Travelers 2005 Annual Report Download - page 194

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
182
12. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY (Continued)
The articles of incorporation allow the Company to issue five million undesignated shares. The Board
of Directors may designate the type of shares and set the terms thereof. The Board designated 1,450,000
shares as Series B Convertible Preferred Stock in connection with the 401(k) Savings Plan.
On February 6, 2006, the Company, under the St. Paul Travelers Companies, Inc. 2004 Incentive Plan,
issued 2,401,032 common stock awards in the form of restricted stock, deferred stock and performance
share awards to participating officers and other key employees. The restricted stock and deferred stock
awards, totaling 2,029,480 shares, generally vest in full after a two-year or three-year period from date of
grant. The performance share awards, totaling 371,552 target shares, represent shares which the recipient
may earn upon the Company’s attainment of certain performance goals. The performance goals are based
upon the Company’s adjusted return on equity over a three-year performance period. If performance falls
short of targeted performance none or only a portion of the shares will vest after the three-year
performance period from date of grant. If performance exceeds targeted performance, more than 100%
(up to a maximum of 160%) of target shares will vest after the three-year performance period from date of
grant. The fair value per share attributable to the common stock awards on the date of grant was $44.79.
See note 13.
Treasury Stock
All shares of TPC common stock that were held by the Company as treasury stock at the merger date
of April 1, 2004, were cancelled and retired as of that date.
The Company’s 2004 Incentive Plan, the legacy SPC 1994 Stock Incentives Plan and the legacy TPC
2002 Incentive Plan provide settlement alternatives to employees in which the Company repurchases
shares to cover tax withholding costs and exercise costs. At December 31, 2005 and 2004, the Company had
purchased $47 million and $14 million, respectively, of its common stock under thisplan.
Prior to the merger, TPC’s Board of Directors approved a $500 million share repurchase program.
During 2003, TPC repurchased approximately 1.1 million shares (as adjusted for the merger) of its
common stock at a total cost of $40 million. That repurchase program was terminated upon completion of
the merger.
Common shares acquired under these plans are reported as treasury stock in the consolidated balance
sheet.
Dividends
The Company’s insurance subsidiaries are subject to various regulatory restrictions that limit the
maximum amount of dividends available to be paid to their parent without prior approval of insurance
regulatory authorities. A maximum of $2.56 billion is available in 2006 for such dividends without prior
approval of the Connecticut Insurance Department for Connecticut-domiciled subsidiaries and the
Minnesota Department of Commerce for Minnesota-domiciled subsidiaries. The Company received $968
million of dividends from its insurance subsidiaries in2005.