8-KOther Events

TRAVELERS COMPANIES, INC. 8-K Report, Corporate Update (Nov 8, 2016)

Filed November 8, 2016For Securities:TRV

Summary

The Travelers Companies, Inc. (TRV) has announced a significant development in a previously disclosed reinsurance dispute. On November 7, 2016, the company entered into a settlement agreement with one of the defendants in the case, "United States Fidelity & Guaranty Company v. American Re-Insurance Company, et al.". This settlement is expected to result in a pre-tax gain of $126.1 million ($82.0 million after-tax) to be recognized in the fourth quarter of 2016. This positive development will also reduce the company's reinsurance recoverable balance related to this specific dispute from approximately $238 million to about $31 million on its consolidated balance sheet. Furthermore, the associated gain contingency, which was previously not recognized in earnings, will be reduced from roughly $287 million to approximately $38 million. The remaining balances in both the reinsurance recoverable and gain contingency accounts pertain to other defendants in the ongoing dispute.

Key Highlights

  • 1Travelers reached a settlement with a defendant in a reinsurance dispute on November 7, 2016.
  • 2The settlement is expected to generate a pre-tax gain of $126.1 million (after-tax gain of $82.0 million) in Q4 2016.
  • 3The reinsurance recoverable balance related to this dispute will decrease from ~$238 million to ~$31 million.
  • 4The previously undisclosed gain contingency will be reduced from ~$287 million to ~$38 million.
  • 5The remaining balances in reinsurance recoverable and gain contingency relate to other defendants.
  • 6This event is classified under 'Other Events' (Item 8.01) in the 8-K filing.

Frequently Asked Questions

The settlement is expected to result in a pre-tax gain of $126.1 million ($82.0 million after-tax) to be recognized in the fourth quarter of 2016. It also reduces the company's reinsurance recoverable balance and a related gain contingency.

No, this settlement is with only one of the defendants in the 'United States Fidelity & Guaranty Company v. American Re-Insurance Company, et al.' dispute. Remaining balances in reinsurance recoverable and gain contingency pertain to other defendants.

Travelers expects to recognize the gain in the fourth quarter of 2016, upon receiving payment from the settling defendant.

Before this settlement, the gain contingency disclosed in the notes to the financial statements was approximately $287 million. After this settlement, the remaining contingency is expected to be around $38 million.