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.