Travelers 2012 Annual Report Download - page 79

We could be adversely affected if our controls designed to ensure compliance with guidelines,
policies and legal and regulatory standards are not effective. Our business is highly dependent on our
ability to engage on a daily basis in a large number of insurance 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 assurance that the control system’s objectives will
be met. If our controls are not effective, it could lead to financial loss, unanticipated risk exposure
(including underwriting, credit and investment risk) or damage to our reputation.
In addition, ineffective controls could lead to litigation or regulatory action. The volume of claims
and amount of damages and penalties claimed in litigation and regulatory proceedings against various
types of financial institutions have increased in recent years following the recent economic downturn
and market disruption. Substantial legal liability or significant regulatory action against us could have a
material adverse financial impact. See note 16 of notes to our consolidated financial statements for a
discussion of certain legal proceedings in which we are involved.
Our businesses may be adversely affected if we are unable to hire and retain qualified employees.
There is significant competition from within the property and casualty insurance industry and from
businesses outside the industry for qualified employees, especially those in key positions and those
possessing highly specialized underwriting knowledge. Our performance is largely dependent on the
talents, efforts and proper conduct of highly-skilled individuals, including our senior executives, many of
whom have decades of experience in the insurance industry. See ‘‘Item 10—Directors, Executive
Officers and Corporate Governance’’ for more information relating to our executive officers. Our
continued ability to compete effectively in our businesses and to expand into new business areas
depends on our ability to attract new employees and to retain and motivate our existing employees. If
we are not able to successfully attract, retain and motivate our employees, our business, financial
results and reputation could be materially and adversely affected.
Loss of or significant restriction on the use of credit scoring in the pricing and underwriting of
Personal Insurance products could reduce our future profitability. In Personal Insurance, we use
credit scoring as a factor in pricing decisions where allowed by state law. Some consumer groups and
regulators have questioned whether the use of credit scoring unfairly discriminates against people with
low incomes, minority groups and the elderly and are calling for the prohibition or restriction on the
use of credit scoring in underwriting and pricing. Laws or regulations that significantly curtail the use
of credit scoring, if enacted in a large number of states, could adversely affect our future profitability.
Item 1B. UNRESOLVED STAFF COMMENTS
NONE.
Item 2. PROPERTIES
The Company leases its principal executive offices in New York, New York, as well as 200 field
and claim offices totaling approximately 4.8 million square feet throughout the United States under
leases or subleases with third parties. The Company also leases offices in the United Kingdom, Canada,
India, China, Singapore and the Republic of Ireland that house operations (primarily for the Financial,
Professional & International Insurance segment) in those locations. The Company owns six buildings in
Hartford, Connecticut, consisting of approximately 1.8 million square feet of office space. The
Company also owns office buildings located at 385 Washington Street and 130 West Sixth Street in
St. Paul, Minnesota. These buildings are adjacent to one another and consist of approximately
1.1 million square feet of gross floor space. The Company also owns other real property, including an
office building in Fall River, Massachusetts, and a data center located in Norcross, Georgia.
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