Travelers 2012 Annual Report Download - page 196

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
The amortized cost and fair value of fixed maturities by contractual maturity follow. Actual
maturities will differ from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Amortized Fair
(at December 31, 2012, in millions) Cost Value
Due in one year or less .............................. $ 5,634 $ 5,719
Due after 1 year through 5 years ....................... 21,498 22,944
Due after 5 years through 10 years ...................... 16,789 18,329
Due after 10 years .................................. 14,164 15,404
58,085 62,396
Mortgage-backed securities, collateralized mortgage obligations
and pass-through securities .......................... 2,744 2,997
Total .......................................... $60,829 $65,393
Pre-refunded bonds of $9.03 billion and $7.33 billion at December 31, 2012 and 2011, respectively,
were bonds for which an irrevocable trust (almost exclusively comprised of U.S. Treasury securities) has
been established to fund the remaining payments of principal and interest.
The Company’s fixed maturity investment portfolio at December 31, 2012 and 2011 included
$3.00 billion and $3.52 billion, respectively, of residential mortgage-backed securities, which include
pass-through securities and collateralized mortgage obligations (CMO). Included in the totals at
December 31, 2012 and 2011 were $1.44 billion and $1.82 billion, respectively, of GNMA, FNMA and
FHLMC (excluding FHA project loans) guaranteed residential mortgage-backed pass-through securities
classified as available for sale. Also included in those totals were residential CMOs classified as
available for sale with a fair value of $1.56 billion and $1.70 billion, respectively. Approximately 43%
and 38% of the Company’s CMO holdings were guaranteed by or fully collateralized by securities
issued by GNMA, FNMA or FHLMC at December 31, 2012 and 2011, respectively. The average credit
rating of the $893 million and $1.05 billion of non-guaranteed CMO holdings at December 31, 2012
and 2011, respectively, was ‘‘B2’’ and ‘‘Ba1,’’ respectively. The average credit rating of all of the above
securities was ‘‘A1’’ and ‘‘Aa3’’ at December 31, 2012 and 2011, respectively.
At December 31, 2012 and 2011, the Company held commercial mortgage-backed securities
(CMBS, including FHA project loans) of $453 million and $446 million, respectively, which are
included in ‘‘All other corporate bonds’’ in the tables above. At December 31, 2012 and 2011,
approximately $64 million and $81 million of these securities, respectively, or the loans backing such
securities, contained guarantees by the U.S. government or a government-sponsored enterprise, and
$4 million and $10 million at December 31, 2012 and 2011, respectively, were comprised of Canadian
non-guaranteed securities. The average credit rating of the $389 million and $365 million of
non-guaranteed securities at December 31, 2012 and 2011, respectively, was ‘‘Aaa’’ at both dates, and
51% and 71%, respectively, of those securities were issued in 2004 and prior years. The CMBS
portfolio is supported by loans that are diversified across economic sectors and geographical areas. The
average credit rating of the CMBS portfolio was ‘‘Aaa’’ at both December 31, 2012 and 2011.
At December 31, 2012 and 2011, the Company had $403 million and $126 million, respectively, of
securities on loan as part of a tri-party lending agreement.
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