Travelers 2009 Annual Report Download - page 167

for U.S. issuers prepared in accordance with International Financial Reporting Standards (IFRS), as
promulgated by the International Accounting Standards Board (IASB), instead of in accordance with
GAAP. The Roadmap contains milestones that, if achieved, may lead the SEC to decide in 2011 to
require the use of IFRS for large accelerated filers, including the Company, in 2014. The SEC is
expected to re-deliberate the proposed Roadmap in 2011 based on the comments received. The IASB
and the FASB are in the process of developing a global insurance standard that may involve
methodologies for valuing insurance contract liabilities that may be significantly different from the
methodologies required by current GAAP. The FASB and the IASB are also embarked on a long-term
project to converge GAAP and IFRS. The Company is not able to predict whether it will choose to, or
be required to, adopt IFRS or how the adoption of IFRS (or the convergence of GAAP and IFRS)
may impact the Company’s financial statements in the future.
FORWARD-LOOKING STATEMENTS
This report contains, and management may make, certain ‘‘forward-looking statements’’ within the
meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements
of historical facts, may be forward-looking statements. Specifically, statements in ‘‘Item 7—
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook,’’
earnings guidance, statements about the Company’s share repurchase plans (which repurchase plans
depend on a variety of factors, including the Company’s financial position, earnings, capital
requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other
investment opportunities (including mergers and acquisitions), and other factors), statements about the
potential impact of recent or future disruption in the investment markets and other economic
conditions on the Company’s investment portfolio and underwriting results are forward looking, and the
Company may make forward-looking statements about its results of operations (including, among
others, premium volume, premium rates (either for new or renewal business), net and operating
income, investment income, return on equity, expected current returns and combined ratio), and
financial condition (including, among others, invested assets and liquidity); the sufficiency of the
Company’s asbestos and other reserves (including, among others, asbestos claim payment patterns); the
cost and availability of reinsurance coverage; catastrophe losses; investment performance; investment,
economic and underwriting market conditions; and strategic initiatives. Such statements are subject to
risks and uncertainties, many of which are difficult to predict and generally beyond the Company’s
control, that could cause actual results to differ materially from those expressed in, or implied or
projected by, the forward-looking information and statements.
For a discussion of some of the factors that could cause actual results to differ, see ‘‘Item 1A—
Risk Factors’’ and ‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and Results
of Operations—Critical Accounting Estimates.’’
The Company’s forward-looking statements speak only as of the date of this report or as of the
date they are made, and the Company undertakes no obligation to update its forward-looking
statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as
interest rates (inclusive of credit spreads), foreign currency exchange rates and other relevant market
rate or price changes. Market risk is directly influenced by the volatility and liquidity in the markets in
which the related underlying assets are traded. The following is a discussion of the Company’s primary
market risk exposures and how those exposures are managed as of December 31, 2009. The Company’s
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