TRAVELERS COMPANIES, INC. | 2013 | FY | 3

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.

        The cost of the Company's catastrophe treaty program is included in the Company's ceded premiums and is allocated among reportable business segments based on an estimate of actual market reinsurance pricing using expected losses calculated by the Company's catastrophe model, adjusted for any experience adjustments.

        The following tables summarize the components of the Company's revenues, operating income (loss), net written premiums and total assets by reportable business segments:

(for the year ended December 31, in millions)
  Business
Insurance		   Financial,
Professional &
International
Insurance		   Personal
Insurance		   Total
Reportable
Segments		  

2013

                          

Premiums

   $ 12,084   $ 3,229   $ 7,324   $ 22,637  

Net investment income

     1,975     372     369     2,716  

Fee income

     393     2     —     395  

Other revenues

     158     22     103     283  
                   

Total operating revenues(1)

   $ 14,610   $ 3,625   $ 7,796   $ 26,031  
                   
                   

Amortization and depreciation

   $ 2,445   $ 779   $ 1,461   $ 4,685  

Income tax expense

     740     245     366     1,351  

Operating income(1)

     2,329     648     838     3,815  

2012

    
 		    
 		    
 		    
 		  

Premiums

   $ 11,691   $ 3,045   $ 7,621   $ 22,357  

Net investment income

     2,090     395     404     2,889  

Fee income

     322     1     —     323  

Other revenues

     40     26     66     132  
                   

Total operating revenues(1)

   $ 14,143   $ 3,467   $ 8,091   $ 25,701  
                   
                   

Amortization and depreciation

   $ 2,393   $ 731   $ 1,602   $ 4,726  

Income tax expense

     539     255     32     826  

Operating income(1)

     1,843     642     217     2,702  

2011

    
 		    
 		    
 		    
 		  

Premiums

   $ 11,327   $ 3,174   $ 7,589   $ 22,090  

Net investment income

     2,041     414     424     2,879  

Fee income

     295     1     —     296  

Other revenues

     31     26     70     127  
                   

Total operating revenues(1)

   $ 13,694   $ 3,615   $ 8,083   $ 25,392  
                   
                   

Amortization and depreciation

   $ 2,313   $ 740   $ 1,615   $ 4,668  

Income tax expense (benefit)

     134     230     (293 )   71  

Operating income (loss)(1)

     1,354     647     (332 )   1,669  
(1)
Operating revenues for reportable business segments exclude net realized investment gains (losses). Operating income (loss) for reportable business segments equals net income (loss) excluding the after-tax impact of net realized investment gains (losses).

        Net written premiums by market were as follows:

(for the year ended December 31, in millions)
  2013   2012   2011  

Business Insurance:

                    

Select Accounts

   $ 2,724   $ 2,775   $ 2,784  

Commercial Accounts

     3,197     3,101     2,890  

National Accounts

     1,010     907     782  

Industry-Focused Underwriting

     2,645     2,554     2,407  

Target Risk Underwriting

     1,799     1,666     1,587  

Specialized Distribution

     858     870     880  
               

Total Business Insurance Core

     12,233     11,873     11,330  

Business Insurance Other

     —     (1 )   10  
               

Total Business Insurance

     12,233     11,872     11,340  
               

Financial, Professional & International Insurance:

                    

Bond & Financial Products

     2,030     1,924     1,953  

International

     1,279     1,057     1,149  
               

Total Financial, Professional & International Insurance

     3,309     2,981     3,102  
               

Personal Insurance:

                    

Automobile

     3,370     3,642     3,788  

Homeowners and Other

     3,855     3,952     3,957  
               

Total Personal Insurance

     7,225     7,594     7,745  
               

Total consolidated net written premiums

   $ 22,767   $ 22,447   $ 22,187  
               
               

Business Segment Reconciliations

(for the year ended December 31, in millions)
  2013   2012   2011  

Revenue reconciliation

                    

Earned premiums

                    

Business Insurance:

                    

Workers' compensation

   $ 3,560   $ 3,222   $ 2,899  

Commercial automobile

     1,904     1,943     1,940  

Commercial property

     1,698     1,621     1,607  

General liability

     1,790     1,757     1,738  

Commercial multi-peril

     3,093     3,113     3,126  

Other

     39     35     17  
               

Total Business Insurance

     12,084     11,691     11,327  
               

Financial, Professional & International Insurance:

                    

Fidelity and surety

     913     939     970  

General liability

     891     850     832  

International

     1,248     1,088     1,218  

Other

     177     168     154  
               

Total Financial, Professional & International Insurance

     3,229     3,045     3,174  
               

Personal Insurance:

                    

Automobile

     3,431     3,665     3,720  

Homeowners and Other

     3,893     3,956     3,869  
               

Total Personal Insurance

     7,324     7,621     7,589  
               

Total earned premiums

     22,637     22,357     22,090  

Net investment income

     2,716     2,889     2,879  

Fee income

     395     323     296  

Other revenues

     283     132     127  
               

Total operating revenues for reportable segments

     26,031     25,701     25,392  

Other revenues

     (6 )   (12 )   (1 )

Net realized investment gains

     166     51     55  
               

Total consolidated revenues

   $ 26,191   $ 25,740   $ 25,446  
               
               

Income reconciliation, net of tax

                    

Total operating income for reportable segments

   $ 3,815   $ 2,702   $ 1,669  

Interest Expense and Other(1)

     (248 )   (261 )   (279 )
               

Total operating income

     3,567     2,441     1,390  

Net realized investment gains

     106     32     36  
               

Total consolidated net income

   $ 3,673   $ 2,473   $ 1,426  
               
               
(1)
The primary component of Interest Expense and Other was after-tax interest expense of $235 million, $246 million and $251 million in 2013, 2012 and 2011, respectively.

(at December 31, in millions)
  2013   2012  

Asset reconciliation:

              

Business Insurance

   $ 73,746   $ 76,972  

Financial, Professional & International Insurance

     16,691     13,452  

Personal Insurance

     12,870     14,195  
           

Total assets for reportable segments

     103,307     104,619  

Other assets(1)

     505     319  
           

Total consolidated assets

   $ 103,812   $ 104,938  
           
           
(1)
The primary components of other assets at December 31, 2013 were other intangible assets and accrued over-funded benefit plan assets related to the Company's qualified domestic pension plan. The primary component of other assets at December 31, 2012 was other intangible assets.

Enterprise-Wide Disclosures

        The Company does not have revenue from transactions with a single customer amounting to 10 percent or more of its revenues.

        The following table presents revenues of the Company's operations based on location:

(for the year ended December 31, in millions)
  2013   2012   2011  

U.S. 

   $ 25,138   $ 24,827   $ 24,408  

Non-U.S. 

     1,053     913     1,038  
               

Total revenues

   $ 26,191   $ 25,740   $ 25,446  
               
               

us-gaap:SegmentReportingDisclosureTextBlock