Travelers 2011 Annual Report Download - page 216

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Company’s operation at Lloyd’s in the aviation, kidnap & ransom, and property lines for recent
accident years.
Personal Insurance. Net favorable prior year reserve development in 2011 was $110 million, driven
by better than expected loss development related to catastrophe losses incurred in the first half of 2010,
as well as better than expected loss development in the 2006-2010 accident years for the umbrella line
of business in the Homeowners and Other product line, partially offset by unfavorable prior year
reserve development in the Automobile product line that was driven by worse than expected loss
experience for the 2007-2010 accident years.
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 (excluding increases to
asbestos and environmental reserves discussed below) 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 more favorable legal and judicial environments than what the
Company previously expected. 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.
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