Travelers 2008 Annual Report Download - page 108

market. Details of exposures under the reinsurance and retrocession policies were identified only when
the Company was advised by the cedant.
In December 2008, the Company completed the sale of Unionamerica, which comprised its United
Kingdom-based runoff insurance and reinsurance businesses. Included in the claim and claim
adjustment expense reserves transferred to the purchaser were gross and net asbestos reserves of
$330 million and $232 million, respectively.
The Company recorded a $70 million pretax increase to asbestos reserves in 2008. The Company
recorded no asbestos reserve additions in 2007, and recorded a pretax asbestos reserve addition of
$155 million in 2006. The 2008 increase was driven by a change in the estimated costs associated with
litigating asbestos coverage matters and a change in estimated losses for certain individual
policyholders. The increase was not a result of a change in the Company’s assessment of the underlying
asbestos environment. Approximately half of the $155 million 2006 pretax reserve adjustment was due
to an increase in the projected defense costs for ten policyholders. The majority of the remainder of
the reserve adjustment was primarily due to continued litigation activity against smaller, peripheral
defendants. Net asbestos reserves totaled $2.91 billion at December 31, 2008, compared with
$3.73 billion at December 31, 2007.
The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2008 2007 2006
Beginning reserves:
Direct ..................................... $4,353 $4,777 $5,103
Ceded .................................... (619) (726) (739)
Net ...................................... 3,734 4,051 4,364
Incurred losses and loss expenses:
Direct ..................................... 70 (1) 196
Ceded .................................... —1 (41)
Net ...................................... 70 — 155
Accretion of discount:
Direct ..................................... ——1
Ceded .................................... ———
Net ...................................... ——1
Losses paid:
Direct ..................................... 794 423 523
Ceded .................................... (136) (106) (54)
Net ...................................... 658 317 469
Sale of subsidiary:
Direct ..................................... 330 ——
Ceded .................................... (98) ——
Net ...................................... 232 ——
Ending reserves:
Direct ..................................... 3,299 4,353 4,777
Ceded .................................... (385) (619) (726)
Net ...................................... $2,914 $3,734 $4,051
See ‘‘—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.’’
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