Travelers 2007 Annual Report Download - page 124

Contractual Obligations
The following table summarizes, as of December 31, 2007, the Company’s future payments under
contractual obligations and estimated claims and claims related payments. The table excludes
short-term obligations and includes only liabilities at December 31, 2007 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 as changes in
claims handling procedures, economic inflation, legal trends and legislative changes. Many of these
items are not 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.
The contractual obligations related to debt, operating leases, purchase obligations, long-term
unfunded investment commitments, estimated claims and claims related payments (gross of the
estimated reinsurance recoveries) and liabilities related to unrecognized tax benefits, at December 31,
2007 were as follows:
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