Travelers 2003 Annual Report Download - page 151

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149
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. RELATED PARTY TRANSACTIONS
Prior to the Citigroup Distribution, Travelers provided and purchased services to and from Citigroup affiliated
companies, including facilities management, banking and financial functions, benefit coverages, data processing
services, and short-term investment pool management services. Charges for these shared services were allocated
at cost. In connection with the Citigroup Distribution, Travelers and Citigroup and its affiliates entered into a
transition services agreement for the provision of certain of these services, tradename and trademark and similar
agreements related to the use of trademarks, logos and tradenames and an amendment to the March 26, 2002
Intercompany Agreement with Citigroup. During the first quarter of 2002, Citigroup provided investment
advisory services on an allocated cost basis, consistent with prior years. On August 6, 2002, Travelers entered
into an investment management agreement, which has been applied retroactively to April 1, 2002, with an
affiliate of Citigroup whereby the affiliate of Citigroup is providing investment advisory and administrative
services to Travelers with respect to its entire investment portfolio for a period of two years and at fees mutually
agreed upon, including a component based on performance. Charges incurred related to this agreement were
$59.7 million and $47.2 million for the year ended December 31, 2003 and for the period from April 1, 2002
through December 31, 2002, respectively. This agreement terminates on March 31, 2004. Travelers intends to
arrange an orderly transition of the investment management and the associated accounting and administrative
services to St. Paul Travelers following the merger with SPC. Travelers and Citigroup also agreed upon the
allocation or transfer of certain other liabilities and assets, and rights and obligations in furtherance of the
separation of operations and ownership as a result of the Citigroup Distribution. The net effect of these
allocations and transfers, in the opinion of management, was not significant to Travelers results of operations or
financial condition.
For a period of two years following the Citigroup Distribution, Travelers has the right of first offer to provide
Citigroup property and casualty coverage that it does not currently provide to it and Citigroup has the right of
first offer to provide Travelers any financial service it does not currently provide to Travelers, at market rates,
terms and conditions at the time of the offer. Neither party is required to purchase the services at rates, terms or
conditions less favorable than those offered by any third party at the time of the offer.
Included in revenues in the consolidated statement of income (loss) is $520.0 million from the Citigroup
indemnification agreement in 2002. At December 31, 2002, other assets in the consolidated balance sheet
include a $360.7 million receivable under the Citigroup indemnification agreement, which was received during
the first quarter of 2003. See note 7.
In conjunction with the purchase of TIGHI’s outstanding shares in April 2000, TPC borrowed $2.2 billion
pursuant to a note agreement with Citigroup. This note was prepaid during 2002 following the offerings.
Interest expense included in the consolidated statement of income was $5.5 million and $79.2 million in 2002
and 2001, respectively. See note 8.
Travelers has line of credit agreements with Citigroup. See note 8.
Travelers had notes payable to Citigroup of $700.0 million at December 31, 2002, which was repaid during
2003. Interest expense included in the consolidated statement of income was $9.1 million, $18.1 million and
$8.7 million in 2003, 2002 and 2001, respectively. See note 8.
On October 1, 2001, Travelers paid $329.5 million to Citigroup for The Northland Company and its subsidiaries
and Associates Lloyds Insurance Company. In addition, on October 3, 2001, the capital stock of Associates
Insurance Company, with a net book value of $356.5 million, was contributed to Travelers. See note 2.