Travelers 2005 Annual Report Download - page 53

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Loss and LAE ratio................. For SAP, it is the ratio of incurred lossesand loss adjustment
expenses to net earned premiums. For GAAP, it is the ratio of
incurred losses and loss adjustment expenses reduced by an
allocation of fee income to net earned premiums.
Loss reserves ...................... Liabilities established by insurers and reinsurers toreflect the
estimated cost of claims incurred that the insurer or reinsurer
will ultimately be required to pay in respect of insurance or
reinsurance it has written. Reserves are established for losses
and for LAE, and consist of case reserves and IBNR reserves.
As the term is used in this document, “loss reserves” ismeant to
include reserves for both losses and LAE.
Loss reserve development........... The increase or decrease in incurred claims and claim
adjustment expenses as a resultof the re-estimation of claims
and claim adjustment expense reserves at successive valuation
dates for a given group of claims. Loss reserve development may
be related to prior year or current year development.
Lossesincurred.................... The total losses sustained by an insurance company under a
policy or policies, whether paid or unpaid. Incurred losses
include a provision for IBNR.
National Association of Insurance
Commissioners (NAIC)........... An organization of the insurance commissioners or directors of
all 50 states and the District of Columbia organized to promote
consistency of regulatory practice and statutory accounting
standards throughout the United States.
Net written premiums. .............. Direct written premiums plus assumed reinsurance premiums
less premiums ceded to reinsurers.
Operating income (loss)............. Net income (loss) excluding the after-tax impact of net realized
investment gains (losses), discontinued operations and
cumulative effect of changes in accounting principles when
applicable.
Operating income (loss) per share .... Operating income (loss) on a per sharebasis.
Operating return on equity .......... The ratio of operating income to average equity excludingnet
unrealized investment gains and losses and discontinued
operations, net of tax.
Personal lines...................... Thevarious kinds of property and casualty insurance that are
written for individuals or families.
Pool .............................. An organization of insurersor reinsurers through which
particular types of risks are underwritten with premiums, losses
and expenses being shared in agreed-upon percentages.
Premiums ......................... The amount charged during the year on policies and contracts
issued, renewed or reinsured by an insurance company.
Producer .......................... Contractual entity which directs insureds to the insurer for
coverage. This term includes agents and brokers.