Travelers 2008 Annual Report Download - page 250

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
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 ‘‘Item 1B—Unresolved Staff Comments.’’ 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 (the
Division) 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 cooperated with the
Division’s 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 $1.56 billion and $1.60 billion at December 31, 2008 and 2007, 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.
Guarantees
The Company has contingent obligations for guarantees related to letters of credit, issuance of
debt securities, certain investments and various indemnifications, including those related to the sale of
business entities. The Company also provides standard indemnifications to service providers in the
normal course of business. The indemnification clauses are often standard contractual terms. Certain of
these guarantees and indemnifications have no stated or notional amounts or limitation to the
maximum potential future payments and, accordingly, the Company is unable to develop an estimate of
the maximum potential payments for such arrangements.
In the ordinary course of selling business entities to third parties, the Company has agreed to
indemnify purchasers for losses arising out of breaches of representations and warranties with respect
to the business entities being sold, covenants and obligations of the Company and/or its subsidiaries
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