Travelers 2014 Annual Report Download - page 135

Table of Contents
The Qualified Plan assets are managed to maximize long
- term total return while maintaining an appropriate level of risk. The Company's overall
strategy is to achieve a mix of approximately 85% to 90% of investments for long
- term growth and 10% to 15% for near - term benefit payments with
a diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 55% to 65% equity securities
and 20% to 40% fixed income securities, with the remainder allocated to short
- term securities. For 2015, the Company plans to apply an expected
long
- term rate of return on plan assets of 7.25%, down from 7.50% in 2014. The expected rate of return reflects the Company's current expectations
with regard to long
- term returns on the Qualified Plan's invested assets, taking into account the current valuation of U.S. equities, the 75% increase
in the S&P 500 Index over the past three years and the current low level of long
- term interest rates which, according to the Federal Reserve's
Commentary in December 2014, are expected to remain at their current low level until its objectives of maximum employment and 2% inflation are
achieved. The Company's expected long
- term rate of return on plan assets also contemplates a return to more normal levels of long - term interest
rates in the future.
For further discussion of the pension and other postretirement benefit plans, see note 14 of notes to the consolidated financial statements.
Risk
- Based Capital
The NAIC has an RBC requirement for most property and casualty insurance companies, which determines minimum capital requirements and
is intended to raise the level of protection for policyholder obligations. The Company's U.S. insurance subsidiaries are subject to these NAIC RBC
requirements based on laws that have been adopted by individual states. These requirements subject insurers having policyholders' surplus less
than that required by the RBC calculation to varying degrees of regulatory action, depending on the level of capital inadequacy. Each of the
Company's U.S. insurance subsidiaries had policyholders' surplus at December 31, 2014 significantly above the level at which any RBC regulatory
action would occur. Regulators in the jurisdictions in which the Company's foreign insurance subsidiaries are located require insurance companies
to maintain certain levels of capital depending on, among other things, the type and amount of insurance policies in force. Each of the Company's
foreign insurance subsidiaries had capital significantly above their respective regulatory requirements at December 31, 2014.
Off - Balance Sheet Arrangements
The Company has entered into certain contingent obligations for guarantees related to selling businesses to third parties, certain investments,
third
- party loans related to certain investments, certain insurance policy obligations of former insurance subsidiaries and various other
indemnifications. See note 16 of notes to the Company's consolidated financial statements. The Company does not expect these arrangements will
have a material effect on the Company's financial position, changes in financial position, revenues and expenses, results of operations, liquidity,
capital expenditures or capital resources.
CRITICAL ACCOUNTING ESTIMATES
The Company considers its most significant accounting estimates to be those applied to claims and claim adjustment expense reserves and
related reinsurance recoverables, investment valuation and impairments, and goodwill and other intangible assets impairments.
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