8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported) : April 30, 2003

THE CHUBB CORPORATION

(Exact name of registrant as specified in its charter)

New Jersey	1-8661	13-2595722
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

15 Mountain View Road, P.O. Box 1615, Warren, New Jersey	07061-1615
(Address of Principal Executive Offices)	(Zip Code)

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

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS

	Item 9. Regulation FD Disclosure.
SIGNATURE
EXHIBIT INDEX
PRESS RELEASE
2002 ASBESTOS REVIEW

TABLE OF CONTENTS

	Item 9. Regulation FD Disclosure
SIGNATURE
EXHIBIT INDEX
EX-99.1: Press release issued by The Chubb Corporation dated April 30, 2003.
EX-99.2: Report detailing previously disclosed 2002 asbestos review posted on The Chubb Corporation’s website on April 30, 2003.

Item 9. Regulation FD Disclosure.

The following information, including the Exhibits to this Form 8-K, is being furnished pursuant to Item 12 — Results of Operations and Financial Condition of Form 8-K and is being presented under Item 9 of Form 8-K in accordance with interim guidance issued by the Securities and Exchange Commission in Release Nos. 33-8216 and 34-47583. This information is not deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act registration statements.

On April 30, 2003, The Chubb Corporation (Chubb) issued a press release announcing its results for the quarter ended March 31, 2003. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and incorporated by reference to this Item 9 and Item 12 as if fully set forth herein.

On April 30, 2003, Chubb posted on its website a report detailing its previously disclosed year-end 2002 asbestos review. A copy of our 2002 asbestos review is attached as Exhibit 99.2 to this Form 8-K and incorporated by reference to this Item 9 and Item 12 as if fully set forth herein.

Throughout its earnings release and 2002 asbestos review and in the conference call to discuss its first quarter 2003 results scheduled to be webcast on May 1, 2003, Chubb presents and will present its results and operations in the manner it believes will be the most meaningful, which includes some measures that are not based on accounting principles generally accepted in the United States (GAAP).

Chubb management uses operating income, a non-GAAP financial measure, which is net income excluding after tax realized investment gains and losses, to evaluate its performance because the realization of investment gains and losses in any given period is largely discretionary as to timing and could distort the analysis of trends. Chubb believes that the insurance industry equity analysts exclude realized gains and losses on investments in their analysis of Chubb’s results for the same reason.

Chubb management uses property and casualty investment income after income tax, a non-GAAP financial measure, to evaluate its investment performance because it reflects the impact of any change in the proportion of the investment portfolio invested in tax-exempt securities and is therefore a more meaningful basis of analyzing Chubb’s investment performance than the GAAP measure of investment income, which is investment income before income taxes.

Book value per share, a GAAP measure, represents the portion of consolidated shareholders’ equity attributable to one share of common stock outstanding as of the balance sheet date. Consolidated shareholders’ equity includes, as part of accumulated other comprehensive income, the after-tax appreciation or depreciation on available-for-sale fixed maturities carried at market value. Chubb management believes that the appreciation or depreciation on available-for-sale fixed maturities is subject to fluctuation due to change in interest rates and therefore could distort the analysis of trends. Management believes that book value per common share with available-

for-sale fixed maturities at amortized cost, a non-GAAP financial measure, is an important measure of the underlying equity attributable to one share of common stock.

The combined ratios and the components thereof are presented in accordance with statutory accounting principles applicable to insurance companies.

Definitions of key terms and, as applicable, a reconciliation to generally accepted accounting principles are included in the earnings release attached as Exhibit 99.1 to this Form 8-K, a copy of which is also posted on Chubb’s website.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE CHUBB CORPORATION
	By:	/s/ Joanne L. Bober
		Name:	Joanne L. Bober
		Title:	Senior Vice President and General Counsel
April 30, 2003

EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
DATED April 30, 2003

Exhibit
Number
(99.1)	Press release issued by The Chubb Corporation dated April 30, 2003.
(99.2)	Report detailing previously disclosed 2002 asbestos review posted on The Chubb Corporation’s website on April 30, 2003.

EX-99.1 3 y85963exv99w1.htm PRESS RELEASE

Exhibit 99.1

News from The Chubb Corporation

The Chubb Corporation
15 Mountain View Road • P.O. Box 1615
Warren, New Jersey 07061-1615
Telephone: 908-903-2000

FOR IMMEDIATE RELEASE

Chubb Reports Record 1st Quarter Net Income of
$224.6 Million or $1.31 per Share;
Operating Income Is a Record $221.7 Million;
Net Written Premiums Grow 22%; Combined Loss and Expense Ratio Is 95.3%

     WARREN, N.J., April 30, 2003 – The Chubb Corporation [NYSE: CB] today reported that net income in the first quarter of 2003 was a record $224.6 million, a 13.3% increase over net income of $198.2 million in the first quarter of 2002. Net income per share increased 13.9% to a record $1.31 from $1.15.

     Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, increased 8.5% in the first quarter of 2003 to a record $221.7 million from $204.3 million in the first quarter of 2002. Operating income per share grew 9.3% to a record $1.29 from $1.18 a year ago. First quarter operating income for 2003 includes $9 million ($0.05 per share) of after-tax income from the non-insurance business of Chubb Financial Solutions (CFS), compared to breakeven results in the first quarter of 2002.

     Chubb adopted the fair value method of accounting for stock-based employee compensation as of January 1, 2003. The per-share amounts for the first quarter of 2003 reflect an after-tax charge of $0.08 for the expensing of stock options, compared to no charge in 2002.

     The company made no share repurchases during the three months ended March 31, 2003.

     Net written premiums for the first quarter increased 22% to $2.7 billion. U.S. premiums grew 21%. Non-U.S. premiums grew 26%, or 16% in local currencies.

     The combined loss and expense ratio for the first quarter was 95.3%, compared with 95.9% in the corresponding year-earlier quarter. In the first quarter of 2003, catastrophe losses for Chubb were $94.9 million and accounted for 4.1 points of the combined ratio. In the first quarter of 2002, catastrophe losses were $13.3 million and accounted for 0.7 point of the combined ratio. Excluding catastrophe losses, the first quarter combined ratio was 91.2% in 2003 and 95.2% in 2002.

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Outlook for 2003

     “We had an excellent first quarter,” said John D. Finnegan, President and Chief Executive Officer, “with record earnings and continued rate increases across all lines. We are continuing to maintain underwriting discipline, and we expect that results will continue to benefit from higher earned premiums, better risk selection and favorable terms and conditions. Strong operating cash flow of about $650 million during the quarter continued to help offset the effect of lower interest rates on investment income. The strong first quarter performance is consistent with our operating earnings forecast of $4.60 to $5.00 per share for 2003, which assumes breakeven results for CFS’s non-insurance business.”

Operations Review

     The year-over-year increase in earnings for the quarter reflected substantially improved performance by Chubb Commercial Insurance, partially offset by a decline in earnings for Chubb Personal Insurance due to a large increase in catastrophe losses.

     Chubb Commercial Insurance (CCI), which accounted for 41% of Chubb’s first quarter net written premiums, had premium growth of 21% and a combined ratio of 86.5% for the quarter, compared to 95.7% in the first quarter of 2002. CCI catastrophe losses in the first quarter accounted for 3.4 points of the combined ratio in 2003 and 0.1 point in 2002.

     CCI premium growth during the first quarter resulted from a 13% annualized increase in the number of policies in force and a 16% average increase in renewal premium rates in the U.S. CCI retained 83% of the premiums that were up for renewal during the quarter, up from 80% a year ago, and premiums from new accounts exceeded nonrenewed business by a 2-to-1 margin.

     Chubb Specialty Insurance (CSI), which accounted for 38% of net written premiums, had net premium growth of 29% and a combined ratio of 99.2%, compared to 95.4% in the corresponding year-earlier quarter. The decline in CSI profitability compared to the first quarter of 2002 resulted mainly from the adverse claim environment in directors & officers (D&O) and errors & omissions (E&O) insurance.

     Executive Protection (EP) net written premiums grew 34%, and the business had a combined ratio of 103.6%. While results were good in crime, fiduciary liability and employment practices liability, EP’s results continued to be adversely affected by D&O and E&O claims that have arisen from the corporate abuses and Wall Street scandals of recent years. Renewal rates in the U.S. for D&O for publicly held companies were up 125%, while rates for the private for-profit sector were up 26% and rates for the not-for-profit sector were up 32%. Renewal retention for D&O overall was 84%. E&O rates in the U.S. were up 56% for the quarter, and employment practices liability rates were up 19%.

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     Financial Institutions (FI) net premiums grew 26% in the first quarter. Standard commercial renewal rates in FI were up 24% in the U.S. for the quarter, while rates in fidelity were up 37%. In professional liability, including D&O and E&O, rates were up 60%. The combined ratio for FI was 110.9% for the first quarter, reflecting the adverse effect of D&O and E&O claims, partially offset by favorable results in the fidelity and standard commercial portions.

     For the other specialty lines, net written premiums were up 23%, primarily driven by growth in Chubb Re. The combined ratio was 78.8%. Chubb Re had a 58% increase in net written premiums and a combined ratio of 90.4%. Accident business grew 25% and had a combined ratio of 94.6%. Surety grew net written premiums by 4% and had a combined ratio of 43.2%.

     Chubb Personal Insurance (CPI), which accounted for 21% of net written premiums in the first quarter, had premium growth of 12% and a combined ratio of 103.6%, compared to 97.4% in the first quarter of 2002. Catastrophes accounted for 10.9 points of the combined ratio in the first quarter of 2003, compared to 2.4 points in the first quarter of 2002. Excluding catastrophes, the CPI combined ratio for the quarter was 92.7% in 2003 and 95.0% in 2002.

     The Homeowners line grew 15% and had a combined ratio of 114.1%, compared to 102.6% in the corresponding year-earlier quarter. Homeowners results reflect 19.6 points of catastrophes in the 2003 first quarter, compared to 4.5 points in the first quarter of 2002. Excluding catastrophe losses, the combined ratio for Homeowners improved to 94.5% from 98.1%.

     Personal automobile insurance grew 12% and produced a combined ratio of 101.4%. Other personal lines, which include valuable articles and personal excess liability, grew 8% and had a combined ratio of 77.8%.

     Property and casualty investment income after taxes was up 6.7% to $198.0 million in the first quarter of 2003 from $185.6 million in the first quarter of 2002. The increase reflected strong operating cash flow and the contribution of $1 billion by the parent company to the operating companies in the fourth quarter of 2002, partially offset by the negative impact of investing the proceeds of maturing bonds at lower interest rates.

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Other Highlights:

• Chubb and its property per risk reinsurers have resolved all of the questions raised regarding September 11th claims. This resolution confirms Chubb’s confidence that it will collect an amount of reinsurance under the property per risk treaties which leaves intact the company’s estimate of $645 million in net costs related to the September 11th attack.

• One of the company’s large gas forward purchase contract surety bond customers, Aquila Inc., has successfully refinanced its debt that was due in April 2003 and continues to perform its obligations under contracts covered by the bonds.

• Chubb intends to run off the financial products portfolio of CFS. The company does not intend to write any new credit derivative transactions, but might enter into transactions for hedging and other risk management reasons.

• Chubb has undertaken a restructuring plan to improve performance in Europe, including several actions to significantly reduce operating expenses on the Continent. The costs of the restructuring are included in the company’s earnings guidance for 2003. Premiums in Europe are expected to grow at a double-digit rate in 2003. In the first quarter of 2003, the European operations were profitable.

• Chubb has posted to its web site additional information regarding its previously disclosed 2002 asbestos review which resulted in an addition in 2002 to its asbestos reserves.

Webcast Conference Call to be Held on May 1

     Chubb’s senior management will discuss the company’s first-quarter performance with analysts tomorrow, May 1, at 9 A.M. Eastern time. The conference call will be webcast live on the Internet at http://www.chubb.com and archived later in the day for replay.

About Chubb

     Founded in 1882, the Chubb Group of Insurance Companies provide property and casualty insurance for personal and commercial customers worldwide through 8,000 independent agents and brokers. Chubb’s global network includes branches and affiliates throughout North America, Europe, Latin America, Asia and Australia.

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Definitions of Key Terms

Operating Income

Operating income, a non-GAAP financial measure, is net income excluding after-tax realized investment gains and losses. Management uses operating income, among other measures, to evaluate its performance because the realization of investment gains and losses in any given period is largely discretionary as to timing and could distort the analysis of trends.

Property and Casualty Investment Income After Income Tax

Management uses property and casualty investment income after income tax, a non-GAAP financial measure, to evaluate its investment performance because it reflects the impact of any change in the proportion of the investment portfolio invested in tax-exempt securities and is therefore more meaningful for analysis purposes than investment income before income taxes.

Book Value per Common Share with Available-for-Sale Fixed Maturities at Amortized Cost

Book value per share represents the portion of consolidated shareholders’ equity attributable to one share of common stock outstanding as of the balance sheet date. Consolidated shareholders’ equity includes, as part of accumulated other comprehensive income, the after-tax appreciation or depreciation on the Corporation’s available-for-sale fixed maturities carried at market value. The appreciation or depreciation on available-for-sale fixed maturities is subject to fluctuation due to changes in interest rates and therefore could distort the analysis of trends. Management believes that book value per common share with available-for-sale fixed maturities at amortized cost, a non-GAAP financial measure, is an important measure of the underlying equity attributable to one share of common stock.

Combined Ratio or Combined Loss and Expense Ratio

The combined loss and expense ratio, expressed as a percentage, is the key measure of underwriting profitability. The Corporation uses the statutory definition of combined loss and expense ratio. It is the sum of the ratio of losses to premiums earned (loss ratio) plus the ratio of underwriting expenses to premiums written (expense ratio) after reducing both premium amounts by dividends to policyholders.

All financial results herein are unaudited as of the date of this release.

For further information contact: Investors:
 
 
Media: Glenn A. Montgomery
(908) 903-2365
 
Mark E. Greenberg
(908) 903-2682

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FORWARD LOOKING INFORMATION

     Certain statements in this communication may be considered to be “forward looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995, such as statements that include words or phrases “will result”, “is expected to”, “will continue”, “is anticipated”, or similar expressions. Such statements are subject to certain risks, uncertainties and assumptions about our business. The factors which could cause actual results to differ materially from those suggested by any such statements include but are not limited to those discussed or identified from time to time in the Corporation’s public filings with the Securities and Exchange Commission and specifically to risks or uncertainties associated with:

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

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

• the effects of the war in Iraq and the outbreak of war or hostilities in other countries or regions of the world;

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

• 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 insurance losses from the September 11 attack and related reinsurance recoverables;

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

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

• developments in judicial decisions or legislative actions relating to coverage and liability for asbestos and toxic waste claims;

• developments in judicial decisions or regulatory actions relating to coverage and liability for mold claims;

• the impact of the current economic climate on companies on whose behalf we have issued surety bonds, and in particular, on those companies that have experienced deterioration in creditworthiness;

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

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

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

• claims and litigation arising out of accounting and other corporate governance disclosures by other companies;

• claims and litigation arising out of investment banking practices;

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

• the impact of Severe Acute Respiratory Syndrome (SARS) on business and on our ability and the ability of our agents and brokers to travel and meet with customers and prospective customers;

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

• general economic conditions including:

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

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

• changes in competition and pricing environments;

• regional or general changes in asset valuations;

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

• the inability to reinsure certain risks economically;

• changes in the litigation environment; and

• general market conditions.

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THE CHUBB CORPORATION

SUPPLEMENTARY FINANCIAL DATA
(Unaudited)

		Three Months Ended
		March 31
		2003			2002
		(in millions)
PROPERTY AND CASUALTY INSURANCE
	Underwriting
	Net Premiums Written	$	2,674.7		$	2,190.9
	Increase in Unearned Premiums		(349.5	)		(335.5	)
	Premiums Earned		2,325.2			1,855.4
	Claims and Claim Expenses		1,505.5			1,190.5
	Operating Costs and Expenses		811.5			686.6
	Increase in Deferred Policy Acquisition Costs		(67.9	)		(87.4	)
	Dividends to Policyholders		6.0			8.6
	Underwriting Income		70.1			57.1
	Investments
	Investment Income Before Expenses		253.6			230.2
	Investment Expenses		7.3			5.0
	Investment Income		246.3			225.2
	Other Charges		(7.5	)		(10.5	)
	Property and Casualty Income		308.9			271.8
CHUBB FINANCIAL SOLUTIONS NON-INSURANCE BUSINESS			14.0			(.1	)
CORPORATE AND OTHER			(45.2	)		(17.5	)
CONSOLIDATED OPERATING INCOME BEFORE INCOME TAX			277.7			254.2
Federal and Foreign Income Tax			56.0			49.9
CONSOLIDATED OPERATING INCOME			221.7			204.3
REALIZED INVESTMENT GAINS (LOSSES) AFTER INCOME TAX			2.9			(6.1	)
CONSOLIDATED NET INCOME		$	224.6		$	198.2
PROPERTY AND CASUALTY INVESTMENT INCOME AFTER INCOME TAX		$	198.0		$	185.6

Effective January 1, 2003, the Corporation adopted the fair value method of accounting for stock-based employee compensation plans using the modified prospective method of transition. The change in accounting resulted in a decrease in operating income before income tax of $19.1 million ($14.0 million after-tax) for the three months ended March 31, 2003.

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		Three Months Ended
		March 31
		2003			2002
OUTSTANDING SHARE DATA
	(in millions)
	Average Common and Potentially Dilutive Shares		171.4			172.9
	Actual Common Shares		171.6			171.0
DILUTED EARNINGS PER SHARE DATA
	Operating Income	$	1.29		$	1.18
	Realized Investment Gains (Losses)		.02			(.03	)
	Net Income	$	1.31		$	1.15
	Effect of Catastrophe Losses	$	(.36	)	$	(.05	)
	Effect of Asbestos and Toxic Waste Losses	$	—		$	(.08	)
	Effect of Chubb Financial Solutions Non-Insurance Business	$	.05		$	—
	Effect of Expensing Stock Options	$	(.08	)	$	—

	Mar. 31		Dec. 31
	2003		2002
BOOK VALUE PER COMMON SHARE	$	41.49	$	40.06
BOOK VALUE PER COMMON SHARE, with Available-for-Sale Fixed Maturities at Amortized Cost		37.76		36.61

PROPERTY AND CASUALTY UNDERWRITING RATIOS
THREE MONTHS ENDED MARCH 31

	2003			2002
Losses to Premiums Earned		64.9	%		64.4	%
Expenses to Premiums Written		30.4			31.5
Combined Loss and Expense Ratio		95.3	%		95.9	%

PROPERTY AND CASUALTY CLAIMS AND CLAIM EXPENSE COMPONENTS
THREE MONTHS ENDED MARCH 31

	2003		2002
	(in millions)
Paid Claims and Claim Expenses	$	1,156.8	$	1,084.9
Increase in Unpaid Claims and Claim Expenses		348.7		105.6
Total Claims and Claim Expenses	$	1,505.5	$	1,190.5

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PROPERTY AND CASUALTY PRODUCT MIX
THREE MONTHS ENDED MARCH 31

			Net Premiums				Combined Loss and
			Written				Expense Ratios
			2003		2002		2003			2002
			(in millions)
Personal Insurance
	Automobile		$	132.9	$	119.1		101.4	%		100.5	%
	Homeowners			312.5		272.4		114.1			102.6
	Other			119.6		111.0		77.8			80.9
		Total Personal		565.0		502.5		103.6			97.4
Commercial Insurance
	Multiple Peril			276.5		247.0		88.0			99.9
	Casualty			344.1		300.8		85.2			100.3
	Workers’ Compensation			188.4		142.8		87.6			91.5
	Property and Marine			273.3		202.3		87.4			87.5
		Total Commercial		1,082.3		892.9		86.5			95.7
Specialty Insurance
	Executive Protection			521.6		388.6		103.6			99.3
	Financial Institutions			223.8		178.2		110.9			94.4
	Other			282.0		228.7		78.8			88.3
		Total Specialty		1,027.4		795.5		99.2			95.4
		Total	$	2,674.7	$	2,190.9		95.3	%		95.9	%

EX-99.1

PRESS RELEASE

EX-99.2

Exhibit 99.2

The Chubb Corporation 2002 Asbestos Review Date of release 04/30/03

Forward Looking Statements The following materials may contain "forward looking statements" that are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or suggested by such statements. Such risks or uncertainties include but are not limited to those which may be noted more fully in the materials themselves, as well as those discussed or identified from time to time in The Chubb Corporation's public filings with the Securities and Exchange Commission. The Chubb Corporation assumes no obligation to update any forward-looking information set forth in the following materials, which speak as of April 30, 2003 or as otherwise specified in the materials.

Contents Purpose of Review Conclusions Evolution of Asbestos Liabilities Legislative Action Evaluation Methodology Exposure Analysis Asbestos Payments and Reserves by Category Claim Management Inception to Date Paid Losses Asbestos Net Loss Reserve Analysis Survival Ratio Summary

Purpose of Review Assess Chubb's ultimate liability regarding asbestos exposures Determine appropriate reserve levels Ensure aggressive case management of asbestos claims manage our exposure identify trends or issues that may impact exposure Provide relevant and substantive information needed by investors and rating agencies

Conclusions A comprehensive ground up analysis of asbestos liabilities concluded a need for $620M of additional net reserves in 2002 The resultant net reserve of $833.9M at 12/31/02 represents the best estimate of Chubb and an independent consulting actuarial firm of our ultimate asbestos liability This amount contemplated a modest 5% reinsurance recoverable Payment history for asbestos liabilities, since inception, was $1.6B (includes Fibreboard settlement of $1.2B)

Conclusions Current reserves calculate to a 3 year survival ratio of 19.9 We confirmed Chubb's relatively low market share, ranging from 1.6 to 2.3%, of commercial liability business in the years of greatest asbestos exposure (1960 - 1985) All cases are aggressively managed by a team of dedicated centralized claim professionals A significant portion of Chubb's exposure stems from high layer excess coverage

Evolution of Asbestos Liabilities Traditional defendants are those engaged in asbestos mining, manufacturing and building products industries From 1983-1987, these defendants accounted for nearly 75% of all asbestos expenditures by defendants and insurers There has been an emerging group of peripheral defendants who manufactured, distributed, or installed an asbestos-containing product or who owned or operated a facility where asbestos products were present From 1993-1997 (most recent data available) these defendants accounted for over 60% of all asbestos expenditures by defendants and insurers

Evolution of Asbestos Liabilities Plaintiffs are pursuing peripheral defendants as the resources of traditional defendants become exhausted Bankruptcies 67 companies have declared bankruptcy primarily because of asbestos related liabilities 29 of these filings have been since 2000 Pool of defendants has broadened from approximately 300 in the early 1980s to more than 8,400 today Today, defendants span 70 different industry types (SIC codes) representing 85% of the U.S. economy

Evolution of Asbestos Liabilities Number of defendants typically named in each asbestos lawsuit is up from 20 in the 1980s to 65 in the 1990s Defendants face increasingly adverse litigation environment most recent analysis indicates 86% of all lawsuits are filed in state courts 66% of lawsuits filed between 1998 and 2000 were filed in 5 plaintiff friendly states (TX, MS, NY, OH, WV) Projections vary from 1M to 3M future asbestos claimants Source: Asbestos Litigation Costs & Compensation: An Interim Report, The Rand Institute for Civil Justice, September 2002

Legislative Action Legislative attempts to address the "elephantine mass of asbestos cases" have yet to succeed Tort reform is needed to: compensate the truly sick (65% of compensation goes to non-malignant or functionally unimpaired claimants) lower transaction costs (currently over 50% of total dollars being spent is for plaintiff attorney fees/expenses and loss adjustment expenses) Source: Asbestos Litigation Costs & Compensation: An Interim Report, The Rand Institute for Civil Justice, September 2002

Evaluation Methodology Chubb segmented its defendant policyholders into two groups Traditional defendant policyholders (Tiers 1 & 2) Those engaged in asbestos mining, manufacturing and building products industries Peripheral defendant policyholders (Tiers 3 & 4) An emerging group of defendants who manufactured, distributed, or installed an asbestos-containing product or who owned or operated a facility where asbestos products were present

Evaluation Methodology Internal claim and actuarial review was directed and overseen by senior management Parallel review was undertaken, at our request, by an internationally known independent actuarial firm Evaluation did not assume passage of any legislation that might be favorable to the insurance industry No discounting was considered for the time value of money Evaluation included ongoing analysis of industry events related to asbestos, recent settlements or judgments, further bankruptcies, mass consolidations and recent court decisions regarding coverage

Exposure Analysis Of these policyholder categories, Chubb reviewed and analyzed: All of its remaining 22 open traditional defendant policyholders (6 of which are settled in principle and awaiting final approval) A representative sampling determined by our independent actuarial firm: 30% of 260 open peripheral defendant policyholders (5 of which are settled in principle and awaiting final approval) Available coverage for each defendant policyholder, including terms of coverage, policy limits and aggregate limits

Exposure Analysis Chubb's ground up review by policyholder category included an assessment of: underlying coverage available when Chubb is excess potential liability including historical claim activity, type of operation and settlement values by jurisdiction applicable coverage defenses, including viability of asbestos exclusions historical reinsurance recoveries and current available reinsurance products vs. non-products or premises exposures loss adjustment expense

Asbestos Payments & Reserves by Category Policyholders with settlement agreements Structured settlements 7 $5.7 $134.6 16% Coverage-in-place 2 0.0 25.0 3 Wellington participants 2 1.0 9.0 1 Other policyholders with active claims Traditional Defendants (Tiers 1 & 2) 16 3.6 246.5 30 Peripheral Defendants (Tiers 3 & 4) 255 27.7 274.8 33 Reserves for future claims from unknown policyholders TBD - 144.0 17 Total 282 $38.0 $833.9* 100% No. of Total Net Policy- Paid holders in 2002 $ % Net Asbestos Reserves At 12/31/02 ($ in millions) * Comprised of $246.5 in case reserves and $587.4 of IBNR reserves.

Asbestos Payments & Reserves by Category Policyholders with Settlement Agreements Structured Settlements: Represents 5 traditional and 2 peripheral defendant policyholders Relevant parties have agreed to final amounts to be paid These payments are scheduled over time and may include lump sum payments Reserves at 12/31/02 represent our best estimate of payment amounts agreed upon

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.15 0.85 0.63 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Structured Settlements All Other Asbestos Payments & Reserves by Category 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.16 0.84 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 All Other Structured Settlements Total Paid 2002 $5.7M Reserves 12/31/02 $134.6M Policyholders with Settlement Agreements Structured Settlements:

Asbestos Payments & Reserves by Category Policyholders with Settlement Agreements Coverage-in-Place Represents 2 peripheral defendant policyholders Agreement has been reached with these policyholders for specified coverage amounts to be paid over time These agreements might include annual caps and payments are made as and when valid claims are submitted Reserves at 12/31/02 represent our best estimate of amounts to be paid

Asbestos Payments & Reserves by Category Total Paid 2002 $0.0M Reserves 12/31/02 $25M Policyholders with Settlement Agreements Coverage-in-Place 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.03 0.97 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 All Other Coverage- In-Place

Asbestos Payments & Reserves by Category Policyholders with Settlement Agreements Wellington Represents 1 traditional and 1 peripheral defendant policyholders who were signatories to the Wellington agreement Chubb was not a signatory to the Wellington Agreement but has excess coverage for these 2 policyholders and has agreed to pay in accordance with the Wellington formula The formula enables agreement on specified amounts of coverage and determines how the coverage may be accessed Reserves at 12/31/02 represent our best estimate of the payment obligations of these policyholders in accordance with the Wellington formula

Asbestos Payments & Reserves by Category Total Paid 2002 $1M Reserves 12/31/02 $9M Policyholders with Settlement Agreements Wellington 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.03 0.97 0.63 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Wellington All Other 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.01 0.99 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 All Other Wellington

Asbestos Payments & Reserves by Category Other Policyholders with Active Claims Traditional Defendants (Tiers 1&2) Represents 16 traditional defendant policyholders These claims, which are in various stages of investigation, evaluation and/or negotiation, are a mixture of product, non-product and premises exposures Reserves at 12/31/02 represent our best estimate of the exposure of the traditional defendant policyholders

Asbestos Payments & Reserves by Category Total Paid 2002 $3.6M Reserves 12/31/02 $246.5M Other Policyholders with Active Claims Traditional Defendants (Tiers 1&2) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.09 0.91 0.63 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Traditional Defendants (Tiers 1&2) All Other 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.3 0.7 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 All Other Traditional Defendants (Tiers 1&2)

Asbestos Payments & Reserves by Category Other Policyholders with Active Claims Peripheral Defendants (Tiers 3&4) Represents 255 peripheral defendant policyholders These claims, which are in various stages of investigation, evaluation and/or negotiation, are a mixture of product, non-product and premises exposures Reserves at 12/31/02 represent our best estimate of the exposure of the peripheral defendant policyholders

Asbestos Payments & Reserves by Category Total Paid 2002 $27.7M Reserves 12/31/02 $274.8M Other Policyholders with Active Claims Peripheral Defendants (Tiers 3&4) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.73 0.27 0.63 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Peripheral Defendants (Tiers 3&4) All Other 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.33 0.67 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 All Other Peripheral Defendants (Tiers 3&4)

1st Qtr 2nd Qtr 4th Qtr East 0.17 0.83 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Reserves for Future Claims from Unknown Policyholders All Other Asbestos Payments & Reserves by Category Reserves 12/31/02 $144M Reserves for Future Claims from Unknown Policyholders

Asbestos Payments & Reserves by Category Total net asbestos reserves: $833.9M Case reserves of $246.5M Established by Claim Department on known claims IBNR reserves of $587.4M Includes provision for: potential reserve development on known defendant policyholders (development) future claims from unknown defendant policyholders (pure IBNR) future declaratory judgment actions and other litigation

1st Qtr 2nd Qtr 4th Qtr East 0.7 0.3 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Case Asbestos Payments & Reserves by Category Reserves 12/31/02 $833.9M IBNR Total Net Asbestos Reserves

Claim Management All of Chubb's active claims are: Aggressively managed by a dedicated centralized team of senior claim professionals supplemented by outside counsel and other experts As necessary, discussed with senior management on a timely basis to allow for recognition of adverse or positive trends Analyzed through a home office committee process to enhance accurate assessment of liability, potential exposure and case strategy on large exposure claims

Claim Management We are engaged in active coverage litigation with 35 policyholders: 12 Tier 1 & 2 defendants which involve 1 primary and 11 excess policies 23 Tier 3 & 4 defendants which involve 7 primary and 16 excess policies 17 of the 35 involve policyholders who have declared bankruptcy These cases involve: resolution of bankruptcy proceedings coverage litigation vs. policyholders

Inception to Date Paid Losses Inception to 12/31/02 Asbestos Payments totaled $1.6B of which $1.2B was related to the Fibreboard settlement in 1993

Asbestos Net Loss Reserve Analysis Beginning Reserves $214.6 $211.7 $216.0 Incurred Losses & LAE 657.3 56.6 29.8 CY Payments for Losses (26.7) (37.9) (23.1) CY Payments for LAE (11.3) (15.8) (11.0) Ending Reserves: 833.9 214.6 211.7 Of which: IBNR $587.4 $ 71.9 $ 80.6 ($ in Millions) 2002 2001 2000

Survival Ratio Paid Loss and LAE (in millions) 2000 $34.1 2001 $53.7 2002 $38.0 Reserves at 12/31/02 (net) $833.9 Average paid 2000 through 2002 $ 41.9 = 19.9 3 year survival ratio Survival ratio can be subject to significant changes based on a number of factors including the timing and amount of payments Avg. $41.9

Summary Chubb's asbestos net reserves of $833.9M at 12/31/02 represent the best estimate of ultimate liability based upon a comprehensive ground up analysis by Chubb and an independent consulting actuarial firm This reserve amount is at full (undiscounted) value No consideration has been given for legislative or judicial relief The net reserve reflects a modest reinsurance recoverable amount of about 5% of the gross reserve

Summary Chubb manages asbestos claims with dedicated, centralized staff, closely supervised by a highly experienced home office management team supplemented by outside counsel and other experts The claim team aggressively manages asbestos exposures through joint defense and cost sharing agreements, policy buy outs, declaratory judgment actions on coverage litigation, mediation and arbitration A significant portion of Chubb's exposure stems from excess policies

Summary Chubb has negligible asbestos exposure outside North America due to limited market share and late entry into these commercial liability markets Chubb has a relatively low market share (ranging from 1.6% to 2.3%) of commercial liability business, depending upon which lines of commercial business are included, in the years of greatest asbestos exposure (1960-1985)