Travelers 2007 Annual Report Download - page 240

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
the Sherman Act claims on August 31, 2007 and the RICO claims on September 28, 2007, both with
prejudice, and declined to exercise supplemental jurisdiction over the state law claims. The plaintiffs
are appealing the district court’s decisions to the U.S. Court of Appeals for the Third Circuit.
Additional individual actions have been brought in state and federal courts against the Company
involving allegations similar to those in In re Insurance Brokerage Antitrust Litigation, and further actions
may be brought. The Company believes that all of these lawsuits have no merit and intends to defend
vigorously.
In addition to those described above, the Company is involved in numerous lawsuits, not involving
asbestos and environmental claims, arising mostly in the ordinary course of business operations either
as a liability insurer defending third-party claims brought against policyholders, or as an insurer
defending claims brought against it relating to coverage or the Company’s business practices. While the
ultimate resolution of these legal proceedings could be material to the Company’s results of operations
in a future period, in the opinion of the Company’s management, none would likely have a material
adverse effect on the Company’s financial position or liquidity.
The Company previously reported that it sought guidance from the Division of Corporation
Finance of the SEC with respect to the appropriate purchase accounting treatment for certain second
quarter 2004 adjustments totaling $1.63 billion. See ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Other Uncertainties.’’ After discussion with the staff of
the Division of Corporate Finance and the Company’s independent auditors, the Company continues to
believe that its accounting treatment for these adjustments is appropriate. On May 3, 2006, the
Company received a letter from the Division of Enforcement of the SEC advising the Company that it
is conducting an inquiry relating to the second quarter 2004 adjustments and the April 1, 2004 merger
of SPC and TPC. The Company is cooperating with the requests for information.
Other Commitments and Guarantees
Commitments
Investment Commitments—The Company has unfunded commitments to partnerships, limited
liability companies, joint ventures and certain private equity investments in which it invests. These
commitments were $1.60 billion and $1.39 billion at December 31, 2007 and 2006, respectively.
SPC’s Sale of Minet—In May 1997, SPC completed the sale of its insurance brokerage operation,
Minet, to Aon Corporation. SPC agreed to indemnify Aon against any future claims for professional
liability and other specified events that occurred or existed prior to the sale. The Company assumed
obligations related to this indemnification upon consummation of the merger. The Company monitors
its exposure under these claims on a regular basis. The Company believes reserves for reported claims
are adequate, but it does not have information on unreported claims to estimate a range of additional
liability.
From 1997 to 2004, SPC purchased insurance to cover a portion of its exposure to such claims.
Under the sale agreement, SPC also committed to acquire a minimum level of reinsurance brokerage
services from Aon through 2012. That commitment requires the Company to make a contractual
payment to Aon to the extent such minimum level of service is not acquired. The maximum annual
amount payable to Aon for such services and any such contractual payment related to that commitment
is $20 million.
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