Travelers 2010 Annual Report Download - page 85

In 2009, impairments included in net income totaled $258 million. Impairments in the fixed
maturity portfolio in 2009 were $169 million and included $81 million of impairments related to
structured mortgage securities, $70 million related to various issuers’ deteriorated financial position and
$18 million with respect to securities that the Company either had the intent to sell or did not have the
ability to assert an intention to hold until recovery in fair value. Equity impairments in 2009 were
$79 million, the majority of which were related to issuers in the financial services industry. Impairments
in 2009 also included $10 million related to other investments.
In 2008, impairments included $186 million related to the deteriorated financial position of various
issuers (including $70 million related to securities issued by Lehman Brothers Holdings Inc. and its
subsidiaries), $113 million related to externally managed securities with respect to which the Company
did not have the ability to assert an intention to hold until recovery in fair value, $64 million related to
structured mortgage securities and $57 million related to securities the Company had identified for
potential sale prior to a recovery in fair value.
Further information regarding the nature of impairment charges in each year is included in the
‘‘Investment Portfolio’’ section later in this discussion.
Other Net Realized Investment Gains—Other net realized investment gains in 2010 totaled
$290 million, compared with $275 million in 2009. In September 2010, the Company sold substantially
all of its remaining common stock holdings in Verisk Analytics, Inc. (Verisk) for total proceeds of
approximately $230 million as part of a secondary public offering of Verisk. The Company recorded a
pretax realized investment gain of $205 million on this sale in 2010. The 2010 total also included
$96 million of net realized investment gains related to fixed maturity investments and $25 million of net
realized investment gains related to equity securities. These gains were partially offset by $30 million of
net realized investment losses related to U.S. Treasury futures contracts, which require a daily
mark-to-market settlement and are used to shorten the duration of the Company’s fixed maturity
investment portfolio.
Other net realized investment gains in 2009 were $275 million, compared with $5 million in 2008.
In October 2009, the Company sold a portion of its common stock holdings in Verisk for total proceeds
of approximately $184 million as part of the initial public offering (IPO) of Verisk. The Company
recorded a pretax realized investment gain of $159 million on this sale in 2009. Other net realized
investment gains in 2009 also included $100 million of net realized investment gains related to fixed
maturity investments, $23 million of net realized investment gains associated with the U.S. Treasury
futures contracts and $23 million of net realized investment losses related to foreign exchange.
Other net realized investment gains in 2008 included $50 million related to foreign currency
exchange gains, $39 million from the sale of subsidiaries, $29 million from the sale of fixed maturity
securities and $17 million of net realized investment gains from the sale of venture capital investments.
Partially offsetting these realized investment gains in 2008 were net realized losses of $77 million
related to convertible bonds wherein the embedded option price is marked to market through realized
gains or losses and $53 million of losses related to U.S. Treasury futures contracts.
Other Revenues
Other revenues primarily consist of premium installment charges. In 2010, this category also
included $60 million of expenses related to the Company’s purchase and retirement of $885 million of
its $1.0 billion 6.25% fixed-to-floating rate junior subordinated debentures.
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