Travelers 2012 Annual Report Download - page 217

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Business Insurance. Net favorable prior year reserve development of $467 million in 2012 was
concentrated in the general liability product line for accident years 2010 and prior (excluding increases
to asbestos and environmental reserves discussed below), which reflected what the Company believes
are more favorable legal and judicial environments than what the Company previously expected; the
commercial property product line primarily for accident years 2009 through 2011, driven by higher than
expected subrogation and salvage recoveries and by favorable loss development related to catastrophe
losses incurred in 2011; and the workers’ compensation product line, primarily driven by better than
expected frequency and severity related to lifetime medical claims for accident years 2008 and prior.
Lower than expected claim department expenses also contributed to net favorable prior year reserve
development in 2012. These factors were partially offset by $167 million and $90 million increases to
asbestos and environmental reserves, respectively, which are discussed in further detail in the ‘‘Asbestos
and Environmental Reserves’’ section below, net unfavorable prior year reserve development in the
commercial automobile line of business, driven by higher than expected severity in the bodily injury
coverage primarily for accident years 2010 and 2011, and net unfavorable prior year reserve
development in the general liability product line for the 2011 accident year resulting from higher than
expected claim frequency.
Financial, Professional & International Insurance. Net favorable prior year reserve development in
2012 was $298 million. In Bond & Financial Products, net favorable prior year reserve development in
2012 reflected better than expected results in the surety product line primarily for the contract surety
business for accident years 2008 and prior, and better than expected results for management liability
business primarily for the errors & omissions and fiduciary products for accident years 2007 and prior.
In International, net favorable prior year reserve development in 2012 occurred in several lines of
business in Canada and in the Company’s operations at Lloyd’s, partially offset by an $8 million
increase to asbestos reserves.
Personal Insurance. Net favorable prior year reserve development of $175 million in 2012 was
primarily driven by better than expected loss development in the Homeowners and Other product line
related to catastrophe losses incurred for 2011 and non-catastrophe losses incurred for accident years
2010 and 2011, as well as favorable loss development in the umbrella line of business for accident years
2007 through 2011. These factors were partially offset by unfavorable prior year reserve development in
the personal automobile line of business, driven primarily by higher than expected bodily injury severity
for accident year 2011.
2011.
In 2011, estimated claims and claim adjustment expenses incurred included $842 million of net
favorable development for claims arising in prior years, including $715 million of net favorable prior
year reserve development impacting the Company’s results of operations and $45 million of accretion
of discount. Overall, accident years prior to and including 2009 experienced $1.10 billion of net
favorable reserve development, while the 2010 accident year experienced $383 million of net
unfavorable reserve development.
Business Insurance. Net favorable prior year reserve development in 2011 was $245 million,
primarily driven by better than expected loss development in the general liability product line
(excluding increases to asbestos and environmental reserves discussed below) which was concentrated in
excess coverages for accident years 2005 through 2008 and reflected what the Company believes are
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