Travelers 2004 Annual Report Download - page 147

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2. MERGER AND ACQUISITION, Continued
supporting the loss reserves. The fair value adjustment is reported as an intangible asset on the consolidated
balance sheet, and the amounts measured in accordance with the acquirer’s accounting policies for insurance
contracts are reported as part of the claims and claim adjustment expense reserves and reinsurance
recoverables. The intangible asset will be recognized into income over the expected payment pattern.
Because the time value of money and the risk adjustment (cost of capital) components of the intangible asset
run off at different rates, the amount recognized in income may be a net benefit in some periods and a net
expense in other periods.
Identification and Valuation of Intangible Assets
Intangible assets subject to amortization are as follows:
(in millions)
Amount assigned
as of April 1,
2004
Weighted-
average
amortization
period
Major intangible asset class
Customer-related (a) .............................................. $495 7.8 years
Marketing-related ................................................ 20 2.0 years
Contract-based (b) ............................................... 145 10.4 years
Fair value adjustment on claims and claim adjustment expense reserves and
reinsurance recoverables (c) ...................................... 191 30.0 years
Total .............................................................. $851
Intangible assets not subject to amortization are as follows:
(in millions)
Amount assigned
as of April 1,
2004
Major intangible asset class
Marketing-related .......................................................... $15
Contract-based (b) .......................................................... 511
Total ......................................................................... $526
(a) Primarily includes customer-related insurance intangibles based on rates derived from expected business
retention and profitability levels.
(b) Contract-based intangibles include management contracts associated with Nuveen Investments’ asset
management business based on the present value of expected cash flows related to the management
contracts. Amounts related to this business are included at the Company’s 79% approximate ownership
interest of Nuveen Investments.
(c) See item 7 of the allocation of the purchase price previously presented.
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