<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, 1996
------------------
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) 310-7911
--------------
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 8, 1996, was 82,980,241.
<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, 1996 and 1995 3
Consolidated Balance Sheets, September 30, 1996
(Unaudited) and December 31, 1995 4
Consolidated Statements of Shareholders' Equity,
Nine Months Ended September 30, 1996 (Unaudited) and
Twelve Months Ended December 31, 1995 6
Consolidated Statements of Cash Flows (Unaudited),
Nine Months Ended September 30, 1996 and 1995 7
Notes to Consolidated Financial Statements (Unaudited) 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION
Item 1 through Item 6 22
Signatures 24
EXHIBIT INDEX 25
<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
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Premiums earned $1,168,908 993,317 3,254,868 2,931,214
Net investment income 211,672 193,922 616,223 570,487
Insurance brokerage fees
and commissions 81,388 83,549 224,476 227,662
Investment banking-asset
management 55,544 55,091 161,468 162,969
Realized investment gains 37,556 25,736 132,981 38,060
Other 10,571 13,251 35,435 32,661
--------- --------- --------- ---------
Total revenues 1,565,639 1,364,866 4,425,451 3,963,053
--------- --------- --------- ---------
Expenses:
Insurance losses and loss
adjustment expenses 905,943 714,302 2,440,204 2,118,131
Policy acquisition expenses 249,736 215,863 712,015 642,785
Provision for loss on
disposal of insurance
brokerage operations 250,000 - 250,000 -
Operating and administrative 296,484 256,596 827,225 732,632
--------- --------- --------- ---------
Total expenses 1,702,163 1,186,761 4,229,444 3,493,548
--------- --------- --------- ---------
Income (loss) before
income taxes (136,524) 178,105 196,007 469,505
Income tax expense (benefit):
Federal current 14,288 53,825 86,855 145,085
Other (279,746) (18,119) (278,656) (41,542)
--------- --------- --------- ---------
Total income tax
expense (benefit) (265,458) 35,706 (191,801) 103,543
--------- --------- --------- ---------
Net income $128,934 142,399 387,808 365,962
========= ========= ========= =========
Earnings per common share:
Primary $1.50 1.64 4.50 4.21
========= ========= ========= =========
Fully diluted $1.42 1.54 4.24 4.00
========= ========= ========= =========
Dividends declared on
common stock $0.44 0.40 1.32 1.20
========= ========= ========= =========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
September 30, December 31,
ASSETS 1996 1995
- ------ ---------- ----------
(Unaudited)
Investments:
Fixed maturities, at estimated market value $11,581,950 10,372,890
Equities, at estimated market value 840,369 711,471
Real estate, at cost less accumulated
depreciation of $78,392 (1995; $68,795) 609,245 611,656
Venture capital, at estimated market value 514,366 388,599
Other investments 51,820 42,776
Short-term investments, at cost 522,201 939,528
---------- ----------
Total investments 14,119,951 13,066,920
Cash 33,646 34,440
Investment banking inventory securities 95,709 249,662
Reinsurance recoverables:
Unpaid losses 1,989,958 1,853,817
Paid losses 59,654 74,568
Receivables:
Underwriting premiums 1,552,360 1,316,560
Insurance brokerage activities - 652,801
Interest and dividends 207,359 197,740
Other 95,819 81,885
Deferred policy acquisition expenses 406,254 372,174
Ceded unearned premiums 204,853 226,943
Deferred income taxes 966,364 528,805
Office properties and equipment, at cost
less accumulated depreciation
of $215,039 (1995; $277,759) 285,586 478,286
Goodwill 170,548 314,457
Other assets 263,802 207,444
---------- ----------
Total assets $20,451,863 19,656,502
========== ==========
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 1996 1995
- ------------------------------------ ------------ -----------
(Unaudited)
Liabilities:
Insurance reserves:
Losses and loss adjustment expenses $11,735,119 10,247,070
Unearned premiums 2,578,197 2,361,028
---------- ----------
Total insurance reserves 14,313,316 12,608,098
Debt 707,560 704,042
Payables:
Insurance brokerage activities - 979,964
Income taxes 212,595 179,249
Reinsurance premiums 130,698 139,058
Accrued expenses and other 522,359 618,903
Other liabilities 484,703 490,067
---------- ----------
Total liabilities 16,371,231 15,719,381
---------- ----------
Company-obligated mandatorily redeemable
preferred securities of
St. Paul Capital L.L.C. 207,000 207,000
---------- ----------
Shareholders' equity:
Preferred:
Series B convertible preferred stock;
1,450 shares authorized; 989 shares
outstanding (999 shares in 1995) 142,833 144,165
Guaranteed obligation - PSOP (126,068) (133,293)
---------- ----------
Total preferred shareholders' equity 16,765 10,872
---------- ----------
Common:
Common stock, 240,000 shares authorized; 83,160
shares outstanding (83,976 shares in 1995) 465,827 460,458
Retained earnings 2,922,092 2,704,075
Guaranteed obligation - ESOP (23,131) (32,294)
Unrealized appreciation of investments 511,457 627,791
Unrealized loss on foreign currency translation (19,378) (40,781)
---------- ----------
Total common shareholders' equity 3,856,867 3,719,249
---------- ----------
Total shareholders' equity 3,873,632 3,730,121
---------- ----------
Total liabilities, redeemable preferred
securities and shareholders' equity $20,451,863 19,656,502
========== ==========
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,
1996 1995
------------ ------------
(Unaudited)
Preferred shareholders' equity:
Series B convertible preferred stock:
Beginning of period $144,165 146,102
Change during period (1,332) (1,937)
---------- ----------
End of period 142,833 144,165
---------- ----------
Guaranteed obligation - PSOP:
Beginning of period (133,293) (141,567)
Principal payments 7,225 8,274
---------- ----------
End of period (126,068) (133,293)
---------- ----------
Total preferred shareholders' equity 16,765 10,872
---------- ----------
Common shareholders' equity:
Common stock:
Beginning of period 460,458 445,222
Stock issued under stock option
and other incentive plans 11,716 19,481
Reacquired common shares (6,347) (4,245)
---------- ----------
End of period 465,827 460,458
---------- ----------
Retained earnings:
Beginning of period 2,704,075 2,362,286
Net income 387,808 521,209
Dividends declared on common stock (109,547) (133,956)
Dividends declared on PSOP
preferred stock, net of taxes (6,503) (8,582)
Reacquired common shares (54,627) (38,291)
Tax benefit on employee stock options and awards 886 1,409
---------- ----------
End of period 2,922,092 2,704,075
---------- ----------
Guaranteed obligation - ESOP:
Beginning of period (32,294) (44,410)
Principal payments 9,163 12,116
---------- ----------
End of period (23,131) (32,294)
---------- ----------
Unrealized appreciation of investments, net of
taxes:
Beginning of period 627,791 13,948
Change during the period (116,334) 613,843
---------- ----------
End of period 511,457 627,791
---------- ----------
Unrealized loss on foreign currency
translation, net of taxes:
Beginning of period (40,781) (44,112)
Currency translation adjustments (4,191) 3,331
Realized loss relating to disposal
of brokerage operations 25,594 -
---------- ----------
End of period (19,378) (40,781)
---------- ----------
Total common shareholders' equity 3,856,867 3,719,249
---------- ----------
Total shareholders' equity $3,873,632 3,730,121
========== ==========
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
--------------------------
1996 1995
------ ------
OPERATING ACTIVITIES
Underwriting:
Net income $374,034 383,742
Adjustments:
Change in net insurance reserves 362,377 625,146
Change in underwriting premiums receivable (51,027) (208,381)
Provision for deferred taxes (27,823) (47,024)
Realized investment gains (124,944) (32,355)
Other 182,695 (96,758)
---------- ----------
Total underwriting 715,312 624,370
---------- ----------
Insurance brokerage:
Net loss (276,074) (22,172)
Adjustments:
Provision for estimated loss on disposal 250,000 -
Change in premium balances (71,162) (28,041)
Other 8,574 15,568
---------- ----------
Total insurance brokerage (88,662) (34,645)
---------- ----------
Investment banking-asset management:
Net income 41,100 37,997
Adjustments:
Change in inventory securities 111,950 40,919
Change in short-term investments (58,457) (104,401)
Change in short-term borrowings (25,000) -
Change in open security transactions (1,502) (2,810)
Other 16,319 52,353
---------- ----------
Total investment banking-asset management 84,410 24,058
---------- ----------
Parent company and consolidating eliminations:
Net income (loss) 248,748 (33,605)
Deferred tax benefit on provision for
loss on disposal of insurance brokerage
operations (266,000) -
Realized investment gains (8,037) (5,705)
Other adjustments (19,847) 42,016
---------- ----------
Total parent company and
consolidating eliminations (45,136) 2,706
---------- ----------
Net cash provided by operating activities 665,924 616,489
---------- ----------
INVESTING ACTIVITIES
Purchase of investments (2,241,359) (2,015,989)
Proceeds from sales and
maturities of investments 1,823,783 1,336,941
Change in short-term investments 107,063 56,399
Purchase of Northbrook Holdings Inc.,
net of cash acquired (184,568) -
Change in open security transactions 16,925 (28,876)
Net purchases of office properties and equipment (32,892) (37,322)
Other (22,566) (50,628)
---------- ----------
Net cash used in investing activities (533,614) (739,475)
---------- ----------
FINANCING ACTIVITIES
Dividends paid on common and preferred stock (115,808) (107,897)
Proceeds from issuance of debt 44,238 192,900
Reacquired common shares (60,310) (497)
Proceeds from issuance of company-obligated
mandatorily redeemable preferred
securities of St. Paul Capital L.L.C. - 207,000
Repayment of debt - (185,844)
Other (1,296) (818)
---------- ----------
Net cash provided by (used in)
financing activities (133,176) 104,844
---------- ----------
Effect of exchange rate changes on cash 72 140
---------- ----------
Decrease in cash (794) (18,002)
Cash at beginning of period 34,440 46,664
---------- ----------
Cash at end of period 33,646 28,662
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited
September 30, 1996
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 51 to 67 of the Registrant's annual report
to shareholders for the year ended December 31, 1995. 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 1995 consolidated financial statements have
been reclassified to conform with the 1996 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
---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
(In thousands)
PRIMARY
Net income, as reported $128,934 142,399 387,808 365,962
PSOP preferred dividends declared
(net of taxes) (2,179) (2,159) (6,503) (6,444)
Premium on preferred shares redeemed (224) - (664) -
-------- ------- ------- -------
Net income, as adjusted $126,531 140,240 380,641 359,518
======== ======= ======= =======
FULLY DILUTED
Net income, as reported $128,934 142,399 387,808 365,962
Dividends on monthly income preferred
securities (net of taxes) 2,018 2,018 6,055 3,027
Additional PSOP expense (net of taxes)
due to assumed conversion
of preferred stock (752) (867) (2,265) (2,612)
Premium on preferred shares redeemed (224) - (664) -
-------- ------- ------- -------
Net income, as adjusted $129,976 143,550 390,934 366,377
======== ======= ======= =======
ADJUSTED AVERAGE COMMON SHARES
OUTSTANDING
Primary 84,254 85,566 84,644 85,373
======== ======= ======= =======
Fully diluted 91,840 93,414 92,179 91,570
======== ======= ======= =======
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 company-obligated
mandatorily redeemable preferred securities of St. Paul Capital
L.L.C. (monthly income preferred securities).
<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
------------------------------
1996 1995
------ ------
(In thousands)
Purchases:
Fixed maturities $1,418,142 1,206,888
Equities 700,308 648,154
Real estate 18,807 108,589
Venture capital 74,375 46,938
Other investments 29,727 5,420
--------- ---------
Total purchases 2,241,359 2,015,989
--------- ---------
Proceeds from sales and maturities:
Fixed maturities:
Sales 390,401 240,652
Maturities and redemptions 637,362 433,306
Equities 682,462 588,601
Venture capital 102,741 64,260
Real estate 8,577 7,520
Other investments 2,240 2,602
--------- ---------
Total sales and maturities 1,823,783 1,336,941
--------- ---------
Net purchases $417,576 679,048
========= =========
<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, 1996 December 31, 1995
------------------ -------------------
(In thousands)
Fixed maturities $(307,394) 742,626
Equities 34,728 130,247
Venture capital 95,160 59,880
-------- -------
Total change in pretax
unrealized appreciation (177,506) 932,753
Increase (decrease) in deferred
tax asset due to change
in unrealized appreciation 61,172 (318,910)
-------- --------
Total change in unrealized
appreciation, net of taxes $(116,334) 613,843
======== ========
Note 4 Income Taxes
- --------------------
The components of the income tax provision are as follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1996 1995 1996 1995
------ ------ ------ ------
(In thousands)
Federal current tax expense $14,288 53,825 86,855 145,085
Federal deferred tax benefit on
provision for loss on disposal
of insurance brokerage
operations (266,000) - (266,000) -
Other federal deferred
tax benefit (23,669) (19,190) (39,900) (50,207)
------- ------- ------- -------
Total federal income tax
expense (benefit) (275,381) 34,635 (219,045) 94,878
Foreign income taxes 8,401 (260) 22,862 4,875
State income taxes 1,522 1,331 4,382 3,790
------- ------- ------- -------
Total income tax
expense (benefit) ($265,458) 35,706 (191,801) 103,543
======= ======= ======= =======
See Note 9 on page 14 for further discussion of the $266 million
deferred tax benefit on the provision for loss on disposal of
insurance brokerage operations.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 or its subsidiaries will ultimately have to pay in
all of these lawsuits will have no material effect on its overall
financial position.
In some cases, plaintiffs seek to establish coverage for their
liability under environmental protection laws. See "Environmental
and Asbestos Claims" in Management's Discussion and Analysis for
information on these claims.
Note 6 Debt
- ------------
Debt consists of the following:
September 30, December 31,
1996 1995
------------------ -----------------
Book Fair Book Fair
Value Value Value Value
----- ----- ----- -----
(In thousands)
Medium-term notes $412,428 408,600 397,433 419,500
Commercial paper 178,473 178,473 149,629 149,629
9 3/8% notes 99,991 102,200 99,982 105,300
Guaranteed ESOP debt 16,668 17,100 25,001 26,200
Pound sterling loan notes - - 6,997 6,997
Short-term borrowings - - 25,000 25,000
------- ------- ------- -------
Total debt $707,560 706,373 704,042 732,626
======= ======= ======= =======
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
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
-------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Premiums written:
Direct $1,120,234 1,076,797 2,813,855 2,828,803
Assumed 273,631 224,685 789,490 750,207
Ceded (146,895) (143,854) (343,838) (409,893)
--------- --------- --------- ---------
Net premiums written $1,246,970 1,157,628 3,259,507 3,169,117
========= ========= ========= =========
Premiums earned:
Direct $1,045,971 928,783 2,891,156 2,715,737
Assumed 270,119 222,705 749,765 656,450
Ceded (147,182) (158,171) (386,053) (440,973)
--------- --------- --------- ---------
Net premiums earned $1,168,908 993,317 3,254,868 2,931,214
========= ========= ========= =========
Insurance losses and loss
adjustment expenses:
Direct $830,977 652,304 2,127,265 1,894,286
Assumed 151,748 181,845 531,170 557,391
Ceded (76,782) (119,847) (218,231) (333,546)
--------- --------- --------- ---------
Net insurance losses and
loss adjustment expenses $905,943 714,302 2,440,204 2,118,131
========= ========= ========= =========
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 8 Acquisition of Northbrook Holdings Inc.
- -----------------------------------------------
On July 31, 1996, St. Paul Fire and Marine Insurance Company, a
subsidiary of the company, completed its acquisition of Northbrook
Holdings Inc. and its three insurance company subsidiaries from The
Allstate Corporation. Northbrook and its subsidiaries, which had
$587 million in net written premiums in 1995, underwrite various
property-liability commercial insurance products throughout the
United States.
The company's total cost for the Northbrook acquisition was
approximately $190 million (subject to post-closing adjustments),
which was provided from internal funds. The company recorded
goodwill of approximately $64 million as a result of this
acquisition, which is being amortized over a 15-year period.
The acquisition was accounted for as a purchase. As a result,
Northbrook's results were included in the company's consolidated
results from the date of purchase. Consolidated results would not
have been materially different had this acquisition been completed at
the beginning of 1995.
Note 9 Provision for Loss on Disposal of Insurance Brokerage Operations
- ------------------------------------------------------------------------
In September 1996, the company committed to a plan to dispose of a
significant portion of its insurance brokerage operations. As a
result, the company recorded a pretax loss of $250 million in the
third quarter, representing the estimated difference between the fair
value and the carrying value of these operations at the date of
disposal. The third quarter loss provision encompasses estimated
operating losses of the affected operations through the estimated
disposal date, the realization of previously unrealized foreign
exchange losses, pension and postretirement curtailment gains, and
estimated selling costs. Any adjustments to the loss provision will
be reflected in the results for the quarter during which the
adjustments are made.
The company recorded a $266 million deferred tax benefit in the third
quarter associated with this loss on disposal. This net benefit
consisted of a tax benefit on the provision for loss on disposal of
$304 million, reduced by a valuation allowance of $38 million. The
company's federal income tax carrying value of the affected
operations was substantially higher than the carrying value for
financial statement purposes, resulting in the tax benefit recognized
in the third quarter being disproportionate to the related pretax
loss.
The brokerage operations' balance sheet was not included in the
company's consolidated balance sheet at Sept. 30, 1996. Rather, the
net assets of the brokerage operations were included on one line in
the balance sheet.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
September 30, 1996
Consolidated Results
- --------------------
The company incurred a pretax loss of $137 million in the third
quarter, driven by a $250 million provision for the estimated
loss on disposal of a significant portion of the company's
insurance brokerage operations. The company also recorded a $266
million deferred tax benefit associated with this loss provision.
Year-to-date pretax earnings of $196 million were $274 million
below comparable 1995 earnings of $470 million, reflecting the
impact of the brokerage loss provision and a significant increase
in catastrophe losses in the company's underwriting operations.
Consolidated revenues in the third quarter totaled $1.57 billion,
over $200 million higher than 1995 third quarter revenues of
$1.36 billion. Year-to-date revenues in 1996 were 12% higher
than the same period of 1995. Growth in insurance premiums
earned, investment income and realized investment gains accounted
for the increased revenue in 1996.
Results by Segment
- ------------------
Pretax results by industry segment were as follows (in millions):
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Pretax income (loss):
Insurance:
Underwriting:
GAAP underwriting results $(87) (25) (168) (66)
Net investment income 202 184 585 543
Realized investment gains 36 23 125 32
Other (40) (11) (88) (33)
---- ---- ---- ----
Total underwriting 111 171 454 476
Brokerage (252) 5 (270) (14)
---- ---- ---- ----
Total insurance (141) 176 184 462
Investment banking-asset management 23 22 67 61
Parent and other (19) (20) (55) (53)
---- ---- ---- ----
Income (loss) before income taxes (137) 178 196 470
Income tax expense (benefit) (266) 36 (192) 104
---- ---- ---- ----
Net income $129 142 388 366
==== ==== ==== ====
Net income per common share $1.42 1.54 4.24 4.00
==== ==== ==== ====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Insurance Underwriting
- ----------------------
The following summarizes key financial results by underwriting
operation:
% of Three Months Nine Months
1996 Ended Sept. 30 Ended Sept. 30
Written -------------- --------------
($ in Millions) Premiums 1996 1995 1996 1995
- --------------- -------- ---- ---- ---- ----
Specialized Commercial:
Written Premiums 29% $342 336 947 975
Underwriting Results $18 (26) 27 (73)
Combined Ratio 93.3 107.4 97.3 106.6
Personal Insurance:
Written Premiums 17% $193 178 546 508
Underwriting Results ($61) (8) (150) (18)
Combined Ratio 133.3 104.1 128.0 103.1
Commercial:
Written Premiums 16% $220 166 530 454
Underwriting Results ($35) (5) (46) (20)
Combined Ratio 117.0 101.1 109.8 103.8
Medical Services:
Written Premiums 12% $201 242 401 508
Underwriting Results $7 14 47 66
Combined Ratio 92.7 86.6 92.0 85.1
---- ----- ----- ----- -----
Total St. Paul Fire &
Marine:
Written Premiums 74% $956 922 2,424 2,445
Underwriting Results ($71) (25) (122) (45)
Combined Ratio 106.9 100.7 105.7 100.9
International:
Written Premiums 7% $118 66 229 154
Underwriting Results ($4) (3) (16) (19)
Combined Ratio 100.0 98.8 106.2 112.6
---- ----- ----- ----- -----
Total Worldwide Insurance:
Written Premiums 81% $1,074 988 2,653 2,599
Underwriting Results ($75) (28) (138) (64)
Combined Ratio 106.2 100.6 105.8 101.7
Reinsurance:
Written Premiums 19% $173 170 607 570
Underwriting Results ($12) 3 (30) (2)
Combined Ratio 108.6 99.9 104.8 99.4
---- ----- ----- ----- -----
Total:
Written Premiums 100% $1,247 1,158 3,260 3,169
GAAP Underwriting Results ($87) (25) (168) (66)
Statutory Combined Ratio:
Loss and Loss Expense Ratio 77.5 71.9 75.0 72.3
Underwriting Expense Ratio 29.1 28.5 30.6 29.0
----- ----- ----- -----
Combined Ratio 106.6 100.4 105.6 101.3
===== ===== ===== =====
Combined Ratio Including
Policyholders' Dividends 106.9 100.7 105.8 101.4
===== ===== ===== =====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
In May 1996, the company formed a new worldwide insurance
underwriting group, which includes St. Paul Fire and Marine, the
company's flagship domestic underwriting operation, and St. Paul
International Underwriting. This new structure is reflected in
the table on the preceding page.
Underwriting operations posted pretax earnings of $111 million in
the third quarter, $60 million less than the same period of 1995.
Catastrophe losses in the third quarter of 1996 totaled $66
million, half of which were the result of Hurricane Fran in
August. Catastrophe losses in last year's third quarter were $28
million. An increase in other expenses, primarily resulting from
the company's agreement to settle a lawsuit (see "Legal Matters"
section on page 20), also contributed to the deterioration in
underwriting earnings.
Third quarter 1996 written premiums of $1.25 billion were 8%
higher than premiums of $1.16 billion in the same 1995 quarter.
The 1996 third quarter total includes $53 million of written
premiums from the three commercial insurance underwriting
subsidiaries of Northbrook Holdings Inc. acquired from The
Allstate Corporation in July. Medical Services' premiums were
down 17% compared with the same 1995 period, reflecting
competitive conditions in that market sector. Personal Insurance
premiums increased 8% over the third quarter of 1995, due to new
business. International volume grew 77% over last year's third
quarter, primarily the result of increased production at
Camperdown Corporation, the company's vehicle for writing
business through Lloyd's of London.
Written premiums for the first nine months of 1996 totaled $3.26
billion, 3% higher than the same period of 1995. Medical
Services' year-to-date premiums were down $107 million from 1995,
reflecting the impact of competitive market conditions and the
transition to annual policy terms in the second half of last
year. This decline was offset by significant premium growth in
Commercial (primarily the result of the Northbrook acquisition)
and International (due to Camperdown). Personal Insurance and
Reinsurance premiums also increased over 1995 levels.
The third quarter 1996 GAAP underwriting loss was $87 million,
compared with 1995's third quarter loss of $25 million. Key
factors in the increase in third quarter underwriting losses
compared to 1995 were as follows:
- Specialized Commercial - $44 million better than 1995 - A
significant decline in losses resulting from the
company's withdrawal from various insurance pool
arrangements drove the improvement over 1995.
- Personal Insurance - $53 million worse than 1995 - The
variance from 1995 resulted from a $22 million increase
in catastrophe losses and a deterioration in other
current year loss experience.
- Commercial - $30 million worse than 1995 - The addition
of Northbrook, which posted a $16 million underwriting
loss in the quarter, and a $15 million increase in
catastrophe losses were the primary factors contributing
to the increase in underwriting losses.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
The nine-month GAAP underwriting loss of $168 million in 1996 was
over $100 million worse than the comparable 1995 loss of $66
million. Catastrophe losses in the first nine months of 1996
totaled $181 million, compared with $99 million for the same
period of 1995. This increase in catastrophe experience, coupled
with an increase in noncatastrophe losses in Personal Insurance
and Reinsurance, more than offset the $100 million improvement in
Specialized Commercial results compared to the first nine months
of 1995.
The underwriting operations' third quarter pretax investment
income of $202 million, which was 10% higher than the same period
of 1995, included $10 million of investment income from
Northbrook. Year-to-date investment income of $585 million was
8% ahead of last year. The increase over 1995 was primarily due
to strong investment cash flows, which have fueled a $586 million
net increase (excluding Northbrook) in fixed-maturity investments
over the last twelve months. After a twelve-month period of
almost exclusive tax-exempt security purchases, the company began
purchasing taxable bonds in the third quarter due to a change in
the company's consolidated tax position.
The weighted average pretax yield on the underwriting operations'
fixed maturities portfolio was 7.1% at Sept. 30, 1996. With the
acquisition of Northbrook in the third quarter, the company added
$1.2 billion of high-quality securities to its underwriting
operations' investment portfolio. Approximately 95% of the fixed-
maturity portfolio at Sept. 30, 1996 was rated at investment
grade levels (BBB or better).
Environmental 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 environmental
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 environmental claims is
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 an environmental 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
claims, both of which are still developing.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
In 1994, the company specifically reallocated, for environmental
and asbestos claims, a portion of previously established IBNR
(incurred but not reported) reserves. Prior to that, the company
made no specific allocation of its IBNR reserves for
environmental or asbestos claims, but rather identified reserves
only for reported claims (case reserves).
In the fourth quarter of 1995, the company recorded additional
gross reserves of $360 million and specifically reallocated $113
million of previously recorded net reserves for North American
environmental and asbestos losses on policies written in the
United Kingdom prior to 1980.
The following table represents a reconciliation of total gross
and net environmental reserve development for the nine months
ended Sept. 30, 1996, and the years ended Dec. 31, 1995 and 1994.
Amounts in the "net" column are reduced by reinsurance
recoverable.
1996 1995 1994
Pollution (nine months) ----------- -----------
- ---------- -----------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $528 319 275 200 105 73
Incurred losses 64 48 59 68 71 56
Reserve reallocation - - 233 79 132 95
Paid losses (23) (19) (39) (28) (33) (24)
--- --- --- --- --- ---
Ending reserves $569 348 528 319 275 200
=== === === === === ===
Many significant environmental 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 Sept. 30, 1996, and the years ended Dec. 31, 1995
and 1994:
1996 1995 1994
Asbestos (nine months) ----------- -----------
-------- -----------
(in millions) Gross Net Gross Net Gross Net
----- ---- ----- --- ----- ---
Beginning reserves $283 158 185 145 62 48
Incurred losses 10 15 (13) (9) 13 14
Reserve reallocation - - 127 34 127 95
Paid losses (19) (10) (16) (12) (17) (12)
--- --- --- --- --- ---
Ending reserves $274 163 283 158 185 145
=== === === === === ===
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
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 included the industry standard
absolute pollution exclusion, which the company believes applies
to asbestos claims.
The company believes its current reserves for environmental and
asbestos losses represent the best estimate of its ultimate
liability for such losses. Because of the difficulty inherent in
estimating those losses, however, there is no assurance that the
company's ultimate liability will, in fact, match current
reserves. The company continues to evaluate new information and
developing loss patterns, but it believes any additional loss
provisions for environmental and asbestos claims will not
materially impact its results of operations, liquidity or
financial position.
Total gross environmental and asbestos reserves at Sept. 30,
1996, of $843 million represented 7% of gross consolidated
reserves of $11.7 billion.
Legal Matters
- -------------
In 1993, the Superior Court of California entered judgment in an
action brought against St. Paul Fire and Marine Insurance Company
in 1987 by Arntz Contracting Company and certain affiliates. The
action alleged breach of contract and intentional interference
with ability to conduct business. The judgment affirmed a jury's
August 1993 award of approximately $16.5 million in compensatory
damages and $100 million in punitive damages. In January 1994,
the portion of the judgment granting punitive damages was
vacated. In the third quarter of 1996, the company, as a result
of its reaching an oral understanding with the plaintiff,
recorded an expense of $22 million for the settlement of all
claims associated with this lawsuit.
Insurance Brokerage
- -------------------
In the third quarter of 1996, the company committed to a plan to
dispose of a significant portion of its insurance brokerage
operations. The company recorded a pretax loss provision of $250
million in the third quarter, representing the estimated loss on
disposal of these operations. The company also recorded a
deferred tax benefit of $266 million relating to the plan for
disposal. See Note 9 on page 14 for further discussion of the
estimated loss on disposal of these operations.
Investment Banking-Asset Management
- -----------------------------------
The company's portion of The John Nuveen Company's third quarter
pretax earnings was $23 million, compared with $22 million in
1995. For the first nine months of 1996, the company's portion
was $67 million, compared with $61 million in 1995. The company
currently owns 78% of Nuveen.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Asset management fees of $46 million for the quarter were level
with the same period of 1995. Year-to-date management fees in
1996 were 2% ahead of last year. Assets under management totaled
$31.7 billion at Sept. 30, down slightly from year-end 1995 due
to a decline in the value of underlying fund investments.
Nuveen's year-to-date Unit Investment Trust sales of $766 million
were down 12% from the comparable 1995 total.
Nuveen commenced a stock repurchase program in the third quarter,
retiring 1.8 million of its common shares for a total cost of $46
million. The repurchases were proportioned between the company
and minority shareholders to maintain the company's 78% interest
in Nuveen. The company's proceeds from Nuveen's repurchases in
the third quarter totaled $36 million.
Capital Resources
- -----------------
Common shareholders' equity grew to a new high of $3.86 billion
at the end of the third quarter, driven by the company's record
nine-month net income of $388 million. The after-tax
appreciation of the company's fixed maturities investment
portfolio has declined $201 million in 1996, reflecting the
impact of confusing economic indicators on the bond markets. The
company's equity and venture capital portfolios, however,
experienced an $84 million increase in their after-tax
appreciation in the first nine months of 1996. The company has
repurchased and retired 1.14 million shares of its common stock
for a total cost of $60 million in 1996.
The company's acquisition of Northbrook Holdings Inc. from The
Allstate Corporation on July 31, 1996 was financed internally.
See Note 8 on page 14 for further details pertaining to this
acquisition.
Total debt outstanding at the end of the quarter was $708
million, virtually unchanged from $704 million at the end of
1995. Nearly 60% of the company's debt is composed of medium-
term notes, which bear a weighted average interest rate of 7.1%.
The ratio of debt to total capitalization at Sept. 30, 1996, was
15%. In June 1996, the company filed a shelf registration
statement with the Securities and Exchange Commission, giving the
company the capacity to issue $275 million of additional debt.
The company issued $15 million of medium-term notes in the third
quarter.
The company's ratio of earnings to fixed charges was 4.68 for the
first nine months of 1996, compared with 9.12 for the same period
of 1995. The company's ratio of earnings to combined fixed
charges and preferred stock dividends was 3.28 for the first nine
months of 1996, compared with 6.93 for the same period of 1995.
The decline in ratios from 1995 was primarily due to the third
quarter 1996 pretax loss of $137 million, which reduced year-to-
date pretax earnings to $196 million, compared with pretax
earnings of $470 million for the same period of 1995. 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.
<PAGE>
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 $666 million in the first
nine months of 1996, compared with $616 million in 1995. The
company's liquidity position remains strong due to cash flows
from underwriting operations.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note 5 to the consolidated
financial statements and the "Legal Matters" section of
Management's Discussion and Analysis included in Part I
of this report is incorporated herein by reference.
In 1993, the Superior Court of California entered
judgment in an action brought against St. Paul Fire and
Marine Insurance Company in 1987 by Arntz Contracting
Company and certain affiliates. The action alleged
breach of contract and intentional interference with
ability to conduct business. The judgment affirmed a
jury's August 1993 award of approximately $16.5 million
in compensatory damages and $100 million in punitive
damages. In January 1994, the portion of the judgment
granting punitive damages was vacated. In the third
quarter of 1996, the company, as a result of its
reaching an oral understanding with the plaintiff,
recorded an expense of $22 million for the settlement of
all claims associated with this lawsuit.
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.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. An Exhibit Index is set forth on page 25
of this report.
(b) Reports on Form 8-K.
The Registrant filed a Form 8-K Current Report
dated July 29, 1996, pertaining to the Registrant's
press release of second quarter 1996 financial
results.
The Registrant filed a Form 8-K Current Report
dated August 7, 1996, pertaining to exhibits filed
in connection with the Registration Statement on
Form S-3 (File No. 333-06456) filed by the
Registrant covering debt securities issuable under
an indenture, dated as of March 31, 1990, between
the Registrant and The Chase Manhattan Bank.
The Registrant filed a Form 8-K Current Report
dated August 27, 1996, announcing that the
Registrant had retained Goldman Sachs International
to assist in examining strategic alternatives with
respect to the Minet Group, the registrant's
insurance brokerage operation.
The Registrant filed a Form 8-K Current Report
dated October 1, 1996, announcing the
anticipated impact of weather-related losses on the
Registrant's third quarter operating results.
The Registrant filed a Form 8-K Current Report
dated October 29, 1996, pertaining to the
Registrant's press release of third quarter 1996
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 12, 1996 By /s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Vice President
and Corporate Secretary
(Authorized Signatory)
Date: November 12, 1996 By /s/ Howard E. Dalton
--------------------
Howard E. Dalton
Senior Vice President
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit How
- ------- 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.
<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
------------------ -----------------
1996 1995 1996 1995
----- ----- ----- -----
EARNINGS:
Primary:
Net income, as reported $128,934 142,399 387,808 365,962
PSOP preferred dividends declared
(net of taxes) (2,179) (2,159) (6,503) (6,444)
Premium on preferred shares redeemed (224) - (664) -
-------- -------- -------- --------
Net income, as adjusted $126,531 140,240 380,641 359,518
======== ======== ======== ========
Fully diluted:
Net income, as reported $128,934 142,399 387,808 365,962
Dividends on monthly income
preferred securities
(net of taxes) 2,018 2,018 6,055 3,027
Additional PSOP expense (net of
taxes) due to assumed conversion
of preferred stock (752) (867) (2,265) (2,612)
Premium on preferred shares redeemed (224) - (664) -
-------- -------- -------- --------
Net income, as adjusted $129,976 143,550 390,934 366,377
======== ======== ======== ========
SHARES:
Primary:
Weighted average number of common
shares outstanding, per
consolidated financial statements 83,286 84,559 83,594 84,413
Additional dilutive effect of
assumed exercise of outstanding
stock options (based on treasury
stock method using
average market price) 968 1,007 1,050 960
-------- -------- -------- --------
Weighted average, as adjusted 84,254 85,566 84,644 85,373
======== ======== ======== ========
Fully diluted:
Weighted average number of common
shares outstanding, per consolidated
financial statements 83,286 84,559 83,594 84,413
Additional dilutive effect of:
Assumed conversion of
PSOP preferred stock 3,963 4,022 3,977 4,034
Assumed conversion of monthly
income preferred securities 3,509 3,509 3,509 1,774
Assumed exercise of outstanding
stock options (based on treasury
stock method using market price
at end of period) 1,082 1,324 1,099 1,349
-------- -------- -------- --------
Weighted average, as adjusted 91,840 93,414 92,179 91,570
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Primary $1.50 1.64 4.50 4.21
Fully diluted $1.42 1.54 4.24 4.00
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Exhibit 12
Computation of Ratios
(In thousands, except ratios)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1996 1995 1996 1995
----- ----- ----- -----
EARNINGS:
Income (loss) before income taxes $(136,524) 178,105 196,007 469,505
Add: fixed charges 18,600 21,073 53,304 57,809
------- ------- ------- -------
Income (loss), as adjusted $(117,924) 199,178 249,311 527,314
======= ======= ======= =======
FIXED CHARGES:
Interest costs $13,071 15,703 38,220 41,060
Rental expense (1) 5,529 5,370 15,084 16,749
------- ------- ------- -------
Total fixed charges $18,600 21,073 53,304 57,809
======= ======= ======= =======
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS:
Fixed charges $18,600 21,073 53,304 57,809
PSOP preferred stock dividends 4,458 4,523 13,422 13,615
Dividends on monthly income
preferred securities 3,105 3,105 9,315 4,658
------- ------- ------- -------
Total fixed charges and preferred
stock dividends $26,163 28,701 76,041 76,082
======= ======= ======= =======
Ratio of earnings to fixed charges (2) - 9.45 4.68 9.12
======= ======= ======= =======
Ratio of earnings to combined fixed charges
and preferred stock dividends (2) - 6.94 3.28 6.93
======= ======= ======= =======
(1) Interest portion deemed implicit in total rent expense.
(2) The 1996 third quarter loss was inadequate to cover "fixed
charges" by $136.5 million and "combined fixed charges and
preferred stock dividends" by $144.1 million.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 11,581,950
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 840,369
<MORTGAGE> 0
<REAL-ESTATE> 609,245
<TOTAL-INVEST> 14,119,951
<CASH> 33,646
<RECOVER-REINSURE> 59,654
<DEFERRED-ACQUISITION> 406,254
<TOTAL-ASSETS> 20,451,863
<POLICY-LOSSES> 11,735,119
<UNEARNED-PREMIUMS> 2,578,197
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 707,560
0
16,765
<COMMON> 465,827
<OTHER-SE> 3,391,040
<TOTAL-LIABILITY-AND-EQUITY> 20,451,863
3,254,868
<INVESTMENT-INCOME> 616,223
<INVESTMENT-GAINS> 132,981
<OTHER-INCOME> 421,379
<BENEFITS> 2,440,204
<UNDERWRITING-AMORTIZATION> 712,015
<UNDERWRITING-OTHER> 1,077,225
<INCOME-PRETAX> 196,007
<INCOME-TAX> (191,801)
<INCOME-CONTINUING> 387,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 387,808
<EPS-PRIMARY> 4.50
<EPS-DILUTED> 4.24
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
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</TABLE>
