Travelers 2001 Annual Report Download - page 70

The St. Paul Companies 2001 Annual Report68
During 2001, we reduced the occupancy-related reserve by a net
amount of $7 million. We entered into a lease buyout related to a
portion of the space, and reduced the reserve by $8 million of lease
payments we were no longer obligated to make. This amount was
offset by a $1 million adjustment related to sublease recoveries.
Other Restructuring Charges — Since 1997, we have recorded in
continuing operations three other restructuring charges related to
actions taken to improve our operations. (Also see Note 14 for a
discussion of the charge related to the sale of our standard personal
insurance business, which was included in discontinued operations
in 1999.)
In August 1999, we announced a cost reduction program designed
to enhance our efficiency and effectiveness in a highly competitive
environment. In the third quarter of 1999, we recorded a pretax
charge of $60 million related to this program, including $25 million
in employee-related charges related to the termination of
approximately 590 employees, $33 million in occupancy-related
charges and $2 million in equipment charges. The charge was
included in “Operating and administrative expenses” in the 1999
statement of operations and in “Property-liability insurance —
other” in the table titled “Income (Loss) from Continuing Operations
Before Income Taxes and Cumulative Effect of Accounting Change”
in Note 19.
Late in the fourth quarter of 1998, we recorded a pretax restructuring
charge of $34 million. The majority of the charge, $26 million, related
to the termination of approximately 500 employees, primarily in our
commercial insurance operations. The remaining charge of $8 million
related to costs to be incurred to exit lease obligations.
In connection with our merger with USF&G, in the second quarter
of 1998 we recorded a pretax charge to net income of $292 million,
primarily consisting of severance and other employee-related costs
related to the termination of approximately 2,200 positions, facilities
exit costs, asset impairments and transaction costs.
All actions have been taken and all obligations have been met
regarding these three charges, with the exception of certain
remaining lease commitments. The lease commitment charges
related to excess space created by the cost reduction actions. The
charge was calculated by determining the percentage of anticipated
excess space, by location, and the current lease costs over the
remaining lease period. The amounts payable under the existing
leases were not discounted, and sublease income was included in
the calculation only for those locations where sublease agreements
were in place.
During 2001, we reduced the remaining reserve by $1 million related
to sublease and buyout activity, which reduced our estimated
remaining lease commitments. We expect to be obligated under
certain lease commitments for at least seven years.
The following presents a rollforward of 2001 activity related to these commitments.
Reserve Reserve
Pretax at Dec. 31, 2001 2001 at Dec. 31,
Charge 2000 Payments Adjustments 2001
(In millions)
Lease commitments previously charged to earnings $ 75 $ 43 $ (11) $ (1) $31
The following presents a rollforward of 2001 activity related to this charge.
Reserve Reserve
Pretax at Dec. 31, 2001 2001 at Dec. 31,
Charge 2000 Payments Adjustments 2001
(In millions)
Charges to earnings:
Employee-related $ 4 $ 1 $ (1) $ — $—
Occupancy-related 24 23 (8) (7) 8
Total $ 28 $ 24 $ (9) $ (7) $8