Travelers 2001 Annual Report Download - page 42

The St. Paul Companies 2001 Annual Report40
Independent Auditors’ Report
the board of directors and shareholders
the st. paul companies, inc.:
We have audited the accompanying consolidated balance sheets
of The St. Paul Companies, Inc. and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of opera-
tions, shareholders’ equity, comprehensive income and cash flows
for each of the years in the three-year period ended December 31,
2001. These consolidated financial statements are the responsibil-
ity of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting prin-
ciples used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated finan-
cial position of The St. Paul Companies, Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Notes 1 and 8 to the consolidated financial state-
ments, in 2001 the Company adopted the provisions of the
Statement of Financial Accounting Standards No. 133, “Accounting
for Derivative Instruments and Hedging Activities” and, as also
described in Note 1, in 1999 the Company adopted the provisions
of Statement of Position No. 97-3, “Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments.”
KPMG LLP
Minneapolis, Minnesota
January 23, 2002
Management’s Responsibility
for Financial Statements
Scope of Responsibility — Management prepares the accompany-
ing financial statements and related information and is responsible
for their integrity and objectivity. The statements were prepared in
conformity with United States generally accepted accounting prin-
ciples. These financial statements include amounts that are based
on management’s estimates and judgments, particularly our
reserves for losses and loss adjustment expenses. We believe that
these statements present fairly the company’s financial position
and results of operations and that the other information contained
in the annual report is consistent with the financial statements.
Internal Controls — We maintain and rely on systems of internal
accounting controls designed to provide reasonable assurance that
assets are safeguarded and transactions are properly authorized
and recorded. We continually monitor these internal accounting
controls, modifying and improving them as business conditions and
operations change. Our internal audit department also independ-
ently reviews and evaluates these controls. We recognize the
inherent limitations in all internal control systems and believe that
our systems provide an appropriate balance between the costs and
benefits desired. We believe our systems of internal accounting con-
trols provide reasonable assurance that errors or irregularities that
would be material to the financial statements are prevented or
detected in the normal course of business.
Independent Auditors — Our independent auditors, KPMG LLP, have
audited the consolidated financial statements. Their audit was con-
ducted in accordance with auditing standards generally accepted
in the United States of America, which includes the consideration
of our internal controls to the extent necessary to form an inde-
pendent opinion on the consolidated financial statements prepared
by management.
Audit Committee — The audit committee of the board of directors,
composed solely of outside directors, assists the board of directors
in overseeing management’s discharge of its financial reporting
responsibilities. The committee meets with management, our direc-
tor of internal audit and representatives of KPMG LLP to discuss
significant changes to financial reporting principles and policies and
internal controls and procedures proposed or contemplated by
management, our internal auditors or KPMG LLP. Additionally, the
committee assists the board of directors in the selection, evalua-
tion and, if applicable, replacement of our independent auditors;
and in the evaluation of the independence of the independent audi-
tors. Both internal audit and KPMG LLP have access to the audit
committee without management’s presence.
Code of Conduct — We recognize our responsibility for maintaining
a strong ethical climate. This responsibility is addressed in the com-
pany’s written code of conduct.
Jay S. Fishman Thomas A. Bradley
Chairman, President and Chief Financial Officer
Chief Executive Officer