Travelers 2006 Annual Report Download - page 198

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
186
6. INSURANCE CLAIM RESERVES
Claims and claim adjustment expense reserves were as follows:
(at December 31, in millions) 2006 2005
Property-casualty.......................................... $ 5 9,202 $61,007
Accident andhealth....................................... 86 83
Total .................................................. $ 5 9,288 $61,090
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)2006 2005 2004
Claims and claim adjustment expense reserves at beginning of year. ..... $ 6 1,007$ 58,984 $ 34,474
Less reinsurance recoverables on unpaid losses ....................... 18,112 17,538 10,419
Net reserves atbeginning of year ............................... 42,895 41,446 24,055
Estimated claims and claim adjustment expenses for claims arising in the
current year.................................................... 12,533 14,450 12,855
Estimated increase (decrease) in claims and claim adjustment expenses
for claims arising inprior years ................................... (429) 260 2,399
Acquisitions(1) ................................................... 538 — 13,653
Total increases............................................... 12,642 14,710 28,907
Claims and claim adjustment expense payments for claims arising in:
Current year................................................... 4,279 4,227 3,998
Prior years ..................................................... 8,632 8,871 7,553
Total payments ............................................... 12,911 13,098 11,551
Unrealized foreign exchange (gain) loss............................. 218 (163 ) 35
Net reserves atend of year ..................................... 42,844 42,895 41,446
Plus reinsurance recoverables on unpaid losses ....................... 16,358 18,112 17,538
Claims and claim adjustment expense reserves at end of year ........... $ 5 9,202$ 61,007 $ 58,984
(1) In February 2006, the 2003 and prior years of account of Lloyd’s Syndicates 5000 and 779 closed
through reinsurance to close into the 2004 year of account. See “Reinsurance to Close” section of
note 1. In2004, acquired amount represents SPC net claims and claim adjustment expense reserves at
the April 1, 2004 acquisition date. SPC gross reserves at that date were $19.50 billion.
Gross claim and claim adjustment expense reserves atDecember 31, 2006 decreased by $1.80 billion
from the same date in 2005, primarily reflecting payments related to prior year hurricane losses, claim and
claim adjustment expense payments from runoff operations and favorable prior year reserve development,
primarily in the Personal Insurance segment, partially offset by the impact of reserves acquired in the
RITC transaction described in note 1.
Gross claims and claim adjustment expense reservesat 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, and an increase to asbestos reserves pursuant to the completion of the Company’s
annual review of asbestos reserves in the fourth quarter. Those increases in reserveswere partially offset