Travelers 2008 Annual Report Download - page 129

In 2007, medium-term notes with a cumulative par value of $72 million and interest rates ranging
from 6.85% to 7.37% matured and were fully paid.
2006. In June 2006, the Company issued $400 million aggregate principal amount of 6.25% senior
unsecured notes due June 20, 2016 and $400 million aggregate principal amount of 6.75% senior
unsecured notes due June 20, 2036. The notes were issued at a discount, resulting in effective interest
rates of 6.30% and 6.86%, respectively. Net proceeds from the issuances (after original issue discount
and expenses) totaled approximately $786 million, which the Company applied to the redemption of
approximately $593 million of 7.60% subordinated debentures (described in more detail below),
$150 million of 6.75% senior notes that matured on November 15, 2006 and $56 million of
medium-term notes that matured in the second half of the year.
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.
The Company’s debt-to-capital ratio of 19.5% at December 31, 2008 was slightly below its 20%
targeted level.
The amounts of debt obligations, other than commercial paper, that becomes due in 2009, 2010
and 2011, are $143 million, $273 million and $11 million, respectively.
Dividends. Dividends paid to shareholders totaled $715 million, $742 million and $702 million in
2008, 2007 and 2006, respectively. On February 4, 2009, the Company’s board of directors declared a
quarterly dividend of $0.30 per share, payable March 31, 2009 to shareholders of record on March 10,
2009. 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 January 2008, the board of directors authorized an additional $5 billion for
the repurchase of the Company’s common shares. Under the authorization, repurchases may be made
from time to time in the open market, pursuant to preset trading plans meeting the requirements of
Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The
authorization 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. Share repurchase levels in prior
periods may not be indicative of future repurchase activity. Notwithstanding the Company’s financial
strength and liquidity, in light of the recent disruption in the financial markets, the Company reduced
its level of share repurchases in the fourth quarter of 2008 compared to prior quarters and will likely
reduce its share repurchases in 2009 as compared to the level of repurchases in preceding years,
although the Company’s plans may change depending on market conditions, potential investment
opportunities, the Company’s share price performance or other factors. This potential reduction in
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