Travelers 2005 Annual Report Download - page 121

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individual claim. These three indicators are related such that if one deteriorates, improvement on another
is necessary for the Company to conclude that further reserve strengthening is not necessary. The
Company’s current view is that it has recorded a reasonable reserve for its medical malpractice exposures
as of December 31, 2005.
Claims and claim adjustment expense reserves by product line were as follows:
2005 2004
(at December 31, in millions) Case IBNR Total Case IBNR Total
General liability...................... $ 8,198 $ 1 2,251 $ 20,449 $ 8,445 $ 1 2,232 $ 20,677
Property ............................ 1,987 1,050 3,037 1,534 1,359 2,893
Commercial multi-peril ............... 2,448 2,901 5,349 1,979 2,216 4,195
Commercial automobile............... 2,792 1,885 4,677 2,817 1,966 4,783
Workers’ compensation............... 8,816 6,374 15,190 8,313 6,658 14,971
Fidelity and surety.................... 1,240 673 1,913 1,216 845 2,061
Personal automobile.................. 1,470 1,138 2,608 1,484 1,219 2,703
Homeowners and personal—other..... 709 987 1,696 470 523 993
International and other............... 3,033 3,055 6,088 2,934 2,774 5,708
Property-casualty................... 30,693 30,314 61,007 29,192 29,792 58,984
Accident andhealth .................. 74 9 83 76 10 86
Claims and claim adjustment expense
reserves......................... $ 3 0,767 $ 30,323 $ 6 1,090 $ 2 9,268 $ 29,802 $ 5 9,070
The $2.02 billion increase in property-casualty claims and claim adjustment expense reserves since
December 31, 2004 reflected the impact of the significant catastrophe losses incurred in the second half of
2005 and the $830 million net charge to increase asbestos reserves in the fourth quarter of 2005. These
increases in reserves were partially offset by claim and claim expense payments from runoff operations,
loss payouts for the third quarter 2004 hurricanes, and favorable non-catastrophe loss experience.
Property-casualty claims and claim adjustment expense reserves at December 31, 2004 increased by
$24.51 billion over year-end 2003, primarily as a result of the merger with SPC and reserve charges
recorded subsequent to the merger. Of the increase in 2004, $19.50 billion resulted from the addition of
the acquired reserves, and $2.39 billion, net of reinsurance, was due to net unfavorable prior year reserve
development. For discussion of the components of net unfavorable prior year reserve development, see
note 9 to the consolidated financial statements.
Asbestos and environmental reserves are included in the General liability, Commercial multi-peril
lines and International and other lines in the summary table. Asbestos and environmental reserves are
discussed separately, see “Asbestos Claims and Litigation”, “Environmental Claims and Litigation” and
“Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves”.
General Discussion
The process for estimatingthe liabilities for claim and claim expenses begins with the collection and
analysis of claim data. Data on individual reported claims, both current and historical, including paid
amounts and individual claim adjuster estimates, are grouped by common characteristics (“components”)
and evaluated by actuaries in their analyses of ultimate claim liabilities by product line. Such data is
occasionally supplemented with external data as available and when appropriate. The process of analyzing
reserves for a component is undertaken on a regular basis, generally quarterly, in light of continually
updated information.
Multiple estimation methods are available for the analysis of ultimate claim liabilities. Each
estimation method has its own set of assumption variables and its own advantages and disadvantages, with
no single estimation method being better than the others in all situations and no one set of assumption