Management's Discussion and Analysis of Financial Condition and Results of Operations addresses the financial condition of the Corporation as of December 31, 2008 compared with December 31, 2007 and the results of operations for each of the three years in the period ended December 31, 2008. This discussion should be read in conjunction with the consolidated financial statements and related notes and the other information contained in this report.

INDEX

Cautionary Statement Regarding Forward-Looking Information 25 Critical Accounting Estimates and Judgments 27 Overview 27 Property and Casualty Insurance 28 Underwriting Operations 29 Underwriting Results 29 Net Premiums Written 29 Reinsurance Ceded 30 Profitability 31 Review of Underwriting Results by Business Unit 33 Personal Insurance 33 Commercial Insurance 34 Specialty Insurance 36 Reinsurance Assumed 37 Catastrophe Risk Management 37 Natural Catastrophes 38 Terrorism Risk and Legislation 38 Loss Reserves 39 Estimates and Uncertainties 41 Reserves Other than Those Relating to Asbestos and Toxic Waste Claims 41 Reserves Relating to Asbestos and Toxic Waste Claims 45 Asbestos Reserves 45 Toxic Waste Reserves 48 Reinsurance Recoverable 49 Prior Year Loss Development 50 Investment Results 53 Other Income 54 Corporate and Other 54 Chubb Financial Solutions 54 Realized Investment Gains and Losses 55 Capital Resources and Liquidity 56 Capital Resources 56 Ratings 58 Liquidity 58 Contractual Obligations and Off-Balance Sheet Arrangements 59 Invested Assets 60 Pension and Other Postretirement Benefits 61 Contingencies 61

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this document are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements are made pursuant to the safe harbor provisions of the PSLRA and include statements regarding our loss reserve and reinsurance recoverable estimates; the impact of future catastrophes (including acts of terrorism); asbestos and toxic waste liability developments; the number and severity of surety-related claims as well as surety market conditions; the impact of changes to our reinsurance program in 2007 and 2008 and the cost and availability of reinsurance in 2009; the adequacy of the rates at which we renewed and wrote new business; premium volume and competition in 2009; property and casualty investment income during 2009; changes in the value of our limited partnership investments during the first quarter of 2009; securities in our investment portfolio that may become other-than-temporarily impaired; cash flows generated by our fixed income investments; the impact of dislocations in the property and casualty insurance market, the ongoing economic downturn and currency rate fluctuations; estimates with respect to our credit derivatives exposure; the repurchase of common stock under our share repurchase program; our capital adequacy and funding of liquidity needs; and the impact of the amortization of net losses relating to our pension and other postretirement benefit plans. Forward-looking statements are made based upon management's current expectations and beliefs concerning trends and future developments and their potential effects on us. These statements are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties, which include, among others, those discussed or identified from time to time in our public filings with the Securities and Exchange Commission and those associated with:

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

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

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

• adverse changes in loss cost trends;

• our ability to retain existing business and attract new business;

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

• the adequacy of loss reserves, including:

• our expectations relating to reinsurance recoverables;

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

• developments in judicial decisions or regulatory or legislative actions relating to coverage and liability, in particular, for asbestos, toxic waste and other mass tort claims;

• development of new theories of liability;

• our estimates relating to ultimate asbestos liabilities;

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

• the effects of proposed asbestos liability legislation, including the impact of claims patterns arising from the possibility of legislation and those that may arise if legislation is not passed;

• the availability and cost of reinsurance coverage;

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

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

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

• claims and litigation arising out of stock option "backdating," spring loading" and other equity grant practices by public companies;

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

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

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

• claims and litigation relating to uncertainty in the credit and broader financial markets; and

• legislative or regulatory proposals or changes;

• the effects of changes in market practices in the U.S. property and casualty insurance industry, in particular contingent commissions and loss mitigation and finite reinsurance arrangements, arising from any legal or regulatory proceedings, related settlements and industry reform, including changes that have been announced and changes that may occur in the future;

• the impact of legislative and regulatory developments on our business, including those relating to terrorism, catastrophes and the financial markets;

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

• the ability of our subsidiaries to pay us dividends;

• general economic and market conditions including:

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

• currency fluctuations;

• the effects of inflation;

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

• changes in competition and pricing environments;

• regional or general changes in asset valuations;

• the inability to reinsure certain risks economically; and

• changes in the litigation environment; and

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

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

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The consolidated financial statements include amounts based on informed estimates and judgments of management for transactions that are not yet complete. Such estimates and judgments affect the reported amounts in the financial statements. Those estimates and judgments that were most critical to the preparation of the financial statements involved the determination of loss reserves and the recoverability of related reinsurance recoverables and the evaluation of whether a decline in value of any investment is temporary or other-than-temporary. These estimates and judgments, which are discussed within the following analysis of our results of operations, require the use of assumptions about matters that are highly uncertain and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements.

OVERVIEW

The following highlights do not address all of the matters covered in the other sections of Management's Discussion and Analysis of Financial Condition and Results of Operations or contain all of the information that may be important to Chubb's shareholders or the investing public. This overview should be read in conjunction with the other sections of Management's Discussion and Analysis of Financial Condition and Results of Operations.

• Net income was $1.8 billion in 2008 compared with $2.8 billion in 2007 and $2.5 billion in 2006. The lower net income in 2008 was due primarily to two factors. First, underwriting income in our property and casualty insurance business was substantially lower in 2008 than in 2007 and 2006. Second, we had realized investment losses in 2008 compared with realized investment gains in 2007 and 2006.

• Underwriting results were highly profitable in 2008, 2007 and 2006, but more so in 2007 and 2006. Our combined loss and expense ratio was 88.7% in 2008 compared with 82.9% in 2007 and 84.2% in 2006. The less profitable results in 2008 were due in large part to higher catastrophe losses and the cumulative impact of rate reductions experienced in our commercial and professional liability classes over the past several years. The impact of catastrophes accounted for 5.1 percentage points of the combined ratio in 2008 compared with 3.0 percentage points in 2007 and 1.4 percentage points in 2006.

• During 2008, we experienced overall favorable development of $873 million on loss reserves established as of the previous year end, due primarily to favorable loss experience in certain professional liability and commercial liability classes as well as lower than expected emergence of losses in the homeowners and commercial property classes. During 2007, we experienced overall favorable development of $697 million due primarily to favorable loss trends in the professional liability classes, lower than expected emergence of losses in the homeowners and commercial property classes and better than expected reported loss activity in the run-off of our reinsurance assumed business. During 2006, we experienced overall favorable development of $296 million due primarily to lower than expected emergence of losses in the homeowners and commercial property classes.

• Total net premiums written decreased by 1% in both 2008 and 2007. The lack of growth in both years reflected our continued emphasis on underwriting discipline in a highly competitive market environment. Net premiums written in the United States decreased by 2% in 2008 and 1% in 2007. Net premiums written outside the United States increased by 6% in 2008 and 10% in 2007; such growth was largely attributable to the impact of currency fluctuation.

• Property and casualty investment income after tax increased by 2% in 2008 and 9% in 2007. The growth in 2008 was limited as average invested assets increased only modestly during the year. For more information on this non-GAAP financial measure, see "Property and Casualty Insurance - Investment Results."

• Net realized investment losses before taxes were $371 million in 2008 compared with net realized gains before taxes of $374 million in 2007 and $245 million in 2006. The net realized losses in 2008 were primarily attributable to other-than-temporary impairment losses on equity securities. The net realized gains in 2007 and 2006 were primarily attributable to gains from investments in limited partnerships.

A summary of our consolidated net income is as follows:

                                                     Years Ended December 31
                                                   2008        2007        2006
                                                          (in millions)

         Property and casualty insurance         $  2,992     $ 3,712     $ 3,369
         Corporate and other                         (214 )      (149 )       (89 )
         Realized investment gains (losses)          (371 )       374         245

         Consolidated income before income tax      2,407       3,937       3,525
         Federal and foreign income tax               603       1,130         997

         Consolidated net income                 $  1,804     $ 2,807     $ 2,528

PROPERTY AND CASUALTY INSURANCE

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


                                                           Years Ended December 31
                                                        2008         2007         2006
                                                                (in millions)

  Underwriting
  Net premiums written                                $ 11,782     $ 11,872     $ 11,974
  Decrease (increase) in unearned premiums                  46           74          (16 )

  Premiums earned                                       11,828       11,946       11,958

  Losses and loss expenses                               6,898        6,299        6,574
  Operating costs and expenses                           3,546        3,564        3,467
  Increase in deferred policy acquisition costs            (17 )        (52 )        (19 )
  Dividends to policyholders                                40           19           31

  Underwriting income                                    1,361        2,116        1,905

  Investments
  Investment income before expenses                      1,652        1,622        1,485
  Investment expenses                                       30           32           31

  Investment income                                      1,622        1,590        1,454

  Other income                                               9            6           10

  Property and casualty income before tax             $  2,992     $  3,712     $  3,369

  Property and casualty investment income after tax   $  1,297     $  1,273     $  1,166

Property and casualty income before tax in 2008 was lower than in 2007 due to substantially lower underwriting income. The decrease in underwriting income in 2008 was due in large part to higher catastrophe losses and the cumulative impact of rate reductions experienced over the past several years in our commercial and specialty insurance businesses. Property and casualty income before tax in 2007 was higher than in 2006 due to higher underwriting income, particularly in our specialty insurance business, as well as a substantial increase in investment income due to an increase in invested assets.

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

Underwriting Operations

Underwriting Results

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

Net Premiums Written

Net premiums written amounted to $11.8 billion in 2008, a decrease of 1%
compared with 2007. Net premiums written in 2007 decreased 1% compared with
2006.

Net premiums written by business unit were as follows:


                                                Years Ended December 31
                                      % Increase                       % Increase
                                      (Decrease)                       (Decrease)
                         2008        2008 vs. 2007        2007        2007 vs. 2006        2006
                                                 (dollars in millions)

Personal insurance     $  3,826                   3 %   $  3,709                   5 %   $  3,518
Commercial insurance      4,993                  (2 )      5,083                  (1 )      5,125
Specialty insurance       2,899                  (2 )      2,944                   -        2,941

Total insurance          11,718                   -       11,736                   1       11,584
Reinsurance assumed          64                 (53 )        136                 (65 )        390

Total                  $ 11,782                  (1 )   $ 11,872                  (1 )   $ 11,974

Net premiums written from our insurance business were flat in 2008 compared with 2007 and grew 1% in 2007 compared with 2006. Premiums in the United States, which represent about 75% of our insurance premiums, decreased 2% in 2008 and 1% in 2007. Insurance premiums outside the U.S. grew 6% in 2008 and 10% in 2007. The growth outside the U.S. in 2008 and 2007 was largely attributable to the impact of currency fluctuation due to the weakness of the U.S. dollar. In both years, such growth was 3% when measured in local currencies.

The overall lack of premium growth in both 2008 and 2007 reflected our continued emphasis on underwriting discipline in a highly competitive market environment. Rates were under competitive pressure that varied by class of business and geographic area. In both years, we retained a high percentage of our existing customers and renewed these accounts at what we believe are acceptable rates relative to the risks. While we continued to be disciplined, we found opportunities to write new business at acceptable rates; however, the number of such opportunities declined throughout 2007 and most of 2008.

During the second half of 2008, the property and casualty insurance market experienced disruption as a result of broader issues in the financial markets and the economies of the United States and other countries. The crisis in the financial markets had an adverse impact on some of our competitors. This has resulted in an increase in opportunities for us to write new business and we expect further opportunities in 2009. There are some factors that indicate that rates should increase during 2009, but the timing and magnitude of those changes are difficult to predict. Although these developments should have a positive effect on our business in 2009, we expect that the continued economic downturn will negatively impact our business in 2009. We expect net written premiums, excluding the impact of currency fluctuation, will be flat to modestly higher in 2009 compared with 2008. Assuming the foreign currency to U.S. dollar

exchange rates remain at current levels, premium growth expressed in U.S. dollars would be adversely affected, resulting in a modest decrease in premiums in 2009 compared to 2008.

Net reinsurance assumed premiums written decreased by 53% in 2008 and 65% in 2007. The significant premium decline reflects the sale of our ongoing reinsurance assumed business to Harbor Point Limited in December 2005, which is discussed below.

Reinsurance Ceded

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

Reinsurance rates generally remained steady in 2007 due in part to a relatively low level of catastrophes in 2006. Capacity restrictions continued in some segments of the marketplace in both years. Our overall reinsurance costs were similar in 2007 and 2006.

We did not renew our casualty clash treaty in 2007 as we believed the cost was not justified given the limited capacity and terms available. The treaty had provided coverage of approximately 55% of losses between $75 million and $150 million per insured event.

On our commercial property per risk treaty, in 2007 we increased the reinsurance coverage at the top of the program by $100 million.

The structure of our property catastrophe program for events in the United States was modified in 2007 but the overall coverage was similar to the previous program. In place of traditional reinsurance, we purchased fully collateralized four-year reinsurance coverage for homeowners-related losses sustained from qualifying hurricane loss events in the northeastern part of the United States. This reinsurance was purchased from East Lane Re Ltd., a Cayman Islands reinsurance company, which financed the provision of reinsurance through the issuance of $250 million in catastrophe bonds to investors under two separate bond tranches.

Reinsurance rates for property risks declined somewhat in 2008. Capacity restrictions for certain coverages continued in the marketplace. The overall cost of our property reinsurance program was modestly lower in 2008 than that in 2007.

On our commercial property per risk treaty, in 2008 we increased the reinsurance coverage in the top layer of the treaty by $60 million. This treaty now provides approximately $560 million of coverage per risk in excess of our $25 million retention.

The structure of our property catastrophe program for events in the United States was again modified in 2008, but the overall coverage remains similar to the previous program. We purchased $200 million of fully collateralized three-year reinsurance coverage in place of traditional reinsurance. This reinsurance was purchased from East Lane Re II Ltd., a Cayman Islands reinsurance company, which financed the provision of reinsurance through the issuance of $200 million in catastrophe bonds to investors under three separate bond tranches. The current traditional catastrophe reinsurance treaty, in combination with the collateralized coverage purchased in 2008, provides coverage of approximately 70% of losses (net of recoveries from other available reinsurance) between $350 million and $1.3 billion, with additional coverage of about 60% of losses between $1.3 billion and $2.05 billion in the northeastern part of the United States, where we have our greatest concentration of catastrophe exposure.

The fully collateralized four-year reinsurance coverage purchased in 2007 for homeowners-related losses sustained from qualifying hurricane loss events in the northeastern part of the United States remains in effect and now provides coverage of approximately 30% of covered losses between $1.35 billion and $2.2 billion.

We have additional reinsurance from the Florida Hurricane Catastrophe Fund, which is a state-mandated fund designed to reimburse insurers for a portion of their residential catastrophic hurricane

losses. Our participation in this program limits our initial retention in Florida for homeowners-related losses to approximately $185 million.

On our property catastrophe treaty for events outside the United States, in 2008, we increased the reinsurance coverage in the top layer of the treaty by $50 million and modestly increased our participation in the program. The treaty now provides coverage of approximately 85% of losses (net of recoveries from other available reinsurance) between $75 million and $325 million.

Our property reinsurance treaties generally contain terrorism exclusions for acts perpetrated by foreign terrorists, and for nuclear, biological, chemical and radiological loss causes whether such acts are perpetrated by foreign or domestic terrorists.

We do not expect the changes we made to our reinsurance program during 2007 and 2008 to have a material effect on the Corporation's results of operations, financial condition or liquidity.

Most of our ceded 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. Therefore, unless we incur losses that exceed our initial retention under these contracts, we do not receive any loss recoveries. As a result, in certain years, we cede premiums to other insurance companies and receive few, if any, loss recoveries. However, in a year in which there is a significant catastrophic event or a series of large individual losses, we may receive substantial loss recoveries. The impact of ceded reinsurance on net premiums written and earned and on net losses and loss expenses incurred for the three years ended December 31, 2008 is presented in Note (10) of the Notes to Consolidated Financial Statements.

Our property reinsurance treaties represent the most significant component of our reinsurance program. Our major property reinsurance treaties expire on April 1, 2009. While we expect that reinsurance rates for property risks will increase in 2009, the final structure of our program and amount of coverage . . .