Travelers 2013 Annual Report Download - page 76

subsidiaries to meet our obligations for payment of interest and principal on outstanding debt, to pay
dividends to shareholders, to make contributions to our qualified domestic pension plan, to pay other
corporate expenses and to make share repurchases. The ability of our insurance subsidiaries to pay
dividends to our holding company in the future will depend on their statutory surplus, earnings and
regulatory restrictions.
We are subject to state insurance regulation as an insurance holding company system. Our U.S.
insurance subsidiaries are subject to various regulatory restrictions that limit the maximum amount of
dividends available to be paid to their parent without prior approval of insurance regulatory authorities.
In a time of prolonged economic downturn or otherwise, insurance regulators may choose to further
restrict the ability of insurance subsidiaries to make payments to their parent companies. The ability of
our insurance subsidiaries to pay dividends to our holding company is also restricted by regulations that
set standards of solvency that must be met and maintained.
The inability of our insurance subsidiaries to pay dividends to our holding company in an amount
sufficient to meet our debt service obligations and other cash requirements could harm our ability to
meet our obligations, to pay future shareholder dividends and to make share repurchases.
Disruptions to our relationships with our independent agents and brokers could adversely affect
us. We market our insurance products primarily through independent agents and brokers. An
important part of our business is written through less than a dozen such intermediaries. Further, there
has been a trend of increased consolidation by agents and brokers, which could impact our
relationships with, and fees paid to, some agents and brokers, and/or otherwise negatively impact the
pricing or distribution of our products. Loss of all or a substantial portion of the business provided
through such agents and brokers could materially and adversely affect our future business volume and
results of operations.
We may also seek to develop new products or distribution channels, including our current efforts
to establish a direct-to-consumer platform in the Personal Insurance segment and our new
Quantum 2.0 auto product. In addition, agents and brokers may create alternate distribution channels
for commercial business, such as insurance exchanges, that may adversely impact product differentiation
and pricing. Access to greater levels of data and increased utilization of technology by agents and
brokers may also impact our relationship with them and our competitive position. Our efforts or their
efforts with respect to new products or alternate distribution channels, as well as changes in the way
agents and brokers utilize data and technology, could adversely impact our business relationship with
independent agents and brokers who currently market our products, resulting in a lower volume of
business generated from these sources.
We rely on internet 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 or commercial insurance products. Should internet disruptions occur, or frustration
with our business platforms or distribution initiatives develop among our independent agents and
brokers, any resulting loss of business could materially and adversely affect our future business volume
and results of operations. See ‘‘If we experience difficulties with technology, data security and/or
outsourcing relationships, our ability to conduct our business could be negatively impacted’’ below.
Customers in the past have brought claims against us for the actions of our agents. Even with
proper controls in place, actual or alleged errors or inaccuracies by our agents could result in our
involvement in disputes, litigation or regulatory actions related to actions taken or not taken by our
agents.
Our efforts to develop new products or expand in targeted markets may not be successful and
may create enhanced risks. A number of our recent and planned business initiatives involve
66