Travelers 2015 Annual Report Download - page 179

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Treasury Stock
The cost of common stock repurchased by the Company is reported as treasury stock and
represents authorized and unissued shares of the Company under the Minnesota Business Corporation
Act.
Statutory Accounting Practices
The Company’s U.S. insurance subsidiaries, domiciled principally in the State of Connecticut, are
required to prepare statutory financial statements in accordance with the accounting practices
prescribed or permitted by the insurance departments of the states of domicile. Prescribed statutory
accounting practices are those practices that are incorporated directly or by reference in state laws,
regulations, and general administrative rules applicable to all insurance enterprises domiciled in a
particular state. The State of Connecticut requires insurers domiciled in Connecticut to prepare their
statutory financial statements in accordance with National Association of Insurance Commissioners’
(NAIC) statutory accounting practices.
Permitted statutory accounting practices are those practices that differ either from state-prescribed
statutory accounting practices or NAIC statutory accounting practices.
The Company does not apply any statutory accounting practices that would be considered a
prescribed or permitted statutory accounting practice that differs from NAIC statutory accounting
practices.
The Company’s non-U.S. insurance subsidiaries file financial statements prepared in accordance
with the regulatory reporting requirements of their respective local jurisdiction.
Premiums and Unearned Premium Reserves
Premiums are recognized as revenues pro rata over the policy period. Unearned premium reserves
represent the unexpired portion of policy premiums. Accrued retrospective premiums are included in
premium balances receivable. Premium balances receivable are reported net of an allowance for
estimated uncollectible premium amounts.
Ceded premiums are charged to income over the applicable term of the various reinsurance
contracts with third party reinsurers. Prepaid reinsurance premiums represent the unexpired portion of
premiums ceded to reinsurers and are reported as part of other assets.
Fee Income
Fee income includes servicing fees from carriers and revenues from large deductible policies and
service contracts and is recognized pro rata over the contract or policy periods.
Other Revenues
Other revenues include revenues from premium installment charges, which are recognized as
collected, revenues of noninsurance subsidiaries other than fee income and gains and losses on
dispositions of assets and redemption of debt, and other miscellaneous revenues.
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