Travelers 2015 Annual Report Download - page 29

Rating Agency Actions
The following rating agency actions were taken with respect to the Company from February 12,
2015, the date on which the Company filed its Annual Report on Form 10-K for the year ended
December 31, 2014, through February 11, 2016:
• On May 28, 2015, A.M. Best affirmed all ratings of the Company, except for Travelers Insurance
Company Limited, which were affirmed on December 4, 2015. The outlook for all ratings is
stable.
• On June 9, 2015, Fitch affirmed all ratings of the Company. The outlook for all ratings is stable.
• On August 28, 2015, Fitch affirmed all ratings of the Company. The outlook for all ratings is
stable.
• On December 2, 2015, Fitch affirmed all ratings of the Company. The outlook for all ratings is
stable.
INVESTMENT OPERATIONS
The majority of funds available for investment are deployed in a widely diversified portfolio of
high quality, liquid, taxable U.S. government, tax-exempt U.S. municipal and taxable corporate and
U.S. agency mortgage-backed bonds. The Company closely monitors the duration of its fixed maturity
investments, and the Company’s investment purchases and sales are executed with the objective of
having adequate funds available to satisfy its insurance and debt obligations. Generally, the expected
principal and interest payments produced by the Company’s fixed maturity portfolio adequately fund
the estimated runoff of the Company’s insurance reserves. The Company’s management of the duration
of the fixed maturity investment portfolio, including its use of Treasury futures at times, has produced a
duration that is less than the estimated duration of the Company’s net insurance liabilities. The
substantial amount by which the fair value of the fixed maturity portfolio exceeds the value of the net
insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of
high quality liquid bonds, contributes to the Company’s ability to fund claim payments without having
to sell illiquid assets or access credit facilities.
The Company also invests much smaller amounts in equity securities, real estate, private equity
limited partnerships, hedge funds, and real estate partnerships and joint ventures. These investment
classes have the potential for higher returns but also involve varying degrees of risk, including less
stable rates of return and less liquidity.
See note 3 of notes to the consolidated financial statements herein for additional information
regarding the Company’s investment portfolio.
REGULATION
U.S. State and Federal Regulation
TRV’s domestic insurance subsidiaries are collectively licensed to transact insurance business in all
U.S. states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands and are subject to
regulation in the various states and jurisdictions in which they transact business. The extent of
regulation varies, but generally derives from statutes that delegate regulatory, supervisory and
administrative authority to a department of insurance in each state and jurisdiction. The regulation,
supervision and administration relate, among other things, to standards of solvency that must be met
and maintained, the licensing of insurers and their agents, the nature of and limitations on investments,
premium rates, restrictions on the size of risks that may be insured under a single policy, reserves and
provisions for unearned premiums, losses and other obligations, deposits of securities for the benefit of
policyholders, approval of policy forms and the regulation of market conduct, including the use of
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