Travelers 2004 Annual Report Download - page 139

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
100% of Nuveen Investments’ assets, liabilities, revenues and expenses, with reductions on the balance sheet and
statement of income (loss) for the minority shareholders’ proportionate interest in Nuveen Investments’ equity
and earnings. Minority interest of $123 million was recorded in other liabilities at December 31, 2004.
Nuveen Investments has three principal sources of revenue: advisory fees on assets under management,
including separately managed accounts, closed-end exchange-traded funds and mutual funds; underwriting and
distribution revenues earned upon the sale of certain investment products; and performance fees earned on
certain institutional accounts based on the performance of such accounts. Investment advisory fees are
recognized as services are provided. With respect to funds, Nuveen Investments receives fees based either on
each fund’s average daily net assets or on a combination of the average daily net assets and gross interest income.
With respect to managed accounts, Nuveen Investments generally earns fees, on a quarterly basis, based on the
value of the assets managed on a particular date, such as the last calendar day of a quarter, or on the average asset
value for the period.
Recoveries From Former Affiliate
Recoveries from former affiliate consist of the recoveries under the Citigroup indemnification agreement.
Other Revenues
Other revenues include revenues from premium installment charges, which are recognized as collected,
revenues of noninsurance subsidiaries other than fee income and gains and losses on dispositions of assets and
operations other than net realized investment gains and losses.
Income Taxes
The Company recognizes deferred income tax assets and liabilities for the expected future tax effects
attributable to temporary differences between the financial statement and tax return bases of assets and liabilities,
based on enacted tax rates and other provisions of the tax law. The effect of a change in tax laws or rates on
deferred tax assets and liabilities is recognized in income in the period in which such change is enacted. Deferred
tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the
deferred tax assets will not be realized.
Foreign Currency Translation
The Company assigns functional currencies to its foreign operations, which are generally the currencies of
the local operating environment. Foreign currency amounts are remeasured to the functional currency, and the
resulting foreign exchange gains or losses are reflected in the statement of income (loss). Functional currency
amounts are then translated into U.S. dollars. The unrealized gain or loss from this translation, net of tax, is
recorded as a part of shareholders’ equity. The change in unrealized foreign currency translation gain or loss
during the year, net of tax, is a component of comprehensive income. Both the remeasurement and translation are
calculated using current exchange rates for the balance sheets and average exchange rates for the statements of
operations.
Stock-Based Compensation
The Company has an employee stock incentive compensation plan that includes stock-based awards of stock
options, restricted stock and deferred stock.
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