Travelers 2015 Annual Report Download - page 118

sale. A.M. Best’s ratings of MetLife Inc. and its subsidiaries were placed under review with
developing implications following the announcement of this plan.
(3) Symetra Financial Corporation became a wholly-owned subsidiary of Sumitomo Life Insurance
Company on February 1, 2016 upon the closing of a previously announced merger
agreement. A.M. Best’s ratings of Symetra were unchanged following the completion of the
merger. The Company does not have any structured settlements with Sumitomo Life.
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. Property and casualty insurance market conditions are
expected to remain competitive. Net written premiums may also be impacted by the structure of
reinsurance programs and related costs, as well as changes in foreign currency exchange rates.
Overall, the Company expects retention levels (the amount of expiring premium that renews,
before the impact of renewal premium changes) will remain strong by historical standards. In the
Business and International Insurance segment, the Company expects that domestic renewal premium
changes during 2016 will remain positive but will be slightly lower than the levels attained in 2015.
Given the relatively smaller amount of premium that the Company generates from outside the United
States and the transactional nature of some of those markets, particularly Lloyd’s, international renewal
premium changes during 2016 could be somewhat higher, broadly consistent with or somewhat lower
than the levels attained in 2015. In the Bond & Specialty Insurance segment, the Company expects that
renewal premium changes with respect to management liability business during 2016 will remain
positive, but will be slightly lower than the levels attained in 2015. With respect to surety business,
within the Bond & Specialty Insurance segment, the Company expects that net written premium
volume during 2016 will be slightly higher than the levels attained in 2015. In the Personal Insurance
segment, the Company expects that Agency Auto renewal premium changes during 2016 will remain
positive and will be slightly higher than the levels attained in 2015, and Agency Homeowners and Other
renewal premium changes during 2016 will remain positive, but will be lower than the levels attained in
2015. The need for state regulatory approval for changes to personal property and casualty insurance
prices, as well as competitive market conditions, may impact the timing and extent of renewal premium
changes.
Property and casualty insurance market conditions are expected to remain competitive in 2016 for
new business, not only in Business and International Insurance and Bond & Specialty Insurance, but
especially in Personal Insurance, where price comparison technology used by agents and brokers,
sometimes referred to as ‘‘comparative raters,’’ has facilitated the process of generating multiple quotes,
thereby increasing price comparison on new business and, increasingly, on renewal business. The
Company expects that its Quantum Auto 2.0 product in the Personal Insurance segment’s Agency
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