TRAVELERS COMPANIES, INC. | 2013 | FY | 3

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

        The following table presents the carrying amount of the Company's goodwill by segment at December 31, 2013 and 2012:

(in millions)
  2013   2012  

Business Insurance

   $ 2,168   $ 2,168  

Financial, Professional & International Insurance(1)

     826     557  

Personal Insurance

     613     613  

Other

     27     27  
           

Total

   $ 3,634   $ 3,365  
           
           
(1)
Goodwill of $273 million was recorded at November 1, 2013 as a result of the acquisition of Dominion and is subject to the impact of changes in foreign currency exchange rates. At December 31, 2013, goodwill related to Dominion was $268 million.

Other Intangible Assets

        The following presents a summary of the Company's other intangible assets by major asset class at December 31, 2013 and 2012:

(at December 31, 2013, in millions)
  Gross Carrying Amount   Accumulated Amortization   Net  

Intangibles subject to amortization

                    

Customer-related(1)

   $ 460   $ 414   $ 46  

Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles(2)

     201     113     88  
               

Total intangible assets subject to amortization

     661     527     134  

Intangible assets not subject to amortization(3)

     217     —     217  
               

Total other intangible assets

   $ 878   $ 527   $ 351  
               
               

(at December 31, 2012, in millions)
  Gross
Carrying
Amount		   Accumulated
Amortization		   Net  

Intangibles subject to amortization

                    

Customer-related

   $ 455   $ 383   $ 72  

Fair value adjustment on claims and claim adjustment expense reserves and reinsurance recoverables(2)

     191     98     93  
               

Total intangible assets subject to amortization

     646     481     165  

Intangible assets not subject to amortization

     216     —     216  
               

Total other intangible assets

   $ 862   $ 481   $ 381  
               
               
(1)
Customer-related intangibles of $5 million were recorded in connection with the acquisition of Dominion in 2013.

(2)
Fair value adjustments of $5 million and $191 million were recorded in connection with the acquisition of Dominion in 2013 and in connection with the merger of The St. Paul Companies, Inc. and Travelers Property Casualty Corp. in 2004, respectively, and were based on management's estimate of nominal claims and claim adjustment expense reserves and reinsurance recoverables. The method used calculated a risk adjustment to a risk-free discounted reserve that would, if reserves ran off as expected, produce results that yielded the assumed cost-of-capital on the capital supporting the loss reserves. The fair value adjustments are reported as other intangible assets on the consolidated balance sheet, and the amounts measured in accordance with the acquirer's accounting policies for insurance contracts have been reported as part of the claims and claim adjustment expense reserves and reinsurance recoverables. The intangible assets are being recognized into income over the expected payment pattern. Because the time value of money and the risk adjustment (cost of capital) components of the intangible assets run off at different rates, the amount recognized in income may be a net benefit in some periods and a net expense in other periods. Additionally, $5 million of contract-related intangibles were recorded related to operating leases in connection with the acquisition of Dominion in 2013.

(3)
Intangible assets not subject to amortization of $1 million were recorded in connection with the acquisition of Dominion in 2013.

        The following presents a summary of the Company's amortization expense for other intangible assets by major asset class:

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

Customer-related

   $ 31   $ 33   $ 47  

Fair value adjustment on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangibles

     15     19     22  
               

Total amortization expense

   $ 46   $ 52   $ 69  
               
               

        Intangible asset amortization expense is estimated to be $47 million in 2014, $27 million in 2015, $10 million in 2016, $9 million in 2017 and $8 million in 2018.

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