Underwriting results

  • The GAAP combined ratio of 84.3% was essentially unchanged from the prior year.
  • Net favorable prior year reserve development was primarily driven by the same factors discussed above for the fourth quarter, as well as better than expected loss experience in the surety line of business in Canada and the marine line of business in the company’s operations at Lloyd’s within International. Catastrophe losses primarily resulted from the same factor discussed above for the fourth quarter as well as from flooding in Alberta, Canada.
  • The underlying GAAP combined ratio improved 0.2 points to 92.0%, primarily resulting from earned rate increases exceeding loss cost trends, partially offset by a higher level of large losses and higher non-catastrophe weather-related losses.

Financial, Professional & International Insurance net written premiums of $3.309 billion increased 11%, primarily driven by the same factors discussed above for the fourth quarter.

Personal Insurance Segment Financial Results
 
                                                                       
($ in millions and pre-tax, unless noted otherwise)                                        
Three Months Ended December 31, Twelve Months Ended December 31,
2013 2012 Change 2013 2012 Change
 
Underwriting gain (loss): $ 216 $ (307 ) $ 523 $ 732 $ (221 ) $ 953

Underwriting gain (loss) includes:
Net favorable prior year reserve development 36 33 3 209 175 34
Catastrophes, net of reinsurance (2 ) (570 ) 568 (250 ) (1,018 ) 768
 
Net investment income 94 96 (2 ) 369 404 (35 )
 
Other 36 14 22 103 66 37
           
Operating income before income taxes 346 (197 ) 543 1,204 249 955
Income tax expense (benefit)   109     (83 )   192     366     32     334  
Operating income (loss) $ 237   $ (114 ) $ 351   $ 838   $ 217   $ 621  
                                                                           
 
GAAP combined ratio 86.9 % 115.2 % (28.3 ) pts 88.9 % 101.9 % (13.0 ) pts
 

Impact on GAAP combined ratio
Net favorable prior year reserve development (2.0 ) pts (1.8 ) pts (0.2 ) pts (2.8 ) pts (2.3 ) pts (0.5 ) pts
Catastrophes, net of reinsurance 0.1 pts 30.1 pts (30.0 ) pts 3.4 pts 13.4 pts (10.0 ) pts
 
Underlying GAAP combined ratio 88.8 % 86.9 % 1.9 pts 88.3 % 90.8 % (2.5 ) pts
                                                                         
 
Net written premiums
Agency Automobile 1 $ 765 $ 822 (7 ) % $ 3,258 $ 3,527 (8 ) %
Agency Homeowners & Other 1 913 934 (2 ) 3,805 3,909 (3 )
Direct to Consumer   39     37   5   162     158   3
Total $ 1,717   $ 1,793   (4 ) % $ 7,225   $ 7,594   (5 ) %
 
1 Represents business sold through agents, brokers and other intermediaries and excludes direct to consumer.                            
 

Fourth Quarter 2013 Results

(All comparisons vs. fourth quarter 2012, unless noted otherwise)

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