Travelers 2009 Annual Report Download - page 131

Financing Activities
Net cash flows used in financing activities totaled $3.44 billion, $2.87 billion and $2.95 billion in
2009, 2008 and 2007, respectively. The 2009 and 2008 totals primarily reflected common share
repurchases, dividends to shareholders and the repayment of debt, partially offset by the proceeds from
employee stock option exercises and the issuance of debt. The 2007 total primarily reflected common
share repurchases, the early redemption of debt, the repayment of maturing debt and dividends to
shareholders, partially offset by the issuance of debt and proceeds from employee stock option
exercises.
Debt Transactions.
2009. On June 2, 2009, the Company issued $500 million aggregate principal amount of 5.90%
senior notes that will mature on June 2, 2019. The net proceeds of the issuance, after original issuance
discount and the deduction of underwriting expenses and commissions and other expenses, totaled
approximately $494 million. Interest on the senior notes is payable semi-annually in arrears on June 2
and December 2 of each year. The senior notes are redeemable in whole at any time or in part from
time to time, at the Company’s option, at a redemption price equal to the greater of (a) 100% of the
principal amount of senior notes to be redeemed or (b) the sum of the present values of the remaining
scheduled payments of principal and interest on the senior notes to be redeemed (exclusive of interest
accrued to the date of redemption) discounted to the date of redemption on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the then current Treasury rate (as
defined) plus 35 basis points for the senior notes.
On March 3, 2009, the Company’s zero coupon convertible notes with an effective yield of 4.17%
and a remaining principal balance of $141 million matured and were fully paid.
2008. On March 15, 2008, the Company’s $400 million, 3.75% senior notes matured and were
fully paid. On May 13, 2008, the Company issued $500 million aggregate principal amount of 5.80%
senior notes that will mature on May 15, 2018. The net proceeds of the issuance, after original issuance
discount and the deduction of underwriting expenses and commissions and other expenses, totaled
approximately $496 million. Interest on the senior notes is payable semi-annually on May 15 and
November 15. The senior notes are redeemable in whole at any time or in part from time to time, at
the Company’s option, at a redemption price equal to the greater of (a) 100% of the principal amount
of senior notes to be redeemed or (b) the sum of the present values of the remaining scheduled
payments of principal and interest on the senior notes to be redeemed (exclusive of interest accrued to
the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the then current Treasury rate plus 30 basis points
for the senior notes.
On December 15, 2008, two medium-term notes with a cumulative par value of $149 million, each
bearing an interest rate of 6.38%, matured and were fully paid.
2007. In January 2007, the Company redeemed $81 million of 8.47% subordinated debentures
originally issued in 1997 and due January 10, 2027. The debentures were redeemable by the Company
on or after January 10, 2007. In January 1997, USF&G Capital II, a business trust, issued $100 million
of capital securities, the proceeds of which, along with $3 million in capital provided by the Company,
were used to purchase the subordinated debentures issued by USF&G Corporation and subsequently
assumed by the Company after the merger of The St. Paul Companies Inc. (SPC) and Travelers
Property Casualty Corp. (TPC). During the period prior to redemption, the Company had repurchased
and retired $22 million of the debentures in open market transactions. Upon the Company’s
redemption of the remaining $81 million of subordinated debentures in January 2007, USF&G Capital
II in turn used the proceeds to redeem its remaining capital securities outstanding. USF&G Capital II
was then liquidated, and the Company received a $3 million distribution of capital. The Company
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