Travelers 2006 Annual Report Download - page 122

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recorded atthe merger date. A portion of the proceeds from the June 2006 debt issuances described above
was used to fund this redemption.
In 2005, the Company repaid$815 million of its outstanding debt, primarily comprised of the
following: maturities of $238 million of 7.875% senior notes, $79 million of 7.125% senior notes, and $99
million of medium-term notes bearing interest rates ranging from 6.44% to 7.09%; and a net repayment of
commercial paper borrowings of $395 million. In November 2005, the Company issued $400 million of
5.50% senior notes maturing in December 2015. The majority of proceeds was used to fund the repayment
of commercial paper borrowings, described above, with the remainder used for general corporate
purposes.
In July 2002, concurrent with the issuance of 17.8 million ofSPC common shares in a public offering,
SPC issued 8.9 million equity units, each having a stated amount of $50, for gross consideration of $442
million. Each equity unit initially consisted of a forward purchase contract for the Company’s common
stock, which matured in August 2005, and anunsecured$50 senior note of the Company (maturingin
2007). Total annual distributions on the equity units were at the rate of 9.00%, consisting of interest on the
note at a rate of 5.25% and fee payments under the forward contract of 3.75%. Holders of the equity units
had the opportunity to participate in a required remarketing of the senior note component. The initial
remarketing date was May 11, 2005. On that date, the notes were successfully remarketed, and the interest
rate on the notes was reset to 5.01%, from 5.25%, effective May 16, 2005. The remarketed notes mature on
August 16, 2007. The forward purchase contract required the investor to purchase, for $50, a variable
number of shares of the Company’s common stock on the settlement date of August 16, 2005. The number
of shares purchased was determined based on a formula that considered the average closing price of the
Company’s common stock on each of 20 consecutive trading days ending on the third trading day
immediately preceding the settlement date, in relation to the $24.20 per share price of common stock at
the time of the offering. On the August 16, 2005 settlement date, the Company issued 15.2 million
common shares and received total proceeds of $442 million.
In January 2007, the Company redeemed its 8.47%, $81 million subordinated debentures due
January 10, 2027. The redemption was fundedinternally. An additional $1.02 billion of the Company’s
outstanding debt at December 31, 2006 will mature at various times during 2007. The Company plans to
refinance thesematurities during 2007.
Share Repurchases. On May 2, 2006, the Company’s Board of Directors authorized a program to
repurchase up to $2 billion of the Company’s common stock. Under this program, repurchases may be
made from time to time in the open market, in accordance with Rule 10b-18 under the Securities
Exchange Act of 1934, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1under
the Securities Exchange Act of 1934, in private transactions or otherwise. This program does not have a
stated expiration date. The timing and actual number of shares to be repurchased in the future will depend
on a variety of factors, including corporate and regulatory requirements, price, catastrophe losses and
other market conditions. During 2006, the Company repurchased 22.8 million common shares under the
program for a total cost of approximately $1.12 billion. The average cost per share repurchased in 2006 was
$49.20.
In 2006, 2005 and 2004, theCompany acquired 1.2 million, 0.8 million and 0.4 million shares,
respectively, of common stock from employees as treasury stock primarily to cover payroll withholding
taxes related to the vesting of restricted stock awards and exercises of stock options.
Dividends. Dividends paid to shareholders totaled $702 million, $628 million and $642 million in
2006, 2005 and 2004, respectively. On February 7, 2007,the Company’s Board ofDirectors declared a
quarterly dividend of $0.26 per share, payable March 30, 2007 to shareholders of record on March 9, 2007.
The declaration and payment of future dividends to holders of the Company’s common stock will be at the
discretion of the Company’s Board of Directors and will depend upon many factors, including the