Travelers 2007 Annual Report Download - page 121

In November 2006, the Company redeemed $593 million of 7.60% subordinated debentures
originally issued in 2001 and due October 15, 2050. The debentures were redeemable by the Company
on or after November 13, 2006. In November 2001, St. Paul Capital Trust I, a business trust, issued
$575 million of preferred securities, the proceeds of which, along with $18 million in capital provided
by the Company, were used to purchase the subordinated debentures issued by the Company. Upon the
Company’s redemption of its subordinated debentures in November 2006, St. Paul Capital Trust I in
turn used the proceeds to redeem its preferred securities. St. Paul Capital Trust I was then liquidated,
and the Company received an $18 million distribution of capital. The Company recorded a $42 million
pretax gain on the redemption of the subordinated debentures, representing the remaining unamortized
fair value adjustment recorded at the merger date. A portion of the proceeds from the June 2006 debt
issuances described above was used to fund this redemption.
2005. 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 the 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 of SPC 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 an unsecured $50 senior note of the
Company (maturing in 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 matured 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.
Dividends. Dividends paid to shareholders totaled $742 million, $702 million and $628 million in
2007, 2006 and 2005, respectively. On February 6, 2008, the Company’s board of directors declared a
quarterly dividend of $0.29 per share, payable March 31, 2008 to shareholders of record on March 10,
2008. 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 Company’s financial position, earnings, capital requirements of the Company’s operating
subsidiaries, legal requirements, regulatory constraints and other factors as the board of directors
deems relevant. Dividends would be paid by the Company only if declared by its board of directors out
of funds legally available, subject to any other restrictions that may be applicable to the Company.
Share Repurchases. In May 2006, the Company’s board of directors authorized the repurchase of
up to $2 billion of shares of the Company’s common stock. In January 2007, the board of directors
authorized an additional $3 billion of share repurchase capacity. At December 31, 2007, the remaining
repurchase capacity under these authorizations was $932 million. In January 2008, the board of
109