Travelers 2014 Annual Report Download - page 69

Table of Contents
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We may refine our underwriting processes. For example, in certain of our businesses in recent years, we have substantially
increased the volume of business that flows through our automated underwriting and pricing systems.
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We may seek to expand distribution channels, such as our establishment of a direct - to - consumer platform in Personal Insurance.
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We may focus on geographic markets within or outside of the United States where we have had relatively little or no market share.
We may not be successful in introducing new products or expanding in targeted markets and, even if we are successful, these efforts may
create enhanced risks. Among other risks:
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Demand for new products or in new markets may not meet our expectations.
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To the extent we are able to market new products or expand in new markets, our risk exposures may change, and the data and models
we use to manage such exposures may not be as sophisticated or effective as those we use in existing markets or with existing
products. This, in turn, could lead to losses in excess of our expectations.
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Models underlying automated underwriting and pricing decisions may not be effective.
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Efforts to develop new products or markets have the potential to create or increase distribution channel conflict, such as described
above under "—Disruptions to our relationships with our independent agents and brokers could adversely affect us."
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In connection with the conversion of existing policyholders to a new product, some policyholders' pricing may increase, while the
pricing for other policyholders may decrease, the net impact of which could negatively impact retention and profit margins.
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To develop new products or markets, we may need to make substantial capital and operating expenditures, which may also
negatively impact results in the near term.
If our efforts to develop new products or expand in targeted markets are not successful, our results of operations could be materially and
adversely affected.
We may be adversely affected if our pricing and capital models provide materially different indications than actual results. The profitability
of our property and casualty business substantially depends on the extent to which our actual claims experience is consistent with the
assumptions we use in pricing our policies. We utilize third
- party and proprietary models to help us price business in a manner that is intended to
be consistent, over time, with actual results and return objectives. We incorporate the Company's historical loss experience, external industry data
and economic indices into our modeling processes, and we use various methods, including predictive modeling, forecasting and sophisticated
simulation modeling techniques, to analyze loss trends and the risks associated with our assets and liabilities. We also use these modeling
processes, analyses and methods in making underwriting, pricing and reinsurance decisions as part of managing our exposure to catastrophes and
other extreme adverse events. These modeling processes incorporate numerous assumptions and forecasts about the future level and variability of:
interest rates, inflation, capital requirements, and frequency and severity of losses, among others, that are difficult to make and may differ materially
from actual results.
Whether we use a proprietary or third
- party model, future experience may be materially different from past and current experience incorporated
in a model's forecasts or simulations. This includes the likelihood of events occurring or continuing or the correlation among events. Third party
models may provide substantially different indications than what our proprietary modeling processes provide. As a result, third
- party model
estimates of losses can be, and often have been, materially different for similar events in comparison to our proprietary estimates. The differences
between third
- party model estimates
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