John D. Finnegan – Chairman, President and Chief Executive Officer Dino E. Robusto – Executive Vice President and President of Personal Lines and Claims Richard G. Spiro – Executive Vice President and Chief Financial Officer Paul J. Krump – President-Personal Lines & Claims, Chubb & Son, Inc.,.

Amit Kumar – Macquarie Group Limited Jay B. Gould – Barclays Capital Inc. Joshua C. Stirling – Sanford C. Bernstein & Co., LLC Vinay G. Misquith – Evercore Group LLC Michael S. Nannizzi – Goldman Sachs & Company, Inc. Kai Pan – Morgan Stanley Jay Cohen – Bank of America Merrill Lynch.

Meyer Shields – Keefe, Bruyette & Woods, Inc Ian Gutterman – Balyasny Asset Management L.P..

Good day, everyone, and welcome to The Chubb Corporation's Second Quarter 2014 Earnings Conference Call. Today's call is being recorded. Before we begin, Chubb has asked me to make the following statements.

In order to help you understand Chubb, its industry and its results, members of Chubb’s management team will include in today’s presentation forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

It is possible that actual results may differ from estimates and forecasts that Chubb's management team makes today. Additional information regarding factors that could cause such differences appears in Chubb's filings with the Securities and Exchange Commission.

In the prepared remarks and responses to questions during today's presentation, Chubb's management may refer to financial measures that are not derived from Generally Accepted Accounting Principles, or GAAP.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures and related information are provided in the press release and the financial supplement for the second quarter 2014, which are available on the Investors section of Chubb's website at www.chubb.com.

Please also note that no portion of this conference may be reproduced or re-broadcast in any form without Chubb’s prior written consent. Replays of this webcast will be available through August 22, 2014.

Those listening after July 24, 2014, should please note that the information and forecast provided in this recording will not necessarily be updated and it is possible that information will no longer be current. Now, I’ll turn the call over to Mr. Finnegan..

Thank you for joining us. Chubb produced solid results in the second quarter of 2014, we generated operating income per share of $17, net income per share $2.03. Our results benefited from strong premium growth of 5% ex-currency and our highest level of retention for commercial and professional liability in three years.

In addition, we enjoyed excellent profitability in our long-tail lines of business such as professional liability, casualty and workers compensation. However, our results of the second quarter were adversely impacted by the performance of our short-tail property lines.

We had unusually high levels of large fire losses in our commercial and personal books of property business. In addition, severe weather in the United States resulted in elevated non- catastrophe losses, as well as catastrophe losses of $0.39 per share.

The market remained stable in the second quarter, as evidenced by the continued increase in the rates. We are pleased that we’re able to secure our mid single-digit increases in our U.S. rate change metrics in all our businesses.

With respect to our commercial and professional liability businesses, well the size of the increases was slightly less than in the first quarter. We’re very pleased that we are able to obtain these increases and still achieve higher levels of renewal rentention. We produced the second quarter combined ratio of 90, including 4.8 points of cats.

Excluding cats, our combined ratio was 85.2 compared to an exceptionally low 80.9 in the second quarter last year. That 80.9 last year was the best ex-cat combined ratio we’ve had any quarter in the past six years. Annualized operating ROE for the second quarter was 11.3%, while annualized GAAP ROE was 12.2%.

GAAP book value per share at June 30, 2014 was $68.60 an increase of 6% from year end 2013. Our capital position is excellent and we made progress on our share repurchase program during the quarter. For the first six months of 2014, we produced net income per share of $3.83 and operating income per share of $3.20.

As a result of our performance in the first half, we have reduced our guidance for full-year 2014 operating income per share to a range of $6.75 to $6.95 from the $7.10 to $7.40 per share range, we provided in January. Ricky will discuss our revised guidance later.

And now for more details on our operating performance will start with Dino, who will discuss Chubb’s commercial and specialty insurance operations..

Thanks, John. Chubb Commercial and Chubb Specialty insurance both had strong performance in the second quarter characterize by excellent underwriting result in most lines of business particularly our long tail lines.

We also had great retention, which as we stated last quarter was our focus and a modest increase in new business allowing us to improve our overall growth rate. Starting with CCI, second quarter net written premiums were up 3% to $1.4 billion.

While the commercial market is always competitive, our value added underwriting driven approach continues to work well. CCI’s second quarter combined ratio was 93.3% compared to 89.9% in the corresponding quarter a year ago.

The impact of catastrophe losses accounted for 4.9 point of the combined ratio, compared to 8.1 points in the second quarter of 2013. Excluding the impact of catastrophes, CCI’s second combined ratio was 88.4% in 2014 compared to 81.8% in 2013.

The deterioration in CCI's ex-cat combined ratio from a year ago was entirely explainable by the property and Marine line of business. Our other three CCI lines performed well, in fact, casualty and workers' comp had much better results than in the year ago second quarter.

In the second quarter of this year, the Property and Marine business experienced significantly higher than usual ex-cat loss activity. This line had a combined ratio, excluding catastrophes of 97.4%, which was 34 points worse and the extremely low second quarter of 2013.

And if we consider a longer historical perspective, this year’s second quarter property and Marine ex-cat combined ratio was about 15 points worse than our five year average. At current earned premium levels, this equates to approximately $50 million.

This elevated loss activity was driven by a combination of several large fire losses and some non-cat weather related losses. As we have pointed out in the past, property losses can fluctuate substantially in any one quarter. The second quarter last year was an unusually low outlier for the Property and Marine business.

With an ex-cat combined ratio of 63.1%. In fact, that was the best ex-cat combined ratio a 9.5 year, whereas this year the second quarter was an unusually high outlier. We have carefully analyzed the losses in the quarter and found no trends or issues that warrant any change in our underwriting strategy.

Partially offsetting the property results was in almost ten point improvement in the casualty combined ratio the 85.3% which was the best performance for casualty in 12 quarters.

We also had about a two point improvement in workers' compensation combined ratio, an outstanding 84.5% reinforcing our status as one of the most profitable workers’ comp underwriters in the industry.

In our first quarter conference call we mentioned that in light of the rate increases over the past several years we were focusing on retaining profitable business and taking advantage of better price new business in this focus favorably impacted our growth rate.

While we are always looking to call accounts where we cannot secure appropriate rates and terms and conditions, our underwriting and pricing actions over the past few years have resulted and there being fewer accounts that needed to be called. This benefited both retention and the new the lost ratio. Indeed, CCI's second quarter retention in the U.S.

increased to 87% its highest level in ten quarters and up from 85% in the first quarter of 2014. We achieved this two point increase in retention over the first quarter while still securing average U.S. renewal rate increases of 4%. Outside the U.S., CCI's average renewal rate increases continued in the low single-digits.

With respect to new business, we continue to penetrate our target market segment where our unique expertise and products and services afford us the greatest opportunity to achieve our required risk adjusted margin. CCI's new to last business ratio in the U.S. was 1.2 to 1 compared to 0.9 to 1 in the first quarter of 2014.

Turning now to Chubb Specialty insurance net written premiums were up 5% in the second quarter to $655 million. CCI's second quarter combined ratio was an outstanding 78.7% in 2014, versus 86% in 2013. For the professional liability portion of CSI, which represents the majority of the portfolio, net written premiums were up 4% to $572 million.

The combined ratio for professional liability improved to 83.2% from 91.9% in the second quarter of 2013 and from 84.6% in the first quarter of 2014.

The continued improvement in the combined ratio over time reflects our discipline underwriting and culling action, aided by our advanced analytic and predictive modeling, skillful portfolio management and the compound effect of the price increases we have achieved over the last few years. Renewal retention for professional liability in the U.S.

in the second quarter improved to 88% from 85% in the first quarter of this year. As our rate taking in underwriting actions have earned into our renewable portfolio as is the case with CCI, we have been increasingly focused on retaining our profitable renewal business, all the while securing a strong 6% average renewal rate increase.

In markets outside the U.S., renewal rate increases remain consistent with prior quarters rising by low single-digits. Our new to loss business ratio for professional liability in the second quarter was 1.2 to 1 up from 0.9 to 1 in the first quarter of 2014 and 0.8 to 1 in the fourth quarter of 2013.

The steady improvement in this metric is driven both by less loss business and we focus on retaining our profitable renewal business, as well as our success in writing better priced new business available in the market after several years of industry rate increases and underwriting action. One final note on our professional liability business.

Several weeks ago the Supreme Court of the United States rendered its long-awaited decision in the Halliburton case.

We view the ruling as a middle of the road outcome and not unexpected, while it will take a long time to know the full impact, if any on the frequency and severity of securities class actions, at this stage our perspective is that the ruling is a mild positive, but should do little to change the current D&O landscape with respect to underwriting or pricing.

Turning now to the surety portion of the CSI book. Net written premiums were up 8% to $83 million. This compares to a decline of 13% in the first quarter of 2014 and was driven by an increase in U.S. construction activity among a few of our larger customers. Surety is a lumpy business from both a premium growth and a profitability standpoint.

The combined ratio was 45.3 compared to 42.1 in the second quarter of 2013. Despite the occasional large loss, our expertise in customer selection, underwriting and portfolio diversification, has enabled us to achieve outstanding long-term results in our surety line making this business very attractive to us.

In conclusion, the results of the second quarter demonstrate that continued success of our long standing commercial and specialty underwriting strategy.

In any one quarter the profile of accounts that are up for renewal can vary and as we have noted in the past, the change in premium growth from one quarter to another is sometimes attributable more to the renewal or non-renewal of a few large accounts than to any underlying trend.

Nevertheless, we are confident that our underwriters will continue to manage the rate retention dynamic, in order to strive for the optimal balance based on the underwriting characteristics of each insured.

It is this commitment to underwriting discipline along with building strong relationship with the best agents and brokers in the industry in providing our customers with unparalleled claims service that should enable us to continue to grow our business profitably over time.

And now I’ll turn it over to Paul, who will review our results for CPI and corporate wide claims..

Thanks Dino. Considering the elevated level of homeowners losses Chubb Personal Insurance turned in a very good quarter. CPI net written premiums increased 5% to $1.2 billion and CPI produced a combined ratio of 92.7 compared to 89.6 in the corresponding quarter last year.

The impact of catastrophes on CPI second quarter combined ratio was 7.5% in 2014. In the second quarter a year ago the cat impact on CPI's combined ratio was 12.7 points. On an ex-cat basis, CPI's combined ratio was 85.2 in the second quarter of 2014 compared to 76.9 in the second quarter of 2013.

Homeowners' premiums grew 4% in the quarter and the combined ratio was 92.2 compared to 86.9 in the corresponding quarter last year. Cat losses accounted for 12.1 points of the homeowners combined ratio in the second quarter of 2014, compared to 20.1 points in the second quarter of 2013.

Excluding the impact of catastrophes the 2014 second quarter, homeowners combined ratio was 80.1, compared to an extraordinary 66.8% in the same period a year ago, which was the lowest homeowners ex-cat combined ratio of any quarter in the previous eight years.

As in the first quarter this year CPI experienced an elevated level of homeowners’ fire losses in the second quarter. For comparison, U.S. fire losses in the second quarter of 2014 accounted for 13 points of the overall worldwide homeowners loss ratio, versus only five points in the second quarter of 2013. In addition the effect of U.S.

non-cat weather related losses contributed about two points more of the loss ratio than in the corresponding quarter of 2013. Together the impact of U.S. fire and non-cat weather related losses accounted for ten points of the year-over-year second quarter ex-cat combined ratio delta for homeowners. Looking at our average combined impact of U.S.

fire and non-cat weather related losses on homeowners over the past five years, the impact in the second quarter of this year was about six points worse than the average. At the current earned premium levels, this equates to about $40 million. Fire and weather losses do not occur in a linear fashion.

We believe our book as well underwritten and that the losses will average out over time. Homeowners’ rate and exposure premium increases totaled 7% in the U.S. in the second quarter. The same is what we achieved in the first quarter of this year, as well as in the second quarter of 2013.

Apart from the dollar impact of rate taking we continue to implement a greater pricing sophistication as our ability to match price to specific risks improves thus, enhancing the quality of our portfolio. The use of sophisticated analytics is also helping us retain more of our best customers.

We believe this suite of enhanced tools will continue to drive profitable growth in the years to come. Personal auto premium growth was flat for the quarter, auto premiums increased in the U.S. and decreased outside the U.S. driven by currency fluctuations. The combined ratio was 95.6 compared to 95.3 in the second quarter of 2013.

Policy retention in the U.S. in the second quarter was 90% for homeowners and 89% for auto. Both of which were essentially unchanged from the first quarter 2014.

In other personal, which includes our accident, personal excess liability and yacht lines, premiums increased 10% and the combined ratio was 93.1 compared to 93.3 in the second quarter a year ago. Growth was driven by accident and personal excess. Turning now to corporate-wide claims.

Catastrophe losses for the second quarter totaled $146 million before tax. There were 13 cat events in the United States and two in Canada. The events included wind, flood and hail, and affected customers in 30 states and three Canadian provinces. The vast majority of our cat losses were in the U.S., and were skewed to CPI.

As we are all aware the season of hurricanes and heighten wildfires is upon us. As evidenced by hurricane Arthur in the Carolinas, as well as the wildfires that are burning in Northwestern United States. Thus far, we have had only a handful of small claims from these events.

That said, it takes just one significant event to create intense demand for the claims services, which are the hallmark of the Chubb brand. Therefore, each year we thoroughly review our cat preparedness protocols to ensure they are current and we incorporate lessons learned from prior events.

And with that, I will turn it over Ricky who will review our financial results in more detail..

Thanks Bob. As usual I will discuss our financial results for the quarter and I will also review our updated earnings guidance. Looking first at our operating results, we had underwriting income of $278 million in the quarter.

Property and casualty investment income after tax was down 4% to $275 million, due once again to lower reinvestment rates in both our domestic and international fixed maturity portfolio.

Net income was higher than operating income in the quarter due to net realized investment gains before tax of $125 million or $0.33 per share after-tax of which $0.15 per share came from our alternative investment.

For comparison, in the second quarter of 2013 we had net realized investment gains before tax of $179 million or $0.44 per share after tax of which $0.12 per share came from alternative investments.

You will recall that in the second quarter of last year, we also recognized the gain of $0.21 per share related to the merger of Alterra Capital and Markel Corporation. As a reminder, unlike some of our competitors, we do not include our share of the change in the net equity of our alternative investments and property and casualty investment income.

We included a net realized investment gains and losses. Unrealized depreciation before tax at June 30 was $2.6 billion compared to $2.2 billion at the end of the first quarter. The total carrying value of our consolidated investment portfolio was $43.5 billion as of June 30, 2014.

The composition of our portfolio remains largely unchanged from the prior quarter. The average duration of our fixed maturity portfolio is four years and the average credit rating is AA3. We continue to have excellent liquidity at the holding company.

At June 30, our holding company portfolio had $2 billion of investment including approximately $575 million of short-term investment. Book value per share under GAAP at June 30, 2014 was $68.60 compared to $64.83 at year end 2013 and $60.76 a year ago.

Adjusted book value per share, which we calculate with available for sale fixed maturities at amortized cost was $63.87 compared to $61.86 at 2013 year end and $57.03 a year ago. As for loss reserves, we estimate that we had favorable development in the second quarter of 2014 on prior year reserves by SBU as follows.

In CPI, we had about $50 million, CCI had about $70 million, CSI at $80 million and the runoff reinsurance assumed business had none, bringing our total favorable development to about $165 million for the quarter. This represents a favorable impact on the second quarter combined ratio of almost 5.5 points overall.

For comparison, in the second quarter of 2013 we had about $215 million of favorable development for the company overall including $40 million in CPI, $115 million in CCI, $55 million in CSI and $5 million in runoff reinsurance assumed business. The favorable impact on the combined ratio in the second quarter of 2013 was about seven points.

For the second quarter of 2014, our ex-cat accident year combined ratio was 90.6 compared to 88 in last year's second quarter. During the second quarter of 2014 our loss reserves increased by $28 million, including an increase of $35 million for the insurance business and a decrease of $7 million for the runoff reinsurance assumed business.

The overall increase in reserves reflects an increase of $21 million related to catastrophes and the impact of currency translation on loss reserves during the quarter resulted in a decrease in reserves of about $10 million. Turning to capital management, during the second quarter we repurchased 4 million shares at an aggregate cost of $375 million.

The average cost of our repurchases in the quarter was $92.95 per share. At the end of the second quarter, we had $823 million available for share repurchases under our current authorization. And as we have said previously, we expect to complete this program by the end of January 2015.

Before turning it back to John, let me provide you with some additional details on our updated guidance. We've revised our guidance for operating income per share for the full-year to a range of $6.75 to $6.95 on the range of $7.10 to $7.40 that we provided in January.

As John mentioned, we’ve reduced our guidance primarily because of our operating results in the first half of this year. Our outlook for the second half of the year remains essentially unchanged from January, when we provided our initial guidance.

As a result, at the mid point of our updated guidance, we expect our ex-cat combined ratio in the second half of the year to improve by about 1.5 points from our actual results for the first half of 2014, which was impacted by an unusually high level of large buyer in non-cat weather related losses.

Our revised guidance is based upon the following underlying assumptions. We expect our combined ratio for the full year 2014 to be in the range of 90% to 91% compared to the January guidance assumption of 89% to 90%. This change reflects our actual operating results in the first six months of the year.

We are assuming five points of catastrophe losses for the second half of 2014. Based on the 5.7 points of actual cat losses we had in the first half, our assumption for the full-year calculates to 5.3 points, compared to the 5 point cat assumption in our original guidance.

For those who would like to make a higher or lower cat assumption the impacted each percentage point of catastrophe losses for the full-year on operating income per share is approximately $0.33. We expect net written premiums for the full-year to increase 2% to 4%, with an insignificant impact of foreign currency translation.

This assumption is unchanged from our January 2014 January 2014 guidance. And we expect property and casualty investment income after tax to decline 4% to 6%, which is also unchanged from our January guidance. Finally, we assume 244 million average diluted shares outstanding for the full-year compared to 245 million in our January guidance.

And now, I will turn it back to John..

Thanks Ricky. Despite an unusually high level of fire and weather related losses, we produced solid earnings in the second quarter of this year, which included a number of very positive developments. With respect to the U.S. market we enjoyed mid-single digit rate increases.

All increase in overall retention to levels better than we have enjoyed for a number of years. In addition our new to lost business ratios improved. The upshot was ex currency premium growth of 5% in the quarter, versus 1% in the first quarter of this year.

Profitability of our professional line business continued to improve professional liability, I'm sorry, reflecting rate increases in the underwriting initiatives we begin to undertake at the end of 2011. Our combined ratio and professional liability of 83.9% for the first six months of 2014.

Represented about a 5 point improvement from calendar year 2013 and almost 13 point improvement from calendar year 2012. In fact the 83.9% posted in the first six months of this year is better than our professional liability performance in any full calendar year since 2007. We also enjoyed terrific performance in other long tail lines.

For example, our 85.3 combined ratio in casualty was the best quarter we’ve had three years. Equally as impressive was workers compensation were combined ratio in each of the first two quarters of 2014 were the best we have recorded in any quarter in about six years.

Our reserve position remains strong as reflected in the 5.8 point a favorable development we had in a quarter. And finally, during the first six months of 2014 book value per share increased 6% from year-end and we will return more than $1 billion to shareholders in the form of stock repurchases and cash dividends.

On the minus side, our second quarter earnings were significantly dampened by an unusually high level of fire and non-cat whether related losses. And both commercial property and homeowners business.

As we have mentioned in the past, wide fluctuation in losses in these areas from quarter-to-quarter are generally a function of the presence or absence of good fortune. Nevertheless, we reviewed these losses exhaustively on a case-by-case basis to ensure that they do not reflect any important underlying trend.

So we expect to reversion to the mean overtime. And as Ricky noted an updated guidance we assume some improvement in the loss experience in the second half of this year. With that, I will open the line to your questions..

(Operator Instructions) We will take our first question from Amit Kumar from Macquarie..

Thanks and good afternoon. Just two quick questions on I guess the guidance and the discussion on pricing. You mentioned better priced new business few times.

What is the approximate delta between the new business pricing and renewal business pricing?.

Hi, its Dino. As we've always mentioned, it's not surprising that renewals are always going to perform better than new lines. We have an ability to review lost until modify terms and conditions as needed. Usually results in reduced losses.

And so we are always careful in our new business selection process and that's why we just focus on the target niches that we did where we have developed some expertise and we see a little bit of contraction in that gap, but it’s really just a function of new business always going to be a little bit less than renewals, there is always going to be a little bit of that gap, we just stick to what we know in our target markets that we like and where we have expertise and we are able to write a little bit more in new business in the second quarter.

Now again, it's still at levels that are much lower than what they have been several years ago so just to keep that I guess the new business..

Volume..

Yes, the volume, yes, yes..

Okay, got it. The other question I had is on the guidance and premiums. Just based on your comments, it seems that you're probably incrementally more satisfied with the price adequacy of our accounts or I guess the buckets which need rate increases.

I would have imagined that seven months from the initial guidance probably you would have ended up thinking about retaining more and hence the NPW guidance might have changed, but its essentially unchanged seven months from when it was announced.

Can you just maybe just explain that to me?.

I guess – it's Ricky, I'll try.

I guess as we think about that the premium growth when we look at what we did in the first half and what we were thinking about when we came into the year, we were probably a little bit lighter in the first half of the year on margin than we had thought given in the first quarter this year we had premium growth of about zero and 1% on an ex-currency basis.

So if I’m answering your question correctly, you probably would get a little incremental growth in the second quarter in order to get from where we were for the second half to get from where we were in the first half for the year to say the midpoint of the guidance.

Does that help?.

Yes. I just wanted to asking was that Dino, are you now with seven months elapsed are you more satisfied with price adequacy of accounts than what you might have imagined at Jan, when you had come out with the guidance..

Maybe – its Dino, maybe I can just take a look at – answer it from just overall rate adequacy and how we look at that if I can and I’ll give you a little color and hopefully this answers its, but I don’t want to talk about rate adequacy in terms of specific percentage of the book, because that’s a little too over simplistic, right the book is very dynamic, its diversify, sophisticated, geographically diverse and also risk characteristics of an account or set of accounts can change in anyone year.

Having said that clearly after the compound rate increases we've achieved over the last several years as well as the underwriting actions, it’s important to keep that in mind.

We clearly feel that the book has improved in terms of rate adequacy, but there is still are portions of the book that need rate and you have to keep in mind that this happens really at the individual account level.

As I mentioned in my earlier remarks, our underwriters are focused on managing the rate retention dynamic based on the underwriting characters of each individual accounts and so you still see some variation on the individual accounts as an example, in the second quarter, in the top quintile by premium rate increasing we’re still getting greater than a 15% increase and in the lowest quintile we were giving about a 5% decrease.

You're still seeing that variation, but clearly bottom line, after several years both of rate increase and the underwriting action the book has an improved in terms of rate adequacy..

I would just point out though it is a moving target and more rates was gotten over the first six months, improved rate adequacy on the other side. Interest rates and therefore investment income prospects are down from the end of last year you might remember interest rates are 50 points lower than they were at year end. There are headwinds here too..

You answered my question I apologize, I phrased the question poorly. Thank you..

We’ll take our next question from Jay Gould from Barclays..

Thank you and good afternoon.

I want to ask you given that we’ve seen the underlined combined ratio tick up to the low 90% range from kind of high 80% level, should we anticipate going forward that low 90s is probably more reasonable run rate and that’s excluding cats in prior development?.

Yes Jay it is Ricky. I don't think that is the correct assumption. If you look at the guidance that the updated guidance and as we mentioned on the call, we are expecting some improvement in the combined ratio performance in the second half of the year. So I wouldn’t make that assumption. And in fact..

I’m sorry you go ahead..

All right in fact it’s as I mentioned when I talked in my remarks, when we came into the year, if you look at what our initial guidance was on an ex-cat combined ratio basis, you do the math between what the midpoint of our guidance is now versus what we had in the first half in essence we believe that we’re going to have the same performance in the second half as we'd assumed we started the year..

So you would attribute the underlying combined ratio in the first half being in the low 90s more to these….

Definitely. .

Number of fires and non-cat weather losses..

Absolutely. If you look at the comparison to last year – to this year, last year we look at year-over-year comparison, you’re talking, I mean – I think Paul kind of gave it, but you’re talking $180 million deterioration due to fire and non-cat weather and then a commercial property in marine lines, that's on $6 million of premium that’s a mouthful.

At three points right there.

And I guess for the second half our guidance is what 88 to 89, what's the second half guidance?.

We keep the year 90 to 91 and then and the second half is….

I want again doing on an ex-cat basis it would be something similar to the ex-cat combined ratio we assumed at the beginning of year which was about 80.5, calendar year..

I see, okay. And then a separate issue, with regard to the Halliburton decision, I would have thought that could be more than a mild positive giving it has the ability to call the number of securities claims before they get the class certification.

So wouldn't that meaningfully if not reduce the number of class actions and at least take down overall severity in defense costs?.

If it all worked out Jay but I think we have to watch and see how the courts rule following the Supreme Court decision here. It's not clear what kind of real threshold are applying in practical matters.

So were not beating a wardroom, it's a great victory, we have to say, and there are some argument that it might increase defense costs on the other side. If courts take aggressive approach at our position it would help. But again, we'll have to see what happens here..

The defendants have the ability to say well prove to what you actually relied on that statement, or that you didn't rely on that alleged fraud when you brought the stock..

Jay this is Paul, I will augment that a little bit by saying it’s not just Halliburton you have got Omnicare, you got [indiscernible], you have got a number of decisions out there, and what really encourages us is that at first to at first to court continues to choose these cases right.

So they a right to accept them or not and they're choosing to take them. I think that gives us a lot of hope. And second because these cases do present opportunities for the court to make changes that could benefit our insureds, the compounding effect of all of these cases could certainly be more than mildly positive.

But taken on individual base I think you know, is characteristic of this mild positive for Halliburton is correct..

Yes. And again Jay it was also in the context, I mean, that we didn’t think it’s going to change the marketplace in the near term, right. The people are going to wait..

I see. That’s helpful thank you..

We’ll take our next question from Josh Stirling from Sanford Bernstein..

Hi good evening. Thanks for taking the call. So as you guys are shifting from focusing on driving margins to really more about retention and putting and getting into growth mode, I thought I had asked a couple of more longer term questions on your posture with growth.

Paul, think you mentioned you brought up a topic I hadn't heard you guys talk about before which was sophisticated analytics that that it was interested because I was think if you guys first and foremost of having a brand and its relationship stay good business selection to start off with.

I’m wondering if you give us a sense of what Moore's behind the comment to what kinds of things you guys doing to integrate analytics in your strategy and may be where you think you stand compared to some of your competitors.

And if you think that analytics can start to be a competitive advantage for you guys?.

Absolutely Josh I mean we’ve talked before, I know Dino last year, for example, brought up our panorama of product and that is certainly taken our auto to a far more sophisticated level. We’ve got many tiers there.

Now remember, what we write in automobile isn’t the same lets say some of the large direct writer's that have been using sophisticated analytics for a very long time.

That said, when we talk about our fleets of affluent or high net worth or high valued cars that type thing, these tools are very sophisticated in helping us a lot to retain the right business and to attract new business. The same thing can be said for our pricing tiers in our predicative models around the homeowners as well for the affluent.

Now your point about our brand, our relationships with agents all of that comes into play, and the analytics are just one part of the tool, but they are not everything so, Dino you wanted to touch on the unified [ph]..

Yes, just at the introduction of your question right, I mean our increased retention is increased retention of profitable business? As we are always focused on increasing our margin, so I don’t want – I just want to clarify that point, but, just a talk a little bit about the analytics on our professional liability as an example there.

Our strategy and our capabilities are good towards taking advantage of the wealth of experience in our tremendously rich data set of information that we have, having underwritten literally hundreds of thousands of professional liabilities, polices over roughly more than three decades.

So it’s through to this expertise and this data mining of coverage, pricing, loss data, we've built proprietary underwriting an account ranking tools and these tools can be also supplemented with external data feeds and it's the proprietary analytical tools are then just one more arrow in the underwriters quiver for them to drop on when making renewal decisions.

As Paul said, analytics are increasing in this industry, but where we see it as being a real competitive advantage for us because of the history of proprietary data that we have amassed overtime. And the underwriters are very pleased with additional insight gained from these tools and we intend to continue to invest in this area..

Yes and Josh not to beat it to death, but we not only use them on the front end underwriting side, but we are using in awful lot of tools on the back end, on the claim side as well.

So for example some of our tools are predicative models around fraud detection in workers compensation, you are seeing that manifest itself into some of the spectacular world-class combined ratio in workers comp..

Let me interrupt Josh, what Dino said. We are properly focused on profitability. We are happy with the growth we’ve got in the second quarter; we didn’t have much growth in the first quarter.

Our accounts are in strong form, we want to retain more of the counts and we think that’s certainly a stepping stone to more profitability, but we are not giving away any rate to do so, we are getting what the market will bear and what we need on the accounts..

Got it, that’s really helpful. If I could ask just one another topic that’s comes to mind a bit not sort of is internally focused but sort of more risk management and just sense of growth and how you think about risk return and the opportunity.

Obviously, the markets changed a lot with changes to the reinsurance industry, smaller guys starting to try to take share and write more Florida business, more coastal opportunities.

How do you guys think about the coast these days are you still sort of running from them and trying to play defense or is this something we could see you be serves a big opportunity for Chubb here?.

I’ll mention the coastal piece here Josh, just because I think you're probably thinking along the homeowner side of it.

And again I’ll go back to what John just really emphasize around profitable growth, where we are seeing it on the homeowner side frankly is maybe we are seeing some customers that have exposure in Florida along the coast where heretofore we weren’t able to necessarily take on that house, but given their spread of risk that they bring to us, not just in Florida but maybe in the Northeast and Illinois another places.

We are able to use some reinsurance opportunistically to hang on to those types of customers or to even write more than we’ve seen in the past. Dino I don’t know if you want to touch anything commercially. .

I’ll point out that the cat modeling agencies have significantly reduced PMLs on the coastal areas which hasn't hurt either..

Got it. Thank you..

We’ll go next to Vinay Misquith from Evercore..

Hello, good evening. The first question is the above average property and marine losses and the fire losses and the homeowners.

We have seen that for a couple of quarters and I think you touched upon this in your remarks, in your opening remarks but if you could help us understand and if we see some sort of trend developing or is it just quarterly volatility?.

I think that in the first quarter we had very high non-cat weather related losses in homeowners that's because the weather was awful, but we’d expected that the – this quarter we had somewhat higher non-cat related weather, fire losses kicked in, first quarter we really didn't have unusually high commercial and property and marine losses just the second quarter last year was so unusually low, 63 combined.

This quarter, sometimes as you never know. The quarters are discrete on a piece of paper but things we roll forward. We all loss experience was not very good in the second quarter, but we can't find any trend.

Last year when I was on these calls and we had usually low losses and I certainly didn’t talk about any trends in fact what I suggested you all was that you should not project or combined ratios in the future based on margin expansion of the base period last year, combined ratio last year because it was so low.

Similarly, I don't think you should project anything out the next are off this years second quarter combined ratio because I think it's unusually high. You're talking way beyond what we normally have in way beyond we had second quarter..

Really this is Paul, if you look back on the homeowners side to 2009 and you can see another period where we had some anomalous losses.

We've been reading high network homes now for 30 years and as we go back and we look at the history of this there have been periods where you to get that kind of misfortune of a rashes of some fires but as John mentioned we scrubbed each of these individual accounts to look for anything that we can learn from them and try to detect any trends, but at the end of the day, I think the conclusion is this is the insurance business..

So that’s helpful thank you. just to follow-up on the pricing and the competitive environment. If could you give us an update on the competitive environment out there? Thanks..

Sure. We didn’t categories it as clearly the market is competitive, but frankly, it usually is. On average, we would say that the pricing dynamics though in the markets are rational.

We can always point to a always to a situation where you're going to scratch your head asking why competitor may have right and account at a low price but general we are seeing most of the pressure emerge on the most profitable account.

So if you're an account with longer-term profitability will on average its going to be priced much more aggressively than an insured with a similar operation that is historically less profitable or inherently tougher exposures which makes sense in particular after multiple years of rate increases.

One area where we might question the rationality of pricing its around some large accounts.

Example a situation where you have a low six-figure property account versus a large seven figure similar property account, the latter is going to tend to have much more aggressive pricing even if to exposure to loss on the large one as far greater and this dynamic seems to be especially prevalent at least wholesaling ENS markets as we see it.

So I guess for some you can conclude that the Lora the big premium is driving motivation quite frankly in our opinion size doesn’t matter. Its really the price and the terms and conditions measured against the risk characteristics that we rely on.

And in fact if you look at our retention rate of these larger accounts its below our overall retention rate we just choose draw align in the sand. In professional liability I was mainly commercial but in professional liability you’d to see same dynamics.

The better businesses is being more aggressively priced however we also continue to see general acceptance in professional liability for meaningful price increases on those lines of business that have had particularly poor profitability over the years such as EPL and review the stability as encouraging.

So I guess I'd say that's against this kind of competitive back drop were pleased what our mid single digital average rate increase in both commercial and professional liability and combined with some of the highest level of retention so that’s the general feel for the market. I hope that helps..

Yes. Thank you..

We’ll take our next question from Mike Nannizzi from Goldman Sachs..

Thanks. One question maybe on other personal lines, so that picked up a bit, is that bundling or is there another effort or something else that's we seen that lift the couple of quarters here in the double-digits recently so I’m just curious sort of what’s been driving that and then just a follow-up. Thanks..

No problem, Mike. Other personal is where we report our accident and health business, up little over 15% of that other personal the remainder than it’s represented by personal excess any odd accident as I mentioned had the highest growth driven by travel accident coverage in the United States.

Personal excess liability also grew, but that was fueled by both rate and exposure, on a year-to-date basis other personal move about 6% I think grew for at 6% for the entire year 2013.

so other personal growth had loss related little bit through out the year because if we have an additional subtraction of a single premium program so that can pretty much drive the growth in any one three month period of time, but I would just tell you that overall we’re very optimistic about our opportunities in accidents and as well as personal excess and in last couple of months we’ve seen some uptick in the yachts purchasing and mega yacht business that’s good for us as well.

That’s what you’re seeing out there another personal..

Got it okay and is the ANH cohort I mean is that you expect to continue to trend higher I mean is that relatively sustainable..

Yes, we've got to learn very good plans for A&H in the coming years, I had mentioned before that we’ve invested in the team of underwriters over the last five years, we've built-in some infrastructure around the globe and we’re finding out that our reputation and our quality of our paper and the relationships are making a big difference in that market place and in fact, we’re finding that there is just an awful lot of commercial accounts that we can round out with A&H covered and we’re also seeing a lot of high net worth individuals that are looking to purchase travel accident as well.

.

Great, thanks and then just one sort of bigger picture question I guess is just on this recent volatility that we’ve seen I mean again I mean its part of the business and its part of the reason that you’re able to sort of extract the premiums you do, but they are – I would their reinsurance solutions out there especially given sort of the state of that market on the property side at this time.

Would you or how do you look into solutions that might help you reduced volatility of earnings and attritional losses outside of cats?.

It’s Ricky.

Obviously given the environment as you point out, you know we do constantly monitor the reinsurance alternatives available in the market, see whether it can not only improve our overall performance of our portfolio but also help us manage our volatility perhaps potentially grow all at the same time well trying to maintain or improve our combined ratios.

We have and will continue to consider variety of options in both the traditional and alternative markets and as always we look at the cost of these alternatives versus the benefit of purchase and protection and where we routinely manage our overall portfolio and reinsurance strategy by reviewing various types of risk transfer options.

We’re not going to change our outstanding strategy focusing on proper underwriting and pricing of each risk. Having said all that, we are looking at all kinds of alternatives.

We understand that there are opportunities in the marketplace, but as you might expect there is always we try to balance the potential short-term opportunities with our long-term objective and strategy. So we’re looking at things, but they've got to meet our particular objectives and our strategy..

You know in the end we are an insurance company and we have to bear some risk and eliminating volatility is a big step from eliminating true balance sheet risk and given away a lot of profitability and so you look at the downside.

This is the worst quarter we've had since here in terms of fire losses and this kind of things and its three points worst than a five year average and guess what? We still make $2 a share on net income.

So you know I mean its – we are sorry we didn't hit what we expected to hit, but this awful quarter we make $2 a share I don’t think we have to ensure it away..

Got it. Okay. Thank you very much..

We’ll go next to Kai Pan from Morgan Stanley..

Good evening. Thanks for taking my call.

As a first question you saw, do you see any sort of loss cost trend across your business and the question is really as you see the pricing increase gradually slowing down, I just wonder at what point the price increase is essentially matching the loss cost trend that was the no margin expansion or what potentially margin contraction?.

Well let’s talk a little bit about it. I mean, let’s take, we use we say often that we have 4% loss cost trends. And I don’t think for looking at margin expansion is kind of a theoretical notion, but if you project combined ratios out, it gets important to understand what’s really going on there. We’re above that in CPI and CSI.

We’re right above that and CCI. But I’m thinking kind of couple of things when you project out loss ratios, in the future. The first is that, we’ll turn transfer are different than what we might expect for losses in given short-term period.

For example, when we talk about long run lost cost trends, we generally mean the economic forces our portfolio paces, before consideration of any underwriting initiatives, any business mix changes that we might adopt. So they assume a pass of underwriting approach.

You know workers compensation it might be, or we’re talking about as let’s got to more the 4% with medical care, cost inflation and payroll inflation it doesn't take into account the types of things we might do in terms of changes in business mix, the client paper predict, but analytically we are using in claims and adjusting these things.

So we’re constantly seeking to improve our books of business and where you just beyond rate taking focused under initiatives calling in the performing risk. It was successful in our book management, the effective year-over-year pressure on our lost ratio is overtime what generally been less in the long-term most trend itself so that’s one.

Two, as I mentioned before even when you project loss ratio, you got a pickup base period that’s representative. Last year, as I said we talked about don’t use the second quarter last year that’s very, very low and we found at that wouldn’t have a good quarter to use. But because the second quarter was low initiate second was high.

Now going forward I would suggest as you look at what you called margin expansion a future loss cause, you also taking into account that this second quarter roughly high loss ratio and you know you probably need to assume some reversion to the mean as you project out into the future loss trend just not apply, the difference in margin expansion that help..

Yes, thank you with that. Just different topic on the buyback it looks like this first half you really terms some buybacks and dividends more than what you earned to operating earnings.

If you fair to assume that you could have return 100% like operating earnings as through the entire 2014?.

Yes, our objective as we’ve said in the past, on average is that the buyback in essence we equal to operating earnings, less shareholder dividends.

If you actually did the math when we came into this year, we were going to get back a little bit more than that formula might suggest an even with the updated guidance – operating earnings will exceed that amount, operating earnings less dividends would be a little bit less than our share buyback efforts.

So, it depends on the period but on average we would expect that we would use the operating earnings less dividends as sort of the guideline..

It might recall last year the opposite….

The opposite….

Were a couple of $100 million more in operating earnings, less dividends. And, we are not going to just the program of $100 million shorten income this year. Obviously give a big catastrophe all bets are off..

And we continue to believe that we have a significant excess capital position, so we have plenty of flexibility..

Thank you so much for all the answers..

We will go next to Jay Cohen from Bank of America Merrill Lynch..

Thank you. A couple of questions, first is on the surety business, obviously a big contributor to your profitability. I guess we're hearing some noise that, that business is getting more competitive, wants you to kind of discuss what you are seeing there.

And then, secondly, the favorable development in the specialty business, presumably that's going to be from the professional lines business was with the highest we’ve seen in something like six years or so.

And I'm wondering if you can get into more detail what drove that pretty significant favorable reserve development in the quarter?.

Okay, maybe a I can start just with the – on the surety fees I mean clearly is the competitive market, because really surety capacity it’s increased over the last several years with demand is down obviously due to the slowdown in the construction in the U.S. as well as actually many geographies around the world.

So, it has put pressure on rates that we can and we obviously do compete successfully really because of our brand or underwriting acumen or pricing discipline and the quality of customers that we have and we have been able to do that very well, it tends to grow slowly to surety business and it’s a little bit lumpy, but has been historically very profitable and we’re going to continue steady as we go..

Okay. And then, Jay, as relates to the question on development, let me try to give a few data points to answer that.

First if you look at the development we took in CSI for this quarter which was $80 million, it was driven mainly as you rightly point out by professional liability, but surety was also favorable and within professional liability it was driven by D&O and fiduciary and it was partially offset but it's a small adverse development in the crime and fidelity classes.

If you go back and look at it compared to a year ago quarter where we also had more development this quarter than we did in the second quarter of 2013 that was mainly because a year ago we had more offsetting adverse development in crime and fidelity E&O and EPL reflecting some of that the trends that we've talked about on this call and on prior calls as well..

That’s helpful.

And then on the D&O and Fiduciary what accident years are we talking about?.

We are taking 2010 and prior. .

Great. Thank you. .

We’ll go next to Meyer Shields, KBW..

Thanks good afternoon.

I was just hoping I could get the catastrophe numbers for the other segments besides homeowners?.

Can you just give me a second here?.

You want to split between commercial and personal?.

Well if I could it online that would be great, but I will take it if it’s available..

Okay let see here. Okay, I got it right here by the line here. We got package at five multi parallel, yes and then we come down at Property and Marine 13.1, homeowners 12.1..

Okay.

So nothing in auto?.

Well auto and personal it was tiny, it was 0.6. All right that’s enough..

Okay thanks very much..

Sure..

We’ll go next to Ian Gutterman from Balyasny..

Hi, thank you.

I guess I wanted to follow-up on the fire losses, is there any other maybe the first spilt I take it, was this a large number of fires relative to normal or was it few and just a very high end homes and basically getting is it a frequency or severity issue?.

Both..

Both okay. Any geographic or okay..

No, I mean there were – to get these numbers, you got to have a large number and by our nature of the kind of business we have, they are large in dollars too, but it was a too major losses there was a lot of losses..

And but the factor we are calling is not cat means they weren’t say wildfire related or tornado related or anything like that?.

You’re absolutely correct Ian. We make a distinction between a brushfire that would get a PCS cat number say a wildfire that might take place out in California or something and burn up a neighborhood that may or may not, but if it got a cat number, we would put that in the cat numbers.

These are just large individual homes that burnt to the ground that's the business we're in..

Got it and has there been any issue is as far as on the severity that rebuild cost is maybe higher than you think or insured values were too lower, anything that suggest aside from the frequency that there might be something you are taking up on the underwriting?.

It’s a great question and the answer is no, we've gone through those files with a fine-toothed comb. We’re very proud of our appraisal process. Getting the insurance to values absolutely key for us its part of our underwriting DNA because we don’t get that valuation right nothing else really matters, because the rates are promulgated off of that.

So that’s a big difference when we send people in that really understand high net worth homes all the special mill work and all the special features and fixtures to the homes, we have fine arts specials, jewelry specialist, you name it. So that's our bread and butter..

Perfect, perfect, that was my real concern. Rick, a question on the guidance, just to make sure I heard right. I think you said earlier that the implied second half is a point and half better combined ratios than the first half, but it looks like that the fire in the non-cat was a best three points impact on the first half.

So that would imply the second half apples-to-apples as a point and a half worst in the first half.

Am I doing that right?.

Yes, the other piece that I didn’t talk about redevelopment..

Got it, got it.

So we’re assuming a less development I guess in the second and the first?.

We don’t make any specific development assumption; we just run a whole bunch of different scenarios so make your type..

Got it, got it.

And then my last one, the pickup in the new to loss ratio given that the retention picked up or is it more a function of less lost business and sort of stable new business or was it more new business and stable loss business, I’m just trying to get a sense of was it more in offensive or defensive driver I guess or both?.

It was both, but it was mainly attributable to the higher retention ratio in both the CI and CSI..

Perfect. I think that’s all I had. Thanks so much..

And with no further questions in this queue. I would like to turn the call back over to John Finnegan for any additional or closing remarks..

Thank you very much and have a good evening..

This does conclude today’s conference. We thank you for your participation..