Travelers 2010 Annual Report Download - page 275

THE TRAVELERS COMPANIES, INC.
(Parent Company Only)
NOTES TO THE CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1. OTHER REVENUES
In 2010, other revenues included $60 million of expenses related to the Company’s purchase and
retirement of $885 million of its $1.0 billion 6.25% fixed-to-floating rate junior subordinated
debentures.
2. GUARANTEES
The Travelers Companies, Inc. (TRV) is the named guarantor for various guarantees. These
guarantees include contingent obligations for guarantees related to letters of credit, subsidiary debt
obligations, issuance of debt securities, certain investments, and various indemnifications, including
those related to the sale of business entities. TRV 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, TRV 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, TRV 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 TRV and/or its subsidiaries following the
closing, and in certain cases obligations arising from undisclosed liabilities, adverse reserve
development, imposition of additional taxes due to either a change in the tax law or an adverse
interpretation of the tax law, or certain named litigation. Such indemnification provisions generally
survive for periods ranging from 2 years following the applicable closing date to the expiration of the
relevant statutes of limitations, although, in some cases, there may be other agreed upon term
limitations or no term limitations. Certain of these contingent obligations are subject to deductibles
which have to be incurred by the obligee before TRV is obligated to make payments. The maximum
amount of TRV’s contingent obligation was $208 million at December 31, 2010, of which $9 million was
recognized on the balance sheet at that date.
TRV has fully and unconditionally guaranteed certain debt obligations of TPC, its wholly-owned
subsidiary, which totaled $1.20 billion at December 31, 2010. Prior to the merger of TPC and SPC in
2004, TPC fully and unconditionally guaranteed the payment of all principal, premiums, if any, and
interest on certain debt obligations of its wholly-owned subsidiary TIGHI. TRV has fully and
unconditionally guaranteed such guarantee obligations of TPC. See note 17 to the Company’s
consolidated financial statements.
On November 3, 2010, an indirect subsidiary of TRV entered into a definitive agreement to
commence a joint venture with J. Malucelli Participa¸c˜ oes em Seguros e Resseguros S.A, a Brazilian
company (‘‘J. Malucelli’’), through the acquisition of approximately 43% of J. Malucelli’s common
stock. TRV unconditionally guaranteed to J. Malucelli the full and complete payment by the indirect
subsidiary on or prior to the closing date. The maximum amount of TRV’s contingent obligation is
R$63 million Brazilian Reais, which was equivalent to $38 million in U.S. dollars at December 31, 2010.
See note 15 to the Company’s consolidated financial statements for further information regarding this
transaction.
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