Travelers 2014 Annual Report Download - page 178

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
key assumptions made for the Prime, Alt
- A and first - lien Sub - Prime mortgage - backed securities at December 31, 2014 were as follows:
Real Estate Investments
On at least an annual basis, the Company obtains independent appraisals for substantially all of its real estate investments. In addition, the
carrying value of all real estate investments is reviewed for impairment on a quarterly basis or when events or changes in circumstances indicate
that the carrying amount may not be recoverable. The review for impairment considers the valuation from the independent appraisal, when
applicable, and incorporates an estimate of the undiscounted cash flows expected to result from the use and eventual disposition of the real estate
property. An impairment loss is recognized if the expected future undiscounted cash flows are less than the carrying value of the real estate
property. The impairment loss is the amount by which the carrying amount exceeds fair value.
Other Investments
Investments in Private Equity Limited Partnerships, Hedge Funds and Real Estate Partnerships
The Company reviews its investments in private equity limited partnerships, hedge funds and real estate partnerships for impairment no less
frequently than quarterly and monitors the performance throughout the year through discussions with the managers/general partners. If the
Company becomes aware of an impairment of a partnership's investments at the balance sheet date prior to receiving the partnership's financial
statements, it will recognize an impairment by recording a reduction in the carrying value of the partnership with a corresponding charge to net
investment income.
Changes in Intent to Sell Temporarily Impaired Assets
The Company may, from time to time, sell invested assets subsequent to the balance sheet date that it did not intend to sell at the balance
sheet date. Conversely, the Company may not sell invested assets that it asserted that it intended to sell at the balance sheet date. Such changes in
intent are due to events occurring subsequent to the balance sheet date. The types of events that may result in a change in intent include, but are
not limited to, significant changes in the economic facts and circumstances related to the invested asset (e.g., a downgrade or upgrade from a rating
agency), significant unforeseen changes in liquidity needs, or changes in tax laws or the regulatory environment.
Securities Lending
The Company has engaged in securities lending activities from which it generates net investment income by lending certain of its investments
to other institutions for short periods of time. Borrowers of these securities provide collateral equal to at least 102% of the market value of the
loaned securities plus accrued interest. This collateral is held by a third
- party custodian, and the Company has the right to access the collateral
only in the event that the institution borrowing the Company's securities is in default under the lending agreement. Therefore, the Company does
not recognize the receipt of the
177
(at December 31, 2014)
Prime
Alt - A
Sub - Prime
Voluntary prepayment rates
4% - 34%
0% - 15%
1% - 9%
Percentage of remaining pool liquidated due to defaults
1% - 40%
9% - 69%
22% - 71%
Loss severity
30% - 65%
45% - 80%
65% - 110%