<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
----
For the quarterly period ended September 30, 1995
------------------
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR
---- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission File Number 0-3021
--------
THE ST. PAUL COMPANIES, INC.
- ----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Minnesota 41-0518860
------------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
385 Washington St., Saint Paul, MN 55102
------------------------------------ ------------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (612) 221-7911
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares of the Registrant's Common Stock, without par value,
outstanding at November 10, 1995, was 84,531,679.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income (Unaudited), Three
and Nine Months Ended September 30, 1995 and 1994 3
Consolidated Balance Sheets, September 30, 1995
(Unaudited) and December 31, 1994 4
Consolidated Statements of Shareholders' Equity,
Nine Months Ended September 30, 1995 (Unaudited)
and Twelve Months Ended December 31, 1994 6
Consolidated Statements of Cash Flows (Unaudited),
Nine Months Ended September 30, 1995 and 1994 7
Notes to Consolidated Financial Statements (Unaudited) 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
PART II. OTHER INFORMATION
Item 1 through Item 6 24
Signatures 25
EXHIBIT INDEX 26
<PAGE>
PART I FINANCIAL INFORMATION
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Unaudited
(In thousands)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Premiums earned $993,317 862,823 2,931,214 2,554,182
Net investment income 193,922 175,166 570,487 510,824
Insurance brokerage fees
and commissions 83,549 85,004 227,662 225,752
Investment banking-asset
management 55,091 54,639 162,969 161,438
Realized investment gains 25,736 14,018 38,060 50,698
Other 13,251 7,418 32,661 25,098
--------- --------- --------- ---------
Total revenues 1,364,866 1,199,068 3,963,053 3,527,992
--------- --------- --------- ---------
Expenses:
Insurance losses and loss
adjustment expenses 714,302 616,458 2,118,131 1,876,092
Policy acquisition expenses 215,863 193,101 642,785 577,920
Operating and administrative 256,596 224,308 732,632 667,582
--------- --------- --------- ---------
Total expenses 1,186,761 1,033,867 3,493,548 3,121,594
--------- --------- --------- ---------
Income before income taxes 178,105 165,201 469,505 406,398
Income tax expense (benefit):
Federal current 53,825 37,280 145,085 100,130
Other (18,119) (1,887) (41,542) (15,739)
--------- --------- --------- ---------
Total income tax expense 35,706 35,393 103,543 84,391
--------- --------- --------- ---------
Net income $142,399 129,808 365,962 322,007
========= ========= ========= =========
Net income per common share:
Primary $1.64 1.51 4.21 3.72
========= ========= ========= =========
Fully diluted $1.54 1.45 4.00 3.59
========= ========= ========= =========
Dividends declared on
common stock $0.40 0.375 1.20 1.125
========= ========= ========= =========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
September 30, December 31,
ASSETS 1995 1994
- ------ ---------- ----------
(Unaudited)
Investments:
Fixed maturities, at estimated market value $9,916,552 8,828,684
Equities, at estimated market value 732,991 531,042
Real estate, at cost less accumulated
depreciation of $69,270 (1994; $60,234) 614,652 528,144
Venture capital, at estimated market value 354,156 330,032
Other investments 50,828 46,539
Short-term investments, at cost 956,543 898,081
---------- ----------
Total investments 12,625,722 11,162,522
Cash 28,662 46,664
Investment banking inventory securities 107,112 148,031
Reinsurance recoverables:
Unpaid losses 1,517,660 1,533,250
Paid losses 84,176 88,900
Receivables:
Underwriting premiums 1,305,224 1,107,788
Insurance brokerage activities 636,291 891,823
Interest and dividends 192,431 182,938
Other 103,202 88,657
Deferred policy acquisition expenses 364,313 324,358
Ceded unearned premiums 224,967 255,687
Deferred income taxes 601,308 790,508
Office properties and equipment, at cost
less accumulated depreciation
of $263,569 (1994: $243,945) 474,856 477,570
Goodwill 286,093 279,308
Other assets 207,933 117,816
---------- ----------
Total assets $18,759,950 17,495,820
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
(In thousands)
September 30, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
- ------------------------------------ ------------ -----------
(Unaudited)
Liabilities:
Insurance reserves:
Losses and loss adjustment expenses $9,817,471 9,423,429
Unearned premiums 2,325,602 2,109,170
---------- ----------
Total insurance reserves 12,143,073 11,532,599
Debt 620,275 622,624
Payables:
Insurance brokerage activities 911,423 1,191,089
Income taxes 177,080 183,659
Reinsurance premiums 146,505 155,833
Accrued expenses and other 602,360 600,211
Other liabilities 456,680 472,336
---------- ----------
Total liabilities 15,057,396 14,758,351
---------- ----------
Company-obligated mandatorily redeemable
preferred securities of St. Paul Capital L.L.C. 207,000 -
---------- ----------
Shareholders' equity:
Series B convertible preferred stock;
1,450 shares authorized; 1,003 shares
outstanding (1,012 shares in 1994) 144,749 146,102
Guaranteed obligation - PSOP (133,293) (141,567)
---------- ----------
Total preferred equity 11,456 4,535
---------- ----------
Common shareholders' equity:
Common stock, 240,000 shares authorized; 84,643
shares outstanding (84,202 shares in 1994) 460,145 445,222
Retained earnings 2,620,215 2,362,286
Guaranteed obligation - ESOP (35,072) (44,410)
Unrealized appreciation of investments 468,903 13,948
Unrealized loss on foreign currency translation (30,093) (44,112)
---------- ----------
Total common shareholders' equity 3,484,098 2,732,934
---------- ----------
Total preferred and common shareholders'
equity 3,495,554 2,737,469
---------- ----------
Total liabilities, redeemable
preferred securities and
shareholders' equity $18,759,950 17,495,820
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(In thousands)
Nine Twelve
Months Ended Months Ended
September 30 December 31
------------ ------------
1995 1994
---- ----
(Unaudited)
Series B convertible preferred stock:
Beginning of period $146,102 147,608
Change during the period (1,353) (1,506)
---------- ----------
End of period 144,749 146,102
---------- ----------
Guaranteed obligation - PSOP:
Beginning of period (141,567) (148,929)
Change during the period 8,274 7,362
---------- ----------
End of period (133,293) (141,567)
---------- ----------
Common stock:
Beginning of period 445,222 438,559
Stock issued under stock option and
other incentive plans 14,978 11,130
Reacquired common stock (55) (4,467)
---------- ----------
End of period 460,145 445,222
---------- ----------
Retained earnings:
Beginning of period 2,362,286 2,082,832
Net income 365,962 442,828
Dividends declared on common stock (100,622) (124,921)
Dividends declared on preferred
stock, net of taxes (6,444) (8,448)
Reacquired common shares (967) (30,005)
---------- ----------
End of period 2,620,215 2,362,286
---------- ----------
Guaranteed obligation - ESOP:
Beginning of period (44,410) (56,005)
Principal payments 9,338 11,595
---------- ----------
End of period (35,072) (44,410)
---------- ----------
Unrealized appreciation of investments,
net of taxes:
Beginning of period 13,948 588,844
Change during the period 454,955 (574,896)
---------- ----------
End of period 468,903 13,948
---------- ----------
Unrealized loss on foreign currency
translation, net of taxes:
Beginning of period (44,112) (49,102)
Change during the period 14,019 4,990
---------- ----------
End of period (30,093) (44,112)
---------- ----------
Total preferred and common
shareholders' equity $3,495,554 2,737,469
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Nine Months Ended
September 30
-----------------------
1995 1994
------ ------
OPERATING ACTIVITIES
Underwriting:
Net income $383,742 330,974
Adjustments:
Change in net insurance reserves 625,146 409,372
Change in underwriting premiums receivable (208,381) (165,947)
Provision for deferred taxes (47,024) (21,235)
Realized gains (32,355) (45,718)
Other (96,758) 116,727
---------- ----------
Total underwriting 624,370 624,173
---------- ----------
Insurance brokerage:
Net loss (22,172) (19,384)
Adjustments:
Change in premium balances (28,041) 20,834
Change in accounts payable and
accrued expenses (24,095) (25,754)
Depreciation and goodwill amortization 20,438 15,484
Other 19,225 32,279
---------- ----------
Total insurance brokerage (34,645) 23,459
---------- ----------
Investment banking-asset management:
Net income 37,997 33,509
Adjustments:
Change in inventory securities 40,919 246,017
Change in short-term investments (104,401) (215,990)
Change in open security transactions (2,810) 10,668
Change in short-term borrowings - (80,383)
Other 52,353 47,748
---------- ----------
Total investment banking-asset management 24,058 41,569
---------- ----------
Parent company and consolidating eliminations:
Net loss (33,605) (23,092)
Realized gains (5,705) (4,980)
Adjustments 42,016 724
---------- ----------
Total parent company and
consolidating eliminations 2,706 (27,348)
---------- ----------
Net cash provided by operating activities 616,489 661,853
---------- ----------
INVESTING ACTIVITIES
Purchase of investments (2,015,989) (1,531,623)
Sales and maturities of investments 1,336,941 1,168,608
Change in short-term investments 56,399 (133,098)
Change in open security transactions (28,876) (2,563)
Net purchases of office properties and equipment (37,322) (37,852)
Other (50,628) (12,872)
---------- ----------
Net cash used by investing activities (739,475) (549,400)
---------- ----------
FINANCING ACTIVITIES
Dividends paid on common and preferred stock (107,897) (101,576)
Proceeds from issuance of company-obligated
mandatorily redeemable preferred securities
of St. Paul Capital L.L.C. 207,000 -
Proceeds from issuance of debt 192,900 73,718
Reacquired common shares (497) (34,150)
Repayment of debt (185,844) (20,350)
Other (818) (16,898)
---------- ----------
Net cash provided by (used in) financing
activities 104,844 (99,256)
---------- ----------
Effect of exchange rate changes on cash 140 300
---------- ----------
Increase (decrease) in cash (18,002) 13,497
Cash at beginning of period 46,664 25,420
---------- ----------
Cash at end of period $28,662 38,917
======= =======
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited
September 30, 1995
Note 1 Basis of Presentation
- -----------------------------
The consolidated financial statements include The St. Paul Companies,
Inc. and subsidiaries, and have been prepared in conformity with
generally accepted accounting principles.
These financial statements rely, in part, on estimates. In the opinion
of management, all necessary adjustments have been reflected for a fair
presentation of the results of operations, financial position and cash
flows in the accompanying unaudited consolidated financial statements.
The results for the period are not necessarily indicative of the results
to be expected for the entire year.
Reference should be made to the "Notes to Consolidated Financial
Statements" on pages 45 to 60 of the Registrant's annual report to
shareholders for the year ended December 31, 1994. The amounts in those
notes have not changed except as a result of transactions in the
ordinary course of business or as otherwise disclosed in these notes.
Some figures in the 1994 consolidated financial statements have been
reclassified to conform with the 1995 presentation. These
reclassifications had no effect on net income or common shareholders'
equity, as previously reported.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 2 Earnings per Share
- --------------------------
Earnings per common share (EPS) amounts were calculated by dividing net
income, as adjusted, by the adjusted average common shares outstanding.
Three Months Ended Nine Months Ended
September 30 September 30
---------------- ----------------
1995 1994 1995 1994
------ ------ ------ ------
(In thousands)
PRIMARY
Net income, as reported $142,399 129,808 365,962 322,007
PSOP preferred dividends declared
(net of taxes) (2,159) (2,129) (6,444) (6,343)
-------- -------- -------- --------
Net income, as adjusted $140,240 127,679 359,518 315,664
======== ======== ======== ========
FULLY DILUTED
Net income, per financial statements $142,399 129,808 365,962 322,007
Additional PSOP expense (net of taxes)
due to assumed conversion of
preferred stock (867) (944) (2,612) (2,841)
Dividend on monthly income preferred
securities (net of taxes)(see Note 8) 2,018 - 3,027 -
-------- -------- -------- --------
Net income, as adjusted $143,550 128,864 366,377 319,166
======== ======== ======== ========
ADJUSTED AVERAGE COMMON SHARES
OUTSTANDING
Primary 85,566 84,696 85,373 84,816
======== ======== ======== ========
Fully diluted 93,414 88,696 91,570 88,872
======== ======== ======== ========
Adjusted average common shares outstanding include the common and common
equivalent shares outstanding for the period and, for fully diluted EPS,
common shares that would be issuable upon conversion of PSOP preferred
stock and the monthly income preferred securities issued by St. Paul
Capital L.L.C. (see Note 8).
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 3 Investments
- -------------------
Investment Activity. A summary of investment transactions is presented
below.
Nine Months Ended September 30
------------------------------
1995 1994
------ ------
(In thousands)
Purchases:
Fixed maturities $1,206,888 872,016
Equities 648,154 533,010
Real estate 108,589 64,666
Venture capital 46,938 52,817
Other investments 5,420 9,114
--------- ---------
Total purchases 2,015,989 1,531,623
--------- ---------
Proceeds from sales and maturities:
Fixed maturities:
Sales 240,652 195,665
Maturities and redemptions 433,306 396,995
Equities 588,601 542,960
Venture capital 64,260 19,744
Real estate 7,520 202
Other investments 2,602 13,042
--------- ---------
Total sales and maturities 1,336,941 1,168,608
--------- ---------
Net purchases $679,048 363,015
========= =========
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Change in Unrealized Appreciation. The increase (decrease) in
unrealized appreciation of investments recorded in common shareholders'
equity was as follows:
Nine Months Ended Twelve Months Ended
September 30, 1995 December 31, 1994
------------------ -------------------
(In thousands)
Fixed maturities $543,472 (847,554)
Equities 105,758 (30,106)
Venture capital 42,423 (4,064)
-------- -------
Total change in pretax
unrealized appreciation 691,653 (881,724)
Increase (decrease) in deferred
tax asset due to change
in unrealized appreciation (236,698) 306,828
-------- --------
Total change in unrealized
appreciation, net of taxes $454,955 (574,896)
======== ========
Restricted Funds. Premiums collected by the brokerage operations from
insureds, but not yet remitted to insurance carriers, are restricted as
to use by business practices. These restricted funds are included in
short-term investments and totaled $361 million at September 30, 1995,
and $385 million at December 31, 1994.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 4 Income Taxes
- --------------------
The components of the income tax provision are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
------ ------ ------ ------
(In thousands)
Federal current tax expense $53,825 37,280 145,085 100,130
Federal deferred tax benefit (19,190) (6,710) (50,207) (28,338)
------- ------- ------- -------
Total federal income tax
expense 34,635 30,570 94,878 71,792
Foreign income taxes (260) 3,479 4,875 8,940
State income taxes 1,331 1,344 3,790 3,659
------- ------- ------- -------
Total income tax expense $35,706 35,393 103,543 84,391
======= ======= ======= =======
Note 5 Contingent Liabilities
- ------------------------------
In the ordinary course of conducting business, the company and some of its
subsidiaries have been named as defendants in various lawsuits. Some of
these lawsuits attempt to establish liability under insurance contracts
issued by those companies. Plaintiffs in these lawsuits are asking for
money damages or to have the court direct the activities of our operations
in certain ways. Although it is possible that the settlement of a
contingency may be material to the company's results of operations and
liquidity in the period in which the settlement occurs, the company believes
that the total amounts that it and its subsidiaries will ultimately have to
pay in all of these lawsuits will have no material effect on the company's
overall financial position.
In some cases, plaintiffs seek to establish coverage for their liability
under environmental protection laws. See "Environmental Pollution and
Asbestos Claims" in Management's Discussion and Analysis for information on
these claims.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 6 Debt
- ------------
Debt consists of the following:
September 30, December 31,
1995 1994
------------------ -----------------
Book Fair Book Fair
Value Value Value Value
----- ----- ----- -----
(In thousands)
Medium-term notes $397,435 402,500 204,433 189,400
9 3/8% notes 99,979 103,500 99,971 102,800
Commercial paper 88,742 88,742 275,635 275,635
Guaranteed ESOP debt 27,779 29,100 36,112 37,200
Pound sterling loan notes 6,340 6,340 6,473 6,473
------- ------- ------- -------
Total debt $620,275 630,182 622,624 611,508
======= ======= ======= =======
Note 7 Reinsurance
- -------------------
The company's consolidated financial statements reflect the effects of
assumed and ceded reinsurance transactions. Assumed reinsurance refers to
the company's acceptance of certain insurance risks that other insurance
companies have underwritten. Ceded reinsurance involves transferring
certain insurance risks the company has underwritten to other insurance
companies who agree to share these risks. The primary purpose of ceded
reinsurance is to protect the company from potential losses in excess of the
amount it is prepared to accept.
The company expects those with whom it has ceded reinsurance to honor their
obligations. In the event these companies are unable to honor their
obligations, the company will pay these amounts. The company has
established allowances for possible nonpayment of amounts due to it.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The effect of assumed and ceded reinsurance on premiums written, premiums
earned and insurance losses and loss adjustment expenses is as follows:
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands)
Premiums written:
Direct $1,076,797 1,023,153 2,828,803 2,593,853
Assumed 224,685 173,122 750,207 610,598
Ceded (143,854) (187,459) (409,893) (469,945)
--------- --------- --------- ---------
Net premiums written $1,157,628 1,008,816 3,169,117 2,734,506
========= ========= ========= =========
Premiums earned:
Direct $928,783 852,270 2,715,737 2,447,687
Assumed 222,705 175,025 656,450 540,412
Ceded (158,171) (164,472) (440,973) (433,917)
--------- --------- --------- ---------
Net premiums earned $993,317 862,823 2,931,214 2,554,182
========= ========= ========= =========
Insurance losses and loss
adjustment expenses:
Direct $652,304 565,799 1,894,286 1,617,135
Assumed 181,845 121,689 557,391 481,222
Ceded (119,847) (71,030) (333,546) (222,265)
--------- --------- --------- ---------
Net insurance losses and
loss adjustment expenses $714,302 616,458 2,118,131 1,876,092
========= ========= ========= =========
Note 8 Company-obligated Mandatorily Redeemable Preferred
Securities of St. Paul Capital L.L.C.
- ----------------------------------------------------------
On May 16, 1995, the company issued, through St. Paul Capital
L.L.C.("SPCLLC"), 4,140,000 company-obligated mandatorily redeemable
preferred securities, generating proceeds of $207 million. These securities
are also known as convertible monthly income preferred securities (MIPS).
The MIPS pay a monthly dividend at an annual rate of 6% of the liquidation
preference of $50 per security. The company directly or indirectly owns all
of the common shares of SPCLLC, a special purpose limited liability company
which was formed for the sole purpose of issuing these MIPS. The company
has effectively fully and unconditionally guaranteed SPCLLC's obligations
under the MIPS. The MIPS are convertible into 0.8475 shares of the
company's common stock (equivalent to a conversion price of $59 per share).
The MIPS are redeemable after four years but may be redeemed by the company
before four years upon the occurrence of certain events.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
SPCLLC used the proceeds of the MIPS sale and capital contributions from the
company (together totaling $262 million) to purchase 6% convertible
subordinated debentures issued by the company. These debentures are due May
31, 2025 and interest is payable monthly. The debentures are the sole asset
of SPCLLC and are eliminated in the company's consolidated balance sheet.
Note 9 Reclassification of Net Convertible Preferred Stock
- -----------------------------------------------------------
In the third quarter of 1995, the company reclassified the net convertible
preferred stock balance associated with its Preferred Stock Ownership Plan
(PSOP) to permanent shareholders' equity. The company had previously
classified this item on its balance sheet between liabilities and common
shareholders' equity.
The PSOP trust, which holds the preferred shares, may at any time convert
any or all preferred shares into shares of the company's common stock at a
rate of four shares of common stock for each preferred share. The company's
board of directors had, at the inception of the PSOP, reserved a sufficient
number of its authorized common shares to satisfy the conversion of all
preferred shares issued to the PSOP trust. In addition, preferred shares
may be redeemed by the trust to meet employee distribution requirements.
The company, at its option, may make the payment required, upon redemption
of the preferred shares, in the form of cash or through the issuance of its
common shares. Until August 1995, the company's intent and practice had
been to pay for the preferred share redemptions with cash. Beginning in
September 1995, the company's intent and practice has been and will continue
to be to issue shares of the company's common stock to the trust to fulfill
the redemption obligations.
As a result of the company's intent to exclusively issue common shares to
the trust in the future, its net convertible preferred stock balance is
classified as permanent equity. The company reclassified the Dec. 31, 1994,
preferred stock balance to conform to the 1995 presentation.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
September 30, 1995
Consolidated Results
- --------------------
Third quarter consolidated pretax earnings of $178 million in 1995
increased 8% over comparable 1994 earnings of $165 million. Improved
results in the underwriting segment were the primary factor in the
growth in earnings over 1994. Insurance brokerage and investment
banking-asset management earnings also improved over the third quarter
of 1994. Year-to-date pretax income in 1995 of $470 million was
significantly higher than 1994 nine-month earnings of $406 million,
driven by reduced underwriting losses and an increase in investment
income in the underwriting segment.
Consolidated revenues of $1.36 billion in the third quarter of 1995
increased 14% over the comparable period of 1994, largely due to strong
growth in insurance premiums earned. Year-to-date revenues of $3.96
billion were more than $400 million higher than 1994's nine-month total.
Results by Segment
- ------------------
Results by industry segment were as follows (in millions):
Three Months EndedNine Months Ended
September 30 September 30
-----------------------------------
1995 1994 1995 1994
Pretax income (loss): ---- ---- ---- ----
Underwriting:
GAAP underwriting result $ (25) (20) (66) (117)
Net investment income 184 169 543 498
Realized investment gains 23 12 32 46
Other (11) (2) (33) (19)
---- ---- ---- ----
Total underwriting 171 159 476 408
Insurance brokerage 5 2 (14) (11)
Investment banking-asset management 22 19 61 54
Parent and other (20) (15) (53) (45)
---- ---- ---- ----
Income before income taxes 178 165 470 406
Income tax expense 36 35 104 84
---- ---- ---- ----
Net income $ 142 130 366 322
==== ==== ==== ====
Net income per common share $1.54 1.45 4.00 3.59
==== ==== ==== ====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Underwriting
- ------------
The underwriting segment's pretax earnings of $171 million in the
third quarter were 7% higher than earnings of $159 million in the
same quarter of 1994. Growth in investment income and realized
investment gains more than offset the catastrophe-driven
deterioration in underwriting results and an increase in other
expenses compared to 1994.
The following summarizes key financial results by underwriting operation:
Three Months Nine Months
% of 1995 Ended Sept. 30 Ended Sept. 30
Written --------------- ---------------
($ in Millions) Premiums 1995 1994 1995 1994
- --------------- -------- ---- ---- ---- ----
Specialized Commercial:
Written Premiums 31% $336 280 975 820
Underwriting Result $(26) (21) (73) (77)
Combined Ratio 107.4 107.2 106.6 108.0
Medical Services:
Written Premiums 16% $242 214 508 510
Underwriting Result $14 28 66 98
Combined Ratio 86.6 78.1 85.1 78.6
Personal Insurance:
Written Premiums 16% $178 168 508 481
Underwriting Result $(8) (8) (18) (25)
Combined Ratio 104.1 104.6 103.1 104.9
Commercial:
Written Premiums 14% $166 151 454 392
Underwriting Result $(5) (15) (20) (63)
Combined Ratio 101.1 108.3 103.8 115.9
---- ----- ----- ----- -----
Total St. Paul Fire and Marine:
Written Premiums 77% $922 813 2,445 2,203
Underwriting Result $(25) (16) (45) (67)
Combined Ratio 100.7 99.9 100.9 101.9
Reinsurance:
Written Premiums 18% $170 132 570 408
Underwriting Result $2 2 (2) (29)
Combined Ratio 99.9 99.2 99.4 107.9
International:
Written Premiums 5% $66 64 154 124
Underwriting Result $(2) (6) (19) (21)
Combined Ratio 98.8 106.9 112.6 115.6
---- ----- ----- ----- -----
Total:
Written Premiums 100% $1,158 1,009 3,169 2,735
GAAP Underwriting Result $(25) (20) (66) (117)
Statutory Combined Ratio:
Loss and Loss Expense Ratio 71.9 71.4 72.3 73.5
Underwriting Expense Ratio 28.5 28.5 29.0 29.9
----- ----- ----- -----
Combined Ratio 100.4 99.9 101.3 103.4
===== ===== ===== =====
Combined Ratio Including
Policyholders' Dividends 100.7 100.0 101.4 103.4
===== ===== ===== =====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
In the first quarter of 1995, the commercial underwriting operations of
the company's business center previously known as St. Paul Personal &
Business Insurance were transferred to the Commercial business center.
The company's Personal Insurance business center, as renamed, now
consists exclusively of personal insurance coverages for individuals.
Amounts for 1994 have been reclassified to conform to the 1995
presentation.
Third quarter written premiums of $1.16 billion increased 15% over
1994's third quarter total of $1.01 billion. All major reporting lines
of business experienced premium growth over 1994. Specialized
Commercial volume was $56 million higher than 1994, driven by new
business in the National Accounts, Financial Services and Ocean Marine
business centers. Premium volume for Medical Services increased $28
million over the third quarter of 1994, reflecting the transition to
annual policy terms for the remainder of its physicians and surgeons
book of business. Reinsurance premiums grew 29% over the same period of
1994, primarily due to approximately $29 million in incremental premiums
from the renewal of certain reinsurance business acquired from a
subsidiary of the CIGNA Corporation in 1994.
Year-to-date written premiums in 1995 of $3.17 billion were 16% higher
than the first nine months of 1994, primarily due to growth in
Reinsurance, Specialized Commercial and Commercial premiums.
The third quarter GAAP underwriting loss of $25 million was $5 million
worse than the same period of 1994. Several hurricanes contributed to
catastrophe losses of $28 million in the quarter, which offset
improvement in underlying loss experience in several lines of business.
Catastrophe losses in the same period of 1994 were $10 million. The
following business centers were factors in the change in third quarter
underwriting losses compared to 1994:
- Medical Services - $14 million worse than 1994 - The
magnitude of favorable prior year loss development has
diminished compared to 1994, resulting in a smaller
underwriting profit.
- Specialized Commercial - $5 million worse than 1994 -
Increased losses from the company's participation in
insurance pools and less favorable loss experience in the
National Accounts and Construction lines offset improvement
in several other Specialized Commercial business sectors.
- Commercial - $10 million better than 1994 - Improved loss
experience in the general liability sector drove the
decline in underwriting loss in 1995.
- International - $4 million better than 1994 - Favorable
loss experience on personal and commercial business in the
United Kingdom was the major factor in the improvement over
1994.
- Reinsurance - level with 1994 - Improvement in
noncatastrophe loss experience offset an $18 million
increase in catastrophe losses in 1995.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
The nine-month GAAP underwriting loss of $66 million was $51 million
better than the 1994 loss of $117 million. Underwriting results in the
Commercial line improved $43 million from 1994, due to improved results
from several types of commercial coverages. Reinsurance underwriting
losses were $27 million less than 1994, primarily due to improved
noncatastrophe loss experience. Losses from involuntary workers'
compensation coverages in several lines of business have also declined
in 1995. Medical Services' underwriting profit for the first nine
months of 1995 was $32 million less than the same period of 1994. While
still performing strongly, the extent of Medical Services' favorable
prior year loss development was not as great as in the first nine months
of 1994. The underwriting segment's total catastrophe losses of $99
million through the first nine months of 1995 were level with the same
period of 1994. The company estimates that it will incur approximately
$25 million to $30 million of pretax losses in the fourth quarter from
Hurricane Opal, which struck in October 1995.
The underwriting segment's pretax investment income for the third
quarter and nine months of 1995 was 9% higher than the same periods of
1994. Continued strong cash flows from operations in 1995 have resulted
in a net increase of $439 million in fixed-maturity investments since
the end of 1994. The weighted average pretax yield on the long-term
fixed maturities portfolio was 7.3% on Sept. 30, 1995, virtually level
with the 7.4% yield at the same time in 1994. The majority of
investment purchases in 1995 have consisted of taxable fixed maturities;
however, tax-exempt securities have dominated investment purchases in
recent months due to growing yields on those securities and changes in
the company's tax position.
Environmental Pollution and Asbestos Claims
- -------------------------------------------
The company's underwriting operations continue to receive claims under
policies written many years ago alleging injuries from environmental
pollution or alleging covered property damages for the cost to clean up
polluted sites. The company has also received asbestos claims arising
out of product liability coverages under general liability policies.
Significant legal issues, primarily pertaining to issues of coverage,
exist with regard to the company's alleged liability for both pollution
and asbestos claims. In the company's opinion, court decisions in
certain jurisdictions have tended to expand insurance coverage beyond
the intent of the original policies.
The company's ultimate liability for pollution claims is extremely
difficult to estimate. Insured parties have submitted claims for losses
not covered in the insurance policy, and the ultimate resolution of
these claims may be subject to lengthy litigation, making it difficult
to estimate the company's potential liability. In addition, variables,
such as the length of time necessary to clean up a polluted site, and
controversies surrounding the identity of the responsible party and the
degree of remediation deemed necessary, make it difficult to estimate
the total cost of a pollution claim. Estimating the ultimate liability
for asbestos claims is equally difficult. The primary factors
influencing the estimate of the total cost of these claims are case law
and a history of prior claim development, both of which are still
developing.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Because of the significant uncertainties associated with pollution and
asbestos claims, and the likelihood that they will not be resolved in
the near future, the company is unable to estimate its ultimate exposure
to these claims and cannot quantify a range of reasonably possible
losses in addition to recorded reserves at this time. However, the
company is continually evaluating its exposure to these claims in an
effort to quantify such a range.
The company's results of operations in future periods may be materially
impacted by these claims, but the company believes it is unlikely that such
claims will materially impact its financial position or liquidity.
Prior to 1994, the company made no specific allocation for pollution or
asbestos claims of its IBNR (incurred but not reported) reserves, but
rather identified reserves for only reported claims (case reserves). In
the third quarter of 1994, the company specifically allocated for
pollution and asbestos claims a portion of previously established IBNR
reserves.
The following table represents a reconciliation of total gross and net
pollution reserve development for the nine months ended September 30,
1995, and the years ended Dec. 31, 1994 and 1993. Amounts in the "net"
column are reduced by reinsurance recoverable.
1995 1994 1993
Pollution (nine months) ---- ----
- --------- ------------
(in millions) Gross Net Gross Net Gross Net
----- ----- ----- ----- ----- -----
Beginning reserves $275 200 105 73 88 62
Incurred losses 49 49 71 56 32 22
IBNR allocation - - 132 95 - -
Paid losses (36) (19) (33) (24) (15) (11)
--- --- --- --- --- ---
Ending reserves $288 230 275 200 105 73
=== === === === === ===
Many significant pollution claims currently being brought against
insurance companies arise out of contamination that occurred 20 to 30
years ago. Since 1970, the company's Commercial General Liability
policy form has included a specific pollution exclusion, and, since
1986, an industry standard absolute pollution exclusion for policies
underwritten in the United States.
The following table represents a reconciliation of total gross and net
reserve development for asbestos claims for the nine months ended
September 30, 1995, and the years ended Dec. 31, 1994 and 1993:
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
1995 1994 1993
Asbestos (nine months) ---- ----
- -------- ------------
(in millions) Gross Net Gross Net Gross Net
----- ---- ----- ---- ----- ----
Beginning reserves $185 145 62 48 70 54
Incurred losses 10 9 13 14 17 15
IBNR allocation - - 127 95 - -
Paid losses (12) (8) (17) (12) (25) (21)
--- --- --- --- --- ---
Ending reserves $183 146 185 145 62 48
=== === === === === ===
Most of the asbestos claims the company has received pertain to policies
written prior to 1986. Since 1986, for policies underwritten in the
United States, the company's Commercial General Liability policy has
used the industry standard absolute pollution exclusion, which the
company believes applies to asbestos claims.
The company has previously reported on its involvement with Weavers
Underwriting Agency ("Weavers"), a subsidiary of London United
Investments PLC ("LUI"). Weavers managed five of LUI's insurance
underwriting subsidiaries which eventually became insolvent in the early
1990's. From 1973 through 1980, a predecessor of the company's UK-based
underwriting operation, St. Paul International Insurance Company
Limited, was a member of the Weavers pool and accepted business from
Weavers.
Because of insufficient information, the company has had difficulty in
determining a reasonable estimate of a range of possible pollution and
asbestos losses relating to Weavers business. Late in the third quarter of
1995, the company obtained new information concerning such possible losses and
continues its evaluation of such information for potential additional losses
arising from its involvement with Weavers. Based on this new information,
the company is also evaluating the collectibility of reinsurance recoverables
associated with these losses. The company expects that this evaluation is
likely to be concluded in the fourth quarter of 1995 and may result in
additional specific allocation of previously established IBNR reserves. The
company believes that, although it is possible that an additional loss
provision may result from this evaluation, any such provision would not
materially impact its results of operations, liquidity or financial position.
Total gross pollution and asbestos reserves at September 30, 1995, of
$471 million represented approximately 5% of gross consolidated reserves
of $9.8 billion.
Insurance Brokerage
- -------------------
The company's insurance brokerage segment (Minet) posted third
quarter 1995 pretax earnings of $5 million, compared with earnings
of $2 million in the same period of 1994. The improvement over
1994 resulted from an increase in investment income and a decline
in the rate of expense
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
growth. Minet's year-to-date pretax loss was $14 million, compared with
a loss of $11 million in the first nine months of 1994. Brokerage fees
and commissions for both the third quarter and nine months of 1995 were
virtually level with the same periods of 1994, reflecting the
competitive worldwide market environment for insurance brokerage
services.
Investment Banking-Asset Management
- -----------------------------------
The company's portion of The John Nuveen Company's pretax earnings in
the third quarter of 1995 was $22 million, compared with $19 million in
the same period of 1994. Year-to-date, the company's portion was $61
million, an increase of $7 million over the first nine months of 1994.
The company currently owns 77% of Nuveen.
The growth in Nuveen's earnings over 1994 resulted from a combination of
flat expenses and a slight increase in revenues. The municipal bond
market remains challenging in 1995, although it has stabilized somewhat
compared to 1994. Nuveen's asset management revenues for the quarter
and nine months were near 1994 levels. Total assets under management
were $31.5 billion at Sept. 30, 1995, an increase of $1.8 billion since
the end of 1994. Nuveen's underwriting and distribution revenues
increased in 1995 due to inventory positioning profits resulting from
the favorable market conditions in 1995. Unit Investment Trust sales
for the first nine months of 1995 were $870 million, down slightly from
1994 sales of $901 million.
Capital Resources
- -----------------
Common shareholders' equity at September 30, 1995 totaled $3.48 billion,
an increase of $751 million, or 27%, since the end of 1994. The
company's strong earnings and a significant increase in the market value
of its fixed maturities portfolio were the primary factors driving the
increase in equity. A rally in the bond market, fueled by a general
decline in interest rates since the end of 1994, has resulted in an
increase of nearly $360 million (net of taxes) in the unrealized
appreciation of the company's fixed maturities portfolio.
In the second quarter of 1995, the company, through St. Paul Capital
L.L.C., completed the sale of 4,140,000 convertible monthly income
preferred securities (MIPS) paying a monthly dividend at an annual rate
of 6%. Each preferred security is convertible at the option of the
holder into 0.8475 shares of the company's common stock. Proceeds from
the sale were $207 million. A portion of the proceeds was used to
reduce the company's commercial paper debt, with the remainder invested
in fixed maturity securities and available for general corporate
purposes.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
At Sept. 30, 1995, debt outstanding totaled $620 million, virtually
unchanged from the year-end 1994 total of $623 million. Under a shelf
registration with the Securities and Exchange Commission, the company
has issued $193 million in medium-term notes in 1995. This increase in
debt was offset by a $187 million decrease in the amount of commercial
paper outstanding. The ratio of debt to total capitalization fell to
14% at Sept. 30, 1995, down from 19% at year-end 1994 due to the
significant growth in capital. The MIPS are included in the company's
total capital.
In October 1995, the company announced that it may repurchase and retire
up to one million of its outstanding common shares on the open market
and through private transactions.
The company's ratio of earnings to fixed charges was 9.12 for the first
nine months of 1995, compared with 9.18 for the same period of 1994.
The company's ratio of earnings to combined fixed charges and preferred
stock dividends was 6.93 for the first nine months of 1995, compared
with 7.19 for the same period of 1994. Fixed charges consist of
interest expense before reduction for capitalized interest and one-third
of rental expense, which is considered to be representative of an
interest factor.
Liquidity
- ---------
Liquidity refers to the company's ability to generate sufficient funds
to meet the cash requirements of its business operations. Net cash
provided by operations was $616 million in the first nine months of
1995, compared to $662 million in 1994. The company's consolidated
liquidity position remains strong due to the Underwriting segment's cash
flows from underwriting and investment activities.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note 5 to the consolidated
financial statements included in Part I of this report is
incorporated herein by reference.
In its Form 10-Q for the quarter ended June 30, 1995, the
company reported that in late May of 1995, a purported class
action lawsuit brought in the District Court of Brazoria
County, Texas was served on three subsidiaries of the company
on behalf of persons who from 1983 through 1985 purchased
interests in certain limited partnerships for which Damson Oil
Corporation served as general partner. While the complaint
seeks unspecified actual damages, treble damages, punitive
damages, attorney fees, costs, and pre- and post-judgment
interests, plaintiffs have sent the defendants (three of the
company's subsidiaries) a demand letter under the Texas
Deceptive Trade Practices Act seeking damages of $400 million.
At the time of that report, the defendants had removed the case
to the U.S. District Court for the Southern District of Texas,
and plaintiffs were seeking to have the case remanded to Texas
State Court. In September of 1995, the case was remanded to
Texas State Court. These proceedings are being vigorously
contested by the defendants, and the company recognizes that
the final outcome of these proceedings, if adverse to the
defendants, may materially impact the results of operations of
the company in the period in which that outcome occurs, but
believes it should not have a material adverse effect on its
liquidity or overall financial position.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. An Exhibit Index is set forth on page 26 of this
report.
(b) Reports on Form 8-K.
1) The Registrant filed a Form 8-K Current Report,
dated July 24, 1995, pertaining to the Registrant's press
release of second quarter 1995 financial results.
2) The Registrant filed a Form 8-K Current Report,
dated October 23, 1995, pertaining to the Registrant's
press release of third quarter 1995 financial results.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ST. PAUL COMPANIES, INC.
(Registrant)
Date: November 13, 1995 By /s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Vice President
and Corporate Secretary
(Authorized Signatory)
Date: November 13, 1995 By /s/ Howard E. Dalton
--------------------
Howard E. Dalton
Senior Vice President
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
-------------
How
Exhibit Filed
- ------- -----
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession*.............................
(4) Instruments defining the rights of security holders,
including indentures*..................................
(10) Material contracts*.......................................
(11) Statement re computation of per share earnings**.......... (1)
(12) Statement re computation of ratios**...................... (1)
(15) Letter re unaudited interim financial information*........
(18) Letter re change in accounting principles*................
(19) Report furnished to security holders*.....................
(22) Published report regarding matters submitted to
vote of security holders*..............................
(23) Consents of experts and counsel*..........................
(24) Power of attorney*........................................
(27) Financial data schedule**................................. (1)
(99) Additional exhibits*......................................
* These items are not applicable.
** This exhibit is included only with the copies of this report that are
filed with the Securities and Exchange Commission. However, a copy
of the exhibit may be obtained from the Registrant for a reasonable
fee by writing to Legal Services, The St. Paul Companies, 385
Washington Street, Saint Paul, MN 55102.
(1) Filed electronically under EDGAR Operational Program.
<PAGE>
Exhibit 11
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(In thousands)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
----- ------ ----- ------
EARNINGS:
Primary:
Net income, as reported $142,399 129,808 365,962 322,007
PSOP preferred dividends
declared (net of taxes) (2,159) (2,129) (6,444) (6,343)
------- ------- ------- -------
Net income, as adjusted $140,240 127,679 359,518 315,664
======= ======= ======= =======
Fully diluted:
Net income, as reported $142,399 129,808 365,962 322,007
Additional PSOP expense (net
of taxes) due to assumed
conversion of preferred
stock (867) (944) (2,612) (2,841)
Dividend on monthly income
preferred securities (net of
taxes) 2,018 - 3,027 -
------- ------- ------- -------
Net income, as adjusted $143,550 128,864 366,377 319,166
======= ======= ======= =======
SHARES:
Primary:
Weighted average number of
common shares outstanding, per
consolidated financial
statements 84,559 84,042 84,413 84,195
Additional dilutive effect of
outstanding stock options (based
on treasury stock method using
average market price) 1,007 654 960 621
------ ------ ------ ------
Weighted average, as adjusted 85,566 84,696 85,373 84,816
====== ====== ====== ======
Fully diluted:
Weighted average number of
common shares outstanding, per
consolidated financial
statements 84,559 84,042 84,413 84,195
Additional dilutive effect of:
Convertible preferred stock 4,022 4,068 4,034 4,078
Monthly income preferred securities 3,509 - 1,774 -
Outstanding stock options (based
on treasury stock method using
market price at end of period) 1,324 586 1,349 599
------ ------ ------ ------
Weighted average, as adjusted 93,414 88,696 91,570 88,872
====== ====== ====== ======
EARNINGS PER COMMON SHARE:
Primary $1.64 1.51 4.21 3.72
Fully diluted $1.54 1.45 4.00 3.59
<PAGE>
Exhibit 12
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Computation of Ratios
(In thousands, except ratios)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
----- ----- ----- -----
EARNINGS:
Income before income taxes $178,105 165,201 469,505 406,398
Add: fixed charges 21,073 16,782 57,809 49,652
------- ------- ------- -------
Income, as adjusted $199,178 181,983 527,314 456,050
======= ======= ======= =======
FIXED CHARGES:
Interest costs $15,703 10,640 41,060 30,852
Rental expense (1) 5,370 6,142 16,749 18,800
------ ------ ------ ------
Total fixed charges $21,073 16,782 57,809 49,652
====== ====== ====== ======
FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS:
Fixed charges $21,073 16,782 57,809 49,652
PSOP preferred stock dividends 4,523 4,578 13,615 13,772
Dividends on monthly income
preferred securities 3,105 - 4,658 -
------ ------ ------ ------
Total fixed charges and
preferred stock dividends $28,701 21,360 76,082 63,424
====== ====== ====== ======
Ratio of earnings to fixed charges 9.45 10.84 9.12 9.18
====== ====== ====== ======
Ratio of earnings to combined fixed
charges and preferred stock
dividends 6.94 8.52 6.93 7.19
====== ====== ====== ======
(1) Interest portion deemed implicit in total rent expense.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 9,916,552
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 732,991
<MORTGAGE> 0
<REAL-ESTATE> 614,652
<TOTAL-INVEST> 12,625,722
<CASH> 28,662
<RECOVER-REINSURE> 84,176
<DEFERRED-ACQUISITION> 364,313
<TOTAL-ASSETS> 18,759,950
<POLICY-LOSSES> 9,817,471
<UNEARNED-PREMIUMS> 2,325,602
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 620,275
<COMMON> 460,145
207,000
11,456
<OTHER-SE> 3,023,953
<TOTAL-LIABILITY-AND-EQUITY> 18,759,950
2,931,214
<INVESTMENT-INCOME> 570,487
<INVESTMENT-GAINS> 38,060
<OTHER-INCOME> 423,292
<BENEFITS> 2,118,131
<UNDERWRITING-AMORTIZATION> 642,785
<UNDERWRITING-OTHER> 732,632
<INCOME-PRETAX> 469,505
<INCOME-TAX> 103,543
<INCOME-CONTINUING> 365,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 365,962
<EPS-PRIMARY> 4.21
<EPS-DILUTED> 4.00
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
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