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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest
event reported): October 12, 1998
THE ST. PAUL COMPANIES, INC.
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(Exact name of Registrant as specified in its charter)
Minnesota 0-3021 41-0518860
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(State of (Commission File (I.R.S. Employer
Incorporation) Number) Identification No.)
385 Washington St., St. Paul, MN 55102
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(Address of principal (Zip Code)
executive offices)
(651) 310-7911
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(Registrant's telephone number,
including area code)
N/A
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(Former name or former address, if changed since last
report)
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Item 5. Other Events.
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The following information was derived from a press
release of The St. Paul Companies, Inc. dated October 12, 1998:
The St. Paul Companies announced that its third quarter
losses from catastrophes are expected to total approximately
$175 million on a pre-tax basis.
The Company also indicated that its results for the
third and fourth quarters would be negatively impacted by
continued deterioration in the condition of the general
commercial property/casualty marketplace.
Given the magnitude of catastrophes, as well as
continuing difficult market conditions, the Company
currently expects third quarter after-tax core operating
earnings of approximately $35 to $45 million. Core
operating earnings exclude the $457 million after-tax charge
taken in the second quarter in connection with the
integration of USF&G. There will be no similar charges
included in the third quarter.
"1998 is turning out to be among the worst catastrophe
years in the history of The St. Paul, unusual in terms of
frequency rather than the severity of any given storm.
Catastrophe losses for the quarter represent approximately
11% of our earned premiums, versus a more normalized
catastrophe level of approximately 3% of earned premiums,"
said Douglas W. Leatherdale, chairman of The St. Paul
Companies. "We are taking steps to reduce our exposure to
loss volatility from catastrophes through the purchase of
additional reinsurance and other measures.
"The continued deterioration in commercial
property/casualty market conditions has adversely impacted
our earnings," said Mr. Leatherdale. "For the past few
years, we have attempted to manage the pressure the soft
market places on our profitability through a number of
expense reduction and underwriting initiatives, hoping to
maintain market share.
"I believe we have reached a point where we can no
longer continue to sell any insurance at rates which are
inadequate relative to the individual risk. Simply put, we
will not sell insurance for less than an adequate rate, and
we will cut expenses more aggressively in line with premium
reductions. We will work with our agents and brokers to
undertake corrective actions on individual accounts we have
determined to be significantly underpriced," continued
Leatherdale.
"Our merger with USF&G provides us the critical mass to
cut unprofitable business while maintaining our strong
franchises. We know what we must do to address current
business realities and maintain our long-term profitability,
and we are taking necessary action," concluded Leatherdale.
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Certain statements made by the company in this release
constitute forward-looking statements. These include
statements regarding the future effects of actions discussed
herein and future business development and profitability.
Actual results may differ materially from those projected in
the forward-looking statements. These forward looking
statements involve risks and uncertainties including, but
not limited to, the following: the frequency and severity
of catastrophic events; a change in the demand for, pricing
of, or supply of reinsurance or insurance; and increased
competitive pressure and general economic conditions.
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.
By /s/ Bruce A. Backberg
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Bruce A. Backberg
Senior Vice President
and Chief Legal Counsel
Date: October 13, 1998
