Travelers 2008 Annual Report Download - page 118

For the year ended December 31, 2006, the Company recognized the following
other-than-temporary impairments:
• $7 million in the fixed maturities portfolio, consisting of $6 million related to externally managed
securities with respect to which the Company does not have the ability to assert an intention to
hold until recovery in market value and $1 million related to credit risk associated with various
issuers’ deteriorated financial position;
• $4 million in the equity portfolio when it was determined that the cost basis of those securities
would not be recovered over the expected holding period;
• $33 million in the venture capital portfolio on 16 holdings. Four of the holdings were impaired
due to new financings on unfavorable terms. Six holdings experienced fundamental economic
deterioration (characterized by less than expected revenues or a fundamental change in
product). Four of the holdings were impaired due to the impending sale, liquidation or
shutdown of the entity. Two of the holdings were public securities whose cost basis was not
anticipated to be recovered over the expected holding period; and
• $4 million in other investments (excluding venture capital). The loss recorded was the result of
one mortgage loan refinancing at less favorable terms.
The market disruptions that occurred in the second half of 2008 led to many of the 2008
impairment losses and resulted in increased unrealized losses compared with previous years. The
Company continually evaluates current developments in the market that have the potential to affect the
valuation of the Company’s investments.
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, 2008, the gross unrealized investment loss by length of time those securities have
continuously been in an unrealized loss position of greater than 20% of amortized cost:
Period For Which Fair Value Is Less Than 80% of Amortized Cost
Greater Than Greater Than
3 Months, 6 Months,
Less Than Less Than Less Than Greater Than
(in millions) 3 Months 6 Months 12 Months 12 Months Total
Fixed maturities:
Mortgage-backed securities ........... $222 $ 36 $ 1 $— $259
Other .......................... 329 73 12 —414
Total fixed maturities .............. 551 109 13 —673
Equity securities .................... 41 30 — —71
Total ............................. $592 $139 $13 $— $744
These unrealized losses at December 31, 2008 represent approximately 1% of the combined fixed
maturity and equity security portfolios on a pretax basis and approximately 2% of shareholders’ equity
on an after-tax basis.
For fixed maturity investments where fair value is less than the carrying value and the Company
did not reach a decision to impair, the Company continues to have the intent and ability to hold such
investments to a projected recovery in value, which may not be until maturity.
At December 31, 2008, below investment grade securities comprised 2.0% of the Company’s fixed
maturity investment portfolio. Included in below investment grade securities at December 31, 2008
were securities in an unrealized loss position that, in the aggregate, had an amortized cost of
$1.34 billion and a fair value of $1.08 billion, resulting in a net pretax unrealized investment loss of
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