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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): August 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 August 3, 1998:
THE ST. PAUL COMPANIES REPORTS SECOND-QUARTER RESULTS
The St. Paul Companies (NYSE:SPC) reported second-
quarter 1998 core operating earnings of $53.2 million, or
$0.21 per share (diluted). Second quarter 1997 core
operating earnings were $176.9 million, or $0.71 per share
(diluted).
Beginning this quarter, all results reflect the
combined St. Paul and USF&G operations, and figures for
prior periods have been restated. "Core operating earnings"
exclude the $457.5 million, or $1.95 per share, one-time
after-tax charge taken in the second quarter as a result of
The St. Paul's merger with USF&G.
Douglas W. Leatherdale, chairman and chief executive
officer, said, "Our second-quarter and six-month performance
was affected by a high level of catastrophe losses and
intensely competitive conditions in the property-liability
insurance market.
"Second-quarter storm activity blanketed the entire
country, but much of the worst was focused in Minnesota,
where we have a heavy concentration of business, and in
Tennessee, which is one of USF&G's largest markets. While
these storms may not have made headlines nationally - for
us, the cumulative effect was the worst catastrophe quarter
since Hurricane Andrew struck in 1992. Pretax catastrophe
losses were $157 million, reducing our core after-tax
operating earnings by about $0.51 per share. 1997 second-
quarter pretax catastrophe losses were $70 million, which
reduced core after-tax operating earnings by approximately
$0.19 per share.
"The other key factor in our second quarter operating
results was the deterioration in the U.S. commercial
marketplace. The good news is that, in our medical
liability operation, we successfully implemented price
increases during the second quarter. It is also important
to note that many of the actions we are taking to reduce
expenses and improve underwriting performance following the
merger have yet to have an impact on our results.
"Despite the high level of catastrophes and difficult
market conditions in certain segments, many of our
businesses performed well during the quarter:
- Specialized commercial, excluding medical
malpractice, held its own in a difficult market, with
standout performance from the newly combined St. Paul-USF&G
surety operation, now the largest surety operation in the
nation.
- Excluding the impact of catastrophe losses, our
personal insurance business performed well, continuing its
recovery.
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- Our reinsurance operation posted strong year-over-
year results.
- Second-quarter core after-tax operating earnings of
our life insurance operation, acquired in the merger, grew
25 percent over the same period of 1997.
- The international segment of our business had a good
quarter, with significant improvement in underwriting
results and strong premium growth.
- Our 78 percent ownership in The John Nuveen Company
also contributed to our performance in the quarter. Nuveen
reported a 14 percent increase in second-quarter net income
and earnings per share.
"In spite of the second-quarter charge we are taking to
earnings, our book value per share, at $27.45 at quarter's
end, is 8 percent higher than our $25.34 of book value per
share as of June 30, 1997. The book value of this
corporation has grown over $600 million in the past year.
This gives you some indication of the underlying strength of
The St. Paul," he said.
The St. Paul Companies reported a second-quarter net
loss of $297.3 million, or $1.28 per share, compared with
net income of $288.9 million, or $1.15 per share, for the
second quarter of 1997. Also included in the net loss were
after-tax realized gains of $107.0 million, or $0.46 per
share, compared with $112.0 million, or $0.44 per share, for
the second quarter of 1997.
The $656 million pretax one-time charge was composed of
the following:
- $250 million increase in loss reserves to reflect the
application of The St. Paul's reserving policies to USF&G's
reserves;
- $176 million in severance and other employee-related
costs;
- $108 million in write-downs in the carrying value of
certain USF&G assets;
- $70 million in facilities exit costs;
- $52 million in other costs, including transaction
fees.
Six-month Results
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Six-month 1998 core operating earnings were $216.0
million, or $0.89 per share (diluted), compared with first-
half 1997 core operating earnings of $351.6 million, or
$1.40 per share (diluted).
Reflecting predominantly the second-quarter after-tax
charge of $457.5 million, or $1.95 per share, The St. Paul
reported a six-month net loss of $102.6 million, or $0.46
per share, compared with net income of $458.4 million, or
$1.82 per share, for the first half of 1997. Also included
in the net loss were six-month after-tax realized gains of
$138.9 million, or $0.60 per share, compared with $174.5
million, or $0.69 per share, for the first half of 1997.
Net income in the first half of 1997 included a loss of
$67.8 million, or a loss of $0.27 per share, from
discontinued operations.
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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
June 30, 1998 were $37.4 billion, compared with $35.5
billion on June 30, 1997. Common shareholders' equity was
$6.5 billion at the end of the second quarter, compared with
$5.8 billion on June 30, 1997.
THE ST. PAUL COMPANIES
CONSOLIDATED SECOND-QUARTER RESULTS
Three months ended June 30 1998 1997
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Revenues $2,408,689,000 $2,493,102,000
Pretax Core Operating Earnings
Property-Liability Insurance $54,633,000 $238,150,000
Life Insurance $19,001,000 $15,047,000
Asset Management-
Investment Banking $25,093,000 $21,430,000
Parent and Other ($53,776,000) ($55,091,000)
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Total Pretax Core Operating Earnings $44,951,000 $219,536,000
Income Tax Expense (Benefit) ($8,260,000) $42,636,000
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Core Operating Earnings from
Continuing Operations $53,211,000 $176,900,000
Per Common Share (Basic) $0.21 $0.76
Per Common Share (Diluted) $0.21 $0.71
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 $107,025,000 $112,042,000
Per Common Share (Basic) $0.46 $0.49
Per Common Share (Diluted) $0.46 $0.44
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Net Income (Loss) ($297,281,000) $288,942,000
Per Common Share (Basic) ($1.28) $1.25
Per Common Share (Diluted) ($1.28) $1.15
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THE ST. PAUL COMPANIES
CONSOLIDATED FIRST-HALF RESULTS
Six months ended June 30 1998 1997
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Revenues $4,732,881,000 $4,895,353,000
Pretax Core Operating Earnings
Property-Liability Insurance $263,620,000 $465,052,000
Life Insurance $37,225,000 $28,796,000
Asset Management-
Investment Banking $48,710,000 $44,134,000
Parent and Other ($104,118,000) ($105,292,000)
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Total Pretax Core
Operating Earnings $245,437,000 $432,690,000
Income Tax Expense $29,452,000 $81,096,000
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Core Operating Earnings from
Continuing Operations $215,985,000 $351,594,000
Per Common Share (Basic) $0.89 $1.50
Per Common Share (Diluted) $0.89 $1.40
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 $138,929,000 $174,516,000
Per Common Share (Basic) $0.60 $0.76
Per Common Share (Diluted) $0.60 $0.69
Discontinued Operations,
Net of Taxes - ($67,750,000)
Per Common Share (Basic) - ($0.30)
Per Common Share (Diluted) - ($0.27)
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Net Income (Loss) ($102,603,000) $458,360,000
Per Common Share (Basic) ($0.46) $1.96
Per Common Share (Diluted) ($0.46) $1.82
Common Shareholders Equity $6,473,719,000 $5,827,054,000
Per Common Share $27.45 $25.34
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THE ST. PAUL COMPANIES
SECOND-QUARTER PROPERTY-LIABILITY UNDERWRITING
OPERATIONS HIGHLIGHTS
Three months ended June 30 1998 1997
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Written premiums $1,745,262,000 $1,827,104,000
Net investment income $331,130,000 $326,827,000
Core statutory combined ratio 116.0 103.0
THE ST. PAUL COMPANIES
FIRST-HALF PROPERTY-LIABILITY UNDERWRITING
OPERATIONS HIGHLIGHTS
Six months ended June 30 1998 1997
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Written premiums $3,399,841,000 $3,499,908,000
Net investment income $662,893,000 $657,334,000
Core statutory combined ratio 111.4 104.6
The St. Paul Companies, headquartered in Saint Paul,
Minn., is a group of companies providing insurance products
and services worldwide.
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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: August 5, 1998
