Travelers 2012 Annual Report Download - page 218

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
more favorable legal and judicial environments than what the Company previously expected, as well as
net favorable prior year reserve development in the commercial property product line that reflected
better than expected loss development for the 2008 and 2009 accident years. The workers’
compensation line of business also contributed slightly to net favorable prior year reserve development
in 2011, as favorable loss development for accident years 2003 through 2009 was largely offset by net
unfavorable loss development for the 2010 accident year. These factors were partially offset by
$175 million and $76 million increases to asbestos and environmental reserves in 2011, respectively
(discussed in further detail in the ‘‘Asbestos and Environmental Reserves’’ section below), unfavorable
prior year reserve development in the commercial multi-peril product line driven by late reporting of
hail claims incurred in 2010 and unfavorable prior year reserve development in the commercial
automobile product line that reflected worse than expected severity for accident years 2009 and 2010.
Financial, Professional & International Insurance. Net favorable prior year reserve development in
2011 was $360 million. In Bond & Financial Products, net favorable development in 2011 primarily
reflected better than expected results for accident years 2008 and prior for the contract surety business,
and better than expected loss development for liability lines of business, driven by the fiduciary product
for accident years 2008 and prior. In International, net favorable development in 2011 reflected better
than expected loss development in Canada, primarily in the surety, directors and officers, and general
liability lines of business for recent accident years and better than expected development in the
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 for accident years 2006 through 2010 in 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 accident years 2007 through 2010.
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 and $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 commercial 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 commercial
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
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