Travelers 2001 Annual Report Download - page 29

primary insurance operations
Lloyd’s and Other
This business segment consists of the following
components: our operations at Lloyd’s, where we
provide capital to five underwriting syndicates and
own a managing agency; our participation in the
insuring of the Lloyd’s Central Fund, which would be
utilized if an individual member of Lloyd’s were to be
unable to pay its share of a syndicate’s losses; and
results from MMI’s London-based insurance operation,
Unionamerica, placed in runoff in 2000 except for cer-
tain business it is contractually obligated to continue
writing through 2004. As discussed on pages 13 and 14
of this report, we announced in late 2001 that we would
cease underwriting certain business through Lloyd’s
beginning in 2002, and would, when current contractual
commitments expire in 2003, end our involvement in the
insuring of the Lloyd’s Central Fund.
The following table summarizes results for this segment for the last
three years. Data for 2001 exclude losses from the terrorist attack,
and data for all three years exclude the impact of the corporate rein-
surance program. Data including these factors is presented on page
21 of this report.
Year ended December 31 2001 2000 1999
(Dollars in millions)
Written premiums $599 $ 430 $ 201
Percentage increase over prior year 39% 114%
GAAP underwriting result $(173)$ (144) $ (23)
Loss and loss adjustment expense ratio 101.7 102.5 84.2
Underwriting expense ratio 28.2 30.2 28.0
Combined ratio 129.9 132.7 112.2
2001 vs. 2000 – Premium growth in 2001 was primarily due to new
business resulting from our increased capacity in several syndicates
at Lloyd’s. Our Lloyd’s premium volume totaled $500 million in
2001, compared with $331 million in 2000. In addition, price
increases in our operations at Lloyd’s averaged nearly 20% for the
year, and began to accelerate further after the Sept. 11 terrorist
attack. Unionamerica generated $99 million of written premiums in
each of 2001 and 2000. Although we ceased new business activity
at Unionamerica late in 2000, we are contractually obligated to
continue underwriting business in certain Unionamerica syndicates
at Lloyd’s through 2004.
The deterioration in underwriting results compared with 2000 was
the result of adverse prior-year loss development in several Lloyd’s
syndicates, particularly those associated with North American lia-
bility coverages. In addition, poor prior-year loss experience and
the write-off of uncollectible reinsurance receivables in our finan-
cial and professional services syndicate contributed to the increase
in underwriting losses in 2001. Unionamerica generated an under-
writing loss of $61 million in 2001, compared with $63 million in
2000. The majority of Unionamerica’s losses in both years were the
result of adverse development on business written in prior years.
2000 vs. 1999 – The addition of Unionamerica accounted for
$99 million of written premium volume in 2000. Excluding
Unionamerica, the 65% increase in premiums over 1999 was driven
by growth in our Lloyd’s operations, where we expanded our invest-
ment in several specialty underwriting syndicates. Premiums
generated at Lloyd’s in 2000 totaled $331 million, compared with
$201 million in 1999. Underwriting results in 2000 suffered from sig-
nificant adverse prior-year loss development at Unionamerica and
deterioration in several syndicates’ results at Lloyd’s. Subsequent
to our acquisition of MMI, we strengthened Unionamerica’s loss
reserves and ceased writing new business in that entity, except
where contractually required. At Lloyd’s, underwriting losses were
centered in a syndicate specializing in financial and professional
liability coverage and in an aviation syndicate, which incurred
significant losses from a number of airline accidents.
2002 Outlook – In 2002, we will limit our operations at Lloyd’s to
the following types of coverage which we believe offer the greatest
potential for profitable growth: aviation, marine, financial and pro-
fessional services, property, kidnap and ransom, accident and
health, creditor, specialist London market reinsurance, and other
personal specialty products. We anticipate additional significant
price increases on business written through Lloyd’s, as worldwide
insurance markets continue to harden in the aftermath of the
Sept. 11 terrorist attack.
The St. Paul Companies 2001 Annual Report 27