Travelers 2005 Annual Report Download - page 146

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
134
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts 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 The St. Paul Travelers Companies, Inc. 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’s historical
financial information and applying fair value estimates to the acquired assets, liabilities and commitments
of SPC as of April 1, 2004. (See note 2for a description of the fair value adjustments recorded). Beginning
on April 1, 2004, the results of operations and financial condition of SPC were consolidated withTPC’s
results of operations and financial condition. Accordingly, all financial information presented herein for
the twelve months ended December 31, 2005 reflects the consolidated accounts of SPC and TPC. The
financial information presented herein for the twelvemonths ended December 31, 2004 reflects only 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 2003
reflects the accounts of TPC. Certain reclassifications have been made to prior years’ financial statements
to conform to the current year’s presentation. Significant intercompany transactions and balances have
been eliminated.
In connection with the merger, each issued and outstanding share of TPC class A and class B common
stock (including the associated preferred stock purchase rights) was exchanged for 0.4334 of a share of the
Company’s common stock. Share and per share amounts for all periods presented have been restated to
reflect the exchange of TPC’s common stock, par value $0.01 per share, for the Company’s common stock
without designated par value. Common stock and additional paid-in capital in the consolidated balance
sheet were also restated to give effect to the difference in par value of the exchanged shares. Cash was paid
in lieu of fractional shares of the Company’s common stock. Immediately following consummation of the
merger, historical TPC shareholders held approximately 66% of the Company’s common stock. For further
information regarding the merger, see note 2.
In 2005, the Company and Nuveen Investments, Inc. (Nuveen Investments), the Company’s asset
management subsidiary, jointly announced that the Company would implement a program to divest its
78% equity interest in Nuveen Investments, which constituted the Company’s Asset Management segment
and was acquired as part of the merger on April 1, 2004. The Company completed the divestiture through
a series of transactionsin 2005. The Company’s share of Nuveen Investments’ results was classified as
discontinued operations onthe consolidated statement of income, and the Company’s results for prior
periods were reclassified to be consistentwith the 2005 presentation. The Company’s ownership in Nuveen
Investments’ assets and liabilities as of December 31, 2004 were netted and reported as “Net assets of
discontinued operations” on the Company’s consolidated balance sheet. See note 3.
The preparation of the consolidated financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and claims and expenses during
the reporting period. Actual results could differ from those estimates.