Travelers 2004 Annual Report Download - page 122

statements about the Company’s results of operations (including, among others, premium volume and net and
operating income), financial condition and liquidity; the sufficiency of the Company’s asbestos and other
reserves (including, among others, asbestos claim payment patterns); the post-merger integration (including,
among others, expense savings); and strategic initiatives (including, among others, the sale of the Company’s
interest in Nuveen Investments). Such statements are subject to certain risks and uncertainties, many of which are
difficult to predict and generally beyond the Company’s control, that could cause actual results to differ
materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ include, but are not limited to, the following:
adverse developments involving asbestos claims and related litigation; the impact of aggregate policy coverage
limits for asbestos claims; the impact of bankruptcies of various asbestos producers and related businesses; the
willingness of parties including the Company to settle asbestos-related litigation; the Company’s ability to fully
integrate the former St. Paul and Travelers businesses in the manner or in the timeframe currently anticipated; the
Company’s ability to execute announced and future strategic initiatives as planned; insufficiency of, or changes
in, loss and loss adjustment expense reserves; the Company’s inability to obtain prices sought due to competition
or otherwise; the occurrence of catastrophic events, both natural and man-made, including terrorist acts, with a
severity or frequency exceeding the Company’s expectations; exposure to, and adverse developments involving,
environmental claims and related litigation; exposure to, and adverse developments involving, construction
defect claims; exposure to, and adverse developments involving, the Company’s medical malpractice and other
runoff operations; exposure to, and adverse developments involving, claims related to exposure to potentially
harmful products or substances, including, but not limited to, lead paint, silica and other potentially harmful
substances; adverse changes in loss cost trends, including inflationary pressures in medical costs and auto and
building repair costs; the effects of corporate bankruptcies and adverse economic conditions on surety bond
claims; adverse developments in the cost, availability and/or ability to collect reinsurance; the ability of the
Company’s subsidiaries to pay dividends to The St. Paul Travelers Companies, Inc.; adverse developments in
legal proceedings, including, but not limited to, those described under “Legal Proceedings’; judicial expansion of
policy coverage and the impact of new theories of liability, including with respect to, among others, coverage for
asbestos and environmental claims and construction defect claims; the impact of legislative and other
governmental actions, including, but not limited to, federal and state legislation related to asbestos liability
reform and terrorism insurance and reinsurance (such as the extension of or replacement for the Terrorism Risk
Insurance Act of 2002) and governmental actions regarding insurance companies’ compensation of brokers and
agents and insurance companies’ purchase or sale of finite reinsurance; the performance of the Company’s
investment portfolios, which could be adversely impacted by adverse developments in U.S. and global and
financial markets, interest rates and rates of inflation; weakening U.S. and global economic conditions; larger
than expected assessments for guaranty funds and mandatory pooling arrangements; a downgrade in the
Company’s claims-paying and financial strength ratings; the loss or significant restriction on the Company’s
ability to use credit scoring in the pricing and underwriting of Personal policies; and changes to the regulatory
capital requirements.
The Company’s forward-looking statements speak only as of the date of this report or as of the date they are
made, and the Company undertakes no obligation to update its forward-looking statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates,
foreign currency exchange rates, and other relevant market rate or price changes. Market risk is directly
influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. The
following is a discussion of the Company’s primary market risk exposures and how those exposures are currently
managed as of December 31, 2004. The Company’s market risk sensitive instruments, including derivatives, are
primarily entered into for purposes other than trading.
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