Travelers 2004 Annual Report Download - page 65

Northland Company and its subsidiaries (Northland) from Citigroup. On October 3, 2001, Citigroup
contributed the capital stock of Commercial Guaranty Casualty Insurance Company to TPC. During April
2000, TPC completed a cash tender offer and acquired all of Travelers Insurance Group Holdings Inc.’s
(TIGHI) outstanding shares of common stock that were not already owned by TPC for approximately $2.41
billion financed by a loan from Citigroup. On May 31, 2000, TPC acquired the surety business of Reliance
Group Holdings, Inc. (Reliance Surety). Includes amounts related to Northland, Commercial Guaranty
Casualty, the remainder of TIGHI and Reliance Surety from their dates of acquisition.
(2) Cumulative effect of changes in accounting principles, net of tax (1) for the year ended December 31, 2002
consisted of a loss of $243 million as a result of a change in accounting for goodwill and other intangible
assets; and (2) for the year ended December 31, 2001 included a gain of $5 million as a result of a change in
accounting for derivative instruments and hedging activities and a loss of $2 million as a result of a change
in accounting for securitized financial assets.
(3) Total liabilities include minority interest liabilities of $117 million, $105 million and $87 million at
December 31, 2004, 2003 and 2002, respectively.
(4) Earning per share, year-end common shares outstanding, cash dividends per share and book value per share
were restated for the years prior to 2004 to reflect the impact of the merger with SPC.
(5) In March 2002, TPC issued common stock through its Initial Public Offering (IPO). See note 1 of notes to
the Company’s consolidated financial statements.
(6) Dividends per common share reflect the recapitalization effected as part of TPC’s corporate reorganization
in 2002. See note 1 to the Company’s consolidated financial statements. During 2002, TPC paid dividends
of $5.10 billion in the form of a note payable and $158 million in cash to Citigroup, its then sole
shareholder. During 2001, TPC paid dividends of $526 million to Citigroup, its then sole shareholder.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion and analysis of the financial condition and results of operations of The St. Paul
Travelers Companies, Inc. (together with its subsidiaries, the Company). On April 1, 2004, Travelers Property
Casualty Corp. (TPC) merged with a subsidiary of The St. Paul Companies, Inc. (SPC), as a result of which TPC
became a wholly-owned subsidiary of SPC, and SPC changed its name to The St. Paul Travelers Companies, Inc. In
connection with the merger, each issued and outstanding share of TPC class A (including the associated preferred
stock purchase rights) and class B par value $0.01 common stock was exchanged for 0.4334 of a share of the
Company’s common stock without designated par value. Share and per share amounts for all periods presented have
been restated to reflect the second quarter exchange of TPC common stock for the Company’s common stock in the
merger. For accounting purposes, this transaction was accounted for as a reverse acquisition with TPC treated as the
accounting acquirer. Accordingly, this transaction was accounted for as a purchase business combination, using
TPC historical financial information and applying fair value estimates to the acquired assets, liabilities, and
commitments of SPC as of April 1, 2004. Beginning on April 1, 2004, the results of operations and financial
condition of SPC were consolidated with TPC’s. Accordingly, all financial information presented herein for the
twelve months ended December 31, 2004 reflects the accounts of TPC for the three months ended March 31, 2004
and the consolidated accounts of SPC and TPC for the nine months ended December 31, 2004. The financial
information presented herein for the prior year periods reflects the accounts of TPC.
For more information regarding the completion of the merger, including the calculation and allocation of the
purchase price, refer to note 2 to the Company’s consolidated financial statements included in this report.
In 2002, TPC completed a corporate reorganization in connection with its initial public offering of common
stock. For more information regarding that reorganization and stock offering, refer to note 3 to the Company’s
consolidated financial statements included in this report.
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