Travelers 2004 Annual Report Download - page 204

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
18. RELATED PARTY TRANSACTIONS, Continued
In the ordinary course of business, the Company purchases and sells securities through formerly affiliated
broker-dealers. These transactions are conducted on an arm’s-length basis. Commissions are not paid for the
purchase and sale of debt securities.
The Company participates in reinsurance agreements with TIC, a former affiliate.
The Company purchases annuities from former affiliates to settle certain claims. Through 2004, the
Company had agreed to use TIC as the most preferred provider of annuities, as long as Citigroup maintains
competitive ratings and its products are competitively priced. Reinsurance recoverables at December 31, 2004
and 2003 included $718 million and $761 million, respectively, related to these annuities.
SPC had made loans to certain current and former executive officers for their purchase of the Company’s
common stock in the open market. These were full-recourse loans, further secured by a pledge of the stock
purchased with the proceeds. The loans accrued interest at the applicable federal rate for loans of such maturity.
Loans to former executive officers were being repaid in accordance with agreed-upon terms. The total amount
receivable under this program was $1 million on December 31, 2003. This program was terminated effective
March 20, 2002; consequently, no new loans were made after that date. All loans were repaid as of December 31,
2004.
19. RESTRUCTURING ACTIVITIES
During the second quarter of 2004, the Company’s management approved and committed to plans to
terminate and relocate certain employees and to exit certain activities. The cost of these actions has been
recognized as a liability and is included in either the allocation of the purchase price or recorded as part of
general and administrative expenses. The following table summarizes the Company’s costs related to these plans.
(in millions) Accrued Costs Payments Adjustments
Balance at
December 31,
2004
Restructuring costs included in the allocation of the
purchase price:
Employee termination and relocation costs .............. $ 71 $(43) $ (3) $25
Costs to exit leases ................................. 4 (1) 5 8
Other exit costs .................................... 4 (2) — 2
Total included in the allocation of purchase price ..... 79 (46) 2 35
Employee termination costs included in general and
administrative expenses:
Commercial .............................. 33 (4) (9) 20
Specialty ................................. 2 (1) — 1
Personal ................................. 4 — (1) 3
Total included in general and administrative
expenses ................................... 39 (5) (10) 24
Total restructuring costs ......................... $118 $ (51) $ (8) $59
Employee termination and relocation costs consist primarily of severance benefits for which payments will
be substantially completed by the end of 2006. Costs to exit leases include remaining lease obligations on
properties to be vacated by the Company and are expected to be fully paid by the end of 2007. Other exit costs
include the remaining costs related to a redundant computer software contract which are expected to be fully paid
by the end of 2005. Adjustments during 2004 primarily represent changes in the original estimate as a result of
new information which became available to the Company.
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