Travelers 2009 Annual Report Download - page 189

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Share-Based Compensation
The Company has an employee stock incentive compensation plan that permits grants of
nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, deferred
stock, stock units, performance awards and other stock-based or stock-denominated awards with respect
to the Company’s common stock.
Compensation cost is measured based on the grant-date fair value of an award, utilizing the
assumptions discussed in note 12. Compensation cost is recognized for financial reporting purposes
over the period in which the employee is required to provide service in exchange for the award
(generally the vesting period). In connection with certain share-based awards, participants are entitled
to receive dividends during the vesting period, either in cash or dividend equivalent shares,
commensurate with the dividends paid to common shareholders. Dividends and dividend equivalent
shares on awards that are expected to vest are recorded in retained earnings. Dividends paid in cash
are presented in the ‘‘Dividends’’ caption of retained earnings while dividend equivalent shares are
presented in the ‘‘Other’’ caption of retained earnings. Dividends on awards that are not expected to
vest are not subject to forfeiture and are, therefore, recorded as compensation expense.
Nature of Operations
The Company is organized into three reportable business segments: Business Insurance; Financial,
Professional & International Insurance; and Personal Insurance. These segments reflect the manner in
which the Company’s businesses are currently managed and represent an aggregation of products and
services based on type of customer, how the business is marketed and the manner in which risks are
underwritten.
The specific business segments are as follows:
Business Insurance
The Business Insurance segment offers a broad array of property and casualty insurance and
insurance-related services to its clients primarily in the United States. Business Insurance is organized
into the following 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 serves mid-sized businesses for property and casualty products, including
property, general liability, commercial multi-peril, commercial auto and workers’ compensation
insurance.
•National Accounts comprises three business units. The largest provides casualty products and
services to large companies, with particular emphasis on workers’ compensation, general liability
and automobile liability, generally utilizing loss-sensitive products such as collateralized
deductibles or self-insured programs. National Accounts also includes Discover Re, which
provides property and casualty insurance products on an unbundled basis using third-party
administrators for insureds who utilize programs such as collateralized deductibles, captive
reinsurers and self-insurance. In addition, National Accounts includes the commercial residual
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