UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
or
|
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-10898
The Travelers Companies, Inc.
(Exact name of registrant as specified in its charter)
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Minnesota |
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41-0518860 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
485 Lexington Avenue
New York, NY 10017
(Address of principal executive offices) (Zip Code)
(917) 778-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
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Large accelerated filer x |
Accelerated filer o |
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Non-accelerated filer o |
Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of the Registrant’s Common Stock, without par value, outstanding at April 20, 2010 was 495,339,156.
The Travelers Companies, Inc.
Quarterly Report on Form 10-Q
For Quarterly Period Ended March 31, 2010
PART 1 — FINANCIAL INFORMATION
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(in millions, except per share amounts)
|
For the three months ended March 31, |
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2010 |
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2009 |
|
||
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Revenues |
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|
|
|
|
||
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Premiums |
|
$ |
5,230 |
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$ |
5,301 |
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Net investment income |
|
753 |
|
542 |
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||
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Fee income |
|
79 |
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73 |
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||
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Net realized investment gains (losses) |
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25 |
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(214 |
) |
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Other revenues |
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32 |
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33 |
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|
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Total revenues |
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6,119 |
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5,735 |
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Claims and expenses |
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|
|
|
|
||
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Claims and claim adjustment expenses |
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3,388 |
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3,190 |
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Amortization of deferred acquisition costs |
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929 |
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944 |
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General and administrative expenses |
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847 |
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782 |
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Interest expense |
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98 |
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92 |
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Total claims and expenses |
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5,262 |
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5,008 |
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|
|
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Income before income taxes |
|
857 |
|
727 |
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||
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Income tax expense |
|
210 |
|
65 |
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||
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|
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|
|
|
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Net income |
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$ |
647 |
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$ |
662 |
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|
|
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|
|
|
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||
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Net income per share |
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|
|
|
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Basic |
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$ |
1.26 |
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$ |
1.12 |
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Diluted |
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$ |
1.25 |
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$ |
1.11 |
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|
|
|
||
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Weighted average number of common shares outstanding |
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|
|
|
|
||
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Basic |
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508.4 |
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584.6 |
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|
|
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|
|
|
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Diluted |
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515.1 |
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590.4 |
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For the three months ended March 31, |
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2010 |
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2009 |
|
||
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Net Realized Investment Gains (Losses) |
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|
|
|
|
||
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Other-than-temporary impairment losses: |
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|
|
|
|
||
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Total losses |
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$ |
(1 |
) |
$ |
(184 |
) |
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Portion of losses recognized in accumulated other changes in equity from nonowner sources |
|
(9 |
) |
— |
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Other-than-temporary impairment losses |
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(10 |
) |
(184 |
) |
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Other net realized investment gains (losses) |
|
35 |
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(30 |
) |
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|
|
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|
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Net realized investment gains (losses) |
|
$ |
25 |
|
$ |
(214 |
) |
See notes to consolidated financial statements (unaudited).
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
(in millions)
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|
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March 31, |
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December 31, |
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|
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(Unaudited) |
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|
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Assets |
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|
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Fixed maturities, available for sale, at fair value (including $83 and $90 subject to securities lending) (amortized cost $62,463 and $63,311) |
|
$ |
65,116 |
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$ |
65,847 |
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Equity securities, available for sale, at fair value (cost $367 and $373) |
|
463 |
|
451 |
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Real estate |
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851 |
|
865 |
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Short-term securities |
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4,648 |
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4,852 |
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Other investments |
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2,963 |
|
2,950 |
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||
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|
|
|
|
|
|
||
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Total investments |
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74,041 |
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74,965 |
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||
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|
|
|
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|
|
||
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Cash |
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251 |
|
255 |
|
||
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Investment income accrued |
|
777 |
|
825 |
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Premiums receivable |
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5,564 |
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5,471 |
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Reinsurance recoverables |
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12,727 |
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12,816 |
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Ceded unearned premiums |
|
997 |
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916 |
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Deferred acquisition costs |
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1,767 |
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1,758 |
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Deferred tax asset |
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560 |
|
672 |
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Contractholder receivables |
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5,840 |
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5,797 |
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Goodwill |
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3,365 |
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3,365 |
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Other intangible assets |
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564 |
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588 |
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Other assets |
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2,243 |
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2,132 |
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Total assets |
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$ |
108,696 |
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$ |
109,560 |
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Liabilities |
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Claims and claim adjustment expense reserves |
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$ |
52,841 |
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$ |
53,127 |
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Unearned premium reserves |
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10,935 |
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10,861 |
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Contractholder payables |
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5,840 |
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5,797 |
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Payables for reinsurance premiums |
|
638 |
|
546 |
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Debt |
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6,525 |
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6,527 |
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Other liabilities |
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5,246 |
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5,287 |
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Total liabilities |
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82,025 |
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82,145 |
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Shareholders’ equity |
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|
|
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Preferred Stock Savings Plan—convertible preferred stock (0.2 shares issued and outstanding) |
|
77 |
|
79 |
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Common stock (1,748.6 shares authorized; 497.0 and 520.3 shares issued and outstanding) |
|
19,762 |
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19,593 |
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Retained earnings |
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16,792 |
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16,315 |
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Accumulated other changes in equity from nonowner sources |
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1,271 |
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1,219 |
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Treasury stock, at cost (227.4 and 199.6 shares) |
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(11,231 |
) |
(9,791 |
) |
||
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|
|
|
|
|
|
||
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Total shareholders’ equity |
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26,671 |
|
27,415 |
|
||
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|
|
|
|
|
|
||
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Total liabilities and shareholders’ equity |
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$ |
108,696 |
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$ |
109,560 |
|
See notes to consolidated financial statements (unaudited).
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in millions)
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For the three months ended March 31, |
|
2010 |
|
2009 |
|
||
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Convertible preferred stock—savings plan |
|
|
|
|
|
||
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Balance, beginning of year |
|
$ |
79 |
|
$ |
89 |
|
|
Redemptions during period |
|
(2 |
) |
(2 |
) |
||
|
|
|
|
|
|
|
||
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Balance, end of period |
|
77 |
|
87 |
|
||
|
|
|
|
|
|
|
||
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Common stock |
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|
|
|
|
||
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Balance, beginning of year |
|
19,593 |
|
19,242 |
|
||
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Employee share-based compensation |
|
119 |
|
11 |
|
||
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Compensation amortization under share-based plans and other changes |
|
50 |
|
37 |
|
||
|
|
|
|
|
|
|
||
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Balance, end of period |
|
19,762 |
|
19,290 |
|
||
|
|
|
|
|
|
|
||
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Retained earnings |
|
|
|
|
|
||
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Balance, beginning of year |
|
16,315 |
|
13,314 |
|
||
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Net income |
|
647 |
|
662 |
|
||
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Dividends |
|
(169 |
) |
(178 |
) |
||
|
Other |
|
(1 |
) |
7 |
|
||
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|
|
|
|
|
|
||
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Balance, end of period |
|
16,792 |
|
13,805 |
|
||
|
|
|
|
|
|
|
||
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Accumulated other changes in equity from nonowner sources, net of tax |
|
|
|
|
|
||
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Balance, beginning of year |
|
1,219 |
|
(900 |
) |
||
|
Change in net unrealized gain (loss) on investment securities: |
|
|
|
|
|
||
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Having no credit losses recognized in the consolidated statement of income |
|
54 |
|
687 |
|
||
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Having credit losses recognized in the consolidated statement of income |
|
23 |
|
— |
|
||
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Net change in unrealized foreign currency translation and other changes |
|
(25 |
) |
(19 |
) |
||
|
|
|
|
|
|
|
||
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Balance, end of period |
|
1,271 |
|
(232 |
) |
||
|
|
|
|
|
|
|
||
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Treasury stock (at cost) |
|
|
|
|
|
||
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Balance, beginning of year |
|
(9,791 |
) |
(6,426 |
) |
||
|
Treasury shares acquired — share repurchase authorization |
|
(1,400 |
) |
— |
|
||
|
Net shares acquired related to employee share-based compensation plans |
|
(40 |
) |
(27 |
) |
||
|
|
|
|
|
|
|
||
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Balance, end of period |
|
(11,231 |
) |
(6,453 |
) |
||
|
|
|
|
|
|
|
||
|
Total common shareholders’ equity |
|
26,594 |
|
26,410 |
|
||
|
|
|
|
|
|
|
||
|
Total shareholders’ equity |
|
$ |
26,671 |
|
$ |
26,497 |
|
|
|
|
|
|
|
|
||
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Common shares outstanding |
|
|
|
|
|
||
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Balance, beginning of year |
|
520.3 |
|
585.1 |
|
||
|
Treasury shares acquired — share repurchase authorization |
|
(27.0 |
) |
— |
|
||
|
Net shares issued under employee share-based compensation plans |
|
3.7 |
|
0.2 |
|
||
|
|
|
|
|
|
|
||
|
Balance, end of period |
|
497.0 |
|
585.3 |
|
||
|
|
|
|
|
|
|
||
|
Summary of changes in equity from nonowner sources |
|
|
|
|
|
||
|
Net income |
|
$ |
647 |
|
$ |
662 |
|
|
Other changes in equity from nonowner sources, net of tax |
|
52 |
|
668 |
|
||
|
|
|
|
|
|
|
||
|
Total changes in equity from nonowner sources |
|
$ |
699 |
|
$ |
1,330 |
|
See notes to consolidated financial statements (unaudited).
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(in millions)
|
For the three months ended March 31, |
|
2010 |
|
2009 |
|
||
|
Cash flows from operating activities |
|
|
|
|
|
||
|
Net income |
|
$ |
647 |
|
$ |
662 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
|
Net realized investment (gains) losses |
|
(25 |
) |
214 |
|
||
|
Depreciation and amortization |
|
216 |
|
206 |
|
||
|
Deferred federal income tax expense |
|
76 |
|
22 |
|
||
|
Amortization of deferred acquisition costs |
|
929 |
|
944 |
|
||
|
Equity in (income) loss from other investments |
|
(45 |
) |
194 |
|
||
|
Premiums receivable |
|
(97 |
) |
(44 |
) |
||
|
Reinsurance recoverables |
|
86 |
|
167 |
|
||
|
Deferred acquisition costs |
|
(939 |
) |
(948 |
) |
||
|
Claims and claim adjustment expense reserves |
|
(224 |
) |
(373 |
) |
||
|
Unearned premium reserves |
|
86 |
|
64 |
|
||
|
Other |
|
(179 |
) |
(295 |
) |
||
|
|
|
|
|
|
|
||
|
Net cash provided by operating activities |
|
531 |
|
813 |
|
||
|
|
|
|
|
|
|
||
|
Cash flows from investing activities |
|
|
|
|
|
||
|
Proceeds from maturities of fixed maturities |
|
1,229 |
|
1,210 |
|
||
|
Proceeds from sales of investments: |
|
|
|
|
|
||
|
Fixed maturities |
|
1,646 |
|
630 |
|
||
|
Equity securities |
|
19 |
|
16 |
|
||
|
Real estate |
|
9 |
|
— |
|
||
|
Other investments |
|
114 |
|
92 |
|
||
|
Purchases of investments: |
|
|
|
|
|
||
|
Fixed maturities |
|
(2,175 |
) |
(2,265 |
) |
||
|
Equity securities |
|
(5 |
) |
(12 |
) |
||
|
Real estate |
|
(3 |
) |
(5 |
) |
||
|
Other investments |
|
(104 |
) |
(112 |
) |
||
|
Net (purchases) sales of short-term securities |
|
202 |
|
(451 |
) |
||
|
Securities transactions in course of settlement |
|
95 |
|
398 |
|
||
|
Other |
|
(75 |
) |
(84 |
) |
||
|
|
|
|
|
|
|
||
|
Net cash provided by (used in) investing activities |
|
952 |
|
(583 |
) |
||
|
|
|
|
|
|
|
||
|
Cash flows from financing activities |
|
|
|
|
|
||
|
Payment of debt |
|
— |
|
(141 |
) |
||
|
Dividends paid to shareholders |
|
(168 |
) |
(178 |
) |
||
|
Issuance of common stock — employee share options |
|
123 |
|
10 |
|
||
|
Treasury stock acquired — share repurchase authorization |
|
(1,407 |
) |
— |
|
||
|
Treasury stock acquired — net employee share-based compensation |
|
(38 |
) |
(27 |
) |
||
|
Excess tax benefits from share-based payment arrangements |
|
4 |
|
1 |
|
||
|
|
|
|
|
|
|
||
|
Net cash used in financing activities |
|
(1,486 |
) |
(335 |
) |
||
|
|
|
|
|
|
|
||
|
Effect of exchange rate changes on cash |
|
(1 |
) |
— |
|
||
|
|
|
|
|
|
|
||
|
Net decrease in cash |
|
(4 |
) |
(105 |
) |
||
|
Cash at beginning of period |
|
255 |
|
350 |
|
||
|
|
|
|
|
|
|
||
|
Cash at end of period |
|
$ |
251 |
|
$ |
245 |
|
|
|
|
|
|
|
|
||
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
||
|
Income taxes paid |
|
$ |
44 |
|
$ |
34 |
|
|
Interest paid |
|
$ |
63 |
|
$ |
63 |
|
See notes to consolidated financial statements (unaudited).
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Basis of Presentation
The interim consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). These financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited. In the opinion of the Company’s management, all adjustments necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. All material intercompany transactions and balances have been eliminated. Certain reclassifications have been made to the 2009 financial statements and notes to conform to the 2010 presentation. The accompanying interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s 2009 Annual Report on Form 10-K.
The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates.
Adoption of Accounting Standards Updates
Amendments to Accounting for Variable Interest Entities
In June 2009, the FASB issued updated guidance on the accounting for variable interest entities that eliminates the concept of a qualifying special-purpose entity and the quantitative-based risks and rewards calculation for determining which company, if any, has a controlling financial interest in a variable interest entity. The updated guidance requires an analysis of whether a company has: (1) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (2) the obligation to absorb the losses that could potentially be significant to the entity or the right to receive benefits from the entity that could potentially be significant to the entity. An entity is required to be re-evaluated as a variable interest entity when the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights to direct the activities that most significantly impact the entity’s economic performance. Additional disclosures are required about a company’s involvement in variable interest entities and an ongoing assessment of whether a company is the primary beneficiary.
The updated guidance is effective for all variable interest entities owned on or formed after January 1, 2010. The adoption of this guidance did not have any effect on the Company’s results of operations, financial position or liquidity.
Nature of Operations
The Company is organized into three reportable business segments: Business Insurance; Financial, Professional & International Insurance; and Personal Insurance. These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of products and services based on type of customer, how the business is marketed and the manner in which risks are underwritten. The specific business segments are as follows:
Business Insurance
The Business Insurance segment offers a broad array of property and casualty insurance and insurance-related services to its clients primarily in the United States. Business Insurance is organized into the following six groups, which collectively comprise Business Insurance Core operations: Select Accounts; Commercial Accounts; National Accounts; Industry-Focused Underwriting; Target Risk Underwriting; and Specialized Distribution.
Business Insurance also includes the Special Liability Group (which manages the Company’s asbestos and environmental liabilities) and the assumed reinsurance and certain international and other runoff operations, which collectively are referred to as Business Insurance Other.
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Unaudited), Continued
Financial, Professional & International Insurance
The Financial, Professional & International Insurance segment includes surety and financial liability coverages, which primarily use credit-based underwriting processes, as well as property and casualty products that are primarily marketed on a domestic basis in the United Kingdom, the Republic of Ireland and Canada, and on an international basis through Lloyd’s. The segment includes the Bond & Financial Products group as well as the International group.
Personal Insurance
The Personal Insurance segment writes virtually all types of property and casualty insurance covering personal risks. The primary coverages in Personal Insurance are automobile and homeowners insurance sold to individuals.
2. SEGMENT INFORMATION
The following tables summarize the components of the Company’s revenues, operating income and total assets by reportable business segments:
|
(for the three months |
|
Business |
|
Financial, |
|
Personal |
|
Total |
|
||||
|
2010 |
|
|
|
|
|
|
|
|
|
||||
|
Premiums |
|
$ |
2,628 |
|
$ |
824 |
|
$ |
1,778 |
|
$ |
5,230 |
|
|
Net investment income |
|
528 |
|
111 |
|
114 |
|
753 |
|
||||
|
Fee income |
|
79 |
|
— |
|
— |
|
79 |
|
||||
|
Other revenues |
|
6 |
|
6 |
|
20 |
|
32 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total operating revenues (1) |
|
$ |
3,241 |
|
$ |
941 |
|
$ |
1,912 |
|
$ |
6,094 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating income (1) |
|
$ |
567 |
|
$ |
86 |
|
$ |
59 |
|
$ |
712 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
2009 |
|
|
|
|
|
|
|
|
|
||||
|
Premiums |
|
$ |
2,757 |
|
$ |
801 |
|
$ |
1,743 |
|
$ |
5,301 |
|
|
Net investment income |
|
355 |
|
104 |
|
83 |
|
542 |
|
||||
|
Fee income |
|
73 |
|
— |
|
— |
|
73 |
|
||||
|
Other revenues |
|
6 |
|
6 |
|
21 |
|
33 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total operating revenues (1) |
|
$ |
3,191 |
|
$ |
911 |
|
$ |
1,847 |
|
$ |
5,949 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating income (1) |
|
$ |
547 |
|
$ |
148 |
|
$ |
154 |
|
$ |
849 |
|
(1) Operating revenues for reportable business segments exclude net realized investment gains (losses). Operating income for reportable business segments equals net income excluding the after-tax impact of net realized investment gains (losses).
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2. SEGMENT INFORMATION, Continued
Business Segment Reconciliations
|
|
|
Three Months Ended |
|
||||
|
(in millions) |
|
2010 |
|
2009 |
|
||
|
Revenue reconciliation |
|
|
|
|
|
||
|
Earned premiums |
|
|
|
|
|
||
|
Business Insurance: |
|
|
|
|
|
||
|
Commercial multi-peril |
|
$ |
710 |
|
$ |
718 |
|
|
Workers’ compensation |
|
600 |
|
633 |
|
||
|
Commercial automobile |
|
471 |
|
479 |
|
||
|
Property |
|
423 |
|
446 |
|
||
|
General liability |
|
425 |
|
482 |
|
||
|
Other |
|
(1 |
) |
(1 |
) |
||
|
|
|
|
|
|
|
||
|
Total Business Insurance |
|
2,628 |
|
2,757 |
|
||
|
|
|
|
|
|
|
||
|
Financial, Professional & International Insurance: |
|
|
|
|
|
||
|
Fidelity and surety |
|
247 |
|
248 |
|
||
|
General liability |
|
226 |
|
228 |
|
||
|
International |
|
318 |
|
292 |
|
||
|
Other |
|
33 |
|
33 |
|
||
|
|
|
|
|
|
|
||
|
Total Financial, Professional & International Insurance |
|
824 |
|
801 |
|
||
|
|
|
|
|
|
|
||
|
Personal Insurance: |
|
|
|
|
|
||
|
Automobile |
|
904 |
|
918 |
|
||
|
Homeowners and other |
|
874 |
|
825 |
|
||
|
|
|
|
|
|
|
||
|
Total Personal Insurance |
|
1,778 |
|
1,743 |
|
||
|
|
|
|
|
|
|
||
|
Total earned premiums |
|
5,230 |
|
5,301 |
|
||
|
Net investment income |
|
753 |
|
542 |
|
||
|
Fee income |
|
79 |
|
73 |
|
||
|
Other revenues |
|
32 |
|
33 |
|
||
|
|
|
|
|
|
|
||
|
Total operating revenues for reportable segments |
|
6,094 |
|
5,949 |
|
||
|
Net realized investment gains (losses) |
|
25 |
|
(214 |
) |
||
|
|
|
|
|
|
|
||
|
Total consolidated revenues |
|
$ |
6,119 |
|
$ |
5,735 |
|
|
|
|
|
|
|
|
||
|
Income reconciliation, net of tax |
|
|
|
|
|
||
|
Total operating income for reportable segments |
|
$ |
712 |
|
$ |
849 |
|
|
Interest Expense and Other (1) |
|
(81 |
) |
(50 |
) |
||
|
|
|
|
|
|
|
||
|
Total operating income |
|
631 |
|
799 |
|
||
|
Net realized investment gains (losses) |
|
16 |
|
(137 |
) |
||
|
|
|
|
|
|
|
||
|
Total consolidated net income |
|
$ |
647 |
|
$ |
662 |
|
(1) The primary component of Interest Expense and Other is after-tax interest expense of $64 million and $60 million for the three months ended March 31, 2010 and 2009, respectively. The 2010 total included $12 million of tax expense associated with the recently enacted federal health care legislation, whereas the 2009 total included a benefit of $14 million from the favorable resolution of various prior year tax matters.
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2. SEGMENT INFORMATION, Continued
|
(in millions) |
|
March 31, |
|
December 31, |
|
||
|
Asset reconciliation: |
|
|
|
|
|
||
|
Business Insurance |
|
$ |
80,724 |
|
$ |
81,705 |
|
|
Financial, Professional & International Insurance |
|
14,217 |
|
13,920 |
|
||
|
Personal Insurance |
|
13,176 |
|
13,328 |
|
||
|
|
|
|
|
|
|
||
|
Total assets for reportable segments |
|
108,117 |
|
108,953 |
|
||
|
Other assets (1) |
|
579 |
|
607 |
|
||
|
|
|
|
|
|
|
||
|
Total consolidated assets |
|
$ |
108,696 |
|
$ |
109,560 |
|
(1) The primary components of other assets at both dates were other intangible assets and deferred taxes.
3. INVESTMENTS
Fixed Maturities
The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:
|
|
|
Amortized |
|
Gross Unrealized |
|
Fair |
|
||||||
|
(at March 31, 2010, in millions) |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
||||
|
U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities |
|
$ |
2,019 |
|
$ |
85 |
|
$ |
— |
|
$ |
2,104 |
|
|
Obligations of states, municipalities and political subdivisions |
|
39,642 |
|
1,810 |
|
46 |
|
41,406 |
|
||||
|
Debt securities issued by foreign governments |
|
1,877 |
|
48 |
|
3 |
|
1,922 |
|
||||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
4,915 |
|
216 |
|
121 |
|
5,010 |
|
||||
|
All other corporate bonds |
|
13,962 |
|
723 |
|
62 |
|
14,623 |
|
||||
|
Redeemable preferred stock |
|
48 |
|
4 |
|
1 |
|
51 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
62,463 |
|
$ |
2,886 |
|
$ |
233 |
|
$ |
65,116 |
|
|
|
|
Amortized |
|
Gross Unrealized |
|
Fair |
|
||||||
|
(at December 31, 2009, in millions) |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
||||
|
U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities |
|
$ |
2,490 |
|
$ |
85 |
|
$ |
1 |
|
$ |
2,574 |
|
|
Obligations of states, municipalities and political subdivisions |
|
39,459 |
|
1,915 |
|
41 |
|
41,333 |
|
||||
|
Debt securities issued by foreign governments |
|
1,912 |
|
48 |
|
3 |
|
1,957 |
|
||||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
5,182 |
|
190 |
|
165 |
|
5,207 |
|
||||
|
All other corporate bonds |
|
14,221 |
|
623 |
|
116 |
|
14,728 |
|
||||
|
Redeemable preferred stock |
|
47 |
|
2 |
|
1 |
|
48 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
63,311 |
|
$ |
2,863 |
|
$ |
327 |
|
$ |
65,847 |
|
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3. INVESTMENTS, Continued
Equity Securities
The cost and fair value of investments in equity securities were as follows:
|
|
|
|
|
Gross Unrealized |
|
Fair |
|
||||||
|
(at March 31, 2010, in millions) |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
||||
|
Common stock |
|
$ |
174 |
|
$ |
54 |
|
$ |
1 |
|
$ |
227 |
|
|
Non-redeemable preferred stock |
|
193 |
|
54 |
|
11 |
|
236 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
367 |
|
$ |
108 |
|
$ |
12 |
|
$ |
463 |
|
|
|
|
|
|
Gross Unrealized |
|
Fair |
|
||||||
|
(at December 31, 2009, in millions) |
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
||||
|
Common stock |
|
$ |
175 |
|
$ |
46 |
|
$ |
2 |
|
$ |
219 |
|
|
Non-redeemable preferred stock |
|
198 |
|
48 |
|
14 |
|
232 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
373 |
|
$ |
94 |
|
$ |
16 |
|
$ |
451 |
|
Variable Interest Entities
Entities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (VIE). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.
The Company is involved in the normal course of business with VIEs primarily as a passive investor in limited partner equity interests issued by third party VIEs. These include investments in private equity limited partnerships, hedge funds and real estate partnerships where the Company is not related to the general partner. These investments are generally accounted for under the equity method and reported in the Company’s consolidated balance sheet as other investments unless the Company is deemed the primary beneficiary. These equity interests generally cannot be redeemed. Distributions from these investments are received by the Company as a result of liquidation of the underlying investments of the funds and/or as income distribution. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment. Neither the carrying amounts nor the unfunded commitments related to these VIEs are material.
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3. INVESTMENTS, Continued
Unrealized Investment Losses
The following tables summarize, for all investments in an unrealized loss position at March 31, 2010 and December 31, 2009, the aggregate fair value and gross unrealized losses by length of time those securities have been continuously in an unrealized loss position.
|
|
|
Less than 12 months |
|
12 months or |
|
Total |
|
||||||||||||
|
(at March 31, 2010, in millions) |
|
Fair |
|
Gross |
|
Fair |
|
Gross |
|
Fair |
|
Gross |
|
||||||
|
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities |
|
$ |
234 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
234 |
|
$ |
— |
|
|
Obligations of states, municipalities and political subdivisions |
|
2,884 |
|
34 |
|
191 |
|
12 |
|
3,075 |
|
46 |
|
||||||
|
Debt securities issued by foreign governments |
|
224 |
|
3 |
|
— |
|
— |
|
224 |
|
3 |
|
||||||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
233 |
|
15 |
|
853 |
|
106 |
|
1,086 |
|
121 |
|
||||||
|
All other corporate bonds |
|
893 |
|
20 |
|
712 |
|
42 |
|
1,605 |
|
62 |
|
||||||
|
Redeemable preferred stock |
|
6 |
|
1 |
|
3 |
|
— |
|
9 |
|
1 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total fixed maturities |
|
4,474 |
|
73 |
|
1,759 |
|
160 |
|
6,233 |
|
233 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Common stock |
|
5 |
|
— |
|
10 |
|
1 |
|
15 |
|
1 |
|
||||||
|
Non-redeemable preferred stock |
|
14 |
|
— |
|
94 |
|
11 |
|
108 |
|
11 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total equity securities |
|
19 |
|
— |
|
104 |
|
12 |
|
123 |
|
12 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total |
|
$ |
4,493 |
|
$ |
73 |
|
$ |
1,863 |
|
$ |
172 |
|
$ |
6,356 |
|
$ |
245 |
|
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3. INVESTMENTS, Continued
|
|
|
Less than 12 months |
|
12 months or |
|
Total |
|
||||||||||||
|
(at December 31, 2009, in millions) |
|
Fair |
|
Gross |
|
Fair |
|
Gross |
|
Fair |
|
Gross |
|
||||||
|
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities |
|
$ |
1,018 |
|
$ |
1 |
|
$ |
— |
|
$ |
— |
|
$ |
1,018 |
|
$ |
1 |
|
|
Obligations of states, municipalities and political subdivisions |
|
1,901 |
|
24 |
|
250 |
|
17 |
|
2,151 |
|
41 |
|
||||||
|
Debt securities issued by foreign governments |
|
282 |
|
3 |
|
— |
|
— |
|
282 |
|
3 |
|
||||||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
313 |
|
4 |
|
988 |
|
161 |
|
1,301 |
|
165 |
|
||||||
|
All other corporate bonds |
|
1,079 |
|
22 |
|
1,100 |
|
94 |
|
2,179 |
|
116 |
|
||||||
|
Redeemable preferred stock |
|
6 |
|
1 |
|
3 |
|
— |
|
9 |
|
1 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total fixed maturities |
|
4,599 |
|
55 |
|
2,341 |
|
272 |
|
6,940 |
|
327 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Common stock |
|
59 |
|
1 |
|
17 |
|
1 |
|
76 |
|
2 |
|
||||||
|
Non-redeemable preferred stock |
|
9 |
|
— |
|
83 |
|
14 |
|
92 |
|
14 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total equity securities |
|
68 |
|
1 |
|
100 |
|
15 |
|
168 |
|
16 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total |
|
$ |
4,667 |
|
$ |
56 |
|
$ |
2,441 |
|
$ |
287 |
|
$ |
7,108 |
|
$ |
343 |
|
The following table summarizes, for all fixed maturities and equity securities reported at fair value for which fair value is less than 80% of amortized cost at March 31, 2010, the gross unrealized investment loss by length of time those securities have continuously been in an unrealized loss position of greater than 20% of amortized cost:
|
|
|
Period For Which Fair Value Is Less Than 80% of Amortized Cost |
|
|||||||||||||
|
(in millions) |
|
3 Months |
|
Greater Than 3 |
|
Greater Than 6 |
|
Greater Than |
|
Total |
|
|||||
|
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Mortgage-backed securities |
|
$ |
3 |
|
$ |
— |
|
$ |
7 |
|
$ |
42 |
|
$ |
52 |
|
|
Other |
|
— |
|
— |
|
— |
|
26 |
|
26 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total fixed maturities |
|
3 |
|
— |
|
7 |
|
68 |
|
78 |
|
|||||
|
Equity securities |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total |
|
$ |
3 |
|
$ |
— |
|
$ |
7 |
|
$ |
68 |
|
$ |
78 |
|
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3. INVESTMENTS, Continued
Impairment Charges
Impairment charges included in net realized investment gains (losses) in the consolidated statement of income were as follows:
|
(for the three months ended March 31, in millions) |
|
2010 |
|
2009 |
|
||
|
Fixed maturities |
|
|
|
|
|
||
|
U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities |
|
$ |
— |
|
$ |
— |
|
|
Obligations of states, municipalities and political subdivisions |
|
— |
|
— |
|
||
|
Debt securities issued by foreign governments |
|
— |
|
— |
|
||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
1 |
|
51 |
|
||
|
All other corporate bonds |
|
5 |
|
56 |
|
||
|
Redeemable preferred stock |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
Total fixed maturities |
|
6 |
|
107 |
|
||
|
|
|
|
|
|
|
||
|
Equity securities |
|
|
|
|
|
||
|
Common stock |
|
1 |
|
15 |
|
||
|
Non-redeemable preferred stock |
|
— |
|
59 |
|
||
|
|
|
|
|
|
|
||
|
Total equity securities |
|
1 |
|
74 |
|
||
|
|
|
|
|
|
|
||
|
Other investments |
|
3 |
|
3 |
|
||
|
|
|
|
|
|
|
||
|
Total |
|
$ |
10 |
|
$ |
184 |
|
In the second quarter of 2009, the Company adopted updated accounting guidance that changed the reporting of other-than-temporary impairments (OTTI). As a result, the credit component of OTTI on fixed maturities was reported separately effective April 1, 2009, the date of adoption.
The following table presents a roll-forward of the credit component of other-than-temporary impairments (OTTI) on fixed maturities recognized in the consolidated statement of income for which a portion of the other-than-temporary impairment was recognized in accumulated other changes in equity from nonowner sources for the period January 1, 2010 through March 31, 2010:
|
January 1, 2010 through March 31, 2010 |
|
January 1, |
|
Additions for |
|
Additions for |
|
Reductions |
|
Adjustments |
|
March 31, |
|
||||||
|
Fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
$ |
46 |
|
$ |
— |
|
$ |
1 |
|
$ |
— |
|
$ |
— |
|
$ |
47 |
|
|
All other corporate bonds |
|
93 |
|
— |
|
2 |
|
(4 |
) |
1 |
|
92 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total fixed maturities |
|
$ |
139 |
|
$ |
— |
|
$ |
3 |
|
$ |
(4 |
) |
$ |
1 |
|
$ |
139 |
|
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4. FAIR VALUE MEASUREMENTS
The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets, and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The three levels of the hierarchy are as follows:
· Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.
· Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
· Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.
Valuation of Investments Reported at Fair Value in Financial Statements
The fair value of a financial instrument is the estimated amount at which the instrument could be exchanged in an orderly transaction between knowledgeable, unrelated willing parties, i.e., not in a forced transaction. The estimated fair value of a financial instrument may differ from the amount that could be realized if the security was sold in an immediate sale, e.g., a forced transaction. Additionally, the valuation of fixed maturity investments is more subjective when markets are less liquid due to the lack of market based inputs, which may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur.
For investments that have quoted market prices in active markets, the Company uses the quoted market prices as fair value and includes these prices in the amounts disclosed in Level 1 of the hierarchy. The Company receives the quoted market prices from a third party, nationally recognized pricing service (pricing service). When quoted market prices are unavailable, the Company utilizes a pricing service to determine an estimate of fair value, which is mainly used for its fixed maturity investments. The fair value estimates provided from this pricing service are included in the amount disclosed in Level 2 of the hierarchy. If quoted market prices and an estimate from a pricing service are unavailable, the Company produces an estimate of fair value based on internally developed valuation techniques, which, depending on the level of observable market inputs, will render the fair value estimate as Level 2 or Level 3. The Company bases all of its estimates of fair value for assets on the bid price as it represents what a third-party market participant would be willing to pay in an arm’s length transaction.
Fixed Maturities
The Company utilizes a pricing service to estimate fair value measurements for approximately 99% of its fixed maturities. The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, the pricing service uses an Option Adjusted Spread model to develop prepayment and interest rate scenarios.
The pricing service evaluates each asset class based on relevant market information, relevant credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each market input depends on the asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4. FAIR VALUE MEASUREMENTS, Continued
The pricing service utilized by the Company has indicated that they will only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If the pricing service discontinues pricing an investment, the Company would be required to produce an estimate of fair value using some of the same methodologies as the pricing service but would have to make assumptions for market-based inputs that are unavailable due to market conditions.
The fair value estimates of most fixed maturity investments are based on observable market information rather than market quotes. Accordingly, the estimates of fair value for such fixed maturities, other than U.S. Treasury securities, provided by the pricing service are included in the amount disclosed in Level 2 of the hierarchy. The estimated fair value of U.S. Treasury securities is included in the amount disclosed in Level 1 as the estimates are based on unadjusted market prices.
The Company holds privately placed corporate bonds and estimates the fair value of these bonds using an internal matrix that is based on market information regarding interest rates, credit spreads and liquidity. The underlying source data for calculating the matrix of credit spreads relative to the U.S. Treasury curve are the Merrill Lynch U.S. Corporate Index and the Merrill Lynch High Yield BB Rated Index. The Company includes the fair value estimates of these corporate bonds in Level 2, since all significant inputs are market observable. As many of these securities are issued by public companies, the Company compares the estimates of fair value to the fair values of these companies’ publicly traded debt to test the validity of the internal pricing matrix.
While the vast majority of the Company’s municipal bonds are included in Level 2, the Company holds a small number of municipal bonds which are not valued by the pricing service and estimates the fair value of these bonds using an internal pricing matrix with some unobservable inputs that are significant to the valuation. Due to the limited amount of observable market information, the Company includes the fair value estimates for these particular bonds in Level 3. Additionally, the Company holds a small amount of fixed maturities that have characteristics that make them unsuitable for matrix pricing. For these fixed maturities, the Company obtains a quote from a broker (typically a market maker). 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.
Equities — Public Common and Preferred
For public common and preferred stocks, the Company receives prices from a nationally recognized pricing service that are based on observable market transactions and includes these estimates in the amount disclosed in Level 1. Infrequently, current market quotes in active markets are unavailable for certain non-redeemable preferred stocks held by the Company. In these instances, the Company receives an estimate of fair value from the pricing service that provides fair value estimates for the Company’s fixed maturities. The service utilizes some of the same methodologies to price the non-redeemable preferred stocks as it does 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
Common Stock with Transfer Restrictions and Other
The Company holds one public common stock with transfer restrictions with a fair value of $212 million. At March 31, 2010, the fair value of this common stock was determined by adjusting the observed market price of the security for a liquidity discount which takes into consideration the restriction on the common stock that existed at March 31, 2010 and is based on market observable inputs. As a result of adjusting the market price to consider the transfer restriction, the Company discloses this security in Level 2. The Company holds investments in non-public common and preferred equity securities, with a fair value estimate of $54 million at March 31, 2010, 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 March 31, 2010 in the amount disclosed in Level 3. The Company holds investments in various publicly-traded securities which are reported in other investments. The $44 million fair value of these investments at March 31, 2010 is disclosed in Level 1. These investments include securities in the Company’s trading portfolio ($24 million), mutual funds ($16 million) and other small holdings ($4 million).
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4. FAIR VALUE MEASUREMENTS, Continued
Derivatives
The Company holds non-public warrants in a public company and has convertible bonds containing embedded conversion options that are valued separately from the host bond contract. The Company estimates fair value for the warrants using an option pricing model with observable market inputs. Because the warrants are not market traded and information concerning market participants is not available, the Company includes the fair value estimate of $84 million at March 31, 2010 in the amount disclosed in Level 3 - other investments.
Fair Value Hierarchy
The following tables present the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis at March 31, 2010 and December 31, 2009.
|
(at March 31, 2010, in millions) |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Invested assets: |
|
|
|
|
|
|
|
|
|
||||
|
Fixed maturities |
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities |
|
$ |
2,104 |
|
$ |
2,087 |
|
$ |
17 |
|
$ |
— |
|
|
Obligations of states, municipalities and political subdivisions |
|
41,406 |
|
— |
|
41,302 |
|
104 |
|
||||
|
Debt securities issued by foreign governments |
|
1,922 |
|
— |
|
1,922 |
|
— |
|
||||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
5,010 |
|
— |
|
4,986 |
|
24 |
|
||||
|
All other corporate bonds |
|
14,623 |
|
— |
|
14,501 |
|
122 |
|
||||
|
Redeemable preferred stock |
|
51 |
|
50 |
|
1 |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total fixed maturities |
|
65,116 |
|
2,137 |
|
62,729 |
|
250 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
||||
|
Common stock |
|
227 |
|
227 |
|
— |
|
— |
|
||||
|
Non-redeemable preferred stock |
|
236 |
|
139 |
|
97 |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total equity securities |
|
463 |
|
366 |
|
97 |
|
— |
|
||||
|
Other investments (1) |
|
394 |
|
44 |
|
212 |
|
138 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
65,973 |
|
$ |
2,547 |
|
$ |
63,038 |
|
$ |
388 |
|
(1) The amount in Level 3 includes $84 million of non-public stock purchase warrants of a publicly-held company.
The Company did not have significant transfers between Levels 1 and 2 during the quarter ended March 31, 2010.
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4. FAIR VALUE MEASUREMENTS, Continued
|
(at December 31, 2009, in millions) |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Invested assets: |
|
|
|
|
|
|
|
|
|
||||
|
Fixed maturities |
|
|
|
|
|
|
|
|
|
||||
|
U.S. Treasury securities and obligations of U.S. Government and government agencies and authorities |
|
$ |
2,574 |
|
$ |
2,517 |
|
$ |
57 |
|
$ |
— |
|
|
Obligations of states, municipalities and political subdivisions |
|
41,333 |
|
— |
|
41,232 |
|
101 |
|
||||
|
Debt securities issued by foreign governments |
|
1,957 |
|
— |
|
1,957 |
|
— |
|
||||
|
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities |
|
5,207 |
|
— |
|
5,184 |
|
23 |
|
||||
|
All other corporate bonds |
|
14,728 |
|
— |
|
14,612 |
|
116 |
|
||||
|
Redeemable preferred stock |
|
48 |
|
36 |
|
12 |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total fixed maturities |
|
65,847 |
|
2,553 |
|
63,054 |
|
240 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
||||
|
Common stock |
|
219 |
|
219 |
|
— |
|
— |
|
||||
|
Non-redeemable preferred stock |
|
232 |
|
138 |
|
94 |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total equity securities |
|
451 |
|
357 |
|
94 |
|
— |
|
||||
|
Other investments (1) |
|
413 |
|
46 |
|
213 |
|
154 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
66,711 |
|
$ |
2,956 |
|
$ | |||||