Travelers 2015 Annual Report Download - page 199

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. FAIR VALUE MEASUREMENTS (Continued)
(primarily the market maker). The fair value of the fixed maturities for which the Company received a
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.
Equity Securities—Public Common Stock and Non-Redeemable Preferred Stock
For public common stock and non-redeemable preferred stocks, the Company receives prices from
pricing services that are based on observable market transactions and includes these estimates in the
amount disclosed in Level 1. When current market quotes in active markets are unavailable for certain
non-redeemable preferred stocks held by the Company, the Company receives an estimate of fair value
from the pricing services. The services utilize similar methodologies to price the non-redeemable
preferred stocks as they do for the fixed maturities. The Company includes the fair value estimate for
these non-redeemable preferred stocks in the amount disclosed in Level 2.
Other Investments
The Company holds investments in various publicly-traded securities which are reported in other
investments. These investments include mutual funds and other small holdings. The $18 million and
$19 million fair value of these investments at December 31, 2015 and 2014, respectively, was disclosed
in Level 1. At December 31, 2015 and 2014, the Company held investments in non-public common and
preferred equity securities, with fair value estimates of $38 million and $36 million, respectively,
reported in other investments, where the fair value estimate is determined either internally or by an
external fund manager based on recent filings, operating results, balance sheet stability, growth and
other business and market sector fundamentals. Due to the significant unobservable inputs in these
valuations, the Company includes the total fair value estimate for all of these investments at
December 31, 2015 and 2014 in the amount disclosed in Level 3.
Derivatives
At December 31, 2015 and 2014, the Company held $2 million and $4 million, respectively, of
convertible bonds containing embedded conversion options that are valued separately from the host
bond contract in the amount disclosed in Level 2—fixed maturities.
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