Travelers 2004 Annual Report Download - page 151

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3. TPC CORPORATE REORGANIZATION, Continued
processing services and short-term investment pool management services. Charges for these shared services were
allocated at cost. In connection with the Citigroup Distribution, TPC 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 in 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, TPC entered into an
investment management agreement, which was applied retroactive to April 1, 2002, with an affiliate of Citigroup
whereby the affiliate of Citigroup provided investment advisory and administrative services to TPC, with respect
to its entire investment portfolio for a period of two years and at fees mutually agreed upon, including a
component based on investment performance. This agreement was modified and extended through the first
quarter of 2005. Charges incurred related to this agreement were $58 million for the year ended December 31,
2004, $60 million for the year ended December 31, 2003 and $47 million for the period from April 1, 2002
through December 31, 2002.
4. INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following presents a summary of the Company’s intangible assets by major asset class as of
December 31, 2004:
(in millions)
Gross
Carrying
Amount
Accumulated
Amortization Net
Intangibles subject to amortization
Customer-related .................................................. $1,032 $252 $ 780
Marketing-related ................................................. 20 7 13
Contract-based .................................................... 145 12 133
Fair value adjustment on claims and claim adjustment expense reserves and
reinsurance recoverables .......................................... 191 (58)(1) 249
Total intangible assets subject to amortization ....................... 1,388 213 1,175
Intangible assets not subject to amortization
Marketing-related ................................................. 15 — 15
Contract-based .................................................... 511 — 511
Total intangible assets not subject to amortization .................... 526 — 526
Total intangible assets .......................................... $1,914 $213 $1,701
(1) The time value of money and the risk margin (cost of capital) components of the intangible asset runoff at
different rates, and as such, the amount recognized in income may be a net benefit in some periods and a net
expense in other periods. See note 2 for further information on the fair value adjustment on claims and claim
adjustment expense reserves and reinsurance recoverables.
The December 31, 2004 ending balance of $1.70 billion includes $1.33 billion of intangible assets acquired
in the merger (see note 2). 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. At December 31, 2003, the Company had $422 million of intangible assets, with a gross
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