Travelers 2006 Annual Report Download - page 152

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Goodwill Impairments
Statement ofFinancial AccountingStandards No. 142,Goodwill and Other Intangible Assets
(FAS142), provides guidance on accounting for goodwill subsequent to acquisition. Accordingly, the
Company performs a review on at least an annual basis, of goodwill held by its reporting units, which are
the Company’s three operating and reportable segments: Business Insurance, Financial, Professional &
International Insurance and Personal Insurance.
In August 2006, the Company announced a realignment of two of its three reportable business
segments. The former Commercial and Specialty segments were realigned into the Business Insurance
segment and the Financial, Professional & International Insurance segment. ThePersonal segment was
renamed Personal Insurance. Goodwill was reallocated among the reportable business segments to align
the acquired business with the appropriate reporting segment.
The impairment test, in accordance with FAS 142, is a two-step process. The first step is to identify
any potential impairment using a multiple-of-earnings approach to estimate the fair value of the reporting
units. The fair values of thereporting units are then compared to their carrying value, including goodwill.
If the carrying amounts of thereporting units exceed their fair value, a second step is performed to
measure the amount of impairment, if any. The Company’s review resulted in no impairment of goodwill
for the years ended December31, 2006 and 2005.
OTHER UNCERTAINTIES
For a discussion of other risks and uncertainties that could impact the Company’s results of operations
or financial condition, see note 15 of notes to the Company’s consolidated financial statements and
“Item 1A—Risk Factors.”
FUTURE APPLICATION OF ACCOUNTING STANDARDS
See note 1 of notes to the Company’s consolidated financial statements for a discussion of recently
issued accounting pronouncements.
FORWARD-LOOKING STATEMENTS
This report may contain, and management may make, certain “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of
historical facts, may be forward-looking statements. Specifically, the Company may make forward-looking
statements about the Company’s results of operations (including, among others, premium volume, income
from continuing operations, net and operating income and return onequity), financial condition and
liquidity; the sufficiency of the Company’s asbestos and other reserves (including, among others, asbestos
claim payment patterns); the cost and availability of reinsurance coverage; and strategic initiatives. Such
statements are subject to 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 thoseexpressed in,
or implied or projected by, the forward-looking information and statements.
For a discussion of some ofthe factors that could cause actual results to differ, see “Item 1A—Risk
Factors” and“Item 7—Management’s Discussion andAnalysis of Financial Condition and Results of
Operations—Critical Accounting Estimates’’.
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.