Travelers 2012 Annual Report Download - page 227

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY (Continued)
Preferred Stock
The Company’s preferred shareholders’ equity at December 31, 2010 represented the par value of
preferred shares outstanding related to a legacy Stock Ownership Plan (SOP) Trust which was
subsequently merged into The Travelers 401(k) Savings Plan (the Savings Plan). The SOP Trust could
at any time convert any or all of the preferred shares into shares of the Company’s common stock at a
rate of eight shares of common stock for each preferred share. In May 2011, the Company’s board of
directors authorized the redemption of the Company’s preferred stock held by the Savings Plan and
gave notice of that redemption to the appropriate fiduciaries of the Savings Plan. Following a fiduciary
review, the Savings Plan exercised its right to convert each preferred share into eight shares of the
Company’s common stock. As a result, all preferred shares outstanding on June 7, 2011 (190,083
shares) were converted into a total of 1.52 million shares of the Company’s common stock.
Dividend Availability
The Company’s U.S. insurance subsidiaries, domiciled principally in the state of Connecticut, are
subject to various regulatory restrictions that limit the maximum amount of dividends available to be
paid by each insurance subsidiary to its respective parent company without prior approval of insurance
regulatory authorities. A maximum of $2.05 billion is available by the end of 2013 for such dividends
without prior approval of the Connecticut Insurance Department. The Company may choose to
accelerate the timing within 2013 and/or increase the amount of dividends from its insurance
subsidiaries in 2013, which could result in certain dividends being subject to approval by the
Connecticut Insurance Department.
The holding company is not dependent on dividends or other forms of repatriation from its foreign
operations to support its liquidity needs. The undistributed earnings of the Company’s foreign
operations are not material and are intended to be permanently reinvested in those operations.
The holding company received $1.96 billion of dividends in 2012, all of which was received from its
U.S. insurance subsidiaries.
Statutory Net Income and Policyholder Surplus
Statutory net income of the Company’s domestic and international insurance subsidiaries was
$2.84 billion, $1.50 billion and $3.69 billion for the years ended December 31, 2012, 2011 and 2010,
respectively. Policyholder surplus of the Company’s domestic and international insurance subsidiaries
was $20.05 billion and $19.17 billion at December 31, 2012 and 2011, respectively.
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