Travelers 2014 Annual Report Download - page 31

Table of Contents
Rating Agency Actions
The following rating agency actions were taken with respect to the Company from February 13, 2014 (the date on which the Company filed its
Annual Report on Form 10
- K for the year ended December 31, 2013), through February 12, 2015:
•
On May 23, 2014, A.M. Best upgraded the financial strength ratings to "A++" from "A+" and the issuer credit ratings to "aa+" from
"aa" of the Travelers Reinsurance Pool as well as Travelers C&S Co. of America, Travelers C&S Co. of Europe, Ltd. and Travelers
Insurance Company of Canada. Concurrently, A.M. Best upgraded the issuer credit ratings and senior debt ratings to "a+" from "a"
of TRV and its two wholly
- owned downstream holding companies, Travelers Property Casualty Corp. and Travelers Insurance
Group Holdings, Inc. The outlook for the above ratings has been revised to stable from positive. A.M. Best also affirmed the
financial strength rating of "A" and issuer credit rating "a+" of The Premier Insurance Company of Massachusetts, and the financial
strength rating of "A–" and issuer credit rating of "a–" of First Floridian Auto and Home Ins. Co. The outlook for these ratings is
stable.
•
On May 23, 2014, A.M. Best assigned a financial strength rating of "A" and an issuer credit rating of "a" to The Dominion of
Canada General Insurance Company, which the Company acquired in November 2013. The outlook assigned to all ratings is stable.
•
On June 13, 2014, S&P affirmed all ratings of the Company. The outlook for all ratings is stable.
•
On August 14, 2014, Moody's affirmed all ratings of the Company. The outlook for all ratings is stable.
•
On August 26, 2014, Fitch affirmed all ratings of the Company. The outlook for all ratings is stable.
•
On November 26, 2014, A.M. Best affirmed the financial strength rating of "A" and the issuer credit rating of "a+" for Travelers
Insurance Company Limited. The outlook for both ratings is stable.
INVESTMENT OPERATIONS
The majority of funds available for investment are deployed in a widely diversified portfolio of high quality, liquid, taxable U.S. government,
tax - exempt U.S. municipal and taxable corporate and U.S. agency mortgage - backed bonds. The Company closely monitors the duration of its fixed
maturity investments, and the Company's investment purchases and sales are executed with the objective of having adequate funds available to
satisfy its insurance and debt obligations. Generally, the expected principal and interest payments produced by the Company's fixed maturity
portfolio adequately fund the estimated runoff of the Company's insurance reserves. The Company's management of the duration of the fixed
maturity investment portfolio, including its use of Treasury futures at times, has produced a duration that is less than the estimated duration of the
Company's net insurance liabilities. The substantial amount by which the fair value of the fixed maturity portfolio exceeds the value of the net
insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of high quality liquid bonds, contributes to the
Company's ability to fund claim payments without having to sell illiquid assets or access credit facilities.
The Company also invests much smaller amounts in equity securities, real estate, private equity limited partnerships, hedge funds, and real
estate partnerships and joint ventures. These investment classes have the potential for higher returns but also involve varying degrees of risk,
including less stable rates of return and less liquidity.
See note 3 of notes to the Company's consolidated financial statements for additional information regarding the Company's investment
portfolio.
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