Travelers 2009 Annual Report Download

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2009 Annual Report and Form 10-K
A defining year
785_Travelers09AR_Cvr_16g.indd ฀1 2/22/10 ฀5:34:44฀PM

Table of contents

  • Page 1
    2009 Annual Report and Form 10-K A defining year

  • Page 2
    ... and losses, net of tax, for the same period. **Total return to shareholders is measured as the change in the stock price plus the cumulative amount of dividends, assuming dividend reinvestment. Travelers at a glance Travelers offers a wide variety of property and casualty insurance products and...

  • Page 3
    ... substantial disruption in the financial markets and challenging investment conditions. We continue to leverage our competitive advantages to execute successfully in the insurance marketplace, generating attractive returns and returning excess capital to our shareholders. During the year, we...

  • Page 4
    ... in public policy dialogue on matters of interest to the property and casualty insurance sector, as well as the financial services industry more broadly. The Travelers Institute draws upon the industry expertise of Travelers' senior management and the technical expertise of its risk professionals...

  • Page 5
    ... the programs we have in place to manage those risks. innovative quote-to-issue technology to help agents process small commercial business more quickly, a key advantage for them. Also, as we recognize that no two businesses are the same, we created Travelers IndustryEdge®, a blend of specialized...

  • Page 6
    4 2009 Annual Report Leadership development is a key competitive advantage for Travelers At Travelers, we know that smart investment in opportunities and development for employees results in significant returns for the company. In fact, when asked what brings employees to Travelers and what keeps...

  • Page 7
    ... companies. In addition, business units in the Target Risk Underwriting, Industry-Focused Underwriting and Specialized Distribution groups provide insurance products and services to address large property, inland marine, ocean marine, equipment breakdown and excess casualty risks and tailor coverage...

  • Page 8
    ... policies. • Significant expansion of the Risk Management PLUS+ Online® Web site, including new resources for Travelers SelectOne® Bank customers. These risk management tools address exposures banks face related to professional liability, directors & officers liability, crime, kidnap & ransom...

  • Page 9
    ... - Insurance Operations and Systems & Chief Information Officer Shane K. Boyd + Vice President - Communications & Branding James W. Chapman + Senior Vice President - First Party Business Group Charles J. Clarke *+ Vice Chairman John P. Clifford Jr. *+ Executive Vice President - Human Resources...

  • Page 10
    ... 2006 Janet M. Dolan President, Act 3 Enterprises, LLC Retired President and CEO, Tennant Company Director since 2001 Kenneth M. Duberstein Chairman and CEO, The Duberstein Group, Inc. Director since 1998 Jay S. Fishman Chairman and CEO, The Travelers Companies, Inc. Director since 2001 Lawrence...

  • Page 11
    ...(I.R.S. Employer Identification No.) 485 Lexington Avenue, New York, NY 10017 (Address of principal executive offices) (Zip Code) (917) 778-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange...

  • Page 12
    ...of Operations ...Quantitative and Qualitative Disclosures About Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...Part III Directors, Executive Officers...

  • Page 13
    ..., operating income and total assets by reportable business segments, see note 2 of notes to the Company's consolidated financial statements. PROPERTY AND CASUALTY INSURANCE OPERATIONS The property and casualty insurance industry is highly competitive in the areas of price, service, product offerings...

  • Page 14
    ... total ... (1) No other single state accounted for 3.0% or more of the total direct written premiums written in 2009 by the Company's domestic operations. Catastrophe Exposure The wide geographic distribution of the Company's property and casualty insurance operations exposes it to claims...

  • Page 15
    ... products include property, commercial auto, general liability, workers' compensation, umbrella, internet liability, technology errors and omissions coverages and global companion products. • Public Sector Services markets insurance products and services to public entities including municipalities...

  • Page 16
    ... coverages other than workers' compensation. • Target Risk Underwriting. The following units serve commercial businesses requiring specialized product underwriting, claims handling and risk management services: • National Property provides traditional and customized property insurance programs...

  • Page 17
    ... located throughout the United States that are serviced by approximately 120 field offices and three customer service centers. Business Insurance continues to make significant investments in enhanced technology utilizing internet-based applications to provide real-time interface capabilities with...

  • Page 18
    ... business discussed below. National Accounts includes the Company's Discover Re operation, which principally provides commercial auto liability, general liability, workers' compensation and property coverages on an unbundled basis using third-party administrators for insureds who utilize programs...

  • Page 19
    ... distributes admitted and excess and surplus lines property and casualty products predominantly through selected wholesale agents, both on a brokerage and managing general underwriting basis, and through selected program agents. Brokers, general agents and program agents operate in certain markets...

  • Page 20
    ... adjusted based on actual loss experience of the insured during the policy period; • service programs, which are generally sold to the Company's National Accounts customers, where the Company receives fees rather than premiums for providing loss prevention, risk management, and claim and benefit...

  • Page 21
    ...and casualty insurance companies compete in the Select Accounts market which generally comprises lower hazard, ''main street'' business customers. Risks are underwritten and priced using standard industry practices and a combination of proprietary and standard industry product offerings. Competition...

  • Page 22
    ... claims and policy management services. These contracts, which generally have three-year terms, are selected by state agencies through a bid process based on the quality of service and price. National Accounts services approximately 32% of the total workers' compensation assigned risk market, making...

  • Page 23
    ... capital, underwrites through five principal business units-marine, global property, accident & special risks, power & utilities and aviation. In the second quarter of 2009, results from the Company's surety bond operation in Canada were reclassified from the Bond & Financial Products group to the...

  • Page 24
    ... United States. Bond & Financial Products, in conjunction with the Business Insurance segment, continues to make investments in enhanced technology utilizing internet-based applications to provide real-time interface capabilities with its independent agencies and brokers. Bond & Financial Products...

  • Page 25
    ... 1, 2010. In the U.S. operations for third party liability, including but not limited to umbrella liability, professional liability, directors' and officers' liability, and employment practices liability, Financial, Professional & International Insurance generally limits net retentions, through the...

  • Page 26
    ... organizations such as employee and affinity groups, joint marketing arrangements with other insurers, and direct marketing. Selected Product and Distribution Channel Information The following table sets forth net written premiums for the Personal Insurance segment's business by product line for the...

  • Page 27
    ... four Customer Care Centers, where the Company provides, on behalf of an agency, a comprehensive array of direct customer service needs, including response to billing and coverage inquiries, and policy changes. Approximately 1,540 agents take advantage of this service alternative. Personal Insurance...

  • Page 28
    ... and rating plans, which enable Personal Insurance to execute its risk selection and pricing processes. Pricing for personal automobile insurance is driven in large part by changes in the frequency of claims and by inflation in the cost of automobile repairs, medical care and litigation of liability...

  • Page 29
    ... of Personal Insurance's direct written premiums for the states that accounted for the majority of premium volume for the year ended December 31, 2009: State % of Total New York ...Texas ...Pennsylvania . . California ...New Jersey . . Massachusetts Connecticut . . Georgia ...Virginia ...Florida...

  • Page 30
    ... insurers and direct marketing. Personal Insurance believes that its continued focus on underwriting and pricing segmentation, claim settlement effectiveness strategies and expense management practices enable Personal Insurance to price its products competitively in all of its distribution channels...

  • Page 31
    ... management of workers' compensation claims with lower medical, wage replacement costs and loss adjustment expenses. REINSURANCE The Company reinsures a portion of the risks it underwrites in order to control its exposure to losses. The Company cedes to reinsurers a portion of these risks and pays...

  • Page 32
    .... For additional information concerning reinsurance, see note 5 of notes to the Company's consolidated financial statements and ''Item 1A-Risk Factors.'' The Company utilizes a variety of reinsurance agreements to manage its exposure to large property and casualty losses, including: • facultative...

  • Page 33
    ... bonds will be reduced by any amounts paid to the Company under the reinsurance agreements. The index-based losses attachment point and maximum limit are reset annually to maintain modeled probabilities of attachment and expected loss on the respective catastrophe bonds equal to the initial modeled...

  • Page 34
    ... to pay an amount equal to such realized investment loss for deposit into the trust. Two of the assets of the trust held at December 31, 2008 failed to meet the investment guidelines of the trust and, accordingly, were sold during the first quarter 2009. Pursuant to the Total Return Swap, upon sale...

  • Page 35
    ... insurance, financial guaranty insurance, medical malpractice insurance, health or life insurance, flood insurance, and reinsurance. The Terrorism Extension Act exempted from coverage certain additional types of insurance, including commercial automobile, professional liability (other than directors...

  • Page 36
    ... of Operations-Asbestos Claims and Litigation,'' and ''-Environmental Claims and Litigation.'' Discounting The claims and claim adjustment expense reserves for most long-term disability payments under workers' compensation insurance and workers' compensation excess insurance, which totaled $2.16...

  • Page 37
    ... rated insurance policies. For example, reserves for long-term disability payments under workers' compensation insurance and workers' compensation excess insurance (tabular reserves) are discounted to reflect the time value of money. Apparent deficiencies will continue to occur as the discount...

  • Page 38
    ... Limited (Unionamerica), which comprised its United Kingdom (U.K.)-based runoff insurance and reinsurance businesses. (Unionamerica was acquired in 2004 as part of the merger of SPC and TPC.) Immediately before the sale, the claims and claim adjustment expense reserves of Unionamerica totaled...

  • Page 39
    ... rating agencies: A.M. Best Company (A.M. Best), Fitch Ratings (Fitch), Moody's Investors Service (Moody's) and Standard & Poor's Corp. (S&P). Rating agencies typically issue two types of ratings: claims-paying (or financial strength) ratings which assess an insurer's ability to meet its financial...

  • Page 40
    ... Company of Canada and Travelers Insurance Company Limited as of February 18, 2010. The table also presents S&P's Lloyd's Syndicate Assessment rating for Travelers Syndicate Management-Syndicate 5000. The table presents the position of each rating in the applicable agency's rating scale. A.M. Best...

  • Page 41
    ... strength ratings of Travelers Guarantee Company of Canada from ''A'' to ''A+.'' The outlook for that rating is stable. In addition, A.M. Best affirmed the financial strength ratings of The Premier Insurance Company of Massachusetts, First Trenton Indemnity Company and First Floridian Auto and Home...

  • Page 42
    ... the fixed income investment portfolio generally produces a duration that modestly exceeds the estimated duration of the Company's net insurance liabilities. The primary goals of the Company's asset liability management process are to satisfy the insurance liabilities, manage the interest rate risk...

  • Page 43
    ...System. The National Association of Insurance Commissioners (NAIC) developed the Insurance Regulatory Information System (IRIS) to help state regulators identify companies that may require special attention. Financial examiners review annual statements and key financial ratios based on year-end data...

  • Page 44
    ...paying contingent commissions in the United States on a number of insurance businesses, including excess casualty and umbrella, personal insurance, boiler and machinery, financial guaranty, fidelity and burglary & theft. The Company has developed alternative compensation arrangements for these lines...

  • Page 45
    ... fixed commission program in the U.S. for most commercial insurance lines. International Regulation TRV's insurance underwriting subsidiaries based in the United Kingdom, Travelers Insurance Company Limited and Travelers Casualty and Surety Company of Europe Limited, are regulated by the Financial...

  • Page 46
    ...the Risk Committee of management, the Credit Committee, the Chief Compliance Officer, the Business Conduct Officer, the Corporate Actuarial group, the Corporate Audit group, the Accounting Policy group, the Enterprise Underwriting group and many others. A senior executive oversees the ERM process at...

  • Page 47
    ... Market Risk,'' and ''Item 8-Financial Statements and Supplementary Data.'' OTHER INFORMATION Customer Concentration In the opinion of the Company's management, no material part of the business of the Company and its subsidiaries is dependent upon a single customer or group of customers, the loss...

  • Page 48
    ...a link on its website to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after...

  • Page 49
    ...estimated averages may be supplemented with other data/analyses. Book value per share ...Total common shareholders' equity divided by the number of common shares outstanding. Adjusted unassigned surplus ... Admitted insurer ...Annuity ... Assigned risk pools ... Assumed reinsurance ...Average value...

  • Page 50
    ...place at risk. Capacity may apply to a single risk, a program, a line of business or an entire book of business. Capacity may be constrained by legal restrictions, corporate restrictions or indirect restrictions. A closely-held insurance company whose primary purpose is to provide insurance coverage...

  • Page 51
    ... property insurance losses but can be written to cover casualty insurance losses such as from workers' compensation policies. When an insurer reinsures its liability with another insurer or a ''cession,'' it ''cedes'' business and is referred to as the ''ceding company.'' Insurance risks transferred...

  • Page 52
    ... ceded. That portion of property casualty premiums written that applies to the expired portion of the policy term. Earned premiums are recognized as revenues under both Statutory Accounting Practices (SAP) and GAAP. Additional casualty coverage above a layer of insurance exposures. Reinsurance that...

  • Page 53
    .... For more information, see ''residual market (involuntary business)'' Fidelity insurance coverage protects an insured for loss due to embezzlement or misappropriation of funds by an employee. Surety is a three-party agreement in which the insurer agrees to pay a second party or make complete an...

  • Page 54
    ...who represent investors. The investors are grouped together into syndicates that provide capital to insure the risks. An occurrence that is the basis for submission and/or payment of a claim. Losses may be covered, limited or excluded from coverage, depending on the terms of the policy. The expenses...

  • Page 55
    ...of regulatory practice and statutory accounting standards throughout the United States. Direct written premiums plus assumed reinsurance premiums less premiums ceded to reinsurers. Net income (loss) excluding the after-tax impact of net realized investment gains (losses), discontinued operations and...

  • Page 56
    ... types of risks are underwritten with premiums, losses and expenses being shared in agreed-upon percentages. The amount charged during the year on policies and contracts issued, renewed or reinsured by an insurance company. Insurance that provides coverage to a person or business with an insurable...

  • Page 57
    ... case of workers' compensation. The costs of the residual market are usually charged back to the direct insurance carriers in proportion to the carriers' voluntary market shares for the type of coverage involved. The amount of exposure a policyholder company retains on any one risk or group of risks...

  • Page 58
    ... self-insureds based on either premiums or losses. That portion of the risk retained by a person for its own account. An insurance company that provides, for a fee, various services including policy issuance, claims adjusting and customer service for insureds in a reinsurance pool. The practices and...

  • Page 59
    ... employers provide insurance for benefit payments to their employees for work-related injuries, deaths and diseases, regardless of fault. Underwriting ... Underwriting expense ratio ... Underwriting gain or loss ...Unearned premium ...Voluntary market ...Wholesale broker ... Workers' compensation...

  • Page 60
    ... losses could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance. Our property and casualty insurance operations expose us to claims...

  • Page 61
    ... Risk Insurance Program Reauthorization Act of 2007 (the ''Act'') provides benefits in the event of certain acts of terrorism, those benefits are subject to a deductible and other limitations. Under this law, once our losses exceed 20% of our commercial property and casualty insurance premium...

  • Page 62
    ...risks discussed below related to our investment portfolio, reinsurance arrangements, other credit exposures, our estimates of claims and claim adjustment expense reserves, emerging claim and coverage issues, the competitive environment, regulatory developments and the impact of rating agency actions...

  • Page 63
    ... by further declines in real estate valuations and/or financial market disruption. Because of the risks set forth above, the value of our investment portfolio could decrease, we could experience reduced net investment income, and we could incur realized investment losses, which could materially and...

  • Page 64
    ... reporting of exposures and/or losses, reduced maintenance of insured properties or increased frequency of small claims. We continually refine our loss reserve estimates in a regular, ongoing process as historical loss experience develops and additional claims are reported and settled. Informed...

  • Page 65
    ... of policy limits or through the insolvency of other participating insurers. We continue to be involved in coverage litigation concerning a number of policyholders, some of whom have filed for bankruptcy, who in some instances have asserted that all or a portion of their asbestos-related claims are...

  • Page 66
    ...determine the ultimate exposure for asbestos and environmental claims and related litigation. As a result, these reserves are subject to revision as new information becomes available and as claims develop. The continuing uncertainties include, without limitation, the risks and lack of predictability...

  • Page 67
    ...; • claims under directors' & officers' insurance policies relating to: losses from involvement in financial market activities, such as mortgage or financial product origination, distribution or structuring; fraud, including those related to investment management businesses; possible accounting...

  • Page 68
    ... competitors with changes in technology and information systems. We may have difficulty in continuing to compete successfully on any of these bases in the future. If competition limits our ability to retain existing business or write new business at adequate rates, our results of operations could be...

  • Page 69
    ...future at commercially reasonable rates or at all, and/or life insurance companies may fail to make required annuity payments, and thus our results of operations and financial position could be materially and adversely affected. We are exposed to credit risk in certain of our business operations. In...

  • Page 70
    ..., capital and surplus requirements, limitations on the types and amounts of certain investments, underwriting limitations, transactions with affiliates, dividend limitations, changes in control, premium rates and a variety of other financial and non-financial components of an insurer's business. In...

  • Page 71
    ... our business volumes, adversely impact our ability to access the capital markets and increase our borrowing costs. Claims-paying and financial strength ratings have become increasingly important to an insurer's competitive position. Rating agencies review insurers' ratings periodically, and change...

  • Page 72
    ... loss of business could materially and adversely affect our future business volume and results of operations. Our efforts to develop new products or expand in targeted markets may not be successful and may create enhanced risks. A number of our recent and planned business initiatives involve...

  • Page 73
    ... ability to write and process new and renewal business, provide customer service, pay claims in a timely manner or perform other necessary business functions. Computer viruses, hackers and other external hazards could expose our data systems to security breaches. These increased risks, and expanding...

  • Page 74
    ... loss, unanticipated risk exposure (including underwriting, credit and investment risk) or damage to our reputation. Our businesses may be adversely affected if we are unable to hire and retain qualified employees. There is significant competition from within the property and casualty insurance...

  • Page 75
    ...Insurance segment's operations in the United Kingdom. The Company, through its subsidiaries, owns an investment portfolio of income-producing properties and real estate funds. Included in this portfolio are four office buildings in which the Company holds a 50% ownership interest located in New York...

  • Page 76
    ...strategies to manage asbestos and environmental loss exposure, including settling litigation under appropriate circumstances. For other information regarding the Company's asbestos and environmental exposure, including the results of its annual in-depth asbestos claim review as well as its quarterly...

  • Page 77
    ..., the coverage of particular claims, exclusions under the agreements, as well as counterclaims for rescission of the agreements. One of these disputes is the action described in the following paragraphs. The Company's Gulf operation brought an action on May 22, 2003 in the Supreme Court of New York...

  • Page 78
    ... financial statements was required. Any authority with open inquiries or investigations could ask that additional work be performed or reach conclusions different from the Company's. Broker Anti-Trust Litigation-In 2005, four putative class action lawsuits were brought against a number of insurance...

  • Page 79
    ...arising mostly in the ordinary course of business operations, either as a liability insurer defending third-party claims brought against policyholders or as an insurer defending claims brought against it relating to coverage or the Company's business practices. While the ultimate resolution of these...

  • Page 80
    ... funds to the Company in the form of cash dividends or otherwise, see ''Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.'' Dividends will be paid by the Company only if declared by its Board of Directors out of funds...

  • Page 81
    ...2009 THE TRAVELERS COMPANIES, INC. (2) S&P 500 INDEX S&P 500 PROPERTY & CASUALTY INSURANCE (3) 12FEB201023372519 (1) The cumulative return to shareholders is a concept used to compare the performance of a company's stock over time and is the ratio of the net stock price change plus the cumulative...

  • Page 82
    ... common stock during the periods indicated. Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs Period Beginning Period Ending Total number of shares purchased Average price paid...

  • Page 83
    ...per share amounts) 2005 Total revenues ...Income from continuing operations ...Loss from discontinued operations(1) ...Net income ...Total investments ...Total assets ...Claims and claim adjustment expense reserves Total debt ...Total liabilities ...Total shareholders' equity ... $ 24,680 $ $ 3,622...

  • Page 84
    ....54 • Holding company liquidity of $2.14 billion CONSOLIDATED OVERVIEW The Company provides a wide range of property and casualty insurance products and services to businesses, government units, associations and individuals, primarily in the United States and in selected international markets. 72

  • Page 85
    ... ...GAAP combined ratio Loss and loss adjustment expense ratio ...Underwriting expense ratio ...GAAP combined ratio ...Incremental impact of direct to consumer initiative on GAAP combined ratio ... The following discussions of the Company's net income and segment operating income are presented on an...

  • Page 86
    ... foreign currency exchange rates. Adjusting for the impact of exchange rates, earned premiums in this segment were slightly higher than in 2008. In the Personal Insurance segment, earned premium growth of 2% over 2008 reflected continued strong business retention rates and continued renewal premium...

  • Page 87
    ... treaties for Bond & Financial Products. In the Personal Insurance segment, earned premium growth of 3% in 2008 (adjusted for the sale of Mendota) reflected continued strong business retention rates and new business volume, coupled with continued renewal price increases. Net Investment Income The...

  • Page 88
    ...to specific reportable business segments. The invested assets and related net investment income from these legal entities are reported in the applicable business segment and are not allocated among the other business segments. Fee Income The National Accounts market in the Business Insurance segment...

  • Page 89
    ... a portion of its common stock holdings in Verisk Analytics, Inc. (Verisk) for total proceeds of approximately $184 million as part of the initial public offering (IPO) of Verisk. The Company recorded a pretax realized investment gain of $159 million on this sale in the fourth quarter of 2009. Other...

  • Page 90
    ... by changes in the terms of certain reinsurance treaties that resulted in a higher level of business retained in the Bond & Financial Products group. In the Personal Insurance segment, net written premiums in 2008 adjusted for the sale of Mendota increased 3% over 2007, reflecting continued strong...

  • Page 91
    ... than expected loss experience in the International group-particularly in the United Kingdom, several lines of business at Lloyd's and in the surety line of business in Canada-and in the contract surety line of business in the Bond & Financial Products group. In the Personal Insurance segment, net...

  • Page 92
    ... of continued investments to support business growth and product development, including the Company's direct to consumer initiative in the Personal Insurance segment, partially offset by the favorable impact of changes in foreign currency exchange rates on expenses in the Financial, Professional...

  • Page 93
    ... the impact of continued investments to support business growth and product development, including the Company's direct to consumer initiative in the Personal Insurance segment, as well as salary increases in the normal course of business. The consolidated loss and loss adjustment expense ratio of...

  • Page 94
    ... of the new fixed agent compensation program described above. Adjusting for these factors in both years, the adjusted 2008 expense ratio was 0.2 points higher than the adjusted expense ratio in 2007, reflecting continued investments to support business growth and product development, as well...

  • Page 95
    ...Fee Income National Accounts is the primary source of fee income due to its service businesses, which include claim and loss prevention services to large companies that choose to self-insure a portion of their insurance risks, as well as claims and policy management services to workers' compensation...

  • Page 96
    ... risk control, underwriting and claim process initiatives. The commercial property product line improvement occurred primarily in the 2007 accident year as a result of better than expected loss development for certain large national property, national programs, and ocean marine claim exposures...

  • Page 97
    ... year reserve development was 2.3 points higher than the 2007 ratio on the same basis, reflecting the impact of competitive market conditions on pricing over the preceding twelve months and loss cost trends, as well as a small increase in the number of large property losses. The underwriting expense...

  • Page 98
    ... Core ...Business Insurance Other ...Total Business Insurance ... (for the year ended December 31, in millions) Net Written Premiums 2009 2008 2007 Select Accounts ...Commercial Accounts ...National Accounts ...Industry-Focused Underwriting . Target Risk Underwriting ...Specialized Distribution...

  • Page 99
    ...enhanced quote-to-issue agency platform and multivariate pricing program for smaller businesses served by Select Accounts. However, new business volume for larger accounts in 2008 declined from 2007 primarily due to competitive market conditions. Commercial Accounts. In 2009, net written premiums of...

  • Page 100
    .... Specialized Distribution. In 2009, net written premiums of $889 million were 5% lower than in 2008. The decline was attributable to both the National Programs and Northland business units, which experienced continued negative renewal premium changes that reflected competitive market conditions...

  • Page 101
    ... the United Kingdom and in the Surety line of business in Canada. In addition, the Aviation and Property lines of business at Lloyd's experienced net favorable prior year reserve development in 2009. In the Bond & Financial Products group, better than expected loss experience for the contract surety...

  • Page 102
    ... than anticipated loss development in the United Kingdom, in part due to favorable claim activity relating to 2007 flood losses. In the Bond & Financial Products group, better than expected loss experience for the contract surety business within the fidelity and surety product line, resulting from...

  • Page 103
    ... positive renewal rate changes on written premiums was largely offset by reduced insured exposures due to underwriting actions and lower levels of economic activity. New business levels in 2009 were lower than in 2008. In the International group (excluding the surety line of business, for which...

  • Page 104
    ...in 2007, and new business volume increased. Personal Insurance Results of the Company's Personal Insurance segment were as follows: (for the year ended December 31, in millions) 2009 2008 2007 Revenues: Earned premiums ...Net investment income ...Other revenues ...Total revenues ...Total claims and...

  • Page 105
    ... loss experience due in part to claim initiatives and fewer than expected late reported homeowners' claims related to non-catastrophe weather events that occurred in the fourth quarter of 2006. In addition, a portion of net favorable prior year reserve development in the Homeowners and Other line...

  • Page 106
    ... in 2009 increased 11%, over 2008, primarily reflecting growth in business volume and continued investments to support business growth and product development, including the Company's direct to consumer initiative. General and administrative expenses totaled $829 million in 2008, an increase of $130...

  • Page 107
    ... totals. In 2009, net written premiums in the Agency Automobile line of business decreased 2% from 2008. The impact of increasing renewal premium changes was more than offset by declines in new business volume and business retention rates compared with 2008. In the Agency Homeowners and Other line...

  • Page 108
    ...of insurers and policyholders. While the Company has experienced a decrease in new asbestos claims over the past several years, the Company continues to receive a significant number of asbestos claims from the Company's policyholders (which includes others seeking coverage under a policy), including...

  • Page 109
    ... limit and the available coverage, if any, for that claim. In the third quarter of 2009, the Company completed its annual in-depth asbestos claim review. As in prior years, the review considered active policyholders and litigation cases for potential product and ''non-product'' liability. The ''home...

  • Page 110
    ..., judicial rulings and legislative actions. Developing payment patterns among policyholders in the ''home office and field office'' and ''assumed reinsurance and other'' categories are also analyzed. In addition, the Company reviews its historical gross and net loss and expense paid experience, year...

  • Page 111
    ...-related coverage litigation. Policyholders are identified for home office review based upon, among other factors: a combination of past payments and current case reserves in excess of a specified threshold (currently $100,000), perceived level of exposure, number of reported claims, products...

  • Page 112
    ... United Kingdom-based runoff insurance and reinsurance businesses. Included in the claims and claim adjustment expense reserves transferred to the purchaser were gross and net asbestos reserves of $330 million and $232 million, respectively. The following table displays activity for asbestos losses...

  • Page 113
    .... This form of settlement is commonly referred to as a ''buy-back'' of policies for future environmental liability. In addition, many of the agreements have also extinguished any insurance obligation which the Company may have for other claims, including but not limited to asbestos and other...

  • Page 114
    ... risk-based site analyses and more efficient clean-up technologies. In recent years, the Company had experienced a decline in both the number of new policyholders tendering claims for the first time and the number of pending lawsuits between the Company and its policyholders pertaining to coverage...

  • Page 115
    ...of any umbrella or excess policies the Company has issued, the resolution or adjudication of disputes pertaining to the amount of available coverage for asbestos and environmental claims in a manner inconsistent with the Company's previous assessment of these claims, the number and outcome of direct...

  • Page 116
    ... Company's average credit quality rating was due to the downgrading of a monoline bond insurer during the second quarter of 2009 and the downgrading of non-agency mortgage-backed securities. Below investment grade securities represented 2.7% and 2.0% of the total fixed maturity investment portfolio...

  • Page 117
    ... Rating Credit Sector(1) Government: Debt securities issued by foreign governments ...Corporate: Financial Bank ...Insurance ...Finance/leasing ...Brokerage and asset management Industrial ...Public utility ...Sovereign corporate securities(2) . Commercial mortgage-backed and Canadian municipal...

  • Page 118
    ...the case of securities enhanced by third-party insurance for the payment of principal and interest in the event of issuer default. (2) No other single state accounted for 3.0% or more of the total non-advance-refunded or escrowed-to-maturity municipal bonds. The Company bases its investment decision...

  • Page 119
    ... of the Company's asset-backed securities collateralized by sub-prime and alternative documentation mortgages were downgraded in 2008. The Company's real estate investments include warehouses and office buildings and other commercial land and properties that are directly owned. The Company's other...

  • Page 120
    ... changes in equity from nonowner sources were as follows: (for the year ended December 31, in millions) 2009 2008 2007 Fixed maturities ...Equity securities ...Other investments ...Unrealized investment gains (losses) before tax ...Tax expense (benefit) ...Net unrealized investment gains (losses...

  • Page 121
    ... agencies and authorities ...Obligations of states, municipalities and political subdivisions Debt securities issued by foreign governments ...Mortgage-backed securities, collateralized mortgage obligations and pass-through securities ...All other corporate bonds ...Redeemable preferred stock...

  • Page 122
    ..., for all fixed maturities and equity securities available for sale and for equity securities reported at fair value for which fair value is less than 80% of amortized cost at December 31, 2009, the gross unrealized investment loss by length of time those securities have continuously been in an...

  • Page 123
    ...on investments sold during the year ended December 31, 2009: (in millions) Loss Fair Value Fixed maturities ...Equity securities ...Other ...Total ... $19 2 2 $23 $866 24 2 $892 Purchases and sales of investments are based on cash requirements, the characteristics of the insurance liabilities and...

  • Page 124
    ..., the Company is exposed to the risk of material losses from other than property and workers' compensation coverages arising out of hurricanes and earthquakes, and it is exposed to catastrophe losses from perils other than hurricanes and earthquakes, for example, floods, tornadoes and acts of...

  • Page 125
    ... Environment, the Company works with its business units and corporate groups as appropriate to identify and try to assess climate change-related liability issues, which are continually evolving and often hard to fully evaluate. See ''Risk Factors-The effects of emerging claim and coverage issues on...

  • Page 126
    ... new underwriting strategies, coverage modifications or new products. There can be no assurance that these efforts will be successful. REINSURANCE RECOVERABLES Ceded reinsurance involves credit risk, except with regard to mandatory pools, and is generally subject to aggregate loss limits. Although...

  • Page 127
    ... premium change) as a result of increases or decreases in rate and/or insured exposures, which the Company considers as a measure of units of exposure. Net written premiums from both renewal and new business, and therefore earned premiums, are impacted by competitive market conditions and general...

  • Page 128
    ... to continue to focus its investment strategy on maintaining a high-quality investment portfolio and a relatively low average effective duration. The Company's invested assets at December 31, 2009 totaled $74.97 billion, of which 94% was invested in fixed maturity and short-term securities, with...

  • Page 129
    ...requirements of the Company's business have been met primarily by funds generated from operations, asset maturities and income received on investments. Cash provided from these sources is used primarily for claims and claim adjustment expense payments and operating expenses. The timing and amount of...

  • Page 130
    ...and the purchase of shorter-term fixed maturities during the second half of 2009. The primary goals of the Company's asset liability management process are to satisfy the insurance liabilities, manage the interest rate risk embedded in those insurance liabilities and maintain sufficient liquidity to...

  • Page 131
    ... assumed by the Company after the merger of The St. Paul Companies Inc. (SPC) and Travelers Property Casualty Corp. (TPC). During the period prior to redemption, the Company had repurchased and retired $22 million of the debentures in open market transactions. Upon the Company's redemption of the...

  • Page 132
    ... merger date, less the redemption premium paid. In March 2007, the Company issued $1 billion aggregate principal amount of 6.25% fixed-tofloating rate junior subordinated debentures due March 15, 2067 for net proceeds of $986 million (after original issue discount and the deduction of underwriting...

  • Page 133
    ..., $11 million and $250 million, respectively. Dividends. Dividends paid to shareholders totaled $693 million, $715 million and $742 million in 2009, 2008 and 2007, respectively. On February 3, 2010, the Company's board of directors declared a quarterly dividend of $0.33 per share, payable March 31...

  • Page 134
    in the open market, pursuant to preset trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The authorizations do not have a stated expiration date. The timing and actual number of shares to be repurchased in the ...

  • Page 135
    ... agreement. The credit agreement provides back-up liquidity for the Company's $800 million commercial paper program, of which $100 million was outstanding at December 31, 2009. In December 2008, the Company filed with the Securities and Exchange Commission a universal shelf registration statement...

  • Page 136
    ...The contractual obligations related to debt, operating leases, purchase obligations, long-term unfunded investment commitments, estimated claims and claims related payments (gross of the estimated reinsurance recoveries) and liabilities related to unrecognized tax benefits, at December 31, 2009 were...

  • Page 137
    ... commitments(5) ...Total purchase obligations ...Long-term unfunded investment commitments(6) ...Estimated claims and claims related payments Claims and claim adjustment expenses(7) ...Claims from large deductible policies (8) ...Loss-based assessments(9) ...Reinsurance contracts accounted for as...

  • Page 138
    ...'s consolidated financial statements.) (8) Workers' compensation large deductible policies provide third party coverage in which the Company typically is responsible for paying the entire loss under such policies and then seeks reimbursement from the insured for the deductible amount. ''Claims from...

  • Page 139
    policies are paid directly from the policyholder's escrow which is periodically replenished by the policyholder. The payment of the loss amounts above the deductible are reported within ''Claims and claim adjustment expenses'' in the above table. Because the timing of the collection of the ...

  • Page 140
    ... December 31, or the insurer's net income for the twelve-month period ending the preceding December 31, in each case determined in accordance with statutory accounting practices and by state regulation. This declaration or payment is further limited by adjusted unassigned surplus, as determined in...

  • Page 141
    ... and when it is actually reported to the insurer). Informed judgment is applied throughout the process, including the application of various individual experiences and expertise to multiple sets of data and analyses. The Company continually refines its loss reserve estimates in a regular ongoing...

  • Page 142
    ... adjustment expense reserves by product line were as follows: (at December 31, in millions) Case 2009 IBNR Total Case 2008 IBNR Total General liability ...Property ...Commercial multi-peril ...Commercial automobile ...Workers' compensation ...Fidelity and surety ...Personal automobile ...Homeowners...

  • Page 143
    ... product lines make the aggregation of individual ranges a highly judgmental and inexact process. Property-casualty insurance policies are either written on a claims-made or on an occurrence basis. Claims-made policies generally cover, subject to requirements in individual policies, claims reported...

  • Page 144
    ... adding several years worth of IBNR claim exposure before the reporting lag exposure becomes clearly observable, thereby increasing the risk associated with pricing and reserving such products. The most extreme example of claim liabilities with long reporting lags are asbestos claims. For some lines...

  • Page 145
    ... The principal estimation and analysis methods utilized by the Company's actuaries are the paid development method, the case incurred development method, the Bornhuetter-Ferguson (BF) method, and average value analysis combined with the reported claim development method. The BF method is usually...

  • Page 146
    ... the change should be reflected in the Company's estimated claim liabilities. The final estimate selected by management in a reporting period is based on these various detailed analyses of past data, adjusted to reflect any new actionable information. The Audit Committee of the Board of Directors is...

  • Page 147
    ... speed of claim reporting and claim settlement is a function of the specific coverage provided, the jurisdiction and specific policy provisions such as self-insured retentions. There are numerous components underlying the general liability product line. Some of these have relatively moderate payment...

  • Page 148
    ... in claim adjuster office structure (causing distortions in the data) Changes in settlement patterns (e.g., medical malpractice) General liability book of business risk factors Changes in policy provisions (e.g., deductibles, policy limits, endorsements) Changes in underwriting standards Product mix...

  • Page 149
    ... and judicial environments, as well as enhanced risk control, underwriting and claim process initiatives. Property Property is generally considered a short tail line with a simpler and faster claim reporting and adjustment process than liability coverages, and less uncertainty in the reserve setting...

  • Page 150
    ... development in the 2007 accident year for certain large property, national programs and ocean marine claim exposures, and improvements in the litigation environment relating to, and ongoing claim settlements for, Hurricane Katrina. The 2007 change was due to fewer than expected late reported claims...

  • Page 151
    ... risk control, underwriting and claim process initiatives. Commercial Automobile The commercial automobile product line is a mix of property and liability coverages and, therefore, includes both short and long tail coverages. The payments that are made quickly typically pertain to auto physical...

  • Page 152
    ... expected loss development, for recent accident years, as a result of more favorable legal and judicial environments, claim handling initiatives and, the Company believes, improvements in auto safety technology. Workers' Compensation Workers' compensation is generally considered a long tail coverage...

  • Page 153
    ... of injured workers with lifetime benefits and medical treatment Degree of cost shifting between workers' compensation and health insurance Workers' compensation book of business risk factors Product mix Injury type mix Changes in underwriting standards Unanticipated changes in risk factors can...

  • Page 154
    ... mitigate loss Defective workmanship/latent defects Financial strategy of insured Changes in statutory obligations Geographic spread of business Fidelity and Surety book of business risk factors Changes in policy provisions (e.g., deductibles, limits, endorsements) Changes in underwriting standards...

  • Page 155
    ... expected loss experience for the contract surety business within this product line, primarily driven by favorable settlements on large claims from older accident years. Personal Automobile Personal automobile includes both short and long tail coverages. The payments that are made quickly typically...

  • Page 156
    ... practices as well as initiatives to fight fraud. Homeowners and Personal Lines Other Homeowners is generally considered a short tail coverage. Most payments are related to the property portion of the policy, where the claim reporting and settlement process is generally restricted to the insured...

  • Page 157
    ... statutory reporting framework. Due to changes in the business mix for this line over time, the recently incurred claim liabilities are relatively short term (due to both the products and the jurisdictions involved, e.g., the Republic of Ireland and the United Kingdom), while the older liabilities...

  • Page 158
    ... losses resulting from large single accounts or single issues Changes in tort law Changes in claim adjuster office structure (causing distortions in the data) International and other book of business risk factors Changes in policy provisions (e.g., deductibles, policy limits, endorsements, ''claims...

  • Page 159
    ...to mandatory pools and associations relate primarily to workers' compensation service business. These recoverables are supported by the participating insurance companies' obligation to pay a pro rata share based on each company's voluntary market share of written premium in each state in which it is...

  • Page 160
    ... receives the quoted market prices from a third party, nationally recognized pricing service (pricing service). When quoted market prices are unavailable, the Company utilizes a pricing service to determine an estimate of fair value, which is mainly used for its fixed maturity investments. The fair...

  • Page 161
    ...model to develop prepayment and interest rate scenarios. The pricing service evaluates each asset class based on relevant market information, relevant credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order...

  • Page 162
    ... at December 31, 2009, reported in other investments, where the fair value estimate is determined either internally or by an external fund manager based on recent filings, operating results, balance sheet stability, growth and other business and market sector fundamentals. Due to the significant...

  • Page 163
    ... in Financial Statements Short-term Securities The Company's short-term securities consist of Aaa-rated registered money market funds and high-quality commercial paper (primarily A1/P1) with a combined average of 27 days to maturity at December 31, 2009. It is the Company's policy to not invest in...

  • Page 164
    ...gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value; however, for fixed maturity investments, the difference between the new cost basis and the expected cash flows is accreted on a quarterly basis to net investment income over the remaining expected life of...

  • Page 165
    ... environment. Real Estate Investments On at least an annual basis, the Company obtains independent appraisals for substantially all of its real estate investments. In addition, the carrying value of all real estate property is reviewed for impairment on a quarterly basis or when events or changes in...

  • Page 166
    ... Assets Impairments The Company performs a review, on at least an annual basis, of goodwill held by the reporting units which are the Company's three operating and reportable segments: Business Insurance, Financial, Professional & International Insurance, and Personal Insurance. The Company...

  • Page 167
    ... 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, premium rates (either for new or renewal business), net and operating income, investment income, return on equity...

  • Page 168
    ..., of the Company's invested assets were denominated in foreign currencies. The Company's exposure to equity price risk is not significant. The Company has no direct commodity risk and is not a party to any credit default swaps. The Company's fixed maturity investment portfolio at December...

  • Page 169
    ... financial statements as well as the ''Liquidity and Capital Resources'' section of ''Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations.'' The Company's foreign exchange market risk exposure is concentrated in the Company's invested assets and insurance...

  • Page 170
    ... value of the Company's financial instruments. Foreign Currency Exchange Rate Risk The Company uses fair values of investment securities to measure its potential loss from foreign denominated investments. A hypothetical 10% reduction in value of foreign denominated investments is used to estimate...

  • Page 171
    ...TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ...Consolidated Statement of Income for the years ended December 31, 2009, 2008 and 2007 ...Consolidated Balance Sheet at December 31, 2009 and 2008 ...Consolidated Statement of Changes in Shareholders...

  • Page 172
    ...of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 173
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (in millions, except per share amounts) For the year ended December 31, 2009 2008 2007 Revenues Premiums ...Net investment income ...Fee income ...Net realized investment gains (losses) Other revenues ... ... ... ... ...

  • Page 174
    ... 84,313 Total investments ... Total assets ...Liabilities Claims and claim adjustment expense reserves . Unearned premium reserves ...Contractholder payables ...Payables for reinsurance premiums ...Debt ...Other liabilities ... Total liabilities ...Shareholders' equity Preferred Stock Savings Plan...

  • Page 175
    ...loss) on investment securities: Having no credit losses recognized in the consolidated statement of income ...Having credit losses recognized in the consolidated statement of income ...Net change in benefit plan assets and obligations recognized in equity ...Net change in unrealized foreign currency...

  • Page 176
    ... Fixed maturities ...Equity securities ...Real estate ...Other investments ...Purchases of investments: Fixed maturities ...Equity securities ...Real estate ...Other investments ...Net sales (purchases) of short-term securities Securities transactions in course of settlement Other ...by ...operating...

  • Page 177
    ..., the Company). The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and...

  • Page 178
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) included in the earnings allocation in computing earnings per share (EPS) under the ''two-class method.'' Under the guidance, participating...

  • Page 179
    ... special-purpose entity and the quantitative-based risks and rewards calculation of the previous guidance for determining which company, if any, has a controlling financial interest in a variable interest entity. The guidance requires an analysis of whether a company has: (1) the power to direct...

  • Page 180
    ... stocks, are classified as available for sale with changes in fair value, net of income tax, charged or credited directly to accumulated other changes in equity from nonowner sources. Real Estate The Company's real estate investments include warehouses, office buildings and other commercial land...

  • Page 181
    ...'s earnings or losses in the fund is reported in net investment income. Trading securities are marked to market with the change in fair value recognized in net investment income during the current period. Accrual of income is suspended on non-securitized fixed maturities or mortgage loans that are...

  • Page 182
    ... flows is accreted on a quarterly basis to net investment income over the remaining expected life of the investment. Determination of Credit Loss The Company determines the credit loss component of fixed maturity investments by utilizing discounted cash flow modeling to determine the present value...

  • Page 183
    ... ACCOUNTING POLICIES (Continued) present value with the amortized cost of the security. If the amortized cost is greater than the present value of the expected cash flows, the difference is considered a credit loss and recognized in net realized investment gains (losses). For non-structured fixed...

  • Page 184
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (at December 31, 2009) Prime Alt-A Sub-Prime Voluntary prepayment rates ...Percentage of remaining pool liquidated due to defaults ...Loss...

  • Page 185
    ... Intangible Assets The Company performs a review, on at least an annual basis, of goodwill held by the reporting units which are the Company's three operating and reportable segments: Business Insurance; Financial, Professional & International Insurance; and Personal Insurance. The Company estimates...

  • Page 186
    ... claims and claim adjustment expense reserves in the consolidated balance sheet are certain reserves discounted to the present value of estimated future payments. The liabilities for losses for most long-term disability payments under workers' compensation insurance and workers' compensation excess...

  • Page 187
    ...insurance contracts, primarily workers' compensation, are participating whereby dividends are paid to policyholders in accordance with contract provisions. Net written premiums for participating dividend policies were approximately 1% of total Company net written premiums for each of the years ended...

  • Page 188
    ... of money. Accordingly, there is no gain or loss at the time the assets and liabilities are acquired and recognized by the subsequent year of account. In addition, there is no impact on reported premiums and losses as a result of an RITC transaction. Fee Income Fee income includes servicing fees...

  • Page 189
    ... six groups, which collectively comprise Business Insurance Core operations: • Select Accounts serves small businesses for property and casualty products, including commercial multi-peril, property, general liability, commercial auto and workers' compensation insurance. • Commercial Accounts...

  • Page 190
    ... coverages other than workers' compensation. • Target Risk Underwriting. The following units serve commercial businesses requiring specialized product underwriting, claims handling and risk management services: • National Property provides traditional and customized property insurance programs...

  • Page 191
    ... & International Insurance segment includes surety and financial liability coverages, which primarily use credit-based underwriting processes, as well as property and casualty products that are primarily marketed on a domestic basis in the United Kingdom, the Republic of Ireland and Canada, and on...

  • Page 192
    ... capital, underwrites through five principal business units-marine, global property, accident & special risks, power & utilities and aviation. In the second quarter of 2009, results from the Company's surety bond operation in Canada were reclassified from the Bond & Financial Products group to the...

  • Page 193
    ... accounted for approximately $49 million of net written premiums for the year ended December 31, 2007. The sale was not material to the Company's results of operations or financial position. 2. SEGMENT INFORMATION The Company is organized into three reportable business segments: Business Insurance...

  • Page 194
    ...Company's revenues, operating income and total assets by reportable business segments: Financial, Professional & International Insurance Total Reportable Segments (for the year ended December 31, in millions) Business Insurance Personal Insurance 2009 Premiums ...Net investment income Fee income...

  • Page 195
    ... STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) Net written premiums by market were as follows: (for the year ended December 31, in millions) 2009 2008 2007 Business Insurance: Select Accounts ...Commercial Accounts ...National Accounts ...Industry-Focused Underwriting Target Risk...

  • Page 196
    ...& International Insurance: Fidelity and surety ...General liability ...International ...Other ... Total Financial, Professional & International Insurance ...Personal Insurance: Automobile ...Homeowners and Other ...Total Personal Insurance ...Total earned premiums Net investment income ...Fee income...

  • Page 197
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) loss in 2009 included a benefit of $28 million from the favorable resolution of various prior year tax matters. The operating loss in 2007 included a benefit of $...

  • Page 198
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS Fixed Maturities The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows: (at December 31, 2009, in millions) Amortized ...

  • Page 199
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS (Continued) At December 31, 2009 and 2008, the Company held commercial mortgage-backed securities (CMBS, including FHA project loans) of $714 million and $766 million, respectively, ...

  • Page 200
    ... investments include warehouses, office buildings and other commercial land and properties that are directly owned. The Company negotiates commercial leases with individual tenants through unrelated, licensed real estate brokers. Negotiated terms and conditions include, among others, rental rates...

  • Page 201
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS (Continued) respectively, were owned by outside investors. The net carrying value of the trusts owned by the Company at December 31, 2009 and 2008 was $16 million and $245 million, ...

  • Page 202
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS (Continued) estimates of several factors in its review and evaluation of individual investments, using the process described in note 1, in determining whether such investments are ...

  • Page 203
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS (Continued) Less than 12 months Gross Fair Unrealized Value Losses 12 months or longer Gross Fair Unrealized Value Losses Total Fair Value Gross Unrealized Losses (at December 31, ...

  • Page 204
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS (Continued) Impairment Charges Impairment charges included in net realized investment gains (losses) in the consolidated statement of income were as follows: (for the year ended ...

  • Page 205
    ... using controls that include credit approvals, limits and other monitoring procedures. Net Investment Income (for the year ended December 31, in millions) 2009 2008 2007 Gross investment income (loss) Fixed maturities ...Equity securities ...Short-term securities ...Real estate ...Other investments...

  • Page 206
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS (Continued) Changes in net unrealized gains (losses) on investment securities that are included as a separate component of accumulated other changes in equity from nonowner sources ...

  • Page 207
    ... receives the quoted market prices from a third party, nationally recognized pricing service (pricing service). When quoted market prices are unavailable, the Company utilizes a pricing service to determine an estimate of fair value, which is mainly used for its fixed maturity investments. The fair...

  • Page 208
    ...model to develop prepayment and interest rate scenarios. The pricing service evaluates each asset class based on relevant market information, relevant credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order...

  • Page 209
    ... at December 31, 2009, reported in other investments, where the fair value estimate is determined either internally or by an external fund manager based on recent filings, operating results, balance sheet stability, growth and other business and market sector fundamentals. Due to the significant...

  • Page 210
    ...) Total Level 1 Level 2 Level 3 Invested assets: Fixed maturities U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities Obligations of states, municipalities and political subdivisions ...Debt securities issued by foreign governments ...Mortgage-backed...

  • Page 211
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. FAIR VALUE MEASUREMENTS (Continued) (at December 31, 2008, in millions) Total Level 1 Level 2 Level 3 Invested assets: Fixed maturities U.S. Treasury securities and obligations of U.S. ...

  • Page 212
    ... investment gains (losses) for the period included in the consolidated statement of income attributable to changes in the fair value of assets still held at the reporting date ... $ - $ 7 $ 7 (1) Includes impairments on investments held at the end of the period as well as amortization on fixed...

  • Page 213
    ... policies have been novated. Included in reinsurance recoverables are certain amounts related to structured settlements. Structured settlements comprise annuities purchased from various life insurance companies to settle certain personal physical injury claims, of which workers' compensation claims...

  • Page 214
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. REINSURANCE (Continued) claimant. In the event that the life insurance company fails to make the required annuity payments, the Company would be required to make such payments. The Company ...

  • Page 215
    ... FINANCIAL STATEMENTS (Continued) 5. REINSURANCE (Continued) The following is a summary of reinsurance financial data reflected in the consolidated statement of income: (for the year ended December 31, in millions) 2009 2008 2007 Written premiums Direct ...Assumed ...Ceded ...Total net written...

  • Page 216
    ... insurance, financial guaranty insurance, medical malpractice insurance, health or life insurance, flood insurance, and reinsurance. The Terrorism Extension Act exempted from coverage certain additional types of insurance, including commercial automobile, professional liability (other than directors...

  • Page 217
    ...Paul Companies, Inc. and Travelers Property Casualty Corp. in 2004 and was based on management's estimate of nominal claims and claim adjustment expense reserves and reinsurance recoverables (after adjusting for conformity with the acquirer's accounting policy on discounting of workers' compensation...

  • Page 218
    ...'s accounting policies for insurance contracts are reported as part of the claims and claim adjustment expense reserves and reinsurance recoverables. The intangible asset will be recognized into income over the expected payment pattern. Because the time value of money and the risk adjustment (cost...

  • Page 219
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) The table below is a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses. (at and for the year...

  • Page 220
    ... in the United Kingdom and in the Surety line of business in Canada. In addition, the Aviation and Property lines of business at Lloyd's experienced net favorable prior year loss development in 2009. In the Bond & Financial Products group, better than expected loss experience for the contract surety...

  • Page 221
    ... than anticipated loss development in the United Kingdom, in part due to favorable claim activity relating to 2007 flood losses. In the Bond & Financial Products group, better than expected loss experience for the contract surety business within the fidelity and surety product line, resulting from...

  • Page 222
    ... better than expected loss development due to more favorable legal and judicial environments, claim handling initiatives focused on the automobile line of insurance and improvements in auto safety technology. The property product line experienced fewer than expected late reported claims related to...

  • Page 223
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) Asbestos Reserves. Because each policyholder presents different liability and coverage issues, the Company generally reviews the exposure presented by each ...

  • Page 224
    ... TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) Net asbestos losses paid in 2009, 2008 and 2007 were $341 million, $658 million and $317 million, respectively. (Asbestos payments in 2008 included the Company...

  • Page 225
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) Asbestos and Environmental Reserves. As a result of the processes and procedures described above, management believes that the reserves carried for asbestos ...

  • Page 226
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) There are also risks which impact the estimation of ultimate costs for catastrophes. For example, the estimation of reserves related to hurricanes can be ...

  • Page 227
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. DEBT Debt outstanding was as follows: (at December 31, in millions) 2009 2008 Short-term: Commercial paper ...8.125% Senior notes due April 15, 2010 ...7.415% Medium-term notes due August 23, ...

  • Page 228
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. DEBT (Continued) of the remaining scheduled payments of principal and interest on the senior notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date...

  • Page 229
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. DEBT (Continued) The Company may defer interest for up to ten consecutive years without giving rise to an event of default. Deferred interest will accumulate additional interest at an annual rate equal to the annual interest rate then applicable to...

  • Page 230
    ...362% 6.362% Total ... On April 1, 2004, The Travelers Companies, Inc. fully and unconditionally guaranteed the payment of all principal, premiums, if any, and interest on certain debt obligations of its subsidiaries TPC and Travelers Insurance Group Holdings Inc. (TIGHI). The guarantees pertain to...

  • Page 231
    ..., the most recent of which totaled $6 billion and was approved by the board of directors in October 2009, repurchases may be made from time to time in the open market, pursuant to preset trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private...

  • Page 232
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. SHAREHOLDERS' EQUITY AND DIVIDEND AVAILABILITY (Continued) From the inception of the authorization in May 2006 through December 31, 2009, the Company repurchased a cumulative total of 193.2 ...

  • Page 233
    ... from Nonowner Sources were as follows: Net Unrealized Gains (Losses) on Investment Securities Net Benefit Plan Assets and Obligations Recognized in Equity Accumulated Other Changes in Equity from Nonowner Sources (at and for the year ended December 31, in millions) Other(1) Balance, December 31...

  • Page 234
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. EARNINGS PER SHARE Basic earnings per share was computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. The ...

  • Page 235
    ... to stock-based compensation, the change in unrealized appreciation on investments, unrealized loss on foreign exchange and unrealized loss on derivatives, and other comprehensive income ...Total income tax expense included in consolidated financial statements ...Effective tax rate Income before...

  • Page 236
    .... INCOME TAXES (Continued) The net deferred tax asset comprises the tax effects of temporary differences related to the following assets and liabilities: (at December 31, in millions) 2009 2008 Deferred tax assets Claims and claim adjustment expense reserves Unearned premium reserves ...Investments...

  • Page 237
    ... U.S. income tax returns for 2007 and 2008. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next twelve months. 12. SHARE-BASED INCENTIVE COMPENSATION The Company has a share-based incentive compensation plan, The Travelers Companies, Inc...

  • Page 238
    ... non-employee director may choose to receive all or a portion of his or her annual retainer in the form of cash or deferred stock units which vest upon grant. The annual deferred stock awards vest in full on the date of the one-year anniversary of the annual meeting of shareholders of the Company...

  • Page 239
    ... the average historical volatility of the common stock of an industry peer group of entities, due to the limited Company stock history, over the estimated option term based on the mid-month of the option grant. The expected dividend is based upon the Company's current quarter dividend annualized and...

  • Page 240
    ... INCENTIVE COMPENSATION (Continued) A summary of stock option activity under the Company's 2004 Incentive Plan and legacy sharebased incentive compensation plans as of and for the year ended December 31, 2009 is as follows: Weighted Average Exercise Price Weighted Average Contractual Life Remaining...

  • Page 241
    ... COMPENSATION (Continued) Restricted Stock, Restricted Stock Units, Deferred Stock and Performance Share Award Programs The Company, commencing with equity grants on or after January 1, 2007, issues restricted stock unit awards to eligible officers and key employees under the Equity Awards program...

  • Page 242
    ...-BASED INCENTIVE COMPENSATION (Continued) On February 2, 2010, the Company, under the 2004 Stock Incentive Plan, granted 1,861,814 common stock awards in the form of restricted stock units, deferred stock and performance share awards to participating officers, non-employee directors and other key...

  • Page 243
    ...) $2,214 $1,907 $173 $137 $2,387 $2,044 Benefit obligation at end of year ...Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets ...Company contributions ...Benefits paid ...Foreign currency exchange rate change ... $1,758 $1,870 $ 60 $105 $1,818 $1,975...

  • Page 244
    ... at beginning of year . Benefits earned ...Interest cost on benefit obligation ...Actuarial loss (gain) ...Benefits paid ...Foreign currency exchange rate change Change in plan assets: Fair value of plan assets at beginning Actual return on plan assets ...Company contributions ...Benefits paid...

  • Page 245
    ... TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) The following table summarizes the components of net periodic benefit cost and other amounts recognized in accumulated other changes...

  • Page 246
    ... long-term total return and the ongoing oversight of the plan's investment performance. Investment risk is measured and monitored on an ongoing basis through daily and monthly investment portfolio review, annual liability measurements, and periodic asset/liability studies. The Company's overall...

  • Page 247
    ...BENEFITS AND SAVINGS PLANS (Continued) diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 55% to 75% equity securities and 20% to 40% fixed income securities. Equity securities primarily include investments in large, medium and small...

  • Page 248
    ..., in millions) Total Level 1 Level 2 Level 3 Invested assets: Fixed maturities U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities ...Debt securities issued by foreign governments . Mortgage-backed securities, collateralized mortgage obligations and...

  • Page 249
    ...% to 65% of investments for long-term growth and 35% to 60% for near-term insurance payments with a wide diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 0% to 10% equity securities and 20% to 60% fixed income securities, with the...

  • Page 250
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) Estimated Future Benefit Payments Benefits expected to be paid, which reflect estimated future employee service, are estimated ...

  • Page 251
    ...strategies to manage asbestos and environmental loss exposure, including settling litigation under appropriate circumstances. For other information regarding the Company's asbestos and environmental exposure, including the results of its annual in-depth asbestos claim review as well as its quarterly...

  • Page 252
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued) against TPC based on similar allegations. Notwithstanding the injunction, additional common law claims were filed against TPC. In November 2003, the parties reached a settlement of the Statutory...

  • Page 253
    ... received subpoenas and written requests for information from a number of government agencies and authorities, including, among others, state attorneys general, state insurance departments, the U.S. Attorney for the Southern District of New York and the U.S. Securities and Exchange Commission (SEC...

  • Page 254
    ... financial statements was required. Any authority with open inquiries or investigations could ask that additional work be performed or reach conclusions different from the Company's. Broker Anti-Trust Litigation-In 2005, four putative class action lawsuits were brought against a number of insurance...

  • Page 255
    ... claims. Under the sale agreement, SPC also committed to acquire a minimum level of reinsurance brokerage services from Aon through May 16, 2012. That commitment requires the Company to make a contractual payment to Aon to the extent such minimum level of service is not acquired. The maximum annual...

  • Page 256
    ... financial information on the same basis of accounting as the consolidated financial statements. The Travelers Companies, Inc. has fully and unconditionally guaranteed certain debt obligations of TPC, its wholly-owned subsidiary, which totaled $1.19 billion at December 31, 2009. Prior to the merger...

  • Page 257
    ... FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES (Continued) CONSOLIDATING STATEMENT OF INCOME (Unaudited) For the year ended December 31, 2009 (in millions) TPC Other Subsidiaries Travelers(1) Eliminations Consolidated Revenues Premiums ...Net investment income ...Fee income...

  • Page 258
    ... FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES (Continued) CONSOLIDATING STATEMENT OF INCOME (Unaudited) For the year ended December 31, 2008 (in millions) TPC Other Subsidiaries Travelers(1) Eliminations Consolidated Revenues Premiums ...Net investment income ...Fee income...

  • Page 259
    ... FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES (Continued) CONSOLIDATING STATEMENT OF INCOME (Unaudited) For the year ended December 31, 2007 (in millions) TPC Other Subsidiaries Travelers(1) Eliminations Consolidated Revenues Premiums ...Net investment income ...Fee income...

  • Page 260
    ...287 82,145 Total investments ... Total assets ...Liabilities Claims and claim adjustment expense reserves Unearned premium reserves ...Contractholder payables ...Payables for reinsurance premiums ...Debt ...Other liabilities ...Shareholders' equity Preferred Stock Savings Plan-convertible preferred...

  • Page 261
    ...574 84,313 Total investments ... Total assets ...Liabilities Claims and claim adjustment expense reserves Unearned premium reserves ...Contractholder payables ...Payables for reinsurance premiums ...Debt ...Other liabilities ...Shareholders' equity Preferred Stock Savings Plan-convertible preferred...

  • Page 262
    ... shares acquired-net employee share-based compensation ...Excess tax benefits from share-based payment arrangements ...Dividends paid to parent company ...Capital contributions and loans between subsidiaries ... Net cash used in financing activities ...Effect of exchange rate changes on cash ...Net...

  • Page 263
    ... shares acquired-net employee sharebased compensation ...Excess tax benefits from share-based payment arrangements ...Dividends paid to parent company ...Capital contributions and loans between subsidiaries ... Net cash used in financing activities ...Effect of exchange rate changes on cash ...Net...

  • Page 264
    ... shares acquired-net employee share-based compensation ...Excess tax benefits from share-based payment arrangements ...Dividends paid to parent company ...Capital contributions and loans between subsidiaries ... Net cash used in financing activities ...Effect of exchange rate changes on cash ...Net...

  • Page 265
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. SELECTED QUARTERLY FINANCIAL DATA (Unaudited) 2009 (in millions, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Total Total revenues ...Total expenses ......

  • Page 266
    ...Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial...

  • Page 267
    ...of the Company's management and directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over...

  • Page 268
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of The Travelers Companies, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in shareholders' equity, and...

  • Page 269
    ... President-Financial, Professional and International Insurance President and Chief Operating Officer Executive Vice President and Chief Administrative Officer Executive Vice President and General Counsel Executive Vice President-Personal Insurance and Claim Services Executive Vice President-Business...

  • Page 270
    ... appointed Senior Vice President for the National Accounts Group's property-casualty business in 1985 and subsequently assumed the responsibility of Chairman of Commercial Lines in 1990. William H. Heyman, 61, has been Chief Investment Officer of the Company since the Merger and Vice Chairman since...

  • Page 271
    ... Company since November 2005, and he is currently Executive Vice President-Business Insurance. In 1998, he assumed the position of Chief Underwriting Officer and Chief Operating Officer for National Accounts and was promoted to President and CEO for National Accounts in 2000 and Commercial Accounts...

  • Page 272
    ...Tabular Executive Compensation Disclosure'' and ''Non-Employee Director Compensation.'' Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS The ''Share Ownership Information'' section of the Company's Proxy Statement relating to its Annual Meeting...

  • Page 273
    ... 43,514,163(3) - 43,514,163(3) Total ... (1) In addition to the 2004 Incentive Plan, these numbers also include the St. Paul Global Stock Option Plan and certain plans for St. Paul's United Kingdom and Ireland employees. Shares of deferred stock or phantom stock units that may be settled in shares...

  • Page 274
    ... Public Accounting Firm-Audit and Non-Audit Fees'' section of the Company's Proxy Statement relating to its Annual Meeting of Shareholders to be held May 4, 2010 is incorporated herein by reference. PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Documents filed as a part of the report...

  • Page 275
    ...Exchange Act of 1934, this report has been signed below by the following persons on behalf of The Travelers Companies, Inc. and in the capacities and on the dates indicated. Date By /s/ JAY S. FISHMAN Jay S. Fishman Director, Chairman and Chief Executive Officer (Principal Executive Officer) Vice...

  • Page 276
    ...February 18, 2010 By /s/ CLEVE L. KILLINGSWORTH, JR. Cleve L. Killingsworth, Jr. Director February 18, 2010 By /s/ ROBERT I. LIPP Robert I. Lipp Director February 18, 2010 By /s/ BLYTHE J. MCGARVIE Blythe J. McGarvie Director February 18, 2010 By /s/ DONALD J. SHEPARD Donald J. Shepard...

  • Page 277
    ... Statements ...Schedules: Schedule II-Condensed Financial Information of Registrant (Parent Company Only) ...Schedule III-Supplementary Insurance Information ...Schedule V-Valuation and Qualifying Accounts ...Schedule VI-Supplementary Information Concerning Property-Casualty Insurance Operations...

  • Page 278
    ...Firm The Board of Directors and Stockholders The Travelers Companies, Inc.: Under date of February 18, 2010, we reported on the consolidated balance sheet of The Travelers Companies, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in...

  • Page 279
    SCHEDULE II THE TRAVELERS COMPANIES, INC. (Parent Company Only) CONDENSED FINANCIAL INFORMATION OF REGISTRANT (in millions) CONDENSED STATEMENT OF INCOME For the year ended December 31, 2009 2008 2007 Revenues Net investment income ...Net realized investment gains ...Other revenues ...Total ...

  • Page 280
    SCHEDULE II THE TRAVELERS COMPANIES, INC. (Parent Company Only) CONDENSED FINANCIAL INFORMATION OF REGISTRANT (in millions) CONDENSED BALANCE SHEET At December 31, 2009 2008 Assets Fixed maturities ...Equity securities ...Short-term securities ...Investment in subsidiaries Other assets ... ... ... ...

  • Page 281
    SCHEDULE II THE TRAVELERS COMPANIES, INC. (Parent Company Only) CONDENSED FINANCIAL INFORMATION OF REGISTRANT (in millions) CONDENSED STATEMENT OF CASH FLOWS For the year ended December 31, 2009 2008 2007 Cash flows from operating activities Net income ...Adjustments to reconcile net income to net ...

  • Page 282
    ... Business Insurance ...Financial, Professional & International Insurance ...Personal Insurance ... Total-Reportable Segments ...Other ... Consolidated ... (a) See note 2 to the consolidated financial statements for discussion of the method used to allocate net investment income and invested assets...

  • Page 283
    ...$ 63 $ 13 $246 $130 $ 49 $618 $138 $ 57 $773 $ 41 $ 13 $- $ - $ - $ 6 $ 49 $ 4 $ 91 $130 $ 66 $688 $125 $ 82 $ 75 $(19) $ - $ - $ 62 $ 6 $138 $ 57 (1) Charged to claims and claim adjustment expenses in the consolidated statement of income. (2) Credited to the related asset account. 271

  • Page 284
    ... Paid Expenses Discount From Amortization Claims and Incurred Related to: Deferred Claims and Reserves for Net of Deferred Claim Net Acquisition Claim Adjustment Unpaid Unearned Earned Investment Current Prior Acquisition Adjustment Written Costs Expense Reserves Claims Premiums Premiums Income...

  • Page 285
    ... Form of Executive Officer Capital Accumulation Program Restricted Stock Award Notification and Agreement was filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2005, and is incorporated herein by reference. 10.8* The St. Paul Companies, Inc...

  • Page 286
    ... to TPC's quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2002, and is incorporated herein by reference. 10.23* Form of Non-Solicitation and Non-Disclosure Agreement for Executive Officers, amending The St. Paul Travelers Companies, Inc. Severance Plan, was filed as Exhibit 99...

  • Page 287
    ... Plan is filed herewith. 10.42†* The Travelers Companies, Inc. Policy Regarding Executive Incentive Recoupment is filed herewith. 10.43†* Form of Non-Competition Agreement is filed herewith. 10.44†* Form of Restricted Stock Unit Award Notification and Agreement (for Management Committee...

  • Page 288
    ...of Jay S. Benet, Vice Chairman and Chief Financial Officer of the Company, as required by Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith. 101.1†The following financial information from The Travelers Companies, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2009...

  • Page 289
    Exhibit 12.1 THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (for the year ended December 31, in millions, except ratios) 2009 2008 2007 2006 2005 Income from continuing operations before income taxes and minority interest ...Interest ...Portion of ...

  • Page 290
    ... I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2009 of The Travelers Companies, Inc. (the Company); Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in...

  • Page 291
    ...process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. By: /s/ JAY S. BENET Jay S. Benet Vice Chairman and Chief Financial Officer...

  • Page 292
    ... OF 2002 Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the ''Exchange Act'') and 18 U.S.C. Section 1350, the undersigned officer of The Travelers Companies, Inc. (the ''Company'') hereby certifies that the Company's Annual Report on Form 10-K for the year ended December 31, 2009...

  • Page 293
    ... OF 2002 Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the ''Exchange Act'') and 18 U.S.C. Section 1350, the undersigned officer of The Travelers Companies, Inc. (the ''Company'') hereby certifies that the Company's Annual Report on Form 10-K for the year ended December 31, 2009...

  • Page 294
    ...Agent and Registrar For address changes, dividend checks, direct deposits of dividends, account consolidations, registration changes, lost stock certificates and general stock holding questions, please contact: Wells Fargo Bank, N.A. Shareowner Services P.O. Box 64854 Saint Paul, MN 55164-0854 Toll...

  • Page 295
    NYSE: TRV The Travelers Companies, Inc. 485 Lexington Avenue New York, NY 10017-2630 800.328.2189 www.travelers.com