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 March 31, 1998
----------------
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 May 6, 1998, was 234,585,388. This
total includes the shares to be issued pursuant to the
Registrant's merger with USF&G Corporation, and also reflects the
impact of the 2-for-1 stock split approved and declared by the
Registrant's board of directors on May 5, 1998.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income, (Unaudited),
Three Months Ended March 31, 1998 and 1997 3
Consolidated Balance Sheets, March 31, 1998
(Unaudited) and December 31, 1997 4
Consolidated Statements of Shareholders' Equity,
Three Months Ended March 31, 1998
(Unaudited) and Twelve Months Ended 6
December 31, 1997
Consolidated Statements of Comprehensive Income
(Unaudited), Three Months Ended March 31, 1998
and 1997 7
Consolidated Statements of Cash Flows (Unaudited),
Three Months Ended March 31, 1998 and 1997 8
Notes to Consolidated Financial Statements
(Unaudited) 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 19
PART II. OTHER INFORMATION
Item 1 through Item 6 26
Signatures 28
EXHIBIT INDEX 29
PART I FINANCIAL INFORMATION
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Unaudited
(In thousands)
Three Months Ended
March 31
-------------------
1998 1997
------ ------
Revenues:
Premiums earned $1,114,756 1,171,453
Net investment income 219,299 218,662
Asset management-investment banking 71,402 58,605
Realized investment gains 44,804 95,592
Other 16,896 12,891
--------- ---------
Total revenues 1,467,157 1,557,203
--------- ---------
Expenses:
Insurance losses and
loss adjustment expenses 811,096 868,878
Policy acquisition expenses 253,053 254,760
Operating and administrative 209,799 188,355
--------- ---------
Total expenses 1,273,948 1,311,993
--------- ---------
Income from continuing operations
before income taxes 193,209 245,210
Income tax expense 39,209 52,911
--------- ---------
Income from continuing operations 154,000 192,299
Loss on disposal of discontinued
operations, net of taxes - (67,750)
--------- ---------
Net income $154,000 124,549
========= =========
Basic earnings per common share:
Income from continuing operations $0.90 1.14
Loss from discontinued operations - (0.41)
--------- ---------
Net income $0.90 0.73
========= =========
Diluted earnings per common share:
Income from continuing operations $0.83 1.05
Loss from discontinued operations - (0.37)
--------- ---------
Net income $0.83 0.68
========= =========
Dividends declared on common stock $0.25 0.235
========= =========
See notes to consolidated financial statements.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
ASSETS 1998 1997
- ------ ---------- -----------
(Unaudited)
Investments:
Fixed maturities, at estimated market value $12,205,321 12,449,793
Equities, at estimated market value 1,080,733 1,033,920
Real estate, at cost less accumulated
depreciation of $96,960 (1997; $93,015) 668,502 649,114
Venture capital, at estimated market value 489,906 461,892
Other investments 58,493 41,359
Short-term investments, at cost 575,652 400,004
---------- ----------
Total investments 15,078,607 15,036,082
Cash 42,647 22,660
Investment banking inventory securities 58,117 130,203
Reinsurance recoverables:
Unpaid losses 1,841,053 1,893,122
Paid losses 53,088 69,693
Receivables:
Underwriting premiums 1,405,600 1,503,497
Interest and dividends 212,063 216,099
Other 81,110 78,360
Deferred policy acquisition expenses 382,867 404,274
Ceded unearned premiums 175,925 192,591
Deferred income taxes 736,512 845,331
Office properties and equipment, at cost
less accumulated depreciation
of $269,348 (1997; $246,158) 288,407 294,705
Goodwill 399,501 408,534
Other assets 371,013 405,506
---------- ----------
Total assets $21,126,510 21,500,657
========== ==========
See notes to consolidated financial statements.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
(In thousands)
March 31, December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
- ------------------------------------ ---------- -----------
(Unaudited)
Liabilities:
Insurance reserves:
Losses and loss adjustment expenses $11,722,580 11,817,633
Unearned premiums 2,241,953 2,379,703
---------- ----------
Total insurance reserves 13,964,533 14,197,336
Debt 654,663 782,825
Payables:
Income taxes 220,511 274,177
Reinsurance premiums 125,449 142,554
Accrued expenses and other 481,244 587,689
Other liabilities 653,755 682,366
---------- ----------
Total liabilities 16,100,155 16,666,947
---------- ----------
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; 952 shares
outstanding (956 shares in 1997) 137,307 137,892
Guaranteed obligation - PSOP (121,167) (121,167)
---------- ----------
Total preferred shareholders' equity 16,140 16,725
---------- ----------
Common:
Common stock, 480,000 shares authorized;
168,050 shares outstanding
(167,456 shares in 1997) 523,700 512,162
Retained earnings 3,563,068 3,450,601
Guaranteed obligation - ESOP - (8,453)
Accumulated other comprehensive income:
Unrealized appreciation of investments 735,374 677,069
Unrealized loss on foreign currency translation (18,927) (21,394)
---------- ----------
Total accumulated other comprehensive income 716,447 655,675
---------- ----------
Total common shareholders' equity 4,803,215 4,609,985
---------- ----------
Total shareholders' equity 4,819,355 4,626,710
---------- ----------
Total liabilities, redeemable preferred
securities and shareholders' equity $21,126,510 21,500,657
========== ==========
See notes to consolidated financial statements.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(In thousands)
Three Twelve
Months Ended Months Ended
March 31 December 31
------------ ------------
1998 1997
-------- --------
(Unaudited)
Preferred shareholders' equity:
Series B convertible preferred stock:
Beginning of period $137,892 142,131
Redemptions during period (585) (4,239)
--------- ---------
End of period 137,307 137,892
--------- ---------
Guaranteed obligation - PSOP:
Beginning of period (121,167) (126,068)
Principal payments - 4,901
--------- ---------
End of period (121,167) (121,167)
--------- ---------
Total preferred shareholders' equity 16,140 16,725
--------- ---------
Common shareholders' equity:
Common stock:
Beginning of period 512,162 475,710
Stock issued under stock incentive plans 10,109 28,224
Stock issued for preferred shares redeemed 1,429 8,678
Stock issued for acquisition - 1,676
Reacquired common shares - (2,126)
--------- ---------
End of period 523,700 512,162
--------- ---------
Retained earnings:
Beginning of period 3,450,601 2,935,928
Net income 154,000 705,473
Dividends declared on common stock (40,756) (156,692)
Dividends declared on preferred stock,
net of taxes (2,149) (8,645)
Reacquired common shares - (24,377)
Premium on preferred shares redeemed (844) (4,441)
Other changes during period 2,216 3,355
--------- ---------
End of period 3,563,068 3,450,601
--------- ---------
Guaranteed obligation - ESOP:
Beginning of period (8,453) (20,353)
Principal payments 8,453 11,900
--------- ---------
End of period - (8,453)
--------- ---------
Unrealized appreciation of investments,
net of taxes:
Beginning of period 677,069 616,968
Change during the period 58,305 60,101
--------- ---------
End of period 735,374 677,069
--------- ---------
Unrealized gain (loss)loss on foreign currency
translation, net of taxes:
Beginning of period (21,394) (20,496)
Change during the period 2,467 (898)
--------- ---------
End of period (18,927) (21,394)
--------- ---------
Total common shareholders' equity 4,803,215 4,609,985
--------- ---------
Total shareholders' equity $4,819,355 4,626,710
========= =========
See notes to consolidated financial statements.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Unaudited
(In thousands)
Three Months Ended
March 31
-------------------
1998 1997
----- -----
Net income $154,000 124,549
------- -------
Other comprehensive income, net of taxes:
Change in unrealized appreciation
of investments 58,305 (209,238)
Change in unrealized loss on foreign
currency translation 2,467 6,336
------- -------
Other comprehensive income (loss) 60,772 (202,902)
------- -------
Comprehensive income (loss) $214,772 (78,353)
======= =======
See notes to consolidated financial statements.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Three Months Ended
March 31
------------------
1998 1997
----- -----
OPERATING ACTIVITIES
Underwriting:
Net income $ 139,033 181,410
Adjustments:
Change in net insurance reserves (122,417) (98,727)
Change in underwriting premiums receivable 96,137 119,656
Realized investment gains (43,171) (92,713)
Other (12,365) (45,611)
------- -------
Total underwriting 57,217 64,015
------- -------
Asset management-investment banking:
Net income 14,133 13,845
Adjustments:
Change in inventory securities 72,085 1,906
Change in short-term investments (11,571) 40,674
Change in short-term borrowings (69,500) -
Change in open security transactions 7,105 (3,589)
Other (4,917) (12,487)
------- -------
Total asset management-investment banking 7,335 40,349
------- -------
Parent company and consolidating eliminations:
Net income (loss) from continuing operations 834 (2,956)
Adjustments:
Realized investment gains (1,633) (2,879)
Other (13,054) (34,241)
------- -------
Total parent company and
consolidating eliminations (13,853) (40,076)
------- -------
Net cash provided by operating activities 50,699 64,288
------- -------
Cash outflow resulting from
sale of discontinued operations (12,748) -
------- -------
INVESTING ACTIVITIES
Purchases of investments (598,012) (790,346)
Proceeds from sales and maturities of investments 726,076 721,727
Change in short-term investments (168,037) 51,489
Change in open security transactions 7,157 (9,659)
Net purchases of office properties and equipment (5,061) (15,791)
Other 62,755 (11,529)
------- -------
Net cash provided by
(used in) investing activities 24,878 (54,109)
------- -------
FINANCING ACTIVITIES
Dividends paid on common and preferred stock (42,105) (39,453)
Repayment of debt (55,663) (8,662)
Proceeds from issuance of debt - 30,000
Other 54,926 9,036
------- -------
Net cash used in financing activities (42,842) (9,079)
------- -------
Effect of exchange rate changes on cash - 69
------- -------
Increase in cash 19,987 1,169
Cash at beginning of period 22,660 37,214
------- -------
Cash at end of period $42,647 38,383
======= =======
See notes to consolidated financial statements.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Unaudited
March 31, 1998
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. The financial statements do not
include the results of USF&G Corporation, except for Note 11.
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 57 to 74 of The St. Paul's annual report to
shareholders for the year ended December 31, 1997. 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 1997 consolidated financial statements have
been reclassified to conform with the 1998 presentation. These
reclassifications had no effect on net income or shareholders'
equity, as previously reported.
All references in the consolidated financial statements and
related footnotes to per share amounts and to the number of
common shares for both 1998 and 1997 reflect the effect of the
2-for-1 stock split approved by The St. Paul's board of directors
on May 5, 1998 (see Note 10).
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 average common
shares outstanding. Average common shares outstanding
for both periods reflect the impact of the 2-for-1
stock split approved by the board of directors on May 5, 1998.
Three Months Ended
March 31
------------------
1998 1997
------ ------
(In thousands)
BASIC
Net income, as reported $154,000 124,549
PSOP preferred dividends
declared (net of taxes) (2,149) (2,185)
Premium on preferred shares redeemed (844) (260)
------- -------
Net income, as adjusted $151,007 122,104
======= =======
DILUTED
Net income, as reported $154,000 124,549
Additional PSOP expense (net of taxes)
due to assumed conversion of preferred stock (576) (670)
Dividends on monthly income preferred
securities (net of taxes) 2,018 2,018
Premium on preferred shares redeemed (844) (260)
------- -------
Net income, as adjusted $154,598 125,637
======= =======
AVERAGE COMMON
SHARES OUTSTANDING
Basic 167,746 166,738
======= =======
Fully diluted 185,184 183,896
======= =======
EARNINGS PER SHARE
Basic $0.90 0.73
======= =======
Diluted $0.83 0.68
======= =======
Average common shares outstanding for diluted EPS include the common
and common equivalent shares outstanding for the period and
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).
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.
Three Months Ended March 31
---------------------------
1998 1997
------ ------
(In thousands)
Purchases:
Fixed maturities $255,230 344,439
Equities 259,591 347,817
Real estate 24,664 56,395
Venture capital 38,560 23,134
Other investments 19,967 18,561
------- -------
Total purchases 598,012 790,346
------- -------
Proceeds from sales and maturities:
Fixed maturities:
Sales 131,241 245,599
Maturities and redemptions 227,007 100,156
Equities 346,205 318,856
Real estate 2,374 16,028
Venture capital 19,225 37,567
Other investments 24 3,521
------- -------
Total sales and maturities 726,076 721,727
------- -------
Net purchases (sales) $(128,064) 68,619
======= =======
Change in Unrealized Appreciation. The increase (decrease) in
unrealized appreciation of investments recorded in common
shareholders' equity was as follows:
Three Months Ended Twelve Months Ended
March 31, 1998 December 31, 1997
------------------ ------------------
(In thousands)
Fixed maturities $(13,862) 184,874
Equities 92,136 63,236
Venture capital 8,838 (154,826)
------- -------
Total change in pretax
unrealized appreciation 87,112 93,284
Change in deferred taxes (28,807) (33,183)
------- -------
Total change in unrealized
appreciation, net of taxes $58,305 60,101
======= =======
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
March 31
------------------
1998 1997
------ ------
(In thousands)
Federal current tax expense $44,794 64,671
Federal deferred tax benefit (13,749) (17,889)
------ ------
Total federal income tax expense 31,045 46,782
Foreign income taxes 5,631 4,606
State income taxes 2,533 1,523
------ ------
Total income tax expense
on continuing operations $39,209 52,911
====== ======
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.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 6 Debt
- ------------
Debt consists of the following:
March 31, December 31,
1998 1997
---------------- --------------
Book Fair Book Fair
Value Value Value Value
------ ------ ------ ------
(In thousands)
Medium-term notes $511,919 528,900 511,920 529,000
Commercial paper 127,548 127,548 168,429 168,429
Real estate mortgages 15,196 15,400 15,196 15,400
Nuveen short-term borrowings - - 69,500 69,500
Nuveen notes payable - - 15,000 15,100
Guaranteed ESOP debt - - 2,780 2,800
------- ------- ------- -------
Total debt $654,663 671,848 782,825 800,229
======= ======= ======= =======
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.
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
March 31
----------------------
1998 1997
------ ------
(In thousands)
Premiums written:
Direct $901,730 875,539
Assumed 199,950 218,133
Ceded (100,833) (64,452)
--------- ---------
Net premiums written $1,000,847 1,029,220
========= =========
Premiums earned:
Direct $998,688 1,023,494
Assumed 233,725 250,303
Ceded (117,657) (102,344)
--------- ---------
Net premiums earned $1,114,756 1,171,453
========= =========
Insurance losses and loss
adjustment expenses:
Direct $723,648 724,755
Assumed 157,499 161,230
Ceded (70,051) (17,107)
--------- ---------
Net insurance losses and
loss adjustment expenses $811,096 868,878
========= =========
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 8 Segment Information
- ---------------------------
Three Months Ended
March 31
----------------------
1998 1997
------ ------
Revenues from Continuing Operations
Underwriting:
St. Paul Fire and Marine:
Specialized Commercial $ 312,957 317,173
Commercial 206,426 268,709
Personal Insurance 188,894 180,243
Medical Services 147,112 148,842
--------- ---------
Total St. Paul Fire and Marine 855,389 914,967
St. Paul International 77,070 63,355
--------- ---------
Total Worldwide Insurance Operations 932,459 978,322
St. Paul Re 182,297 193,131
--------- ---------
Total premiums earned 1,114,756 1,171,453
Net investment income 218,803 218,269
Realized investment gains 43,171 92,713
Other 14,228 10,704
--------- ---------
Total underwriting 1,390,958 1,493,139
--------- ---------
Asset management-investment banking 72,469 61,122
--------- ---------
Total reportable segments 1,463,427 1,554,261
Parent company and consolidating eliminations 3,730 2,942
--------- ---------
Total revenues $1,467,157 1,557,203
========= =========
Income (Loss) from Continuing Operations
Before Income Taxes
Underwriting:
St. Paul Fire and Marine:
Specialized Commercial $ (6,371) (2,656)
Commercial (12,008) (16,304)
Personal Insurance (4,180) (22,971)
Medical Services (27,937) 3,463
-------- ---------
Total St. Paul Fire and Marine (50,496) (38,468)
St. Paul International (18,592) (7,041)
-------- ---------
Total Worldwide Insurance Operations (69,088) (45,509)
-------- ---------
St. Paul Re 8,465 (5,544)
-------- ---------
Total GAAP underwriting result (60,623) (51,053)
Net investment income 218,803 218,269
Realized investment gains 43,171 92,173
Other (10,076) (18,617)
-------- ---------
Total underwriting 191,275 240,772
-------- ---------
Asset management-investment banking:
Pretax income before minority interest 31,450 29,194
Minority interest (7,833) (6,490)
-------- ---------
Total asset management-investment banking 23,617 22,704
-------- ---------
Total reportable segments 214,892 263,476
Parent company and consolidating eliminations (21,683) (18,266)
-------- ---------
Total income from continuing
operations before income taxes $193,209 245,210
======== =========
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Note 9 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.
Note 10 Subsequent Event - Common Stock Split
- ----------------------------------------------
The St. Paul's Restated Articles of Incorporation were amended
after the vote of shareholders at the 1998 Annual Meeting of
Shareholders on May 5, 1998, to increase the authorized common
shares of the company from 240 million to 480 million.
Subsequent to this action, The St. Paul's board of directors
approved a 2-for-1 common stock split. One additional share of
common stock for each outstanding share was issued on May 11,
1998, to shareholders of record on May 6, 1998.
Note 11 Subsequent Event - Completion of Merger With USF&G Corporation
- -----------------------------------------------------------------------
In January 1998, The St. Paul and USF&G Corporation (USF&G)
announced an agreement to merge, subject to the approval of both
companies' shareholders and various regulatory authorities. On
April 24, 1998, having obtained all such approvals, The St. Paul
completed its merger with USF&G. The combined company operates
under The St. Paul name and remains based in Saint Paul, Minn.
The merger was a tax-free exchange of stock accounted for as a
pooling of interests. Under the terms of the merger agreement,
USF&G shareholders received 0.5642 of one of The St. Paul's
common shares (post-stock split) for each USF&G common share.
The St. Paul issued approximately 66.5 million of its common
shares (post-stock split) to USF&G shareholders. Based on The
St. Paul's closing common stock price of $42.125 (post-stock
split) on April 24, 1998, the total value of the transaction was
approximately $3.7 billion, which included the assumption of
USF&G's debt and capital securities.
The St. Paul anticipates incurring a pretax charge of
approximately $500 million in the second quarter of 1998 for
restructuring and other nonrecurring charges related to the
consummation of the merger.
The table on the next page presents unaudited statements of
income for the quarters ended March 31, 1998 and 1997 for The St.
Paul and USF&G on a combined basis.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The St. Paul Companies Inc. and USF&G Corporation
Combined Statements of Income
Unaudited
(In thousands)
Three Months Ended
March 31
------------------------
1998 1997
------ ------
Revenues:
Premiums earned $1,782,000 1,840,000
Net investment income 397,000 391,000
Asset management-investment banking 71,000 59,000
Realized investment gains 50,000 95,000
Other 24,000 17,000
--------- ---------
Total revenues
from continuing operations 2,324,000 2,402,000
--------- ---------
Expenses:
Insurance losses, loss adjustment expenses
and policy benefits 1,331,000 1,385,000
Policy acquisition expenses 433,000 427,000
Operating and administrative 310,000 281,000
--------- ---------
Total expenses 2,074,000 2,093,000
--------- ---------
Income before income taxes 250,000 309,000
Income tax expense 56,000 72,000
--------- ---------
Income from continuing operations 194,000 237,000
Loss on disposal of discontinued
operations, net of taxes - (68,000)
--------- ---------
Net income $194,000 169,000
========= =========
Basic earnings per common share:
Income from continuing operations $0.82 1.01
Net income 0.82 0.71
Diluted earnings per common share:
Income from continuing operations $0.77 0.94
Net income 0.77 0.67
Adjusted average common shares outstanding
(post-stock split):
Basic 234,000 231,000
Diluted 256,000 253,000
This statement was prepared by combining the companies'
respective statements of income for the three months ended
March 31, 1998 and 1997, and adjusting the result to conform the
accounting policies of both companies with regard to loss and
loss adjustment expense reserves. USF&G discounted all of its
workers' compensation reserves to present value in its financial
statements,
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
whereas The St. Paul did not discount any of its loss reserves.
On a combined basis, The St. Paul and USF&G will
discount only tabular workers' compensation reserves
to present value using an interest rate of up to 4%.
Accordingly, the combined income statement includes a reduction
in insurance losses and loss adjustment expenses of $3.9 million
for the quarter ended March 31, 1998, and an increase in
insurance losses and loss adjustment expenses of $0.2 million for
the quarter ended March 31, 1997, to conform the discounting
policies of both companies.
The combined income statement does not reflect an estimated
pretax charge of approximately $500 million for restructuring
costs and other nonrecurring charges related to the merger,
which will be recorded during the quarter ended June 30, 1998.
For purposes of the combined earnings per common share
calculation, USF&G's weighted average common shares outstanding
was multiplied by the exchange ratio of 0.5642.
On a combined basis, shareholders' equity totaled $6.8 billion on
March 31, 1998, and $6.6 billion on Dec. 31, 1997.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations
March 31, 1998
Consolidated Results
--------------------
The St. Paul's pretax income from continuing operations of $193
million in the first quarter of 1998 was down 21% from pretax
income of $245 million in the same period of 1997, primarily due
to a decline in realized investment gains, and, to a lesser
extent, deterioration in underwriting results.
On April 24, 1998, The St. Paul completed its merger with USF&G
Corporation. Refer to Note 11 on page 16 of this report for
further information regarding the merger, including unaudited
combined results of The St. Paul and USF&G for the first quarter
of 1998. The following discussion addresses only the financial
condition and results of operations of The St. Paul and does not
include a discussion of the results of USF&G Corporation.
The St. Paul's net income of $154 million in the first quarter of
1998 increased $29 million over comparable 1997 net income of
$125 million. In the 1997 period, The St. Paul recorded an after-
tax loss from discontinued operations of $67.8 million relating
to the sale of its brokerage operation, Minet.
Consolidated revenues of $1.47 billion in the first quarter of
1998 declined $90 million, or 6%, from the equivalent 1997 total
of $1.56 billion. A reduction in realized investment gains and
insurance premiums earned accounted for the revenue decline in
1998.
The following table summarizes The St. Paul's results for the
first quarters of 1998 and 1997.
Three Months Ended
March 31
------------------
1998 1997
Pretax income (loss): ----- -----
Underwriting:
GAAP underwriting result $(61) (51)
Net investment income 219 218
Realized investment gains 43 93
Other (10) (19)
--- ---
Total underwriting 191 241
Asset management-investment banking 24 23
Parent and other (22) (19)
--- ---
Income from continuing operations
before income taxes 193 245
Income tax expense 39 53
--- ---
Income from continuing operations 154 192
Loss from discontinued operations,
net of taxes - (67)
--- ---
Net income $154 125
=== ===
Diluted net income per common share $0.83 0.68
==== ====
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Underwriting
------------
The following summarizes key financial results by underwriting
business segment:
Three Months
% of 1998 Ended March 31
Written --------------
($ in Millions) Premiums 1998 1997
--------- ---- ----
Specialized Commercial:
Written Premiums 29% $292 300
Underwriting Result $(6) (3)
Combined Ratio 103.9 101.5
Commercial:
Written Premiums 20% $198 241
Underwriting Result $(12) (16)
Combined Ratio 106.2 112.6
Personal Insurance:
Written Premiums 17% $175 175
Underwriting Result $(4) (23)
Combined Ratio 103.1 112.9
Medical Services:
Written Premiums 10% $95 95
Underwriting Result $(28) 4
Combined Ratio 125.0 105.6
--- ----- -----
Total St. Paul
Fire and Marine:
Written Premiums 76% $760 811
Underwriting Result $(50) (38)
Combined Ratio 108.1 107.7
St. Paul International
Underwriting:
Written Premiums 9% $87 53
Underwriting Result $(19) (7)
Combined Ratio 120.8 113.9
--- ----- -----
Total Worldwide
Insurance Operations:
Written Premiums 85% $847 864
Underwriting Result $(69) (45)
Combined Ratio 109.2 108.1
St. Paul Re:
Written Premiums 15% $154 165
Underwriting Result $8 (6)
Combined Ratio 99.2 104.2
--- ----- -----
Total Underwriting:
Written Premiums 100% $1,001 1,029
GAAP Underwriting Result $(61) (51)
Statutory Combined Ratio:
Loss and Loss Expense Ratio 72.8 74.2
Underwriting Expense Ratio 34.7 33.3
----- -----
Combined Ratio 107.5 107.5
===== =====
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Written Premiums
- ----------------
First quarter written premiums of $1.00 billion were 3% below
the comparable 1997 total of $1.03 billion. Premium volume in
The St. Paul's Commercial segment was down $43 million, or
18%, from 1997's first quarter. Competitive pressures in this
market sector are intense, resulting in price declines and
severely limiting opportunities for new business. In
addition, premium volume in last year's first quarter included
certain business from Northbrook Holdings (acquired in August
1996) that was purposely not renewed in subsequent periods.
The Reinsurance segment experienced an $11 million decline in
premiums from the first quarter of 1997, reflecting the soft
demand for reinsurance products throughout domestic and
international markets.
The International segment posted a $34 million increase in
premium volume over the first quarter of 1997. New business
in Europe and Canada, in addition to approximately $10 million
of volume from The St. Paul's new operation in Botswana,
accounted for the strong increase over 1997. In March 1998,
St. Paul International sold the renewal rights to its personal
insurance business in the United Kingdom for approximately $4
million in order to focus on its commercial and surety
underwriting operations. That business accounted for
approximately $57 million of The St. Paul's written premium
volume for the year 1997.
Premiums written in the Personal Insurance and Medical
Services segments in the first three months of 1998 were level
with the same period of 1997, while Specialized Commercial
premiums were down 3%.
Underwriting Results
- --------------------
The first quarter GAAP underwriting loss was $61 million,
compared with a loss of $51 million in the first quarter of
1997. A sharp deterioration in Medical Services results and
an increase in catastrophe losses were to a significant extent
offset by favorable prior year loss development in several of
The St. Paul's underwriting business segments. Pretax
catastrophe losses totaled $39 million in the first three
months of 1998, compared with losses of just $5 million in the
same period of 1997. The majority of 1998 losses originated
from tornadoes in the Midwest and South and ice storms in
Canada. The lack of premium growth in the first quarter
negatively impacted the underwriting operations' expense
ratio, which, at 34.7, was 1.4 points worse than 1997's first
quarter ratio. Agent and broker commission expenses as a
percentage of premiums written were higher in 1998 than in
1997, reflecting the intense competition to retain existing
business and underwrite new business throughout the property-
liability industry.
Key factors in the change in underwriting results from 1997
were as follows:
- Medical Services - $32 million worse than 1997 -
An increase in the severity of prior year loss
development on medical malpractice coverages was
the primary factor in the deterioration from 1997.
- Personal Insurance - $19 million better than 1997 -
Improvements in both current year loss
experience and prior year loss development
contributed to the favorable 1998 result.
- Reinsurance - $14 million better than 1997 - The
absence of significant catastrophe losses in this
segment and substantial favorable prior year loss
development accounted for the improvement over
1997.
- International - $12 million worse than 1997 -
Catastrophe losses resulting from ice storms in
Canada and adverse loss development on personal
insurance coverages in Europe were the major
factors in the 1998 underwriting loss.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Investments
- -----------
The St. Paul's underwriting operations posted first quarter
pretax investment income of $219 million in 1998, virtually
level with first quarter 1997 income of $218 million. The
lack of written premium growth and an increase in insurance
losses paid in recent quarters have resulted in a decline in
new funds available for investment. In addition, market
yields available on new investments continue to decline.
These factors accounted for the negligible increase in
investment income in the first quarter of 1998. The weighted
average pretax yield on the fixed maturities portfolio was
6.9% at the end of the quarter, down from 7.1% at the same
time in 1997. Approximately 97% of that portfolio is rated at
investment grade levels (BBB or better).
Pretax realized investment gains of $43 million in the first
quarter largely resulted from the sale of equity investments.
Gains of $93 million in the first quarter of 1997 were fueled
by sales of equity and venture capital holdings.
Environmental and Asbestos Claims
---------------------------------
The St. Paul's underwriting operations continue to receive
claims alleging injuries from environmental pollution or
alleging covered property damages for the cost to clean up
polluted sites. The company also receives asbestos injury
claims arising out of product liability coverages under
general liability policies. The vast majority of these claims
arise from policies written many years ago. The St. Paul's
alleged liability for both environmental and asbestos claims
is complicated by significant legal issues, primarily
pertaining to the scope of coverage. In the company's
opinion, court decisions in certain jurisdictions have tended
to broaden insurance coverage beyond the intent of the
original policies.
The company's ultimate liability for environmental claims is
difficult to estimate because of these issues. 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 St. Paul'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 claim development, both of which are still
developing.
The table on the next page represents a reconciliation of
total gross and net environmental reserve development for the
three months ended March 31, 1998, and the years ended Dec. 31,
1997 and 1996. Amounts in the "net" column are reduced by
reinsurance recoverable.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
1998 1997 1996
Environmental (three months) ------ ------
- ------------- --------------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $563 373 581 368 528 319
Reserves acquired - - - - 18 7
Incurred losses 6 7 18 32 67 72
Paid losses (15) (14) (36) (27) (32) (30)
--- --- --- --- --- ---
Ending reserves $554 366 563 373 581 368
=== === === === === ===
Many significant environmental claims currently being brought
against the insurance industry arise out of contamination that
occurred 20 to 30 years ago. Since 1970, The St. Paul'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 three
months ended March 31, 1998, and the years ended Dec. 31, 1997
and 1996.
1998 1997 1996
Asbestos (three months) ------ ------
- -------- -------------
(in millions) Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Beginning reserves $271 153 278 169 283 158
Reserves acquired - - - - 6 6
Incurred losses 5 2 25 (1) 12 18
Paid losses (7) (1) (32) (15) (23) (13)
--- --- --- --- --- ---
Ending reserves $269 154 271 153 278 169
=== === === === === ===
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 St. Paul's commercial
general liability policy has included the industry standard
absolute pollution exclusion, which the company believes
applies to asbestos claims.
The St. Paul's reserves for environmental and asbestos losses
at March 31, 1998 represent its best estimate of its ultimate
liability for such losses, based on all information currently
available. Because of the inherent difficulty 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 March 31,
1998, of $823 million represented approximately 7% of gross
consolidated reserves of $11.72 billion.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion, Continued
Asset Management-Investment Banking
-----------------------------------
The company's portion of pretax earnings from The John Nuveen
Company (Nuveen) was $24 million in the first quarter of 1998,
compared with $23 million in 1997's first quarter. The
company holds a 77% interest in Nuveen.
Asset management revenues of $64 million in the first quarter
were $14 million, or 28%, higher than in the same period of
1997. The increase was primarily due to Nuveen's acquisition
of Rittenhouse Financial Services, Inc., which manages
individual equity and balanced accounts for affluent
investors, in September 1997. The Rittenhouse acquisition
added approximately $9 billion to Nuveen's managed asset base.
Total managed assets grew to $51.3 billion at March 31, 1998,
an increase of $1.7 billion over year-end 1997. Growth in the
market value of underlying assets, together with new product
sales during the quarter, accounted for the increase.
Nuveen's gross product sales in the first quarter of 1998
totaled $1.7 billion, consisting of $1.1 billion in managed
accounts, $395 million in mutual funds and $167 million in
unit investment trusts. Gross product sales in the same 1997
period were $493 million.
Capital Resources
-----------------
Common shareholders' equity grew to $4.8 billion at March 31,
1998, an increase of nearly $200 million over year-end 1997.
In addition to the impact of first quarter net income on
shareholders' equity, the after-tax unrealized appreciation on
The St. Paul's investment portfolio increased by $58 million
during the quarter. Total debt outstanding at March 31, 1998
of $655 million declined $128 million from year-end 1997,
largely due to Nuveen's repayment of $70 million of short-term
borrowings and $15 million of other notes payable. After
final payment of its ESOP debt in the first quarter, The St.
Paul's debt at March 31, 1998 was largely comprised of medium-
term notes ($512 million) and commercial paper ($128 million).
The medium-term notes bear a weighted-average interest rate of
7.1%. The ratio of total debt to total capitalization of 12%
declined from the year-end 1997 ratio of 14%.
The company anticipates that any major capital expenditures
during the remainder of 1998 would involve acquisitions of
existing businesses. In February 1998, The St. Paul's board
of directors rescinded management's authority for repurchasing
common shares of the company. There are no major capital
improvements planned for the remainder of 1998.
The merger with USF&G Corporation was a noncash, tax-free
exchange of stock accounted for on a pooling-of-interests
basis. The St. Paul anticipates incurring a pretax charge of
approximately $500 million in the second quarter of 1998 for
restructuring and other nonrecurring charges related to
the USF&G merger.
The company's ratio of earnings to fixed charges was 11.29 for
the first three months of 1998, compared with 13.59 for the
same period of 1997. The company's ratio of earnings to
combined fixed charges and preferred stock dividends was 8.10
for the first three months of 1998, compared with 9.80 for the
same period of 1997. Fixed charges consist of interest
expense and one-third of rental expense, which is considered
to be representative of an interest factor.
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 short- and long-term cash requirements of its
business segments. Net cash provided by operations was $51
million in the first three months of 1998, compared to $64
million in the same period of 1997. Cash flows in The St. Paul's
underwriting operations declined $7 million from the first
quarter of 1997, primarily due to the decline in written
premiums. Operational cash flows at The John Nuveen Company were
also down from first quarter 1997, primarily due to the repayment
of short-term borrowings.
Year 2000 Issues
----------------
Many computer systems in the world have the potential of being
disrupted at the turn of the century due to programming
limitations that may cause the two-digit year code of "00" to be
recognized as the year 1900, instead of 2000. For several years,
The St. Paul has been evaluating its financial and operational
computer systems to determine the impact of the "Year 2000" issue
on those systems. With the completion of the merger
with USF&G Corporation, The St. Paul has further evaluated
USF&G's activities to become "Year 2000" compliant. The St. Paul
has developed and implemented plans to address the required
system modifications., and does not expect the financial impact
of making these modifications to be material to its results of
operations, cash flows or consolidated financial position.
The St. Paul also faces potential "Year 2000" claims stemming
from coverages offered in insurance policies it has sold to
customers. In some instances, coverage is not provided under the
insurance policies, while in other instances, coverage may be
provided under certain circumstances. The company continues to
assess its exposure to insurance claims arising from those
coverages, and it is taking a number of actions to
address that exposure, including individual risk evaluation and
classification of high hazard exposures. Currently, The St. Paul
does not believe that such claims will have a material effect
on its results of operations, cash flows or consolidated
financial position.
Forward-looking Statement Disclosure
------------------------------------
This report contains certain forward-looking statements within
the meaning of the Private Litigation Reform Act of 1995.
Forward-looking statements are statements other than historical
information or statements of current condition. Words such as
expects, anticipates, intends, plans, believes, seeks or
estimates, or variations of such words, and similar expressions
are also intended to identify forward-looking statements. In
light of the risks and uncertainties inherent in future
projections, many of which are beyond The St. Paul's control,
actual results could differ materially from those in forward-
looking statements. These statements should not be regarded as a
representation that the objectives will be achieved. Risks and
uncertainties include, but are not limited to, the following:
general economic conditions including changes in interest rates
and the performance of financial markets; changes in domestic and
foreign laws, regulations and taxes; changes in the demand for,
pricing of, or supply of reinsurance or insurance; catastrophic
events of unanticipated frequency or severity; loss of
significant customers; judicial decisions and rulings; and
various other matters, including the effects of the merger with
USF&G Corporation. The St. Paul undertakes no obligation to
release publicly the results of any future revisions we may make
to forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of
unanticipated events.
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.
The St. Paul held a special shareholders' meeting on
April 7, 1998.
(1) By a vote of 66,877,859 in favor, 427,887
against and 79,339 abstaining, the shareholders
approved the issuance of common stock of The St.
Paul pursuant to the Agreement and Plan of Merger,
dated as of January 19, 1998 among USF&G
Corporation, The St. Paul and SP Merger
Corporation, pursuant to which SP Merger
Corporation will be merged with and into USF&G and
USF&G will become a wholly owned subsidiary of The
St. Paul.
The St. Paul's annual shareholders' meeting was held
on May 5, 1998.
(1) All thirteen 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
thirteen nominees were elected by the following
votes:
In favor Withheld
----------- ----------
Michael R. Bonsignore 72,423,850 126,854
John H. Dasburg 72,400,544 150,160
W. John Driscoll 72,403,483 147,221
Pierson M. Grieve 72,395,933 154,771
Thomas R. Hodgson 72,417,868 132,836
David G. John 72,419,655 131,049
William H. Kling 72,398,247 152,457
Douglas W. Leatherdale 72,415,736 134,968
Bruce K. MacLaury 72,410,117 140,587
Glen D. Nelson 72,422,627 128,077
Anita M. Pampusch 72,426,464 124,240
Gordon M. Sprenger 72,423,192 127,512
Patrick A. Thiele 72,418,479 132,225
(2) By a vote of 72,260,092 in favor, 125,187
against and 165,425 abstaining, the shareholders
ratified the selection of KPMG Peat Marwick LLP as
the independent auditors for The St. Paul.
(3) By a vote of 69,723,277 in favor, 2,674,220
against and 153,207 abstaining, the shareholders
amended the Restated Articles of Incorporation of
The St. Paul to increase the number of authorized
shares of voting common stock from 240 million to
480 million.
(4) By a vote of 62,462,370 in favor, 9,056,577
against and 1,031,757 abstaining, the
shareholders approved The St. Paul's Amended and
Restated 1994 Stock Incentive Plan.
(5) By a vote of 62,126,111 in favor, 9,425,661
against and 998,932 abstaining, the shareholders
approved The St. Paul's Global Stock Option Plan.
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 January 19, 1998, relating to
the announcement of its definitive merger
agreement and stock option agreement with
USF&G Corporation.
2) The St. Paul filed a Form 8-K Current
Report dated January 26, 1998, relating to
the announcement of its financial results for
the year ended Dec. 31, 1997.
3) The St. Paul filed a Form 8-K Current
Report dated February 26, 1998, containing
the following documents for The St. Paul for
the year ended Dec. 31, 1997: Audited
Financial Statements, Notes to Consolidated
Financial Statements, Management's Discussion
and Analysis of Financial Condition and
Results of Operations, Eleven-year Summary of
Selected Financial Data, Independent
Auditors' Report, Statement Regarding
Management's Responsibility for Financial
Statements, Consent of Independent Auditors
and Financial Data Schedule.
4) The St. Paul filed a Form 8-K Current
Report dated April 24, 1998, relating to the
consummation of its merger with USF&G
Corporation.
5) The St. Paul filed a Form 8-K Current
Report dated April 27, 1998, relating to the
announcement of its financial results for the
quarter ended March 31, 1998.
6) The St. Paul filed a Form 8-K Current
Report dated May 5, 1998, relating to the
election of three former directors of USF&G
Corporation to The St. Paul's board of
directors, and the approval of a two-for-one
common stock split to shareholders of record
on May 6, 1998.
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: May 12, 1998 By /s/ Bruce A.Backberg
--------------------
Bruce A. Backberg
Senior Vice President
and Chief Legal Counsel
(Authorized Signatory)
Date: May 12, 1998 By /s/ Howard E. Dalton
--------------------
Howard E. Dalton
Senior Vice President
Chief Accounting Officer
EXHIBIT INDEX
---------------
Method of
Exhibit Filing
- ------- ---------
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession*.............................
(3) (i) Articles of incorporation**...........................(1)
(ii) 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 The St. Paul Companies, 385 Washington Street,
Saint Paul, MN 55102, Attention: Corporate Secretary.
(1) Filed electronically herewith.