Travelers 2005 Annual Report Download - page 180

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
168
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) 2005 2004 2003
Written premiums
Direct......................................................... $ 2 2,741 $ 2 1,413 $ 1 4,977
Assumed....................................................... 995 845 393
Ceded......................................................... (3,350 )(3,247 ) (2,169)
Total net written premiums. .................................... $ 2 0,386 $ 1 9,011 $ 1 3,201
Earned premiums
Direct ......................................................... $ 2 2,793 $ 2 1,551 $ 1 4,324
Assumed....................................................... 1,079 1,007 498
Ceded......................................................... (3,531 )(3,520 ) (2,277)
Total net earned premiums..................................... $ 2 0,341 $ 1 9,038 $ 1 2,545
Percentage of assumed earned premiums to net earned premiums..... 5.3 % 5.3 % 4.0%
Ceded claims and claim adjustment expenses incurred.............. $3,601
$3,175 $2,333
Reinsurance recoverables, net of valuation allowance, include amounts recoverable on unpaid and
paid claims and were as follows:
(at December 31, in millions) 2005 2004
Mandatory pools and associations. ........................... $2,211 $2,497
Structured settlements...................................... 3,990 3,941
Other .................................................... 13,373 12,616
Total reinsurance recoverables ............................ $ 1 9,574 $ 1 9,054
In 2004, the Company entered into commutation agreements with a major reinsurer, 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 $59million gain was 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 $867million in 2004.
9. INSURANCE CLAIMS RESERVES
Claims and claim adjustment expense reserves were as follows:
(at December 31, in millions) 2005 2004
Property-casualty .......................................... $ 6 1,007 $ 5 8,984
Accident and health ........................................ 83 86
Total................................................... $ 6 1,090 $ 5 9,070