Travelers 2011 Annual Report Download - page 201

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
accumulated other changes in equity from nonowner sources for the years ended December 31, 2011
and 2010:
Cumulative Additions for Additions for Adjustments to
OTTI Credit OTTI Securities OTTI Securities Reductions Book Value Cumulative OTTI
Losses Where No Where Credit Due to of Credit- Credit Losses
Recognized for Credit Losses Losses Have Sales/Defaults Impaired Recognized for
Securities Held, Were Been of Credit- Securities due Securities Still
Year ended December 31, 2011 Beginning of Previously Previously Impaired to Changes in Held, End of
(in millions) Period Recognized Recognized Securities Cash Flows Period
Fixed maturities
Mortgage-backed securities, collateralized
mortgage obligations and pass-through
securities ................... $ 47 $— $12 $— $(1) $ 58
All other corporate bonds ........... 88 2 2 (4) 6 94
Total fixed maturities ............ $135 $ 2 $14 $(4) $ 5 $152
Cumulative Additions for Additions for Adjustments to
OTTI Credit OTTI Securities OTTI Securities Reductions Book Value Cumulative OTTI
Losses Where No Where Credit Due to of Credit- Credit Losses
Recognized for Credit Losses Losses Have Sales/Defaults Impaired Recognized for
Securities Held, Were Been of Credit- Securities due Securities Still
Year ended December 31, 2010 Beginning of Previously Previously Impaired to Changes in Held, End of
(in millions) Period Recognized Recognized Securities Cash Flows Period
Fixed maturities
Mortgage-backed securities, collateralized
mortgage obligations and pass-through
securities ................... $46 $— $4 $(3) $— $47
All other corporate bonds ........... 93 — 5 (13) 3 88
Total fixed maturities ............ $139 $— $9 $(16) $ 3 $135
Concentrations and Credit Quality
Concentrations of credit risk arise from exposure to counterparties that are engaged in similar
activities and have similar economic characteristics that could cause their ability to meet contractual
obligations to be similarly affected by changes in economic or other conditions. The Company seeks to
mitigate credit risk by actively monitoring the creditworthiness of counterparties, obtaining collateral as
deemed appropriate, and applying controls that include credit approvals, limits of credit exposure, and
other monitoring procedures.
At December 31, 2011 and 2010, other than U.S. Treasury securities and obligations of U.S.
government and government agencies and authorities, the Company was not exposed to any
concentration of credit risk of a single issuer greater than 5% of shareholders’ equity of the Company.
Included in fixed maturities are below investment grade assets totaling $1.96 billion and
$1.88 billion at December 31, 2011 and 2010, respectively. The Company defines its below investment
grade assets as those securities rated below investment grade by external rating agencies, or the
equivalent by the Company when a public rating does not exist. Such assets include publicly traded
below investment grade bonds and certain other privately issued bonds that are classified as below
investment grade loans.
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