Travelers 2008 Annual Report Download - page 203

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
Net Realized and Unrealized Investment Gains (Losses)
(for the year ended December 31, in millions) 2008 2007 2006
Net realized investment gains (losses)
Fixed maturities .................................. $(371) $ 5 $(33)
Equity securities .................................. (72) 221
Other .......................................... 28 147 23
Net realized investment gains (losses) ................. $(415) $154 $ 11
Changes in net unrealized gains (losses) on investment securities that are included as a separate
component of accumulated other changes in equity from nonowner sources were as follows:
(at and for the year ended December 31, in millions) 2008 2007 2006
Change in net unrealized investment gains (losses)
Fixed maturities ................................. $(1,062) $346 $ 55
Equity securities ................................. (97) (22) (4)
Venture capital ................................. (9) (91) 19
Other investments ............................... (23) 25 125
(1,191) 258 195
Related tax expense (benefit) ....................... (427) 91 69
Change in net unrealized gain on investment securities . . . (764) 167 126
Balance, beginning of year ......................... 620 453 327
Balance, end of year ............................ $ (144) $620 $453
Derivative Financial Instruments
Derivative Instruments Designated as Hedging Instruments
The Company has foreign currency hedges of net investments in foreign operations in which
derivatives (foreign currency forward contracts) hedge the foreign currency exposure. The effective
portion of the change in fair value of the derivative hedging the net investment, including any forward
premium or discount, is reflected in the accumulated other changes in equity from nonowner sources as
part of the foreign currency translation adjustment. For the years ended December 31, 2008 and 2007,
the amount included in changes in equity from nonowner sources was a loss of $2 million in 2008 and a
gain of $1 million in 2007. With regard to hedge ineffectiveness in 2008 and 2007, the Company had no
realized gains or losses in either year.
Derivative Instruments not Designated as Hedging Instruments
Derivatives that are not designated or do not qualify as hedges are carried at fair value with
changes in value reflected in net realized investment gains (losses). The Company has certain U.S.
Treasury futures contracts and foreign currency forward contracts, which are not designated as hedges
at December 31, 2008 and 2007.
191