Travelers 2008 Annual Report Download - page 131

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, 2008, the
Company was in compliance with these covenants and all other covenants related to its outstanding
debt instruments. There was no amount outstanding under the credit agreement as of December 31,
2008.
Shelf Registration. In December 2008, the Company filed with the Securities and Exchange
Commission a universal shelf registration statement for the potential offering and sale of securities to
replace its expiring universal shelf registration statement. 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 2008 and
2007, the Company issued $500 million and $2.50 billion, respectively, of debt (as described above)
under the prior shelf registration statement.
Share Repurchase Authorization. At December 31, 2008, the Company had $3.81 billion of
capacity remaining under its share repurchase authorization approved by the board of directors.
Contractual Obligations
The following table summarizes, as of December 31, 2008, the Company’s future payments under
contractual obligations and estimated claims and claims related payments. The table excludes
short-term obligations and includes only liabilities at December 31, 2008 that are expected to be settled
in cash.
The table below includes the amount and estimated future timing of claims and claim related
payments. The amounts do not represent the exact liability, but instead represent estimates, generally
utilizing actuarial projections techniques, at a given accounting date. These estimates include
expectations of what the ultimate settlement and administration of claims will cost based on the
Company’s assessment of facts and circumstances then known, review of historical settlement patterns,
estimates of trends in claims severity, frequency, legal theories of liability and other factors. Variables in
the reserve estimation process can be affected by both internal and external events, such as changes in
claims handling procedures, economic inflation, legal trends and legislative changes. Many of these
items are not directly quantifiable, particularly on a prospective basis. Additionally, there may be
significant reporting lags between the occurrence of the policyholder event and the time it is actually
reported to the insurer. The future cash flows related to the items contained in the table below
required estimation of both amount (including severity considerations) and timing. Amount and timing
are frequently estimated separately. An estimation of both amount and timing of future cash flows
related to claims and claim related payments is generally reliable only in the aggregate with some
unavoidable estimation uncertainty.
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