Travelers 2014 Annual Report Download - page 185

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Bond & Specialty Insurance
The Bond & Specialty Insurance segment provides surety, crime, management and professional liability coverages and related risk
management services to a wide range of primarily domestic customers, utilizing various degrees of financially
- based underwriting approaches. The
range of coverages includes performance, payment and commercial surety and fidelity bonds for construction and general commercial enterprises;
management liability coverages for losses caused by the actual or alleged negligence or misconduct of directors and officers or employee
dishonesty; employment practices liability coverages and fiduciary coverages for public corporations, private companies and not
- for - profit
organizations; professional liability coverage for actual or alleged errors and omissions committed in the course of professional conduct or practice
for a variety of professionals including, among others, lawyers and design professionals; and professional and management liability, property,
workers' compensation, auto and general liability and fidelity insurance for financial institutions.
Personal Insurance
The Personal Insurance segment writes a broad range of property and casualty insurance covering individuals' personal risks. The primary
products of automobile and homeowners insurance are complemented by a broad suite of related coverages.
Automobile policies provide coverage for liability to others for both bodily injury and property damage, uninsured motorist protection, and for
physical damage to an insured's own vehicle from collision, fire, flood, hail and theft. In addition, many states require policies to provide first
- party
personal injury protection, frequently referred to as no
- fault coverage.
Homeowners policies provide protection against losses to dwellings and contents from a variety of perils (excluding flooding) as well as
coverage for personal liability. The Company writes homeowners insurance for dwellings, condominiums and tenants, and rental properties. The
Company also writes coverage for boats and yachts and valuable personal items such as jewelry, and also writes coverages for umbrella liability,
identity fraud, and weddings and special events.
2. SEGMENT INFORMATION
The accounting policies used to prepare the segment reporting data for the Company's three reportable business segments are the same as
those described in the Summary of Significant Accounting Policies in note 1.
Except as described below for certain legal entities, the Company allocates its invested assets and the related net investment income to its
reportable business segments. Pretax net investment income is allocated based upon an investable funds concept, which takes into account
liabilities (net of non
- invested assets) and appropriate capital considerations for each segment. For investable funds, a benchmark investment yield
is developed that reflects the estimated duration of the loss reserves' future cash flows, the interest rate environment at the time the losses were
incurred and A+ rated corporate debt instrument yields. For capital, a benchmark investment yield is developed that reflects the average yield on
the total investment portfolio. The benchmark investment yields are applied to each segment's investable funds and capital, respectively, to
produce a total notional investment income by segment. The Company's actual net investment income is allocated to each segment in proportion to
the respective segment's notional investment income to total notional investment income. There are certain legal entities within the Company that
are dedicated to specific reportable business segments. The invested assets and related net investment income from these legal entities are
reported in the applicable business segment and are not allocated among the other business segments.
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