Travelers 2006 Annual Report Download - page 101

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unfavorable prior year reserve development. Excluding both factors in each year, the 2005 loss and loss
adjustment expense ratio improved by 7.6 points compared with the 2004 ratio, reflecting the significant
improvement in current year loss experience in 2005.
The underwriting expense ratio in 2006 improved by 0.4 points compared with 2005, benefiting from
the absence of catastrophe-related reinstatement premiums and increased business volume. Reinstatement
premiums of $33 million increased the 2005 underwriting expense ratio by 0.4 points. In 2005, the
underwriting expense ratio improved 1.3 points compared with 2004, reflecting the impact of the merger
and expense efficiencies realized since the completion of the merger.
Written Premiums
Financial, Professional & International Insurance gross and net written premiums by market were as
follows:
Gross Written Premiums
(for the year ended December 31, in millions) 2006 2005 2004
Bond & FinancialProducts.......................... $2,657 $2,531 $ 2 ,102
International and Lloyd’s ............................ 1,324 1,278 1,011
Total Financial, Professional & International
Insurance..................................... $3,981 $3,809 $ 3 ,113
Net Written Premiums
(for the year ended December 31, in millions) 2006 2005 200 4
Bond & FinancialProducts........................... $2,255 $2,117 $1,819
International and Lloyd’s ............................. 1,138 1,042 889
Total Financial, Professional & International
Insurance...................................... $3,393 $3,159 $2,708
The Financial, Professional & International Insurance segment’s gross and net written premiums in
2006 increased 5% and 7%, respectively, over 2005. Growth in net written premium volume in 2006
resulted from strong construction surety volume in Bond& Financial Products, strong price increases for
Southeastern U.S. catastrophe-prone exposures in the Company’s operations at Lloyd’s, strong business
retention rates and new business volume in International, and the absence of catastrophe-related
reinstatement premiums. The Bond & Financial Products category represents the combination of the
Company’s previous Bond and Financial & Professional Services marketing groups. The elimination of a
reporting lagat the Company’s operations at Lloyd’s resulted in$39 million and $31 million of additional
gross and net written premium volume in 2005, respectively. In Bond & Financial Products (excluding the
surety line of business, for which these arenot relevant measures), business retention rates in 2006
remained strong and increased over 2005, while renewal price increases remained positive, but declined
from 2005.New business volume was down from 2005. For International in 2006, business retention rates
increased over 2005, renewal price changes declinedslightly and new business volume increased when
compared with 2005. Net written premiums in the Financial, Professional& International Insurance
segment for 2005 were reduced by $33 million of catastrophe-related reinstatement premiums, primarily
related to the Company’s operations at Lloyd’s.
Gross and net written premiums in 2005 increased 22% and 17%, respectively, over written premium
volume in 2004. The increase ingross and net written premiums in 2005 primarily reflected the impact of
the merger. Net written premiums in 2005 were reduced by the$33 million of catastrophe-related
reinstatement premiums, whereas net written premiums in2004 were reduced by $76 million of
reinstatement premiums primarily related to reserving actions in Bond & Financial Products. Gross and
net written premiums in 2005 declined compared with 2004 volume on a pro forma combined basis.