Travelers 2015 Annual Report Download - page 117

The $376 million decline in net reinsurance recoverables from December 31, 2014 primarily
reflected the impact of cash collections in 2015.
The following table presents the Company’s top five reinsurer groups by reinsurance recoverable at
December 31, 2015 (in millions). Also included is the A.M. Best rating of each reinsurer group at
February 11, 2016:
Reinsurance
Reinsurer Group Recoverable A.M. Best Rating of Group’s Predominant Reinsurer
Swiss Re Group ...................... $453 A+ second highest of 16 ratings
Munich Re Group .................... 418 A+ second highest of 16 ratings
Sompo Japan Nipponkoa Group .......... 232 A+ second highest of 16 ratings
Berkshire Hathaway ................... 229 A++ highest of 16 ratings
XL Capital Group .................... 196 A third highest of 16 ratings
At December 31, 2015, the Company held $1.10 billion of collateral in the form of letters of credit,
funds and trust agreements held to fully or partially collateralize certain reinsurance recoverables.
For a discussion of a pending reinsurance dispute pertaining to a portion of the Company’s
reinsurance recoverable from the Munich Re Group in the foregoing table, see note 16 of notes to the
consolidated financial statements herein.
Included in reinsurance recoverables are 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
reinsurance recoverable and the related claim cost is included in the liability for claims and claim
adjustment expense reserves, as the Company retains the contingent liability to the claimant. If it is
expected that the life insurance company is not able to pay, the Company would recognize an
impairment of the related reinsurance recoverable if, and to the extent, the purchased annuities are not
covered by state guaranty associations. In the event that the life insurance company fails to make the
required annuity payments, the Company would be required to make such payments. The following
table presents the Company’s top five groups by structured settlements at December 31, 2015
(in millions). Also included is the A.M. Best rating of the Company’s predominant insurer from each
insurer group at February 11, 2016:
Structured
Group Settlements A.M. Best Rating of Group’s Predominant Insurer
Fidelity & Guaranty Life Group(1) .......... $910 B++ fifth highest of 16 ratings
MetLife Group(2) ...................... 408 A+ second highest of 16 ratings
Genworth Financial Group ................ 400 B++ fifth highest of 16 ratings
John Hancock Group .................... 321 A+ second highest of 16 ratings
Symetra Financial Corporation(3) ........... 226 A third highest of 16 ratings
(1) Fidelity & Guaranty Life (FGL) has entered into a definitive merger agreement with Anbang
Insurance Group Co., Ltd. whereby Anbang will acquire all of the outstanding shares of FGL. The
transaction is expected to close in the second quarter of 2016. A.M. Best’s ratings of FGL were
placed under review with developing implications following the announcement of the merger
agreement. The Company does not have any structured settlements with Anbang.
(2) MetLife Inc. has announced a plan to pursue the separation of a substantial portion of its U.S.
Retail segment. MetLife is currently evaluating structural alternatives for such a separation,
including a public offering of shares in an independent, publicly-traded company, a spin-off, or a
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