Travelers 2003 Annual Report Download - page 92

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90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
On August 20, 2002, Citigroup made a tax-free distribution to its stockholders (the Citigroup Distribution), of a
portion of its ownership interest in TPC, which, together with the shares issued in the IPO, represented more
than 90% of TPC’s common equity and more than 90% of the combined voting power of TPC’s outstanding
voting securities. For each 100 shares of Citigroup outstanding common stock, approximately 4.32 shares of
TPC class A common stock and 8.88 shares of TPC class B common stock were distributed. At December 31,
2003 and 2002, Citigroup held for their own account 9.87% and 9.95%, respectively, of TPC’s common equity
and 9.87% and 9.98%, respectively, of the combined voting power of TPC’s outstanding voting securities.
Citigroup received a private letter ruling from the Internal Revenue Service that the Citigroup Distribution was
tax-free to Citigroup, its stockholders and TPC. As part of the ruling process, Citigroup agreed to vote the shares
it continues to hold following the Citigroup Distribution pro rata with the shares held by the public and to divest
the remaining shares it holds within five years following the Citigroup Distribution.
On August 20, 2002, in connection with the Citigroup Distribution, stock-based awards held by Travelers
employees on that date under Citigroup’s various incentive plans were cancelled and replaced by awards under
Travelers own incentive programs.
TPC’s consolidated financial statements include the accounts of its primary subsidiary, Travelers Insurance
Group Holdings Inc. (TIGHI), a property casualty insurance holding company. Also included are the accounts
of CitiInsurance International Holdings Inc. and its subsidiaries (CitiInsurance), the principal assets of which are
investments in the property casualty and life operations of Fubon Insurance Co., Ltd. and Fubon Assurance Co.,
Ltd., with respect to results prior to March 1, 2002. On February 28, 2002, Travelers sold CitiInsurance to other
Citigroup affiliated companies for $402.6 million, its net book value. Travelers has applied $137.8 million of
the proceeds from this sale to repay intercompany indebtedness to Citigroup. In addition, Travelers has
purchased from Citigroup affiliated companies the premises located at One Tower Square, Hartford, Connecticut
and other properties for $68.2 million. Additionally, certain liabilities relating to employee benefit plans and
lease obligations were assigned and assumed by Citigroup affiliated companies. In connection with these
assignments, Travelers transferred $172.4 million and $87.8 million, respectively, to Citigroup affiliated
companies.
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.