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.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ~~(232.405~~(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares of common stock outstanding as of ~~March 31,~~June 30, 2014 was ~~244,486,040.~~240,483,744.


						Second Quarter						Six Months
	2014		2013			2014			2013			2014			2013
Revenues
Premiums Earned	$	3,029	$	3,004		$	3,064		$	2,995		$	6,093		$	5,999
Investment Income		358		372			351			368			709			740
Other Revenues		3		3			2			9			5			12
Realized Investment Gains (Losses), Net
Total Other-Than-Temporary Impairment Losses on Investments		—		(2	)		(5	)		(5	)		(5	)		(7	)
Other Realized Investment Gains, Net		116		140			130			184			246			324

Total Realized Investment Gains, Net		116		138			125			179			241			317


Total Revenues		3,506		3,517			3,542			3,551			7,048			7,068


Losses and Expenses
Losses and Loss Expenses		1,845		1,568			1,792			1,694			3,637			3,262
Amortization of Deferred Policy Acquisition Costs		622		587			630			617			1,252			1,204
Other Insurance Operating Costs and Expenses		356		359			366			358			722			717
Investment Expenses		11		13			9			13			20			26
Other Expenses		5		6			5			11			10			17
Corporate Expenses		64		68			62			62			126			130


Total Losses and Expenses		2,903		2,601			2,864			2,755			5,767			5,356


Income Before Federal and Foreign Income Tax		603		916			678			796			1,281			1,712
Federal and Foreign Income Tax		154		260			179			217			333			477


Net Income	$	449	$	656		$	499		$	579		$	948		$	1,235


Net Income Per Share

Basic	$	1.81	$	2.49		$	2.03		$	2.22		$	3.84		$	4.72
Diluted		1.80		2.48			2.03			2.21			3.83			4.69

Dividends Declared Per Share		.50		.44			.50			.44			1.00			.88


							Second Quarter					Six Months
	2014			2013			2014		2013			2014			2013
Net Income	$	449		$	656		$	499	$	579		$	948		$	1,235


Other Comprehensive Income (Loss), Net of Tax
Change in Unrealized Appreciation of Investments		235			4			238		(700	)		473			(696	)
Change in Postretirement Benefit Costs Not Yet Recognized in Net Income		6			17			5		14			11			31
Foreign Currency Translation Losses		(19	)		(50	)
Foreign Currency Translation Gains (Losses)								4		28			(15	)		(22	)

		222			(29	)		247		(658	)		469			(687	)


Comprehensive Income	$	671		$	627
Comprehensive Income (Loss)							$	746	$	(79	)	$	1,417		$	548


	March 31 2014			December 31 2013			June 30 2014			December 31 2013
Assets

Invested Assets
Short Term Investments	$	1,693		$	2,114		$	1,845		$	2,114
Fixed Maturities (cost $36,331 and $35,959)		37,825			37,091
Equity Securities (cost $1,111 and $1,057)		1,863			1,810
Fixed Maturities (cost $36,313 and $35,959)								38,062			37,091
Equity Securities (cost $1,106 and $1,057)								1,969			1,810
Other Invested Assets		1,555			1,598			1,595			1,598


TOTAL INVESTED ASSETS		42,936			42,613			43,471			42,613

Cash		57			52			55			52
Accrued Investment Income		419			418			417			418
Premiums Receivable		2,200			2,284			2,420			2,284
Reinsurance Recoverable on Unpaid Losses and Loss Expenses		1,767			1,802			1,729			1,802
Prepaid Reinsurance Premiums		282			290			278			290
Deferred Policy Acquisition Costs		1,265			1,255			1,286			1,255
Deferred Income Tax		—			47			—			47
Goodwill		467			467			467			467
Other Assets		1,397			1,205			1,317			1,205


TOTAL ASSETS	$	50,790		$	50,433		$	51,440		$	50,433


Liabilities

Unpaid Losses and Loss Expenses	$	23,137		$	23,146		$	23,127		$	23,146
Unearned Premiums		6,439			6,423			6,588			6,423
Long Term Debt		3,300			3,300			3,300			3,300
Dividend Payable to Shareholders		124			110			122			110
Deferred Income Tax		131			—			259			—
Accrued Expenses and Other Liabilities		1,433			1,357			1,546			1,357


TOTAL LIABILITIES		34,564			34,336			34,942			34,336


Shareholders’ Equity

Common Stock - $1 Par Value; 371,980,460 Shares		372			372			372			372
Paid-In Surplus		108			171			129			171
Retained Earnings		22,227			21,902			22,604			21,902
Accumulated Other Comprehensive Income		1,257			1,035			1,504			1,035
Treasury Stock, at Cost - 127,494,420 and 123,673,969 Shares		(7,738	)		(7,383	)
Treasury Stock, at Cost - 131,496,716 and 123,673,969 Shares								(8,111	)		(7,383	)


TOTAL SHAREHOLDERS’ EQUITY		16,226			16,097	��		16,498			16,097


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	50,790		$	50,433		$	51,440		$	50,433


	2014			2013			2014			2013
Common Stock
Balance, Beginning and End of Period	$	372		$	372
Balance, Beginning of Year and End of Period							$	372		$	372


Paid-In-Surplus
Balance, Beginning of Year		171			178			171			178
Changes Related to Stock-Based Employee Compensation (includes tax benefit of $14 and $27)		(63	)		(73	)		(42	)		(52	)

Balance, End of Period		108			105			129			126


Retained Earnings
Balance, Beginning of Year		21,902			20,009			21,902			20,009
Net Income		449			656			948			1,235
Dividends Declared (per share $.50 and $.44)		(124	)		(115	)
Dividends Declared (per share $1.00 and $.88)								(246	)		(229	)

Balance, End of Period		22,227			20,550			22,604			21,015


Accumulated Other Comprehensive Income (Loss)
Unrealized Appreciation of Investments Including Unrealized Other-Than-Temporary Impairment Losses
Balance, Beginning of Year		1,225			2,013			1,225			2,013
Change During Period, Net of Tax		235			4			473			(696	)

Balance, End of Period		1,460			2,017			1,698			1,317


Postretirement Benefit Costs Not Yet Recognized in Net Income
Balance, Beginning of Year		(253	)		(717	)		(253	)		(717	)
Change During Period, Net of Tax		6			17			11			31

Balance, End of Period		(247	)		(700	)		(242	)		(686	)


Foreign Currency Translation Gains
Balance, Beginning of Year		63			135			63			135
Change During Period, Net of Tax		(19	)		(50	)		(15	)		(22	)

Balance, End of Period		44			85			48			113


Accumulated Other Comprehensive Income, End of Period		1,257			1,402			1,504			744


Treasury Stock, at Cost
Balance, Beginning of Year		(7,383	)		(6,163	)		(7,383	)		(6,163	)
Repurchase of Shares		(409	)		(326	)		(784	)		(649	)
Shares Issued Under Stock-Based Employee Compensation Plans		54			76			56			78

Balance, End of Period		(7,738	)		(6,413	)		(8,111	)		(6,734	)


TOTAL SHAREHOLDERS’ EQUITY	$	16,226		$	16,016		$	16,498		$	15,523


	2014			2013			2014			2013
Cash Flows from Operating Activities
Net Income	$	449		$	656		$	948		$	1,235
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Increase (Decrease) in Unpaid Losses and Loss Expenses, Net		51			(270	)		87			(299	)
Increase in Unearned Premiums, Net		33			53			192			158
Decrease in Premiums Receivable		84			4
Change in Income Tax Payable or Recoverable		80			168
Increase in Premiums Receivable								(136	)		(130	)
Amortization of Premiums and Discounts on Fixed Maturities		46			44			93			91
Depreciation		14			14			27			28
Realized Investment Gains, Net		(116	)		(138	)		(241	)		(317	)
Other, Net		(269	)		(232	)		(192	)		(202	)


Net Cash Provided by Operating Activities		372			299			778			564


Cash Flows from Investing Activities
Proceeds from Fixed Maturities
Sales		379			450			2,377			1,138
Maturities, Calls and Redemptions		957			943			2,067			2,353
Proceeds from Sales of Equity Securities		101			106			136			273
Purchases of Fixed Maturities		(1,810	)		(1,909	)		(4,884	)		(4,053	)
Purchases of Equity Securities		(89	)		(36	)		(97	)		(92	)
Investments in Other Invested Assets, Net		98			139			112			280
Decrease in Short Term Investments, Net		417			659			259			514
Change in Receivable or Payable from Security Transactions Not Settled, Net		105			(244	)		278			165
Purchases of Property and Equipment, Net		(10	)		(15	)		(26	)		(25	)
Other, Net		(3	)		—			(3	)		—


Net Cash Provided by Investing Activities		145			93			219			553


Cash Flows from Financing Activities
Repayment of Long Term Debt								—			(275	)
Decrease in Funds Held Under Deposit Contracts		(1	)		(4	)		(1	)		(4	)
Proceeds from Issuance of Common Stock Under Stock-Based Employee Compensation Plans		14			34			15			36
Repurchase of Shares		(415	)		(309	)		(774	)		(634	)
Dividends Paid to Shareholders		(110	)		(108	)		(234	)		(223	)


Net Cash Used in Financing Activities		(512	)		(387	)		(994	)		(1,100	)


Net Increase in Cash		5			5			3			17

Cash at Beginning of Year		52			50			52			50


Cash at End of Period	$	57		$	55		$	55		$	67

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of The Chubb Corporation (Chubb) and its subsidiaries (collectively, the Corporation). Significant intercompany transactions have been eliminated in consolidation.

The amounts included in this report are unaudited but include those adjustments, consisting of normal recurring items, that management considers necessary for a fair presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Notes to Consolidated Financial Statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013.

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


	March 31, 2014								June 30, 2014
	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value		Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value
	(in millions)								(in millions)
Fixed maturities
Tax exempt	$	17,923	$	945	$	84	$	18,784	$	18,168	$	1,088	$	36	$	19,220

Taxable
U.S. government and government agency and authority obligations		776		32		3		805		1,245		43		2		1,286
Corporate bonds		9,465		402		47		9,820		8,809		405		20		9,194
Foreign government and government agency obligations		6,684		220		19		6,885		6,682		236		13		6,905
Residential mortgage-backed securities		251		23		1		273		229		22		1		250
Commercial mortgage-backed securities		1,232		28		2		1,258		1,180		28		1		1,207

		18,408		705		72		19,041		18,145		734		37		18,842


Total fixed maturities	$	36,331	$	1,650	$	156	$	37,825	$	36,313	$	1,822	$	73	$	38,062


Equity securities	$	1,111	$	766	$	14	$	1,863	$	1,106	$	878	$	15	$	1,969

The fair value and amortized cost of fixed maturities at ~~March 31,~~June 30, 2014 by contractual maturity were as follows:


	Fair Value		Amortized Cost		Fair Value		Amortized Cost
	(in millions)				(in millions)
Due in one year or less	$	2,311	$	2,284	$	1,967	$	1,946
Due after one year through five years		14,107		13,487		14,182		13,577
Due after five years through ten years		11,959		11,413		12,348		11,661
Due after ten years		7,917		7,664		8,108		7,720

		36,294		34,848		36,605		34,904
Residential mortgage-backed securities		273		251		250		229
Commercial mortgage-backed securities		1,258		1,232		1,207		1,180

	$	37,825	$	36,331	$	38,062	$	36,313

Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations.

The Corporation’s equity securities comprise a diversified portfolio of primarily U.S. publicly-traded common stocks.

The Corporation is involved in the normal course of business with variable interest entities (VIEs) primarily as a passive investor in residential mortgage-backed securities, commercial mortgage-backed securities and private equity limited partnerships issued by third party VIEs. The Corporation is not the primary beneficiary of these VIEs. The Corporation’s maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the Corporation’s consolidated balance sheet and any unfunded partnership commitments.

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


	March 31 2014		December 31 2013		June 30 2014		December 31 2013
	(in millions)				(in millions)
Fixed maturities
Gross unrealized appreciation	$	1,650	$	1,457	$	1,822	$	1,457
Gross unrealized depreciation		156		325		73		325

		1,494		1,132		1,749		1,132

Equity securities
Gross unrealized appreciation		766		756		878		756
Gross unrealized depreciation		14		3		15		3

		752		753		863		753

		2,246		1,885		2,612		1,885
Deferred income tax liability		786		660		914		660

	$	1,460	$	1,225	$	1,698	$	1,225

The following table summarizes, for all investment securities in an unrealized loss position at ~~March 31,~~June 30, 2014, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.


	Less Than 12 Months				12 Months or More				Total				Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
	(in millions)												(in millions)
Fixed maturities
Tax exempt	$	1,540	$	32	$	819	$	52	$	2,359	$	84	$	441	$	5	$	1,069	$	31	$	1,510	$	36

Taxable
U.S. government and government agency and authority obligations		128		1		36		2		164		3		510		—		36		2		546		2
Corporate bonds		1,534		29		462		18		1,996		47		502		2		1,097		18		1,599		20
Foreign government and government agency obligations		1,096		14		147		5		1,243		19		465		2		500		11		965		13
Residential mortgage-backed securities		3		—		9		1		12		1		2		—		6		1		8		1
Commercial mortgage-backed securities		176		1		34		1		210		2		55		—		40		1		95		1

		2,937		45		688		27		3,625		72		1,534		4		1,679		33		3,213		37


Total fixed maturities		4,477		77		1,507		79		5,984		156		1,975		9		2,748		64		4,723		73

Equity securities		102		14		—		—		102		14		62		15		—		—		62		15

	$	4,579	$	91	$	1,507	$	79	$	6,086	$	170	$	2,037	$	24	$	2,748	$	64	$	4,785	$	88

At ~~March 31,~~June 30, 2014, approximately ~~790~~570 individual fixed maturities and 2010 individual equity securities were in an unrealized loss position. The Corporation does not have the intent to sell and it is not more likely than not that the Corporation will be required to sell these fixed maturities before the securities recover to their amortized cost value. In addition, the Corporation believes that none of the declines in the fair values of these fixed maturities relate to credit losses. The Corporation has the intent and ability to hold the equity securities in an unrealized loss position for a period of time sufficient to allow for the recovery of cost. The Corporation believes that none of the declines in the fair value of these fixed maturities and equity securities were other than temporary at ~~March 31,~~June 30, 2014.

The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2013, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.

The change in unrealized appreciation or depreciation of investments carried at fair value, including the change in unrealized other-than-temporary impairment losses, was as follows:


	Three Months Ended						Periods Ended June 30
	March 31						Second Quarter					Six Months
	2014			2013			2014		2013			2014		2013
	(in millions)						(in millions)
Change in unrealized appreciation of fixed maturities	$	362		$	(196	)	$	255		$ (1,019	)	$	617	$	(1,215	)
Change in unrealized appreciation of equity securities		(1	)		202			111		(57	)		110		145

		361			6			366		(1,076	)		727		(1,070	)
Deferred income tax		126			2
Deferred income tax (credit)								128		(376	)		254		(374	)

	$	235		$	4		$	238	$	(700	)	$	473	$	(696	)


	Three Months Ended						Periods Ended June 30
	March 31						Second Quarter						Six Months
	2014			2013			2014			2013			2014			2013
	(in millions)						(in millions)
Fixed maturities
Gross realized gains	$	8		$	13		$	69		$	14		$	77		$	27
Gross realized losses		(11	)		(2	)		(17	)		(8	)		(28	)		(10	)
Other-than-temporary impairment losses								(4	)		—			(4	)		—

		(3	)		11			48			6			45			17


Equity securities
Gross realized gains		66			55			23			119			89			174
Other-than-temporary impairment losses		—			(2	)		(1	)		(5	)		(1	)		(7	)

		66			53			22			114			88			167


Other invested assets		53			74			55			59			108			133

	$	116		$	138		$	125		$	179		$	241		$	317

(d) As of ~~March 31,~~June 30, 2014 and December 31, 2013, fixed maturities still held by the Corporation for which a portion of their other-than-temporary impairment losses were recognized in other comprehensive income had cumulative credit-related losses of $19 million and $20 million, respectively, recognized in net income.

Comprehensive income is defined as all changes in shareholders’ equity, except those arising from transactions with shareholders. Comprehensive income includes net income and other comprehensive income or loss, which for the Corporation consists of changes in unrealized appreciation or depreciation of investments carried at fair value, changes in unrealized other-than-temporary impairment losses of fixed maturities, changes in postretirement benefit costs not yet recognized in net income and changes in foreign currency translation gains or losses.


	Three Months Ended									Periods Ended June 30, 2014
	March 31, 2014									Second Quarter									Six Months
	Before Tax			Income Tax			Net of Tax			Before Tax			Income Tax			Net of Tax			Before Tax			Income Tax			Net of Tax
	(in millions)									(in millions)
Net unrealized holding gains arising during the period	$	424		$	148		$	276		$	436		$	153		$	283		$	860		$	301		$	559
Reclassification adjustment for net realized gains included in net income		63			22			41			70			25			45			133			47			86

Net unrealized gains recognized in other comprehensive income		361			126			235			366			128			238			727			254			473


Reclassification adjustment for the amortization of net actuarial loss and prior service cost included in net income (a)		(9	)		(3	)		(6	)		(8	)		(3	)		(5	)		(17	)		(6	)		(11	)

Net change in postretirement benefit costs not yet recognized in net income		9			3			6			8			3			5			17			6			11


Foreign currency translation losses		(28	)		(9	)		(19	)
Foreign currency translation gains (losses)											6			2			4			(22	)		(7	)		(15	)


Total other comprehensive income	$	342		$	120		$	222		$	380		$	133		$	247		$	722		$	253		$	469

(a) Postretirement benefit costs recognized in net income during the period are included among several of the loss and expense components presented in the consolidated statements of income.


	Three Months Ended									Periods Ended June 30, 2013
	March 31, 2013									Second Quarter									Six Months
	Before Tax			Income Tax			Net of Tax			Before Tax			Income Tax			Net of Tax			Before Tax			Income Tax			Net of Tax
	(in millions)									(in millions)
Net unrealized holding gains arising during the period	$	70		$	24		$	46
Net unrealized holding losses arising during the period										$	(956	)	$	(334	)	$	(622	)	$	(886	)	$	(310	)	$	(576	)
Reclassification adjustment for net realized gains included in net income		64			22			42			120			42			78			184			64			120

Net unrealized gains recognized in other comprehensive loss		6			2			4
Net unrealized losses recognized in other comprehensive loss											(1,076	)		(376	)		(700	)		(1,070	)		(374	)		(696	)


Postretirement benefit gain not yet recognized in net income arising during the period		2			1			1
Postretirement benefit gain (loss) not yet recognized in net income arising during the period											(1	)		(1	)		—			1			—			1
Reclassification adjustment for the amortization of net actuarial loss and prior service cost included in net income (a)		(24	)		(8	)		(16	)		(23	)		(9	)		(14	)		(47	)		(17	)		(30	)

Net change in postretirement benefit costs not yet recognized in net income		26			9			17			22			8			14			48			17			31


Foreign currency translation losses		(77	)		(27	)		(50	)
Foreign currency translation gains (losses)											42			14			28			(35	)		(13	)		(22	)


Total other comprehensive loss	$	(45	)	$	(16	)	$	(29	)	$	(1,012	)	$	(354	)	$	(658	)	$	(1,057	)	$	(370	)	$	(687	)

(a) Postretirement benefit costs recognized in net income during the period are included among several of the loss and expense components presented in the consolidated statements of income.

The principal business of the Corporation is the sale of property and casualty insurance. The profitability of the property and casualty insurance business depends on the results of both underwriting operations and investments, which are viewed as two distinct operations. The underwriting operations are managed and evaluated separately from the investment function.

The property and casualty insurance subsidiaries underwrite most lines of property and casualty insurance. Underwriting operations consist of four separate business units: personal insurance, commercial insurance, specialty insurance and reinsurance assumed. The personal segment targets the personal insurance market. The personal classes include automobile, homeowners and other personal coverages. The commercial segment includes those classes of business that are generally available in broad markets and are of a more commodity nature. Commercial classes include multiple peril, casualty, workers’ compensation and property and marine. The specialty segment includes those classes of business that are available in more limited markets since they require specialized underwriting and claim settlement. Specialty classes include professional liability coverages and surety. The reinsurance assumed business has been in runoff since the transfer of the ongoing reinsurance assumed business to a reinsurance company in 2005.

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

Revenues and income before income tax of each operating segment were as follows:


	Three Months Ended						Periods Ended June 30
	March 31						Second Quarter						Six Months
	2014			2013			2014			2013			2014			2013
	(in millions)						(in millions)
Revenues
Property and casualty insurance
Premiums earned
Personal insurance	$	1,076		$	1,031		$	1,102		$	1,050		$	2,178		$	2,081
Commercial insurance		1,300			1,308			1,305			1,299			2,605			2,607
Specialty insurance		653			666			656			645			1,309			1,311


Total insurance		3,029			3,005			3,063			2,994			6,092			5,999

Reinsurance assumed		—			(1	)		1			1			1			—

		3,029			3,004			3,064			2,995			6,093			5,999

Investment income		351			363			345			361			696			724


Total property and casualty insurance		3,380			3,367			3,409			3,356			6,789			6,723

Corporate and other		10			12			8			16			18			28
Realized investment gains, net		116			138			125			179			241			317


Total revenues	$	3,506		$	3,517		$	3,542		$	3,551		$	7,048		$	7,068


Income (loss) before income tax
Property and casualty insurance
Underwriting
Personal insurance	$	2		$	150		$	45		$	75		$	47		$	225
Commercial insurance		111			195			71			124			182			319
Specialty insurance		82			95			140			96			222			191


Total insurance		195			440			256			295			451			735

Reinsurance assumed		—			4			1			6			1			10

		195			444			257			301			452			745
Increase in deferred policy acquisition costs		13			41			21			16			34			57


Underwriting income		208			485			278			317			486			802

Investment income		341			351			336			349			677			700

Other income (charges)		(2	)		5			(2	)		9			(4	)		14


Total property and casualty insurance		547			841			612			675			1,159			1,516

Corporate and other		(60	)		(63	)		(59	)		(58	)		(119	)		(121	)
Realized investment gains, net		116			138			125			179			241			317


Total income before income tax	$	603		$	916		$	678		$	796		$	1,281		$	1,712

Fair values of financial instruments are determined by management using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical assets or liabilities or other inputs, such as quoted prices for similar assets or liabilities, that are observable either directly or indirectly. In those instances where observable inputs are not available, fair values are measured using unobservable inputs for the asset or liability. Unobservable inputs reflect the Corporation’s own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange. Certain financial instruments, particularly insurance contracts, are excluded from fair value disclosure requirements.

The methods and assumptions used to estimate the fair values of financial instruments are as follows:


	March 31, 2014				December 31, 2013				June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)								(in millions)
Assets
Invested assets
Short term investments	$	1,693	$	1,693	$	2,114	$	2,114	$	1,845	$	1,845	$	2,114	$	2,114
Fixed maturities		37,825		37,825		37,091		37,091		38,062		38,062		37,091		37,091
Equity securities		1,863		1,863		1,810		1,810		1,969		1,969		1,810		1,810

Liabilities
Long term debt		3,300		3,922		3,300		3,806		3,300		3,989		3,300		3,806

At ~~March 31,~~June 30, 2014 and December 31, 2013, a pricing service provided fair value amounts for approximately 99% of the Corporation’s fixed maturities. The prices obtained from a pricing service and brokers generally are non-binding, but are reflective of current market transactions in the applicable financial instruments.

At ~~March 31,~~June 30, 2014 and December 31, 2013, the Corporation held an insignificant amount of financial instruments in its investment portfolio for which a lack of market liquidity impacted the determination of fair value.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 – Unadjusted quoted prices in active markets for identical financial instruments.

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

The fair value of financial instruments categorized based upon the lowest level of input that was significant to the fair value measurement was as follows:


	March 31, 2014								June 30, 2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)								(in millions)
Assets
Short term investments	$	256	$	1,437	$	—	$	1,693	$	284	$	1,561	$	—	$	1,845

Fixed maturities
Tax exempt		—		18,780		4		18,784		—		19,216		4		19,220

Taxable
U.S. government and government agency and authority obligations		—		805		—		805		—		1,286		—		1,286
Corporate bonds		—		9,690		130		9,820		—		9,066		128		9,194
Foreign government and government agency obligations		—		6,871		14		6,885		—		6,896		9		6,905
Residential mortgage-backed securities		—		268		5		273		—		246		4		250
Commercial mortgage-backed securities		—		1,258		—		1,258		—		1,196		11		1,207

		—		18,892		149		19,041		—		18,690		152		18,842


Total fixed maturities		—		37,672		153		37,825		—		37,906		156		38,062


Equity securities		1,857		—		6		1,863		1,963		—		6		1,969

	$	2,113	$	39,109	$	159	$	41,381	$	2,247	$	39,467	$	162	$	41,876

Liabilities
Long term debt	$	—	$	3,922	$	—	$	3,922	$	—	$	3,989	$	—	$	3,989


	December 31, 2013								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)								(in millions)
Assets
Short term investments	$	399	$	1,715	$	—	$	2,114	$	399	$	1,715	$	—	$	2,114

Fixed maturities
Tax exempt		—		18,416		5		18,421		—		18,416		5		18,421

Taxable
U.S. government and government agency and authority obligations		—		802		—		802		—		802		—		802
Corporate bonds		—		9,179		135		9,314		—		9,179		135		9,314
Foreign government and government agency obligations		—		6,881		9		6,890		—		6,881		9		6,890
Residential mortgage-backed securities		—		293		6		299		—		293		6		299
Commercial mortgage-backed securities		—		1,345		20		1,365		—		1,345		20		1,365

		—		18,500		170		18,670		—		18,500		170		18,670


Total fixed maturities		—		36,916		175		37,091		—		36,916		175		37,091


Equity securities		1,803		—		7		1,810		1,803		—		7		1,810

	$	2,202	$	38,631	$	182	$	41,015	$	2,202	$	38,631	$	182	$	41,015

Liabilities
Long term debt	$	—	$	3,806	$	—	$	3,806	$	—	$	3,806	$	—	$	3,806

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


	Three Months Ended				Periods Ended June 30
	March 31				Second Quarter				Six Months
	2014		2013		2014		2013		2014		2013
	(in millions, except for per share amounts)				(in millions, except for per share amounts)
Basic earnings per share:
Net income	$	449	$	656	$	499	$	579	$	948	$	1,235


Weighted average shares outstanding		248.6		263.3		245.7		260.5		247.1		261.9


Basic earnings per share	$	1.81	$	2.49	$	2.03	$	2.22	$	3.84	$	4.72


Diluted earnings per share:
Net income	$	449	$	656	$	499	$	579	$	948	$	1,235


Weighted average shares outstanding		248.6		263.3		245.7		260.5		247.1		261.9
Additional shares from assumed issuance of shares under stock-based compensation awards		.6		1.5		.5		1.0		.6		1.3


Weighted average shares and potential shares assumed outstanding for computing diluted earnings per share		249.2		264.8		246.2		261.5		247.7		263.2


Diluted earnings per share	$	1.80	$	2.48	$	2.03	$	2.21	$	3.83	$	4.69

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses the financial condition of the Corporation as of ~~March 31,~~June 30, 2014 compared with December 31, 2013 and the results of operations for the ~~quarters~~six months and three months ended ~~March 31,~~June 30, 2014 and 2013. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes contained in this report and the consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013.

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 market conditions in 2014, including premium volume, rate trends, the pricing environment and competition; the cost of our property reinsurance program in 2014; our loss reserve and reinsurance recoverable estimates; property and casualty investment income after taxes for the full year 2014; the repurchase of common stock under our share repurchase program; and our financial position, capital adequacy and funding of liquidity needs. Forward-looking statements frequently can be identified by words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue,” or other similar expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning trends and future developments and their potential effects on us. These statements are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties, which include, among others, those discussed or identified in our Annual Report on Form 10-K for the year ended December 31, 2013 and from time to time in our other public filings with the Securities and Exchange Commission and those associated with:

Chubb 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 and the evaluation of whether a decline in value of any investment is temporary or other than temporary. These estimates and judgments, which are discussed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013 as supplemented within the following analysis of our results of operations, require the use of assumptions about matters that are highly uncertain and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements.

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.


							Periods Ended June 30
	Quarter Ended March 31						Six Months						Second Quarter
	2014			2013			2014			2013			2014			2013
	(in millions)						(in millions)
Property and casualty insurance	$	547		$	841		$	1,159		$	1,516		$	612		$	675
Corporate and other		(60	)		(63	)		(119	)		(121	)		(59	)		(58	)

Consolidated operating income before income tax		487			778			1,040			1,395			553			617
Federal and foreign income tax		113			212			248			366			135			154

Consolidated operating income		374			566			792			1,029			418			463
Realized investment gains after income tax		75			90			156			206			81			116

Consolidated net income	$	449		$	656		$	948		$	1,235		$	499		$	579

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


							Periods Ended June 30
	Quarter Ended March 31						Six Months						Second Quarter
	2014			2013			2014			2013			2014			2013
	(in millions)						(in millions)
Underwriting
Net premiums written	$	3,062		$	3,057		$	6,285		$	6,157		$	3,223		$	3,100
Increase in unearned premiums		(33	)		(53	)		(192	)		(158	)		(159	)		(105	)

Premiums earned		3,029			3,004			6,093			5,999			3,064			2,995

Losses and loss expenses		1,845			1,568			3,637			3,262			1,792			1,694
Operating costs and expenses		979			983			1,983			1,974			1,004			991
Increase in deferred policy acquisition costs		(13	)		(41	)		(34	)		(57	)		(21	)		(16	)
Dividends to policyholders		10			9			21			18			11			9


Underwriting income		208			485			486			802			278			317


Investments
Investment income before expenses		351			363			696			724			345			361
Investment expenses		10			12			19			24			9			12


Investment income		341			351			677			700			336			349


Other income (charges)		(2	)		5			(4	)		14			(2	)		9


Property and casualty income before tax	$	547		$	841		$	1,159		$	1,516		$	612		$	675


Property and casualty investment income after tax	$	277		$	288		$	552		$	574		$	275		$	286

Property and casualty income before tax was lower in the first six months and second quarter of 2014 compared with the same ~~period~~periods of ~~2013,~~2013. The lower income in the 2014 periods was due to ~~substantially~~ lower underwriting income, particularly in the first six months and, to a lesser extent, a decrease in investment income. The decrease in underwriting income in the first ~~quarter~~six months of 2014 compared with the same period of 2013 was primarily attributable to a higher ~~impact of~~current accident year loss ratio excluding catastrophes and, to a lesser extent, a higher ~~current accident year loss ratio excluding~~impact of catastrophes and a lower amount of favorable prior year loss development. The decrease in ~~investment~~underwriting income in the ~~first~~second quarter of 2014 compared with the same period of 2013 was due primarily to a higher current accident year loss ratio excluding catastrophes and, to a lesser extent, a lower amount of favorable prior year loss development, offset in part by a lower impact of catastrophes. The decrease in investment income in the first six months and second quarter of 2014 compared with the same periods of 2013 was due to a decline in the average yield on our investment portfolio.

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.

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

Net premiums written were ~~$3.1~~$6.3 billion in the first ~~quarter~~six months of ~~both~~ 2014 and $3.2 billion in the second quarter compared with $6.2 billion and $3.1 billion, respectively, in the same periods of 2013. Net premiums written by business unit were as follows:


	Quarter Ended March 31					% Increase			Six Months Ended June 30								Quarter Ended June 30
	2014		2013			(Decrease)			2014		2013			% Incr.			2014		2013		% Incr.
	(in millions)								(in millions)								(in millions)
Personal insurance	$	1,013	$	987			3	%	$	2,222	$	2,141			4	%	$	1,209	$	1,154		5	%
Commercial insurance		1,425		1,440			(1	)		2,783		2,759			1			1,358		1,319		3
Specialty insurance		624		632			(1	)		1,279		1,258			2			655		626		5

Total insurance		3,062		3,059			—			6,284		6,158			2			3,222		3,099		4
Reinsurance assumed		—		(2	)		*			1		(1	)		*			1		1		*

Total	$	3,062	$	3,057			—		$	6,285	$	6,157			2		$	3,223	$	3,100		4

Net premiums written ~~were flat~~increased by 2% in the first ~~quarter~~six months of 2014 and 4% in the second quarter compared with the same ~~period~~periods of 2013. Net premiums written in the United States, which represented ~~72%~~75% of our total net premiums written in the first ~~quarter~~six months of 2014, increased by ~~3%.~~4% in the first six months of 2014 and 5% in the second quarter. Net premiums written outside the United States decreased by 6%3% in the first six months of 2014 and increased by 1% in the second quarter in U.S. ~~dollars and by a modestly lower amount when~~dollars. When measured in local ~~currencies.~~currencies, such premiums were flat in the first six months of 2014 and increased modestly in the second quarter.

We classify business as written in the United States or outside the United States based on the location of the risk associated with the underlying policies. The method of determining location of risk varies by class of business. Location of risk for property classes is typically based on the physical location of the covered property, while location of risk for liability classes may be based on the main location of the insured, or in the case of the workers’ compensation class, the primary work location of the covered employee.

Growth in net premiums written in the United States in the first six months and second quarter of 2014 ~~was driven by~~occurred in each segment of our business, with the most significant growth occurring in our personal insurance segment. Net premiums written in the United States increased modestly in the first six months and second quarter of 2014 in our commercial and specialty insurance ~~segment and were flat in our commercial insurance segment.~~segments. Growth in our personal insurance business in the first six months and second quarter of 2014 was attributable to higher rates ~~and~~upon renewal, higher insured exposures, ~~upon renewal, new business as well as~~ strong retention of existing business, and new business. In the first six months and second quarter of 2014, net premiums written ofin our commercial insurance segment and our professional liability business, which is the predominant component of our specialty insurance segment, reflected higher rates, higher retention levels and ~~continued strong retention. Growth~~an increase in ~~these businesses, however, remained constrained by our underwriting actions and judicious approach to~~ new business incompared with the ~~competitive market.~~

Average renewal rates for our personal insurance business in the United States were up modestly in the first six months and second quarter of 2014, driven particularly by our homeowners and excess liability classes of business. Retention levels in our personal insurance business in the United States remained strong in the first six months and second quarter of 2014. Average renewal rates in the first six months and second quarter of 2014 in the United States were up in both our commercial insurance and professional liability businesses, but more so in our professional liability business. The amounts of coverage purchased or the insured exposures, both of which are bases upon which we calculate the premiums we charge, were down slightly in our commercial insurance and professional liability businesses in the first six months and second quarter of 2014 compared with the same ~~period~~periods in 2013. We continued to retain a high percentage of our existing commercial insurance and professional liability business in the United States. Renewal retention levels in the first six months and second quarter of 2014 were ~~slightly~~modestly higher in our commercial insurance ~~business~~ and ~~modestly higher in our~~ professional liability ~~business~~businesses compared with those in the same ~~period~~periods of 2013. As part of our ongoing catastrophe management activities, during the first quarter of 2014 we reduced our participation in some commercial accounts to better manage exposure aggregations. During the first quarter of 2014, weWe continued to seek renewal rate increases in most of the classes within the commercial insurance and professional liability businesses and to take underwriting actions to improve profitability. As components of our business have approached rate adequacy due to pricing and underwriting actions over the last several years, ~~during~~ the ~~first quarter~~level of ~~2014~~renewal rate increases has moderated and we ~~sought~~have achieved higher retention ~~levels at more moderate rate increases, particularly in our commercial insurance business.~~levels. The ~~overall~~ level of new business in the United States was higher in both our commercial ~~business~~insurance and ~~our~~ professional liability ~~business~~businesses in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013.

Outside the United States, net premiums written decreased in each segment of our business in the first ~~quarter~~six months of ~~2014.~~2014 compared with the same period of 2013. The most significant decrease occurred in our personal insurance ~~segment. Excluding~~segment driven by the effect of foreign currency ~~translation,~~translation. In the ~~decline~~second quarter of 2014, increases in net premiums written outside the United States in our commercial and specialty insurance segments were partially offset by a decrease in our personal insurance segment. Net premiums written outside the United States excluding the effect of foreign currency translation were flat in each segment of our business in the first six months of 2014. Such premiums grew in the second quarter of 2014 in each segment of our business, ~~was modest.~~but less so in the personal insurance segment.

Net premiums written in our personal insurance business outside the United States in the first six months and second quarter of 2014 reflected a modest ~~increase in the~~ overall average renewal rate ~~compared with that in the same period of 2013, but included~~increase, driven by a ~~more~~ significant increase in our automobile business. Average renewal rates outside the United States were up slightly in both our commercial insurance ~~business~~ and our professional liability ~~business~~businesses in the first six months and second quarter of 2014. Retention levels ~~for our commercial insurance and professional liability business written~~ outside the United States were about the same for our commercial insurance and professional liability businesses in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013. For ~~both~~ our commercial insurance business, the level of new business written outside the United States was flat in the first six months of 2014 and modestly higher in the second quarter compared with the same periods of 2013. For our professional liability ~~businesses,~~business, the level of new business written outside the United States was modestly ~~lower~~higher in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013.

We expect our net premiums written for the full year 2014 will increase at a rate similar to or slightly higher than the rate in the first half of the year, with an insignificant impact from foreign currency translation, assuming average foreign currency to U.S. dollar exchange rates for the remainder of the year remain similar to June 30, 2014 levels. We expect that market conditions will remain competitive but that the positive pricing environment, particularly in the United States, will continue during the remainder of 2014. However, we expect that the average renewal rate increases achieved in some of our commercial and professional liability classes of business may be at levels below those achieved in recent ~~years, as a greater portion of this business approaches or attains rate adequacy.~~

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 reinsurance.

The most significant component of our ceded reinsurance program is property reinsurance. We purchase two main types of property reinsurance: catastrophe and property per risk.

For property risks in the United States and Canada we purchase traditional catastrophe reinsurance, including our primary treaty, which we refer to as our North American catastrophe treaty, as well as supplemental catastrophe reinsurance that provides additional coverage for our exposures in the northeast United States. For certain exposures in the United States, we have also arranged for the purchase of multi–year, collateralized reinsurance funded through the issuance of collateralized risk-linked securities, known as catastrophe bonds. For events outside the United States, we also purchase traditional catastrophe reinsurance.

We renewed our primary traditional property catastrophe treaties and our commercial property per risk treaty in April 2014 with limit structures similar to the expiring ~~treaties and some modest enhancements to~~treaties. Certain coverage provided under the North American catastrophe ~~treaty.~~treaty was modestly enhanced. The supplemental catastrophe reinsurance that provides coverage for our exposures in the northeast United States ~~remains~~was renewed in ~~effect until~~ June ~~2014.~~2014 on terms similar to the expiring coverage. In March 2014, we arranged for the purchase of reinsurance through the issuance of a catastrophe bond to replace the portion of a catastrophe bond that expired in March 2014. ~~The three catastrophe bond arrangements currently in place expire between 2015 and 2018.~~

The North American catastrophe treaty has an initial retention of $500 million and provides coverage for exposures in the United States and Canada of approximately 34% of losses (net of recoveries from other available reinsurance) between $500 million and $900 million and approximately 75% of losses (net of recoveries) between $900 million and $1.75 billion. For certain catastrophic events in the northeast United States or along the southern U.S. coastline, the combination of the North American catastrophe treaty, supplemental catastrophe reinsurance and/or the catastrophe bond arrangements provide additional coverages as discussed below.

The catastrophe bond arrangements provide reinsurance coverage for specific types of losses in specific geographic locations. They are generally designed to supplement coverage provided under the North American catastrophe treaty. We currently have three catastrophe bond arrangements in ~~effect.~~effect that expire between 2015 and 2018. We have a $250 million reinsurance arrangement that expires in March 2015 and a $270 million reinsurance arrangement that incepted in March 2014 and expires in March 2018. Both of these catastrophe bond arrangements provide coverage for our exposure to homeowners and commercial losses related to certain perils, including hurricanes, earthquakes, severe thunderstorms and winter storms in twelve states in the northeast United States and the District of Columbia. The $270 million reinsurance arrangement ~~also~~ provides similar coverage for named storms in addition to hurricanes. We also have a $150 million reinsurance arrangement that expires in March 2016 that provides coverage for homeowners-related hurricane and severe thunderstorm losses in eight states along the southern U.S. coastline.

For the indicated catastrophic events in the northeast United States, the combination of the North American catastrophe treaty, the supplemental catastrophe reinsurance, and the $250 million and $270 million catastrophe bond arrangements provides additional coverage of approximately 63% of losses (net of recoveries from other available reinsurance) between $1.75 billion and $3.65 billion.

For hurricane and severe thunderstorm events along the southern U.S. coastline, the $150 million catastrophe bond arrangement provides additional coverage of approximately 50% of homeowners-related hurricane and severe thunderstorm losses (net of recoveries from other available reinsurance) between $855 million and $1.15 billion.

For hurricane events in Florida, in addition to the coverage provided by the North American catastrophe treaty and the $150 million catastrophe bond arrangement discussed above, we have 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, for which the most recent annual period began on June 1, ~~2013,~~2014, provides coverage of 90% of homeowners-related hurricane losses in Florida in excess of our initial retention of $160 million per event. Under the terms of the program, our aggregate recoveries during the annual coverage period are limited to approximately ~~$395~~$385 million, based on our current level of participation.

Our primary property catastrophe treaty for events outside the United States, including Canada, provides coverage of approximately 75% of losses (net of recoveries from other available reinsurance) between $100 million and $350 million. For catastrophic events in Australia and Canada, additional reinsurance provides coverage of 80% of losses (net of recoveries from other available reinsurance) between $350 million and $475 million.

Our commercial property per risk treaty provides coverage for property exposures both inside and outside the United States. Depending upon the currency in which the covered insurance policy was issued, the treaty provides coverage per risk of approximately ~~$550~~$565 million to ~~$850~~$830 million in excess of our initial retention, which is generally between $25 million and $35 million.

In addition to our major property catastrophe and property per risk treaties, we purchase several smaller property treaties that provide coverage for specific classes of business or locations having concentrations of risk.

Recoveries under our property reinsurance treaties are subject to certain coinsurance requirements that affect the interaction of some elements of our reinsurance program.

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.

The renewal rates associated with the North American catastrophe treaty, the catastrophe treaty that covers events outside the United States, ~~and~~ the commercial property per risk treaty and the supplemental catastrophe reinsurance were lower than the rates for the expiring treaties. The costs related to the reinsurance purchased through the issuance of the catastrophe bond in March 2014 were also lower than those related to the expiring bond. We therefore expect that the overall cost of our property reinsurance program will be lower in 2014 than in 2013.

The combined loss and expense ratio (or combined 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 U.S. statutory accounting principles. It is the sum of the ratio of losses and loss expenses to premiums earned (loss ratio) and 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 U.S. property and casualty insurance companies differ in certain respects from generally accepted accounting principles in the United States (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, certain 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 and loss expenses incurred and GAAP underwriting expenses incurred.

An accident year is the calendar year in which a loss ~~is incurred~~occurs or, in the case of claims-made policies, the calendar year in which a loss is reported. The total losses and loss expenses incurred for a particular calendar year include current accident year losses and loss expenses as well as any increases or decreases to our estimates of losses and loss expenses that occurred in all prior accident years, which we refer to as prior year loss development.

Underwriting results were profitable in the first ~~quarter~~six months of 2014 compared with highly profitable results in the same period of 2013. Underwriting results were highly profitable in the second quarter of both years. The combined loss and expense ratio for our overall property and casualty business was as follows:


							Periods Ended June 30
	Quarter Ended March 31						Six Months						Second Quarter
	2014			2013			2014			2013			2014			2013

Loss ratio		61.1	%		52.3	%		59.9	%		54.5	%		58.7	%		56.7	%
Expense ratio		32.1			32.3			31.7			32.2			31.3			32.1

Combined loss and expense ratio		93.2	%		84.6	%
Combined ratio								91.6	%		86.7	%		90.0	%		88.8	%

The loss ratio was ~~significantly~~ higher in the first six months of 2014 and modestly higher in the second quarter compared with the same periods of 2013. The higher loss ratio in the first six months of 2014 compared with the same period of 2013 was due primarily to a higher ~~impact of~~current accident year loss ratio excluding catastrophes and, to a lesser extent, a higher ~~current accident year loss ratio excluding~~impact of catastrophes and a lower amount of favorable prior year loss development. The higher loss ratio in the second quarter of 2014 compared with the same period in 2013 was due primarily to a higher current accident year loss ratio excluding catastrophes and, to a lesser extent, a lower amount of favorable prior year loss development, offset in part by a lower impact of catastrophes. In our personal insurance segment, the current accident year loss ratio excluding catastrophes was significantly higher in the first six months and second quarter of 2014 compared with the same ~~period~~periods of ~~2013 in both our personal and specialty insurance segments.~~2013. The higher current accident year loss ratio excluding catastrophes in our personal insurance segment was driven by ~~a significant~~an increase in both ~~non-catastrophe weather-related~~fire losses and ~~fire~~non-catastrophe weather-related losses in our homeowners business compared with the ~~first quarter of 2013. The current accident year loss ratio of our specialty insurance segment deteriorated in the first quarter of 2014 compared to the same period in~~ 2013 ~~due to the adverse impact of a single, substantial surety loss.~~periods. The current accident year loss ratio excluding catastrophes for our commercial insurance segment was slightly ~~lower~~higher in the first six months of 2014 and modestly higher in the second quarter compared with the same periods of 2013. The higher current accident year loss ratio excluding catastrophes of our commercial insurance segment in the second quarter of 2014 compared ~~with~~to the same period of ~~2013.~~2013 was driven by an increase in large fire losses and non-catastrophe weather-related losses primarily in our property and marine business. The ~~overall~~current accident year loss ratio ~~excluding catastrophes~~of our specialty insurance segment was similar in the first six months of 2014 and 2013, and was modestly lower in the second quarter of ~~both years reflected favorable~~2014 compared to the same period in 2013. The ratio in the first six months of 2014 was adversely impacted by a single, substantial surety loss ~~experience that we believe resulted from our disciplined underwriting~~ in ~~recent years as well as~~ the ~~positive impact on premiums earned of rate increases in most classes of business.~~first quarter.

Our underwriting profitability in any given period will be affected by the impact of catastrophes in that period. We define a catastrophe as an event that is estimated to cause $25 million or more in industry-wide insured property losses and affects a significant number of policyholders and insurers.

The net impact of catastrophes in the first ~~quarter~~six months of 2014 was ~~$199~~$345 million, which represented ~~6.6~~5.7 percentage points of the combined ratio, compared with ~~$18~~$255 million or ~~0.6~~4.3 percentage points in the same period of a2013. The net impact of catastrophes in the second quarter of 2014 was $146 million, which represented 4.8 percentage ~~point~~points of the combined ratio, compared with $237 million or 7.9 percentage points in the same period of 2013. A significant portion of the catastrophe losses in the first ~~quarter~~six months of 2014 related to weather-related events in the ~~severe winter weather,~~United States, including a severe winter freeze event in ~~January~~the first quarter which affected a widespread area of the United States. A significant portion of the catastrophe losses in the first six months of 2013 related to several severe storms in the central United States, as well as flooding in southern Alberta, Canada, primarily in the second quarter.

The individually significant events that contributed to catastrophe costs, including losses and ~~resulted in approximately $140 million in incurred losses.~~ any related reinsurance reinstatement premiums, during the first six months of 2014 and 2013 were as follows:

The net impact of catastrophes in the first six months and second quarter of 2014 ~~and 2013~~ reflected $7$8 million and $3$1 million, respectively, of favorable prior year loss development. ~~Our overall estimate~~This compares to favorable prior year loss development of ~~net losses related to the Storm Sandy event~~$6 million and $3 million, respectively, in 2012 has not changed significantly, although during the first quarter of 2013 the estimate related to our commercial insurance business decreased slightly and the estimate related to our personal insurance business increased by the same ~~amount.~~periods of 2013.

The expense ratio was slightly lower in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013. The lower ratio in the ~~first quarter of~~ 2014 periods was due primarily to a slight decrease in overhead expenses and an increase in net premiums written, offset in part by a slight increase in commissions.

Net premiums written from personal insurance, which represented ~~33%~~36% of our premiums written in the first ~~quarter~~six months of 2014, increased by 3%4% in the first ~~quarter~~six months of 2014 and 5% in the second quarter compared with the same ~~period~~periods of 2013. Net premiums written for the classes of business within the personal insurance segment were as follows:


	Quarter Ended March 31				% Increase			Six Months Ended June 30				% Incr.			Quarter Ended June 30
	2014		2013		(Decrease)			2014		2013		(Decr.)			2014		2013		% Incr.
	(in millions)							(in millions)							(in millions)
Automobile	$	173	$	176		(2	)%	$	368	$	371		(1	)%	$	195	$	195		—	%
Homeowners		592		570		4			1,358		1,304		4			766		734		4
Other		248		241		3			496		466		6			248		225		10

Total personal	$	1,013	$	987		3		$	2,222	$	2,141		4		$	1,209	$	1,154		5

The increase in net premiums written in our personal insurance business in the first six months and second quarter of 2014 was driven by growth inside the United States. Premium growth occurred in all classes of our personal insurance business in the first six months and second quarter of 2014 inside the United States. Net premiums written outside the United States decreased in the first six months and second quarter of 2014, due ~~in part~~ to the negative impact of foreign currency translation. The overall growth in our personal insurance business was attributable to higher rates ~~and~~upon renewal, higher insured exposures, ~~upon renewal, new business, as well as~~ strong retention of existing business, and new business. Net premiums written for our personal automobile business decreased ~~modestly~~slightly in the first ~~quarter~~six months of 2014 and were flat in the second quarter compared with the same ~~period~~periods of 2013, as growth in the United States was ~~more than~~ offset by a decline in premiums written outside the United States. The decrease in net premiums written outside the United States was due ~~in large part~~ to the negative impact of foreign currency ~~translation as well as targeted rate initiatives.~~translation. Personal automobile premiums written outside the United States represent about 40% of our annual worldwide personal automobile business, ~~annually,~~ with more than half written in Brazil. Premiums in our homeowners business increased modestly in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013, driven by growth in the United States, reflecting higher renewal rates, ~~and~~ increases in the values insured on existing ~~policies.~~policies, as well as strong retention. Homeowners premiums outside the United States decreased in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013, due to the negative impact of foreign currency translation. Premiums from our other personal business, which includes accident and health, excess liability and yacht coverages, increased ~~modestly~~ in the first six months and second quarter of 2014 compared with the same ~~period~~periods of ~~2013. Significant~~2013, driven by significant growth ininside the United States. Premiums from our other personal business ~~inside the United States was largely offset by a decline in premiums~~ written outside the United States ~~due~~decreased in ~~part to~~the first six months and second quarter of 2014 compared with the same periods of 2013. The decrease in both periods reflected the negative impact of foreign currency translation. Premiums from our accident and health business increased ~~slightly~~ in the first six months and second quarter of ~~2014, as~~2014. The increase was more significant ~~growth~~ in ~~this business~~the second quarter, driven by growth inside the United ~~States was offset in large part by a decline in~~States. Accident and health premiums written outside the United ~~States.~~States decreased in the first six months and second quarter of 2014. Premiums for our excess liability business, most of which is written in the United States, grew significantly in the first six months and second quarter of 2014.

Our personal insurance business produced ~~slightly unprofitable~~profitable underwriting results in the first six months and second quarter of 2014 compared with highly profitable results in the same ~~period~~periods of 2013. The combined loss and expense ratios for the classes of business within the personal insurance segment were as follows:


							Periods Ended June 30
	Quarter Ended March 31						Six Months						Second Quarter
	2014			2013			2014			2013			2014			2013

Automobile		101.4	%		94.0	%		98.5	%		94.7	%		95.6	%		95.3	%
Homeowners		104.9			82.5			98.3			84.5			92.2			86.9
Other		92.4			94.0			92.8			93.6			93.1			93.3
Total personal		101.8			87.0			97.2			88.2			92.7			89.6

The deterioration in the underwriting results for our personal insurance business in the first ~~quarter~~six months of 2014 compared with the same period of 2013 was driven mainly by less profitable results in our homeowners business, due to a higher impact of ~~catastrophes as well as~~fire losses and non-catastrophe weather-related losses, and to a lesser extent, a higher impact of catastrophes. The less profitable results for our personal insurance business in the second quarter of 2014 compared with the same period of 2013 were also driven by less profitable results in our homeowners business, mainly due to a higher impact of fire losses and non-catastrophe weather-related losses, ~~and fire losses.~~offset in part by a lower impact of catastrophes. The impact of catastrophes represented ~~11.2~~9.3 percentage points of the combined ratio for our personal insurance business in the first ~~quarter~~six months of 2014 ~~compared with 3.9~~and 7.5 percentage points in the second quarter compared with 8.3 and 12.7 percentage points, respectively, in the same ~~period~~periods of 2013. ~~Of the 3.9 percentage points impact of catastrophes in the first quarter of 2013, 2.6 percentage points related to an increase in estimated losses from Storm Sandy.~~

Our personal automobile business produced ~~slightly unprofitable~~profitable results in the first ~~quarter~~six months of 2014 ~~compared with~~and 2013, but more so in the 2013 period. The more profitable results in the ~~same period~~first six months of ~~2013. The deterioration in results in 2014 was primarily due to unprofitable~~2013 were driven by more profitable results in the United ~~States. Overall results in the first quarter of 2014 reflected a modest amount of unfavorable prior year loss development whereas results in the same period of 2013 reflected~~States, which benefited from a modest amount of favorable prior year loss development. Results for this business were similarly profitable in the second quarter of both years as improved current accident year results in the 2014 period were offset by a lower amount of favorable prior year loss development compared to the same period of 2013. Results outside the United States for the first six months and the second quarter of 2014 and 2013 were ~~also adversely affected by a higher impact of weather-related losses.~~near breakeven.

Homeowners results were ~~unprofitable~~profitable in the first six months and second quarter of 2014, compared with highly profitable results in the same ~~period~~periods of 2013. The ~~unprofitable~~less profitable results in the first ~~quarter~~six months of 2014 were due to ~~a higher impact of catastrophes as well as~~ a higher current accident year loss ratio excluding catastrophes, driven by an increase in fire losses and non-catastrophe weather-related losses, and, to a lesser extent, a higher impact of catastrophes. The less profitable results in the second quarter of 2014 were due primarily to a higher current accident year loss ratio excluding catastrophes, driven by an increase in fire ~~losses.~~losses and non-catastrophe weather-related losses, offset in part by a lower impact of catastrophes. Catastrophe losses represented ~~17.9~~15.0 percentage points of the combined ratio for this class in the first ~~quarter~~six months of 2014 ~~compared with 6.1~~and 12.1 percentage points in the second quarter compared with 13.1 and 20.1 percentage points, respectively, in the same ~~period~~periods of 2013.

Our other personal business produced profitable results in the first six months and second quarter of 2014 and ~~2013, but slightly more so in 2014.~~2013. Our accident and health business produced modestly profitable results in the first ~~quarter~~six months of 2014 and ~~2013.~~2013 and slightly profitable results in the second quarter of both years. In the United States, results for this business were profitable in the first six months and second quarter of both years. Results for this business outside the United States were modestly unprofitable in the first six months and second quarter of both years. Results for our personal excess liability business were similarly profitable in the first six months and second quarter of both ~~years, but more so~~years. Results for this business in ~~2014, and~~each period benefited from favorable prior year loss development. Our yacht business produced highly profitable results in the first six months and second quarter of both years.

Net premiums written from commercial insurance, which represented ~~47%~~44% of our premiums written in the first ~~quarter~~six months of 2014, ~~decreased~~increased by 1% in the first ~~quarter~~six months of 2014 and 3% in the second quarter compared with the same ~~period~~periods of 2013. Net premiums written for the classes of business within the commercial insurance segment were as follows:


	Quarter Ended March 31				% Increase			Six Months Ended June 30				% Incr. (Decr.)			Quarter Ended June 30				% Incr.
	2014		2013		(Decrease)			2014		2013		% Incr. (Decr.)			2014		2013		% Incr.
	(in millions)							(in millions)							(in millions)
Multiple peril	$	261	$	272		(4	)%	$	546	$	549		(1	)%	$	285	$	277		3	%
Casualty		446		448		—			850		850		—			404		402		—
Workers’ compensation		310		299		4			595		565		5			285		266		7
Property and marine		408		421		(3	)		792		795		—			384		374		3

Total commercial	$	1,425	$	1,440		(1	)	$	2,783	$	2,759		1		$	1,358	$	1,319		3

Net premiums written in our commercial insurance business increased modestly in the first six months and second quarter of 2014 ~~were flat~~ in the United ~~States and decreased modestly~~States. Such premiums outside the United ~~States.~~States decreased slightly in the first six months of 2014 but increased modestly in the second quarter. Overall, premium growth for our commercial insurance business in the first six months and second quarter of 2014 was constrained by lower renewal exposures and our continued efforts to secure adequate rates on renewal and new business in a market that continued to be competitive. ~~Modest~~The growth ~~occurred~~in our commercial insurance business in the first six months and second quarter of 2014 was driven by growth in the workers’ compensation class, ~~driven by new business,~~reflecting rate increases, ~~and~~ a continued strong retention level ~~but~~and new business. In the first six months of 2014, premiums written ~~were either flat or decreased modestly in~~for the other classes within our commercial insurance ~~business.~~business were either flat or decreased slightly. In the second quarter of 2014, modest growth occurred in the multiple peril and property and marine classes, while premiums written in the casualty class were flat. The positive overall rate environment experienced in recent years for commercial insurance in the United States ~~experienced in recent years~~ continued in the first ~~quarter~~six months of 2014. Overall, average renewal rates in the United States increased modestly in the first six months and second quarter of 2014 for our commercial insurance business, with increases occurring in ~~all major classes. The rate environment outside the United States has not been as positive as in the United States and, as a result, overall~~each class. Overall, average renewal rates outside the United States increased only slightly in the first six months and second quarter of 2014. Retention levels of our existing policyholders remained strong and were ~~slightly~~modestly higher in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013. In the first six months and second quarter of 2014, the average renewal exposure change was down slightly both inside and outside the United States. The amount of new business in the United States was uphigher in the first six months and second quarter of 2014 compared with the same ~~period~~periods in 2013, ~~driven by an increase in the United States~~ as result of more opportunities to write business ~~is becoming available~~ at ~~adequate~~appropriate rates. New business was ~~down modestly~~flat in the first ~~quarter~~six months of 2014 outside the United ~~States.~~States, but up modestly in the second quarter.

Our commercial insurance business produced ~~highly~~ profitable underwriting results in the first six months and second quarter of 2014 ~~and 2013, but less so~~compared with highly profitable results in ~~2014.~~the same periods of 2013. The combined loss and expense ratios for the classes of business within the commercial insurance segment were as follows:


							Periods Ended June 30
	Quarter Ended March 31						Six Months						Second Quarter
	2014			2013			2014			2013			2014			2013

Multiple peril		91.8	%		83.4	%		91.6	%		88.9	%		91.5	%		94.4	%
Casualty		89.7			93.2			87.4			94.0			85.3			94.8
Workers’ compensation		84.0			89.0			84.3			87.7			84.5			86.6
Property and marine		89.1			64.7			99.8			73.6			110.5			83.0
Total commercial		88.5			81.9			90.9			85.9			93.3			89.9

The less profitable results in our commercial insurance business in the first ~~quarter~~six months of 2014 compared with the same period of 2013 were due to a higher impact of catastrophes, a lower amount of favorable prior year loss development and a slightly higher current accident year loss ratio excluding catastrophes. ~~Catastrophes had an unfavorable~~The less profitable results in our commercial insurance business in the second quarter of 2014 compared with the same period in 2013 were due to a higher current accident year loss ratio excluding catastrophes and a lower amount of favorable prior year loss development, offset in part by a lower impact of ~~6.1~~catastrophes. The impact of catastrophes represented 5.5 percentage points onof the combined ratio for our commercial insurance business in the first ~~quarter~~six months of 2014 ~~compared with a favorable impact of 1.7~~and 4.9 percentage points in the second quarter compared with 3.2 and 8.1 percentage points, respectively, in the same ~~period~~periods of 2013. ~~The 1.7 percentage points favorable impact in the first quarter of 2013 reflected 2.1 percentage points related to a decrease in estimated losses from Storm Sandy.~~ The current accident year loss ratio excluding catastrophes for our commercial insurance business ~~decreased~~increased slightly in the first ~~quarter~~six months of 2014 and increased modestly in the second quarter compared with the same ~~period~~periods of 2013. The current accident year loss ratio excluding catastrophes in the 2014 periods was adversely affected by a higher impact of large fire losses and non-catastrophe weather-related losses in the second quarter primarily in our property and marine business. Results for our commercial insurance business in ~~both~~all periods benefited from significant favorable prior year loss development and our disciplined risk selection in recent years.

Multiple peril results were profitable in the first ~~quarter~~six months of 2014 compared with highly profitable results in the same period of 2013. Results for this business were profitable in the second quarter of both years, but more so in 2014. The less profitable results in the first ~~quarter~~six months of 2014 were driven by less profitable results in the property component of this business ~~which produced highly~~due primarily to a higher impact of catastrophes. The more profitable results in the ~~first~~second quarter of 2014 compared with the same period of 2013 were due to improved results in both the property and liability components of this business. Results in the property component were profitable in the second quarter of both years, but ~~less~~more so in 2014 ~~due to~~driven mainly by a ~~higher~~lower impact of catastrophes. In the multiple peril class overall, the impact of catastrophes represented ~~9.4~~7.2 percentage points of the combined ratio in the first six months of 2014 and 5.0 percentage points in the second quarter ~~of 2014. This compares~~compared with ~~a favorable impact of catastrophes of 0.7 of a~~5.0 and 10.8 percentage ~~point~~points, respectively, in the same ~~period~~periods of 2013. The liability component of this business produced profitable results in the first six months of both years. Results for the liability component of this business were highly profitable in the second quarter of ~~both years, but slightly less so~~2014 compared with profitable results in ~~2014 due to a lower amount~~the same period of ~~favorable prior year loss development, offset in part by slightly improved current accident year results.~~2013.

Results for our casualty business were highly profitable in the first six months and second quarter of 2014 ~~and 2013, but more so~~compared with profitable results in ~~2014.~~the same periods of 2013. Results for the primary liability component of this business were ~~near breakeven~~modestly profitable in the first six months and second quarter of ~~both~~ 2014 ~~and~~compared with unprofitable results in the same periods of 2013. Results for this component in the 2013 periods reflected a high volume of large reported losses, many of which related to prior accident years. The automobile component of our casualty business produced ~~modestly profitable~~unprofitable results in the first six months and second quarter of 2014 compared with ~~slightly~~ profitable results in the same ~~period~~periods of 2013. Results for the excess liability component were highly profitable in the first six months and second quarter of both 2014 and 2013. Results for the excess liability component of our casualty business in ~~both years~~all periods benefited from substantial favorable prior year loss development. ~~Our overall~~Overall results for our casualty ~~results in the first quarter of 2014 experienced a lower amount of~~business were adversely affected by incurred losses related to toxic waste claims in the first six months of 2014 and incurred losses related to both asbestos and toxic waste claims in the same period of 2013. Overall casualty results were adversely affected by incurred losses related to toxic waste claims in the second quarter of 2014 and incurred losses related to asbestos claims ~~compared to~~in the same period of 2013. Our analysis of these exposures resulted in ~~virtually no change~~increases in the estimate of our ultimate ~~liabilities in the first quarter of 2014, whereas such~~liabilities. Such losses represented ~~3.6~~1.5 and 4.0 percentage points of the combined ratio for this class in the first six months of 2014 and 2013, respectively, and 3.0 and 4.4 percentage points in the second quarter of ~~2013.~~

Workers’ compensation results were highly profitable in the first six months and second quarter of both 2014 and 2013, but more so in ~~2014.~~the 2014 periods. The more profitable results in the ~~first quarter of~~ 2014 periods were mainly due to improved current accident year results compared with the same ~~period~~periods of 2013. ~~Prior~~Results in each period reflected favorable prior year loss ~~reserve development was favorable in both periods.~~development. Results ~~in both years~~also reflected improved pricing and our disciplined risk selection during the past several years.

Property and marine results were ~~highly profitable~~near breakeven in the first ~~quarter~~six months of 2014 and ~~2013, but substantially more so~~unprofitable in the second quarter compared with highly profitable results in the same periods of 2013. The less profitable results in the first six months of 2014 were ~~primarily~~ due to a significant unfavorable impact of catastrophes. Catastrophe losses had an unfavorable impact of 14.6 percentage points on the combined ratio for this class in the first quarter of 2014 compared with a favorable impact of 6.0 percentage points in the same period of 2013. Thesignificantly higher current accident year loss ratio excluding catastrophes, ~~was slightly~~due in large part to a higher ~~in the first quarter~~impact of ~~2014 compared with the first quarter~~large fire losses and non-catastrophe weather-related losses, as well as a higher impact of ~~2013.~~catastrophes. Results in the first ~~quarter~~six months of ~~both years reflected~~2013 also benefited from a significant amount of favorable prior year loss development. The unprofitable results in the second quarter of 2014 were due to a significantly higher current accident year loss ratio excluding catastrophes, which reflected a higher impact of large fire losses and non-catastrophe weather-related losses. Results in the second quarter of 2014 were also adversely impacted by unfavorable prior year loss development ~~but more so~~whereas results in the same period of 2013 ~~mostly related to catastrophes.~~benefited from a significant amount of favorable prior year loss development. These adverse impacts were offset in part by a lower impact of catastrophes in the second quarter of 2014. The impact of catastrophes represented 13.9 percentage points of the combined ratio in the first six months of 2014 and 13.1 percentage points in the second quarter compared with 6.7 and 19.9 percentage points, respectively, in the same periods of 2013.

Net premiums written from specialty insurance, which represented 20% of our premiums written in the first ~~quarter~~six months of 2014, ~~decreased~~increased by 1%2% in the first ~~quarter~~six months of 2014 and 5% in the second quarter compared with the same ~~period~~periods of 2013. Net premiums written for the classes of business within the specialty insurance segment were as follows:


	Quarter Ended March 31					% Increase			Six Months Ended June 30				% Incr. (Decr.)			Quarter Ended June 30				% Incr.
	2014			2013		(Decrease)			2014		2013		% Incr. (Decr.)			2014		2013		% Incr.
	(in millions)								(in millions)							(in millions)
Professional liability	$	552	��	$	549		1	%	$	1,124	$	1,098		2	%	$	572	$	549		4	%
Surety		72			83		(13	)		155		160		(3	)		83		77		8

Total specialty	$	624		$	632		(1	)	$	1,279	$	1,258		2		$	655	$	626		5

Net premiums written in our professional liability business increased by 1%2% in the first ~~quarter~~six months of 2014 and 4% in the second quarter compared with the same ~~period~~periods of 2013. Net premiums written in the United States were modestly higher in the first six months and second quarter of 2014 compared with the same ~~period~~periods in 2013. Net premiums written outside the United States were ~~modestly lower~~slightly higher in the first ~~quarter~~six months of 2014 and modestly higher in the second quarter compared with the same ~~period~~periods of 2013. ~~Premium~~Overall premium growth in ~~the first quarter~~both periods of 2014 ~~reflected a slightly~~included the modestly positive effect of our decision not to renew a reinsurance program, which expired July 1, 2013, that provided coverage for a portion of our professional liability business. Premium growth in the professional liability business remained somewhat constrained as we continued our focus on profitability in the pricing of renewal policies and ~~due to limited opportunities to write suitably-priced~~ new business, in what remains a competitive marketplace. Nevertheless, the overall rate environment remained positive, particularly in the United States. We continued to pursue rate increases on our professional liability business to address margin compression experienced in these classes of business in recent years. Retention levels for the classes within our professional liability business remained strong. Retention levels were modestly higher in the United States and substantially unchanged outside the United States in the first six months and second quarter of 2014 compared with those in the same period of 2013.

New business volume was ~~near flat~~modestly higher in the first six months and second quarter of 2014 compared with the same ~~period~~periods of 2013, ~~as a slight increase in new business in the United States was offset by a slight decrease~~with increases occurring both inside and outside the United States. The new business volume in the ~~United States in the first quarter of~~ 2014 periods reflected slightly more opportunities to write suitably-priced business in select classes ~~of this business~~ due to the positive pricing trends in the market over the last two years. However, new business volume remained somewhat constrained as rate levels in some customer segments were still not attractive and we continued to adhere to our underwriting discipline in a market environment which remained competitive. Average renewal rates for our professional liability business in the United States increased ~~significantly~~ in the first six months and second quarter of ~~2014 compared with the same period of 2013.~~2014. Rate increases occurred in ~~all major~~most classes of this ~~business, particularly in our directors and officers liability and employment practices liability classes.~~business. Overall, average renewal rates outside the United States were up slightly in the first six months and second quarter of ~~2014 compared with the same period of 2013.~~2014.

The decrease in net premiums written in our surety business in the first six months of 2014 was driven by a ~~significant~~ decline in premiums written outside the United States, due ~~in large part~~primarily to a decrease in premiums written in Latin America. ~~Premiums~~The decrease in premiums written ~~inside~~outside the United States in ~~our surety business also declined in~~ the first ~~quarter~~six months of 2014 ~~but to a lesser extent. The decreases in premiums written inside and outside the United States were~~was mainly driven by a lower number of new contracts requiring a surety bond being awarded to our existing customers compared with the same period of 2013. Premiums written inside the United States in ~~2013.~~our surety business increased modestly in the first six months of 2014. The increase in net premiums written in the second quarter of 2014 was driven by significant growth in premiums written inside the United States, due primarily to an increase in construction activity among a few of our larger customers. The timing of contract awards to our customers can vary and, as a result, premium growth in our surety business varies from period to period.

Our specialty insurance business produced highly profitable underwriting results in the first six months and second quarter of 2014 and 2013. The combined loss and expense ratios for the classes of business within the specialty insurance segment were as follows:


							Periods Ended June 30
	Quarter Ended March 31						Six Months						Second Quarter
	2014			2013			2014			2013			2014			2013
Professional liability		84.6	%		92.4	%		83.9	%		92.1	%		83.2	%		91.9	%
Surety		122.9			50.7			82.2			46.6			45.3			42.1
Total specialty		88.9			87.4			83.7			86.7			78.7			86.0

Our professional liability business produced highly profitable results in the first six months and second quarter of 2014 compared with profitable results in the same ~~period~~periods of 2013. The more profitable results in the 2014 periods were due to a higher amount of favorable prior year loss development and improved current accident year results compared with the same ~~period~~periods of 2013.

Results for the directors and officers liability class were highly profitable in the first six months and second quarter of 2014 and ~~2013, but more so in 2014.~~2013. Results in ~~both years~~all periods benefited from favorable prior year loss development. Results for the fidelity class were ~~highly~~ profitable in the first six months and second quarter of 2014 compared with ~~profitable~~unprofitable results in the same ~~period~~periods of 2013. Results for the fidelity class ~~in the first quarter of 2014~~ reflected ~~a modest amount of favorable~~unfavorable prior year loss development ~~whereas~~in all periods, but more so in the 2013 periods. Results for the employment practices liability class were modestly unprofitable in the first six months and second quarter of 2014 compared with highly unprofitable results in the same ~~period~~periods of 2013. Results for this class in the first six months and second quarter of 2013

~~reflected~~ were adversely affected by unfavorable prior year loss development. Results for the ~~employment practices~~errors and omissions liability class were ~~slightly~~similarly unprofitable in the first six months of 2014 and 2013 as improved current accident year results in 2014 were largely offset by adverse prior year loss development. Results for this class were unprofitable in the second quarter of 2014 compared with highly unprofitable results in the same period of 2013. Results ~~for this class~~ in the ~~first~~second quarter of ~~2013 were adversely affected by unfavorable prior year loss development. Employment practices liability claims have been more numerous and protracted in recent~~both years due primarily to the lingering effect of the economic downturn and resulting unemployment levels. Results for the errors and omissions liability class were highly unprofitable in the first quarter of 2014 compared with near breakeven results in the same period of 2013. Results in the first quarter of 2014 reflected unfavorable prior year loss development, ~~whereas results~~but more so in ~~the first quarter of 2013 reflected favorable prior year loss reserve development.~~2013. Results for the fiduciary liability class were highly profitable in the first six months and second quarter of both 2014 and ~~2013; results in both years~~2013. Results for this class reflected favorable prior year loss ~~development.~~development in all periods.

Our surety business produced highly ~~unprofitable~~profitable results in the first six months and second quarter of 2014 ~~compared with highly profitable results in the same period of~~and 2013. Results in the first ~~quarter~~six months of 2014 were ~~adversely impacted by~~less profitable than the same period of 2013 due to the impact of one large loss in the first quarter outside the United States. Our surety business tends to be characterized by losses that are infrequent but have the potential to be highly severe.

Net premiums written from our reinsurance assumed business, which is in runoff, were not significant in the first six months and second quarter of 2014 or 2013. This business produced breakeven results in the first six months and second quarter of 2014 compared with profitable results in the same ~~period~~periods of 2013. Results in the ~~first quarter of~~ 2013 periods benefited from favorable prior year loss development.

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

The extent of losses from a 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 concentrations of risk in catastrophe exposed areas globally and have strategies and underwriting standards to manage these exposures through individual risk selection, subject to regulatory constraints, and through the purchase of catastrophe reinsurance coverage. We use catastrophe modeling and a risk concentration management tool 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 catastrophe exposed areas in other countries. The information provided by the catastrophe modeling and the risk concentration management tool has resulted in our non-renewing or reducing our exposure on some accounts and refraining from writing others.

Catastrophe modeling generally relies on multiple inputs based on experience, science, engineering and history, and the selection of those inputs requires a significant amount of judgment. The modeling results may also fail to account for risks that are outside the range of normal probability or are otherwise unforeseen. Because of this, actual results may differ materially from those derived from our modeling exercises.

We also continue to actively explore and analyze credible scientific evidence, including the potential impact of global climate change, that may affect our ability to manage our exposure under the insurance policies we issue as well as the impact that laws and regulations intended to combat climate change may have on us.

Despite our efforts to manage our catastrophe exposure, the occurrence of one or more severe catastrophic events could have a material effect on the Corporation’s results of operations, financial condition or liquidity.

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 case estimates for claims that have been reported and estimates for claims that have been incurred but not reported at the balance sheet date as well as estimates of the expenses associated with processing and settling all reported and unreported claims, less estimates of anticipated salvage and subrogation recoveries. 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 and/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.

Incurred but not reported (IBNR) reserve estimates are generally calculated by first projecting the ultimate cost of all claims that have occurred and then subtracting reported losses and loss expenses. Reported losses include cumulative paid losses and loss expenses plus case reserves. The IBNR reserve includes a provision for claims that have occurred but have not yet been reported to us, some of which are not yet known to the insured, as well as a provision for future development on reported claims. A relatively large proportion of our net loss reserves, particularly for long tail liability classes, are reserves for IBNR losses. In fact, about ~~70%~~75% of our aggregate net loss reserves at ~~March 31,~~June 30, 2014 were for IBNR losses.

Our gross case and IBNR loss reserves and related reinsurance recoverable by class of business were as follows:


	Gross Loss Reserves						Reinsurance		Net Loss		Gross Loss Reserves						Reinsurance Recoverable		Net Loss Reserves
March 31, 2014	Case		IBNR		Total		Recoverable		Reserves										Net Loss Reserves
June 30, 2014											Case		IBNR		Total		Reinsurance Recoverable	Reinsurance Recoverable		Net Loss Reserves
	(in millions)										(in millions)							Reinsurance Recoverable		Net Loss Reserves

Personal insurance
Automobile	$	269	$	137	$	406	$	15	$	391	$	268	$	144	$	412	$	15	$	397
Homeowners		471		395		866		57		809		452		391		843		45		798
Other		344		721		1,065		89		976		346		737		1,083		88		995

Total personal		1,084		1,253		2,337		161		2,176		1,066		1,272		2,338		148		2,190


Commercial insurance
Multiple peril		584		1,213		1,797		42		1,755		612		1,214		1,826		45		1,781
Casualty		1,463		5,477		6,940		388		6,552		1,406		5,508		6,914		395		6,519
Workers’ compensation		1,052		2,051		3,103		284		2,819		1,079		2,057		3,136		288		2,848
Property and marine		786		501		1,287		412		875		807		523		1,330		394		936

Total commercial		3,885		9,242		13,127		1,126		12,001		3,904		9,302		13,206		1,122		12,084

Specialty insurance
Professional liability		1,254		5,888		7,142		327		6,815		1,225		5,847		7,072		312		6,760
Surety		35		57		92		11		81		21		59		80		6		74

Total specialty		1,289		5,945		7,234		338		6,896		1,246		5,906		7,152		318		6,834


Total insurance		6,258		16,440		22,698		1,625		21,073		6,216		16,480		22,696		1,588		21,108

Reinsurance assumed		152		287		439		142		297		148		283		431		141		290

Total	$	6,410	$	16,727	$	23,137	$	1,767	$	21,370	$	6,364	$	16,763	$	23,127	$	1,729	$	21,398


	Gross Loss Reserves						Reinsurance		Net Loss
December 31, 2013	Case		IBNR		Total		Recoverable		Reserves
	(in millions)

Personal insurance
Automobile	$	265	$	141	$	406	$	16	$	390
Homeowners		414		357		771		56		715
Other		345		713		1,058		90		968

Total personal		1,024		1,211		2,235		162		2,073


Commercial insurance
Multiple peril		598		1,190		1,788		43		1,745
Casualty		1,565		5,398		6,963		387		6,576
Workers’ compensation		1,023		2,047		3,070		277		2,793
Property and marine		834		492		1,326		440		886

Total commercial		4,020		9,127		13,147		1,147		12,000


Specialty insurance
Professional liability		1,390		5,842		7,232		343		6,889
Surety		19		56		75		4		71

Total specialty		1,409		5,898		7,307		347		6,960


Total insurance		6,453		16,236		22,689		1,656		21,033
Reinsurance assumed		169		288		457		146		311

Total	$	6,622	$	16,524	$	23,146	$	1,802	$	21,344

Loss reserves, net of reinsurance recoverable, increased by ~~$26~~$54 million during the first ~~quarter~~six months of 2014. Loss reserves related to our insurance business increased by ~~$40~~$75 million during the first ~~quarter~~six months of 2014, which reflected an increase of ~~$57~~$78 million related to catastrophe losses and a decrease of approximately ~~$25~~$33 million related to the effect of foreign currency translation due to the stronger U.S. dollar at ~~March 31,~~June 30, 2014 compared with December 31, 2013. Loss reserves related to our reinsurance assumed business, which is in runoff, decreased by ~~$14~~$21 million.

The increase in our homeowners gross loss reserves during the first ~~quarter~~six months of 2014 was driven by catastrophe-related losses, ~~non-catastrophe weather-related~~fire losses and ~~fire~~non-catastrophe weather-related losses. The decrease in gross loss reserves in the professional liability classes was due to lower case reserves as a result of paid claim activity during the first ~~quarter~~six months of 2014.

In establishing the loss reserves of our property and casualty subsidiaries, we consider facts currently known and the present state of the law and coverage litigation. Based on all information currently available, we believe that the aggregate loss reserves at ~~March 31,~~June 30, 2014 were adequate to cover claims for losses that had occurred as of that date, including both those known to us and those yet to be reported. However, as discussed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013, there are significant uncertainties inherent in the loss reserving process. It is therefore possible that management’s estimate of the ultimate liability for losses that had occurred as of ~~March 31,~~June 30, 2014 may change, which could have a material effect on the Corporation’s results of operations and financial condition.

Changes in loss reserve estimates are unavoidable because such estimates are subject to the outcome of future events. Loss trends vary and time is required for changes in trends to be recognized and confirmed. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development or reserve releases.

We estimate that we experienced overall favorable prior year development of about ~~$160~~$325 million during the first ~~quarter~~six months of 2014 and $165 in the second quarter compared with favorable prior year development of about ~~$190~~$405 million and $215 million, respectively, in the same ~~period~~periods of 2013, on loss reserves established as of the respective previous year end.

The favorable development in the first ~~quarter~~six months of 2014 was primarily in the professional liability classes due to favorable loss experience related mainly to accident years ~~2007~~2010 and prior, and in the commercial liability classes due to favorable loss experience related mainly to accident years 2012 and ~~prior, and in the commercial property classes due mainly to lower than expected severity in the 2013 accident year.~~prior. The favorable development in the first ~~quarter~~six months of 2013 was primarily in the commercial property classes, partly due to lower than expected severity primarily in the 2012 accident year and, to a lesser extent, in the commercial liability classes due to ~~continued~~ favorable loss experience related mainly to accident years 2010 and prior, and in the professional liability classes due to favorable loss experience related mainly to accident years 2008 and prior.

Property and casualty investment income before taxes decreased by 3% in the first ~~quarter~~six months of 2014 and 4% in the second quarter compared with the same ~~period~~periods in 2013. The decrease was due to a decline in the average yield ofon our property and casualty subsidiaries’ investment ~~portfolio, partially offset by the impact of a slight increase in our average invested assets.~~portfolio. The decrease in the average yield ofon the investment portfolio for the first six months and second quarter of 2014 compared with the same periods of 2013 resulted from lower reinvestment yields on securities that we purchased to replace fixed maturities that matured, were redeemed by the issuer or were sold since the ~~first~~second quarter of 2013. ~~While~~For the ~~property and casualty subsidiaries generated substantial operating cash flows in the last nine~~first six months of ~~2013 and~~2014, the ~~first quarter~~impact of ~~2014,~~the decline in average yield was partially offset by the impact of a slight increase in our average invested ~~assets were impacted by substantial dividend distributions made by the property and casualty subsidiaries to Chubb during 2013.~~assets. Our property and casualty subsidiaries held only a slightly higher amount of average invested assets in the first ~~quarter~~six months of 2014 and a similar amount in the second quarter compared with the same ~~period~~periods in 2013. While the property and casualty subsidiaries generated substantial operating cash flows in the last six months of 2013 and the first six months of 2014, average invested assets were also impacted by substantial dividend distributions made by the property and casualty subsidiaries to Chubb during 2013 and the first quarter of 2014.

The effective tax rate on our investment income was ~~18.8%~~18.5% in the first ~~quarter~~six months of 2014 compared with ~~17.9%~~18.0% in the same period of 2013. The effective tax rate fluctuates as the proportion of tax exempt investment income relative to total investment income changes from period to period.

On an after-tax basis, property and casualty investment income decreased by 4% in the first six months and the second quarter of 2014 compared with the same ~~period~~periods in 2013. The after-tax annualized yield on our property and casualty subsidiaries’ investment portfolio was 2.80% and ~~2.93%~~2.91% in the first ~~quarter~~six months of 2014 and 2013, respectively.

We expect that property and casualty investment income after taxes will decline for the full year 2014, assuming the average yield on fixed maturity securities available in the market and the average foreign currency to U.S. dollar exchange rates for the last six months of 2014 are both similar to June 30, 2014 levels. This expected decline reflects the actual results for the first six months of 2014 as well as the expected effect of having invested funds from securities that matured in 2013 and 2014 in securities with yields lower than the yields on the maturing securities, and the expectation that this pattern will continue during the remainder of 2014. The expected decline in property and casualty investment income after taxes in 2014 also reflects an assumption that average invested assets in 2014 will be slightly higher than 2013, based on our expectations of cash flows during the year.

Other income and charges, which includes miscellaneous income and expenses of the property and casualty subsidiaries, was not significant in the first ~~quarter~~six months of 2014 and 2013.

Corporate and other comprises investment income earned on corporate invested assets, interest expense and other expenses not allocated to our operating subsidiaries and the results of our non-insurance subsidiaries.

Corporate and other produced a loss before taxes of ~~$60~~$119 million in the first ~~quarter~~six months of 2014 compared with a loss of ~~$63~~$121 million for the same period of 2013.


	Quarter Ended March 31						Periods Ended June 30
	2014			2013			Six Months						Second Quarter
	(in millions)						2014			2013			2014			2013
							(in millions)
Net realized gains (losses)

Net realized gains
Fixed maturities	$	(3	)	$	11		$	49		$	17		$	52		$	6
Equity securities		66			55			89			174			23			119
Other invested assets		53			74			108			133			55			59

		116			140			246			324			130			184

Other-than-temporary impairment losses
Fixed maturities								(4	)		—			(4	)		—
Equity securities		—			(2	)		(1	)		(7	)		(1	)		(5	)

		—			(2	)		(5	)		(7	)		(5	)		(5	)

Realized investment gains before tax	$	116		$	138		$	241		$	317		$	125		$	179


Realized investment gains after tax	$	75		$	90		$	156		$	206		$	81		$	116

In the first six months and second quarter of 2013, the net realized gains of equity securities and other invested assets included $74 million and $10 million, respectively, related to the exchange of our holdings of common stock and warrants of Alterra Capital Holdings Limited for common stock of Markel Corporation and cash as a result of a business combination that took place during the second quarter of 2013.

The net realized gains and losses of other invested assets ~~represent~~include primarily the aggregate of realized gain distributions to us from the limited partnerships in which we have an interest and changes in our equity in the net assets of those partnerships based on valuations provided to us by the manager of each partnership. Due to the timing of our receipt of valuation data from the investment managers, the value of these investments and any related realized gains and losses are generally reported on a one quarter lag.

The net realized gains of the limited partnerships reported in the first six months of 2014 primarily reflected the positive performance of the global equity and high yield investment markets in the first quarter of 2014 and the fourth quarter of 2013. The net realized gains of the limited partnerships reported in the first six months of 2013 primarily reflected the positive performance of the global equity and high yield investment markets in the ~~fourth~~first quarter of 2013 and ~~2012, respectively.~~the fourth quarter of 2012.

We regularly review invested assets that have a fair value less than cost to determine if an other-than-temporary decline in value has occurred. We have a monitoring process overseen by a committee of investment and accounting professionals that is responsible for identifying those securities to be specifically evaluated for a potential other-than-temporary impairment.

The determination of whether a decline in value of any investment is temporary or other than temporary requires the judgment of management. The assessment of other-than-temporary impairment of fixed maturities and equity securities is based on both quantitative criteria and qualitative information. A number of factors are considered including, but not limited to, the length of time and the extent to which the fair value has been less than the cost, the financial condition and near term prospects of the issuer, whether the issuer is current on contractually obligated interest and principal payments, general market conditions and industry or sector specific factors. The decision to recognize a decline in the value of a security carried at fair value as other than temporary rather than temporary has no impact on shareholders’ equity.

In determining whether fixed maturities are other than temporarily impaired, we are required to recognize an other-than-temporary impairment loss when we conclude that we have the intent to sell or it is more likely than not that we will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value or it is likely we will not recover the entire amortized cost value of an impaired security. If we have the intent to sell or it is more likely than not that we will be required to sell an impaired fixed maturity before the security recovers to its amortized cost value, the security is written down to fair value and the entire amount of the writedown is included in net income as a realized investment loss. For all other impaired fixed maturities, when the impairment is determined to be other than temporary, the impairment loss is separated into the amount representing the credit loss and the amount representing the loss related to all other factors. The amount of the impairment loss that represents the credit loss is included in net income as a realized investment loss and the amount of the impairment loss that relates to all other factors is included in other comprehensive income.

In determining whether equity securities are other than temporarily impaired, we consider our intent and ability to hold a security for a period of time sufficient to allow us to recover our cost. If a decline in the fair value of an equity security is deemed to be other than temporary, the security is written down to fair value and the amount of the writedown is included in net income as a realized investment loss.

Capital resources and liquidity represent a company’s overall financial strength and its ability to generate cash flows, borrow funds at competitive rates and raise new capital to meet operating and growth needs.

Capital resources provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks and facilitate continued business growth. At ~~March 31,~~June 30, 2014, the Corporation had shareholders’ equity of ~~$16.2~~$16.5 billion and total debt of $3.3 billion.

Management regularly monitors the Corporation’s capital resources. In connection with our long term capital strategy, Chubb from time to time contributes capital to its property and casualty subsidiaries. In addition, in order to satisfy capital needs as a result of any rating agency capital adequacy or other future rating issues, or in the event we were to need additional capital to make strategic investments in light of market opportunities, we may take a variety of actions, which could include the issuance of additional debt and/or equity securities. We believe that our strong financial position and current debt level provide us with the flexibility and capacity to obtain funds externally through debt or equity financings on both a short term and long term basis.

In January 2013, the Board of Directors authorized the repurchase of up to $1.3 billion of Chubb’s common stock. Repurchases under this authorization were completed in January 2014. On January 30, 2014, the Board of Directors authorized the repurchase of up to $1.5 billion of Chubb’s common stock. During the first ~~quarter~~six months of 2014, under these two authorizations we repurchased ~~4,720,726~~8,752,012 shares of Chubb’s common stock in open market transactions at a cost of ~~$409~~$784 million. As of ~~March 31,~~June 30, 2014, ~~$1,198~~$823 million remained under the January 2014 authorization. This authorization has no expiration date. We expect to complete the repurchase of shares under this authorization by the end of January 2015, subject to market conditions and other factors.

Chubb and its property and casualty insurance subsidiaries are rated by major rating agencies. These ratings reflect the rating agency’s opinion of our financial strength, operating performance, strategic position and ability to meet our obligations to policyholders.

Credit ratings assess a company’s ability to make timely payments of interest and principal on its debt. Financial strength ratings assess an insurer’s ability to meet its financial obligations to policyholders.

Ratings are 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.

It is possible that one or more of the rating agencies may raise or lower our existing ratings in the future. If our credit ratings were downgraded, we might incur higher borrowing costs and might have more limited means to access capital. A downgrade in our financial strength ratings could adversely affect the competitive position of our insurance operations, including a possible reduction in demand for our products in certain markets.

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet the short and long term cash requirements of its business operations.

The Corporation’s liquidity requirements in the past have generally been met by funds from operations and we expect that funds from operations will continue to be sufficient to meet such requirements in the future. Liquidity requirements could also be met by funds received upon the maturity or sale of marketable securities in our investment portfolio. The Corporation also has the ability to borrow under its $500 million credit facility and we believe we could issue debt or equity securities.

Our property and casualty operations provide liquidity in that insurance premiums are generally received months or even years before losses are paid under the policies purchased by such premiums. Cash receipts from operations, consisting of insurance premiums and investment income, provide funds to pay losses, operating expenses and dividends to Chubb. Cash receipts in excess of required cash outflows can be used to build the investment portfolio, with the expectation of generating additional investment income in the future.

Our strong underwriting and investment results generated substantial positive operating cash flows in the first ~~quarter~~six months of 2014 and 2013. The cash provided by the property and casualty subsidiaries’ operating activities ~~decreased modestly~~increased in the first ~~quarter~~six months of 2014 compared with the same period of ~~2013. The positive impact~~2013 primarily as a result of modestly higher premium collections and ~~slightly~~ lower ~~loss payments was offset by the impact of modestly higher~~ tax ~~payments in the first quarter of 2014 compared with the same period of 2013.~~payments. During the first ~~quarter~~six months of 2014, the cash used by the property and casualty subsidiaries for financing activities (primarily the payment of dividends to Chubb) exceeded the cash provided by the property and casualty subsidiaries’ operating activities by approximately ~~$150~~$215 million. In the first ~~quarter~~six months of 2014, dividends paid to Chubb by the property and casualty subsidiaries increased by $457 million compared with the comparable period of 2013 reflecting in part a difference in the timing of the payment of subsidiary dividends in 2013 and those paid and anticipated in 2014. During the first ~~quarter~~six months of 2013, the cash provided by the operating activities of the property and casualty subsidiaries exceeded the cash used for financing activities by the property and casualty subsidiaries (primarily the payment of dividends to Chubb) by approximately ~~$330~~$70 million.

Our property and casualty subsidiaries maintain substantial investments in highly liquid, short term marketable securities. Accordingly, we do not anticipate selling long term fixed maturity investments to meet any liquidity needs.

Chubb’s liquidity requirements primarily include the payment of dividends to shareholders and interest and principal on debt obligations. 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 our operating results, financial condition, capital requirements and any regulatory constraints.

As a holding company, Chubb’s ability to continue to pay dividends to shareholders and to satisfy its debt obligations relies on the availability of liquid assets, which is dependent in large part on the dividend paying ability of its property and casualty subsidiaries. The timing and amount of dividends paid by the property and casualty subsidiaries to Chubb may vary from year to year. In the United States, our property and casualty subsidiaries are subject to laws and regulations in the jurisdictions in which they operate that restrict the amount and timing of dividends they may pay within twelve consecutive months without the prior approval of regulatory authorities. The restrictions are generally based on net income and on certain levels of policyholders’ surplus as determined in accordance with statutory accounting practices. Dividends in excess of such thresholds are considered “extraordinary” and require prior regulatory approval.

During the first ~~quarter~~six months of 2014, the property and casualty subsidiaries paid dividends of ~~$561~~$1,091 million to Chubb. Whether any dividends the property and casualty subsidiaries may pay during the remainder of 2014 require regulatory approval will depend on the amount and timing of the dividend payments. As of ~~March 31,~~June 30, 2014, the maximum aggregate dividend distribution that may be made by the subsidiaries to Chubb during the remainder of 2014 without prior regulatory approval was approximately ~~$1.5 billion.~~

The main objectives in managing our investment portfolios are to maximize after-tax investment income and total investment return while managing credit risk and interest rate risk in order to ensure that funds will be available to meet our insurance obligations. Investment strategies are developed based on many factors including underwriting results and our resulting tax position, regulatory requirements, fluctuations in interest rates and consideration of other market risks. Investment decisions are centrally managed by investment professionals based on guidelines established by management and approved by the boards of directors of Chubb and its respective operating companies.

Our investment portfolio primarily comprises high quality bonds, principally tax exempt securities, corporate bonds, mortgage-backed securities and U.S. Treasury securities, as well as foreign government and corporate bonds that support our operations outside the United States. The portfolio also includes equity securities, primarily publicly traded common stocks, and other invested assets, primarily private equity limited partnerships, all of which are held with the primary objective of capital appreciation.

Our objective is to achieve an appropriate mix of taxable and tax exempt securities in our portfolio to balance both investment and tax strategies. At ~~March 31,~~June 30, 2014, ~~62%~~63% of our U.S. fixed maturity portfolio was invested in tax exempt securities. At ~~March 31,~~June 30, 2014, about 70% of our tax exempt securities were rated Aa or better, with about 20% rated Aaa. The average rating of our tax exempt securities was Aa. While about 15% of our tax exempt securities were insured, the effect of insurance on the average credit rating of these securities was insignificant. The insured tax exempt securities in our portfolio have been selected based on the quality of the underlying credit and not the value of the credit insurance enhancement.

At ~~March 31,~~June 30, 2014, 4%7% of our taxable fixed maturity portfolio was invested in U.S. government and government agency and authority obligations other than mortgage-backed securities and had an average rating of Aa. About ~~50%~~70% of the U.S. government and government agency and authority obligations other than mortgage-backed securities were U.S. Treasury securities with an average rating of Aaa and the remainder were taxable bonds issued by states, municipalities and political subdivisions within the United States with an average rating of Aa.

At ~~March 31,~~June 30, 2014, ~~52%~~49% of our taxable fixed maturity portfolio consisted of corporate bonds that were issued by a diverse group of U.S. and foreign issuers and had an average rating of A. About 55% of our corporate bonds were issued by U.S. companies and about 45% were issued by foreign companies. Our foreign corporate bonds included ~~$62 million, $13~~$60 million and ~~$10~~$13 million issued by companies, including banks, in Ireland ~~Spain~~ and ~~Italy,~~Spain, respectively. We held no bonds issued by companies in Greece, Italy or Portugal.

At ~~March 31,~~June 30, 2014, 36% of our taxable fixed maturity portfolio was invested in foreign government and government agency obligations, which had an average rating of Aa. The foreign government and government agency obligations consisted of high quality securities, primarily issued by national governments and, to a lesser extent, government agencies, regional governments and supranational organizations. The five largest sovereign issuers within our portfolio were Canada, Germany, the United Kingdom, Australia and Brazil, which collectively accounted for about 75% of our total foreign government and government agency obligations. Another 8%7% of our total foreign government and government agency obligations were issued by supranational organizations. We held no sovereign securities issued by Portugal, Ireland, Italy, Greece or Spain. We did not hold any foreign government or government agency fixed maturities that have third party guarantees.

At ~~March 31,~~June 30, 2014, 8% of our taxable fixed maturity portfolio was invested in mortgage-backed securities. About 95% of the mortgage-backed securities were rated Aaa. About half of the remaining 5% were below investment grade. Of the Aaa rated securities, ~~86%~~87% were call protected, commercial mortgage-backed securities (CMBS). All of our CMBS were senior securities with the highest level of credit support. The other ~~14%~~13% of the Aaa rated securities were residential mortgage-backed securities, consisting of government agency pass-through securities guaranteed by a government agency or a government sponsored enterprise and collateralized mortgage obligations backed by single family home mortgages.

The net unrealized appreciation before tax of our fixed maturities and equity securities carried at fair value was ~~$2.2~~$2.6 billion at ~~March 31,~~June 30, 2014 compared with net unrealized appreciation before tax of $1.9 billion at December 31, 2013. Such unrealized appreciation is reflected in accumulated other comprehensive income, net of applicable deferred income taxes.

During the first six months of 2014, market yields on fixed maturity investments decreased resulting in an increase in the fair value of many of our fixed maturity investments.

Fair values of financial instruments are determined by management using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical assets or liabilities or other inputs, such as quoted prices for similar assets or liabilities, that are observable either directly or indirectly. In those instances where observable inputs are not available, fair values are measured using unobservable inputs for the asset or liability. Unobservable inputs reflect our own assumptions about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 – Unadjusted quoted prices in active markets for identical financial instruments.

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

The methods and assumptions used to estimate the fair values of financial instruments are as follows:

The carrying value of short term investments approximates fair value due to the short maturities of these investments.

Fair values of fixed maturities are determined by management, utilizing prices obtained from a third party, nationally recognized pricing service or, in the case of securities for which prices are not provided by a pricing service, from third party brokers. For fixed maturities that have quoted prices in active markets, market quotations are provided. For fixed maturities that do not trade on a daily basis, the pricing service and brokers provide fair value estimates using a variety of inputs including, but not limited to, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, reference data, prepayment rates and measures of volatility. Management reviews on an ongoing basis the reasonableness of the methodologies used by the relevant pricing service and brokers. In addition, management, using the prices received for the securities from the pricing service and brokers, determines the aggregate portfolio price performance and reviews it against applicable indices. If management believes that significant discrepancies exist, it will discuss these with the relevant pricing service or broker to resolve the discrepancies.

Fair values of equity securities are determined by management, utilizing quoted market prices.

Fair values of long term debt issued by Chubb are determined by management, utilizing prices obtained from a third party, nationally recognized pricing service.

At ~~March 31,~~June 30, 2014 and December 31, 2013, a pricing service provided fair value amounts for approximately 99% of our fixed maturities. The prices we obtain from a pricing service and brokers generally are non-binding, but are reflective of current market transactions in the applicable financial instruments.

At ~~March 31,~~June 30, 2014 and December 31, 2013, we held an insignificant amount of financial instruments in our investment portfolio for which a lack of market liquidity impacted our determination of fair value.

~~Page 49~~For the Corporation’s disclosures about market risk, see Item 7A in Part II of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material changes to the Corporation’s disclosures about market risk in Item 7A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013.

As of ~~March 31,~~June 30, 2014, an evaluation of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) was performed under the supervision and with the participation of the Corporation’s management, including Chubb’s chief executive officer and chief financial officer. Based on that evaluation, the chief executive officer and chief financial officer concluded that the Corporation’s disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2014.

During the quarter ended ~~March 31,~~June 30, 2014, there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

~~The~~For a discussion of the Corporation’s ~~business is subject to a number of~~potential risks ~~including those identified in Item 1A of Chubb’s Annual Report on Form 10-K for the year ended December 31, 2013,~~or uncertainties that could have a material effect on our business, results of operations, financial condition and/or liquidity ~~and~~or that could cause our operating results to vary significantly from fiscal period to fiscal ~~period. The risks described~~period, see Item 1A in Part I of the Corporation’s Annual Report on Form 10-K ~~are not~~for the ~~only risks we face.~~year ended December 31, 2013. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also could have a material effect on our business, results of operations, financial condition and/or liquidity.

The following table summarizes Chubb’s stock repurchased each month in the quarter ended ~~March 31,~~June 30, 2014:

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


NEW JERSEY		13-2595722
(State or other jurisdiction of		(~~I.R.S.~~I. R. S. Employer
incorporation or organization)		Identification No.)

15 MOUNTAIN VIEW ROAD, WARREN, NEW JERSEY		07059
(Address of principal executive offices)		(Zip Code)


Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)


	Page Number
Part I. Financial Information:

Item 1 — Financial Statements:

Consolidated Statements of Income for the Three Months and Six Months Ended ~~March 31,~~June 30, 2014 and 2013		1

Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended ~~March 31,~~June 30, 2014 and 2013		2

Consolidated Balance Sheets as of ~~March 31,~~June 30, 2014 and December 31, 2013		3

Consolidated Statements of Shareholders’ Equity for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2014 and 2013		4

Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2014 and 2013		5

Notes to Consolidated Financial Statements		6

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 3 — Quantitative and Qualitative Disclosures About Market Risk		52

Item 4 — Controls and Procedures		4952

Part II. Other Information:

Item 1A — Risk Factors		5053

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		5053

Item 6 — Exhibits		5154

Signatures		5154

EX-10.2

EX-10.3

EX-31.1

EX-31.2

EX-32.1

EX-32.2

EX-101 INSTANCE DOCUMENT

EX-101 SCHEMA DOCUMENT

EX-101 CALCULATION LINKBASE DOCUMENT

EX-101 LABELS LINKBASE DOCUMENT

EX-101 PRESENTATION LINKBASE DOCUMENT

EX-101 DEFINITION LINKBASE DOCUMENT


	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(a)
							(in millions)
Period
January 2014		1,187,069	$	90.46		1,187,069	$	1,500

February 2014		2,799,557		85.06		2,799,557		1,262

March 2014		734,100		87.04		734,100		1,198


Total		4,720,726		86.73		4,720,726


	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(a)
							(in millions)
Period
April 1-30		118,570	$	91.61		118,570	$	1,187

May 1-31		1,768,154		92.67		1,768,154		1,023

June 1-30		2,144,562		93.26		2,144,562		823


Total		4,031,286		92.95		4,031,286


	(in millions)

2014
Winter freeze – 17 states in the United States – January 2014	$	130
Other events		215

Total	$	345


2013
Flooding – Alberta, Canada – June 2013	$	85
Other events		170

Total	$	255


Exhibit Number		Description
	-	Material Contracts
~~10.1~~10.1*		~~Schedule of Salary Actions for Named Executive Officers~~The Chubb Corporation Long-Term Incentive Plan (2014) incorporated by reference to Exhibit ~~(10.1)~~99.1 of the registrant’s ~~Current Report~~registration statement on Form ~~8-K~~S-8 filed on ~~March 4,~~April 29, 2014. (File No. 333-195560)
~~10.2~~10.2*		Form of ~~Performance~~Deferred Stock Unit ~~Award~~ Agreement (for Non-Employee Directors) under The Chubb Corporation Long-Term Incentive Plan ~~(2009) incorporated by reference to Exhibit (10.2) of the registrant’s Current Report on Form 8-K~~(2014) filed ~~on March 4, 2014.~~herewith.
~~10.3~~10.3*		Form of Restricted Stock Unit Agreement under The Chubb Corporation Long-Term Incentive Plan ~~(2009) incorporated by reference to Exhibit (10.3) of the registrant’s Current Report on Form 8-K~~(2014) filed ~~on March 4, 2014.~~
~~10.4~~		The Chubb Corporation Long-Term Incentive Plan (2014) incorporated by reference to Annex A of the registrant’s definitive proxy statement for the Annual Meeting of Shareholders held on April 29, 2014.herewith.

	-	Rule 13a-14(a)/15d-14(a) Certifications
31.1		Certification by John D. Finnegan filed herewith.
31.2		Certification by Richard G. Spiro filed herewith.

	-	Section 1350 Certifications
32.1		Certification by John D. Finnegan filed herewith.
32.2		Certification by Richard G. Spiro filed herewith.

	-	Interactive Data File
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document


THE CHUBB CORPORATION

(Registrant)

By:		/s/ John J. Kennedy
		John J. Kennedy
		Senior Vice President and Chief Accounting Officer


YES þ		NO ¨


YES þ		NO ¨


YES ¨		NO þ