Travelers 2005 Annual Report Download - page 220

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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17. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
reporting period. The fair value of this obligation as of December 31, 2005 was $66 million, which was
included in “Other Liabilities” on the Company’s consolidated balance sheet.
18. RELATED PARTY TRANSACTIONS
Prior to Citigroup’s distribution to its stockholders of a portion of its ownership in TPC in
August 2002, TPC provided and purchased services to and from Citigroup affiliated companies, including
facilities management, banking and financial functions, benefit coverages, data processing services, and
short-term investment pool management services. Charges for these shared services were allocated at cost.
In connection with the Citigroup Distribution, TPC andCitigroup and its affiliates entered into a transition
services agreement for the provision of certain of these services, tradename and trademark and similar
agreements related to the use of trademarks, logos and tradenames and an amendment to the March 26,
2002 Intercompany Agreement withCitigroup. Duringthe first quarter of 2002, Citigroup provided
investment advisory services on an allocated cost basis, consistent with prior years.On August 6, 2002,TPC
entered into an investmentmanagement agreement, which was applied retroactively to April 1, 2002, with
an affiliate of Citigroup whereby the affiliate of Citigroup provided investment advisory and administrative
services to TPC with respect to its entire investment portfolio for a period of two years and at fees mutually
agreed upon, including a component based on investment performance. This agreement was modified and
extended through the first quarter of 2005, at which time it was terminated. Charges incurred related to
this agreement were $2 million, $58 million and $60 million for the years ended December 31, 2005, 2004
and 2003, respectively. TPC and Citigroup also agreed upon the allocation or transfer of certain other
liabilities and assets, and rights and obligations in furtherance of the separation of operations and
ownership as a result of the Citigroup Distribution. The net effect of these allocations and transfers, in the
opinion of management, was not significant to the Company’s results of operationsor financial condition.
The Company had notes payable to Citigroup of $700 million at December 31, 2002, which was repaid
during 2003. Interest expense included in the consolidated statement of income was $9 million for the year
ended December 31, 2003.
In the ordinary course of business, the Company purchases and sells securities through formerly
affiliated broker-dealers. These transactions are conducted on an arm’s-length basis. Commissions are not
paid for the purchase and sale of debt securities.
The Company participates in reinsurance agreements with TIC, a former affiliate.
The Company purchased annuities from former affiliates to settle certain claims. Through 2004, the
Company had agreed to use TIC as the most preferred provider of annuities, as long as Citigroup
maintained competitive ratings and its products are competitively priced. Beginning in 2005, the Company
had no preferred provider of annuities. Reinsurance recoverables at December 31, 2005 and 2004 included
$791 million and $718 million, respectively, related to these annuities.