Travelers 2008 Annual Report Download - page 137

Gross claims and claim adjustment expense reserves by product line were as follows:
2008 2007
(at December 31, in millions) Case IBNR Total Case IBNR Total
General liability .................... $ 6,529 $11,809 $18,338 $ 7,180 $12,388 $19,568
Property ......................... 1,414 858 2,272 1,069 963 2,032
Commercial multi-peril .............. 1,816 2,140 3,956 1,860 2,499 4,359
Commercial automobile .............. 2,413 1,511 3,924 2,450 1,640 4,090
Workers’ compensation .............. 9,419 6,872 16,291 9,373 6,474 15,847
Fidelity and surety .................. 697 1,168 1,865 878 1,026 1,904
Personal automobile ................ 1,448 1,043 2,491 1,466 998 2,464
Homeowners and personal—other ...... 633 800 1,433 545 739 1,284
International and other .............. 2,120 1,956 4,076 3,054 3,017 6,071
Property-casualty ................. 26,489 28,157 54,646 27,875 29,744 57,619
Accident and health ................. 68 9 77 71 10 81
Claims and claim adjustment expense
reserves ...................... $26,557 $28,166 $54,723 $27,946 $29,754 $57,700
The $2.98 billion decline in gross claims and claim adjustment expense reserves since
December 31, 2007 primarily reflected favorable prior year reserve development during 2008, payments
related to operations in runoff (including asbestos and environmental payments) and the sale of
Unionamerica, partially offset by catastrophe losses incurred. During the third quarter of 2008, the
Company made a $449 million settlement payment related to ACandS, Inc., formerly a national
distributor and installer of products containing asbestos, that reduced claim and claim adjustment
expense reserves. (Also, see ‘‘Part I—Item 3, Legal Proceedings’’).
Asbestos and environmental reserves are included in the General liability, Commercial multi-peril
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
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