Travelers 2014 Annual Report Download - page 126

Table of Contents
Many of the statements in this "Outlook" section are forward
- looking statements, which are subject to risks and uncertainties that are often
difficult to predict and beyond the Company's control. Actual results could differ materially from those expressed or implied by such forward
-
looking statements. Further, such forward - looking statements speak only as of the date of this report and the Company undertakes no obligation to
update them. See "—Forward
- Looking Statements." For a discussion of potential risks and uncertainties that could impact the Company's results
of operations or financial position, see "Item 1A—Risk Factors" and "Item 7—Management's Discussion and Analysis of Financial Condition and
Results of Operations—Critical Accounting Estimates."
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measure of a company's ability to generate sufficient cash flows to meet the cash requirements of its business operations and to
satisfy general corporate purposes when needed.
Operating Company Liquidity. The liquidity requirements of the Company's insurance subsidiaries are met primarily by funds generated
from premiums, fees, income received on investments and investment maturities. Cash provided from these sources is used primarily for claims and
claim adjustment expense payments and operating expenses. The insurance subsidiaries' liquidity requirements can be impacted by, among other
factors, the timing and amount of catastrophe claims, which are inherently unpredictable, as well as the timing and amount of reinsurance
recoveries, which may be affected by reinsurer solvency and reinsurance coverage disputes. Additionally, the variability of asbestos - related claim
payments, as well as the volatility of potential judgments and settlements arising out of litigation, may also result in increased liquidity
requirements. It is the opinion of the Company's management that the insurance subsidiaries' future liquidity needs will be adequately met from all
of the sources described above. Subject to restrictions imposed by states in which the Company's insurance subsidiaries are domiciled, the
Company's principal insurance subsidiaries pay dividends to their respective parent companies, which in turn pay dividends to the corporate
holding (parent) company (TRV). For further information regarding restrictions on dividends paid by the Company's insurance subsidiaries, see
"Part I—
Item 1 —Regulation."
Holding Company Liquidity. TRV's liquidity requirements primarily include shareholder dividends, debt servicing, common share
repurchases and, from time to time, contributions to its qualified domestic pension plan. At December 31, 2014, TRV held total cash and short
- term
invested assets in the United States aggregating $1.59 billion and having a weighted average maturity of 56 days. These assets are sufficient to
meet TRV's current liquidity requirements and are in excess of TRV's minimum target level, which comprises TRV's estimated annual pretax interest
expense and common shareholder dividends, and currently totals approximately $1.1 billion.
TRV is not dependent on dividends or other forms of repatriation from its foreign operations to support its liquidity needs. U.S. income taxes
have not been recognized on $647 million of the Company's foreign operations' undistributed earnings as of December 31, 2014, as such earnings
are intended to be permanently reinvested in those operations. Furthermore, taxes paid to foreign governments on these earnings may be used as
credits against the U.S. tax on dividend distributions if such earnings were to be distributed to the holding company. The amount of undistributed
earnings from foreign operations and related taxes on those undistributed earnings were not material to the Company's financial position or
liquidity at December 31, 2014.
TRV has a shelf registration statement with the Securities and Exchange Commission which permits it to issue securities from time to time. TRV
also has a $1.0 billion line of credit facility with a syndicate of financial institutions that expires in June 2018. This line of credit also supports TRV's
$800 million commercial paper program, of which $100 million was outstanding at December 31, 2014. TRV is not reliant on its commercial paper
program to meet its operating cash flow needs.
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