Travelers 2012 Annual Report Download - page 216

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INSURANCE CLAIM RESERVES (Continued)
The following table presents a reconciliation of beginning and ending property casualty reserve
balances for claims and claim adjustment expenses:
(at and for the year ended December 31, in millions) 2012 2011 2010
Claims and claim adjustment expense reserves at beginning of year ..... $51,353 $51,537 $53,529
Less reinsurance recoverables on unpaid losses ................... 10,434 11,282 12,588
Net reserves at beginning of year .......................... 40,919 40,255 40,941
Estimated claims and claim adjustment expenses for claims arising in the
current year ........................................... 15,559 16,937 14,452
Estimated decrease in claims and claim adjustment expenses for claims
arising in prior years ..................................... (1,074) (842) (1,417)
Total increases ........................................ 14,485 16,095 13,035
Claims and claim adjustment expense payments for claims arising in:
Current year ........................................... 6,507 7,751 5,949
Prior years ............................................ 8,326 7,653 7,748
Total payments ....................................... 14,833 15,404 13,697
Unrealized foreign exchange (gain) loss ......................... 63 (27) (24)
Net reserves at end of year .............................. 40,634 40,919 40,255
Plus reinsurance recoverables on unpaid losses .................... 10,254 10,434 11,282
Claims and claim adjustment expense reserves at end of year ......... $50,888 $51,353 $51,537
Gross claims and claim adjustment expense reserves at December 31, 2012 and 2011 decreased by
$465 million and $184 million from the respective prior year-end, primarily reflecting the impact of net
favorable prior year reserve development as well as payments related to operations in runoff, including
asbestos and environmental claims, partially offset by the increase in loss cost trends. Additionally, the
decrease in reserves at December 31, 2011 from the prior year-end was partially offset by the impact of
significant catastrophe losses incurred in 2011.
The $180 million and $848 million decline in reinsurance recoverables at December 31, 2012 and
2011, respectively, compared with the respective prior year-end reflected cash collections, including
commutation agreements, and the impact of net favorable prior year reserve development.
Prior Year Reserve Development
The following disclosures regarding reserve development are on a ‘‘net of reinsurance’’ basis.
2012.
In 2012, estimated claims and claim adjustment expenses incurred included $1.07 billion of net
favorable development for claims arising in prior years, including $940 million of net favorable prior
year reserve development impacting the Company’s results of operations and $48 million of accretion
of discount.
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