Travelers 2011 Annual Report Download - page 126

factors including, but not limited to, the reinsurers’ legal structure and trading history with the
Company.
The following table summarizes the composition of the Company’s reinsurance recoverables:
(at December 31, in millions) 2011 2010
Gross reinsurance recoverables on paid and unpaid claims and
claim adjustment expenses ........................... $ 6,216 $ 6,934
Allowance for uncollectible reinsurance ................... (345) (363)
Net reinsurance recoverables .......................... 5,871 6,571
Mandatory pools and associations(1) ..................... 2,020 2,043
Structured settlements ............................... 3,291 3,380
Total reinsurance recoverables ......................... $11,182 $11,994
(1) Includes impact from certain reclassifications made to 2010 amounts to conform to 2011
presentation.
The $700 million decline in net reinsurance recoverables since December 31, 2010 reflected cash
collections and the impact of net favorable prior year reserve development.
The following table presents the Company’s top five reinsurer groups by reinsurance recoverable at
December 31, 2011 (in millions). Also included is the A.M. Best rating of each reinsurer group at
February 16, 2012:
Reinsurance
Reinsurer Group Recoverable A.M. Best Rating of Group’s Predominant Reinsurer
Munich Re Group .................... $670 A+ second highest of 16 ratings
Swiss Re Group ...................... 626 A+ second highest of 16 ratings
Transatlantic Holdings, Inc.(1) ........... 349 A third highest of 16 ratings
Berkshire Hathaway Group ............. 289 A++ highest of 16 ratings
XL Capital Group .................... 281 A third highest of 16 ratings
(1) Transatlantic Holdings, Inc. has entered into a merger agreement with Alleghany Corporation in a
transaction expected to be finalized in the first quarter of 2012.
At December 31, 2011, the Company held $1.9 billion of collateral in the form of letters of credit,
trust agreements and funds held to fully or partially collateralize certain reinsurance recoverables.
Also included in reinsurance recoverables are certain amounts related to structured settlements,
which are annuities purchased from various life insurance companies to settle certain personal physical
injury claims, of which workers’ compensation claims comprise a significant portion. In cases where the
Company did not receive a release from the claimant, the amount due from the life insurance company
related to the structured settlement is included in the Company’s consolidated balance sheet as a
liability and as a reinsurance recoverable, as the Company retains the contingent liability to the
claimant. In the event that the life insurance company fails to make the required annuity payments, the
Company would be required to make such payments if and to the extent the purchased annuities are
not covered by state guaranty associations. The following table presents the Company’s top five groups
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