<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 June 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 August 8, 1996, was 83,281,695.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income (Unaudited), Three
and Six Months Ended June 30, 1996 and 1995 3
Consolidated Balance Sheets, June 30, 1996
(Unaudited) and December 31, 1995 4
Consolidated Statements of Shareholders' Equity,
Six Months Ended June 30, 1996 (Unaudited) and
Twelve Months Ended December 31, 1995 6
Consolidated Statements of Cash Flows (Unaudited),
Six Months Ended June 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 Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Premiums earned $1,055,384 991,827 2,085,960 1,937,897
Net investment income 204,051 190,176 404,551 376,565
Insurance brokerage fees
and commissions 74,979 77,052 143,088 144,113
Investment banking-asset
management 52,584 54,262 105,924 107,878
Realized investment gains 47,505 9,347 95,425 12,324
Other 16,618 8,064 24,864 19,410
--------- --------- --------- ----------
Total revenues 1,451,121 1,330,728 2,859,812 2,598,187
--------- --------- --------- ----------
Expenses:
Insurance losses and loss
adjustment expenses 778,801 723,390 1,534,261 1,403,829
Policy acquisition expenses 231,791 219,228 462,279 426,922
Operating and administrative 272,078 244,856 530,741 476,036
--------- --------- --------- ---------
Total expenses 1,282,670 1,187,474 2,527,281 2,306,787
--------- --------- --------- ---------
Income before income taxes 168,451 143,254 332,531 291,400
Income tax expense (benefit):
Federal current 37,170 44,192 72,567 91,260
Other 1,228 (13,905) 1,090 (23,423)
--------- --------- --------- ---------
Total income tax expense 38,398 30,287 73,657 67,837
--------- --------- --------- ---------
Net income $130,053 112,967 258,874 223,563
========= ========= ========= =========
Earnings per common share:
Primary $1.51 1.30 3.00 2.57
========= ========= ========= =========
Fully diluted $1.42 1.24 2.83 2.47
========= ========= ========= =========
Dividends declared on
common stock $0.44 0.40 0.88 0.80
========= ========= ========= =========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
June 30, December 31,
ASSETS 1996 1995
- ------ ---------- ----------
(Unaudited)
Investments:
Fixed maturities, at estimated market value $10,257,774 10,372,890
Equities, at estimated market value 802,117 711,471
Real estate, at cost less accumulated
depreciation of $75,114 (1995; $68,795) 611,614 611,656
Venture capital, at estimated market value 442,236 388,599
Other investments 49,210 42,776
Short-term investments, at cost 1,022,983 939,528
---------- ----------
Total investments 13,185,934 13,066,920
Cash 33,159 34,440
Investment banking inventory securities 64,937 249,662
Reinsurance recoverables:
Unpaid losses 1,789,508 1,853,817
Paid losses 70,301 74,568
Receivables:
Underwriting premiums 1,317,428 1,316,560
Insurance brokerage activities 687,816 652,801
Interest and dividends 196,660 197,740
Other 113,140 81,885
Deferred policy acquisition expenses 371,383 372,174
Ceded unearned premiums 184,246 226,943
Deferred income taxes 640,356 528,805
Office properties and equipment, at cost
less accumulated depreciation
of $300,366 (1995; $277,759) 455,531 478,286
Goodwill 313,666 314,457
Other assets 184,416 207,444
---------- ----------
Total assets $19,608,481 19,656,502
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
(In thousands)
June 30, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
- ------------------------------------ ------------ -----------
(Unaudited)
Liabilities:
Insurance reserves:
Losses and loss adjustment expenses $10,354,052 10,247,070
Unearned premiums 2,242,500 2,361,028
---------- ----------
Total insurance reserves 12,596,552 12,608,098
Debt 695,552 704,042
Payables:
Insurance brokerage activities 983,041 979,964
Income taxes 192,639 179,249
Reinsurance premiums 137,337 139,058
Accrued expenses and other 574,533 618,903
Other liabilities 523,874 490,067
---------- ----------
Total liabilities 15,703,528 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; 992 shares
outstanding (999 shares in 1995) 143,336 144,165
Guaranteed obligation - PSOP (130,523) (133,293)
---------- ----------
Total preferred shareholders' equity 12,813 10,872
---------- ----------
Common:
Common stock, 240,000 shares authorized; 83,445
shares outstanding (83,976 shares in 1995) 464,844 460,458
Retained earnings 2,848,500 2,704,075
Guaranteed obligation - ESOP (25,909) (32,294)
Unrealized appreciation of investments 444,241 627,791
Unrealized loss on foreign currency translation (46,536) (40,781)
---------- ----------
Total common shareholders' equity 3,685,140 3,719,249
---------- ----------
Total shareholders' equity 3,697,953 3,730,121
---------- ----------
Total liabilities, redeemable preferred
securities and shareholders' equity $19,608,481 19,656,502
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(In thousands)
Six Twelve
Months Ended Months Ended
June 30, December 31,
1996 1995
------------ ------------
Preferred shareholders' equity: (Unaudited)
Series B convertible preferred stock:
Beginning of period $144,165 146,102
Change during period (829) (1,937)
---------- ----------
End of period 143,336 144,165
---------- ----------
Guaranteed obligation - PSOP:
Beginning of period (133,293) (141,567)
Principal payments 2,770 8,274
---------- ----------
End of period (130,523) (133,293)
---------- ----------
Total preferred shareholders' equity 12,813 10,872
---------- ----------
Common shareholders' equity:
Common stock:
Beginning of period 460,458 445,222
Stock issued under stock option
and other incentive plans 8,707 19,481
Reacquired common shares (4,321) (4,245)
---------- ----------
End of period 464,844 460,458
---------- ----------
Retained earnings:
Beginning of period 2,704,075 2,362,286
Net income 258,874 521,209
Dividends declared on common stock (73,155) (133,956)
Dividends declared on preferred stock,
net of taxes (4,324) (8,582)
Reacquired common shares (37,737) (38,291)
Tax benefit on employee stock options and awards 767 1,409
---------- ----------
End of period 2,848,500 2,704,075
---------- ----------
Guaranteed obligation - ESOP:
Beginning of period (32,294) (44,410)
Principal payments 6,385 12,116
---------- ----------
End of period (25,909) (32,294)
---------- ----------
Unrealized appreciation of investments, net of
taxes:
Beginning of period 627,791 13,948
Change during the period (183,550) 613,843
---------- ----------
End of period 444,241 627,791
---------- ----------
Unrealized loss on foreign currency
translation, net of taxes:
Beginning of period (40,781) (44,112)
Change during the period (5,755) 3,331
---------- ----------
End of period (46,536) (40,781)
---------- ----------
Total common shareholders' equity 3,685,140 3,719,249
---------- ----------
Total shareholders' equity $3,697,953 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)
Six Months Ended
June 30
--------------------------
1996 1995
------ ------
OPERATING ACTIVITIES
Underwriting:
Net income $276,543 244,253
Adjustments:
Change in net insurance reserves 123,419 334,822
Change in underwriting premiums receivable (5,246) (130,344)
Provision for deferred taxes (18,464) (31,570)
Realized investment gains (88,473) (9,133)
Other 85,277 (102,901)
---------- ----------
Total underwriting 373,056 305,127
---------- ----------
Insurance brokerage:
Net loss (23,307) (23,061)
Adjustments:
Change in premium balances (31,635) 22,410
Change in accounts payable and accrued expenses (32,046) (19,988)
Depreciation and goodwill amortization 16,032 12,241
Other 9,456 23,970
---------- ----------
Total insurance brokerage (61,500) 15,572
---------- ----------
Investment banking-asset management:
Net income 26,679 24,165
Adjustments:
Change in inventory securities 186,110 88,413
Change in short-term investments (163,827) (115,154)
Change in short-term borrowings (25,000) -
Change in open security transactions 4,381 (17,195)
Other (13,689) 37,742
---------- ----------
Total investment banking-asset management 14,654 17,971
---------- ----------
Parent company and consolidating eliminations:
Net loss (21,041) (21,794)
Realized investment gains (6,952) (3,191)
Other adjustments (4,712) 29,931
---------- ----------
Total parent company and
consolidating eliminations (32,705) 4,946
---------- ----------
Net cash provided by operating activities 293,505 343,616
---------- ----------
INVESTING ACTIVITIES
Purchase of investments (1,437,458) (1,272,747)
Proceeds from sales and maturities of investments 1,158,798 850,757
Change in short-term investments 77,654 (33,468)
Change in open security transactions (16,666) 60,929
Net purchases of office properties and equipment (16,090) (22,544)
Other 28,417 (44,759)
---------- ----------
Net cash used in investing activities (205,345) (461,832)
---------- ----------
FINANCING ACTIVITIES
Dividends paid on common and preferred stock (76,217) (71,184)
Proceeds from issuance of company-obligated
mandatorily redeemable preferred
securities of St. Paul Capital L.L.C. - 207,000
Proceeds from issuance of debt 22,586 65,500
Reacquired common shares (41,619) (497)
Repayment of debt - (95,306)
Other 5,748 3,170
---------- ----------
Net cash provided by (used in)
financing activities (89,502) 108,683
---------- ----------
Effect of exchange rate changes on cash 61 140
---------- ----------
Increase (decrease) in cash (1,281) (9,393)
Cash at beginning of period 34,440 46,664
---------- ----------
Cash at end of period $33,159 37,271
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited
June 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 Six Months Ended
June 30 June 30
---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
(In thousands)
PRIMARY
Net income, as reported $130,053 112,967 258,874 223,563
PSOP preferred dividends declared
(net of taxes) (2,159) (2,139) (4,324) (4,285)
Premium on preferred shares redeemed (232) - (440) -
-------- ------- ------- -------
Net income, as adjusted $127,662 110,828 254,110 219,278
======== ======= ======= =======
FULLY DILUTED
Net income, as reported $130,053 112,967 258,874 223,563
Dividends on monthly income preferred
securities (net of taxes) 2,019 1,009 4,037 1,009
Additional PSOP expense (net of taxes)
due to assumed conversion
of preferred stock (755) (871) (1,513) (1,745)
Premium on preferred shares redeemed (232) - (440) -
-------- ------- ------- -------
Net income, as adjusted $131,085 113,105 260,958 222,827
======== ======= ======= =======
ADJUSTED AVERAGE COMMON SHARES
OUTSTANDING
Primary 84,510 85,362 84,838 85,277
======== ======= ======= =======
Fully diluted 92,011 91,157 92,258 90,231
======== ======= ======= =======
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.
Six Months Ended June 30
------------------------------
1996 1995
------ ------
(In thousands)
Purchases:
Fixed maturities $857,188 761,513
Equities 503,952 376,182
Real estate 12,338 102,426
Venture capital 50,554 27,344
Other investments 13,426 5,282
--------- ---------
Total purchases 1,437,458 1,272,747
--------- ---------
Proceeds from sales and maturities:
Fixed maturities:
Sales 174,459 126,205
Maturities and redemptions 413,100 352,244
Equities 480,694 334,704
Venture capital 85,525 30,598
Real estate 3,308 4,839
Other investments 1,712 2,167
--------- ---------
Total sales and maturities 1,158,798 850,757
--------- ---------
Net purchases $278,660 421,990
========= =========
<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:
Six Months Ended Twelve Months Ended
June 30, 1996 December 31, 1995
------------------ -------------------
(In thousands)
Fixed maturities $(352,325) 742,626
Equities 20,750 130,247
Venture capital 51,212 59,880
-------- -------
Total change in pretax
unrealized appreciation (280,363) 932,753
Increase (decrease) in deferred
tax asset due to change
in unrealized appreciation 96,813 (318,910)
-------- --------
Total change in unrealized
appreciation, net of taxes $(183,550) 613,843
======== ========
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 $348
million at June 30, 1996, and $380 million at December 31,
1995.
<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 Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
------ ------ ------ ------
(In thousands)
Federal current tax expense $37,170 44,192 72,567 91,260
Federal deferred tax benefit (8,784) (17,396) (16,231) (31,017)
------- ------- ------- -------
Total federal income tax
expense 28,386 26,796 56,336 60,243
Foreign income taxes 8,568 2,265 14,461 5,135
State income taxes 1,444 1,226 2,860 2,459
------- ------- ------- -------
Total income tax expense $38,398 30,287 73,657 67,837
======= ======= ======= =======
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.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 6 Debt
- ------------
Debt consists of the following:
June 30, December 31,
1996 1995
------------------ -----------------
Book Fair Book Fair
Value Value Value Value
----- ----- ----- -----
(In thousands)
Medium-term notes $397,430 393,900 397,433 419,500
Commercial paper 171,799 171,799 149,629 149,629
9 3/8% notes 99,988 102,900 99,982 105,300
Guaranteed ESOP debt 19,446 20,100 25,001 26,200
Pound sterling loan notes 6,889 6,889 6,997 6,997
Short-term borrowings - - 25,000 25,000
------- ------- ------- -------
Total debt $695,552 695,588 704,042 732,626
======= ======= ======= =======
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 Six Months Ended
June 30 June 30
-------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Premiums written:
Direct $910,911 947,804 1,693,621 1,752,006
Assumed 292,249 307,008 515,859 525,522
Ceded (125,234) (159,686) (196,943) (266,039)
--------- --------- --------- ---------
Net premiums written $1,077,926 1,095,126 2,012,537 2,011,489
========= ========= ========= =========
Premiums earned:
Direct $927,064 921,372 1,845,185 1,786,954
Assumed 249,887 239,556 479,646 433,745
Ceded (121,567) (169,101) (238,871) (282,802)
--------- --------- --------- ---------
Net premiums earned $1,055,384 991,827 2,085,960 1,937,897
========= ========= ========= =========
Insurance losses and loss
adjustment expenses:
Direct $672,799 666,432 1,296,288 1,241,982
Assumed 190,023 170,814 379,422 375,546
Ceded (84,021) (113,856) (141,449) (213,699)
--------- --------- --------- ---------
Net insurance losses and
loss adjustment expenses $778,801 723,390 1,534,261 1,403,829
========= ========= ========= =========
Note 8 Acquisition of Northbrook Holdings Inc.
- -----------------------------------------------
In June 1996, the company announced an agreement with
The Allstate Corporation to purchase Northbrook
Holdings Inc., an Allstate subsidiary which
underwrites various commercial insurance products
throughout the United States. The acquisition of
Northbrook was completed on July 31, 1996, for a total
cost of $184 million, which was provided from internal
funds.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
June 30, 1996
Consolidated Results
- --------------------
Consolidated pretax earnings of $168 million in
the second quarter of 1996 were 18% higher than
comparable 1995 earnings of $143 million. The
improvement over 1995 was primarily due to a
significant increase in realized investment gains
in the underwriting segment, largely resulting
from sales of venture capital investments and
equity securities. These gains more than offset
an increase in other expenses in the underwriting
segment during the quarter. Year-to-date pretax
earnings of $333 million increased 14% over 1995's
six-month earnings, primarily due to an $83
million increase in pretax realized investment
gains, which was partially offset by a catastrophe-
driven $40 million deterioration in underwriting
results.
Net income in the second quarter was $130 million,
or $1.42 per share, compared with net income of
$113 million, or $1.24 per share, in the second
quarter of 1995. Net income of $259 million, or
$2.83 per share, for the first six months of 1996
increased 16% over comparable 1995 net income of
$224 million, or $2.47 per share.
Consolidated revenues in the second quarter
totaled $1.45 billion, an increase of 9% over
second quarter 1995 revenues of $1.33 billion.
Year-to-date revenues in 1996 were 10% higher than
the same period of 1995. Growth in insurance
premiums earned, realized investment gains and
investment income drove the increased revenue in
1996.
Results by Segment
- ------------------
Pretax results by industry segment were as follows (in
millions):
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Pretax income (loss):
Underwriting:
GAAP underwriting results ($39) (26) (81) (41)
Net investment income 194 181 383 359
Realized investment gains 46 8 88 9
Other (32) (18) (48) (22)
---- ---- ---- ----
Total underwriting 169 145 342 305
Insurance brokerage (5) (4) (18) (18)
Investment banking-asset management 22 20 43 39
Parent and other (18) (18) (34) (35)
---- ---- ---- ----
Income before income taxes $168 143 333 291
==== ==== ==== ====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Underwriting
- ------------
The following summarizes key financial results by
underwriting operation:
% of Three Months Six Months
1996 Ended June 30 Ended June 30
Written -------------- --------------
($ in Millions) Premiums 1996 1995 1996 1995
- --------------- -------- ---- ---- ---- ----
Specialized Commercial:
Written Premiums 30% $340 355 604 639
Underwriting Results $19 (26) 9 (46)
Combined Ratio 94.1 106.0 99.5 106.2
Personal Insurance:
Written Premiums 18% $189 179 353 329
Underwriting Results ($61) (3) (89) (10)
Combined Ratio 134.0 101.1 125.5 102.7
Commercial:
Written Premiums 15% $155 142 310 289
Underwriting Results ($2) (11) (11) (15)
Combined Ratio 102.7 107.9 104.4 105.2
Medical Services:
Written Premiums 10% $98 129 200 266
Underwriting Results $20 25 40 51
Combined Ratio 94.2 85.8 94.3 85.5
---- ----- ----- ----- -----
Total St. Paul Fire &
Marine:
Written Premiums 73% $782 805 1,467 1,523
Underwriting Results ($24) (15) (51) (20)
Combined Ratio 104.5 101.3 105.3 101.2
International:
Written Premiums 6% $56 46 113 88
Underwriting Results ($6) (12) (12) (17)
Combined Ratio 112.0 127.5 112.1 120.8
---- ----- ----- ----- -----
Total Worldwide Insurance:
Written Premiums 79% $838 851 1,580 1,611
Underwriting Results ($30) (27) (63) (37)
Combined Ratio 105.0 102.9 105.8 102.4
Reinsurance:
Written Premiums 21% $240 244 433 400
Underwriting Results ($9) 1 (18) (4)
Combined Ratio 102.0 95.5 103.2 99.4
---- ----- ----- ----- -----
Total:
Written Premiums 100% $1,078 1,095 2,013 2,011
GAAP Underwriting Results ($39) (26) (81) (41)
Statutory Combined Ratio:
Loss and Loss Expense Ratio 73.8 72.9 73.6 72.4
Underwriting Expense Ratio 30.5 28.5 31.6 29.3
----- ----- ----- -----
Combined Ratio 104.3 101.4 105.2 101.7
===== ===== ===== =====
Combined Ratio Including
Policyholders' Dividends 104.4 101.6 105.3 101.9
===== ===== ===== =====
<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.
The underwriting segment posted pretax earnings of $169 million
in the second quarter, 17% higher than pretax earnings of $145
million in the same quarter of 1995. A $38 million increase in
realized investment gains more than offset the $13 million
deterioration in underwriting results and a $14 million increase
in other expenses, which resulted from the company's agreement to
settle a lawsuit (see "Legal Matters" section on page 20). Year-
to-date pretax earnings of $342 million grew 12% over the first
half of 1995, primarily due to a $79 million increase in realized
investment gains.
Second quarter 1996 written premiums of $1.08 billion were 2%
below comparable 1995 premiums of $1.10 billion. Medical
Services premium volume of $98 million for the quarter was down
25% from the same period of 1995, reflecting the impact of the
transition to annual policy terms in the second half of last
year, as well as the increasingly competitive medical insurance
market. Specialized Commercial premiums were down 4% compared to
the second quarter of 1995, primarily due to a decline in volume
in the Construction line of business. Personal Insurance and
Commercial premiums increased over the second quarter of 1995,
due to new business.
Written premiums for the first half of 1996 were level with those
in the same period of 1995. Premium declines of $66 million and
$35 million in Medical Services and Specialized Commercial,
respectively, were offset by premium growth in all other
underwriting segments.
The second quarter 1996 GAAP underwriting loss was $39 million,
compared with 1995's second quarter loss of $26 million.
Catastrophe losses in the second quarter of 1996 totaled $52
million, largely resulting from Midwestern storms in April and
May. Catastrophe losses in last year's second quarter were $55
million. Key factors in the increase in second quarter
underwriting losses compared to 1995 were as follows:
- Specialized Commercial - $45 million better than 1995 - A
significant decline in losses resulting from the
company's reduced participation in insurance pool
arrangements was the primary factor in the improvement
over 1995.
- Commercial - $8 million better than 1995 - Favorable
current year loss experience accounted for the reduction
in losses from the second quarter of 1995.
- Personal Insurance - $58 million worse than 1995 - A $26
million increase in catastrophe losses and other adverse
current year loss experience on monoline personal
coverages were the primary contributors to the
deterioration from 1995.
- Reinsurance - $10 million worse than 1995 - An increase
in noncatastrophe losses drove the decline from 1995.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
The year-to-date GAAP underwriting loss of $81 million was almost
twice the 1995 six-month loss of $41 million. Catastrophe losses
in the first half of 1996 totaled $115 million, compared with $71
million for the same period of 1995. This increase in
catastrophe losses, coupled with a significant increase in
noncatastrophe losses in Personal Insurance, more than offset the
$55 million improvement in Specialized Commercial results
compared to the first half of 1995.
Pretax investment income in the underwriting segment for the
second quarter was $194 million, up 7% from $181 million in 1995.
Year-to-date investment income was $24 million ahead of last
year. The increase over 1995 was primarily due to strong
investment cash flows, which have fueled a $735 million increase
in fixed-maturity investments over the last twelve months. Fixed
maturities purchased in the first half of 1996 were predominantly
tax-exempt securities.
The weighted average pretax yield on the underwriting segment's
fixed maturities portfolio was 7.2% at June 30, 1996, and
approximately 96% of that portfolio 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.
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).
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
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 six months
ended June 30, 1996, and the years ended Dec. 31, 1995 and 1994.
Amounts in the "net" column are reduced by reinsurance
recoverable.
1996
Pollution (six months) 1995 1994
- --------- ----------- ----------- -----------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $528 319 275 200 105 73
Incurred losses 15 10 59 68 71 56
Reserve reallocation - - 233 79 132 95
Paid losses (14) (11) (39) (28) (33) (24)
--- --- --- --- --- ---
Ending reserves $529 318 528 319 275 200
=== === === === === ===
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 six
months ended June 30, 1996, and the years ended Dec. 31, 1995 and
1994:
1996
Asbestos (six months) 1995 1994
-------- ----------- ----------- -----------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $283 158 185 145 62 48
Incurred losses (5) 2 (13) (9) 13 14
Reserve reallocation - - 127 34 127 95
Paid losses (12) (6) (16) (12) (17) (12)
--- --- --- --- --- ---
Ending reserves $266 154 283 158 185 145
=== === === === === ===
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.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
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 June 30, 1996,
of $795 million represented 8% of gross consolidated
reserves of $10.4 billion.
Legal Matters
- -------------
In May 1995, a purported class action lawsuit brought in the
District Court of Brazoria County, Texas, was served on three of
the company's subsidiaries on behalf of persons who, from 1983
through 1985, purchased interests in certain limited partnerships
for which Damson Oil Corporation served as general partner. The
complaint sought unspecified actual damages, treble damages,
punitive damages, attorneys' fees, costs, and pre- and post-
judgment interest. In April 1995, plaintiffs sent the company's
subsidiaries a letter under the Texas Deceptive Trade Practices
Act demanding $400 million of alleged actual damages plus
unspecified attorneys' fees in settlement of their claims.
During the second quarter of 1996, the company, pursuant to an
oral understanding with the plaintiffs, recorded an expense of
$16 million, which, in addition to a previously recorded provision
of $9 million, would settle all claims associated with this lawsuit.
The defendants and plaintiffs recently entered into a written
agreement, which is subject to approval by the Texas court with
jurisdiction over the case, to settle all claims and related expenses
associated with this lawsuit for approximately $25 million.
Insurance Brokerage
- -------------------
The insurance brokerage segment (Minet) incurred a pretax loss of
$5 million in the second quarter, slightly worse than the
comparable 1995 loss of $4 million. Minet's pretax loss for the
first half of 1996 was $18 million, level with the first six
months of 1995. Brokerage fees and commissions for the quarter
were 4% below 1995. Year-to-date fees and commissions were level
with 1995. The competitive market environment for brokerage
services worldwide has negatively impacted Minet's efforts to
increase revenues. The company is in the process of examining a
number of near-term strategic options for Minet.
Investment Banking-Asset Management
- -----------------------------------
The company's portion of The John Nuveen Company's second quarter
pretax earnings was $22 million, compared with $20 million in
1995. For the first half of 1996, the company's portion was $43
million, compared with $39 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, but operating expenses were down
14%. Assets under management totaled $31.4 billion at June 30,
down slightly from year-end 1995 due to a decline in the value of
underlying fund investments. Unit Investment Trust sales in the
first half of 1996 were $491 million, down from sales of $570 for
the same period of 1995. Second quarter sales of $276 million,
however, were slightly higher than the comparable 1995 total.
Capital Resources
- -----------------
Common shareholders' equity totaled $3.69 billion at the end of
the second quarter, down slightly from year-end 1995 despite $259
million of net income for the first half of 1996. The after-tax
appreciation of the company's fixed maturities investment
portfolio has declined $230 million in 1996, reflecting the
impact of rising interest rates on the bond markets. The company's
equity and venture capital portfolios experienced a $47 million
increase in their after-tax appreciation in the first half of
1996. The company has repurchased and retired 782,000 shares of
its common stock for a total cost of $42 million in 1996.
In June 1996, the company announced an agreement with The
Allstate Corporation to purchase Northbrook Holdings Inc., an
Allstate subsidiary which underwrites various commercial
insurance products throughout the United States. The Northbrook
purchase was completed on July 31, 1996, for a total cost of $184
million, which was provided from internal funds.
Total debt outstanding at the end of the quarter was $696
million, down slightly from $704 million at the end of 1995. The
ratio of debt to total capitalization at June 30, 1996, was 15%,
unchanged from year-end 1995. In June 1996, the company filed a
shelf registration statement with the Securities and Exchange
Commission which will give the company the capacity to issue $275
million of additional debt in the future.
In July 1996, The John Nuveen Company, in which the company holds
a 78% majority interest, announced its intention to repurchase up
to 3.5 million of its outstanding common shares. The repurchases
will be proportioned between minority shareholders and the
company in order to maintain the company's 78% ownership. If
Nuveen were to complete the repurchase of those shares at the
current market price, the total proceeds to the company would be
approximately $70 million.
The company's ratio of earnings to fixed charges was 10.58 for
the first six months of 1996, compared with 8.93 for the same
period of 1995. The company's ratio of earnings to combined
fixed charges and preferred stock dividends was 7.36 for the
first six months of 1996, compared with 6.93 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>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
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 $294 million in the first
half of 1996, compared with $344 million in 1995. The company's
liquidity position remains strong due to cash flows from the
underwriting segment.
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 May 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 allegedly paid $400 million from 1983
through 1985 for interests in certain limited
partnerships that Damson Oil Corporation ("Damson")
served as general partner. The complaint in this
lawsuit (Olin Nelson, et al. v. St. Paul Fire and Marine
Insurance Company, St. Paul Surplus Lines Insurance
Company ("Surplus Lines") and St. Paul Specialty
Underwriting, Inc.) alleged, among other things, that
the defendants conspired with Damson to mislead the
investors as to the protection afforded by certain
insurance policies issued by Surplus Lines in violation
of the Texas Deceptive Trade Practices Act and other
laws. The plaintiffs sought unspecified actual damages,
treble damages, punitive damages, attorney fees, costs,
and pre- and post-judgment interest. During the second
quarter of 1996, the company, pursuant to an oral
understanding with the plaintiffs, recorded an expense of
$16 million, which, in addition to a previously recorded
provision of $9 million, would settle all claims
associated with this lawsuit. The defendants and
plaintiffs recently entered into a written agreement,
which is subject to approval by the Texas court with
jurisdiction over the case, to settle all claims and related
expenses associated with this lawsuit for approximately
$25 million.
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.
The Registrant's annual shareholders' meeting was held
on May 7, 1996.
<PAGE>
(1) All twelve persons nominated for directors by
management were named in proxies for the
meeting which were solicited pursuant to
Regulation 14A of the Securities Exchange Act
of 1934. There was no solicitation in
opposition to management's nominees as listed
in the proxy statements. All twelve nominees
were elected by the following votes:
In favor Withheld
-------- --------
Michael R. Bonsignore 74,435,964 318,551
John H. Dasburg 74,344,441 410,074
W. John Driscoll 74,383,632 370,883
Pierson M. Grieve 74,393,753 360,762
Ronald James 74,423,368 331,147
William H. Kling 74,360,893 393,622
Douglas W. Leatherdale 74,351,405 403,110
Bruce K. MacLaury 74,420,698 333,817
Glen D. Nelson 74,424,692 329,823
Anita M. Pampusch 74,418,508 336,007
Gordon M. Sprenger 74,416,523 337,992
Patrick A. Thiele 74,418,520 335,995
(2) By a vote of 74,204,593 in favor, 298,205
against and 251,717 abstaining, the
shareholders ratified the selection of KPMG
Peat Marwick LLP as the independent auditors
for the Registrant.
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 25
of this report.
(b) Reports on Form 8-K.
The Registrant filed a Form 8-K Current Report
dated June 18, 1996, pertaining to the press
release of the announcement of the Registrant's
agreement to acquire Northbrook Holdings Inc. from
The Allstate Corporation.
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.
<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: August 12, 1996 By /s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Vice President
and Corporate Secretary
(Authorized Signatory)
Date: August 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 Six Months Ended
June 30 June 30
------------------ -----------------
1996 1995 1996 1995
----- ----- ----- -----
EARNINGS:
Primary:
Net income, as reported $130,053 112,967 258,874 223,563
PSOP preferred dividends declared
(net of taxes) (2,159) (2,139) (4,324) (4,285)
Premium on preferred shares redeemed (232) - (440) -
-------- -------- -------- --------
Net income, as adjusted $127,662 110,828 254,110 219,278
======== ======== ======== ========
Fully diluted:
Net income, as reported $130,053 112,967 258,874 223,563
Dividends on monthly income
preferred securities
(net of taxes) 2,019 1,009 4,037 1,009
Additional PSOP expense (net of
taxes) due to assumed conversion of
preferred stock (755) (871) (1,513) (1,745)
Premium on preferred shares redeemed (232) - (440) -
-------- -------- -------- --------
Net income, as adjusted $131,085 113,105 260,958 222,827
======== ======== ======== ========
SHARES:
Primary:
Weighted average number of common
shares outstanding, per consolidated
financial statements 83,522 84,414 83,749 84,340
Additional dilutive effect of
assumed exercise of outstanding
stock options (based on treasury
stock method using
average market price) 988 948 1,089 937
-------- -------- -------- --------
Weighted average, as adjusted 84,510 85,362 84,838 85,277
======== ======== ======== ========
Fully diluted:
Weighted average number of common
shares outstanding, per consolidated
financial statements 83,522 84,414 83,749 84,340
Additional dilutive effect of:
Assumed conversion of PSOP
preferred stock 3,977 4,034 3,984 4,040
Assumed conversion of monthly
income preferred securities 3,509 1,774 3,509 892
Assumed exercise of outstanding
stock options (based on treasury
stock method using market
price at end of period) 1,003 935 1,016 959
-------- -------- -------- --------
Weighted average, as adjusted 92,011 91,157 92,258 90,231
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Primary $1.51 1.30 3.00 2.57
Fully diluted $1.42 1.24 2.83 2.47
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Exhibit 12
Computation of Ratios
(In thousands, except ratios)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
----- ----- ----- -----
EARNINGS:
Income before income taxes $168,451 143,254 332,531 291,400
Add: fixed charges 17,584 19,291 34,703 36,736
------- ------- ------- -------
Income, as adjusted $186,035 162,545 367,234 328,136
======= ======= ======= =======
FIXED CHARGES:
Interest costs $12,724 13,740 25,148 25,357
Rental expense (1) 4,860 5,551 9,555 11,379
------- ------- ------- -------
Total fixed charges $17,584 19,291 34,703 36,736
======= ======= ======= =======
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS:
Fixed charges $17,584 19,291 34,703 36,736
PSOP preferred stock dividends 4,474 4,538 8,963 9,092
Dividends on monthly income
preferred securities 3,105 1,553 6,210 1,553
------- ------- ------- -------
Total fixed charges and preferred
stock dividends $25,163 25,382 49,876 47,381
======= ======= ======= =======
Ratio of earnings to fixed charges 10.58 8.43 10.58 8.93
======= ======= ======= =======
Ratio of earnings to combined fixed charges
and preferred stock dividends 7.39 6.40 7.36 6.93
======= ======= ======= =======
(1) Interest portion deemed implicit in total rent expense.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 10,257,774
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 802,117
<MORTGAGE> 0
<REAL-ESTATE> 611,614
<TOTAL-INVEST> 13,185,934
<CASH> 33,159
<RECOVER-REINSURE> 70,301
<DEFERRED-ACQUISITION> 371,383
<TOTAL-ASSETS> 19,608,481
<POLICY-LOSSES> 10,354,052
<UNEARNED-PREMIUMS> 2,242,500
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 695,552
<COMMON> 464,844
0
12,813
<OTHER-SE> 3,220,296
<TOTAL-LIABILITY-AND-EQUITY> 19,608,481
2,085,960
<INVESTMENT-INCOME> 404,551
<INVESTMENT-GAINS> 95,425
<OTHER-INCOME> 273,876
<BENEFITS> 1,534,261
<UNDERWRITING-AMORTIZATION> 462,279
<UNDERWRITING-OTHER> 530,741
<INCOME-PRETAX> 332,531
<INCOME-TAX> 73,657
<INCOME-CONTINUING> 258,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258,874
<EPS-PRIMARY> 3.00
<EPS-DILUTED> 2.83
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
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