Shareholders' Equity and Dividend Availability

12 Months Ended

Dec. 31, 2019

Stockholders' Equity Note [Abstract]

Shareholders' Equity and Dividend Availability

SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY

Authorized Shares

The number of authorized shares of the Company is 1.755 billion, consisting of five million shares of preferred stock, 1.745 billion shares of voting common stock and five million undesignated shares.  The Company’s Articles of Incorporation authorize the Board of Directors to establish, from the undesignated shares, one or more classes and series of shares, and to further designate the type of shares and terms thereof.

Preferred Stock

The Company’s Articles of Incorporation provide authority to issue up to five million shares of preferred stock.

Common Stock

The Company is governed by the Minnesota Business Corporation Act. All authorized shares of voting common stock have no par value.  Shares of common stock reacquired are considered authorized and unissued shares.

Restricted Stock

At December 31, 2019, 41,997 shares of restricted stock issued by the Company in August 2017 to certain employees of an acquired business remained outstanding and unvested. The restricted shares vest in August 2020 and are subject to service conditions. As a result, the value of the shares is recognized over the vesting period and is included with the share-based compensation cost of awards that are issued under the Company’s share-based incentive compensation plan (see note 13). Recipients generally have all the rights of a shareholder of the Company including the right to vote the applicable shares of common stock and to receive dividends on such shares, if and as declared by the Board of Directors. The restricted shares are held under the Company’s control with the Company’s transfer agent and will be released upon vesting.

Treasury Stock

The Company’s Board of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise.  The authorizations do not have a stated expiration date.  The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels commensurate with the Company’s desired ratings from independent rating agencies, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions and other factors.  In April 2017, the Board of Directors approved a share repurchase authorization that added an additional $5.0 billion of repurchase capacity. The following table summarizes repurchase activity in 2019 and remaining repurchase capacity at December 31, 2019.

(in millions, except per share amounts) Quarterly Period Ending	Number of shares repurchased	Cost of shares repurchased		Average price paid per share		Remaining capacity under share repurchase authorization
March 31, 2019	2.9	$	375	$	129.42	$	2,911
June 30, 2019	2.6	375		145.87		2,536
September 30, 2019	2.5	375		147.23		2,161
December 31, 2019	2.8	375		134.33		1,786
Total	10.8	$	1,500	138.80		1,786

The Company’s Amended and Restated 2004 Stock Incentive Plan and the Amended and Restated 2014 Stock Incentive Plan provide settlement alternatives to employees in which the Company retains shares to cover payroll withholding taxes in connection with the vesting of restricted stock unit awards and performance share awards, and shares used by employees to cover the price of certain stock options that were exercised.  During the years ended December 31, 2019 and 2018, the Company acquired $48 million and $51 million, respectively, of its common stock under these plans.

Common shares acquired are reported as treasury stock in the consolidated balance sheet.

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 $2.79 billion is available by the end of 2020 for such dividends to the holding company, TRV, without prior approval of the Connecticut Insurance Department.  The Company may choose to accelerate the timing within 2020 and/or increase the amount of dividends from its insurance subsidiaries in 2020, which could result in certain dividends being subject to approval by the Connecticut Insurance Department.

In addition to the regulatory restrictions on the availability of dividends that can be paid by the Company’s U.S. insurance subsidiaries, the maximum amount of dividends that may be paid to the Company’s shareholders is limited, to a lesser degree, by certain covenants contained in its line of credit agreement with a syndicate of financial institutions that require the Company to maintain a minimum consolidated net worth as described in note 8.

TRV 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 intended to be permanently reinvested in those operations, and such earnings were not material to the Company's financial position or liquidity at December 31, 2019.

TRV and its two non-insurance holding company subsidiaries received dividends of $2.50 billion, $2.30 billion and $2.33 billion from their U.S. insurance subsidiaries in 2019, 2018 and 2017, respectively.

For the years ended December 31, 2019, 2018 and 2017, TRV declared cash dividends per common share of $3.23, $3.03 and $2.83, respectively, and paid cash dividends of $844 million, $814 million and $785 million, respectively.

Statutory Net Income and Statutory Capital and Surplus

Statutory net income of the Company’s domestic and international insurance subsidiaries was $2.74 billion, $2.61 billion and $2.30 billion for the years ended December 31, 2019, 2018 and 2017, respectively. Statutory capital and surplus of the Company’s domestic and international insurance subsidiaries was $21.33 billion and $20.77 billion at December 31, 2019 and 2018, respectively.