Travelers 2006 Annual Report Download - page 211

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
199
8. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY (Continued)
threshold, between 50%-160% of the performance shares will vest, depending on the actual return on
equity attained. The fair value per share attributable to the common stock awards on the date of grant was
$52.76.
Refer to note 11 for information regarding share-basedgrants made in 2006, 2005 and prior years.
Treasury Stock
On May 2, 2006, the Company’s Board of Directors authorized a program to repurchase up to $2
billion of shares of the Company’s common stock. Under this program, repurchases may be made from
time to time in the open market, pursuant to pre-set trading plans meeting the requirements of
Rule 10b5-1 under 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. During2006, 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.
At December 31, 2006, the Company had $879 million of capacity remaining under the original $2
billion share repurchase program approved by the Board of Directors in 2006. In January 2007, the
Company’s board of directors authorized a $3 billion increase to the program.
The Company’s 2004 Incentive Plan, the legacy SPC 1994 Stock Incentives Plan and the legacy TPC
2002Incentive Plan provide settlementalternatives to employees in which the Company repurchases
shares to cover tax withholding costs and exercise costs. During the years ended December 31, 2006 and
2005, the Company purchased $61 million and $33 million, respectively, of its common stock under this
plan.
Common shares acquired are reported as treasury stock in the consolidated balance sheet.
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.
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 $3.07 billion isavailable in 2007 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 $1.16
billion of dividends from its insurance subsidiaries in 2006.
Statutory Net Income and Surplus
Statutory net income of the Company’s insurance subsidiaries was $4.27 billion, $2.92 billion, and
$1.58 billion for the years ended December31, 2006, 2005 and 2004, respectively. Statutory capital and
surplus of the Company’s insurancesubsidiaries was $20.94 billion and $17.81 billion at December 31, 2006
and 2005, respectively.