Travelers 2015 Annual Report Download - page 109

The Company bases its investment decision on the underlying credit characteristics of the
municipal security. While its municipal bond portfolio includes a number of securities that were
enhanced by third-party insurance for the payment of principal and interest in the event of an issuer
default, the Company does not rely on enhanced credit characteristics provided by such third-party
insurance as part of its investing decisions. Of the insured municipal securities in the Company’s
investment portfolio at December 31, 2015, approximately 97% were rated at ‘‘A3’’ or above, and
approximately 88% were rated at ‘‘Aa3’’ or above, without the benefit of insurance. The Company
believes that a loss of the benefit of insurance would not result in a material adverse impact on the
Company’s results of operations, financial position or liquidity, due to the underlying credit strength of
the issuers of the securities, as well as the Company’s ability and intent to hold the securities. The
average credit rating of the underlying issuers of these securities was ‘‘Aa2’’ at December 31, 2015. The
average credit rating of the entire municipal bond portfolio was ‘‘Aa1’’ at December 31, 2015, with and
without the enhancement provided by third-party insurance.
Debt Securities Issued by Foreign Governments
The following table shows the geographic distribution of the Company’s long-term fixed maturity
investments in debt securities issued by foreign governments at December 31, 2015.
Carrying Average Credit
(at December 31, 2015, in millions) Value Quality(1)
Foreign Government:
Canada ...................................... $1,131 Aaa
United Kingdom ............................... 669 Aaa/Aa1
All Others(2)(3) ............................... 73 A2
Total ...................................... $1,873 Aaa/Aa1
(1) Rated using external rating agencies or by the Company when a public rating does not
exist.
(2) The Company does not have direct exposure to sovereign debt issued by the Republic of
Ireland, Italy, Greece, Portugal or Spain.
(3) No other country accounted for 2.5% or more of total debt securities issued by foreign
governments.
The following table shows the Company’s Eurozone exposure at December 31, 2015 to all debt
securities issued by foreign governments, financial companies, sovereign corporations (including
sovereign banks) whose securities are backed by the respective country’s government and all other
corporate securities (comprised of industrial corporations and utility companies) which could be
affected if economic conditions deteriorated due to a prolonged recession.
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