Travelers 2013 Annual Report Download - page 220

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
Reinsurance recoverables on unpaid losses at December 31, 2013 declined by $974 million from
December 31, 2012, reflecting the impacts of (i) a decline in mandatory pools and associations
primarily due to catastrophe-related collections and, to a lesser extent the sale of renewal rights, related
to the Company’s National Flood Insurance Program in 2013, (ii) cash collections, including
commutation agreements, and (iii) net favorable prior year reserve development, partially offset by
(iv) the acquisition of Dominion, which added $352 million of reinsurance recoverables on unpaid
losses at November 1, 2013. Reinsurance recoverables on unpaid losses at December 31, 2012 declined
by $180 million from December 31, 2011, reflecting cash collections, including commutation
agreements, and the impact of net favorable prior year reserve development.
Prior Year Reserve Development
The following disclosures regarding reserve development are on a ‘‘net of reinsurance’’ basis.
2013.
In 2013, estimated claims and claim adjustment expenses incurred included $944 million of net
favorable development for claims arising in prior years, including $840 million of net favorable prior
year reserve development impacting the Company’s results of operations and $48 million of accretion
of discount.
Business Insurance. Net favorable prior year reserve development in 2013 of $325 million was
primarily driven by better than expected loss experience in the general liability product line for accident
years 2012 and prior, reflecting more favorable legal and judicial environments than what the Company
previously expected, better than expected loss experience related to both catastrophe and non-
catastrophe losses in the property product line for accident years 2010 through 2012, and better than
expected loss experience in the workers’ compensation line of business (which was largely offset by a
$42 million charge that was precipitated by legislation in New York enacted during the first quarter of
2013 related to the New York Fund for Reopened Cases for workers’ compensation). Net favorable
prior year reserve development in 2013 was also reduced by $190 million and $65 million increases to
asbestos and environmental reserves, respectively, which are discussed in further detail in the ‘‘Asbestos
and Environmental Reserves’’ section below.
Financial, Professional & International Insurance. Net favorable prior year reserve development in
2013 was $306 million. In Bond & Financial Products, net favorable prior year reserve development in
2013 primarily reflected better than expected results in the surety product line for the contract surety
business for accident years 2010 and prior. In International, net favorable prior year reserve
development in 2013 primarily reflected better than expected loss experience for the surety line of
business in Canada and the marine line of business in the Company’s operations at Lloyd’s, partially
offset by higher than expected loss experience in the public and product liability line of business in the
United Kingdom.
Personal Insurance. Net favorable prior year reserve development in 2013 of $209 million was
primarily driven by better than expected loss experience in the Homeowners and Other product line for
(i) catastrophe losses incurred in 2012, and (ii) non-catastrophe weather-related losses and
non-weather-related losses for accident years 2012 and 2011.
210