Travelers 2014 Annual Report Download - page 122

Table of Contents
adjustment expense reserves, as the Company retains the contingent liability to the claimant. If it is expected that the life insurance company is not
able to pay, the Company would recognize an impairment of the related reinsurance recoverable if, and to the extent, the purchased annuities are
not covered by state guaranty associations. In the event that the life insurance company fails to make the required annuity payments, the Company
would be required to make such payments. The following table presents the Company's top five groups by structured settlements at December 31,
2014 (in millions). Also included is the A.M. Best rating of the Company's predominant insurer from each insurer group at February 12, 2015:
The Company considers the ratings and related outlook assigned to reinsurance companies and life insurance companies by various
independent ratings agencies in assessing the adequacy of its allowance for uncollectible amounts.
OUTLOOK
The following discussion provides outlook information for certain key drivers of the Company's results of operations and capital position.
Premiums. The Company's earned premiums are a function of net written premium volume. Net written premiums comprise both renewal
business and new business and are recognized as earned premium over the life of the underlying policies. When business renews, the amount of
net written premiums associated with that business may increase or decrease (renewal premium change) as a result of increases or decreases in rate
and/or insured exposures, which the Company considers as a measure of units of exposure (such as the number and value of vehicles or properties
insured). Net written premiums from both renewal and new business, and therefore earned premiums, are impacted by competitive market
conditions as well as general economic conditions, which, particularly in the case of the Business and International Insurance segment, affect audit
premium adjustments, policy endorsements and mid
- term cancellations. Net written premiums are also impacted by the structure of reinsurance
programs and related costs.
Overall, the Company expects retention levels (the amount of expiring premium that renews, before the impact of renewal premium changes) will
remain strong. In the Business and International Insurance segment, the Company expects that renewal premium changes during 2015 will remain
positive, driven by both positive renewal rate changes and, subject to the economic uncertainties discussed below, growth in insured exposures,
but will be lower than the levels attained in 2014. In the Bond & Specialty Insurance segment, the Company expects that renewal premium changes
during 2015 will be broadly consistent with 2014. With respect to surety, the Company expects net written premium volume in 2015 that is broadly
consistent with the levels attained in 2014. In the Personal Insurance segment, the Company expects both Agency Automobile and Agency
Homeowners and Other renewal premium changes during 2015 will remain positive, driven by both positive renewal rate changes (based on the
Company's actions to file for rate increases) and, subject to the economic uncertainties discussed below, growth in insured exposures, but will be
lower than the levels attained in 2014. The
121
Group
Structured
Settlements
A.M. Best Rating of Group's Predominant Insurer
Fidelity & Guaranty Life Group
$
938
B++
fifth highest of 16 ratings
MetLife Group
439
A+
second highest of 16 ratings
Genworth Financial Group(1)
414
A
third highest of 16 ratings
John Hancock Group
259
A+
second highest of 16 ratings
Symetra Financial Corporation
238
A
third highest of 16 ratings
(1) A.M. Best has placed the ratings of Genworth Financial Group under review with negative implications.