Travelers 2001 Annual Report Download - page 72

The St. Paul Companies 2001 Annual Report70
18
Statutory Accounting Practices
Our underwriting operations are required to file financial statements
with state and foreign regulatory authorities. The accounting
principles used to prepare these statutory financial statements
follow prescribed or permitted accounting principles, which differ
from GAAP. Prescribed statutory accounting practices include state
laws, regulations and general administrative rules issued by the
state of domicile as well as a variety of publications and manuals
of the National Association of Insurance Commissioners (“NAIC”).
Permitted statutory accounting practices encompass all accounting
practices not so prescribed, but allowed by the state of domicile.
During 2001, Fire and Marine was granted a permitted practice
regarding the valuation of certain investments in affiliated limited
liability companies, allowing it to value these investments at their
audited GAAP equity. Since these investments were not required to
be valued on a statutory basis, Fire and Marine is not able to
determine the impact on statutory surplus.
On a statutory accounting basis, our property-liability underwriting
operations reported a net loss of $873 million in 2001, and net
income of $1.2 billion in 2000 and $945 million in 1999. Statutory
surplus (shareholder’s equity) of our property-liability underwriting
operations was $4.5 billion and $6.3 billion as of Dec. 31, 2001 and
2000, respectively.
The NAIC published revised statutory accounting practices in
connection with its codification project, which became effective
Jan. 1, 2001. The cumulative effect to our property-liability insurance
operations of the adoption of these practices was to increase
statutory surplus by $165 million, primarily related to the treatment
of deferred taxes.
19
Segment Information
We have seven reportable segments in our insurance operations,
which consist of Specialty Commercial, Commercial Lines Group,
Health Care, Surety and Construction, Lloyd’s and Other,
Reinsurance, and Property-Liability Investment Operations. The
insurance operations are managed separately because each targets
different customers and requires different marketing strategies. We
also have an Asset Management segment, consisting of our majority
ownership in The John Nuveen Company.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. We
evaluate performance based on underwriting results for our
property-liability insurance segments, investment income and
realized gains for our investment operations, and on pretax
operating results for the asset management segment. Property-
liability underwriting assets are reviewed in total by management
for purposes of decision-making. We do not allocate assets to these
specific underwriting segments. Assets are specifically identified
for our asset management segment.
Geographic Areas — The following summary presents financial data
of our continuing operations based on their location.
Year ended December 31 2001 2000 1999
(In millions)
revenues
U.S. $7,161 $ 6,792 $ 6,342
Non-U.S. 1,782 1,180 807
Total revenues $ 8,943 $ 7,972 $ 7,149
Segment Information — In the fourth quarter of 2001, we
implemented a new segment reporting structure for our property-
liability insurance business following the completion of a strategic
review of all of our businesses (see Note 3). At the same time, we
further defined what we consider to be “specialty” business. We
determined that for a business center to be considered a specialty,
it must possess dedicated underwriting, claims and risk control
services that require specialized expertise and focus exclusively on
the customers served by that business center.
Under our new segment structure, our Specialty Commercial
segment includes Financial & Professional Services, Technology,
Public Sector Services, Umbrella/Excess & Surplus Lines, Ocean
Marine, Discover Re, National Programs, Oil & Gas, Transportation,
and Catastrophe Risk, as well as our International Specialties. We
have aggregated these business centers because they meet our
specialty definition, as well as the aggregation criteria for external
segment reporting.
Our Commercial Lines Group segment includes Small Commercial,
Middle Market Commercial and Large Accounts, which have common
underwriting, claim and risk control functions. Commercial Lines
Group also includes our participation in voluntary and involuntary
pools, referred to as Pools and Other.
Our Surety and Construction operations, under common leadership,
have been combined into one reporting segment due to the
significance of their shared customer base. Due to its size and
specialized nature, our Health Care business will continue to be
reported as a separate segment, although we are exiting that
business (see Note 3). Our Lloyd’s and Other segment includes our
operations at Lloyd’s, our participation in the insuring of Lloyd’s
Central Fund, and Unionamerica, MMI’s international subsidiary.
Although we ceased new business activity at Unionamerica late in
2000, we are contractually obligated to continue underwriting
business in certain Unionamerica syndicates at Lloyd’s through
2004. The foregoing segments are all included in our Primary
Insurance Operations. Our Reinsurance segment includes all
reinsurance business written by our reinsurance subsidiary, out of
New York and London. All periods presented have been revised to
reflect these reclassifications.
In 2001, we sold our life insurance operations; in 2000, we sold our
nonstandard auto business; and in 1999, we sold our standard
personal insurance business. These operations have been accounted
for as discontinued operations for all periods presented and are not
included in our segment data.