Travelers 2015 Annual Report Download - page 4

dividends and share repurchases. Capital raised by debt and equity offerings may also increase statutory
capital and surplus.
Pricing and Underwriting
Pricing of the Company’s property and casualty insurance products is generally developed based
upon an estimation of expected losses, the expenses associated with producing, issuing and servicing
business and managing claims, the time value of money related to the expected loss and expense cash
flows, and a reasonable allowance for profit that considers the capital needed to support the Company’s
business. The Company has a disciplined approach to underwriting and risk management that
emphasizes product returns and profitable growth over the long-term rather than premium volume or
market share. The Company’s insurance subsidiaries are subject to state laws and regulations regarding
rate and policy form approvals. The applicable state laws and regulations establish standards in certain
lines of business to ensure that rates are not excessive, inadequate, unfairly discriminatory, or used to
engage in unfair price competition. The Company’s ability to increase rates and the relative timing of
the process are dependent upon each respective state’s requirements, as well as the competitive market
environment.
Geographic Distribution
The following table shows the geographic distribution of the Company’s consolidated direct written
premiums for the year ended December 31, 2015:
% of
Location Total
Domestic:
California ................................................ 9.8%
New York ................................................ 9.8
Texas ................................................... 7.3
Pennsylvania .............................................. 4.7
Illinois .................................................. 4.0
New Jersey ............................................... 3.9
Florida .................................................. 3.9
Georgia ................................................. 3.1
Massachusetts ............................................. 3.0
All other domestic(1) ....................................... 43.7
Total domestic ........................................... 93.2
International:
Canada .................................................. 4.6
All other international(1) ..................................... 2.2
Total international ........................................ 6.8
Consolidated total ........................................ 100.0%
(1) No other single state or country accounted for 3.0% or more of the Company’s
consolidated direct written premiums written in 2015.
Catastrophe Exposure
The wide geographic distribution of the Company’s property and casualty insurance operations
exposes it to claims arising out of catastrophes. The Company uses various analyses and methods,
including proprietary and third-party computer modeling processes, to continually monitor and analyze
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