Travelers 2014 Annual Report Download - page 132

Table of Contents
The Company manages its business and evaluates its liabilities for claims and claim adjustment expenses on a net of reinsurance basis. The
estimated cash flows on a net of reinsurance basis are as follows:
For business underwritten by non
- U.S. operations, future cash flows related to reported and unreported claims incurred and related claim
adjustment expenses were translated at the spot rate on December 31, 2014.
The amounts reported in the table above and in the table of reinsurance recoverables above are presented on a nominal basis and have not
been adjusted to reflect the time value of money. Accordingly, the amounts above will differ from the Company's balance sheet to the extent
that the liability for claims and claim adjustment expenses and the related reinsurance recoverables have been discounted in the balance
sheet. (See note 1 of notes to the Company's consolidated financial statements.)
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(3) Includes agreements with vendors to purchase system software administration and maintenance services.
(4) Includes commitments to vendors entered into in the ordinary course of business for goods and services including property,
plant and equipment, office supplies, archival services, etc.
(5) Represents estimated timing for fulfilling unfunded commitments for private equity limited partnerships and real estate
partnerships.
(6) The amounts in "Claims and claim adjustment expenses" in the table above represent the estimated timing of future payments
for both reported and unreported claims incurred and related claim adjustment expenses, gross of reinsurance recoverables,
excluding structured settlements expected to be paid by annuity companies.
The Company has entered into reinsurance agreements to manage its exposure to losses and protect its capital as described
in note 5 of notes to the Company's consolidated financial statements.
In order to qualify for reinsurance accounting, a reinsurance agreement must indemnify the insurer from insurance risk,
i.e., the agreement must transfer amount and timing risk. Since the timing and amount of cash inflows from such reinsurance
agreements are directly related to the underlying payment of claims and claim adjustment expenses by the insurer,
reinsurance recoverables are recognized in a manner consistent with the liabilities (the estimated liability for claims and claim
adjustment expenses) relating to the underlying reinsured contracts. The presence of any feature that can delay timely
reimbursement of claims by a reinsurer results in the reinsurance contract being accounted for as a deposit rather than
reinsurance. The assumptions used in estimating the amount and timing of the reinsurance recoverables are consistent with
those used in estimating the amount and timing of the related liabilities.
The estimated future cash inflows from the Company's reinsurance contracts that qualify for reinsurance accounting are as
follows:
(in millions)
Total
Less than
1 Year
1 - 3 Years
3 - 5 Years
After
5 Years
Reinsurance recoverables
$
5,627
$
748
$
1,013
$
631
$
3,235
(in millions)
Total
Less than
1 Year
1 - 3 Years
3 - 5 Years
After
5 Years
Claims and claim adjustment
expenses, net
$
42,019
$
9,163
$
9,719
$
5,100
$
18,037