Travelers 2013 Annual Report Download - page 190

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Share-Based Compensation
The Company has an employee stock incentive compensation plan that permits grants of
nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, deferred
stock, stock units, performance awards and other stock-based or stock-denominated awards with respect
to the Company’s common stock.
Compensation cost is measured based on the grant-date fair value of an award, utilizing the
assumptions discussed in note 13. Compensation cost is recognized for financial reporting purposes
over the period in which the employee is required to provide service in exchange for the award
(generally the vesting period). In connection with certain share-based awards, participants are entitled
to receive dividends during the vesting period, either in cash or dividend equivalent shares,
commensurate with the dividends paid to common shareholders. Dividends and dividend equivalent
shares on awards that are expected to vest are recorded in retained earnings. Dividends paid on awards
that are not expected to vest as part of the Company’s forfeiture estimate are recorded as
compensation expense.
Nature of Operations
The Company is organized into three reportable business segments: Business Insurance; Financial,
Professional & International Insurance; and Personal Insurance. These segments reflect the manner in
which the Company’s businesses are currently managed and represent an aggregation of products and
services based on type of customer, how the business is marketed and the manner in which risks are
underwritten. The specific business segments are as follows:
Business Insurance
The Business Insurance segment offers a broad array of property and casualty insurance and
insurance-related services to its clients primarily in the United States. Business Insurance is organized
into the following six groups, which collectively comprise Business Insurance Core operations:
•Select Accounts provides small businesses with property and casualty products, including
commercial multi-peril, commercial property, general liability, commercial auto and workers’
compensation insurance.
•Commercial Accounts provides mid-sized businesses with property and casualty products,
including commercial multi-peril, commercial property, general liability, commercial auto and
workers’ compensation insurance.
•National Accounts provides large companies with casualty products and services, including
workers’ compensation, general liability and automobile liability, generally utilizing loss-sensitive
products, on both a bundled and unbundled basis. National Accounts also includes the
Company’s commercial residual market business, which primarily offers workers’ compensation
products and services to the involuntary market.
•Industry-Focused Underwriting. The following units provide targeted industries with differentiated
combinations of insurance coverage, risk management, claims handling and other services:
•Construction serves a broad range of construction businesses, offering guaranteed cost
products and loss sensitive programs structured to meet customer needs. Products offered
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