Travelers 2010 Annual Report Download - page 212

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.
2010.
In 2010, estimated claims and claim adjustment expenses incurred included $1.42 billion of net
favorable development for claims arising in prior years, including $1.25 billion of net favorable prior
year reserve development impacting the Company’s results of operations, which excludes $45 million of
accretion of discount.
Business Insurance. Net favorable prior year reserve development in 2010 totaled $901 million,
driven by better than expected loss development in the property, general liability and workers’
compensation product lines for multiple accident years, as well as in assumed reinsurance, which is in
runoff. The property product line improvement primarily occurred in the 2008 and 2009 accident years
as a result of better than expected loss development in Industry-Focused Underwriting and Target Risk
Underwriting. The general liability product line improvement was concentrated in excess coverages for
accident years 2006 and prior and reflected what the Company believes are favorable legal and judicial
environments. Net favorable prior year reserve development in the workers’ compensation product line
was concentrated in accident years 2007 and prior and resulted from better than expected loss
development. The improvement in assumed reinsurance resulted primarily from favorable resolutions of
claims and disputes from accident years 2002 and prior. In addition, better than expected loss
development in the Business Insurance segment in recent years resulted in a favorable re-estimation of
reserves for unallocated loss adjustment expenses in 2010. The net favorable prior year reserve
development in these product lines in 2010 was partially offset by $140 million and $35 million
increases to asbestos and environmental reserves, respectively.
Financial, Professional & International Insurance. Net favorable prior year reserve development
totaled $259 million in 2010. In Bond & Financial Products, net favorable prior year reserve
development in 2010 was driven by better than expected loss development in the surety and
management liability lines of business due to lower than expected claim activity and loss severity in the
2008 and prior accident years. In International, the majority of net favorable prior year reserve
development in 2010 occurred at the Company’s operation at Lloyd’s, in Canada and in the United
Kingdom.
Personal Insurance. Net favorable prior year reserve development of $87 million in 2010 was
concentrated in the Homeowners and Other product line, primarily driven by favorable loss
development in the 2008 and prior accident years, primarily for the umbrella line of business, partially
offset by unfavorable loss development in the 2009 accident year for the homeowners line of business
that was driven by higher than anticipated late-reported claims related to storms in 2009.
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.
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