Travelers 2004 Annual Report Download - page 158

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. INVESTMENTS, Continued
(at December 31, 2003, in millions) Cost
Gross Unrealized Fair
ValueGains Losses
Common stock ..................................................... $ 71 $19 $ 1 $ 89
Non-redeemable preferred stock ....................................... 602 52 10 644
Total ......................................................... $673 $71 $11 $733
Proceeds from sales of equity securities were $264 million, $254 million and $127 million in 2004, 2003
and 2002, respectively, resulting in gross realized gains of $37 million, $22 million and $18 million and gross
realized losses of $8 million, $9 million and $14 million, respectively.
Real Estate
The Company’s real estate investments include warehouses, office buildings, land, and other commercial
real estate assets that are directly owned. The Company negotiates commercial leases with individual tenants
through unrelated, licensed real estate brokers. Negotiated terms and conditions include, among others, rental
rates, length of lease period and improvements to the premises to be provided by the landlord.
Future minimum rental income expected on operating leases relating to the Company’s real estate properties
is $95 million, $82 million, $69 million, $55 million, $39 million, and $58 million for 2005, 2006, 2007, 2008,
2009 and 2010 and thereafter, respectively.
Venture Capital
The cost and fair value of investments in venture capital, which were acquired in the merger and are
reported as part of other investments in the Company’s consolidated balance sheet, were as follows:
(at December 31, 2004, in millions) Cost
Gross Unrealized Fair
ValueGains Losses
Venture capital ..................................................... $480 $29 $18 $491
Impairments
Fixed Maturities and Equity Securities
An investment in a fixed maturity or equity security which is available for sale is impaired if its fair value
falls below its book value and the decline is considered to be other-than-temporary. Factors considered in
determining whether a decline is other-than-temporary include the length of time and the extent to which fair
value has been below cost, the financial condition and near-term prospects of the issuer, and the Company’s
ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.
Additionally, for certain securitized financial assets with contractual cash flows (including asset-backed
securities), EITF 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial
Interests in Securitized Financial Assets, requires the Company to periodically update its best estimate of cash
flows over the life of the security. If management determines that the fair value of its securitized financial asset is
less than its carrying amount and there has been a decrease in the present value of the estimated cash flows since
the last revised estimate, considering both timing and amount, then an other-than-temporary impairment is
recognized.
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