Travelers 2001 Annual Report Download - page 61

The St. Paul Companies 2001 Annual Report 59
In connection with our purchase of MMI in April 2000, we assumed
all obligations under their preferred securities. In December 1997,
MMI issued $125 million of 30-year mandatorily redeemable
preferred securities through MMI Capital Trust I, formed for the sole
purpose of issuing the securities. The preferred securities pay a
preferred distribution of 75
⁄
8% semi-annually in arrears, and have
a mandatory redemption date of Dec. 15, 2027.
In 1997 and 1996, USF&G issued three series of preferred securities.
After consummation of the merger with USF&G in 1998, The St. Paul
assumed all obligations relating to these preferred securities. These
Series A, Series B and Series C Capital Securities were issued
through separate wholly-owned business trusts (“USF&G Capital I,”
“USF&G Capital II,” and “USF&G Capital III,” respectively) formed
for the sole purpose of issuing the securities. We have effectively
fully and unconditionally guaranteed all obligations of the three
business trusts.
In December 1996, USF&G Capital I issued 100,000 shares of 8.5%
Series A Capital Securities, generating gross proceeds of $100
million. The proceeds were used to purchase $100 million of USF&G
Corporation 8.5% Series A subordinated debentures, which mature
on Dec. 15, 2045. The debentures are redeemable under certain
circumstances related to tax events at a price of $1,000 per
debenture. The proceeds of such redemptions will be used to
redeem a like amount of the Series A Capital Securities.
In January 1997, USF&G Capital II issued 100,000 shares of 8.47%
Series B Capital Securities, generating gross proceeds of $100
million. The proceeds were used to purchase $100 million of USF&G
Corporation 8.47% Series B subordinated debentures, which mature
on Jan. 10, 2027. The debentures are redeemable at our option at
any time beginning in January 2007 at scheduled redemption prices
ranging from $1,042 to $1,000 per debenture. The debentures are
also redeemable prior to January 2007 under certain circumstances
related to tax and other special events. The proceeds of such
redemptions will be used to redeem a like amount of the Series B
Capital Securities.
In July 1997, USF&G Capital III issued 100,000 shares of 8.312%
Series C Capital Securities, generating gross proceeds of $100
million. The proceeds were used to purchase $100 million of USF&G
Corporation 8.312% Series C subordinated debentures, which
mature on July 1, 2046. The debentures are redeemable under
certain circumstances related to tax events at a price of $1,000 per
debenture. The proceeds of such redemptions will be used to
redeem a like amount of the Series C Capital Securities.
Under certain circumstances related to tax events, we have the
right to shorten the maturity dates of the Series A, Series B and
Series C debentures to no earlier than June 24, 2016, July 10, 2016
and April 8, 2012, respectively, in which case the stated maturities
of the related Capital Securities will likewise be shortened.
In 2001, we repurchased and retired $20 million of USF&G Capital I
securities. In 1999, we repurchased and retired a total of $79 million
of USF&G Capital I, II and III securities. Purchases in both years were
done in open market transactions. The amount retired in 1999
included $27 million of 8.5% Capital I, $22 million of 8.47%
Capital II, and $30 million of 8.312% Capital III securities.
preferred shareholders’ equity
The preferred shareholders’ equity on our balance sheet represents
the par value of preferred shares outstanding that we issued to our
Stock Ownership Plan (“SOP”) Trust, less the remaining principal
balance on the SOP Trust debt. The SOP Trust borrowed funds from
a U.S. underwriting subsidiary to finance the purchase of the
preferred shares, and we guaranteed the SOP debt.
The SOP Trust may at any time convert any or all of the preferred
shares into shares of our common stock at a rate of eight shares of
common stock for each preferred share. Our board of directors has
reserved a sufficient number of our authorized common shares to
satisfy the conversion of all preferred shares issued to the SOP Trust
and the redemption of preferred shares to meet employee
distribution requirements. Upon the redemption of preferred shares,
we will issue shares of our common stock to the trust to fulfill the
redemption obligations.
common shareholders’ equity
Common Stock and Reacquired Shares — We are governed by the
Minnesota Business Corporation Act. All authorized shares of voting
common stock have no par value. Shares of common stock
reacquired are considered unissued shares. The number of
authorized shares of the company is 480 million.
We reacquired some of our common shares in 2001, 2000 and 1999
for total costs of $589 million, $536 million and $356 million,
respectively. We reduced our capital stock account and retained
earnings for the cost of these repurchases.
A summary of our common stock activity for the last three years is
as follows.
Year ended December 31 2001 2000 1999
(Shares)
Outstanding at beginning
of year 218,308,016 224,830,894 233,749,778
Shares issued:
Stock incentive plans
and other 2,012,533 3,686,827 1,896,229
Conversion of
preferred stock 287,442 661,523 287,951
Conversion of MIPS —7,006,954 —
Acquisition —— 27,936
Reacquired shares (12,983,616) (17,878,182) (11,131,000)
Outstanding at end
of year 207,624,375 218,308,016 224,830,894
Undesignated Shares — Our articles of incorporation allow us to
issue five million undesignated shares. The board of directors may
designate the type of shares and set the terms thereof. The board
designated 1,450,000 shares as Series B Convertible Preferred Stock
in connection with the formation of our Stock Ownership Plan.