Travelers 2015 Annual Report Download - page 155

broker quote was $117 million and $140 million at December 31, 2015 and 2014, respectively. Due to
the disclaimers on the quotes that indicate that the price is indicative only, the Company includes these
fair value estimates in Level 3.
Non-Fixed Maturities and Other Investments Not Reported at Fair Value
See note 4 of notes to the consolidated financial statements herein for a discussion of the
determination of fair value of non-fixed maturities and valuation of investments not reported at fair
value in the financial statements.
Investment Impairments
The Company conducts a periodic review to identify and evaluate invested assets having
other-than-temporary impairments. Some of the factors considered in identifying other-than-temporary
impairments include: (1) for fixed maturity investments, whether the Company intends to sell the
investment or whether it is more likely than not that the Company will be required to sell the
investment prior to an anticipated recovery in value; (2) for non-fixed maturity investments, the
Company’s ability and intent to retain the investment for a reasonable period of time sufficient to allow
for an anticipated recovery in value; (3) the likelihood of the recoverability of principal and interest for
fixed maturity securities (i.e., whether there is a credit loss) or cost for equity securities; (4) the length
of time and extent to which the fair value has been less than amortized cost for fixed maturity
securities or cost for equity securities; and (5) the financial condition, near-term and long-term
prospects for the issuer, including the relevant industry conditions and trends, and implications of
rating agency actions and offering prices.
Other-Than-Temporary Impairments of Fixed Maturities and Equity Securities
For fixed maturity investments that the Company does not intend to sell or for which it is more
likely than not that the Company would not be required to sell before an anticipated recovery in value,
the Company separates the credit loss component of the impairment from the amount related to all
other factors and reports the credit loss component in net realized investment gains (losses). The
impairment related to all other factors is reported in other comprehensive income.
For equity securities (including public common and non-redeemable preferred stock) and for fixed
maturity investments the Company intends to sell or for which it is more likely than not that the
Company will be required to sell before an anticipated recovery in value, the full amount of the
impairment is included in net realized investment gains (losses).
Upon recognizing an other-than-temporary impairment, the new cost basis of the investment is the
previous amortized cost basis less the other-than-temporary impairment recognized in net realized
investment gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value;
however, for fixed maturity investments the difference between the new cost basis and the expected
cash flows is accreted on a quarterly basis to net investment income over the remaining expected life of
the investment.
Due to the subjective nature of the Company’s analysis and estimates of future cash flows, along
with the judgment that must be applied in the analysis, it is possible that the Company could reach a
different conclusion whether or not to impair a security if it had access to additional information about
the issuer. Additionally, it is possible that the issuer’s actual ability to meet contractual obligations may
be different than what the Company determined during its analysis, which may lead to a different
impairment conclusion in future periods.
See note 1 of notes to the consolidated financial statements herein for a further discussion of
investment impairments.
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