Travelers 2015 Annual Report Download - page 132

Off-Balance Sheet Arrangements
The Company has entered into certain contingent obligations for guarantees related to selling
businesses to third parties, certain investments, third-party loans related to certain investments, certain
insurance policy obligations of former insurance subsidiaries and various other indemnifications. See
note 16 of notes to the consolidated financial statements herein. The Company does not expect these
arrangements will have a material effect on the Company’s financial position, changes in financial
position, revenues and expenses, results of operations, liquidity, capital expenditures or capital
resources.
CRITICAL ACCOUNTING ESTIMATES
The Company considers its most significant accounting estimates to be those applied to claims and
claim adjustment expense reserves and related reinsurance recoverables, investment valuation and
impairments, and goodwill and other intangible assets impairments.
Claims and Claim Adjustment Expense Reserves
Gross claims and claim adjustment expense reserves by product line were as follows:
December 31, 2015 December 31, 2014
(in millions) Case IBNR Total Case IBNR Total
General liability .................... $ 5,603 $ 7,148 $12,751 $ 5,886 $ 7,826 $13,712
Commercial property ................ 719 408 1,127 795 496 1,291
Commercial multi-peril .............. 1,890 1,767 3,657 1,849 1,819 3,668
Commercial automobile .............. 2,069 1,259 3,328 2,094 1,249 3,343
Workers’ compensation .............. 10,337 8,519 18,856 10,067 8,191 18,258
Fidelity and surety .................. 229 476 705 233 573 806
Personal automobile ................ 1,710 842 2,552 1,737 848 2,585
Homeowners and personal—other ...... 601 399 1,000 578 525 1,103
International and other .............. 2,718 1,578 4,296 3,254 1,804 5,058
Property-casualty ................. 25,876 22,396 48,272 26,493 23,331 49,824
Accident and health ................. 23—2326—26
Claims and claim adjustment expense
reserves ...................... $25,899 $22,396 $48,295 $26,519 $23,331 $49,850
The $1.56 billion decrease in gross claims and claim adjustment expense reserves since
December 31, 2014 primarily reflected the impact of (i) payments related to operations in runoff,
including a $579 million payment related to the settlement of the Asbestos Direct Action Litigation as
described in more detail in note 16 of notes to the consolidated financial statements herein, (ii) net
favorable prior year reserve development and (iii) changes in foreign currency exchange rates.
Asbestos and environmental reserves are included in the General liability, Commercial multi-peril
and International and other lines in the foregoing summary table. Asbestos and environmental reserves
are discussed separately; see ‘‘Asbestos Claims and Litigation’’, ‘‘Environmental Claims and Litigation’’
and ‘‘Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.’’
Claims and claim adjustment expense reserves represent management’s estimate of ultimate unpaid
costs of losses and loss adjustment expenses for claims that have been reported and claims that have
been incurred but not yet reported (IBNR). Claims and claim adjustment expense reserves do not
represent an exact calculation of liability, but instead represent management estimates, generally
utilizing actuarial expertise and projection techniques, at a given accounting date. These estimates are
expectations of what the ultimate settlement and administration of claims will cost upon final resolution
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