Travelers 2008 Annual Report Download - page 99

In the Bond & Financial Products group, net written premiums in 2008 increased 1% over 2007
(adjusted for the sale of Afianzadora Insurgentes), as the impact of the higher level of business
retained in 2008 was largely offset by a decline in premium volume due to competitive market
conditions and the economic downturn. In the Bond & Financial Products group (excluding the surety
line of business, for which the following are not relevant measures), business retention rates in 2008
remained strong and increased slightly over 2007. Renewal price changes in 2008 were slightly negative,
compared to an increase in the prior year, and new business levels were consistent with 2007.
Net written premiums in the International group in 2008 were flat with 2007. For the International
group in 2008, business retention rates declined from 2007 due to the intentional non-renewal of
certain property business in Canada and more competitive market conditions at Lloyd’s. Renewal price
changes in 2008 were flat, compared to a decrease in 2007, and new business volume increased.
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), business retention rates in 2007 increased over 2006. Renewal price changes in 2007 were
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 the
International group in 2007, business retention rates remained strong, new business volume increased
over 2006, and renewal price changes declined from 2006.
Personal Insurance
Results of the Company’s Personal Insurance segment were as follows:
(for the year ended December 31, in millions) 2008 2007 2006
Revenues:
Earned premiums .......................... $6,970 $6,803 $6,563
Net investment income ...................... 421 559 548
Other revenues ............................ 75 90 94
Total revenues ............................. $7,466 $7,452 $7,205
Total claims and expenses ...................... $6,855 $5,996 $5,555
Operating income ............................ $ 465 $1,019 $1,132
Loss and loss adjustment expense ratio ............ 66.2% 58.6% 54.8%
Underwriting expense ratio ..................... 30.8 28.2 28.3
GAAP combined ratio ....................... 97.0% 86.8% 83.1%
Overview
Operating income of $465 million in 2008 was $554 million, or 54%, lower than operating income
in 2007, primarily reflecting an increase in the cost of catastrophes. Also contributing to the decline in
2008 were the impact of a reduction in net investment income, an increase in non-catastrophe related
weather losses and loss cost trends. The cost of catastrophes in 2008 totaled $618 million, compared
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