Travelers 2007 Annual Report Download - page 97

The underwriting expense ratio of 36.8% in 2007 was 1.5 points higher than the comparable 2006
expense ratio, driven by the increase in expenses supporting business growth. 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.
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) 2007 2006 2005
Bond & Financial Products ....................... $2,614 $2,657 $2,531
International ................................. 1,423 1,324 1,278
Total Financial, Professional & International Insurance .$4,037 $3,981 $3,809
Net Written Premiums
(for the year ended December 31, in millions) 2007 2006 2005
Bond & Financial Products ....................... $2,228 $2,255 $2,117
International ................................. 1,237 1,138 1,042
Total Financial, Professional & International Insurance .$3,465 $3,393 $3,159
Gross and net written premiums in 2007 increased 1% and 2%, respectively, over 2006. Adjusting
for the sale of Afianzadora Insurgentes, gross and net written premiums increased 3% and 4%,
respectively, over 2006. Net written premiums in the Bond & Financial Products group in 2007
increased 1% over 2006 (adjusted for the sale of Afianzadora Insurgentes), primarily due to increased
construction surety business volume resulting from strong economic conditions in the public works
sector of the construction industry. For Bond and Financial Products (excluding the surety line of
business, for which these are not relevant measures), business retention rates in 2007 increased over
2006. Renewal price changes in 2007 were slightly positive but down from 2006, and new business levels
declined due in part to competitive market conditions. In the International group, net written
premiums in 2007 increased $99 million, or 9%, over 2006, primarily reflecting the favorable impact of
foreign currency exchange rates and strong business volume at Lloyd’s and in Canada. Net written
premium volume in the International group in 2007 also benefited from adjustments to prior year
premium estimates in the Lloyd’s operation. In 2007, business retention rates remained strong, new
business volume increased over 2006, and renewal price changes, which were negative, in the
International group declined slightly from 2006.
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 elimination of a reporting lag at 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
are not relevant measures), business retention rates in 2006 remained strong and increased over 2005.
Renewal price increases in 2006 also increased over 2005, but new business volume was down slightly
from 2005. For International in 2006, business retention rates increased over 2005, renewal price
changes increased slightly and new business volume was significantly higher than in 2005. Net written
premiums in the Financial, Professional & International Insurance segment for 2005 were reduced by
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