1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
\nBasis of Presentation
\nThe consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to the 2013 and 2012 financial statements to conform to the 2014 presentation, including reclassifications related to the realignment of the Company's reportable business segments described in the \"Nature of Operations\" section of this note. All material intercompany transactions and balances have been eliminated.
\nOn November 1, 2013, the Company acquired all of the issued and outstanding shares of Dominion for an aggregate purchase price of approximately $1.035 billion. Dominion primarily markets personal lines and small commercial insurance business in Canada. At the acquisition date, the Company recorded at fair value $3.91 billion of assets acquired and $2.88 billion of liabilities assumed as part of purchase accounting, including $16 million of identifiable intangible assets and $273 million of goodwill. Dominion is included in the Company's Business and International Insurance segment. The unearned premium reserve related to the acquired insurance and reinsurance contracts was carried over and included in the Company's unearned premium reserve. Premium revenue from the acquired business is recognized on a pro rata basis beginning with the acquisition date over the remaining policy terms in accordance with the Company's accounting policy. The Company recognized an intangible asset for the value of business acquired (VOBA) of $76 million at the acquisition date. VOBA represented the present value of future gross profits of the business acquired from Dominion, was reported as part of the Company's deferred acquisition costs, and was amortized in proportion to the premium revenue recognized from the acquired business.
\nAdoption of Accounting Standards Updates
\nObligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date
\nIn February 2013, the Financial Accounting Standards Board (FASB) issued updated guidance to resolve diversity in practice concerning the recognition, measurement and disclosure of obligations resulting from certain joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The guidance requires that the reporting entity measure joint and several liability arrangements as the amount the reporting entity agreed to pay on the basis of its arrangement among the co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The updated guidance was effective for the quarter ending March 31, 2014. The adoption of this guidance did not have any effect on the Company's results of operations, financial position or liquidity.
\nParent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity
\nIn March 2013, the FASB issued updated guidance to resolve diversity in practice concerning the release of the cumulative foreign currency translation adjustment into net income when a parent sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. When a company ceases to have a controlling financial interest in a subsidiary within a foreign entity, the company should recognize any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary had resided. Upon the partial sale of an equity method investment that is a foreign entity, the company should release into earnings a pro rata portion of the cumulative translation adjustment. Upon the partial sale of an equity method investment that is not a foreign entity, the company should release into earnings the cumulative translation adjustment if the partial sale represents a complete or substantially complete liquidation of the foreign entity that holds the equity method investment. The updated guidance was effective for the quarter ending March 31, 2014. The adoption of this guidance did not have any effect on the Company's results of operations, financial position or liquidity.
\nAccounting Standards Not Yet Adopted
\nReporting Discontinued Operations and Disclosures of Disposals of Components of an Entity
\nIn April 2014, the FASB issued revised guidance to reduce diversity in practice for reporting discontinued operations. Under the previous guidance, any component of an entity that was a reportable segment, an operating segment, a reporting unit, a subsidiary or an asset group was eligible for discontinued operations presentation. The revised guidance only allows disposals of components of an entity that represent a strategic shift (e.g., disposal of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity) and that have a major effect on a reporting entity's operations and financial results to be reported as discontinued operations. The revised guidance also requires expanded disclosure in the financial statements for discontinued operations as well as for disposals of significant components of an entity that do not qualify for discontinued operations presentation. The updated guidance is effective for the quarter ending March 31, 2015. The adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
\nRevenue from Contracts with Customers
\nIn May 2014, the FASB issued updated guidance to clarify the principles for recognizing revenue. While insurance contracts are not within the scope of this updated guidance, the Company's fee income related to providing claims and policy management services as well as claim and loss prevention services will be subject to this updated guidance.
\nThe updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.
\nThe updated guidance is effective for the quarter ending March 31, 2017. The adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
\nAccounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
\nIn June 2014, the FASB issued updated guidance to resolve diversity in practice concerning employee share-based payments that contain performance targets that could be achieved after the requisite service period. Many reporting entities account for performance targets that could be achieved after the requisite service period as performance conditions that affect the vesting of the award and, therefore, do not reflect the performance targets in the estimate of the grant-date fair value of the award. Other reporting entities treat those performance targets as nonvesting conditions that affect the grant-date fair value of the award.
\nThe updated guidance requires that a performance target that affects vesting and that can be achieved after the requisite service period be treated as a performance condition. As such, the performance target that affects vesting should not be reflected in estimating that fair value of the award at the grant date. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which service has been rendered. If the performance target becomes probable of being achieved before the end of the service period, the remaining unrecognized compensation cost for which requisite service has not yet been rendered is recognized prospectively over the remaining service period. The total amount of compensation cost recognized during and after the service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest.
\nThe updated guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
\nDisclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern
\nIn August 2014, the FASB issued guidance to address the diversity in practice in determining when there is substantial doubt about an entity's ability to continue as a going concern and when an entity must disclose certain relevant conditions and events. The new guidance requires an entity to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). The new guidance allows the entity to consider the mitigating effects of management's plans that will alleviate the substantial doubt and requires certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans. If conditions or events raise substantial doubt that is not alleviated, an entity should disclose that there is substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued), along with the principal conditions or events that raise substantial doubt, management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations and management's plans that are intended to mitigate those conditions.
\nThe guidance is effective for annual periods ending after December 15, 2016, and interim and annual periods thereafter.
\nDetermining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity
\nIn November 2014, the FASB issued updated guidance to clarify when the separation of certain embedded derivative features in a hybrid financial instrument that is issued in the form of a share is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument.
\nThe updated guidance is effective for reporting periods beginning after December 15, 2015. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company's results of operations, financial position or liquidity.
\nAccounting Policies
\nInvestments
\nFixed Maturity and Equity Securities
\nFixed maturities include bonds, notes and redeemable preferred stocks. Fixed maturities, including instruments subject to securities lending agreements, are classified as available for sale and are reported at fair value, with unrealized investment gains and losses, net of income taxes, charged or credited directly to other comprehensive income. Equity securities, which include public common and non-redeemable preferred stocks, are classified as available for sale with changes in fair value, net of income taxes, charged or credited directly to other comprehensive income.
\nReal Estate Investments
\nThe Company's real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. Real estate is recorded on the purchase date at the purchase price, which generally represents fair value, and is supported by internal analysis or external appraisals that use discounted cash flow analyses and other acceptable valuation techniques. Real estate held for investment purposes is subsequently carried at cost less accumulated depreciation.
\nBuildings are depreciated on a straight-line basis over the shorter of the expected useful life of the building or 39 years. Real estate held for sale is carried at lower of cost or fair value, less estimated costs to sell.
\nShort-term Securities
\nShort-term securities have an original maturity of less than one year and are carried at amortized cost, which approximates fair value.
\nOther Investments
\nInvestments in Private Equity Limited Partnerships, Hedge Funds and Real Estate Partnerships
\nThe Company uses the equity method of accounting for investments in private equity limited partnerships, hedge funds and real estate partnerships. The partnerships and the hedge funds generally report investments on their balance sheet at fair value. The financial statements prepared by the investee are received by the Company on a lag basis, with the lag period generally dependent upon the type of underlying investments. The private equity and real estate partnerships provide financial information quarterly which is generally available to investors, including the Company, within three to six months following the date of the reporting period. The hedge funds provide financial information monthly, which is generally available to investors within one month following the date of the reporting period. The Company regularly requests financial information from the partnerships prior to the receipt of the partnerships' financial statements and records any material information obtained from these requests in its consolidated financial statements.
\nOther
\nAlso included in other investments are non-public common and preferred equities, trading securities and derivatives. Non-public common and preferred equities are reported at fair value with changes in fair value, net of income taxes, charged or credited directly to other comprehensive income. Trading securities are marked to market with the change in fair value recognized in net investment income during the current period. The Company sold all of its remaining trading securities during 2013. The Company's derivative financial instruments are carried at fair value, with the changes in fair value reflected in the consolidated statement of income in net realized investment gains (losses). For a further discussion of the derivatives used by the Company, see note 3.
\nNet Investment Income
\nInvestment income from fixed maturities is recognized based on the constant effective yield method which includes an adjustment for estimated principal pre-payments, if any. The effective yield used to determine amortization for fixed maturities subject to prepayment risk (e.g., asset-backed, loan-backed and structured securities) is recalculated and adjusted periodically based upon actual historical and/or projected future cash flows, which are obtained from a widely-accepted securities data provider. The adjustments to the yield for highly rated prepayable fixed maturities are accounted for using the retrospective method. The adjustments to the yield for non-highly rated prepayable fixed maturities are accounted for using the prospective method. Dividends on equity securities (including those with transfer restrictions) are recognized in income when declared. Rental income on real estate is recognized on a straight-line basis over the lease term. See note 3 for further discussion. Investments in private equity limited partnerships, hedge funds, real estate partnerships and joint ventures are accounted for using the equity method of accounting, whereby the Company's share of the investee's earnings or losses in the fund is reported in net investment income. Trading securities are marked to market with the change in fair value recognized in net investment income during the current period. The Company sold all of its remaining trading securities in 2013.
\nAccrual of income is suspended on non-securitized fixed maturities that are in default, or on which it is likely that future payments will not be made as scheduled. Interest income on investments in default is recognized only when payments are received. Investments included in the consolidated balance sheet that were not income-producing for the preceding 12 months were not material.
\nFor fixed maturities where the Company records an other-than-temporary impairment, a determination is made as to the cause of the impairment and whether the Company expects a recovery in the value. For fixed maturities where the Company expects a recovery in value, not necessarily to par, the constant effective yield method is utilized, and the investment is amortized to the expected recovery amount.
\nInvestment Gains and Losses
\nNet realized investment gains and losses are included as a component of pretax revenues based upon specific identification of the investments sold on the trade date. Included in net realized investment gains (losses) are other-than-temporary impairment losses on invested assets other than those investments accounted for using the equity method of accounting as described in the \"Investment Impairments\" section that follows.
\nInvestment Impairments
\nThe Company conducts a periodic review to identify and evaluate invested assets having other-than-temporary impairments. Some of the factors considered in identifying other-than-temporary impairments include: (1) for fixed maturity investments, whether the Company intends to sell the investment or whether it is more likely than not that the Company will be required to sell the investment prior to an anticipated recovery in value; (2) for non-fixed maturity investments, the Company's ability and intent to retain the investment for a reasonable period of time sufficient to allow for an anticipated recovery in value; (3) the likelihood of the recoverability of principal and interest for fixed maturity securities (i.e., whether there is a credit loss) or cost for equity securities; (4) the length of time and extent to which the fair value has been less than amortized cost for fixed maturity securities or cost for equity securities; and (5) the financial condition, near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices.
\nOther-Than-Temporary Impairments of Fixed Maturities and Equity Securities
\nFor fixed maturity investments that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component in net realized investment gains (losses). The impairment related to all other factors is reported in other comprehensive income.
\nFor equity securities (including public common and non-redeemable preferred stock) and for fixed maturity investments the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in net realized investment gains (losses).
\nUpon recognizing an other-than-temporary impairment, the new cost basis of the investment is the previous amortized cost basis less the other-than-temporary impairment recognized in net realized investment gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value; however, for fixed maturity investments the difference between the new cost basis and the expected cash flows is accreted on a quarterly basis to net investment income over the remaining expected life of the investment.
\nDetermination of Credit Loss—Fixed Maturities
\nThe Company determines the credit loss component of fixed maturity investments by utilizing discounted cash flow modeling to determine the present value of the security and comparing the present value with the amortized cost of the security. If the amortized cost is greater than the present value of the expected cash flows, the difference is considered a credit loss and recognized in net realized investment gains (losses).
\nFor non-structured fixed maturities (U.S. Treasury securities, obligations of U.S. government and government agencies and authorities, obligations of states, municipalities and political subdivisions, debt securities issued by foreign governments, and certain corporate debt), the estimate of expected cash flows is determined by projecting a recovery value and a recovery time frame and assessing whether further principal and interest will be received. The determination of recovery value incorporates an issuer valuation assumption utilizing one or a combination of valuation methods as deemed appropriate by the Company. The Company determines the undiscounted recovery value by allocating the estimated value of the issuer to the Company's assessment of the priority of claims. The present value of the cash flows is determined by applying the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment) and an estimated recovery time frame. Generally, that time frame for securities for which the issuer is in bankruptcy is 12 months. For securities for which the issuer is financially troubled but not in bankruptcy, that time frame is generally 24 months. Included in the present value calculation are expected principal and interest payments; however, for securities for which the issuer is classified as bankrupt or in default, the present value calculation assumes no interest payments and a single recovery amount.
\nIn estimating the recovery value, significant judgment is involved in the development of assumptions relating to a myriad of factors related to the issuer including, but not limited to, revenue, margin and earnings projections, the likely market or liquidation values of assets, potential additional debt to be incurred pre- or post-bankruptcy/restructuring, the ability to shift existing or new debt to different priority layers, the amount of restructuring/bankruptcy expenses, the size and priority of unfunded pension obligations, litigation or other contingent claims, the treatment of intercompany claims and the likely outcome with respect to inter-creditor conflicts.
\nFor structured fixed maturity securities (primarily residential and commercial mortgage-backed securities and asset-backed securities), the Company estimates the present value of the security by projecting future cash flows of the assets underlying the securitization, allocating the flows to the various tranches based on the structure of the securitization and determining the present value of the cash flows using the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment or changes in expected cash flows). The Company incorporates levels of delinquencies, defaults and severities as well as credit attributes of the remaining assets in the securitization, along with other economic data, to arrive at its best estimate of the parameters applied to the assets underlying the securitization. In order to project cash flows, the following assumptions are applied to the assets underlying the securitization: (1) voluntary prepayment rates, (2) default rates and (3) loss severity. The key assumptions made for the Prime, Alt-A and first-lien Sub-Prime mortgage-backed securities at December 31, 2014 were as follows:
\n| \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014) | \n\n | Prime | \n\n | Alt-A | \n\n | Sub-Prime |
|---|---|---|---|---|---|---|
| \n Voluntary prepayment rates | \n\n | 4% - 34% | \n\n | 0% - 15% | \n\n | 1% - 9% |
| \n Percentage of remaining pool liquidated due to defaults | \n\n | 1% - 40% | \n\n | 9% - 69% | \n\n | 22% - 71% |
| \n Loss severity | \n\n | 30% - 65% | \n\n | 45% - 80% | \n\n | 65% - 110% |
Real Estate Investments
\nOn at least an annual basis, the Company obtains independent appraisals for substantially all of its real estate investments. In addition, the carrying value of all real estate investments is reviewed for impairment on a quarterly basis or when events or changes in circumstances indicate that the carrying amount may not be recoverable. The review for impairment considers the valuation from the independent appraisal, when applicable, and incorporates an estimate of the undiscounted cash flows expected to result from the use and eventual disposition of the real estate property. An impairment loss is recognized if the expected future undiscounted cash flows are less than the carrying value of the real estate property. The impairment loss is the amount by which the carrying amount exceeds fair value.
\nOther Investments
\nInvestments in Private Equity Limited Partnerships, Hedge Funds and Real Estate Partnerships
\nThe Company reviews its investments in private equity limited partnerships, hedge funds and real estate partnerships for impairment no less frequently than quarterly and monitors the performance throughout the year through discussions with the managers/general partners. If the Company becomes aware of an impairment of a partnership's investments at the balance sheet date prior to receiving the partnership's financial statements, it will recognize an impairment by recording a reduction in the carrying value of the partnership with a corresponding charge to net investment income.
\nChanges in Intent to Sell Temporarily Impaired Assets
\nThe Company may, from time to time, sell invested assets subsequent to the balance sheet date that it did not intend to sell at the balance sheet date. Conversely, the Company may not sell invested assets that it asserted that it intended to sell at the balance sheet date. Such changes in intent are due to events occurring subsequent to the balance sheet date. The types of events that may result in a change in intent include, but are not limited to, significant changes in the economic facts and circumstances related to the invested asset (e.g., a downgrade or upgrade from a rating agency), significant unforeseen changes in liquidity needs, or changes in tax laws or the regulatory environment.
\nSecurities Lending
\nThe Company has engaged in securities lending activities from which it generates net investment income by lending certain of its investments to other institutions for short periods of time. Borrowers of these securities provide collateral equal to at least 102% of the market value of the loaned securities plus accrued interest. This collateral is held by a third-party custodian, and the Company has the right to access the collateral only in the event that the institution borrowing the Company's securities is in default under the lending agreement. Therefore, the Company does not recognize the receipt of the collateral held by the third-party custodian or the obligation to return the collateral. The loaned securities remain a recorded asset of the Company. The Company accepts only cash as collateral for securities on loan and restricts the manner in which that cash is invested.
\nReinsurance Recoverables
\nAmounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. The Company reports its reinsurance recoverables net of an allowance for estimated uncollectible reinsurance recoverables. The allowance is based upon the Company's ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and other relevant factors. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance for estimated uncollectible reinsurance recoverables. Any subsequent collections of amounts previously written off are reported as part of claims and claim adjustment expenses. The Company evaluates and monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to minimize its exposure to significant losses from reinsurer insolvencies.
\nDeferred Acquisition Costs
\nIncremental direct costs of acquired, new and renewal insurance contracts, consisting of commissions (other than contingent commissions) and premium-related taxes, are capitalized and charged to expense pro rata over the contract periods in which the related premiums are earned. Deferred acquisition costs are reviewed to determine if they are recoverable from future income and, if not, are charged to expense. Future investment income attributable to related premiums is taken into account in measuring the recoverability of the carrying value of this asset. All other acquisition expenses are charged to operations as incurred.
\nContractholder Receivables and Payables
\nUnder certain workers' compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a gross basis in the consolidated balance sheet in contractholder payables and contractholder receivables, respectively.
\nGoodwill and Other Intangible Assets
\nThe Company performs a review, on at least an annual basis, of goodwill held by the reporting units which are the Company's three operating and reportable segments: Business and International Insurance; Bond & Specialty Insurance; and Personal Insurance. The Company estimates the fair value of its reporting units and compares it to their carrying value, including goodwill. If the carrying values of the reporting units were to exceed their fair value, the amount of the impairment would be calculated and goodwill adjusted accordingly.
\nThe Company uses a discounted cash flow model to estimate the fair value of its reporting units. The discounted cash flow model is an income approach to valuation that is based on a detailed cash flow analysis for deriving a current fair value of reporting units and is representative of the Company's reporting units' current and expected future financial performance. The discount rate assumptions reflect the Company's assessment of the risks inherent in the projected future cash flows and the Company's weighted-average cost of capital, and are compared against available market data for reasonableness.
\nOther indefinite-lived intangible assets held by the Company are also reviewed for impairment on at least an annual basis. The classification of the asset as indefinite-lived is reassessed and an impairment is recognized if the carrying amount of the asset exceeds its fair value.
\nIntangible assets that are deemed to have a finite useful life are amortized over their useful lives. The carrying amount of intangible assets with a finite useful life is regularly reviewed for indicators of impairment in value. Impairment is recognized only if the carrying amount of the intangible asset is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the fair value of the asset.
\nAs a result of the reviews performed for the years ended December 31, 2014, 2013 and 2012, the Company determined that the estimated fair value substantially exceeded the respective carrying value of its reporting units for those years and that goodwill was not impaired. The Company also determined during its reviews for each year that its other indefinite-lived intangible assets and finite-lived intangible assets were not impaired.
\nClaims and Claim Adjustment Expense Reserves
\nClaims and claim adjustment expense reserves represent estimates for the ultimate cost of unpaid reported and unreported claims incurred and related expenses. The reserves are adjusted regularly based upon experience. Included in the claims and claim adjustment expense reserves in the consolidated balance sheet are certain reserves discounted to the present value of estimated future payments. The liabilities for losses for most long-term disability and annuity claim payments, primarily arising from workers' compensation insurance and workers' compensation excess insurance policies, were discounted using a rate of 5% at both December 31, 2014 and 2013. These discounted reserves totaled $2.01 billion and $2.21 billion at December 31, 2014 and 2013, respectively.
\nThe Company performs a continuing review of its claims and claim adjustment expense reserves, including its reserving techniques and its reinsurance. The reserves are also reviewed regularly by qualified actuaries employed by the Company. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the results of operations in the period in which the estimates are changed. Such changes in estimates could occur in a future period and may be material to the Company's results of operations and financial position in such period.
\nOther Liabilities
\nIncluded in other liabilities in the consolidated balance sheet is the Company's estimate of its liability for guaranty fund and other insurance-related assessments. The liability for expected state guaranty fund and other premium-based assessments is recognized as the Company writes or becomes obligated to write or renew the premiums on which the assessments are expected to be based. The liability for loss-based assessments is recognized as the related losses are incurred. At December 31, 2014 and 2013, the Company had a liability of $245 million and $261 million, respectively, for guaranty fund and other insurance-related assessments and related recoverables of $15 million and $14 million, respectively. The liability for such assessments and the related recoverables are not discounted for the time value of money. The loss-based assessments are expected to be paid over a period ranging from one year to the life expectancy of certain workers' compensation claimants and the recoveries are expected to occur over the same period of time.
\nAlso included in other liabilities is an accrual for policyholder dividends. Certain insurance contracts, primarily workers' compensation, are participating whereby dividends are paid to policyholders in accordance with contract provisions. Net written premiums for participating dividend policies were approximately 1%, 1% and 2% of total net written premiums for the years ended December 31, 2014, 2013 and 2012, respectively. Policyholder dividends are accrued against earnings using best available estimates of amounts to be paid. The liability accrued for policyholder dividends totaled $54 million and $53 million at December 31, 2014 and 2013, respectively.
\nTreasury Stock
\nThe 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.
\nStatutory Accounting Practices
\nThe 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.
\nPermitted statutory accounting practices are those practices that differ either from state-prescribed statutory accounting practices or NAIC statutory accounting practices.
\nThe 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.
\nThe Company's non-U.S. insurance subsidiaries file financial statements prepared in accordance with the regulatory reporting requirements of their respective local jurisdiction.
\nPremiums and Unearned Premium Reserves
\nPremiums 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.
\nCeded 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.
\nFee Income
\nFee 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.
\nOther Revenues
\nOther 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.
\nIncome Taxes
\nThe Company recognizes deferred income tax assets and liabilities for the expected future tax effects attributable to temporary differences between the financial statement and tax return bases of assets and liabilities, based on enacted tax rates and other provisions of the tax law. The effect of a change in tax laws or rates on deferred tax assets and liabilities is recognized in income in the period in which such change is enacted. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.
\nForeign Currency Translation
\nThe Company assigns functional currencies to its foreign operations, which are generally the currencies of the local operating environment. Foreign currency amounts are remeasured to the functional currency, and the resulting foreign exchange gains or losses are reflected in earnings. Functional currency amounts are then translated into U.S. dollars. The foreign currency remeasurement and translation are calculated using current exchange rates for items reported in the balance sheets and average exchange rates for items recorded in earnings. The change in unrealized foreign currency translation gain or loss during the year, net of tax, is a component of other comprehensive income.
\nShare-Based Compensation
\nThe Company has an employee stock incentive compensation plan that permits grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, deferred stock, stock units, performance awards and other share-based or share-denominated awards with respect to the Company's common stock.
\nCompensation cost is measured based on the grant-date fair value of an award, utilizing the assumptions discussed in note 13. Compensation cost is recognized for financial reporting purposes over the period in which the employee is required to provide service in exchange for the award (generally the vesting period). In connection with certain share-based awards, participants are entitled to receive dividends during the vesting period, either in cash or dividend equivalent shares, commensurate with the dividends paid to common shareholders. Dividends and dividend equivalent shares on awards that are expected to vest are recorded in retained earnings. Dividends paid on awards that are not expected to vest as part of the Company's forfeiture estimate are recorded as compensation expense.
\nNature of Operations
\nThe Company is organized into three reportable business segments: Business and International Insurance; Bond & Specialty Insurance; and Personal Insurance. On June 10, 2014, the Company announced a realignment of its management team, effective July 1, 2014, that gave rise to a realignment of two of its three reportable business segments, as follows:
\nThe realignment of segments described above was made to reflect the realignment of the Company's senior management responsibilities and the manner in which the Company's businesses have been managed starting July 1, 2014, and the aggregation of products and services based on the type of customer, how the business is marketed and the manner in which risks are underwritten. In connection with these changes, the Company realigned and revised the names of several businesses that comprise the Business and International Insurance segment.
\nThe specific business segments are as follows:
\nBusiness and International Insurance
\nThe Business and International Insurance segment offers a broad array of property and casualty insurance and insurance related services to its clients, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd's. Business and International Insurance is organized as follows:
\nDomestic
\nInternational
\nInternational also includes the Company's 49.5% ownership of the common stock of J. Malucelli Participações em Seguros e Resseguros S.A. (JMalucelli), its joint venture in Brazil. JMalucelli is currently the market leader in surety in Brazil based on market share. JMalucelli commenced writing other property and casualty insurance business in 2012. The Company's investment in JMalucelli is accounted for using the equity method and is included in \"other investments\" on the consolidated balance sheet.
Business and International Insurance also includes the Special Liability Group (which manages the Company's asbestos and environmental liabilities) and the assumed reinsurance and certain other runoff operations, which are collectively referred to as Business and International Insurance Other.
\nBond & Specialty Insurance
\nThe 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.
\nPersonal Insurance
\nThe 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.
\nAutomobile 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.
\nHomeowners 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
\nThe 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.
\nExcept 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.
\nThe 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.
\nThe following tables summarize the components of the Company's revenues, operating income, net written premiums and total assets by reportable business segments. Financial data for prior years presented in the tables was reclassified to be consistent with the new segment structure implemented in 2014.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | Business and \nInternational \nInsurance | \n\n | Bond & Specialty \nInsurance | \n\n | Personal \nInsurance | \n\n | Total \nReportable \nSegments | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n 2014 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n14,512 | \n\n | $ | \n2,076 | \n\n | $ | \n7,125 | \n\n | $ | \n23,713 | \n|
| \n Net investment income | \n\n | \n | 2,156 | \n\n | \n | 252 | \n\n | \n | 379 | \n\n | \n | 2,787 | \n|
| \n Fee income | \n\n | \n | 438 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 438 | \n|
| \n Other revenues | \n\n | \n | 46 | \n\n | \n | 19 | \n\n | \n | 80 | \n\n | \n | 145 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues(1) | \n\n | $ | \n17,152 | \n\n | $ | \n2,347 | \n\n | $ | \n7,584 | \n\n | $ | \n27,083 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amortization and depreciation | \n\n | $ | \n2,909 | \n\n | $ | \n482 | \n\n | $ | \n1,347 | \n\n | $ | \n4,738 | \n|
| \n Income tax expense | \n\n | \n | 798 | \n\n | \n | 348 | \n\n | \n | 366 | \n\n | \n | 1,512 | \n|
| \n Operating income(1) | \n\n | \n | 2,347 | \n\n | \n | 727 | \n\n | \n | 824 | \n\n | \n | 3,898 | \n|
| \n 2013 | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Premiums | \n\n | $ | \n13,332 | \n\n | $ | \n1,981 | \n\n | $ | \n7,324 | \n\n | $ | \n22,637 | \n|
| \n Net investment income | \n\n | \n | 2,087 | \n\n | \n | 260 | \n\n | \n | 369 | \n\n | \n | 2,716 | \n|
| \n Fee income | \n\n | \n | 395 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 395 | \n|
| \n Other revenues | \n\n | \n | 160 | \n\n | \n | 20 | \n\n | \n | 103 | \n\n | \n | 283 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues(1) | \n\n | $ | \n15,974 | \n\n | $ | \n2,261 | \n\n | $ | \n7,796 | \n\n | $ | \n26,031 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amortization and depreciation | \n\n | $ | \n2,751 | \n\n | $ | \n473 | \n\n | $ | \n1,461 | \n\n | $ | \n4,685 | \n|
| \n Income tax expense | \n\n | \n | 758 | \n\n | \n | 227 | \n\n | \n | 366 | \n\n | \n | 1,351 | \n|
| \n Operating income(1) | \n\n | \n | 2,404 | \n\n | \n | 573 | \n\n | \n | 838 | \n\n | \n | 3,815 | \n|
| \n 2012 | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Premiums | \n\n | $ | \n12,779 | \n\n | $ | \n1,957 | \n\n | $ | \n7,621 | \n\n | $ | \n22,357 | \n|
| \n Net investment income | \n\n | \n | 2,205 | \n\n | \n | 280 | \n\n | \n | 404 | \n\n | \n | 2,889 | \n|
| \n Fee income | \n\n | \n | 323 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 323 | \n|
| \n Other revenues | \n\n | \n | 41 | \n\n | \n | 25 | \n\n | \n | 66 | \n\n | \n | 132 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues(1) | \n\n | $ | \n15,348 | \n\n | $ | \n2,262 | \n\n | $ | \n8,091 | \n\n | $ | \n25,701 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amortization and depreciation | \n\n | $ | \n2,654 | \n\n | $ | \n470 | \n\n | $ | \n1,602 | \n\n | $ | \n4,726 | \n|
| \n Income tax expense | \n\n | \n | 580 | \n\n | \n | 214 | \n\n | \n | 32 | \n\n | \n | 826 | \n|
| \n Operating income(1) | \n\n | \n | 1,981 | \n\n | \n | 504 | \n\n | \n | 217 | \n\n | \n | 2,702 | \n
Net written premiums by market were as follows:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Business and International Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Domestic: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Select Accounts | \n\n | $ | \n2,707 | \n\n | $ | \n2,724 | \n\n | $ | \n2,775 | \n|
| \n Middle Market | \n\n | \n | 6,108 | \n\n | \n | 5,862 | \n\n | \n | 5,654 | \n|
| \n National Accounts | \n\n | \n | 1,047 | \n\n | \n | 1,010 | \n\n | \n | 907 | \n|
| \n First Party | \n\n | \n | 1,579 | \n\n | \n | 1,552 | \n\n | \n | 1,436 | \n|
| \n Specialized Distribution | \n\n | \n | 1,074 | \n\n | \n | 1,085 | \n\n | \n | 1,100 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Domestic | \n\n | \n | 12,515 | \n\n | \n | 12,233 | \n\n | \n | 11,872 | \n|
| \n International | \n\n | \n | 2,121 | \n\n | \n | 1,279 | \n\n | \n | 1,057 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Business and International Insurance | \n\n | \n | 14,636 | \n\n | \n | 13,512 | \n\n | \n | 12,929 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Bond & Specialty Insurance | \n\n | \n | 2,103 | \n\n | \n | 2,030 | \n\n | \n | 1,924 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Personal Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Automobile | \n\n | \n | 3,390 | \n\n | \n | 3,370 | \n\n | \n | 3,642 | \n|
| \n Homeowners and Other | \n\n | \n | 3,775 | \n\n | \n | 3,855 | \n\n | \n | 3,952 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Personal Insurance | \n\n | \n | 7,165 | \n\n | \n | 7,225 | \n\n | \n | 7,594 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated net written premiums | \n\n | $ | \n23,904 | \n\n | $ | \n22,767 | \n\n | $ | \n22,447 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Business Segment Reconciliations
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenue reconciliation | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Earned premiums | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Business and International Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Domestic: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Workers' compensation | \n\n | $ | \n3,713 | \n\n | $ | \n3,560 | \n\n | $ | \n3,222 | \n|
| \n Commercial automobile | \n\n | \n | 1,901 | \n\n | \n | 1,904 | \n\n | \n | 1,943 | \n|
| \n Commercial property | \n\n | \n | 1,756 | \n\n | \n | 1,698 | \n\n | \n | 1,621 | \n|
| \n General liability | \n\n | \n | 1,852 | \n\n | \n | 1,790 | \n\n | \n | 1,757 | \n|
| \n Commercial multi-peril | \n\n | \n | 3,070 | \n\n | \n | 3,093 | \n\n | \n | 3,113 | \n|
| \n Other | \n\n | \n | 42 | \n\n | \n | 39 | \n\n | \n | 35 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Domestic | \n\n | \n | 12,334 | \n\n | \n | 12,084 | \n\n | \n | 11,691 | \n|
| \n International | \n\n | \n | 2,178 | \n\n | \n | 1,248 | \n\n | \n | 1,088 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Business and International Insurance | \n\n | \n | 14,512 | \n\n | \n | 13,332 | \n\n | \n | 12,779 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Bond & Specialty Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fidelity and surety | \n\n | \n | 936 | \n\n | \n | 913 | \n\n | \n | 939 | \n|
| \n General liability | \n\n | \n | 963 | \n\n | \n | 891 | \n\n | \n | 850 | \n|
| \n Other | \n\n | \n | 177 | \n\n | \n | 177 | \n\n | \n | 168 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Bond & Specialty Insurance | \n\n | \n | 2,076 | \n\n | \n | 1,981 | \n\n | \n | 1,957 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Personal Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Automobile | \n\n | \n | 3,316 | \n\n | \n | 3,431 | \n\n | \n | 3,665 | \n|
| \n Homeowners and Other | \n\n | \n | 3,809 | \n\n | \n | 3,893 | \n\n | \n | 3,956 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Personal Insurance | \n\n | \n | 7,125 | \n\n | \n | 7,324 | \n\n | \n | 7,621 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total earned premiums | \n\n | \n | 23,713 | \n\n | \n | 22,637 | \n\n | \n | 22,357 | \n|
| \n Net investment income | \n\n | \n | 2,787 | \n\n | \n | 2,716 | \n\n | \n | 2,889 | \n|
| \n Fee income | \n\n | \n | 438 | \n\n | \n | 395 | \n\n | \n | 323 | \n|
| \n Other revenues | \n\n | \n | 145 | \n\n | \n | 283 | \n\n | \n | 132 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues for reportable segments | \n\n | \n | 27,083 | \n\n | \n | 26,031 | \n\n | \n | 25,701 | \n|
| \n Other revenues | \n\n | \n | — | \n\n | \n | (6 | \n) | \n\n | (12 | \n) |
| \n Net realized investment gains | \n\n | \n | 79 | \n\n | \n | 166 | \n\n | \n | 51 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated revenues | \n\n | $ | \n27,162 | \n\n | $ | \n26,191 | \n\n | $ | \n25,740 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income reconciliation, net of tax | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Total operating income for reportable segments | \n\n | $ | \n3,898 | \n\n | $ | \n3,815 | \n\n | $ | \n2,702 | \n|
| \n Interest Expense and Other(1) | \n\n | \n | (257 | \n) | \n\n | (248 | \n) | \n\n | (261 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating income | \n\n | \n | 3,641 | \n\n | \n | 3,567 | \n\n | \n | 2,441 | \n|
| \n Net realized investment gains | \n\n | \n | 51 | \n\n | \n | 106 | \n\n | \n | 32 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated net income | \n\n | $ | \n3,692 | \n\n | $ | \n3,673 | \n\n | $ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Asset reconciliation: | \n\n | \n | \n | \n | \n | \n | |
| \n Business and International Insurance | \n\n | $ | \n82,309 | \n\n | $ | \n82,789 | \n|
| \n Bond & Specialty Insurance | \n\n | \n | 7,525 | \n\n | \n | 7,648 | \n|
| \n Personal Insurance | \n\n | \n | 12,798 | \n\n | \n | 12,870 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total assets for reportable segments | \n\n | \n | 102,632 | \n\n | \n | 103,307 | \n|
| \n Other assets(1) | \n\n | \n | 446 | \n\n | \n | 505 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated assets | \n\n | $ | \n103,078 | \n\n | $ | \n103,812 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
Enterprise-Wide Disclosures
\nThe Company does not have revenue from transactions with a single customer amounting to 10 percent or more of its revenues.
\nThe following table presents revenues of the Company's operations based on location:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n U.S. | \n\n | $ | \n25,091 | \n\n | $ | \n25,138 | \n\n | $ | \n24,827 | \n|
| \n Non-U.S.: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Canada | \n\n | \n | 1,474 | \n\n | \n | 529 | \n\n | \n | 349 | \n|
| \n Other Non-U.S. | \n\n | \n | 597 | \n\n | \n | 524 | \n\n | \n | 564 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Non-U.S. | \n\n | \n | 2,071 | \n\n | \n | 1,053 | \n\n | \n | 913 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | $ | \n27,162 | \n\n | $ | \n26,191 | \n\n | $ | \n25,740 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
3. INVESTMENTS
\nFixed Maturities
\nThe amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross Unrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | Amortized \nCost | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2014, in millions) | \n\n | Gains | \n\n | Losses | \n|||||||||
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,022 | \n\n | $ | \n36 | \n\n | $ | \n5 | \n\n | $ | \n2,053 | \n|
| \n Obligations of states, municipalities and political subdivisions: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Pre-refunded | \n\n | \n | 7,229 | \n\n | \n | 332 | \n\n | \n | — | \n\n | \n | 7,561 | \n|
| \n All other | \n\n | \n | 24,666 | \n\n | \n | 1,356 | \n\n | \n | 10 | \n\n | \n | 26,012 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total obligations of states, municipalities and political subdivisions | \n\n | \n | 31,895 | \n\n | \n | 1,688 | \n\n | \n | 10 | \n\n | \n | 33,573 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,320 | \n\n | \n | 48 | \n\n | \n | — | \n\n | \n | 2,368 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,052 | \n\n | \n | 165 | \n\n | \n | 4 | \n\n | \n | 2,213 | \n|
| \n All other corporate bonds | \n\n | \n | 22,390 | \n\n | \n | 844 | \n\n | \n | 99 | \n\n | \n | 23,135 | \n|
| \n Redeemable preferred stock | \n\n | \n | 122 | \n\n | \n | 10 | \n\n | \n | — | \n\n | \n | 132 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n60,801 | \n\n | $ | \n2,791 | \n\n | $ | \n118 | \n\n | $ | \n63,474 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross Unrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | Amortized \nCost | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2013, in millions) | \n\n | Gains | \n\n | Losses | \n|||||||||
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,288 | \n\n | $ | \n39 | \n\n | $ | \n12 | \n\n | $ | \n2,315 | \n|
| \n Obligations of states, municipalities and political subdivisions: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Pre-refunded | \n\n | \n | 9,074 | \n\n | \n | 445 | \n\n | \n | 1 | \n\n | \n | 9,518 | \n|
| \n All other | \n\n | \n | 25,414 | \n\n | \n | 991 | \n\n | \n | 361 | \n\n | \n | 26,044 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total obligations of states, municipalities and political subdivisions | \n\n | \n | 34,488 | \n\n | \n | 1,436 | \n\n | \n | 362 | \n\n | \n | 35,562 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,552 | \n\n | \n | 33 | \n\n | \n | 8 | \n\n | \n | 2,577 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,263 | \n\n | \n | 179 | \n\n | \n | 18 | \n\n | \n | 2,424 | \n|
| \n All other corporate bonds | \n\n | \n | 20,472 | \n\n | \n | 767 | \n\n | \n | 299 | \n\n | \n | 20,940 | \n|
| \n Redeemable preferred stock | \n\n | \n | 133 | \n\n | \n | 6 | \n\n | \n | 1 | \n\n | \n | 138 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n62,196 | \n\n | $ | \n2,460 | \n\n | $ | \n700 | \n\n | $ | \n63,956 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The amortized cost and fair value of fixed maturities by contractual maturity follow. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Amortized \nCost | \n\n | Fair \nValue | \n|||
|---|---|---|---|---|---|---|---|
| \n Due in one year or less | \n\n | $ | \n7,762 | \n\n | $ | \n7,859 | \n|
| \n Due after 1 year through 5 years | \n\n | \n | 18,447 | \n\n | \n | 19,325 | \n|
| \n Due after 5 years through 10 years | \n\n | \n | 16,815 | \n\n | \n | 17,462 | \n|
| \n Due after 10 years | \n\n | \n | 15,725 | \n\n | \n | 16,615 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n
| \n\n | \n | 58,749 | \n\n | \n | 61,261 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,052 | \n\n | \n | 2,213 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n60,801 | \n\n | $ | \n63,474 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
Pre-refunded bonds of $7.56 billion and $9.52 billion at December 31, 2014 and 2013, respectively, were bonds for which states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities, which were created to satisfy their responsibility for payments of principal and interest.
\nThe Company's fixed maturity investment portfolio at December 31, 2014 and 2013 included $2.21 billion and $2.42 billion, respectively, of residential mortgage-backed securities, which include pass-through securities and collateralized mortgage obligations (CMO). Included in the totals at December 31, 2014 and 2013 were $872 million and $1.07 billion, respectively, of GNMA, FNMA, FHLMC (excluding FHA project loans) and Canadian government guaranteed residential mortgage-backed pass-through securities classified as available for sale. Also included in those totals were residential CMOs classified as available for sale with a fair value of $1.34 billion and $1.36 billion at December 31, 2014 and 2013, respectively. Approximately 46% and 42% of the Company's CMO holdings at December 31, 2014 and 2013, respectively, were guaranteed by or fully collateralized by securities issued by GNMA, FNMA or FHLMC. The average credit rating of the $725 million and $790 million of non-guaranteed CMO holdings at December 31, 2014 and 2013, respectively, was \"Ba1\" and \"Ba3,\" respectively. The average credit rating of all of the above securities was \"Aa3\" and \"A1\" at December 31, 2014 and 2013, respectively.
\nAt December 31, 2014 and 2013, the Company held commercial mortgage-backed securities (CMBS, including FHA project loans) of $715 million and $475 million, respectively, which are included in \"All other corporate bonds\" in the tables above. At December 31, 2014 and 2013, approximately $202 million and $59 million of these securities, respectively, or the loans backing such securities, contained guarantees by the U.S. government or a government-sponsored enterprise. The average credit rating of the $513 million and $416 million of non-guaranteed securities at December 31, 2014 and 2013, respectively, was \"Aaa\" at both dates. The CMBS portfolio is supported by loans that are diversified across economic sectors and geographical areas. The average credit rating of the CMBS portfolio was \"Aaa\" at both December 31, 2014 and 2013.
\nAt December 31, 2014 and 2013, the Company had $296 million and $131 million, respectively, of securities on loan as part of a tri-party lending agreement.
\nProceeds from sales of fixed maturities classified as available for sale were $1.05 billion, $1.64 billion and $1.09 billion in 2014, 2013 and 2012, respectively. Gross gains of $44 million, $66 million and $70 million and gross losses of $12 million, $25 million and $9 million were realized on sales in 2014, 2013 and 2012, respectively.
\nAt December 31, 2014 and 2013, the Company's insurance subsidiaries had $4.78 billion and $4.77 billion, respectively, of securities on deposit at financial institutions in certain states pursuant to the respective states' insurance regulatory requirements. Funds deposited with third parties to be used as collateral to secure various liabilities on behalf of insureds, cedants and other creditors had a fair value of $39 million and $59 million at December 31, 2014 and 2013, respectively. Other investments pledged as collateral securing outstanding letters of credit had a fair value of $22 million and $42 million at December 31, 2014 and 2013, respectively. In addition, the Company utilized a Lloyd's trust deposit at December 31, 2014 and 2013, whereby owned securities with a fair value of approximately $151 million and $181 million, respectively, held by an insurance subsidiary were pledged into a Lloyd's trust account to support capital requirements for the Company's operations at Lloyd's.
\nEquity Securities
\nThe cost and fair value of investments in equity securities were as follows:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross \nUnrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2014, in millions) | \n\n | Cost | \n\n | Gains | \n\n | Losses | \n|||||||
| \n Public common stock | \n\n | $ | \n400 | \n\n | $ | \n295 | \n\n | $ | \n4 | \n\n | $ | \n691 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 179 | \n\n | \n | 31 | \n\n | \n | 2 | \n\n | \n | 208 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n579 | \n\n | $ | \n326 | \n\n | $ | \n6 | \n\n | $ | \n899 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross \nUnrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2013, in millions) | \n\n | Cost | \n\n | Gains | \n\n | Losses | \n|||||||
| \n Public common stock | \n\n | $ | \n385 | \n\n | $ | \n226 | \n\n | $ | \n1 | \n\n | $ | \n610 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 301 | \n\n | \n | 34 | \n\n | \n | 2 | \n\n | \n | 333 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n686 | \n\n | $ | \n260 | \n\n | $ | \n3 | \n\n | $ | \n943 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Proceeds from sales of equity securities were $158 million, $86 million and $37 million in 2014, 2013 and 2012, respectively. Gross gains of $27 million, $16 million and $8 million and gross losses of $3 million, $1 million and less than $1 million were realized on those sales (excluding impairments) in 2014, 2013 and 2012, respectively.
\nReal Estate
\nThe Company's real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. The Company negotiates commercial leases with individual tenants through unrelated, licensed real estate brokers. Negotiated terms and conditions include, among others, rental rates, length of lease period and improvements to the premises to be provided by the landlord.
\nProceeds from the sale of real estate investments were $15 million, $18 million and $53 million in 2014, 2013 and 2012, respectively. Gross gains of $6 million, $7 million and $19 million were realized on those sales in 2014, 2013 and 2012, respectively, and there were no gross losses. The Company had no real estate held for sale at December 31, 2014 and 2013. Accumulated depreciation on real estate held for investment purposes was $290 million and $264 million at December 31, 2014 and 2013, respectively.
\nFuture minimum rental income on operating leases relating to the Company's real estate properties is expected to be $85 million, $72 million, $56 million, $44 million and $34 million for 2015, 2016, 2017, 2018 and 2019, respectively, and $64 million for 2020 and thereafter.
\nShort-term Securities
\nThe Company's short-term securities consist of Aaa-rated registered money market funds, U.S. Treasury securities, high-quality commercial paper (primarily A1/P1) and high-quality corporate securities purchased within a year to their maturity with a combined average of 57 days to maturity at December 31, 2014. The amortized cost of these securities, which totaled $4.36 billion and $3.88 billion at December 31, 2014 and 2013, respectively, approximated their fair value.
\nVariable Interest Entities
\nEntities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (VIE). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE's capital structure, contractual terms, nature of the VIE's operations and purpose and the Company's relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.
\nThe Company is a passive investor in limited partner equity interests issued by third party VIEs. These include certain of the Company's investments in private equity limited partnerships, hedge funds and real estate partnerships where the Company is not related to the general partner. These investments are generally accounted for under the equity method and reported in the Company's consolidated balance sheet as other investments unless the Company is deemed the primary beneficiary. These equity interests generally cannot be redeemed. Distributions from these investments are received by the Company as a result of liquidation of the underlying investments of the funds and/or as income distribution. The Company's maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company's consolidated balance sheet and any unfunded commitment. Neither the carrying amounts nor the unfunded commitments related to these VIEs are material.
\nUnrealized Investment Losses
\nThe following tables summarize, for all investments in an unrealized loss position at December 31, 2014 and 2013, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1, in determining whether such investments are other-than-temporarily impaired.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Less than 12 months | \n\n | 12 months or longer | \n\n | Total | \n|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (at December 31, 2014, in millions) | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n|||||||
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n180 | \n\n | $ | \n2 | \n\n | $ | \n125 | \n\n | $ | \n3 | \n\n | $ | \n305 | \n\n | $ | \n5 | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 173 | \n\n | \n | 1 | \n\n | \n | 797 | \n\n | \n | 9 | \n\n | \n | 970 | \n\n | \n | 10 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 50 | \n\n | \n | — | \n\n | \n | 24 | \n\n | \n | — | \n\n | \n | 74 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 68 | \n\n | \n | — | \n\n | \n | 192 | \n\n | \n | 4 | \n\n | \n | 260 | \n\n | \n | 4 | \n|
| \n All other corporate bonds | \n\n | \n | 2,148 | \n\n | \n | 38 | \n\n | \n | 2,355 | \n\n | \n | 61 | \n\n | \n | 4,503 | \n\n | \n | 99 | \n|
| \n Redeemable preferred stock | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 2,619 | \n\n | \n | 41 | \n\n | \n | 3,493 | \n\n | \n | 77 | \n\n | \n | 6,112 | \n\n | \n | 118 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 81 | \n\n | \n | 4 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 82 | \n\n | \n | 4 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 44 | \n\n | \n | 1 | \n\n | \n | 42 | \n\n | \n | 1 | \n\n | \n | 86 | \n\n | \n | 2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 125 | \n\n | \n | 5 | \n\n | \n | 43 | \n\n | \n | 1 | \n\n | \n | 168 | \n\n | \n | 6 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n2,744 | \n\n | $ | \n46 | \n\n | $ | \n3,536 | \n\n | $ | \n78 | \n\n | $ | \n6,280 | \n\n | $ | \n124 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Less than 12 months | \n\n | 12 months or longer | \n\n | Total | \n|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (at December 31, 2013, in millions) | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n|||||||
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n433 | \n\n | $ | \n12 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n433 | \n\n | $ | \n12 | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 4,785 | \n\n | \n | 298 | \n\n | \n | 432 | \n\n | \n | 64 | \n\n | \n | 5,217 | \n\n | \n | 362 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 907 | \n\n | \n | 8 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 908 | \n\n | \n | 8 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 542 | \n\n | \n | 17 | \n\n | \n | 21 | \n\n | \n | 1 | \n\n | \n | 563 | \n\n | \n | 18 | \n|
| \n All other corporate bonds | \n\n | \n | 6,887 | \n\n | \n | 253 | \n\n | \n | 421 | \n\n | \n | 46 | \n\n | \n | 7,308 | \n\n | \n | 299 | \n|
| \n Redeemable preferred stock | \n\n | \n | 82 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 82 | \n\n | \n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 13,636 | \n\n | \n | 589 | \n\n | \n | 875 | \n\n | \n | 111 | \n\n | \n | 14,511 | \n\n | \n | 700 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 53 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 53 | \n\n | \n | 1 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 147 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 147 | \n\n | \n | 2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 200 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 200 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n13,836 | \n\n | $ | \n592 | \n\n | $ | \n875 | \n\n | $ | \n111 | \n\n | $ | \n14,711 | \n\n | $ | \n703 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The following table summarizes, for all fixed maturities and equity securities reported at fair value for which fair value is less than 80% of amortized cost at December 31, 2014, the gross unrealized investment loss by length of time those securities have continuously been in an unrealized loss position of greater than 20% of amortized cost:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Period For Which Fair Value Is Less Than 80% of Amortized Cost | \n||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (in millions) | \n\n | 3 Months \nor Less | \n\n | Greater Than \n3 Months, \n6 Months \nor Less | \n\n | Greater Than \n6 Months, \n12 Months \nor Less | \n\n | Greater Than \n12 Months | \n\n | Total | \n||||||
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Mortgage-backed securities | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Other | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 2 | \n\n | \n | 2 | \n\n | \n | 8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 2 | \n\n | \n | 2 | \n\n | \n | 8 | \n|
| \n Equity securities | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n4 | \n\n | $ | \n— | \n\n | $ | \n2 | \n\n | $ | \n2 | \n\n | $ | \n8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
These unrealized losses at December 31, 2014 represented less than 1% of the combined fixed maturity and equity security portfolios on a pretax basis and less than 1% of shareholders' equity on an after-tax basis.
\nImpairment Charges
\nImpairment charges included in net realized investment gains in the consolidated statement of income were as follows:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 1 | \n\n | \n | 2 | \n\n | \n | 4 | \n|
| \n All other corporate bonds | \n\n | \n | 15 | \n\n | \n | 3 | \n\n | \n | 4 | \n|
| \n Redeemable preferred stock | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 16 | \n\n | \n | 5 | \n\n | \n | 8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Public common stock | \n\n | \n | 9 | \n\n | \n | 5 | \n\n | \n | 3 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 9 | \n\n | \n | 5 | \n\n | \n | 4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments | \n\n | \n | 1 | \n\n | \n | 5 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n26 | \n\n | $ | \n15 | \n\n | $ | \n15 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The following tables present the cumulative amount of and the changes during the reporting period in the credit losses of other-than-temporary impairments (OTTI) on fixed maturities recognized in the consolidated statement of income for which a portion of the OTTI was recognized in other comprehensive income:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Year ended December 31, 2014 \n(in millions) | \n\n | Cumulative \nOTTI Credit \nLosses \nRecognized for \nSecurities Held, \nBeginning of \nPeriod | \n\n | Additions for \nOTTI Securities \nWhere No \nCredit Losses \nWere \nPreviously \nRecognized | \n\n | Additions for \nOTTI Securities \nWhere Credit \nLosses Have \nBeen \nPreviously \nRecognized | \n\n | Reductions \nDue to \nSales/Defaults \nof Credit- \nImpaired \nSecurities | \n\n | Adjustments to \nBook Value \nof Credit- \nImpaired \nSecurities due \nto Changes in \nCash Flows | \n\n | Cumulative OTTI \nCredit Losses \nRecognized for \nSecurities Still \nHeld, End of \nPeriod | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | $ | \n53 | \n\n | $ | \n— | \n\n | $ | \n1 | \n\n | $ | \n(5 | \n) | \n$ | \n(9 | \n) | \n$ | \n40 | \n|
| \n All other corporate bonds | \n\n | \n | 65 | \n\n | \n | — | \n\n | \n | 3 | \n\n | \n | (6 | \n) | \n\n | (3 | \n) | \n\n | 59 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | $ | \n118 | \n\n | $ | \n— | \n\n | $ | \n4 | \n\n | $ | \n(11 | \n) | \n$ | \n(12 | \n) | \n$ | \n99 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Year ended December 31, 2013 \n(in millions) | \n\n | Cumulative \nOTTI Credit \nLosses \nRecognized for \nSecurities Held, \nBeginning of \nPeriod | \n\n | Additions for \nOTTI Securities \nWhere No \nCredit Losses \nWere \nPreviously \nRecognized | \n\n | Additions for \nOTTI Securities \nWhere Credit \nLosses Have \nBeen \nPreviously \nRecognized | \n\n | Reductions \nDue to \nSales/Defaults \nof Credit- \nImpaired \nSecurities | \n\n | Adjustments to \nBook Value \nof Credit- \nImpaired \nSecurities due \nto Changes in \nCash Flows | \n\n | Cumulative OTTI \nCredit Losses \nRecognized for \nSecurities Still \nHeld, End of \nPeriod | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | $ | \n55 | \n\n | $ | \n— | \n\n | $ | \n2 | \n\n | $ | \n— | \n\n | $ | \n(4 | \n) | \n$ | \n53 | \n|
| \n All other corporate bonds | \n\n | \n | 72 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | (7 | \n) | \n\n | (3 | \n) | \n\n | 65 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | $ | \n127 | \n\n | $ | \n3 | \n\n | $ | \n2 | \n\n | $ | \n(7 | \n) | \n$ | \n(7 | \n) | \n$ | \n118 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Concentrations and Credit Quality
\nConcentrations of credit risk arise from exposure to counterparties that are engaged in similar activities and have similar economic characteristics that could cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company seeks to mitigate credit risk by actively monitoring the creditworthiness of counterparties, obtaining collateral as deemed appropriate and applying controls that include credit approvals, limits of credit exposure and other monitoring procedures.
\nAt December 31, 2014 and 2013, other than U.S. Treasury securities, obligations of U.S. government and government agencies and authorities, and obligations of the Canadian government, the Company was not exposed to any concentration of credit risk of a single issuer greater than 5% of the Company's shareholders' equity.
\nIncluded in fixed maturities are below investment grade securities totaling $1.91 billion and $1.93 billion at December 31, 2014 and 2013, respectively. The Company defines its below investment grade securities as those securities rated below investment grade by external rating agencies, or the equivalent by the Company when a public rating does not exist. Such securities include below investment grade bonds that are publicly traded and certain other privately issued bonds that are classified as below investment grade loans.
\nNet Investment Income
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Gross investment income | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | $ | \n2,244 | \n\n | $ | \n2,310 | \n\n | $ | \n2,439 | \n|
| \n Equity securities | \n\n | \n | 40 | \n\n | \n | 31 | \n\n | \n | 28 | \n|
| \n Short-term securities | \n\n | \n | 9 | \n\n | \n | 11 | \n\n | \n | 10 | \n|
| \n Real estate | \n\n | \n | 44 | \n\n | \n | 37 | \n\n | \n | 34 | \n|
| \n Other investments | \n\n | \n | 489 | \n\n | \n | 364 | \n\n | \n | 414 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Gross investment income | \n\n | \n | 2,826 | \n\n | \n | 2,753 | \n\n | \n | 2,925 | \n|
| \n Investment expenses | \n\n | \n | 39 | \n\n | \n | 37 | \n\n | \n | 36 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net investment income | \n\n | $ | \n2,787 | \n\n | $ | \n2,716 | \n\n | $ | \n2,889 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Changes in net unrealized gains on investment securities that are included as a separate component of other comprehensive income (loss) were as follows:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Changes in net unrealized investment gains | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | $ | \n913 | \n\n | $ | \n(2,804 | \n) | \n$ | \n326 | \n|
| \n Equity securities | \n\n | \n | 63 | \n\n | \n | 74 | \n\n | \n | 38 | \n|
| \n Other investments | \n\n | \n | 2 | \n\n | \n | (1 | \n) | \n\n | (2 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Change in net pretax unrealized gains on investment securities | \n\n | \n | 978 | \n\n | \n | (2,731 | \n) | \n\n | 362 | \n|
| \n Related tax expense (benefit) | \n\n | \n | 334 | \n\n | \n | (950 | \n) | \n\n | 130 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Change in net unrealized gains on investment securities | \n\n | \n | 644 | \n\n | \n | (1,781 | \n) | \n\n | 232 | \n|
| \n Balance, beginning of year | \n\n | \n | 1,322 | \n\n | \n | 3,103 | \n\n | \n | 2,871 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, end of year | \n\n | $ | \n1,966 | \n\n | $ | \n1,322 | \n\n | $ | \n3,103 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Derivative Financial Instruments
\nFrom time to time, the Company enters into U.S. Treasury note futures contracts to modify the effective duration of specific assets within the investment portfolio. U.S. Treasury futures contracts require a daily mark-to-market and settlement with the broker. At December 31, 2014 and 2013, the Company had $350 million and $0 notional value of open U.S. Treasury futures contracts, respectively. Net realized investment gains in 2014, 2013 and 2012 included net losses of $1 million, net gains of $115 million and net losses of $14 million, respectively, related to U.S. Treasury futures contracts.
\nThe Company purchases investments that have embedded derivatives, primarily convertible debt securities. These embedded derivatives are carried at fair value with changes in value reflected in net realized investment gains. Derivatives embedded in convertible debt securities are reported on a combined basis with their host instrument and are classified as fixed maturity securities. The Company recorded net realized losses of less than $1 million in 2014, net realized investment gains of less than $1 million in 2013 and net realized investment losses of less than $1 million in 2012 related to these embedded derivatives.
4. FAIR VALUE MEASUREMENTS
\nThe Company's estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company's significant market assumptions. The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety. The three levels of the hierarchy are as follows:
\nValuation of Investments Reported at Fair Value in Financial Statements
\nThe fair value of a financial instrument is the estimated amount at which the instrument could be exchanged in an orderly transaction between knowledgeable, unrelated, willing parties, i.e., not in a forced transaction. The estimated fair value of a financial instrument may differ from the amount that could be realized if the security was sold in an immediate sale, e.g., a forced transaction. Additionally, the valuation of investments is more subjective when markets are less liquid due to the lack of market based inputs, which may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur.
\nFor investments that have quoted market prices in active markets, the Company uses the unadjusted quoted market prices as fair value and includes these prices in the amounts disclosed in Level 1 of the hierarchy. The Company receives the quoted market prices from third party, nationally recognized pricing services. When quoted market prices are unavailable, the Company utilizes these pricing services to determine an estimate of fair value. The fair value estimates provided from these pricing services are included in the amount disclosed in Level 2 of the hierarchy. If quoted market prices and an estimate from a pricing service are unavailable, the Company produces an estimate of fair value based on internally developed valuation techniques, which, depending on the level of observable market inputs, will render the fair value estimate as Level 2 or Level 3. The Company bases all of its estimates of fair value for assets on the bid price as it represents what a third-party market participant would be willing to pay in an arm's length transaction.
\nFixed Maturities
\nThe Company utilized a pricing service to estimate fair value measurements for approximately 98% of its fixed maturities at both December 31, 2014 and 2013. The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, the pricing service uses an Option Adjusted Spread model to develop prepayment and interest rate scenarios.
\nThe pricing service evaluates each asset class based on relevant market information, relevant credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each market input depends on the asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.
\nThe pricing service utilized by the Company has indicated that it will only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If the pricing service discontinues pricing an investment, the Company would be required to produce an estimate of fair value using some of the same methodologies as the pricing service but would have to make assumptions for any market-based inputs that were unavailable due to market conditions.
\nThe fair value estimates of most fixed maturity investments are based on observable market information rather than market quotes. Accordingly, the estimates of fair value for such fixed maturities, other than U.S. Treasury securities, provided by the pricing service are included in the amount disclosed in Level 2 of the hierarchy. The estimated fair value of U.S. Treasury securities is included in the amount disclosed in Level 1 as the estimates are based on unadjusted market prices.
\nThe Company also holds certain fixed maturity investments which are not priced by the pricing service and, accordingly, estimates the fair value of such fixed maturities using an internal matrix that is based on market information regarding interest rates, credit spreads and liquidity. The underlying source data for calculating the matrix of credit spreads relative to the U.S. Treasury curve are the BofA Merrill Lynch U.S. Corporate Index and the BofA Merrill Lynch High Yield BB Rated Index. The Company includes the fair value estimates of these corporate bonds in Level 2, since all significant inputs are market observable.
\nWhile the vast majority of the Company's municipal bonds and corporate bonds are included in Level 2, the Company holds a number of municipal bonds and corporate bonds which are not valued by the pricing service and estimates the fair value of these bonds using an internal pricing matrix with some unobservable inputs that are significant to the valuation. Due to the limited amount of observable market information, the Company includes the fair value estimates for these particular bonds in Level 3. The fair value of the fixed maturities for which the Company used an internal pricing matrix was $92 million and $94 million at December 31, 2014 and 2013, respectively. Additionally, the Company holds a small amount of other fixed maturity investments that have characteristics that make them unsuitable for matrix pricing. For these fixed maturities, the Company obtains a quote from a broker (primarily the market maker). The fair value of the fixed maturities for which the Company received a broker quote was $140 million and $161 million at December 31, 2014 and 2013, respectively. Due to the disclaimers on the quotes that indicate that the price is indicative only, the Company includes these fair value estimates in Level 3.
\nEquity Securities—Public Common Stock and Non-Redeemable Preferred Stock
\nFor public common stock and non-redeemable preferred stocks, the Company receives prices from pricing services that are based on observable market transactions and includes these estimates in the amount disclosed in Level 1. When current market quotes in active markets are unavailable for certain non-redeemable preferred stocks held by the Company, the Company receives an estimate of fair value from the pricing services. The services utilize similar methodologies to price the non-redeemable preferred stocks as they do for the fixed maturities. The Company includes the fair value estimate for these non-redeemable preferred stocks in the amount disclosed in Level 2.
\nOther Investments
\nThe Company holds investments in various publicly-traded securities which are reported in other investments. These investments include mutual funds and other small holdings. The $19 million fair value of these investments at both December 31, 2014 and 2013, respectively, was disclosed in Level 1. At December 31, 2014 and 2013, the Company held investments in non-public common and preferred equity securities, with fair value estimates of $36 million and $34 million, respectively, reported in other investments, where the fair value estimate is determined either internally or by an external fund manager based on recent filings, operating results, balance sheet stability, growth and other business and market sector fundamentals. Due to the significant unobservable inputs in these valuations, the Company includes the total fair value estimate for all of these investments at December 31, 2014 and 2013 in the amount disclosed in Level 3.
\nDerivatives
\nAt December 31, 2014 and 2013, the Company held $4 million and $8 million, respectively, of convertible bonds containing embedded conversion options that are valued separately from the host bond contract in the amount disclosed in Level 2—fixed maturities.
\nFair Value Hierarchy
\nThe following tables present the level within the fair value hierarchy at which the Company's financial assets and financial liabilities are measured on a recurring basis at December 31, 2014 and 2013. An investment transferred between levels during a period is transferred at its fair value as of the beginning of that period.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,053 | \n\n | $ | \n2,049 | \n\n | $ | \n4 | \n\n | $ | \n— | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 33,573 | \n\n | \n | — | \n\n | \n | 33,560 | \n\n | \n | 13 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,368 | \n\n | \n | — | \n\n | \n | 2,368 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,213 | \n\n | \n | — | \n\n | \n | 2,203 | \n\n | \n | 10 | \n|
| \n All other corporate bonds | \n\n | \n | 23,135 | \n\n | \n | — | \n\n | \n | 22,934 | \n\n | \n | 201 | \n|
| \n Redeemable preferred stock | \n\n | \n | 132 | \n\n | \n | 2 | \n\n | \n | 122 | \n\n | \n | 8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 63,474 | \n\n | \n | 2,051 | \n\n | \n | 61,191 | \n\n | \n | 232 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 691 | \n\n | \n | 691 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 208 | \n\n | \n | 82 | \n\n | \n | 126 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 899 | \n\n | \n | 773 | \n\n | \n | 126 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments | \n\n | \n | 55 | \n\n | \n | 19 | \n\n | \n | — | \n\n | \n | 36 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n64,428 | \n\n | $ | \n2,843 | \n\n | $ | \n61,317 | \n\n | $ | \n268 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
During the year ended December 31, 2014, the Company had transfers of $1 million of obligations of states, municipalities and political subdivisions and $7 million of non-redeemable preferred stock from Level 1 to Level 2. In addition, the Company had transfers of $11 million of non-redeemable preferred stock and $2 million of redeemable preferred stock from Level 2 to Level 1.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,315 | \n\n | $ | \n2,298 | \n\n | $ | \n17 | \n\n | $ | \n— | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 35,562 | \n\n | \n | 1 | \n\n | \n | 35,538 | \n\n | \n | 23 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,577 | \n\n | \n | — | \n\n | \n | 2,577 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,424 | \n\n | \n | — | \n\n | \n | 2,415 | \n\n | \n | 9 | \n|
| \n All other corporate bonds | \n\n | \n | 20,940 | \n\n | \n | — | \n\n | \n | 20,726 | \n\n | \n | 214 | \n|
| \n Redeemable preferred stock | \n\n | \n | 138 | \n\n | \n | — | \n\n | \n | 129 | \n\n | \n | 9 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 63,956 | \n\n | \n | 2,299 | \n\n | \n | 61,402 | \n\n | \n | 255 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 610 | \n\n | \n | 610 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 333 | \n\n | \n | 138 | \n\n | \n | 195 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 943 | \n\n | \n | 748 | \n\n | \n | 195 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments | \n\n | \n | 53 | \n\n | \n | 19 | \n\n | \n | — | \n\n | \n | 34 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n64,952 | \n\n | $ | \n3,066 | \n\n | $ | \n61,597 | \n\n | $ | \n289 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
During the year ended December 31, 2013, the Company had transfers of $31 million of redeemable preferred stock and $54 million of non-redeemable preferred stock from Level 1 to Level 2.
\nThe following tables present the changes in the Level 3 fair value category for the years ended December 31, 2014 and 2013.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Fixed \nMaturities | \n\n | Other \nInvestments | \n\n | Total | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Balance at December 31, 2013 | \n\n | $ | \n255 | \n\n | $ | \n34 | \n\n | $ | \n289 | \n|
| \n Total realized and unrealized investment gains (losses): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Reported in net realized investment gains(1) | \n\n | \n | 3 | \n\n | \n | 1 | \n\n | \n | 4 | \n|
| \n Reported in increases (decreases) in other comprehensive income | \n\n | \n | (2 | \n) | \n\n | 1 | \n\n | \n | (1 | \n) |
| \n Purchases, sales and settlements/maturities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Purchases | \n\n | \n | 232 | \n\n | \n | 1 | \n\n | \n | 233 | \n|
| \n Sales | \n\n | \n | (1 | \n) | \n\n | (1 | \n) | \n\n | (2 | \n) |
| \n Settlements/maturities | \n\n | \n | (90 | \n) | \n\n | — | \n\n | \n | (90 | \n) |
| \n Gross transfers into Level 3 | \n\n | \n | 18 | \n\n | \n | — | \n\n | \n | 18 | \n|
| \n Gross transfers out of Level 3 | \n\n | \n | (183 | \n) | \n\n | — | \n\n | \n | (183 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at December 31, 2014 | \n\n | $ | \n232 | \n\n | $ | \n36 | \n\n | $ | \n268 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amount of total realized investment gains (losses) for the period included in the consolidated statement of income attributable to changes in the fair value of assets still held at the reporting date | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Fixed \nMaturities | \n\n | Other \nInvestments | \n\n | Total | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Balance at December 31, 2012 | \n\n | $ | \n230 | \n\n | $ | \n54 | \n\n | $ | \n284 | \n|
| \n Total realized and unrealized investment gains (losses): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Reported in net realized investment gains(1) | \n\n | \n | 4 | \n\n | \n | 12 | \n\n | \n | 16 | \n|
| \n Reported in increases (decreases) in other comprehensive income | \n\n | \n | (2 | \n) | \n\n | 1 | \n\n | \n | (1 | \n) |
| \n Purchases, sales and settlements/maturities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Purchases | \n\n | \n | 180 | \n\n | \n | — | \n\n | \n | 180 | \n|
| \n Sales | \n\n | \n | (25 | \n) | \n\n | (33 | \n) | \n\n | (58 | \n) |
| \n Settlements/maturities | \n\n | \n | (83 | \n) | \n\n | — | \n\n | \n | (83 | \n) |
| \n Gross transfers into Level 3 | \n\n | \n | 15 | \n\n | \n | — | \n\n | \n | 15 | \n|
| \n Gross transfers out of Level 3 | \n\n | \n | (64 | \n) | \n\n | — | \n\n | \n | (64 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at December 31, 2013 | \n\n | $ | \n255 | \n\n | $ | \n34 | \n\n | $ | \n289 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amount of total realized investment gains (losses) for the period included in the consolidated statement of income attributable to changes in the fair value of assets still held at the reporting date | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Financial Instruments Disclosed, But Not Carried, At Fair Value
\nThe Company uses various financial instruments in the normal course of its business. The Company's insurance contracts are excluded from fair value of financial instruments accounting guidance and, therefore, are not included in the amounts discussed below. The following tables present the carrying value and fair value of the Company's financial assets and financial liabilities disclosed, but not carried, at fair value at December 31, 2014 and 2013, and the level within the fair value hierarchy at which such assets and liabilities are categorized.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Carrying \nValue | \n\n | Fair \nValue | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Financial assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Short-term securities | \n\n | $ | \n4,364 | \n\n | $ | \n4,364 | \n\n | $ | \n1,283 | \n\n | $ | \n3,042 | \n\n | $ | \n39 | \n|
| \n Financial liabilities: | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Debt | \n\n | $ | \n6,249 | \n\n | $ | \n7,522 | \n\n | $ | \n— | \n\n | $ | \n7,522 | \n\n | $ | \n— | \n|
| \n Commercial paper | \n\n | \n | 100 | \n\n | \n | 100 | \n\n | \n | — | \n\n | \n | 100 | \n\n | \n | — | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Carrying \nValue | \n\n | Fair \nValue | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Financial assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Short-term securities | \n\n | $ | \n3,882 | \n\n | $ | \n3,882 | \n\n | $ | \n1,608 | \n\n | $ | \n2,215 | \n\n | $ | \n59 | \n|
| \n Financial liabilities: | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Debt | \n\n | $ | \n6,246 | \n\n | $ | \n7,123 | \n\n | $ | \n— | \n\n | $ | \n7,123 | \n\n | $ | \n— | \n|
| \n Commercial paper | \n\n | \n | 100 | \n\n | \n | 100 | \n\n | \n | — | \n\n | \n | 100 | \n\n | \n | — | \n
The Company utilized a pricing service to estimate fair value for approximately 98% and 97% of short-term securities at December 31, 2014 and 2013, respectively. A description of the process and inputs used by the pricing service to estimate fair value is discussed in the \"Fixed Maturities\" section above. Estimates of fair value for U.S. Treasury securities and money market funds are based on market quotations received from the pricing service and are disclosed in Level 1 of the hierarchy. The fair value of other short-term fixed maturity securities is estimated by the pricing service using observable market inputs and is disclosed in Level 2 of the hierarchy. For short-term securities where an estimate is not obtained from the pricing service, the carrying value approximates fair value and is included in Level 3 of the hierarchy.
\nThe Company utilized a pricing service to estimate fair value for 100% of its debt, including commercial paper, at December 31, 2014 and 2013. The pricing service utilizes market quotations for debt that have quoted prices in active markets. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the fair value estimates are based on market observable inputs and disclosed in Level 2 of the hierarchy.
\nThe Company had no material assets or liabilities that were measured at fair value on a non-recurring basis during the years ended December 31, 2014 and 2013.
\n5. REINSURANCE
\nThe Company's consolidated financial statements reflect the effects of assumed and ceded reinsurance transactions. Assumed reinsurance refers to the acceptance of certain insurance risks that other insurance companies have underwritten. Ceded reinsurance involves transferring certain insurance risks (along with the related written and earned premiums) the Company has underwritten to other insurance companies who agree to share these risks. The primary purpose of ceded reinsurance is to protect the Company, at a cost, from losses in excess of the amount it is prepared to accept and to protect the Company's capital. Reinsurance is placed on both a quota-share and excess-of-loss basis. Ceded reinsurance arrangements do not discharge the Company as the primary insurer, except for instances where the primary policy or policies have been novated, such as in certain structured settlement agreements.
\nThe Company utilizes general corporate catastrophe treaties with unaffiliated reinsurers to help manage its exposure to losses resulting from catastrophes and protect its capital. In addition to the coverage provided under these treaties, the Company also utilizes catastrophe bonds to protect against hurricane losses in the Northeastern United States, and a Northeast catastrophe reinsurance treaty to protect against losses resulting from weather-related and earthquake catastrophes in the Northeastern United States. The Company also utilizes excess-of-loss treaties to protect against earthquake losses up to a certain threshold in the Business and International Insurance segment (for certain markets) and for the Personal Insurance segment, and several reinsurance treaties specific to its international operations.
\nThe Company monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to evaluate the collectability of amounts due from reinsurers and as a basis for determining the reinsurers with which the Company conducts ongoing business. In addition, in the ordinary course of business, the Company may become involved in coverage disputes with its reinsurers. Some of these disputes could result in lawsuits and arbitrations brought by or against the reinsurers to determine the Company's rights and obligations under the various reinsurance agreements. The Company employs dedicated specialists and strategies to manage reinsurance collections and disputes.
\nIncluded in reinsurance recoverables are amounts related to involuntary reinsurance arrangements. The Company is required to participate in various involuntary reinsurance arrangements through assumed reinsurance, principally with regard to residual market mechanisms in workers' compensation and automobile insurance, as well as homeowners' insurance in certain coastal areas. In addition, the Company provides services for several of these involuntary arrangements (mandatory pools and associations) under which it writes such residual market business directly, then cedes 100% of this business to the mandatory pool. Such participations and servicing arrangements are arranged to mitigate credit risk to the Company, as any ceded balances are jointly backed by all the pool members.
\nAlso included in reinsurance recoverables are amounts related to structured settlements. Structured settlements are annuities purchased from various life insurance companies to settle certain personal physical injury claims, of which workers' compensation claims comprise a significant portion. In cases where the Company did not receive a release from the claimant, the structured settlement is included in reinsurance recoverables and the related claim cost is included in the liability for claims and claim adjustment expense reserves, as the Company retains the contingent liability to the claimant. If it is expected that the life insurance company is not able to pay, the Company would recognize an impairment of the related reinsurance recoverable if, and to the extent, the purchased annuities are not covered by state guaranty associations. In the event that the life insurance company fails to make the required annuity payments, the Company would be required to make such payments.
\nThe following is a summary of reinsurance financial data reflected in the consolidated statement of income:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Written premiums | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Direct | \n\n | $ | \n24,844 | \n\n | $ | \n23,952 | \n\n | $ | \n23,612 | \n|
| \n Assumed | \n\n | \n | 788 | \n\n | \n | 705 | \n\n | \n | 697 | \n|
| \n Ceded | \n\n | \n | (1,728 | \n) | \n\n | (1,890 | \n) | \n\n | (1,862 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total net written premiums | \n\n | $ | \n23,904 | \n\n | $ | \n22,767 | \n\n | $ | \n22,447 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Earned premiums | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Direct | \n\n | $ | \n24,810 | \n\n | $ | \n23,891 | \n\n | $ | \n23,507 | \n|
| \n Assumed | \n\n | \n | 743 | \n\n | \n | 717 | \n\n | \n | 693 | \n|
| \n Ceded | \n\n | \n | (1,840 | \n) | \n\n | (1,971 | \n) | \n\n | (1,843 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total net earned premiums | \n\n | $ | \n23,713 | \n\n | $ | \n22,637 | \n\n | $ | \n22,357 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Percentage of assumed earned premiums to net earned premiums | \n\n | \n | 3.1 | \n% | \n\n | 3.2 | \n% | \n\n | 3.1 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Ceded claims and claim adjustment expenses incurred | \n\n | $ | \n953 | \n\n | $ | \n1,019 | \n\n | $ | \n1,357 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Ceded premiums included the premiums paid for coverage provided by the Company's catastrophe bonds.
\nReinsurance recoverables include amounts recoverable on both paid and unpaid claims and were as follows:
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses | \n\n | $ | \n4,270 | \n\n | $ | \n4,707 | \n|
| \n Allowance for uncollectible reinsurance | \n\n | \n | (203 | \n) | \n\n | (239 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Net reinsurance recoverables | \n\n | \n | 4,067 | \n\n | \n | 4,468 | \n|
| \n Mandatory pools and associations | \n\n | \n | 1,909 | \n\n | \n | 1,897 | \n|
| \n Structured settlements | \n\n | \n | 3,284 | \n\n | \n | 3,348 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total reinsurance recoverables | \n\n | $ | \n9,260 | \n\n | $ | \n9,713 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
Terrorism Risk Insurance Program
\nThe Terrorism Risk Insurance Program is a Federal program administered by the Department of the Treasury that provides for a system of shared public and private compensation for certain insured losses resulting from certified acts of terrorism. The program expired at the end of 2014 but was reauthorized, with some adjustments to its provisions, in January 2015 for six years through December 31, 2020.
\nIn order for a loss to be covered under the program (subject losses), the loss must meet certain aggregate industry loss minimums and must be the result of an event that is certified as an act of terrorism by the U.S. Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General of the United States. The annual aggregate industry loss minimum under the reauthorized program is initially $100 million for 2015, but will increase over the six-year life of the program to $200 million by December 31, 2020. The program excludes from participation the following types of insurance: Federal crop insurance, private mortgage insurance, financial guaranty insurance, medical malpractice insurance, health or life insurance, flood insurance, reinsurance, commercial automobile, professional liability (other than directors and officers'), surety, burglary and theft, and farm-owners multi-peril. In the case of a war declared by Congress, only workers' compensation losses are covered by the program. All commercial property and casualty insurers licensed in the United States are generally required to participate in the program. Under the reauthorized program, a participating insurer, in exchange for making terrorism insurance available, is initially entitled to be reimbursed by the Federal Government for 85% of subject losses, after an insurer deductible, subject to an annual cap. This reimbursement percentage will decrease over the six-year life of the program to 80% of subject losses by December 31, 2020.
\nThe deductible for any calendar year is equal to 20% of the insurer's direct earned premiums for covered lines for the preceding calendar year. The Company's estimated deductible under the program is $2.38 billion for 2015. The annual cap limits the amount of aggregate subject losses for all participating insurers to $100 billion. Once subject losses have reached the $100 billion aggregate during a program year, participating insurers will not be liable under the program for additional covered terrorism losses for that program year. There have been no terrorism-related losses that have triggered program coverage since the program was established. Since the law is untested, there is substantial uncertainty as to how it will be applied if an act of terrorism is certified under the program. It is also possible that future legislative action could change or eliminate the program. Further, given the unpredictable frequency and severity of terrorism losses, as well as the limited terrorism coverage in the Company's own reinsurance program, future losses from acts of terrorism, particularly involving nuclear, biological, chemical or radiological events, could be material to the Company's operating results, financial position and/or liquidity in future periods. In addition, the Company may not have sufficient resources to respond to claims arising from a high frequency of high severity natural catastrophes and/or of man-made catastrophic events involving conventional means. While the Company seeks to manage its exposure to man-made catastrophic events involving conventional means, the Company may not have sufficient resources to respond to claims arising out of one or more man-made catastrophic events involving nuclear, biological, chemical or radiological means.
\n6. GOODWILL AND OTHER INTANGIBLE ASSETS
\nGoodwill
\nThe following table presents the carrying amount of the Company's goodwill by segment at December 31, 2014 and 2013:
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Business and International Insurance(1) | \n\n | $ | \n2,476 | \n\n | $ | \n2,499 | \n|
| \n Bond & Specialty Insurance | \n\n | \n | 495 | \n\n | \n | 495 | \n|
| \n Personal Insurance | \n\n | \n | 613 | \n\n | \n | 613 | \n|
| \n Other | \n\n | \n | 27 | \n\n | \n | 27 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n3,611 | \n\n | $ | \n3,634 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
Other Intangible Assets
\nThe following tables present a summary of the Company's other intangible assets by major asset class at December 31, 2014 and 2013:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Gross \nCarrying \nAmount | \n\n | Accumulated \nAmortization | \n\n | Net | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Intangibles subject to amortization | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Customer-related | \n\n | $ | \n460 | \n\n | $ | \n446 | \n\n | $ | \n14 | \n|
| \n Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles(1) | \n\n | \n | 209 | \n\n | \n | 136 | \n\n | \n | 73 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total intangible assets subject to amortization | \n\n | \n | 669 | \n\n | \n | 582 | \n\n | \n | 87 | \n|
| \n Intangible assets not subject to amortization | \n\n | \n | 217 | \n\n | \n | — | \n\n | \n | 217 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other intangible assets | \n\n | $ | \n886 | \n\n | $ | \n582 | \n\n | $ | \n304 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Gross \nCarrying \nAmount | \n\n | Accumulated \nAmortization | \n\n | Net | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Intangibles subject to amortization | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Customer-related | \n\n | $ | \n460 | \n\n | $ | \n414 | \n\n | $ | \n46 | \n|
| \n Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles(1) | \n\n | \n | 201 | \n\n | \n | 113 | \n\n | \n | 88 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total intangible assets subject to amortization | \n\n | \n | 661 | \n\n | \n | 527 | \n\n | \n | 134 | \n|
| \n Intangible assets not subject to amortization | \n\n | \n | 217 | \n\n | \n | — | \n\n | \n | 217 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other intangible assets | \n\n | $ | \n878 | \n\n | $ | \n527 | \n\n | $ | \n351 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The following presents a summary of the Company's amortization expense for other intangible assets by major asset class:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Customer-related | \n\n | $ | \n32 | \n\n | $ | \n31 | \n\n | $ | \n33 | \n|
| \n Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles | \n\n | \n | 14 | \n\n | \n | 15 | \n\n | \n | 19 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total amortization expense | \n\n | $ | \n46 | \n\n | $ | \n46 | \n\n | $ | \n52 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Intangible asset amortization expense is estimated to be $26 million in 2015, $10 million in 2016, $9 million in 2017, $7 million in 2018 and $6 million in 2019.
\n7. INSURANCE CLAIM RESERVES
\nClaims and claim adjustment expense reserves were as follows:
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Property-casualty | \n\n | $ | \n49,824 | \n\n | $ | \n50,865 | \n|
| \n Accident and health | \n\n | \n | 26 | \n\n | \n | 30 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n49,850 | \n\n | $ | \n50,895 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Claims and claim adjustment expense reserves at beginning of year | \n\n | $ | \n50,865 | \n\n | $ | \n50,888 | \n\n | $ | \n51,353 | \n|
| \n Less reinsurance recoverables on unpaid losses | \n\n | \n | 9,280 | \n\n | \n | 10,254 | \n\n | \n | 10,434 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net reserves at beginning of year | \n\n | \n | 41,585 | \n\n | \n | 40,634 | \n\n | \n | 40,919 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Estimated claims and claim adjustment expenses for claims arising in the current year | \n\n | \n | 14,621 | \n\n | \n | 14,060 | \n\n | \n | 15,559 | \n|
| \n Estimated decrease in claims and claim adjustment expenses for claims arising in prior years | \n\n | \n | (957 | \n) | \n\n | (944 | \n) | \n\n | (1,074 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total increases | \n\n | \n | 13,664 | \n\n | \n | 13,116 | \n\n | \n | 14,485 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and claim adjustment expense payments for claims arising in: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Current year | \n\n | \n | 5,828 | \n\n | \n | 5,485 | \n\n | \n | 6,507 | \n|
| \n Prior years | \n\n | \n | 8,099 | \n\n | \n | 8,477 | \n\n | \n | 8,326 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total payments | \n\n | \n | 13,927 | \n\n | \n | 13,962 | \n\n | \n | 14,833 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Acquisition(1) | \n\n | \n | — | \n\n | \n | 1,792 | \n\n | \n | — | \n|
| \n Unrealized foreign exchange (gain) loss | \n\n | \n | (286 | \n) | \n\n | 5 | \n\n | \n | 63 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net reserves at end of year | \n\n | \n | 41,036 | \n\n | \n | 41,585 | \n\n | \n | 40,634 | \n|
| \n Plus reinsurance recoverables on unpaid losses | \n\n | \n | 8,788 | \n\n | \n | 9,280 | \n\n | \n | 10,254 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and claim adjustment expense reserves at end of year | \n\n | $ | \n49,824 | \n\n | $ | \n50,865 | \n\n | $ | \n50,888 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
Gross claims and claim adjustment expense reserves at December 31, 2014 decreased by $1.04 billion from December 31, 2013, primarily reflecting the impact of net favorable prior year reserve development and payments related to operations in runoff. Gross claims and claim adjustment expense reserves at December 31, 2013 decreased by $23 million from December 31, 2012, primarily reflecting the impact of net favorable prior year reserve development and payments related to catastrophes and operations in runoff, largely offset by the impact of the acquisition of Dominion.
\nReinsurance recoverables on unpaid losses at December 31, 2014 declined by $492 million from December 31, 2013, reflecting the impacts of (i) net favorable prior year reserve development, (ii) cash collections, (iii) commutation agreements, as well as (iv) a slightly lower level of reinsurance purchased in 2014. Reinsurance recoverables on unpaid losses at December 31, 2013 declined by $974 million from December 31, 2012, reflecting the impacts of (i) a decline in mandatory pools and associations primarily due to catastrophe-related collections and, to a lesser extent the sale of renewal rights, related to the Company's National Flood Insurance Program in 2013, (ii) cash collections, (iii) commutation agreements and (iv) net favorable prior year reserve development, partially offset by (v) the acquisition of Dominion, which added $352 million of reinsurance recoverables on unpaid losses at November 1, 2013.
\nPrior Year Reserve Development
\nThe following disclosures regarding reserve development are on a \"net of reinsurance\" basis.
\n2014.
\nIn 2014, estimated claims and claim adjustment expenses incurred included $957 million of net favorable development for claims arising in prior years, including $941 million of net favorable prior year reserve development impacting the Company's results of operations and $50 million of accretion of discount.
\nBusiness and International Insurance. Net favorable prior year reserve development in 2014 totaled $322 million. Net favorable prior year reserve development in 2014 was primarily driven by (i) better than expected loss experience in the general liability product line (excluding increases to asbestos and environmental reserves discussed below), primarily related to excess coverages for accident years 2008 through 2012, reflecting more favorable legal and judicial environments than what the Company previously expected, (ii) a $162 million benefit resulting from better than expected loss experience related to, and the commutation of reinsurance treaties associated with, a workers' compensation reinsurance pool for accident years 1996 and prior, (iii) better than expected loss experience in the property product line for accident years 2010 through 2013, including catastrophe losses from Storm Sandy for accident year 2012 and (iv) better than expected loss experience in the commercial auto product line for accident years 2011 and 2012. These factors contributing to net favorable prior year reserve development in 2014 were partially offset by (i) $250 million and $87 million increases to asbestos and environmental reserves, respectively, which are discussed in further detail in the \"Asbestos and Environmental Reserves\" section below, (ii) an increase in unallocated loss adjustment expense reserves of $77 million for interest awarded as part of damages pursuant to a court decision in the third quarter of 2014 related to a legal matter, which is discussed in more detail in the \"Asbestos Direct Action Litigation\" section of note 16 and (iii) higher than expected loss experience for liability coverages in the commercial multi-peril product line for accident years 2010 through 2013.
\nBond & Specialty Insurance. Net favorable prior year reserve development in 2014 of $450 million was primarily driven by better than expected loss experience in the contract surety product line for accident years 2012 and prior.
\nPersonal Insurance. Net favorable prior year reserve development in 2014 of $169 million was primarily driven by better than expected loss experience in the Homeowners and Other line of business for non-catastrophe weather-related losses for accident year 2013 and catastrophe losses for accident years 2011 through 2013.
\n2013.
\nIn 2013, estimated claims and claim adjustment expenses incurred included $944 million of net favorable development for claims arising in prior years, including $840 million of net favorable prior year reserve development impacting the Company's results of operations and $48 million of accretion of discount.
\nBusiness and International Insurance. Net favorable prior year reserve development in 2013 totaled $399 million. Net favorable prior year reserve development in 2013 was primarily driven by (i) better than expected loss experience in the general liability product line for excess coverages for accident years 2012 and prior (excluding increases to asbestos and environmental reserves discussed below), reflecting more favorable legal and judicial environments than what the Company previously expected, (ii) better than expected loss experience related to both catastrophe and non-catastrophe losses in the property product line for accident years 2010 through 2012, (iii) better than expected loss experience in the workers' compensation line of business (which was largely offset by a $42 million charge that was precipitated by legislation in New York enacted during the first quarter of 2013 related to the New York Fund for Reopened Cases for workers' compensation) and (iv) better than expected loss experience for the surety line of business in Canada and the marine line of business in the Company's operations at Lloyd's. These factors contributing to net favorable prior year reserve development in 2013 were partially offset by $190 million and $65 million increases to asbestos and environmental reserves, respectively, which are discussed in further detail in the \"Asbestos and Environmental Reserves\" section below and by higher than expected loss experience in the public and product liability line of business in the United Kingdom.
\nBond & Specialty Insurance. Net favorable prior year reserve development in 2013 of $232 million was primarily driven by better than expected loss experience in the contract surety product line for accident years 2010 and prior.
\nPersonal Insurance. Net favorable prior year reserve development in 2013 of $209 million was primarily driven by better than expected loss experience in the Homeowners and Other product line for catastrophe losses incurred in 2012, and non-catastrophe weather-related losses and non-weather-related losses for accident years 2012 and 2011.
\n2012.
\nIn 2012, estimated claims and claim adjustment expenses incurred included $1.07 billion of net favorable development for claims arising in prior years, including $940 million of net favorable prior year reserve development impacting the Company's results of operations and $48 million of accretion of discount.
\nBusiness and International Insurance. Net favorable prior year reserve development in 2012 totaled $585 million. Net favorable prior year reserve development in 2012 was primarily driven by (i) better than expected loss experience in the general liability product line for excess coverages for accident years 2010 and prior (excluding increases to asbestos and environmental reserves discussed below), which reflected what the Company believes are more favorable legal and judicial environments than what the Company previously expected, (ii) better than expected loss experience in the commercial property product line primarily for accident years 2009 through 2011, driven by higher than expected subrogation and salvage recoveries and by favorable loss development related to catastrophe losses incurred in 2011; (iii) better than expected loss experience in the workers' compensation product line, primarily driven by better than expected frequency and severity related to lifetime medical claims for accident years 2008 and prior and (iv) better than expected loss experience in several lines of business in Canada and in the Company's operations at Lloyd's. Lower than expected claim department expenses also contributed to net favorable prior year reserve development in 2012. Net favorable prior year reserve development in 2012 was reduced by (i) $175 million and $90 million increases to asbestos and environmental reserves, respectively, which are discussed in further detail in the \"Asbestos and Environmental Reserves\" section below, (ii) net unfavorable prior year reserve development in the commercial automobile line of business, driven by higher than expected severity in the bodily injury coverage primarily for accident years 2010 and 2011, and (iii) net unfavorable prior year reserve development in the general liability product line for the 2011 accident year resulting from higher than expected claim frequency.
\nBond & Specialty Insurance. Net favorable prior year reserve development in 2012 of $180 million was primarily driven by better than expected loss experience in the contract surety product line for accident years 2008 and prior, and better than expected results for management liability business primarily for the errors & omissions and fiduciary products for accident years 2007 and prior.
\nPersonal Insurance. Net favorable prior year reserve development of $175 million in 2012 was primarily driven by better than expected loss development in the Homeowners and Other product line related to catastrophe losses incurred for 2011 and non-catastrophe losses incurred for accident years 2010 and 2011, as well as favorable loss development in the umbrella line of business for accident years 2007 through 2011. These factors were partially offset by unfavorable prior year reserve development in the personal automobile line of business, driven primarily by higher than expected bodily injury severity for accident year 2011.
\nAsbestos and Environmental Reserves
\nAt December 31, 2014 and 2013, the Company's claims and claim adjustment expense reserves included $2.70 billion and $2.69 billion, respectively, for asbestos and environmental-related claims, net of reinsurance.
\nIt is difficult to estimate the reserves for asbestos and environmental-related claims due to the vagaries of court coverage decisions, plaintiffs' expanded theories of liability, the risks inherent in complex litigation and other uncertainties, including, without limitation, those which are set forth below.
\nAsbestos Reserves. Because each policyholder presents different liability and coverage issues, the Company generally reviews the exposure presented by each policyholder at least annually. Among the factors which the Company may consider in the course of this review are: available insurance coverage, including the role of any umbrella or excess insurance the Company has issued to the policyholder; limits and deductibles; an analysis of the policyholder's potential liability; the jurisdictions involved; past and anticipated future claim activity and loss development on pending claims; past settlement values of similar claims; allocated claim adjustment expense; potential role of other insurance; the role, if any, of non-asbestos claims or potential non-asbestos claims in any resolution process; and applicable coverage defenses or determinations, if any, including the determination as to whether or not an asbestos claim is a products/completed operation claim subject to an aggregate limit and the available coverage, if any, for that claim.
\nIn the third quarter of 2014, the Company completed its annual in-depth asbestos claim review, including a review of active policyholders and litigation cases for potential product and \"non-product\" liability, and noted the continuation of the following trends:
\nWhile the Company believes that over the past several years there has been a reduction in the volatility associated with the Company's overall asbestos exposure, there nonetheless remains a high degree of uncertainty with respect to future exposure from asbestos claims.
\nThe Home Office and Field Office categories, which account for the vast majority of policyholders with active asbestos-related claims, experienced a slight increase in net asbestos-related payments in 2014 when compared with 2013. The number of policyholders with pending asbestos claims in these categories as of December 31, 2014 was essentially unchanged when compared with December 31, 2013. Payments on behalf of policyholders in these categories continue to be influenced by the high level of litigation activity in a limited number of jurisdictions where individuals alleging serious asbestos-related injury continue to target defendants who were not traditionally primary targets of asbestos litigation.
\nThe Company's quarterly asbestos reserve reviews include an analysis of exposure and claim payment patterns by policyholder category, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative actions. The Company also analyzes developing payment patterns among policyholders in the Home Office, Field Office and Assumed Reinsurance and Other categories as well as projected reinsurance billings and recoveries. In addition, the Company reviews its historical gross and net loss and expense paid experience, year-by-year, to assess any emerging trends, fluctuations, or characteristics suggested by the aggregate paid activity. Conventional actuarial methods are not utilized to establish asbestos reserves nor have the Company's evaluations resulted in any way of determining a meaningful average asbestos defense or indemnity payment.
\nThe completion of these reviews and analyses in 2014, 2013 and 2012 resulted in $250 million, $190 million and $175 million increases, respectively, in the Company's net asbestos reserves. In each year, the reserve increases were primarily driven by increases in the Company's estimate of projected settlement and defense costs related to a broad number of policyholders in the Home Office category due to a higher level of litigation activity surrounding mesothelioma claims than previously anticipated. In addition, the reserve increases in 2013 and 2012 also reflected higher projected payments on assumed reinsurance accounts. The increase in the estimate of projected settlement and defense costs resulted from payment trends that continue to be higher than previously anticipated due to the impact of the current litigation environment discussed above. Notwithstanding these trends, the Company's overall view of the underlying asbestos environment is essentially unchanged from recent periods and there remains a high degree of uncertainty with respect to future exposure to asbestos claims.
\nNet asbestos paid loss and loss expenses in 2014, 2013 and 2012 were $242 million, $218 million and $236 million, respectively. Approximately 8%, 1% and 6% of total net paid losses in 2014, 2013 and 2012, respectively, related to policyholders with whom the Company had entered into settlement agreements limiting the Company's liability.
\nEnvironmental Reserves. In establishing environmental reserves, the Company evaluates the exposure presented by each policyholder and the anticipated cost of resolution, if any. In the course of this analysis, the Company generally considers the probable liability, available coverage and relevant judicial interpretations. In addition, the Company considers the many variables presented, such as: the nature of the alleged activities of the policyholder at each site; the number of sites; the total number of potentially responsible parties at each site; the nature of the alleged environmental harm and the corresponding remedy at each site; the nature of government enforcement activities at each site; the ownership and general use of each site; the overall nature of the insurance relationship between the Company and the policyholder, including the role of any umbrella or excess insurance the Company has issued to the policyholder; the involvement of other insurers; the potential for other available coverage, including the number of years of coverage; the role, if any, of non-environmental claims or potential non-environmental claims in any resolution process; and the applicable law in each jurisdiction. The evaluation of the exposure presented by a policyholder can change as information concerning that policyholder and the many variables presented is developed. Conventional actuarial techniques are not used to estimate these reserves.
\nThe Company continues to receive notices from policyholders tendering claims for the first time, frequently under policies issued prior to the mid-1980's. These policyholders continue to present smaller exposures, have fewer sites and are lower tier defendants. Further, in many instances, clean-up costs have been reduced because regulatory agencies are willing to accept risk-based site analyses and more efficient clean-up technologies. Over the past several years, the Company has experienced generally favorable trends in the number of new policyholders tendering environmental claims for the first time and in the number of pending declaratory judgment actions relating to environmental matters. However, the degree to which those favorable trends have continued has been less than anticipated. In addition, reserve development on existing environmental claims has been greater than anticipated. As a result of these factors, in 2014, 2013 and 2012, the Company increased its net environmental reserves by $87 million, $65 million and $90 million, respectively.
\nAsbestos and Environmental Reserves. As a result of the processes and procedures discussed above, management believes that the reserves carried for asbestos and environmental claims are appropriately established based upon known facts, current law and management's judgment. However, the uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine the ultimate exposure for asbestos and environmental claims and related litigation. As a result, these reserves are subject to revision as new information becomes available and as claims develop. The continuing uncertainties include, without limitation, the risks and lack of predictability inherent in complex litigation, any impact from the bankruptcy protection sought by various asbestos producers and other asbestos defendants, a further increase or decrease in the cost to resolve, and/or the number of, asbestos and environmental claims beyond that which is anticipated, the emergence of a greater number of asbestos claims than anticipated as a result of extended life expectancies resulting from medical advances and lifestyle improvements, the role of any umbrella or excess policies the Company has issued, the resolution or adjudication of disputes pertaining to the amount of available coverage for asbestos and environmental claims in a manner inconsistent with the Company's previous assessment of these claims, the number and outcome of direct actions against the Company, future developments pertaining to the Company's ability to recover reinsurance for asbestos and environmental claims and the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers. In addition, uncertainties arise from the insolvency or bankruptcy of policyholders and other defendants. It is also not possible to predict changes in the legal, regulatory and legislative environment and their impact on the future development of asbestos and environmental claims. This environment could be affected by changes in applicable legislation and future court and regulatory decisions and interpretations, including the outcome of legal challenges to legislative and/or judicial reforms establishing medical criteria for the pursuit of asbestos claims. It is also difficult to predict the ultimate outcome of complex coverage disputes until settlement negotiations near completion and significant legal questions are resolved or, failing settlement, until the dispute is adjudicated. This is particularly the case with policyholders in bankruptcy where negotiations often involve a large number of claimants and other parties and require court approval to be effective. As part of its continuing analysis of asbestos and environmental reserves, the Company continues to study the implications of these and other developments.
\nBecause of the uncertainties set forth above, additional liabilities may arise for amounts in excess of the Company's current reserves. In addition, the Company's estimate of claims and claim adjustment expenses may change. These additional liabilities or increases in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company's operating results in future periods.
\nCatastrophe Exposure
\nThe Company has geographic exposure to catastrophe losses, which can be caused by a variety of events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also result from terrorist attacks and other intentionally destructive acts (including those involving nuclear, biological, chemical or radiological events), explosions and infrastructure failures. The incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in larger areas, especially those that are heavily populated. The Company generally seeks to mitigate its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance.
\nThere are also risks which impact the estimation of ultimate costs for catastrophes. For example, the estimation of reserves related to hurricanes can be affected by the inability of the Company and its insureds to access portions of the impacted areas, the complexity of factors contributing to the losses, the legal and regulatory uncertainties and the nature of the information available to establish the reserves. Complex factors include, but are not limited to: determining whether damage was caused by flooding versus wind; evaluating general liability and pollution exposures; estimating additional living expenses; the impact of demand surge; the potential impact of changing climate conditions, including higher frequency and severity of weather-related events; infrastructure disruption; fraud; the effect of mold damage and business income interruption costs; and reinsurance collectibility. The timing of a catastrophe's occurrence, such as at or near the end of a reporting period, can also affect the information available to us in estimating reserves for that reporting period. The estimates related to catastrophes are adjusted as actual claims emerge.
\n8. DEBT
\nDebt outstanding was as follows:
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Short-term: | \n\n | \n | \n | \n | \n | \n | |
| \n Commercial paper | \n\n | $ | \n100 | \n\n | $ | \n100 | \n|
| \n 5.50% Senior notes due December 1, 2015 | \n\n | \n | 400 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total short-term debt | \n\n | \n | 500 | \n\n | \n | 100 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Long-term: | \n\n | \n | \n | \n | \n | \n | |
| \n 5.50% Senior notes due December 1, 2015 | \n\n | \n | — | \n\n | \n | 400 | \n|
| \n 6.25% Senior notes due June 20, 2016 | \n\n | \n | 400 | \n\n | \n | 400 | \n|
| \n 5.75% Senior notes due December 15, 2017 | \n\n | \n | 450 | \n\n | \n | 450 | \n|
| \n 5.80% Senior notes due May 15, 2018 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 5.90% Senior notes due June 2, 2019 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 3.90% Senior notes due November 1, 2020 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 7.75% Senior notes due April 15, 2026 | \n\n | \n | 200 | \n\n | \n | 200 | \n|
| \n 7.625% Junior subordinated debentures due December 15, 2027 | \n\n | \n | 125 | \n\n | \n | 125 | \n|
| \n 6.375% Senior notes due March 15, 2033 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 6.75% Senior notes due June 20, 2036 | \n\n | \n | 400 | \n\n | \n | 400 | \n|
| \n 6.25% Senior notes due June 15, 2037 | \n\n | \n | 800 | \n\n | \n | 800 | \n|
| \n 5.35% Senior notes due November 1, 2040 | \n\n | \n | 750 | \n\n | \n | 750 | \n|
| \n 4.60% Senior notes due August 1, 2043 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 8.50% Junior subordinated debentures due December 15, 2045 | \n\n | \n | 56 | \n\n | \n | 56 | \n|
| \n 8.312% Junior subordinated debentures due July 1, 2046 | \n\n | \n | 73 | \n\n | \n | 73 | \n|
| \n 6.25% Fixed-to-floating rate junior subordinated debentures due March 15, 2067 | \n\n | \n | 107 | \n\n | \n | 107 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total long-term debt | \n\n | \n | 5,861 | \n\n | \n | 6,261 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total debt principal | \n\n | \n | 6,361 | \n\n | \n | 6,361 | \n|
| \n Unamortized fair value adjustment | \n\n | \n | 50 | \n\n | \n | 51 | \n|
| \n Unamortized debt issuance costs | \n\n | \n | (62 | \n) | \n\n | (66 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total debt | \n\n | $ | \n6,349 | \n\n | $ | \n6,346 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
2013 Debt Issuance. On July 25, 2013, the Company issued $500 million aggregate principal amount of 4.60% senior notes that will mature on August 1, 2043. The net proceeds of the issuance, after original issuance discount and the deduction of underwriting expenses and commissions and other expenses, totaled approximately $494 million. Interest on the senior notes is payable semi-annually in arrears on February 1 and August 1. The senior notes are redeemable in whole at any time or in part from time to time, at the Company's option, at a redemption price equal to the greater of (a) 100% of the principal amount of senior notes to be redeemed or (b) the sum of the present value of the remaining scheduled payments of principal and interest on the senior notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the then current treasury rate (as defined) plus 15 basis points.
\n2013 Debt Repayment. On March 15, 2013, the Company's $500 million, 5.00% senior notes matured and were fully paid.
\n2012 Debt Repayments. On May 29, 2012, the Company purchased and retired $8.5 million aggregate principal amount of its 6.25% fixed-to-floating rate junior subordinated debentures due March 15, 2067. On June 15, 2012, the Company's $250 million, 5.375% senior notes matured and were fully paid.
\nDescription of Debt
\nCommercial Paper—The Company maintains an $800 million commercial paper program, supported by a $1.0 billion bank credit agreement that expires on June 7, 2018. (See \"Credit Agreement\" discussion that follows). Interest rates on commercial paper issued in 2014 ranged from 0.08% to 0.15%, and in 2013 ranged from 0.08% to 0.13%.
\nSenior Notes—The Company's various senior debt issues are unsecured obligations that rank equally with one another. Interest payments are made semi-annually. The Company generally may redeem some or all of the notes prior to maturity in accordance with terms unique to each debt instrument.
\nJunior Subordinated Debentures—The Company's $107 million remaining aggregate principal amount of 6.25% fixed-to-floating rate debentures bear interest at an annual rate of 6.25% from the date of issuance to, but excluding, March 15, 2017, payable semi-annually in arrears on March 15 and September 15. From and including March 15, 2017, the debentures will bear interest at an annual rate equal to three-month LIBOR plus 2.215%, payable quarterly on March 15, June 15, September 15 and December 15 of each year. The Company can redeem the debentures at its option, in whole or in part, at any time on or after March 15, 2017 at a redemption price of 100% of the principal amount being redeemed plus accrued but unpaid interest. The Company can redeem the debentures at its option prior to March 15, 2017 (a) in whole at any time or in part from time to time or (b) in whole, but not in part, in the event of certain tax or rating agency events relating to the debentures, at a redemption price equal to the greater of 100% of the principal amount being redeemed and the applicable make-whole amount, in each case plus any accrued and unpaid interest.
\nThe Company has the right, on one or more occasions, to defer the payment of interest on the debentures. The Company will not be required to settle deferred interest until it has deferred interest for five consecutive years or, if earlier, made a payment of current interest during a deferral period. The Company may defer interest for up to ten consecutive years without giving rise to an event of default. Deferred interest will accumulate additional interest at an annual rate equal to the annual interest rate then applicable to the debentures.
\nThe debentures have a final maturity date of March 15, 2067 and a scheduled maturity date of March 15, 2037. The Company can redeem the debentures at its option any time (as described above) using any source of funds, including cash. If the Company chooses not to redeem the debentures, then during the 180-day period ending not more than 15 and not less than ten business days prior to the scheduled maturity date, the Company will be required to use commercially reasonable efforts to sell enough qualifying capital securities to permit repayment of the debentures at the scheduled maturity date. If any debentures remain outstanding after the scheduled maturity date, unless and until the Company redeems the debentures (as described above) using any source of funds, including cash, the Company shall be required to use its commercially reasonable efforts on a quarterly basis to raise sufficient proceeds from the sale of qualifying capital securities to permit the repayment in full of the debentures. If there are remaining debentures at the final maturity date, the Company is required to redeem the debentures using any source of funds. Qualifying capital securities are securities (other than common stock, qualifying warrants, mandatorily convertible preferred stock, debt exchangeable for common equity, and debt exchangeable for preferred equity) which generally are treated by the ratings agencies as having similar equity content to the debentures.
\nThe Company's three other junior subordinated debenture instruments are all similar in nature to each other. Three separate business trusts issued preferred securities to investors and used the proceeds to purchase the Company's subordinated debentures. Interest on each of the instruments is paid semi-annually.
\nThe Company's consolidated balance sheet includes the debt instruments acquired in the merger, which were recorded at fair value as of the acquisition date. The resulting fair value adjustment is being amortized over the remaining life of the respective debt instruments using the effective-interest method. The amortization of the fair value adjustment reduced interest expense by $1 million for each of the years ended December 31, 2014 and 2013.
\nThe following table presents merger-related unamortized fair value adjustments and the related effective interest rate:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | | \n\n | Unamortized \nFair Value \nPurchase \nAdjustment at \nDecember 31, | \n\n | | \n||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | | \n\n | | \n\n | Effective \nInterest Rate \nto Maturity | \n||||||||||
| \n (in millions) | \n\n | Issue Rate | \n\n | Maturity Date | \n\n | 2014 | \n\n | 2013 | \n||||||||
| \n Subordinated debentures | \n\n | \n | 7.625 | \n% | \n\n | Dec. 2027 | \n\n | $ | \n16 | \n\n | $ | \n17 | \n\n | \n | 6.147 | \n% |
| \n
| \n\n | \n | 8.500 | \n% | \n\n | Dec. 2045 | \n\n | \n | 15 | \n\n | \n | 15 | \n\n | \n | 6.362 | \n% |
| \n
| \n\n | \n | 8.312 | \n% | \n\n | Jul. 2046 | \n\n | \n | 19 | \n\n | \n | 19 | \n\n | \n | 6.362 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | \n | \n | \n | \n | \n | \n | $ | \n50 | \n\n | $ | \n51 | \n\n | \n | \n | |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The Travelers Companies, Inc. fully and unconditionally guarantees the payment of all principal, premiums, if any, and interest on certain debt obligations of its subsidiaries TPC and Travelers Insurance Group Holdings Inc. (TIGHI). The guarantees pertain to the $200 million 7.75% notes due 2026 and the $500 million 6.375% notes due 2033.
\nMaturities—The amount of debt obligations, other than commercial paper, that become due in each of the next five years is as follows: 2015, $400 million; 2016, $400 million; 2017, $450 million; 2018, $500 million; and 2019, $500 million.
\nCredit Agreement
\nThe Company is party to a five-year, $1.0 billion revolving credit agreement with a syndicate of financial institutions that expires in June 2018. Pursuant to the credit agreement covenants, the Company must maintain a minimum consolidated net worth, defined as shareholders' equity determined in accordance with GAAP plus (a) trust preferred securities (not to exceed 15% of total capital) and (b) mandatorily convertible securities (combined with trust preferred securities, not to exceed 25% of total capital) less goodwill and other intangible assets, of $13.73 billion. In addition, the credit agreement contains other customary restrictive covenants as well as certain customary events of default, including with respect to a change in control, which is defined to include the acquisition of 35% or more of the Company's voting stock and certain changes in the composition of the Company's board of directors. At December 31, 2014, the Company was in compliance with these covenants. Generally, the cost of borrowing under this agreement will range from LIBOR plus 87.5 basis points to LIBOR plus 150 basis points, depending on the Company's credit ratings. At December 31, 2014, that cost would have been LIBOR plus 112.5 basis points, had there been any amounts outstanding under the credit agreement. This credit agreement also supports the Company's commercial paper program.
\nShelf Registration
\nIn June 2013, the Company filed with the Securities and Exchange Commission a universal shelf registration statement for the potential offering and sale of securities to replace the Company's previous registration statement that had expired in the normal course of business. The Company may offer these securities from time to time at prices and on other terms to be determined at the time of offering.
\n9. SHAREHOLDERS' EQUITY AND DIVIDEND AVAILABILITY
\nAuthorized Shares
\nThe number of authorized shares of the company is 1.755 billion, consisting of five million of preferred stock, 1.745 billion shares of voting common stock and five million undesignated shares. The Company's Articles of Incorporation authorize the board of directors to establish, from the undesignated shares, one or more classes and series of shares, and to further designate the type of shares and terms thereof.
\nPreferred Stock
\nIn May 2013, the Company's shareholders voted to amend the Company's Articles of Incorporation to provide authority to issue up to five million additional shares of preferred stock. Subsequent to this amendment of the Company's Articles of Incorporation, the Company filed a shelf registration statement with the Securities and Exchange Commission in June 2013 pursuant to which it may publicly sell securities, including the new preferred stock, from time to time. The new shelf registration statement replaced the Company's prior shelf registration statement.
\nCommon Stock
\nThe Company is governed by the Minnesota Business Corporation Act. All authorized shares of voting common stock have no par value. Shares of common stock reacquired are considered authorized and unissued shares.
\nTreasury Stock
\nThe Company's board of directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The authorizations do not have a stated expiration date. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company's financial position, earnings, share price, catastrophe losses, maintaining capital levels commensurate with the Company's desired ratings from independent rating agencies, funding of the Company's qualified pension plan, capital requirements of the Company's operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions and other factors. The following table summarizes repurchase activity in 2014 and remaining repurchase capacity at December 31, 2014.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Quarterly Period Ending \n(in millions, except per share amounts) | \n\n | Number of \nshares \npurchased | \n\n | Cost of \nshares \nrepurchased | \n\n | Average price \npaid per share | \n\n | Remaining capacity \nunder share repurchase \nauthorization | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n March 31, 2014 | \n\n | \n | 7.8 | \n\n | $ | \n650 | \n\n | $ | \n82.97 | \n\n | $ | \n4,109 | \n|
| \n June 30, 2014 | \n\n | \n | 9.5 | \n\n | \n | 875 | \n\n | \n | 92.67 | \n\n | \n | 3,234 | \n|
| \n September 30, 2014 | \n\n | \n | 8.1 | \n\n | \n | 750 | \n\n | \n | 92.47 | \n\n | \n | 2,484 | \n|
| \n December 31, 2014 | \n\n | \n | 9.7 | \n\n | \n | 1,000 | \n\n | \n | 102.82 | \n\n | \n | 1,484 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | \n | 35.1 | \n\n | $ | \n3,275 | \n\n | \n | 93.27 | \n\n | \n | 1,484 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The Company's Amended and Restated 2004 Stock Incentive Plan provides settlement alternatives to employees in which the Company retains shares to cover tax withholding costs and exercise costs. During the years ended December 31, 2014 and 2013, the Company acquired $58 million and $61 million, respectively, of its common stock under this plan.
\nCommon shares acquired are reported as treasury stock in the consolidated balance sheet.
\nDividend Availability
\nThe Company's U.S. insurance subsidiaries, domiciled principally in the state of Connecticut, are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid by each insurance subsidiary to its respective parent company without prior approval of insurance regulatory authorities. A maximum of $3.25 billion is available by the end of 2015 for such dividends to the holding company, TRV, without prior approval of the Connecticut Insurance Department. The Company may choose to accelerate the timing within 2015 and/or increase the amount of dividends from its insurance subsidiaries in 2015, which could result in certain dividends being subject to approval by the Connecticut Insurance Department.
\nIn addition to the regulatory restrictions on the availability of dividends that can be paid by the Company's U.S. insurance subsidiaries, the maximum amount of dividends that may be paid to the Company's shareholders is limited, to a lesser degree, by certain covenants contained in its line of credit agreement with a syndicate of financial institutions that require the Company to maintain a minimum consolidated net worth as described in note 8.
\nTRV is not dependent on dividends or other forms of repatriation from its foreign operations to support its liquidity needs. The undistributed earnings of the Company's foreign operations are not material and are intended to be permanently reinvested in those operations.
\nTRV and its two non-insurance holding company subsidiaries received $4.10 billion of dividends in 2014 from their U.S. insurance subsidiaries.
\nFor the years ended December 31, 2014, 2013 and 2012, TRV declared cash dividends per common share of $2.15, $1.96 and $1.79, respectively, and paid cash dividends of $729 million, $729 million and $694 milllion, respectively.
\nStatutory Net Income and Statutory Capital and Surplus
\nStatutory net income of the Company's domestic and international insurance subsidiaries was $3.97 billion, $4.18 billion and $2.84 billion for the years ended December 31, 2014, 2013 and 2012, respectively. Statutory capital and surplus of the Company's domestic and international insurance subsidiaries was $21.05 billion and $21.12 billion at December 31, 2014 and 2013, respectively.
\n10. OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME
\nThe following table presents the changes in the Company's accumulated other comprehensive income (AOCI) for the years ended December 31, 2014, 2013 and 2012.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Changes in Net \nUnrealized Gains \non Investment \nSecurities Having \nNo Credit Losses \nRecognized in the \nConsolidated \nStatement of Income | \n\n | Changes in Net \nUnrealized Gains on \nInvestment \nSecurities Having \nCredit Losses \nRecognized in the \nConsolidated \nStatement of Income | \n\n | Net Benefit Plan \nAssets and \nObligations \nRecognized in \nShareholders' \nEquity | \n\n | Net Unrealized \nForeign Currency \nTranslation | \n\n | Total Accumulated \nOther Comprehensive \nIncome | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Balance, December 31, 2011 | \n\n | $ | \n2,729 | \n\n | $ | \n142 | \n\n | $ | \n(811 | \n) | \n$ | \n(55 | \n) | \n$ | \n2,005 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (OCI) before reclassifications | \n\n | \n | 228 | \n\n | \n | 48 | \n\n | \n | (104 | \n) | \n\n | 45 | \n\n | \n | 217 | \n|
| \n Amounts reclassified from AOCI | \n\n | \n | (49 | \n) | \n\n | 5 | \n\n | \n | 58 | \n\n | \n | — | \n\n | \n | 14 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net OCI, current period | \n\n | \n | 179 | \n\n | \n | 53 | \n\n | \n | (46 | \n) | \n\n | 45 | \n\n | \n | 231 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, December 31, 2012 | \n\n | \n | 2,908 | \n\n | \n | 195 | \n\n | \n | (857 | \n) | \n\n | (10 | \n) | \n\n | 2,236 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n OCI before reclassifications | \n\n | \n | (1,740 | \n) | \n\n | (2 | \n) | \n\n | 358 | \n\n | \n | (79 | \n) | \n\n | (1,463 | \n) |
| \n Amounts reclassified from AOCI | \n\n | \n | (43 | \n) | \n\n | 4 | \n\n | \n | 68 | \n\n | \n | 8 | \n\n | \n | 37 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net OCI, current period | \n\n | \n | (1,783 | \n) | \n\n | 2 | \n\n | \n | 426 | \n\n | \n | (71 | \n) | \n\n | (1,426 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, December 31, 2013 | \n\n | \n | 1,125 | \n\n | \n | 197 | \n\n | \n | (431 | \n) | \n\n | (81 | \n) | \n\n | 810 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n OCI before reclassifications | \n\n | \n | 667 | \n\n | \n | (2 | \n) | \n\n | (363 | \n) | \n\n | (250 | \n) | \n\n | 52 | \n|
| \n Amounts reclassified from AOCI | \n\n | \n | (24 | \n) | \n\n | 3 | \n\n | \n | 39 | \n\n | \n | — | \n\n | \n | 18 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net OCI, current period | \n\n | \n | 643 | \n\n | \n | 1 | \n\n | \n | (324 | \n) | \n\n | (250 | \n) | \n\n | 70 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, December 31, 2014 | \n\n | $ | \n1,768 | \n\n | $ | \n198 | \n\n | $ | \n(755 | \n) | \n$ | \n(331 | \n) | \n$ | \n880 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The following table presents the pretax components of the Company's other comprehensive income (loss) and the related income tax expense (benefit) for the years ended December 31, 2014, 2013 and 2012.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | $ | \n976 | \n\n | $ | \n(2,734 | \n) | \n$ | \n281 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 333 | \n\n | \n | (951 | \n) | \n\n | 102 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 643 | \n\n | \n | (1,783 | \n) | \n\n | 179 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 2 | \n\n | \n | 3 | \n\n | \n | 81 | \n|
| \n Income tax expense | \n\n | \n | 1 | \n\n | \n | 1 | \n\n | \n | 28 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 1 | \n\n | \n | 2 | \n\n | \n | 53 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net changes in benefit plan assets and obligations | \n\n | \n | (494 | \n) | \n\n | 647 | \n\n | \n | (69 | \n) |
| \n Income tax expense (benefit) | \n\n | \n | (170 | \n) | \n\n | 221 | \n\n | \n | (23 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | (324 | \n) | \n\n | 426 | \n\n | \n | (46 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (289 | \n) | \n\n | (112 | \n) | \n\n | 43 | \n|
| \n Income tax benefit | \n\n | \n | (39 | \n) | \n\n | (41 | \n) | \n\n | (2 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | (250 | \n) | \n\n | (71 | \n) | \n\n | 45 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other comprehensive income (loss) | \n\n | \n | 195 | \n\n | \n | (2,196 | \n) | \n\n | 336 | \n|
| \n Total income tax expense (benefit) | \n\n | \n | 125 | \n\n | \n | (770 | \n) | \n\n | 105 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other comprehensive income (loss), net of taxes | \n\n | $ | \n70 | \n\n | $ | \n(1,426 | \n) | \n$ | \n231 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The following table presents the pretax and related income tax (expense) benefit components of the amounts reclassified from the Company's AOCI to the Company's consolidated statement of income for the years ended December 31, 2014, 2013 and 2012.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Reclassification adjustments related to unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income(1) | \n\n | $ | \n(36 | \n) | \n$ | \n(66 | \n) | \n$ | \n(75 | \n) |
| \n Income tax expense(2) | \n\n | \n | (12 | \n) | \n\n | (23 | \n) | \n\n | (26 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | (24 | \n) | \n\n | (43 | \n) | \n\n | (49 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Having credit losses recognized in the consolidated statement of income(1) | \n\n | \n | 4 | \n\n | \n | 5 | \n\n | \n | 8 | \n|
| \n Income tax benefit(2) | \n\n | \n | 1 | \n\n | \n | 1 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 3 | \n\n | \n | 4 | \n\n | \n | 5 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Reclassification adjustment related to benefit plan assets and obligations(3) | \n\n | \n | 60 | \n\n | \n | 105 | \n\n | \n | 88 | \n|
| \n Income tax benefit(2) | \n\n | \n | 21 | \n\n | \n | 37 | \n\n | \n | 30 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 39 | \n\n | \n | 68 | \n\n | \n | 58 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Reclassification adjustment related to foreign currency translation(1) | \n\n | \n | — | \n\n | \n | 8 | \n\n | \n | — | \n|
| \n Income tax benefit(2) | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | — | \n\n | \n | 8 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total reclassifications | \n\n | \n | 28 | \n\n | \n | 52 | \n\n | \n | 21 | \n|
| \n Total income tax benefit | \n\n | \n | 10 | \n\n | \n | 15 | \n\n | \n | 7 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total reclassifications, net of taxes | \n\n | $ | \n18 | \n\n | $ | \n37 | \n\n | $ | \n14 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
11. EARNINGS PER SHARE
\nBasic earnings per share was computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share reflected the effect of potentially dilutive securities.
\nThe following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions, except per share amounts) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Basic and Diluted | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income, as reported | \n\n | $ | \n3,692 | \n\n | $ | \n3,673 | \n\n | $ | \n2,473 | \n|
| \n Participating share-based awards—allocated income | \n\n | \n | (27 | \n) | \n\n | (27 | \n) | \n\n | (19 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income available to common shareholders—basic and diluted | \n\n | $ | \n3,665 | \n\n | $ | \n3,646 | \n\n | $ | \n2,454 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Common Shares | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Weighted average shares outstanding | \n\n | \n | 338.8 | \n\n | \n | 370.3 | \n\n | \n | 386.2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Diluted | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Weighted average shares outstanding | \n\n | \n | 338.8 | \n\n | \n | 370.3 | \n\n | \n | 386.2 | \n|
| \n Weighted average effects of dilutive securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Stock options and performance shares | \n\n | \n | 3.7 | \n\n | \n | 4.0 | \n\n | \n | 3.6 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | \n | 342.5 | \n\n | \n | 374.3 | \n\n | \n | 389.8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income Per Common Share | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | $ | \n10.82 | \n\n | $ | \n9.84 | \n\n | $ | \n6.35 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Diluted | \n\n | $ | \n10.70 | \n\n | $ | \n9.74 | \n\n | $ | \n6.30 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
12. INCOME TAXES
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Composition of income tax expense included in the consolidated statement of income | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Current expense: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Federal | \n\n | $ | \n1,216 | \n\n | $ | \n1,059 | \n\n | $ | \n406 | \n|
| \n Foreign | \n\n | \n | 28 | \n\n | \n | 30 | \n\n | \n | 45 | \n|
| \n State | \n\n | \n | 10 | \n\n | \n | 6 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total current tax expense | \n\n | \n | 1,254 | \n\n | \n | 1,095 | \n\n | \n | 454 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Deferred expense: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Federal | \n\n | \n | 121 | \n\n | \n | 167 | \n\n | \n | 223 | \n|
| \n Foreign | \n\n | \n | 22 | \n\n | \n | 10 | \n\n | \n | 16 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total deferred tax expense | \n\n | \n | 143 | \n\n | \n | 177 | \n\n | \n | 239 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income tax expense included in the consolidated statement of income | \n\n | \n | 1,397 | \n\n | \n | 1,272 | \n\n | \n | 693 | \n|
| \n Composition of income tax included in shareholders' equity | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Expense (benefit) relating to share-based compensation, the changes in unrealized gain on investments, unrealized loss on foreign exchange and other items in other comprehensive income | \n\n | \n | 68 | \n\n | \n | (822 | \n) | \n\n | 57 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income tax expense included in the consolidated financial statements | \n\n | $ | \n1,465 | \n\n | $ | \n450 | \n\n | $ | \n750 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Income before income taxes | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S | \n\n | $ | \n4,899 | \n\n | $ | \n4,804 | \n\n | $ | \n2,955 | \n|
| \n Foreign | \n\n | \n | 190 | \n\n | \n | 141 | \n\n | \n | 211 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income before income taxes | \n\n | \n | 5,089 | \n\n | \n | 4,945 | \n\n | \n | 3,166 | \n|
| \n Effective tax rate | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Statutory tax rate | \n\n | \n | 35 | \n% | \n\n | 35 | \n% | \n\n | 35 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expected federal income tax expense | \n\n | \n | 1,781 | \n\n | \n | 1,731 | \n\n | \n | 1,108 | \n|
| \n Tax effect of: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Nontaxable investment income | \n\n | \n | (379 | \n) | \n\n | (409 | \n) | \n\n | (427 | \n) |
| \n Other, net | \n\n | \n | (5 | \n) | \n\n | (50 | \n) | \n\n | 12 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income tax expense | \n\n | $ | \n1,397 | \n\n | $ | \n1,272 | \n\n | $ | \n693 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effective tax rate | \n\n | \n | 27 | \n% | \n\n | 26 | \n% | \n\n | 22 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The Company paid income taxes of $1.15 billion, $1.06 billion and $188 million during the years ended December 31, 2014, 2013 and 2012, respectively. The current income tax payable was $139 million and $85 million at December 31, 2014 and 2013, respectively, and was included in other liabilities in the consolidated balance sheet.
\nThe net deferred tax asset comprises the tax effects of temporary differences related to the following assets and liabilities:
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Deferred tax assets | \n\n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expense reserves | \n\n | $ | \n768 | \n\n | $ | \n825 | \n|
| \n Unearned premium reserves | \n\n | \n | 709 | \n\n | \n | 693 | \n|
| \n Compensation-related liabilities | \n\n | \n | 345 | \n\n | \n | 207 | \n|
| \n Other | \n\n | \n | 346 | \n\n | \n | 356 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total gross deferred tax assets | \n\n | \n | 2,168 | \n\n | \n | 2,081 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Deferred tax liabilities | \n\n | \n | \n | \n | \n | \n | |
| \n Deferred acquisition costs | \n\n | \n | 565 | \n\n | \n | 554 | \n|
| \n Investments | \n\n | \n | 1,267 | \n\n | \n | 931 | \n|
| \n Internally developed software | \n\n | \n | 130 | \n\n | \n | 138 | \n|
| \n Other | \n\n | \n | 173 | \n\n | \n | 155 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total gross deferred tax liabilities | \n\n | \n | 2,135 | \n\n | \n | 1,778 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Net deferred tax asset | \n\n | $ | \n33 | \n\n | $ | \n303 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
If the Company determines that any of its deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of these assets that are not expected to be realized. Based upon a review of the Company's anticipated future taxable income, and also including all other available evidence, both positive and negative, the Company's management concluded that it is more likely than not that the gross deferred tax assets will be realized.
\nFor tax return purposes, as of December 31, 2014, the Company had net operating loss (NOL) carryforwards in the United States, Canada and the United Kingdom. The amount and timing of realizing the benefits of NOL carryforwards depend on future taxable income and limitations imposed by tax laws. The benefits of the NOL carryforwards have been recognized in the consolidated financial statements and are included in net deferred tax assets. The NOL amounts by jurisdiction and year of expiration are as follows:
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Amount | \n\n | Year of \nexpiration | \n|||
|---|---|---|---|---|---|---|---|
| \n United States | \n\n | $ | \n15 | \n\n | \n | 2018 | \n|
| \n Canada | \n\n | \n | 6 | \n\n | \n | 2033 | \n|
| \n United Kingdom | \n\n | \n | 133 | \n\n | \n | None | \n
U.S. income taxes have not been recognized on $647 million of the Company's foreign operations' undistributed earnings as of December 31, 2014, as such earnings are intended to be permanently reinvested in those operations. Furthermore, any taxes paid to foreign governments on these earnings may be used as credits against the U.S. tax on any dividend distributions from such earnings.
\nThe following is a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2014 and 2013:
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Balance at January 1 | \n\n | $ | \n21 | \n\n | $ | \n24 | \n|
| \n Additions for tax positions of prior years | \n\n | \n | 2 | \n\n | \n | — | \n|
| \n Reductions for tax positions of prior years | \n\n | \n | — | \n\n | \n | (3 | \n) |
| \n Additions based on tax positions related to current year | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at December 31 | \n\n | $ | \n23 | \n\n | $ | \n21 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
Included in the balances at both December 31, 2014 and 2013 were $2 million of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Also included in the balances at those dates were $21 million and $19 million, respectively, of tax positions for which the ultimate deductibility is certain, but for which there is uncertainty about the timing of deductibility. The timing of such deductibility would not affect the annual effective tax rate.
\nThe Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income taxes. During the years ended December 31, 2014 and 2013, the Company recognized approximately $31 million and $(67) million in interest, respectively. The Company had approximately $58 million and $27 million accrued for the payment of interest at December 31, 2014 and 2013, respectively.
\nThe IRS is conducting an examination of the Company's U.S. income tax returns for 2011 and 2012. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next twelve months.
\n13. SHARE-BASED INCENTIVE COMPENSATION
\nThe Company has a share-based incentive compensation plan, The Travelers Companies, Inc. 2014 Stock Incentive Plan (the 2014 Incentive Plan), which was approved by the Company's shareholders in May 2014 and replaced The Travelers Companies, Inc. Amended and Restated 2004 Stock Incentive Plan, as amended (the 2004 Incentive Plan). The purposes of the 2014 Incentive Plan are to align the interests of the Company's non-employee directors, executive officers and other employees with those of the Company's shareholders, and to attract and retain personnel by providing incentives in the form of share-based awards. The 2014 Incentive Plan permits grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, deferred stock units, performance awards and other share-based or share-denominated awards with respect to the Company's common stock. The number of shares of the Company's common stock authorized for grant under the 2014 Incentive Plan is 10 million shares, subject to additional shares that may be available for awards as described below. The Company has a policy of issuing new shares to settle the exercise of stock option awards and the vesting of other equity awards.
\nIn connection with the adoption of the 2014 Incentive Plan, the 2004 Incentive Plan was terminated, joining several other legacy share-based incentive compensation plans that had been terminated in prior years (together, the legacy plans). Outstanding grants were not affected by the termination of the legacy plans, including the grant of reload options related to prior option grants under the legacy plans. As of December 31, 2012, there were no longer any options eligible for reload.
\nThe 2014 Incentive Plan is currently the only plan pursuant to which future stock-based awards may be granted. In addition to the 10 million shares initially authorized for issuance under the 2014 Incentive Plan, the following will not be counted towards the 10 million shares available and will be available for future grants under the 2014 Incentive Plan: (i) shares of common stock subject to awards that expire unexercised, that are forfeited, terminated or canceled, that are settled in cash or other forms of property, or otherwise do not result in the issuance of shares of common stock, in whole or in part; (ii) shares that are used to pay the exercise price of stock options and shares used to pay withholding taxes on awards generally; and (iii) shares purchased by the Company on the open market using cash option exercise proceeds; provided, however, that the increase in the number of shares of common stock available for grant pursuant to such market purchases shall not be greater than the number that could be repurchased at fair market value on the date of exercise of the stock option giving rise to such option proceeds. In addition, the 10 million shares initially authorized for issuance under the 2014 Incentive Plan will be increased by any shares subject to awards under the 2004 Incentive Plan that were outstanding as of May 27, 2014 and subsequently expire, are forfeited, cancelled, settled in cash or otherwise terminate without the issuance of shares.
\nThe Company also has a compensation program for non-employee directors (the Director Compensation Program). Under the Director Compensation Program, non-employee directors' compensation consists of an annual retainer, a deferred stock award, committee chair fees and a lead director fee. Each non-employee director may choose to receive all or a portion of his or her annual retainer in the form of cash or deferred stock units which vest upon grant. The annual deferred stock awards vest in full one day prior to the date of the Company's annual meeting of shareholders occurring in the year following the year of the grant date, subject to continued service. The deferred stock awards may accumulate, including reinvestment dividends, until distribution either in a lump sum six months after termination of service as a director or, if the director so elects, in annual installments beginning at least six months following termination of service as a director. The shares of deferred stock units issued under the Director Compensation Program are awarded under the 2014 Incentive Plan.
\nStock Option Awards
\nStock option awards granted to eligible officers and key employees have a ten-year term. Prior to January 1, 2007, stock options were granted with an exercise price equal to the fair market value of the Company's common stock on the day preceding the date of grant. Beginning January 1, 2007, all stock options are granted with an exercise price equal to the closing price of the Company's common stock on the date of grant. The stock options granted generally vest upon meeting certain years of service criteria. Except as the Compensation Committee of the Board may allow in the future, stock options cannot be sold or transferred by the participant. The stock options granted under the 2014 Incentive Plan and the 2004 Incentive Plan vest three years after grant date (cliff vest).
\nIn addition to the stock option awards described above, certain stock option awards that were granted under legacy plans permitted an employee exercising an option to be granted a new option (a reload option) at an exercise price equal to the closing price of the Company's common stock on the date on which the original option was exercised. The reload option was permitted on certain stock option awards granted prior to January 2003 at an amount equal to the number of shares of the common stock used to satisfy both the exercise price and withholding taxes due upon exercise of an option and vest either six months or one year after the grant date and are exercisable for the remaining term of the related original option. As of December 31, 2012, there were no longer any options eligible for reload.
\nThe fair value of each option award is estimated on the date of grant by application of a variation of the Black-Scholes option pricing model using the assumptions noted in the following table. The expected term of newly granted stock options is the time to vest plus half the remaining time to expiration. This considers the vesting restriction and represents an even pattern of exercise behavior over the remaining term. Reload options were exercisable for the remaining term of the original option and therefore generally had a shorter expected term. The expected volatility assumption is based on the historical volatility of the Company's common stock for the same period as the estimated option term based on the mid-month of the option grant. The expected dividend is based upon the Company's current quarter dividend annualized and assumed to be constant over the expected option term. The risk-free interest rate for each option is the interpolated market yield for the mid-month of the option grant on a U.S. Treasury bill with a term comparable to the expected option term of the granted stock option. Shares received through option exercises under the reload program were subject to either a one-year or two-year restriction on sale. A discount, as measured by the estimated cost of protecting against changes in market value—5% for one-year sales restrictions and 10% for two-year sales restrictions—had been applied to the fair value of reload options granted to reflect these sales restrictions. The following assumptions were used in estimating the fair value of options on grant date for the years ended December 31, 2014, 2013 and 2012:
\n| \n | \n | \n | \n | |
| \n 2014 | \n\n | Original Grants | \n\n | |
|---|---|---|---|---|
| \n Expected term of stock options | \n\n | 6 years | \n\n | |
| \n Expected volatility of the Company's stock | \n\n | 27.2% - 27.5% | \n\n | |
| \n Weighted average volatility | \n\n | 27.5% | \n\n | |
| \n Expected annual dividend per share | \n\n | $2.00 - $2.20 | \n\n | |
| \n Risk-free rate | \n\n | 1.81% - 1.82% | \n\n | |
| | \n | \n | \n | \n |
| \n | \n | \n | \n | |
| \n 2013 | \n\n | Original Grants | \n\n | |
|---|---|---|---|---|
| \n Expected term of stock options | \n\n | 6 years | \n\n | |
| \n Expected volatility of the Company's stock | \n\n | 28.7% - 28.8% | \n\n | |
| \n Weighted average volatility | \n\n | 28.8% | \n\n | |
| \n Expected annual dividend per share | \n\n | $1.84 | \n\n | |
| \n Risk-free rate | \n\n | 1.11% - 1.14% | \n\n | |
| | \n | \n | \n | \n |
| \n | \n | \n | \n | |
| \n 2012 | \n\n | Original Grants | \n\n | Reload Grants |
|---|---|---|---|---|
| \n Expected term of stock options | \n\n | 6 years | \n\n | 1 year |
| \n Expected volatility of the Company's stock | \n\n | 28.5% - 28.6% | \n\n | 22.9% - 23.5% |
| \n Weighted average volatility | \n\n | 28.6% | \n\n | 23.4% |
| \n Expected annual dividend per share | \n\n | $1.64 - $1.84 | \n\n | $1.64 - $1.84 |
| \n Risk-free rate | \n\n | 1.02% - 1.17% | \n\n | 0.10% - 0.17% |
| | \n | \n | \n | \n |
A summary of stock option activity under the 2014 Incentive Plan and legacy share-based incentive compensation plans as of and for the year ended December 31, 2014 is as follows:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Stock Options | \n\n | Number | \n\n | Weighted \nAverage \nExercise \nPrice | \n\n | Weighted \nAverage \nContractual \nLife \nRemaining | \n\n | Aggregate \nIntrinsic \nValue \n($ in millions) | \n||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Outstanding, beginning of year | \n\n | \n | 11,071,256 | \n\n | $ | \n56.68 | \n\n | \n | \n | \n | \n | |
| \n Original grants | \n\n | \n | 2,010,043 | \n\n | \n | 80.36 | \n\n | \n | \n | \n | \n | |
| \n Exercised | \n\n | \n | (2,845,405 | \n) | \n\n | 49.70 | \n\n | \n | \n | \n | \n | |
| \n Forfeited or expired | \n\n | \n | (211,034 | \n) | \n\n | 72.32 | \n\n | \n | \n | \n | \n | |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding, end of year | \n\n | \n | 10,024,860 | \n\n | $ | \n63.08 | \n\n | 6.5 Years | \n\n | $ | \n429 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Vested at end of year(1) | \n\n | \n | 7,159,841 | \n\n | $ | \n59.44 | \n\n | 5.9 Years | \n\n | $ | \n332 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Exercisable at end of year | \n\n | \n | 4,232,855 | \n\n | $ | \n50.65 | \n\n | 4.4 Years | \n\n | $ | \n234 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The following table presents additional information regarding original and reload grants for the years ended December 31, 2014, 2013 and 2012.
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n 2014 | \n\n | Original Grants | \n\n | | \n|||
|---|---|---|---|---|---|---|---|
| \n Weighted average grant-date fair value of options granted (per share) | \n\n | $ | \n17.22 | \n\n | \n | \n | |
| \n Total intrinsic value of options exercised during the year (in millions) | \n\n | $ | \n117 | \n\n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | |
| \n 2013 | \n\n | Original Grants | \n\n | | \n|||
|---|---|---|---|---|---|---|---|
| \n Weighted average grant-date fair value of options granted (per share) | \n\n | $ | \n17.09 | \n\n | \n | \n | |
| \n Total intrinsic value of options exercised during the year (in millions) | \n\n | $ | \n122 | \n\n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | |
| \n 2012 | \n\n | Original Grants | \n\n | Reload Grants | \n|||
|---|---|---|---|---|---|---|---|
| \n Weighted average grant-date fair value of options granted (per share) | \n\n | $ | \n12.08 | \n\n | $ | \n4.49 | \n|
| \n Total intrinsic value of options exercised during the year (in millions) | \n\n | $ | \n102 | \n\n | $ | \n5 | \n
On February 3, 2015, the Company, under the 2014 Stock Incentive Plan, granted 2,244,464 stock option awards with an exercise price of $106.04 per share. The fair value attributable to the stock option awards on the date of grant was $15.78 per share.
\nRestricted Stock Units, Deferred Stock Units and Performance Share Award Programs
\nThe Company issues restricted stock unit awards to eligible officers and key employees under the Equity Awards program established pursuant to the 2014 Incentive Plan. A restricted stock unit represents the right to receive a share of common stock. These restricted stock unit awards are granted at market price, generally vest three years from the date of grant, do not have voting rights and the underlying shares of common stock are not issued until the vesting criteria is satisfied. In addition, the Company's board of directors can be issued deferred stock unit awards from (i) an annual award; (ii) deferred compensation (in lieu of cash retainer); and (iii) dividend reinvestment shares earned on outstanding deferred compensation.
\nThe Company also has a Performance Share Awards Program established pursuant to the 2004 Incentive Plan and which continues pursuant to the 2014 Incentive Plan. Under the program, the Company may issue performance share awards to certain employees of the Company who hold positions of Vice President (or its equivalent) or above. The performance awards provide the recipient the right to earn shares of the Company's common stock based upon the Company's attainment of certain performance goals and the recipient meeting certain years of service criteria. The performance goals for performance awards are based on the Company's adjusted return on equity over a three-year performance period. Vesting of performance shares is contingent upon the Company attaining the relevant performance period minimum threshold return on equity and the recipient meeting certain years of service criteria, generally three years for full vesting, subject to proration for certain termination conditions. If the performance period return on equity is below the minimum threshold, none of the shares will vest. If performance meets or exceeds the minimum performance threshold, a range of performance shares will vest (50%—130% for awards granted in February 2012 and 2013; and 50%—150% for awards granted in 2014 and 2015), depending on the actual return on equity attained.
\nThe fair value of restricted stock units, deferred stock units and performance shares is measured at the market price of the Company stock at date of grant. Under terms of the 2014 Incentive Plan, holders of deferred stock units and performance shares may receive dividend equivalents.
\nThe total fair value of shares that vested during the years ended December 31, 2014, 2013 and 2012 was $147 million, $151 million and $146 million, respectively.
\nA summary of restricted stock units, deferred stock units and performance share activity under the Company's 2014 Incentive Plan and legacy plans as of and for the year ended December 31, 2014 is as follows:
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Restricted and Deferred Stock \nUnits | \n\n | Performance Shares | \n|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Other Equity Instruments | \n\n | Number | \n\n | Weighted Average \nGrant-Date \nFair Value | \n\n | Number | \n\n | Weighted Average \nGrant-Date \nFair Value | \n|||||
| \n Nonvested, beginning of year | \n\n | \n | 1,952,274 | \n\n | $ | \n64.60 | \n\n | \n | 1,389,770 | \n\n | $ | \n68.38 | \n|
| \n Granted | \n\n | \n | 759,151 | \n\n | \n | 80.63 | \n\n | \n | 594,901 | \n\n | \n | 80.35 | \n|
| \n Vested | \n\n | \n | (885,048 | \n)(1) | \n\n | 61.76 | \n\n | \n | (801,479 | \n)(2) | \n\n | 59.74 | \n|
| \n Forfeited | \n\n | \n | (65,406 | \n) | \n\n | 78.88 | \n\n | \n | (99,547 | \n) | \n\n | 71.50 | \n|
| \n Performance-based adjustment | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 206,424 | \n(3) | \n\n | 71.12 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Nonvested, end of year | \n\n | \n | 1,760,971 | \n\n | $ | \n72.40 | \n\n | \n | 1,290,069 | \n\n | $ | \n79.46 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
In addition to the nonvested shares presented in the above table, there are related nonvested dividend equivalent shares. The number of nonvested dividend equivalent shares related to deferred stock units was 372 at the beginning of the year and 387 at the end of the year and the number of nonvested dividend equivalent shares related to performance shares was 14,584 at the beginning of the year and 38,738 at the end of the year. The dividend equivalent shares are subject to the same vesting terms as the deferred stock units and performance shares.
\nOn February 3, 2015, the Company, under the 2014 Stock Incentive Plan, granted 1,044,313 common stock awards in the form of restricted stock units, deferred stock units and performance share awards to participating officers, non-employee directors and other key employees. The restricted stock units and deferred stock units totaled 583,458 shares while the performance share awards totaled 460,855 shares. The fair value per share attributable to the common stock awards on the date of grant was $106.04.
\nShare-Based Compensation Cost Recognition
\nThe amount of compensation cost for awards subject to a service condition is based on the number of shares expected to be issued and is recognized over the time period for which service is to be provided (requisite service period). Awards granted to retiree-eligible employees or to employees who become retiree-eligible before an award's vesting date are considered to have met the requisite service condition. The compensation cost for awards subject to a performance condition is based upon the probable outcome of the performance condition, which on the grant date reflects an estimate of attaining 100% of the performance shares granted. The compensation cost reflects an estimated annual forfeiture rate from 3.0% to 4.5% over the requisite service period of the awards. That estimate is revised if subsequent information indicates that the actual number of instruments expected to vest is likely to differ from previous estimates. Compensation costs for awards are recognized on a straight-line basis over the requisite service period. For awards that have graded vesting terms, the compensation cost is recognized on a straight-line basis over the requisite service period for each separate vesting portion of the award as if the award was, in substance, multiple awards. The total compensation cost for all share-based incentive compensation awards recognized in earnings for the years ended December 31, 2014, 2013 and 2012 was $138 million, $129 million and $120 million, respectively. Included in these amounts are compensation cost adjustments of $14 million, $8 million and $4 million, for the years ended December 31, 2014, 2013 and 2012, respectively, that reflected the cost associated with the updated estimate of performance shares due to attaining certain performance levels from the date of the initial grant of the performance awards. The related tax benefits recognized in earnings were $47 million, $45 million and $42 million for the years ended December 31, 2014, 2013 and 2012, respectively.
\nAt December 31, 2014, there was $123 million of total unrecognized compensation cost related to all nonvested share-based incentive compensation awards. This includes stock options, restricted and deferred stock units and performance shares granted under the 2014 Incentive Plan and the 2004 Incentive Plan. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.7 years. Cash received from the exercise of employee stock options under share-based compensation plans totaled $195 million and $206 million in 2014 and 2013, respectively. The tax benefit realized for tax deductions from employee stock options exercised during 2014 and 2013 totaled $40 million and $42 million, respectively.
\n14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS
\nThe Company sponsors a qualified non-contributory defined benefit pension plan, which covers substantially all U.S. domestic employees and provides benefits under a cash balance formula, except that employees satisfying certain age and service requirements remain covered by a prior final average pay formula. In addition, the Company sponsors a nonqualified defined benefit pension plan which covers certain highly-compensated employees, pension plans for employees of its foreign subsidiaries, and a postretirement health and life insurance benefit plan for employees satisfying certain age and service requirements and for certain retirees.
\nObligations and Funded Status
\nThe following tables summarize the funded status, obligations and amounts recognized in the consolidated balance sheet for the Company's benefit plans. The Company uses a December 31 measurement date for its pension and postretirement benefit plans.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Qualified \nDomestic Pension \nPlan | \n\n | Nonqualified \nand Foreign \nPension Plans | \n\n | Total | \n|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2014 | \n\n | 2013 | \n\n | 2014 | \n\n | 2013 | \n|||||||
| \n Change in projected benefit obligation: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Benefit obligation at beginning of year | \n\n | $ | \n2,908 | \n\n | $ | \n3,055 | \n\n | $ | \n209 | \n\n | $ | \n206 | \n\n | $ | \n3,117 | \n\n | $ | \n3,261 | \n|
| \n Benefits earned | \n\n | \n | 104 | \n\n | \n | 112 | \n\n | \n | 6 | \n\n | \n | 6 | \n\n | \n | 110 | \n\n | \n | 118 | \n|
| \n Interest cost on benefit obligation | \n\n | \n | 140 | \n\n | \n | 124 | \n\n | \n | 10 | \n\n | \n | 8 | \n\n | \n | 150 | \n\n | \n | 132 | \n|
| \n Actuarial loss (gain) | \n\n | \n | 428 | \n\n | \n | (243 | \n) | \n\n | 29 | \n\n | \n | (19 | \n) | \n\n | 457 | \n\n | \n | (262 | \n) |
| \n Benefits paid | \n\n | \n | (187 | \n) | \n\n | (140 | \n) | \n\n | (11 | \n) | \n\n | (9 | \n) | \n\n | (198 | \n) | \n\n | (149 | \n) |
| \n Plan amendments | \n\n | \n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (8 | \n) | \n\n | — | \n|
| \n Curtailment | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (3 | \n) | \n\n | — | \n\n | \n | (3 | \n) | \n\n | — | \n|
| \n Settlement | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (6 | \n) | \n\n | — | \n\n | \n | (6 | \n) | \n\n | — | \n|
| \n Foreign currency exchange rate change | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (7 | \n) | \n\n | 2 | \n\n | \n | (7 | \n) | \n\n | 2 | \n|
| \n Acquisition | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 15 | \n\n | \n | — | \n\n | \n | 15 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Benefit obligation at end of year | \n\n | $ | \n3,385 | \n\n | $ | \n2,908 | \n\n | $ | \n227 | \n\n | $ | \n209 | \n\n | $ | \n3,612 | \n\n | $ | \n3,117 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Change in plan assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fair value of plan assets at beginning of year | \n\n | $ | \n3,074 | \n\n | $ | \n2,761 | \n\n | $ | \n129 | \n\n | $ | \n98 | \n\n | $ | \n3,203 | \n\n | $ | \n2,859 | \n|
| \n Actual return on plan assets | \n\n | \n | 148 | \n\n | \n | 453 | \n\n | \n | 11 | \n\n | \n | 12 | \n\n | \n | 159 | \n\n | \n | 465 | \n|
| \n Company contributions | \n\n | \n | 200 | \n\n | \n | — | \n\n | \n | 7 | \n\n | \n | 6 | \n\n | \n | 207 | \n\n | \n | 6 | \n|
| \n Benefits paid | \n\n | \n | (187 | \n) | \n\n | (140 | \n) | \n\n | (11 | \n) | \n\n | (9 | \n) | \n\n | (198 | \n) | \n\n | (149 | \n) |
| \n Foreign currency exchange rate change | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (8 | \n) | \n\n | 2 | \n\n | \n | (8 | \n) | \n\n | 2 | \n|
| \n Settlement | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (6 | \n) | \n\n | — | \n\n | \n | (6 | \n) | \n\n | — | \n|
| \n Acquisition | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 20 | \n\n | \n | — | \n\n | \n | 20 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Fair value of plan assets at end of year | \n\n | \n | 3,235 | \n\n | \n | 3,074 | \n\n | \n | 122 | \n\n | \n | 129 | \n\n | \n | 3,357 | \n\n | \n | 3,203 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Funded status of plan at end of year | \n\n | $ | \n(150 | \n) | \n$ | \n166 | \n\n | $ | \n(105 | \n) | \n$ | \n(80 | \n) | \n$ | \n(255 | \n) | \n$ | \n86 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in the consolidated balance sheet consist of: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Accrued over-funded benefit plan assets | \n\n | $ | \n— | \n\n | $ | \n176 | \n\n | $ | \n6 | \n\n | $ | \n10 | \n\n | $ | \n6 | \n\n | $ | \n186 | \n|
| \n Accrued under-funded benefit plan liabilities | \n\n | \n | (150 | \n) | \n\n | (10 | \n) | \n\n | (111 | \n) | \n\n | (90 | \n) | \n\n | (261 | \n) | \n\n | (100 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n(150 | \n) | \n$ | \n166 | \n\n | $ | \n(105 | \n) | \n$ | \n(80 | \n) | \n$ | \n(255 | \n) | \n$ | \n86 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in accumulated other comprehensive income consist of: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net actuarial loss | \n\n | $ | \n1,132 | \n\n | $ | \n704 | \n\n | $ | \n53 | \n\n | $ | \n34 | \n\n | $ | \n1,185 | \n\n | $ | \n738 | \n|
| \n Prior service benefit | \n\n | \n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (8 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n1,124 | \n\n | $ | \n704 | \n\n | $ | \n53 | \n\n | $ | \n34 | \n\n | $ | \n1,177 | \n\n | $ | \n738 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Postretirement \nBenefit Plans | \n|||||
|---|---|---|---|---|---|---|---|
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
| \n Change in projected benefit obligation: | \n\n | \n | \n | \n | \n | \n | |
| \n Benefit obligation at beginning of year | \n\n | $ | \n211 | \n\n | $ | \n222 | \n|
| \n Benefits earned | \n\n | \n | — | \n\n | \n | — | \n|
| \n Interest cost on benefit obligation | \n\n | \n | 10 | \n\n | \n | 9 | \n|
| \n Actuarial loss (gain) | \n\n | \n | 51 | \n\n | \n | (25 | \n) |
| \n Benefits paid | \n\n | \n | (15 | \n) | \n\n | (14 | \n) |
| \n Foreign currency exchange rate change | \n\n | \n | (2 | \n) | \n\n | — | \n|
| \n Acquisition | \n\n | \n | — | \n\n | \n | 19 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Benefit obligation at end of year | \n\n | $ | \n255 | \n\n | $ | \n211 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Change in plan assets: | \n\n | \n | \n | \n | \n | \n | |
| \n Fair value of plan assets at beginning of year | \n\n | $ | \n17 | \n\n | $ | \n18 | \n|
| \n Actual return on plan assets | \n\n | \n | — | \n\n | \n | — | \n|
| \n Company contributions | \n\n | \n | 14 | \n\n | \n | 13 | \n|
| \n Benefits paid | \n\n | \n | (15 | \n) | \n\n | (14 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Fair value of plan assets at end of year | \n\n | \n | 16 | \n\n | \n | 17 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Funded status of plan at end of year | \n\n | $ | \n(239 | \n) | \n$ | \n(194 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in the consolidated balance sheet consist of: | \n\n | \n | \n | \n | \n | \n | |
| \n Accrued under-funded benefit plan liability | \n\n | $ | \n(239 | \n) | \n$ | \n(194 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in accumulated other comprehensive income consist of: | \n\n | \n | \n | \n | \n | \n | |
| \n Net actuarial loss (gain) | \n\n | $ | \n9 | \n\n | $ | \n(44 | \n) |
| \n Prior service benefit | \n\n | \n | (26 | \n) | \n\n | (28 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n(17 | \n) | \n$ | \n(72 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
The total accumulated benefit obligation for the Company's defined benefit pension plans was $3.51 billion and $3.05 billion at December 31, 2014 and 2013, respectively. The qualified domestic pension plan accounted for $3.29 billion and $2.85 billion of the total accumulated benefit obligation at December 31, 2014 and 2013, respectively, whereas the nonqualified and foreign plans accounted for $0.22 billion and $0.20 billion of the total accumulated benefit obligation at December 31, 2014 and 2013, respectively.
\nFor pension plans with an accumulated benefit obligation in excess of plan assets, the aggregate projected benefit obligation was $3.53 billion and $123 million at December 31, 2014 and 2013, respectively, and the aggregate accumulated benefit obligation was $3.43 billion and $121 million at December 31, 2014 and 2013, respectively. The fair value of plan assets for the above plans was $3.27 billion and $33 million at December 31, 2014 and 2013, respectively.
\nThe Company has discretion regarding whether to provide additional funding and when to provide such funding to its qualified domestic pension plan. In 2014, 2013 and 2012, there were no required contributions to the qualified domestic pension plan. In 2014 and 2012, the Company voluntarily made contributions totaling $200 million and $217 million, respectively, to the qualified domestic pension plan. In 2013, the Company made no voluntary contributions to the qualified domestic pension plan. The Company has not determined whether or not additional funding will be made during 2015. There is no required contribution to the qualified domestic pension plan during 2015. With respect to the Company's foreign pension plans, there are no significant required contributions in 2015.
\nThe following table summarizes the components of net periodic benefit cost and other amounts recognized in other comprehensive income related to the benefit plans for the years ended December 31, 2014, 2013 and 2012.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Pension Plans | \n\n | Postretirement \nBenefit Plans | \n|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n|||||||
| \n Net Periodic Benefit Cost: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Service cost | \n\n | $ | \n110 | \n\n | $ | \n118 | \n\n | $ | \n113 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Interest cost on benefit obligation | \n\n | \n | 150 | \n\n | \n | 132 | \n\n | \n | 138 | \n\n | \n | 10 | \n\n | \n | 9 | \n\n | \n | 12 | \n|
| \n Expected return on plan assets | \n\n | \n | (218 | \n) | \n\n | (208 | \n) | \n\n | (187 | \n) | \n\n | — | \n\n | \n | (1 | \n) | \n\n | (1 | \n) |
| \n Curtailment | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Settlement | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Amortization of unrecognized: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Prior service benefit | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (2 | \n) | \n\n | (2 | \n) | \n\n | — | \n|
| \n Net actuarial loss (gain) | \n\n | \n | 65 | \n\n | \n | 107 | \n\n | \n | 89 | \n\n | \n | (3 | \n) | \n\n | — | \n\n | \n | (1 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net periodic benefit cost | \n\n | $ | \n108 | \n\n | $ | \n149 | \n\n | $ | \n153 | \n\n | $ | \n5 | \n\n | $ | \n6 | \n\n | $ | \n10 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other Changes in Benefit Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Prior service benefit | \n\n | $ | \n(8 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Net actuarial loss (gain) | \n\n | \n | 516 | \n\n | \n | (518 | \n) | \n\n | 176 | \n\n | \n | 50 | \n\n | \n | (24 | \n) | \n\n | 11 | \n|
| \n Plan amendments | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (31 | \n) |
| \n Curtailment | \n\n | \n | (2 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Settlement | \n\n | \n | (2 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Amortization of prior service benefit | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 2 | \n\n | \n | 2 | \n\n | \n | — | \n|
| \n Amortization of net actuarial gain (loss) | \n\n | \n | (65 | \n) | \n\n | (107 | \n) | \n\n | (89 | \n) | \n\n | 3 | \n\n | \n | — | \n\n | \n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other changes recognized in other comprehensive income | \n\n | \n | 439 | \n\n | \n | (625 | \n) | \n\n | 87 | \n\n | \n | 55 | \n\n | \n | (22 | \n) | \n\n | (19 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other changes recognized in net periodic benefit cost and other comprehensive income | \n\n | $ | \n547 | \n\n | $ | \n(476 | \n) | \n$ | \n240 | \n\n | $ | \n60 | \n\n | $ | \n(16 | \n) | \n$ | \n(9 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
For the defined benefit pension plans, the estimated net actuarial loss that will be reclassified (amortized) from accumulated other comprehensive income into net income as part of net periodic benefit cost over the next fiscal year is $96 million, and the estimated prior service benefit to be amortized over the next fiscal year is $1 million. For the postretirement benefit plans, the estimated net actuarial loss that will be reclassified (amortized) from accumulated other comprehensive income into net income as part of net periodic benefit cost over the next fiscal year is less than $1 million, and the estimated prior service benefit to be amortized over the next fiscal year is $3 million.
\nAssumptions and Health Care Cost Trend Rate Sensitivity
\nThe following table summarizes assumptions used with regard to the Company's U.S. qualified domestic pension plan and the postretirement benefit plans.
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n (at and for the year ended December 31,) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Assumptions used to determine benefit obligations | \n\n | \n | \n | \n | \n | \n | |
| \n Discount rate | \n\n | \n | 4.10 | \n% | \n\n | 4.96 | \n% |
| \n Future compensation increase rate | \n\n | \n | 4.00 | \n% | \n\n | 4.00 | \n% |
| \n Assumptions used to determine net periodic benefit cost | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Discount rate | \n\n | \n | 4.96 | \n% | \n\n | 4.15 | \n% |
| \n Expected long-term rate of return on pension plans' assets | \n\n | \n | 7.50 | \n% | \n\n | 7.50 | \n% |
| \n Expected long-term rate of return on postretirement benefit plans' assets | \n\n | \n | 4.00 | \n% | \n\n | 4.00 | \n% |
| \n Assumed health care cost trend rates | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Following year: | \n\n | \n | \n | \n | \n | \n | |
| \n Medical (before age 65) | \n\n | \n | 7.00 | \n% | \n\n | 7.25 | \n% |
| \n Medical (age 65 and older) | \n\n | \n | 6.50 | \n% | \n\n | 6.75 | \n% |
| \n Rate to which the cost trend rate is assumed to decline (ultimate trend rate) | \n\n | \n | \n5.00 | \n\n% | \n\n | \n5.00 | \n\n% |
| \n Year that the rate reaches the ultimate trend rate: | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Medical (before age 65) | \n\n | \n | 2022 | \n\n | \n | 2022 | \n|
| \n Medical (age 65 and older) | \n\n | \n | 2020 | \n\n | \n | 2020 | \n
The discount rate assumption used to determine the benefit obligation was based on a yield-curve approach. Under this approach, a weighted average yield is determined from a hypothetical portfolio of high quality fixed maturity corporate bonds (rated Aa) available at the year-end valuation date for which the timing and amount of cash outflows correspond with the timing and amount of the estimated benefit payouts of the Company's benefit plan.
\nIn choosing the expected long-term rate of return on plan assets, the Company selected the rate that was set as the return objective by the Company's Benefit Plans Investment Committee, which had considered the historical returns of equity and fixed maturity markets in conjunction with prevailing economic and financial market conditions.
\nAs an indicator of sensitivity, increasing the assumed health care cost trend rate by 1% would have increased the accumulated postretirement benefit obligation by $29 million at December 31, 2014, and the aggregate of the service and interest cost components of net postretirement benefit expense by $1 million for the year ended December 31, 2014. Decreasing the assumed health care cost trend rate by 1% would have decreased the accumulated postretirement benefit obligation at December 31, 2014 by $24 million and the aggregate of the service and interest cost components of net postretirement benefit expense by $1 million for the year ended December 31, 2014.
\nThe assumptions made for the Company's foreign pension and postretirement benefit plans are not materially different from those of the Company's U.S. qualified domestic pension plan and the postretirement benefit plan.
\nPlan Assets
\nThe U.S. qualified domestic pension plan assets are invested for the exclusive benefit of the plan participants and beneficiaries and are intended, over time, to satisfy the benefit obligations under the plan. Risk tolerance is established through consideration of plan liabilities, plan funded status and corporate financial position. The asset mix guidelines have been established and are reviewed quarterly. These guidelines are intended to serve as tools to facilitate the investment of plan assets to maximize long-term total return and the ongoing oversight of the plan's investment performance. Investment risk is measured and monitored on an ongoing basis through daily and monthly investment portfolio reviews, annual liability measurements and periodic asset/liability studies.
\nThe Company's overall investment strategy for the U.S. qualified domestic pension plan is to achieve a mix of approximately 85% to 90% of investments for long-term growth and 10% to 15% for near-term benefit payments with a diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 55% to 65% equity securities and 20% to 40% fixed income securities, with the remainder allocated to short-term securities. Equity securities primarily include investments in large, medium and small-cap companies primarily located in the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, U.S. Treasury securities and debt securities issued by foreign governments. Other investments include two private equity funds held by the Company's qualified defined benefit pension plan. One private equity fund is focused on financial companies, and the other is focused on real estate-related investments.
\nAssets of the Company's foreign pension plans are not significant.
\nFair Value Measurement—Pension Plans and Other Postretirement Benefit Assets
\nFor a discussion of the methods employed by the Company to measure the fair value of invested assets, see note 4. The following discussion of fair value measurements applies exclusively to the Company's pension plans and other postretirement benefit assets.
\nFair value estimates for equity and bond mutual funds held by the pension plans reflect prices received from an external pricing service that are based on observable market transactions. These estimates are included in Level 1.
\nShort-term securities are carried at fair value which approximates cost plus accrued interest or amortized discount. The fair value or market value of these is periodically compared to this amortized cost and is based on significant observable inputs as determined by an external pricing service. Accordingly, the estimates of fair value for such short-term securities, other than U.S. Treasury securities and money market mutual funds, provided by an external pricing service are included in the amount disclosed in Level 2 of the hierarchy. The estimated fair value of U.S. Treasury securities and money market mutual funds is included in the amount disclosed in Level 1 as the estimates are based on unadjusted market prices.
\nFair Value Hierarchy—Pension Plans
\nThe following tables present the level within the fair value hierarchy at which the financial assets of the Company's pension plans are measured on a recurring basis at December 31, 2014 and 2013.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Obligations of states, municipalities and political subdivisions | \n\n | $ | \n19 | \n\n | $ | \n— | \n\n | $ | \n19 | \n\n | $ | \n— | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 17 | \n\n | \n | — | \n\n | \n | 17 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 14 | \n\n | \n | — | \n\n | \n | 14 | \n\n | \n | — | \n|
| \n All other corporate bonds | \n\n | \n | 474 | \n\n | \n | — | \n\n | \n | 474 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 524 | \n\n | \n | — | \n\n | \n | 524 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Mutual funds | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Equity mutual funds | \n\n | \n | 1,290 | \n\n | \n | 1,283 | \n\n | \n | 7 | \n\n | \n | — | \n|
| \n Bond mutual funds | \n\n | \n | 610 | \n\n | \n | 607 | \n\n | \n | 3 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total mutual funds | \n\n | \n | 1,900 | \n\n | \n | 1,890 | \n\n | \n | 10 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | 616 | \n\n | \n | 615 | \n\n | \n | 1 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments(1) | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash and short-term securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Money market mutual funds | \n\n | \n | 22 | \n\n | \n | 18 | \n\n | \n | 4 | \n\n | \n | — | \n|
| \n Other | \n\n | \n | 293 | \n\n | \n | 29 | \n\n | \n | 264 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total cash and short-term securities | \n\n | \n | 315 | \n\n | \n | 47 | \n\n | \n | 268 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n3,357 | \n\n | $ | \n2,552 | \n\n | $ | \n803 | \n\n | $ | \n2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Obligations of states, municipalities and political subdivisions | \n\n | $ | \n18 | \n\n | $ | \n— | \n\n | $ | \n18 | \n\n | $ | \n— | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 14 | \n\n | \n | — | \n\n | \n | 14 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 11 | \n\n | \n | — | \n\n | \n | 11 | \n\n | \n | — | \n|
| \n All other corporate bonds | \n\n | \n | 447 | \n\n | \n | — | \n\n | \n | 447 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 490 | \n\n | \n | — | \n\n | \n | 490 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Mutual funds | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Equity mutual funds | \n\n | \n | 1,355 | \n\n | \n | 1,355 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Bond mutual funds | \n\n | \n | 446 | \n\n | \n | 446 | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total mutual funds | \n\n | \n | 1,801 | \n\n | \n | 1,801 | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | 571 | \n\n | \n | 570 | \n\n | \n | 1 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments(1) | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash and short-term securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities | \n\n | \n | 122 | \n\n | \n | 122 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Money market mutual funds | \n\n | \n | 19 | \n\n | \n | 19 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Other | \n\n | \n | 196 | \n\n | \n | 31 | \n\n | \n | 165 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total cash and short-term securities | \n\n | \n | 337 | \n\n | \n | 172 | \n\n | \n | 165 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n3,203 | \n\n | $ | \n2,543 | \n\n | $ | \n656 | \n\n | $ | \n4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The following table presents the changes in the Level 3 fair value category for the years ended December 31, 2014 and 2013.
\n| \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Other \nInvestments | \n|||||
|---|---|---|---|---|---|---|---|
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
| \n Balance at beginning of year | \n\n | $ | \n4 | \n\n | $ | \n6 | \n|
| \n Actual return on plan assets: | \n\n | \n | \n | \n | \n | \n | |
| \n Relating to assets still held | \n\n | \n | — | \n\n | \n | 1 | \n|
| \n Relating to assets sold during the year | \n\n | \n | — | \n\n | \n | — | \n|
| \n Purchases, sales, settlements and maturities: | \n\n | \n | \n | \n | \n | \n | |
| \n Purchases | \n\n | \n | — | \n\n | \n | — | \n|
| \n Sales | \n\n | \n | (2 | \n) | \n\n | (3 | \n) |
| \n Settlements/maturities | \n\n | \n | — | \n\n | \n | — | \n|
| \n Gross transfers into Level 3 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Gross transfers out of Level 3 | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at end of year | \n\n | $ | \n2 | \n\n | $ | \n4 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
Other Postretirement Benefit Plan
\nThe Company's overall investment strategy is to achieve a mix of approximately 35% to 65% of investments for long-term growth and 35% to 60% for near-term insurance payments with a wide diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 25% to 75% fixed income securities, with the remainder allocated to short-term securities. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities and U.S. Treasuries.
\nFair Value—Other Postretirement Benefit Plan
\nThe Company's other postretirement benefit plan had financial assets of $16 million and $17 million at December 31, 2014 and 2013, respectively, which are measured at fair value on a recurring basis. The assets are primarily corporate bonds and short-term securities, and categorized as level 2 in the fair value hierarchy.
\nEstimated Future Benefit Payments
\nThe following table presents the estimated benefits expected to be paid by the Company's pension and postretirement benefit plans for the next ten years (reflecting estimated future employee service).
\n| \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Benefits Expected to be Paid | \n|||||
|---|---|---|---|---|---|---|---|
| \n (in millions) | \n\n | Pension Plans | \n\n | Postretirement \nBenefit Plans | \n|||
| \n 2015 | \n\n | $ | \n205 | \n\n | $ | \n15 | \n|
| \n 2016 | \n\n | \n | 211 | \n\n | \n | 15 | \n|
| \n 2017 | \n\n | \n | 215 | \n\n | \n | 15 | \n|
| \n 2018 | \n\n | \n | 224 | \n\n | \n | 15 | \n|
| \n 2019 | \n\n | \n | 234 | \n\n | \n | 15 | \n|
| \n 2020 through 2024 | \n\n | \n | 1,203 | \n\n | \n | 76 | \n
Savings Plan
\nThe Company has a savings plan, The Travelers 401(k) Savings Plan (the Savings Plan), in which substantially all U.S. domestic Company employees are eligible to participate. Under the Savings Plan, the Company matches employee contributions up to 5% of eligible pay, with a maximum annual match of $6,000 which becomes 100% vested after three years of service. The Company's matching contribution is made in cash and invested according to the employee's current investment elections and can be reinvested into other investment options in accordance with the terms of the plan. The Company's non-U.S. employees participate in separate savings plans. The total expense related to all of the savings plans was $103 million, $100 million and $92 million for the years ended December 31, 2014, 2013 and 2012, respectively.
\nAll common shares held by the Savings Plan are considered outstanding for basic and diluted EPS computations and dividends paid on all shares are charged to retained earnings.
\n15. LEASES
\nRent expense was $215 million, $196 million and $192 million in 2014, 2013 and 2012, respectively.
\nFuture minimum annual rental payments under noncancellable operating leases for 2015, 2016, 2017, 2018 and 2019 are $160 million, $144 million, $118 million, $80 million and $61 million, respectively, and $133 million for 2020 and thereafter. Future sublease rental income aggregating approximately $6 million will partially offset these commitments.
\n16. CONTINGENCIES, COMMITMENTS AND GUARANTEES
\nContingencies
\nThe major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or to which any of the Company's properties is subject are described below.
\nAsbestos and Environmental Claims and Litigation
\nIn the ordinary course of its insurance business, the Company has received and continues to receive claims for insurance arising under policies issued by the Company asserting alleged injuries and damages from asbestos- and environmental-related exposures that are the subject of related coverage litigation. The Company is defending asbestos- and environmental-related litigation vigorously and believes that it has meritorious defenses; however, the outcomes of these disputes are uncertain. In this regard, the Company employs dedicated specialists and aggressive resolution strategies to manage asbestos and environmental loss exposure, including settling litigation under appropriate circumstances. Currently, it is not possible to predict legal outcomes and their impact on the future development of claims and litigation relating to asbestos and environmental claims. Any such development will be affected by future court decisions and interpretations, as well as changes in applicable legislation. Because of these uncertainties, additional liabilities may arise for amounts in excess of the Company's current reserves. In addition, the Company's estimate of ultimate claims and claim adjustment expenses may change. These additional liabilities or increases in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company's results of operations in future periods.
\nSettlement of Asbestos Direct Action Litigation
\nIn October 2001 and April 2002, two purported class action suits (Wise v. Travelers and Meninger v. Travelers) were filed against Travelers Property Casualty Corp. (TPC), a wholly-owned subsidiary of the Company, and other insurers (not including The St. Paul Companies, Inc. (SPC), which was acquired by TPC in 2004) in state court in West Virginia. These and other cases subsequently filed in West Virginia were consolidated into a single proceeding in the Circuit Court of Kanawha County, West Virginia. The plaintiffs alleged that the insurer defendants engaged in unfair trade practices in violation of state statutes by inappropriately handling and settling asbestos claims. The plaintiffs sought to reopen large numbers of settled asbestos claims and to impose liability for damages, including punitive damages, directly on insurers. Similar lawsuits alleging inappropriate handling and settling of asbestos claims were filed in Massachusetts and Hawaii state courts. These suits are collectively referred to as the Statutory and Hawaii Actions.
\nIn March 2002, the plaintiffs in consolidated asbestos actions pending before a mass tort panel of judges in West Virginia state court amended their complaint to include TPC as a defendant, alleging that TPC and other insurers breached alleged duties to certain users of asbestos products. The plaintiffs sought damages, including punitive damages. Lawsuits seeking similar relief and raising similar allegations, primarily violations of purported common law duties to third parties, were also asserted in various state courts against TPC and SPC. The claims asserted in these suits are collectively referred to as the Common Law Claims.
\nIn response to these claims, TPC moved to enjoin the Statutory Actions and the Common Law Claims in the federal bankruptcy court that had presided over the bankruptcy of TPC's former policyholder Johns-Manville Corporation on the ground that the suits violated injunctions entered in connection with confirmation of the Johns-Manville bankruptcy (the 1986 Orders). The bankruptcy court issued a temporary restraining order and referred the parties to mediation. In November 2003, the parties reached a settlement of the Statutory and Hawaii Actions, which included a lump-sum payment of up to $412 million by TPC, subject to a number of significant contingencies. In May 2004, the parties reached a settlement resolving substantially all pending and similar future Common Law Claims against TPC, which included a payment of up to $90 million by TPC, subject to similar contingencies.
\nAfter the parties reached the settlements of the Statutory and Hawaiian Actions and the Common Law Claims (collectively \"the Settlements\"), numerous proceedings took place in the bankruptcy, district and appellate courts concerning the approval of the Settlements and their effect on other parties. As a result of certain rulings in those proceedings, TPC concluded that it was not obligated to go forward with the Settlements because certain conditions precedent to the Settlements had not been met.
\nThe plaintiffs in the Statutory and Hawaii Actions and the Common Law Claims actions thereafter filed motions in the bankruptcy court to compel TPC to make payment under the settlement agreements, arguing that all conditions precedent to the Settlements had been met. On December 16, 2010, the bankruptcy court granted the plaintiffs' motions and ruled that TPC was required to fund the Settlements. The court entered judgment against TPC on January 20, 2011 in accordance with this ruling and ordered TPC to pay the Settlements plus prejudgment interest. The bankruptcy court's judgment was reversed by the district court on March 1, 2012, the district court having found that the conditions to the Settlements had not been met. The plaintiffs appealed the district court's March 1, 2012 decision to the Second Circuit Court of Appeals. On July 22, 2014, the Second Circuit issued an opinion reversing the district court's decision and reinstating the bankruptcy court's January 20, 2011 order which ordered TPC to pay the Settlements plus prejudgment interest. On August 5, 2014, TPC filed a Petition for Rehearing and Rehearing En Banc with the Second Circuit, which was denied on January 5, 2015. At December 31, 2014, the amount of the Company's payment was recognized in the Company's consolidated financial statements in the amount of $579 million, comprising the $502 million settlement amount described above, plus pre-judgment and post-judgment interest totaling $77 million. On January 15, 2015, the bankruptcy court entered an order directing TPC to pay $579 million to the plaintiffs, and the Company has made that payment.
Other Proceedings Not Arising Under Insurance Contracts or Reinsurance Agreements
\nThe Company is involved in other lawsuits, including lawsuits alleging extra-contractual damages relating to insurance contracts or reinsurance agreements, that do not arise under insurance contracts or reinsurance agreements. The legal costs associated with such lawsuits are expensed in the period in which the costs are incurred. Based upon currently available information, the Company does not believe it is reasonably possible that any such lawsuit or related lawsuits would be material to the Company's results of operations or would have a material adverse effect on the Company's financial position or liquidity.
\nGain Contingencies
\nOn August 17, 2010, in a reinsurance dispute in New York state court captioned United States Fidelity & Guaranty Company v. American Re-Insurance Company, et al., the trial court granted summary judgment for United States Fidelity and Guaranty Company (USF&G), a subsidiary of the Company, and denied summary judgment for American Re-Insurance Company, a subsidiary of Munich Re (American Re), and three other reinsurers. By order dated October 22, 2010, the trial court corrected certain clerical errors and made certain clarifications to the August 17, 2010 order. On October 25, 2010, judgment was entered against American Re and the other three insurers, awarding USF&G $420 million, comprising $251 million ceded under the terms of the disputed reinsurance contract plus interest of 9% amounting to $169 million as of that date. The judgment, including the award of interest, was appealed by the reinsurers to the New York Supreme Court, Appellate Division, First Department. On January 24, 2012, the Appellate Division affirmed the judgment. On January 30, 2012, the reinsurers filed a motion with the Appellate Division seeking permission to appeal its decision to the New York Court of Appeals, and on March 12, 2012, the Appellate Division granted the reinsurers' motion. On February 7, 2013, the Court of Appeals issued an opinion that largely affirmed the summary judgment in USF&G's favor, while modifying in part the summary judgment with respect to two discrete issues and remanding the case to the trial court for determination of those issues. The Court set a trial date for August 3, 2015. The Company believes it has a meritorious position on each of these issues and intends to pursue its claim vigorously. On May 2, 2013, the Court of Appeals denied a motion by reinsurers to reconsider the February 7, 2013 opinion. In November 2013, the Company entered into a settlement agreement with one of the reinsurers. At December 31, 2014, the claim totaled $488 million, comprising the $238 million of reinsurance recoverable plus interest amounting to $250 million as of that date. Interest will continue to accrue at an annual rate of 9% until the claim is paid. The $238 million of reinsurance recoverable owed to USF&G under the terms of the disputed reinsurance contract has been reported as part of reinsurance recoverables in the Company's consolidated balance sheet. The interest that would be owed as part of any judgment ultimately entered in favor of USF&G is treated for accounting purposes as a gain contingency in accordance with FASB Topic 450, Contingencies, and accordingly has not been recognized in the Company's consolidated financial statements.
\nResolution of Gain Contingency
\nThe Travelers Indemnity Company was one of the Settlement Class plaintiffs and a class member in a class action lawsuit captioned Safeco Insurance Company of America, et al. v American International Group, Inc. et al. (U.S. District Court, N.D. Ill.) in which the defendants were alleged to have engaged in the under-reporting of workers' compensation premium in connection with a workers' compensation reinsurance pool in which several subsidiaries of the Company participate. In February 2012, the district court issued a written opinion approving the class settlement pursuant to which the defendants agreed to pay $450 million to the class. In March 2012, three parties who objected to the settlement appealed the court's orders approving the settlement to the U.S. Court of Appeals for the Seventh Circuit. In January 2013, all parties, including the three parties who had objected to the settlement, filed a Stipulation of Dismissal indicating that there were no longer any objections to the settlement, and in March 2013, the Seventh Circuit dismissed the appeals. In April 2013, the Seventh Circuit issued its mandate returning the case to the district court for administration of the settlement. In June and November 2013, the Company received two payments totaling approximately $93 million, comprising its allocation from the settlement fund. The combination of the payments received in June and November 2013 totaling $93 million, less approximately $2 million remitted to another insurer, resulted in a net gain of $91 million that was reported in \"Other revenues\" in the Company's consolidated statement of income for the year ended December 31, 2013.
Other Commitments and Guarantees
\nCommitments
\nInvestment Commitments—The Company has unfunded commitments to private equity limited partnerships and real estate partnerships in which it invests. These commitments totaled $1.63 billion and $1.52 billion at December 31, 2014 and 2013, respectively.
\nGuarantees
\nIn the ordinary course of selling businesses to third parties, the Company has agreed to indemnify purchasers for losses arising out of breaches of representations and warranties with respect to the businesses being sold, covenants and obligations of the Company and/or its subsidiaries following the closing and, in certain cases, obligations arising from certain liabilities, adverse reserve development and imposition of additional taxes due to either a change in the tax law or an adverse interpretation of the tax law. Such indemnification provisions generally are applicable from the closing date to the expiration of the relevant statutes of limitations, although, in some cases, there may be agreed upon term limitations or no term limitations. Certain of these contingent obligations are subject to deductibles which have to be incurred by the obligee before the Company is obligated to make payments. The maximum amount of the Company's contingent obligation for indemnifications related to the sale of businesses that are quantifiable was $462 million at December 31, 2014, of which $8 million was recognized on the balance sheet at that date.
\nThe Company also has contingent obligations for guarantees related to certain investments, third-party loans related to certain investments, certain insurance policy obligations of former insurance subsidiaries, and various other indemnifications. The Company also provides standard indemnifications to service providers in the normal course of business. The indemnification clauses are often standard contractual terms. Certain of these guarantees and indemnifications have no stated or notional amounts or limitation to the maximum potential future payments, and, accordingly, the Company is unable to develop an estimate of the maximum potential payments for such arrangements. The maximum amount of the Company's obligation for guarantees of certain investments and third-party loans related to certain investments that are quantifiable was $150 million at December 31, 2014, approximately $75 million of which is indemnified by a third party. The maximum amount of the Company's obligation related to the guarantee of certain insurance policy obligations of a former insurance subsidiary was $480 million at December 31, 2014, all of which is indemnified by a third party.
\n17. NONCASH INVESTING AND FINANCING ACTIVITIES
\nThere were no material noncash financing or investing activities during the years ended December 31, 2014, 2013 and 2012.
\n18. CONSOLIDATING FINANCIAL STATEMENTS OF THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
\nThe following consolidating financial statements of the Company have been prepared pursuant to Rule 3-10 of Regulation S-X. These consolidating financial statements have been prepared from the Company's financial information on the same basis of accounting as the consolidated financial statements. The Travelers Companies, Inc. has fully and unconditionally guaranteed certain debt obligations of TPC, which totaled $700 million at December 31, 2014.
\nPrior to the merger of TPC and SPC in 2004, TPC fully and unconditionally guaranteed the payment of all principal, premiums, if any, and interest on certain debt obligations of its wholly-owned subsidiary, Travelers Insurance Group Holdings, Inc. (TIGHI). Concurrent with the merger, The Travelers Companies, Inc. fully and unconditionally assumed such guarantee obligations of TPC. TPC is deemed to have no assets or operations independent of TIGHI. Consolidating financial information for TIGHI has not been presented herein because such financial information would be substantially the same as the financial information provided for TPC.
\nCONSOLIDATING STATEMENT OF INCOME (Unaudited)
\nFor the year ended December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenues | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n16,097 | \n\n | $ | \n7,616 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n23,713 | \n|
| \n Net investment income | \n\n | \n | 1,874 | \n\n | \n | 907 | \n\n | \n | 6 | \n\n | \n | — | \n\n | \n | 2,787 | \n|
| \n Fee income | \n\n | \n | 436 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 438 | \n|
| \n Net realized investment gains(1) | \n\n | \n | 12 | \n\n | \n | 64 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | 79 | \n|
| \n Other revenues | \n\n | \n | 125 | \n\n | \n | 20 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 145 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | \n | 18,544 | \n\n | \n | 8,609 | \n\n | \n | 9 | \n\n | \n | — | \n\n | \n | 27,162 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and expenses | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expenses | \n\n | \n | 9,274 | \n\n | \n | 4,596 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 13,870 | \n|
| \n Amortization of deferred acquisition costs | \n\n | \n | 2,604 | \n\n | \n | 1,278 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,882 | \n|
| \n General and administrative expenses | \n\n | \n | 2,743 | \n\n | \n | 1,194 | \n\n | \n | 15 | \n\n | \n | — | \n\n | \n | 3,952 | \n|
| \n Interest expense | \n\n | \n | 48 | \n\n | \n | — | \n\n | \n | 321 | \n\n | \n | — | \n\n | \n | 369 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total claims and expenses | \n\n | \n | 14,669 | \n\n | \n | 7,068 | \n\n | \n | 336 | \n\n | \n | — | \n\n | \n | 22,073 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) before income taxes | \n\n | \n | 3,875 | \n\n | \n | 1,541 | \n\n | \n | (327 | \n) | \n\n | — | \n\n | \n | 5,089 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 1,095 | \n\n | \n | 417 | \n\n | \n | (115 | \n) | \n\n | — | \n\n | \n | 1,397 | \n|
| \n Net income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,904 | \n\n | \n | (3,904 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n2,780 | \n\n | $ | \n1,124 | \n\n | $ | \n3,692 | \n\n | $ | \n(3,904 | \n) | \n$ | \n3,692 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total OTTI losses | \n\n | $ | \n(16 | \n) | \n$ | \n(6 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(22 | \n) |
| \n OTTI losses recognized in net realized investment gains | \n\n | $ | \n(19 | \n) | \n$ | \n(7 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(26 | \n) |
| \n OTTI gains recognized in OCI | \n\n | $ | \n3 | \n\n | $ | \n1 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n4 | \n
CONSOLIDATING STATEMENT OF INCOME (Unaudited)
\nFor the year ended December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenues | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n15,262 | \n\n | $ | \n7,375 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n22,637 | \n|
| \n Net investment income | \n\n | \n | 1,830 | \n\n | \n | 879 | \n\n | \n | 7 | \n\n | \n | — | \n\n | \n | 2,716 | \n|
| \n Fee income | \n\n | \n | 393 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 395 | \n|
| \n Net realized investment gains(1) | \n\n | \n | 126 | \n\n | \n | 38 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 166 | \n|
| \n Other revenues | \n\n | \n | 225 | \n\n | \n | 52 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 277 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | \n | 17,836 | \n\n | \n | 8,346 | \n\n | \n | 9 | \n\n | \n | — | \n\n | \n | 26,191 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and expenses | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expenses | \n\n | \n | 8,817 | \n\n | \n | 4,490 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 13,307 | \n|
| \n Amortization of deferred acquisition costs | \n\n | \n | 2,571 | \n\n | \n | 1,250 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,821 | \n|
| \n General and administrative expenses | \n\n | \n | 2,570 | \n\n | \n | 1,174 | \n\n | \n | 13 | \n\n | \n | — | \n\n | \n | 3,757 | \n|
| \n Interest expense | \n\n | \n | 53 | \n\n | \n | — | \n\n | \n | 308 | \n\n | \n | — | \n\n | \n | 361 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total claims and expenses | \n\n | \n | 14,011 | \n\n | \n | 6,914 | \n\n | \n | 321 | \n\n | \n | — | \n\n | \n | 21,246 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) before income taxes | \n\n | \n | 3,825 | \n\n | \n | 1,432 | \n\n | \n | (312 | \n) | \n\n | — | \n\n | \n | 4,945 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 1,054 | \n\n | \n | 388 | \n\n | \n | (170 | \n) | \n\n | — | \n\n | \n | 1,272 | \n|
| \n Net income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,815 | \n\n | \n | (3,815 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n2,771 | \n\n | $ | \n1,044 | \n\n | $ | \n3,673 | \n\n | $ | \n(3,815 | \n) | \n$ | \n3,673 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total OTTI losses | \n\n | $ | \n(8 | \n) | \n$ | \n(2 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(10 | \n) |
| \n OTTI losses recognized in net realized investment gains | \n\n | $ | \n(10 | \n) | \n$ | \n(5 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(15 | \n) |
| \n OTTI gains recognized in OCI | \n\n | $ | \n2 | \n\n | $ | \n3 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n5 | \n
CONSOLIDATING STATEMENT OF INCOME (Unaudited)
\nFor the year ended December 31, 2012
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenues | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n15,158 | \n\n | $ | \n7,199 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n22,357 | \n|
| \n Net investment income | \n\n | \n | 1,912 | \n\n | \n | 968 | \n\n | \n | 9 | \n\n | \n | — | \n\n | \n | 2,889 | \n|
| \n Fee income | \n\n | \n | 321 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 323 | \n|
| \n Net realized investment gains(1) | \n\n | \n | 29 | \n\n | \n | 22 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 51 | \n|
| \n Other revenues | \n\n | \n | 87 | \n\n | \n | 34 | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | 120 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | \n | 17,507 | \n\n | \n | 8,225 | \n\n | \n | 8 | \n\n | \n | — | \n\n | \n | 25,740 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and expenses | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expenses | \n\n | \n | 9,908 | \n\n | \n | 4,768 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 14,676 | \n|
| \n Amortization of deferred acquisition costs | \n\n | \n | 2,636 | \n\n | \n | 1,274 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,910 | \n|
| \n General and administrative expenses | \n\n | \n | 2,445 | \n\n | \n | 1,161 | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 3,610 | \n|
| \n Interest expense | \n\n | \n | 73 | \n\n | \n | — | \n\n | \n | 305 | \n\n | \n | — | \n\n | \n | 378 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total claims and expenses | \n\n | \n | 15,062 | \n\n | \n | 7,203 | \n\n | \n | 309 | \n\n | \n | — | \n\n | \n | 22,574 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) before income taxes | \n\n | \n | 2,445 | \n\n | \n | 1,022 | \n\n | \n | (301 | \n) | \n\n | — | \n\n | \n | 3,166 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 588 | \n\n | \n | 224 | \n\n | \n | (119 | \n) | \n\n | — | \n\n | \n | 693 | \n|
| \n Net income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 2,655 | \n\n | \n | (2,655 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n1,857 | \n\n | $ | \n798 | \n\n | $ | \n2,473 | \n\n | $ | \n(2,655 | \n) | \n$ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total OTTI gains | \n\n | $ | \n18 | \n\n | $ | \n9 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n27 | \n|
| \n OTTI losses recognized in net realized investment gains | \n\n | $ | \n(9 | \n) | \n$ | \n(6 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(15 | \n) |
| \n OTTI gains recognized in OCI | \n\n | $ | \n27 | \n\n | $ | \n15 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n42 | \n
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
\nFor the year ended December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Net income | \n\n | $ | \n2,780 | \n\n | $ | \n1,124 | \n\n | $ | \n3,692 | \n\n | $ | \n(3,904 | \n) | \n$ | \n3,692 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | \n | 681 | \n\n | \n | 289 | \n\n | \n | 6 | \n\n | \n | — | \n\n | \n | 976 | \n|
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 9 | \n\n | \n | (7 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | 2 | \n|
| \n Net changes in benefit plan assets and obligations | \n\n | \n | (15 | \n) | \n\n | (8 | \n) | \n\n | (471 | \n) | \n\n | — | \n\n | \n | (494 | \n) |
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (173 | \n) | \n\n | (116 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (289 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss) before income taxes and other comprehensive income of subsidiaries | \n\n | \n | 502 | \n\n | \n | 158 | \n\n | \n | (465 | \n) | \n\n | — | \n\n | \n | 195 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 207 | \n\n | \n | 81 | \n\n | \n | (163 | \n) | \n\n | — | \n\n | \n | 125 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries | \n\n | \n | 295 | \n\n | \n | 77 | \n\n | \n | (302 | \n) | \n\n | — | \n\n | \n | 70 | \n|
| \n Other comprehensive income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 372 | \n\n | \n | (372 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income | \n\n | \n | 295 | \n\n | \n | 77 | \n\n | \n | 70 | \n\n | \n | (372 | \n) | \n\n | 70 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Comprehensive income | \n\n | $ | \n3,075 | \n\n | $ | \n1,201 | \n\n | $ | \n3,762 | \n\n | $ | \n(4,276 | \n) | \n$ | \n3,762 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
\nFor the year ended December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Net income | \n\n | $ | \n2,771 | \n\n | $ | \n1,044 | \n\n | $ | \n3,673 | \n\n | $ | \n(3,815 | \n) | \n$ | \n3,673 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | \n | (1,982 | \n) | \n\n | (771 | \n) | \n\n | 19 | \n\n | \n | — | \n\n | \n | (2,734 | \n) |
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 4 | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | 3 | \n|
| \n Net changes in benefit plan assets and obligations | \n\n | \n | 12 | \n\n | \n | 19 | \n\n | \n | 616 | \n\n | \n | — | \n\n | \n | 647 | \n|
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (92 | \n) | \n\n | (20 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (112 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss) before income taxes and other comprehensive loss of subsidiaries | \n\n | \n | (2,058 | \n) | \n\n | (773 | \n) | \n\n | 635 | \n\n | \n | — | \n\n | \n | (2,196 | \n) |
| \n Income tax expense (benefit) | \n\n | \n | (719 | \n) | \n\n | (273 | \n) | \n\n | 222 | \n\n | \n | — | \n\n | \n | (770 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss), net of taxes, before other comprehensive loss of subsidiaries | \n\n | \n | (1,339 | \n) | \n\n | (500 | \n) | \n\n | 413 | \n\n | \n | — | \n\n | \n | (1,426 | \n) |
| \n Other comprehensive loss of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (1,839 | \n) | \n\n | 1,839 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive loss | \n\n | \n | (1,339 | \n) | \n\n | (500 | \n) | \n\n | (1,426 | \n) | \n\n | 1,839 | \n\n | \n | (1,426 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Comprehensive income | \n\n | $ | \n1,432 | \n\n | $ | \n544 | \n\n | $ | \n2,247 | \n\n | $ | \n(1,976 | \n) | \n$ | \n2,247 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
\nFor the year ended December 31, 2012
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Net income | \n\n | $ | \n1,857 | \n\n | $ | \n798 | \n\n | $ | \n2,473 | \n\n | $ | \n(2,655 | \n) | \n$ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | \n | 248 | \n\n | \n | 23 | \n\n | \n | 10 | \n\n | \n | — | \n\n | \n | 281 | \n|
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 57 | \n\n | \n | 24 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 81 | \n|
| \n Net changes in benefit plan assets and obligations | \n\n | \n | (6 | \n) | \n\n | (5 | \n) | \n\n | (58 | \n) | \n\n | — | \n\n | \n | (69 | \n) |
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (19 | \n) | \n\n | 62 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 43 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss) before income taxes and other comprehensive income of subsidiaries | \n\n | \n | 280 | \n\n | \n | 104 | \n\n | \n | (48 | \n) | \n\n | — | \n\n | \n | 336 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 101 | \n\n | \n | 21 | \n\n | \n | (17 | \n) | \n\n | — | \n\n | \n | 105 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries | \n\n | \n | 179 | \n\n | \n | 83 | \n\n | \n | (31 | \n) | \n\n | — | \n\n | \n | 231 | \n|
| \n Other comprehensive income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 262 | \n\n | \n | (262 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income | \n\n | \n | 179 | \n\n | \n | 83 | \n\n | \n | 231 | \n\n | \n | (262 | \n) | \n\n | 231 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Comprehensive income | \n\n | $ | \n2,036 | \n\n | $ | \n881 | \n\n | $ | \n2,704 | \n\n | $ | \n(2,917 | \n) | \n$ | \n2,704 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING BALANCE SHEET (Unaudited)
\nAt December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Assets | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities, available for sale, at fair value (amortized cost $60,801) | \n\n | $ | \n43,401 | \n\n | $ | \n20,043 | \n\n | $ | \n30 | \n\n | $ | \n— | \n\n | $ | \n63,474 | \n|
| \n Equity securities, available for sale, at fair value (cost $579) | \n\n | \n | 236 | \n\n | \n | 522 | \n\n | \n | 141 | \n\n | \n | — | \n\n | \n | 899 | \n|
| \n Real estate investments | \n\n | \n | 56 | \n\n | \n | 882 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 938 | \n|
| \n Short-term securities | \n\n | \n | 2,128 | \n\n | \n | 706 | \n\n | \n | 1,530 | \n\n | \n | — | \n\n | \n | 4,364 | \n|
| \n Other investments | \n\n | \n | 2,630 | \n\n | \n | 955 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 3,586 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total investments | \n\n | \n | 48,451 | \n\n | \n | 23,108 | \n\n | \n | 1,702 | \n\n | \n | — | \n\n | \n | 73,261 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash | \n\n | \n | 221 | \n\n | \n | 151 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 374 | \n|
| \n Investment income accrued | \n\n | \n | 468 | \n\n | \n | 215 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 685 | \n|
| \n Premiums receivable | \n\n | \n | 4,241 | \n\n | \n | 2,057 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 6,298 | \n|
| \n Reinsurance recoverables | \n\n | \n | 6,156 | \n\n | \n | 3,104 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 9,260 | \n|
| \n Ceded unearned premiums | \n\n | \n | 608 | \n\n | \n | 70 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 678 | \n|
| \n Deferred acquisition costs | \n\n | \n | 1,622 | \n\n | \n | 213 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 1,835 | \n|
| \n Deferred taxes | \n\n | \n | 23 | \n\n | \n | (40 | \n) | \n\n | 50 | \n\n | \n | — | \n\n | \n | 33 | \n|
| \n Contractholder receivables | \n\n | \n | 3,306 | \n\n | \n | 1,056 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,362 | \n|
| \n Goodwill | \n\n | \n | 2,602 | \n\n | \n | 1,009 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,611 | \n|
| \n Other intangible assets | \n\n | \n | 216 | \n\n | \n | 88 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 304 | \n|
| \n Investment in subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 28,821 | \n\n | \n | (28,821 | \n) | \n\n | — | \n|
| \n Other assets | \n\n | \n | 1,931 | \n\n | \n | 429 | \n\n | \n | 17 | \n\n | \n | — | \n\n | \n | 2,377 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total assets | \n\n | $ | \n69,845 | \n\n | $ | \n31,460 | \n\n | $ | \n30,594 | \n\n | $ | \n(28,821 | \n) | \n$ | \n103,078 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Liabilities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expense reserves | \n\n | $ | \n32,999 | \n\n | $ | \n16,851 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n49,850 | \n|
| \n Unearned premium reserves | \n\n | \n | 8,201 | \n\n | \n | 3,638 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 11,839 | \n|
| \n Contractholder payables | \n\n | \n | 3,306 | \n\n | \n | 1,056 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,362 | \n|
| \n Payables for reinsurance premiums | \n\n | \n | 194 | \n\n | \n | 142 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 336 | \n|
| \n Debt | \n\n | \n | 692 | \n\n | \n | — | \n\n | \n | 5,657 | \n\n | \n | — | \n\n | \n | 6,349 | \n|
| \n Other liabilities | \n\n | \n | 4,084 | \n\n | \n | 1,308 | \n\n | \n | 114 | \n\n | \n | — | \n\n | \n | 5,506 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities | \n\n | \n | 49,476 | \n\n | \n | 22,995 | \n\n | \n | 5,771 | \n\n | \n | — | \n\n | \n | 78,242 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Shareholders' equity | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Common stock (1,750.0 shares authorized; 322.2 shares issued and outstanding) | \n\n | \n | — | \n\n | \n | 390 | \n\n | \n | 21,843 | \n\n | \n | (390 | \n) | \n\n | 21,843 | \n|
| \n Additional paid-in capital | \n\n | \n | 11,634 | \n\n | \n | 6,502 | \n\n | \n | — | \n\n | \n | (18,136 | \n) | \n\n | — | \n|
| \n Retained earnings | \n\n | \n | 7,673 | \n\n | \n | 1,073 | \n\n | \n | 27,238 | \n\n | \n | (8,733 | \n) | \n\n | 27,251 | \n|
| \n Accumulated other comprehensive income | \n\n | \n | 1,062 | \n\n | \n | 500 | \n\n | \n | 880 | \n\n | \n | (1,562 | \n) | \n\n | 880 | \n|
| \n Treasury stock, at cost (437.3 shares) | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (25,138 | \n) | \n\n | — | \n\n | \n | (25,138 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total shareholders' equity | \n\n | \n | 20,369 | \n\n | \n | 8,465 | \n\n | \n | 24,823 | \n\n | \n | (28,821 | \n) | \n\n | 24,836 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities and shareholders' equity | \n\n | $ | \n69,845 | \n\n | $ | \n31,460 | \n\n | $ | \n30,594 | \n\n | $ | \n(28,821 | \n) | \n$ | \n103,078 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING BALANCE SHEET (Unaudited)
\nAt December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Assets | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities, available for sale, at fair value (amortized cost $62,196) | \n\n | $ | \n43,720 | \n\n | $ | \n20,199 | \n\n | $ | \n37 | \n\n | $ | \n— | \n\n | $ | \n63,956 | \n|
| \n Equity securities, available for sale, at fair value (cost $686) | \n\n | \n | 329 | \n\n | \n | 484 | \n\n | \n | 130 | \n\n | \n | — | \n\n | \n | 943 | \n|
| \n Real estate investments | \n\n | \n | 33 | \n\n | \n | 905 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 938 | \n|
| \n Short-term securities | \n\n | \n | 1,867 | \n\n | \n | 492 | \n\n | \n | 1,523 | \n\n | \n | — | \n\n | \n | 3,882 | \n|
| \n Other investments | \n\n | \n | 2,450 | \n\n | \n | 990 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 3,441 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total investments | \n\n | \n | 48,399 | \n\n | \n | 23,070 | \n\n | \n | 1,691 | \n\n | \n | — | \n\n | \n | 73,160 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash | \n\n | \n | 137 | \n\n | \n | 154 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | 294 | \n|
| \n Investment income accrued | \n\n | \n | 499 | \n\n | \n | 231 | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 734 | \n|
| \n Premiums receivable | \n\n | \n | 4,124 | \n\n | \n | 2,001 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 6,125 | \n|
| \n Reinsurance recoverables | \n\n | \n | 6,292 | \n\n | \n | 3,421 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 9,713 | \n|
| \n Ceded unearned premiums | \n\n | \n | 712 | \n\n | \n | 89 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 801 | \n|
| \n Deferred acquisition costs | \n\n | \n | 1,570 | \n\n | \n | 234 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 1,804 | \n|
| \n Deferred taxes | \n\n | \n | 279 | \n\n | \n | 86 | \n\n | \n | (62 | \n) | \n\n | — | \n\n | \n | 303 | \n|
| \n Contractholder receivables | \n\n | \n | 3,179 | \n\n | \n | 1,149 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,328 | \n|
| \n Goodwill | \n\n | \n | 2,619 | \n\n | \n | 1,015 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,634 | \n|
| \n Other intangible assets | \n\n | \n | 250 | \n\n | \n | 101 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 351 | \n|
| \n Investment in subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 28,616 | \n\n | \n | (28,616 | \n) | \n\n | — | \n|
| \n Other assets | \n\n | \n | 2,010 | \n\n | \n | 357 | \n\n | \n | 198 | \n\n | \n | — | \n\n | \n | 2,565 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total assets | \n\n | $ | \n70,070 | \n\n | $ | \n31,908 | \n\n | $ | \n30,450 | \n\n | $ | \n(28,616 | \n) | \n$ | \n103,812 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Liabilities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expense reserves | \n\n | $ | \n33,506 | \n\n | $ | \n17,389 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n50,895 | \n|
| \n Unearned premium reserves | \n\n | \n | 8,188 | \n\n | \n | 3,662 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 11,850 | \n|
| \n Contractholder payables | \n\n | \n | 3,179 | \n\n | \n | 1,149 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,328 | \n|
| \n Payables for reinsurance premiums | \n\n | \n | 127 | \n\n | \n | 171 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 298 | \n|
| \n Debt | \n\n | \n | 692 | \n\n | \n | — | \n\n | \n | 5,654 | \n\n | \n | — | \n\n | \n | 6,346 | \n|
| \n Other liabilities | \n\n | \n | 4,109 | \n\n | \n | 1,180 | \n\n | \n | 10 | \n\n | \n | — | \n\n | \n | 5,299 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities | \n\n | \n | 49,801 | \n\n | \n | 23,551 | \n\n | \n | 5,664 | \n\n | \n | — | \n\n | \n | 79,016 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Shareholders' equity | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Common stock (1,750.0 shares authorized; 353.5 shares issued and outstanding) | \n\n | \n | — | \n\n | \n | 390 | \n\n | \n | 21,500 | \n\n | \n | (390 | \n) | \n\n | 21,500 | \n|
| \n Additional paid-in capital | \n\n | \n | 11,634 | \n\n | \n | 6,502 | \n\n | \n | — | \n\n | \n | (18,136 | \n) | \n\n | — | \n|
| \n Retained earnings | \n\n | \n | 7,868 | \n\n | \n | 1,042 | \n\n | \n | 24,281 | \n\n | \n | (8,900 | \n) | \n\n | 24,291 | \n|
| \n Accumulated other comprehensive income | \n\n | \n | 767 | \n\n | \n | 423 | \n\n | \n | 810 | \n\n | \n | (1,190 | \n) | \n\n | 810 | \n|
| \n Treasury stock, at cost (401.5 shares) | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (21,805 | \n) | \n\n | — | \n\n | \n | (21,805 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total shareholders' equity | \n\n | \n | 20,269 | \n\n | \n | 8,357 | \n\n | \n | 24,786 | \n\n | \n | (28,616 | \n) | \n\n | 24,796 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities and shareholders' equity | \n\n | $ | \n70,070 | \n\n | $ | \n31,908 | \n\n | $ | \n30,450 | \n\n | $ | \n(28,616 | \n) | \n$ | \n103,812 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
\nFor the twelve months ended December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Cash flows from operating activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income | \n\n | $ | \n2,780 | \n\n | $ | \n1,124 | \n\n | $ | \n3,692 | \n\n | $ | \n(3,904 | \n) | \n$ | \n3,692 | \n|
| \n Net adjustments to reconcile net income to net cash provided by operating activities | \n\n | \n | 343 | \n\n | \n | (293 | \n) | \n\n | 118 | \n\n | \n | (167 | \n) | \n\n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by operating activities | \n\n | \n | 3,123 | \n\n | \n | 831 | \n\n | \n | 3,810 | \n\n | \n | (4,071 | \n) | \n\n | 3,693 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from investing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Proceeds from maturities of fixed maturities | \n\n | \n | 6,625 | \n\n | \n | 4,258 | \n\n | \n | 11 | \n\n | \n | — | \n\n | \n | 10,894 | \n|
| \n Proceeds from sales of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | 595 | \n\n | \n | 453 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 1,049 | \n|
| \n Equity securities | \n\n | \n | 111 | \n\n | \n | 43 | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 158 | \n|
| \n Real estate investments | \n\n | \n | 1 | \n\n | \n | 14 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 15 | \n|
| \n Other investments | \n\n | \n | 477 | \n\n | \n | 378 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 855 | \n|
| \n Purchases of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | (6,856 | \n) | \n\n | (4,465 | \n) | \n\n | (4 | \n) | \n\n | — | \n\n | \n | (11,325 | \n) |
| \n Equity securities | \n\n | \n | (3 | \n) | \n\n | (42 | \n) | \n\n | (7 | \n) | \n\n | — | \n\n | \n | (52 | \n) |
| \n Real estate investments | \n\n | \n | (22 | \n) | \n\n | (26 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (48 | \n) |
| \n Other investments | \n\n | \n | (405 | \n) | \n\n | (149 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (554 | \n) |
| \n Net sales (purchases) of short-term securities | \n\n | \n | (268 | \n) | \n\n | (223 | \n) | \n\n | (7 | \n) | \n\n | — | \n\n | \n | (498 | \n) |
| \n Securities transactions in course of settlement | \n\n | \n | 44 | \n\n | \n | 38 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 82 | \n|
| \n Acquisition, net of cash acquired | \n\n | \n | (9 | \n) | \n\n | (3 | \n) | \n\n | — | \n\n | \n | \n | \n | \n | (12 | \n) |
| \n Other | \n\n | \n | (350 | \n) | \n\n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (358 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by (used in) investing activities | \n\n | \n | (60 | \n) | \n\n | 268 | \n\n | \n | (2 | \n) | \n\n | — | \n\n | \n | 206 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from financing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Treasury stock acquired—share repurchase authorization | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (3,275 | \n) | \n\n | — | \n\n | \n | (3,275 | \n) |
| \n Treasury stock acquired—net employee share-based compensation | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (57 | \n) | \n\n | — | \n\n | \n | (57 | \n) |
| \n Dividends paid to shareholders | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (729 | \n) | \n\n | — | \n\n | \n | (729 | \n) |
| \n Issuance of common stock—employee share options | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 195 | \n\n | \n | — | \n\n | \n | 195 | \n|
| \n Excess tax benefits from share-based payment arrangements | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 57 | \n\n | \n | — | \n\n | \n | 57 | \n|
| \n Dividends paid to parent company | \n\n | \n | (2,978 | \n) | \n\n | (1,093 | \n) | \n\n | — | \n\n | \n | 4,071 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash used in financing activities | \n\n | \n | (2,978 | \n) | \n\n | (1,093 | \n) | \n\n | (3,809 | \n) | \n\n | 4,071 | \n\n | \n | (3,809 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effect of exchange rate changes on cash | \n\n | \n | (1 | \n) | \n\n | (9 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (10 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net increase (decrease) in cash | \n\n | \n | 84 | \n\n | \n | (3 | \n) | \n\n | (1 | \n) | \n\n | — | \n\n | \n | 80 | \n|
| \n Cash at beginning of year | \n\n | \n | 137 | \n\n | \n | 154 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | 294 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash at end of year | \n\n | $ | \n221 | \n\n | $ | \n151 | \n\n | $ | \n2 | \n\n | $ | \n— | \n\n | $ | \n374 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Supplemental disclosure of cash flow information | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Income taxes paid (received) | \n\n | $ | \n947 | \n\n | $ | \n336 | \n\n | $ | \n(136 | \n) | \n$ | \n— | \n\n | $ | \n1,147 | \n|
| \n Interest paid | \n\n | $ | \n47 | \n\n | $ | \n— | \n\n | $ | \n318 | \n\n | $ | \n— | \n\n | $ | \n365 | \n
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
\nFor the twelve months ended December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Cash flows from operating activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income | \n\n | $ | \n2,771 | \n\n | $ | \n1,044 | \n\n | $ | \n3,673 | \n\n | $ | \n(3,815 | \n) | \n$ | \n3,673 | \n|
| \n Net adjustments to reconcile net income to net cash provided by operating activities | \n\n | \n | (497 | \n) | \n\n | 413 | \n\n | \n | (1,665 | \n) | \n\n | 1,892 | \n\n | \n | 143 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by operating activities | \n\n | \n | 2,274 | \n\n | \n | 1,457 | \n\n | \n | 2,008 | \n\n | \n | (1,923 | \n) | \n\n | 3,816 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from investing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Proceeds from maturities of fixed maturities | \n\n | \n | 5,484 | \n\n | \n | 2,419 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 7,904 | \n|
| \n Proceeds from sales of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | 989 | \n\n | \n | 641 | \n\n | \n | 5 | \n\n | \n | — | \n\n | \n | 1,635 | \n|
| \n Equity securities | \n\n | \n | 45 | \n\n | \n | 41 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 86 | \n|
| \n Real estate investments | \n\n | \n | — | \n\n | \n | 18 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 18 | \n|
| \n Other investments | \n\n | \n | 489 | \n\n | \n | 273 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 762 | \n|
| \n Purchases of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | (6,260 | \n) | \n\n | (3,201 | \n) | \n\n | (6 | \n) | \n\n | — | \n\n | \n | (9,467 | \n) |
| \n Equity securities | \n\n | \n | (21 | \n) | \n\n | (34 | \n) | \n\n | (2 | \n) | \n\n | — | \n\n | \n | (57 | \n) |
| \n Real estate investments | \n\n | \n | (1 | \n) | \n\n | (106 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (107 | \n) |
| \n Other investments | \n\n | \n | (320 | \n) | \n\n | (126 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (446 | \n) |
| \n Net sales (purchases) of short-term securities | \n\n | \n | (272 | \n) | \n\n | (52 | \n) | \n\n | 435 | \n\n | \n | — | \n\n | \n | 111 | \n|
| \n Securities transactions in course of settlement | \n\n | \n | (2 | \n) | \n\n | 24 | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | 21 | \n|
| \n Acquisition, net of cash acquired | \n\n | \n | (773 | \n) | \n\n | (224 | \n) | \n\n | — | \n\n | \n | \n | \n | \n | (997 | \n) |
| \n Other | \n\n | \n | (365 | \n) | \n\n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (373 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by (used in) investing activities | \n\n | \n | (1,007 | \n) | \n\n | (335 | \n) | \n\n | 432 | \n\n | \n | — | \n\n | \n | (910 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from financing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Payment of debt | \n\n | \n | (500 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (500 | \n) |
| \n Issuance of debt | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 494 | \n\n | \n | — | \n\n | \n | 494 | \n|
| \n Dividends paid to shareholders | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (729 | \n) | \n\n | — | \n\n | \n | (729 | \n) |
| \n Issuance of common stock—employee share options | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 206 | \n\n | \n | — | \n\n | \n | 206 | \n|
| \n Treasury stock acquired—share repurchase authorization | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (2,400 | \n) | \n\n | — | \n\n | \n | (2,400 | \n) |
| \n Treasury stock acquired—net employee share-based compensation | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (61 | \n) | \n\n | — | \n\n | \n | (61 | \n) |
| \n Excess tax benefits from share-based payment arrangements | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 51 | \n\n | \n | — | \n\n | \n | 51 | \n|
| \n Dividends paid to parent company | \n\n | \n | (1,307 | \n) | \n\n | (1,116 | \n) | \n\n | — | \n\n | \n | 2,423 | \n\n | \n | — | \n|
| \n Capital contributions, loans and other transactions between subsidiaries | \n\n | \n | 500 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (500 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash used in financing activities | \n\n | \n | (1,307 | \n) | \n\n | (1,116 | \n) | \n\n | (2,439 | \n) | \n\n | 1,923 | \n\n | \n | (2,939 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effect of exchange rate changes on cash | \n\n | \n | — | \n\n | \n | (3 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (3 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net increase (decrease) in cash | \n\n | \n | (40 | \n) | \n\n | 3 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | (36 | \n) |
| \n Cash at beginning of year | \n\n | \n | 177 | \n\n | \n | 151 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 330 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash at end of year | \n\n | $ | \n137 | \n\n | $ | \n154 | \n\n | $ | \n3 | \n\n | $ | \n— | \n\n | $ | \n294 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Supplemental disclosure of cash flow information | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Income taxes paid (received) | \n\n | $ | \n942 | \n\n | $ | \n325 | \n\n | $ | \n(210 | \n) | \n$ | \n— | \n\n | $ | \n1,057 | \n|
| \n Interest paid | \n\n | $ | \n60 | \n\n | $ | \n— | \n\n | $ | \n295 | \n\n | $ | \n— | \n\n | $ | \n355 | \n
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
\nFor the twelve months ended December 31, 2012
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Cash flows from operating activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income | \n\n | $ | \n1,857 | \n\n | $ | \n798 | \n\n | $ | \n2,473 | \n\n | $ | \n(2,655 | \n) | \n$ | \n2,473 | \n|
| \n Net adjustments to reconcile net income to net cash provided by operating activities | \n\n | \n | 715 | \n\n | \n | 7 | \n\n | \n | (700 | \n) | \n\n | 735 | \n\n | \n | 757 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by operating activities | \n\n | \n | 2,572 | \n\n | \n | 805 | \n\n | \n | 1,773 | \n\n | \n | (1,920 | \n) | \n\n | 3,230 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from investing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Proceeds from maturities of fixed maturities | \n\n | \n | 5,905 | \n\n | \n | 2,462 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 8,369 | \n|
| \n Proceeds from sales of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | 730 | \n\n | \n | 355 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 1,087 | \n|
| \n Equity securities | \n\n | \n | 21 | \n\n | \n | 16 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 37 | \n|
| \n Real estate investments | \n\n | \n | — | \n\n | \n | 53 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 53 | \n|
| \n Other investments | \n\n | \n | 555 | \n\n | \n | 280 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 835 | \n|
| \n Purchases of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | (7,361 | \n) | \n\n | (3,077 | \n) | \n\n | (9 | \n) | \n\n | — | \n\n | \n | (10,447 | \n) |
| \n Equity securities | \n\n | \n | (18 | \n) | \n\n | (28 | \n) | \n\n | (2 | \n) | \n\n | — | \n\n | \n | (48 | \n) |
| \n Real estate investments | \n\n | \n | — | \n\n | \n | (95 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (95 | \n) |
| \n Other investments | \n\n | \n | (371 | \n) | \n\n | (163 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (534 | \n) |
| \n Net sales (purchases) of short-term securities | \n\n | \n | (308 | \n) | \n\n | 44 | \n\n | \n | 381 | \n\n | \n | — | \n\n | \n | 117 | \n|
| \n Securities transactions in course of settlement | \n\n | \n | 14 | \n\n | \n | (36 | \n) | \n\n | (1 | \n) | \n\n | — | \n\n | \n | (23 | \n) |
| \n Other | \n\n | \n | (323 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (323 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by (used in) investing activities | \n\n | \n | (1,156 | \n) | \n\n | (189 | \n) | \n\n | 373 | \n\n | \n | — | \n\n | \n | (972 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from financing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Payment of debt | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (258 | \n) | \n\n | — | \n\n | \n | (258 | \n) |
| \n Dividends paid to shareholders | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (694 | \n) | \n\n | — | \n\n | \n | (694 | \n) |
| \n Issuance of common stock—employee share options | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 295 | \n\n | \n | — | \n\n | \n | 295 | \n|
| \n Treasury stock acquired—share repurchase authorization | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (1,474 | \n) | \n\n | — | \n\n | \n | (1,474 | \n) |
| \n Treasury stock acquired—net employee share-based compensation | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (53 | \n) | \n\n | — | \n\n | \n | (53 | \n) |
| \n Excess tax benefits from share-based payment arrangements | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 38 | \n\n | \n | — | \n\n | \n | 38 | \n|
| \n Dividends paid to parent company | \n\n | \n | (1,353 | \n) | \n\n | (567 | \n) | \n\n | — | \n\n | \n | 1,920 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash used in financing activities | \n\n | \n | (1,353 | \n) | \n\n | (567 | \n) | \n\n | (2,146 | \n) | \n\n | 1,920 | \n\n | \n | (2,146 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effect of exchange rate changes on cash | \n\n | \n | — | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net increase in cash | \n\n | \n | 63 | \n\n | \n | 53 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 116 | \n|
| \n Cash at beginning of year | \n\n | \n | 114 | \n\n | \n | 98 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 214 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash at end of year | \n\n | $ | \n177 | \n\n | $ | \n151 | \n\n | $ | \n2 | \n\n | $ | \n— | \n\n | $ | \n330 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Supplemental disclosure of cash flow information | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Income taxes paid (received) | \n\n | $ | \n287 | \n\n | $ | \n108 | \n\n | $ | \n(207 | \n) | \n$ | \n— | \n\n | $ | \n188 | \n|
| \n Interest paid | \n\n | $ | \n73 | \n\n | $ | \n— | \n\n | $ | \n302 | \n\n | $ | \n— | \n\n | $ | \n375 | \n
19. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n 2014 (in millions, except per share amounts) | \n\n | First \nQuarter | \n\n | Second \nQuarter | \n\n | Third \nQuarter | \n\n | Fourth \nQuarter | \n\n | Total | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total revenues | \n\n | $ | \n6,708 | \n\n | $ | \n6,785 | \n\n | $ | \n6,886 | \n\n | $ | \n6,783 | \n\n | $ | \n27,162 | \n|
| \n Total expenses | \n\n | \n | 5,238 | \n\n | \n | 5,884 | \n\n | \n | 5,628 | \n\n | \n | 5,323 | \n\n | \n | 22,073 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income before income taxes | \n\n | \n | 1,470 | \n\n | \n | 901 | \n\n | \n | 1,258 | \n\n | \n | 1,460 | \n\n | \n | 5,089 | \n|
| \n Income tax expense | \n\n | \n | 418 | \n\n | \n | 218 | \n\n | \n | 339 | \n\n | \n | 422 | \n\n | \n | 1,397 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n1,052 | \n\n | $ | \n683 | \n\n | $ | \n919 | \n\n | $ | \n1,038 | \n\n | $ | \n3,692 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income per share(1): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | $ | \n2.98 | \n\n | $ | \n1.98 | \n\n | $ | \n2.72 | \n\n | $ | \n3.15 | \n\n | $ | \n10.82 | \n|
| \n Diluted | \n\n | \n | 2.95 | \n\n | \n | 1.95 | \n\n | \n | 2.69 | \n\n | \n | 3.11 | \n\n | \n | 10.70 | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n 2013 (in millions, except per share amounts) | \n\n | First \nQuarter | \n\n | Second \nQuarter | \n\n | Third \nQuarter | \n\n | Fourth \nQuarter | \n\n | Total | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total revenues | \n\n | $ | \n6,328 | \n\n | $ | \n6,674 | \n\n | $ | \n6,452 | \n\n | $ | \n6,737 | \n\n | $ | \n26,191 | \n|
| \n Total expenses | \n\n | \n | 5,108 | \n\n | \n | 5,497 | \n\n | \n | 5,275 | \n\n | \n | 5,366 | \n\n | \n | 21,246 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income before income taxes | \n\n | \n | 1,220 | \n\n | \n | 1,177 | \n\n | \n | 1,177 | \n\n | \n | 1,371 | \n\n | \n | 4,945 | \n|
| \n Income tax expense | \n\n | \n | 324 | \n\n | \n | 252 | \n\n | \n | 313 | \n\n | \n | 383 | \n\n | \n | 1,272 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n896 | \n\n | $ | \n925 | \n\n | $ | \n864 | \n\n | $ | \n988 | \n\n | $ | \n3,673 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income per share(1): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | $ | \n2.36 | \n\n | $ | \n2.44 | \n\n | $ | \n2.33 | \n\n | $ | \n2.73 | \n\n | $ | \n9.84 | \n|
| \n Diluted | \n\n | \n | 2.33 | \n\n | \n | 2.41 | \n\n | \n | 2.30 | \n\n | \n | 2.70 | \n\n | \n | 9.74 | \n
SCHEDULE II
\nTHE TRAVELERS COMPANIES, INC.
\n(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
\n(in millions)
CONDENSED STATEMENT OF INCOME
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n For the year ended December 31, | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenues | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net investment income | \n\n | $ | \n6 | \n\n | $ | \n7 | \n\n | $ | \n9 | \n|
| \n Net realized investment gains(1) | \n\n | \n | 3 | \n\n | \n | 2 | \n\n | \n | — | \n|
| \n Other revenues | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (1 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | \n | 9 | \n\n | \n | 9 | \n\n | \n | 8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expenses | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Interest | \n\n | \n | 321 | \n\n | \n | 308 | \n\n | \n | 305 | \n|
| \n Other | \n\n | \n | 15 | \n\n | \n | 13 | \n\n | \n | 4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total expenses | \n\n | \n | 336 | \n\n | \n | 321 | \n\n | \n | 309 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Loss before income taxes and net income of subsidiaries | \n\n | \n | (327 | \n) | \n\n | (312 | \n) | \n\n | (301 | \n) |
| \n Income tax benefit | \n\n | \n | (115 | \n) | \n\n | (170 | \n) | \n\n | (119 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Loss before net income of subsidiaries | \n\n | \n | (212 | \n) | \n\n | (142 | \n) | \n\n | (182 | \n) |
| \n Net income of subsidiaries | \n\n | \n | 3,904 | \n\n | \n | 3,815 | \n\n | \n | 2,655 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n3,692 | \n\n | $ | \n3,673 | \n\n | $ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
The condensed financial statements should be read in conjunction with the notes to the condensed financial information of the registrant, as well as the consolidated financial statements and notes thereto.
\nSee the accompanying Report of Independent Registered Public Accounting Firm.
\n\n
SCHEDULE II
\nTHE TRAVELERS COMPANIES, INC.
\n(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
\n(in millions)
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n For the year ended December 31, | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Consolidated net income | \n\n | $ | \n3,692 | \n\n | $ | \n3,673 | \n\n | $ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income—parent company: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | \n | 6 | \n\n | \n | 19 | \n\n | \n | 10 | \n|
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Net changes in benefit plan assets and obligations | \n\n | \n | (471 | \n) | \n\n | 616 | \n\n | \n | (58 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss) before income taxes and other comprehensive income (loss) of subsidiaries | \n\n | \n | (465 | \n) | \n\n | 635 | \n\n | \n | (48 | \n) |
| \n Income tax expense (benefit) | \n\n | \n | (163 | \n) | \n\n | 222 | \n\n | \n | (17 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss), net of taxes, before other comprehensive income (loss) of subsidiaries | \n\n | \n | (302 | \n) | \n\n | 413 | \n\n | \n | (31 | \n) |
| \n Other comprehensive income (loss) of subsidiaries | \n\n | \n | 372 | \n\n | \n | (1,839 | \n) | \n\n | 262 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Consolidated other comprehensive income (loss) | \n\n | \n | 70 | \n\n | \n | (1,426 | \n) | \n\n | 231 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Consolidated comprehensive income | \n\n | $ | \n3,762 | \n\n | $ | \n2,247 | \n\n | $ | \n2,704 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
The condensed financial statements should be read in conjunction with the notes to the condensed financial information of the registrant, as well as the consolidated financial statements and notes thereto.
\nSee the accompanying Report of Independent Registered Public Accounting Firm.
\n\n
SCHEDULE II
\nTHE TRAVELERS COMPANIES, INC.
\n(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
\n(in millions)
CONDENSED BALANCE SHEET
\n| \n | \n | \n | \n | \n | \n | \n | |
| \n At December 31, | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Assets | \n\n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | $ | \n30 | \n\n | $ | \n37 | \n|
| \n Equity securities | \n\n | \n | 141 | \n\n | \n | 130 | \n|
| \n Short-term securities | \n\n | \n | 1,530 | \n\n | \n | 1,523 | \n|
| \n Investment in subsidiaries | \n\n | \n | 28,821 | \n\n | \n | 28,616 | \n|
| \n Other assets | \n\n | \n | 72 | \n\n | \n | 144 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total assets | \n\n | $ | \n30,594 | \n\n | $ | \n30,450 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Liabilities | \n\n | \n | \n | \n | \n | \n | |
| \n Debt | \n\n | $ | \n5,657 | \n\n | $ | \n5,654 | \n|
| \n Other liabilities | \n\n | \n | 114 | \n\n | \n | 10 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities | \n\n | \n | 5,771 | \n\n | \n | 5,664 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Shareholders' equity | \n\n | \n | \n | \n | \n | \n | |
| \n Common stock (1,750.0 shares authorized, 322.2 and 353.5 shares issued and outstanding) | \n\n | \n | 21,843 | \n\n | \n | 21,500 | \n|
| \n Retained earnings | \n\n | \n | 27,238 | \n\n | \n | 24,281 | \n|
| \n Accumulated other comprehensive income | \n\n | \n | 880 | \n\n | \n | 810 | \n|
| \n Treasury stock, at cost (437.3 and 401.5 shares) | \n\n | \n | (25,138 | \n) | \n\n | (21,805 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total shareholders' equity | \n\n | \n | 24,823 | \n\n | \n | 24,786 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities and shareholders' equity | \n\n | $ | \n30,594 | \n\n | $ | \n30,450 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
The condensed financial statements should be read in conjunction with the notes to the condensed financial information of the registrant, as well as the consolidated financial statements and notes thereto.
\nSee the accompanying Report of Independent Registered Public Accounting Firm.
\n\n
SCHEDULE II
\nTHE TRAVELERS COMPANIES, INC.
\n(Parent Company Only)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
\n(in millions)
CONDENSED STATEMENT OF CASH FLOWS
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n For the year ended December 31, | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Cash flows from operating activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income | \n\n | $ | \n3,692 | \n\n | $ | \n3,673 | \n\n | $ | \n2,473 | \n|
| \n Adjustments to reconcile net income to net cash provided by operating activities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Equity in net income of subsidiaries | \n\n | \n | (3,904 | \n) | \n\n | (3,815 | \n) | \n\n | (2,655 | \n) |
| \n Dividends received from consolidated subsidiaries | \n\n | \n | 4,071 | \n\n | \n | 2,423 | \n\n | \n | 1,920 | \n|
| \n Deferred federal income tax expense (benefit) | \n\n | \n | 51 | \n\n | \n | (59 | \n) | \n\n | 52 | \n|
| \n Change in income taxes payable | \n\n | \n | (87 | \n) | \n\n | 48 | \n\n | \n | (1 | \n) |
| \n Capital contributed to subsidiaries | \n\n | \n | — | \n\n | \n | (500 | \n) | \n\n | — | \n|
| \n Other | \n\n | \n | (13 | \n) | \n\n | 238 | \n\n | \n | (16 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by operating activities | \n\n | \n | 3,810 | \n\n | \n | 2,008 | \n\n | \n | 1,773 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from investing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net sales (purchases) of short-term securities | \n\n | \n | (7 | \n) | \n\n | 435 | \n\n | \n | 381 | \n|
| \n Other investments, net | \n\n | \n | 5 | \n\n | \n | (3 | \n) | \n\n | (8 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by (used in) investing activities | \n\n | \n | (2 | \n) | \n\n | 432 | \n\n | \n | 373 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from financing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Treasury stock acquired—share repurchase authorization | \n\n | \n | (3,275 | \n) | \n\n | (2,400 | \n) | \n\n | (1,474 | \n) |
| \n Treasury stock acquired—net employee share-based compensation | \n\n | \n | (57 | \n) | \n\n | (61 | \n) | \n\n | (53 | \n) |
| \n Dividends paid to shareholders | \n\n | \n | (729 | \n) | \n\n | (729 | \n) | \n\n | (694 | \n) |
| \n Issuance of common stock—employee share options | \n\n | \n | 195 | \n\n | \n | 206 | \n\n | \n | 295 | \n|
| \n Payment of debt | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (258 | \n) |
| \n Issuance of debt | \n\n | \n | — | \n\n | \n | 494 | \n\n | \n | — | \n|
| \n Other | \n\n | \n | 57 | \n\n | \n | 51 | \n\n | \n | 38 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash used in financing activities | \n\n | \n | (3,809 | \n) | \n\n | (2,439 | \n) | \n\n | (2,146 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net increase (decrease) in cash | \n\n | \n | (1 | \n) | \n\n | 1 | \n\n | \n | — | \n|
| \n Cash at beginning of year | \n\n | \n | 3 | \n\n | \n | 2 | \n\n | \n | 2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash at end of year | \n\n | $ | \n2 | \n\n | $ | \n3 | \n\n | $ | \n2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Supplemental disclosure of cash flow information | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Cash received during the year for taxes | \n\n | $ | \n136 | \n\n | $ | \n210 | \n\n | $ | \n207 | \n|
| \n Cash paid during the year for interest | \n\n | $ | \n318 | \n\n | $ | \n295 | \n\n | $ | \n302 | \n
The condensed financial statements should be read in conjunction with the notes to the condensed financial information of the registrant, as well as the consolidated financial statements and notes thereto.
\nSee the accompanying Report of Independent Registered Public Accounting Firm.
\n\n
1. GUARANTEES
\nIn the ordinary course of selling businesses to third parties, The Travelers Companies, Inc. (TRV) has agreed to indemnify purchasers for losses arising out of breaches of representations and warranties with respect to the businesses being sold, covenants and obligations of TRV and/or its subsidiaries following the closing, and in certain cases obligations arising from certain liabilities or adverse reserve development. Such indemnification provisions generally are applicable from the closing date to the expiration of the relevant statutes of limitations, although, in some cases, there may be agreed upon term limitations or no term limitations. Certain of these contingent obligations are subject to deductibles which have to be incurred by the obligee before TRV is obligated to make payments. The maximum amount of TRV's contingent obligation for indemnifications related to the sale of businesses that are quantifiable was $89 million at December 31, 2014, of which $8 million was recognized on the balance sheet at that date.
\nTRV also has contingent obligations for guarantees related to its subsidiary's debt obligations and various other indemnifications. TRV also provides standard indemnifications to service providers in the normal course of business. The indemnification clauses are often standard contractual terms. Certain of these guarantees and indemnifications have no stated or notional amounts or limitation to the maximum potential future payments, and, accordingly, TRV is unable to develop an estimate of the maximum potential payments for such arrangements.
\nTRV fully and unconditionally guarantees the payment of all principal, premiums, if any, and interest on certain debt obligations of its subsidiaries TPC and Travelers Insurance Group Holdings Inc. (TIGHI). The guarantees pertain to the $200 million 7.75% notes due 2026 and the $500 million 6.375% notes due 2033.
SCHEDULE III
\nTHE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
\nSupplementary Insurance Information
\n2012-2014
\n(in millions)
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Segment | \n\n | Deferred \nAcquisition \nCosts | \n\n | Claims and \nClaim \nAdjustment \nExpense \nReserves | \n\n | Unearned \nPremiums | \n\n | Earned \nPremiums | \n\n | Net \nInvestment \nIncome(1) | \n\n | Claims and \nClaim \nAdjustment \nExpenses | \n\n | Amortization \nof Deferred \nAcquisition \nCosts | \n\n | Other \nOperating \nExpenses(2) | \n\n | Net \nWritten \nPremiums | \n||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n 2014 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Business and International Insurance | \n\n | $ | \n1,080 | \n\n | $ | \n42,700 | \n\n | $ | \n7,208 | \n\n | $ | \n14,512 | \n\n | $ | \n2,156 | \n\n | $ | \n9,145 | \n\n | $ | \n2,321 | \n\n | $ | \n2,541 | \n\n | $ | \n14,636 | \n|
| \n Bond & Specialty Insurance | \n\n | \n | 222 | \n\n | \n | 3,435 | \n\n | \n | 1,286 | \n\n | \n | 2,076 | \n\n | \n | 252 | \n\n | \n | 481 | \n\n | \n | 388 | \n\n | \n | 403 | \n\n | \n | 2,103 | \n|
| \n Personal Insurance | \n\n | \n | 533 | \n\n | \n | 3,689 | \n\n | \n | 3,345 | \n\n | \n | 7,125 | \n\n | \n | 379 | \n\n | \n | 4,244 | \n\n | \n | 1,173 | \n\n | \n | 977 | \n\n | \n | 7,165 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total—Reportable Segments | \n\n | \n | 1,835 | \n\n | \n | 49,824 | \n\n | \n | 11,839 | \n\n | \n | 23,713 | \n\n | \n | 2,787 | \n\n | \n | 13,870 | \n\n | \n | 3,882 | \n\n | \n | 3,921 | \n\n | \n | 23,904 | \n|
| \n Other | \n\n | \n | — | \n\n | \n | 26 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 400 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Consolidated | \n\n | $ | \n1,835 | \n\n | $ | \n49,850 | \n\n | $ | \n11,839 | \n\n | $ | \n23,713 | \n\n | $ | \n2,787 | \n\n | $ | \n13,870 | \n\n | $ | \n3,882 | \n\n | $ | \n4,321 | \n\n | $ | \n23,904 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n 2013 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Business and International Insurance | \n\n | $ | \n1,046 | \n\n | $ | \n43,181 | \n\n | $ | \n7,170 | \n\n | $ | \n13,332 | \n\n | $ | \n2,087 | \n\n | $ | \n8,285 | \n\n | $ | \n2,158 | \n\n | $ | \n2,369 | \n\n | $ | \n13,512 | \n|
| \n Bond & Specialty Insurance | \n\n | \n | 213 | \n\n | \n | 3,921 | \n\n | \n | 1,264 | \n\n | \n | 1,981 | \n\n | \n | 260 | \n\n | \n | 695 | \n\n | \n | 378 | \n\n | \n | 388 | \n\n | \n | 2,030 | \n|
| \n Personal Insurance | \n\n | \n | 545 | \n\n | \n | 3,763 | \n\n | \n | 3,416 | \n\n | \n | 7,324 | \n\n | \n | 369 | \n\n | \n | 4,327 | \n\n | \n | 1,285 | \n\n | \n | 980 | \n\n | \n | 7,225 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total—Reportable Segments | \n\n | \n | 1,804 | \n\n | \n | 50,865 | \n\n | \n | 11,850 | \n\n | \n | 22,637 | \n\n | \n | 2,716 | \n\n | \n | 13,307 | \n\n | \n | 3,821 | \n\n | \n | 3,737 | \n\n | \n | 22,767 | \n|
| \n Other | \n\n | \n | — | \n\n | \n | 30 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 381 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Consolidated | \n\n | $ | \n1,804 | \n\n | $ | \n50,895 | \n\n | $ | \n11,850 | \n\n | $ | \n22,637 | \n\n | $ | \n2,716 | \n\n | $ | \n13,307 | \n\n | $ | \n3,821 | \n\n | $ | \n4,118 | \n\n | $ | \n22,767 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n 2012 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Business and International Insurance | \n\n | $ | \n959 | \n\n | $ | \n41,979 | \n\n | $ | \n6,438 | \n\n | $ | \n12,779 | \n\n | $ | \n2,205 | \n\n | $ | \n8,383 | \n\n | $ | \n2,100 | \n\n | $ | \n2,304 | \n\n | $ | \n12,929 | \n|
| \n Bond & Specialty Insurance | \n\n | \n | 209 | \n\n | \n | 4,064 | \n\n | \n | 1,254 | \n\n | \n | 1,957 | \n\n | \n | 280 | \n\n | \n | 788 | \n\n | \n | 373 | \n\n | \n | 383 | \n\n | \n | 1,924 | \n|
| \n Personal Insurance | \n\n | \n | 624 | \n\n | \n | 4,845 | \n\n | \n | 3,549 | \n\n | \n | 7,621 | \n\n | \n | 404 | \n\n | \n | 5,505 | \n\n | \n | 1,437 | \n\n | \n | 900 | \n\n | \n | 7,594 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total—Reportable Segments | \n\n | \n | 1,792 | \n\n | \n | 50,888 | \n\n | \n | 11,241 | \n\n | \n | 22,357 | \n\n | \n | 2,889 | \n\n | \n | 14,676 | \n\n | \n | 3,910 | \n\n | \n | 3,587 | \n\n | \n | 22,447 | \n|
| \n Other | \n\n | \n | — | \n\n | \n | 34 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 401 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Consolidated | \n\n | $ | \n1,792 | \n\n | $ | \n50,922 | \n\n | $ | \n11,241 | \n\n | $ | \n22,357 | \n\n | $ | \n2,889 | \n\n | $ | \n14,676 | \n\n | $ | \n3,910 | \n\n | $ | \n3,988 | \n\n | $ | \n22,447 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
See the accompanying Report of Independent Registered Public Accounting Firm.
\nSCHEDULE V
\nTHE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
\nValuation and Qualifying Accounts
\n(in millions)
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Balance at \nbeginning of \nperiod | \n\n | Charged to \ncosts and \nexpenses | \n\n | Charged to \nother \naccounts(1) | \n\n | Deductions(2) | \n\n | Balance \nat end of \nperiod | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n 2014 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Reinsurance recoverables | \n\n | $ | \n239 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n36 | \n\n | $ | \n203 | \n|
| \n Allowance for uncollectible: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums receivable from underwriting activities | \n\n | $ | \n75 | \n\n | $ | \n44 | \n\n | $ | \n— | \n\n | $ | \n49 | \n\n | $ | \n70 | \n|
| \n Deductibles | \n\n | $ | \n39 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n3 | \n\n | $ | \n36 | \n|
| \n 2013 | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Reinsurance recoverables | \n\n | $ | \n258 | \n\n | $ | \n— | \n\n | $ | \n2 | \n\n | $ | \n21 | \n\n | $ | \n239 | \n|
| \n Allowance for uncollectible: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums receivable from underwriting activities | \n\n | $ | \n76 | \n\n | $ | \n48 | \n\n | $ | \n— | \n\n | $ | \n49 | \n\n | $ | \n75 | \n|
| \n Deductibles | \n\n | $ | \n41 | \n\n | $ | \n1 | \n\n | $ | \n— | \n\n | $ | \n3 | \n\n | $ | \n39 | \n|
| \n 2012 | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Reinsurance recoverables | \n\n | $ | \n345 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n87 | \n\n | $ | \n258 | \n|
| \n Allowance for uncollectible: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums receivable from underwriting activities | \n\n | $ | \n83 | \n\n | $ | \n44 | \n\n | $ | \n— | \n\n | $ | \n51 | \n\n | $ | \n76 | \n|
| \n Deductibles | \n\n | $ | \n40 | \n\n | $ | \n4 | \n\n | $ | \n— | \n\n | $ | \n3 | \n\n | $ | \n41 | \n
See the accompanying Report of Independent Registered Public Accounting Firm.
\nSCHEDULE VI
\nTHE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
\nSupplementary Information Concerning Property-Casualty Insurance Operations(1)
\n2012-2014
\n(in millions)
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | | \n\n | | \n\n | | \n\n | | \n\n | | \n\n | Claims and \nClaim \nAdjustment \nExpenses \nIncurred \nRelated to: | \n\n | | \n\n | | \n\n | | \n||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | | \n\n | | \n\n | | \n\n | | \n\n | | \n\n | | \n\n | | \n\n | Paid \nClaims \nand \nClaim \nAdjustment \nExpenses | \n\n | | \n||||||||||||||||
| | \n\n | | \n\n | | \n\n | Discount From \nReserves for \nUnpaid \nClaims(3) | \n\n | | \n\n | | \n\n | | \n\n | Amortization \nof Deferred \nAcquisition \nCosts | \n\n | | \n||||||||||||||||||
| \n Affiliation with Registrant(2) | \n\n | Deferred \nAcquisition \nCosts | \n\n | Claims and \nClaim Adjustment \nExpense Reserves | \n\n | Unearned \nPremiums | \n\n | Earned \nPremiums | \n\n | Net \nInvestment \nIncome | \n\n | Current \nYear | \n\n | Prior \nYear | \n\n | Net \nWritten \nPremiums | \n||||||||||||||||||
| \n 2014 | \n\n | $ | \n1,835 | \n\n | $ | \n49,824 | \n\n | $ | \n1,080 | \n\n | $ | \n11,839 | \n\n | $ | \n23,713 | \n\n | $ | \n2,787 | \n\n | $ | \n14,621 | \n\n | $ | \n(957 | \n) | \n$ | \n3,882 | \n\n | $ | \n13,927 | \n\n | $ | \n23,904 | \n|
| \n 2013 | \n\n | $ | \n1,804 | \n\n | $ | \n50,865 | \n\n | $ | \n1,090 | \n\n | $ | \n11,850 | \n\n | $ | \n22,637 | \n\n | $ | \n2,716 | \n\n | $ | \n14,060 | \n\n | $ | \n(944 | \n) | \n$ | \n3,821 | \n\n | $ | \n13,962 | \n\n | $ | \n22,767 | \n|
| \n 2012 | \n\n | $ | \n1,792 | \n\n | $ | \n50,888 | \n\n | $ | \n1,088 | \n\n | $ | \n11,241 | \n\n | $ | \n22,357 | \n\n | $ | \n2,889 | \n\n | $ | \n15,559 | \n\n | $ | \n(1,074 | \n) | \n$ | \n3,910 | \n\n | $ | \n14,833 | \n\n | $ | \n22,447 | \n
See the accompanying Report of Independent Registered Public Accounting Firm.
\nBasis of Presentation
\nThe consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to the 2013 and 2012 financial statements to conform to the 2014 presentation, including reclassifications related to the realignment of the Company's reportable business segments described in the \"Nature of Operations\" section of this note. All material intercompany transactions and balances have been eliminated.
\nAdoption of Accounting Standards Updates
\nObligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date
\nIn February 2013, the Financial Accounting Standards Board (FASB) issued updated guidance to resolve diversity in practice concerning the recognition, measurement and disclosure of obligations resulting from certain joint and several liability arrangements for which the total amount under the arrangement is fixed at the reporting date. The guidance requires that the reporting entity measure joint and several liability arrangements as the amount the reporting entity agreed to pay on the basis of its arrangement among the co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The updated guidance was effective for the quarter ending March 31, 2014. The adoption of this guidance did not have any effect on the Company's results of operations, financial position or liquidity.
\nParent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity
\nIn March 2013, the FASB issued updated guidance to resolve diversity in practice concerning the release of the cumulative foreign currency translation adjustment into net income when a parent sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. When a company ceases to have a controlling financial interest in a subsidiary within a foreign entity, the company should recognize any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary had resided. Upon the partial sale of an equity method investment that is a foreign entity, the company should release into earnings a pro rata portion of the cumulative translation adjustment. Upon the partial sale of an equity method investment that is not a foreign entity, the company should release into earnings the cumulative translation adjustment if the partial sale represents a complete or substantially complete liquidation of the foreign entity that holds the equity method investment. The updated guidance was effective for the quarter ending March 31, 2014. The adoption of this guidance did not have any effect on the Company's results of operations, financial position or liquidity.
\nInvestments
\nFixed Maturity and Equity Securities
\nFixed maturities include bonds, notes and redeemable preferred stocks. Fixed maturities, including instruments subject to securities lending agreements, are classified as available for sale and are reported at fair value, with unrealized investment gains and losses, net of income taxes, charged or credited directly to other comprehensive income. Equity securities, which include public common and non-redeemable preferred stocks, are classified as available for sale with changes in fair value, net of income taxes, charged or credited directly to other comprehensive income.
\nReal Estate Investments
\nThe Company's real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. Real estate is recorded on the purchase date at the purchase price, which generally represents fair value, and is supported by internal analysis or external appraisals that use discounted cash flow analyses and other acceptable valuation techniques. Real estate held for investment purposes is subsequently carried at cost less accumulated depreciation.
\nBuildings are depreciated on a straight-line basis over the shorter of the expected useful life of the building or 39 years. Real estate held for sale is carried at lower of cost or fair value, less estimated costs to sell.
\nShort-term Securities
\nShort-term securities have an original maturity of less than one year and are carried at amortized cost, which approximates fair value.
\nOther Investments
\nInvestments in Private Equity Limited Partnerships, Hedge Funds and Real Estate Partnerships
\nThe Company uses the equity method of accounting for investments in private equity limited partnerships, hedge funds and real estate partnerships. The partnerships and the hedge funds generally report investments on their balance sheet at fair value. The financial statements prepared by the investee are received by the Company on a lag basis, with the lag period generally dependent upon the type of underlying investments. The private equity and real estate partnerships provide financial information quarterly which is generally available to investors, including the Company, within three to six months following the date of the reporting period. The hedge funds provide financial information monthly, which is generally available to investors within one month following the date of the reporting period. The Company regularly requests financial information from the partnerships prior to the receipt of the partnerships' financial statements and records any material information obtained from these requests in its consolidated financial statements.
\nOther
\nAlso included in other investments are non-public common and preferred equities, trading securities and derivatives. Non-public common and preferred equities are reported at fair value with changes in fair value, net of income taxes, charged or credited directly to other comprehensive income. Trading securities are marked to market with the change in fair value recognized in net investment income during the current period. The Company sold all of its remaining trading securities during 2013. The Company's derivative financial instruments are carried at fair value, with the changes in fair value reflected in the consolidated statement of income in net realized investment gains (losses). For a further discussion of the derivatives used by the Company, see note 3.
\nNet Investment Income
\nInvestment income from fixed maturities is recognized based on the constant effective yield method which includes an adjustment for estimated principal pre-payments, if any. The effective yield used to determine amortization for fixed maturities subject to prepayment risk (e.g., asset-backed, loan-backed and structured securities) is recalculated and adjusted periodically based upon actual historical and/or projected future cash flows, which are obtained from a widely-accepted securities data provider. The adjustments to the yield for highly rated prepayable fixed maturities are accounted for using the retrospective method. The adjustments to the yield for non-highly rated prepayable fixed maturities are accounted for using the prospective method. Dividends on equity securities (including those with transfer restrictions) are recognized in income when declared. Rental income on real estate is recognized on a straight-line basis over the lease term. See note 3 for further discussion. Investments in private equity limited partnerships, hedge funds, real estate partnerships and joint ventures are accounted for using the equity method of accounting, whereby the Company's share of the investee's earnings or losses in the fund is reported in net investment income. Trading securities are marked to market with the change in fair value recognized in net investment income during the current period. The Company sold all of its remaining trading securities in 2013.
\nAccrual of income is suspended on non-securitized fixed maturities that are in default, or on which it is likely that future payments will not be made as scheduled. Interest income on investments in default is recognized only when payments are received. Investments included in the consolidated balance sheet that were not income-producing for the preceding 12 months were not material.
\nFor fixed maturities where the Company records an other-than-temporary impairment, a determination is made as to the cause of the impairment and whether the Company expects a recovery in the value. For fixed maturities where the Company expects a recovery in value, not necessarily to par, the constant effective yield method is utilized, and the investment is amortized to the expected recovery amount.
\nInvestment Gains and Losses
\nNet realized investment gains and losses are included as a component of pretax revenues based upon specific identification of the investments sold on the trade date. Included in net realized investment gains (losses) are other-than-temporary impairment losses on invested assets other than those investments accounted for using the equity method of accounting as described in the \"Investment Impairments\" section that follows.
\nInvestment Impairments
\nThe Company conducts a periodic review to identify and evaluate invested assets having other-than-temporary impairments. Some of the factors considered in identifying other-than-temporary impairments include: (1) for fixed maturity investments, whether the Company intends to sell the investment or whether it is more likely than not that the Company will be required to sell the investment prior to an anticipated recovery in value; (2) for non-fixed maturity investments, the Company's ability and intent to retain the investment for a reasonable period of time sufficient to allow for an anticipated recovery in value; (3) the likelihood of the recoverability of principal and interest for fixed maturity securities (i.e., whether there is a credit loss) or cost for equity securities; (4) the length of time and extent to which the fair value has been less than amortized cost for fixed maturity securities or cost for equity securities; and (5) the financial condition, near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices.
\nOther-Than-Temporary Impairments of Fixed Maturities and Equity Securities
\nFor fixed maturity investments that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component in net realized investment gains (losses). The impairment related to all other factors is reported in other comprehensive income.
\nFor equity securities (including public common and non-redeemable preferred stock) and for fixed maturity investments the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in net realized investment gains (losses).
\nUpon recognizing an other-than-temporary impairment, the new cost basis of the investment is the previous amortized cost basis less the other-than-temporary impairment recognized in net realized investment gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value; however, for fixed maturity investments the difference between the new cost basis and the expected cash flows is accreted on a quarterly basis to net investment income over the remaining expected life of the investment.
\nDetermination of Credit Loss—Fixed Maturities
\nThe Company determines the credit loss component of fixed maturity investments by utilizing discounted cash flow modeling to determine the present value of the security and comparing the present value with the amortized cost of the security. If the amortized cost is greater than the present value of the expected cash flows, the difference is considered a credit loss and recognized in net realized investment gains (losses).
\nFor non-structured fixed maturities (U.S. Treasury securities, obligations of U.S. government and government agencies and authorities, obligations of states, municipalities and political subdivisions, debt securities issued by foreign governments, and certain corporate debt), the estimate of expected cash flows is determined by projecting a recovery value and a recovery time frame and assessing whether further principal and interest will be received. The determination of recovery value incorporates an issuer valuation assumption utilizing one or a combination of valuation methods as deemed appropriate by the Company. The Company determines the undiscounted recovery value by allocating the estimated value of the issuer to the Company's assessment of the priority of claims. The present value of the cash flows is determined by applying the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment) and an estimated recovery time frame. Generally, that time frame for securities for which the issuer is in bankruptcy is 12 months. For securities for which the issuer is financially troubled but not in bankruptcy, that time frame is generally 24 months. Included in the present value calculation are expected principal and interest payments; however, for securities for which the issuer is classified as bankrupt or in default, the present value calculation assumes no interest payments and a single recovery amount.
\nIn estimating the recovery value, significant judgment is involved in the development of assumptions relating to a myriad of factors related to the issuer including, but not limited to, revenue, margin and earnings projections, the likely market or liquidation values of assets, potential additional debt to be incurred pre- or post-bankruptcy/restructuring, the ability to shift existing or new debt to different priority layers, the amount of restructuring/bankruptcy expenses, the size and priority of unfunded pension obligations, litigation or other contingent claims, the treatment of intercompany claims and the likely outcome with respect to inter-creditor conflicts.
\nFor structured fixed maturity securities (primarily residential and commercial mortgage-backed securities and asset-backed securities), the Company estimates the present value of the security by projecting future cash flows of the assets underlying the securitization, allocating the flows to the various tranches based on the structure of the securitization and determining the present value of the cash flows using the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment or changes in expected cash flows). The Company incorporates levels of delinquencies, defaults and severities as well as credit attributes of the remaining assets in the securitization, along with other economic data, to arrive at its best estimate of the parameters applied to the assets underlying the securitization. In order to project cash flows, the following assumptions are applied to the assets underlying the securitization: (1) voluntary prepayment rates, (2) default rates and (3) loss severity. The key assumptions made for the Prime, Alt-A and first-lien Sub-Prime mortgage-backed securities at December 31, 2014 were as follows:
\n| \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014) | \n\n | Prime | \n\n | Alt-A | \n\n | Sub-Prime |
|---|---|---|---|---|---|---|
| \n Voluntary prepayment rates | \n\n | 4% - 34% | \n\n | 0% - 15% | \n\n | 1% - 9% |
| \n Percentage of remaining pool liquidated due to defaults | \n\n | 1% - 40% | \n\n | 9% - 69% | \n\n | 22% - 71% |
| \n Loss severity | \n\n | 30% - 65% | \n\n | 45% - 80% | \n\n | 65% - 110% |
Real Estate Investments
\nOn at least an annual basis, the Company obtains independent appraisals for substantially all of its real estate investments. In addition, the carrying value of all real estate investments is reviewed for impairment on a quarterly basis or when events or changes in circumstances indicate that the carrying amount may not be recoverable. The review for impairment considers the valuation from the independent appraisal, when applicable, and incorporates an estimate of the undiscounted cash flows expected to result from the use and eventual disposition of the real estate property. An impairment loss is recognized if the expected future undiscounted cash flows are less than the carrying value of the real estate property. The impairment loss is the amount by which the carrying amount exceeds fair value.
\nOther Investments
\nInvestments in Private Equity Limited Partnerships, Hedge Funds and Real Estate Partnerships
\nThe Company reviews its investments in private equity limited partnerships, hedge funds and real estate partnerships for impairment no less frequently than quarterly and monitors the performance throughout the year through discussions with the managers/general partners. If the Company becomes aware of an impairment of a partnership's investments at the balance sheet date prior to receiving the partnership's financial statements, it will recognize an impairment by recording a reduction in the carrying value of the partnership with a corresponding charge to net investment income.
\nChanges in Intent to Sell Temporarily Impaired Assets
\nThe Company may, from time to time, sell invested assets subsequent to the balance sheet date that it did not intend to sell at the balance sheet date. Conversely, the Company may not sell invested assets that it asserted that it intended to sell at the balance sheet date. Such changes in intent are due to events occurring subsequent to the balance sheet date. The types of events that may result in a change in intent include, but are not limited to, significant changes in the economic facts and circumstances related to the invested asset (e.g., a downgrade or upgrade from a rating agency), significant unforeseen changes in liquidity needs, or changes in tax laws or the regulatory environment.
\nSecurities Lending
\nThe Company has engaged in securities lending activities from which it generates net investment income by lending certain of its investments to other institutions for short periods of time. Borrowers of these securities provide collateral equal to at least 102% of the market value of the loaned securities plus accrued interest. This collateral is held by a third-party custodian, and the Company has the right to access the collateral only in the event that the institution borrowing the Company's securities is in default under the lending agreement. Therefore, the Company does not recognize the receipt of the collateral held by the third-party custodian or the obligation to return the collateral. The loaned securities remain a recorded asset of the Company. The Company accepts only cash as collateral for securities on loan and restricts the manner in which that cash is invested.
\nReinsurance Recoverables
\nAmounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. The Company reports its reinsurance recoverables net of an allowance for estimated uncollectible reinsurance recoverables. The allowance is based upon the Company's ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and other relevant factors. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance for estimated uncollectible reinsurance recoverables. Any subsequent collections of amounts previously written off are reported as part of claims and claim adjustment expenses. The Company evaluates and monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to minimize its exposure to significant losses from reinsurer insolvencies.
\nDeferred Acquisition Costs
\nIncremental direct costs of acquired, new and renewal insurance contracts, consisting of commissions (other than contingent commissions) and premium-related taxes, are capitalized and charged to expense pro rata over the contract periods in which the related premiums are earned. Deferred acquisition costs are reviewed to determine if they are recoverable from future income and, if not, are charged to expense. Future investment income attributable to related premiums is taken into account in measuring the recoverability of the carrying value of this asset. All other acquisition expenses are charged to operations as incurred.
\nContractholder Receivables and Payables
\nUnder certain workers' compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a gross basis in the consolidated balance sheet in contractholder payables and contractholder receivables, respectively.
\nGoodwill and Other Intangible Assets
\nThe Company performs a review, on at least an annual basis, of goodwill held by the reporting units which are the Company's three operating and reportable segments: Business and International Insurance; Bond & Specialty Insurance; and Personal Insurance. The Company estimates the fair value of its reporting units and compares it to their carrying value, including goodwill. If the carrying values of the reporting units were to exceed their fair value, the amount of the impairment would be calculated and goodwill adjusted accordingly.
\nThe Company uses a discounted cash flow model to estimate the fair value of its reporting units. The discounted cash flow model is an income approach to valuation that is based on a detailed cash flow analysis for deriving a current fair value of reporting units and is representative of the Company's reporting units' current and expected future financial performance. The discount rate assumptions reflect the Company's assessment of the risks inherent in the projected future cash flows and the Company's weighted-average cost of capital, and are compared against available market data for reasonableness.
\nOther indefinite-lived intangible assets held by the Company are also reviewed for impairment on at least an annual basis. The classification of the asset as indefinite-lived is reassessed and an impairment is recognized if the carrying amount of the asset exceeds its fair value.
\nIntangible assets that are deemed to have a finite useful life are amortized over their useful lives. The carrying amount of intangible assets with a finite useful life is regularly reviewed for indicators of impairment in value. Impairment is recognized only if the carrying amount of the intangible asset is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the fair value of the asset.
\nAs a result of the reviews performed for the years ended December 31, 2014, 2013 and 2012, the Company determined that the estimated fair value substantially exceeded the respective carrying value of its reporting units for those years and that goodwill was not impaired. The Company also determined during its reviews for each year that its other indefinite-lived intangible assets and finite-lived intangible assets were not impaired.
\nClaims and Claim Adjustment Expense Reserves
\nClaims and claim adjustment expense reserves represent estimates for the ultimate cost of unpaid reported and unreported claims incurred and related expenses. The reserves are adjusted regularly based upon experience. Included in the claims and claim adjustment expense reserves in the consolidated balance sheet are certain reserves discounted to the present value of estimated future payments. The liabilities for losses for most long-term disability and annuity claim payments, primarily arising from workers' compensation insurance and workers' compensation excess insurance policies, were discounted using a rate of 5% at both December 31, 2014 and 2013. These discounted reserves totaled $2.01 billion and $2.21 billion at December 31, 2014 and 2013, respectively.
\nThe Company performs a continuing review of its claims and claim adjustment expense reserves, including its reserving techniques and its reinsurance. The reserves are also reviewed regularly by qualified actuaries employed by the Company. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the results of operations in the period in which the estimates are changed. Such changes in estimates could occur in a future period and may be material to the Company's results of operations and financial position in such period.
\nOther Liabilities
\nIncluded in other liabilities in the consolidated balance sheet is the Company's estimate of its liability for guaranty fund and other insurance-related assessments. The liability for expected state guaranty fund and other premium-based assessments is recognized as the Company writes or becomes obligated to write or renew the premiums on which the assessments are expected to be based. The liability for loss-based assessments is recognized as the related losses are incurred. At December 31, 2014 and 2013, the Company had a liability of $245 million and $261 million, respectively, for guaranty fund and other insurance-related assessments and related recoverables of $15 million and $14 million, respectively. The liability for such assessments and the related recoverables are not discounted for the time value of money. The loss-based assessments are expected to be paid over a period ranging from one year to the life expectancy of certain workers' compensation claimants and the recoveries are expected to occur over the same period of time.
\nAlso included in other liabilities is an accrual for policyholder dividends. Certain insurance contracts, primarily workers' compensation, are participating whereby dividends are paid to policyholders in accordance with contract provisions. Net written premiums for participating dividend policies were approximately 1%, 1% and 2% of total net written premiums for the years ended December 31, 2014, 2013 and 2012, respectively. Policyholder dividends are accrued against earnings using best available estimates of amounts to be paid. The liability accrued for policyholder dividends totaled $54 million and $53 million at December 31, 2014 and 2013, respectively.
\nTreasury Stock
\nThe 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.
\nStatutory Accounting Practices
\nThe 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.
\nPermitted statutory accounting practices are those practices that differ either from state-prescribed statutory accounting practices or NAIC statutory accounting practices.
\nThe 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.
\nThe Company's non-U.S. insurance subsidiaries file financial statements prepared in accordance with the regulatory reporting requirements of their respective local jurisdiction.
\nPremiums and Unearned Premium Reserves
\nPremiums 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.
\nCeded 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.
\nFee Income
\nFee 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.
\nOther Revenues
\nOther 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.
\nIncome Taxes
\nThe Company recognizes deferred income tax assets and liabilities for the expected future tax effects attributable to temporary differences between the financial statement and tax return bases of assets and liabilities, based on enacted tax rates and other provisions of the tax law. The effect of a change in tax laws or rates on deferred tax assets and liabilities is recognized in income in the period in which such change is enacted. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.
\nForeign Currency Translation
\nThe Company assigns functional currencies to its foreign operations, which are generally the currencies of the local operating environment. Foreign currency amounts are remeasured to the functional currency, and the resulting foreign exchange gains or losses are reflected in earnings. Functional currency amounts are then translated into U.S. dollars. The foreign currency remeasurement and translation are calculated using current exchange rates for items reported in the balance sheets and average exchange rates for items recorded in earnings. The change in unrealized foreign currency translation gain or loss during the year, net of tax, is a component of other comprehensive income.
\nShare-Based Compensation
\nThe Company has an employee stock incentive compensation plan that permits grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, deferred stock, stock units, performance awards and other share-based or share-denominated awards with respect to the Company's common stock.
\nCompensation cost is measured based on the grant-date fair value of an award, utilizing the assumptions discussed in note 13. Compensation cost is recognized for financial reporting purposes over the period in which the employee is required to provide service in exchange for the award (generally the vesting period). In connection with certain share-based awards, participants are entitled to receive dividends during the vesting period, either in cash or dividend equivalent shares, commensurate with the dividends paid to common shareholders. Dividends and dividend equivalent shares on awards that are expected to vest are recorded in retained earnings. Dividends paid on awards that are not expected to vest as part of the Company's forfeiture estimate are recorded as compensation expense.
\n\n
| \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014) | \n\n | Prime | \n\n | Alt-A | \n\n | Sub-Prime |
|---|---|---|---|---|---|---|
| \n Voluntary prepayment rates | \n\n | 4% - 34% | \n\n | 0% - 15% | \n\n | 1% - 9% |
| \n Percentage of remaining pool liquidated due to defaults | \n\n | 1% - 40% | \n\n | 9% - 69% | \n\n | 22% - 71% |
| \n Loss severity | \n\n | 30% - 65% | \n\n | 45% - 80% | \n\n | 65% - 110% |
\n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | Business and \nInternational \nInsurance | \n\n | Bond & Specialty \nInsurance | \n\n | Personal \nInsurance | \n\n | Total \nReportable \nSegments | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n 2014 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n14,512 | \n\n | $ | \n2,076 | \n\n | $ | \n7,125 | \n\n | $ | \n23,713 | \n|
| \n Net investment income | \n\n | \n | 2,156 | \n\n | \n | 252 | \n\n | \n | 379 | \n\n | \n | 2,787 | \n|
| \n Fee income | \n\n | \n | 438 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 438 | \n|
| \n Other revenues | \n\n | \n | 46 | \n\n | \n | 19 | \n\n | \n | 80 | \n\n | \n | 145 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues(1) | \n\n | $ | \n17,152 | \n\n | $ | \n2,347 | \n\n | $ | \n7,584 | \n\n | $ | \n27,083 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amortization and depreciation | \n\n | $ | \n2,909 | \n\n | $ | \n482 | \n\n | $ | \n1,347 | \n\n | $ | \n4,738 | \n|
| \n Income tax expense | \n\n | \n | 798 | \n\n | \n | 348 | \n\n | \n | 366 | \n\n | \n | 1,512 | \n|
| \n Operating income(1) | \n\n | \n | 2,347 | \n\n | \n | 727 | \n\n | \n | 824 | \n\n | \n | 3,898 | \n|
| \n 2013 | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Premiums | \n\n | $ | \n13,332 | \n\n | $ | \n1,981 | \n\n | $ | \n7,324 | \n\n | $ | \n22,637 | \n|
| \n Net investment income | \n\n | \n | 2,087 | \n\n | \n | 260 | \n\n | \n | 369 | \n\n | \n | 2,716 | \n|
| \n Fee income | \n\n | \n | 395 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 395 | \n|
| \n Other revenues | \n\n | \n | 160 | \n\n | \n | 20 | \n\n | \n | 103 | \n\n | \n | 283 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues(1) | \n\n | $ | \n15,974 | \n\n | $ | \n2,261 | \n\n | $ | \n7,796 | \n\n | $ | \n26,031 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amortization and depreciation | \n\n | $ | \n2,751 | \n\n | $ | \n473 | \n\n | $ | \n1,461 | \n\n | $ | \n4,685 | \n|
| \n Income tax expense | \n\n | \n | 758 | \n\n | \n | 227 | \n\n | \n | 366 | \n\n | \n | 1,351 | \n|
| \n Operating income(1) | \n\n | \n | 2,404 | \n\n | \n | 573 | \n\n | \n | 838 | \n\n | \n | 3,815 | \n|
| \n 2012 | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Premiums | \n\n | $ | \n12,779 | \n\n | $ | \n1,957 | \n\n | $ | \n7,621 | \n\n | $ | \n22,357 | \n|
| \n Net investment income | \n\n | \n | 2,205 | \n\n | \n | 280 | \n\n | \n | 404 | \n\n | \n | 2,889 | \n|
| \n Fee income | \n\n | \n | 323 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 323 | \n|
| \n Other revenues | \n\n | \n | 41 | \n\n | \n | 25 | \n\n | \n | 66 | \n\n | \n | 132 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues(1) | \n\n | $ | \n15,348 | \n\n | $ | \n2,262 | \n\n | $ | \n8,091 | \n\n | $ | \n25,701 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amortization and depreciation | \n\n | $ | \n2,654 | \n\n | $ | \n470 | \n\n | $ | \n1,602 | \n\n | $ | \n4,726 | \n|
| \n Income tax expense | \n\n | \n | 580 | \n\n | \n | 214 | \n\n | \n | 32 | \n\n | \n | 826 | \n|
| \n Operating income(1) | \n\n | \n | 1,981 | \n\n | \n | 504 | \n\n | \n | 217 | \n\n | \n | 2,702 | \n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Business and International Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Domestic: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Select Accounts | \n\n | $ | \n2,707 | \n\n | $ | \n2,724 | \n\n | $ | \n2,775 | \n|
| \n Middle Market | \n\n | \n | 6,108 | \n\n | \n | 5,862 | \n\n | \n | 5,654 | \n|
| \n National Accounts | \n\n | \n | 1,047 | \n\n | \n | 1,010 | \n\n | \n | 907 | \n|
| \n First Party | \n\n | \n | 1,579 | \n\n | \n | 1,552 | \n\n | \n | 1,436 | \n|
| \n Specialized Distribution | \n\n | \n | 1,074 | \n\n | \n | 1,085 | \n\n | \n | 1,100 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Domestic | \n\n | \n | 12,515 | \n\n | \n | 12,233 | \n\n | \n | 11,872 | \n|
| \n International | \n\n | \n | 2,121 | \n\n | \n | 1,279 | \n\n | \n | 1,057 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Business and International Insurance | \n\n | \n | 14,636 | \n\n | \n | 13,512 | \n\n | \n | 12,929 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Bond & Specialty Insurance | \n\n | \n | 2,103 | \n\n | \n | 2,030 | \n\n | \n | 1,924 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Personal Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Automobile | \n\n | \n | 3,390 | \n\n | \n | 3,370 | \n\n | \n | 3,642 | \n|
| \n Homeowners and Other | \n\n | \n | 3,775 | \n\n | \n | 3,855 | \n\n | \n | 3,952 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Personal Insurance | \n\n | \n | 7,165 | \n\n | \n | 7,225 | \n\n | \n | 7,594 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated net written premiums | \n\n | $ | \n23,904 | \n\n | $ | \n22,767 | \n\n | $ | \n22,447 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenue reconciliation | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Earned premiums | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Business and International Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Domestic: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Workers' compensation | \n\n | $ | \n3,713 | \n\n | $ | \n3,560 | \n\n | $ | \n3,222 | \n|
| \n Commercial automobile | \n\n | \n | 1,901 | \n\n | \n | 1,904 | \n\n | \n | 1,943 | \n|
| \n Commercial property | \n\n | \n | 1,756 | \n\n | \n | 1,698 | \n\n | \n | 1,621 | \n|
| \n General liability | \n\n | \n | 1,852 | \n\n | \n | 1,790 | \n\n | \n | 1,757 | \n|
| \n Commercial multi-peril | \n\n | \n | 3,070 | \n\n | \n | 3,093 | \n\n | \n | 3,113 | \n|
| \n Other | \n\n | \n | 42 | \n\n | \n | 39 | \n\n | \n | 35 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Domestic | \n\n | \n | 12,334 | \n\n | \n | 12,084 | \n\n | \n | 11,691 | \n|
| \n International | \n\n | \n | 2,178 | \n\n | \n | 1,248 | \n\n | \n | 1,088 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Business and International Insurance | \n\n | \n | 14,512 | \n\n | \n | 13,332 | \n\n | \n | 12,779 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Bond & Specialty Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fidelity and surety | \n\n | \n | 936 | \n\n | \n | 913 | \n\n | \n | 939 | \n|
| \n General liability | \n\n | \n | 963 | \n\n | \n | 891 | \n\n | \n | 850 | \n|
| \n Other | \n\n | \n | 177 | \n\n | \n | 177 | \n\n | \n | 168 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Bond & Specialty Insurance | \n\n | \n | 2,076 | \n\n | \n | 1,981 | \n\n | \n | 1,957 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Personal Insurance: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Automobile | \n\n | \n | 3,316 | \n\n | \n | 3,431 | \n\n | \n | 3,665 | \n|
| \n Homeowners and Other | \n\n | \n | 3,809 | \n\n | \n | 3,893 | \n\n | \n | 3,956 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Personal Insurance | \n\n | \n | 7,125 | \n\n | \n | 7,324 | \n\n | \n | 7,621 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total earned premiums | \n\n | \n | 23,713 | \n\n | \n | 22,637 | \n\n | \n | 22,357 | \n|
| \n Net investment income | \n\n | \n | 2,787 | \n\n | \n | 2,716 | \n\n | \n | 2,889 | \n|
| \n Fee income | \n\n | \n | 438 | \n\n | \n | 395 | \n\n | \n | 323 | \n|
| \n Other revenues | \n\n | \n | 145 | \n\n | \n | 283 | \n\n | \n | 132 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating revenues for reportable segments | \n\n | \n | 27,083 | \n\n | \n | 26,031 | \n\n | \n | 25,701 | \n|
| \n Other revenues | \n\n | \n | — | \n\n | \n | (6 | \n) | \n\n | (12 | \n) |
| \n Net realized investment gains | \n\n | \n | 79 | \n\n | \n | 166 | \n\n | \n | 51 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated revenues | \n\n | $ | \n27,162 | \n\n | $ | \n26,191 | \n\n | $ | \n25,740 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income reconciliation, net of tax | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Total operating income for reportable segments | \n\n | $ | \n3,898 | \n\n | $ | \n3,815 | \n\n | $ | \n2,702 | \n|
| \n Interest Expense and Other(1) | \n\n | \n | (257 | \n) | \n\n | (248 | \n) | \n\n | (261 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total operating income | \n\n | \n | 3,641 | \n\n | \n | 3,567 | \n\n | \n | 2,441 | \n|
| \n Net realized investment gains | \n\n | \n | 51 | \n\n | \n | 106 | \n\n | \n | 32 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated net income | \n\n | $ | \n3,692 | \n\n | $ | \n3,673 | \n\n | $ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Asset reconciliation: | \n\n | \n | \n | \n | \n | \n | |
| \n Business and International Insurance | \n\n | $ | \n82,309 | \n\n | $ | \n82,789 | \n|
| \n Bond & Specialty Insurance | \n\n | \n | 7,525 | \n\n | \n | 7,648 | \n|
| \n Personal Insurance | \n\n | \n | 12,798 | \n\n | \n | 12,870 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total assets for reportable segments | \n\n | \n | 102,632 | \n\n | \n | 103,307 | \n|
| \n Other assets(1) | \n\n | \n | 446 | \n\n | \n | 505 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total consolidated assets | \n\n | $ | \n103,078 | \n\n | $ | \n103,812 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n U.S. | \n\n | $ | \n25,091 | \n\n | $ | \n25,138 | \n\n | $ | \n24,827 | \n|
| \n Non-U.S.: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Canada | \n\n | \n | 1,474 | \n\n | \n | 529 | \n\n | \n | 349 | \n|
| \n Other Non-U.S. | \n\n | \n | 597 | \n\n | \n | 524 | \n\n | \n | 564 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total Non-U.S. | \n\n | \n | 2,071 | \n\n | \n | 1,053 | \n\n | \n | 913 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | $ | \n27,162 | \n\n | $ | \n26,191 | \n\n | $ | \n25,740 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross Unrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | Amortized \nCost | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2014, in millions) | \n\n | Gains | \n\n | Losses | \n|||||||||
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,022 | \n\n | $ | \n36 | \n\n | $ | \n5 | \n\n | $ | \n2,053 | \n|
| \n Obligations of states, municipalities and political subdivisions: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Pre-refunded | \n\n | \n | 7,229 | \n\n | \n | 332 | \n\n | \n | — | \n\n | \n | 7,561 | \n|
| \n All other | \n\n | \n | 24,666 | \n\n | \n | 1,356 | \n\n | \n | 10 | \n\n | \n | 26,012 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total obligations of states, municipalities and political subdivisions | \n\n | \n | 31,895 | \n\n | \n | 1,688 | \n\n | \n | 10 | \n\n | \n | 33,573 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,320 | \n\n | \n | 48 | \n\n | \n | — | \n\n | \n | 2,368 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,052 | \n\n | \n | 165 | \n\n | \n | 4 | \n\n | \n | 2,213 | \n|
| \n All other corporate bonds | \n\n | \n | 22,390 | \n\n | \n | 844 | \n\n | \n | 99 | \n\n | \n | 23,135 | \n|
| \n Redeemable preferred stock | \n\n | \n | 122 | \n\n | \n | 10 | \n\n | \n | — | \n\n | \n | 132 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n60,801 | \n\n | $ | \n2,791 | \n\n | $ | \n118 | \n\n | $ | \n63,474 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross Unrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | Amortized \nCost | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2013, in millions) | \n\n | Gains | \n\n | Losses | \n|||||||||
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,288 | \n\n | $ | \n39 | \n\n | $ | \n12 | \n\n | $ | \n2,315 | \n|
| \n Obligations of states, municipalities and political subdivisions: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Pre-refunded | \n\n | \n | 9,074 | \n\n | \n | 445 | \n\n | \n | 1 | \n\n | \n | 9,518 | \n|
| \n All other | \n\n | \n | 25,414 | \n\n | \n | 991 | \n\n | \n | 361 | \n\n | \n | 26,044 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total obligations of states, municipalities and political subdivisions | \n\n | \n | 34,488 | \n\n | \n | 1,436 | \n\n | \n | 362 | \n\n | \n | 35,562 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,552 | \n\n | \n | 33 | \n\n | \n | 8 | \n\n | \n | 2,577 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,263 | \n\n | \n | 179 | \n\n | \n | 18 | \n\n | \n | 2,424 | \n|
| \n All other corporate bonds | \n\n | \n | 20,472 | \n\n | \n | 767 | \n\n | \n | 299 | \n\n | \n | 20,940 | \n|
| \n Redeemable preferred stock | \n\n | \n | 133 | \n\n | \n | 6 | \n\n | \n | 1 | \n\n | \n | 138 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n62,196 | \n\n | $ | \n2,460 | \n\n | $ | \n700 | \n\n | $ | \n63,956 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Amortized \nCost | \n\n | Fair \nValue | \n|||
|---|---|---|---|---|---|---|---|
| \n Due in one year or less | \n\n | $ | \n7,762 | \n\n | $ | \n7,859 | \n|
| \n Due after 1 year through 5 years | \n\n | \n | 18,447 | \n\n | \n | 19,325 | \n|
| \n Due after 5 years through 10 years | \n\n | \n | 16,815 | \n\n | \n | 17,462 | \n|
| \n Due after 10 years | \n\n | \n | 15,725 | \n\n | \n | 16,615 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n
| \n\n | \n | 58,749 | \n\n | \n | 61,261 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,052 | \n\n | \n | 2,213 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n60,801 | \n\n | $ | \n63,474 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross \nUnrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2014, in millions) | \n\n | Cost | \n\n | Gains | \n\n | Losses | \n|||||||
| \n Public common stock | \n\n | $ | \n400 | \n\n | $ | \n295 | \n\n | $ | \n4 | \n\n | $ | \n691 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 179 | \n\n | \n | 31 | \n\n | \n | 2 | \n\n | \n | 208 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n579 | \n\n | $ | \n326 | \n\n | $ | \n6 | \n\n | $ | \n899 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | Gross \nUnrealized | \n\n | | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | | \n\n | Fair \nValue | \n|||||||||
| \n (at December 31, 2013, in millions) | \n\n | Cost | \n\n | Gains | \n\n | Losses | \n|||||||
| \n Public common stock | \n\n | $ | \n385 | \n\n | $ | \n226 | \n\n | $ | \n1 | \n\n | $ | \n610 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 301 | \n\n | \n | 34 | \n\n | \n | 2 | \n\n | \n | 333 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n686 | \n\n | $ | \n260 | \n\n | $ | \n3 | \n\n | $ | \n943 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Less than 12 months | \n\n | 12 months or longer | \n\n | Total | \n|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (at December 31, 2014, in millions) | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n|||||||
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n180 | \n\n | $ | \n2 | \n\n | $ | \n125 | \n\n | $ | \n3 | \n\n | $ | \n305 | \n\n | $ | \n5 | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 173 | \n\n | \n | 1 | \n\n | \n | 797 | \n\n | \n | 9 | \n\n | \n | 970 | \n\n | \n | 10 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 50 | \n\n | \n | — | \n\n | \n | 24 | \n\n | \n | — | \n\n | \n | 74 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 68 | \n\n | \n | — | \n\n | \n | 192 | \n\n | \n | 4 | \n\n | \n | 260 | \n\n | \n | 4 | \n|
| \n All other corporate bonds | \n\n | \n | 2,148 | \n\n | \n | 38 | \n\n | \n | 2,355 | \n\n | \n | 61 | \n\n | \n | 4,503 | \n\n | \n | 99 | \n|
| \n Redeemable preferred stock | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 2,619 | \n\n | \n | 41 | \n\n | \n | 3,493 | \n\n | \n | 77 | \n\n | \n | 6,112 | \n\n | \n | 118 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 81 | \n\n | \n | 4 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 82 | \n\n | \n | 4 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 44 | \n\n | \n | 1 | \n\n | \n | 42 | \n\n | \n | 1 | \n\n | \n | 86 | \n\n | \n | 2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 125 | \n\n | \n | 5 | \n\n | \n | 43 | \n\n | \n | 1 | \n\n | \n | 168 | \n\n | \n | 6 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n2,744 | \n\n | $ | \n46 | \n\n | $ | \n3,536 | \n\n | $ | \n78 | \n\n | $ | \n6,280 | \n\n | $ | \n124 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Less than 12 months | \n\n | 12 months or longer | \n\n | Total | \n|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (at December 31, 2013, in millions) | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n\n | Fair \nValue | \n\n | Gross \nUnrealized \nLosses | \n|||||||
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n433 | \n\n | $ | \n12 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n433 | \n\n | $ | \n12 | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 4,785 | \n\n | \n | 298 | \n\n | \n | 432 | \n\n | \n | 64 | \n\n | \n | 5,217 | \n\n | \n | 362 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 907 | \n\n | \n | 8 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 908 | \n\n | \n | 8 | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 542 | \n\n | \n | 17 | \n\n | \n | 21 | \n\n | \n | 1 | \n\n | \n | 563 | \n\n | \n | 18 | \n|
| \n All other corporate bonds | \n\n | \n | 6,887 | \n\n | \n | 253 | \n\n | \n | 421 | \n\n | \n | 46 | \n\n | \n | 7,308 | \n\n | \n | 299 | \n|
| \n Redeemable preferred stock | \n\n | \n | 82 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 82 | \n\n | \n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 13,636 | \n\n | \n | 589 | \n\n | \n | 875 | \n\n | \n | 111 | \n\n | \n | 14,511 | \n\n | \n | 700 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 53 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 53 | \n\n | \n | 1 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 147 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 147 | \n\n | \n | 2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 200 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 200 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n13,836 | \n\n | $ | \n592 | \n\n | $ | \n875 | \n\n | $ | \n111 | \n\n | $ | \n14,711 | \n\n | $ | \n703 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Period For Which Fair Value Is Less Than 80% of Amortized Cost | \n||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (in millions) | \n\n | 3 Months \nor Less | \n\n | Greater Than \n3 Months, \n6 Months \nor Less | \n\n | Greater Than \n6 Months, \n12 Months \nor Less | \n\n | Greater Than \n12 Months | \n\n | Total | \n||||||
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Mortgage-backed securities | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Other | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 2 | \n\n | \n | 2 | \n\n | \n | 8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 2 | \n\n | \n | 2 | \n\n | \n | 8 | \n|
| \n Equity securities | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n4 | \n\n | $ | \n— | \n\n | $ | \n2 | \n\n | $ | \n2 | \n\n | $ | \n8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 1 | \n\n | \n | 2 | \n\n | \n | 4 | \n|
| \n All other corporate bonds | \n\n | \n | 15 | \n\n | \n | 3 | \n\n | \n | 4 | \n|
| \n Redeemable preferred stock | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 16 | \n\n | \n | 5 | \n\n | \n | 8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Public common stock | \n\n | \n | 9 | \n\n | \n | 5 | \n\n | \n | 3 | \n|
| \n Non-redeemable preferred stock | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 9 | \n\n | \n | 5 | \n\n | \n | 4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments | \n\n | \n | 1 | \n\n | \n | 5 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n26 | \n\n | $ | \n15 | \n\n | $ | \n15 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Year ended December 31, 2014 \n(in millions) | \n\n | Cumulative \nOTTI Credit \nLosses \nRecognized for \nSecurities Held, \nBeginning of \nPeriod | \n\n | Additions for \nOTTI Securities \nWhere No \nCredit Losses \nWere \nPreviously \nRecognized | \n\n | Additions for \nOTTI Securities \nWhere Credit \nLosses Have \nBeen \nPreviously \nRecognized | \n\n | Reductions \nDue to \nSales/Defaults \nof Credit- \nImpaired \nSecurities | \n\n | Adjustments to \nBook Value \nof Credit- \nImpaired \nSecurities due \nto Changes in \nCash Flows | \n\n | Cumulative OTTI \nCredit Losses \nRecognized for \nSecurities Still \nHeld, End of \nPeriod | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | $ | \n53 | \n\n | $ | \n— | \n\n | $ | \n1 | \n\n | $ | \n(5 | \n) | \n$ | \n(9 | \n) | \n$ | \n40 | \n|
| \n All other corporate bonds | \n\n | \n | 65 | \n\n | \n | — | \n\n | \n | 3 | \n\n | \n | (6 | \n) | \n\n | (3 | \n) | \n\n | 59 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | $ | \n118 | \n\n | $ | \n— | \n\n | $ | \n4 | \n\n | $ | \n(11 | \n) | \n$ | \n(12 | \n) | \n$ | \n99 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Year ended December 31, 2013 \n(in millions) | \n\n | Cumulative \nOTTI Credit \nLosses \nRecognized for \nSecurities Held, \nBeginning of \nPeriod | \n\n | Additions for \nOTTI Securities \nWhere No \nCredit Losses \nWere \nPreviously \nRecognized | \n\n | Additions for \nOTTI Securities \nWhere Credit \nLosses Have \nBeen \nPreviously \nRecognized | \n\n | Reductions \nDue to \nSales/Defaults \nof Credit- \nImpaired \nSecurities | \n\n | Adjustments to \nBook Value \nof Credit- \nImpaired \nSecurities due \nto Changes in \nCash Flows | \n\n | Cumulative OTTI \nCredit Losses \nRecognized for \nSecurities Still \nHeld, End of \nPeriod | \n|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | $ | \n55 | \n\n | $ | \n— | \n\n | $ | \n2 | \n\n | $ | \n— | \n\n | $ | \n(4 | \n) | \n$ | \n53 | \n|
| \n All other corporate bonds | \n\n | \n | 72 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | (7 | \n) | \n\n | (3 | \n) | \n\n | 65 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | $ | \n127 | \n\n | $ | \n3 | \n\n | $ | \n2 | \n\n | $ | \n(7 | \n) | \n$ | \n(7 | \n) | \n$ | \n118 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Gross investment income | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | $ | \n2,244 | \n\n | $ | \n2,310 | \n\n | $ | \n2,439 | \n|
| \n Equity securities | \n\n | \n | 40 | \n\n | \n | 31 | \n\n | \n | 28 | \n|
| \n Short-term securities | \n\n | \n | 9 | \n\n | \n | 11 | \n\n | \n | 10 | \n|
| \n Real estate | \n\n | \n | 44 | \n\n | \n | 37 | \n\n | \n | 34 | \n|
| \n Other investments | \n\n | \n | 489 | \n\n | \n | 364 | \n\n | \n | 414 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Gross investment income | \n\n | \n | 2,826 | \n\n | \n | 2,753 | \n\n | \n | 2,925 | \n|
| \n Investment expenses | \n\n | \n | 39 | \n\n | \n | 37 | \n\n | \n | 36 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net investment income | \n\n | $ | \n2,787 | \n\n | $ | \n2,716 | \n\n | $ | \n2,889 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Changes in net unrealized investment gains | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | $ | \n913 | \n\n | $ | \n(2,804 | \n) | \n$ | \n326 | \n|
| \n Equity securities | \n\n | \n | 63 | \n\n | \n | 74 | \n\n | \n | 38 | \n|
| \n Other investments | \n\n | \n | 2 | \n\n | \n | (1 | \n) | \n\n | (2 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Change in net pretax unrealized gains on investment securities | \n\n | \n | 978 | \n\n | \n | (2,731 | \n) | \n\n | 362 | \n|
| \n Related tax expense (benefit) | \n\n | \n | 334 | \n\n | \n | (950 | \n) | \n\n | 130 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Change in net unrealized gains on investment securities | \n\n | \n | 644 | \n\n | \n | (1,781 | \n) | \n\n | 232 | \n|
| \n Balance, beginning of year | \n\n | \n | 1,322 | \n\n | \n | 3,103 | \n\n | \n | 2,871 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, end of year | \n\n | $ | \n1,966 | \n\n | $ | \n1,322 | \n\n | $ | \n3,103 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,053 | \n\n | $ | \n2,049 | \n\n | $ | \n4 | \n\n | $ | \n— | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 33,573 | \n\n | \n | — | \n\n | \n | 33,560 | \n\n | \n | 13 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,368 | \n\n | \n | — | \n\n | \n | 2,368 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,213 | \n\n | \n | — | \n\n | \n | 2,203 | \n\n | \n | 10 | \n|
| \n All other corporate bonds | \n\n | \n | 23,135 | \n\n | \n | — | \n\n | \n | 22,934 | \n\n | \n | 201 | \n|
| \n Redeemable preferred stock | \n\n | \n | 132 | \n\n | \n | 2 | \n\n | \n | 122 | \n\n | \n | 8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 63,474 | \n\n | \n | 2,051 | \n\n | \n | 61,191 | \n\n | \n | 232 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 691 | \n\n | \n | 691 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 208 | \n\n | \n | 82 | \n\n | \n | 126 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 899 | \n\n | \n | 773 | \n\n | \n | 126 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments | \n\n | \n | 55 | \n\n | \n | 19 | \n\n | \n | — | \n\n | \n | 36 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n64,428 | \n\n | $ | \n2,843 | \n\n | $ | \n61,317 | \n\n | $ | \n268 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities and obligations of U.S. government and government agencies and authorities | \n\n | $ | \n2,315 | \n\n | $ | \n2,298 | \n\n | $ | \n17 | \n\n | $ | \n— | \n|
| \n Obligations of states, municipalities and political subdivisions | \n\n | \n | 35,562 | \n\n | \n | 1 | \n\n | \n | 35,538 | \n\n | \n | 23 | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 2,577 | \n\n | \n | — | \n\n | \n | 2,577 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 2,424 | \n\n | \n | — | \n\n | \n | 2,415 | \n\n | \n | 9 | \n|
| \n All other corporate bonds | \n\n | \n | 20,940 | \n\n | \n | — | \n\n | \n | 20,726 | \n\n | \n | 214 | \n|
| \n Redeemable preferred stock | \n\n | \n | 138 | \n\n | \n | — | \n\n | \n | 129 | \n\n | \n | 9 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 63,956 | \n\n | \n | 2,299 | \n\n | \n | 61,402 | \n\n | \n | 255 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Public common stock | \n\n | \n | 610 | \n\n | \n | 610 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Non-redeemable preferred stock | \n\n | \n | 333 | \n\n | \n | 138 | \n\n | \n | 195 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total equity securities | \n\n | \n | 943 | \n\n | \n | 748 | \n\n | \n | 195 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments | \n\n | \n | 53 | \n\n | \n | 19 | \n\n | \n | — | \n\n | \n | 34 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n64,952 | \n\n | $ | \n3,066 | \n\n | $ | \n61,597 | \n\n | $ | \n289 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Fixed \nMaturities | \n\n | Other \nInvestments | \n\n | Total | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Balance at December 31, 2013 | \n\n | $ | \n255 | \n\n | $ | \n34 | \n\n | $ | \n289 | \n|
| \n Total realized and unrealized investment gains (losses): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Reported in net realized investment gains(1) | \n\n | \n | 3 | \n\n | \n | 1 | \n\n | \n | 4 | \n|
| \n Reported in increases (decreases) in other comprehensive income | \n\n | \n | (2 | \n) | \n\n | 1 | \n\n | \n | (1 | \n) |
| \n Purchases, sales and settlements/maturities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Purchases | \n\n | \n | 232 | \n\n | \n | 1 | \n\n | \n | 233 | \n|
| \n Sales | \n\n | \n | (1 | \n) | \n\n | (1 | \n) | \n\n | (2 | \n) |
| \n Settlements/maturities | \n\n | \n | (90 | \n) | \n\n | — | \n\n | \n | (90 | \n) |
| \n Gross transfers into Level 3 | \n\n | \n | 18 | \n\n | \n | — | \n\n | \n | 18 | \n|
| \n Gross transfers out of Level 3 | \n\n | \n | (183 | \n) | \n\n | — | \n\n | \n | (183 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at December 31, 2014 | \n\n | $ | \n232 | \n\n | $ | \n36 | \n\n | $ | \n268 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amount of total realized investment gains (losses) for the period included in the consolidated statement of income attributable to changes in the fair value of assets still held at the reporting date | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Fixed \nMaturities | \n\n | Other \nInvestments | \n\n | Total | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Balance at December 31, 2012 | \n\n | $ | \n230 | \n\n | $ | \n54 | \n\n | $ | \n284 | \n|
| \n Total realized and unrealized investment gains (losses): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Reported in net realized investment gains(1) | \n\n | \n | 4 | \n\n | \n | 12 | \n\n | \n | 16 | \n|
| \n Reported in increases (decreases) in other comprehensive income | \n\n | \n | (2 | \n) | \n\n | 1 | \n\n | \n | (1 | \n) |
| \n Purchases, sales and settlements/maturities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Purchases | \n\n | \n | 180 | \n\n | \n | — | \n\n | \n | 180 | \n|
| \n Sales | \n\n | \n | (25 | \n) | \n\n | (33 | \n) | \n\n | (58 | \n) |
| \n Settlements/maturities | \n\n | \n | (83 | \n) | \n\n | — | \n\n | \n | (83 | \n) |
| \n Gross transfers into Level 3 | \n\n | \n | 15 | \n\n | \n | — | \n\n | \n | 15 | \n|
| \n Gross transfers out of Level 3 | \n\n | \n | (64 | \n) | \n\n | — | \n\n | \n | (64 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at December 31, 2013 | \n\n | $ | \n255 | \n\n | $ | \n34 | \n\n | $ | \n289 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amount of total realized investment gains (losses) for the period included in the consolidated statement of income attributable to changes in the fair value of assets still held at the reporting date | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Carrying \nValue | \n\n | Fair \nValue | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Financial assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Short-term securities | \n\n | $ | \n4,364 | \n\n | $ | \n4,364 | \n\n | $ | \n1,283 | \n\n | $ | \n3,042 | \n\n | $ | \n39 | \n|
| \n Financial liabilities: | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Debt | \n\n | $ | \n6,249 | \n\n | $ | \n7,522 | \n\n | $ | \n— | \n\n | $ | \n7,522 | \n\n | $ | \n— | \n|
| \n Commercial paper | \n\n | \n | 100 | \n\n | \n | 100 | \n\n | \n | — | \n\n | \n | 100 | \n\n | \n | — | \n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Carrying \nValue | \n\n | Fair \nValue | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Financial assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Short-term securities | \n\n | $ | \n3,882 | \n\n | $ | \n3,882 | \n\n | $ | \n1,608 | \n\n | $ | \n2,215 | \n\n | $ | \n59 | \n|
| \n Financial liabilities: | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Debt | \n\n | $ | \n6,246 | \n\n | $ | \n7,123 | \n\n | $ | \n— | \n\n | $ | \n7,123 | \n\n | $ | \n— | \n|
| \n Commercial paper | \n\n | \n | 100 | \n\n | \n | 100 | \n\n | \n | — | \n\n | \n | 100 | \n\n | \n | — | \n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Written premiums | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Direct | \n\n | $ | \n24,844 | \n\n | $ | \n23,952 | \n\n | $ | \n23,612 | \n|
| \n Assumed | \n\n | \n | 788 | \n\n | \n | 705 | \n\n | \n | 697 | \n|
| \n Ceded | \n\n | \n | (1,728 | \n) | \n\n | (1,890 | \n) | \n\n | (1,862 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total net written premiums | \n\n | $ | \n23,904 | \n\n | $ | \n22,767 | \n\n | $ | \n22,447 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Earned premiums | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Direct | \n\n | $ | \n24,810 | \n\n | $ | \n23,891 | \n\n | $ | \n23,507 | \n|
| \n Assumed | \n\n | \n | 743 | \n\n | \n | 717 | \n\n | \n | 693 | \n|
| \n Ceded | \n\n | \n | (1,840 | \n) | \n\n | (1,971 | \n) | \n\n | (1,843 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total net earned premiums | \n\n | $ | \n23,713 | \n\n | $ | \n22,637 | \n\n | $ | \n22,357 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Percentage of assumed earned premiums to net earned premiums | \n\n | \n | 3.1 | \n% | \n\n | 3.2 | \n% | \n\n | 3.1 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Ceded claims and claim adjustment expenses incurred | \n\n | $ | \n953 | \n\n | $ | \n1,019 | \n\n | $ | \n1,357 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses | \n\n | $ | \n4,270 | \n\n | $ | \n4,707 | \n|
| \n Allowance for uncollectible reinsurance | \n\n | \n | (203 | \n) | \n\n | (239 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Net reinsurance recoverables | \n\n | \n | 4,067 | \n\n | \n | 4,468 | \n|
| \n Mandatory pools and associations | \n\n | \n | 1,909 | \n\n | \n | 1,897 | \n|
| \n Structured settlements | \n\n | \n | 3,284 | \n\n | \n | 3,348 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total reinsurance recoverables | \n\n | $ | \n9,260 | \n\n | $ | \n9,713 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Business and International Insurance(1) | \n\n | $ | \n2,476 | \n\n | $ | \n2,499 | \n|
| \n Bond & Specialty Insurance | \n\n | \n | 495 | \n\n | \n | 495 | \n|
| \n Personal Insurance | \n\n | \n | 613 | \n\n | \n | 613 | \n|
| \n Other | \n\n | \n | 27 | \n\n | \n | 27 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n3,611 | \n\n | $ | \n3,634 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Gross \nCarrying \nAmount | \n\n | Accumulated \nAmortization | \n\n | Net | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Intangibles subject to amortization | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Customer-related | \n\n | $ | \n460 | \n\n | $ | \n446 | \n\n | $ | \n14 | \n|
| \n Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles(1) | \n\n | \n | 209 | \n\n | \n | 136 | \n\n | \n | 73 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total intangible assets subject to amortization | \n\n | \n | 669 | \n\n | \n | 582 | \n\n | \n | 87 | \n|
| \n Intangible assets not subject to amortization | \n\n | \n | 217 | \n\n | \n | — | \n\n | \n | 217 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other intangible assets | \n\n | $ | \n886 | \n\n | $ | \n582 | \n\n | $ | \n304 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Gross \nCarrying \nAmount | \n\n | Accumulated \nAmortization | \n\n | Net | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Intangibles subject to amortization | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Customer-related | \n\n | $ | \n460 | \n\n | $ | \n414 | \n\n | $ | \n46 | \n|
| \n Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles(1) | \n\n | \n | 201 | \n\n | \n | 113 | \n\n | \n | 88 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total intangible assets subject to amortization | \n\n | \n | 661 | \n\n | \n | 527 | \n\n | \n | 134 | \n|
| \n Intangible assets not subject to amortization | \n\n | \n | 217 | \n\n | \n | — | \n\n | \n | 217 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other intangible assets | \n\n | $ | \n878 | \n\n | $ | \n527 | \n\n | $ | \n351 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Customer-related | \n\n | $ | \n32 | \n\n | $ | \n31 | \n\n | $ | \n33 | \n|
| \n Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles | \n\n | \n | 14 | \n\n | \n | 15 | \n\n | \n | 19 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total amortization expense | \n\n | $ | \n46 | \n\n | $ | \n46 | \n\n | $ | \n52 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Property-casualty | \n\n | $ | \n49,824 | \n\n | $ | \n50,865 | \n|
| \n Accident and health | \n\n | \n | 26 | \n\n | \n | 30 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n49,850 | \n\n | $ | \n50,895 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Claims and claim adjustment expense reserves at beginning of year | \n\n | $ | \n50,865 | \n\n | $ | \n50,888 | \n\n | $ | \n51,353 | \n|
| \n Less reinsurance recoverables on unpaid losses | \n\n | \n | 9,280 | \n\n | \n | 10,254 | \n\n | \n | 10,434 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net reserves at beginning of year | \n\n | \n | 41,585 | \n\n | \n | 40,634 | \n\n | \n | 40,919 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Estimated claims and claim adjustment expenses for claims arising in the current year | \n\n | \n | 14,621 | \n\n | \n | 14,060 | \n\n | \n | 15,559 | \n|
| \n Estimated decrease in claims and claim adjustment expenses for claims arising in prior years | \n\n | \n | (957 | \n) | \n\n | (944 | \n) | \n\n | (1,074 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total increases | \n\n | \n | 13,664 | \n\n | \n | 13,116 | \n\n | \n | 14,485 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and claim adjustment expense payments for claims arising in: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Current year | \n\n | \n | 5,828 | \n\n | \n | 5,485 | \n\n | \n | 6,507 | \n|
| \n Prior years | \n\n | \n | 8,099 | \n\n | \n | 8,477 | \n\n | \n | 8,326 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total payments | \n\n | \n | 13,927 | \n\n | \n | 13,962 | \n\n | \n | 14,833 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Acquisition(1) | \n\n | \n | — | \n\n | \n | 1,792 | \n\n | \n | — | \n|
| \n Unrealized foreign exchange (gain) loss | \n\n | \n | (286 | \n) | \n\n | 5 | \n\n | \n | 63 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net reserves at end of year | \n\n | \n | 41,036 | \n\n | \n | 41,585 | \n\n | \n | 40,634 | \n|
| \n Plus reinsurance recoverables on unpaid losses | \n\n | \n | 8,788 | \n\n | \n | 9,280 | \n\n | \n | 10,254 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and claim adjustment expense reserves at end of year | \n\n | $ | \n49,824 | \n\n | $ | \n50,865 | \n\n | $ | \n50,888 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Short-term: | \n\n | \n | \n | \n | \n | \n | |
| \n Commercial paper | \n\n | $ | \n100 | \n\n | $ | \n100 | \n|
| \n 5.50% Senior notes due December 1, 2015 | \n\n | \n | 400 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total short-term debt | \n\n | \n | 500 | \n\n | \n | 100 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Long-term: | \n\n | \n | \n | \n | \n | \n | |
| \n 5.50% Senior notes due December 1, 2015 | \n\n | \n | — | \n\n | \n | 400 | \n|
| \n 6.25% Senior notes due June 20, 2016 | \n\n | \n | 400 | \n\n | \n | 400 | \n|
| \n 5.75% Senior notes due December 15, 2017 | \n\n | \n | 450 | \n\n | \n | 450 | \n|
| \n 5.80% Senior notes due May 15, 2018 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 5.90% Senior notes due June 2, 2019 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 3.90% Senior notes due November 1, 2020 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 7.75% Senior notes due April 15, 2026 | \n\n | \n | 200 | \n\n | \n | 200 | \n|
| \n 7.625% Junior subordinated debentures due December 15, 2027 | \n\n | \n | 125 | \n\n | \n | 125 | \n|
| \n 6.375% Senior notes due March 15, 2033 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 6.75% Senior notes due June 20, 2036 | \n\n | \n | 400 | \n\n | \n | 400 | \n|
| \n 6.25% Senior notes due June 15, 2037 | \n\n | \n | 800 | \n\n | \n | 800 | \n|
| \n 5.35% Senior notes due November 1, 2040 | \n\n | \n | 750 | \n\n | \n | 750 | \n|
| \n 4.60% Senior notes due August 1, 2043 | \n\n | \n | 500 | \n\n | \n | 500 | \n|
| \n 8.50% Junior subordinated debentures due December 15, 2045 | \n\n | \n | 56 | \n\n | \n | 56 | \n|
| \n 8.312% Junior subordinated debentures due July 1, 2046 | \n\n | \n | 73 | \n\n | \n | 73 | \n|
| \n 6.25% Fixed-to-floating rate junior subordinated debentures due March 15, 2067 | \n\n | \n | 107 | \n\n | \n | 107 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total long-term debt | \n\n | \n | 5,861 | \n\n | \n | 6,261 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total debt principal | \n\n | \n | 6,361 | \n\n | \n | 6,361 | \n|
| \n Unamortized fair value adjustment | \n\n | \n | 50 | \n\n | \n | 51 | \n|
| \n Unamortized debt issuance costs | \n\n | \n | (62 | \n) | \n\n | (66 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total debt | \n\n | $ | \n6,349 | \n\n | $ | \n6,346 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | | \n\n | | \n\n | Unamortized \nFair Value \nPurchase \nAdjustment at \nDecember 31, | \n\n | | \n||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | \n\n | | \n\n | | \n\n | Effective \nInterest Rate \nto Maturity | \n||||||||||
| \n (in millions) | \n\n | Issue Rate | \n\n | Maturity Date | \n\n | 2014 | \n\n | 2013 | \n||||||||
| \n Subordinated debentures | \n\n | \n | 7.625 | \n% | \n\n | Dec. 2027 | \n\n | $ | \n16 | \n\n | $ | \n17 | \n\n | \n | 6.147 | \n% |
| \n
| \n\n | \n | 8.500 | \n% | \n\n | Dec. 2045 | \n\n | \n | 15 | \n\n | \n | 15 | \n\n | \n | 6.362 | \n% |
| \n
| \n\n | \n | 8.312 | \n% | \n\n | Jul. 2046 | \n\n | \n | 19 | \n\n | \n | 19 | \n\n | \n | 6.362 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | \n | \n | \n | \n | \n | \n | $ | \n50 | \n\n | $ | \n51 | \n\n | \n | \n | |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Quarterly Period Ending \n(in millions, except per share amounts) | \n\n | Number of \nshares \npurchased | \n\n | Cost of \nshares \nrepurchased | \n\n | Average price \npaid per share | \n\n | Remaining capacity \nunder share repurchase \nauthorization | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n March 31, 2014 | \n\n | \n | 7.8 | \n\n | $ | \n650 | \n\n | $ | \n82.97 | \n\n | $ | \n4,109 | \n|
| \n June 30, 2014 | \n\n | \n | 9.5 | \n\n | \n | 875 | \n\n | \n | 92.67 | \n\n | \n | 3,234 | \n|
| \n September 30, 2014 | \n\n | \n | 8.1 | \n\n | \n | 750 | \n\n | \n | 92.47 | \n\n | \n | 2,484 | \n|
| \n December 31, 2014 | \n\n | \n | 9.7 | \n\n | \n | 1,000 | \n\n | \n | 102.82 | \n\n | \n | 1,484 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | \n | 35.1 | \n\n | $ | \n3,275 | \n\n | \n | 93.27 | \n\n | \n | 1,484 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Changes in Net \nUnrealized Gains \non Investment \nSecurities Having \nNo Credit Losses \nRecognized in the \nConsolidated \nStatement of Income | \n\n | Changes in Net \nUnrealized Gains on \nInvestment \nSecurities Having \nCredit Losses \nRecognized in the \nConsolidated \nStatement of Income | \n\n | Net Benefit Plan \nAssets and \nObligations \nRecognized in \nShareholders' \nEquity | \n\n | Net Unrealized \nForeign Currency \nTranslation | \n\n | Total Accumulated \nOther Comprehensive \nIncome | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Balance, December 31, 2011 | \n\n | $ | \n2,729 | \n\n | $ | \n142 | \n\n | $ | \n(811 | \n) | \n$ | \n(55 | \n) | \n$ | \n2,005 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (OCI) before reclassifications | \n\n | \n | 228 | \n\n | \n | 48 | \n\n | \n | (104 | \n) | \n\n | 45 | \n\n | \n | 217 | \n|
| \n Amounts reclassified from AOCI | \n\n | \n | (49 | \n) | \n\n | 5 | \n\n | \n | 58 | \n\n | \n | — | \n\n | \n | 14 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net OCI, current period | \n\n | \n | 179 | \n\n | \n | 53 | \n\n | \n | (46 | \n) | \n\n | 45 | \n\n | \n | 231 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, December 31, 2012 | \n\n | \n | 2,908 | \n\n | \n | 195 | \n\n | \n | (857 | \n) | \n\n | (10 | \n) | \n\n | 2,236 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n OCI before reclassifications | \n\n | \n | (1,740 | \n) | \n\n | (2 | \n) | \n\n | 358 | \n\n | \n | (79 | \n) | \n\n | (1,463 | \n) |
| \n Amounts reclassified from AOCI | \n\n | \n | (43 | \n) | \n\n | 4 | \n\n | \n | 68 | \n\n | \n | 8 | \n\n | \n | 37 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net OCI, current period | \n\n | \n | (1,783 | \n) | \n\n | 2 | \n\n | \n | 426 | \n\n | \n | (71 | \n) | \n\n | (1,426 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, December 31, 2013 | \n\n | \n | 1,125 | \n\n | \n | 197 | \n\n | \n | (431 | \n) | \n\n | (81 | \n) | \n\n | 810 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n OCI before reclassifications | \n\n | \n | 667 | \n\n | \n | (2 | \n) | \n\n | (363 | \n) | \n\n | (250 | \n) | \n\n | 52 | \n|
| \n Amounts reclassified from AOCI | \n\n | \n | (24 | \n) | \n\n | 3 | \n\n | \n | 39 | \n\n | \n | — | \n\n | \n | 18 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net OCI, current period | \n\n | \n | 643 | \n\n | \n | 1 | \n\n | \n | (324 | \n) | \n\n | (250 | \n) | \n\n | 70 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Balance, December 31, 2014 | \n\n | $ | \n1,768 | \n\n | $ | \n198 | \n\n | $ | \n(755 | \n) | \n$ | \n(331 | \n) | \n$ | \n880 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | $ | \n976 | \n\n | $ | \n(2,734 | \n) | \n$ | \n281 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 333 | \n\n | \n | (951 | \n) | \n\n | 102 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 643 | \n\n | \n | (1,783 | \n) | \n\n | 179 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 2 | \n\n | \n | 3 | \n\n | \n | 81 | \n|
| \n Income tax expense | \n\n | \n | 1 | \n\n | \n | 1 | \n\n | \n | 28 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 1 | \n\n | \n | 2 | \n\n | \n | 53 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net changes in benefit plan assets and obligations | \n\n | \n | (494 | \n) | \n\n | 647 | \n\n | \n | (69 | \n) |
| \n Income tax expense (benefit) | \n\n | \n | (170 | \n) | \n\n | 221 | \n\n | \n | (23 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | (324 | \n) | \n\n | 426 | \n\n | \n | (46 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (289 | \n) | \n\n | (112 | \n) | \n\n | 43 | \n|
| \n Income tax benefit | \n\n | \n | (39 | \n) | \n\n | (41 | \n) | \n\n | (2 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | (250 | \n) | \n\n | (71 | \n) | \n\n | 45 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other comprehensive income (loss) | \n\n | \n | 195 | \n\n | \n | (2,196 | \n) | \n\n | 336 | \n|
| \n Total income tax expense (benefit) | \n\n | \n | 125 | \n\n | \n | (770 | \n) | \n\n | 105 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other comprehensive income (loss), net of taxes | \n\n | $ | \n70 | \n\n | $ | \n(1,426 | \n) | \n$ | \n231 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Reclassification adjustments related to unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income(1) | \n\n | $ | \n(36 | \n) | \n$ | \n(66 | \n) | \n$ | \n(75 | \n) |
| \n Income tax expense(2) | \n\n | \n | (12 | \n) | \n\n | (23 | \n) | \n\n | (26 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | (24 | \n) | \n\n | (43 | \n) | \n\n | (49 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Having credit losses recognized in the consolidated statement of income(1) | \n\n | \n | 4 | \n\n | \n | 5 | \n\n | \n | 8 | \n|
| \n Income tax benefit(2) | \n\n | \n | 1 | \n\n | \n | 1 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 3 | \n\n | \n | 4 | \n\n | \n | 5 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Reclassification adjustment related to benefit plan assets and obligations(3) | \n\n | \n | 60 | \n\n | \n | 105 | \n\n | \n | 88 | \n|
| \n Income tax benefit(2) | \n\n | \n | 21 | \n\n | \n | 37 | \n\n | \n | 30 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | 39 | \n\n | \n | 68 | \n\n | \n | 58 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Reclassification adjustment related to foreign currency translation(1) | \n\n | \n | — | \n\n | \n | 8 | \n\n | \n | — | \n|
| \n Income tax benefit(2) | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net of taxes | \n\n | \n | — | \n\n | \n | 8 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total reclassifications | \n\n | \n | 28 | \n\n | \n | 52 | \n\n | \n | 21 | \n|
| \n Total income tax benefit | \n\n | \n | 10 | \n\n | \n | 15 | \n\n | \n | 7 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total reclassifications, net of taxes | \n\n | $ | \n18 | \n\n | $ | \n37 | \n\n | $ | \n14 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions, except per share amounts) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Basic and Diluted | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income, as reported | \n\n | $ | \n3,692 | \n\n | $ | \n3,673 | \n\n | $ | \n2,473 | \n|
| \n Participating share-based awards—allocated income | \n\n | \n | (27 | \n) | \n\n | (27 | \n) | \n\n | (19 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income available to common shareholders—basic and diluted | \n\n | $ | \n3,665 | \n\n | $ | \n3,646 | \n\n | $ | \n2,454 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Common Shares | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Weighted average shares outstanding | \n\n | \n | 338.8 | \n\n | \n | 370.3 | \n\n | \n | 386.2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Diluted | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Weighted average shares outstanding | \n\n | \n | 338.8 | \n\n | \n | 370.3 | \n\n | \n | 386.2 | \n|
| \n Weighted average effects of dilutive securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Stock options and performance shares | \n\n | \n | 3.7 | \n\n | \n | 4.0 | \n\n | \n | 3.6 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | \n | 342.5 | \n\n | \n | 374.3 | \n\n | \n | 389.8 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income Per Common Share | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | $ | \n10.82 | \n\n | $ | \n9.84 | \n\n | $ | \n6.35 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Diluted | \n\n | $ | \n10.70 | \n\n | $ | \n9.74 | \n\n | $ | \n6.30 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Composition of income tax expense included in the consolidated statement of income | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Current expense: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Federal | \n\n | $ | \n1,216 | \n\n | $ | \n1,059 | \n\n | $ | \n406 | \n|
| \n Foreign | \n\n | \n | 28 | \n\n | \n | 30 | \n\n | \n | 45 | \n|
| \n State | \n\n | \n | 10 | \n\n | \n | 6 | \n\n | \n | 3 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total current tax expense | \n\n | \n | 1,254 | \n\n | \n | 1,095 | \n\n | \n | 454 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Deferred expense: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Federal | \n\n | \n | 121 | \n\n | \n | 167 | \n\n | \n | 223 | \n|
| \n Foreign | \n\n | \n | 22 | \n\n | \n | 10 | \n\n | \n | 16 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total deferred tax expense | \n\n | \n | 143 | \n\n | \n | 177 | \n\n | \n | 239 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income tax expense included in the consolidated statement of income | \n\n | \n | 1,397 | \n\n | \n | 1,272 | \n\n | \n | 693 | \n|
| \n Composition of income tax included in shareholders' equity | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Expense (benefit) relating to share-based compensation, the changes in unrealized gain on investments, unrealized loss on foreign exchange and other items in other comprehensive income | \n\n | \n | 68 | \n\n | \n | (822 | \n) | \n\n | 57 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income tax expense included in the consolidated financial statements | \n\n | $ | \n1,465 | \n\n | $ | \n450 | \n\n | $ | \n750 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n||||
|---|---|---|---|---|---|---|---|---|---|---|
| \n Income before income taxes | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S | \n\n | $ | \n4,899 | \n\n | $ | \n4,804 | \n\n | $ | \n2,955 | \n|
| \n Foreign | \n\n | \n | 190 | \n\n | \n | 141 | \n\n | \n | 211 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income before income taxes | \n\n | \n | 5,089 | \n\n | \n | 4,945 | \n\n | \n | 3,166 | \n|
| \n Effective tax rate | \n\n | \n | \n | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Statutory tax rate | \n\n | \n | 35 | \n% | \n\n | 35 | \n% | \n\n | 35 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Expected federal income tax expense | \n\n | \n | 1,781 | \n\n | \n | 1,731 | \n\n | \n | 1,108 | \n|
| \n Tax effect of: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Nontaxable investment income | \n\n | \n | (379 | \n) | \n\n | (409 | \n) | \n\n | (427 | \n) |
| \n Other, net | \n\n | \n | (5 | \n) | \n\n | (50 | \n) | \n\n | 12 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total income tax expense | \n\n | $ | \n1,397 | \n\n | $ | \n1,272 | \n\n | $ | \n693 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effective tax rate | \n\n | \n | 27 | \n% | \n\n | 26 | \n% | \n\n | 22 | \n% |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Deferred tax assets | \n\n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expense reserves | \n\n | $ | \n768 | \n\n | $ | \n825 | \n|
| \n Unearned premium reserves | \n\n | \n | 709 | \n\n | \n | 693 | \n|
| \n Compensation-related liabilities | \n\n | \n | 345 | \n\n | \n | 207 | \n|
| \n Other | \n\n | \n | 346 | \n\n | \n | 356 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total gross deferred tax assets | \n\n | \n | 2,168 | \n\n | \n | 2,081 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Deferred tax liabilities | \n\n | \n | \n | \n | \n | \n | |
| \n Deferred acquisition costs | \n\n | \n | 565 | \n\n | \n | 554 | \n|
| \n Investments | \n\n | \n | 1,267 | \n\n | \n | 931 | \n|
| \n Internally developed software | \n\n | \n | 130 | \n\n | \n | 138 | \n|
| \n Other | \n\n | \n | 173 | \n\n | \n | 155 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total gross deferred tax liabilities | \n\n | \n | 2,135 | \n\n | \n | 1,778 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Net deferred tax asset | \n\n | $ | \n33 | \n\n | $ | \n303 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | Amount | \n\n | Year of \nexpiration | \n|||
|---|---|---|---|---|---|---|---|
| \n United States | \n\n | $ | \n15 | \n\n | \n | 2018 | \n|
| \n Canada | \n\n | \n | 6 | \n\n | \n | 2033 | \n|
| \n United Kingdom | \n\n | \n | 133 | \n\n | \n | None | \n
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Balance at January 1 | \n\n | $ | \n21 | \n\n | $ | \n24 | \n|
| \n Additions for tax positions of prior years | \n\n | \n | 2 | \n\n | \n | — | \n|
| \n Reductions for tax positions of prior years | \n\n | \n | — | \n\n | \n | (3 | \n) |
| \n Additions based on tax positions related to current year | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at December 31 | \n\n | $ | \n23 | \n\n | $ | \n21 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | |
| \n 2014 | \n\n | Original Grants | \n\n | |
|---|---|---|---|---|
| \n Expected term of stock options | \n\n | 6 years | \n\n | |
| \n Expected volatility of the Company's stock | \n\n | 27.2% - 27.5% | \n\n | |
| \n Weighted average volatility | \n\n | 27.5% | \n\n | |
| \n Expected annual dividend per share | \n\n | $2.00 - $2.20 | \n\n | |
| \n Risk-free rate | \n\n | 1.81% - 1.82% | \n\n | |
| | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | |
| \n 2013 | \n\n | Original Grants | \n\n | |
|---|---|---|---|---|
| \n Expected term of stock options | \n\n | 6 years | \n\n | |
| \n Expected volatility of the Company's stock | \n\n | 28.7% - 28.8% | \n\n | |
| \n Weighted average volatility | \n\n | 28.8% | \n\n | |
| \n Expected annual dividend per share | \n\n | $1.84 | \n\n | |
| \n Risk-free rate | \n\n | 1.11% - 1.14% | \n\n | |
| | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | |
| \n 2012 | \n\n | Original Grants | \n\n | Reload Grants |
|---|---|---|---|---|
| \n Expected term of stock options | \n\n | 6 years | \n\n | 1 year |
| \n Expected volatility of the Company's stock | \n\n | 28.5% - 28.6% | \n\n | 22.9% - 23.5% |
| \n Weighted average volatility | \n\n | 28.6% | \n\n | 23.4% |
| \n Expected annual dividend per share | \n\n | $1.64 - $1.84 | \n\n | $1.64 - $1.84 |
| \n Risk-free rate | \n\n | 1.02% - 1.17% | \n\n | 0.10% - 0.17% |
| | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Stock Options | \n\n | Number | \n\n | Weighted \nAverage \nExercise \nPrice | \n\n | Weighted \nAverage \nContractual \nLife \nRemaining | \n\n | Aggregate \nIntrinsic \nValue \n($ in millions) | \n||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Outstanding, beginning of year | \n\n | \n | 11,071,256 | \n\n | $ | \n56.68 | \n\n | \n | \n | \n | \n | |
| \n Original grants | \n\n | \n | 2,010,043 | \n\n | \n | 80.36 | \n\n | \n | \n | \n | \n | |
| \n Exercised | \n\n | \n | (2,845,405 | \n) | \n\n | 49.70 | \n\n | \n | \n | \n | \n | |
| \n Forfeited or expired | \n\n | \n | (211,034 | \n) | \n\n | 72.32 | \n\n | \n | \n | \n | \n | |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Outstanding, end of year | \n\n | \n | 10,024,860 | \n\n | $ | \n63.08 | \n\n | 6.5 Years | \n\n | $ | \n429 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Vested at end of year(1) | \n\n | \n | 7,159,841 | \n\n | $ | \n59.44 | \n\n | 5.9 Years | \n\n | $ | \n332 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Exercisable at end of year | \n\n | \n | 4,232,855 | \n\n | $ | \n50.65 | \n\n | 4.4 Years | \n\n | $ | \n234 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n 2014 | \n\n | Original Grants | \n\n | | \n|||
|---|---|---|---|---|---|---|---|
| \n Weighted average grant-date fair value of options granted (per share) | \n\n | $ | \n17.22 | \n\n | \n | \n | |
| \n Total intrinsic value of options exercised during the year (in millions) | \n\n | $ | \n117 | \n\n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n 2013 | \n\n | Original Grants | \n\n | | \n|||
|---|---|---|---|---|---|---|---|
| \n Weighted average grant-date fair value of options granted (per share) | \n\n | $ | \n17.09 | \n\n | \n | \n | |
| \n Total intrinsic value of options exercised during the year (in millions) | \n\n | $ | \n122 | \n\n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n 2012 | \n\n | Original Grants | \n\n | Reload Grants | \n|||
|---|---|---|---|---|---|---|---|
| \n Weighted average grant-date fair value of options granted (per share) | \n\n | $ | \n12.08 | \n\n | $ | \n4.49 | \n|
| \n Total intrinsic value of options exercised during the year (in millions) | \n\n | $ | \n102 | \n\n | $ | \n5 | \n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Restricted and Deferred Stock \nUnits | \n\n | Performance Shares | \n|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Other Equity Instruments | \n\n | Number | \n\n | Weighted Average \nGrant-Date \nFair Value | \n\n | Number | \n\n | Weighted Average \nGrant-Date \nFair Value | \n|||||
| \n Nonvested, beginning of year | \n\n | \n | 1,952,274 | \n\n | $ | \n64.60 | \n\n | \n | 1,389,770 | \n\n | $ | \n68.38 | \n|
| \n Granted | \n\n | \n | 759,151 | \n\n | \n | 80.63 | \n\n | \n | 594,901 | \n\n | \n | 80.35 | \n|
| \n Vested | \n\n | \n | (885,048 | \n)(1) | \n\n | 61.76 | \n\n | \n | (801,479 | \n)(2) | \n\n | 59.74 | \n|
| \n Forfeited | \n\n | \n | (65,406 | \n) | \n\n | 78.88 | \n\n | \n | (99,547 | \n) | \n\n | 71.50 | \n|
| \n Performance-based adjustment | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 206,424 | \n(3) | \n\n | 71.12 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Nonvested, end of year | \n\n | \n | 1,760,971 | \n\n | $ | \n72.40 | \n\n | \n | 1,290,069 | \n\n | $ | \n79.46 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Qualified \nDomestic Pension \nPlan | \n\n | Nonqualified \nand Foreign \nPension Plans | \n\n | Total | \n|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2014 | \n\n | 2013 | \n\n | 2014 | \n\n | 2013 | \n|||||||
| \n Change in projected benefit obligation: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Benefit obligation at beginning of year | \n\n | $ | \n2,908 | \n\n | $ | \n3,055 | \n\n | $ | \n209 | \n\n | $ | \n206 | \n\n | $ | \n3,117 | \n\n | $ | \n3,261 | \n|
| \n Benefits earned | \n\n | \n | 104 | \n\n | \n | 112 | \n\n | \n | 6 | \n\n | \n | 6 | \n\n | \n | 110 | \n\n | \n | 118 | \n|
| \n Interest cost on benefit obligation | \n\n | \n | 140 | \n\n | \n | 124 | \n\n | \n | 10 | \n\n | \n | 8 | \n\n | \n | 150 | \n\n | \n | 132 | \n|
| \n Actuarial loss (gain) | \n\n | \n | 428 | \n\n | \n | (243 | \n) | \n\n | 29 | \n\n | \n | (19 | \n) | \n\n | 457 | \n\n | \n | (262 | \n) |
| \n Benefits paid | \n\n | \n | (187 | \n) | \n\n | (140 | \n) | \n\n | (11 | \n) | \n\n | (9 | \n) | \n\n | (198 | \n) | \n\n | (149 | \n) |
| \n Plan amendments | \n\n | \n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (8 | \n) | \n\n | — | \n|
| \n Curtailment | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (3 | \n) | \n\n | — | \n\n | \n | (3 | \n) | \n\n | — | \n|
| \n Settlement | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (6 | \n) | \n\n | — | \n\n | \n | (6 | \n) | \n\n | — | \n|
| \n Foreign currency exchange rate change | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (7 | \n) | \n\n | 2 | \n\n | \n | (7 | \n) | \n\n | 2 | \n|
| \n Acquisition | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 15 | \n\n | \n | — | \n\n | \n | 15 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Benefit obligation at end of year | \n\n | $ | \n3,385 | \n\n | $ | \n2,908 | \n\n | $ | \n227 | \n\n | $ | \n209 | \n\n | $ | \n3,612 | \n\n | $ | \n3,117 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Change in plan assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fair value of plan assets at beginning of year | \n\n | $ | \n3,074 | \n\n | $ | \n2,761 | \n\n | $ | \n129 | \n\n | $ | \n98 | \n\n | $ | \n3,203 | \n\n | $ | \n2,859 | \n|
| \n Actual return on plan assets | \n\n | \n | 148 | \n\n | \n | 453 | \n\n | \n | 11 | \n\n | \n | 12 | \n\n | \n | 159 | \n\n | \n | 465 | \n|
| \n Company contributions | \n\n | \n | 200 | \n\n | \n | — | \n\n | \n | 7 | \n\n | \n | 6 | \n\n | \n | 207 | \n\n | \n | 6 | \n|
| \n Benefits paid | \n\n | \n | (187 | \n) | \n\n | (140 | \n) | \n\n | (11 | \n) | \n\n | (9 | \n) | \n\n | (198 | \n) | \n\n | (149 | \n) |
| \n Foreign currency exchange rate change | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (8 | \n) | \n\n | 2 | \n\n | \n | (8 | \n) | \n\n | 2 | \n|
| \n Settlement | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (6 | \n) | \n\n | — | \n\n | \n | (6 | \n) | \n\n | — | \n|
| \n Acquisition | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 20 | \n\n | \n | — | \n\n | \n | 20 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Fair value of plan assets at end of year | \n\n | \n | 3,235 | \n\n | \n | 3,074 | \n\n | \n | 122 | \n\n | \n | 129 | \n\n | \n | 3,357 | \n\n | \n | 3,203 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Funded status of plan at end of year | \n\n | $ | \n(150 | \n) | \n$ | \n166 | \n\n | $ | \n(105 | \n) | \n$ | \n(80 | \n) | \n$ | \n(255 | \n) | \n$ | \n86 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in the consolidated balance sheet consist of: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Accrued over-funded benefit plan assets | \n\n | $ | \n— | \n\n | $ | \n176 | \n\n | $ | \n6 | \n\n | $ | \n10 | \n\n | $ | \n6 | \n\n | $ | \n186 | \n|
| \n Accrued under-funded benefit plan liabilities | \n\n | \n | (150 | \n) | \n\n | (10 | \n) | \n\n | (111 | \n) | \n\n | (90 | \n) | \n\n | (261 | \n) | \n\n | (100 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n(150 | \n) | \n$ | \n166 | \n\n | $ | \n(105 | \n) | \n$ | \n(80 | \n) | \n$ | \n(255 | \n) | \n$ | \n86 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in accumulated other comprehensive income consist of: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net actuarial loss | \n\n | $ | \n1,132 | \n\n | $ | \n704 | \n\n | $ | \n53 | \n\n | $ | \n34 | \n\n | $ | \n1,185 | \n\n | $ | \n738 | \n|
| \n Prior service benefit | \n\n | \n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (8 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n1,124 | \n\n | $ | \n704 | \n\n | $ | \n53 | \n\n | $ | \n34 | \n\n | $ | \n1,177 | \n\n | $ | \n738 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Postretirement \nBenefit Plans | \n|||||
|---|---|---|---|---|---|---|---|
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
| \n Change in projected benefit obligation: | \n\n | \n | \n | \n | \n | \n | |
| \n Benefit obligation at beginning of year | \n\n | $ | \n211 | \n\n | $ | \n222 | \n|
| \n Benefits earned | \n\n | \n | — | \n\n | \n | — | \n|
| \n Interest cost on benefit obligation | \n\n | \n | 10 | \n\n | \n | 9 | \n|
| \n Actuarial loss (gain) | \n\n | \n | 51 | \n\n | \n | (25 | \n) |
| \n Benefits paid | \n\n | \n | (15 | \n) | \n\n | (14 | \n) |
| \n Foreign currency exchange rate change | \n\n | \n | (2 | \n) | \n\n | — | \n|
| \n Acquisition | \n\n | \n | — | \n\n | \n | 19 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Benefit obligation at end of year | \n\n | $ | \n255 | \n\n | $ | \n211 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Change in plan assets: | \n\n | \n | \n | \n | \n | \n | |
| \n Fair value of plan assets at beginning of year | \n\n | $ | \n17 | \n\n | $ | \n18 | \n|
| \n Actual return on plan assets | \n\n | \n | — | \n\n | \n | — | \n|
| \n Company contributions | \n\n | \n | 14 | \n\n | \n | 13 | \n|
| \n Benefits paid | \n\n | \n | (15 | \n) | \n\n | (14 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Fair value of plan assets at end of year | \n\n | \n | 16 | \n\n | \n | 17 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Funded status of plan at end of year | \n\n | $ | \n(239 | \n) | \n$ | \n(194 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in the consolidated balance sheet consist of: | \n\n | \n | \n | \n | \n | \n | |
| \n Accrued under-funded benefit plan liability | \n\n | $ | \n(239 | \n) | \n$ | \n(194 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Amounts recognized in accumulated other comprehensive income consist of: | \n\n | \n | \n | \n | \n | \n | |
| \n Net actuarial loss (gain) | \n\n | $ | \n9 | \n\n | $ | \n(44 | \n) |
| \n Prior service benefit | \n\n | \n | (26 | \n) | \n\n | (28 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n(17 | \n) | \n$ | \n(72 | \n) |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Pension Plans | \n\n | Postretirement \nBenefit Plans | \n|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n (in millions) | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n\n | 2014 | \n\n | 2013 | \n\n | 2012 | \n|||||||
| \n Net Periodic Benefit Cost: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Service cost | \n\n | $ | \n110 | \n\n | $ | \n118 | \n\n | $ | \n113 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Interest cost on benefit obligation | \n\n | \n | 150 | \n\n | \n | 132 | \n\n | \n | 138 | \n\n | \n | 10 | \n\n | \n | 9 | \n\n | \n | 12 | \n|
| \n Expected return on plan assets | \n\n | \n | (218 | \n) | \n\n | (208 | \n) | \n\n | (187 | \n) | \n\n | — | \n\n | \n | (1 | \n) | \n\n | (1 | \n) |
| \n Curtailment | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Settlement | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Amortization of unrecognized: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Prior service benefit | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (2 | \n) | \n\n | (2 | \n) | \n\n | — | \n|
| \n Net actuarial loss (gain) | \n\n | \n | 65 | \n\n | \n | 107 | \n\n | \n | 89 | \n\n | \n | (3 | \n) | \n\n | — | \n\n | \n | (1 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net periodic benefit cost | \n\n | $ | \n108 | \n\n | $ | \n149 | \n\n | $ | \n153 | \n\n | $ | \n5 | \n\n | $ | \n6 | \n\n | $ | \n10 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other Changes in Benefit Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Prior service benefit | \n\n | $ | \n(8 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n— | \n|
| \n Net actuarial loss (gain) | \n\n | \n | 516 | \n\n | \n | (518 | \n) | \n\n | 176 | \n\n | \n | 50 | \n\n | \n | (24 | \n) | \n\n | 11 | \n|
| \n Plan amendments | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (31 | \n) |
| \n Curtailment | \n\n | \n | (2 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Settlement | \n\n | \n | (2 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n|
| \n Amortization of prior service benefit | \n\n | \n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 2 | \n\n | \n | 2 | \n\n | \n | — | \n|
| \n Amortization of net actuarial gain (loss) | \n\n | \n | (65 | \n) | \n\n | (107 | \n) | \n\n | (89 | \n) | \n\n | 3 | \n\n | \n | — | \n\n | \n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other changes recognized in other comprehensive income | \n\n | \n | 439 | \n\n | \n | (625 | \n) | \n\n | 87 | \n\n | \n | 55 | \n\n | \n | (22 | \n) | \n\n | (19 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total other changes recognized in net periodic benefit cost and other comprehensive income | \n\n | $ | \n547 | \n\n | $ | \n(476 | \n) | \n$ | \n240 | \n\n | $ | \n60 | \n\n | $ | \n(16 | \n) | \n$ | \n(9 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| \n (at and for the year ended December 31,) | \n\n | 2014 | \n\n | 2013 | \n|||
|---|---|---|---|---|---|---|---|
| \n Assumptions used to determine benefit obligations | \n\n | \n | \n | \n | \n | \n | |
| \n Discount rate | \n\n | \n | 4.10 | \n% | \n\n | 4.96 | \n% |
| \n Future compensation increase rate | \n\n | \n | 4.00 | \n% | \n\n | 4.00 | \n% |
| \n Assumptions used to determine net periodic benefit cost | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Discount rate | \n\n | \n | 4.96 | \n% | \n\n | 4.15 | \n% |
| \n Expected long-term rate of return on pension plans' assets | \n\n | \n | 7.50 | \n% | \n\n | 7.50 | \n% |
| \n Expected long-term rate of return on postretirement benefit plans' assets | \n\n | \n | 4.00 | \n% | \n\n | 4.00 | \n% |
| \n Assumed health care cost trend rates | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Following year: | \n\n | \n | \n | \n | \n | \n | |
| \n Medical (before age 65) | \n\n | \n | 7.00 | \n% | \n\n | 7.25 | \n% |
| \n Medical (age 65 and older) | \n\n | \n | 6.50 | \n% | \n\n | 6.75 | \n% |
| \n Rate to which the cost trend rate is assumed to decline (ultimate trend rate) | \n\n | \n | \n5.00 | \n\n% | \n\n | \n5.00 | \n\n% |
| \n Year that the rate reaches the ultimate trend rate: | \n\n | \n | \n | \n\n | \n | \n | \n|
| \n Medical (before age 65) | \n\n | \n | 2022 | \n\n | \n | 2022 | \n|
| \n Medical (age 65 and older) | \n\n | \n | 2020 | \n\n | \n | 2020 | \n
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2014, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Obligations of states, municipalities and political subdivisions | \n\n | $ | \n19 | \n\n | $ | \n— | \n\n | $ | \n19 | \n\n | $ | \n— | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 17 | \n\n | \n | — | \n\n | \n | 17 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 14 | \n\n | \n | — | \n\n | \n | 14 | \n\n | \n | — | \n|
| \n All other corporate bonds | \n\n | \n | 474 | \n\n | \n | — | \n\n | \n | 474 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 524 | \n\n | \n | — | \n\n | \n | 524 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Mutual funds | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Equity mutual funds | \n\n | \n | 1,290 | \n\n | \n | 1,283 | \n\n | \n | 7 | \n\n | \n | — | \n|
| \n Bond mutual funds | \n\n | \n | 610 | \n\n | \n | 607 | \n\n | \n | 3 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total mutual funds | \n\n | \n | 1,900 | \n\n | \n | 1,890 | \n\n | \n | 10 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | 616 | \n\n | \n | 615 | \n\n | \n | 1 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments(1) | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash and short-term securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Money market mutual funds | \n\n | \n | 22 | \n\n | \n | 18 | \n\n | \n | 4 | \n\n | \n | — | \n|
| \n Other | \n\n | \n | 293 | \n\n | \n | 29 | \n\n | \n | 264 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total cash and short-term securities | \n\n | \n | 315 | \n\n | \n | 47 | \n\n | \n | 268 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n3,357 | \n\n | $ | \n2,552 | \n\n | $ | \n803 | \n\n | $ | \n2 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (at December 31, 2013, in millions) | \n\n | Total | \n\n | Level 1 | \n\n | Level 2 | \n\n | Level 3 | \n|||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Invested assets: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Obligations of states, municipalities and political subdivisions | \n\n | $ | \n18 | \n\n | $ | \n— | \n\n | $ | \n18 | \n\n | $ | \n— | \n|
| \n Debt securities issued by foreign governments | \n\n | \n | 14 | \n\n | \n | — | \n\n | \n | 14 | \n\n | \n | — | \n|
| \n Mortgage-backed securities, collateralized mortgage obligations and pass-through securities | \n\n | \n | 11 | \n\n | \n | — | \n\n | \n | 11 | \n\n | \n | — | \n|
| \n All other corporate bonds | \n\n | \n | 447 | \n\n | \n | — | \n\n | \n | 447 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total fixed maturities | \n\n | \n | 490 | \n\n | \n | — | \n\n | \n | 490 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Mutual funds | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Equity mutual funds | \n\n | \n | 1,355 | \n\n | \n | 1,355 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Bond mutual funds | \n\n | \n | 446 | \n\n | \n | 446 | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total mutual funds | \n\n | \n | 1,801 | \n\n | \n | 1,801 | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Equity securities | \n\n | \n | 571 | \n\n | \n | 570 | \n\n | \n | 1 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other investments(1) | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash and short-term securities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n U.S. Treasury securities | \n\n | \n | 122 | \n\n | \n | 122 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Money market mutual funds | \n\n | \n | 19 | \n\n | \n | 19 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Other | \n\n | \n | 196 | \n\n | \n | 31 | \n\n | \n | 165 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total cash and short-term securities | \n\n | \n | 337 | \n\n | \n | 172 | \n\n | \n | 165 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total | \n\n | $ | \n3,203 | \n\n | $ | \n2,543 | \n\n | $ | \n656 | \n\n | $ | \n4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Other \nInvestments | \n|||||
|---|---|---|---|---|---|---|---|
| \n (at and for the year ended December 31, in millions) | \n\n | 2014 | \n\n | 2013 | \n|||
| \n Balance at beginning of year | \n\n | $ | \n4 | \n\n | $ | \n6 | \n|
| \n Actual return on plan assets: | \n\n | \n | \n | \n | \n | \n | |
| \n Relating to assets still held | \n\n | \n | — | \n\n | \n | 1 | \n|
| \n Relating to assets sold during the year | \n\n | \n | — | \n\n | \n | — | \n|
| \n Purchases, sales, settlements and maturities: | \n\n | \n | \n | \n | \n | \n | |
| \n Purchases | \n\n | \n | — | \n\n | \n | — | \n|
| \n Sales | \n\n | \n | (2 | \n) | \n\n | (3 | \n) |
| \n Settlements/maturities | \n\n | \n | — | \n\n | \n | — | \n|
| \n Gross transfers into Level 3 | \n\n | \n | — | \n\n | \n | — | \n|
| \n Gross transfers out of Level 3 | \n\n | \n | — | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| \n Balance at end of year | \n\n | $ | \n2 | \n\n | $ | \n4 | \n|
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n |
\n
| \n | \n | \n | \n | \n | \n | \n | |
| | \n\n | Benefits Expected to be Paid | \n|||||
|---|---|---|---|---|---|---|---|
| \n (in millions) | \n\n | Pension Plans | \n\n | Postretirement \nBenefit Plans | \n|||
| \n 2015 | \n\n | $ | \n205 | \n\n | $ | \n15 | \n|
| \n 2016 | \n\n | \n | 211 | \n\n | \n | 15 | \n|
| \n 2017 | \n\n | \n | 215 | \n\n | \n | 15 | \n|
| \n 2018 | \n\n | \n | 224 | \n\n | \n | 15 | \n|
| \n 2019 | \n\n | \n | 234 | \n\n | \n | 15 | \n|
| \n 2020 through 2024 | \n\n | \n | 1,203 | \n\n | \n | 76 | \n
CONSOLIDATING STATEMENT OF INCOME (Unaudited)
\nFor the year ended December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenues | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n16,097 | \n\n | $ | \n7,616 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n23,713 | \n|
| \n Net investment income | \n\n | \n | 1,874 | \n\n | \n | 907 | \n\n | \n | 6 | \n\n | \n | — | \n\n | \n | 2,787 | \n|
| \n Fee income | \n\n | \n | 436 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 438 | \n|
| \n Net realized investment gains(1) | \n\n | \n | 12 | \n\n | \n | 64 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | 79 | \n|
| \n Other revenues | \n\n | \n | 125 | \n\n | \n | 20 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 145 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | \n | 18,544 | \n\n | \n | 8,609 | \n\n | \n | 9 | \n\n | \n | — | \n\n | \n | 27,162 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and expenses | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expenses | \n\n | \n | 9,274 | \n\n | \n | 4,596 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 13,870 | \n|
| \n Amortization of deferred acquisition costs | \n\n | \n | 2,604 | \n\n | \n | 1,278 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,882 | \n|
| \n General and administrative expenses | \n\n | \n | 2,743 | \n\n | \n | 1,194 | \n\n | \n | 15 | \n\n | \n | — | \n\n | \n | 3,952 | \n|
| \n Interest expense | \n\n | \n | 48 | \n\n | \n | — | \n\n | \n | 321 | \n\n | \n | — | \n\n | \n | 369 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total claims and expenses | \n\n | \n | 14,669 | \n\n | \n | 7,068 | \n\n | \n | 336 | \n\n | \n | — | \n\n | \n | 22,073 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) before income taxes | \n\n | \n | 3,875 | \n\n | \n | 1,541 | \n\n | \n | (327 | \n) | \n\n | — | \n\n | \n | 5,089 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 1,095 | \n\n | \n | 417 | \n\n | \n | (115 | \n) | \n\n | — | \n\n | \n | 1,397 | \n|
| \n Net income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,904 | \n\n | \n | (3,904 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n2,780 | \n\n | $ | \n1,124 | \n\n | $ | \n3,692 | \n\n | $ | \n(3,904 | \n) | \n$ | \n3,692 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total OTTI losses | \n\n | $ | \n(16 | \n) | \n$ | \n(6 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(22 | \n) |
| \n OTTI losses recognized in net realized investment gains | \n\n | $ | \n(19 | \n) | \n$ | \n(7 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(26 | \n) |
| \n OTTI gains recognized in OCI | \n\n | $ | \n3 | \n\n | $ | \n1 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n4 | \n
CONSOLIDATING STATEMENT OF INCOME (Unaudited)
\nFor the year ended December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenues | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n15,262 | \n\n | $ | \n7,375 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n22,637 | \n|
| \n Net investment income | \n\n | \n | 1,830 | \n\n | \n | 879 | \n\n | \n | 7 | \n\n | \n | — | \n\n | \n | 2,716 | \n|
| \n Fee income | \n\n | \n | 393 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 395 | \n|
| \n Net realized investment gains(1) | \n\n | \n | 126 | \n\n | \n | 38 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 166 | \n|
| \n Other revenues | \n\n | \n | 225 | \n\n | \n | 52 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 277 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | \n | 17,836 | \n\n | \n | 8,346 | \n\n | \n | 9 | \n\n | \n | — | \n\n | \n | 26,191 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and expenses | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expenses | \n\n | \n | 8,817 | \n\n | \n | 4,490 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 13,307 | \n|
| \n Amortization of deferred acquisition costs | \n\n | \n | 2,571 | \n\n | \n | 1,250 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,821 | \n|
| \n General and administrative expenses | \n\n | \n | 2,570 | \n\n | \n | 1,174 | \n\n | \n | 13 | \n\n | \n | — | \n\n | \n | 3,757 | \n|
| \n Interest expense | \n\n | \n | 53 | \n\n | \n | — | \n\n | \n | 308 | \n\n | \n | — | \n\n | \n | 361 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total claims and expenses | \n\n | \n | 14,011 | \n\n | \n | 6,914 | \n\n | \n | 321 | \n\n | \n | — | \n\n | \n | 21,246 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) before income taxes | \n\n | \n | 3,825 | \n\n | \n | 1,432 | \n\n | \n | (312 | \n) | \n\n | — | \n\n | \n | 4,945 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 1,054 | \n\n | \n | 388 | \n\n | \n | (170 | \n) | \n\n | — | \n\n | \n | 1,272 | \n|
| \n Net income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,815 | \n\n | \n | (3,815 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n2,771 | \n\n | $ | \n1,044 | \n\n | $ | \n3,673 | \n\n | $ | \n(3,815 | \n) | \n$ | \n3,673 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total OTTI losses | \n\n | $ | \n(8 | \n) | \n$ | \n(2 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(10 | \n) |
| \n OTTI losses recognized in net realized investment gains | \n\n | $ | \n(10 | \n) | \n$ | \n(5 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(15 | \n) |
| \n OTTI gains recognized in OCI | \n\n | $ | \n2 | \n\n | $ | \n3 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n5 | \n
CONSOLIDATING STATEMENT OF INCOME (Unaudited)
\nFor the year ended December 31, 2012
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Revenues | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Premiums | \n\n | $ | \n15,158 | \n\n | $ | \n7,199 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n22,357 | \n|
| \n Net investment income | \n\n | \n | 1,912 | \n\n | \n | 968 | \n\n | \n | 9 | \n\n | \n | — | \n\n | \n | 2,889 | \n|
| \n Fee income | \n\n | \n | 321 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 323 | \n|
| \n Net realized investment gains(1) | \n\n | \n | 29 | \n\n | \n | 22 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 51 | \n|
| \n Other revenues | \n\n | \n | 87 | \n\n | \n | 34 | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | 120 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total revenues | \n\n | \n | 17,507 | \n\n | \n | 8,225 | \n\n | \n | 8 | \n\n | \n | — | \n\n | \n | 25,740 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Claims and expenses | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expenses | \n\n | \n | 9,908 | \n\n | \n | 4,768 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 14,676 | \n|
| \n Amortization of deferred acquisition costs | \n\n | \n | 2,636 | \n\n | \n | 1,274 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,910 | \n|
| \n General and administrative expenses | \n\n | \n | 2,445 | \n\n | \n | 1,161 | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 3,610 | \n|
| \n Interest expense | \n\n | \n | 73 | \n\n | \n | — | \n\n | \n | 305 | \n\n | \n | — | \n\n | \n | 378 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total claims and expenses | \n\n | \n | 15,062 | \n\n | \n | 7,203 | \n\n | \n | 309 | \n\n | \n | — | \n\n | \n | 22,574 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income (loss) before income taxes | \n\n | \n | 2,445 | \n\n | \n | 1,022 | \n\n | \n | (301 | \n) | \n\n | — | \n\n | \n | 3,166 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 588 | \n\n | \n | 224 | \n\n | \n | (119 | \n) | \n\n | — | \n\n | \n | 693 | \n|
| \n Net income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 2,655 | \n\n | \n | (2,655 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n1,857 | \n\n | $ | \n798 | \n\n | $ | \n2,473 | \n\n | $ | \n(2,655 | \n) | \n$ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(2) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total OTTI gains | \n\n | $ | \n18 | \n\n | $ | \n9 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n27 | \n|
| \n OTTI losses recognized in net realized investment gains | \n\n | $ | \n(9 | \n) | \n$ | \n(6 | \n) | \n$ | \n— | \n\n | $ | \n— | \n\n | $ | \n(15 | \n) |
| \n OTTI gains recognized in OCI | \n\n | $ | \n27 | \n\n | $ | \n15 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n42 | \n
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
\nFor the year ended December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Net income | \n\n | $ | \n2,780 | \n\n | $ | \n1,124 | \n\n | $ | \n3,692 | \n\n | $ | \n(3,904 | \n) | \n$ | \n3,692 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | \n | 681 | \n\n | \n | 289 | \n\n | \n | 6 | \n\n | \n | — | \n\n | \n | 976 | \n|
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 9 | \n\n | \n | (7 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | 2 | \n|
| \n Net changes in benefit plan assets and obligations | \n\n | \n | (15 | \n) | \n\n | (8 | \n) | \n\n | (471 | \n) | \n\n | — | \n\n | \n | (494 | \n) |
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (173 | \n) | \n\n | (116 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (289 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss) before income taxes and other comprehensive income of subsidiaries | \n\n | \n | 502 | \n\n | \n | 158 | \n\n | \n | (465 | \n) | \n\n | — | \n\n | \n | 195 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 207 | \n\n | \n | 81 | \n\n | \n | (163 | \n) | \n\n | — | \n\n | \n | 125 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries | \n\n | \n | 295 | \n\n | \n | 77 | \n\n | \n | (302 | \n) | \n\n | — | \n\n | \n | 70 | \n|
| \n Other comprehensive income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 372 | \n\n | \n | (372 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income | \n\n | \n | 295 | \n\n | \n | 77 | \n\n | \n | 70 | \n\n | \n | (372 | \n) | \n\n | 70 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Comprehensive income | \n\n | $ | \n3,075 | \n\n | $ | \n1,201 | \n\n | $ | \n3,762 | \n\n | $ | \n(4,276 | \n) | \n$ | \n3,762 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
\nFor the year ended December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Net income | \n\n | $ | \n2,771 | \n\n | $ | \n1,044 | \n\n | $ | \n3,673 | \n\n | $ | \n(3,815 | \n) | \n$ | \n3,673 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | \n | (1,982 | \n) | \n\n | (771 | \n) | \n\n | 19 | \n\n | \n | — | \n\n | \n | (2,734 | \n) |
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 4 | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | 3 | \n|
| \n Net changes in benefit plan assets and obligations | \n\n | \n | 12 | \n\n | \n | 19 | \n\n | \n | 616 | \n\n | \n | — | \n\n | \n | 647 | \n|
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (92 | \n) | \n\n | (20 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (112 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss) before income taxes and other comprehensive loss of subsidiaries | \n\n | \n | (2,058 | \n) | \n\n | (773 | \n) | \n\n | 635 | \n\n | \n | — | \n\n | \n | (2,196 | \n) |
| \n Income tax expense (benefit) | \n\n | \n | (719 | \n) | \n\n | (273 | \n) | \n\n | 222 | \n\n | \n | — | \n\n | \n | (770 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss), net of taxes, before other comprehensive loss of subsidiaries | \n\n | \n | (1,339 | \n) | \n\n | (500 | \n) | \n\n | 413 | \n\n | \n | — | \n\n | \n | (1,426 | \n) |
| \n Other comprehensive loss of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (1,839 | \n) | \n\n | 1,839 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive loss | \n\n | \n | (1,339 | \n) | \n\n | (500 | \n) | \n\n | (1,426 | \n) | \n\n | 1,839 | \n\n | \n | (1,426 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Comprehensive income | \n\n | $ | \n1,432 | \n\n | $ | \n544 | \n\n | $ | \n2,247 | \n\n | $ | \n(1,976 | \n) | \n$ | \n2,247 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
\nFor the year ended December 31, 2012
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Net income | \n\n | $ | \n1,857 | \n\n | $ | \n798 | \n\n | $ | \n2,473 | \n\n | $ | \n(2,655 | \n) | \n$ | \n2,473 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Changes in net unrealized gains on investment securities: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Having no credit losses recognized in the consolidated statement of income | \n\n | \n | 248 | \n\n | \n | 23 | \n\n | \n | 10 | \n\n | \n | — | \n\n | \n | 281 | \n|
| \n Having credit losses recognized in the consolidated statement of income | \n\n | \n | 57 | \n\n | \n | 24 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 81 | \n|
| \n Net changes in benefit plan assets and obligations | \n\n | \n | (6 | \n) | \n\n | (5 | \n) | \n\n | (58 | \n) | \n\n | — | \n\n | \n | (69 | \n) |
| \n Net changes in unrealized foreign currency translation | \n\n | \n | (19 | \n) | \n\n | 62 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 43 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss) before income taxes and other comprehensive income of subsidiaries | \n\n | \n | 280 | \n\n | \n | 104 | \n\n | \n | (48 | \n) | \n\n | — | \n\n | \n | 336 | \n|
| \n Income tax expense (benefit) | \n\n | \n | 101 | \n\n | \n | 21 | \n\n | \n | (17 | \n) | \n\n | — | \n\n | \n | 105 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income (loss), net of taxes, before other comprehensive income of subsidiaries | \n\n | \n | 179 | \n\n | \n | 83 | \n\n | \n | (31 | \n) | \n\n | — | \n\n | \n | 231 | \n|
| \n Other comprehensive income of subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 262 | \n\n | \n | (262 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Other comprehensive income | \n\n | \n | 179 | \n\n | \n | 83 | \n\n | \n | 231 | \n\n | \n | (262 | \n) | \n\n | 231 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Comprehensive income | \n\n | $ | \n2,036 | \n\n | $ | \n881 | \n\n | $ | \n2,704 | \n\n | $ | \n(2,917 | \n) | \n$ | \n2,704 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING BALANCE SHEET (Unaudited)
\nAt December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Assets | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities, available for sale, at fair value (amortized cost $60,801) | \n\n | $ | \n43,401 | \n\n | $ | \n20,043 | \n\n | $ | \n30 | \n\n | $ | \n— | \n\n | $ | \n63,474 | \n|
| \n Equity securities, available for sale, at fair value (cost $579) | \n\n | \n | 236 | \n\n | \n | 522 | \n\n | \n | 141 | \n\n | \n | — | \n\n | \n | 899 | \n|
| \n Real estate investments | \n\n | \n | 56 | \n\n | \n | 882 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 938 | \n|
| \n Short-term securities | \n\n | \n | 2,128 | \n\n | \n | 706 | \n\n | \n | 1,530 | \n\n | \n | — | \n\n | \n | 4,364 | \n|
| \n Other investments | \n\n | \n | 2,630 | \n\n | \n | 955 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 3,586 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total investments | \n\n | \n | 48,451 | \n\n | \n | 23,108 | \n\n | \n | 1,702 | \n\n | \n | — | \n\n | \n | 73,261 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash | \n\n | \n | 221 | \n\n | \n | 151 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 374 | \n|
| \n Investment income accrued | \n\n | \n | 468 | \n\n | \n | 215 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 685 | \n|
| \n Premiums receivable | \n\n | \n | 4,241 | \n\n | \n | 2,057 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 6,298 | \n|
| \n Reinsurance recoverables | \n\n | \n | 6,156 | \n\n | \n | 3,104 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 9,260 | \n|
| \n Ceded unearned premiums | \n\n | \n | 608 | \n\n | \n | 70 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 678 | \n|
| \n Deferred acquisition costs | \n\n | \n | 1,622 | \n\n | \n | 213 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 1,835 | \n|
| \n Deferred taxes | \n\n | \n | 23 | \n\n | \n | (40 | \n) | \n\n | 50 | \n\n | \n | — | \n\n | \n | 33 | \n|
| \n Contractholder receivables | \n\n | \n | 3,306 | \n\n | \n | 1,056 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,362 | \n|
| \n Goodwill | \n\n | \n | 2,602 | \n\n | \n | 1,009 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,611 | \n|
| \n Other intangible assets | \n\n | \n | 216 | \n\n | \n | 88 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 304 | \n|
| \n Investment in subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 28,821 | \n\n | \n | (28,821 | \n) | \n\n | — | \n|
| \n Other assets | \n\n | \n | 1,931 | \n\n | \n | 429 | \n\n | \n | 17 | \n\n | \n | — | \n\n | \n | 2,377 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total assets | \n\n | $ | \n69,845 | \n\n | $ | \n31,460 | \n\n | $ | \n30,594 | \n\n | $ | \n(28,821 | \n) | \n$ | \n103,078 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Liabilities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expense reserves | \n\n | $ | \n32,999 | \n\n | $ | \n16,851 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n49,850 | \n|
| \n Unearned premium reserves | \n\n | \n | 8,201 | \n\n | \n | 3,638 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 11,839 | \n|
| \n Contractholder payables | \n\n | \n | 3,306 | \n\n | \n | 1,056 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,362 | \n|
| \n Payables for reinsurance premiums | \n\n | \n | 194 | \n\n | \n | 142 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 336 | \n|
| \n Debt | \n\n | \n | 692 | \n\n | \n | — | \n\n | \n | 5,657 | \n\n | \n | — | \n\n | \n | 6,349 | \n|
| \n Other liabilities | \n\n | \n | 4,084 | \n\n | \n | 1,308 | \n\n | \n | 114 | \n\n | \n | — | \n\n | \n | 5,506 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities | \n\n | \n | 49,476 | \n\n | \n | 22,995 | \n\n | \n | 5,771 | \n\n | \n | — | \n\n | \n | 78,242 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Shareholders' equity | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Common stock (1,750.0 shares authorized; 322.2 shares issued and outstanding) | \n\n | \n | — | \n\n | \n | 390 | \n\n | \n | 21,843 | \n\n | \n | (390 | \n) | \n\n | 21,843 | \n|
| \n Additional paid-in capital | \n\n | \n | 11,634 | \n\n | \n | 6,502 | \n\n | \n | — | \n\n | \n | (18,136 | \n) | \n\n | — | \n|
| \n Retained earnings | \n\n | \n | 7,673 | \n\n | \n | 1,073 | \n\n | \n | 27,238 | \n\n | \n | (8,733 | \n) | \n\n | 27,251 | \n|
| \n Accumulated other comprehensive income | \n\n | \n | 1,062 | \n\n | \n | 500 | \n\n | \n | 880 | \n\n | \n | (1,562 | \n) | \n\n | 880 | \n|
| \n Treasury stock, at cost (437.3 shares) | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (25,138 | \n) | \n\n | — | \n\n | \n | (25,138 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total shareholders' equity | \n\n | \n | 20,369 | \n\n | \n | 8,465 | \n\n | \n | 24,823 | \n\n | \n | (28,821 | \n) | \n\n | 24,836 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities and shareholders' equity | \n\n | $ | \n69,845 | \n\n | $ | \n31,460 | \n\n | $ | \n30,594 | \n\n | $ | \n(28,821 | \n) | \n$ | \n103,078 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING BALANCE SHEET (Unaudited)
\nAt December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Assets | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities, available for sale, at fair value (amortized cost $62,196) | \n\n | $ | \n43,720 | \n\n | $ | \n20,199 | \n\n | $ | \n37 | \n\n | $ | \n— | \n\n | $ | \n63,956 | \n|
| \n Equity securities, available for sale, at fair value (cost $686) | \n\n | \n | 329 | \n\n | \n | 484 | \n\n | \n | 130 | \n\n | \n | — | \n\n | \n | 943 | \n|
| \n Real estate investments | \n\n | \n | 33 | \n\n | \n | 905 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 938 | \n|
| \n Short-term securities | \n\n | \n | 1,867 | \n\n | \n | 492 | \n\n | \n | 1,523 | \n\n | \n | — | \n\n | \n | 3,882 | \n|
| \n Other investments | \n\n | \n | 2,450 | \n\n | \n | 990 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 3,441 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total investments | \n\n | \n | 48,399 | \n\n | \n | 23,070 | \n\n | \n | 1,691 | \n\n | \n | — | \n\n | \n | 73,160 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash | \n\n | \n | 137 | \n\n | \n | 154 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | 294 | \n|
| \n Investment income accrued | \n\n | \n | 499 | \n\n | \n | 231 | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 734 | \n|
| \n Premiums receivable | \n\n | \n | 4,124 | \n\n | \n | 2,001 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 6,125 | \n|
| \n Reinsurance recoverables | \n\n | \n | 6,292 | \n\n | \n | 3,421 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 9,713 | \n|
| \n Ceded unearned premiums | \n\n | \n | 712 | \n\n | \n | 89 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 801 | \n|
| \n Deferred acquisition costs | \n\n | \n | 1,570 | \n\n | \n | 234 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 1,804 | \n|
| \n Deferred taxes | \n\n | \n | 279 | \n\n | \n | 86 | \n\n | \n | (62 | \n) | \n\n | — | \n\n | \n | 303 | \n|
| \n Contractholder receivables | \n\n | \n | 3,179 | \n\n | \n | 1,149 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,328 | \n|
| \n Goodwill | \n\n | \n | 2,619 | \n\n | \n | 1,015 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 3,634 | \n|
| \n Other intangible assets | \n\n | \n | 250 | \n\n | \n | 101 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 351 | \n|
| \n Investment in subsidiaries | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 28,616 | \n\n | \n | (28,616 | \n) | \n\n | — | \n|
| \n Other assets | \n\n | \n | 2,010 | \n\n | \n | 357 | \n\n | \n | 198 | \n\n | \n | — | \n\n | \n | 2,565 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total assets | \n\n | $ | \n70,070 | \n\n | $ | \n31,908 | \n\n | $ | \n30,450 | \n\n | $ | \n(28,616 | \n) | \n$ | \n103,812 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Liabilities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Claims and claim adjustment expense reserves | \n\n | $ | \n33,506 | \n\n | $ | \n17,389 | \n\n | $ | \n— | \n\n | $ | \n— | \n\n | $ | \n50,895 | \n|
| \n Unearned premium reserves | \n\n | \n | 8,188 | \n\n | \n | 3,662 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 11,850 | \n|
| \n Contractholder payables | \n\n | \n | 3,179 | \n\n | \n | 1,149 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4,328 | \n|
| \n Payables for reinsurance premiums | \n\n | \n | 127 | \n\n | \n | 171 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 298 | \n|
| \n Debt | \n\n | \n | 692 | \n\n | \n | — | \n\n | \n | 5,654 | \n\n | \n | — | \n\n | \n | 6,346 | \n|
| \n Other liabilities | \n\n | \n | 4,109 | \n\n | \n | 1,180 | \n\n | \n | 10 | \n\n | \n | — | \n\n | \n | 5,299 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities | \n\n | \n | 49,801 | \n\n | \n | 23,551 | \n\n | \n | 5,664 | \n\n | \n | — | \n\n | \n | 79,016 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Shareholders' equity | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Common stock (1,750.0 shares authorized; 353.5 shares issued and outstanding) | \n\n | \n | — | \n\n | \n | 390 | \n\n | \n | 21,500 | \n\n | \n | (390 | \n) | \n\n | 21,500 | \n|
| \n Additional paid-in capital | \n\n | \n | 11,634 | \n\n | \n | 6,502 | \n\n | \n | — | \n\n | \n | (18,136 | \n) | \n\n | — | \n|
| \n Retained earnings | \n\n | \n | 7,868 | \n\n | \n | 1,042 | \n\n | \n | 24,281 | \n\n | \n | (8,900 | \n) | \n\n | 24,291 | \n|
| \n Accumulated other comprehensive income | \n\n | \n | 767 | \n\n | \n | 423 | \n\n | \n | 810 | \n\n | \n | (1,190 | \n) | \n\n | 810 | \n|
| \n Treasury stock, at cost (401.5 shares) | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (21,805 | \n) | \n\n | — | \n\n | \n | (21,805 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total shareholders' equity | \n\n | \n | 20,269 | \n\n | \n | 8,357 | \n\n | \n | 24,786 | \n\n | \n | (28,616 | \n) | \n\n | 24,796 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Total liabilities and shareholders' equity | \n\n | $ | \n70,070 | \n\n | $ | \n31,908 | \n\n | $ | \n30,450 | \n\n | $ | \n(28,616 | \n) | \n$ | \n103,812 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
\nFor the twelve months ended December 31, 2014
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Cash flows from operating activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income | \n\n | $ | \n2,780 | \n\n | $ | \n1,124 | \n\n | $ | \n3,692 | \n\n | $ | \n(3,904 | \n) | \n$ | \n3,692 | \n|
| \n Net adjustments to reconcile net income to net cash provided by operating activities | \n\n | \n | 343 | \n\n | \n | (293 | \n) | \n\n | 118 | \n\n | \n | (167 | \n) | \n\n | 1 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by operating activities | \n\n | \n | 3,123 | \n\n | \n | 831 | \n\n | \n | 3,810 | \n\n | \n | (4,071 | \n) | \n\n | 3,693 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from investing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Proceeds from maturities of fixed maturities | \n\n | \n | 6,625 | \n\n | \n | 4,258 | \n\n | \n | 11 | \n\n | \n | — | \n\n | \n | 10,894 | \n|
| \n Proceeds from sales of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | 595 | \n\n | \n | 453 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 1,049 | \n|
| \n Equity securities | \n\n | \n | 111 | \n\n | \n | 43 | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | 158 | \n|
| \n Real estate investments | \n\n | \n | 1 | \n\n | \n | 14 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 15 | \n|
| \n Other investments | \n\n | \n | 477 | \n\n | \n | 378 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 855 | \n|
| \n Purchases of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | (6,856 | \n) | \n\n | (4,465 | \n) | \n\n | (4 | \n) | \n\n | — | \n\n | \n | (11,325 | \n) |
| \n Equity securities | \n\n | \n | (3 | \n) | \n\n | (42 | \n) | \n\n | (7 | \n) | \n\n | — | \n\n | \n | (52 | \n) |
| \n Real estate investments | \n\n | \n | (22 | \n) | \n\n | (26 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (48 | \n) |
| \n Other investments | \n\n | \n | (405 | \n) | \n\n | (149 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (554 | \n) |
| \n Net sales (purchases) of short-term securities | \n\n | \n | (268 | \n) | \n\n | (223 | \n) | \n\n | (7 | \n) | \n\n | — | \n\n | \n | (498 | \n) |
| \n Securities transactions in course of settlement | \n\n | \n | 44 | \n\n | \n | 38 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 82 | \n|
| \n Acquisition, net of cash acquired | \n\n | \n | (9 | \n) | \n\n | (3 | \n) | \n\n | — | \n\n | \n | \n | \n | \n | (12 | \n) |
| \n Other | \n\n | \n | (350 | \n) | \n\n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (358 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by (used in) investing activities | \n\n | \n | (60 | \n) | \n\n | 268 | \n\n | \n | (2 | \n) | \n\n | — | \n\n | \n | 206 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from financing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Treasury stock acquired—share repurchase authorization | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (3,275 | \n) | \n\n | — | \n\n | \n | (3,275 | \n) |
| \n Treasury stock acquired—net employee share-based compensation | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (57 | \n) | \n\n | — | \n\n | \n | (57 | \n) |
| \n Dividends paid to shareholders | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (729 | \n) | \n\n | — | \n\n | \n | (729 | \n) |
| \n Issuance of common stock—employee share options | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 195 | \n\n | \n | — | \n\n | \n | 195 | \n|
| \n Excess tax benefits from share-based payment arrangements | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 57 | \n\n | \n | — | \n\n | \n | 57 | \n|
| \n Dividends paid to parent company | \n\n | \n | (2,978 | \n) | \n\n | (1,093 | \n) | \n\n | — | \n\n | \n | 4,071 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash used in financing activities | \n\n | \n | (2,978 | \n) | \n\n | (1,093 | \n) | \n\n | (3,809 | \n) | \n\n | 4,071 | \n\n | \n | (3,809 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effect of exchange rate changes on cash | \n\n | \n | (1 | \n) | \n\n | (9 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (10 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net increase (decrease) in cash | \n\n | \n | 84 | \n\n | \n | (3 | \n) | \n\n | (1 | \n) | \n\n | — | \n\n | \n | 80 | \n|
| \n Cash at beginning of year | \n\n | \n | 137 | \n\n | \n | 154 | \n\n | \n | 3 | \n\n | \n | — | \n\n | \n | 294 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash at end of year | \n\n | $ | \n221 | \n\n | $ | \n151 | \n\n | $ | \n2 | \n\n | $ | \n— | \n\n | $ | \n374 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Supplemental disclosure of cash flow information | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Income taxes paid (received) | \n\n | $ | \n947 | \n\n | $ | \n336 | \n\n | $ | \n(136 | \n) | \n$ | \n— | \n\n | $ | \n1,147 | \n|
| \n Interest paid | \n\n | $ | \n47 | \n\n | $ | \n— | \n\n | $ | \n318 | \n\n | $ | \n— | \n\n | $ | \n365 | \n
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
\nFor the twelve months ended December 31, 2013
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Cash flows from operating activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income | \n\n | $ | \n2,771 | \n\n | $ | \n1,044 | \n\n | $ | \n3,673 | \n\n | $ | \n(3,815 | \n) | \n$ | \n3,673 | \n|
| \n Net adjustments to reconcile net income to net cash provided by operating activities | \n\n | \n | (497 | \n) | \n\n | 413 | \n\n | \n | (1,665 | \n) | \n\n | 1,892 | \n\n | \n | 143 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by operating activities | \n\n | \n | 2,274 | \n\n | \n | 1,457 | \n\n | \n | 2,008 | \n\n | \n | (1,923 | \n) | \n\n | 3,816 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from investing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Proceeds from maturities of fixed maturities | \n\n | \n | 5,484 | \n\n | \n | 2,419 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | 7,904 | \n|
| \n Proceeds from sales of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | 989 | \n\n | \n | 641 | \n\n | \n | 5 | \n\n | \n | — | \n\n | \n | 1,635 | \n|
| \n Equity securities | \n\n | \n | 45 | \n\n | \n | 41 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 86 | \n|
| \n Real estate investments | \n\n | \n | — | \n\n | \n | 18 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 18 | \n|
| \n Other investments | \n\n | \n | 489 | \n\n | \n | 273 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 762 | \n|
| \n Purchases of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | (6,260 | \n) | \n\n | (3,201 | \n) | \n\n | (6 | \n) | \n\n | — | \n\n | \n | (9,467 | \n) |
| \n Equity securities | \n\n | \n | (21 | \n) | \n\n | (34 | \n) | \n\n | (2 | \n) | \n\n | — | \n\n | \n | (57 | \n) |
| \n Real estate investments | \n\n | \n | (1 | \n) | \n\n | (106 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (107 | \n) |
| \n Other investments | \n\n | \n | (320 | \n) | \n\n | (126 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (446 | \n) |
| \n Net sales (purchases) of short-term securities | \n\n | \n | (272 | \n) | \n\n | (52 | \n) | \n\n | 435 | \n\n | \n | — | \n\n | \n | 111 | \n|
| \n Securities transactions in course of settlement | \n\n | \n | (2 | \n) | \n\n | 24 | \n\n | \n | (1 | \n) | \n\n | — | \n\n | \n | 21 | \n|
| \n Acquisition, net of cash acquired | \n\n | \n | (773 | \n) | \n\n | (224 | \n) | \n\n | — | \n\n | \n | \n | \n | \n | (997 | \n) |
| \n Other | \n\n | \n | (365 | \n) | \n\n | (8 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (373 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by (used in) investing activities | \n\n | \n | (1,007 | \n) | \n\n | (335 | \n) | \n\n | 432 | \n\n | \n | — | \n\n | \n | (910 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from financing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Payment of debt | \n\n | \n | (500 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (500 | \n) |
| \n Issuance of debt | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 494 | \n\n | \n | — | \n\n | \n | 494 | \n|
| \n Dividends paid to shareholders | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (729 | \n) | \n\n | — | \n\n | \n | (729 | \n) |
| \n Issuance of common stock—employee share options | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 206 | \n\n | \n | — | \n\n | \n | 206 | \n|
| \n Treasury stock acquired—share repurchase authorization | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (2,400 | \n) | \n\n | — | \n\n | \n | (2,400 | \n) |
| \n Treasury stock acquired—net employee share-based compensation | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (61 | \n) | \n\n | — | \n\n | \n | (61 | \n) |
| \n Excess tax benefits from share-based payment arrangements | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 51 | \n\n | \n | — | \n\n | \n | 51 | \n|
| \n Dividends paid to parent company | \n\n | \n | (1,307 | \n) | \n\n | (1,116 | \n) | \n\n | — | \n\n | \n | 2,423 | \n\n | \n | — | \n|
| \n Capital contributions, loans and other transactions between subsidiaries | \n\n | \n | 500 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (500 | \n) | \n\n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash used in financing activities | \n\n | \n | (1,307 | \n) | \n\n | (1,116 | \n) | \n\n | (2,439 | \n) | \n\n | 1,923 | \n\n | \n | (2,939 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effect of exchange rate changes on cash | \n\n | \n | — | \n\n | \n | (3 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (3 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net increase (decrease) in cash | \n\n | \n | (40 | \n) | \n\n | 3 | \n\n | \n | 1 | \n\n | \n | — | \n\n | \n | (36 | \n) |
| \n Cash at beginning of year | \n\n | \n | 177 | \n\n | \n | 151 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 330 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash at end of year | \n\n | $ | \n137 | \n\n | $ | \n154 | \n\n | $ | \n3 | \n\n | $ | \n— | \n\n | $ | \n294 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Supplemental disclosure of cash flow information | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Income taxes paid (received) | \n\n | $ | \n942 | \n\n | $ | \n325 | \n\n | $ | \n(210 | \n) | \n$ | \n— | \n\n | $ | \n1,057 | \n|
| \n Interest paid | \n\n | $ | \n60 | \n\n | $ | \n— | \n\n | $ | \n295 | \n\n | $ | \n— | \n\n | $ | \n355 | \n
CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
\nFor the twelve months ended December 31, 2012
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n (in millions) | \n\n | TPC | \n\n | Other \nSubsidiaries | \n\n | Travelers(1) | \n\n | Eliminations | \n\n | Consolidated | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Cash flows from operating activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Net income | \n\n | $ | \n1,857 | \n\n | $ | \n798 | \n\n | $ | \n2,473 | \n\n | $ | \n(2,655 | \n) | \n$ | \n2,473 | \n|
| \n Net adjustments to reconcile net income to net cash provided by operating activities | \n\n | \n | 715 | \n\n | \n | 7 | \n\n | \n | (700 | \n) | \n\n | 735 | \n\n | \n | 757 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by operating activities | \n\n | \n | 2,572 | \n\n | \n | 805 | \n\n | \n | 1,773 | \n\n | \n | (1,920 | \n) | \n\n | 3,230 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from investing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Proceeds from maturities of fixed maturities | \n\n | \n | 5,905 | \n\n | \n | 2,462 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 8,369 | \n|
| \n Proceeds from sales of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | 730 | \n\n | \n | 355 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 1,087 | \n|
| \n Equity securities | \n\n | \n | 21 | \n\n | \n | 16 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 37 | \n|
| \n Real estate investments | \n\n | \n | — | \n\n | \n | 53 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 53 | \n|
| \n Other investments | \n\n | \n | 555 | \n\n | \n | 280 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 835 | \n|
| \n Purchases of investments: | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Fixed maturities | \n\n | \n | (7,361 | \n) | \n\n | (3,077 | \n) | \n\n | (9 | \n) | \n\n | — | \n\n | \n | (10,447 | \n) |
| \n Equity securities | \n\n | \n | (18 | \n) | \n\n | (28 | \n) | \n\n | (2 | \n) | \n\n | — | \n\n | \n | (48 | \n) |
| \n Real estate investments | \n\n | \n | — | \n\n | \n | (95 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (95 | \n) |
| \n Other investments | \n\n | \n | (371 | \n) | \n\n | (163 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | (534 | \n) |
| \n Net sales (purchases) of short-term securities | \n\n | \n | (308 | \n) | \n\n | 44 | \n\n | \n | 381 | \n\n | \n | — | \n\n | \n | 117 | \n|
| \n Securities transactions in course of settlement | \n\n | \n | 14 | \n\n | \n | (36 | \n) | \n\n | (1 | \n) | \n\n | — | \n\n | \n | (23 | \n) |
| \n Other | \n\n | \n | (323 | \n) | \n\n | — | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (323 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash provided by (used in) investing activities | \n\n | \n | (1,156 | \n) | \n\n | (189 | \n) | \n\n | 373 | \n\n | \n | — | \n\n | \n | (972 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash flows from financing activities | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Payment of debt | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (258 | \n) | \n\n | — | \n\n | \n | (258 | \n) |
| \n Dividends paid to shareholders | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (694 | \n) | \n\n | — | \n\n | \n | (694 | \n) |
| \n Issuance of common stock—employee share options | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 295 | \n\n | \n | — | \n\n | \n | 295 | \n|
| \n Treasury stock acquired—share repurchase authorization | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (1,474 | \n) | \n\n | — | \n\n | \n | (1,474 | \n) |
| \n Treasury stock acquired—net employee share-based compensation | \n\n | \n | — | \n\n | \n | — | \n\n | \n | (53 | \n) | \n\n | — | \n\n | \n | (53 | \n) |
| \n Excess tax benefits from share-based payment arrangements | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 38 | \n\n | \n | — | \n\n | \n | 38 | \n|
| \n Dividends paid to parent company | \n\n | \n | (1,353 | \n) | \n\n | (567 | \n) | \n\n | — | \n\n | \n | 1,920 | \n\n | \n | — | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net cash used in financing activities | \n\n | \n | (1,353 | \n) | \n\n | (567 | \n) | \n\n | (2,146 | \n) | \n\n | 1,920 | \n\n | \n | (2,146 | \n) |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Effect of exchange rate changes on cash | \n\n | \n | — | \n\n | \n | 4 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 4 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net increase in cash | \n\n | \n | 63 | \n\n | \n | 53 | \n\n | \n | — | \n\n | \n | — | \n\n | \n | 116 | \n|
| \n Cash at beginning of year | \n\n | \n | 114 | \n\n | \n | 98 | \n\n | \n | 2 | \n\n | \n | — | \n\n | \n | 214 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Cash at end of year | \n\n | $ | \n177 | \n\n | $ | \n151 | \n\n | $ | \n2 | \n\n | $ | \n— | \n\n | $ | \n330 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Supplemental disclosure of cash flow information | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Income taxes paid (received) | \n\n | $ | \n287 | \n\n | $ | \n108 | \n\n | $ | \n(207 | \n) | \n$ | \n— | \n\n | $ | \n188 | \n|
| \n Interest paid | \n\n | $ | \n73 | \n\n | $ | \n— | \n\n | $ | \n302 | \n\n | $ | \n— | \n\n | $ | \n375 | \n
19. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n 2014 (in millions, except per share amounts) | \n\n | First \nQuarter | \n\n | Second \nQuarter | \n\n | Third \nQuarter | \n\n | Fourth \nQuarter | \n\n | Total | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total revenues | \n\n | $ | \n6,708 | \n\n | $ | \n6,785 | \n\n | $ | \n6,886 | \n\n | $ | \n6,783 | \n\n | $ | \n27,162 | \n|
| \n Total expenses | \n\n | \n | 5,238 | \n\n | \n | 5,884 | \n\n | \n | 5,628 | \n\n | \n | 5,323 | \n\n | \n | 22,073 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income before income taxes | \n\n | \n | 1,470 | \n\n | \n | 901 | \n\n | \n | 1,258 | \n\n | \n | 1,460 | \n\n | \n | 5,089 | \n|
| \n Income tax expense | \n\n | \n | 418 | \n\n | \n | 218 | \n\n | \n | 339 | \n\n | \n | 422 | \n\n | \n | 1,397 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n1,052 | \n\n | $ | \n683 | \n\n | $ | \n919 | \n\n | $ | \n1,038 | \n\n | $ | \n3,692 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income per share(1): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | $ | \n2.98 | \n\n | $ | \n1.98 | \n\n | $ | \n2.72 | \n\n | $ | \n3.15 | \n\n | $ | \n10.82 | \n|
| \n Diluted | \n\n | \n | 2.95 | \n\n | \n | 1.95 | \n\n | \n | 2.69 | \n\n | \n | 3.11 | \n\n | \n | 10.70 | \n
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n 2013 (in millions, except per share amounts) | \n\n | First \nQuarter | \n\n | Second \nQuarter | \n\n | Third \nQuarter | \n\n | Fourth \nQuarter | \n\n | Total | \n||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| \n Total revenues | \n\n | $ | \n6,328 | \n\n | $ | \n6,674 | \n\n | $ | \n6,452 | \n\n | $ | \n6,737 | \n\n | $ | \n26,191 | \n|
| \n Total expenses | \n\n | \n | 5,108 | \n\n | \n | 5,497 | \n\n | \n | 5,275 | \n\n | \n | 5,366 | \n\n | \n | 21,246 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Income before income taxes | \n\n | \n | 1,220 | \n\n | \n | 1,177 | \n\n | \n | 1,177 | \n\n | \n | 1,371 | \n\n | \n | 4,945 | \n|
| \n Income tax expense | \n\n | \n | 324 | \n\n | \n | 252 | \n\n | \n | 313 | \n\n | \n | 383 | \n\n | \n | 1,272 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income | \n\n | $ | \n896 | \n\n | $ | \n925 | \n\n | $ | \n864 | \n\n | $ | \n988 | \n\n | $ | \n3,673 | \n|
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Net income per share(1): | \n\n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | |
| \n Basic | \n\n | $ | \n2.36 | \n\n | $ | \n2.44 | \n\n | $ | \n2.33 | \n\n | $ | \n2.73 | \n\n | $ | \n9.84 | \n|
| \n Diluted | \n\n | \n | 2.33 | \n\n | \n | 2.41 | \n\n | \n | 2.30 | \n\n | \n | 2.70 | \n\n | \n | 9.74 | \n
NOTES TO THE CONDENSED FINANCIAL INFORMATION OF REGISTRANT
\n1. GUARANTEES
\nIn the ordinary course of selling businesses to third parties, The Travelers Companies, Inc. (TRV) has agreed to indemnify purchasers for losses arising out of breaches of representations and warranties with respect to the businesses being sold, covenants and obligations of TRV and/or its subsidiaries following the closing, and in certain cases obligations arising from certain liabilities or adverse reserve development. Such indemnification provisions generally are applicable from the closing date to the expiration of the relevant statutes of limitations, although, in some cases, there may be agreed upon term limitations or no term limitations. Certain of these contingent obligations are subject to deductibles which have to be incurred by the obligee before TRV is obligated to make payments. The maximum amount of TRV's contingent obligation for indemnifications related to the sale of businesses that are quantifiable was $89 million at December 31, 2014, of which $8 million was recognized on the balance sheet at that date.
\nTRV also has contingent obligations for guarantees related to its subsidiary's debt obligations and various other indemnifications. TRV also provides standard indemnifications to service providers in the normal course of business. The indemnification clauses are often standard contractual terms. Certain of these guarantees and indemnifications have no stated or notional amounts or limitation to the maximum potential future payments, and, accordingly, TRV is unable to develop an estimate of the maximum potential payments for such arrangements.
\nTRV fully and unconditionally guarantees the payment of all principal, premiums, if any, and interest on certain debt obligations of its subsidiaries TPC and Travelers Insurance Group Holdings Inc. (TIGHI). The guarantees pertain to the $200 million 7.75% notes due 2026 and the $500 million 6.375% notes due 2033.
\n