Travelers 2005 Annual Report Download - page 178

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
166
7. EARNINGS PER SHARE (Continued)
The following is a reconciliation of the income and share data used in the basic anddiluted earnings
per share computations:
(for the year ended December 31, in millions, except per share amounts) 2005 2004 2003
Basic
Income from continuing operations, as reported ......................... $2,061 $867 $1,696
Preferred stock dividends, net of taxes .................................. (6 )(6 ) —
Income from continuing operations available to common shareholders—
basic ......................................................... $2,055 $861 $1,696
Diluted
Income from continuing operations available to commonshareholders. ..... $2,055 $861 $1,696
Effect of dilutive securities:
Equity unit stock purchasecontracts.................................. 9 12 —
Convertible preferred stock......................................... 6 4 —
Zero coupon convertible notes....................................... 4 2 —
Convertible junior subordinated notes................................ 26
— 26
Income from continuing operations available to common shareholders—
diluted........................................................ $2,100 $879 $1,722
Common Shares
Basic
Weighted average shares outstanding ................................... 676.3 608.3 434.3
Diluted
Weighted average shares outstanding ................................... 676.3 608.3 434.3
Weighted average effects of dilutive securities:
Stock optionsand other incentive plans............................... 3.7 2.9 2.3
Equity unit stock purchasecontracts.................................. 9.5 11.5 —
Convertible preferred stock......................................... 4.2 3.8 —
Zero coupon convertible notes....................................... 2.4 1.8 —
Convertible junior subordinated notes ................................ 16.7 — 16.7
Total ........................................................... 712.8 628.3 453.3
Incomefrom Continuing Operations Per Common Share
Basic............................................................... $3.04 $1.42 $3.91
Diluted ............................................................. $2.95
$1.40 $3.80
8. REINSURANCE
The Company’s consolidated financial statements reflect the effects of assumed and ceded
reinsurance transactions. Assumed reinsurance refers to the acceptance of certain insurance risks that
other insurance companies have underwritten. Ceded reinsurance involves transferring certain insurance
risks (along with the related written and earned premiums) the Company has underwritten to other
insurance companies who agree to share these risks. The primary purpose of ceded reinsurance is to
protect the Company from potential losses in excess of the amount it is prepared to accept. Reinsurance is
placed on both a quota-share and excess of loss basis. Ceded reinsurance arrangements do not discharge
the Company as the primary insurer, except for cases involving a novation.