DEF 14A 1 y83140def14a.htm DEF 14A def14a
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )
 
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o  Preliminary Proxy Statement
o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ  Definitive Proxy Statement
o  Definitive Additional Materials
o  Soliciting Material Pursuant to § 240.14a-12
 
The Chubb Corporation
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
þ   No fee required.
o    Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)  Title of each class of securities to which transaction applies:
 
(2)  Aggregate number of securities to which transaction applies:
 
  (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
(4)  Proposed maximum aggregate value of transaction:
 
  (5)   Total fee paid:
 
o  Fee paid previously with preliminary materials.
 
  o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)  Amount Previously Paid:
 
(2)  Form, Schedule or Registration Statement No.:
 
(3)  Filing Party:
 
(4)  Date Filed:


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(CHUBB LOGO AND HEADER)
 
 
 
NOTICE OF 2010 ANNUAL MEETING OF SHAREHOLDERS
 
DATE AND TIME Tuesday, April 27, 2010 at 8:00 a.m., local time
 
PLACE Amphitheater
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
 
ITEMS OF BUSINESS (1) To elect 11 directors to serve until the next annual meeting of shareholders and until their respective successors are elected and qualified.
 
(2) To ratify the appointment of Ernst & Young LLP as independent auditor.
 
RECORD DATE You are entitled to vote at the annual meeting and at any adjournment or postponement thereof if you were a shareholder of record at the close of business on March 8, 2010.
 
ADJOURNMENTS AND POSTPONEMENTS Any action on the items of business described above may be considered at the annual meeting at the time and on the date specified above or at any time and date to which the annual meeting may be properly adjourned or postponed.
 
VOTING BY PROXY The notice you received providing instructions on accessing our annual meeting materials through the internet includes instructions for voting online or by telephone. Also, in the event that you affirmatively request paper copies of our annual meeting materials, you may complete, sign, date and return the accompanying proxy card in the enclosed addressed envelope. The giving of a proxy will not affect your right to revoke the proxy by appropriate written notice or to vote in person should you later decide to attend the annual meeting.
 
ADMISSION TO THE MEETING You are entitled to attend the annual meeting if you were a shareholder as of the close of business on March 8, 2010. For admittance to the meeting, please be prepared to present a valid, government-issued photo identification (federal, state or local), such as a driver’s license or passport, and proof of beneficial ownership if you hold your shares through a broker, bank or other nominee. The annual meeting will begin promptly at 8:00 a.m., local time. Please allow yourself ample time for the check-in procedures. Video and audio recording devices and other electronic devices will not be permitted at the meeting, and attendees may be subject to security inspections.
 
By order of the Board of Directors,
 
-s- W. ANDREW MACAN
W. Andrew Macan
Vice President and Secretary
 
March 18, 2010


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(CHUBB LOGO AND HEADER)
 
2010 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
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(CHUBB LOGO AND HEADER)
 
PROXY STATEMENT
 
PROXY AND VOTING INFORMATION
 
Our Board of Directors (our Board) has provided you with these proxy materials in connection with its solicitation of proxies to be voted at the 2010 Annual Meeting of Shareholders (the 2010 Annual Meeting). We will hold the 2010 Annual Meeting on Tuesday, April 27, 2010 in the Amphitheater at The Chubb Corporation, 15 Mountain View Road, Warren, New Jersey 07059, beginning at 8:00 a.m., local time. Please note that throughout these proxy materials we may refer to The Chubb Corporation as “Chubb,” “we,” “us” or “our.” We mailed the instructions for accessing our annual meeting materials, which include this proxy statement, the proxy card, voting instructions and our Annual Report on Form 10-K for the year ended December 31, 2009 (the 2009 10-K), on or before March 18, 2010.
 
Information about the Delivery of our Annual Meeting Materials
 
As permitted by rules adopted by the Securities and Exchange Commission (the SEC), we have made our annual meeting materials available to our shareholders electronically via the internet. On or before March 18, 2010, we mailed to our shareholders a notice containing instructions on how to access our annual meeting materials, how to request paper copies of these materials and how to vote online or by telephone. Unless you affirmatively request a paper copy of our annual meeting materials by following the instructions set forth in the notice, you will not receive a paper copy of our annual meeting materials in the mail. However, due to an ambiguity in the regulations promulgated under the Employee Retirement Income Security Act of 1974, as amended (ERISA), unless we have previously received a written consent to deliver materials electronically, we have assumed that participants in the Capital Accumulation Plan of The Chubb Corporation (the CCAP) have affirmatively requested paper copies of our annual meeting materials and, therefore, have mailed or will mail copies of the annual meeting materials to each participant in the CCAP whose account holds shares of our stock.
 
The SEC’s rules also permit us to deliver a single notice or set of annual meeting materials to one address shared by two or more of our shareholders. This delivery method is referred to as “householding” and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one notice or set of annual meeting materials to multiple shareholders who share an address, unless we received contrary instructions from such impacted shareholders prior to our mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the notice or set of annual meeting materials, as requested, to any shareholder at the shared address to which a single copy of those documents was delivered. For future meetings, if you prefer to receive separate copies of our annual meeting materials, please contact Broadridge Financial Solutions, Inc. at 800-542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you are currently a shareholder sharing an address with another shareholder and wish to receive only one copy of our future annual meeting materials for your household, please contact Broadridge at the above phone number or address.
 
Who Can Vote
 
Our Board has set March 8, 2010 as the record date for the 2010 Annual Meeting. Shareholders of record of our common stock at the close of business on March 8, 2010 may vote at the 2010 Annual Meeting.
 
How Many Shares Can Be Voted
 
Each shareholder has one vote for each share of common stock owned at the close of business on the record date. On the record date, 328,527,950 shares of our common stock were outstanding.


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How You Can Vote
 
Record Holders
 
If your shares are registered in your name with BNY Mellon Shareowner Services, our dividend agent, transfer agent and registrar, you are considered a shareholder of record, and the notice containing instructions on accessing our annual meeting materials online or requesting a paper copy thereof is being sent directly to you by us. Shareholders of record can vote in person at the 2010 Annual Meeting or give their proxy to be voted at the 2010 Annual Meeting in any one of the following ways:
 
  •   over the internet;
 
  •   by telephone; or
 
  •   for shareholders requesting a paper copy of our annual meeting materials, by completing, signing, dating and returning the proxy card accompanying the paper copy.
 
CCAP Participants
 
If you are a participant in the CCAP, your proxy will include all shares allocated to you in the CCAP (Plan Shares), which you may vote in person at the 2010 Annual Meeting or over the internet, by telephone or, provided that you have not delivered a written consent to receive our materials electronically, by completing and mailing the proxy card accompanying your paper copy of the annual meeting materials. Your proxy will serve as a voting instruction for the trustee of the CCAP. If your voting instructions are not received by April 22, 2010, any Plan Shares you hold will not be voted.
 
Brokerage and Other Account Holders
 
You are considered to be the beneficial owner of shares you hold in an account maintained by a broker, bank or other nominee, which may be referred to as shares held in “street name.” For shares held in street name, your broker, bank or nominee, who is the shareholder of record, has forwarded you the instructions for accessing, or requesting paper copies of, our annual meeting materials. You have the right to direct your broker, bank or nominee on how to vote these shares, and you may also attend the 2010 Annual Meeting. Your broker, bank or nominee has enclosed a voting instruction card. Beneficial owners of shares who wish to vote at the 2010 Annual Meeting must obtain a legal proxy from their broker, bank or nominee and present it at the 2010 Annual Meeting. The availability of telephone and internet voting for beneficial owners will depend on the voting processes of their broker, bank or nominee. Please refer to the voting instructions of your broker, bank or nominee for directions as to how to vote shares that you beneficially own.
 
Voting
 
Whether you vote over the internet, by telephone or by mail, you can specify whether you vote your shares for or against each of the nominees for election as a director (Proposal 1 on the proxy card). You can also specify whether you vote for or against or abstain from the ratification of Ernst & Young LLP as independent auditor (Proposal 2 on the proxy card).
 
If you are a shareholder of record and return a signed and dated proxy card without marking any voting selections, your shares will be considered present and entitled to vote and will be voted “FOR” the election of each of the director nominees and “FOR” the ratification of Ernst & Young LLP as independent auditor. If any other matter is properly presented at the meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using his best judgment.
 
Please note that this year, the rules that guide how brokers vote your shares have changed. Brokers may no longer vote your shares in the absence of your specific instructions as to how to vote with respect to the election of nominees for director or any other matter that is not considered a routine matter by the New York Stock Exchange (NYSE). Please return your voting instruction card to your broker so that your vote can be counted. If you are a beneficial owner of shares held in street name and return a signed and dated proxy card without marking any voting selections for the election of director nominees, your shares will not be voted and will not be considered as present and entitled to vote with respect to the election of each of the director nominees. The


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ratification of Ernst & Young LLP as independent auditor is considered a routine matter by the NYSE. If you are a beneficial owner of shares held in street name and return a signed and dated voting instruction card without marking any voting selection with respect to ratification of Ernst & Young LLP as independent auditor, your shares will be considered as present and entitled to vote with respect to that proposal and voted “FOR” this proposal.
 
Revocation of Proxies
 
If you are a shareholder of record or a holder of Plan Shares, you may revoke your proxy at any time before it is exercised in any of four ways:
 
  •   by notifying our Corporate Secretary of the revocation in writing;
 
  •   by delivering a duly executed proxy card bearing a later date;
 
  •   by properly submitting a new, timely and valid proxy via the internet or by telephone after the date of the revoked proxy; or
 
  •   by voting in person at the 2010 Annual Meeting.
 
You will not revoke a proxy merely by attending the 2010 Annual Meeting. To revoke a proxy, you must take one of the actions described above.
 
If you hold your shares in a brokerage or other account, you may submit new voting instructions by contacting your broker, bank or nominee.
 
Required Votes
 
The presence, in person or by proxy, of the holders of a majority of all outstanding shares of our common stock entitled to vote at the 2010 Annual Meeting is necessary to constitute a quorum. Each of the proposals to be voted upon at the 2010 Annual Meeting requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions are counted as shares present at the 2010 Annual Meeting for purposes of determining a quorum. Similarly, shares which brokers do not have the authority to vote in the absence of timely instructions from beneficial owners (broker non-votes) also are counted as shares present at the 2010 Annual Meeting for purposes of determining a quorum. Abstentions and broker non-votes are not considered votes cast and will not be counted either for or against these proposals and, accordingly, will have no effect on the outcome of the vote for Proposal 1 or 2.
 
Adjournments and Postponements
 
Any action on the items of business described above may be considered at the 2010 Annual Meeting at the time and on the date specified above or at any time and date to which the 2010 Annual Meeting may be properly adjourned or postponed.
 
2009 10-K
 
The 2009 10-K is not a part of the proxy soliciting materials. However, the instructions for accessing the 2009 10-K online and for requesting a paper copy are included in the notice you received regarding our annual meeting materials. The 2009 10-K is available on our website at www.chubb.com/investors, as well as on a website maintained by Broadridge at www.proxyvote.com. It also is available without charge by sending a written request to our Corporate Secretary at 15 Mountain View Road, Warren, New Jersey 07059.
 
Important Notice about Security
 
All 2010 Annual Meeting attendees may be asked to present a valid, government-issued photo identification (federal, state or local), such as a driver’s license or passport, and proof of beneficial ownership if you hold your shares through a broker, bank or other nominee before entering the 2010 Annual Meeting. Attendees may be subject to security inspections. Video and audio recording devices and other electronic devices will not be permitted at the 2010 Annual Meeting.


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CORPORATE GOVERNANCE
 
Commitment to Corporate Governance
 
Our Board and management have a strong commitment to effective corporate governance. We have in place a comprehensive corporate governance framework for our operations which, among other things, takes into account the requirements of the Sarbanes-Oxley Act of 2002, the SEC and the NYSE. The key components of this framework are set forth in the following documents:
 
  •   our Restated Certificate of Incorporation;
 
  •   our By-Laws;
 
  •   our Audit Committee Charter;
 
  •   our Corporate Governance & Nominating Committee Charter;
 
  •   our Organization & Compensation Committee Charter;
 
  •   our Corporate Governance Guidelines;
 
  •   our Code of Business Conduct; and
 
  •   our Code of Ethics for CEO and Senior Financial Officers.
 
Copies of these documents are available on our website at www.chubb.com/investors. Copies also are available without charge by sending a written request to our Corporate Secretary.
 
Corporate Governance Guidelines
 
Our Corporate Governance Guidelines address a number of policies and principles employed in the operation of our Board and our business generally, including our policies with respect to:
 
  •   the size of our Board;
 
  •   director independence and minimum qualifications;
 
  •   factors to be considered in selecting candidates to serve on our Board;
 
  •   director nominating procedures, including the procedures by which shareholders may propose director candidates;
 
  •   incumbent directors who do not receive a majority of the votes cast in uncontested elections;
 
  •   term limits, director retirement, director resignations upon job change and Board vacancies;
 
  •   directors’ outside directorships and outside audit committee service;
 
  •   the role and responsibilities of the independent Lead Director;
 
  •   director responsibilities;
 
  •   director attendance at Board meetings, committee meetings and the annual meeting of shareholders;
 
  •   executive sessions of our independent directors;
 
  •   director access to management and our Board’s ability to retain outside consultants;
 
  •   director compensation;
 
  •   stock ownership guidelines for directors and certain employees;
 
  •   administration of our legal compliance and ethics program;
 
  •   director orientation and continuing education;


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  •   management succession and evaluation of our Chief Executive Officer;
 
  •   annual self-assessments of our Board and each of our Audit Committee, our Corporate Governance & Nominating Committee (our Governance Committee) and our Organization & Compensation Committee (our Compensation Committee); and
 
  •   shareholder access to our Board and Audit Committee.
 
Director Qualifications and Director Nominee Considerations
 
Our Board of Directors has established our Governance Committee which is comprised solely of directors satisfying the independence requirements of the NYSE. A copy of the charter of our Governance Committee is available on our website at www.chubb.com/investors. Copies also are available by sending a written request to our Corporate Secretary. Our Board has delegated to our Governance Committee responsibility for, among other things:
 
  •   recruiting qualified independent directors, consisting of persons with diverse backgrounds and skills who have the time and ability to exercise independent judgment and perform our Board’s function effectively and who meet the needs of our Board; and
 
  •   identifying the respective qualifications needed for directors serving on our Board committees and serving as chairmen of such committees, recommending to our Board the nomination of persons meeting such respective qualifications to the appropriate committees of our Board and as chairmen of such committees and taking a leadership role in shaping our corporate governance policies.
 
We require that a majority of the directors on our Board meet the criteria for independence under applicable law and the requirements of the NYSE. We believe that variety in the lengths of service among the directors benefits us and our shareholders. Accordingly, we do not have term limits for service on our Board. As an alternative to term limits, all director nominations are considered annually by our Governance Committee. Individuals who would be age 72 or older at the time of election are ineligible for nomination to serve on our Board. While our Board does not require that in every instance directors who retire or change from the position they held when they were elected to our Board resign, it does require that our Governance Committee consider the desirability of continued Board membership under the circumstances.
 
Our Governance Committee takes a holistic approach in identifying and considering director nominees. The Governance Committee primarily focuses on the composition and competencies of our Board as a whole and how the traits possessed by individual director nominees will complement one another. While evaluating individual director nominees within this framework, the factors that our Governance Committee considers include:
 
  •   the personal and professional ethics, integrity and values of the candidate;
 
  •   the independence of the candidate under legal, regulatory and other applicable standards, including the ability of the candidate to represent all of our shareholders without any conflicting relationship with any particular constituency;
 
  •   the diversity of the existing Board, so that we maintain a diverse body of directors, with diversity reflecting gender, ethnic background and geographic and professional experience;
 
  •   the professional experience and industry expertise of the candidate and whether it will add to or complement that of the existing Board;
 
  •   the compatibility of the candidate with the existing Board;
 
  •   the length of tenure of the members of the existing Board;
 
  •   the number of other public company boards of directors on which the candidate serves or intends to serve, with the general expectation that the candidate would not serve on the boards of directors of more than four other public companies;


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  •   the number of public company audit committees on which the candidate serves or intends to serve, with the general expectation that, if the candidate is to be considered for service on our Audit Committee, the candidate would not serve on the audit committees of more than two other public companies;
 
  •   the candidate’s service on the boards of directors of other for-profit companies, not-for-profit organizations, trade associations or industry associations;
 
  •   the ability and willingness of the candidate to devote sufficient time to carrying out his or her Board duties and responsibilities effectively;
 
  •   the commitment of the candidate to serve on our Board for an extended period of time; and
 
  •   such other attributes of the candidate and external factors as our Governance Committee deems appropriate.
 
Our Governance Committee has the discretion to weight these factors as it deems appropriate. The importance of these factors may vary from candidate to candidate.
 
Nominating Procedures
 
The primary purpose of our nominating procedures is to identify and recruit outstanding individuals to serve on our Board. Our Governance Committee meets periodically to consider the slate of nominees for election at our next annual meeting of shareholders. If appropriate, our Governance Committee schedules follow-up meetings and interviews with potential candidates. Our Governance Committee submits its recommended nominee slate to our Board for approval.
 
Our Governance Committee will consider candidates recommended by directors, members of management and our shareholders. In addition, our Governance Committee is authorized to engage one or more search firms to assist in the recruitment of director candidates.
 
The procedures for shareholders to propose director candidates are set forth in Article I, Section 10 of our By-Laws. Our Governance Committee may make such additional inquiries of the candidate or the proposing shareholder as our Governance Committee deems appropriate. This information is necessary to allow our Governance Committee to evaluate the shareholder’s proposed candidate on the same basis as those candidates referred through directors, members of management or by consultants retained by our Governance Committee.
 
Shareholders wishing to propose a candidate for consideration should refer to Article I, Section 10 of our By-Laws, the information set forth under the heading “2011 Shareholder Proposals and Nominations” and the SEC rules applicable to shareholder proposal submission procedures.
 
Director Election Procedures
 
In uncontested elections, our directors are elected by the affirmative vote of a majority of the votes cast. In the event that an incumbent director receives less than the affirmative vote of a majority of the votes cast and the director would otherwise remain in office by operation of New Jersey law, the affected director is required to tender his or her resignation. Our Governance Committee is required to promptly consider the resignation and make a recommendation to our Board as to whether or not to accept such resignation. Our Board is required to take action with respect to our Governance Committee’s recommendation within 90 days after the date of the election. These procedures are described in full in our Corporate Governance Guidelines.
 
Director Independence
 
Our Governance Committee reviews each director’s independence annually in accordance with the standards set forth in our Corporate Governance Guidelines and the requirements of the NYSE. No member of our Board will be considered independent unless our Governance Committee determines that the director has no material relationship with us that would affect the director’s independence and that the director satisfies the independence requirements of all applicable laws, rules and regulations. To facilitate the analysis of whether a director has a


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relationship with us that could affect his or her independence, our Board has identified in our Corporate Governance Guidelines the following categories of relationships which should not affect a director’s independence or are deemed immaterial and, therefore, are not considered by our Governance Committee in determining director independence:
 
  •   charitable contributions made by us to any organization:
 
  •   pursuant to our Matching Gifts Program on terms of general applicability to employees and directors;
 
  •   in amounts that do not exceed $25,000 per year; or
 
  •   that have been approved by our Governance Committee;
 
  •   commercial relationships with any entity or organization where the annual sales to, or purchases from, us are less than two percent of our annual revenue and less than two percent of the annual revenue of the other entity or organization; and
 
  •   insurance, reinsurance and other risk transfer arrangements entered into on an arm’s length basis in the ordinary course of business.
 
Our Board reviewed director independence in 2009 based on the assessment of our Governance Committee. As a result of this review, our Board determined that each of our directors, other than John D. Finnegan, who is our Chairman, President and Chief Executive Officer, was independent as defined in the listing standards of the NYSE and, in the case of the members of our Audit Committee, Section 10A(m)(3) of the Exchange Act.
 
Related Person Transactions
 
Our Governance Committee has adopted a written policy governing the review and approval of transactions in which we are a participant and in which any of our officers, our directors, holders of five percent or more of our common stock or any of their respective immediate family members (as defined by the SEC) has a material direct or indirect interest. These individuals collectively are referred to as related persons. This policy prohibits us from participating in any transaction in which a related person has a direct or indirect material interest unless:
 
  •   the transaction is a permitted transaction (as defined below);
 
  •   in the case of our executive officers and holders of five percent or more of our common stock, the transaction is reported to and approved by our Board, our Governance Committee or another Board committee comprised of disinterested directors; or
 
  •   in the case of our directors and nominees for director, the transaction is reported to and approved by a majority of the disinterested members of our Governance Committee or, if less than a majority of our Governance Committee is disinterested, a majority of the disinterested members of our Board.
 
In the event that a related person inadvertently fails to obtain the appropriate approvals prior to engaging in a transaction in which the related person has a material direct or indirect interest and in which we are a participant, the related person is required to seek ratification of the transaction by the appropriate decision maker referenced above as soon as reasonably practicable after discovery of such failure.
 
Our Governance Committee has identified categories of transactions that are appropriate and generally do not give rise to conflicts of interest or the appearance of impropriety, which, accordingly, do not require approval or ratification. These categories of transactions, referred to as permitted transactions under the policy, are:
 
  •   the purchase of insurance products or services from us on an arm’s length basis in the ordinary course of business and on terms and conditions generally available to other insureds;
 
  •   claims activity relating to insurance policies administered on an arm’s length basis in the ordinary course of business and consistent with the administration of the claims of other insureds;
 
  •   any transaction or series of transactions with an aggregate dollar amount involved of $100,000 or less;


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  •   transactions within the scope of a related person’s ordinary business duties to us, where the benefits inuring to the related person relate solely to our performance review process (and resulting compensation and advancement decisions);
 
  •   our payment or reimbursement of a related person’s expenses incurred in performing his or her Chubb-related responsibilities;
 
  •   the receipt of compensation and benefits from us, provided that such arrangements are approved in accordance with the policies and procedures established by our Board or a committee thereof;
 
  •   the purchase or sale of our securities in the open market or pursuant to any equity compensation plan approved by our Board and our shareholders;
 
  •   any transaction with an entity or organization with whom the related person is serving or affiliated solely at our request;
 
  •   any transaction in which the related person’s interest arises only: (i) from the related person’s position as a director of another corporation or organization that is a party to the transaction; (ii) from the direct or indirect ownership by the related person and all other related persons, in the aggregate, of less than a ten percent equity interest in another person (other than a partnership) which is a party to the transaction; or (iii) from both such position and ownership; and
 
  •   any transaction in which the related person’s interest arises only from the related person’s position as a limited partner in a partnership in which the related person and all other related persons have an interest of less than ten percent and the person is not a general partner of and does not have another position in the partnership.
 
Related person transactions since January 1, 2009 are discussed under the heading “Certain Transactions and Other Matters.”
 
Board Leadership Structure and Risk Oversight
 
Board Structure
 
As noted in our Corporate Governance Guidelines, the determination of our Board’s leadership structure is an integral part of our succession planning process. Based on our Board’s current composition as well as Mr. Finnegan’s business experience and day-to-day involvement in our operations, our Board has determined that the most effective leadership structure for our Board is for the roles of Chief Executive Officer and Chairman of the Board to be combined. To ensure our Board’s independence and proper functioning, our Board has also elected a Lead Director with substantial authority over our Board’s operations. Our Board has determined that this structure currently is beneficial because it fosters the development and implementation of business strategies, while also providing the balance of an empowered independent Board.
 
The Lead Director has the following authority:
 
  •   to act as a liaison between the Chairman and the independent directors;
 
  •   to call special meetings of our Board;
 
  •   to call special meetings of any committee of our Board;
 
  •   with the consent of a majority of the members of our Executive Committee, to call special meetings of our shareholders;
 
  •   in the absence of the Chairman of the Board, to preside at meetings of our Board;
 
  •   to preside at all executive sessions of the non-employee directors and the independent directors;
 
  •   in the absence of the Chairman of the Board, to preside at meetings of our shareholders;
 
  •   to provide direction regarding the meeting schedule, information to be sent to our Board and the agenda for our Board meetings to assure that there is sufficient time for discussion of all agenda items;


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  •   at the Lead Director’s discretion, to attend meetings of any committee on which he or she is not otherwise a member;
 
  •   to hire independent legal, financial or other advisors as he or she deems desirable or appropriate, without consulting or obtaining the approval of any member of management in advance; and
 
  •   to exercise such additional powers as may be conferred upon the office of Lead Director by resolution of our Board or our Governance Committee from time to time.
 
The Lead Director serves on our Executive Committee and is eligible to serve on any or all other committees of our Board. The Lead Director is elected annually and is not subject to term limits. James M. Zimmerman currently serves as our Lead Director.
 
Risk Oversight
 
Our Board recognizes that one of its key responsibilities is to understand and evaluate how the material risks to which we are subject interrelate, how they affect our business and how management addresses those risks. Pursuant to its charter, our Audit Committee is responsible for overseeing our major risk exposures and related mitigation strategies. Our Chief Risk Officer and other members of senior management report quarterly (and more frequently if warranted) to the Audit Committee on these subjects. In turn, the Audit Committee members regularly report on these matters to our Board. In addition, our Lead Director generally attends meetings of the Audit Committee and, as he deems appropriate, he (or any other member of the Audit Committee) may discuss matters (risk-related or otherwise) raised during those meetings in the executive sessions of our independent directors at which he presides. Any member of the Board may attend Audit Committee meetings and are regularly invited to do so. From time to time, members of senior management also make presentations to the other committees of the Board as well as to the full Board on a variety of topics that include discussion of risks that we face.
 
Contacting our Board and Audit Committee
 
Director Communications
 
Parties interested in contacting our Board, the Chairman of the Board, the Lead Director, the independent directors as a group or any individual director are invited to do so by writing to them in care of our Corporate Secretary at:
 
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
 
Complaints and concerns relating to our accounting, internal controls over financial reporting or auditing matters should be communicated to our Audit Committee using the procedures described below. Communications addressed to a particular director will be referred to that director. All other communications addressed to our Board will be referred to our Lead Director and tracked by the Corporate Secretary.
 
Audit Committee Communications
 
Complaints and concerns relating to our accounting, internal controls over financial reporting or auditing matters should be communicated to our Audit Committee, which consists solely of non-employee directors. Any such communication may be anonymous and may be reported to our Audit Committee through our General Counsel by writing to:
 
Executive Vice President and General Counsel
The Chubb Corporation
15 Mountain View Road
Warren, New Jersey 07059
GeneralCounsel@chubb.com


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All such concerns will be reviewed under our Audit Committee’s direction and oversight by the General Counsel, our Internal Audit Department or such other persons as our Audit Committee determines to be appropriate. Confidentiality will be maintained to the fullest extent possible, consistent with the need to conduct an adequate review. Prompt and appropriate corrective action will be taken when and as warranted in the judgment of our Audit Committee. The General Counsel will prepare a periodic summary report of all such communications for our Audit Committee.
 
Our Code of Business Conduct provides that we will not discharge, demote, suspend, threaten, harass or in any manner discriminate against any employee in the terms and conditions of employment based upon any lawful actions of such employee with respect to good faith reporting of complaints regarding accounting matters or otherwise as specified in Section 806 of the Sarbanes-Oxley Act of 2002.
 
Meeting Attendance and Related Matters
 
Our directors are expected to attend all Board meetings, meetings of committees on which they serve and the annual meeting of shareholders. Twelve of our directors attended the 2009 Annual Meeting of Shareholders. Directors also are expected to spend the time needed and to meet as frequently as necessary to properly discharge their responsibilities. In 2009, our Board met seven times. All of our incumbent directors attended at least 75% of the meetings of our Board and the committees on which they serve.
 
Audit Committee
 
Our Audit Committee is directly responsible for the appointment, compensation and retention (or termination) of our independent auditor. Our Audit Committee also is responsible for the oversight of the integrity of our financial statements, risk management, compliance with legal and regulatory requirements, the independence and qualifications of our independent auditor, the performance of our internal audit function and independent auditor and other significant financial matters. For 2009, our Board designated Joel J. Cohen, Martin G. McGuinn and Daniel E. Somers as our audit committee financial experts (as defined by SEC rules). In 2009, our Audit Committee met eight times. The Audit Committee Report for 2009 is set forth under the heading “Audit Committee Report.”
 
Compensation Committee
 
Composition; Scope of Authority
 
Each member of our Compensation Committee satisfies the independence requirements of the NYSE and the independence standards set forth in our Corporate Governance Guidelines. Our Compensation Committee’s primary responsibilities include establishing our general compensation philosophy and overseeing the development, implementation and administration of our compensation, benefit and perquisite programs. It also evaluates the performance and sets all aspects of the compensation paid to our Chief Executive Officer and reviews and approves the compensation paid to our other executive officers. In addition, our Compensation Committee is responsible for recommending the form and amount of compensation for our non-employee directors to our Governance Committee. The principal duties and responsibilities of our Compensation Committee are set forth in its charter, which is available on our website at www.chubb.com/investors.
 
Processes and Procedures
 
In 2009, our Compensation Committee met five times.
 
During the first quarter of each year, our Compensation Committee evaluates our performance relative to the pre-established goals under The Chubb Corporation Annual Incentive Compensation Plan (2006) (the Annual Incentive Plan), in the case of annual incentive compensation, The Chubb Corporation Long-Term Incentive Plan (2009) (the 2009 LTIP), in the case of long-term incentive awards, and for certain other plans in which our named executive officers identified under the heading “Executive Compensation—Summary Compensation Table” (our NEOs) do not participate. In addition, our Compensation Committee evaluates our Chief Executive Officer’s overall individual performance and contributions over the prior year. Our Chief Executive Officer presents our

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Compensation Committee with his evaluation of each of the other NEOs, which includes a review of contributions and performance during the prior year, strengths, weaknesses, development plans, succession potential and compensation recommendations. Our Compensation Committee then makes a final determination of compensation amounts for each NEO with respect to each of the elements of the executive compensation program for both compensation based on prior year performance and target compensation for the current year.
 
Mid-year, typically in June, our Compensation Committee considers each NEO’s total compensation as compared with that of the named executive officers of a peer group of companies. Information regarding this peer group analysis is set forth under the heading “Compensation Discussion and Analysis—Setting of Executive Compensation.” This peer group review provides our Compensation Committee with an external basis to evaluate our overall compensation program, including an assessment of its pay to performance relationship. Following this presentation of competitive market data, our Compensation Committee makes decisions, in consultation with our Chief Executive Officer regarding the other NEOs, assessing the need for any modifications to executive compensation opportunities and overall program design for implementation in the following year. Final approval of any program or individual changes typically occurs in the first quarter of the following year, at or around the same time that our Compensation Committee is evaluating overall performance for the just-completed year to determine actual award amounts payable under our incentive-based plans.
 
Role of Executive Officers
 
Our Compensation Committee, and through it our Board, retains final authority with respect to our compensation, benefit and perquisite programs and all actions taken thereunder. However, as noted above, our Chief Executive Officer recommends to our Compensation Committee compensation actions for each of the other NEOs. Our other NEOs evaluate the performance of and recommend compensation actions for other members of our senior management team to our Chief Executive Officer. Our Chief Executive Officer, after making any adjustments he deems appropriate, presents these recommendations to our Compensation Committee for consideration and compensation action. Compensation actions for the rest of our employees are determined by management, with our Compensation Committee receiving and approving aggregated information (e.g., aggregate incentive compensation and equity awards) by employee level with respect to such actions. None of our employees has a role in determining or recommending the amount or form of non-employee director compensation.
 
Delegation of Authority
 
Subject to an aggregate limit of 400,000 shares of our common stock, our Compensation Committee has delegated authority to our Chief Executive Officer to make equity grants to employees at or below the level of Senior Vice President. In accordance with the terms of this delegation of authority, our Compensation Committee periodically reviews all such awards. If our Compensation Committee ratifies the awards, the number of shares so ratified is restored to our Chief Executive Officer’s pool of awardable shares. Our Chief Executive Officer uses this authority to grant performance, promotion, retention and new hire awards. Our Compensation Committee has retained exclusive authority for granting equity awards to employees above the level of Senior Vice President, as well as for certain of our Senior Vice Presidents, including those subject to the reporting requirements of Section 16 of the Exchange Act.
 
Role of Executive Compensation Consultant
 
Pursuant to its charter, our Compensation Committee has the sole authority to retain any compensation consultant to be used to assist in the evaluation of executive compensation and to approve the fees and terms of such retention. In accordance with this authority, our Compensation Committee directly engaged a compensation consulting firm, Compensation Advisory Partners LLC (CAP or the Compensation Consultant), effective September 21, 2009. CAP has been engaged by our Compensation Committee to assist in reviewing our overall compensation strategy and total compensation package and to provide input on the competitive market for executive talent, evolving executive compensation market practices, program design and regulatory compliance. CAP does not provide any other services to us.
 
Prior to the retention of CAP, our Compensation Committee directly retained the Executive Remuneration Services group at the compensation consulting firm, Mercer (US) Inc. (Mercer or the Compensation Consultant), to


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perform the services described above. Our Compensation Committee previously determined that there was overlap between the structuring of our compensation programs by our Compensation Committee and their implementation and administration by management. Accordingly, our Compensation Committee authorized our management to retain other consulting groups within Mercer to assist with our medical, prescription and dental benefit plans and to serve as the actuary for our qualified and nonqualified defined benefit pension plans. To ensure that these management level services did not impair the Compensation Consultant’s objectivity, all of these services required the pre-approval of our Compensation Committee and the nature of the services rendered together with the Compensation Consultant’s aggregate fees for such services were reviewed periodically. In 2009, we paid Mercer approximately $440,000 in fees related to executive compensation consulting. During 2009, we paid approximately $3,369,000 to Mercer (US) Inc. and certain of its international affiliates for additional HR consulting services.
 
Mercer is a subsidiary of Marsh & McLennan Companies, Inc., and, as a result, it has over 700 affiliates that operate in numerous distinct areas of business unrelated to Mercer’s compensation consulting practice, including in the property and casualty insurance industry in which we operate. In connection with insurance business relationships we have with certain of these affiliates, we paid an aggregate of approximately $153 million to such affiliates during 2009 relating to brokerage commissions, reinsurance procurement, service and collection fees and other consulting services.
 
Executive Committee
 
Our Executive Committee, which consists of the Chairman of the Board, our Lead Director and the Chairmen of our Audit, Compensation and Governance Committees, is responsible for overseeing our business, property and affairs during the intervals between the meetings of our Board, if necessary. Our Executive Committee did not meet during 2009.
 
Finance Committee
 
Our Finance Committee oversees and regularly reviews the purchase and sale of securities in our investment portfolio. In 2009, our Finance Committee met four times.
 
Governance Committee
 
As noted above, our Governance Committee assists our Board in identifying individuals qualified to become members of our Board and oversees the annual evaluation of our Board and each committee. As provided in its charter, our Governance Committee also makes recommendations to our Board on a variety of corporate governance and nominating matters, including recommending standards of independence, director nominees, appointments to committees of our Board, designees for chairmen of each of our Board committees, non-employee director compensation and corporate governance guidelines. In 2009, our Governance Committee met four times.
 
Compensation Committee Interlocks and Insider Participation
 
During our 2009 fiscal year, each of Sheila P. Burke, Martin G. McGuinn, Daniel E. Somers, Karen Hastie Williams, James M. Zimmerman and Alfred W. Zollar served on our Compensation Committee. None of these individuals has at any time been an officer or employee of Chubb. During our 2009 fiscal year, none of our executive officers served as a member of the board of directors or compensation committee of any entity for which a member of our Board or Compensation Committee served as an executive officer.
 
Directors’ Compensation
 
Our Governance Committee, with the assistance of our Compensation Committee, is responsible for establishing and overseeing non-employee director compensation. The Compensation and Governance Committees consult periodically with the Compensation Consultant to evaluate and, if appropriate, adjust non-employee director compensation. To benchmark the competitiveness of our non-employee director compensation, the Compensation and Governance Committees utilize the same peer group of companies described below under the heading “Compensation Discussion and Analysis—Setting of Executive Compensation.” Consistent with our compensation philosophy for our NEOs, our non-employee director compensation program is designed to target total non-employee director compensation in the second quartile of the compensation paid to non-employee directors in this peer group.


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Director Compensation Table
 
The following table sets forth the compensation we paid to our non-employee directors in 2009:
 
                                                         
                            Change
             
                            in Pension
             
                            Value and
             
    Fees
                Non-Equity
    Nonqualified
             
    Earned
                Incentive
    Deferred
             
    or Paid
    Stock
    Option
    Plan
    Compensation
    All Other
       
    in Cash
    Awards
    Awards
    Compensation
    Earnings
    Compensation
    Total
 
Name(1)
  ($)     ($)(2)     ($)(3)     ($)     ($)     ($)(4)     ($)  
 
Zoë Baird
  $ 113,000     $ 99,997                       $ 107     $ 213,104  
Sheila P. Burke
    107,000       99,997                               206,997  
James I. Cash, Jr. 
    102,000       99,997                               201,997  
Joel J. Cohen(5)
    132,167       99,997                               232,164  
Klaus J. Mangold(5)
    89,500       99,997                               189,497  
Martin G. McGuinn(6)
    130,000       99,997                         26,234       256,231  
Lawrence M. Small
    89,500       99,997                         986       190,483  
Jess Søderberg(7)
    89,500       99,997                         28,219       217,716  
Daniel E. Somers
    131,000       99,997                         26,399       257,396  
Karen Hastie Williams
    105,000       99,997                         531       205,528  
James M. Zimmerman(8)
    129,833       99,997                               229,830  
Alfred W. Zollar
    111,000       99,997                         178       211,175  
 
 
(1) Compensation for Mr. Finnegan is not included in this table because he does not receive compensation for services that he renders as a member of our Board. Information regarding Mr. Finnegan’s compensation is set forth under the headings “Compensation Discussion and Analysis” and “Executive Compensation.”
 
(2) Pursuant to the 2009 LTIP, on April 28, 2009, each non-employee director received deferred stock units representing the right to receive 2,481 shares of our common stock valued at $40.31 per share. These awards vested immediately upon grant, but the issuance of the shares underlying such awards was mandatorily deferred until following the recipient’s separation of service from our Board. Accordingly, the aggregate grant date fair value of each of these awards, calculated in accordance with FASB ASC Topic 718, is $99,997 per non-employee director.
 
As of December 31, 2009, each of our non-employee directors other than Messrs. McGuinn, Søderberg and Zimmerman had the following outstanding equity awards:
 
             
Grant Date
 
Type of Award
  Number of Units(a)  
 
April 24, 2007
  Stock Unit     413 (b)
April 29, 2008
  Stock Unit     469 (b)
April 29, 2008
  Performance Unit     1,407 (c)
April 28, 2009
  Deferred Stock Unit     2,481 (d)
             
Total
        4,770 (e)
 
 
(a) Each stock unit and each performance unit has the equivalent value of one share of our common stock. The grant date fair value of each of these awards is estimated based on the fair market value of our common stock on the date of grant.
 
(b) Settles on the third anniversary of grant date.
 
(c) Represents target award. Actual payout may range from 0% to 200% of target. Additional information regarding non-employee director performance units is set forth under the heading “Directors’ Compensation—Stock Awards.”
 
(d) Settles following separation of service from our Board.
 
(e) Excludes the April 24, 2007 performance unit awards that were earned as of December 31, 2009. The actual payment of these awards was made on February 24, 2010, pursuant to which each non-employee director other than Messrs. McGuinn, Søderberg and Zimmerman received, or was entitled to receive, 1,638 shares of our common stock (132.2% of the original performance unit award).


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(3) The following table sets forth the option awards outstanding for each non-employee director at December 31, 2009, all of which are fully vested:
 
         
    Aggregate Number of
 
    Shares Subject to
 
Name
  Option Awards  
 
Zoë Baird
    40,000  
Sheila P. Burke
    56,000  
James I. Cash, Jr. 
    8,000  
Joel J. Cohen
    103,371  
Klaus J. Mangold
    16,000  
Martin G. McGuinn
     
Lawrence M. Small
    41,943  
Jess Søderberg
     
Daniel E. Somers
    2,000  
Karen Hastie Williams
    24,000  
James M. Zimmerman
     
Alfred W. Zollar
     
 
(4) Represents (i) imputed income for premiums paid to purchase life insurance under the Directors’ Group Term Life Insurance Program; (ii) premiums paid for life insurance policies through which we will fund our non-employee directors’ charitable contributions under the Director’s Charitable Award Program; and/or (iii) imputed income for premiums paid to purchase life insurance under The Chubb Corporation Estate Enhancement Program for Non-Employee Directors. Additional information regarding these programs is set forth under the heading “Directors’ Compensation—All Other Compensation.”
 
(5) Mr. Cohen and Dr. Mangold will retire from our Board as of April 27, 2010.
 
(6) Mr. McGuinn was elected to our Board on June 8, 2007. As of December 31, 2009, Mr. McGuinn had the following outstanding equity awards, which have the same general terms as those described in footnote (2) above:
 
             
Grant Date
 
Type of Award
  Number of Units(a)  
 
June 8, 2007
  Stock Unit     384 (b)
April 29, 2008
  Stock Unit     469 (b)
April 29, 2008
  Performance Unit     1,407 (c)
April 28, 2009
  Deferred Stock Unit     2,481 (d)
             
Total
        4,741 (e)
 
 
(a) Each stock unit and each performance unit has the equivalent value of one share of our common stock. The grant date fair value of each of these awards is estimated based on the fair market value of our common stock on the date of grant.
 
(b) Settles on the third anniversary of grant date.
 
(c) Represents target award. Actual payout may range from 0% to 200% of target. Additional information regarding non-employee director performance units is set forth under the heading “Directors’ Compensation—Stock Awards.”
 
(d) Settles following separation of service from our Board.
 
(e) Excludes the June 8, 2007 performance unit award that was earned as of December 31, 2009. The actual payment of this award was made on February 24, 2010, pursuant to which Mr. McGuinn received 1,530 shares of our common stock (132.2% of the original performance unit award).


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(7) Mr. Søderberg was elected to our Board on September 6, 2007. As of December 31, 2009, Mr. Søderberg had the following outstanding equity awards, which have the same general terms as those described in footnote (2) above:
 
             
Grant Date
 
Type of Award
  Number of Units(a)  
 
September 6, 2007
  Stock Unit     295 (b)
April 29, 2008
  Stock Unit     469 (b)
April 29, 2008
  Performance Unit     1,407 (c)
April 28, 2009
  Deferred Stock Unit     2,481 (d)
             
Total
        4,652 (e)
 
 
(a) Each stock unit and each performance unit has the equivalent value of one share of our common stock. The grant date fair value of each of these awards is estimated based on the fair market value of our common stock on the date of grant.
 
(b) Settles on the third anniversary of grant date.
 
(c) Represents target award. Actual payout may range from 0% to 200% of target. Additional information regarding non-employee director performance units is set forth under the heading “Directors’ Compensation—Stock Awards.”
 
(d) Settles following separation of service from our Board.
 
(e) Excludes the September 6, 2007 performance unit award that was earned as of December 31, 2009. The actual payment of this award was made on February 24, 2010, pursuant to which Mr. Søderberg received 1,170 shares of our common stock (132.2% of the original performance unit award).
 
(8) Mr. Zimmerman was elected to our Board on June 11, 2008. As of December 31, 2009, Mr. Zimmerman had the following outstanding equity awards, which have the same general terms as those described in footnote (2) above:
 
             
Grant Date
 
Type of Award
  Number of Units(a)  
 
June 11, 2008
  Stock Unit     433 (b)
June 11, 2008
  Performance Unit     1,301 (c)
April 28, 2009
  Deferred Stock Unit     2,481 (d)
             
Total
        4,215  
 
 
(a) Each stock unit and each performance unit has the equivalent value of one share of our common stock. The grant date fair value of each of these awards is estimated based on the fair market value of our common stock on the date of grant.
 
(b) Settles on the third anniversary of grant date.
 
(c) Represents target award. Actual payout may range from 0% to 200% of target. Additional information regarding non-employee director performance units is set forth under the heading “Directors’ Compensation—Stock Awards.”
 
(d) Settles following separation of service from our Board.


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Fees Earned or Paid in Cash
 
The following table summarizes the cash components of our 2009 non-employee director compensation program:
 
         
Item
  Amount  
 
Annual Director Retainer
  $ 60,000  
Lead Director Annual Supplemental Retainer
    50,000  
Audit Committee Chairman Retainer
    20,000  
Audit Committee Member Retainer
    7,500  
Compensation Committee Chairman Retainer
    15,000  
Compensation Committee Member Retainer
    7,500  
Executive Committee Retainer
    7,500  
Finance Committee Member Retainer
    7,500  
Governance Committee Chairman Retainer
    12,500  
Governance Committee Member Retainer
    7,500  
Board Meeting Fee
    2,000  
Committee Meeting Fee
    2,000  
 
Stock Awards
 
With respect to non-employee directors, the 2009 LTIP is administered by our Governance Committee with the assistance of our Compensation Committee. Subject to adjustment upon the occurrence of certain events described below, as of March 8, 2010, a maximum of 548,114 shares of our common stock were issuable to non-employee directors under the 2009 LTIP.
 
Based upon its market analysis, a peer group comparison and the recommendation of the Compensation Consultant and Compensation Committee, our Governance Committee approved deferred stock unit awards to each of our non-employee directors in the amount of approximately $100,000 on April 28, 2009. The deferred stock units vested immediately upon grant, but the issuance of the shares underlying such awards was mandatorily deferred until following the recipient’s separation of service from our Board.
 
Option Awards
 
Since the adoption of The Chubb Corporation Long-Term Stock Incentive Plan for Non-Employee Directors (2004) (2004 Director Plan) in April 2004, our Board’s practice has been to refrain from granting stock options to non-employee directors. The only stock options that have been granted to non-employee directors since the adoption of the 2004 Director Plan were granted on a non-discretionary basis pursuant to a restoration stock option feature that was included in the terms of stock options granted under predecessor plans to the 2004 Director Plan. The restoration stock option feature provides for an automatic grant of a new stock option if, upon exercise of the original stock option, shares are exchanged in a stock-for-stock exercise. The restoration stock option feature only applies if the original stock option is exercised within seven years of the grant date and if the fair market value of our common stock on the date of exercise is at least 25% higher than the exercise price of the original stock option. The grant date of the restoration stock option is the date of exercise of the original option and the exercise price is the average of the high and low prices of our common stock on the date that the original option is exercised.
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings
 
Cash Compensation.  Under the Deferred Compensation Plan for Directors, non-employee directors may defer receipt of all or a portion of their cash compensation. Amounts of deferred compensation are payable at the option of the non-employee director either upon the non-employee director’s separation of service from our Board or at a specified date chosen by the non-employee director at the time the deferral election is made. The Deferred Compensation Plan for Directors provides that amounts deferred may be invested in:
 
  •  an interest bearing account;


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  •  a market value account; or
 
  •  a shareholders’ equity account.
 
A non-employee director participating in the Deferred Compensation Plan for Directors may elect to receive the compensation deferred in either a lump sum or in annual installments. All amounts are paid in cash, except for the market value accounts which we pay in shares of our common stock. Deferred compensation represents an unsecured obligation payable out of our general corporate assets.
 
Cash Accounts.  Interest bearing accounts (cash accounts) bear interest at the lesser of 120% of the applicable long-term federal interest rate and Citibank, N.A.’s prime rate in effect on the first day of each January, April, July and October during the deferral period. At December 31, 2009, we maintained cash accounts for two non-employee directors, one of whom deferred 2009 compensation into this account pursuant to the Deferred Compensation Plan for Directors.
 
Market Value Accounts.  Market value accounts, which are denominated in units with one unit having the equivalent value of one share of our common stock, track the value of shares of our common stock. On each date compensation otherwise would have been paid in accordance with our normal practice (the credit date), non-employee directors deferring cash compensation into market value accounts are credited with the number of market value units equal to the quotient of:
 
  •  the amount of compensation deferred by the non-employee director, divided by
 
  •  the closing share price of our common stock on the NYSE on the credit date or on the trading day preceding the credit date if the credit date is not a trading day.
 
When we pay cash dividends on our common stock, the market value account of each participating non-employee director is credited with the number of market value units equal to:
 
  •  the product of (i) the amount of the dividend per share, multiplied by (ii) the number of units in the non-employee director’s market value account on the dividend payment date, divided by
 
  •  the closing share price of our common stock on the NYSE on the dividend payment date or on the trading day preceding the dividend payment date if the dividend payment date is not a trading day.
 
At December 31, 2009, we maintained market value accounts for six non-employee directors, two of whom deferred 2009 compensation into a market value account pursuant to the Deferred Compensation Plan for Directors.
 
Shareholders’ Equity Accounts.  Shareholders’ equity accounts, which are denominated in units, track the book value per share of our common stock. On each date compensation otherwise would have been paid in accordance with our normal practice, non-employee directors deferring cash compensation into shareholders’ equity accounts are credited with the number of shareholders’ equity units equal to the quotient of:
 
  •  the amount of compensation deferred by the non-employee director, divided by
 
  •  the shareholders’ equity per share as reported in our annual report to shareholders for the immediately preceding year.
 
When we pay cash dividends on our common stock, the shareholders’ equity account of each participating non-employee director is credited with the number of shareholders’ equity units equal to:
 
  •  the product of (i) the amount of the dividend per share, multiplied by (ii) the number of units in the non-employee director’s shareholders’ equity account on the dividend payment date, divided by
 
  •  the closing share price of our common stock on the NYSE on the dividend payment date or on the trading day preceding the dividend payment date if the dividend payment date is not a trading day.
 
At December 31, 2009, we did not maintain shareholders’ equity accounts for any of our non-employee directors.
 
Equity Compensation.  Prior to 2009, we offered non-employee directors the option of deferring receipt of all or a portion of their equity compensation. At December 31, 2009, we maintained deferred equity accounts for seven non-employee directors who had elected to defer receipt of all or a portion of the shares they would have been


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entitled to receive upon settlement of pre-2009 equity grants. Amounts of voluntarily deferred equity are payable at the option of the non-employee director either upon the non-employee director’s separation of service from our Board or at a specified date chosen by the non-employee director at the time the deferral election is made. Non-employee directors receive current payment of dividend equivalents on their deferred equity, whether such deferral is voluntary or mandatory. We declare and pay dividend equivalents on equity held in director deferral accounts at the same rate and at the same time as we declare and pay dividends on our common stock generally.
 
In 2009, our Governance Committee determined that deferred stock units would be the primary equity award structure under the 2009 LTIP for our non-employee directors. Accordingly, in April 2009, our non-employee directors were awarded deferred stock units which vested immediately upon grant but the issuance of the shares underlying such awards was mandatorily deferred until following each recipient’s separation of service from our Board.
 
All Other Compensation
 
Directors’ Group Term Life Insurance Program.  Our non-employee directors have the option of purchasing $50,000 in group term life insurance coverage for themselves. Directors pay the full cost of the coverage, which is based on coverage rates for our active employees. Mmes. Baird and Williams and Messrs. Small, Somers and Zollar have elected to purchase life insurance coverage under this program. In connection with the premiums they paid to purchase life insurance policies under Directors’ Group Term Life Insurance Program, income was imputed in 2009 to Mmes. Baird and Williams in the respective amounts of $107 and $531 and to Messrs. Small, Somers and Zollar in the respective amounts of $318, $165 and $178. The imputed income represented the difference between the group rates on these policies and the IRS prescribed coverage values.
 
Director’s Charitable Award Program.  Effective January 1, 1992, we established the Director’s Charitable Award Program. Under this program, each non-employee director, following his or her first election to our Board by our shareholders, was entitled to request that we direct one or more charitable contributions totaling up to $500,000 to eligible tax exempt organizations. We have elected to fund the Director’s Charitable Award Program through the proceeds of “second-to-die” life insurance policies that we have purchased on the lives of the participating non-employee directors. We are the owner and beneficiary of these policies. Non-employee directors have no rights in these policies or the benefits thereunder.
 
Under the terms of these policies, participating non-employee directors are paired and, upon the death of the second paired non-employee director, we use the proceeds of these policies to fund the contributions to the organizations selected by the non-employee directors. At December 31, 2009, ten non-employee directors were participating in the program. For seven of these non-employee directors, we paid the full premium on the life insurance policies through which we fund the program prior to 2009. For Messrs. McGuinn, Søderberg and Somers, the premiums paid in 2009 in connection with their participation in this program, which also are reflected in the “All Other Compensation” column of the Director Compensation Table set forth under the heading “Corporate Governance—Directors’ Compensation,” were $26,234, $28,219 and $26,234, respectively.
 
In March 2008, our Board voted to close the Director’s Charitable Award Program to future participants (with currently eligible participants under the Director’s Charitable Award Program being grandfathered). In addition, we may further amend or terminate the Director’s Charitable Award Program at our election at any time. Participating non-employee directors are entitled to change their designated charities at any time.
 
Estate Enhancement Program.  Prior to 2002, we maintained The Chubb Corporation Estate Enhancement Program for Non-Employee Directors. This program was offered to non-employee directors as an estate enhancement benefit pursuant to which a participant could exchange deferred compensation for a split-dollar whole-life insurance benefit. The program was designed so that it would be cost neutral to us, with the after-tax cost of the program (including amounts we will receive upon payout of the life insurance benefit) to us being intended to approximate the participant’s foregone deferred compensation. During 2009, Mr. Small recognized imputed income of $668 in connection with the premiums paid on the insurance policies purchased in connection with his participation in the program.


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OUR BOARD OF DIRECTORS
 
Our Board oversees our business operations, assets, affairs and performance. In accordance with our long-standing practice, each of the director nominees other than our Chief Executive Officer is independent. Set forth below are the name, age, length of service on our Board and principal occupation of each director nominee, together with certain other biographical information and factors considered by our Governance Committee and the Board in nominating each director nominee for election to our Board. Unless otherwise indicated, each nominee has served for at least ten years in the business position currently or most recently held. The age of each director is as of April 27, 2010, the date of the 2010 Annual Meeting.
 
     
(ZOE BAIRD PHOTO)   ZOË BAIRD (Age 57)
Director since 1998
Zoë Baird is President of the Markle Foundation, a private philanthropy that focuses on using information and communications technologies to address critical public needs, particularly in the areas of health care and national security. Ms. Baird’s career spans business, government and academia. She has been Senior Vice President and General Counsel of Aetna, Inc., a senior visiting scholar at Yale Law School, counselor and staff executive at General Electric Co., and a partner in the law firm of O’Melveny and Myers. She was Associate General Counsel to President Jimmy Carter and an attorney in the Office of Legal Counsel of the Department of Justice. She served on President Clinton’s Foreign Intelligence Advisory Board from 1993 - 2001 and on the International Competition Policy Advisory Committee to the Attorney General. Ms. Baird served on the Technology & Privacy Advisory Committee to the Secretary of Defense in 2003 - 2004, which advised on the use of technology to counter terrorism. She is on a number of non-profit and corporate boards, including the Convergys Corporation, Boston Properties, and Brookings Institution, among others.
    In selecting Ms. Baird as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Ms. Baird’s outside board service and business activities, including her knowledge of the insurance industry, legal matters, public policy matters, governmental affairs and information technology.
     
(SHEILA P. BURKE PHOTO)   SHEILA P. BURKE (Age 58)
Director since 1997
Faculty Research Fellow, Malcolm Wiener Center for Social Policy, Member of Faculty, J.F. Kennedy School of Government, Harvard University since 2007. Senior Public Policy Advisor, Baker, Donelson, Bearman, Caldwell & Berkowitz from 2009 to present. From 2004 - 2007 Deputy Secretary and Chief Operating Officer, Smithsonian Institution. Ms. Burke previously was Under Secretary for American Museums and National Programs, Smithsonian Institution, from June 2000 to December 2003 and Executive Dean and Lecturer in Public Policy of the John F. Kennedy School of Government, Harvard University, from November 1996 until June 2000. Ms. Burke served as Chief of Staff to the Majority Leader of the U.S. Senate and Deputy Staff Director of the U.S. Senate Committee on Finance from 1985 - 1996. Ms. Burke also serves on the boards of Wellpoint Inc., the Kaiser Commission on the Future of Medicaid and Uninsured, the Georgetown University School of Nursing and Health Studies, the Partnership for Public Service and the Association of American Medical Colleges.
    In selecting Ms. Burke as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Ms. Burke’s outside board service and business activities, including her knowledge of public policy matters and governmental affairs.


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(JAMES I. CASH, JR. PHOTO)   JAMES I. CASH, JR. (Age 62)
Director since 1996
The James E. Robison Emeritus Professor of Business Administration, Harvard University. Dr. Cash was a member of the Harvard Business School faculty from July 1976 to October 2003. He also serves on the boards of General Electric Company and Wal-Mart. He owns a private company - The Cash Catalyst - and serves as a Special Advisor or Director of several private companies including General Catalyst Partners, Verne Global and Veracode. Dr. Cash also serves on the non-profit boards of the National Association of Basketball Coaches Foundation and the Bert King Foundation.
    In selecting Dr. Cash as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Dr. Cash’s outside board service and business experience, including his knowledge of information technology, strategic planning and international business operations.
     
(JOHN D. FINNEGAN PHOTO)   JOHN D. FINNEGAN (Age 61)
Director since 2002
President and Chief Executive Officer of The Chubb Corporation since December 2002 and Chairman since December 2003. Mr. Finnegan previously had been Executive Vice President of General Motors Corporation, which is primarily engaged in the development, manufacture and sale of automotive vehicles, and Chairman and President of General Motors Acceptance Corporation, a finance company and subsidiary of General Motors Corporation, from May 1999 to December 2002. He was Vice President and Group Executive of General Motors and also President of General Motors Acceptance Corporation from November 1997 to April 1999. Mr. Finnegan was associated with General Motors Corporation from 1976 to December 2002.
    In selecting Mr. Finnegan as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Mr. Finnegan’s role as our Chief Executive Officer and his extensive experience in the financial services industry as well as the perspective he has gained through his outside board service and business activities.
     
(MARTIN G. McGUINN PHOTO)   MARTIN G. McGUINN (Age 67)
Director since 2007
Chairman and Chief Executive Officer of Mellon Financial Corporation from January 1999 until February 2006. Mr. McGuinn held a number of positions during his 25 years at Mellon. Mr. McGuinn recently concluded a one-year term as Chairman of the Financial Services Roundtable. He served as the 2005 President of the Federal Reserve Board’s Advisory Council. Mr. McGuinn serves on the Boards of Celanese Corporation and iGate Corporation, and is a member of the Advisory Board of CapGen Financial. Mr. McGuinn also serves on several nonprofit boards, including the Carnegie Museums of Pittsburgh and the University of Pittsburgh Medical Center.
    In selecting Mr. McGuinn as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Mr. McGuinn’s outside board service and business activities, including his role as Chairman and Chief Executive Officer of a major public financial services company.


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(LAWRENCE M. SMALL PHOTO)   LAWRENCE M. SMALL (Age 68)
Director since 1989
Former Secretary of the Smithsonian Institution, the world’s largest museum and research complex, a position he held from 2000 - 2007. Mr. Small previously had been President and Chief Operating Officer of Fannie Mae from 1991 to 2000. Before joining Fannie Mae, he served as Vice Chairman of the executive committee of the boards of directors of Citicorp and Citibank, where he worked for 27 years. He currently also serves as a director on the boards of Marriott International and New York City’s Spanish Repertory Theatre.
    In selecting Mr. Small as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Mr. Small’s outside board service and business activities, including his senior leadership roles at major public financial services companies and a government institution.
     
(JESS SODERBERG PHOTO)   JESS SØDERBERG (Age 65)
Director since 2007
Retired from A.P. Moller-Maersk in November 2007. Mr. Søderberg was Partner and Group CEO of A.P. Moller-Maersk since 1994. He joined the company after graduating with an MBA from the Copenhagen Business School in 1969, and has since held a number of senior financial positions in both the USA and Denmark. Mr. Søderberg was a member of JP Morgan Chase’s International Council until recently, is a member of Danske Bank’s Advisory Board, is the Vice Chairman of the board of Carlsberg A/S, is Chairman of Carlsberg A/S’s audit committee, and an adviser to Permira (a major international equity fund). Mr. Søderberg is honored as a Knight 1st Degree of the Order of Dannebrog and the Chilean Order of Bernardo O’Higgins.
    In selecting Mr. Søderberg as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Mr. Søderberg’s outside board service and business activities, including his role as Chief Executive Officer of a major public company and his expertise in international business operations.
     
(DANIEL E. SOMERS PHOTO)   DANIEL E. SOMERS (Age 62)
Director since 2003
Vice Chairman of Blaylock and Partners LP, an investment banking firm, from January 2002 until September 2007. Mr. Somers previously had been President and Chief Executive Officer of AT&T Broadband, a provider of cable and broadband services, from December 1999 to October 2001, and Senior Executive Vice President and Chief Financial Officer at AT&T Corp., a telecommunications company, from May 1997 to December 1999. Mr. Somers served on the board of The Lubrizol Corporation until February 2007. He is also a member of the Board of Trustees of Stonehill College.
    In selecting Mr. Somers as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Mr. Somers’ outside board service and business activities, including his role as Chief Financial Officer of a major public company.


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(KAREN HASTIE WILLIAMS PHOTO)   KAREN HASTIE WILLIAMS (Age 65)
Director since 2000
Partner, Crowell & Moring LLP, attorneys, from 1982 until her retirement to Senior Counsel status in January 2005. Ms. Williams also serves on the boards of Continental Airlines Inc., Gannett Company, Inc., SunTrust Banks, Inc. and Washington Gas Light Holdings, Inc. She is also a Trustee Emeritus of Amherst College and Trustee of the Black Student Fund and the NAACP Legal Defense and Education Fund.
    In selecting Ms. Williams as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Ms. Williams’ outside board service and business activities, including her experience with legal matters, public policy matters and governmental affairs.
     
(JAMES M. ZIMMERMAN PHOTO)   JAMES M. ZIMMERMAN (Age 66)
Director since 2008
Retired Chairman and Chief Executive Officer of Federated Department Stores, Inc. Mr. Zimmerman was Chairman of the Board from February 2003 until January 2004, Chairman and Chief Executive Officer from May 1997 to February 2003, and President and Chief Operating Officer from March 1988 to May 1997. He began his career with Federated in 1965 after graduating from Rice University in Houston, Texas. Mr. Zimmerman is also a director of Fossil, Inc., continues on the boards of and in leadership roles with several community organizations, and previously served on the boards of the H. J. Heinz Company, Goodyear Tire and Rubber Company, and Convergys Corporation.
    In selecting Mr. Zimmerman as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Mr. Zimmerman’s outside board service and business activities, including his role as Chairman and Chief Executive Officer of a major public company.
     
(ALFRED W. ZOLLAR PHOTO)   ALFRED W. ZOLLAR (Age 55)
Director since 2001
General Manager, Tivoli Software, IBM Corporation, which manufactures and sells computer services, hardware and software, since July 2004. Mr. Zollar previously had been General Manager, eServer iSeries, IBM Corporation, from January 2003 to July 2004; General Manager, Lotus Software, which designs and develops business software and was a subsidiary of IBM Corporation, from January 2000 to January 2003; General Manager, Network Computing Software Division, IBM Corporation from 1998 to 2000 and General Manager, Network Software, IBM Corporation, from 1996 to 1998.
    In selecting Mr. Zollar as a director nominee, our Nominating Committee and Board considered the factors set forth under the heading “Corporate Governance - Director Qualifications and Candidate Considerations.” In addition, the Nominating Committee and the Board considered Mr. Zollar’s outside board service and business activities, including his experience with product management and information technology matters.


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COMMITTEE ASSIGNMENTS
 
Our Board has established the five committees described above under the headings “Corporate Governance—Audit Committee,” “—Compensation Committee,” “—Executive Committee,” “—Finance Committee,” and “—Governance Committee” to assist our Board in fulfilling its responsibilities. The charter for each of our Audit, Compensation and Governance Committees, which are available on our website at www.chubb.com/investors, requires that all members satisfy the independence requirements of the NYSE. Our Governance Committee annually considers committee assignments, with appointments being effective as of the date of the annual meeting of shareholders. Current members of our committees are identified below:
 
Audit Committee
Daniel E. Somers (Chair)
Zoë Baird
Joel J. Cohen
Martin G. McGuinn
Alfred W. Zollar
 
Compensation Committee
Martin G. McGuinn (Chair)
Sheila P. Burke
Daniel E. Somers
Karen Hastie Williams
James M. Zimmerman
Alfred W. Zollar
 
Executive Committee
John D. Finnegan (Chair)
James I. Cash, Jr.
Martin G. McGuinn
Daniel E. Somers
James M. Zimmerman
 
Finance Committee
John D. Finnegan (Chair)
Sheila P. Burke
Klaus J. Mangold
Jess Søderberg
 
Governance Committee
James I. Cash, Jr. (Chair)
Zoë Baird
Joel J. Cohen
Lawrence M. Small
Karen Hastie Williams


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AUDIT COMMITTEE REPORT
 
Purpose
 
Our Board has formed our Audit Committee to assist our Board in monitoring:
 
  •  the integrity of our financial statements;
 
  •  our compliance with legal and regulatory requirements;
 
  •  the independence and qualifications of our independent auditor;
 
  •  the performance of our internal auditors and independent auditor; and
 
  •  other significant financial matters.
 
Composition and Meetings
 
At December 31, 2009, our Audit Committee was comprised of five directors, each of whom our Board determined to be independent and each of whom satisfied the applicable legal and regulatory independence requirements. Mr. Somers served as the Chairman of our Audit Committee during 2009 and our Board designated him, together with Messrs. Cohen and McGuinn, as the audit committee financial experts. Information regarding the respective experience of Messrs. Cohen, McGuinn and Somers is set forth under the heading “Our Board of Directors.”
 
Our Governance Committee and the full Board consider Audit Committee membership annually. Committee appointments are effective as of the date of the annual meeting of shareholders. In addition to Messrs. Cohen, McGuinn and Somers, Ms. Baird and Mr. Zollar currently serve on our Audit Committee. Our Audit Committee met eight times during 2009.
 
Charter and Self-Assessment
 
Our Audit Committee operates pursuant to its written charter, which is available on our website at www.chubb.com/investors. The Audit Committee Charter has been approved by our Audit Committee and our Board and it is subject to review at least annually. It was last revised in February 2005.
 
Pursuant to its charter, our Audit Committee performs an annual self-assessment. For 2009, our Audit Committee concluded that, in all material respects, it had fulfilled its responsibilities and satisfied the requirements of its charter and applicable laws and regulations.
 
Appointment of Independent Auditor
 
Under its charter, our Audit Committee, among other things, is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor engaged for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for us. Our Audit Committee has appointed Ernst & Young LLP to serve as independent auditor. Our Audit Committee has recommended to our Board that Ernst & Young’s appointment as independent auditor be submitted for ratification by our shareholders. This matter is described under the heading “Proposal 2—Ratification of Appointment of Independent Auditor.”
 
Review of Financial Information
 
Management is responsible for our internal controls over the financial reporting process and the independent auditor is responsible for performing an independent audit of our consolidated financial statements in accordance with generally accepted auditing standards and for issuing a report on its audit. Our Audit Committee is charged with overseeing and monitoring these activities on behalf of our Board. During 2009 and the first quarter of 2010, our Audit Committee reviewed and discussed with management and the independent auditor our quarterly financial statements and our audited consolidated financial statements for the year ended December 31, 2009. Our Audit


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Committee discussed with the independent auditor the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
 
Auditor Independence
 
The Audit Committee has received the written disclosures and the letter from the independent accountant required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.
 
Inclusion of Consolidated Financial Statements in the 2009 10-K
 
Based on the foregoing, our Audit Committee recommended to our Board that the audited consolidated financial statements be included in the 2009 10-K filed with the SEC.
 
The foregoing report has been furnished by the following members of our Board who comprise our Audit Committee:
 
     
Daniel E. Somers (Chair)
  Martin G. McGuinn
Zoë Baird
  Alfred W. Zollar
Joel J. Cohen
   
 
This Audit Committee Report shall not be deemed to be “soliciting material,” to be “filed” with the SEC, subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that the information be treated as soliciting material, nor shall it be incorporated by reference into any document filed under the Securities Act of 1933, as amended (Securities Act), or the Exchange Act unless we specifically incorporate it by reference.


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COMPENSATION COMMITTEE REPORT
 
Our Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included under the heading “Compensation Discussion and Analysis” pursuant to Item 402(b) of SEC Regulation S-K.
 
Based upon the review and discussion described in the preceding paragraph, our Compensation Committee recommended to our Board that the “Compensation Discussion and Analysis” be included in our proxy statement on Schedule 14A prepared in connection with the 2010 Annual Meeting and that the “Compensation Discussion and Analysis” be incorporated by reference into the 2009 10-K for the year ended December 31, 2009.
 
The foregoing report has been furnished by the following members of our Board who comprise our Compensation Committee:
 
     
Martin G. McGuinn (Chair)
  Karen Hastie Williams
Sheila P. Burke
  James M. Zimmerman
Daniel E. Somers
  Alfred W. Zollar
 
This Compensation Committee Report shall not be deemed to be “soliciting material,” to be “filed” with the SEC, subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that the information be treated as soliciting material, nor shall it be incorporated by reference into any document filed under the Securities Act or the Exchange Act unless we specifically incorporate it by reference.


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COMPENSATION DISCUSSION AND ANALYSIS
 
This Compensation Discussion and Analysis describes the 2009 compensation program for our NEOs. During 2009, our executive management team consisted of the following NEOs:
 
  •  John D. Finnegan, Chief Executive Officer;
 
  •  Richard G. Spiro, Chief Financial Officer;
 
  •  John J. Degnan, Chief Operating Officer;
 
  •  Paul J. Krump, Chief Underwriting Officer;
 
  •  Harold L. Morrison, Jr., Chief Global Field Officer; and
 
  •  Dino E. Robusto, Chief Administrative Officer.
 
Overall Executive Compensation Philosophy and Objectives
 
The property and casualty insurance industry is comprised of hundreds of companies vying for part of the multibillion-dollar market for personal, commercial and specialty lines of insurance coverage. Within this competitive environment, we are considered to be one of the world’s preeminent insurers, offering extensive business and personal insurance solutions globally. We distinguish ourselves with an approach that focuses on providing premier customer service, quality underwriting and highly disciplined cost management. It is imperative to our success and long-term viability that our business continues to be managed by highly experienced, focused and capable executives who possess the dedication to oversee our global organization on a day-to-day basis and have the vision to anticipate and respond to market developments. It is also important that we concentrate on retaining and developing the capabilities of our emerging leaders to ensure that we continue to have an appropriate depth of executive talent.
 
Our executive compensation program is intended to attract, reward and retain a management team with the individual and collective abilities that fit our profile described above. With this philosophy in mind, our executive compensation program is intended to motivate our employees to achieve the following objectives:
 
  •  enhance our market reputation as a provider of the highest quality customer service;
 
  •  attain superior financial performance, in both the short- and long-term;
 
  •  take accountability for the performance of the business units and functions for which they are responsible; and
 
  •  make decisions about our business that will maximize long-term shareholder value.
 
As discussed more fully below, a substantial portion of an executive’s compensation incorporates performance criteria that support and reward achievement of our annual operating plan and long-term business goals. Specifically, compensation decisions for our NEOs are linked to corporate goals based on financial results (merit-based salary increases and Annual Incentive Plan awards), absolute stock price appreciation (restricted stock unit (RSU)) and a combination of total shareholder return relative to companies in the S&P 500 Index and stock price appreciation (performance unit awards). For 2009, approximately 71% of Mr. Finnegan’s total target compensation was performance-based (Annual Incentive Plan award and performance unit award). The percentages of performance-based pay relative to total target compensation for Messrs. Spiro, Degnan, Krump, Morrison and Robusto were approximately 67%, 68%, 55%, 56% and 56%, respectively.
 
Setting of Executive Compensation
 
Our Compensation Committee is responsible for establishing the philosophy and objectives that underlie our executive compensation program and guiding its design and administration. Additional information on the structure, scope of authority and operation of our Compensation Committee, as well as the roles of the


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Compensation Consultant and management in determining compensation, is set forth under the heading “Corporate Governance—Compensation Committee.”
 
Market Data
 
Our Compensation Committee, with the assistance of the Compensation Consultant, reviews the compensation of similarly situated officers of a representative peer group of companies on an annual basis to ensure that our executive compensation program is competitive with the companies with which we believe we compete for executive talent. The overall peer group is comprised of companies similar in size and scope to us within the property and casualty and broader insurance industries as well as the financial services industry. In 2009, the 19 companies comprising our peer group, of which seven were in the property and casualty insurance industry, were:
 
         
*ACE Ltd. 
  *CNA Financial Corp.   Prudential Financial, Inc.
Aetna, Inc. 
  Genworth Financial, Inc.   Principal Financial Group, Inc.
Aflac, Inc. 
  *Hartford Financial Services Group Inc.   State Street Corp.
*Allstate Corp. 
  Lincoln National Corp.   *The Travelers Companies, Inc.
Bank of New York Mellon Corp. 
  MetLife, Inc.   *XL Capital Ltd.
BB&T Corp.
  PNC Financial Svcs Grp, Inc.    
Cigna Corp. 
  *Progressive Corp.    
 
Our Compensation Committee has established what it believes to be challenging performance goals—both on an absolute basis and relative to our peers, with an emphasis on our property and casualty insurance industry peers (indicated above with an asterisk). Accordingly, total compensation for our NEOs is targeted between the 50th and 75th percentiles of our peers, combined salary and annual cash incentive compensation is targeted at the median of our peers and long-term incentive awards are targeted between the 50th and 75th percentiles. During 2009, we achieved the second highest operating income (net income excluding after-tax realized investment gains) per share result in our 127 year history. The total compensation for Messrs. Finnegan and Degnan exceeded the 75th percentile as a result of their individual performance as well as our strong absolute and relative performance. Mr. Spiro’s total compensation slightly exceeded the 75th percentile goal, reflective of the external market for attracting the superior talent that he provides, his excellent performance and our financial results. While our Compensation Committee recognizes the outstanding contributions to our financial results attributable to Messrs. Krump, Morrison and Robusto, each of them was recently promoted and each received raises in 2008 and 2009, which brought their respective total compensation packages close to the 25th percentile of other NEOs within our peer group.
 
Our emphasis on long-term performance-based compensation supports our need for executives to maintain a longer-term focus on our business, while merit-based salary increases and annual incentive compensation reward the delivery of strong annual results. For 2009, approximately 70% of Mr. Finnegan’s total target compensation represented long-term equity incentive awards. The percentage of long-term equity incentive awards relative to total target compensation for Messrs. Spiro and Degnan was approximately 62% and 60%, respectively. The percentage of long-term equity incentive awards relative to total target compensation for Messrs. Krump, Morrison and Robusto was approximately 35%, 37% and 37%, respectively.
 
Individual Performance
 
Our executive compensation program provides our Compensation Committee with the flexibility to make annual compensation decisions based on individual performance. Specifically, our program is designed to provide our Compensation Committee with the ability to adjust individual compensation, significantly in some cases, to the extent the executive achieves individual annual performance goals and strengthens his or her competencies, performance and potential over a longer period. Our Compensation Committee believes that this flexibility is imperative to reward and recognize the key skills, talents and contributions to annual performance and overall long-term company success. Each year, our Compensation Committee evaluates Mr. Finnegan’s performance. Mr. Finnegan, in turn, presents our Compensation Committee with his evaluation of each of the other NEOs, which includes a review of contributions and performance over the prior year, strengths, weaknesses, development plans,


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succession potential and compensation recommendations. Our Compensation Committee then makes a final determination of compensation amounts for each NEO with respect to each of the elements of the executive compensation program for actual compensation relative to the preceding year and target compensation for the current year.
 
Tally Sheets
 
Our Compensation Committee reviews tally sheets prepared by management on an annual basis. The tally sheets set forth all components of the NEOs’ compensation, including base salary, annual incentive compensation, equity incentive awards, benefits and perquisites, retirement plan accruals and total payments upon various termination scenarios. Our Compensation Committee uses these tally sheets to confirm that it has a full understanding of our NEOs’ comprehensive compensation packages.
 
Assessment of Compensation Programs
 
During 2009, with the assistance of the Compensation Consultant, our Compensation Committee performed an assessment of the primary components of our executive compensation program—annual salary, annual incentive compensation, long-term equity incentive awards and deferred compensation plan. Our Compensation Committee reviewed each component from an internal perspective, including the alignment of our overall executive compensation philosophy and objectives to our business strategy, and from an external perspective, which considered our peer group and evolving market trends. The assessment revealed that our overall executive compensation program is aligned with our business strategy of emphasizing operating income and shareholder return and reflects market practices in terms of incentive mix, metrics and equity use. Based on the assessment, the Compensation Committee determined that these components of our executive compensation program did not encourage inappropriate risk-taking by our NEOs.
 
In reaching this conclusion, our Compensation Committee noted that:
 
  •  The financial performance objectives of our annual cash incentive program are the budgeted objectives that are reviewed and approved by the Compensation Committee.
 
  •  We generally use the same financial performance measures under our Annual Incentive Plan for our NEOs that we use for all other plan participants.
 
  •  Our variable compensation awards (annual cash incentives and long-term incentives in the form of performance units and RSUs) are based on a formula and are at the discretion of the Compensation Committee.
 
  •  We have a recoupment policy that requires the repayment of any bonus or other incentive-based or equity-based compensation in certain circumstances.
 
  •  A substantial component of our NEO’s annual compensation is in the form of performance units that are subject to a three-year performance cycle, which mitigates excessive short-term risk taking.
 
  •  Our NEOs hold a significant amount of their personal wealth in the form of our stock. Accordingly, they would be personally impacted by the potential consequences of inappropriate or unnecessary risk-taking.
 
  •  We balance short- and long-term decision making with the annual cash incentive program and equity awards that vest over three years.
 
In addition to the risk assessment of the compensation programs in which our NEOs participate, in February 2010, our Compensation Committee undertook a risk analysis of our other compensation programs and determined that these compensation programs do not create any risk that is reasonably likely to have a material adverse effect on us.


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Tax Policies
 
Section 162(m) of the Internal Revenue Code limits to $1 million per year the federal income tax deduction to public corporations for compensation paid for any fiscal year to the CEO and the three most highly compensated executive officers (other than the CFO) as of the end of the fiscal year as determined in accordance with the Exchange Act. This limitation does not apply to qualifying “performance-based compensation.” Our Compensation Committee has designed our annual incentive compensation awards and performance unit awards to qualify for the performance-based compensation exception to the $1 million limit. In establishing targets for meeting the performance-based compensation exception, our Compensation Committee anticipated using negative discretion in calculating final incentive payouts. In addition, our NEOs (other than Mr. Spiro) generally are required to defer compensation that would not otherwise be deductible. Due to guidance issued in 2007 by the Internal Revenue Service (IRS), the compensation of Mr. Spiro, our principal financial officer for 2009, was not subject to the Section 162(m) limitation on deductibility.
 
Our Compensation Committee believes that our shareholders are best served by not restricting our Compensation Committee’s discretion and flexibility in crafting compensation plans and arrangements, such as annual salaries and RSU awards, even though they may result in certain non-deductible compensation expenses. Accordingly, our Compensation Committee may from time to time approve elements of compensation for one or more of our NEOs that are not fully deductible and reserves the right to do so in the future.
 
Components of Executive Compensation
 
Our executive compensation program consists of annual and long-term compensation and company-sponsored benefit plans. Each component is designed for a specific purpose and contributes to an overall total compensation package that is competitive, predominantly performance-based and valued by our executives.
 
Annual Salary
 
Annual salary is designed to provide a fixed level of compensation to our NEOs based on their skills, background, and market data, as well as to retain their services. Annual salaries are generally targeted at the median of our peer group because we want to provide attractive and competitive levels of base compensation to ensure our ability to attract and retain superior talent. In addition to considering peer group data, individual performance and contributions, our Compensation Committee determines annual salaries based upon the skills, knowledge and competencies of each NEO, as reviewed and recommended annually by Mr. Finnegan (for all NEOs other than himself). Setting of annual salaries is important because each NEO’s target annual incentive compensation is then developed based on annual salary levels.
 
In February 2009, our Compensation Committee reviewed annual salaries for each of our NEOs based upon the above factors. Although we achieved another year of excellent performance, at that time, our Compensation Committee decided to maintain the 2008 base salaries in 2009 for all of our NEOs given that Mr. Spiro’s annual salary had just been fixed in October 2008 and each of Messrs. Degnan, Krump, Morrison and Robusto had received substantial increases in connection with their respective promotions in June 2008. The Compensation Committee also determined that Mr. Finnegan’s salary remained competitive without adjustment. Accordingly, the 2009 base salaries for Messrs. Finnegan, Spiro, Degnan, Krump, Morrison and Robusto were set at $1,275,000, $750,000, $825,000, $550,000, $480,000, and $450,000, respectively. In September 2009, our Board extended for one year the mandatory retirement date for Mr. Degnan so that he could remain our Chief Operating Officer until the end of 2010. In connection with this decision to defer Mr. Degnan’s retirement, the Compensation Committee undertook a comprehensive review of the compensation of our NEOs during the third quarter of 2009. As a result of that analysis, the Compensation Committee approved base salary increases for Messrs. Degnan, Krump, Morrison and Robusto of 6.0%, 5.5%, 6.3% and 13.3%, respectively. Accordingly, effective September 1, 2009, the annual base salaries for Messrs. Degnan, Krump, Morrison and Robusto increased to $874,500, $580,000, $510,000 and $510,000, respectively. Due to his recent hire in 2008, our Compensation Committee decided to maintain Mr. Spiro’s base salary for the remainder of 2009.


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Annual Incentive Compensation
 
Our Annual Incentive Plan is designed to support our compensation strategy by linking a significant portion of total annual cash compensation to the achievement of critical business goals on an annual basis. All of our salaried employees, including our NEOs, are eligible to participate in the Annual Incentive Plan.
 
Incentive Opportunity.  As discussed under the heading “Compensation Discussion and Analysis—Setting of Executive Compensation,” baseline opportunities for annual incentive compensation awards (combined with salary) are generally set at the median for executives with commensurate positions at our peers. Our Compensation Committee establishes the range of potential payments for Mr. Finnegan’s annual incentive compensation based upon its analysis of market data from our peer group of companies, advice from the Compensation Consultant and subject to the minimum annual incentive compensation award target of $1.6 million as provided for in his employment agreement. For the other NEOs, our Compensation Committee establishes the annual incentive compensation payment range after taking into consideration Mr. Finnegan’s recommendations, advice from the Compensation Consultant and market data from our peer group of companies. For information regarding the potential ranges of awards under the Annual Incentive Plan for our NEOs in 2009, see the information set forth under the heading “Executive Compensation—Grants of Plan-Based Awards.” Baseline opportunities are disclosed in the “target” column.
 
Performance Goal.  Since 2007, annual incentive compensation awards have been earned based on our adjusted operating income. We define adjusted operating income as net income excluding after-tax realized investment gains and losses and adjusted to account for the loss of investment income attributable to our repurchase of shares of our common stock. Our Compensation Committee believes that adjusted operating income provides an effective means of directly linking executive compensation to our shareholders’ interests. We adjust for investment income so that the calculation is not distorted by the impact of our continuing commitment to return capital to shareholders through our share repurchase program.
 
Pool Funding.  Each year we fund an aggregate award pool for all Annual Incentive Plan participants in an amount equal to 8.8% of adjusted operating income subject to a minimum funding condition that requires us to achieve operating income greater than 50% of the prior year’s operating income. This means that each percentage increase or decrease in 2009 operating income relative to 2008 operating income will result in a proportional increase or decrease in the 2009 Annual Incentive Compensation award pool, thus providing a direct link between incentive payouts and year over year performance.
 
Performance Multiplier.  Actual incentive compensation awards for our NEOs are earned by applying a performance multiplier to each NEO’s baseline opportunity. The performance multiplier is derived by dividing the total Annual Incentive Compensation award pool by the total baseline opportunities for all participants covered by the Annual Incentive Plan.
 
Incentive Payouts.  Adjusted operating income in 2009 was $2.3 billion, which was approximately 7.0% higher than 2008 adjusted operating income of $2.2 billion. This created a 2009 award pool of $202.7 million. Based upon this award pool and total baseline opportunities, awards to Messrs. Spiro, Degnan, Krump, Morrison and Robusto were set at $1,563,300, $1,974,700, $806,000, $708,700 and $708,700, respectively. These amounts reflect our formulaic approach to calculating bonuses and the Compensation Committee did not make any adjustments. Our Compensation Committee decided to adjust the formulaic approach for Mr. Finnegan to reflect his outstanding performance towards the achievement of enterprise financial goals and the development of a rigorous succession plan that included comprehensive competencies for CFO, COO, CAO and CEO. With this adjustment, the award to Mr. Finnegan was increased by $206,500 to $3,750,000.
 
The incentive payouts for our NEOs who are subject to the $1 million compensation limit under Section 162(m) of the Internal Revenue Code are below their respective targets established by our Compensation Committee to meet the performance-based compensation exception.


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Long-Term Equity Incentive Awards
 
In 2009, our Board adopted, and our shareholders approved the 2009 LTIP to replace the 2004 Employee Plan. The terms of the new plan and types of awards granted thereunder are substantially similar to those of the 2004 Employee Plan. Our NEOs received their 2009 equity awards under the 2004 Employee Plan and did not begin receiving equity awards under the new plan until 2010.
 
Equity Incentive Awards.  Long-term equity incentive awards made pursuant to the 2004 Employee Plan are designed to support several of our compensation objectives, including:
 
  •  placing a significant portion of total compensation at risk;
 
  •  linking long-term performance-based awards with shareholder value; and
 
  •  retaining our highly-skilled and valued senior management.
 
All employees at or above the level of Assistant Vice President (approximately 1,700 employees), including our NEOs, participate in our long-term equity incentive award program. Target long-term equity incentive awards are designed to achieve our desired competitive market position of being between the 50th and 75th percentiles of our peer group of companies and are commensurate with the individual’s level within our organization. For 2009, the target long-term equity incentive awards for Messrs. Finnegan, Spiro and Degnan were $7,600,000, $2,650,000 and $3,000,000, respectively. The target long-term equity incentive award for each of Messrs. Krump, Morrison, and Robusto was $550,000. These target levels were determined based on analysis of data from our peer group of companies.
 
Annual equity incentive awards to our NEOs are in the form of performance units and RSUs. Consistent with our emphasis on performance-based compensation, for officers at or above the level of Senior Vice President, including our NEOs, performance units generally constitute 75% of the annual equity award, while RSUs generally constitute the remaining 25%. We believe our emphasis on performance-based long-term equity incentive awards is consistent with the practice of our peer group companies.
 
Our Compensation Committee manages the potential dilutive effect of equity incentive awards by monitoring our “run rate”—the number of shares granted as a percentage of our fully diluted common shares outstanding—relative to our peer companies. Our Compensation Committee also evaluates guidelines used by certain institutional advisory services and considers advice from the Compensation Consultant. Our annual run rate was approximately 0.6% in 2009, which we believe is conservative relative to the practices of our peer group companies. Our conservative run rate is primarily attributable to the fact that fewer full-value shares are needed to provide a target award value in the form of performance units and RSUs than would be required for an award of stock options as well as our limited participation levels.
 
Performance Units.  Performance units are intended to motivate our senior officers to achieve superior total shareholder return—share price appreciation plus reinvested dividends (TSR)—versus companies in the Standard & Poor 500 Index (S&P 500) over a three-year performance period. We view the other companies in the S&P 500 as the competition for our shareholders’ investment dollars. The value of performance units is directly linked to the total return delivered to our shareholders, thus motivating our senior officers to deliver superior returns over an extended performance period. Performance units also support retention, as they are subject to forfeiture if the recipient’s employment terminates before the shares are settled for any reason other than death, disability, retirement or with the consent of our Compensation Committee.


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The number of performance units earned for each three-year performance period can vary from 0% to 200% of the original target award based on our relative TSR versus S&P 500 companies as follows:
 
         
TSR
   
Percentile
  Percent of Target
Ranking
  Shares Earned
 
85th & higher
    200 %
50th
    100 %
25th
    50 %
Below 25th
    0 %
 
For relative performance between the 25th and 85th percentiles, the number of shares earned is determined by multiplying the relative percentile of comparative performance achieved by two. The final dollar value of each recipient’s performance unit award is also dependent on the price of our common stock at the award’s settlement date, thus providing an additional link to shareholders’ interests and providing our senior officers with significant value potential based on our results.
 
The performance period for the performance units granted in 2007 ended on December 31, 2009. Our TSR over the performance period was 0.4%, which positioned us at the 66.1 percentile of companies in the S&P 500. Based on the performance scale above, each of our NEOs (other than Mr. Spiro), like all recipients of 2007 performance units who did not forfeit such awards due to termination of their employment, received in February 2010 the number of shares of common stock equal to 132.2% of the respective target number of performance units granted in 2007. Information regarding the vesting of each NEO’s respective 2007 performance unit award is set forth under the heading “Executive Compensation—Option Exercises and Stock Vested.”
 
The number and grant date fair value of performance units granted to our NEOs in 2009 for the performance period running from January 1, 2009 to December 31, 2011 is set forth under the heading “Executive Compensation—Grants of Plan-Based Awards.”
 
RSUs.  RSUs are intended to align management’s interests with those of our shareholders and serve as a strong retention tool for key employees. Like performance units, RSUs support retention because they generally cliff vest on the third anniversary of the date of grant, provided the recipient remains employed by us over that period. The number and grant date value of RSUs granted to NEOs in 2009 is set forth under the heading “Executive Compensation—Grants of Plan-Based Awards.”
 
Stock Options.  We discontinued the use of stock options as part of our core long-term equity incentive award program in 2004. However, we still utilize stock option grants as a means of providing tax-efficient equity awards to certain internationally-based employees. In addition, stock options granted to all participants, including participating NEOs, under predecessor plans to the 2004 Employee Plan included a restoration option feature that provides the optionee with the right to receive a restoration stock option upon exercise of the original option if shares are exchanged in a stock-for-stock exercise within seven years of the grant date and our stock price is at least 25% above the exercise price on the exercise date. Restoration stock options are granted on the same date the original stock option award is exercised, have an exercise price equal to the average of the high and low prices of our common stock on the grant date and have a term equal to the remaining term of the original option.
 
Equity Grant Practices.  Our Compensation Committee approves and grants annual equity awards at a regularly scheduled meeting in the first quarter of each year based on market data from our peer group of companies, advice from the Compensation Consultant and recommendations from Mr. Finnegan for the other NEOs. There is no relationship between the timing of equity incentive award grants and our release of material, non-public information. Although our Compensation Committee has the discretion to do so, our Compensation Committee generally does not make interim equity award grants to employees at or above the level of Executive Vice President, including our NEOs.
 
As discussed under the heading “Corporate Governance—Compensation Committee,” our Compensation Committee has delegated authority to Mr. Finnegan to grant equity awards to employees up to and including the level of Senior Vice President pursuant to guidelines that specify the range of award values an employee could


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receive based on his or her level within our organization. These guidelines are adjusted on a periodic basis as warranted by competitive market conditions. Grants made by Mr. Finnegan pursuant to this authority are effective on the last business day of the month (date of hire for newly hired employees), with the number of shares awarded determined by dividing the award value by the average of the high and low prices of our common stock on the grant date. These grants are reported to our Compensation Committee at its next regularly scheduled meeting following the date of grant.
 
Perquisites
 
We provide certain executives, including each of our NEOs, with a limited range of perquisites. The incremental cost and valuation of these perquisites for the NEOs is set forth under the heading “Executive Compensation—Summary Compensation Table.”
 
Corporate Aircraft.  During 2009, we owned one corporate aircraft and leased a second. From time to time, we have leased a third aircraft on a per trip basis. Senior executives use these aircraft to minimize and more efficiently utilize their travel time, protect the confidentiality of their travel and our business and enhance their personal security. Our Board also permits Messrs. Finnegan and Degnan limited use of the corporate aircraft for personal travel. The annual personal use of the corporate aircraft for Messrs. Finnegan and Degnan is limited to 35 hours and 20 hours, respectively.
 
Automobile Use/Allowance.  As required pursuant to his employment agreement, we provide Mr. Finnegan with a car and driver for all of his business travel needs to minimize and more efficiently utilize his travel time and enhance his personal security. Mr. Finnegan’s personal use of the car and driver is primarily for his commute to and from the office. Mr. Finnegan bears the applicable taxes with respect to his personal usage. We provide all domestic employees at or above the level of Vice President, including our NEOs other than Mr. Finnegan, a monthly automobile allowance of $500. Recipients of this benefit bear the applicable income taxes with respect thereto.
 
Financial Counseling.  We offer all of our domestic employees at or above the level of Senior Vice Presidents, including our NEOs, financial counseling services. These services include income tax preparation, portfolio management and estate planning. Recipients of this benefit bear the applicable income taxes with respect thereto.
 
Company-Sponsored Benefit Plans
 
We maintain company-sponsored retirement and deferred compensation plans for the benefit of all of our salaried employees, including our NEOs. These benefits are designed to assist employees, including our NEOs, in providing for their financial security and personal needs in a manner that recognizes individual goals and preferences.
 
Retirement Plans.  We maintain the Pension Plan of The Chubb Corporation (the Pension Plan), which is our tax-qualified defined benefit plan, and the Pension Excess Benefit Plan of The Chubb Corporation (the Pension Excess Benefit Plan), which is our nonqualified excess defined benefit plan, to help us attract and retain our employees. Our NEOs participate in the Pension Plan on the same terms and conditions as other employees. Our NEOs participate in the Pension Excess Benefit Plan on the same terms and conditions as other highly compensated employees, except that Mr. Finnegan is entitled to a supplemental pension benefit under his employment agreement (the Pension SERP). Information about our retirement plans is set forth under the heading “Executive Compensation—Pension Benefits.”
 
We also maintain the CCAP, which is a qualified 401(k) savings plan, for all eligible employees. The CCAP provides employees with an opportunity to voluntarily defer pre-tax or after-tax dollars into a 401(k) account. Chubb provides matching contributions on an annual basis equal to the lesser of 4% or the actual percentage deferred by the participant.
 
Nonqualified Defined Contribution and Deferred Compensation Plans.  We maintain The Chubb Corporation Key Employee Deferred Compensation Plan (2005) (the 2005 Deferred Compensation Plan) and The Chubb Corporation Executive Deferred Compensation Plan (collectively, the Deferred Compensation Plans), which are


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our nonqualified deferred compensation plans for our employees at or above the level of Vice President, including our NEOs, to provide them with additional tools to enhance their retirement planning and wealth management. These plans allow participants to defer receipt, and thus the tax liability, of income (salary, annual incentive compensation and equity compensation) to a later specified date. We also maintain the Defined Contribution Excess Benefit Plan of The Chubb Corporation (the CCAP Excess Benefit Plan), which is our nonqualified excess defined contribution plan, and the CCAP-related supplemental executive retirement plan for Mr. Finnegan pursuant to his employment agreement (the CCAP SERP). None of these plans provide for above-market returns. Information about our nonqualified defined contribution and deferred compensation plans is set forth under the heading “Executive Compensation—Nonqualified Defined Contribution and Deferred Compensation Plans.”
 
Restrictive Covenants and Recoupment Provisions
 
To protect our competitive position, since 2005, individual equity award agreements for each of our employees, including our NEOs, have contained non-disclosure, non-solicitation and invention assignment covenants. In addition, the NEO equity award agreements and those of certain other senior officers contain non-competition provisions. Failure to comply with these provisions, among other potential consequences, results in the forfeiture of unsettled awards. Our Compensation Committee also may require repayment of any awards that are settled within one year prior to the breach of the applicable covenant and within one year after termination of employment. Additionally, we may seek an injunction, restraining order or such other equitable relief restraining the officer from committing any violation of the covenants.
 
In 2009, we adopted a policy on the recoupment of performance-based compensation in restatement situations. The policy provides that if we are required to restate our financial statements due to material noncompliance with any financial reporting requirement under the securities laws, as a result of misconduct of a senior executive, the independent members of the Board, in their sole discretion, have the right to cause such senior executive to reimburse us for (1) any bonus or other incentive-based or equity-based compensation received by that senior executive during the 12-month period following the first public issuance or filing with the SEC (whichever first occurs) of the document containing such financial statements; and (2) any profits realized from the sale of our stock during that 12-month period. A senior executive means any of our officers who are subject to Section 16 of the Exchange Act and any of our other officers who the Board designates.
 
Employment and Severance Agreements
 
In general, it is our Board’s policy not to enter into employment agreements with, or provide executive severance benefits to, our executive officers beyond those generally available to our salaried employees, other than the change in control agreements discussed below. As a result, our NEOs serve at the will of our Board. The only exception to this policy is the employment agreement with Mr. Finnegan that we entered into when he was hired in 2002. Our Compensation Committee believed, and continues to believe, that it is in our best interest and the best interests of our shareholders to have a specific compensation package with incentives and guarantees in order to retain Mr. Finnegan’s services. A description of, and the amount of the estimated payments and benefits payable to Mr. Finnegan upon a termination of employment under, his employment agreement is set forth under the heading “Executive Compensation—Potential Payments upon Termination or a Change in Control.”
 
Change in Control Agreements
 
Our Board has determined that it is in our best interest and the best interests of our shareholders to assure that we will have the continued dedication of Messrs. Finnegan and Spiro in the event of a threat or occurrence of a change in control. Our Board continues to believe that change in control agreements diminish the inevitable distraction of these individuals by virtue of the personal uncertainties and risks created by a pending or threatened change in control and encourage their full attention and dedication to our business in the event of any pending or threatened change in control. As such, we have individual change in control agreements with Messrs. Finnegan and Spiro. The change in control agreement for Mr. Spiro requires both a change in control event as well as a termination event to trigger benefits. A description of, and the amount of the estimated payments and benefits payable upon a change in control under, these agreements is set forth under the heading “Executive Compensation—Potential


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Payments upon Termination or a Change in Control.” Mr. Finnegan’s change in control agreement provides for a gross-up payment in connection with the determination that a payment would be subject to the excise tax under Section 280G of the Internal Revenue Code. Mr. Degnan is retirement-eligible. Consequently, he is no longer entitled to any enhanced benefits under his change in control agreement.
 
Share Ownership Guidelines
 
Our Board, based upon our Compensation Committee’s recommendation, adopted executive share ownership guidelines in 2004. Our Compensation Committee believes that these guidelines promote our objective of increasing shareholder value by encouraging senior officers to acquire and maintain a meaningful equity stake in Chubb.
 
The guidelines were designed to maintain share ownership at levels high enough to assure our shareholders of our senior officers’ commitment to value creation, while taking into account each individual officer’s need for portfolio diversification. Under these guidelines, senior officers, including each of our NEOs, are expected, over time, to acquire and hold shares of our common stock equal in value to a multiple of their annual salaries. Owned shares, unvested RSUs, shares allocated in our retirement plans and shares deferred until termination of employment count toward satisfying the guidelines. Unexercised stock options and unearned performance units do not count toward satisfaction of the guidelines. There is a five-year phase-in period beginning on the later of becoming an officer subject to the share ownership guidelines and the date the guidelines were adopted in February 2004. Our current share ownership guidelines are as follows:
 
             
Pay Band
 
Officer Titles Included
  Ownership Level
 
15
  Chief Executive Officer     5x Salary  
14
  Chief Operating Officer/Chief Financial Officer     3x Salary  
13
  Executive Vice President/Senior Vice President     2x Salary  
12
  Senior Vice President     1x Salary  
 
Our Compensation Committee reviews the guidelines on a periodic basis and monitors the officers’ progress toward meeting their target ownerships levels. The share ownership of our NEOs at the end of 2009 was:
 
                         
    Target
  Target Number
  Number of Shares
Name
  Ownership Level   of Shares(1)   Deemed Owned
 
John D. Finnegan
    5x Salary       129,626       663,470  
Richard G. Spiro
    3x Salary       45,750       80,448  
John J. Degnan
    3x Salary       53,345       217,231  
Paul J. Krump
    2x Salary       23,587       76,899  
Harold L. Morrison, Jr. 
    2x Salary       20,740       29,445  
Dino E. Robusto
    2x Salary       20,740       32,846  
 
 
  (1)  Based on a per share price of $49.18, which was the closing price of our common stock on December 31, 2009, and the respective salaries of our NEOs as of that date.
 
As shown in the above table, each of our NEOs has met his required ownership threshold. We generally discourage our employees (including our NEOs) from engaging in hedging transactions in our common stock that would allow the employee to continue to own shares of our common stock without the full risks and rewards of ownership.


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EXECUTIVE COMPENSATION
 
Summary Compensation Table
 
The following table sets forth information regarding NEO compensation during 2009, 2008 and 2007:
 
                                                                         
                                        Change in
             
                                        Pension
             
                                        Value and
             
                                  Non-Equity
    Nonqualified
             
                                  Incentive
    Deferred
             
                      Stock
    Option
    Plan
    Compensation
    All Other
       
Name and
        Salary
    Bonus
    Awards
    Awards
    Compensation
    Earnings
    Compensation
    Total
 
Principal Position
  Year     ($)(1)     ($)(2)     ($)(3)     ($)(4)     ($)(5)     ($)(6)     ($)(7)     ($)  
 
John D. Finnegan
    2009     $ 1,275,000           $ 8,339,203           $ 3,750,000     $ 5,514,009     $ 283,019     $ 19,161,231  
Chairman, President and Chief
    2008       1,275,000             7,718,690             3,357,800       4,412,367       205,615       16,969,472  
Executive Officer
    2007       1,275,000             7,904,809             3,569,900       3,542,642       189,248       16,481,599  
Richard G. Spiro
    2009       750,000             2,907,723             1,563,300             6,000       5,227,023  
Executive Vice President and Chief
    2008       187,500     $ 1,735,000       3,716,951                         1,500       5,640,951  
Financial Officer
                                                                       
John J. Degnan
    2009       841,500             3,291,772             1,974,700       1,487,700       134,991       7,730,663  
Vice Chairman and Chief Operating
    2008       759,588             2,467,924             1,765,300       1,424,657       144,819       6,562,288  
Officer
    2007       669,188             2,527,460             1,438,500       941,587       100,947       5,677,682  
Paul J. Krump
    2009       560,000             603,469             806,000       519,244       63,191       2,551,904  
Executive Vice President and Chief
    2008       505,285             482,384             775,000       522,480       58,056       2,343,205  
Underwriting Officer
    2007       447,855             442,032     $ 86,683       725,000       425,293       50,704       2,177,567  
Harold L. Morrison, Jr. 
    2009       490,000             603,469             708,700       601,945       55,330       2,459,444  
Executive Vice President and Chief
    2008       433,744             456,990             682,000       563,237       48,239       2,184,210  
Global Field Officer
                                                                       
Dino E. Robusto
    2009       470,000             603,469             708,700       536,190       53,939       2,372,298  
Executive Vice President and Chief
    2008       398,975             456,990             675,000       432,120       47,071       2,010,156  
Administrative Officer
                                                                       
 
 
(1) $275,000 of Mr. Finnegan’s salary for 2009, 2008 and 2007 was deferred under the 2005 Deferred Compensation Plan. Additional information regarding the 2005 Deferred Compensation Plan is set forth under the heading “Executive Compensation—Nonqualified Defined Contribution and Deferred Compensation Plans.” For 2009, salaries earned by our NEOs accounted for the following percentages of their total compensation: Mr. Finnegan (6.7%), Mr. Spiro (14.3%), Mr. Degnan (10.9%), Mr. Krump (21.9%), Mr. Morrison (19.9%) and Mr. Robusto (19.8%).
 
(2) Pursuant to his offer letter, Mr. Spiro received a guaranteed cash bonus in the amount of $1,420,000 paid in March 2009 (which would have been reduced to the extent he had received any 2008 bonus from his previous employer) and a cash payment in the amount of $315,000 paid on his start date of October 1, 2008.
 
(3) The grant date fair values of the RSU and performance unit awards are estimated based upon the fair market value of our common stock on the date of grant. A breakdown of the 2009 stock awards is set forth under the heading “Executive Compensation — Grants of Plan-Based Awards.” The grant date fair value for RSU awards is based upon a price of $40.365 (average of the high and low price on the grant date). Performance unit awards use a grant date fair value of $45.60. The fair value of the performance unit awards is adjusted to reflect (i) the anticipated appreciation of our common stock over the performance period and (ii) that these awards do not receive dividend equivalents during such period. The grant date fair value of performance unit awards is based upon target payout of 100%. For our performance unit awards, a range of 0% to 200% of the original award can be achieved under the program.
 
(4) In 2004, we eliminated stock options from our core long-term equity incentive program. Amounts in this column reflect the grant date fair value of non-discretionary restoration stock options granted to Mr. Krump upon his exercise in 2007 of vested stock options. The restoration stock option feature is described under the heading “Compensation Discussion and Analysis—Components of Executive Compensation.” Restoration stock options are fully vested on the grant date. The grant date fair value of these awards is the same as the amount of compensation expense we reflect in our financial statements with respect to these awards. The grant date fair value of each restoration stock option was estimated using the Black-Scholes option pricing model. Information regarding our grant date fair value calculations is set forth in footnote 12 to the financial statements included in the 2009 10-K.


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(5) Reflects 2009, 2008 and 2007 incentive compensation paid in March 2010, March 2009 and March 2008, respectively, under our Annual Incentive Plan. Additional information regarding annual incentive compensation is set forth under the headings “Compensation Discussion and Analysis—Components of Executive Compensation” and “Executive Compensation—Grants of Plan-Based Awards.”
 
(6) Reflects solely the aggregate change in pension value for 2009 under our defined benefit plans as follows: Mr. Finnegan’s benefits under the Pension Plan, Pension Excess Benefit Plan and Pension SERP, $15,575, $274,775 and $5,223,659, respectively; Mr. Degnan’s benefits under the Pension Plan and Pension Excess Benefit Plan, $94,832 and $1,392,868, respectively; Mr. Krump’s benefits under the Pension Plan and Pension Excess Benefit Plan, $70,714 and $448,530, respectively; Mr. Morrison’s benefits under the Pension Plan and Pension Excess Benefit Plan, $78,287 and $523,658, respectively; and Mr. Robusto’s benefits under the Pension Plan and Pension Excess Benefit Plan, $69,879 and $466,311, respectively. Since Mr. Spiro joined us on October 1, 2008, he has not accrued any benefits under the Pension Plan or Pension Excess Benefit Plan. Information regarding our calculations of pension values is set forth in footnote 13 to the financial statements included in the 2009 10-K.
 
(7) The following table reflects the components for the “All Other Compensation” column for 2009:
 
                                                 
                      Registrant
             
                      Contributions
             
                      to Defined
             
    Personal Use
    Financial
    Automobile
    Contribution
             
    of Aircraft
    Planning
    Expense
    Plans
    Life Insurance
    Total
 
Name
  ($)(a)     ($)(b)     ($)(c)     ($)(d)     $(e)     ($)  
 
John D. Finnegan(f)
  $ 8,111     $ 13,000     $ 12,558     $ 193,796     $ 55,554     $ 283,019  
Richard G. Spiro
                6,000                   6,000  
John J. Degnan
    28,067       13,000       6,000       87,924             134,991  
Paul J. Krump
          7,980       6,000       49,211             63,191  
Harold L. Morrison, Jr. 
          7,980       6,000       41,350             55,330  
Dino E. Robusto
          7,980       6,000       39,959             53,939  
 
 
(a) The incremental cost of the personal use of corporate aircraft expense for each of the NEOs is calculated by multiplying the direct operating cost per hour by the NEO’s personal use hours. Direct operating cost of the aircraft is comprised of fuel, landing/parking fees, crew fees and expenses, custom fees, flight services/charts, variable maintenance costs, catering, aircraft supplies and other miscellaneous expenses.
 
(b) The incremental cost of financial planning represents the actual cost incurred by us.
 
(c) The incremental cost to us relating to automobile expense is the amount of the automobile allowance provided to our NEOs (other than Mr. Finnegan). The incremental cost of Mr. Finnegan’s automobile and driver was calculated by multiplying the variable expenses of owning and operating the car that Mr. Finnegan uses by the personal use percentage of the total vehicle miles in 2009. The variable expenses are comprised of gas, maintenance, driver overtime and miscellaneous driving expenses. Mr. Finnegan’s personal use percentage for 2009 was approximately 21.3% of the total vehicle miles.
 
(d) Reflects 2009 matching contributions under the CCAP and the CCAP Excess Benefit Plan.
 
(e) The incremental cost of providing life insurance coverage for Mr. Finnegan equal to five times his annual salary (as required under his employment agreement) represents the actual premiums paid by us.
 
(f) As stipulated in Mr. Finnegan’s employment agreement, we pay the club dues and membership fees associated with his country club membership but do not recognize any incremental cost due to his personal use because club dues and membership fees are generally fixed. For 2009, the club dues and membership fees were $10,995. Mr. Finnegan is responsible for paying income tax on his personal use of the country club and any additional costs resulting from such personal use.


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Grants of Plan-Based Awards
 
The following table sets forth information regarding 2009 grants to our NEOs under our Annual Incentive Plan and 2004 Employee Plan:
 
                                                                                                 
                                              All Other
    All Other
                   
                                              Stock
    Option
                   
                                              Awards:
    Awards:
                Grant Date
 
          Estimated Future Payouts
    Estimated Future Payouts
    Number
    Number of
    Exercise or
    Closing
    Fair Value
 
          Under Non-Equity
    Under Equity Incentive
    of Shares
    Securities
    Base Price
    Market Price
    of Stock
 
          Incentive Plan Awards(1)     Plan Awards(3)     of Stock
    Underlying
    of Option
    on the Date
    and Option
 
          Threshold
    Target
    Maximum
    Threshold
    Target
    Maximum
    or Units
    Options
    Awards
    of the Grant
    Awards
 
Name
  Grant Date     ($)(2)     ($)     ($)     (#)     (#)     (#)     (#)(4)     (#)     ($/Sh)     ($/Sh)     ($)(5)  
 
John D. Finnegan
    02/25/2009     $ 1,595,300     $ 2,040,000     $ 4,972,500                                                                     
      02/25/2009                               70,606       141,211       282,422                                     $ 6,439,222  
      02/25/2009                                                       47,070                               1,899,981  
Richard G. Spiro
    02/25/2009       703,800       900,000       2,325,000                                                                  
      02/25/2009                               24,619       49,238       98,476                                       2,245,253  
      02/25/2009                                                       16,412                               662,470  
John J. Degnan
    02/25/2009       889,100       1,136,900       2,885,900                                                                  
      02/25/2009                               27,871       55,741       111,482                                       2,541,790  
      02/25/2009                                                       18,580                               749,982  
Paul J. Krump
    02/25/2009       362,800       464,000       1,334,000                                                                  
      02/25/2009                               5,110       10,219       20,438                                       465,986  
      02/25/2009                                                       3,406                               137,483  
Harold L. Morrison, Jr. 
    02/25/2009       319,100       408,000       1,173,000                                                                  
      02/25/2009                               5,110       10,219       20,438                                       465,986  
      02/25/2009                                                       3,406                               137,483  
Dino E. Robusto
    02/25/2009       319,100       408,000       1,173,000                                                                  
      02/25/2009                               5,110       10,219       20,438                                       465,986  
      02/25/2009                                                       3,406                               137,483  
 
 
(1) Represents the range of potential awards to each NEO under our Annual Incentive Plan. The plan is designed so that the Compensation Committee can apply negative discretion to annual awards of each NEO. Maximum awards reflect the maximum annual incentive compensation awards established by our Compensation Committee pursuant to Section 162(m) of the Internal Revenue Code. Accordingly, the amounts represented above reflect the Section 162(m) target awards after application of negative discretion by our Compensation Committee. Information regarding the actual payouts under the Annual Incentive Plan is set forth in the “Non-Equity Incentive Plan Compensation” column of the table included under the heading “Executive Compensation—Summary Compensation Table.” Information regarding the structure of the Annual Incentive Plan is set forth under the heading “Compensation Discussion and Analysis—Components of Executive Compensation.”
 
(2) Represents payouts under the Annual Incentive Plan assuming that 2009 operating income was 50% of 2008 operating income. No payouts would have been awarded if 2009 operating income had been less than 50% of 2008 operating income.
 
(3) Represents grants to each NEO during 2009 of performance units under our 2004 Employee Plan. Performance units are earned, if at all, based on our TSR over a three-year performance period relative to the TSR over the same period for the companies in the S&P 500 Index. No dividend equivalents are paid on performance unit awards during the performance period. Information regarding performance targets, vesting and additional performance unit award details are set forth under the heading “Compensation Discussion and Analysis—Components of Executive Compensation.”
 
(4) Represents RSU grants to each NEO during 2009. The RSUs will vest, subject to continued employment, on the third anniversary of the grant date. RSUs pay dividend equivalents at the same time and in the same amount as dividends are paid on our common stock. Additional information regarding RSUs is set forth under the heading “Executive Compensation—Components of Executive Compensation.”
 
(5) Represents full grant date fair value of stock awards granted to each NEO in 2009. The grant date fair value of each stock award is estimated based on the fair market value of our common stock on the date of grant adjusted, in the case of performance units, to reflect (i) the anticipated appreciation of our common stock over the performance period and (ii) that these awards do not receive dividend equivalents during such period. The grant date fair value of performance unit awards is based upon target payout of 100%. For our performance unit awards, a range of 0% to 200% of the original award can be achieved under the program.


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Outstanding Equity Awards at Fiscal Year-End
 
The following table sets forth information regarding our NEOs’ equity holdings as of December 31, 2009. The market value of unvested and unearned stock awards is based on the closing price of our common stock on December 31, 2009 of $49.18 per share:
 
                                                                         
    Option Awards     Stock Awards  
                                                    Equity
 
                                              Equity
    Incentive
 
                Equity
                            Incentive
    Plan Awards:
 
                Incentive
                            Plan
    Market or
 
                Plan
                            Awards:
    Payout
 
                Awards:
                Number
    Market
    Number of
    Value of
 
    Number of
    Number of
    Number of
                of Shares
    Value
    Unearned
    Unearned
 
    Securities
    Securities
    Securities
                or Units
    of Shares
    Shares,
    Shares, Units
 
    Underlying
    Underlying
    Underlying
                of Stock
    or Units
    Units or
    or Other
 
    Unexercised
    Unexercised
    Unexercised
    Option
          that
    of Stock
    Other Rights
    Rights that
 
    Options
    Options
    Unearned
    Exercise
    Option
    Have Not
    that Have
    that Have
    Have Not
 
    Exercisable
    Unexercisable
    Options
    Price
    Expiration
    Vested
    Not Vested
    Not Vested
    Vested
 
Name
  (#)     (#)     (#)     ($)     Date     (#)(1)     ($)     (#)(2)     ($)  
 
John D. Finnegan
    40,650                 $ 39.7125       12/02/2012                                  
      52,554                   45.8750       12/02/2012                                  
      129,750                   51.4550       12/02/2012                                  
      141,826                   53.5100       12/02/2012                                  
                                              122,533     $ 6,026,173                  
                                                              296,752     $ 14,594,263  
Richard G. Spiro
                                  64,701       3,181,995                  
                                                              24,619       1,210,762  
John J. Degnan
                                  42,708       2,100,379                  
                                                              100,177       4,926,705  
Paul J. Krump
    15,682                   36.8400       03/07/2012                                  
      17,840                   41.5975       03/06/2013                                  
      13,663                   52.0200       03/02/2010                                  
      13,295                   52.7250       03/01/2011                                  
                                              7,873       387,194                  
                                                              19,244       946,420  
Harold L. Morrison, Jr
                                  7,625       374,998                  
                                                              18,500       909,830  
Dino E. Robusto
    9,460                   35.4250       03/01/2011                                  
      10,396                   36.8400       03/07/2012                                  
      11,932                   23.0250       03/06/2013                                  
                                              7,625       374,998                  
                                                              18,500       909,830  
 
 
(1) Represents unvested RSUs for Mr. Finnegan, of which 37,773 RSUs vested on March 1, 2010, 37,690 RSUs will vest on March 12, 2011 and 47,070 RSUs will vest on February 25, 2012. Represents unvested RSUs for Mr. Spiro, of which 24,145 RSUs vested on January 31, 2010, 24,144 RSUs will vest on January 31, 2011 and 16,412 RSUs will vest on February 25, 2012. Represents unvested RSUs for Mr. Degnan, of which 12,077 RSUs vested on March 1, 2010, 12,051 RSUs will vest on March 12, 2011 and 18,580 RSUs will vest on February 25, 2012. Represents unvested RSUs for Mr. Krump, of which 2,112 RSUs vested on March 1, 2010, 2,355 RSUs will vest on March 12, 2011 and 3,406 RSUs will vest on February 25, 2012. Represents unvested RSUs for Mr. Morrison, of which 1,988 RSUs vested on March 1, 2010, 2,231 RSUs will vest on March 12, 2011 and 3,406 RSUs will vest on February 25, 2012. Represents unvested RSUs for Mr. Robusto, of which 1,988 RSUs vested on March 1, 2010, 2,231 RSUs will vest on March 12, 2011 and 3,406 RSUs will vest on February 25, 2012. Dividend equivalents are paid on RSUs during the restricted period.
 
(2) Represents outstanding performance unit awards for the 2008-2010 performance period assuming maximum performance, which would produce a 200% payout (performance was above target as of December 31, 2009) for Messrs. Finnegan, Degnan, Krump, Morrison and Robusto in the amounts of 226,146, 72,306, 14,134,


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13,390 and 13,390 shares, respectively. Such awards will vest, if at all, on December 31, 2010. Also represents outstanding performance unit awards for the 2009-2011 performance period assuming threshold performance, which would produce a 50% payout (performance was below threshold as of December 31, 2009) for Messrs. Finnegan, Spiro, Degnan, Krump, Morrison and Robusto in the amounts of 70,606, 24,619, 27,871, 5,110, 5,110 and 5,110 shares, respectively. Such awards will vest, if at all, on December 31, 2011. Performance units awarded in 2007 vested on December 31, 2009. Information regarding the vesting of the NEO’s respective 2007 performance units is set forth under the heading “Executive Compensation—Option Exercises and Stock Vested.” The actual value of awards at the end of the performance period may vary from the valuations indicated above. No dividend equivalents are paid on performance unit awards during the performance period.
 
Option Exercises and Stock Vested
 
The following table sets forth the value realized by our NEOs with respect to stock option exercises and stock awards that vested in 2009:
 
                                 
    Option Awards     Stock Awards  
    Number of
          Number of
       
    Shares
    Value
    Shares
    Value
 
    Acquired
    Realized on
    Acquired on
    Realized
 
    on Exercise
    Exercise
    Vesting
    on Vesting
 
Name
  (#)(1)     ($)(2)     (#)(3)     ($)(4)  
 
John D. Finnegan
                189,701     $ 8,818,153  
Richard G. Spiro
                24,145       1,035,217  
John J. Degnan
                60,654       2,819,477  
Paul J. Krump
                10,582       492,088  
Harold L. Morrison, Jr
                9,982       464,018  
Dino E. Robusto
    14,318     $ 348,361       9,852       458,888  
 
 
(1) Represents the exercise of the following stock options by Mr. Robusto: (a) 4,252 shares at an exercise price of $48.3147, and (b) 10,066 shares at an exercise price of $48.3147.
 
(2) For stock options exercised through a cashless-sell-all transaction, value realized is based on the market price at the time of the exercise.
 
(3) For Mr. Finnegan, represents the vesting of 39,892 RSUs granted in 2006 and the vesting of 149,809 shares in respect of the performance unit award granted in 2007. For Mr. Spiro, represents the vesting of 24,145 RSUs granted in 2008. For Mr. Degnan, represents the vesting of 12,754 RSUs granted in 2006 and 47,900 shares in respect of the performance unit award granted in 2007. For Mr. Krump, represents the vesting of 2,204 RSUs granted in 2006 and 8,378 shares in respect of the performance unit award granted in 2007. For Mr. Morrison, represents the vesting of 2,098 RSUs granted in 2006 and 7,884 shares in respect of the performance unit award granted in 2007. For Mr. Robusto, represents the vesting of 1,968 RSUs granted in 2006 and 7,884 shares in respect of the performance unit award granted in 2007. Receipt of the 39,892 RSUs for Mr. Finnegan and 12,495 RSUs of Mr. Degnan’s 12,754 granted in 2006 have been deferred until their respective retirements. Information regarding performance unit awards is set forth under the heading “Compensation Discussion and Analysis—Components of Executive Compensation.”
 
(4) For RSU awards, the value realized is based on the average of the high and low prices of our common stock on the applicable settlement date. Performance unit awards are valued at their settlement price of $48.355 which was the average of the high and low prices of our common stock on the settlement date.


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Pension Benefits
 
Pension Plan
 
Our eligible employees, and certain eligible employees of our subsidiaries, participate in the Pension Plan. Our NEOs participate on the same terms and conditions as other eligible employees, except as noted below. The Pension Plan, as in effect during 2009, provides each eligible employee with annual retirement income beginning at age 65 equal to the product of:
 
  •  the total number of years of participation in the Pension Plan; and
 
  •  13/4% of average compensation for the highest five years in the last ten years of participation prior to retirement during which the employee was most highly paid or, if higher, the last 60 consecutive months (final average earnings).
 
Average compensation under the Pension Plan includes salary and annual incentive compensation. A social security offset is subtracted from this benefit. The social security offset is equal to the product of:
 
  •  the total number of years of participation in the Pension Plan (for years prior to February 1, 2008, this number was capped at 35 years); and
 
  •  an amount related to the participant’s primary social security benefit.
 
Benefits can commence as early as age 55. However, if pension benefits commence prior to age 65, they may be actuarially reduced. The reduction in the gross benefit (prior to offset for social security benefits) is based on the participant’s age at retirement and years of Pension Plan participation as follows:
 
  •  If the participant has at least 25 years of Pension Plan participation, benefits are unreduced at age 62. They are reduced 2.5% per year from 62 to 60 (5% reduction at 60) and 5% per year from 60 to 55 (30% reduction at 55).
 
  •  If the participant has at least 15 but less than 25 years of Pension Plan participation, benefits are unreduced at age 65. They are reduced 2% per year from 65 to 62 (6% reduction at 62) and 4% per year from 62 to 61 (10% reduction at 61) and 5% per year from 61 to 55 (40% reduction at 55).
 
  •  If the participant has less than 15 years of Pension Plan participation, or if the participant terminates employment with us before age 55, benefits are unreduced at age 65. They are reduced 6.67% per year from 65 to 60 (33.3% reduction at 60) and 3.33% per year from 60 to 55 (50% reduction at 55).
 
The participant’s social security benefit is reduced based on factors relating to the participant’s year of birth and age at retirement.
 
Benefits are generally paid in the form of an annuity. If a participant retires and elects a joint and survivor annuity, the Pension Plan provides a 10% subsidy. The portion of the benefit attributable to the cash balance account, as described in the following paragraph, may be paid in the form of a lump sum upon termination of employment.
 
Effective January 1, 2001, we amended the Pension Plan to provide a cash balance benefit, in lieu of the benefit described above, to reduce the rate of increase in the Pension Plan costs. This benefit provides for a participant to receive a credit to his or her cash balance account every six months. The amount of the cash balance credit increases as the sum of a participant’s age and years of service credit increases from 2.5% to 5% of compensation. The maximum credit of 5% of compensation (subject to the maximum limitation on compensation permitted by the Internal Revenue Code) earned over the preceding six months is made when the sum of a participant’s age and years of service credit equals or exceeds 55 (which is the case for each NEO). Amounts credited to a participant’s cash balance account earn interest at a rate based on the 30-year U.S. treasury bond rate. Participants who were hired by us prior to January 1, 2001 (including Messrs. Degnan, Krump, Morrison and Robusto) will receive a benefit under the Pension Plan equal to the greater of the pension benefit described in the preceding paragraphs or the amount calculated under the cash balance formula.


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ERISA and the Internal Revenue Code impose maximum limitations on the recognized compensation and the amount of a pension which may be paid under a funded defined benefit plan such as the Pension Plan. The Pension Plan complies with these limitations.
 
Pension Excess Benefit Plan
 
We also maintain the Pension Excess Benefit Plan, which is a supplemental, nonqualified, unfunded plan. The Pension Excess Benefit Plan uses essentially the same benefit formula, early retirement reduction factors and other features as the Pension Plan, except that the Pension Excess Benefit Plan recognizes compensation (salary and annual incentive plan compensation) above IRS compensation limits. The Pension Excess Benefit Plan also recognizes deferred compensation for purposes of determining applicable retirement benefits. Benefits under both the Pension Plan and the Pension Excess Benefit Plan are provided by us on a noncontributory basis.
 
Benefits payable under the Pension Excess Benefit Plan are generally paid in the form of a lump sum, calculated using an interest discount rate of 5%. However, the portion of the benefit that was earned and vested as of December 31, 2004 may be payable in certain other forms, including installment payments and life annuities, if properly elected by the participant and if the participant satisfies the requirements of the Pension Excess Benefit Plan.
 
Pension SERP—Mr. Finnegan
 
Under the terms of Mr. Finnegan’s employment agreement, he is entitled to a Pension SERP, which provides a nonqualified and unfunded benefit in addition to those provided under the Pension Plan and the Pension Excess Benefit Plan. The benefit will equal 6% of his final average compensation for each full year of service up to a maximum of 60% of final average compensation offset by benefits under the Pension Plan and Pension Excess Benefit Plan, previous employer pension benefits and social security benefits. The Pension Plan provisions described above with respect to the early retirement discount and joint and survivor benefits apply to the Pension SERP. Under the Pension SERP, Mr. Finnegan’s compensation means the sum of his annual salary plus annual incentive compensation earned for the relevant year (whether or not any such compensation is deferred).


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Pension Benefits Table
 
The following table sets forth information regarding participation by our NEOs in our pension plans as of December 31, 2009:
 
                             
        Number of
  Present Value
   
        Years
  of
  Payments During
        Credited
  Accumulated
  Last
        Service
  Benefit
  Fiscal Year
Name
  Plan Name   (#)   ($)(1)(2)   ($)
 
John D. Finnegan
  Pension Plan     6     $ 75,739        
    Pension Excess Benefit Plan     6       1,285,238        
    Pension SERP     7       20,305,474        
Richard G. Spiro
  Pension Plan                  
    Pension Excess Benefit Plan                  
John J. Degnan
  Pension Plan     18       710,559        
    Pension Excess Benefit Plan     18       6,225,343        
Paul J. Krump
  Pension Plan     27       529,648        
    Pension Excess Benefit Plan     27       2,537,126        
Harold L. Morrison, Jr. 
  Pension Plan     25       572,939        
    Pension Excess Benefit Plan     25       2,053,936        
Dino E. Robusto
  Pension Plan     23       500,166        
    Pension Excess Benefit Plan     23       1,598,946        
 
 
(1) Represents the present value of the NEO’s accumulated pension benefit computed as of the same Pension Plan measurement date we used for 2009 financial statement reporting. The following actuarial assumptions were used:
(a)    Interest discount rate: 6.00%;
(b)    Future interest crediting rate on cash balance accounts: 5.00%;
(c)    Mortality table: RP 2000 projected to 2009 white collar combined mortality table; and
  (d)     Payment Form:
(i)    Pension Plan—50% take cash balance account as a lump sum;
(ii)   Pension Excess Benefit Plan—100% take benefit as a lump sum; and
(iii)  Pension SERP—lump sum.
 
(2) The figures shown in the table above assume retirement benefits commence at the earliest unreduced retirement age, reflecting the assumptions described in the preceding footnote. However, if the NEO’s employment terminated or he retired on December 31, 2009 (which is the assumption underlying the figures set forth in the “Voluntary Resignation/Retirement” column in the tables under the heading “Executive Compensation—Potential Payments upon Termination”), and plan benefits were immediately payable as lump sums (calculated using the 5% discount rate specified in the plans), the Pension Excess Benefit Plan and Pension SERP benefits, as applicable, would have been as follows:
 
                 
        Lump Sum
Name
  Plan Name   Amount
 
John D. Finnegan
    Pension Excess Benefit Plan     $ 1,298,500  
      Pension SERP       21,786,735  
Richard G. Spiro
    Pension Excess Benefit Plan        
John J. Degnan
    Pension Excess Benefit Plan       6,225,345  
Paul Krump
    Pension Excess Benefit Plan       2,275,524  
Harold L. Morrison Jr. 
    Pension Excess Benefit Plan       1,807,126  
Dino E. Robusto
    Pension Excess Benefit Plan       1,415,435  
 
(3) The amount payable from the Pension Plan will be offset by the benefit payable from the Pension Plan for the Employees of Chubb Insurance Company of Canada, under which Mr. Robusto is no longer accruing additional service. The amount is estimated to be C$14,407 per year commencing at age 65. In addition to the amounts shown above, Mr. Robusto is also entitled to a benefit from the Supplementary Income Plan for Employees of Chubb Insurance Company of Canada in the amount of C$1,800 per year commencing at age 65.


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Nonqualified Defined Contribution and Deferred Compensation Plans
 
Deferred Compensation Plans
 
Pursuant to the Deferred Compensation Plans, we provide certain of our employees, including our NEOs, with the opportunity to electively defer the payment of certain components of compensation (annual salary, annual incentive compensation, RSUs and performance unit awards) that would otherwise be payable to them. Deferred RSUs and performance unit awards are deemed to be invested in our common stock. Deferred annual salary and annual incentive compensation are credited with earnings based on the deemed returns that would have been received had such amounts been invested in one of the investment options available under the Deferred Compensation Plans that are generally available for investment in the marketplace and as selected by the participant. Dividends on deferred RSUs and performance unit awards are treated the same as an annual salary or annual incentive compensation deferral. The investment options available under the Deferred Compensation Plans are the same as those investment alternatives that are available under the CCAP Plan except for the Chubb Stock Fund. Investment elections may be changed by the participant at any time, at his or her discretion.
 
CCAP Excess Benefit Plan
 
We also maintain the CCAP Excess Benefit Plan which is a supplemental, nonqualified, unfunded excess defined contribution plan. The CCAP Excess Benefit Plan recognizes compensation in excess of IRS limits for the CCAP and provides the participants with the applicable company match on eligible compensation. Matching contributions for each of the NEOs equal 4% of plan compensation. Messrs. Finnegan, Degnan and Krump have elected to defer receipt of matching contribution amounts attributable to the CCAP Excess Benefit Plan. Deferred balances are notionally invested in the Fidelity Stable Value Fund, which is one of the investment funds available under the CCAP. For 2009, the Fidelity Stable Value Fund had a 2.83% investment return. Messrs. Morrison and Robusto elected to take a cash distribution of their matching contribution amounts attributable to the CCAP Excess Benefit Plan, paid in March 2009. Mr. Spiro did not receive a matching contribution under the CCAP Excess Benefit Plan during 2009.
 
CCAP SERP—Mr. Finnegan
 
Mr. Finnegan’s employment agreement also provides that he is entitled to the CCAP SERP. The CCAP Excess Benefit Plan, like the CCAP, requires a one-year waiting period before a participant becomes eligible for our company matching contributions and has a six-year graded vesting schedule. Mr. Finnegan’s employment agreement, however, provides that he is entitled to the matching contributions for eligible deferrals from his employment date and provides that the CCAP SERP will pay any otherwise unvested company match dollars forfeited under the CCAP and CCAP Excess Benefit Plan if his employment with us terminates prior to his becoming being 100% vested. Amounts credited to the CCAP SERP account earn 5% interest per annum.
 
ESOP Excess Benefit Plan
 
In 2004, we merged the Employee Stock Ownership Plan (the ESOP) and the ESOP Excess Benefit Plan into the respective CCAP and CCAP Excess Plans. No new shares or contributions are credited to balances under the ESOP and the ESOP Excess Benefit Plan. Annual earnings for the ESOP Excess Benefit Plan include only the change in account balance attributable to changes in our stock price and any dividends we pay.
 
ESOP SERP—Mr. Finnegan
 
Mr. Finnegan’s employment agreement also provides that he is entitled to the ESOP SERP. The ESOP and ESOP Excess Benefit Plan included a one-year waiting period prior to entry as well as five years of vesting service. Mr. Finnegan’s employment agreement, however, provides that he was credited with an amount equal to the stock that he would have been entitled under the ESOP and ESOP Excess Benefit Plan from his date of employment and provides that the ESOP SERP account is immediately vested and the balance credited thereunder earns 5% interest per annum.


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Nonqualified Defined Contribution and Deferred Compensation Table
 
The following table sets forth information regarding participation by our NEOs in our nonqualified defined contribution and deferred compensation plans as of December 31, 2009:
 
                                         
    Executive
    Registrant
    Aggregate
          Aggregate
 
    Contributions
    Contributions
    Earnings in
    Aggregate
    Balance at
 
    in Last
    in Last
    Last
    Withdrawals/
    Last Fiscal
 
    Fiscal Year
    Fiscal Year
    Fiscal Year
    Distributions
    Year-End
 
Name
  ($)(1)     ($)(2)     ($)(3)     ($)(4)     ($)(5)  
 
John D. Finnegan
  $ 1,849,138     $ 184,596     $ 454,280     $ 268,198     $ 13,806,287  
Richard G. Spiro
                             
John J. Degnan
    493,053       78,724       138,453       54,696       3,438,251  
Paul J. Krump
          40,011       64,038             948,125  
Harold L. Morrison, Jr. 
          32,150       460             85,282  
Dino E. Robusto
          30,759       (268 )           98,521  
 
 
(1) Represents RSU deferrals for Messrs. Finnegan and Degnan in the amounts of $1,574,138 and $493,053, respectively. Mr. Finnegan’s amount also includes the deferral of $275,000 of his 2009 annual salary. This amount is included in the “Salary” column of the table set forth under the heading “Executive Compensation—Summary Compensation Table.” All of these deferrals were made under the 2005 Deferred Compensation Plan.
 
(2) Represents the company match for the CCAP Excess Benefit Plan.
 
(3) The following table reflects the components for the “Aggregate Earnings in Last Fiscal Year” column:
 
                                         
    CCAP Excess
          ESOP Excess
   
    Benefit Plan and
  Deferred
  Appreciation and
  Benefit Plan and
   
    CCAP SERP
  Compensation
  Dividends on
  ESOP SERP
   
    Earnings
  Earnings
  Deferred RSUs
  Earnings
  Total
Name
  ($)(a)   ($)   ($)   ($)(b)   ($)
 
John D. Finnegan
  $ 25,219     $ 68,291     $ 357,479     $ 3,291     $ 454,280  
Richard G. Spiro
                             
John J. Degnan
    13,390       7,567       121,315       (3,819 )     138,453  
Paul J. Krump
    6,685       58,431             (1,078 )     64,038  
Harold L. Morrison, Jr. 
    748                   (288 )     460  
Dino E. Robusto
    186                   (454 )     (268 )
 
 
  (a)  For Mr. Finnegan, represents CCAP Excess earnings of $21,389 and CCAP SERP earnings of $3,830. For all other participants, represents CCAP Excess benefit only.
 
  (b)  For Mr. Finnegan, represents ESOP Excess earnings of ($793) and ESOP SERP earnings of $4,084. For all other participants, represents ESOP Excess benefits only.
 
(4) Represents dividends paid on deferred vested RSUs for Messrs. Finnegan and Degnan.
 
(5) Messrs. Morrison and Robusto have made “cash elections” under the CCAP Excess Benefit Plan in 2009, resulting in lower account balances.
 
Potential Payments upon Termination or a Change in Control
 
Accrued Compensation and Benefits
 
As of December 31, 2009, each of our NEOs other than Mr. Spiro was fully vested in the amounts set forth under the heading “Executive Compensation—Pension Benefits” and the amounts set forth under the heading “Executive Compensation—Nonqualified Defined Contribution and Deferred Compensation Plans.” In addition, at that date, each NEO was entitled to receive all earned but unpaid salary, other vested long-term equity awards (as set forth under the heading “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End” and the other applicable tables set forth under the heading “Executive Compensation”), amounts held in his account under the CCAP and employee welfare plans.


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Termination Events
 
Disability or Death.  With the exception of Mr. Finnegan, a termination of employment due to disability or death does not entitle our NEOs to payments or benefits that are not generally available to our salaried employees.
 
Equity Awards.  With respect to equity awards, under the terms of the 2004 Employee Plan, upon the disability or death of a participant, including each of our NEOs, the participant or the participant’s estate, as applicable, would receive pro-rata vesting of the unvested portion of outstanding RSUs and continuation of the exercise period within which the participant or the participant’s estate may exercise outstanding options through the stated expiration date of such options. With respect to performance unit awards, if a participant’s employment terminates due to disability or death on or after the completion of the first calendar year of any performance period, the participant or the participant’s estate, as applicable, would receive all of the performance units for the performance period that would have been earned had the participant continued employment for the full period (with payments contingent on our relative TSR over the performance period).
 
Mr. Finnegan.  In addition to the equity vesting provisions described in the preceding paragraph, Mr. Finnegan’s employment agreement calls for us to provide him with a death benefit equal to fives times his annual salary as of the time of his death. We provide this benefit on an insured basis. In the event of Mr. Finnegan’s disability, his employment agreement provides that he is entitled to receive a disability benefit equal to 60% of his annual salary as of the date of disability until he reaches age 65. We provide this coverage in the form of an unsecured, uninsured disability benefit. Mr. Finnegan’s employment agreement also provides that he or his estate, as applicable, would be entitled to a pro-rata portion of the annual incentive compensation award he would have received for the year of his disability or death. For purposes of Mr. Finnegan’s employment agreement, disability means Mr. Finnegan’s inability to perform his duties on a full-time basis for six consecutive months as a result of incapacity due to mental or physical illness.
 
Retirement.  Mr. Degnan is eligible for retirement under all of our compensation and benefit plans and arrangements. Accordingly, other than in connection with a termination for cause, the termination of his employment would be treated as a retirement, as is the case for all of our retirement-eligible salaried employees. As such, upon termination of his employment other than for cause, Mr. Degnan would receive pro-rata vesting of the unvested portion of his outstanding RSUs and continued vesting of all performance units for which the first calendar year of the performance period has been completed (with payments contingent on actual performance for the performance period).
 
For Cause Termination.  Under Mr. Finnegan’s employment agreement, in the event of his termination for cause, he is entitled to receive retiree health benefits pursuant to our retiree health plans that would be available to an employee with 34 years of service with us. None of our other NEOs are entitled to any additional payments or benefits, and each of our NEOs would forfeit his unvested equity awards, in the event we terminate his employment for cause. Under the 2004 Employee Plan, cause means:
 
  •  the willful failure of a participant to perform his or her employment-related duties or gross negligence in the performance of such duties;
 
  •  a participant’s willful or serious misconduct that has caused or could reasonably be expected to result in material injury to our business or reputation;
 
  •  a participant’s indictment for a crime constituting a felony; or
 
  •  a material breach by a participant of any written covenant or agreement with us or any of our written policies.
 
The 2004 Employee Plan provides that the definition of cause in an employment or severance agreement will govern in lieu of the foregoing definition. Accordingly, the definition of cause in Mr. Finnegan’s employment agreement applies to Mr. Finnegan for purposes of the 2004 Employee Plan. Therefore, in his case, cause means:
 
  •  Mr. Finnegan’s willful and continued failure to perform his duties under the terms of his employment agreement;


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  •  Mr. Finnegan’s willful engagement in any malfeasance, fraud, dishonesty or gross misconduct in connection with his position as our President and Chief Executive Officer or as a member of our Board that causes us material damage;
 
  •  Mr. Finnegan’s conviction of, or plea of guilty or nolo contendere to, a felony; or
 
  •  Mr. Finnegan’s breach of certain representations, warranties and covenants contained in his employment agreement that materially damage or could reasonably be expected to materially damage us.
 
Voluntary Resignation.  Messrs. Spiro, Krump, Morrison and Robusto are not entitled to any payments or benefits that are not generally available to our salaried employees upon voluntary resignation. As discussed above, Mr. Degnan is retirement-eligible for purposes of our plans. Accordingly, a resignation by Mr. Degnan would be treated as a retirement under such plans. Under Mr. Finnegan’s employment agreement, in the event of his voluntary resignation, he is entitled to receive retiree health benefits pursuant to our retiree health plans that would be available to an employee with 34 years of service with us.
 
Involuntary Termination without Cause.  Except for Mr. Finnegan and as discussed below for Mr. Spiro in connection with a change in control, neither a termination of employment by us without cause nor a demotion or other constructive termination would entitle our NEOs to any payments or benefits that are not generally available to our salaried employees. The severance policy applicable to all of our salaried employees generally provides two weeks of severance pay for each year of service up to a maximum of 52 weeks. As discussed above, Mr. Degnan is retirement-eligible for purposes of our plans. Accordingly, an involuntary termination by Mr. Degnan without cause would be treated as a retirement under such plans.
 
Mr. Finnegan’s employment agreement provides that, upon the termination of his employment without cause, his constructive termination or in the event we elect not to renew his employment agreement in accordance with its terms, he is entitled to receive the following benefits beyond those generally available to our salaried employees:
 
  •  current annual salary (without proration);
 
  •  pro-rated annual incentive compensation for the year of his termination;
 
  •  a severance payment equal to the sum of up to 2.5 times (with the 2.5 multiple being subject to reduction as described below) the sum of his then-current annual salary and the average amount of his annual incentive compensation paid in the preceding three years;
 
  •  up to 2.5 years of additional age and service credit for purposes of his supplemental retirement benefits (with the 2.5 multiple being subject to reduction as described below);
 
  •  up to 2.5 years of continued health and welfare benefits (with the 2.5 multiple being subject to reduction as described below) under our employee welfare plans and then retiree benefits; and
 
  •  if any payments or benefits that Mr. Finnegan receives are subject to the excise tax imposed under Section 4999 of the Internal Revenue Code on golden parachute payments, an additional payment to him to restore him to the after-tax position that he would have been in if the excise tax had not been imposed.
 
In addition, any outstanding equity awards would accelerate and vest in full (subject to the achievement of the performance goals in the case of performance units) and his stock options would continue to be exercisable until the earlier of the fifth anniversary of the date of termination of his employment or the expiration of the option term.
 
In the case of our non-renewal of his employment agreement only, the 2.5 multiplier decreases by 0.5 when Mr. Finnegan attains age 58 and decreases by an additional 0.5 on each anniversary of such date so that when Mr. Finnegan turns 62, this multiplier will be zero. In addition, the obligation to continue to provide health and welfare benefits would cease if Mr. Finnegan were to receive such benefits from a new employer. As of December 31, 2009, Mr. Finnegan’s severance multiplier was equal to 2.5.


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Under Mr. Finnegan’s employment agreement, constructive termination means his voluntary termination of employment following:
 
  •  a reduction in Mr. Finnegan’s annual salary or target annual incentive compensation;
 
  •  our failure to appoint Mr. Finnegan as our President and Chief Executive Officer and as a member of our Board or his removal from any of these positions;
 
  •  a material diminution in Mr. Finnegan’s duties or responsibilities or the assignment to him of duties or responsibilities materially inconsistent with his position and status as our President and Chief Executive Officer;
 
  •  a material change in Mr. Finnegan’s reporting relationship so that he no longer reports solely to our Board in his positions as President and Chief Executive Officer;
 
  •  our breach of any material obligations to Mr. Finnegan under the terms of his employment agreement;
 
  •  our breach of certain representations, warranties and covenants set forth in Mr. Finnegan’s employment agreement; or
 
  •  our requiring that Mr. Finnegan’s principal location of employment to be at any office or location more than 50 miles from our corporate headquarters in Warren, New Jersey.
 
Mr. Finnegan’s employment agreement requires Mr. Finnegan to comply with confidentiality, non-competition and non-solicitation covenants. The non-competition and non-solicitation provisions run during the term of Mr. Finnegan’s employment through the second anniversary of the termination thereof.
 
Change in Control
 
Equity Awards.  Under the terms of the 2004 Employee Plan, if outstanding equity awards are assumed by an acquirer in accordance with the terms of the 2004 Employee Plan, the awards would remain outstanding and vesting would not accelerate unless the employee was terminated without cause or experienced a constructive termination. In the event of a change in control in which the acquirer did not assume outstanding equity awards in accordance with the 2004 Employee Plan, RSUs would immediately vest in full (but would be paid out in accordance with the terms of the awards) and performance unit awards would become earned and payable at 100% of the applicable target award. These provisions would apply to the outstanding RSUs and performance unit awards held by Messrs. Spiro, Degnan, Krump, Morrison and Robusto as of December 31, 2009. The impact of a change in control on Mr. Finnegan’s equity awards is discussed below. For purposes of the 2004 Employee Plan, change in control is defined as:
 
  •  the acquisition of 20% or more of our shares by any person;
 
  •  a change in a majority of the members of our Board due to a proxy contest or tender or exchange offer; or
 
  •  a merger, reorganization or similar transaction (including a sale of substantially all assets), where our shareholders immediately prior to such transaction do not control more than 50% of the surviving entity immediately after the transaction.
 
Mr. Finnegan.  Upon the occurrence of a change in control (as defined below), Mr. Finnegan’s employment agreement would be superseded by his change in control employment agreement with us. Mr. Finnegan’s change in control employment agreement provides generally that the terms and conditions of his employment (including position, location and benefits) may not be adversely changed during the three-year period after a change in control. The change in control employment agreement contains a double trigger mechanism such that (i) if a change in control occurs, and (ii) Mr. Finnegan’s employment is terminated (other than for cause, death or disability), or constructively terminated, during the three-year period following a change in control, Mr. Finnegan would be entitled to receive:
 
  •  pro-rated annual incentive compensation through the date of termination for the year in which the termination of employment occurs;


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  •  three times the sum of his then-current annual salary and highest annual bonus over the past three years, including any bonus payable for the current year;
 
  •  three years of additional age and service credit for purposes of the supplemental retirement benefits;
 
  •  three years of continued health and welfare benefits (or, if shorter, until a new employer provides these benefits) under our employee welfare plans and thereafter retiree benefits;
 
  •  up to $100,000 of outplacement services; and
 
  •  if any payments or benefits that Mr. Finnegan receives are subject to the excise tax imposed under Section 4999 of the Internal Revenue Code on golden parachute payments, an additional payment to him to restore him to the after-tax position that he would have been in if the excise tax had not been imposed.
 
In addition, any outstanding equity awards would vest and his stock options would continue to be exercisable until the earlier of the fifth anniversary of the date of termination of his employment or the expiration of the option term. Mr. Finnegan also is entitled to reimbursement for legal fees he incurs as a result of the termination of his employment.
 
For purposes of Mr. Finnegan’s change in control employment agreement, change in control means:
 
  •  the acquisition of 20% or more of our outstanding common stock by any person;
 
  •  continuing directors (or their approved successors) ceasing to constitute a majority of our Board;
 
  •  a merger, reorganization or similar transaction (including a sale of substantially all assets), where our shareholders immediately prior to such transaction do not control more than 50% of the surviving entity immediately after the transaction; or
 
  •  shareholder approval of any plan or proposal for our liquidation or dissolution.
 
Mr. Finnegan’s change in control employment agreement requires Mr. Finnegan to comply with confidentiality, non-competition and non-solicitation covenants. The non-competition and non-solicitation provisions run during the term of Mr. Finnegan’s employment through the second anniversary of the termination thereof.
 
Mr. Spiro.  In addition to the above terms with respect to equity awards, we have entered into a change in control agreement with Mr. Spiro. The agreement with Mr. Spiro comes into effect in the event that his employment is terminated (other than as a result of his death, disability, retirement, voluntary termination or by us for cause) or is constructively terminated within two years after the effective date of the change in control (as defined below). Upon actual or constructive termination following a change in control, Mr. Spiro is entitled to receive a severance payment equal to two times the sum of:
 
  •  his then-current annual salary; and
 
  •  the average amount of his annual incentive compensation for the last three years;
 
provided that the amount of the severance payment cannot exceed the amount the individual would have received had he remained in our employment until his normal retirement age under the Pension Plan. In addition to severance, Mr. Spiro also is entitled to reimbursement for legal fees incurred by him as a result of the termination and continuation of health and other welfare benefits for a period of two years after the date of termination. Mr. Spiro’s agreement does not provide for a gross-up of any excise taxes that might be triggered by these payments.
 
For purposes of Mr. Spiro’s agreement, the definition of a change in control is the same definition of a change in control used in the 2004 Employee Plan.
 
For purposes of Mr. Spiro’s agreement, cause means:
 
  •  his willful and continued failure to perform his duties; or
 
  •  his willful engagement in misconduct which is materially injurious to us.


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For purposes of Mr. Spiro’s agreement, the definition of a constructive termination means his voluntary termination of employment following the occurrence of certain events, including:
 
  •  the assignment to Mr. Spiro, without his express written consent, of any duties inconsistent with his positions, duties, responsibilities, authority and status immediately prior to the change in control;
 
  •  a change in reporting responsibilities, titles or offices as in effect immediately prior to the change in control or any removal of, or any failure to re-elect, Mr. Spiro to any of such positions, except in limited circumstances;
 
  •  a reduction in Mr. Spiro’s annual salary as in effect at the time of the change in control;
 
  •  our failure to continue Mr. Spiro’s participation in certain compensation plans in effect at the time of the change in control; or
 
  •  our requiring Mr. Spiro to maintain his principal office or conduct his principal activities anywhere other than our corporate headquarters located within the New York Metropolitan area (including Warren, New Jersey).
 
Mr. Degnan.  Since Mr. Degnan is now retirement-eligible, his change in control agreement no longer provides him any enhanced benefits.
 
Messrs. Krump, Morrison and Robusto.  Messrs. Krump, Morrison and Robusto are not entitled to any payments or benefits beyond those generally available to our salaried employees upon a change in control.


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Estimate of Incremental Potential Payment
 
The following tables quantify the additional payments and benefits under the compensation and benefit plans and arrangements to which our NEOs would be entitled upon termination of employment under the termination scenarios described above that are beyond those generally available to our salaried employees. Because the payments to be made to an NEO depend on several factors, the actual amounts to be paid out upon a triggering event can only be determined at the time of the triggering event.
 
                                                 
John D. Finnegan  
                            Involuntary
       
                            Termination or
       
                            Constructive
       
                Voluntary
          Termination
       
                Resignation/
    Involuntary
    after Change in
    Change in
 
    Death
    Disability
    Retirement
    Termination
    Control
    Control 
 
Payment Type
  ($)     ($)     ($)     ($)     ($)     ($)  
 
Cash Payment(1)(2)
  $ 6,375,000     $ 2,838,000             $11,663,000       $15,075,000        
RSUs(3)
    3,478,764       3,478,764             6,026,173       6,026,173     $ 6,026,173  
Performance Units(4)
    14,594,263       14,594,263             14,594,263       12,505,687       12,505,687  
Retirement Benefits(5)
                      9,446,091       10,908,561        
Retiree Medical Benefits(6)
    137,100       223,101       $212,400       212,400       212,400        
Other Benefits(7)
    26,000       26,000             184,407       316,089        
Gross-up on Excise Tax(8)
                                   
                                                 
Total
  $ 24,611,127     $ 21,160,128       $212,400       $42,126,334       $45,043,910     $ 18,531,860  
                                                 
 
 
(1) In the event of death, reflects a death benefit of five times annual salary as of December 31, 2009 ($1,275,000). In the event of disability, reflects the present value of payments equal to 60% of annual salary until age 65. In the event of a termination without cause, reflects a multiple of annual salary as of December 31, 2009 and the average of Mr. Finnegan’s last three annual incentive compensation awards ($3,390,200). In the event of an “Involuntary Termination or Constructive Termination after Change in Control”, reflects a multiple of annual salary and the highest of his last three annual or current incentive compensation awards ($3,750,000).
 
(2) Except for the amount listed under the “Involuntary Termination or Constructive Termination after Change in Control” column, these amounts do not include any amounts attributable to Mr. Finnegan’s 2009 annual incentive compensation award to be paid in March 2010 and disclosed under the heading “Executive Compensation—Summary Compensation Table.”
 
(3) Reflects fair market value of accelerated unvested RSUs based on our closing stock price of $49.18 per share on December 31, 2009. Figure reflected in the “Change in Control” column assumes that RSUs are not assumed by the acquirer.
 
(4) Reflects fair market value of accelerated unearned performance units based on our closing stock price of $49.18 per share on December 31, 2009. In the case of a termination of Mr. Finnegan’s employment without cause or due to death or disability, the number of performance units that vest would be based on our actual performance at the end of the performance period and, for purposes of this calculation, reflects the same performance assumptions used for Mr. Finnegan’s outstanding performance unit awards set forth under the heading “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End.” In the event of an “Involuntary Termination or Constructive Termination after Change in Control” or upon a “Change in Control,” the number of performance units that vest would be based on target performance. Figure reflected in the “Change in Control” column assumes that performance units are not assumed by the acquirer.
 
(5) Reflects the value attributable to additional age and service credit under Mr. Finnegan’s Pension SERP.
 
(6) Mr. Finnegan’s employment agreement provides for retiree medical benefits assuming that Mr. Finnegan had 34 years of service at retirement. None of our other employees hired on or after January 1, 1999 receives company-subsidized retiree medical benefits. The present value of these benefits is calculated based on the assumptions used for financial reporting purposes at year-end 2009, including a discount rate of 6.0%, medical trend of 8.75% in 2009 and grading down gradually to a trend rate of 4.5% in 2028 and thereafter.


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(7) In the case of a termination in the connection with a change of control, represents outplacement benefits ($100,000), three years of continued life insurance ($166,663), three years of continued medical and dental benefits ($23,426) and two years of executive financial counseling ($26,000). In the event of an involuntary termination without cause, value represents 2.5 years of continued medical and dental benefits ($19,521), 2.5 years of continued life insurance benefits ($138,886) and two years of executive financial counseling ($26,000).
 
(8) This calculation is an estimate for proxy disclosure purposes only. Payments upon a change in control may differ based on factors such as transaction price, timing of employment termination and payments, changes in compensation and reasonable compensation analyses. For purposes of this calculation, no portion of the performance units that would accelerate upon a change in control have been treated as reasonable compensation for services rendered prior to the change in control or no value has been attributed to non-competition covenants. The increase in Mr. Finnegan’s prior taxable wages negates any excise tax liabilities under Section 280G of the Internal Revenue Code.
 
                                                 
Richard G. Spiro  
                            Involuntary
       
                            Termination or
       
                            Constructive
       
                Voluntary
          Termination
       
                Resignation/
    Involuntary
    after Change
    Change
 
    Death
    Disability
    Retirement
    Termination
    in Control
    in Control
 
    ($)     ($)     ($)(1)     ($)     ($)     ($)  
 
Cash Payment(2)(3)
                          $ 4,340,000        
RSUs(4)
  $ 1,973,550     $ 1,973,550                   3,181,995     $ 3,181,995  
Performance Units(5)
    1,210,762       1,210,762                   2,421,525       2,421,525  
Other Benefits(6)
    12,000       12,000           $ 12,000       38,682       38,682  
                                                 
Total
  $ 3,196,312     $ 3,196,312           $ 12,000     $ 9,982,202     $ 5,642,202  
                                                 
 
 
(1) Mr. Spiro was not eligible for retirement as of December 31, 2009.
 
(2) Figure reflected in the “Involuntary Termination or Constructive Termination after Change in Control” column represents two years of compensation based on Mr. Spiro’s annual salary as of December 31, 2009 ($750,000) and a deemed annual bonus of $1,420,000 pursuant to his change in control agreement.
 
(3) Does not include any amounts attributable to Mr. Spiro’s 2009 annual incentive compensation award to be paid in March 2010 and disclosed under the heading “Executive Compensation—Summary Compensation Table.”
 
(4) Reflects fair market value of accelerated unvested RSUs based on our closing stock price of $49.18 per share on December 31, 2009. Figure reflected in the “Change in Control” column assumes that RSUs are not assumed by the acquirer.
 
(5) Reflects fair market value of accelerated unearned performance units based on our closing stock price of $49.18 per share on December 31, 2009. In the case of a termination of Mr. Spiro’s employment due to death, disability or without cause, the number of performance units that vest would be based on our actual performance at the end of the performance period and, for purposes of this calculation, reflects the same performance assumptions used for Mr. Spiro’s outstanding performance unit awards set forth under the heading “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End.” In the event of an “Involuntary Termination or Constructive Termination after Change in Control” or upon a “Change in Control,” performance units would become earned and payable at 100% of the applicable target award. Figure reflected in the “Change in Control” column assumes that performance units are not assumed by the acquirer.
 
(6) Represents the value attributable to two years of executive financial counseling ($12,000) and, in the case of a termination in connection with a change in control, two years of (i) life insurance premiums ($1,044) and (ii) medical and dental coverage ($25,638).
 


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John J. Degnan  
                            Involuntary
       
                            Termination or
       
                            Constructive
       
                Voluntary
          Termination
       
                Resignation/
    Involuntary
    after Change
    Change
 
    Death
    Disability
    Retirement
    Termination
    in Control
    in Control
 
    ($)     ($)     ($)(1)     ($)     ($)     ($)  
 
Cash Payment(2)(3)
                                   
RSUs(4)
  $ 1,160,496     $ 1,160,496     $ 1,160,496     $ 1,160,496     $ 2,100,379     $ 2,100,379  
Performance Units(5)
    4,926,705       4,926,705       4,926,705       4,926,705       4,519,347       4,519,347  
Other Benefits(6)
    26,000       26,000       26,000       26,000       48,797        
                                                 
Total
  $ 6,113,201     $ 6,113,201     $ 6,113,201     $ 6,113,201     $ 6,668,523     $ 6,619,726  
                                                 
 
 
(1) As of December 31, 2009, Mr. Degnan was eligible for retirement under all plans.
 
(2) Since Mr. Degnan reached his normal retirement age in October 2009, he is no longer entitled to severance compensation under his change in control agreement.
 
(3) Does not include any amounts attributable to Mr. Degnan’s 2009 annual incentive compensation award to be paid in March 2010 and disclosed under the heading “Executive Compensation—Summary Compensation Table.”
 
(4) Reflects fair market value of accelerated unvested RSUs based on our closing stock price of $49.18 per share on December 31, 2009. Figure reflected in the “Change in Control” column assumes that RSUs are not assumed by the acquirer.
 
(5) Reflects fair market value of accelerated unearned performance units based on our closing stock price of $49.18 per share on December 31, 2009. In the case of a termination of Mr. Degnan’s employment due to death, disability, retirement or termination without cause, the number of performance units that vest would be based on our actual performance at the end of the performance period and, for purposes of this calculation, reflects the same performance assumptions used for Mr. Degnan’s outstanding performance unit awards set forth under the heading “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End.” In the event of an “Involuntary Termination or Constructive Termination after Change in Control” or upon a “Change in Control,” performance units would become earned and payable at 100% of the applicable target award. Figure reflected in the “Change in Control” column assumes that performance units are not assumed by the acquirer.
 
(6) Represents the value attributable to two years of executive financial counseling ($26,000) and, in the case of a termination in connection with a change in control, two years of (i) life insurance premiums ($4,578) and (ii) medical and dental coverage ($18,219).
 

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Paul J. Krump  
                            Involuntary
       
                            Termination or
       
                            Constructive
       
                Voluntary
          Termination
       
                Resignation/
    Involuntary
    after Change
    Change
 
    Death
    Disability
    Retirement
    Termination
    in Control
    in Control
 
    ($)     ($)     ($)(1)     ($)     ($)     ($)  
 
Cash Payment(2)
                                   
RSUs(3)
  $ 212,188     $ 212,188                 $ 387,194     $ 387,194  
Performance Units(4)
    946,420       946,420                   850,125       850,125  
Retirement Benefits(5)
    2,304,222                                
Other Benefits(6)
    15,960       15,960           $ 15,960       15,960        
                                                 
Total
  $ 3,478,790     $ 1,174,568           $ 15,960     $ 1,253,279     $ 1,237,319  
                                                 
 
 
(1) Mr. Krump was not eligible for retirement as of December 31, 2009.
 
(2) Does not include any amounts attributable to Mr. Krump’s 2009 annual incentive compensation award to be paid in March 2010 and disclosed under the heading “Executive Compensation—Summary Compensation Table.”
 
(3) Reflects fair market value of accelerated unvested RSUs based on our closing stock price of $49.18 per share on December 31, 2009. Figure reflected in the “Change in Control” column assumes that RSUs are not assumed by the acquirer.
 
(4) Reflects fair market value of accelerated unearned performance units based on our closing stock price of $49.18 per share on December 31, 2009. In the case of a termination of Mr. Krump’s employment due to death, disability or without cause, the number of performance units that vest would be based on our actual performance at the end of the performance period and, for purposes of this calculation, reflects the same performance assumptions used for Mr. Krump’s outstanding performance unit awards set forth under the heading “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End.” In the event of an “Involuntary Termination or Constructive Termination after Change in Control” or upon a “Change in Control,” performance units would become earned and payable at 100% of the applicable target award. Figure reflected in the “Change in Control” column assumes that performance units are not assumed by the acquirer.
 
(5) In the event of death, the Pension Plan and Pension Excess Benefit Plan provide for a pre-retirement survivor’s benefit with an incremental value of $2,304,222. For Mr. Krump, the pre-retirement survivor’s benefit is more valuable than the benefits that he would have received in the event of a voluntary termination due to his commencement of employment prior to January 1, 2001.
 
(6) Represents the value attributable to continuation of two years of executive financial counseling.
 

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Harold L. Morrison, Jr.  
                            Involuntary
       
                            Termination or
       
                            Constructive
       
                Voluntary
          Termination
       
                Resignation/
    Involuntary
    after Change
    Change
 
    Death
    Disability
    Retirement
    Termination
    in Control
    in Control
 
    ($)     ($)     ($)(1)     ($)     ($)     ($)  
 
Cash Payment(2)
                                   
RSUs(3)
  $ 202,872     $ 202,872                 $ 374,998     $ 374,998  
Performance units(4)
    909,830       909,830                   831,830       831,830  
Retirement Benefits(5)
    1,215,275                                
Other Benefits(6)
    15,960       15,960           $ 15,960       15,960        
                                                 
Total
  $ 2,343,937     $ 1,128,662           $ 15,960     $ 1,222,788     $ 1,206,828  
                                                 
 
 
(1) Mr. Morrison was not eligible for retirement as of December 31, 2009.
 
(2) Does not include any amounts attributable to Mr. Morrison’s 2009 annual incentive compensation award to be paid in March 2010 and disclosed under the heading “Executive Compensation—Summary Compensation Table.”
 
(3) Reflects fair market value of accelerated unvested RSUs based on our closing stock price of $49.18 per share on December 31, 2009. Figure reflected in the “Change in Control” column assumes that RSUs are not assumed by the acquirer.
 
(4) Reflects fair market value of accelerated unearned performance units based on our closing stock price of $49.18 per share on December 31, 2009. In the case of a termination of Mr. Morrison’s employment due to death, disability or without cause, the number of performance units that vest would be based on our actual performance at the end of the performance period and, for purposes of this calculation, reflects the same performance assumptions used for Mr. Morrison’s outstanding performance units awards set forth under the heading “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End.” In the event of an “Involuntary Termination or Constructive Termination after Change in Control” or upon a “Change in Control,” performance units would become earned and payable at 100% of the applicable target award. Figure reflected in the “Change in Control” column assumes that performance units are not assumed by the acquirer.
 
(5) In the event of death, the Pension Plan and Pension Excess Benefit Plan provide for a pre-retirement survivor’s benefit with an incremental value of $1,215,275. For Mr. Morrison, the pre-retirement survivor’s benefit is more valuable than the benefits that he would have received in the event of a voluntary termination due to his commencement of employment prior to January 1, 2001.
 
(6) Represents the value attributable to continuation of two years of executive financial counseling.
 

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Dino E. Robusto  
                            Involuntary
       
                            Termination or
       
                            Constructive
       
                Voluntary
          Termination
       
                Resignation/
    Involuntary
    after Change
    Change
 
    Death
    Disability
    Retirement
    Termination
    in Control
    in Control
 
    ($)     ($)     ($)(1)     ($)     ($)     ($)  
 
Cash Payment(2)
                                   
RSUs(3)
  $ 202,872     $ 202,872                 $ 374,998     $ 374,998  
Performance Units(4)
    909,830       909,830                   831,830       831,830  
Retirement Benefits(5)
    1,487,043                                
Other Benefits(6)
    15,960       15,960           $ 15,960       15,960        
                                                 
Total
  $ 2,615,705     $ 1,128,662           $ 15,960     $ 1,222,788     $ 1,206,828  
                                                 
 
 
(1) Mr. Robusto was not eligible for retirement as of December 31, 2009.
 
(2) Does not include any amounts attributable to Mr. Robusto’s 2009 annual incentive compensation award to be paid in March 2010 and disclosed under the heading “Executive Compensation—Summary Compensation Table.”
 
(3) Reflects fair market value of accelerated unvested RSUs based on our closing stock price of $49.18 per share on December 31, 2009. Figure reflected in the “Change in Control” column assumes that RSUs are not assumed by the acquirer.
 
(4) Reflects fair market value of accelerated unearned performance units based on our closing stock price of $49.18 per share on December 31, 2009. In the case of a termination of Mr. Robusto’s employment due to death, disability or without cause, the number of performance units that vest would be based on our actual performance at the end of the performance period and, for purposes of this calculation, reflects the same performance assumptions used for Mr. Robusto’s outstanding performance unit awards set forth under the heading “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End.” In the event of an “Involuntary Termination or Constructive Termination after Change in Control” or upon a “Change in Control,” performance units would become earned and payable at 100% of the applicable target award. Figure reflected in the “Change in Control” column assumes that performance units are not assumed by the acquirer.
 
(5) In the event of death, the Pension Plan and Pension Excess Benefit Plan provide for a pre-retirement survivor’s benefit with an incremental value of $1,487,043. For Mr. Robusto, the pre-retirement survivor’s benefit is more valuable than the benefits that he would have received in the event of a voluntary termination due to his commencement of employment prior to January 1, 2001.
 
(6) Represents the value attributable to continuation of two years of executive financial counseling.

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EQUITY COMPENSATION PLAN INFORMATION
 
The following table shows certain information with respect to our equity compensation plans as of December 31, 2009:
 
                         
                Number of
 
    Number of
          Securities Remaining
 
    Securities
          Available for Future
 
    to be Issued
    Weighted-Average
    Issuance under
 
    upon Exercise of
    Exercise Price of
    Equity Compensation
 
    Outstanding
    Outstanding
    Plans (excluding
 
    Options, Warrants
    Options, Warrants
    securities reflected
 
    and Rights
    and Rights
    in column (a))
 
Plan Category
  (a)     (b)     (c)  
 
Equity compensation plans approved by security holders
    12,003,605 (2)   $ 35.76 (4)     24,082,942 (6)
Equity compensation plans not approved by security holders(1)
    202,613 (3)   $ 52.02 (5)     347,629  
Total
    12,206,218     $ 35.82 (4)(5)     24,430,571  
 
(1) These plans are the CCAP Excess Benefit Plan and the Deferred Compensation Plan for Directors, under which 141,932 shares of common stock and 205,697 shares of common stock, respectively, are available for future issuance.
 
The CCAP Excess Benefit Plan is a nonqualified, defined contribution plan and covers those participants in the CCAP and the ESOP whose total benefits under those plans are limited by certain provisions of the Internal Revenue Code. A participant in the CCAP Excess Benefit Plan is entitled to a benefit equaling the difference between the participant’s benefits under the CCAP and the ESOP, without considering the applicable limitations of the Internal Revenue Code, and the participant’s actual benefits under such plans. A participant’s excess ESOP benefit is expressed as shares of our common stock. Payments under the CCAP Excess Benefit Plan are generally made: (i) for excess benefits related to the CCAP in cash annually as soon as practical after the amount of excess benefit can be determined; and (ii) for excess benefits related to the ESOP, in common stock as soon as practicable after the earlier of the participant’s 65th birthday or termination of employment. Allocations under the ESOP ceased in 2004. Accordingly, other than dividends, no new contributions are made to the ESOP or the CCAP Excess Benefit Plan with respect to excess ESOP benefits. Additional information regarding the CCAP and the CCAP Excess Benefit Plan is set forth under the heading “Compensation Discussion and Analysis—Company-Sponsored Benefit Plans.”
 
The material terms of the Deferred Compensation Plan for Directors are described under the heading “Corporate Governance—Directors’ Compensation.”
 
(2) Includes 3,587,773 shares, representing 200% of the aggregate target for the performance unit awards for the three-year performance periods ending December 31, 2010 and December 31, 2011, which is the maximum number of shares issuable under these awards and 829,531 shares for the performance period ended December 31, 2009. The December 31, 2009 performance units are shown at the actual payout percentage of 132.2% of target. Shortly after the end of each performance period, our Compensation Committee will determine the actual number of shares to be received by 2004 Employee Plan participants for the awards that are earned on December 31, 2010 and December 31, 2011.
 
(3) Includes an aggregate of 16,681 shares issuable upon exercise of the special option grants awarded to two independent directors in 2002 as individual compensation for their service on our CEO search committee.
 
(4) Weighted average exercise price excludes shares issuable under outstanding performance unit awards, RSU awards and director stock unit awards.
 
(5) Weighted average exercise price consists of exercise price of special option grants described in note (3) above, and excludes shares issuable in connection with the CCAP Excess Benefit Plan and the Deferred Compensation Plan for Directors.
 
(6) Includes 14,139,932 shares available for issuance under the Global Employee Stock Purchase Plan (2001), 9,943,010 shares available for issuance under the 2009 LTIP (which includes 425,467 shares previously reserved for issuance in connection with the 2007 performance unit awards). After December 31, 2009, the number of shares available for issuance under the 2009 LTIP was reduced by approximately 1.8 million net shares due to grants made to participants in the 2009 LTIP during the first quarter of 2010 (partially offset by shares returned to the status of available for issuance due to forfeitures and shares cancelled in connection with tax withholdings).


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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth certain information concerning the only persons or entities known to us to be beneficial owners of more than 5% of our outstanding common stock. The information below is as reported by that entity in statements filed with the SEC.
 
                 
    Amount and Nature
       
    of Beneficial
       
    Ownership of
       
Name and Address
  Common Stock     Percent of Class(3)  
 
BlackRock, Inc. 
    25,162,691 (1)     7.5 %
Morgan Stanley
    22,130,668 (2)     6.5 %
 
 
(1) Reflects ownership as of December 31, 2009 as reported on an amendment to Schedule 13G filed with the SEC by BlackRock, Inc., located at 40 East 52nd Street, New York, NY 10022. BlackRock, Inc. reports sole voting and dispositive power over all of the reported shares. BlackRock, Inc. has certified that these shares of our common stock were acquired in the ordinary course of business and were not acquired for the purpose of, and do not have the effect of, changing or influencing the control of Chubb and were not acquired in connection with or as a participant in any transaction having such purpose or effect.
 
(2) Reflects ownership as of December 31, 2009 as reported on a Schedule 13G/A filed with the SEC by Morgan Stanley, located at 1585 Broadway, New York, NY 10036. Morgan Stanley reports sole voting power over 21,465,067 of the reported shares, shared voting power over none of the reported shares and sole dispositive power over all of the reported shares. Morgan Stanley has certified that these shares of our common stock were acquired in the ordinary course of business and were not acquired for the purpose of, and do not have the effect of, changing or influencing the control of Chubb and were not acquired in connection with or as a participant in any transaction having such purpose or effect.
 
(3) As reported in the applicable statement filed with the SEC.


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The following table sets forth certain information regarding the beneficial ownership of our common stock and common stock-based holdings by each of our directors and nominees for director, by each of our NEOs and by our directors and executive officers as a group as of March 8, 2010.
 
                 
    Amount and Nature
       
    of Beneficial
       
    Ownership of
       
Name and Address(1)
  Common Stock(2)     Percent of Class(3)  
 
Zoë Baird(4)(8)
    63,027       *
Sheila P. Burke(4)(9)
    77,766       *
James I. Cash, Jr.(4)(10)
    18,933       *
Joel J. Cohen(4)(11)
    181,701       *
John D. Finnegan(12)
    1,126,654       *
Klaus J. Mangold(4)(13)
    36,897       *
Martin G. McGuinn(5)
    14,864       *
Lawrence M. Small(4)(14)
    103,503       *
Jess Søderberg(6)
    4,345       *
Daniel E. Somers(4)(15)
    20,530       *
Karen Hastie Williams(4)(16)
    38,223       *
James M. Zimmerman(7)
    8,674       *
Alfred W. Zollar(4)(17)
    12,906       *
John J. Degnan(18)
    219,409       *
Paul J. Krump(19)
    141,792       *
Harold L. Morrison, Jr.(20)
    36,029       *
Dino E. Robusto(21)
    69,880       *
Richard G. Spiro(22)
    84,158       *
All directors and executive officers as a group(23)
    2,488,924       *
 
 
 * Less than 1%.
 
(1) The business address of each director and executive officer named in this table is c/o The Chubb Corporation, 15 Mountain View Road, Warren, New Jersey 07059.
 
(2) Unless otherwise indicated, share amounts are as of March 8, 2010 and each person has sole voting and investment power with respect to the shares listed.
 
(3) Based upon 328,527,950 shares of our common stock outstanding as of March 8, 2010.
 
(4) Includes (i) 882 fully vested stock units and (ii) 2,481 deferred stock units but does not include performance units representing a target of 1,407 shares for the performance period ending December 31, 2010. Payment of such performance units will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(5) Includes (i) 853 fully vested stock units and (ii) 2,481 deferred stock units but does not include performance units representing a target of 1,407 shares for the performance period ending December 31, 2010. Payment of such performance units will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(6) Includes (i) 764 fully vested stock units and (ii) 2,481 deferred stock units but does not include performance units representing a target of 1,407 shares for the performance period ending December 31, 2010. Payment of such performance units will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(7) Includes (i) 433 fully vested stock units and (ii) 2,481 deferred stock units but does not include performance units representing a target of 1,301 shares for the performance period ending December 31, 2010. Payment of such performance units will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.


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(8) Includes (i) 40,000 shares that may be purchased within 60 days; and (ii) 3,988 market value units and 609 vested stock units which Ms. Baird has elected to defer her receipt of.
 
(9) Includes (i) 56,000 shares that may be purchased within 60 days; and (ii) 7,213 market value units and 9,442 vested stock units which Ms. Burke has elected to defer her receipt of.
 
(10) Includes (i) 8,000 shares that may be purchased within 60 days; and (ii) 2,288 market value units and 644 vested stock units which Dr. Cash has elected to defer his receipt of.
 
(11) Includes (i) 90,708 shares that may be purchased within 60 days; (ii) 12,663 shares that may be purchased within 60 days pursuant to a restoration stock option awarded pursuant to exercising a special stock option grant; and (iii) 1,638 vested stock units and 35,791 market value units which Mr. Cohen has elected to defer his receipt of.
 
(12) Includes (i) 80,000 shares held by a family-owned limited liability company; (ii) 364,780 shares that may be purchased within 60 days; (iii) 37,690 RSUs that will vest on March 12, 2011; (iv) 47,070 RSUs that will vest on February 25, 2012; (v) 37,262 RSUs that will vest on February 24, 2013; (vi) 197 shares that were allocated to Mr. Finnegan pursuant to the ESOP; and (vii) 241,659 RSUs that are fully vested which Mr. Finnegan has elected to defer receipt of until retirement. This amount does not include (i) performance units representing a target of 113,073 shares for the performance period ending December 31, 2010; (ii) 141,211 shares for the performance period ending December 31, 2011; and (iii) 111,786 shares for the performance period ending December 31, 2012. Payment of such shares will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(13) Includes (i) 16,000 shares that may be purchased within 60 days; and (ii) 5,741 market value units and 9,793 vested stock units which Dr. Mangold has elected to defer his receipt of.
 
(14) Includes (i) 37,925 shares that may be purchased within 60 days; and (ii) 4,018 shares that may be purchased within 60 days pursuant to a restoration stock option awarded pursuant to exercising a special stock option grant.
 
(15) Includes (i) 2,000 shares that may be purchased within 60 days; and (ii) 2,459 market value units and 10,660 vested stock units which Mr. Somers has elected to defer his receipt of.
 
(16) Includes (i) 24,000 shares that may be purchased within 60 days; and (ii) 5,874 vested stock units which Ms. Hastie Williams has elected to defer her receipt of.
 
(17) Includes 322 vested stock units which Mr. Zollar has elected to defer his receipt of.
 
(18) Includes (i) 12,051 RSUs that will vest on March 12, 2011; (ii) 18,580 RSUs that will vest on February 25, 2012; (iii) 14,708 RSUs that will vest on February 24, 2013; (iv) 54,700 RSUs that are fully vested which Mr. Degnan has elected to defer receipt of until retirement; and (v) 6,607 shares that were allocated to Mr. Degnan pursuant to the ESOP. This amount does not include (i) performance units representing a target of 36,153 shares for the performance period ending December 31, 2010; (ii) 55,741 shares for the performance period ending December 31, 2011; and (iii) 44,127 shares for the performance period ending December 31, 2012. Payment of such shares will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(19) Includes (i) 60,480 shares that may be purchased within 60 days; (ii) 2,355 RSUs that will vest on March 12, 2011; (iii) 3,406 RSUs that will vest on February 25, 2012; (iv) 3,432 RSUs that will vest on February 24, 2013; and (v) 6,483 shares that were allocated to Mr. Krump pursuant to the ESOP. This amount does not include (i) performance units representing a target of 7,067 shares for the performance period ending December 31, 2010; (ii) 10,219 shares for the performance period ending December 31, 2011; and (iii) 10,296 shares for the performance period ending December 31, 2012. Payment of such shares will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(20) Includes (i) 2,231 RSUs that will vest on March 12, 2011; (ii) 3,406 RSUs that will vest on February 25, 2012; (iii) 3,432 RSUs that will vest on February 24, 2013; (iv) 348 shares in the Chubb Stock Fund of the CCAP; and (v) 129 shares that were allocated to Mr. Morrison pursuant to the ESOP. This amount does not include (i) performance units representing a target of 6,695 shares for the performance period ending


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December 31, 2010; (ii) 10,219 shares for the performance period ending December 31, 2011; and (iii) 10,296 shares for the performance period ending December 31, 2012. Payment of such shares will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(21) Includes (i) 31,788 shares that may be purchased within 60 days; (ii) 2,231 RSUs that will vest on March 12, 2011; (iii) 3,406 RSUs that will vest on February 25, 2012; and (iv) 3,432 RSUs that will vest on February 24, 2013. This amount does not include (i) performance units representing a target of 6,695 shares for the performance period ending December 31, 2010; (ii) 10,219 shares for the performance period ending December 31, 2011; and (iii) 10,296 shares for the performance period ending December 31, 2012. Payment of such shares will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(22) Includes (i) 24,144 RSUs that will vest on January 31, 2011; (ii) 16,412 RSUs that will vest on February 25, 2012; and (iii) 12,992 RSUs that will vest on February 24, 2013. This amount does not include (i) performance units representing a target of 49,238 shares for the performance period ending December 31, 2011; and (ii) 38,978 shares for the performance period ending December 31, 2012. Payment of such shares will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.
 
(23) Includes (i) 1,162 shares which executive officers other than those listed in the table above disclaim beneficial ownership; (ii) 116 shares which were allocated to executive officers other than those listed in the table above pursuant to the Chubb Stock Fund of the CCAP; (iii) 8,403 shares which were allocated to executive officers other than those listed in the table above pursuant to the ESOP; (iv) 58,018 shares which executive officers other than those listed in the table above have the right to purchase within 60 days; (v) 10,436 RSUs that will vest on March 12, 2011; (vi) 16,027 RSUs that will vest on February 25, 2012; and (vii) 12,648 RSUs that will vest on February 24, 2013. This amount does not include (i) performance units awarded to executive officers other than those listed in the table above representing a target of 31,318 shares for the performance period ending December 31, 2010; (ii) 48,085 shares for the performance period ending December 31, 2011; and (iii) 37,949 shares for the performance period ending December 31, 2012. Payment of such shares will range from 0% to 200% depending on actual performance measured against the stated performance goals for the applicable performance period.


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CERTAIN TRANSACTIONS AND OTHER MATTERS
 
At December 31, 2009, BlackRock, Inc. was the beneficial owner of more than 5% of our outstanding common stock. In 2009, BlackRock, Inc. purchased insurance policies from one of our property and casualty insurance subsidiaries with an aggregate net written premium of approximately $2,800,000. At December 31, 2009, we owned approximately $40 million of BlackRock, Inc. fixed income securities.
 
At December 31, 2009, Morgan Stanley was the beneficial owner of more than 5% of our outstanding common stock. During 2009, an affiliate of Morgan Stanley acted as our broker in connection with certain securities transactions for which it earned aggregate commissions of approximately $2,000,000. In addition, during 2009, we paid an affiliate of Morgan Stanley approximately $150,000 in brokerage commissions relating to certain equity trades made by us. As of December 31, 2009, an affiliate of Morgan Stanley served as the general partner of three limited partnerships in which we have invested. During 2009, we paid management fees to this affiliate in the approximate amount of $1,500,000. As of December 31, 2009, an affiliate of Morgan Stanley managed a fixed income portfolio in our Pension Plan for which it received approximately $425,000 in fees. In addition, as of December 31, 2009, an affiliate of Morgan Stanley managed one of the funds offered to participants in the CCAP. As of December 31, 2009, CCAP participants had invested approximately $49 million in this fund. The associated management fees are borne by the CCAP participants who invest in this fund. In 2009, a subsidiary of Morgan Stanley purchased insurance policies from one of our property and casualty insurance subsidiaries with an aggregate net written premium of approximately $2,000,000. At December 31, 2009, we owned approximately $6,200,000 of Morgan Stanley common stock.
 
During the first quarter of 2010, one of our property and casualty insurance subsidiaries agreed to pay €650,000 on behalf of the subsidiary’s insured to resolve all claims of a third party against the insured’s directors, officers and employees. The company that purchased the insurance policy from our subsidiary was an early stage venture capital backed software company that, like many information technology companies, filed for bankruptcy in 2002 when its backers declined to make further investments in it. Dr. Cash was a director of the insured. The settlement was negotiated at arm’s length between counsel for the claimant and the insureds. Our subsidiary administered the insured’s claim for insurance coverage in the ordinary course of business and consistent with our administration of claims of other insureds. The insured, together with its directors, officers and employees, have denied, and continue to deny, liability for the claims. No portion of the settlement payment has been attributed to Dr. Cash.
 
Effective December 1, 2002, we entered into an employment agreement with Mr. Finnegan. This employment agreement covers Mr. Finnegan’s roles and responsibilities, his compensation and benefits and the results of the termination of his employment under various circumstances. The employment agreement contains an automatic renewal clause, providing that the employment agreement will have a perpetual two-year term unless Mr. Finnegan or we deliver a notice of non-renewal. Additional information regarding Mr. Finnegan’s employment agreement is set forth under the headings “Compensation Discussion and Analysis—Employment and Severance Agreements,” “Compensation Discussion and Analysis—Change in Control Agreements” and “Executive Compensation—Potential Payments upon Termination.”
 
We have entered into change in control agreements with our Chief Operating Officer and our Chief Financial Officer. Information regarding these change in control agreements is set forth under the headings “Compensation Discussion and Analysis—Change in Control Agreements” and “Executive Compensation—Potential Payments upon Termination.”
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than 10% of our common stock to file reports of securities ownership and changes in such ownership with the SEC. Based solely upon a review of copies of such reports or written representations that all such reports were timely filed, we believe that each of our directors, executive officers and greater than 10% beneficial owners complied with all Section 16(a) filing requirements applicable to them during 2009, except for Mr. Søderberg who filed a Form 4 due on April 23, 2008 on July 24, 2009 as a result of an administrative error and Mr. Krump who filed a Form 4 on February 8, 2010 reporting transactions that should have been reported by February 12, 2007 and May 7, 2007, respectively, as a result of a broker error.


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PROPOSAL 1
 
ELECTION OF DIRECTORS
 
Upon the recommendation of the Governance Committee, our Board has nominated the following individuals for election to our Board this year:
 
     
Zoë Baird
  Jess Søderberg
Sheila P. Burke
  Daniel E. Somers
James I. Cash, Jr. 
  Karen Hastie Williams
John D. Finnegan
  James M. Zimmerman
Martin G. McGuinn
  Alfred W. Zollar
Lawrence M. Small
   
 
Information regarding the business experience of each nominee and the factors considered by our Governance Committee and the Board in selecting each nominee for election to our Board is provided under the heading “Our Board of Directors.” Each of our directors is elected annually to serve until the next annual meeting of shareholders and until his or her successor is elected and qualified. There are no family relationships among our executive officers and directors. Each director nominee other than Mr. Finnegan satisfies the independence requirements set forth in the NYSE listing standards and, with respect to the nominees expected to serve on our Audit Committee, Section 10A(m)(3) of the Exchange Act.
 
Our Board expects that each of the nominees named in this proxy statement will be available for election and, if elected, will be willing to serve as a director. If any nominee is not available, then the proxies may vote for a substitute as may be designated by our Board, unless our Board reduces the number of directors. Our Board has, in accordance with our By-Laws, fixed the number of directors to be elected at 11. If elected, each director will serve until the next annual meeting of shareholders and until his or her successor is duly elected and qualified.
 
Director nominees will be elected by a majority of the votes cast by shareholders entitled to vote at the 2010 Annual Meeting. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on your proxy card.
 
Our Board unanimously recommends that you vote “FOR” each of the foregoing nominees for director. If you are a shareholder of record and return a signed and dated proxy card without marking any voting selections, your shares will be voted “FOR” the election of each of the director nominees. If you are a beneficial owner of shares held in street name and return a signed and dated voting instruction card without marking any voting selections for the election of directors, your shares will not be voted and will not be considered as present and entitled to vote with respect to the election of each of the director nominees.


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PROPOSAL 2
 
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
 
Our Audit Committee, acting pursuant to the authority granted to it in its charter, has retained Ernst & Young LLP (Ernst & Young) as our independent auditor. The appointment of Ernst & Young is being submitted to our shareholders for ratification. Ernst & Young has acted as our independent auditor for many years. The following summarizes the fees billed to us by Ernst & Young for professional services rendered in 2009 and 2008:
 
                 
    2009     2008  
 
Audit Fees(1)
  $ 6,840,000     $ 6,555,000  
Audit-Related Fees(2)
    1,190,000       852,000  
Tax Fees(3)
           
All Other Fees(4)
    33,000       102,000  
 
 
(1) Audit Fees primarily relate to the audit of our annual financial statements, review of our financial statements included in our quarterly reports on Form 10-Q, statutory audits for our insurance subsidiaries and review of SEC registration statements.
 
(2) Audit-Related Fees primarily relate to an International Financial Reporting Standards impact assessment, a SAS 70 internal control report, employee benefit plan audits and certain non-insurance related statutory audits.
 
(3) Tax Fees primarily relate to tax compliance, tax advice and tax planning.
 
(4) All Other Fees relate to other services not described in notes (1), (2), and (3) above, including special actuarial reports filed with regulators, technical training and an online information service.
 
Our Audit Committee determined that the provision of these services is compatible with maintaining Ernst & Young’s independence.
 
In 2009, our Audit Committee pre-approved all services performed for us by Ernst & Young.
 
Representatives of Ernst & Young are expected to be present at the 2010 Annual Meeting and to have the opportunity to make a statement should they desire to do so and to be available to respond to appropriate questions.
 
The affirmative vote of a majority of the votes cast by shareholders entitled to vote at the 2010 Annual Meeting is required to ratify the appointment of Ernst & Young as our independent auditor. If our shareholders do not ratify the appointment of Ernst & Young, our Audit Committee will reconsider the appointment.
 
Our Board unanimously recommends that you vote “FOR” ratification of the appointment of Ernst & Young LLP as our independent auditor. Proxies solicited by our Board will be voted “FOR” this proposal unless a shareholder has indicated otherwise on the proxy card. If you are a shareholder of record and return a signed and dated proxy card without marking any voting selections with respect to ratification of Ernst & Young LLP as independent auditor, or if you are a beneficial owner of shares held in street name and return a signed and dated voting instruction card without marking any voting selection with respect to ratification of Ernst & Young LLP as independent auditor, your shares will be considered as present and entitled to vote with respect to that proposal and your shares will be voted “FOR” Proposal 2.


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SOLICITATION OF PROXIES
 
We will pay the cost of this solicitation of proxies. In addition to the solicitation of proxies by use of the internet and mail, we may use the services of one or more of our directors, officers or other regular employees (who will receive no additional compensation for their services in such solicitation) to solicit proxies personally, by telephone or by other electronic means. In addition, we may enter into an agreement with a professional proxy solicitor, pursuant to which it may assist us in the solicitation of proxies by mail, in person and by telephone for a fee, which is estimated not to exceed $8,500 plus out-of-pocket expenses. Arrangements will be made with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of shares held on the record date by such persons and we will reimburse them for reasonable expenses actually incurred by them in so doing.
 
2011 SHAREHOLDER PROPOSALS AND NOMINATIONS
 
Any proposal that a shareholder intends to be included in our proxy statement and form of proxy card for our 2011 Annual Meeting of Shareholders must be in writing and be received by our Corporate Secretary at The Chubb Corporation, 15 Mountain View Road, Warren, New Jersey 07059 no later than November 18, 2010 and must otherwise comply with the rules promulgated by the SEC in order to be eligible for inclusion in our proxy materials for the 2011 Annual Meeting of Shareholders.
 
Under our By-Laws, if a shareholder desires to bring a matter before the annual meeting of shareholders or if a shareholder wants to nominate a person for election to our Board, the shareholder must follow the procedures set forth in our By-Laws. A copy of Article I, Section 10, of our By-Laws, which covers those matters, is available without charge upon written request to our Corporate Secretary. Our By-Laws also are available on our website at www.chubb.com/investors. Our By-Law procedures are separate from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy statement.
 
One of the procedural requirements in our By-Laws is timely notice in writing of any business the shareholder proposes to bring before the annual meeting of shareholders and/or the nomination any shareholder proposes to make at the annual meeting of shareholders. Notice of business proposed to be brought before the 2011 Annual Meeting of Shareholders and/or director nominations proposed to be made at the 2011 Annual Meeting of Shareholders must be received by our Corporate Secretary no earlier than December 28, 2010 and no later than January 27, 2011.
 
The notice for business that a shareholder proposes to bring before the annual meeting of shareholders must be a proper matter for shareholder action and must set forth:
 
  •  the name and address of such shareholder, as they appear on our books, and the name and address of any certain parties related to the shareholder (each a Shareholder Associated Person);
 
  •  the class and number of shares of our stock that are, directly or indirectly, owned beneficially and of record by such shareholder or Shareholder Associated Person;
 
  •  the date such shares of our stock were acquired;
 
  •  a representation that the shareholder is a holder of record of shares of our stock entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to bring or propose such business or make such nomination, as the case may be;
 
  •  a description of any agreement, understanding or arrangement, direct or indirect, with respect to such business, proposal or nomination between or among such shareholder, any Shareholder Associated Person or any others (including their names) acting in concert with any of the foregoing;
 
  •  a description of any agreement, understanding or arrangement (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that has been entered into, directly or indirectly, as of the date of such shareholder’s notice by, or on behalf of, the shareholder or any Shareholder Associated Person, the effect or intent of which is to mitigate loss to, manage risk or benefit of


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  share price changes for, or increase or decrease the voting power of such shareholder or any Shareholder Associated Person with respect to shares of our stock;
 
  •  if such shareholder’s notice relates to the nomination of a person for election to the Board of Directors, (i) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such nominating shareholder, any Shareholder Associated Person or others acting in concert with any of the foregoing, including all information that would be required to be disclosed pursuant to Rule 404 promulgated by the SEC under Regulation S-K, as amended from time to time, if such nominating shareholder, Shareholder Associated Person or any person acting in concert therewith, were the “registrant” for the purposes of such rule and the person being nominated for election as director were a director or executive of such “registrant” and (ii) as to each person whom the shareholder proposes to nominate for election as a director, all information relating to such person that would be required to be disclosed in a solicitation of proxies for the election of such person as a director pursuant to Regulation 14A under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if so elected);
 
  •  a description of any proxy (including revocable proxies), contract, arrangement, understanding or other relationship pursuant to which such shareholder or Shareholder Associated Person has a right to vote any shares of our stock;
 
  •  with respect to any and all of the agreements, contracts, understandings, arrangements, proxies or other relationships referred to in the foregoing bullets, a representation that such shareholder will notify us in writing of any such agreement, contract, understanding, arrangement, proxy and/or other relationship that are or will be in effect as of the date of the applicable annual meeting of shareholders no later than five business days before the date of such meeting;
 
  •  all other information that would be required to be filed with the SEC if such shareholder or Shareholder Associated Person were participants in a solicitation subject to Section 14 of the Exchange Act;
 
  •  as to any business that the shareholder proposes to bring before the meeting, (i) a brief description of such business, (ii) if such business includes a proposal, the text of the proposal (including the text of any resolutions proposed for consideration), (iii) if the proposal includes an amendment to our By-Laws, the language of the proposed amendment, (iv) the reasons for conducting such business at the meeting and (v) any material interest of such shareholder and any Shareholder Associated Person in such business; and
 
  •  a representation as to whether the shareholder intends (i) to deliver a proxy statement and form of proxy to holders of at least the percentage of our outstanding capital stock required to approve or adopt the proposal or elect the nominee or (ii) otherwise to solicit proxies from shareholders in support of such proposal or nomination. In addition, a shareholder seeking to submit a shareholder proposal or other business or make a director nomination shall promptly provide any other information reasonably requested by us, and any proposed nominee for election to our Board must furnish such other information as we may reasonably require to determine the eligibility of such proposed nominee to serve as a member of our Board.
 
By Order of the Board of Directors,
 
-s-W. Andrew Macan
 
W. Andrew Macan
Vice President and Secretary
 
March 18, 2010


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ANNEX A
 
THE CHUBB CORPORATION
POLICY ON PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES
 
I.   Statement of Principles
 
The Audit Committee of the Board of Directors is responsible for the appointment, compensation, retention, and oversight of the work of the independent auditor. The Chubb Corporation and the Audit Committee are committed to ensuring the independence of the auditor, both in appearance and in fact. Accordingly, significant attention is directed toward ensuring that services provided by the auditor are consistent with the SEC’s rules on auditor independence.
 
The Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor or its affiliates on behalf of The Chubb Corporation or any of its subsidiaries (collectively, the “Corporation”) in order to assure that the provision of such services does not impair the auditor’s independence from the Corporation. In the case of audit services, pre-approval by the Audit Committee is required for such services provided to all consolidated subsidiaries of the Corporation, whether provided by the principal independent auditor or other firms.
 
II.   Delegation
 
The Audit Committee has delegated to the Chairman of the Audit Committee authority to pre-approve specific services not to exceed $25,000 per engagement. Any services pre-approved by the Chairman shall be reported to the Audit Committee at its next scheduled meeting.
 
The Audit Committee may consult with management but does not delegate its responsibilities to pre-approve services performed by the independent auditor to management.
 
III.  Audit Services
 
Audit services include all services to be performed to comply with generally accepted auditing standards and those services that generally only the Corporation’s independent auditor can provide, such as comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the SEC.
 
IV.   Audit-Related Services
 
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Corporation’s financial statements and that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence. Audit-related services include, among other services, audits of employee benefit plans; due diligence related to mergers and acquisitions; internal control reviews; attest services that are not required by statute or regulation; and consultations related to financial accounting or reporting standards.
 
V.   Tax Services
 
The Audit Committee believes that the provision of tax services to the Corporation including tax planning, compliance, and advice does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence. Tax services include tax planning, compliance, and advice; preparation and review of original and amended tax returns; assistance with claims for refund and tax payment-planning services, tax audits and appeals before the IRS and similar state, local and foreign agencies; and advice related to mergers and acquisitions, employee benefit plans and requests for rulings or technical advice for taxing authorities. The Corporation shall not record a transaction or transactions, the primary business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related


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regulations; the rendering of services to the Corporation, its executive officers and its directors by the independent auditor in connection with the auditor’s recommendation of such transaction or transactions is prohibited.
 
VI.   All Other Services
 
The Audit Committee believes that certain specific non-audit services do not impair the auditor’s independence. Accordingly, the Audit Committee may grant pre-approval to specific, permissible non-audit services classified as “All Other Services” that it believes are routine and recurring services that would not impair the independence of the auditor. “All Other Services” may include preparation of actuarial reports in accordance with regulatory requirements provided that the Audit Committee reasonably concludes that the results of these services will not be subject to audit procedures during an audit of the Corporation’s financial statements.
 
VII.  Procedures
 
Requests for services to be rendered by the independent auditor will be provided annually to the Audit Committee for specific pre-approval. The requests will include a description of the particular services to be rendered and the expected fee range. On a periodic basis at subsequent Audit Committee meetings, an update on independent auditor services and all other audit services will be provided to the Audit Committee and any proposed new services, increases in engagement scope, and increases in engagement fees will be provided for specific pre-approval by the Audit Committee. Requests for pre-approval will be submitted to the Audit Committee by both the independent auditor and management and must include a written statement by the independent auditor as to whether, in its view, the request is consistent with the SEC’s rules on auditor independence.
 
The Audit Committee will consider whether such service requests are consistent with the SEC rules on auditor independence. The Audit Committee will also consider whether the independent auditor is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with the Corporation’s business, people, culture, accounting systems, risk profile and other factors.
 
The term of any pre-approval is the period beginning on the date of pre-approval and ending on the last day of the first full calendar year after the date of pre-approval, unless the Corporation specifically provides for a different period.
 
The Audit Committee is also mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. For each fiscal year, the Audit Committee may determine the appropriate ratio between the total amount of fees for Audit, Audit-related, Tax, and All Other Services.
 
VIII.  Prohibited Non-Audit Services
 
Provision of the following non-audit services by the independent auditor is prohibited in accordance with the SEC’s rules. The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions.
 
  •  Bookkeeping or other services related to the accounting records or financial statements of the Corporation;
 
  •  Financial information systems design and implementation;
 
  •  Appraisal or valuation services, fairness opinions or contribution-in-kind reports;
 
  •  Actuarial services;
 
  •  Internal audit outsourcing services;
 
  •  Management functions or human resources;
 
  •  Broker-dealer, investment adviser, or investment banking services;
 
  •  Legal services and expert services unrelated to the audit; and
 
  •  Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible.


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(CHUBB LOGO)
THE CHUBB CORPORATION
15 MOUNTAIN VIEW ROAD
WARREN, NJ 07059
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
                                                                 
THE CHUBB CORPORATION                                      
 
                                                               
  The Board of Directors recommends you vote “FOR” the following proposals:                                    
                                                     
  1. Election of Directors:    
   
     
   
     
   
   
                       
  Nominees:   For   Against      
  For   Against  
 
                                                               
                                                             
      1a) Zoë Baird    
   o
     
   o
     
   
    1h)     Daniel E. Somers     o       o          
                                                           
      1b) Sheila P. Burke    
   o
     
   o
     
   
    1i)     Karen Hastie Williams     o       o          
                                                           
      1c) James I. Cash, Jr.    
   o
     
   o
     
   
    1j)     James M. Zimmerman     o       o          
                                                           
      1d) John D. Finnegan    
   o
     
   o
     
   
    1k)     Alfred W. Zollar     o       o          
                                                           
      1e) Martin G. McGuinn    
   o
     
   o
     
   
        For   Against   Abstain
                                                           
      1f) Lawrence M. Small    
   o
     
   o
     
   
2.   To ratify the appointment of Ernst & Young LLP as independent auditor.     o       o       o  
      1g)   Jess Søderberg    
   o
     
   o
     
   
                             
                                                             
 
 
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