Travelers 2006 Annual Report Download - page 194

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
182
4. REINSURANCE (Continued)
$265 million and $346 million at December 31, 2006and 2005, respectively, are accounted for using deposit
accounting and are included in other liabilities in the consolidated balance sheet.
The following is a summary of reinsurance financial data reflected in the consolidated statement
of income:
(for the yearended December 31, in millions)2006 2005 2004
Written premiums
Direct ......................................................... $23,635 $23,289 $ 21,413
Assumed...................................................... 404 447 845
Ceded ......................................................... (2,889)(3,350 ) (3,247)
Total net written premiums .................................... $21,150 $20,386 $ 19,011
Earned premiums
Direct ......................................................... $23,280 $23,370 $ 21,551
Assumed...................................................... 478 502 1,007
Ceded ......................................................... (2,998)(3,531 ) (3,520)
Total net earnedpremiums .................................... $20,760 $20,341 $ 19,038
Percentage of assumed earned premiums to net earned premiums .... 2.3%2.5 % 5.3%
Ceded claims and claim adjustment expenses incurred .............. $2,158 $3,601 $ 3,175
Reinsurance recoverables include amounts recoverable on both paid and unpaid claims and were
as follows:
(at December 31, in millions) 2006 2005
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment
expenses................................................................ $12,837
$ 1 4,177
Allowance for uncollectible reinsurance ...................................... (773 )(804)
Net reinsurance recoverables................................................ 12,064
13,373
Structured settlements...................................................... 3,758 3,990
Mandatory pools and associations. ........................................... 1,998 2,211
Total reinsurance recoverables .............................................. $17,820
$ 1 9,574
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, it was considered retroactive reinsurance and the resulting $59 million
gain was deferred and will be recognized in earnings as amounts are recovered from the reinsurer.
Through December 31, 2006, $11 million of the deferred gain was recognized in earnings, all of which
occurred in 2006. Under the terms of these agreements, the Company received net cash of approximately
$867 million in 2004.