Travelers 2013 Annual Report Download - page 121

The following table displays the funding sources for the $10.25 billion of municipal bonds
identified as revenue bonds in the foregoing table at December 31, 2013.
Carrying Average Credit
(at December 31, 2013, in millions) Value Quality(1)
Source:
Water and sewer ............................... $ 3,479 Aaa/Aa1
Higher education .............................. 1,806 Aaa/Aa1
Power and utilities ............................. 985 Aa2
Transportation ................................ 930 Aa1
Special tax ................................... 658 Aa1
Lease ....................................... 437 Aa2
Housing ..................................... 107 Aaa/Aa1
Government funded/grant revenue .................. 104 Aaa
Healthcare ................................... 92 Aa2
General fund ................................. 57 Aa3
Industrial revenue .............................. 52 A1
Property tax .................................. 24 Aa2
Other revenue sources .......................... 1,515 Aaa/Aa1
Total ..................................... $10,246 Aa1
(1) Rated using external rating agencies or by the Company when a public rating does not
exist. Ratings shown are the higher of the rating of the underlying issuer or the insurer in
the case of securities enhanced by third-party insurance for the payment of principal and
interest in the event of issuer default.
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 as part of its investing decisions. Of the insured municipal securities in the Company’s
investment portfolio at December 31, 2013, approximately 99% were rated at ‘‘A3’’ or above, and
approximately 91% 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, 2013. The
average credit rating of the entire municipal bond portfolio was ‘‘Aa1’’ at December 31, 2013 with and
without the enhancement provided by third-party insurance.
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