Travelers 2014 Annual Report Download - page 58

Table of Contents
of which could be adversely impacted by declines in real estate valuations and/or financial market disruption.
We also invest a portion of our assets in equity securities, private equity limited partnerships, hedge funds and real estate partnerships. From
time to time, we may also invest in other types of non
- fixed maturity investments, including investments with exposure to commodity price risk,
such as in the energy sector. All of these asset classes are subject to greater volatility in their investment returns than fixed maturity investments.
General economic conditions, changes in applicable tax laws and many other factors beyond our control can adversely affect the value of our non
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fixed maturity investments and the realization of net investment income, and/or result in realized investment losses. As a result of these factors, we
may realize reduced returns on these investments, incur losses on sales of these investments and be required to write down the value of these
investments, which could reduce our net investment income and result in realized investment losses. From time to time, the Company enters into
short positions in U.S. Treasury futures contracts to manage the duration of its fixed maturity portfolio, which can result in realized investment
losses.
Our investment portfolio is also subject to increased valuation uncertainties when investment markets are illiquid. The valuation of
investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the
portion of the investment portfolio that is carried at fair value as reflected in our financial statements is not reflective of prices at which actual
transactions could occur.
Given that economic and market conditions have been and could be highly uncertain, we may, depending on circumstances in the future, make
changes to the mix of investments in our investment portfolio. These changes may impact the duration, volatility and risk of our investment
portfolio.
Because of the risks set forth above, the value of our investment portfolio could decrease, we could experience reduced net investment income
and we could experience realized and/or unrealized investment losses, which could materially and adversely affect our results of operations,
financial position and/or liquidity.
Our business could be harmed because of our potential exposure to asbestos and environmental claims and related litigation.
With regard to asbestos claims, we have received and continue to receive a significant number of asbestos claims from policyholders
(including others seeking coverage under a policy). Factors underlying these claim filings include continued intensive advertising by lawyers
seeking asbestos claimants and the continued focus by plaintiffs on defendants who were not traditionally primary targets of asbestos litigation.
The focus on these defendants is primarily the result of the number of traditional asbestos defendants who have sought bankruptcy protection in
previous years. The bankruptcy of many traditional defendants has also caused increased settlement demands against those policyholders who are
not in bankruptcy but remain in the tort system. Currently, in many jurisdictions, those who allege very serious injury and who can present credible
medical evidence of their injuries are receiving priority trial settings in the courts, while those who have not shown any credible disease
manifestation are having their hearing dates delayed or placed on an inactive docket. This trend of prioritizing claims involving credible evidence of
injuries, along with the focus on defendants who were not traditionally primary targets of asbestos litigation, has contributed to the claims and
claim adjustment expense payments we experienced.
We also continue to be involved in coverage litigation concerning a number of policyholders, some of whom have filed for bankruptcy, who in
some instances have asserted that all or a portion of their asbestos
- related claims are not subject to aggregate limits on coverage. In these
instances, policyholders also may assert that each individual bodily injury claim should be treated as a separate occurrence under the policy. It is
difficult to predict whether these policyholders will be successful on both issues.
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