Travelers 2003 Annual Report Download - page 44

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42
Revenues increased $526.9 million or 6% in 2003 and $1.851 billion or 25% in 2002.
Earned premiums increased $921.6 million or 14% in 2003 primarily due to premium rate increases, growth in targeted
new business and strong customer retention. Earned premiums included Northland and Associates which decreased
$213.8 million or 25% in 2003 due to the withdrawal in 2002 of business at American Equity and Associates. Earned
premiums increased $1.354 billion or 25% in 2002 primarily due to premium rate increases and the full-year inclusion
of Northland and Associates in 2002. Earned premiums for Northland and Associates were $846.1 million in 2002, an
increase of $642.9 million over 2001 which only included the fourth quarter of 2001.
Net investment income increased $11.6 million in 2003 due to higher average invested assets resulting from strong
cash flows from operations partially offset by the reduction in investment yields to 5.3% in 2003 from 6.0% in 2002.
The decrease in yields reflected the lower interest rate environment, the shortening of the average effective duration of
the fixed maturity portfolio, a higher proportion of tax-exempt investments and reduced returns in Travelers private
equity investments; partially offset by higher returns in arbitrage fund investments. Net investment income decreased
$121.0 million in 2002. The decline resulted from a reduction in investment yields to 6.0% in 2002 from 6.9% in
2001. The decrease in yields reflected reduced returns in Travelers public equity investments and the lower interest
rate environment. The impact of lower yields was partially offset by the rise in average invested assets due to the
Northland and Associates acquisitions and increased cash flow from operations. Net investment income related to
Northland and Associates was $88.2 million in 2002, an increase of $65.8 million over 2001 which only included the
fourth quarter.
Fee income increased $105.1 million or 23% in 2003 and $107.5 million or 31% in 2002. National Accounts is the
primary source of fee income due to its service businesses, which include claim and loss prevention services to large
companies that choose to self-insure a portion of their insurance risks, and claims and policy management services to
workers’ compensation residual market pools, automobile assigned risk plans and to self-insurance pools. Fees rose
reflecting new business levels, price increases and more workers’ compensation business being written by state
residual market pools.
Commercial Lines net written premiums by market were as follows:
(for the year ended December 31, in millions) 2003 2002 2001
Core
National Accounts $ 902.8 $ 734.6 $ 418.9
Commercial Accounts 3,725.7 3,556.1 2,407.1
Select Accounts 2,047.6 1,869.5 1,713.2
Total Core 6
,
676.1 6
,
160.2 4
,
539.2
S
p
ecialt
y
Bond 780.5 629.9 590.2
Gulf 662.8 579.4 608.2
Total S
p
ecialt
y
1
,
443.3 1
,
209.3 1
,
198.4
Total net written premiums $ 8,119.4 $ 7,369.5 $ 5,737.6
Commercial Lines net written premiums increased $749.9 million or 10% in 2003. The strong but moderating rate
environment, growth in targeted new business, and strong customer retention across all major lines of business
combined to drive premium growth. This premium growth was partially offset by the decrease in net written
premiums at Northland and Associates due to the withdrawal in 2002 of business at American Equity and Associates
and a one-time additional $115.0 million of net written premium in 2002 related to the termination of certain
reinsurance contracts. Net written premiums for Northland and Associates were $546.8 million in 2003 compared to
$824.8 million in 2002. The Commercial Lines business of Northland and Associates is included with Commercial
Accounts.
Commercial Lines net written premiums in 2002 increased $1.632 billion or 28%. The 2002 increase reflected
premium rate increases and the full-year inclusion of Northland and Associates. The inclusion of Northland and
Associates contributed $657.4 million to the increase. Net written premiums for Northland and Associates were
$824.8 million in 2002 compared to $167.4 million in 2001 which only included the fourth quarter of 2001.