Travelers 2005 Annual Report Download - page 107

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•$5 million in the equity portfolio when it became apparent that the cost basis of those securities
would not be recovered over the expected holding period.
•$40million in its venture capital portfolio on 16 holdings. Three of the holdings were impaired due
to new financings at less than favorable rates. Five holdings experienced fundamental economic
deterioration (characterized by less than expected revenues or a fundamental change in product).
Eight of the holdings were impaired due to the impending sale, liquidation or shutdown of the
entity. The Company continually evaluates current developments in the market that have the
potential to affect the valuation of the Company’s investments.
•$10million in its real estate and other holdings. The losses recorded were the result of falling rental
rates and occupancies in three of the Company’s real estate investment holdings.
The Company recognized other-than-temporary impairments of $65 million in the fixed income
portfolio during 2003 related to various issuers, with$8 million due to companies filing bankruptcy and the
remainder related to credit risk due to the issuer’s deteriorated financial position.
For publicly traded securities, the amounts of the impairments were recognized by writing down the
investments to quoted market prices. For non-publicly traded securities, impairments are recognized by
writing down the investment to its estimated fair value, as determined during the Company’s quarterly
internal review process.
The specific circumstances that led to the impairments described above did not materially impact
other individual investments held during 2005 or 2004.
The following table summarizes for all fixed maturities and equity securities available for sale and for
equity securities reported at fair value for which fair value is less than 80% of amortized cost at
December 31, 2005, the gross unrealized investmentloss by length of time those securities have
continuously been in anunrealized loss position:
Period For Which Fair Value Is Less Than 80% of Amortized Cost
(in millions)
Less Than 3
Months
Greater Than 3
Months, Less
Than 6 Months
Greater Than 6
Months, Less
Than
12 Months
Greater Than
12 Months Total
Fixed maturities.................... $ 1$ — $ — $ — $ 1
Equitysecurities................... — — —— —
Venturecapital.................... — — —— —
Total ............................. $ 1 $ — $ —$ — $ 1
Unrealized investment losses as of December 31, 2005 represent less than 1% of the portfolio, and,
therefore, any impact on the Company’s financial position would not be significant.
At December 31, 2005, non-investment grade securities comprised 3% of the Company’s fixed income
investment portfolio. Included in those categories at December 31, 2005 were securities in an unrealized
loss position that, in the aggregate, had an amortized cost of $907 million and a fair value of $870 million,
resulting in a net pretax unrealized investment loss of $37 million. These securities in an unrealized loss
position represented less than 2% of the total amortized cost and less than 2% of the fair value of the fixed
income portfolio at December 31, 2005, and accounted for 7% of the total pretax unrealized investment
loss in the fixed income portfolio.