Travelers 2013 Annual Report Download - page 205

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
The following tables present a roll-forward of the credit component of OTTI on fixed maturities
recognized in the consolidated statement of income for which a portion of the OTTI was recognized in
other comprehensive income for the years ended December 31, 2013 and 2012:
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, 2013 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 .................... $63 $— $2 $— $4 $69
All other corporate bonds ........... 102 3 — (7) 3 101
Total fixed maturities ............. $165 $ 3 $ 2 $(7) $7 $170
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, 2012 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 .................... $58 $— $4 $(1) $2 $63
All other corporate bonds ........... 94 — 4 — 4 102
Total fixed maturities ............. $152 $— $8 $(1) $6 $165
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, 2013, other than U.S. Treasury securities, obligations of U.S. government and
government agencies and authorities, and obligations of the Canadian government, the Company was
not exposed to any concentration of credit risk of a single issuer greater than 5% of the Company’s
shareholders’ equity. At December 31, 2012, 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 the Company’s shareholders’ equity.
Included in fixed maturities are below investment grade securities totaling $1.93 billion and
$2.05 billion at December 31, 2013 and 2012, respectively. The Company defines its below investment
grade securities 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 securities include below
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