Travelers 2006 Annual Report Download - page 53

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Loss and LAE ratio ............ For SAP, it is the ratioof incurred losses andloss adjustment
expenses to net earned premiums. For GAAP, it is the ratio of
incurred losses and loss adjustment expenses reducedby an
allocation of fee income to net earned premiums.
Loss reserves .................. Liabilities established by insurers and reinsurers to reflect 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” is meant to include reserves for both
losses and LAE.
Loss reserve development.......The increase or decrease in incurred claims and claim adjustment
expenses as a result of 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.
Losses incurred................ 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 commissionersordirectors of all 50
states, the District of Columbia and the five U.S. territories
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 share basis.
Operating return on equity...... The ratio of operating income to average equity excluding net
unrealized investment gains and losses and discontinued operations,
net of tax.