Travelers 2015 Annual Report Download - page 43

Loss reserves .............. Liabilities established by insurers and reinsurers to reflect the
estimated cost of claims incurred that the insurer or reinsurer will
ultimately be required to pay in respect of insurance or reinsurance
it has written. Reserves are established for losses and for LAE, and
consist of case reserves and IBNR reserves. As the term is used in
this document, ‘‘loss reserves’’ is meant to include reserves for both
losses and LAE.
Loss reserve development ..... The increase or decrease in incurred claims and claim adjustment
expenses as a result of the re-estimation of claims and claim
adjustment expense reserves at successive valuation dates for a
given group of claims. Loss reserve development may be related to
prior year or current year development.
Losses incurred ............ The total losses sustained by an insurance company under a policy
or policies, whether paid or unpaid. Incurred losses include a
provision for IBNR.
National Association of
Insurance Commissioners
(NAIC) ................ An organization of the insurance commissioners or directors of all
50 states, the District of Columbia and the five U.S. territories
organized to promote consistency of regulatory practice and
statutory accounting standards throughout the United States.
Net written premiums ........ Direct written premiums plus assumed reinsurance premiums less
premiums ceded to reinsurers.
New business volume ........ The amount of written premium related to new policyholders and
additional products sold to existing policyholders.
Operating income (loss) ...... Net income (loss) excluding the after-tax impact of net realized
investment gains (losses), discontinued operations and cumulative
effect of changes in accounting principles when applicable.
Operating income (loss) per
share .................. Operating income (loss) on a per share basis.
Operating return on equity .... The ratio of operating income to average equity excluding net
unrealized investment gains and losses and discontinued operations,
net of tax.
Paid loss development 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 unpaid
losses.
The basic premise of the method is that cumulative paid losses for
a given cohort of claims will grow in a stable, predictable pattern
from year-to-year, based on the age of the cohort. These age-to-age
growth factors are sometimes called ‘‘link ratios.’’
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