Travelers 2014 Annual Report Download - page 197

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
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, 2014 and 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.
Included in fixed maturities are below investment grade securities totaling $1.91 billion and $1.93 billion at December 31, 2014 and 2013,
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 investment grade bonds that are
publicly traded and certain other privately issued bonds that are classified as below investment grade loans.
Net Investment Income
196
Year ended December 31, 2013
(in millions)
Cumulative
OTTI Credit
Losses
Recognized
for
Securities
Held,
Beginning of
Period
Additions for
OTTI
Securities
Where No
Credit Losses
Were
Previously
Recognized
Additions for
OTTI
Securities
Where Credit
Losses Have
Been
Previously
Recognized
Reductions
Due to
Sales/Defaults
of Credit
-
Impaired
Securities
Adjustments
to
Book Value
of Credit
-
Impaired
Securities due
to Changes in
Cash Flows
Cumulative
OTTI
Credit Losses
Recognized for
Securities Still
Held, End of
Period
Fixed maturities
Mortgage - backed securities,
collateralized mortgage
obligations and pass - through
securities
$
55
$
—
$
2
$
—
$
( 4
)
$
53
All other corporate bonds
72
3
—
( 7
)
(3
)
65
Total fixed maturities
$
127
$
3
$
2
$
(7
)
$
(7
)
$
118
(for the year ended December 31, in millions)
2014
2013
2012
Gross investment income
Fixed maturities
$
2,244
$
2,310
$
2,439
Equity securities
40
31
28
Short - term securities
9
11
10
Real estate
44
37
34
Other investments
489
364
414
Gross investment income
2,826
2,753
2,925
Investment expenses
39
37
36
Net investment income
$
2,787
$
2,716
$
2,889