<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
-------------
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
incorporation or organization) Identification 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, 1997, was 83,864,479.
<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, 1997 and 1996 3
Consolidated Balance Sheets, June 30, 1997
(Unaudited) and December 31, 1996 4
Consolidated Statements of Shareholders' Equity,
Six Months Ended June 30, 1997 (Unaudited) and
Twelve Months Ended December 31, 1996 6
Consolidated Statements of Cash Flows (Unaudited),
Six Months Ended June 30, 1997 and 1996 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 23
EXHIBIT INDEX 24
<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
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Premiums earned $1,165,297 1,055,384 2,336,750 2,085,960
Net investment income 217,570 196,801 436,232 389,180
Realized investment gains 167,914 47,505 263,506 95,425
Investment banking-asset
management 59,755 52,584 118,360 105,924
Other 10,175 12,200 23,066 17,876
--------- --------- --------- ---------
Total revenues 1,620,711 1,364,474 3,177,914 2,694,365
--------- --------- --------- ---------
Expenses:
Insurance losses and loss
adjustment expenses 845,485 778,801 1,714,363 1,534,261
Policy acquisition expenses 272,714 231,791 527,474 462,279
Operating and administrative 194,135 180,907 382,490 347,362
--------- --------- --------- ---------
Total expenses 1,312,334 1,191,499 2,624,327 2,343,902
--------- --------- --------- ---------
Income from continuing
operations before
income taxes 308,377 172,975 553,587 350,463
Income tax expense (benefit):
Federal current 92,773 37,427 157,444 73,082
Other (14,920) 253 (26,680) (2,325)
--------- --------- --------- --------
Total income tax expense 77,853 37,680 130,764 70,757
--------- --------- --------- --------
Income from continuing
operations 230,524 135,295 422,823 279,706
Discontinued operations:
Operating loss, net
of taxes - (5,242) - (20,832)
Loss on disposal, net
of taxes - - (67,750) -
--------- --------- --------- --------
Loss from discontinued
operations - (5,242) (67,750) (20,832)
--------- --------- --------- --------
Net income $230,524 130,053 355,073 258,874
========= ========= ========= ========
Primary earnings per
common share:
Income from continuing
operations $2.68 1.57 4.94 3.24
Loss from discontinued
operations - (0.06) (0.81) (0.24)
-------- --------- --------- --------
Net income $2.68 1.51 4.13 3.00
======== ========= ========= ========
Fully diluted earnings per
common share:
Income from continuing
operations $2.50 1.48 4.59 3.05
Loss from discontinued
operations - (0.06) (0.73) (0.22)
-------- --------- --------- --------
Net income $2.50 1.42 3.86 2.83
======== ========= ========= ========
Dividends declared on
common stock $0.47 0.44 0.94 0.88
======== ========= ========= =======
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
June 30, December 31,
ASSETS 1997 1996
- ------ ---------- ----------
(Unaudited)
Investments:
Fixed maturities, at estimated market value $11,935,094 11,944,085
Equities, at estimated market value 986,124 808,295
Real estate, at cost less accumulated
depreciation of $85,086 (1996; $81,764) 731,876 693,910
Venture capital, at estimated market value 463,112 586,222
Other investments 44,955 43,311
Short-term investments, at cost 422,948 289,793
---------- ----------
Total investments 14,584,109 14,365,616
Cash 54,423 37,214
Investment banking inventory securities 57,603 143,594
Reinsurance recoverables:
Unpaid losses 1,849,941 1,890,105
Paid losses 67,579 68,692
Receivables:
Underwriting premiums 1,541,357 1,558,967
Interest and dividends 209,929 213,883
Other 107,894 104,865
Deferred policy acquisition expenses 398,898 401,768
Ceded unearned premiums 213,272 243,663
Deferred income taxes 941,107 908,220
Office properties and equipment, at cost
less accumulated depreciation
of $243,947 (1996; $217,454) 283,813 281,093
Goodwill 245,689 167,338
Other assets 370,302 295,958
---------- ----------
Total assets $20,925,916 20,680,976
========== ==========
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 1997 1996
- ------------------------------------ ----------- ------------
(Unaudited)
Liabilities:
Insurance reserves:
Losses and loss adjustment expenses $11,743,413 11,673,148
Unearned premiums 2,418,414 2,566,551
---------- ----------
Total insurance reserves 14,161,827 14,239,699
Debt 705,740 689,141
Payables:
Income taxes 256,630 219,081
Reinsurance premiums 169,654 181,524
Accrued expenses and other 581,949 484,062
Other liabilities 635,718 656,649
---------- ----------
Total liabilities 16,511,518 16,470,156
---------- ----------
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; 974 shares
outstanding (985 shares in 1996) 140,998 142,131
Guaranteed obligation - PSOP (123,000) (126,068)
---------- ----------
Total preferred shareholders' equity 17,998 16,063
---------- ----------
Common:
Common stock, 240,000 shares authorized; 83,741
shares outstanding (83,198 shares in 1996) 496,905 475,710
Retained earnings 3,209,879 2,935,928
Guaranteed obligation - ESOP (14,009) (20,353)
Unrealized appreciation of investments 511,822 616,968
Unrealized loss on foreign currency translation (15,197) (20,496)
---------- ----------
Total common shareholders' equity 4,189,400 3,987,757
---------- ----------
Total shareholders' equity 4,207,398 4,003,820
---------- ----------
Total liabilities, redeemable preferred
securities and shareholders' equity $20,925,916 20,680,976
========== ==========
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,
1997 1996
------------ ------------
Preferred shareholders' equity: (Unaudited)
Series B convertible preferred stock:
Beginning of period $142,131 144,165
Change during period (1,133) (2,034)
---------- ----------
End of period 140,998 142,131
---------- ----------
Guaranteed obligation - PSOP:
Beginning of period (126,068) (133,293)
Principal payments 3,068 7,225
---------- ----------
End of period (123,000) (126,068)
---------- ----------
Total preferred shareholders' equity 17,998 16,063
---------- ----------
Common shareholders' equity:
Common stock:
Beginning of period 475,710 460,458
Stock issued under stock incentive plans 21,246 21,393
Stock issued for acquisition - 1,664
Reacquired common shares (51) (7,805)
---------- ----------
End of period 496,905 475,710
---------- ----------
Retained earnings:
Beginning of period 2,935,928 2,704,075
Net income 355,073 450,099
Dividends declared on common stock (78,342) (145,956)
Dividends declared on PSOP
preferred stock, net of taxes (4,353) (8,664)
Reacquired common shares (515) (67,445)
Tax benefit on employee stock options and awards 2,088 3,819
---------- ----------
End of period 3,209,879 2,935,928
---------- ----------
Guaranteed obligation - ESOP:
Beginning of period (20,353) (32,294)
Principal payments 6,344 11,941
---------- ----------
End of period (14,009) (20,353)
---------- ----------
Unrealized appreciation of investments, net of
taxes:
Beginning of period 616,968 627,791
Change during the period (105,146) (10,823)
---------- ----------
End of period 511,822 616,968
---------- ----------
Unrealized loss on foreign currency
translation, net of taxes:
Beginning of period (20,496) (40,781)
Currency translation adjustments 5,299 (5,309)
Realized loss relating to
discontinued operations - 25,594
---------- ----------
End of period (15,197) (20,496)
---------- ----------
Total common shareholders' equity 4,189,400 3,987,757
---------- ----------
Total shareholders' equity $4,207,398 4,003,820
========== ==========
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
--------------------
1997 1996
------ ------
OPERATING ACTIVITIES
Underwriting:
Net income 407,895 276,543
Adjustments:
Change in net insurance reserves (44,119) 123,419
Change in underwriting premiums receivable 43,038 (5,246)
Deferred tax benefit (12,209) (18,464)
Realized investment gains (259,537) (88,473)
Other 23,104 85,277
---------- ----------
Total underwriting 158,172 373,056
---------- ----------
Investment banking-asset management:
Net income 26,681 26,679
Adjustments:
Change in inventory securities 85,991 186,110
Change in short-term investments (25,326) (163,827)
Change in short-term borrowings - (25,000)
Change in open security transactions 2,398 4,381
Other (15,095) (13,689)
---------- ----------
Total investment banking-asset management 74,649 14,654
---------- ----------
Parent company and consolidating eliminations:
Net loss from continuing operations (11,753) (23,516)
Adjustments:
Realized investment gains (3,969) (6,952)
Other (35,037) (2,237)
---------- ----------
Total parent company and
consolidating eliminations (50,759) (32,705)
---------- ----------
Net cash provided by operating activities 182,062 355,005
---------- ----------
Cash outflow resulting from sale of
discontinued operations (20,284) -
---------- ----------
INVESTING ACTIVITIES
Purchase of investments (1,546,239) (1,437,458)
Proceeds from sales and maturities
of investments 1,525,478 1,158,798
Change in short-term investments (96,902) 18,174
Change in open security transactions 38,633 (16,666)
Net purchases of office properties and equipment (24,764) (13,710)
Other 12,410 21,699
---------- ----------
Net cash used in investing activities (91,384) (269,163)
---------- ----------
FINANCING ACTIVITIES
Dividends paid on common and preferred stock (81,550) (76,217)
Proceeds from issuance of debt 122,186 22,586
Repayment of debt (100,000) -
Repurchase of common shares (566) (41,619)
Other 6,701 5,856
---------- ----------
Net cash used in financing activities (53,229) (89,394)
---------- ----------
Effect of exchange rate changes on cash 44 (49)
---------- ----------
Increase (decrease) in cash 17,209 (3,601)
Cash at beginning of period 37,214 25,475
---------- ----------
Cash at end of period 54,423 21,874
========== ==========
See notes to consolidated financial statements.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited
June 30, 1997
Note 1 Basis of Presentation
- -----------------------------
The financial statements include The St. Paul Companies, Inc. and
subsidiaries, and have been prepared in conformity with generally
accepted accounting principles.
These consolidated 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 53 to 69 of the Registrant's annual report
to shareholders for the year ended December 31, 1996. 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 1996 consolidated financial statements have
been reclassified to conform with the 1997 presentation. These
reclassifications had no effect on net income or 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
------------------ -----------------
1997 1996 1997 1996
------ ------ ------ ------
(In thousands)
PRIMARY
Net income, as reported $230,524 130,053 355,073 258,874
PSOP preferred dividends declared
(net of taxes) (2,168) (2,159) (4,353) (4,324)
Premium on preferred shares redeemed (651) (232) (911) (440)
-------- ------- ------- -------
Net income, as adjusted $227,705 127,662 349,809 254,110
======== ======= ======= =======
FULLY DILUTED
Net income, as reported $230,524 130,053 355,073 258,874
Dividends on monthly income preferred
securities (net of taxes) 2,019 2,019 4,037 4,037
Additional PSOP expense (net of taxes)
due to assumed conversion
of preferred stock (666) (755) (1,336) (1,513)
Premium on preferred shares redeemed (651) (232) (911) (440)
-------- ------- ------- -------
Net income, as adjusted $231,226 131,085 356,863 260,958
======== ======= ======= =======
ADJUSTED AVERAGE COMMON SHARES
OUTSTANDING
Primary 84,849 84,510 84,679 84,838
====== ====== ====== ======
Fully diluted 92,425 92,011 92,345 92,258
====== ====== ====== ======
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
----------------------------
1997 1996
------ ------
(In thousands)
Purchases:
Fixed maturities $683,639 857,188
Equities 712,474 503,952
Real estate 72,889 12,338
Venture capital 57,222 50,554
Other investments 20,015 13,426
--------- ---------
Total purchases 1,546,239 1,437,458
--------- ---------
Proceeds from sales and maturities:
Fixed maturities:
Sales 379,770 174,459
Maturities and redemptions 258,575 413,100
Equities 675,707 480,694
Venture capital 180,973 85,525
Real estate 26,991 3,308
Other investments 3,462 1,712
--------- ---------
Total sales and maturities 1,525,478 1,158,798
--------- ---------
Net purchases $20,761 278,660
========= =========
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, 1997 December 31, 1996
------------------- ---------------------
(In thousands)
Fixed maturities $(63,174) (198,855)
Equities 41,873 25,975
Venture capital (140,472) 163,110
----------- -----------
Total change in pretax
unrealized appreciation (161,773) (9,770)
Increase (decrease) in
deferred tax asset 56,627 (1,053)
----------- -----------
Total change in unrealized
appreciation, net of taxes $(105,146) (10,823)
=========== ===========
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 4 Income Taxes
- --------------------
The components of income tax expense on continuing operations are as
follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
1997 1996 1997 1996
------ ------ ------ ------
(In thousands)
Federal current tax expense $92,773 37,427 157,444 73,082
Federal deferred tax benefit (21,137) (8,143) (39,026) (16,018)
--------- --------- --------- ---------
Total federal income tax
expense 71,636 29,284 118,418 57,064
Foreign income taxes 4,723 6,952 9,329 10,833
State income taxes 1,494 1,444 3,017 2,860
--------- --------- --------- ---------
Total income tax expense on
continuing operations $77,853 37,680 130,764 70,757
========= ========= ========= =========
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,
1997 1996
---------------------- ------------------
Book Fair Book Fair
Value Value Value Value
------ ------ ------ ------
(In thousands)
Medium-term notes $511,923 514,700 430,427 435,500
Commercial paper 172,262 172,262 131,610 131,610
Real estate mortgage debt 13,220 13,100 13,220 13,220
Guaranteed ESOP debt 8,335 8,400 13,890 14,000
9 3/8% notes - - 99,994 101,500
-------- -------- -------- --------
Total debt $705,740 708,462 689,141 695,830
======== ======== ======== ========
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
---------------------- ---------------------
1997 1996 1997 1996
------ ------ ------ ------
(In thousands)
Premiums written:
Direct $945,001 910,911 1,820,540 1,693,621
Assumed 368,885 292,249 587,685 515,859
Ceded (127,601) (125,234) (192,720) (196,943)
---------- --------- ---------- ----------
Net premiums written $1,186,285 1,077,926 2,215,505 2,012,537
========== ========= ========== ==========
Premiums earned:
Direct $1,025,971 927,064 2,049,465 1,845,185
Assumed 256,443 249,887 507,413 479,646
Ceded (117,117) (121,567) (220,128) (238,871)
---------- --------- --------- ----------
Net premiums earned $1,165,297 1,055,384 2,336,750 2,085,960
========== ========= ========= ==========
Insurance losses and loss
adjustment expenses:
Direct $779,463 672,799 1,504,218 1,296,288
Assumed 168,957 190,023 330,187 379,422
Ceded (102,935) (84,021) (120,042) (141,449)
---------- --------- --------- ----------
Net insurance losses
and loss adjustment
expenses $845,485 778,801 1,714,363 1,534,261
========== ========= ========= =========
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 8 Discontinued Operations
- -------------------------------
In May 1997, The St. Paul completed the sale of its brokerage
operation, Minet, to Aon Corporation. The St. Paul's gross
proceeds from the sale were approximately equal to its remaining
carrying value of Minet. In connection with the transaction, The
St. Paul agreed to indemnify Aon against most preclosing
liabilities of the Minet businesses. The company recorded a net
after-tax loss on disposal of $67.8 million in the first quarter
of 1997, which resulted primarily from The St. Paul's agreement
to be responsible for certain severance, employee benefits,
future lease commitments and other costs relating to Minet.
The following summarizes discontinued operations for the second
quarter and first half of 1997 and 1996:
Three Months Ended, Six Months Ended
June 30 June 30
------------------- ------------------
1997 1996 1997 1996
------ ------ ------ ------
(In thousands)
Operating loss, before
income taxes $ - (4,524) - (17,932)
Income tax expense - 718 - 2,900
-------- -------- -------- --------
Operating loss,
net of taxes - (5,242) - (20,832)
-------- -------- -------- --------
Loss on disposal, before
income taxes - - (103,280) -
Income tax benefit - - 35,530 -
-------- -------- -------- --------
Loss on disposal,
net of taxes - - (67,750) -
-------- -------- -------- --------
Loss from discontinued
operations $ - (5,242) (67,750) (20,832)
======== ======== ======== ========
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
June 30, 1997
Consolidated Results
--------------------
The St. Paul's consolidated pretax income from continuing
operations of $308 million in the second quarter of 1997 was 78%
higher than comparable 1996 income of $173 million. The
improvement over 1996 was primarily due to a $121 million
increase in realized investment gains in the underwriting
segment, largely resulting from sales of venture capital
investments and equity securities. Year-to-date pretax earnings
of $554 million increased by over $200 million compared with six-
month earnings in 1996, driven by the underwriting segment's
increase in realized investment gains and investment income.
The St. Paul's net income of $355 million for the first six
months of 1997 includes an after-tax loss from discontinued
operations of $67.8 million relating to the sale of its
brokerage operation, Minet. Refer to Note 8 on page 14 of this
report for further information regarding The St. Paul's
discontinued operations.
Consolidated revenues in the second quarter totaled $1.62
billion, an increase of 19% over second quarter 1996 revenues of
$1.36 billion. Year-to-date revenues in 1997 were 18% higher
than the same period of 1996. Growth in insurance premiums
earned, investment income and realized investment gains drove
the increased revenue in 1997.
The following table summarizes The St. Paul's results.
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1997 1996 1997 1996
----- ----- ----- -----
Pretax income (loss):
Underwriting:
GAAP underwriting result $(57) (39) (108) (81)
Net investment income 217 194 435 383
Realized investment gains 167 46 260 88
Other (17) (32) (36) (48)
--- --- --- ---
Total underwriting 310 169 551 342
Investment banking-
asset management 21 22 44 43
Parent and other (23) (18) (41) (35)
--- --- --- ---
Income from continuing
operations before
income taxes 308 173 554 350
Income tax expense 77 38 131 70
--- --- --- ---
Income from continuing
operations 231 135 423 280
Loss from discontinued operations,
net of taxes - (5) (68) (21)
--- --- --- ---
Net income $231 130 355 259
=== === === ===
Fully diluted net
income per common share $2.50 1.42 3.86 2.83
==== ==== ==== ====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Underwriting
------------
The following summarizes key financial results by underwriting
operation:
% of Three Months Six Months
1997 Ended June 30 Ended June 30
Written ------------- -------------
($ in Millions) Premiums 1997 1996 1997 1996
-------- ----- ----- ----- -----
Specialized Commercial:
Written Premiums 28% $327 340 628 604
Underwriting Result ($12) 19 (15) 9
Combined Ratio 103.5 94.1 102.5 99.5
Commercial:
Written Premiums 21% $211 155 451 310
Underwriting Result ($12) (2) (28) (11)
Combined Ratio 107.4 102.7 110.1 104.4
Personal Insurance:
Written Premiums 17% $205 189 380 353
Underwriting Result ($13) (61) (36) (89)
Combined Ratio 105.9 134.0 109.3 125.5
Medical Services:
Written Premiums 8% $87 98 182 200
Underwriting Result $5 20 8 40
Combined Ratio 104.9 94.2 105.2 94.3
----- ----- ----- ----- -----
Total St. Paul Fire &
Marine:
Written Premiums 74% $830 782 1,641 1,467
Underwriting Result ($32) (24) (71) (51)
Combined Ratio 105.0 104.5 106.4 105.3
St. Paul International
Underwriting:
Written Premiums 7% $93 56 146 113
Underwriting Result ($15) (6) (22) (12)
Combined Ratio 117.6 112.0 115.7 112.1
----- ----- ----- ----- -----
Total Worldwide Insurance
Operations:
Written Premiums 81% $923 838 1,787 1,580
Underwriting Result ($47) (30) (93) (63)
Combined Ratio 105.9 105.0 107.1 105.8
St. Paul Re:
Written Premiums 19% $ 263 240 429 433
Underwriting Result ($10) (9) (15) (18)
Combined Ratio 101.6 102.0 102.6 103.2
----- ----- ----- ----- -----
Total Underwriting:
Written Premiums 100% $1,186 1,078 2,216 2,013
GAAP Underwriting Result ($57) (39) (108) (81)
Statutory Combined Ratio:
Loss and Loss Expense Ratio 72.6 73.8 73.4 73.6
Underwriting Expense Ratio 32.4 30.5 32.8 31.6
----- ----- ----- -----
Combined Ratio 105.0 104.3 106.2 105.2
===== ===== ===== =====
Combined Ratio Incl.
Policyholders' Dividends 105.4 104.4 106.6 105.3
===== ===== ===== =====
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Written Premiums
- ----------------
Second quarter 1997 written premiums of $1.19 billion grew 10%
over comparable 1996 premiums of $1.08 billion. The St. Paul's
Commercial operation posted a $56 million premium increase over
1996's second quarter, reflecting the impact of The St. Paul's
acquisition of Northbrook Holdings, Inc. and its three
commercial underwriting companies (Northbrook) in the third
quarter of 1996. Personal Insurance premiums of $205 million
increased 9% over 1996, due to new business and price increases
on policies renewed during the quarter. International premiums
of $93 million grew 65% over the same quarter of 1996, primarily
the result of an increase in premiums generated by Camperdown
(a subsidiary of The St. Paul) through Lloyd's of London.
Reinsurance premiums increased 10% in the second quarter
of 1997, largely due to several new business initiatives.
Medical Services' premiums declined 11%, to $87 million, in the
second quarter of 1997, reflecting the impact of pricing actions
supporting the company's strategy to sustain market share.
Specialized Commercial, experienced a 4% decline in premiums
compared with the second quarter of 1996, due to competitive
conditions which have impacted pricing in many of the commercial
markets served by this operation.
For the first half of 1997, consolidated premiums were 10% ahead
of 1996, primarily due to the $155 million incremental impact of
Northbrook on 1997 volume. Medical Services premiums were down
9% from the first half of 1996.
Underwriting Results
- --------------------
The second quarter 1997 GAAP underwriting loss was $57 million,
compared with 1996's second quarter loss of $39 million.
Catastrophe losses in the second quarter of 1997 totaled $61
million, the majority of which resulted from flood-related
damage in the Red River Valley, which forms the border between
North Dakota and Minnesota. Catastrophe losses in last year's
second quarter were $52 million.
Key factors in the change in second quarter underwriting results
from 1996 were as follows:
- Personal Insurance - $48 million better than 1996 - A
decline in catastrophe losses accounted for half of the
improvement over 1996. The remainder resulted from
improved loss experience in Personal's core book of
business, as well as a reduction in the rate of expense
growth.
- Specialized Commercial - $31 million worse than 1996 - A
$19 million increase in catastrophes was the primary
factor in the deterioration in 1997 results.
- Medical Services - $15 million worse than 1996 - The
combination of deterioration in loss experience and
price declines in a competitive market accounted for the
decline in 1997 profitability.
- Commercial - $10 million worse than 1996 - An increase
in catastrophe losses was the primary factor
contributing to the deterioration from 1996.
- International - $9 million worse than 1996 -
Restructuring of operations in Argentina, difficult
market conditions in the United Kingdom and a loss in
one of the Lloyd's syndicates in which The St. Paul
invested account for the deterioration in 1997 results.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
The year-to-date GAAP underwriting loss of $108 million was $27
million worse than the 1996 six-month loss of $81 million
despite a $49 million improvement in catastrophe experience. An
increase in losses and declining prices contributed to a $32
million decline in Medical Services profitability in 1997.
Specialized Commercial's six-month results were $24 million
worse than 1996, and Commercial results deteriorated by $17
million. The negative variances in these three operations more
than offset a $53 million improvement in Personal Insurance
results in 1997.
Investments
- -----------
Pretax investment income in the underwriting segment for the
second quarter was $217 million, up 12% from $194 million in
1996. Year-to-date investment income increased by $52 million,
or 14%, over last year. More than half of the increase in 1997
was attributable to income earned on fixed maturity investments
acquired in last year's Northbrook purchase. Investment income
growth also resulted from an increase in invested assets over
the last twelve months. New money available for fixed maturity
investments in the first half of 1997 was predominantly directed
toward taxable securities due to The St. Paul's current
consolidated tax position. The weighted average pretax yield on
the underwriting segment's fixed maturities portfolio was 7.0%
at June 30, 1997, down from 7.2% a year ago.
Pretax realized investment gains totaled $167 million and $260
million for the second quarter and six months of 1997,
respectively. Both amounts were well above comparable 1996
levels. Sales of venture capital and equity security
investments in favorable market conditions accounted for
virtually all of 1997's gains. The sale of a single venture
capital investment generated pretax gains of $129 million in the
first half of 1997.
Environmental and Asbestos Claims
---------------------------------
The St. Paul'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. These
operations also receive 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 underwriting operations' 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. In addition, variables, such as
the length of time necessary to clean up a polluted site,
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.
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
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 experience, both of which are still developing.
In 1995, The St. Paul's underwriting operations 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, 1997, and the years ended Dec. 31, 1996 and 1995.
Amounts in the "net" column are reduced by reinsurance
recoverables.
Environmental
- -------------
1997
(six months) 1996 1995
------------ ------------ ------------
(in millions) Gross Net Gross Net Gross Net
----- --- ---- --- ----- ---
Beginning reserves $581 368 528 319 275 200
Reserves acquired - - 18 7 - -
Incurred losses 9 6 67 72 59 68
Reserve reallocation - - - - 233 79
Paid losses (22) (13) (32) (30) (39) (28)
---- --- --- --- --- ---
Ending reserves $568 361 581 368 528 319
==== === === === === ===
Many significant environmental claims currently being brought
against insurance companies arise out of contamination that
occurred 20 to 30 years ago. Since 1970, the underwriting
operations' 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, 1997, and the years ended Dec. 31, 1996
and 1995:
Asbestos 1997
- -------- (six months) 1996 1995
----------- ------------ ------------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $278 169 283 158 185 145
Reserves acquired - - 6 6 - -
Incurred losses 19 (2) 12 18 (13) (9)
Reserve reallocation - - - - 127 34
Paid losses (13) (7) (23) (13) (16) (12)
---- --- --- --- --- ---
Ending reserves $284 160 278 169 283 158
==== === === === === ===
<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 underwriting operations'
Commercial General Liability policy has included the industry
standard absolute pollution exclusion, which the company
believes applies to asbestos claims.
Based on all information currently available, The St. Paul's
reserves for environmental and asbestos losses represent its
best estimate of its ultimate liability for such losses.
Because of the difficulty inherent in estimating such losses,
however, the company cannot give assurances that its ultimate
liability for environmental and asbestos losses will, in fact,
match current reserves. The company continues to evaluate new
information and developing loss patterns, but it believes any
future additional loss provisions for environmental and asbestos
claims will not materially impact the results of operations,
liquidity or financial position.
Total gross environmental and asbestos reserves at June 30,
1997, of $852 million represented approximately 7% of gross
consolidated reserves of $11.74 billion.
Investment Banking-Asset Management
-----------------------------------
The company's portion of second quarter pretax earnings of The
John Nuveen Company (Nuveen) was $21 million, compared with $22
million in 1996. For the first half of 1997, the company's
portion was $44 million, compared with $43 million in 1996. The
company currently holds a 77% interest in Nuveen.
Asset management fees of $51 million for the second quarter were
12% higher than those in the same period of 1996. Assets under
management totaled $37.6 billion at June 30, up over $4 billion
from year-end 1996. The increases in managed assets and related
fee revenues reflect Nuveen's January 1997 acquisition of
Flagship Resources, Inc., a tax-exempt mutual fund and money
management firm. The total cost of that acquisition was $63
million (substantially all of which represented goodwill), plus
as much as an additional $20 million, contingent upon meeting
future growth targets. Nuveen partially funded the purchase by
the issuance of $45 million of preferred stock. Nuveen's Unit
Investment Trust sales in the first six months of 1997 were 10%
below the same period of 1996, reflecting a decline in investor
interest in municipal security investments in the current
favorable equity market conditions.
In July, Nuveen announced an agreement to acquire Rittenhouse
Financial Services, Inc., which manages approximately $9 billion
of individual equity and balanced accounts for affluent
investors. The purchase is expected to be completed by
September 1997 for a total cash consideration of approximately
$145 million.
Capital Resources
-----------------
The St. Paul's total capitalization (debt and equity) stood at
just under $5 billion at the end of the second quarter. Six-
month net income of $355 million pushed common shareholders'
equity to a record high of $4.19 billion at the end of June, an
increase of over $200 million from year-end 1996. A bond market
rally added almost $100 million to the after-tax unrealized
appreciation of the company's fixed maturities portfolio in the
second quarter, but that appreciation was still $41
<PAGE>
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
million lower than year-end 1996. The after-tax unrealized
appreciation on The St. Paul's equity and venture capital
portfolios declined $64 million in the first half of 1997,
reflecting sales of investments that generated substantial
realized gains in that six-month period. The St. Paul
repurchased and retired less than 10,000 shares of its common
stock in the first half of 1997. The company intends to
continue its repurchase program when such purchases are deemed
an appropriate use of capital.
Total debt outstanding at the end of the quarter was $706
million, up slightly from $689 million at the end of 1996. In
June 1997, the maturity of The St. Paul's $100 million, 9-3/8%
Notes was funded through the issuance of medium-term notes and
commercial paper, both of which bear lower interest rates than
the matured notes. The company has issued $81.5 million of
medium-term notes in the first half of 1997. The $512 million
of such notes outstanding at June 30, 1997, bear a weighted
average interest rate of 7.1% and account for nearly 75% of The
St. Paul's total debt outstanding. Debt as a percentage of
total capitalization at June 30, 1997, was 14%, unchanged from
year-end 1996.
The company anticipates that any major capital expenditures
during the second half of 1997 would involve acquisitions of
existing businesses or common stock repurchases; there are no
major capital improvements planned for the remainder of the
year.
The company's ratio of earnings to fixed charges was 15.80 for
the first six months of 1997, compared with 11.42 for the same
period of 1996. The company's ratio of earnings to combined
fixed charges and preferred stock dividends was 11.27 for the
first six months of 1997, compared with 7.87 for the same period
of 1996. Fixed charges consist of interest expense before
reduction for capitalized interest and one-third of rental
expense, which is considered to be representative of an interest
factor.
Liquidity
---------
Liquidity refers to the company's ability to generate sufficient
funds to meet the cash requirements of its business operations.
Net cash provided by operations was $182 million in the first
half of 1997, compared with $355 million in 1996. Although The
St. Paul's operational cash flows have declined in 1997, the
company's overall liquidity position remains strong due to funds
provided from substantial realized investment gains in the
underwriting segment.
Impact of Accounting Pronouncement to be Adopted in the Future
- --------------------------------------------------------------
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share," which revises the calculation and
presentation provisions of Accounting Principles Board Opinion
No. 15 and its related interpretations. SFAS No. 128 is
effective for fiscal years and interim periods ending after
December 15, 1997. It replaces the presentation of primary
earnings per share with "basic earnings per share," and fully
diluted earnings per share with "diluted earnings per share."
If the provisions of SFAS No. 128 had been applied for the six
months ended June 30, 1997 and 1996, basic earnings per share
would have been $5.01 and $3.29, respectively, for income from
continuing operations, and $4.20 and $3.04, respectively, for
net income. Diluted earnings per share would have been the same
as fully diluted earnings per share for both periods.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note 5 to the consolidated
financial statements is incorporated herein by
reference.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. An Exhibit Index is set forth as the
last page in this document.
(b) Reports on Form 8-K.
1) The St. Paul filed a Form 8-K Current
Report dated April 28, 1997, announcing its
financial results for the quarter ended
March 31, 1997, and the anticipated impact
of flooding in the Red River Valley on its
second quarter 1997 financial results.
2) The St. Paul filed a Form 8-K Current
Report dated July 28, 1997, announcing its
financial results for the quarter ended June 30,
1997.
<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 14, 1997 By /s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Vice President
and Corporate Secretary
(Authorized Signatory)
Date: August 14, 1997 By /s/ Howard E. Dalton
--------------------
Howard E. Dalton
Senior Vice President
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
------------------
Method of
Exhibit Filing
- ------- -----------
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession*................................
(3) Articles of incorporation and by-laws*.......................
(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
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
EARNINGS:
Primary:
Net income, as reported $230,524 130,053 355,073 258,874
PSOP preferred dividends declared
(net of taxes) (2,168) (2,159) (4,353) (4,324)
Premium on preferred
shares redeemed (651) (232) (911) (440)
-------- -------- -------- --------
Net income, as adjusted $227,705 127,662 349,809 254,110
======== ======== ======== ========
Fully diluted:
Net income, as reported $230,524 130,053 355,073 258,874
Dividends on monthly income
preferred securities
(net of taxes) 2,019 2,019 4,037 4,037
Additional PSOP expense (net of
taxes) due to assumed conversion
of preferred stock (666) (755) (1,336) (1,513)
Premium on preferred
shares redeemed (651) (232) (911) (440)
-------- -------- -------- --------
Net income, as adjusted $231,226 131,085 356,863 260,958
======== ======== ======== ========
SHARES:
Primary:
Weighted average number of common
shares outstanding, per
consolidated financial
statements 83,607 83,522 83,489 83,749
Additional dilutive effect of
assumed exercise of outstanding
stock options (based on treasury
stock method using average
market price) 1,242 988 1,190 1,089
------- ------- ------- -------
Weighted average, as adjusted 84,849 84,510 84,679 84,838
======= ======= ======= =======
Fully diluted:
Weighted average number of common
shares outstanding, per
consolidated financial
statements 83,607 83,522 83,489 83,749
Additional dilutive effect of:
Assumed conversion of
PSOP preferred stock 3,915 3,977 3,924 3,984
Assumed conversion of monthly
income preferred securities 3,509 3,509 3,509 3,509
Assumed exercise of outstanding
stock options (based on treasury
stock method using market
price at end of period) 1,394 1,003 1,423 1,016
------- ------- ------- -------
Weighted average, as adjusted 92,425 92,011 92,345 92,258
======= ======= ======= =======
EARNINGS PER COMMON SHARE:
Primary $2.68 1.51 4.13 3.00
Fully diluted $2.50 1.42 3.86 2.83
<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
----------------- -----------------
1997 1996 1997 1996
----- ----- ----- -----
EARNINGS:
Income from continuing
operations before income taxes $308,377 172,975 553,587 350,463
Add: fixed charges 18,360 17,051 37,397 33,636
------- ------- ------- -------
Income, as adjusted $326,737 190,026 590,984 384,099
======= ======= ======= =======
FIXED CHARGES:
Interest costs $13,925 12,724 26,826 25,148
Rental expense (1) 4,435 4,327 10,571 8,488
------- ------- ------- -------
Total fixed charges $18,360 17,051 37,397 33,636
======= ======= ======= =======
FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS:
Fixed charges $18,360 17,051 37,397 33,636
PSOP preferred stock dividends 4,391 4,474 8,815 8,963
Dividends on monthly income
preferred securities 3,105 3,105 6,210 6,210
------- ------- ------- -------
Total fixed charges and
preferred stock dividends $25,856 24,630 52,422 48,809
======= ======= ======= =======
Ratio of earnings to fixed charges 17.80 11.14 15.80 11.42
======= ======= ======= =======
Ratio of earnings to
combined fixed charges
and preferred stock dividends 12.64 7.72 11.27 7.87
======= ======= ======= =======
(1) Interest portion deemed implicit in total rent expense.
<TABLE> <S> <C>
<ARTICLE> 7
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1997 JUN-30-1996 JUN-30-1995
<DEBT-HELD-FOR-SALE> 11,935,094 10,257,774 9,621,174
<DEBT-CARRYING-VALUE> 0 0 0
<DEBT-MARKET-VALUE> 0 0 0
<EQUITIES> 986,124 802,117 662,461
<MORTGAGE> 0 0 0
<REAL-ESTATE> 731,876 611,614 617,867
<TOTAL-INVEST> 14,584,109 12,736,605 11,879,788
<CASH> 54,423 21,874 24,029
<RECOVER-REINSURE> 67,579 70,301 138,733
<DEFERRED-ACQUISITION> 398,898 371,383 337,825
<TOTAL-ASSETS> 20,925,916 18,503,607 17,316,634
<POLICY-LOSSES> 11,743,413 10,354,052 9,693,382
<UNEARNED-PREMIUMS> 2,418,414 2,242,500 2,169,679
<POLICY-OTHER> 0 0 0
<POLICY-HOLDER-FUNDS> 0 0 0
<NOTES-PAYABLE> 705,740 688,663 580,140
207,000 207,000 207,000
17,998 12,813 7,656
<COMMON> 496,905 464,844 454,406
<OTHER-SE> 3,692,495 3,220,296 2,845,916
<TOTAL-LIABILITY-AND-EQUITY> 20,925,916 18,503,607 17,316,634
2,336,750 2,085,960 1,937,897
<INVESTMENT-INCOME> 436,232 389,180 361,848
<INVESTMENT-GAINS> 263,506 95,425 12,324
<OTHER-INCOME> 141,426 123,800 124,869
<BENEFITS> 1,714,363 1,534,261 1,403,829
<UNDERWRITING-AMORTIZATION> 527,474 462,279 426,922
<UNDERWRITING-OTHER> 382,490 347,362 296,463
<INCOME-PRETAX> 553,587 350,463 309,724
<INCOME-TAX> 130,764 70,757 63,999
<INCOME-CONTINUING> 422,823 279,706 245,725
<DISCONTINUED> (67,750) (20,832) (22,162)
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 355,073 258,874 223,563
<EPS-PRIMARY> 4.13 3.00 2.57
<EPS-DILUTED> 3.86 2.83 2.47
<RESERVE-OPEN> 0 0 0
<PROVISION-CURRENT> 0 0 0
<PROVISION-PRIOR> 0 0 0
<PAYMENTS-CURRENT> 0 0 0
<PAYMENTS-PRIOR> 0 0 0
<RESERVE-CLOSE> 0 0 0
<CUMULATIVE-DEFICIENCY> 0 0 0
</TABLE>
