Travelers 2012 Annual Report Download - page 185

THE 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 accrued for policyholder dividends totaled $59 million
and $54 million at December 31, 2012 and 2011, respectively.
Treasury Stock
The cost of common stock repurchased by the Company is reported as treasury stock and
represents authorized and unissued shares of the Company under the Minnesota Business Corporation
Act.
Statutory Accounting Practices
The Company’s U.S. insurance subsidiaries, domiciled principally in the state of Connecticut,
prepare statutory financial statements in accordance with the accounting practices prescribed or
permitted by the insurance departments of the states of domicile. Prescribed statutory accounting
practices are those practices that are incorporated directly or by reference in state laws, regulations,
and general administrative rules applicable to all insurance enterprises domiciled in a particular state.
Permitted statutory accounting practices include practices not prescribed by the domiciliary state, but
allowed by the domiciliary state regulatory authority. The impact of any permitted accounting practices
on policyholders’ surplus of the Company is not material.
The Company’s non-U.S. insurance subsidiaries file financial statements prepared in accordance
with the regulatory reporting requirements of their respective local jurisdiction.
Premiums and Unearned Premium Reserves
Premiums are recognized as revenues pro rata over the policy period. Unearned premium reserves
represent the unexpired portion of policy premiums. Accrued retrospective premiums are included in
premium balances receivable. Premium balances receivable are reported net of an allowance for
estimated uncollectible premium amounts.
Ceded premiums are charged to income over the applicable term of the various reinsurance
contracts with third party reinsurers. Prepaid reinsurance premiums represent the unexpired portion of
premiums ceded to reinsurers and are reported as part of other assets.
Fee Income
Fee income includes servicing fees from carriers and revenues from large deductible policies and
service contracts and is recognized pro rata over the contract or policy periods.
Other Revenues
Other revenues include revenues from premium installment charges, which are recognized as
collected, revenues of noninsurance subsidiaries other than fee income and gains and losses on
dispositions of assets and redemption of debt, and other miscellaneous revenues.
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