Travelers 2014 Annual Report Download - page 42

Table of Contents
41
Cohort
A group of items or individuals that share a particular statistical or demographic
characteristic. For example, all claims for a given product in a given market for a given
accident year would represent a cohort of claims.
Combined ratio
For Statutory Accounting Practices (SAP), the combined ratio is the sum of the SAP loss
and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial
statements required by insurance regulators. The combined ratio as used in this report is the
equivalent of, and is calculated in the same manner as, the SAP combined ratio except that
the SAP underwriting expense ratio is based on net written premium and the underwriting
expense ratio as used in this report is based on net earned
premiums.
The combined ratio is an indicator of the Company's underwriting discipline, efficiency in
acquiring and servicing its business and overall underwriting profitability. A combined ratio
under 100% generally indicates an underwriting profit. A combined ratio over 100%
generally indicates an underwriting loss.
Other companies' method of computing a similarly titled measure may not be comparable to
the Company's method of computing this ratio.
Combined ratio excluding incremental impact of
direct to consumer initiative
The combined ratio excluding incremental impact of direct to consumer initiative is the
combined ratio adjusted to exclude the direct, variable impact of the Company's direct
- to -
consumer initiative in the Personal Insurance segment.
Commercial multi - peril policies
Refers to policies which cover both property and third - party liability exposures.
Commutation agreement
An agreement between a reinsurer and a ceding company whereby the reinsurer pays an
agreed
- upon amount in exchange for a complete discharge of all obligations, including future
obligations, between the parties for reinsurance losses incurred.
Debt - to - total capital ratio
The ratio of debt to total capitalization.
Debt - to - total capital ratio excluding net unrealized
gain (loss) on investments
The ratio of debt to total capitalization excluding the after - tax impact of net unrealized
investment gains and losses.
Deductible
The amount of loss that an insured retains.
Deferred acquisition costs (DAC)
Incremental direct costs of acquired and renewal insurance contracts, consisting of
commissions (other than contingent commissions) and premium
- related taxes that are
deferred and amortized to achieve a matching of revenues and expenses when reported in
financial statements prepared in accordance with U.S. Generally Accepted Accounting
Principles (GAAP).