Travelers 2005 Annual Report Download - page 219

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
207
17. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
Other Commitments and Guarantees
Commitments
Investment Commitments—The Company has long-term commitments to fund venture capital
investments through its subsidiary, St. Paul Venture Capital VI, LLC, through new and existing
partnerships and certain other venture capital entities. The Company’s total future estimated obligations
related to its venture capital investments were $128 million and $289 million at December 31, 2005 and
2004, respectively. The Company also has unfunded commitments to partnerships, joint ventures and
certain private equity investments in which it invests. These additional commitments were $803 million and
$483 million at December 31, 2005 and 2004, respectively.
SPC’s Sale of Minet—In May 1997, SPC completed the sale of its insurance brokerage operation,
Minet, to Aon Corporation.SPC agreed to indemnify Aon against any future claims for professional
liability and other specified events that occurred or existed prior to the sale. The Company assumed
obligations related to this indemnification upon consummation of the merger. The Company monitors its
exposure under these claims on a regular basis. The Company believes reserves for reported claims are
adequate, but it does not have information on unreported claims to estimate a range of additional liability.
From 1997 to 2004, SPC purchased insurance to cover a portion of its exposure to such claims. Under the
sale agreement, SPC also committed to acquire a minimum level of reinsurance brokerage services from
Aon through2012. That commitment requires the Company to make a contractual payment to Aon to the
extent such minimum level of service is not acquired. The maximum annual amount payable to Aon for
such services and any such contractual payment related to that commitment is $20 million. SPC also had
commitments under lease agreements through 2015 for vacated space (included in lease commitment
totals innote 15), as well as a commitment to make payments to a former Minet executive. The Company
assumed all obligations to these commitments upon consummationof the merger.
Guarantees
The Company has certain contingentobligations for guarantees related to agency loans and letters of
credit, issuance of debt securities, third party loans related to venture capital investments and various
indemnifications related to the sale of business entities.
In the ordinary course of selling business entities to third parties, the Company has agreed to
indemnify purchasers for losses arising out of breaches of representations and warranties with respect to
the business entities being sold, covenants and obligations of the Company and/or its subsidiaries following
the close, and in certain cases obligations arising from undisclosed liabilities, adverse reserve development
or certain named litigation. Such indemnification provisions generally survive for periods ranging from 12
months following the applicable closing date to the expiration of the relevant statutes of limitations, or in
some cases agreed upon term limitations. As of December 31, 2005, the aggregate amount of the
Company’s obligation for those indemnifications that are quantifiable related to sales of business entities
was $1.82 billion. Certain of these contingent obligations are subject to deductibles whichhave to be
incurred by the obligee before the Company is obligated to make payments. Included in the
indemnification obligations at December 31, 2005 was $172million related to the Company’s variable
interest in Camperdown UK Limited, which SPC sold in December 2003. The Company’s variable interest
results from an agreement to indemnify the purchaser in the event a specified reserve deficiency develops,
a reserve-related foreign exchange impact occurs, or a foreign tax adjustment is imposed on a pre-sale