous two years, particularly in 2004. Results in each year benefited from improved pricing, higher deductibles and better terms and conditions. Results in 2005 and 2004 also benefited from unusually low non-catastrophe losses. Results in 2005 deteriorated, however, due to substantially higher catastrophe losses, primarily from Hurricane Katrina. The impact of catastrophes accounted for 27.2 percentage points of the combined loss and expense ratio for this class in 2005 compared with 1.8 percentage points in 2004 and 7.1 percentage points in 2003. The impact of catastrophes in 2004 reflects a $20 million reduction in net loss reserves related to the September 11, 2001 attack.

Net premiums from specialty insurance, which represented 25% of our total writings in 2005, increased by 6% in 2005 compared with a 4% increase in 2004. Net premiums written for the classes of business within the specialty insurance segment were as follows:

Growth in net premiums written for the professional liability classes of business was constrained in both 2005 and 2004 by the competitive pressure on rates that began in the latter half of 2003 and by our commitment to maintain underwriting discipline. Growth in 2005 was also dampened by the sale of renewal rights, effective July 1, 2005, on our hospital medical malpractice and managed care errors and omissions business. The net premium growth in 2005 in the professional liability classes was due solely to the non-renewal of a per risk reinsurance treaty.

Overall, rates increased slightly in 2004 and were down slightly in 2005. The most significant rate declines occurred in the for-profit directors and officers liability component. Retention levels were significantly higher in 2004 compared with 2003, while new business volume was similar to 2003 levels. Retention levels in 2005 were comparable to the 2004 levels, while new business volume was lower due in part to our exiting the hospital medical malpractice and managed care errors and omissions business. Overall, we continued to get adequate rates and favorable terms and conditions on both new business and renewals. While large public companies remain a significant component of our book of business, that component has decreased in recent years in line with our strategy to focus on small and middle market publicly traded and privately held companies.

The growth in net premiums written for our surety business was substantial in both 2005 and 2004. The growth in 2005 was due in part to the non-renewal of a high excess reinsurance treaty.

Our specialty insurance business produced modestly profitable underwriting results in 2005 compared with unprofitable results in 2004 and 2003. The combined loss and expense ratios for the classes of business within specialty insurance were as follows:

Our professional liability business improved substantially in 2005, producing near breakeven results compared with the highly unprofitable results in 2004 and 2003. Results have begun to benefit from the cumulative effect of price increases, lower policy limits and better terms and conditions in recent years. Results in all three years, but more so in 2004 and 2003, were adversely affected by unfavorable loss development related to accident years 2002 and prior, particularly in the errors and omissions class. The adverse development was predominantly from claims that have arisen due to corporate failures and allegations of management misconduct and accounting irregularities. Results were particularly unprofitable in 2004 due to an increase of about $160 million in errors and omissions liability loss reserves in the second quarter related to investment banks. The fidelity component of our professional liability business was highly profitable in each of the past three years due to favorable loss experience.

Our surety business produced highly profitable results in each of the past three years due to favorable loss experience.

Our surety business tends to be characterized by infrequent but potentially high severity losses. We continue to manage our exposure on an absolute basis and by specific bond type. The majority of our obligations are intended to be performance-based guarantees. When losses occur, they are mitigated, at times, by the customer’s balance sheet, contract proceeds, collateral and bankruptcy recovery.

We continue to have substantial commercial and construction surety exposure for current and prior customers. In that regard, we have exposures related to surety bonds issued on behalf of companies that have experienced deterioration in creditworthiness since we issued bonds to them. We therefore may experience an increase in filed claims and may incur high severity losses. Such losses would be recognized if and when claims are filed and determined to be valid, and could have a material adverse effect on the Corporation’s results of operations and liquidity.

Our reinsurance assumed business is treaty reinsurance, primarily casualty reinsurance. Premiums from our reinsurance assumed business, which represented 7% of our net premiums written in 2005, decreased by 21% in 2005 compared with a 16% increase in 2004. Premiums in 2005 included net reinsurance reinstatement premium revenue of $43 million related to Hurricane Katrina. The significant decrease in premiums in 2005 was in line with our expectations as we had anticipated fewer attractive opportunities in the reinsurance market.

Our reinsurance assumed business was profitable in 2005, 2004 and 2003. The combined loss and expense ratio for this business was 96.1%, 94.3% and 93.6% in 2005, 2004 and 2003, respectively. The impact of catastrophes accounted for 5.2 percentage points of the combined loss and expense ratio in 2005 and 2.2 percentage points in 2004. Catastrophe losses were not significant in 2003.

In December 2005, we completed a transaction involving a new Bermuda-based reinsurance company, Harbor Point Limited. As part of the transaction, we transferred our continuing reinsurance assumed business and certain related assets, including renewal rights, to Harbor Point. In exchange, we received from Harbor Point $200 million of 6% convertible notes and warrants to purchase common stock of Harbor Point. The notes and warrants represent in the aggregate on a fully diluted basis approximately 16% of the new company.

Harbor Point generally did not assume our reinsurance liabilities relating to reinsurance contracts incepting prior to December 31, 2005. We retained those liabilities and the related assets.

Other than pursuant to certain arrangements entered into with Harbor Point, we generally will no longer engage directly in the reinsurance assumed business. However, Harbor Point will have the right for a transition period of up to two years to underwrite specific reinsurance business on our behalf. We will retain a portion of any such business and will cede the balance to Harbor Point in return for a fronting commission.

The transaction resulted in a pre-tax gain of $204 million, of which $171 million was recognized as a realized investment gain in 2005. The remaining gain of $33 million was deferred and will be recognized based on the timing of the ultimate disposition of our economic interest in Harbor Point.

We will receive additional payments over the next two years based on the amount of business renewed by Harbor Point, which will be recognized as realized investment gains when earned.

To promote and distribute our insurance products, we rely on a large network of independent brokers and agents. Accordingly, our business is dependent on the willingness of these brokers and agents to recommend our products to their customers. We have agreements in place with insurance brokers under which we agree to pay commissions that are contingent on the volume and/or the profitability of business placed with us. We also have in place contingent commission arrangements with agents who are appointed by us to sell our insurance.

The New York Attorney General and other regulators have commenced investigations with respect to potential conflicts of interest and anti-competitive behavior arising from the payment of contingent commissions to brokers and agents. In connection with these investigations, we have received subpoenas and requests for information from the Attorneys General of several states, as well as from various states’ insurance regulators. We are cooperating, and intend to continue to cooperate, fully with these investigations.

As a result of these investigations, in certain instances, brokers and agents and, in at least one case, a major insurance carrier have entered into settlement agreements with such regulators. Among other things, these agreements prohibit the acceptance or payment, as applicable, of contingent commissions for some or all lines of business. Several other brokers and some agents have voluntarily eliminated the practice of receiving contingent compensation from insurers. Other industry participants may make similar or different determinations in the future. In addition, a number of states have announced that they are looking at compensation arrangements and considering regulatory action or reform in this area. The rules that would be imposed if these actions or reforms were adopted range in nature from disclosure requirements to prohibition of certain forms of compensation to imposition of new duties on insurance agents, brokers or carriers in dealing with customers. These or other developments may require changes to market practices relative to contingent commissions. Changes to the manner in which we interact with and compensate insurance brokers and agents could have a material adverse impact on our ability to renew business or write new business, which, in turn, could have a material adverse impact on our results of operations.

Certain regulators also have commenced investigations into certain loss mitigation and finite reinsurance arrangements in the property and casualty insurance industry. In connection with these investigations, we have received subpoenas and requests for information from various regulators including the U.S. Securities and Exchange Commission and the U.S. Attorney for the Southern

We cannot predict at this time the outcome of these investigations or any impact on our business or results of operations.

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

The extent of losses from a natural catastrophe is a function of both the total amount of insured exposure in an area affected by the event and the severity of the event. We regularly assess our concentration of risk exposures in catastrophe exposed areas globally and have strategies and underwriting standards to manage this exposure through individual risk selection, subject to regulatory constraints, and through the purchase of catastrophe reinsurance. We have invested in modeling technologies and a concentration management tool that allow us to monitor and control our accumulations of potential losses in catastrophe exposed areas in the United States, such as California and the gulf and east coasts, as well as in such areas in other countries. Actual results may differ materially from those suggested by the model. We also continue to actively explore and analyze credible scientific evidence, including the impact of global climate change, that may affect our ability to manage exposure under the insurance policies we issue.

Despite these efforts, the occurrence of one or more severe natural catastrophic events in heavily populated areas could have a material adverse effect on the Corporation’s results of operations, financial condition or liquidity.

The September 11, 2001 attack changed the way the property and casualty insurance industry views catastrophic risk. That tragic event demonstrated that numerous classes of business we write are subject to terrorism-related catastrophic risks in addition to the catastrophic risks related to natural occurrences. This has required us to change how we identify and evaluate risk accumulations. We have licensed a terrorism model that provides estimates of loss events. We also have a concentration management tool that enables us to identify locations and geographic areas that are exposed to risk accumulations. The information provided by the model and the tracking tool has resulted in our non-renewing some accounts and has restricted us from writing others. Actual results may differ materially from those suggested by the model.

The Terrorism Risk Insurance Act of 2002 (TRIA) established a temporary program under which the federal government will share the risk of loss from certain acts of international terrorism with the insurance industry. The program, which was applicable to most lines of commercial business, was scheduled to terminate on December 31, 2005. In December 2005, the federal government extended TRIA through December 31, 2007. Under the terms of the amended law, certain lines of business previously subject to the provisions of TRIA, including commercial automobile, surety and professional liability insurance, other than directors and officers liability, are excluded from the program. As a precondition to recovery under TRIA, insurance companies with direct commercial insurance exposure in the United States for TRIA lines of business are required to make insurance for covered acts of terrorism available under their policies. Each insurer has a separate deductible that it must meet in the event of an act of terrorism before federal assistance becomes available. The deductible is based on a percentage of direct U.S. earned premiums for the covered lines of business in the previous calendar year. For 2006, that deductible is 17.5% of direct premiums earned in 2005 for these lines of business. For losses above the deductible, the federal government will pay for 90% of covered losses, while the insurer retains 10%. In 2007, the deductible will increase to 20% of direct premiums earned in 2006 and the insurer share for losses above the deductible will increase to 15%. There is a combined

annual aggregate limit for the federal government and all insurers of $100 billion. If acts of terrorism result in covered losses exceeding the $100 billion annual limit, insurers are not liable for additional losses.

While the provisions of TRIA will serve to mitigate our exposure in the event of a large-scale terrorist attack, our deductible is substantial, approximating $925 million in 2006. For certain classes of business, such as workers’ compensation, terrorism insurance is mandatory under TRIA. For those classes of business where it is not mandatory, insureds may choose not to accept terrorism insurance, which would, subject to other statutory or regulatory restrictions, reduce our exposure.

We will continue to manage this type of catastrophic risk by monitoring terrorism risk aggregations. Nevertheless, given the unpredictability of the targets, frequency and severity of potential terrorist events as well as the limited terrorism coverage in our reinsurance program, the occurrence of any such events could have a material adverse effect on the Corporation’s results of operations, financial condition or liquidity.

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

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

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

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

Our loss reserves include significant amounts related to asbestos and toxic waste claims, Hurricane Katrina and the September 11 attack. The components of our loss reserves were as follows:


x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
		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 Contracts¹		New York Stock Exchange
2.25% Senior Notes due 2008¹		New York Stock Exchange


	ITEM		DESCRIPTION	PAGE

PART I		1	Business		3
		1A	Risk Factors		12
		1B	Unresolved Staff Comments		17
		2	Properties		17
		3	Legal Proceedings		17
		4	Submission of Matters to a Vote of Security Holders		18
PART II		5	Market for the Registrant’s Common Stock and Related Stockholder Matters		20
		6	Selected Financial Data		21
		7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
		7A	Quantitative and Qualitative Disclosures About Market Risk		57
		8	Consolidated Financial Statements and Supplementary Data		60
		9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		60
		9A	Controls and Procedures		60
		9B	Other Information		60
PART III		10	Directors and Executive Officers of the Registrant		62
		11	Executive Compensation		62
		12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		62
		13	Certain Relationships and Related Transactions		62
		14	Principal Accountant Fees and Services		62
PART IV		15	Exhibits, Financial Statements and Schedules		63
			Signatures		64
			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)
2003	$	11,337.7	$	1,266.0	$	1,535.8	$	11,067.9
2004		12,001.3		1,397.7		1,346.1		12,052.9
2005		12,179.6		1,119.7		1,016.7		12,282.6



		December 31

Year Ended		1995			1996			1997			1998		1999		2000		2001		2002		2003		2004		2005


		(in millions)
Net Liability for Unpaid Losses and Loss Adjustment Expenses		$	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	$	16,808.7	$	18,712.5

Net Liability Reestimated as of:
	One year later		7,571.7			7,690.6			8,346.2			8,854.8		9,518.8		9,855.8		11,799.4		13,038.9		14,848.1		16,971.4
	Two years later		7,520.9			7,419.6			7,899.8			8,516.5		9,094.5		10,550.7		12,143.3		13,633.6		15,314.9
	Three years later		7,256.8			6,986.2			7,564.8			8,058.0		9,652.9		10,761.5		12,642.2		14,407.2
	Four years later		6,901.5			6,719.4			7,145.0			8,527.1		9,739.7		11,149.9		13,245.8
	Five years later		6,692.1			6,409.4			7,570.7			8,655.7		9,998.7		11,605.0
	Six years later		6,476.7			6,886.9			7,693.7			8,844.3		10,373.2
	Seven years later		7,035.9			7,051.5			7,821.8			9,118.9
	Eight years later		7,253.8			7,197.0			8,060.9
	Nine years later		7,422.9			7,411.4
	Ten years later		7,597.4

Total Cumulative Net Deficiency (Redundancy)			(17.1	)		(344.5	)		(503.7	)		69.0		624.4		1,553.7		2,236.1		1,765.6		793.7		162.7

Cumulative Net Deficiency Related to Asbestos and Toxic Waste Claims (Included in Above Total)			1,583.5			1,432.8			1,307.6			1,239.8		1,193.0		1,162.0		1,101.1		360.0		110.0		35.0

Cumulative Amount of Net Liability Paid as of:
	One year later		1,889.4			1,418.3			1,797.7			2,520.1		2,482.7		2,793.7		3,084.5		3,398.8		3,342.0		4,031.3
	Two years later		2,678.2			2,488.2			3,444.2			3,707.8		4,079.3		4,668.7		5,354.1		5,671.4		6,094.8
	Three years later		3,438.8			3,757.0			4,160.6			4,653.1		5,285.8		5,981.4		6,931.6		7,753.3
	Four years later		4,457.6			4,194.8			4,710.9			5,351.1		6,138.9		7,011.9		8,389.8
	Five years later		4,755.4			4,555.6			5,132.9			5,894.3		6,829.0		7,894.2
	Six years later		5,010.6			4,857.2			5,481.1			6,325.5		7,382.1
	Seven years later		5,251.0			5,137.4			5,806.6			6,679.7
	Eight years later		5,480.9			5,420.3			6,059.6
	Nine years later		5,735.4			5,640.9
	Ten years later		5,916.0

Gross Liability, End of Year		$	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	$	20,291.9	$	22,481.7
Reinsurance Recoverable, End of Year			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		3,483.2		3,769.2

Net Liability, End of Year		$	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	$	16,808.7	$	18,712.5


Reestimated Gross Liability		$	9,718.1		$	9,232.9		$	9,337.7		$	10,596.8	$	12,653.1	$	14,329.6	$	18,670.1	$	19,109.7	$	18,997.0	$	20,360.3
Reestimated Reinsurance Recoverable			2,120.7			1,821.5			1,276.8			1,477.9		2,279.9		2,724.6		5,424.3		4,702.5		3,682.1		3,388.9

Reestimated Net Liability		$	7,597.4		$	7,411.4		$	8,060.9		$	9,118.9	$	10,373.2	$	11,605.0	$	13,245.8	$	14,407.2	$	15,314.9	$	16,971.4


Cumulative Gross Deficiency (Redundancy)		$	129.9		$	(290.8	)	$	(434.8	)	$	240.3	$	1,218.4	$	2,425.0	$	3,155.2	$	2,396.6	$	1,049.2	$	68.4



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


	(in millions)
2003	$	22,168.5	$	1,058.4		4.77	%		3.80	%
2004		26,778.2		1,184.3		4.42			3.55
2005		30,570.3		1,315.3		4.30			3.45


	(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		57		2002
Maureen A. Brundage, Executive Vice President and General Counsel		49		2005
Robert C. Cox, Executive Vice President of Chubb & Son, a division of Federal		47		2003
John J. Degnan, Vice Chairman and Chief Administrative Officer		61		1994
Paul J. Krump, Executive Vice President of Chubb & Son, a division of Federal		46		2001
Michael J. Marchio, Executive Vice President of Chubb & Son, a division of Federal		58		2002
Andrew A. McElwee, Jr., Executive Vice President of Chubb & Son, a division of Federal		51		1997
Thomas F. Motamed, Vice Chairman and Chief Operating Officer		57		1997
Dino Robusto, Executive Vice President of Chubb & Son, a division of Federal		47		2006
Michael O’Reilly, Vice Chairman and Chief Financial Officer		62		1976
Henry B. Schram, Senior Vice President		59		1985


Item 5.	*Market for the Registrant’s Common Stock and Related Stockholder Matters*



		2005

		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter

Common stock prices
	High	$	80.95	$	86.28	$	90.61	$	98.13
	Low		73.34		77.02		85.44		83.86
Dividends declared			.43		.43		.43		.43


						PAGE

Cautionary Statement Regarding Forward-Looking Information							23
Critical Accounting Estimates and Judgments							24
Executive Overview							25
Property and Casualty Insurance							26
	Underwriting Operations						26
		Underwriting Results					27
			*Net Premiums Written*				27
			*Reinsurance Ceded*				28
			*Profitability*				29
		Review of Underwriting Results by Business Unit					30
			*Personal Insurance*				30
			*Commercial Insurance*				31
			*Specialty Insurance*				33
			*Reinsurance Assumed*				34
		Transfer of Ongoing Reinsurance Assumed Business					35
		Regulatory Developments					35
		Catastrophe Risk Management					36
			*Natural Catastrophes*				36
			*Terrorism Risk and Legislation*				36
		Loss Reserves					37
			*Estimates and Uncertainties*				39
				*Reserves Relating to Asbestos and Toxic Waste Claims*			41
					*Asbestos Reserves*		41
					*Toxic Waste Reserves*		44
				*Reinsurance Recoverable*			45
			*Prior Year Loss Development*				46
	Investment Results						47
	Other Charges						48
Chubb Financial Solutions							48
Corporate and Other							50
	Real Estate						50
Realized Investment Gains and Losses							51
Income Taxes							52
Capital Resources and Liquidity							52
	Capital Resources						52
	Ratings						54
	Liquidity						54
	Contractual Obligations and Off-Balance Sheet Arrangements						55
Invested Assets							56


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



	Years Ended December 31

	2005			2004			2003


	(in millions)
Property and casualty insurance	$	2,235		$	2,026		$	1,133
Chubb Financial Solutions non-insurance business		(6	)		(17	)		(127	)
Corporate and other		(166	)		(159	)		(157	)
Realized investment gains		384			218			85

Consolidated income before income tax		2,447			2,068			934
Federal and foreign income tax		621			520			125

Consolidated net income	$	1,826		$	1,548		$	809



		Years Ended December 31

				% Increase					% Increase
		2005		2005 vs. 2004			2004		2004 vs. 2003			2003


		(dollars in millions)
Personal insurance		$	3,307		6	%	$	3,116		9	%	$	2,868
Commercial insurance			5,030		2			4,938		11			4,468
Specialty insurance			3,042		6			2,860		4			2,748

	Total insurance		11,379		4			10,914		8			10,084
Reinsurance assumed			904		(21	)		1,139		16			984

	Total	$	12,283		2		$	12,053		9		$	11,068


Item 1A.	*Risk Factors*


				2005			2004			2003			2002			2001


				(in millions except for per share amounts)
FOR THE YEAR
Revenues
	Property and Casualty Insurance
		Premiums Earned		$	12,176.0		$	11,635.7		$	10,182.5		$	8,085.3		$	6,656.4
		Investment Income			1,342.3			1,207.0			1,082.9			952.2			914.7
	Corporate and Other				180.5			116.3			44.2			68.9			182.1
	Realized Investment Gains				383.5			218.2			84.4			33.9			.8

			Total Revenues	$	14,082.3		$	13,177.2		$	11,394.0		$	9,140.3		$	7,754.0

Income
	Property and Casualty Insurance
		Underwriting Income (Loss)(a)		$	920.6	(e)	$	846.1	(c)	$	104.5		$	(625.9	)(b)	$	(903.5	)(b)(c)
		Investment Income			1,315.3			1,184.3			1,058.4			929.4			902.6
		Other Charges			(.6	)		(4.7	)		(29.5	)		(25.3	)		(52.3	)

	Property and Casualty Insurance Income (Loss)				2,235.3			2,025.7			1,133.4			278.2			(53.2	)
	Chubb Financial Solutions Non-Insurance Business				(6.2	)		(17.2	)		(126.9	)		(69.8	)		9.2
	Corporate and Other				(165.6	)		(158.5	)		(157.3	)		(73.9	)		(22.8	)
	Realized Investment Gains				383.5			218.2			84.4			33.9			.8

	Income (Loss) Before Income Tax				2,447.0			2,068.2			933.6			168.4			(66.0	)
	Federal and Foreign Income Tax (Credit)				621.1			519.8			124.8	(d)		(54.5	)(d)		(177.5	)

	Net Income			$	1,825.9		$	1,548.4		$	808.8		$	222.9		$	111.5

Per Share
	Net Income			$	8.94		$	8.01		$	4.46		$	1.29		$	.63
	Dividends Declared on Common Stock				1.72			1.56			1.44			1.40			1.36
AT DECEMBER 31
Total Assets				$	48,060.7		$	44,260.3		$	38,360.6		$	34,080.9		$	29,415.5
Long Term Debt					2,467.3			2,813.7			2,813.9			1,959.1			1,351.0
Total Shareholders’ Equity					12,407.0			10,126.4			8,522.0			6,825.7			6,491.8
Book Value Per Share					59.36			52.55			45.33			39.87			38.17


	Change in Reporting Format


	Personal Insurance