Travelers 2007 Annual Report Download - page 130

Gross claims and claim adjustment expense reserves by product line were as follows:
2007 2006
(at December 31, in millions) Case IBNR Total Case IBNR Total
General liability .................... $ 7,180 $12,388 $19,568 $ 7,555 $12,414 $19,969
Property ......................... 1,069 963 2,032 1,612 978 2,590
Commercial multi-peril .............. 1,860 2,499 4,359 1,940 2,693 4,633
Commercial automobile .............. 2,450 1,640 4,090 2,573 1,801 4,374
Workers’ compensation .............. 9,373 6,474 15,847 9,142 6,337 15,479
Fidelity and surety .................. 878 1,026 1,904 1,035 838 1,873
Personal automobile ................ 1,466 998 2,464 1,505 1,092 2,597
Homeowners and personal—other ...... 545 739 1,284 481 706 1,187
International and other .............. 3,054 3,017 6,071 3,296 3,204 6,500
Property-casualty ................. 27,875 29,744 57,619 29,139 30,063 59,202
Accident and health ................. 71 10 81 76 10 86
Claims and claim adjustment expense
reserves ...................... $27,946 $29,754 $57,700 $29,215 $30,073 $59,288
The $1.59 billion decline in gross claims and claim adjustment expense reserves in 2007 primarily
reflected payments related to operations in runoff (including asbestos and environmental payments),
prior year hurricane losses, and favorable prior year reserve development.
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 estimating the liabilities for claims 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 variables being meaningful for all product line components. The relative strengths and
weaknesses of the particular estimation methods when applied to a particular group of claims can also
change over time. Therefore, the actual choice of estimation method(s) can change with each
evaluation. The estimation method(s) chosen are those that are believed to produce the most reliable
indication at that particular evaluation date for the claim liabilities being evaluated.
In most cases, multiple estimation methods will be valid for the particular facts and circumstances
of the claim liabilities being evaluated. This will result in a range of reasonable estimates for any
particular claim liability. The Company uses such range analyses to back test whether previously
established estimates for reserves at the reporting segments are reasonable, given subsequent
information. Reported values found to be closer to the endpoints of a range of reasonable estimates
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