Travelers 2009 Annual Report Download - page 221

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
commercial multi-peril product lines, an increase in anticipated ceded recoveries for older accident
years in the general liability product line and better than anticipated loss development in the
commercial property and commercial automobile product lines. The net favorable prior year reserve
development in the general liability and commercial multi-peril lines was attributable to several factors,
including improved legal and judicial environments, as well as enhanced risk control, underwriting and
claim process initiatives. The commercial property product line improvement occurred primarily in the
2007 accident year as a result of better than expected development for certain large national property,
national programs, and ocean marine claim exposures and lower than expected weather-related losses
during the last half of 2007, as well as favorable development in certain large inland marine claim
exposures and in ceded recoveries for commercial property large claims. In addition, the commercial
multi-peril and property product lines’ 2005 accident year results experienced improvement due to the
litigation environment relating to, and ongoing claim settlements for, Hurricane Katrina. The
commercial automobile product line improvement was attributable to several factors, including
improved legal and judicial environments, as well as enhanced risk control, underwriting and claim
process initiatives. The net favorable prior year reserve development in the foregoing product lines in
2008 was partially offset by net unfavorable prior year reserve development in the workers’
compensation product line, primarily driven by higher than anticipated medical costs related to 2004
and prior accident years, and by a $70 million and $85 million increase to asbestos and environmental
reserves, respectively.
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.
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