Travelers 2008 Annual Report Download - page 162

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 2008, the Securities and Exchange Commission (SEC) issued a
proposed Roadmap for comment for the potential use in filings with the SEC of financial statements
for U.S. issuers prepared in accordance with International Financial Reporting Standards (IFRS), as
promulgated by the International Accounting Standards Board (IASB), instead of in accordance with
GAAP. The Roadmap contains milestones that, if achieved, may lead the SEC to decide in 2011 to
require the use of IFRS for large accelerated filers, including the Company, in 2014. The SEC also is
proposing to permit U.S. companies to elect to file using IFRS, as adopted by the IASB, as early as
2010, if the company is in an industry group that reports using IFRS more commonly than any other
set of standards, and if the company is one of the 20 largest companies in the industry worldwide based
on market capitalization. The IASB and the FASB are in the process of developing a global insurance
standard that may involve methodologies for valuing insurance contract liabilities that may be
significantly different from the methodologies required by current 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, statements about the potential impact of the recent disruption
in the investment markets and other economic conditions on the Company’s investment portfolio and
underwriting results are forward looking, and the Company may make forward-looking statements
about its results of operations (including, among others, premium volume, net and operating income,
investment income, return on equity, expected current returns and combined ratio), and financial
condition (including, among others, invested assets 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; catastrophe losses; investment performance; investment, economic
and underwriting market conditions; 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 those expressed in, or implied or projected by, the
forward-looking information and statements.
For a discussion of some of the factors that could cause actual results to differ, see ‘‘Item 1A—
Risk Factors’’. and ‘‘Item 7—Management’s Discussion and Analysis 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.
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 (inclusive of credit spreads), 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 managed as of December 31, 2008. The Company’s
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