SAINT PAUL, Minn.--(BUSINESS WIRE)--July 28, 2005--
Net Income of $1.069 Billion or $1.52 per Diluted Share; Income from
Continuing Operations of $931 Million or $1.33 per Diluted Share;
Operating Income of $966 Million or $1.38 per Diluted Share
The St. Paul Travelers Companies, Inc. ("St. Paul Travelers,"
NYSE:STA) today reported record net income for the current quarter of
$1.069 billion, or $1.59 per basic share and $1.52 per diluted share,
compared to a net loss of $275 million, or $0.42 per basic and diluted
share, in the prior year quarter. Net income for the current quarter
included a $138 million after-tax gain from discontinued operations,
primarily related to the partial disposition of St. Paul Travelers'
equity stake in Nuveen Investments, Inc. ("Nuveen"). Income from
continuing operations was a record $931 million for the current
quarter, or $1.39 per basic share and $1.33 per diluted share,
compared to a loss of $302 million, or $0.46 per basic and diluted
share, in the prior year quarter.
Operating income for the current quarter was a record $966
million, or $1.44 per basic share and $1.38 per diluted share,
compared to a loss of $337 million, or $0.51 per basic and diluted
share, in the prior year quarter. The current quarter results included
a net after-tax benefit of $50 million ($75 million pre-tax) for
favorable prior year reserve development primarily in the Personal
segment. The prior year quarter included an after-tax charge of $925
million ($1.397 billion pre-tax) for net unfavorable reserve
development for years prior to 2004 and other after-tax charges of
$141 million ($217 million pre-tax). Operating income is net income
excluding the after-tax impact of net realized investment gains
(losses) and discontinued operations.
Highlights for the Quarter
-- Operating return on equity of 18.6 percent (excluding FAS
115).
-- GAAP combined ratio of 87.6 percent.
-- Strong performance in all business segments. The Commercial,
Specialty and Personal segments reported after-tax operating
income of $530 million, $221 million and $266 million,
respectively, and combined ratios of 89.5 percent, 90.9
percent and 81.6 percent, respectively.
-- Net favorable prior year reserve development of $50 million
after-tax, primarily related to continued favorable prior year
loss trends in the Personal segment.
-- Gross written premiums unchanged and net written premiums up 2
percent from the prior year quarter, excluding Commercial
Other, the Company's runoff operations.
Jay Fishman, President and Chief Executive Officer, said, "We are
very pleased with our performance for the quarter, with all of our
segments recording very strong results. Contributing to our
performance was a 22 percent increase in net investment income over
the comparable quarter last year.
"Our top line story is increasingly encouraging. Gross written
premiums in a number of our business lines posted growth in the
quarter. We have done a very good job of retaining our business,
generating strong retention levels that are at historically high
levels. New business premiums in Commercial and Specialty are higher
this quarter than they have been in each of the last three quarters.
The rates for business renewed are such that margins continue to be
attractive.
"This quarter we completed a number of initiatives that
significantly strengthened our financial flexibility and capital
position. Our statutory capital was increased by the record earnings
generated during the first six months of this year and will be further
increased by the addition of the majority of the proceeds related to
the Nuveen divestiture. Statutory capital ratios were also enhanced by
the combination of the Travelers Property Casualty and St. Paul
Companies insurance pools. In addition, over the last six months we
reduced our total debt by over $800 million, including the elimination
of the Nuveen debt. We are pleased to have received updated financial
strength ratings of A+ from A.M. Best and Aa3 from Moody's for the
recently combined insurance pool.
"We are excited about the momentum we have in the Company, and the
opportunities the Company's earnings power provides us to invest in
the future," concluded Mr. Fishman.
Consolidated Second Quarter Highlights
----------------------------------------------------------------------
($ in Three Months Ended June 30, Six Months Ended June 30,
millions, --------------------------- ---------------------------
except for
per share
amounts, and
after-tax
except for
premiums)
2005 2004 Change 2005 2004 Change
-------- -------- --------- -------- -------- ---------
Gross written
premiums $5,909 $6,142 (4)% $11,829 $10,152 17%
excluding
Commercial
Other 5,868 5,841 - 11,711 9,560 23
Net written
premiums 5,216 5,256 (1) 9,996 8,656 15
excluding
Commercial
Other 5,194 5,088 2 9,934 8,342 19
Net earned
premiums 5,109 5,154 (1) 10,228 8,493 20
Underwriting
gain/(loss) 383 (789) NMF 674 (629) NMF
Net investment
income 598 490 22 1,181 944 25
Operating
income/(loss) 966 (337) NMF 1,825 277 559
per diluted
share $1.38 $(0.51) NMF $2.60 $0.50 420
Income/(loss)
from
continuing
operations 931 (302) NMF 1,808 285 534
per diluted
share $1.33 $(0.46) NMF $2.58 $0.51 406
Net income/
(loss) 1,069 (275) NMF 1,281 312 311
per diluted
share $1.52 $(0.42) NMF $1.84 $0.56 229
Book value per
share $32.90 $29.52 11 $32.90 $29.52 11
Adjusted book
value per
share(1) $31.48 $29.30 7 $31.48 $29.30 7
GAAP combined
ratio 87.6% 122.7% (35.1)pts 89.1% 110.6% (21.5)pts
Continuing
operations
return on
equity 17.4% (6.0%) 23.4pts 17.0% 3.5% 13.5pts
Return on
equity 20.0% (5.4%) 25.4pts 12.1% 3.8% 8.3pts
Operating
return on
equity(1) 18.6% (6.9%) 25.5pts 17.7% 3.5% 14.2pts
(1) Excludes FAS 115
Note: The results of St. Paul Travelers for the six months ended June
30, 2004 reflect only the accounts of Travelers for the three
months ended March 31, 2004, and the consolidated accounts of
St. Paul and Travelers for the three months ended June 30, 2004.
Please see Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data
----------------------------------------------------------------------
Gross and net written premiums, excluding runoff operations, were
unchanged and increased 2 percent, respectively, from the prior year
quarter, while gross and net written premiums including runoff
operations decreased 4 percent and 1 percent, respectively. As
mentioned last quarter, the difference in the percentage changes
quarter over quarter in gross and net written premiums is primarily
driven by changes in the terms and timing of the purchase of the
Company's reinsurance programs for its Specialty segment. Premium
growth in a number of business lines was offset primarily by decreases
in Construction, the middle market business within Commercial Accounts
and the Lloyd's operation.
Net investment income for the current quarter was $598 million
after-tax ($775 million pre-tax), a 22 percent increase over the prior
year quarter. The increase was driven by continued strong operating
cash flows, the proceeds received from the partial sale of Nuveen
shares and favorable returns in private equity partnerships.
The current quarter GAAP combined ratio was 87.6 percent. The
current quarter ratio included 1.5 points for net favorable prior year
reserve development and 0.2 points for catastrophe losses, compared to
27.1 points for net unfavorable prior year reserve development and 0.5
points for catastrophe losses for the prior year quarter.
During the second quarter, the Company sold 45.9 million shares of
Nuveen, resulting in net after-tax proceeds of $1.790 billion and a
$138 million after-tax gain recorded as part of discontinued
operations.
Year-to-Date Consolidated Results
The St. Paul Companies, Inc. ("St. Paul") and Travelers Property
Casualty Corp. ("Travelers") merged to form St. Paul Travelers on
April 1, 2004. The results of St. Paul Travelers for the six months
ended June 30, 2004, reflect only the accounts of Travelers for the
three months ended March 31, 2004, and the consolidated accounts of
St. Paul and Travelers for the three months ended June 30, 2004.
For the first six months of 2005, St. Paul Travelers reported
record net income of $1.281 billion, or $1.91 per basic share and
$1.84 per diluted share, compared to $312 million, or $0.56 per basic
and diluted share, in the prior year period. Income from continuing
operations for the first six months was a record $1.808 billion, or
$2.70 per basic share and $2.58 per diluted share, compared to $285
million, or $0.51 per basic and diluted share, in the prior year
period. Operating income for the first six months was a record $1.825
billion, or $2.72 per basic share and $2.60 per diluted share,
compared to $277 million, or $0.50 per basic and diluted share, in the
prior year period. Net and operating income for the first six months
of 2005 included an after-tax benefit of $86 million ($130 million pre
-tax) for net favorable prior year reserve development and an
after-tax charge of $28 million ($42 million pre-tax) for catastrophe
losses, compared to an after-tax charge of $953 million ($1.440
billion pre-tax) for pre-2004 net unfavorable prior year reserve
development, other after-tax charges of $141 million ($217 million
pre-tax) and an after-tax charge of $29 million ($44 million pre-tax)
for catastrophe losses, in the prior year period.
Commercial Segment Financial Results
For the second quarter 2005, the Commercial segment reported
operating income of $530 million compared to $316 million in the prior
year quarter. The current quarter benefited from favorable weather,
strong net investment income, and an after-tax benefit of $7 million
($10 million pre-tax) for net favorable prior year reserve
development. The prior year quarter included an after-tax charge of
$155 million ($213 million pre-tax) for pre-2004 net unfavorable prior
year reserve development and other after-tax charges of $40 million
($62 million pre-tax). There were no catastrophe losses in the current
or prior year quarters. During the current quarter, the financial
results of the Company's Discover Re operations were reclassified from
the Specialty segment to the Commercial segment, and all prior
quarters have been restated to align Discover Re with the National
Accounts operations.
The Commercial GAAP combined ratio was 89.5 percent in the current
quarter, compared to 100.6 percent in the prior year quarter. The GAAP
combined ratio in the current quarter included 0.5 points of net
favorable prior year reserve development compared to 8.9 points of net
unfavorable prior year reserve development in the prior year quarter.
Gross and net written premiums for Commercial Core, which does not
include the runoff businesses, each decreased 2 percent from the prior
year quarter, while Commercial gross and net written premiums
including the runoff businesses decreased 11 percent and 8 percent,
respectively. The modest declines in Commercial Core gross and net
written premiums were primarily driven by declines in renewal price
changes in the middle market business within Commercial Accounts.
Retention rates were strong in the current quarter and at historically
high levels, and new business premiums continued their upward trend
from the previous three quarters.
Specialty Segment Financial Results
For the second quarter 2005, the Specialty segment reported
operating income of $221 million compared to a loss of $790 million in
the prior year quarter. The current quarter benefited from favorable
weather, improved performance in the surety business and strong net
investment income, and included an after-tax charge of $10 million
($16 million pre-tax) for net unfavorable prior year reserve
development. The prior year quarter included an after-tax charge of
$835 million ($1.284 billion pre-tax) for pre-2004 net unfavorable
prior year reserve development and other after-tax charges of $99
million ($152 million pre-tax). There were no catastrophe losses in
the current and prior year quarters.
The Specialty GAAP combined ratio was 90.9 percent in the current
quarter, compared to 198.3 percent in the prior year quarter. The
current quarter GAAP combined ratio included 1.1 points of net
unfavorable prior year reserve development compared to 93.4 points in
the prior year quarter.
Gross and net written premiums increased 1 percent and 6 percent,
respectively, from the prior year quarter. As previously mentioned,
the difference in the percentage increase quarter over quarter in
gross and net written premiums is primarily driven by changes in the
terms and timing of the purchase of the Company's reinsurance
programs. The modest increase in gross written premiums quarter over
quarter was primarily driven by strong performances in the Technology,
Ocean Marine, and Oil and Gas businesses and the transfer of Gulf
business to Financial and Professional Services, partially offset by
the now completed process of aligning the Construction underwriting
profile of the two predecessor companies and the sale of certain
credit-related personal lines classes written through Lloyd's.
Approximately $50 million of gross written premiums previously written
by Gulf were renewed in Financial and Professional Services in the
current quarter.
Within Domestic Specialty, retention levels were strong, and new
business levels continued to improve, with both amounts higher than
they had been over the last year. Within International Specialty,
excluding Lloyd's, retention levels were also strong and consistent
with prior quarters, and new business premiums were up from each of
the prior three quarters.
Personal Segment Financial Results
For the second quarter 2005, the Personal segment reported
operating income of $266 million compared to $197 million in the prior
year quarter. The 35 percent increase in 2005 was primarily due to
continued favorable claim frequency in both the Auto and the
Homeowners and Other lines, growth in business volumes and strong net
investment income. The current quarter results included an after-tax
benefit of $53 million ($81 million pre-tax) for net favorable prior
year reserve development primarily related to continued declines in
claim frequency in both the Auto and the Homeowners and Other lines.
This compares to an after-tax benefit of $65 million ($100 million
pre-tax) for net favorable prior year reserve development in the prior
year quarter. Current quarter catastrophe losses, related to hail
storms in Texas, were $8 million after-tax ($11 million pre-tax)
compared to catastrophe losses of $16 million after-tax ($24 million
pre-tax) in the prior year quarter.
The Personal GAAP combined ratio was 81.6 percent in the current
quarter, compared to 85.6 percent in the prior year quarter. The
improvement in the combined ratio was primarily due to the recognition
of lower frequency across the Personal segment, consistent with trends
in the past few quarters. The current quarter GAAP combined ratio
included 5.4 points of net favorable prior year reserve development
and 0.7 points of catastrophe losses. The prior year quarter GAAP
combined ratio included 7.3 points of net favorable prior year reserve
development and 1.8 points of catastrophe losses.
Second quarter gross and net written premiums increased 4 percent
from the prior year quarter. Automobile gross written premiums
decreased 1 percent in the current quarter as compared to the prior
year quarter. Successful efforts to diversify geographically resulted
in positive premium growth outside of the Northeast, but did not
offset the increasingly competitive environment in the Northeastern
states. Retention rates, however, remained strong and consistent with
prior year levels.
Homeowners and Other gross written premiums increased 12 percent
from the prior year quarter due to a combination of price increases
and unit growth. Organic new business premiums remained healthy and in
line with the prior year quarter while retention rates were strong and
consistent with prior quarters.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with a financial supplement that is available on our Web
site at www.stpaultravelers.com. The management of St. Paul Travelers
will discuss the contents of this release via Webcast at 9:00 a.m.
Eastern (8:00 a.m. Central) on Thursday, July 28, 2005. Prior to the
Webcast, a related slide presentation will be available on the
Company's Web site. Following the live event, an audio playback of the
Webcast and the slide presentation will be available at the Company's
Web site.
To view the slides or to listen to the Webcast or the playback,
visit the "Webcasts & Presentations" section of St. Paul Travelers
investor relations Web site at http://investor.stpaultravelers.com/.
About St. Paul Travelers
St. Paul Travelers is a leading provider of property casualty
insurance. For more information, visit www.stpaultravelers.com.
Glossary of Financial Measures
The following measures are used by the Company's management to
evaluate financial performance against historical results and
establish targets on a consolidated basis. In some cases, these
measures are considered non-GAAP financial measures under applicable
SEC rules because they are not displayed as separate line items in the
consolidated statement of income or required to be disclosed in the
notes to financial statements, and in some cases, include or exclude
certain items not ordinarily included or excluded in the most
comparable GAAP financial measure. In the opinion of the Company's
management, a discussion of these measures provides investors with a
better understanding of the significant factors that comprise the
Company's periodic results of operations and how management evaluates
the Company's financial performance.
Operating income (loss) is net income (loss) excluding the
after-tax impact of net realized investment gains (losses) and
discontinued operations. Operating income (loss) per share is
operating income (loss) on a per share basis.
Return on equity is the ratio of net income to average equity.
Continuing operations return on equity is the ratio of income from
continuing operations to average equity. Operating return on equity is
the ratio of operating income to average equity excluding net
unrealized gains or losses on investment securities and discontinued
operations, net of tax.
In the opinion of the Company's management, operating income,
operating income per share, and operating return on equity are
meaningful indicators of underwriting and operating results. These
measures exclude net realized investment gains or losses which can be
significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Internally, the Company's management uses operating income, operating
income per share and operating return on equity to evaluate
performance against historical results and establish financial targets
on a consolidated basis.
Underwriting gain or loss is net earned premiums and fee income
less claims and claim adjustment expenses and insurance-related
expenses.
A catastrophe is a severe loss, resulting from natural and manmade
events, including risks such as fire, earthquake, windstorm,
explosion, terrorism and other similar events. Each catastrophe has
unique characteristics. Catastrophes are not predictable as to timing
or amount in advance, and therefore their effects are not included in
earnings or claims and claim adjustment expense reserves prior to
occurrence. In the opinion of the Company's management, a discussion
of the impact of catastrophes is meaningful for investors to
understand the variability in periodic earnings.
Loss reserve development is the increase or decrease in incurred
claims and claim adjustment expenses as a result of the re-estimation
of claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims. Loss reserve development
may be related to prior year or current year development. In the
opinion of the Company's management, discussion of prior year loss
reserve development is useful to investors as it allows them to assess
the impact between prior year and current year development on current
earnings and changes in claims and claim adjustment expense reserve
levels from period to period.
GAAP combined ratio is the sum of the loss and loss adjustment
expense ratio (loss and LAE ratio), the underwriting expense ratio
and, where applicable, the ratio of dividends to policyholders to net
premiums earned. For GAAP, the loss and LAE ratio is the ratio of
incurred losses and loss adjustment expenses reduced by an allocation
of fee income to net earned premiums. The underwriting expense ratio
is the ratio of underwriting expenses incurred reduced by an
allocation of fee income, billing and policy fees to net earned
premium. A GAAP combined ratio under 100 percent generally indicates
an underwriting profit. A GAAP combined ratio over 100 percent
generally indicates an underwriting loss. The GAAP combined ratio is
an operating statistic that includes GAAP measures in the numerator
and the denominator.
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to the policyholders for the
effective period of the contract based on the terms and conditions of
the insurance contract. Gross written premiums are a measure of
overall business volume.
Adjusted book value per share represents assets less liabilities
and preferred shareholder's equity excluding the after-tax impact of
net unrealized investment gains and losses, divided by the number of
shares outstanding. In the opinion of the Company's management,
adjusted book value is useful in an analysis of a property-casualty
company's book value on a nominal basis as it removes the effect of
changing prices on invested assets, which do not have an equivalent
impact on unpaid claims and claim adjustment expense reserves.
St. Paul Travelers has organized its businesses into the following
operating and reporting segments, beginning with the second quarter
2004:
Commercial: Commercial - Core offers a broad array of property and
casualty insurance and insurance-related services and is organized
into the following three marketing and underwriting groups focusing on
a particular client base or product grouping to provide products and
services that specifically address clients' needs: Commercial
Accounts, Select Accounts and National Accounts. Commercial - Other
includes policies written by Gulf, primarily management and
professional liability coverages (prior to the integration of these
products into Specialty in April 2004), the Special Liability Group
and other runoff operations.
Specialty provides dedicated underwriting, claim and risk control
services that require specialized expertise, domestically and
internationally. Domestic Specialty includes Financial and
Professional Services, Bond, Construction, Technology, Ocean Marine,
Oil and Gas, Public Sector and Excess & Umbrella, among others.
International Specialty includes operations in the U.K, Ireland,
Canada and the Company's participation in Lloyd's.
Personal writes virtually all types of property and casualty
insurance covering personal risks. The primary coverages in this
segment are personal automobile and homeowners insurance sold to
individuals.
Discontinued Operations (Asset Management) comprises Nuveen
Investments, whose core businesses are asset management and related
research, as well as the development, marketing and distribution of
investment products and services for the affluent, high net worth and
institutional market segments. The Company held a 31% interest in
Nuveen Investments as of June 30, 2005.
Segment results for periods beginning prior to April 1, 2004 have
been restated from the historical presentation of Travelers to conform
to the new St. Paul Travelers segment arrangement where practicable.
As a result, prior quarter Bond and Construction results were
disaggregated from historical Travelers Commercial Lines segment to
create a historical Specialty segment and to restate Commercial into
the new format. Beginning in the second quarter of 2005, the results
of Discover Re are now included in the Commercial segment. Previously,
Discover Re's results were included in the Specialty segment. All
prior quarters have been restated to conform with the second quarter
2005 presentation.
Invested and other assets and net investment income (NII) of
historical Travelers had been specifically identified by reporting
segment prior to the merger. Beginning in the second quarter 2004, the
Company developed a methodology to allocate NII and invested assets to
the identified segments. This methodology allocates pretax NII based
upon an investable funds concept, which takes into account liabilities
(net of non-invested assets) and appropriate capital considerations
for each segment. It is not practicable to apply the methodology to
historical businesses and as such, actual (versus allocated) NII is
included in revenues and operating income of the restated segments for
periods prior to the merger. It is also not practicable to present
total assets for restated Specialty and Commercial segments for
periods prior to the merger. The Company believes that the
differences, if any, are not significant to a comparison with the new
segment presentation.
Forward Looking Statement
This press release may contain, and management may make, certain
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, may be forward-looking statements.
Specifically, the Company may make forward-looking statements about
the Company's results of operations (including, among others, premium
volume, income from continuing operations, net and operating income
and return on equity), financial condition and liquidity; the
sufficiency of the Company's asbestos and other reserves (including,
among others, asbestos claim payment patterns); the post-merger
integration (including, among others, expense savings); and strategic
initiatives (including, among others, the sale of the Company's
interest in Nuveen). Such statements are subject to certain risks and
uncertainties, many of which are difficult to predict and generally
beyond the Company's control, that could cause actual results to
differ materially from those expressed in, or implied or projected by,
the forward-looking information and statements.
Some of the factors that could cause actual results to differ
include, but are not limited to, the following: adverse developments
involving asbestos claims and related litigation; the impact of
aggregate policy coverage limits for asbestos claims; the impact of
bankruptcies of various asbestos producers and related businesses; the
willingness of parties including the Company to settle
asbestos-related litigation; the Company's ability to fully integrate
the former St. Paul and Travelers businesses in the manner or in the
timeframe currently anticipated; the Company's ability to execute
announced and future strategic initiatives as planned; insufficiency
of, or changes in, loss and loss adjustment expense reserves; the
Company's inability to obtain prices sought due to competition or
otherwise; the occurrence of catastrophic events, both natural and
man-made, including terrorist acts, with a severity or frequency
exceeding the Company's expectations; exposure to, and adverse
developments involving, environmental claims and related litigation;
exposure to, and adverse developments involving construction defect
claims; the impact of claims related to exposure to potentially
harmful products or substances, including, but not limited to, lead
paint, silica and other potentially harmful substances; adverse
changes in loss cost trends, including inflationary pressures in
medical costs and auto and building repair costs; the effects of
corporate bankruptcies on surety bond claims; adverse developments in
the cost, availability and/or ability to collect reinsurance; the
ability of the Company's subsidiaries to pay dividends to us; adverse
developments in legal proceedings; judicial expansion of policy
coverage and the impact of new theories of liability; the impact of
legislative and other governmental actions, including, but not limited
to, federal and state legislation related to asbestos liability
reform, terrorism insurance and reinsurance (such as the extension of
or replacement for the Terrorism Risk Insurance Act of 2002) and
governmental actions regarding the compensation of brokers and agents;
the impact of well-publicized governmental investigations of certain
industry practices, including with respect to business practices
between insurers, including the Company, and brokers and the purchase
and sale by insurers, including the Company, of finite, or
non-traditional, insurance products; the performance of the Company's
investment portfolios, which could be adversely impacted by adverse
developments in U.S. and global financial markets, interest rates and
rates of inflation; weakening U.S. and global economic conditions;
larger than expected assessments for guaranty funds and mandatory
pooling arrangements; a downgrade in the Company's claims-paying and
financial strength ratings; the loss or significant restriction on the
Company's ability to use credit scoring in the pricing and
underwriting of Personal policies; and changes to the regulatory
capital requirements.
The Company's forward-looking statements speak only as of the date
of this press release or as of the date they are made, and the Company
undertakes no obligation to update its forward-looking statements.
----------------------------------------------------------------------
Summary of Financial Information
On April 1, 2004, Travelers Property Casualty Corp. ("Travelers")
completed its previously announced merger into The St. Paul Companies,
Inc. ("St. Paul"), forming The St. Paul Travelers Companies, Inc.
("St. Paul Travelers"). Each share of Travelers class A and class B
common stock was exchanged for 0.4334 of a share of St. Paul Travelers
common stock, and the Travelers treasury stock was cancelled. The
number of shares and per share amounts for all periods presented have
been restated to reflect the equivalent number of shares resulting
from the exchange of Travelers common stock for St. Paul Travelers
common stock due to the merger on April 1, 2004.
For accounting purposes, this transaction was accounted for as a
reverse acquisition with Travelers treated as the accounting acquirer.
Accordingly, the transaction was accounted for as a purchase business
combination, using Travelers historical financial information and
applying fair value estimates to the acquired assets, liabilities and
commitments of St. Paul as of April 1, 2004. The results of St. Paul
Travelers for the six months ended June 30, 2004, reflect only the
accounts of Travelers for the three months ended March 31, 2004, and
the consolidated accounts of St. Paul and Travelers for the three
months ended June 30, 2004.
----------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
($ in millions, except per
share amounts, and after-tax) 2005 2004 2005 2004
----------------------------------------------------------------------
Operating income (loss) $966 $(337) $1,825 $277
Net realized investment gains
(losses) (35) 35 (17) 8
----------------------------------------------------------------------
Income (loss) from continuing
operations 931 (302) 1,808 285
Discontinued operations 138 27 (527) 27
----------------------------------------------------------------------
Net income (loss) $1,069 $(275) $1,281 $312
----------------------------------------------------------------------
Basic earnings per share
Operating income (loss) $1.44 $(0.51) $2.72 $0.50
Net realized investment gains
(losses) (0.05) 0.05 (0.02) 0.01
----------------------------------------------------------------------
Income (loss) from continuing
operations 1.39 (0.46) 2.70 0.51
Discontinued operations 0.20 0.04 (0.79) 0.05
----------------------------------------------------------------------
Net income (loss) $1.59 $(0.42) $1.91 $0.56
----------------------------------------------------------------------
Diluted earnings per share
Operating income (loss) $1.38 $(0.51) $2.60 $0.50
Net realized investment gains
(losses) (0.05) 0.05 (0.02) 0.01
----------------------------------------------------------------------
Income (loss) from continuing
operations 1.33 (0.46) 2.58 0.51
Discontinued operations 0.19 0.04 (0.74) 0.05
----------------------------------------------------------------------
Net income (loss) $1.52 $(0.42) $1.84 $0.56
----------------------------------------------------------------------
Weighted average number of
common shares outstanding
(basic) 669.5 664.8 668.8 549.7
Weighted average number of
common shares outstanding and
common stock equivalents
(diluted) 710.3 664.8 709.7 562.9
Common shares outstanding at
period end 674.6 668.5 674.6 668.5
Common stock dividends
declared $155.1 $146.9 $303.3 $228.6
----------------------------------------------------------------------
Operating income (loss) by
segment
Commercial $530 $316 $978 $746
Specialty 221 (790) 394 (818)
Personal 266 197 551 434
Interest Expense and Other (51) (60) (98) (85)
----------------------------------------------------------------------
$966 $(337) $1,825 $277
----------------------------------------------------------------------
Continuing operations return
on equity 17.4% (6.0%) 17.0% 3.5%
Return on equity 20.0% (5.4%) 12.1% 3.8%
Operating return on equity(1) 18.6% (6.9%) 17.7% 3.5%
----------------------------------------------------------------------
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
(1) Excludes FAS 115
----------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
($ in millions, pre-tax) 2005 2004 2005 2004
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Revenues
Premiums $5,109 $5,154 $10,228 $8,493
Net investment income 775 642 1,540 1,261
Fee income 165 171 336 343
Net realized investment gains
(losses) (55) 55 (55) 13
Other revenues 43 38 93 77
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$6,037 $6,060 $12,142 $10,187
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Revenues by segment excluding
net realized investment gains
(losses)
Commercial $2,831 $3,006 $5,693 $5,342
Specialty 1,639 1,514 3,285 1,882
Personal 1,635 1,482 3,227 2,947
Interest Expense and Other (13) 3 (8) 3
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6,092 6,005 12,197 10,174
Net realized investment gains
(losses) (55) 55 (55) 13
----------------------------------------------------------------------
$6,037 $6,060 $12,142 $10,187
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Gross written premiums
Commercial Core $2,440 $2,498 $5,114 $4,420
Commercial Other 41 301 118 592
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Total Commercial 2,481 2,799 5,232 5,012
Specialty 1,758 1,743 3,449 2,141
Personal 1,670 1,600 3,148 2,999
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$5,909 $6,142 $11,829 $10,152
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Net written premiums
Commercial Core $2,025 $2,066 $4,177 $3,685
Commercial Other 22 168 62 314
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Total Commercial 2,047 2,234 4,239 3,999
Specialty 1,545 1,463 2,699 1,732
Personal 1,624 1,559 3,058 2,925
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$5,216 $5,256 $9,996 $8,656
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GAAP combined ratios:(1)
Commercial(2)
Loss and loss adjustment
expense ratio 61.7% 71.6% 63.5% 68.6%
Underwriting expense ratio 27.8 29.0 28.5 27.7
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Combined ratio 89.5% 100.6% 92.0% 96.3%
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Specialty(2)
Loss and loss adjustment
expense ratio 59.9% 162.8% 62.1% 150.8%
Underwriting expense ratio 31.0 35.5 31.5 35.5
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Combined ratio 90.9% 198.3% 93.6% 186.3%
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Personal
Loss and loss adjustment
expense ratio 55.4% 60.9% 53.9% 60.5%
Underwriting expense ratio 26.2 24.7 26.3 24.5
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Combined ratio 81.6% 85.6% 80.2% 85.0%
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Total Company(2)
Loss and loss adjustment
expense ratio 59.4% 93.1% 60.4% 82.4%
Underwriting expense ratio 28.2 29.6 28.7 28.2
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Combined ratio 87.6% 122.7% 89.1% 110.6%
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(1) For purposes of computing GAAP ratios, billing and policy fees
(which are a component of other revenues) are allocated as a
reduction of other underwriting expenses. In addition, fee income
is allocated as a reduction of losses and loss adjustment expenses
and other underwriting expenses.
(2) Before policyholder dividends.
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
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Three months ended Six months ended
June 30, June 30,
------------------- -------------------
($ in millions; after tax
except as noted) 2005 2004 2005 2004
----------------------------------------------------------------------
Reconciliation of underwriting
gain (loss) to net income
(loss)
Pre-tax underwriting gain
(loss) $600 $(1,186) $1,051 $(954)
Tax (expense) benefit on
underwriting results (217) 397 (377) 325
----------------------------------------------------------------------
Underwriting gain (loss) 383 (789) 674 (629)
Net investment income 598 490 1,181 944
Other, including interest
expense and minority interest (15) (38) (30) (38)
----------------------------------------------------------------------
Consolidated operating income
(loss) 966 (337) 1,825 277
Net realized investment gains
(losses) (35) 35 (17) 8
Discontinued operations 138 27 (527) 27
----------------------------------------------------------------------
Net income (loss) $1,069 $(275) $1,281 $312
----------------------------------------------------------------------
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
CONTACT: St. Paul Travelers Companies, Inc., Saint Paul
Media:
Shane Boyd, 651-310-3846
or
Marlene Ibsen, 860-277-9039
or
Joan Palm, 651-310-2685
or
Institutional Investors:
Maria Olivo, 860-277-8330
or
Individual Investors:
Marc Parr, 860-277-0779
SOURCE: St. Paul Travelers Companies, Inc.