- The GAAP combined ratio improved 3.3 points to 85.0% due to lower catastrophe losses (4.9 points) and higher net favorable prior year reserve development (1.6 points), partially offset by lower underlying underwriting margins (3.2 points), primarily reflecting higher levels of large losses and non-catastrophe weather-related losses within International.
- Net favorable prior year reserve development primarily resulted from better than expected loss experience in the surety line of business within Bond & Financial Products for accident years 2010 and prior, reflecting favorable resolutions on certain claims. Catastrophe losses primarily resulted from Storm Xaver in the United Kingdom.
- The underlying GAAP combined ratio increased 3.2 points to 94.7%, due to a higher underlying loss ratio reflecting higher levels of large losses and non-catastrophe weather-related losses within International as well as the inclusion of Dominion, partially offset by earned rate increases exceeding loss cost trends. The increase in the underlying loss ratio was partially offset by a lower expense ratio due to the inclusion of Dominion.
Financial, Professional & International Insurance net written premiums of $1.043 billion increased 29% as result of higher net written premiums in both Bond & Financial Products and International. Bond & Financial Products net written premiums of $551 million increased 7% primarily due to a change in a reinsurance program as well as continued strong retention rates and renewal rate increases in management liability. International net written premiums of $492 million increased 67% primarily due to the inclusion of Dominion.
Full Year 2013 Results
(All comparisons vs. full year 2012, unless noted otherwise)Operating income of $648 million after-tax increased $6 million or 1%, primarily reflecting improved underwriting results driven by a higher underlying underwriting gain. This improvement was mostly offset by lower net investment income.