Travelers 2006 Annual Report Download - page 127

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“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.........$ 5,023$ 1 ,274 $1,425 $ 719
$ 1 ,605
(9)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 a pre-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.
(10)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.
(11) 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 topay 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 theevent of default by the
company issuing the annuity. The Company is not reasonably likely to incur future payment obligations
under such agreements. In addition, the Company is not required to make any contributions to its qualified
pension plan in2006 and does not have a best estimate of contributions expected to be paid to the
qualified pension plan. Accordingly, any future contributions are not included in the foregoing table.
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
requires notice to, and approval by, the state insurance commissioner for the declaration or payment of
any dividend, that together with other distributions made within the preceding twelve months, exceeds the
greater of 10% of the insurer’s capital andsurplus as of the preceding December 31, or the insurer’s net
income for the twelve-month period ending the preceding December 31, in each case determined in
accordance with statutory accounting practices and by state regulation. This declaration or payment is
further limited by adjusted unassigned surplus, as determined in accordance with statutory accounting
practices.