Travelers 2003 Annual Report Download - page 64

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62
• The company is performing substantially and consistently behind plan;
• The investee has announced, or Travelers has become aware of, adverse changes or events such as changes or
planned changes in senior management, restructurings, or a sale of assets;
• The regulatory, economic, or technological environment has changed in a way that is expected to adversely
affect the investee's profitability;
Factors affecting on-going financial condition:
• Factors that raise doubts about the investee's ability to continue as a going concern, such as negative cash
flows from operations, working-capital deficiencies, investment advisors' recommendations, or non-
compliance with regulatory capital requirements or debt covenants;
• A secondary equity offering at a price substantially lower than the holder’s cost;
• A breach of a covenant or the failure to service debt;
• Fraud within the company.
For debt and equity investments, factors that may indicate that a decline in value is not other-than-temporary include
the following:
• The securities owned continue to generate reasonable earnings and dividends, despite a general stock market
decline;
• Bond interest or preferred stock dividend rate (on cost) is lower than rates for similar securities issued
currently but quality of investment is not adversely affected;
• The investment is performing as expected and is current on all expected payments;
• Specific, recognizable, short-term factors have affected the market value;
• Financial condition, market share, backlog and other key statistics indicate growth.
Impairment charges included in net realized investment gains (losses) were as follows:
(for the year ended December 31, in millions) 2003 2002 2001
Fixed maturities $ 65.4
$ 255.0 $ 109.7
Equity securities 5.9 8.5 35.8
Real estate and other 18.9 20.6 0.7
Total $ 90.2
$ 284.1 $ 146.2
Travelers recognized other-than-temporary impairments of $65.4 million in the fixed income portfolio during 2003
related to various issuers, with $8.3 million due to companies filing bankruptcy and the remainder related to credit risk
associated with the issuer’s deteriorated financial position.
For publicly traded securities, the amounts of the impairments were determined by writing down the investments to
quoted market prices. For non-publicly traded securities, impairments are determined by writing down the investment
to its estimated fair value, as determined during Travelers quarterly internal review process.
The specific circumstances that led to the impairments described above did not materially impact other individual
investments held during 2003. Travelers continues to evaluate current developments in the market that have the
potential to affect the valuation of Travelers investments.
Travelers investment portfolio includes non-publicly traded investments, such as real estate partnerships and joint
ventures, investment partnerships, private equities and certain fixed income securities. The real estate partnerships and
joint ventures, investment partnerships and certain private equities are accounted for using the equity method of
accounting. These investments are carried at cost, adjusted for Travelers share of earnings or losses and reduced by