Travelers 2003 Annual Report Download - page 104
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102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
The following is a reconciliation of the income and share data used in the basic and diluted earnings per share
computations:
(for the year ended December 31, in millions, except
per share amounts) 2003
2002
2001
Income before cumulative effect of accounting changes $ 1,696.0 $ 215.6 $ 1,062.2
Cumulative effect of accounting changes - (242.6) 3.2
Net income (loss) available to common shareholders for
basic EPS (numerator)
1,696.0
(27.0)
1,065.4
Effect of dilutive securities - - -
Net income (loss) available to common shareholders for
diluted EPS (numerator)
$ 1,696.0
$ (27.0)
$ 1,065.4
Weighted average common shares outstanding applicable
to basic EPS (denominator)
1,002.0
949.5
769.0
Effect of dilutive shares 5.3 1.7 -
Adjusted weighted average common shares outstanding
applicable to diluted EPS (denominator) 1,007.3 951.2 769.0
Basic earnings per share
Income before cumulative effect of accounting changes $ 1.69 $ 0.23 $ 1.38
Cumulative effect of accounting changes - (0.26) 0.01
Net income (loss) $ 1.69 $ (0.03) $ 1.39
Diluted earnings per share
Income before cumulative effect of accounting changes $ 1.68 $ 0.23 $ 1.38
Cumulative effect of accounting changes - (0.26) 0.01
Net income (loss) $ 1.68 $ (0.03) $ 1.39
Derivative Financial Instruments
Travelers uses derivative financial instruments, including interest rate swaps, equity swaps, credit derivatives,
options, forward contracts and financial futures, as a means of hedging exposure to interest rate, equity price
change and foreign currency risk. Travelers insurance subsidiaries do not hold or issue derivative instruments
for trading purposes. Travelers recognizes all derivatives, including certain derivative instruments embedded in
other contracts, as either assets or liabilities in the consolidated balance sheet and measures those instruments at
fair value. Where applicable, hedge accounting is used to account for derivatives. To qualify for hedge
accounting, the changes in value of the derivative must be expected to substantially offset the changes in value
of the hedged item. Hedges are monitored to ensure that there is a high correlation between the derivative
instruments and the hedged investment. Derivatives that do not qualify for hedge accounting are marked to
market with the changes in market value reflected in the consolidated statement of income.
Interest rate swaps, equity swaps, credit derivatives, options and forward contracts were not significant at
December 31, 2003 and 2002.