Travelers 2005 Annual Report Download - page 181

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
169
9. INSURANCE CLAIMS RESERVES (Continued)
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) 2005 2004 2003
Claims and claim adjustment expense reserves at beginning of year...... $ 5 8,984 $ 3 4,474 $ 3 3,628
Less reinsurance recoverables onunpaidlosses....................... 17,538 10,419 10,360
Net balance at beginning of year................................ 41,446 24,055 23,268
Provision for claims and claim adjustment expenses for claims arising in
the current year................................................. 14,450 12,855 8,554
Estimated claims and claim adjustment expenses for claims arising in
prior years...................................................... 260 2,399 390
Acquisition(1) .................................................... —13,653 —
Total increases. ............................................... 14,710 28,907 8,944
Claims and claim adjustment expense payments for claims arising in:
Current year. ................................................... 4,227 3,998 2,987
Prior years ..................................................... 8,871 7,553 5,170
Total payments............................................... 13,098 11,551 8,157
Unrealized foreign exchange (gain) loss .............................. (163 )35 —
Net balance at end of year. ..................................... 42,895 41,446 24,055
Plus reinsurance recoverables on unpaid losses(1) ..................... 18,112 17,538 10,419
Claims and claim adjustment expense reserves at end of year........... $ 6 1,007 $ 5 8,984 $ 3 4,474
(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, 2005 increased $2.02 billion
over year-end 2004 as a result of the impact of the significant catastrophe losses incurred in the third and
fourth quarters of 2005, andan increase to asbestos reserves pursuant to the completion of the Company’s
annual review of asbestos reserves in the fourth quarter, both of which are described in more detail in the
discussion that follows. Those increases in reserves were partially offset by claim and claim expense
payments from runoff operations and other net favorable prior year reserve development in the Company’s
Commercial and Personal segments.
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 fair value adjustments to the acquired claims and claim adjustment expense reserves and
reinsurance recoverables as of April 1, 2004, the merger date, are reported as intangible assets and are
being amortized over the expected payout period of the acquired reserves. See note 2.