Travelers 2006 Annual Report Download - page 189

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
177
3. INVESTMENTS (Continued)
Other Investments
Venture Capital. The cost and fair value of investments in venture capital were as follows:
Gross Unrealized Fair
(at December 31, 2006, in millions)CostGainsLosses Value
Venture capital.................................................. $ 392 $ 109 $ 1 $ 500
Gross Unrealized Fair
(at December 31, 2005, in millions)Cost Gains Losses Value
Venturecapital.................................................$ 4 06 $91$ 2 $495
Other. Other Investments also include private equity limited partnerships, joint ventures, other
limitedpartnerships, mortgage loans and trading securities.
Variable Interest Entities (VIEs)
The following entities are consolidated:
•Municipal Trusts—The Company owns interests in various municipal trusts that were formed for
the purpose of allowing more flexibility to generate investment income in a manner consistent with
the Company’s investment objectives and tax position. As of December 31, 2006 and 2005, there
were 35 and 36 such trusts, respectively, which held a combined total of $391 million and
$441million, respectively, in municipal securities, of which $76 million and $84 million, respectively,
were owned by outside investors. The net carrying value of the trusts owned by the Company at
December 31, 2006 and 2005 was $315 million and $357 million, respectively.
The Company has significant interests in the following VIEs which are not consolidated because the
Company is not considered to be the primary beneficiary:
•The Company has a significant variable interest in two real estate entities. Of these two investments,
one became a reportable VIE in 2006 duetoan increase in the Company’s ownership interest.
These investments have total assets of approximately $305 million and $299 million as of
December 31, 2006 and2005, respectively. The carrying value of the Company’s share of these
investments was approximately $33 million and $38 million at December 31, 2006 and 2005,
respectively. The Company has an unfunded commitment of $12 million associated with one of
these funds. The Company’s exposure to loss is limited to the investment carrying amounts reported
in the consolidated balance sheet and the unfunded commitment amount. The purpose of the
Company’s involvement in these entities is to generate investment returns.
•The Company has a significant variable interest in Camperdown UK Limited, which SPC sold in
December 2003. The Company’s variable interest resulted from an agreement to indemnify the
purchaser in the event a specified reserve deficiency develops, a reserve-related foreign exchange
impact occurs, or a foreign tax adjustment is imposed on a pre-sale reporting period. The maximum
amount of this indemnification obligation is $187 million. The fair value of this obligation as of
December 31, 2006 and2005 was $65 million and $66 million, respectively. See “Guarantees”
section of note 15.
The Company has other significant interests in variable interest entities that are not material.