Travelers 2006 Annual Report Download - page 124

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Contractual Obligations
The following table summarizes, as of December 31, 2006, the Company’s future payments under
contractual obligations and estimated claims and claims related payments. The tableexcludes short-term
obligations and includes only liabilities at December 31, 2006 that are expected to be settled in cash.
The table below includes the amount and estimated future timing of claims and claim related
payments. The amounts do not represent the exact liability, but instead represent estimates, generally
utilizing actuarial projections techniques, at a given accounting date. These estimates include expectations
of what the ultimate settlement and administration of claims will cost based on the Company’s assessment
of facts and circumstances then known, review of historical settlement patterns, estimates of trends in
claims severity, frequency, legal theories of liability and other factors. Variables in the reserve estimation
process can be affected by both internal and external events, such aschanges in claims handling
procedures, economic inflation, legal trends and legislative changes. Many of these items arenot directly
quantifiable, particularly on a prospective basis. Additionally, there may be significant reporting lags
between the occurrence of the policyholder event and the time it is actually reported to the insurer. The
future cash flows related to the items contained in the table below required estimation of both amount
(including severity considerations) and timing. Amount and timing are frequently estimated separately. An
estimation of both amount and timing of future cash flows related to claims and claim related payments is
generally reliable only in the aggregate with some unavoidable estimation uncertainty.