Travelers 2004 Annual Report Download - page 165

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
8. REINSURANCE, Continued
The following is a summary of reinsurance financial data reflected in the consolidated statement of income:
(for the year ended December 31, in millions) 2004 2003 2002
Written premiums
Direct ............................................................ $21,457 $14,977 $13,468
Assumed .......................................................... 816 498 607
Ceded ............................................................ (3,337) (2,274) (2,130)
Total net written premiums ....................................... $18,936 $13,201 $11,945
Earned premiums
Direct ............................................................ $21,593 $14,324 $12,525
Assumed .......................................................... 1,025 498 671
Ceded ............................................................ (3,580) (2,277) (2,041)
Total net earned premiums ........................................ $19,038 $12,545 $11,155
Percentage of amount assumed to net earned ........................... 5.4% 4.0% 6.0%
Ceded claims and claim adjustment expenses incurred ................... $ 3,175 $ 2,333 $ 2,112
Reinsurance recoverables, net of valuation allowance, include amounts recoverable on unpaid and paid
claims and were as follows:
(at December 31, in millions) 2004 2003
Mandatory pools and associations .............................................. $ 2,497 $ 2,204
Structured settlements ........................................................ 3,941 2,411
Other ..................................................................... 12,616 6,559
Total reinsurance recoverables ............................................. $19,054 $11,174
The Company entered into commutation agreements with a major reinsurer, effective June 30, 2004,
resulting in a charge of $153 million for amounts received less than the reinsurance recoverable balances of
approximately $1.26 billion. In connection with the commutation, the Company also entered into a new
reinsurance agreement effective April 1, 2004, that provides $300 million aggregate coverage for the 2000
accident year exposures written by SPC. Because the new agreement is for events occurring prior to the effective
date of the agreement, the resulting $59 million gain has been deferred and will be recognized in earnings as
amounts are recovered from the reinsurer. Under the terms of these agreements, the Company received net cash
of approximately $867 million.
In 1996, Lloyd’s of London (Lloyd’s) restructured its operations with respect to claims for years prior to
1993 and reinsured these claims into Equitas Limited (Equitas). Amounts recoverable from unaffiliated insurers
at December 31, 2004 and 2003 included $90 million and $269 million, respectively, recoverable from Equitas.
During the first quarter of 2004, TPC entered into an agreement to settle all current and future reinsurance claims
against certain underwriters at Lloyd’s reinsured by Equitas. Under terms of this settlement, the Company
received $245 million, resolving approximately $255 million of TPC’s net claim balances from Equitas. Virtually
all of the $90 million reinsurance recoverables relating to Equitas remaining at December 31, 2004 relate to SPC.
153