Travelers 2009 Annual Report Download - page 220

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Prior Year Reserve Development
The following disclosures regarding reserve development are on a ‘‘net of reinsurance’’ basis.
2009.
In 2009, estimated claims and claim adjustment expenses incurred included $1.45 billion of net
favorable development for claims arising in prior years, including $1.33 billion of net favorable prior
year reserve development impacting the Company’s results of operations, which excludes $54 million of
accretion of discount.
Business Insurance. Net favorable prior year reserve development totaled $1.03 billion in 2009,
driven by better than expected loss results primarily concentrated in the general liability, commercial
multi-peril, commercial automobile and commercial property product lines for recent accident years.
The general liability and commercial multi-peril 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 line of business experienced better than expected loss development that was
attributable to more favorable legal and judicial environments, claim handling initiatives and
improvements in auto safety technology. The commercial property product line improvement primarily
occurred in the 2007 and 2008 accident years as a result of better than expected loss development for
certain large national property and inland marine exposures. In addition, the commercial property
product line’s 2005 accident year experience improved due to the litigation environment relating to, and
ongoing claim settlements for, Hurricane Katrina. The net favorable prior year reserve development in
these product lines in 2009 was partially offset by a $185 million increase to asbestos reserves and a
$70 million increase to environmental reserves.
Financial, Professional & International Insurance. Net favorable prior year reserve development
totaled $168 million in 2009, driven by better than expected loss experience in the International group,
particularly in the United Kingdom and in the Surety line of business in Canada. In addition, the
Aviation and Property lines of business at Lloyd’s experienced net favorable prior year loss
development in 2009. In the Bond & Financial Products group, better than expected loss experience for
the contract surety business within the fidelity and surety product line for recent accident years also
resulted in net favorable prior year reserve development in 2009.
Personal Insurance. Net favorable prior year reserve development totaled $135 million in 2009,
driven by favorable loss experience related to Hurricanes Ike and Katrina, as well as the 2007
California wildfires.
2008.
In 2008, estimated claims and claim adjustment expenses incurred included $1.73 billion of net
favorable development for claims arising in prior years, including $1.54 billion 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 $1.12 billion in 2008,
driven by better than expected loss results primarily concentrated in the general liability and
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