Travelers 2003 Annual Report Download - page 61

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Bond achieved significant growth in 2003 in both the surety and executive liability markets. A decrease in capacity in
the surety industry, driven by an increase in claim frequency and severity in accident years 1999 through 2001 for the
surety industry, enabled Bond to increase prices for all surety products. In 2004, Bond expects surety price increases
to moderate compared to 2003 price increases. In the executive liability market for middle and small private accounts
and not-for-profit accounts, Bond’s expanding array of products and recognized local expertise enabled it to further
enhance its product and customer diversification, as well as profit opportunities, while realizing significant price
increases. Bond’s focus remains on selective underwriting, selling its products to customers that provide the greatest
opportunities for profit. Bond is also focused on Travelers efforts to cross-sell its expanding array of products to
existing customers of Commercial Lines and Personal Lines.
In Gulf, rate increases began in most lines of business in 2001 and accelerated significantly in 2002. Rate increases
continued in 2003, but at a slower pace than in 2002. Although specific increases varied by region, industry and
product, improvement was consistent across all product lines, with increases averaging well above loss cost trends.
During 2003, Gulf significantly strengthened its reserve position, due to adverse development from prior accident
years in both residual value and core specialty lines.
There are currently various state and federal legislative and judicial proposals to require asbestos claimants to
demonstrate an asbestos illness. At this time it is not possible to predict the likelihood or timing of such proposals
being enacted or the effect if they are enacted. Travelers ongoing analysis of its asbestos reserves did not assume the
adoption of any asbestos reforms. For information about the outlook with respect to asbestos-related claims and
liabilities see “ – Asbestos Claims and Litigation” and “ – Uncertainty Regarding Adequacy of Asbestos and
Environmental Reserves.”
Personal Lines
Personal Lines strategy is to profitably grow its customer base in the independent agent and additional distribution
channels. The core factors underlying the business are controlling operating expenses, sophisticated pricing
segmentation, providing responsive and fair claim settlement practices and providing an efficient sales platform for our
distributors.
During 2003, the personal auto market continued to increase rates in an effort to obtain profitability targets. These
increases, along with maintaining underwriting discipline and focusing on risk segmentation has made significant
progress towards rate adequacy. Personal Lines automobile rates are expected to increase in 2004, moderating slightly
from 2003 levels.
Personal Lines reported strong property underwriting results in 2003 as market conditions for property insurance
improved in 2003. Significant rate increases were earned and the effects of increased underwriting discipline and
product modification were recognized. Catastrophe losses in the year were above average while non-catastrophe claim
frequencies remained below historical averages. Property rate increases are expected to moderate in 2004 but should
continue to offset increases in loss costs.