Travelers 2007 Annual Report Download - page 93

was concentrated in National Accounts and was due to the nature of certain products offered in this
market. A significant portion of gross written premiums for products offered by National Accounts is
ceded to other insurers; as a result, a decline in gross written premiums does not necessarily have a
proportional impact on net written premiums. All markets in Business Insurance Core operations,
except National Accounts and Specialized Distribution, recorded net written premium growth in 2007,
driven by higher new business volume throughout the majority of markets coupled with continued
strong business retention rates, offset in some markets by minor decreases in renewal price changes.
Net written premium growth in 2007 also benefited from a reduction in ceded premiums related to
catastrophe reinsurance coverage.
In Business Insurance Core operations, gross written premiums in 2006 were down slightly from
2005. Net written premiums in 2006, however, increased slightly over 2005. The disparity between gross
and net written premium growth rates in 2006 was primarily due to a change in the structure of
reinsurance coverage in the Company’s Discover Re subsidiary in National Accounts that resulted in a
decline in ceded premiums. For purposes of comparison between 2006 and 2005 net written premium
volume, the impact of a higher level of ceded premiums for property catastrophe reinsurance in 2006
was virtually equivalent to the impact of the $67 million of catastrophe-related reinstatement premiums
in 2005. Net written premium growth in Business Insurance Core operations in 2006 was primarily
concentrated in Target Risk Underwriting and Industry-Focused Underwriting, driven by continued
strong business retention rates, renewal price increases and higher new business volume throughout the
majority of businesses comprising these markets. The decline in National Accounts’ net written
premiums primarily reflected a reduction in premiums related to favorable loss experience on business
priced on a loss-sensitive basis and lower new business volume, partially offset by the decline in ceded
premiums at Discover Re due to a change in the structure of reinsurance coverage. In Business
Insurance Other operations, gross and net written premiums were down significantly from the
comparable 2005 totals, reflecting the sale of the Personal Catastrophe Risk operation in November
2005 and the intentional non-renewal of business in the runoff operations comprising this category.
Select Accounts. Net written premiums of $2.71 billion in 2007 grew 2% over 2006. New business
volume increased over 2006, due in part to the introduction of the Company’s enhanced quote-to-issue
agency platform and multivariate pricing program in 37 states. That platform is expected to be
introduced in the remainder of the United States over the next six months. Enhanced marketing efforts
and additional products sold to existing customers also contributed to new business growth in 2007.
Business retention rates remained strong in 2007. Renewal price changes in this market remained
positive in 2007 but were lower than in 2006, as price increases for coastal coverages were partially
offset by declines in renewal price changes for non-coastal coverages, which continue to be impacted by
competitive market conditions. Net written premiums of $2.66 billion in 2006 declined 2% from 2005,
primarily reflecting the impact of a reduction in premium volume from certain national small business
insurance programs, the majority of which was transferred to the Specialized Distribution market.
Excluding the impact of the business transferred, net written premiums increased by approximately 2%
in 2006. Business retention rates remained strong and increased over 2005, and focused investments in
technology and personnel led to improvement in new business volume over 2005. Renewal price
changes for the Select Accounts market in 2006 were consistent with 2005, as modest pricing pressures
in non-coastal coverages were largely offset by price increases for coastal coverages.
Commercial Accounts. Net written premiums of $2.52 billion in 2007 grew 6% over 2006,
primarily driven by an increase in new business volume, coupled with continued strong business
retention rates. The growth in new business volume reflected the impact of recent product
introductions, additional products sold to existing customers and increased marketing efforts. Renewal
price changes in this market declined from 2006 and were negative in 2007, primarily reflecting
competitive market conditions. Net written premiums of $2.38 billion in 2006 increased 2% over 2005,
driven by a strong increase in business retention rates and an improvement in renewal pricing.
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