Travelers 2014 Annual Report Download - page 39

Table of Contents
38
Agent
A licensed individual who sells and services insurance policies, receiving a commission from
the insurer for selling the business and a fee for servicing it. An independent agent
represents multiple insurance companies and searches the market for the best product for its
client.
Annuity
A contract that pays a periodic benefit over the remaining life of a person (the annuitant),
the lives of two or more persons or for a specified period of time.
Assigned risk pools
Reinsurance pools which cover risks for those unable to purchase insurance in the
voluntary market. Possible reasons for this inability include the risk being too great or the
profit being too small under the required insurance rate structure. The costs of the risks
associated with these pools are charged back to insurance carriers in proportion to their
direct writings.
Assumed reinsurance
Insurance risks acquired from a ceding company.
Average value analysis
A conventional actuarial method used to estimate ultimate losses for a given cohort of
claims such as an accident year/product line component. If the paid
- to - date losses are then
subtracted from the estimated ultimate losses, the result is an indication of the unpaid
losses.
The basic premise of the method is that average claim values are stable and predictable over
time for a particular cohort of claims. The method is utilized most often where ultimate claim
counts are known or reliably estimable fairly early after the start of an accident year and
average values are expected to be fairly predictable from one year to the next.
The method comes up with an estimate of ultimate claims counts by accident year cohort,
and multiplies it by an estimate of average claim value by accident year cohort, with multiple
methods used to estimate these average claim values.
Book value per share
Total common shareholders' equity divided by the number of common shares outstanding.
Bornhuetter - Ferguson method
A conventional actuarial method to estimate ultimate losses for a given cohort of claims
such as an accident year/product line component. If the paid
- to - date losses are then
subtracted from the estimated ultimate losses, the result is an indication of the outstanding
losses.