Travelers 2007 Annual Report Download - page 24

In March 2007, the Company completed the sale of its Mexican surety subsidiary, Afianzadora
Insurgentes, S.A. de C.V., which accounted for $25 million, $78 million and $78 million of net written
premiums for the years ended December 31, 2007, 2006 and 2005, respectively. The impact of this
transaction was not material to the Company’s results of operations or financial position.
Principal Markets and Methods of Distribution
Within the Financial, Professional & International Insurance segment, Bond & Financial Products
distributes the majority of its products in the United States through approximately 6,400 of the same
independent agencies and brokers that distribute the Business Insurance segment’s products. These
brokers and independent agencies are located throughout the United States. Bond & Financial
Products, in conjunction with the Business Insurance segment, continues to make significant
investments in enhanced technology utilizing internet-based applications to provide real-time interface
capabilities with its independent agencies and brokers. Bond & Financial Products builds relationships
with well-established, independent insurance agencies and brokers. In selecting new independent
agencies and brokers to distribute its products, Bond & Financial Products considers, among other
matters, each agency’s or broker’s profitability, financial stability, staff experience and strategic fit with
its operating and marketing plans. Once an agency or broker is appointed, its ongoing performance is
closely monitored. In addition, Bond & Financial Products sells its surety products through independent
agents using subsidiaries in Canada and the United Kingdom.
The International market distributes its products through brokers in the domestic markets of each
of the three countries in which it operates, the United Kingdom, Canada and the Republic of Ireland.
It also writes business at Lloyd’s, where its products are distributed through Lloyd’s wholesale and
retail brokers. By virtue of Lloyd’s worldwide licenses, Financial, Professional & International Insurance
has access to international markets across the world.
Pricing and Underwriting
Pricing levels for Financial, Professional & International Insurance property and casualty insurance
products are generally developed based upon an estimation of expected losses, the expenses of
producing, issuing and servicing business and managing claims, and a reasonable allowance for profit.
Financial, Professional & International Insurance has a disciplined approach to underwriting and risk
management that emphasizes profitable growth rather than premium volume or market share.
Financial, Professional & International Insurance has developed an underwriting and pricing
methodology that incorporates dedicated underwriting, claims, engineering, actuarial and product
development disciplines. This approach is designed to maintain high quality underwriting and pricing
discipline, based on an in-depth knowledge of the specific account or industry issues. The underwriters
use proprietary data gathered and analyzed over many years to assess and evaluate risks prior to
quotation, and then use proprietary forms to tailor insurance coverage to insureds within the target
markets. This methodology enables Financial, Professional & International Insurance to streamline its
risk selection process and develop pricing parameters that will not compromise its underwriting
integrity.
The Company continually monitors its exposure to natural and manmade peril catastrophic losses
and attempts to manage such exposure. The Company uses various analyses and methods, including
sophisticated computer modeling techniques, to analyze underwriting risks of business in hurricane-
prone, earthquake-prone and target risk areas. The Company relies upon this analysis to make
underwriting decisions designed to manage its exposure on catastrophe-exposed business. The Company
also utilizes reinsurance to manage its aggregate exposures to catastrophes. See ‘‘—Reinsurance.’’
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