Travelers 2007 Annual Report Download - page 152

Intangible Impairments
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.
The impairment test of goodwill 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 the reporting units are then compared to their carrying value, including goodwill. If the
carrying amounts of the reporting units exceed their fair value, a second step is performed to measure
the amount of impairment, if any. The Company’s review did not result in an impairment of goodwill
for the years ended December 31, 2007, 2006 and 2005.
Other indefinite-lived intangible assets held by the Company are also reviewed for impairment on
at least an annual basis. The classification of the asset as indefinite-lived is reassessed and an
impairment is recognized if the carrying amount of the asset exceeds its fair value. The Company’s
review did not result in an impairment of indefinite-lived intangible assets for the years ended
December 31, 2007, 2006 and 2005.
OTHER UNCERTAINTIES
For a discussion of other risks and uncertainties that could impact the Company’s results of
operations or financial position, 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.
The Company is currently required to prepare its financial statements in accordance with
U.S. Generally Accepted Accounting Principles (GAAP), as promulgated by the Financial Accounting
Standards Board (FASB). During 2007, the Securities and Exchange Commission (SEC) issued a
proposed release for comment that would allow U.S. domestic companies the option to prepare their
financial statements in accordance with International Financial Reporting Standards (IFRS), as
promulgated by the International Accounting Standards Board (IASB), instead of in accordance with
GAAP. The SEC is considering comments it has received and may make a further proposal during
2008. The SEC has also indicated that it is considering whether to require U.S. domestic companies to
prepare their financial statements in accordance with IFRS; however, the Company would not expect
any such requirement to take effect for at least a number of years. The IASB is currently evaluating
IFRS as it applies to insurance companies. Among other things, the IASB is considering methodologies
for valuing insurance contract liabilities that may be significantly different from the methodologies
required by GAAP. The FASB and the IASB are also embarked on a long-term project to converge
GAAP and IFRS. The Company is not able to predict whether it will choose to, or be required to,
adopt IFRS or how the adoption of IFRS (or the convergence of GAAP and IFRS) may impact the
Company’s financial statements in the future.
FORWARD-LOOKING STATEMENTS
This report contains, 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, earnings guidance, statements about
the Company’s share repurchase plans and statements about the potential impact of the recent
disruption in the sub-prime and other financial markets on the Company’s investment portfolio and
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