Travelers 2005 Annual Report Download - page 173

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
161
6. INVESTMENTS (Continued)
•consideration of evidential matter, including an evaluation of factors or triggers that would or could
cause individual investments to qualify ashaving other-than-temporary impairments and those that
would not support other-than-temporary impairment; and
•determination of the status of each analyzed investment as other than temporary or not, with
documentation of the rationale for the decision.
Real Estate Investments
The carrying values of real estate properties are reviewed for impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable. The review for impairment
includes 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.
Venture Capital Investments
Other investments include venture capital investments, which are generally non-publicly traded
instruments in early-stage companies and, historically, having a holding period of four toseven years.
These investments have primarily been made in the health care, software and computer services, and
networking and information technologies infrastructures industries. The Company typically is involved
withventure capital companies early in their formation, as they are developing anddetermining the
viability of, and market demand for, their product. Generally, the Company does not expect these venture
capital companies to record revenues in the early stages of their development, which can often take three
to four years, and does not generally expect them to become profitable for an even longer period of time.
With respect to the Company’s valuation of such non-publicly traded venture capital investments, on a
quarterly basis, portfolio managers as well as an internal valuation committee review and consider a variety
of factors in determining the potential for loss impairment. Factors considered include the following:
•the issuer’s most recent financing events;
•an analysis of whether fundamental deterioration has occurred;
•whether or not the issuer’s progress has been substantially less than expected;
•whether ornot the valuations have declined significantly in the entity’s market sector;
•whether or not the internal valuation committee believes it is probable that the issuer will need
financing within six months at a lower price than our carrying value; and
•whether or not the Company has the ability and intent to hold the security for a period of time
sufficient to allow for recovery, enabling it to receive value equal to or greater than our cost.
The quarterly valuation procedures described above are in addition to the portfolio managers’
ongoing responsibility to frequently monitor developments affecting those invested assets, paying
particular attention to events that might give rise to impairment write-downs.