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Reliability in an increasingly uncertain world
 ANNUAL REPORT AND FORM K
Satellite photo showing Storm Sandy courtesy of NASA

Table of contents

  • Page 1
    Satellite photo showing Storm Sandy courtesy of NASA Reliability in an increasingly uncertain world 2012 ANNUAL REPORT AND FORM 102K

  • Page 2
    ... provider of property and casualty insurance for auto, home and business. The company's diverse business lines offer customers a wide range of coverage predominantly through independent agents and brokers. A component of the Dow Jones Industrial Average, Travelers has more than 30,000 employees...

  • Page 3
    ...of our consistent strategy of managing the company for the long term and focusing on producing top tier returns over time. Our business is confronted with a number of uncertainties - the outlook for the economy in general and interest rates in particular, loss costs on the insurance products we sell...

  • Page 4
    ... claims and life insurance benefits. Travelers issues the first insurance on aerial transportation, which includes public liability, property damage and workers' compensation. President Woodrow Wilson is one of the first individuals covered by such insurance. 4 TRAVELERS 2012 Annual Report

  • Page 5
    ...the company does not lay off any workers or cut salaries. In fact, employees receive a special one-month salary bonus. Two years later, company directors contribute $79,000 to Depression relief funds. Travelers introduces a homeowners policy that combines fire, theft and liability coverages. Soon...

  • Page 6
    ...We continue to invest in the people, products and technology that are core to our competitive advantages. SMALL BUSINESS ADVOCACY As one of the nation's largest insurers of small businesses, Travelers advocated for their economic opportunity in 2012. The company supported public policy solutions to...

  • Page 7
    ... presented. 1996 1997 The Travelers Indemnity Company and The Aetna Casualty and Surety Company merge to form the nation's fourth largest property-casualty insurance company. Travelers launches the first insurance policy to protect individuals using personal computers for online banking. 7

  • Page 8
    ... range of customers with bond and insurance products and risk management services. Coverages include performance, payment and commercial surety and fidelity bonds for 2004 2007 Travelers Property Casualty Corp. and The St. Paul Companies, Inc. merge to form The St. Paul Travelers Companies, Inc...

  • Page 9
    ...*+ Executive Vice President - Select Accounts & Agribusiness Alan D. Schnitzer* + Vice Chairman - Financial, Professional & International Insurance and Field Management; Chief Legal Officer Richard D. Schug+ Senior Vice President & Actuary Peter Schwartz Senior Vice President & Group General Counsel...

  • Page 10
    ... RISK Hodgson (Chair) Beller Dasburg Chairman & CEO, The Travelers Companies, Inc. Director since 2001 Chairman & CEO, The GlenRock Group, LLC Director since 2002 Retired President & CEO, Switch and Data Facilities, Inc. Director since 2007 Retired President & COO, Abbott Laboratories Director...

  • Page 11
    ... (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 on which registered Common stock, without par value New York Stock Exchange...

  • Page 12
    ... 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 and Corporate Governance ...Executive Compensation ...Security...

  • Page 13
    ..., through its subsidiaries, in providing a wide range of commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals. The Company is incorporated as a general business corporation under the laws of the state of Minnesota...

  • Page 14
    ... a reasonable allowance for profit that considers the capital needed to support the Company's business. The Company has a disciplined approach to underwriting and risk management that over the long-term emphasizes product returns and profitable growth rather than premium volume or market share. The...

  • Page 15
    ...the customer and the Company work together in actively managing and controlling exposure and claims, and they share risk through policy features such as deductibles or retrospective rating. Products offered include workers' compensation, general liability, umbrella and commercial auto coverages, and...

  • 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
    ... independent agencies and brokers located throughout the United States that are serviced by 118 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...

  • Page 18
    ... the United States, and generated $82 million in fee income in 2012. Workers' compensation accounted for approximately 73% of sales to National Accounts customers during 2012, based on direct written premiums and fees. Industry-Focused Underwriting markets commercial property and casualty insurance...

  • Page 19
    ... the insured during the policy period; and • 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 administration services to organizations...

  • Page 20
    ...General Liability. Insures businesses against third-party claims arising from accidents occurring on their premises or arising out of their operations, including as a result of injuries sustained from products sold. Specialized liability policies may also include coverage for directors' and officers...

  • Page 21
    ... contracts to provide claims and policy management services. National Accounts services approximately 33% of the total workers' compensation assigned risk market, making the Company one of the largest servicing carriers in the industry. There are several other business groups in Business Insurance...

  • Page 22
    ... others, lawyers, design professionals and real estate agents; and professional and management liability, property, workers' compensation, auto and general liability and fidelity insurance for financial institutions. • International, through its operations in the United Kingdom, Canada and the...

  • Page 23
    ... 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 builds relationships with wellestablished, independent insurance agencies and brokers. In selecting new...

  • Page 24
    ... to workers' compensation coverage in the United States), public and product liability (the equivalent of general liability), professional indemnity (similar to professional liability coverage), motor (similar to automobile coverage in the United States), property, surety, marine, aviation, personal...

  • Page 25
    ... national property and casualty insurance companies that write most classes of business using traditional products and pricing and, to a lesser extent, regional insurance companies and companies that have developed niche programs for specific industry segments. Bond & Financial Products underwrites...

  • Page 26
    ... GEICO to underwrite homeowners business for their auto customers. In 2009, the Company began marketing its insurance products directly to consumers, largely through online channels. The investment in the direct-to-consumer initiative generated modest premium volume for Personal Insurance in recent...

  • Page 27
    ... its pricing segmentation. The Company's product management area establishes underwriting guidelines integrated with its filed pricing and rating plans, which enable Personal Insurance to effectively execute its risk selection and pricing processes. Pricing for personal automobile insurance is...

  • Page 28
    ... coverages for umbrella liability, identity fraud, and weddings and special events. Net Retention Policy The following describes the Company's retention policy with respect to the Personal Insurance segment as of January 1, 2013. The Company generally retains its primary personal auto exposures...

  • Page 29
    ... segment. The Company's home office operations provide additional support in the form of workflow design, quality management, information technology, advanced management information and data analysis, training, financial reporting and control, and human resources strategy. This structure permits the...

  • Page 30
    ...of which workers' compensation claims comprise a significant portion. In cases where the Company did not receive a release from the claimant, the amount due from the life insurance company related to the structured settlement is included in the Company's consolidated balance sheet as a liability and...

  • Page 31
    ... for the period July 1, 2012 through June 30, 2013, as well as certain other catastrophe-related coverages: Layer of Loss Reinsurance Coverage In-Force $0 - $1.5 billion ... Loss 100% retained by the Company, except for certain losses covered by the Earthquake Excess-of-Loss Treaty as described...

  • Page 32
    ... percentages to insured industry losses in each state in the covered area as reported by a third-party service provider. The reinsurance agreement meets the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts. Amounts payable to the Company under...

  • Page 33
    ... property and related coverages in the Company's Personal Insurance segment, and within the ''Select Accounts'' and the ''Commercial Accounts'' business groups within the Company's Business Insurance segment. Covered losses under the agreement are limited to the following geographic locations...

  • Page 34
    ...30, 2013, the Company has entered into an earthquake excess-of-loss treaty that provides for up to $142.5 million of coverage, subject to a $125 million retention, for earthquake losses incurred under policies written by the National Property business unit in the Company's Business Insurance segment...

  • Page 35
    ... reserves for most long-term disability and annuity claim payments, primarily arising from workers' compensation insurance and workers' compensation excess insurance policies, were discounted to the present value of estimated future payments using a rate of 5% at both December 31, 2012 and 2011...

  • Page 36
    ... and the use of retrospectively rated insurance policies. For example, reserves for long-term disability and annuity claim payments (tabular reserves), primarily arising from workers' compensation insurance and workers' compensation excess insurance policies, are discounted to reflect the time value...

  • Page 37
    ... business, the Company pays the deductible portion of a casualty insurance claim and then seeks reimbursement from the insured, plus a fee. This fee is reported as fee income for GAAP reporting, but as an offset to claim expenses paid for statutory reporting. Retroactive reinsurance balances...

  • Page 38
    ... points to LIBOR plus 175 basis points, depending on the Company's debt ratings), the Company's commercial paper program, or in the event that the Company were to access the capital markets by issuing debt or similar types of securities. See ''Item 7-Management's Discussion and Analysis of Financial...

  • Page 39
    ... Insurance Company of Canada and Travelers Insurance Company Limited as of February 19, 2013. The table presents the position of each rating in the applicable agency's rating scale. A.M. Best Moody's S&P Fitch Travelers Reinsurance Pool(a)(b) ...Travelers C&S Co. of America ...First Floridian Auto...

  • Page 40
    ...December 19, 2012, Fitch affirmed all ratings of the Company. The outlook for all ratings is stable. • On January 24, 2013, S&P assigned its ''AAǁ'' financial strength rating to Travelers Insurance Company of Canada. The outlook is stable. INVESTMENT OPERATIONS The majority of funds available for...

  • Page 41
    ...to perform an ORSA and, upon request, file an ORSA report that describes for the regulators the ERM process used by an insurer. See ''Enterprise Risk Management'' herein for further discussion of the Company's ERM. TRV's insurance subsidiaries are collectively licensed to transact insurance business...

  • Page 42
    ... on the payment of dividends. Rate and Rule Approvals. TRV's insurance subsidiaries are subject to each state's laws and regulations regarding rate and rule approvals. The applicable laws and regulations are used by states to establish standards to ensure that rates are not excessive, inadequate...

  • Page 43
    ... 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. These ratios assist state insurance departments in executing their statutory...

  • Page 44
    ... of Lloyd's, is subject to the laws and insurance regulation of that jurisdiction. In addition, TRV's managing agency has an underwriting agency in Singapore, the operations of which are regulated by the Monetary Authority of Singapore. A TRV subsidiary, Travelers Casualty and Surety Company, has...

  • Page 45
    ... transactions affecting the control of or the ownership of common stock, including transactions that could be advantageous to TRV's shareholders. ENTERPRISE RISK MANAGEMENT As a large property and casualty insurance enterprise, the Company is exposed to many risks. These risks are a function of...

  • Page 46
    ... support the Company's long-term financial strategies and objectives. In addition to the day-to-day ERM activities within the Company's business units, other key internal risk management functions include the Management and Operating Committees (comprised of the Company's Chief Executive Officer...

  • Page 47
    ... Filings The Company's Internet website is www.travelers.com. Information on the Company's website is not incorporated by reference herein and is not a part of this Form 10-K. The Company makes available free of charge on its website or provides a link on its website to the Company's Annual Report...

  • Page 48
    ...policies, receiving a commission from the insurer for selling the business and a fee for servicing it. An independent agent represents multiple insurance companies and searches the market for the best product for its client. A contract that pays a periodic benefit over the remaining life of a person...

  • Page 49
    ... party, receiving a commission from the insurer or reinsurer for placement and other services rendered. The percentage of surplus, or the dollar amount of exposure, that an insurer or reinsurer is willing or able to place at risk. Capacity may apply to a single risk, a program, a line of business...

  • Page 50
    ... designed to cover 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...

  • Page 51
    ... used in the pricing of an insurance product. The change in exposure is the amount of change in premium on policies that renew attributable to the change in portfolio risk. Deficiency ... Demand surge ... Direct written premiums ... Earned premiums or premiums earned ... Excess liability ...Excess...

  • Page 52
    ... insurers doing business in those states. Should insolvencies occur, these funds are available to meet some or all of the insolvent insurer's obligations to policyholders. Total cash, short-term invested assets and other readily marketable securities held by the holding company. Holding company...

  • Page 53
    ...for movable objects such as personal effects, personal property, jewelry, furs, fine art and others. Financial ratios calculated by the NAIC to assist state insurance departments in monitoring the financial condition of insurance companies. An insurance policy where the customer assumes at least $25...

  • Page 54
    ...of the insurance commissioners or directors of all 50 states, the District of Columbia and the five U.S. territories organized to promote consistency of regulatory practice and statutory accounting standards throughout the United States. Direct written premiums plus assumed reinsurance premiums less...

  • Page 55
    ... 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 interest in tangible property for...

  • Page 56
    ..., based on the age of the cohort. Renewal rate change ... Reported claim development method ... Residual market (involuntary business) ... Insurance market which provides coverage for risks for those unable to purchase insurance in the voluntary market. Possible reasons for this inability include...

  • Page 57
    ... number of years or for life, typically in settlement of a claim under a liability policy, usually funded through the purchase of an annuity. Risk retention group ...Runoff business ... Salvage ...S-curve method ... Second-injury fund ... Self-insured retentions ...Servicing carrier ... Statutory...

  • Page 58
    ... enables an insurance company, after paying a claim under a policy, to recover the amount of the loss from another person or entity who is legally liable for it. A liability owed to a claimant (third party) who is not one of the two parties to the insurance contract. Insured liability claims are...

  • Page 59
    ... and federal laws) under which employers provide insurance for benefit payments to their employees for work-related injuries, deaths and diseases, regardless of fault. Underwriting gain or loss ...Unearned premium ...Voluntary market ...Wholesale broker ... Workers' compensation ... Item 1A. RISK...

  • Page 60
    ... of public policy, the evolving political environment, changes in the general economic climate and/or social responsibilities. We also may choose to write business in catastropheprone areas that we might not otherwise write for strategic purposes, such as improving our access to other underwriting...

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

  • Page 62
    ... what the ultimate settlement and administration of claims will cost, generally utilizing actuarial expertise and projection techniques, at a given accounting date. The process of estimating claims and claim adjustment expense reserves involves a high degree of judgment and is subject to a number of...

  • Page 63
    ... to the risk that certain investments may default or become impaired due to a deterioration in the financial condition of one or more issuers of the securities held in our portfolio, or due to a deterioration in the financial condition of an insurer that guarantees an issuer's payments of such...

  • Page 64
    ... and revenues in times of financial stress. • Some issuers may be unwilling to increase tax rates, or to reduce spending, to fund interest or principal payments on their municipal bonds, or may be unable to access the municipal bond market to fund such payments. The risk of widespread defaults...

  • Page 65
    ... risk that the estimated fair value (i.e., the carrying amount) of the portion of the investment portfolio that is carried at fair value as reflected in our financial statements is not reflective of prices at which actual transactions could occur. Given that economic and market conditions are highly...

  • Page 66
    ... umbrella or excess policies we have issued; • the resolution or adjudication of disputes pertaining to the amount of available coverage for asbestos and environmental claims in a manner inconsistent with our previous assessment of these claims; • the number and outcome of direct actions against...

  • Page 67
    ... often present complex coverage and damage valuation questions; • claims under directors' & officers' insurance policies relating to losses from involvement in financial market activities, such as mortgage or financial product origination, distribution, structuring or servicing and foreclosure...

  • Page 68
    ... used to access comparative rates for small commercial business. Agents, brokers or other third parties may also create alternate distribution channels for personal or commercial business, such as insurance exchanges, that may adversely impact product differentiation and pricing. Other technological...

  • Page 69
    ... new business; • premiums charged, contract terms and conditions, products and services offered (including the ability to design customized programs); • agent, broker and client relationships; • ability to keep pace relative to our competitors with changes in technology and information systems...

  • Page 70
    ... policyholders, independent agents and brokers. We are exposed to credit risk in our surety insurance operations, where we guarantee to a third party that our customer will satisfy certain performance obligations (e.g., a construction contract) or certain financial obligations. If a customer of ours...

  • Page 71
    ...systems also address authorization for lines of business, policyholders' 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...

  • Page 72
    ... adversely impact our business volumes, adversely impact our ability to access the capital markets and increase our borrowing costs. Claims-paying and financial strength ratings are important to an insurer's competitive position. Rating agencies periodically review insurers' ratings and change their...

  • Page 73
    ...applications for the marketing and sale of certain of our products, and we may increasingly rely on internet applications and toll-free numbers for distribution. In some instances, our agents and brokers are required to access separate business platforms to execute the sale of our personal insurance...

  • Page 74
    ...efforts may create enhanced risks. Among other risks: • Demand for new products or in new markets may not meet our expectations. • To the extent we are able to market new products or expand in new markets, our risk exposures may change, and the data and models we use to manage such exposures may...

  • Page 75
    ...provide competitive services to new and existing customers in a cost effective manner and our ability to implement our strategic initiatives could be adversely impacted. If we experience difficulties with technology, data security and/or outsourcing relationships, our ability to conduct our business...

  • Page 76
    ... and process new and renewal business, provide customer service, pay claims in a timely manner or perform other necessary business functions. Our operations rely on the reliable and secure processing, storage and transmission of confidential and other information in our computer systems and networks...

  • Page 77
    ... group supervision. The IAIS is working with the Financial Stability Board (FSB) created by the G-20 and is developing a methodology for determining whether and which, if any, insurance companies pose a systemic risk to the global economy. Such insurers would be designated ''global systemically...

  • Page 78
    ... U.S. financial reporting system, including for companies such as us. The FASB and the International Accounting Standards Board (IASB) have also embarked on a long-term project to converge GAAP and IFRS. Additionally, the IASB and the FASB are in the process of developing a global insurance standard...

  • Page 79
    ... underwriting, claim processing and investment activities, many of which are highly complex. These activities often are subject to internal guidelines and policies, as well as legal and regulatory standards. A control system, no matter how well designed and operated, can provide only reasonable...

  • Page 80
    ...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 81
    ... owners. The following table sets forth the high and low closing sales prices of the Company's common stock for each quarter during the last two fiscal years and the amount of cash dividends declared per share. Cash Dividend Declared High Low 2012 First Quarter . . Second Quarter . Third Quarter...

  • Page 82
    ... 2009 2010 2011 2012 The Travelers Companies, Inc. (2) S&P 500 Index S&P 500 Property & Casualty Insurance (3) 9FEB201312011091 (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...

  • Page 83
    ...financial position, earnings, common share price, catastrophe losses, funding of the Company's qualified pension plan, capital requirements of the Company's operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions), market...

  • Page 84
    Item 6. SELECTED FINANCIAL DATA 2012 At and for the year ended December 31, 2011 2010 2009 (in millions, except per share amounts) 2008 Total revenues ...Net income ...Total investments ...Total assets ...Claims and claim adjustment expense reserves Total long-term debt ...Total liabilities ......

  • Page 85
    ... income of $2.89 billion ($2.32 billion after-tax) • Operating cash flows of $3.23 billion 2012 Consolidated Financial Condition • Total investments of $73.84 billion; fixed maturities and short-term securities comprise 93% of total investments • Total assets of $104.94 billion • Total debt...

  • Page 86
    ... development (''underlying underwriting margins'') primarily resulting from lower non-catastrophe weather-related losses in the Business Insurance and Personal Insurance segments and the impact of earned pricing that exceeded loss cost trends in the Business Insurance and Financial, Professional...

  • Page 87
    .... In the Personal Insurance segment, earned premiums in 2012 increased by less than 1% over 2011. Earned premiums in 2011 were $22.09 billion, $658 million or 3% higher than in 2010. In the Business Insurance segment, earned premiums in 2011 increased by 5% over 2010. In the Financial, Professional...

  • Page 88
    ... lower long-term reinvestment yields available in the market. Net investment income generated by non-fixed maturity investments was $476 million in 2012, an increase of $121 million over 2011, primarily driven by improved results from the Company's real estate partnerships and hedge fund investments...

  • Page 89
    ... severe winter storms throughout the United States. Catastrophe losses in 2011 also included losses from floods in Thailand and an earthquake in Japan that impacted the Financial, Professional & International Insurance segment. Net favorable prior year reserve development in 2012 and 2011 was $940...

  • Page 90
    ... prior year tax matters. The Company's effective tax rate was 22%, (5%) and 25% in 2012, 2011 and 2010, respectively. The Company's effective tax rates in 2012 and 2010 were lower than the statutory rate of 35% primarily due to the impact of tax-exempt investment income on the calculation of the...

  • Page 91
    ... the underwriting expense ratio in 2010. Written Premiums Consolidated gross and net written premiums were as follows: (for the year ended December 31, in millions) Gross Written Premiums 2012 2011 2010 Business Insurance ...Financial, Professional & International Insurance ...Personal Insurance...

  • Page 92
    RESULTS OF OPERATIONS BY SEGMENT Business Insurance Results of the Company's Business Insurance segment were as follows: (for the year ended December 31, in millions) 2012 2011 2010 Revenues: Earned premiums ...Net investment income Fee income ...Other revenues ... ... ... ... ... ... ... ... ... ...

  • Page 93
    ... 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 residual market pools. Fee income in 2012 increased by $27...

  • Page 94
    ... increase in 2012 included the impact of higher employee-related costs. General and administrative expenses in 2011 were $1.94 billion, $40 million or 2% higher than in 2010, primarily driven by a higher level of state assessment expenses related to workers' compensation business in New York, which...

  • Page 95
    ...market were as follows: (for the year ended December 31, in millions) Gross Written Premiums 2012 2011 2010 Select Accounts ...Commercial Accounts ...National Accounts ...Industry-Focused Underwriting . . Target Risk Underwriting ...Specialized Distribution ...Total Business Insurance Core Business...

  • Page 96
    ... in workers' compensation residual market pools contributed to premium growth in 2012. Net written premiums of $782 million in 2011 decreased by 3% from 2010, primarily reflecting negative retrospective premium adjustments related to prior year policies. Business retention rates remained high in...

  • Page 97
    ...-exposed lines of business), the impact of the termination of an exclusive broker relationship in the Republic of Ireland, the Company's withdrawal from personal insurance business in the Republic of Ireland, competitive market conditions and, to a lesser extent, foreign currency rates of exchange...

  • Page 98
    ... the catastrophe-exposed lines of business) and competitive market conditions. Earned premiums in 2011 benefited slightly from the favorable impact of foreign currency exchange rates. In addition, earned premiums in 2010 benefited from the impact of a reduction in surety reinsurance costs associated...

  • Page 99
    ....4% in 2011 was 4.5 points lower than the 2010 ratio of 50.9%. Catastrophe losses in 2011 and 2010 accounted for 1.7 and 2.4 points of the loss and loss adjustment expense ratio, respectively. Net favorable prior year reserve development provided 11.3 points and 7.8 points of benefit to the loss and...

  • Page 100
    ... business volume in the Company's operations at Lloyd's, lower surety volumes in Canada, the impact of the Company's withdrawal from personal insurance business in the Republic of Ireland and, to a lesser extent, the impact of foreign currency rates of exchange. Excluding the surety line of business...

  • Page 101
    ... of Ireland. New business volume in International in 2011 decreased from 2010, primarily reflecting the Company's withdrawal from personal insurance business in the Republic of Ireland and intentional underwriting actions in the Company's operations at Lloyd's. Renewal premium changes were flat...

  • Page 102
    ... in 2010. The changes in deferred acquisition costs in both 2012 and 2011 differed from the change in earned premiums, primarily reflecting an increase in the number of agents reverting to a contingent commission compensation program (the costs of which are classified in ''general and administrative...

  • Page 103
    ... in 2011 was 15.4 points higher than the 2010 ratio of 68.1%. Catastrophe losses accounted for 19.6 and 8.1 points of the loss and loss adjustment expense ratio in 2011 and 2010, respectively. Net favorable prior year reserve development provided 1.5 points and 1.2 points of benefit to the loss and...

  • Page 104
    ... 2010. In the Agency Homeowners and Other line of business, net written premiums in 2012 were slightly lower than in 2011. Business retention rates remained strong but were lower than in 2011, while new business levels in 2012 declined from 2011, largely as a result of the Company's pricing strategy...

  • Page 105
    ...in 2012, 2011 and 2010 was $246 million, $251 million and $252 million, respectively. ASBESTOS CLAIMS AND LITIGATION The Company believes that the property and casualty insurance industry has suffered from court decisions and other trends that have expanded insurance coverage for asbestos claims far...

  • Page 106
    ... quarter of 2012, the Company completed its annual in-depth asbestos claim review. As in prior years, the annual claim review considered active policyholders and litigation cases for potential product and ''non-product'' liability. The Company noted the following trends: • continued high level of...

  • Page 107
    ... reviews include an analysis of exposure and claim payment patterns by policyholder category, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative actions. The Company also analyzes developing payment patterns among policyholders in the Home Office, Field Office...

  • Page 108
    ... coverage litigation. Policyholders are identified for the annual 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 109
    ... to claimants. Generally, the Company strives to extinguish any obligations it may have under any policy issued to the policyholder for past, present and future environmental liabilities and extinguish any pending coverage litigation dispute with the policyholder. This form of settlement is commonly...

  • Page 110
    ... the Company has issued to the policyholder; the involvement of other insurers; the potential for other available coverage, including the number of years of coverage; the role, if any, of non-environmental claims or potential non-environmental claims in any resolution process; and the applicable law...

  • Page 111
    ..., and/or the number of, asbestos and environmental claims beyond that which is anticipated, the role 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...

  • Page 112
    ... 31, 2012 were $73.84 billion, of which 93% was invested in fixed maturity and short-term investments, 1% in equity securities, 1% in real estate and 5% in other investments. Because the primary purpose of the investment portfolio is to fund future claims payments, the Company employs a conservative...

  • Page 113
    ... Baa1 Total financial ...project ... Total all other corporate bonds and redeemable preferred stock ...Total fixed maturities ... Aa2 $64,232 Aa2 (1) Rated using external rating agencies or by the Company when a public rating does not exist. (2) Sovereign corporate securities include corporate...

  • Page 114
    ... escrow accounts are verified as to their sufficiency by an independent verification agent of the underwriter, issuer or trustee and are almost exclusively comprised of U.S. Treasury securities. Moody's Investors Service has assigned negative outlooks to municipal securities in both the state sector...

  • Page 115
    ...... (1) Rated using external rating agencies or by the Company when a public rating does not exist. Ratings shown are the higher of the rating of the underlying issuer or the insurer in the case of securities enhanced by third-party insurance for the payment of principal and interest in the event of...

  • Page 116
    ...agencies or by the Company when a public rating does not exist. The Company bases its investment decision on the underlying credit characteristics of the municipal security. While its municipal bond portfolio includes a number of securities that were enhanced by third-party insurance for the payment...

  • Page 117
    ... Rated using external rating agencies or by the Company when a public rating does not exist. (2) The Company does not have direct exposure to sovereign debt issued by the Republic of Ireland, Italy, Greece, Portugal or Spain. (3) No other country accounted for 2.5% or more of total debt securities...

  • Page 118
    ... A3 Baa1 Subtotal ...Total ... (1) Rated using external rating agencies or by the Company when a public rating does not exist. The table includes $225 million of short-term securities which have the highest ratings issued by external rating agencies for short-term issuances. For purposes of this...

  • Page 119
    ...'s relatively small size and the underlying credit strength of these securities. Equity Securities Available for Sale, Real Estate and Short-Term Investments See note 1 of notes to the Company's consolidated financial statements for further information about these invested asset classes. 107

  • Page 120
    ... average monthly balance of securities on loan during 2012 and 2011 was $197 million and $170 million, respectively. Borrowers of these securities provide collateral equal to at least 102% of the market value of the loaned securities plus accrued interest. The Company has not incurred any investment...

  • Page 121
    ... at December 31, 2012 represent less than 1% of the combined fixed maturity and equity security portfolios on a pretax basis and less than 1% of shareholders' equity on an after-tax basis. For fixed maturity investments where fair value is less than the carrying value and the Company did not reach...

  • Page 122
    ... third-party computer modeling processes, to analyze catastrophic events and the risks associated with them. The Company uses these analyses and methods to make underwriting and reinsurance decisions designed to manage its exposure to catastrophic events. There are no industry-standard methodologies...

  • Page 123
    ... trends. Accordingly, the Company's management uses the percentage of common equity calculated on this basis as a metric to evaluate the potential impact of a single hurricane or single earthquake on the Company's financial position for purposes of making underwriting and reinsurance decisions. The...

  • Page 124
    ... loss amount. In addition, more than one such event could occur in any period. Moreover, 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...

  • Page 125
    ... and businesses. The Company regularly reviews emerging issues, such as changing climate conditions, to consider potential changes to its modeling and the use of such modeling, as well as to help determine the need for new underwriting strategies, coverage modifications or new products. REINSURANCE...

  • Page 126
    ...of which workers' compensation claims comprise a significant portion. In cases where the Company did not receive a release from the claimant, the amount due from the life insurance company related to the structured settlement is included in the Company's consolidated balance sheet as a liability and...

  • Page 127
    ... 31, 2012 (in millions). Also included is the A.M. Best rating of the Company's predominant insurer from each insurer group at February 19, 2013: Group Structured Settlements A.M. Best Rating of Group's Predominant Insurer Fidelity & Guaranty Life Group . MetLife Group ...Genworth Financial Group...

  • Page 128
    ... business. Property and casualty insurance market conditions are expected to remain competitive during 2013 for new business, not only in Business Insurance and Financial, Professional & International Insurance, but especially in Personal Insurance, where price comparison technology used by agents...

  • Page 129
    ...In Agency Homeowners and Other, the Company anticipates a decline in underlying underwriting margins during 2013, reflecting a return to non-catastrophe weather-related loss levels consistent with the Company's expectations. Also in Personal Insurance, the Company's direct to consumer initiative, as...

  • Page 130
    ... ratings from independent rating agencies, share price, funding of the Company's qualified pension plan, strategic initiatives and other market conditions. For information regarding the Company's common share repurchases in 2012, see ''Liquidity and Capital Resources'' in this report. The Company...

  • Page 131
    ...2012, total cash and short-term invested assets aggregating $2.03 billion and having a weighted average maturity of 76 days were held in the United States by the holding company. These assets are sufficient to meet the holding company's current liquidity requirements and are in excess of the Company...

  • Page 132
    ... market leader in surety in Brazil based on market share. The Company's investment was funded with cash provided internally from an operating subsidiary of the Company. The Company's investment portfolio is managed to support its insurance operations; accordingly, the portfolio is positioned to meet...

  • Page 133
    ...March 8, 2013. Share Repurchases. The Company's board of directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act...

  • Page 134
    ... common stock. Capital Resources Capital resources reflect the overall financial strength of the Company and its ability to borrow funds at competitive rates and raise new capital to meet its needs. The following table summarizes the components of the Company's capital structure at December 31, 2012...

  • Page 135
    ...ratings. At December 31, 2012, that cost would have been LIBOR plus 125 basis points had there been any amounts outstanding under the credit agreement. This line of credit also supports the Company's commercial paper program. Shelf Registration. The Company has filed with the Securities and Exchange...

  • Page 136
    ... calculated using the threemonth LIBOR rate as of December 31, 2012. See note 8 of notes to the Company's consolidated financial statements for a further discussion of outstanding indebtedness. Because the amounts reported in the foregoing table include principal and interest, the total long-term...

  • Page 137
    ... note 5 of notes to the Company's consolidated financial statements. In order to qualify for reinsurance accounting, a reinsurance agreement must indemnify the insurer from insurance risk, i.e., the agreement must transfer amount and timing risk. Since the timing and amount of cash inflows from such...

  • Page 138
    ...from payment of current claim liabilities. Second injury funds cover the cost of any additional benefits for aggravation of a pre-existing condition. For loss-based assessments, the cost is shared by the insurance industry and self-insureds, funded through assessments to insurance companies and self...

  • Page 139
    ...to actual plan performance and funded status at the time, that it may make discretionary pension contributions of approximately $75 million to $100 million annually over the next few years. The Qualified Plan assets are managed to maximize long-term total return. The Company's overall strategy is to...

  • Page 140
    ... by product line were as follows: (at December 31, in millions) Case 2012 IBNR Total Case 2011 IBNR Total General liability ...Commercial property ...Commercial multi-peril ...Commercial automobile ...Workers' compensation ...Fidelity and surety ...Personal automobile ...Homeowners and personal...

  • Page 141
    ...on the Company's consolidated balance sheet. The claims and claim adjustment expense reserves are reviewed regularly by qualified actuaries employed by the Company. The process of estimating claims and claim adjustment expense reserves involves a high degree of judgment and is subject to a number of...

  • Page 142
    ... 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 143
    ... the policy issuance. The occurrence form, which accounts for much of the reserve development in asbestos and environmental exposures, is also used to provide coverage for construction general liability, including construction defect. Occurrence-based forms of insurance for general liability...

  • Page 144
    ... risk factors within product line components. The effect of a particular risk factor on estimates of claim liabilities cannot be isolated in most cases. For example, estimates of potential claim settlements may be impacted by the risk associated with potential court rulings, but the final settlement...

  • Page 145
    ... by product line component, based on the volume of business for that component and the reliability of an individual accident year estimate. Management's estimates At least once per quarter, certain members of Company management meet with the Company's actuaries to review the latest claims and claim...

  • Page 146
    ... 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 responsible for providing oversight...

  • Page 147
    ...by component for the general liability product line. The components in this product line with the longest latency, longest reporting lags, largest potential dollars involved and greatest claim settlement complexity are asbestos and environmental. Components that include latency, reporting lag and/or...

  • Page 148
    ...law • Shifts in lawsuit mix between federal and state courts • Changes in claim adjuster office structure (causing distortions in the data) • The potential impact of inflation on loss costs • Changes in settlement patterns General liability book of business risk factors • Changes in policy...

  • Page 149
    .... The claim reporting and settlement process for property coverage claim reserves is generally restricted to the insured and the insurer. Overall, the claim liabilities for this line create a low estimation risk, except possibly for catastrophes and business interruption claims. Commercial property...

  • Page 150
    ...of time to close claims. The reserving risk for this line is dominated by the liability coverage portion of this product, except occasionally in the event of catastrophic or large single losses. The reserving risk for this line differs from that of the general liability product line and the property...

  • Page 151
    ... development driven by late reporting of hail claims incurred in 2010. 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...

  • Page 152
    ... of long payment tails, the reporting lags are generally short, settlements are generally not complex, and most of the liability can be considered high frequency with moderate severity. The largest reserve risk generally comes from the low frequency, high severity claims providing lifetime coverage...

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

  • Page 154
    ... loss development are generally not applicable to low frequency, high severity policies. Surety has certain components that are generally considered short tail coverages with short reporting lags, although large individual construction and commercial surety contracts can result in a long settlement...

  • Page 155
    ... the contract surety business in this product line for the 2008 and prior accident years. Personal Automobile Personal automobile includes both short and long tail coverages. The payments that are made quickly typically pertain to auto physical damage (property) claims and property damage (liability...

  • Page 156
    ... to treatment Personal automobile book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.) • Changes in underwriting standards • Changes in the use of credit data for rating and underwriting Unanticipated changes in risk factors can...

  • Page 157
    ... 2007-2010 accident years. 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 and the insurer. Claims on...

  • Page 158
    ...in demand for those materials and services Homeowners book of business risk factors • Policy provisions mix (e.g., deductibles, policy limits, endorsements, etc.) • Degree of concentration of policyholders • Changes in underwriting standards • Changes in the use of credit data for rating and...

  • Page 159
    ... or lead-insurer for claim settlement purposes. International and other reserves are generally analyzed by program/pool, country and general coverage category (e.g., U.S. Liability-excess of loss reinsurance, or General Liability- Municipalities-by country). The business is also generally split by...

  • Page 160
    ... international product lines as insurers domiciled outside of the U.S. do not file U.S. statutory reports. Comparative historical information on runoff business is not indicative of reasonably possible one-year changes in the reserve estimate for this mix of runoff business. Accordingly, the Company...

  • Page 161
    ... 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 a pool participant. In the event a member...

  • Page 162
    ...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 value estimates provided from this pricing...

  • Page 163
    ... processes including randomly selecting purchased or sold securities and comparing execution prices to the estimates from the pricing service as well as reviewing reports that contain securities whose valuation did not change from their previous valuation (stale price review). The Company also uses...

  • Page 164
    ... the financial condition, near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices. Other-Than-Temporary Impairments of Fixed Maturities and Equity Securities For fixed maturity investments...

  • Page 165
    ... companies that file financial statements with the SEC. In July 2012, the SEC staff issued a final report on the SEC work plan which concluded that IFRS provide high quality accounting standards, but also indicated concerns with funding, consistency of application and enforcement of IFRS globally...

  • Page 166
    ... rate risk and credit risk associated with investments in fixed maturity securities. The portfolio duration relative to the liabilities' duration is primarily managed through cash market transactions and treasury futures transactions. For additional information regarding the Company's investments...

  • Page 167
    ... 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, insurance reserves and shareholders' equity denominated in foreign currencies. Cash flows from...

  • Page 168
    ... 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 the impact on the market...

  • Page 169
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ...Consolidated Statement of Income for the years ended December 31, 2012, 2011 and 2010 ...Consolidated Statement of Comprehensive Income for...

  • Page 170
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the...

  • Page 171
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (in millions, except per share amounts) For the year ended December 31, 2012 2011 2010 Revenues Premiums ...Net investment income ...Fee income ...Net realized investment gains(1) Other revenues ... ... ... ... ... ... ...

  • Page 172
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in millions) For the year ended December 31, 2012 2011 2010 Net income ...Other comprehensive income: Changes in net unrealized gains on investment securities: Having no credit losses recognized in the ...

  • Page 173
    ...$59,994) ...Equity securities, available for sale, at fair value (cost $462 and $414) ...Real estate investments ...Short-term securities ...Other investments ...Cash ...Investment income accrued Premiums receivable ...Reinsurance recoverables . . Ceded unearned premiums . Deferred acquisition costs...

  • Page 174
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (in millions) For the year ended December 31, 2012 2011 2010 Convertible preferred stock-savings plan Balance, beginning of year ...Redemptions ...Conversion to common stock ...Balance, end of ...

  • Page 175
    ... of common stock-employee share options ...Treasury stock acquired-share repurchase authorization ...Treasury stock acquired-net employee share-based compensation Excess tax benefits from share-based payment arrangements ... Net cash used in financing activities ...Effect of exchange rate changes on...

  • Page 176
    ... manner in which the two-step impairment test of goodwill is applied. Under the updated guidance, an entity may assess qualitative factors (such as changes in management, key personnel, strategy, key technology or customers) that may impact a reporting unit's fair value and lead to the determination...

  • Page 177
    ... any effect on the Company's results of operations, financial position or liquidity. Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts In October 2010, the FASB issued updated guidance to address diversity in practice for accounting for costs associated with acquiring...

  • Page 178
    ... income. Real Estate Investments The Company's real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. Real estate is recorded on the purchase date at the purchase price, which generally represents fair value, and is supported by...

  • Page 179
    ... and structured securities) is recalculated and adjusted periodically based upon actual historical and/or projected future cash flows, which are obtained from a widelyaccepted securities data provider. The adjustments to the yield for highly rated prepayable fixed maturities are accounted for using...

  • Page 180
    ... the financial condition, near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices. Other-Than-Temporary Impairments of Fixed Maturities and Equity Securities For fixed maturity investments...

  • Page 181
    ... FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) by the Company. The Company determines the undiscounted recovery value by allocating the estimated value of the issuer to the Company's assessment of the priority of claims. The present value of the cash...

  • Page 182
    ... funds and real estate partnerships that generally report investments on their balance sheet at fair value and are accounted for by the Company using the equity method of accounting. The Company reviews these investments for impairment no less frequently than quarterly and monitors the performance...

  • Page 183
    ... 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 the...

  • Page 184
    ... of estimated future payments. The liabilities for losses for most long-term disability and annuity claim payments, primarily arising from workers' compensation insurance and workers' compensation excess insurance policies, were discounted using a rate of 5% at both December 31, 2012 and 2011. These...

  • Page 185
    ...TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) and 2010, respectively. Policyholder dividends are accrued against earnings using best available estimates of amounts to be paid. The liability...

  • Page 186
    ...: 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...

  • Page 187
    ... the customer and the Company work together in actively managing and controlling exposure and claims and they share risk through policy features such as deductibles or retrospective rating. Products offered include workers' compensation, general liability, umbrella and commercial auto coverages, and...

  • Page 188
    ... 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 189
    ... others, lawyers, design professionals and real estate agents; and professional and management liability, property, workers' compensation, auto and general liability and fidelity insurance for financial institutions. • International, through its operations in the United Kingdom, Canada and the...

  • Page 190
    ...and rental properties. The Company writes coverage for boats and yachts and valuable personal items such as jewelry, and also writes coverages for umbrella liability, identity fraud, and weddings and special events. 2. SEGMENT INFORMATION The accounting policies used to prepare the segment reporting...

  • Page 191
    ...the Company's revenues, operating income (loss) 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 2012 Premiums ...Net investment income...

  • Page 192
    ... FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) Net written premiums by market were as follows: (for the year ended December 31, in millions) 2012 2011 2010 Business Insurance: Select Accounts ...Commercial Accounts ...National Accounts ...Industry-Focused Underwriting...

  • Page 193
    ... FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) Business Segment Reconciliations (for the year ended December 31, in millions) 2012 2011 2010 Revenue reconciliation Earned premiums Business Insurance: Workers' compensation Commercial automobile Commercial property . . General...

  • Page 194
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. SEGMENT INFORMATION (Continued) (at December 31, in millions) 2012 2011 Asset reconciliation: Business Insurance ...Financial, Professional & International Insurance ...Personal Insurance ......

  • Page 195
    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, 2012, in millions) Amortized ...

  • Page 196
    ...-guaranteed CMO holdings at December 31, 2012 and 2011, respectively, was ''B2'' and ''Ba1,'' respectively. The average credit rating of all of the above securities was ''A1'' and ''Aa3'' at December 31, 2012 and 2011, respectively. At December 31, 2012 and 2011, the Company held commercial mortgage...

  • Page 197
    ... 31, 2012 and 2011, the Company's insurance subsidiaries had $4.94 billion and $4.70 billion, respectively, of securities on deposit at financial institutions in certain states pursuant to the respective states' insurance regulatory requirements. Funds deposited with third parties to be used as...

  • Page 198
    ... 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 199
    ... by length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4. The Company also relies upon estimates of several factors in its review and evaluation of...

  • Page 200
    ... stock ...Total equity securities ...Total ... The following table summarizes, for all fixed maturities and equity securities reported at fair value for which fair value is less than 80% of amortized cost at December 31, 2012, the gross unrealized investment loss by length of time those securities...

  • Page 201
    ... COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. INVESTMENTS (Continued) These unrealized losses at December 31, 2012 represented less than 1% of the combined fixed maturity and equity security portfolios on a pretax basis and less than 1% of shareholders...

  • Page 202
    ..., respectively. The Company defines its below investment grade assets as those securities rated below investment grade by external rating agencies, or the equivalent by the Company when a public rating does not exist. Such assets include publicly traded below investment grade bonds and certain other...

  • Page 203
    ... Platinum Underwriters Holdings, Ltd., a publicly-held company. These warrants were not designated and did not qualify for hedge accounting, and, as such, the mark-to-market changes in fair value were reflected in net realized investment gains. In October 2010, the Company sold these stock purchase...

  • Page 204
    ...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 value estimates provided from this pricing...

  • Page 205
    ...FINANCIAL STATEMENTS (Continued) 4. FAIR VALUE MEASUREMENTS (Continued) relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, the pricing service uses an Option Adjusted Spread model to develop prepayment and interest rate...

  • Page 206
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. FAIR VALUE MEASUREMENTS (Continued) Equities-Public Common and Preferred For public common and preferred stocks, the Company receives prices from a nationally recognized pricing service that are based on observable market transactions and...

  • Page 207
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. FAIR VALUE MEASUREMENTS (Continued) (at December 31, 2012, in millions) Total Level 1 Level 2 Level 3 Invested assets: Fixed maturities U.S. Treasury securities and obligations of U.S. ...

  • Page 208
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. FAIR VALUE MEASUREMENTS (Continued) (at December 31, 2011, in millions) Total Level 1 Level 2 Level 3 Invested assets: Fixed maturities U.S. Treasury securities and obligations of U.S. ...

  • Page 209
    ... Investments Total Balance at December 31, 2010 ...Total realized and unrealized investment gains (losses): Reported in net realized investment gains(1) ...Reported in increases (decreases) in other comprehensive income Purchases, sales and settlements/maturities: Purchases ...Sales ...Settlements...

  • Page 210
    ...957 $7,715 $ 100 Level 2 $78 $- - Level 3 Level 1 Financial assets: Short-term securities ...Financial liabilities: Debt ...Commercial paper ... $3,594 $6,505 $ 100 $3,594 $7,583 $ 100 $2,472 $ - - $1,029 $7,583 $ 100 $93 $- - The Company utilized a pricing service to estimate fair value for...

  • Page 211
    ...workers' compensation claims comprise a significant portion. In cases where the Company did not receive a release from the claimant, the structured settlement is included in reinsurance recoverables as the Company retains the contingent liability to the claimant. In the event that the life insurance...

  • Page 212
    ... $10,712 5,910 2,020 3,225 $11,155 The Terrorism Risk Insurance Program (the Program) is a Federal program administered by the Department of the Treasury that provides for a system of shared public and private compensation for certain insured losses resulting from acts of terrorism or war committed...

  • Page 213
    ... liability (other than directors and officers'), surety, burglary and theft, and farm-owners multi-peril. In the case of a war declared by Congress, only workers' compensation losses are covered by the Program. All commercial property and casualty insurers licensed in the United States are generally...

  • Page 214
    ... during the first quarter of 2012. (2) The fair value adjustment of $191 million was recorded in connection with the merger of The St. 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...

  • Page 215
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued) The following presents a summary of the Company's amortization expense for other intangible assets by major asset class: (for the year ended December 31, in millions) 2012 2011 2010 Customer-related...

  • Page 216
    ... FINANCIAL STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses: (at and for the year ended December 31, in millions) 2012 2011 2010 Claims...

  • Page 217
    ... STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) Business Insurance. Net favorable prior year reserve development of $467 million in 2012 was concentrated in the general liability product line for accident years 2010 and prior (excluding increases to asbestos and environmental...

  • Page 218
    ... in Canada, primarily in the surety, directors and officers, and general liability lines of business for recent accident years and better than expected development in the Company's operation at Lloyd's in the aviation, kidnap & ransom, and property lines for recent accident years. Personal Insurance...

  • Page 219
    ...& International Insurance. Net favorable prior year reserve development totaled $259 million in 2010. In Bond & Financial Products, net favorable prior year reserve development in 2010 was driven by better than expected loss development in the surety and management liability lines of business due to...

  • Page 220
    ... reviews include an analysis of exposure and claim payment patterns by policyholder category, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative actions. The Company also analyzes developing payment patterns among policyholders in the Home Office, Field Office...

  • Page 221
    ..., and/or the number of, asbestos and environmental claims beyond that which is anticipated, the role 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...

  • Page 222
    ...AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. INSURANCE CLAIM RESERVES (Continued) of direct actions against the Company, future developments pertaining to the Company's ability to recover reinsurance for asbestos and environmental claims and the unavailability of other...

  • Page 223
    ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. DEBT Debt outstanding was as follows: (at December 31, in millions) 2012 2011 Short-term: Commercial paper ...5.00% Senior notes due March 15, 2013 ...5.375% Senior notes due June 15, 2012 ...Total short-term debt ...Long-term: 5.00% Senior...

  • Page 224
    ... redeems the debentures (as described above) using any source of funds, including cash, the Company shall be required to use its commercially reasonable efforts on a quarterly basis to raise sufficient proceeds from the sale of qualifying capital securities to permit the repayment in full of the...

  • Page 225
    ...... The Travelers Companies, Inc. fully and unconditionally guarantees 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 the $500 million 5.00% notes due 2013...

  • Page 226
    ...and terms thereof. Treasury Stock The Company's board of directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act...

  • Page 227
    ...into The Travelers 401(k) Savings Plan (the Savings Plan). The SOP Trust could at any time convert any or all of the preferred shares into shares of the Company's common stock at a rate of eight shares of common stock for each preferred share. In May 2011, the Company's board of directors authorized...

  • Page 228
    ... presents the changes in the Company's accumulated other comprehensive income (AOCI) for the years ended December 31, 2012, 2011 and 2010. Changes in Net Changes in Net Unrealized Gains on Unrealized Gains on Investment Investment Net Benefit Plan Securities Having Securities Having Assets and No...

  • Page 229
    ... the years ended December 31, 2012, 2011 and 2010. (for the year ended December 31, in millions) 2012 2011 2010 Changes in net pretax unrealized gains on investment securities: Having no credit losses recognized in the consolidated statement of income . Income tax expense (benefit) ...Net of taxes...

  • Page 230
    ... comprehensive income to the Company's consolidated statement of income for the years ended December 31, 2012, 2011 and 2010. (for the year ended December 31, in millions) 2012 2011 2010 Reclassification adjustments related to net pretax unrealized gains on investment securities: Having no credit...

  • Page 231
    ... income and share data used in the basic and diluted earnings per share computations: (for the year ended December 31, in millions, except per share amounts) 2012 2011 2010 Basic Net income, as reported ...Participating share-based awards-allocated income ...Preferred stock dividends ...Net income...

  • Page 232
    ... financial statements ...(for the year ended December 31, in millions) 57 $ 750 2012 399 $ 325 2011 (2) $1,088 2010 Effective tax rate Income before federal, foreign and state income taxes ...Statutory tax rate ...Expected federal income tax expense ...Tax effect of: Nontaxable investment...

  • Page 233
    ... FINANCIAL STATEMENTS (Continued) 12. INCOME TAXES (Continued) The net deferred tax asset (liability) comprises the tax effects of temporary differences related to the following assets and liabilities: (at December 31, in millions) 2012 2011 Deferred tax assets Claims and claim adjustment...

  • Page 234
    ... U.S. income tax returns for 2009 and 2010. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next twelve months. 13. SHARE-BASED INCENTIVE COMPENSATION The Company has a share-based incentive compensation plan, The Travelers Companies, Inc...

  • Page 235
    ...shares that are used to pay the exercise price of stock options and shares used to pay withholding taxes on awards generally; and (iii) shares purchased by the Company on the open market using cash option exercise proceeds; provided, however, that the increase in the number of shares of common stock...

  • Page 236
    ... industry peer group of entities due to the limited Company stock history. The expected dividend is based upon the Company's current quarter dividend annualized and assumed to be constant over the expected option term. The risk-free interest rate for each option is the interpolated market yield for...

  • Page 237
    ... stock unit awards to eligible officers and key employees under the Equity Awards program established pursuant to the 2004 Incentive Plan. A restricted stock unit represents the right to receive a share of common stock. These restricted stock unit awards are granted at market price, generally...

  • Page 238
    ...; and 50%-130% for awards granted in February 2011, 2012 and 2013); depending on the actual return on equity attained. The fair value of restricted stock units, deferred stock units and performance shares is measured at the market price of the Company stock at date of grant. The total fair value of...

  • Page 239
    ...14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS The Company sponsors a qualified non-contributory defined benefit pension plan, which covers substantially all U.S. domestic employees and provides benefits under a cash balance formula, except that employees satisfying certain age and service...

  • Page 240
    ... COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) covers certain highly-compensated employees, pension plans for employees of its foreign subsidiaries, and a postretirement health and life...

  • Page 241
    ... year ...Amounts recognized in the statement of financial position consist of: Accrued under-funded benefit plan liability ...Amounts recognized in accumulated other comprehensive income consist of: Net actuarial gain ... Effective January 1, 2013, the Company converted its current prescription drug...

  • Page 242
    ... FINANCIAL STATEMENTS (Continued) 14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) The Company has discretion regarding whether to provide additional funding and when to provide such funding to its qualified pension plan. In 2012, 2011 and 2010, the Company voluntarily...

  • Page 243
    ... long-term rate of return on plan assets, the Company selected the rate that was set as the return objective by the Company's Benefit Plans Investment Committee, which had considered the historical returns of equity and fixed maturity markets in conjunction with prevailing economic and financial...

  • Page 244
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) The Company's overall investment strategy is to achieve a mix of approximately 85% to 90% of investments for long-term growth and 10% to 15% for near-term benefit payments with...

  • Page 245
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) Fair Value Hierarchy-Pension Plans The following tables present the level within the fair value hierarchy at which the financial assets of the Company's pension plans are measured...

  • Page 246
    THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) (at December 31, 2011, in millions) Total Level 1 Level 2 Level 3 Invested assets: Fixed maturities U.S. Treasury securities ...

  • Page 247
    ...Other Postretirement Benefit Plan The Company's overall investment strategy is to achieve a mix of approximately 35% 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...

  • Page 248
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued) Estimated Future Benefit Payments The following table presents the estimated benefits expected to be paid by the Company's pension and postretirement benefit plans for the...

  • Page 249
    ... appropriate circumstances. Asbestos Direct Action Litigation-In October 2001 and April 2002, two purported class action suits (Wise v. Travelers and Meninger v. Travelers) were filed against Travelers Property Casualty Corp. (TPC) and other insurers (not including The St. Paul Companies, Inc. (SPC...

  • Page 250
    ... 10, 2013, and the parties await the court's decision. SPC, which is not covered by the Manville bankruptcy court rulings or the settlements described above, from time to time has been named as a defendant in direct action cases in Texas state court asserting common law claims. All such cases that...

  • Page 251
    ... Sherman Act and RICO claims involving the sale of excess casualty insurance through a single defendant broker, as well as all state law claims, which they remanded to the district court for further proceedings. On October 1, 2010, defendants, including the Company, filed renewed motions to dismiss...

  • Page 252
    ...recognized in the Company's consolidated financial statements. In an unrelated action, The Travelers Indemnity Company is one of the Settlement Class plaintiffs and a class member in a class action lawsuit captioned Safeco Insurance Company of America, et al. v. American International Group, Inc. et...

  • Page 253
    ... related to the sale of business entities that are quantifiable was $471 million at December 31, 2012, of which $9 million was recognized on the balance sheet at that date. The Company also has contingent obligations for guarantees related to certain investments, thirdparty loans related...

  • Page 254
    ... 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 $1.20 billion at December 31, 2012. Prior to the merger...

  • Page 255
    ... CONSOLIDATING FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES (Continued) CONSOLIDATING STATEMENT OF INCOME (Unaudited) For the year ended December 31, 2012 (in millions) TPC Other Subsidiaries Travelers(2) Eliminations Consolidated Revenues Premiums ...Net investment income...

  • Page 256
    ... CONSOLIDATING FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES (Continued) CONSOLIDATING STATEMENT OF INCOME (Unaudited) For the year ended December 31, 2011 (in millions) TPC Other Subsidiaries Travelers(2) Eliminations Consolidated Revenues Premiums ...Net investment income...

  • Page 257
    ... CONSOLIDATING FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES (Continued) CONSOLIDATING STATEMENT OF INCOME (Unaudited) For the year ended December 31, 2010 (in millions) TPC Other Subsidiaries Travelers(2) Eliminations Consolidated Revenues Premiums ...Net investment income...

  • Page 258
    ... year ended December 31, 2012 (in millions) TPC Other Subsidiaries Travelers(1) Eliminations Consolidated Net income ...Other comprehensive income: Changes in net unrealized gains on investment securities: Having no credit losses recognized in the consolidated statement of income ...Having credit...

  • Page 259
    ... gains 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 changes in benefit plan assets and obligations ...Net changes in unrealized foreign currency translation and...

  • Page 260
    ... year ended December 31, 2010 (in millions) TPC Other Subsidiaries Travelers(1) Eliminations Consolidated Net income ...Other comprehensive income: Changes in net unrealized gains on investment securities: Having no credit losses recognized in the consolidated statement of income ...Having credit...

  • Page 261
    ... value (amortized cost $60,829) ...Equity securities, available for sale, at fair value (cost $462) ...Real estate investments ...Short-term securities ...Other investments ...Total investments ...Cash ...Investment income accrued Premiums receivable ...Reinsurance recoverables . . Ceded unearned...

  • Page 262
    ... value (amortized cost $59,994) ...Equity securities, available for sale, at fair value (cost $414) ...Real estate investments ...Short-term securities ...Other investments ...Total investments ...Cash ...Investment income accrued Premiums receivable ...Reinsurance recoverables . . Ceded unearned...

  • Page 263
    ... stock acquired-net employee share-based compensation ...Excess tax benefits from share-based payment arrangements ...Dividends paid to parent company ...Net cash used in financing activities ...Effect of exchange rate changes on cash ...Net increase in cash ...Cash at beginning of year ...Cash...

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

  • Page 265
    ... stock acquired-net employee share-based compensation ...Excess tax benefits from share-based payment arrangements ...Dividends paid to parent company ...Capital contributions, loans and other transactions between subsidiaries ...Net cash used in financing activities ...Effect of exchange rate...

  • Page 266
    ...TRAVELERS COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. SELECTED QUARTERLY FINANCIAL DATA (Unaudited) 2012 (in millions, except per share...taxes ...Income tax expense (benefit) ...Net income (loss) ...Net income (loss) per share(1): Basic ...Diluted ... ...

  • Page 267
    ... 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 Officer, as...

  • Page 268
    ... is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of the consolidated financial statements of the Company in accordance with U.S. generally accepted accounting principles. The Company's accounting policies and internal controls over...

  • Page 269
    ... our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material...

  • Page 270
    ...on April 10, 2012. From time to time, some of the Company's executives may determine that it is advisable to diversify their investments for personal financial planning reasons, or may seek liquidity for other reasons, and may sell shares of common stock of the Company in the open market, in private...

  • Page 271
    ...-Financial, Professional & International Insurance and Field Management; Chief Legal Officer Vice Chairman-Claim Services, Personal Insurance, Operations and Systems, and Risk Control Executive Vice President and Chief Administrative Officer Executive Vice President and General Counsel Executive...

  • Page 272
    ... Accounts Group's property-casualty business in 1985 and subsequently assumed the responsibility of Chairman of Commercial Lines in 1990. William H. Heyman, 64, has been Chief Investment Officer of the Company since the Merger and Vice Chairman since May 2005. Prior to May 2005, he was Executive...

  • Page 273
    ...., 47, has been Executive Vice President-Business Insurance since March 2010. Prior to that, he served as Senior Vice President-Business Insurance where he was responsible for Commercial Accounts, Construction, Technology, Public Sector Services, Global Accounts, Excess Casualty and Oil & Gas since...

  • Page 274
    ... rather than settled through the issuance of shares; (ii) shares that are used to pay the exercise price of stock options and shares used to pay withholding taxes on equity awards generally; and (iii) shares purchased by the Company on the open market using cash from option exercises, as limited by...

  • Page 275
    ... 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 22, 2013 is incorporated herein by reference. PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Documents filed as a part of the report...

  • Page 276
    ... Securities 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...

  • Page 277
    Date By * Thomas R. Hodgson Director February 19, 2013 By * William J. Kane Director February 19, 2013 By * Cleve L. Killingsworth, Jr. Director February 19, 2013 By * Donald J. Shepard Director February 19, 2013 By * Laurie J. Thomsen Director February 19, 2013 *By /s/ MATTHEW...

  • Page 278
    ... Financial 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...

  • Page 279
    ... of February 19, 2013, we reported on the consolidated balance sheet of The Travelers Companies, Inc. and subsidiaries (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for each of...

  • Page 280
    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, 2012 2011 2010 Revenues Net investment income ...Net realized investment gains (losses)(1) ...Other revenues ......

  • Page 281
    ... Only) CONDENSED FINANCIAL INFORMATION OF REGISTRANT (in millions) CONDENSED STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, 2012 2011 2010 Consolidated net income ...Other comprehensive income-parent company: Changes in net unrealized gains on investment securities: Having no...

  • Page 282
    SCHEDULE II THE TRAVELERS COMPANIES, INC. (Parent Company Only) CONDENSED FINANCIAL INFORMATION OF REGISTRANT (in millions) CONDENSED BALANCE SHEET At December 31, 2012 2011 Assets Fixed maturities ...Equity securities ...Short-term securities ...Investment in subsidiaries Other assets ... ... ... ...

  • Page 283
    ... activities Net sales (purchases) of short-term securities ...Other investments, net ...Net cash provided by (used in) investing activities ...Cash flows from financing activities Payment of debt ...Issuance of debt ...Dividends paid to shareholders ...Issuance of common stock-employee share options...

  • Page 284
    ... 2010, other revenues included $60 million of expenses related to the Company's purchase and retirement of $885 million of its $1.0 billion 6.25% fixed-to-floating rate junior subordinated debentures. 2. GUARANTEES In the ordinary course of selling business entities to third parties, The Travelers...

  • Page 285
    ... ... 2010 Business Insurance ...Financial, Professional & International Insurance ...Personal Insurance ... Total-Reportable Segments ...Other ... Consolidated ... (1) See note 2 of notes to the Company's consolidated financial statements for discussion of the method used to allocate net investment...

  • Page 286
    ... V THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts (in millions) Balance at beginning of period Charged to costs and expenses Charged to other accounts(1) Balance at end of period Deductions(2) 2012 Reinsurance recoverables ...Allowance for uncollectible: Premiums...

  • Page 287
    ... (2) Consolidated property-casualty insurance operations. (3) For a discussion of types of reserves discounted and discount rates used, see ''Item 1-Business-Claims and Claim Adjustment Expense Reserves-Discounting.'' See the accompanying Report of Independent Registered Public Accounting Firm.

  • Page 288
    .... 10.9†* Amendment to the TPC 2002 Stock Incentive Plan, as amended effective January 23, 2003, is filed herewith. 10.10* The St. Paul Companies, Inc. (''SPC'') Amended and Restated 1994 Stock Incentive Plan was filed as Exhibit 10(f) to the Company's annual report on Form 10-K for the fiscal year...

  • Page 289
    .... 10.22* Eighth Amendment to The Travelers Severance Plan was filed as Exhibit 10.43 to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference. 10.23* The Company's Senior Executive Performance Plan was filed as Exhibit 10.1 to the...

  • Page 290
    ... Executive Officers, amending The St. Paul Travelers Companies, Inc. Severance Plan, was filed as Exhibit 99 to the Company's Form 8-K filed on February 16, 2006, and is incorporated herein by reference. 10.37* Form of Restricted Stock Unit Award Notification and Agreement (For Management Committee...

  • Page 291
    ... Agreement (2013) is filed herewith. 10.47†* Form of Performance Shares Award Notification and Agreement for Jay S. Fishman (2013) is filed herewith. 10.48†* Form of Non-Employee Director Notification and Agreement of Annual Deferred Stock Award is filed herewith. 12.1†Statement regarding the...

  • Page 292
    ...) Financial Statement Schedules. †* Filed herewith. Management contract or compensatory plan in which directors and/or executive officers are eligible to participate. The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company...

  • Page 293
    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) 2012 2011 2010 2009 2008 Income before income taxes ...Interest ...Portion of rentals deemed to be interest ...Income available ...

  • Page 294
    ... 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. FISHMAN Jay S. Fishman Chairman and Chief Executive Officer...

  • Page 295
    ...supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; evaluated the effectiveness of the Company's disclosure controls and procedures...

  • Page 296
    ... 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, 2012 (the ''Report...

  • Page 297
    ... 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, 2012 (the ''Report...

  • Page 298

  • Page 299
    ... New York Stock Exchange (NYSE) and is publicly traded under the ticker symbol "TRV". The following tables set forth the quarterly high and low closing sales prices of The Travelers Companies, Inc. common stock as well as the amount of quarterly cash dividends declared per share for years 2012 and...

  • Page 300
    The Travelers Companies, Inc. 485 Lexington Avenue New York, NY 10017-2630 800.328.2189 Scan here for the 2012 Community Giving Report NYSE: TRV travelers.com