Travelers 2015 Annual Report Download - page 195

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
Cumulative Additions for Additions for Adjustments to
OTTI Credit OTTI Securities OTTI Securities Reductions Book Value Cumulative OTTI
Losses Where No Where Credit Due to of Credit- Credit Losses
Recognized for Credit Losses Losses Have Sales/Defaults Impaired Recognized for
Securities Held, Were Been of Credit- Securities due Securities Still
Year ended December 31, 2014 Beginning of Previously Previously Impaired to Changes in Held, End of
(in millions) Period Recognized Recognized Securities Cash Flows Period
Fixed maturities
Mortgage-backed securities, collateralized
mortgage obligations and pass-through
securities .................... $53 $— $1 $(5) $(9) $40
All other corporate bonds ........... 65 — 3 (6) (3) 59
Total fixed maturities ............. $118 $— $4 $(11) $(12) $99
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, 2015 and 2014, 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 $1.71 billion and
$1.91 billion at December 31, 2015 and 2014, 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
(for the year ended December 31, in millions) 2015 2014 2013
Gross investment income
Fixed maturities ............................... $2,091 $2,244 $2,310
Equity securities ............................... 39 40 31
Short-term securities ............................ 12 911
Real estate investments .......................... 48 44 37
Other investments ............................. 230 489 364
Gross investment income ....................... 2,420 2,826 2,753
Investment expenses ............................ 41 39 37
Net investment income ........................ $2,379 $2,787 $2,716
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