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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): November 3, 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 November 3, 1998:
The St. Paul Companies reported third-quarter 1998 core
operating earnings of $47.7 million, or $0.19 per share
(diluted). Third-quarter 1997 core operating earnings were
$184.4 million, or $0.73 per share (diluted).
In addition, The St. Paul's board of directors
announced that, depending on market conditions, the company
is authorized to repurchase up to $500 million of its
outstanding common stock in the open market and through
private transactions.
The company instituted the repurchase program due to
the recent significant decline in The St. Paul's stock
price.
"We believe our stock, at its current price, is
undervalued. This plan represents a very attractive use of
our capital and demonstrates our determination to increase
shareholder value," said Douglas W. Leatherdale, chairman
and chief executive officer.
The board also declared a regular quarterly dividend of
twenty-five cents ($0.25) per share payable Jan. 15, 1999,
to shareholders of record as of the close of business Dec. 31,
1998. The company has paid cash dividends without
interruption for 126 years.
"1998 third-quarter catastrophe losses were almost five
times higher than third-quarter 1997 catastrophe losses -
$173.5 million pretax vs. $35.7 million pretax," Leatherdale
said. "Hurricane Georges accounted for more than half of
the loss; an unusually large number of summer storms
accounted for the rest. Catastrophes had a per-share impact
of $0.49 in the third quarter, compared with $0.09 in third-
quarter 1997.
"Through September, catastrophe losses for the year
totaled $381.2 million, more than three times higher than
1997 nine-month catastrophe losses of $119.7 million. I
expect catastrophe losses will be close to our record 1992
catastrophe losses, the year of Hurricane Andrew.
"I want to emphasize that the underlying strength of
The St. Paul has not been compromised by these catastrophe
losses. Severe storm years are inherent in our business,
and we have the balance sheet strength to withstand these
storms.
"In addition to third-quarter storm losses, the
deteriorating conditions in the commercial property-
liability marketplace continued to adversely impact our
performance. Continued softening in pricing and intense
competition resulted in a 5 percent decline in revenues
compared with the third quarter of 1997. On the other hand,
excluding the unusually high catastrophe losses, our
personal insurance, reinsurance and a number of our
specialty operations performed well.
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"As I announced three weeks ago, we are taking measures
to improve our performance in this difficult commercial
insurance market. I said we will not sell insurance for
less than an adequate rate, and we will cut expenses more
aggressively in line with premium reductions. Our merger
with USF&G provides us the critical mass to cut unprofitable
business while maintaining our strong franchises.
"I am pleased with the third quarter results of our
operations outside the property-liability insurance realm.
F&G Life's earnings were up 16 percent over last year's
third quarter, and our portion of The John Nuveen Company's
earnings were up 12 percent," Leatherdale said.
Third-quarter net income
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The St. Paul Companies reported third-quarter net
income of $63.8 million, or $0.25 per share, compared with
net income of $215.2 million, or $0.85 per share, for the
third quarter of 1997. Third-quarter net income included
after-tax realized investment gains of $16.1 million, or
$0.06 per share, compared with $30.8 million, or $0.12 per
share, for the third quarter of 1997.
Nine-month results
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Nine-month 1998 core operating earnings were $263.7
million, or $1.08 per share (diluted), compared with nine-
month 1997 core operating earnings of $536.0 million, or
$2.13 per share (diluted).
Reflecting primarily the second-quarter one-time after-
tax charge of $457.5 million, or $1.95 per share, as a
result of The St. Paul's merger with USF&G, The St. Paul
reported a nine-month net loss of $38.8 million, or $0.21
per share, compared with net income of $673.5 million, or
$2.68 per share, for the first nine months of 1997. There
were no such merger-related charges in the third quarter.
Also included in the 1998 net loss were nine-month after-tax
realized gains of $155.0 million, or $0.66 per share,
compared with $205.3 million, or $0.82 per share, for the
first nine months of 1997. Net income in the first nine
months of 1997 included a loss of $67.8 million, or $0.27
per share, from discontinued operations.
All results reflect the combined St. Paul and USF&G
operations, and figures for prior periods have been
restated. "Core operating earnings" exclude the 1998 second-
quarter one-time after-tax merger charge.
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Consolidated financial position of The St. Paul Companies
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Consolidated assets of The St. Paul Companies as of
Sept. 30, 1998 were $37.5 billion, compared with $36.2
billion on Sept. 30, 1997. Common shareholders' equity was
$6.6 billion at the end of the second quarter, compared with
$6.2 billion on Sept. 30, 1997. The increase was primarily
the result of a rise in the unrealized appreciation in the
company's bond portfolio.
THE ST. PAUL COMPANIES
CONSOLIDATED THIRD-QUARTER RESULTS
Three months ended Sept. 30 1998 1997
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Revenues $2,211,257,000 $2,324,290,000
Pretax Core Operating Earnings
Property-Liability Insurance $14,679,000 $245,342,000
Life Insurance $19,754,000 $16,960,000
Asset Management-
Investment Banking $25,872,000 $23,149,000
Parent and Other ($53,127,000) ($58,378,000)
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Total Pretax Core Operating Earnings $7,178,000 $227,073,000
Income Tax Expense (Benefit) ($40,541,000) $42,696,000
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Core Operating Earnings from
Continuing Operations $47,719,000 $184,377,000
Per Common Share (Basic) $0.19 $0.79
Per Common Share (Diluted) $0.19 $0.73
Core Realized Investment Gains,
Net of Taxes $16,083,000 $30,795,000
Per Common Share (Basic) $0.07 $0.13
Per Common Share (Diluted) $0.06 $0.12
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Net Income $63,802,000 $215,172,000
Per Common Share (Basic) $0.26 $0.92
Per Common Share (Diluted) $0.25 $0.85
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THE ST. PAUL COMPANIES
CONSOLIDATED NINE-MONTHS RESULTS
Nine months ended Sept. 30 1998 1997
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Revenues $6,944,138,000 $7,219,643,000
Pretax Core Operating Earnings
Property-Liability Insurance $278,299,000 $710,394,000
Life Insurance $56,979,000 $45,756,000
Asset Management-
Investment Banking $74,582,000 $67,283,000
Parent and Other ($157,245,000) ($163,670,000)
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Total Pretax Core Operating Earnings $252,615,000 $659,763,000
Income Tax Expense (Benefit) ($11,089,000) $123,792,000
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Core Operating Earnings from
Continuing Operations $263,704,000 $535,971,000
Per Common Share (Basic) $1.08 $2.28
Per Common Share (Diluted) $1.08 $2.13
One-time Charge, Net of Taxes ($457,517,000) -
Per Common Share (Basic) ($1.95) -
Per Common Share (Diluted) ($1.95) -
Core Realized Investment Gains,
Net of Taxes $155,012,000 $205,311,000
Per Common Share (Basic) $0.66 $0.89
Per Common Share (Diluted) $0.66 $0.82
Discontinued Operations,
Net of Taxes - ($67,750,000)
Per Common Share (Basic) - ($0.29)
Per Common Share (Diluted) - ($0.27)
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Net Income (Loss) ($38,801,000) $673,532,000
Per Common Share (Basic) ($0.21) $2.88
Per Common Share (Diluted) ($0.21) $2.68
Common Shareholders Equity $6,592,198,000 $6,199,592,000
Per Common Share $27.83 $26.98
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ST. PAUL THIRD-QUARTER PROPERTY-LIABILITY
UNDERWRITING OPERATIONS HIGHLIGHTS
Three months ended Sept. 30 1998 1997
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Written premiums $1,726,918,000 $1,826,455,000
Net investment income $322,094,000 $328,360,000
Core statutory combined ratio 116.7 102.2
ST. PAUL NINE-MONTHS PROPERTY-LIABILITY
UNDERWRITING OPERATIONS HIGHLIGHTS
Nine months ended Sept. 30 1998 1997
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Written premiums $5,126,759,000 $5,326,363,000
Net investment income $984,987,000 $985,684,000
Core statutory combined ratio 113.1 103.8
The St. Paul Companies, headquartered in Saint Paul,
Minn., is a group of companies providing insurance products
and services worldwide.
Certain statements made by the company in this release
constitute forward-looking statements. 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; increased competitive
pressure; losses due to foreign currency exchange rate
fluctuations; changing rates of inflation; and general
economic conditions.
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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: November 3, 1998
