Travelers 2005 Annual Report Download - page 118

106
The amounts reported in the table are presented on a nominal basis and have not been adjusted to
reflect the time value of money. Accordingly, the amounts above will differ from the Company’s
balance sheet to the extent that the liability for claims and claim adjustment expenses has been
discounted in the balance sheet. (See note 1of the financial statements.)
(2) Workers’ compensation large deductible policies provide third party coverage in which the Company
typically is responsible for paying the entire loss under such policies and then seeks reimbursement
from the insured for the deductible amount. “Claims from large deductible policies” represent the
estimated future payment for claims and claim related expenses below the deductible amount, net of
the estimated recovery of the deductible. The liability and the related deductible receivable for unpaid
claims are presented in the consolidated balance sheet as “contractholder payables” and
“contractholder receivables,” respectively. Most deductibles for suchpolicies are paid directly from
the policyholder’s escrow which is periodically replenished by the policyholder. The payment of the
loss amounts above the deductible are reported within “Claims and claim adjustment expenses” in the
above table. Because the timing of the collection of the deductible (contractholder receivables) occurs
shortly after the payment of the deductible to a claimant (contractholder payables), these cash flows
offset each other in the table.
The estimated timing of the payment of the contractholder payables and the collection of
contractholder receivables for workers’ compensation policies is presented below:
(in millions) Total
Less than 1
Year
1-3
Years
3-5
Years
After 5
Years
Contractholder payables/ receivables ......... $ 5 ,516 $ 1,362 $ 1,492 $ 755 $1,907
(3) The amounts in “Loss-based assessments” relate to estimated future payments of second-injury fund
assessments which would result from payment of current claim liabilities. Second injury funds cover
the cost of any additional benefits for aggravation of apre-existing condition. For loss-based
assessments, the cost is shared by the insurance industry and self-insureds, funded through
assessments to insurance companies and self-insureds based on losses. Amounts relating to second-
injury fund assessments are included in “other liabilities” in the consolidated balance sheet.
(4) The amounts in “Reinsurance contracts accounted for as deposits” represent estimated future
nominal payments for reinsurance agreements that are accounted for as deposits. Amounts payable
under deposit agreements are included in “other liabilities” in the consolidated balance sheet. The
amounts reported in the table are presented on a nominal basis and have not been adjusted to reflect
the time value of money. Accordingly, the amounts above will differ from the Company’s balance
sheet to the extent that deposit values in the balance sheet have been discounted using deposit
accounting.
(5) The amounts in “Payouts from ceded funds withheld” represent estimated payments for losses and
return of funds held related to certain reinsurance arrangements whereby the Company holds a
portion of the premium due to the reinsurer and is allowed to pay claims from the amounts held.
The above table does not include an analysis of liabilities reported for structured settlements for
which the Company has purchased annuities and remains contingently liable in the event of default by the
company issuing the annuity. The Company is not reasonably likely to incur future payment obligations
under such agreements. See note 9 of the Company’s consolidated financial statements for a further
discussion.
Dividend Availability
The Company’s principal insurance subsidiaries are domiciled in the states of Connecticut and
Minnesota. The insurance holding company laws of both states applicable to the Company’s subsidiaries