Travelers 2009 Annual Report Download - page 218

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)
rate yield curve, a leverage ratio assumption (reserves to statutory surplus), and a cost of capital
expressed as a spread over risk-free rates. The method used calculates a risk adjustment to a
risk-free discounted reserve that will, if reserves run off as expected, produce results that yield the
assumed cost-of-capital on the capital supporting the loss reserves. The fair value adjustment is
reported as an other intangible asset on the consolidated balance sheet, and the amounts measured
in accordance with the acquirer’s accounting policies for insurance contracts are reported as part
of the claims and claim adjustment expense reserves and reinsurance recoverables. The intangible
asset will be recognized into income over the expected payment pattern. Because the time value of
money and the risk adjustment (cost of capital) components of the intangible asset run off at
different rates, the amount recognized in income may be a net benefit in some periods and a net
expense in other periods.
The following presents a summary of the Company’s amortization expense for other intangible
assets by major asset class:
(for the year ended December 31, in millions) 2009 2008 2007
Customer-related ............................................... $72 $ 96 $118
Fair value adjustment on claims and claim adjustment expense reserves and
reinsurance recoverables ........................................ 28 30 28
Total amortization expense....................................... $100 $126 $146
Intangible asset amortization expense is estimated to be $86 million in 2010, $69 million in 2011,
$52 million in 2012, $45 million in 2013 and $43 million in 2014.
7. INSURANCE CLAIM RESERVES
Claims and claim adjustment expense reserves were as follows:
(at December 31, in millions) 2009 2008
Property-casualty................................................. $53,054 $54,646
Accident and health .............................................. 73 77
Total........................................................ $53,127 $54,723
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