Travelers 2006 Annual Report Download - page 67

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significant increases in compliance costs. As a result, our ability to conduct our business might be adversely
affected.
Item 1B. UNRESOLVED STAFF COMMENTS
On July 23, 2004, the Company announced that it was seeking guidance from thestaff of the Division
of CorporationFinance of the SEC with respect to the appropriate purchase accounting treatment for
certain second quarter 2004 adjustments totaling $1.63 billion ($1.07 billion after-tax). The Company
recorded these adjustments as charges in its consolidated statement of income in the second quarter of
2004. Through an informal comment process, thestaff of the Division of Corporation Finance has
subsequently asked for further information, which the Company has provided. Specifically, the staff has
askedfor information concerning the Company’s adjustments to certain of SPC’s insurancereserves and
reserves for reinsurance recoverables andpremiums due from policyholders, and how those adjustments
may relate to SPC’s reserves for periods prior to the merger of SPC and TPC. After reviewing the staff’s
questions and comments anddiscussions with the Company’s independent auditors, the Company
continues to believe that its accounting treatment for these a djustments is appropriate. If, however, the
staff disagrees, some or all of the adjustments being discussed may not be recorded as charges in the
Company’s consolidated statement of income, thereby increasing net income for the second quarter and
full year 2004 and increasing shareholders’ equity at December 31, 2006, 2005 and 2004, ineach case by the
approximate after-tax amount of the change. The effect on tangible shareholders’ equity (adjusted for the
effects of deferred taxes associated with goodwill and intangible assets) at December 31, 2006, 2005 and
2004 would not be material.
Increases to goodwill and deferred tax liabilities would be reflected on the Company’s balance sheet
as of April 1, 2004, either due to purchase accounting or adjustment of SPC’s reserves prior to the merger
of SPC and TPC. On May 3, 2006, the Company received a letter from the Division of Enforcement of the
SEC (the Division) advising the Company that it is conducting an inquiry relating to the second quarter
2004 adjustments and the April 1, 2004 merger between SPC and TPC. The Company is cooperating with
the Division’s requests for information.
Item 2.PROPERTIES
The Company owns its corporate headquarters buildings located at 385 WashingtonStreet and 130
West Sixth Street, St. Paul, Minnesota. Thesebuildings are adjacent to one another and consist of
approximately 1.1million square feet of gross floor space.
The Company also owns six buildings in Hartford, Connecticut. The Company currently occupies
approximately 1.8million square feet of office space in these buildings. The Company also owns other real
property, which includes office buildings in Denver, Colorado, Fall River, Massachusetts and Irving, Texas,
and a data center located in Norcross, Georgia. In January 2007, the Company acquired a building and
adjacent land in Windsor, Connecticut. The Company leases 196 field and claim offices totaling
approximately 5.1million square feet throughout the United States under leases or subleases with third
parties.
The Company owns a building in London, England, which houses a portion of its operations in the
United Kingdom.