Travelers 2004 Annual Report Download - page 166

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
9. INSURANCE CLAIMS RESERVES
Claims and claim adjustment expense reserves were as follows:
(at December 31, in millions) 2004 2003
Property-casualty ............................................................ $58,984 $34,474
Accident and health .......................................................... 86 99
Total ................................................................. $59,070 $34,573
The table below is a reconciliation of beginning and ending property casualty reserve balances for claims
and claim adjustment expenses.
(at and for the year ended December 31, in millions) 2004 2003 2002
Claims and claim adjustment expense reserves at beginning of year ........... $34,474 $33,628 $30,616
Less reinsurance recoverables on unpaid losses ........................... 10,419 10,360 10,419
Net balance at beginning of year ............................... 24,055 23,268 20,197
Provision for claims and claim adjustment expenses for claims arising in the
current year ...................................................... 12,855 8,554 7,872
Estimated claims and claim adjustment expenses for claims arising in prior
years ........................................................... 2,399 390 3,031
Acquisition(1) ...................................................... 13,653 ——
Total increases ............................................. 28,907 8,944 10,903
Claims and claim adjustment expense payments for claims arising in:
Current year ................................................... 3,998 2,987 2,814
Prior years .................................................... 7,553 5,170 5,018
Total payments ............................................. 11,551 8,157 7,832
Unrealized foreign exchange loss ...................................... 35 ——
Net balance at end of year .................................... 41,446 24,055 23,268
Plus reinsurance recoverables on unpaid losses(1) ......................... 17,538 10,419 10,360
Claims and claim adjustment expense reserves at end of year ................ $58,984 $34,474 $33,628
(1) SPC net claims and claim adjustment expense reserves at April 1, 2004. SPC gross reserves at that date were
$19.50 billion. SPC reinsurance recoverables on unpaid losses at April 1, 2004 were $5.85 billion.
Gross claims and claim adjustment expense reserves at December 31, 2004 increased by $24.51 billion over
year-end 2003, primarily as a result of the merger with SPC and reserve charges recorded subsequent to the
merger. Of the increase in 2004, $19.50 billion resulted from the addition of the acquired operations, and $2.40
billion was due to estimated claims and claim adjustment expenses for claims arising in prior years, which is
described in more detail in the discussion that follows.
The increase in the claims and claim adjustment expense reserves in 2003 from 2002 was primarily due to
net prior year reserve strengthening, principally in Commercial, and growth in business volume in both
Commercial and Personal. Partially offsetting the above were net payments of $607 million in 2003 and $522
million in 2002 for asbestos and environmental claims, and favorable prior year reserve development for
Personal.
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