Travelers 2014 Annual Report Download - page 171

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company).
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting
period. Actual results could differ from those estimates. Certain reclassifications have been made to the 2013 and 2012 financial statements to
conform to the 2014 presentation, including reclassifications related to the realignment of the Company's reportable business segments described
in the "Nature of Operations" section of this note. All material intercompany transactions and balances have been eliminated.
On November 1, 2013, the Company acquired all of the issued and outstanding shares of Dominion for an aggregate purchase price of
approximately $1.035 billion. Dominion primarily markets personal lines and small commercial insurance business in Canada. At the acquisition date,
the Company recorded at fair value $3.91 billion of assets acquired and $2.88 billion of liabilities assumed as part of purchase accounting, including
$16 million of identifiable intangible assets and $273 million of goodwill. Dominion is included in the Company's Business and International
Insurance segment. The unearned premium reserve related to the acquired insurance and reinsurance contracts was carried over and included in
the Company's unearned premium reserve. Premium revenue from the acquired business is recognized on a pro rata basis beginning with the
acquisition date over the remaining policy terms in accordance with the Company's accounting policy. The Company recognized an intangible
asset for the value of business acquired (VOBA) of $76 million at the acquisition date. VOBA represented the present value of future gross profits
of the business acquired from Dominion, was reported as part of the Company's deferred acquisition costs, and was amortized in proportion to the
premium revenue recognized from the acquired business.
Adoption of Accounting Standards Updates
Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting
Date
In February 2013, the Financial Accounting Standards Board (FASB) issued updated guidance to resolve diversity in practice concerning the
recognition, measurement and disclosure of obligations resulting from certain joint and several liability arrangements for which the total amount
under the arrangement is fixed at the reporting date. The guidance requires that the reporting entity measure joint and several liability arrangements
as the amount the reporting entity agreed to pay on the basis of its arrangement among the co
- obligors and any additional amount the reporting
entity expects to pay on behalf of its co
- obligors. The updated guidance was effective for the quarter ending March 31, 2014. The adoption of this
guidance did not have any effect on the Company's results of operations, financial position or liquidity.
Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a
Foreign Entity or of an Investment in a Foreign Entity
In March 2013, the FASB issued updated guidance to resolve diversity in practice concerning the release of the cumulative foreign currency
translation adjustment into net income when a parent sells a
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