Travelers 2003 Annual Report Download - page 18
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16
Note 2 — Pro Forma Adjustments
The pro forma adjustments related to the preliminary Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 31, 2003 assume the merger occurred on December 31, 2003. The pro forma adjustments to the preliminary
Unaudited Pro Forma Condensed Combined Income Statement for the year ended December 31, 2003 assume the
merger occurred on January 1, 2003.
The following pro forma adjustments result from the allocation of the purchase price for the acquisition based on the
fair value of the assets, liabilities and commitments acquired from SPC and to conform SPC's accounting policies to
TPC. The amounts and descriptions related to the preliminary adjustments are as follows:
Increase (Decrease)
as of December 31,
2003
(in millions)
Unaudited Pro Forma Condensed Combined Balance Sheet
Assets
a) Adjustment of carrying amount of investment real estate to fair value $ 283
b) Reinsurance recoverables —
i. Adjustment to conform the accounting policy for discounting certain workers'
compensation claim reserves $ (15)
ii. Adjustment to record the reinsurance recoverables related to claims and
claim adjustment expense reserves at fair value — See Note 3 $ (402)
c) Adjustment to conform the accounting policy for the deferral of certain policy
acquisition costs $ (78)
d) Adjustment to record the deferred tax liability resulting from all pro forma
adjustments except goodwill at a statutory rate of 35% $ (296)
e) Net adjustment to eliminate SPC's historical goodwill and to record the goodwill
related to this merger $ 1,919
f) Net adjustment to eliminate SPC's historical intangible assets and to record the
identifiable intangible assets related to this merger — See Note 4 $ 1,061
g) Other assets —
i. Adjustment to record the fair value of SPC's pension plans, using the
December 31, 2003 plan assumptions $ (346)
ii. Adjustment to eliminate SPC's unamortized issue costs related to long-term
debt, equity unit related debt and mandatorily redeemable preferred securities $ (38)
Liabilities
h) Claims and claim adjustment expense reserves —
i. Adjustment to conform the accounting policy for discounting certain workers'
compensation claim reserves $ (125)
ii. Adjustment to conform the accounting policy for discounting involuntary
market workers’ compensation claims reserves $ 39
iii. Adjustment to record claims and claim adjustment expense reserves at fair
value — See Note 3 $ (675)
i) Adjustment to record long-term debt, equity unit related debt and mandatorily
redeemable preferred securities at fair value $ 293
j) Other liabilities —
i. Adjustment to record the fair value of SPC's post-retirement benefit plans,
using the December 31, 2003 plan assumptions $ 86
ii. Adjustment to record the liability for TPC estimated merger related
transaction costs $ 15