Travelers 2008 Annual Report Download - page 216

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Financial, Professional & International Insurance. Net favorable prior year reserve development
totaled $274 million in 2008, primarily driven by better than expected loss experience in the
International group. The improvements in longer-tail lines of business were attributable to several
factors, including enhanced risk control and underwriting strategies throughout the International group.
In the property line of business, the improvement primarily resulted from better than anticipated loss
development in the United Kingdom, in part due to favorable claim activity relating to 2007 flood
losses. In the Bond & Financial Products group, better than expected loss experience for the contract
surety business within the fidelity and surety product line, resulting from favorable settlements on large
claims (primarily from accident years prior to 2005), resulted in net favorable prior year reserve
development in 2008.
Personal Insurance. Net favorable prior year reserve development in 2008 totaled $143 million,
primarily driven by favorable loss experience related to Hurricane Katrina, and better than expected
loss experience from recent accident years for the Homeowners and Other product line. This
improvement was driven in part by claim initiatives as well as better than expected outcomes on 2007
catastrophe-related claims. In addition, the Homeowners and Other product line experienced
improvement in older accident years for the umbrella line as well as favorable experience from accident
year 2007 for allied coverages due to less than expected claim activity.
2007.
In 2007, estimated claims and claim adjustment expenses incurred included $672 million of net
favorable development for claims arising in prior years, including $546 million of net favorable prior
year reserve development impacting the Company’s results of operations, which excludes $60 million of
accretion of discount.
Business Insurance. Net favorable prior year reserve development totaled $301 million in 2007,
primarily driven by better than expected loss development for recent accident years in the commercial
multi-peril, general liability, commercial automobile and property product lines. The commercial multi-
peril and general liability product lines experienced better than anticipated loss development that was
attributable to several factors, including improved legal and judicial environments, as well as enhanced
risk control, underwriting and claim process initiatives. The commercial automobile product line
experienced better than expected loss development due to more favorable legal and judicial
environments, claim handling initiatives focused on the automobile line of insurance and improvements
in auto safety technology. The property product line experienced fewer than expected late reported
claims related to non-catastrophe weather events that occurred late in 2006, as well as better than
expected frequency and severity due in part to changes in the marketplace, such as higher deductibles
and lower policy limits. In addition, the property product line experienced better than expected large
loss outcomes which were partially attributable to favorable litigation resolutions. Net total prior year
development in 2007 included a $185 million increase to environmental reserves.
Financial, Professional & International Insurance. Net favorable prior year reserve development in
2007 totaled $93 million, primarily reflecting better than expected loss development in international
property, employers’ liability, professional indemnity and motor lines of business for recent accident
years, which was attributable to several factors, including enhanced pricing and underwriting strategies
throughout the international operations, and the favorable impact of legal and judicial reforms in
Ireland.
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