Travelers 2010 Annual Report Download - page 107

On January 29, 2009, the Company and PPG Industries, Inc (‘‘PPG’’), along with approximately 30
other insurers of PPG, agreed in principle to an agreement to settle asbestos-related coverage litigation
under insurance policies issued to PPG. The tentative settlement agreement has been incorporated into
the Modified Third Amended Plan of Reorganization (‘‘Amended Plan’’) proposed as part of the
Pittsburgh Corning Corp. (‘‘PCC’’, which is 50% owned by PPG) bankruptcy proceeding. Pursuant to
the proposed Amended Plan, which was filed on January 30, 2009, PCC, along with enumerated other
companies (including PPG as well as the Company as a participating insurer), are to receive protections
afforded by Section 524(g) of the Bankruptcy Code from certain asbestos-related bodily injury claims.
Under the agreement in principle, the Company has the option to make a series of payments over the
next 20 years totaling approximately $620 million to the Trust to be created under the Amended Plan,
or it may elect to make a one-time discounted payment, which, as of March 31, 2011, would total
approximately $454 million (approximately $425 million after reinsurance). The agreement in principle
with PPG is subject to numerous contingencies, including final court approval of the Amended Plan,
and the Company has no obligation to make the settlement payment until all contingencies are
satisfied. The Company’s obligations under this agreement in principle are included in the ‘‘home office
and field office’’ category in the preceding table.
In December 2008, the Company completed the sale of Unionamerica, which comprised its United
Kingdom-based runoff insurance and reinsurance businesses. Included in the claims and claim
adjustment expense reserves transferred to the purchaser were gross and net asbestos reserves of
$330 million and $232 million, respectively.
The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the year ended December 31, in millions) 2010 2009 2008
Beginning reserves:
Direct ..................................... $3,097 $3,299 $4,353
Ceded .................................... (339) (385) (619)
Net ...................................... 2,758 2,914 3,734
Incurred losses and loss expenses:
Direct ..................................... 262 185 70
Ceded .................................... (122) ——
Net ...................................... 140 185 70
Losses paid:
Direct ..................................... 418 387 794
Ceded .................................... (68) (46) (136)
Net ...................................... 350 341 658
Sale of subsidiary:
Direct ..................................... —— 330
Ceded .................................... —— (98)
Net ...................................... —— 232
Ending reserves:
Direct ..................................... 2,941 3,097 3,299
Ceded .................................... (393) (339) (385)
Net ...................................... $2,548 $2,758 $2,914
See ‘‘—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.’’
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