Travelers 2011 Annual Report Download - page 116

The following table displays the funding sources for the $11.86 billion of municipal bonds
identified as revenue bonds in the foregoing table at December 31, 2011.
Carrying Average Credit
(at December 31, 2011, in millions) Value Quality(1)
Source:
Water and sewer ............................... $ 3,658 Aaa/Aa1
Higher education .............................. 1,601 Aaa/Aa1
Transportation ................................ 1,485 Aa2
Power and utilities ............................. 1,169 Aa2
Special tax ................................... 1,090 Aa1
Lease ....................................... 636 Aa2
Housing ..................................... 147 Aaa/Aa1
Property tax .................................. 64 Aa2
General fund ................................. 63 Aa2
Other revenue sources .......................... 1,951 Aaa/Aa1
Total ..................................... $11,864 Aa1
(1) Rated using external rating agencies or by the Company when a public rating does not
exist.
The Company bases its investment decision on the underlying credit characteristics of the
municipal security. While its municipal bond portfolio includes a number of securities that were
enhanced by third-party insurance for the payment of principal and interest in the event of an issuer
default, the Company does not rely on enhanced credit characteristics provided by such third-party
insurance. The downgrade during 2008 and 2009 of credit ratings of insurers of these securities resulted
in a corresponding downgrade in the ratings of many such securities to the underlying rating of the
respective security. Of the insured municipal securities in the Company’s investment portfolio at
December 31, 2011, approximately 99% were rated at A3 or above, and approximately 92% were rated
at Aa3 or above, without the benefit of insurance. The Company believes that a loss of the benefit of
insurance would not result in a material adverse impact on the Company’s results of operations,
financial position or liquidity, due to the underlying credit strength of the issuers of the securities, as
well as the Company’s ability and intent to hold the securities. The average credit rating of the
underlying issuers of these securities was ‘‘Aa2’’ at December 31, 2011. The average credit rating of the
entire municipal bond portfolio was ‘‘Aa1’’ at December 31, 2011 with and without the enhancement
provided by third-party insurance.
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