Travelers 2004 Annual Report Download - page 196

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
16. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
INSTRUMENTS, Continued
At December 31, 2004 and 2003, investments in fixed maturities had a fair value, which equaled carrying
value, of $54.26 billion and $33.05 billion, respectively. The fair value of investments in fixed maturities for
which a quoted market price or dealer quote are not available was $574 million and $685 million at
December 31, 2004 and 2003, respectively. See note 1.
The carrying values of cash, short-term securities, mortgage loans, investment income accrued, and
payables for securities lending and repurchase agreements approximated their fair values. See notes 1 and 6.
The carrying values of $1.23 billion and $284 million of financial instruments classified as other assets
approximated their fair values at December 31, 2004 and 2003, respectively. The carrying values of $4.94 billion
and $2.69 billion of financial instruments classified as other liabilities at December 31, 2004 and 2003,
respectively, also approximated their fair values. Fair value is determined using various methods including
discounted cash flows, as appropriate for the various financial instruments.
The carrying value and fair value of the Company’s debt at December 31, 2004 was $6.62 billion and $6.78
billion, respectively. The respective totals at December 31, 2003 were $2.68 billion and $2.77 billion.
The fair value of commercial paper included in debt outstanding at December 31, 2004 approximated its
book value of $499 million because of its short-term nature. For other debt, the fair value estimate was based
upon the bid price at December 31, 2004 and 2003.
17. CONTINGENCIES, COMMITMENTS AND GUARANTEES
Contingencies
The following section describes the major pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Company or its subsidiaries are a party or to which any of the Company’s
property is subject.
Asbestos and Environmental-Related Proceedings
In the ordinary course of its insurance business, the Company receives claims for insurance arising under
policies issued by the Company asserting alleged injuries and damages from asbestos and other hazardous waste
and toxic substances which are the subject of related coverage litigation, including, among others, the litigation
described below. The Company continues to be subject to aggressive asbestos-related litigation. The conditions
surrounding the final resolution of these claims and the related litigation continue to change.
TPC is involved in three significant proceedings relating to ACandS, Inc. (ACandS), formerly a national
distributor and installer of products containing asbestos, including ACandS’ bankruptcy proceedings. The
proceedings involve disputes as to whether and to what extent any of ACandS’ potential liabilities for bodily
injury asbestos claims are covered by insurance policies issued by TPC. These proceedings have resulted in
decisions favorable to TPC, although those decisions are subject to appellate review. The status of the various
proceedings is described below.
ACandS filed for bankruptcy in September 2002 (In re: ACandS, Inc., pending in the U.S. Bankruptcy Court
for the District of Delaware). In its proposed plan of reorganization, ACandS sought to establish a trust to pay
asbestos bodily injury claims against it and sought to assign to the trust its rights under the insurance policies
184