Travelers 2003 Annual Report Download - page 99

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97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Goodwill and Intangible Assets
Travelers adopted FAS 141 and FAS 142 effective January 1, 2002. Upon adoption of FAS 141 and FAS 142,
Travelers stopped amortizing goodwill. Instead, goodwill is tested for impairment at least annually using a two-
step process. The first step is performed to identify potential impairment and, if necessary, the second step is
performed for the purpose of measuring the amount of impairment, if any. Other intangible assets that are not
deemed to have an indefinite useful life continue to be amortized over their useful lives. Travelers does not have
indefinite-lived intangible assets as of December 31, 2003.
The carrying amount of intangible assets that are not deemed to have an indefinite useful life is regularly
reviewed for indicators of impairments in value in accordance with FAS 144. Impairment is recognized only if
the carrying amount of the intangible asset is not recoverable from its undiscounted cash flows and is measured
as the difference between the carrying amount and the fair value of the asset.
Receivables for Investment Sales
Receivables for investment sales represent amounts due Travelers from investment brokers for securities sold,
which are recorded as of trade date, for which Travelers, in the normal course of securities settlement, has not
yet received the proceeds.
Claims and Claim Adjustment Expense Reserves
Claims and claim adjustment expense reserves represent estimated provisions for both reported and unreported
claims incurred and related expenses. The reserves are adjusted regularly based upon experience. Included in
the claims and claim adjustment expense reserves in the consolidated balance sheet at December 31, 2003 and
2002 are $1.325 billion and $1.370 billion, respectively, of reserves related to workers’ compensation that have
been discounted using an interest rate of 5%. Also included at December 31, 2003 and 2002 are $445.4 million
and $456.1 million, respectively, of reserves related to certain fixed and determinable asbestos-related
settlements, where all payment amounts and their timing are known, that have been discounted using a range of
interest rates of 1.56% to 5.50%.
In determining claims and claim adjustment expense reserves, Travelers carries on a continuing review of its
overall position, its reserving techniques and its reinsurance. The reserves are also reviewed periodically by a
qualified actuary employed by Travelers. These reserves represent the estimated ultimate cost of all incurred
claims and claim adjustment expenses. Since the reserves are based on estimates, the ultimate liability may be
more or less than such reserves. The effects of changes in such estimated reserves are included in the results of
operations in the period in which the estimates are changed. Such changes may be material to the results of
operations and financial condition and could occur in a future period.
Payables for Investment Purchases
Payables for investment purchases represent amounts owed by Travelers to investment brokers for securities
purchased, which are recorded as of trade date, for which Travelers, in the normal course of securities
settlement, has not yet settled the purchase.