Travelers 2007 Annual Report Download - page 189

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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, 2007, in millions) Cost Gains Losses Value
Venture capital .......................................... $ 63 $ 17 $— $ 80
Gross Unrealized Fair
(at December 31, 2006, in millions) Cost Gains Losses Value
Venture capital .......................................... $392 $109 $ 1 $500
In May 2007, the Company completed the bundled sale of a substantial portion of its venture
capital portfolio for total net proceeds of $397 million, which are included on the consolidated
statement of cash flow in ‘‘proceeds from sales of other investments.’’ The sale resulted in the
realization of $81 million of previously unrealized pretax net investment gains that had been recorded
as a component of accumulated other changes in equity from nonowner sources.
Other. Other Investments also include private equity limited partnerships, joint ventures, other
limited partnerships, 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, 2007 and 2006,
there were 31 and 35 such trusts, respectively, which held a combined total of $355 million and
$391 million, respectively, in municipal securities, of which $44 million and $76 million,
respectively, were owned by outside investors. The net carrying value of the trusts owned by the
Company at December 31, 2007 and 2006 was $311 million and $315 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 significant variable interest in real estate entities. These investments have
total assets of approximately $268 million and $184 million as of December 31, 2007 and 2006,
respectively. The carrying value of the Company’s share of these investments was approximately
$13 million and $64 million at December 31, 2007 and 2006, respectively. The Company has an
unfunded commitment of $24 million associated with these entities. 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
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