Travelers 2007 Annual Report Download - page 123

Capital Resources
Capital resources reflect the overall financial strength of the Company and its ability to borrow
funds at competitive rates and raise new capital to meet its needs. The following table summarizes the
components of the Company’s capital structure at December 31, 2007 and 2006.
(at December 31, in millions) 2007 2006
Debt:
Short-term ............................................. $ 649 $ 1,114
Long-term ............................................. 5,577 4,588
Net unamortized fair value adjustments and debt issuance costs ...... 16 58
Total debt ............................................ 6,242 5,760
Preferred shareholders’ equity ................................ 112 129
Common shareholders’ equity:
Common stock and retained earnings, less treasury stock ........... 25,834 24,554
Accumulated other changes in equity from nonowner sources ........ 670 452
Total shareholders’ equity ................................ 26,616 25,135
Total capitalization .................................... $32,858 $30,895
The increase in shareholders’ equity in 2007 reflected the Company’s net income for the year,
partially offset by the impact of common share repurchases and dividends to shareholders.
Line of Credit Agreement. The Company maintains an $800 million commercial paper program
with back-up liquidity consisting of a bank credit agreement. On June 10, 2005, the Company entered
into a $1.0 billion, five-year revolving credit agreement with a syndicate of financial institutions.
Pursuant to covenants in the credit agreement, the Company must maintain an excess of consolidated
net worth over goodwill and other intangible assets of not less than $10 billion at all times. The
Company must also maintain a ratio of total consolidated debt to the sum of total consolidated debt
plus consolidated net worth of not greater than 0.40 to 1.00. In addition, the credit agreement contains
other customary restrictive covenants as well as certain customary events of default, including with
respect to a change in control. At December 31, 2007, the Company was in compliance with these
covenants and all other covenants related to its respective debt instruments outstanding. Pursuant to
the terms of the credit agreement, the Company has an option to increase the credit available under
the facility, no more than once a year, up to a maximum facility amount of $1.5 billion, subject to the
satisfaction of a ratings requirement and certain other conditions. There was no amount outstanding
under the credit agreement as of December 31, 2007.
Shelf Registration. In December 2005, the Company filed with the Securities and Exchange
Commission a shelf registration statement for the potential offering and sale of securities. The
Company may offer these securities from time to time at prices and on other terms to be determined
at the time of offering. During 2007 and 2006, the Company issued $2.50 billion and $800 million,
respectively, of debt (as described above) under this shelf registration statement.
Share Repurchase Capacity. At December 31, 2007, the Company had $932 million of capacity
remaining under its $5 billion share repurchase program previously approved by the board of directors.
In January 2008, the Company’s board of directors authorized a $5 billion increase to the program,
subject to the factors listed in the ‘‘Share Repurchases’’ section above.
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