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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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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 Street, Saint Paul, MN 55102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 612-221-7911
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (without par value) New York Stock Exchange
Stock Purchase Rights New York Stock Exchange
(Title of class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None.
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. (X)
The aggregate market value of the outstanding Common Stock held by
non-affiliates of the Registrant on March 16, 1994 was $3,413,523,325.
The number of shares of the Registrant's Common Stock, without par
value, outstanding at March 16, 1994, was 42,032,939.
An Exhibit Index is set forth at page 38 of this report.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1993 Annual Report to Shareholders are
incorporated by reference into Parts I, II and IV of this report.
Portions of the Registrant's Proxy Statement relating to the annual
meeting of shareholders to be held May 3, 1994, are incorporated by
reference into Parts III and IV of this report.
PART I
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Item 1. Business.
- ------ --------
General Description
The Registrant is incorporated as a general business corporation
under the laws of the State of Minnesota. The Registrant and its
subsidiaries comprise one of the oldest insurance organizations in
the United States, dating back to 1853. The Registrant is a
management company principally engaged, through its subsidiaries,
in three industry segments: property-liability insurance
underwriting, insurance brokerage and investment banking-asset
management. As a management company, the Registrant oversees the
operations of its subsidiaries and provides them with capital,
management and administrative services. According to "Fortune"
magazine's most recent rankings, in terms of total assets, the
Registrant is the 25th largest diversified financial company in the
United States. At March 16, 1994, the Registrant and its
subsidiaries employed approximately 12,900 persons.
The Registrant's primary business is insurance underwriting, which
accounted for 88% of consolidated revenues in 1993. The
Registrant's insurance brokerage and investment banking-asset
management operations accounted for 7% and 5% of consolidated
revenues, respectively, in 1993. Note 15 on pages 61 and 62 of the
Registrant's 1993 Annual Report to Shareholders, which discloses
revenues, income (loss) before income taxes and identifiable assets
for the Registrant's industry segments and by geographic areas for
the last three years, is incorporated herein by reference.
The following table lists, for each of the last three years, the
percentage of consolidated revenues contributed by each of the
operations or departments that accounted for 10% or more of
consolidated revenues during any of those years:
- --------------------------------------------------------------------------
Operation or Department Percentage of Consolidated Revenues
with Similar Products or Services 1993 1992 1991
- --------------------------------- ---- ---- ----
Insurance Underwriting:
Specialized Commercial 22.7% 23.4% 25.8%
Medical Services 15.4 16.1 15.8
Net Investment Income 14.5 14.3 14.7
Business Insurance 11.9 15.0 16.1
- --------------------------------------------------------------------------
Underwriting Operations
Overview. The Registrant's principal operating subsidiary is St.
Paul Fire and Marine Insurance Company ("Fire and Marine"), which
is a property-liability insurance company doing business throughout
the United States and in selected international markets. Fire and
Marine and its subsidiaries underwrite property and liability
insurance and provide insurance-related products and services to
commercial, professional and individual customers. They also
reinsure other insurers and provide risk management services.
The primary sources of Fire and Marine's revenues are premiums
earned on insurance policies sold and income earned from the
investment of those premiums. According to the most recent
industry statistics published in "Best's Review" with respect to
property-liability insurers doing business in the United States,
Fire and Marine ranked 15th on the basis of 1992 written premiums.
Principal Departments and Products
The "Underwriting Results" table on page 25 of the Registrant's
1993 Annual Report to Shareholders, which summarizes written
premiums, underwriting results and combined ratios for each of Fire
and Marine's underwriting operations for the last three years, is
incorporated herein by reference. The information in that table,
as well as the following description of underwriting operations,
reflects Fire and Marine's reporting structure as it existed in
1993. See "1994 Restructured Underwriting Operations" on page 5
herein for a discussion of Fire and Marine's organizational
restructuring effective Jan. 1, 1994.
Specialized Commercial. This operation is composed of Industry
Underwriting, Specialty Underwriting, St. Paul Surety, Financial
Services and Pools.
Industry Underwriting underwrites insurance for selected industry
groups, such as construction companies, technology companies and
public sector entities. This operation provides coverage for
damage to the customer's property (fire, inland marine and auto),
liability for bodily injury or damage to the property of others
(general liability, auto liability and excess), and workers'
compensation insurance. In addition, specialty errors and
omissions insurance may be provided. Businesses insured in the
construction line include general building contractors, highway
contractors and specialty contractors. Large construction projects
are insured during the life of the project. The following
businesses are insured in the technology line: electronics
manufacturers, software and telecommunications companies, medical
equipment manufacturers and manufacturers of synthetic products and
electronic equipment for industrial use. The public sector line
provides coverages for cities and counties as well as other
publicly created authorities.
Specialty Underwriting includes National Accounts, Professional
Liability, Surplus Lines and Ocean Marine. National Accounts
underwrites large commercial risks for a broad spectrum of large
businesses. Professional Liability provides errors and omissions
coverage for certain professionals such as lawyers and real estate
agents, and also underwrites directors and officers liability
insurance. Surplus Lines underwrites products liability insurance,
umbrella and excess liability coverages, property insurance for
high risk classes of business, and coverages for unique, sometimes
one-of-a-kind risks. Ocean Marine provides a variety of property
and liability insurance related to ocean and inland waterways
traffic, including cargo and hull property protection.
St. Paul Surety underwrites surety bonds, primarily for
construction contractors, which guarantee that third parties will
be indemnified against nonperformance of contractual obligations.
This operation also underwrites specialty casualty coverages,
including railroad protective liability, directors and officers
liability for nonprofit organizations and advertisers liability for
advertising agencies and broadcasting stations. Based on 1992
premium data published in "Best's Review," Fire and Marine is the
leading underwriter of surety bonds in the United States.
Financial Services provides coverages for depository institutions.
These coverages include fidelity, which covers employers against
dishonest acts of employees; directors and officers liability; and
all property and liability coverages for this industry.
Pools. Fire and Marine is a member of and participates in business
produced by a number of pools and associations which provide
specialized engineering and underwriting skills for the classes of
business which they supervise. These pools and associations also
serve to increase the underwriting capacity of the member companies
for insurance policies where the concentration of risk is so high
or the amount so large that a single company could not prudently
accept the entire risk.
Medical Services. Medical Services underwrites professional
liability insurance and various other types of property and
liability insurance for physicians and surgeons, hospitals, nurses,
dentists, nursing homes and other health care providers.
Professional liability insurance written for physicians and
surgeons accounted for approximately 37% of Medical Services'
business in 1993. Professional liability insurance written for
hospitals, nurses, dentists, nursing homes and other health care
providers produced approximately 40% of Medical Services' premium
volume in 1993. The Registrant is the largest medical liability
insurer in the United States, with premium volume representing
approximately 12% of the United States market in 1992 based on data
published in "Best's Review."
Business Insurance. Business Insurance underwrites general
commercial property and liability coverages, commercial package
insurance and various coverages designed specifically for small- to
medium-sized commercial businesses, including manufacturers,
wholesalers and retailers. Customers served by this operation
include a broad class of middle market businesses, as well as
specific customer groups such as museums and country clubs.
Reinsurance. Fire and Marine's Reinsurance operation functions
under the name St. Paul Re, which is based in New York with an
office in London, England. St. Paul Re underwrites reinsurance in
both domestic and international insurance markets (referred to as
"assumed reinsurance"). Reinsurance is an agreement between
insurance companies to transfer risks. A large portion of
reinsurance is effected automatically under general reinsurance
contracts known as treaties. In some instances, reinsurance is
effected by negotiation on individual risks, which is referred to
as facultative reinsurance.
Personal Insurance. Personal Insurance underwrites all personal
property and liability insurance coverages for homes, automobiles,
boats and other personal property. Fire & Marine's primary product
has been a personal package policy, which combines auto and
homeowners insurance along with other personal coverages into one
policy. Package policies accounted for approximately 83% of Fire &
Marine's Personal Insurance premium volume in 1993. In August 1993, the
Registrant acquired Economy Fire & Casualty Company ("Economy"), a
personal insurance underwriter based in Illinois, for a total
investment of $395 million. Economy primarily markets monoline
policies, which provides coverage for specific personal insurance
needs, such as home or auto.
International. The International category is composed of direct
insurance written in foreign countries, primarily the United
Kingdom and Canada, and multinational accounts.
1994 Restructured Underwriting Operations. Effective Jan. 1, 1994,
the Registrant restructured its U.S. Insurance Underwriting
operations into three separate organizations, each having a
distinct identity and each focused on particular insurance market
sectors. St. Paul Specialty is composed of Medical Services,
National Accounts, Surety, Construction, Custom Markets (which
includes Technology, Financial Services, Professional Liability,
Surplus Lines, Ocean Marine and Public Sector) and Pools. St. Paul
Personal & Business Insurance is composed of the Registrant's
personal insurance operations (including Economy) and also serves
small commercial accounts. St. Paul Commercial primarily consists
of the Registrant's former Business Insurance operation and serves
midsize commercial customers. The Registrant's Reinsurance and
International underwriting operations were unaffected by this
restructuring.
Principal Markets and Methods of Distribution
Fire and Marine and its subsidiaries are licensed and transact
business in all 50 states of the United States, the District of
Columbia, Puerto Rico, the Virgin Islands, all provinces of Canada,
the United Kingdom, the Republic of Ireland and Spain. Fire and
Marine's business is broadly distributed throughout the United
States, with a particularly strong market presence in the
Midwestern region. Five percent or more of Fire and Marine's 1993
property-liability written premiums were produced in each of
Illinois, Minnesota, and Texas. Approximately 88% of Fire and
Marine's 1993 property-liability insurance business was written on
U.S.-based insurance risks.
Fire and Marine's U.S. insurance business is produced primarily
through approximately 8,900 independent insurance agencies and
national insurance brokers. Fire and Marine maintains 29 service
centers in major cities throughout the United States (and one in
Canada) to respond to the needs of agents, brokers and
policyholders. Over 70% of Fire and Marine's total premium volume
in 1993 originated in the service centers, with the balance of
business produced by other Fire and Marine subsidiaries, by various
insurance pools and by the home office. The reorganization of Fire
and Marine's U.S. Insurance Underwriting operations in 1994 will
not materially alter the methods by which Fire and Marine's
business is generated. Independent insurance agents and national
insurance brokers will continue to produce the majority of Fire and
Marine's business.
Reserves for Losses and Loss Adjustment Expenses (LAE)
General Information. When claims are made by or against
policyholders, any amounts Fire and Marine pays or expects to pay
to the claimant are referred to as losses. The costs of
investigating, resolving and processing these claims are referred
to as loss adjustment expenses (LAE). Fire and Marine establishes
reserves which reflect the estimated unpaid total cost of these two
items. The reserves for unpaid losses and LAE cover claims which
were incurred not only in 1993 but also in prior years. These
reserves include estimates of the total
cost of claims that have already been reported but not yet settled,
and of the cost of claims that have been incurred but not yet
reported. Loss reserves are established on an undiscounted basis,
and are reduced for deductibles recoverable from customers and
estimates of salvage and subrogation.
Management continually reviews loss reserves, using a variety of
statistical and actuarial techniques to analyze claim costs,
frequency and severity data, and social and economic factors.
Management believes that the reserves currently established for
losses and LAE are adequate to cover their eventual costs.
However, final claim payments may differ from these reserves,
particularly when these payments may not take place for several
years. Adjustments to previously estimated reserves are reflected
in results in the year in which they are made.
Ten-year Development. The table on page 8 presents a development
of net loss and LAE reserve liabilities and payments for the years
1983 through 1993. The top line on the table shows the estimated
liability for unpaid losses and LAE, net of reinsurance
recoverable, recorded at the balance sheet date for each of the
years indicated. Loss development data for Fire and Marine's
foreign underwriting subsidiary, St. Paul UK, is included for all
years in the table since 1988.
The upper portion of the table, which shows the re-estimated amount
relating to the previously recorded liability, is based upon
experience as of the end of each succeeding year. This estimate is
either increased or decreased as further
information becomes known about individual claims and as changes in
the trend of claim frequency and severity become apparent.
The "Cumulative Redundancy (Deficiency)" line on the table for any
given year represents the aggregate change in the estimates for all
years subsequent to the year the reserves were initially
established. For example, the 1983 reserve of $2,413 million
developed up to $2,539 million, or a $126 million deficiency, by
the end of 1984. By the end of 1993, the 1983 reserve had
developed a deficiency of $408 million. The changes in the
estimate of 1983 loss reserves were reflected in operations during
the past ten years.
In 1993, the Registrant adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts." This statement required, among other things, that
reinsurance recoverables on unpaid losses and LAE be shown as an
asset, instead of the prior practice of netting this amount against
insurance reserves for balance sheet reporting purposes.
The middle portion of the table, which includes data for only those
periods impacted by SFAS No. 113 (the years 1992 and 1993),
represents a reconciliation between the net reserve liability as
shown on the top line of the table and the gross reserve liability
as shown on the Registrant's balance sheet. This portion of the
table also presents the gross re-estimated reserve liability as of
the end of the latest re-estimation period (Dec. 31, 1993) and the
related re-estimated reinsurance recoverable.
The lower portion of the table presents the cumulative amounts paid
with respect to the previously recorded liability as of the end of
each succeeding year. For example, as of Dec. 31, 1993, Fire and
Marine has paid $2,555 million of the currently estimated $2,821
million of losses and LAE that have been incurred for the years up
to and including 1983. Thus, as of Dec. 31, 1993, Fire and Marine
estimates that $266 million of losses and LAE are unpaid for the
years up to and including 1983.
Caution should be exercised in evaluating the information shown on
this table. It should be noted that each amount includes the
effects of all changes in amounts for prior periods. For example,
the portion of the development shown for year-end 1992 reserves
that relates to 1983 losses is included in the cumulative
redundancy or deficiency amount for the years 1983 through 1992.
This table presents calendar year data. It does not present
accident or policy year development data, which some readers may be
more accustomed to analyzing. The social and economic conditions
and other trends which had an impact on the changes in the
estimated liability in the past are not necessarily indicative of
the future. Accordingly, readers are cautioned against
extrapolating any conclusions about future results from the
information presented in this table.
Analysis of Loss and Loss Adjustment Expense (LAE) Development
Year Ended December 31 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ---------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net Liability for
Unpaid Losses and LAE $2,413 2,917 3,364 4,043 4,745 5,502 5,907 6,279 6,688 7,207 7,640
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Liability Re-estimated
as of:
One Year Later 2,539 2,993 3,477 4,087 4,727 5,313 5,656 6,037 6,436 6,984
Two Years Later 2,523 3,104 3,625 4,078 4,489 4,914 5,338 5,787 6,260
Three Years Later 2,601 3,203 3,652 3,955 4,268 4,789 5,135 5,628
Four Years Later 2,664 3,222 3,597 3,874 4,226 4,731 5,027
Five Years Later 2,679 3,202 3,572 3,874 4,178 4,707
Six Years Later 2,670 3,227 3,624 3,885 4,180
Seven Years Later 2,714 3,280 3,652 3,914
Eight Years Later 2,756 3,308 3,688
Nine Years Later 2,780 3,361
Ten Years Later 2,821
Cumulative Redundancy
(Deficiency) $ (408) (444) (324) 129 565 795 880 651 428 223
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Cumulative Redundancy
(Deficiency) Excluding
Foreign Exchange(1) $ (408) (444) (324) 129 565 803 859 647 428 206
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Gross Liability for
Unpaid Losses and LAE 8,813 9,185
Reinsurance Recoverable on
Unpaid Losses 1,606 1,545
----- -----
Net Liability 7,207 7,640
===== =====
Gross Re-estimated Liability 8,692
Re-estimated Recoverable 1,708
------
Net Re-estimated Liability 6,984
======
Gross Cumulative
Redundancy 121
Gross Cumulative
Redundancy Excluding
Foreign Exchange(1) 88
Cumulative Amount of
Liability Paid Through:
One Year Later $ 811 941 976 1,008 1,101 1,196 1,318 1,450 1,452 1,547
Two Years Later 1,320 1,539 1,666 1,787 1,884 2,044 2,209 2,361 2,493
Three Years Later 1,675 1,983 2,185 2,332 2,466 2,646 2,797 3,015
Four Years Later 1,928 2,304 2,548 2,732 2,869 3,043 3,216
Five Years Later 2,107 2,533 2,812 3,012 3,132 3,348
Six Years Later 2,240 2,703 3,008 3,205 3,322
Seven Years Later 2,347 2,833 3,157 3,343
Eight Years Later 2,429 2,935 3,258
Nine Years Later 2,500 3,010
Ten Years Later 2,555
(1) The results of St. Paul UK translated from original
currencies into U.S. dollars are included with Fire
and Marine's U.S. Insurance Underwriting operations
in this table since 1988. The foreign currency
translation impact on the cumulative redundancy
(deficiency) arises from the difference between
reserve developments translated at the exchange rates
at the end of the year in which the liabilities were
originally estimated, and the exchange rates at the
end of the year in which the liabilities were re-
estimated.
For further information on Fire and Marine's loss reserves,
including an analysis of loss reserve liabilities for each of the
latest three years, refer to the "Reserves for Losses and Loss
Adjustment Expenses" section on pages 31 through 33 of the
Registrant's 1993 Annual Report to Shareholders, which is
incorporated herein by reference.
Ceded Reinsurance
Through ceded reinsurance, other insurers and reinsurers agree to
share certain risks that Fire and Marine and its subsidiaries have
underwritten. The purpose of reinsurance is to limit a ceding
insurer's maximum net loss arising from large risks or
catastrophes. Reinsurance also serves to increase the direct
writing capacity of the ceding insurer. In accordance with the
provisions of SFAS No. 113, Fire and Marine records the amounts
recoverable on ceded losses as an asset.
The Registrant strives to achieve the following objectives with
respect to ceded reinsurance:
1) Protect its assets from large individual risk and
occurrence losses by purchasing reinsurance from financially
secure reinsurance companies at a reasonable cost.
2) Provide its respective underwriting operations with the
capacity necessary to write large limits on accounts by
purchasing reinsurance from financially secure reinsurance
companies at a reasonable cost.
The collectibility of reinsurance is subject to the solvency of
reinsurers. The placement of ceded reinsurance is guided by Fire
and Marine's Reinsurance Security Committee, which has established
financial standards to determine qualified reinsurers.
Uncollectible reinsurance recoverables have not had a material
adverse impact on the Registrant's consolidated financial position.
Note 13 on pages 60 and 61 of the Registrant's 1993 Annual Report
to Shareholders, which provides a schedule of ceded reinsurance
information, is incorporated herein by reference.
INSURANCE BROKERAGE OPERATIONS
All of the Registrant's insurance brokerage operations are managed
by the Minet Group (Minet) based in London, England. Based on the
most recent ranking in terms of total 1992 revenues by "Business
Insurance," Minet is the eighth largest international insurance
broking organization in the world. Minet has 125 offices
throughout North America, Europe, Africa, Asia and Australia.
Minet operates through six business units, each focusing on
distinct client groups. Global Professional Services provides
insurance brokerage services to the world's largest accounting
firms and other professionals. International Retail serves clients
in Asia, Africa, Australia and Europe. Retail brokers act on
behalf of organizations such as corporations and partnerships by
procuring insurance coverages. International Broking assembles
underwriting capacity to provide specialized insurance programs for
clients throughout the world.
North America serves professional clients and major industrial and
service corporations. This business unit includes Minet's U.S.
wholesale brokerage network, Swett & Crawford, which, according to
the most recent rankings in terms of total revenues by "Business
Insurance," is the largest wholesale insurance broker in the United
States. Wholesale brokers act on behalf of retail brokers by
procuring specialty insurance coverages. Reinsurance provides
treaty and facultative reinsurance brokerage services worldwide.
Reinsurance brokers act as intermediaries for obtaining reinsurance
for insurance companies. Minet Risk Services provides consulting
and actuarial to clients worldwide, and also provides management
services to captive insurance companies.
Minet has sought to expand the scope of its specialty brokerage
operations by acquiring several small, specialized brokers
throughout the world to complement its existing worldwide client
base and market network.
In 1992, the Registrant significantly reduced the carrying value of
its investment in Minet through a $365 million write-down of
goodwill. The "Insurance Brokerage" section of "Management's
Discussion and Analysis" on pages 35 and 36 of the Registrant's
1993 Annual Report to Shareholders, which discusses the goodwill
write-down and other matters, is incorporated herein by reference.
INVESTMENT BANKING-ASSET MANAGEMENT OPERATIONS
The John Nuveen Company ("Nuveen") is the Registrant's investment
banking-asset management subsidiary. The Registrant and Fire and
Marine currently hold a combined 74% interest in Nuveen after
selling a minority interest by means of an initial public offering
in 1992. Note 12 on page 60 of the Registrant's 1993 Annual Report
to Shareholders, which provides further information on the sale of
a minority interest in Nuveen, is incorporated herein by reference.
Through John Nuveen & Co. Incorporated, a wholly-owned subsidiary,
Nuveen markets tax-exempt open-end and closed-end (exchange-traded)
managed fund shares. Nuveen also underwrites and trades municipal
bonds and tax-exempt unit investment trusts (UIT). Nuveen markets
its fund shares and UITs to individuals through registered
representatives associated with unaffiliated national and regional
broker-dealers and other financial organizations. Through its
Municipal Finance Department, the firm also serves state and local
governments and their authorities by financing community projects
through both negotiated and competitive financings.
Nuveen Advisory Corp., a wholly-owned subsidiary of John Nuveen &
Co. Incorporated, is investment adviser to the Nuveen-sponsored
open-end mutual funds and exchange-traded funds. Nuveen
Institutional Advisory Corp., also a wholly-owned subsidiary, is
investment adviser to the Nuveen-sponsored exchange-traded funds
and provides investment management services for trust funds
established by public utilities for the decommissioning of nuclear
power plants.
As the leading sponsor of tax-free unit investment trusts, Nuveen
currently sponsors trusts with assets of more than $20 billion in
50 different national, state and insured portfolios. Nuveen also
sponsors 21 tax-free, open-end mutual funds and money market funds
with assets of approximately $7 billion in national, state, insured
and money market portfolios. In addition, Nuveen sponsors 82
closed-end tax-free managed funds with approximately $26 billion in
total assets. These funds are traded on national stock exchanges
and provide individual investors with additional opportunities to
invest in tax-free securities.
Nuveen has its principal office in Chicago and maintains regional
sales offices in other cities across the United States.
INVESTMENTS
Objectives. The Registrant's Board of Directors approves the
annual investment plans of the underwriting subsidiaries. The
primariy objectives of those plans are as follows:
1) to maintain a widely diversified fixed maturities portfolio
structured to maximize investment income while minimizing
credit risk through investments in high-quality instruments;
2) to provide for long-term growth in the market value of the
investment portfolio through investments in certain other
investment classes, such as equity securities, real estate
and venture capital;
3) to manage the mix of portfolio maturities to correspond to
anticipated insurance loss pay-out patterns.
Fixed Maturities. Fixed maturities constituted 81% of the
Registrant's investment portfolio at Dec. 31, 1993. The following
table presents information about the fixed maturities portfolio for
the last five years (dollars in millions).
Amortized Pretax Net Weighted Weighted
Cost at Investment Average Pretax Average After-tax
Year Year-End Income Yield Yield
- ---- --------- ----------- ----------------- ----------------
1993 $8,385.1 $607.1 7.4% 5.9%
1992 7,731.2 605.2 8.0% 6.5%
1991 7,230.3 589.0 8.4% 6.8%
1990 6,538.1 561.4 9.0% 6.9%
1989 6,284.3 561.8 9.3% 7.0%
Based on its current and projected tax position and the
relationship between taxable and tax-exempt investment yields, the
Registrant determines the mix of its investment in taxable and tax-
exempt securities. The Registrant's fixed-maturity purchases in
1993 were predominantly intermediate-term, investment-grade taxable
securities. At Dec. 31, 1993, the unrealized appreciation on
the fixed-maturities portfolio totaled $763 million. The
Registrant implemented SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" as of Dec. 31, 1993.
The fixed-maturity portfolio is reported at estimated market value
at Dec. 31, 1993, with unrealized gains and losses (net of deferred
taxes) recorded in common shareholders' equity.
The fixed maturities portfolio is managed conservatively to provide
reasonable return while limiting exposure to risks. Approximately
95% of the fixed maturities portfolio is rated at investment grade
levels (BBB or better). Nonrated securities comprise the remainder
of the portfolio. Most of these are nonrated municipal bonds
which, in the Registrant's view, would be considered of investment
grade quality if rated.
Equities. Equity securities comprised 5% of investments as of Dec.
31, 1993. Common stocks are held with the primary objective of
achieving capital appreciation. This portfolio provided $44
million of realized investment gains and $12 million of dividend
income in 1993.
Real Estate. The Registrant's real estate holdings, which
comprised 4% of total investments, consist primarily of a
diversified portfolio of commercial buildings. The Registrant does
not invest in real estate mortgages.
Venture Capital. Securities of small-to medium-sized companies
comprised the Registrant's investments in venture capital, which
accounted for 3% of total investments at Dec. 31, 1993. These
investments are in the form of limited partnerships or direct
ownership.
Other Investments. The Registrant's portfolio also includes short-
term securities and other miscellaneous investments, which in the
aggregate comprised 7% of total investments.
Notes 3 and 4 on pages 52 and 53 of the Registrant's 1993 Annual
Report to Shareholders, which provide additional information about
the Registrant's total investment portfolio, are incorporated
herein by reference.
COMPETITION AND REGULATION
The businesses in which the subsidiaries of the Registrant are
engaged are all highly competitive.
Underwriting. The Registrant's underwriting subsidiaries compete
with a large number of other insurers. These subsidiaries compete
principally by attempting to offer a combination of superior
products, underwriting expertise and services at a competitive
price. The combination of products, services, pricing and other
methods of competition varies by line of insurance and by coverage
within each line of insurance.
The Registrant and its underwriting subsidiaries are subject to
regulation by certain states as an insurance holding company
system. Such regulation generally provides that transactions
between companies within the holding company system must be fair
and equitable. In addition, transfers of assets among such
affiliated companies, certain dividend payments from underwriting
subsidiaries and certain material transactions between companies
within the system may be subject to prior notice to or approval of
state regulatory authorities. During 1993, the Registrant received
$200.0 million in cash dividends from Fire and Marine; in 1994,
Fire and Marine has regulatory approval to pay up to $300.0 million
in cash dividends to the Registrant, in addition to a dividend of
the capital stock of its U.K.-based underwriting operation. Any
change of control (generally presumed by the holding company laws
to occur with the acquisition of 10% or more of an insurance
holding company's voting securities) of the Registrant and its
underwriting subsidiaries is also subject to such prior approval.
The underwriting subsidiaries are subject to licensing and
supervision by government regulatory agencies in the jurisdictions
in which they do business. The nature and extent of such
regulation varies but generally have their source
in statutes which delegate regulatory, supervisory and
administrative powers to state insurance commissioners. Such
regulation, supervision and administration
of the underwriting subsidiaries may relate, among other things, to the
standards of solvency which must be met and maintained; the
licensing of insurers and their agents; the nature of and
limitations on investments; restrictions on the size of risk which
may be insured under a single policy; deposits of securities for
the benefit of policyholders; regulation of policy forms and
premium rates; periodic examination of the affairs of insurance
companies; annual and other reports required to be filed on the
financial condition of insurers or for other purposes; requirements
regarding reserves for unearned premiums, losses and other matters;
the nature of and limitations on dividends to policyholders and
shareholders; the nature and extent of required participation in
insurance guaranty funds; and the involuntary assumption of hard-to-
place or high-risk insurance business, primarily in the personal
auto and workers' compensation insurance lines.
Loss ratio trends in property-liability insurance underwriting
experience may be improved by, among other things, changing the
kinds of coverages provided by policies, providing loss prevention
services, increasing premium rates or by a combination of these.
The freedom of the insurance underwriting subsidiaries of the
Registrant to meet emerging adverse underwriting trends may be
slowed, from time to time, by the effects of those state laws which
require prior approval by insurance regulatory authorities of
changes in policy forms and premium rates. Fire and Marine does
business in all 50 states and the District of Columbia. Many of
these jurisdictions require prior approval of most or all premium
rates.
In 1988, California voters passed Proposition 103 which provided
that rates for most property liability insurance policies be rolled
back for one year by up to 20% from November 1987 levels. It also
required pre-approval by the California insurance commissioner of
rates charged subsequent to November 1989. The commissioner can
grant relief from the rollback if the rollback does not allow a
fair and reasonable return.
The Registrant filed timely requests for a rollback exemption and
approval for subsequent rates. The Registrant believes these
filings demonstrate that its rates are fair and reasonable. In
February 1993, a California trial judge invalidated key sections of
the current insurance commissioner's rollback standards. The
California Supreme Court is reviewing and will provide guidance on
Proposition 103's standards for all insurers. The Registrant
believes that even if its requests are denied, any premium refunds
it will be required to make will not materially impact its overall
financial position.
Insurance Brokerage. The Registrant's brokerage operations are
subject to licensing requirements and other regulations under the
laws of the countries in which they operate. In addition, rules of
the Lloyd's insurance market in London and other regulatory
organizations govern certain business activities of the brokerage
operations. The regulation, supervision and administration of the
brokerage operations is extensive, but in general relate to
licensing standards and procedures applicable to brokers;
limitations on the handling and investment of premium trust funds;
business reporting and premium tax collection requirements;
procedures for issuing policies; and restrictions on the
eligibility of insurers with whom insurance coverage may be placed.
Investment Banking-Asset Management. Nuveen is a publicly-traded
company registered under the Securities Exchange Act of 1934 and
listed on the New York Stock Exchange. One of its subsidiaries is
a registered broker and dealer under the Securities Exchange Act of
1934, and is subject to regulation by The Securities and Exchange
Commission, the National Association of Securities Dealers, Inc.
and other federal and state agencies. Nuveen's other two
subsidiaries are registered investment advisers under the
Investment Advisers Act of 1940. As such, they are subject to
regulation by the Securities and Exchange Commission.
Item 2. Properties.
- ------ ----------
Fire and Marine owns its home office buildings, located at 385
Washington Street and 130 West Sixth Street, Saint Paul, Minn.
These buildings, which are adjacent to one another and connected by
skyway, are also occupied by the Registrant and a number of its
other insurance subsidiaries located in Saint Paul. These
buildings consist of approximately 1.1 million square feet of gross
floor space.
Several subsidaries of the Registrant, including the Minet Group,
St. Paul UK and Economy, own buildings which house their respective
operations.
Fire and Marine and its subsidiary, St. Paul Properties, Inc., own
a portfolio of income-producing properties in various locations
across the United States that they have purchased for investment.
The Registrant's operating subsidiaries rent or lease office space
in many cities in which they operate.
Management considers the currently owned and leased office
facilities of the Registrant and its subsidiaries adequate for the
current and anticipated future level of operations.
Item 3. Legal Proceedings.
- ------ -----------------
The information set forth in the "Legal Matters" section of Note 10
on page 60 of the Registrant's 1993 Annual Report to Shareholders,
and the "Environmental Claims" section of "Management's Discussion
and Analysis" on pages 38 and 39 of said Annual Report are
incorporated herein by reference.
In 1989, Economy commenced a declaratory judgment action in the
Circuit Court of Missouri asking that court to declare that Economy
is not liable under a homeowner's policy for a wrongful death that
occurred in the home of its insured, Robert A. Berdella, Jr.
(Berdella). In a separate lawsuit (to which Economy was not a
party) concerning that wrongful death, judgment was entered against
Berdella and in favor of the claimant (Haste) in the amount of $2.5
billion in compensatory damages and $2.5 billion in punitive
damages. Berdella subsequently agreed to pay Haste $17 million, in
settlement of the $2.5 billion punitive damages award, and interest
(currently totaling approximately $250 million) on $2.5 billion, in
settlement of the $2.5 billion compensatory damages award. In its
declaratory judgment action, Economy has moved for summary
judgment which, if granted, would mean that Economy is not liable
to pay any portion of the amount that Berdella has agreed to pay
Haste. The Registrant expects the court to rule on Economy's
motion for summary judgment in the near future. Kemper Corporation
has agreed to indemnify the Registrant and its subsidiaries
(including Economy) against all losses and expenses incurred in
connection with this lawsuit.
The Registrant previously reported that the Superior Court of
California had entered judgment against St. Paul Fire and Marine
Insurance Company and in favor of Arntz Contracting Company and
certain of its affiliates in the amount of $16.5 million in
compensatory damages and $100 million in punitive damages. In
January 1994, the portion of the judgment granting punitive damages
was vacated. Both parties have appealed the court's rulings.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
No matter was submitted to a vote of security holders during the
quarter ended Dec. 31, 1993.
Executive Officers of the Registrant.
- ------------------------------------
All of the persons listed below are regarded as executive officers
of The St. Paul Companies, Inc. because of the responsibilities
they have and duties they perform as elected officers of the
Registrant, Fire and Marine or St. Paul Re. There are no family
relationships between any of the Registrant's executive officers
and directors, and there are no arrangements or understandings
between any of these officers and any other person pursuant to
which the officer was selected as an officer. All of the following
officers except Nicholas M. Brown Jr., Andrew I. Douglass and
Greg A. Lee have held executive positions with the Registrant or
one or more of its subsidiaries for more than five years, and have
been employees of the Registrant or a subsidiary for more than five
years. Nicholas M. Brown Jr. joined the Registrant in September
1993. For more than five years prior to joining the Registrant,
Mr. Brown held various management positions with Aetna Life and
Casualty. Mr. Douglass joined the Registrant in August 1993. For
more than five years prior to joining the Registrant, Mr. Douglass
held various legal management positions with Heller International
Corporation. Greg A. Lee joined the Registrant in January 1993.
For more than five years prior to joining the Registrant, Mr. Lee
held various human resources management positions with PepsiCo,
Inc. and its subsidiaries.
Positions Term of Office
Presently and Period of
Name Age Held Service
- ---- --- --------- --------------
Douglas W. 57 Chairman, President Serving at the
Leatherdale and Chief Executive pleasure of the
Officer Board from 5-90
Thomas W. McKeown 64 Executive Vice Serving at the
President and Chief pleasure of the
Administrative Board from 5-85
Officer
Patrick A. Thiele 43 Executive Vice Serving at the
President and pleasure of the
Chief Financial Board from 12-91
Officer
Nicholas M. 39 President- Serving at the
Brown Jr. St. Paul pleasure of the
Specialty- Board from 9-93
Fire and Marine
Gary P. Hanson 50 President- Serving at the
St. Paul pleasure of the
Personal & Board from 9-93
Business
Insurance-
Fire and Marine
James A. Schulte 44 President- Serving at the
St. Paul pleasure of the
Commercial- Board from 10-93
Fire and Marine
James F. Duffy 50 President and Serving at the
Chief Executive pleasure of the
Officer- Board from 9-93
St. Paul Re
Howard E. Dalton 56 Senior Vice Serving at the
President and pleasure of the
Chief Accounting Board from 9-87
Officer
Andrew I. Douglass 50 Senior Vice Serving at the
President and pleasure of the
General Counsel Board from 8-93
Greg A. Lee 44 Senior Vice Serving at the
President- pleasure of the
Human Resources Board from 1-93
Bruce A. Backberg 45 Vice President Serving at the
and Corporate pleasure of the
Secretary Board from 5-92
James L. Boudreau 58 Vice President Serving at the
and Treasurer pleasure of the
Board from 11-90
Part II
Item 5. Market for the Registrant's Common Equity and Related
- ------ Stockholder Matters.
-----------------------------------------------------
The "Stock Trading" and "Stock Price and Dividend Rate" portions of
the "Shareholder Information" section on the inside back cover of
the Registrant's 1993 Annual Report to Shareholders are
incorporated herein by reference.
Item 6. Selected Financial Data.
- ------ -----------------------
The "Eleven-year Summary of Selected Financial Data" section on
pages 42 and 43 of the Registrant's 1993 Annual Report to
Shareholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------ Results of Operations.
---------------------------------------------------------------
The "Management's Discussion and Analysis" section on pages 22 to
41 of the Registrant's 1993 Annual Report to Shareholders is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
The financial statements and supplementary data on pages 42 to 63
of the Registrant's 1993 Annual Report to Shareholders are
incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on
- ------ Accounting and Financial Disclosure.
---------------------------------------------------------------
None.
Part III
--------
Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
The "Nominees for Directors" section, which provides information
regarding the Registrant's directors, on pages 4 to 6 of the
Registrant's Proxy Statement relating to the annual meeting of
shareholders to be held May 3, 1994, is incorporated herein by
reference. Roger L. Hale, who has served the Registrant as a
director since January 1, 1980, is not standing for re-election as
a director at the May 3, 1994 annual meeting. Mr. Hale, who is 59
years old, has held the positions of President and Chief Executive
Officer of TENNANT, which manufactures industrial floor maintenance
equipment, for more than the past five years. He also serves as a
director of TENNANT, First Bank System, Inc. and Dayton-Hudson
Corporation. Information regarding the Registrant's executive
officers is included in Part I of this report.
Item 11. Executive Compensation.
- ------- ----------------------
The "Executive Compensation" section on pages 19 to 26 and the
"Board of Directors Compensation" section on pages 6 to 8 of the
Registrant's Proxy Statement relating to the annual meeting of
shareholders to be held May 3, 1994, are incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
- ------- Management.
---------------------------------------------------
The "Security Ownership of Certain Beneficial Owners and
Management" section on pages 27 to 30 of the Registrant's Proxy
Statement relating to the annual meeting of shareholders to be held
May 3, 1994, are incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
None.
Part IV
-------
Item 14. Exhibits, Financial Statements, Financial Statement
- ------- Schedules and Reports on Form 8-K.
---------------------------------------------------
(a) Filed documents. The following documents are filed as part of
this report:
1. Financial Statements.
Incorporated by reference into Part II of this report:
The St. Paul Companies, Inc. and Subsidiaries:
Consolidated Statements of Operations - Year Ended
December 31, 1993, 1992 and 1991
Consolidated Balance Sheets - December 31, 1993 and 1992
Consolidated Statements of Common Shareholders' Equity -
Year Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows - Year Ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
The St. Paul Companies, Inc. and Subsidiaries:
Independent Auditor's Report on Financial Statement
Schedules
I. Summary of Investments - Other than Investments in
Related Parties
II. Amounts Receivable from Related Parties, and
Underwriters, Promoters, and Employees Other
Than Related Parties
III. Condensed Financial Information of Registrant
V. Supplementary Insurance Information
VI. Reinsurance
VIII. Valuation and Qualifying Accounts
IX. Short-term Borrowings
X. Supplemental Information -
Property-Liability Insurance
All other schedules are omitted because they are not
applicable, not required, or the information is included
elsewhere in the Financial Statements or Notes
thereto.
3. Exhibits. An Exhibit Index is set forth at page 38 of
this report.
(3) The current articles of incorporation and the
current bylaws of the Registrant are incorporated
herein by reference to the Registrant's Form 10-K
for the year ended December 31, 1990.
(4) A specimen certificate of the Registrant's common
stock is incorporated herein by reference to the
Registrant's Form 10-K for the year ended December
31, 1992.
The Registrant's Shareholder Protection Rights
Agreement and the amendment thereof are incorporated
herein by reference to the Registrant's Form 8-K
Current Reports dated December 4, 1989 and March 9,
1990.
There are no long-term debt instruments in which the
total amount of securities authorized exceeds 10% of
the total assets of the Registrant and its
subsidiaries on a consolidated basis. The
Registrant agrees to furnish a copy of any of its
long-term debt instruments to the Commission upon
request.
(10) The Registrant's Non-Employee Director Stock
Retainer Plan is incorporated by reference to the
Registrant's Form 10-K for the year ended December
31, 1991.
The summary description of the Registrant's Outside
Directors' Retirement Plan is incorporated by
reference to the Registrant's proxy statement
relating to the annual meeting of shareholders
to be held May 3, 1994.
The Registrant's 1988 Stock Option Plan, as amended,
is incorporated by reference to the Registrant's
Form 10-K for the year ended December 31, 1990.
The Registrant's Restricted Stock Award Plan, as
amended, is incorporated herein by reference to the
Registrant's Form 10-K for the year ended December
31, 1989.
The Registrant's Benefit Equalization Plan and
Special Severance Policy are incorporated by
reference to the Registrant's Form 10-K for the year
ended December 31, 1987.
The Registrant's amended 1980 Stock Option Plan as
in effect for options granted prior to February
1988, is incorporated by reference to the
Registrant's Registration Statement on Form S-8 (SEC
File No. 33-26923) filed February 8, 1989.
The Deferred Management Incentive Awards Agreement -
Prime Rate, the Deferred Management Incentive Awards
Agreement - Phantom Stock, the Directors' Deferred
Compensation Agreement - Prime Rate and the
Directors' Deferred Compensation Agreement - Phantom
Stock are incorporated by reference to the
Registrant's Form 10-K for the year ended December 31, 1982.
The Registrant's Alternate Long-Term Incentive Plan
is incorporated by reference to the Registrant's
Form 10-Q for the quarter ended March 31, 1983.
The summary descriptions of the Registrant's Annual
Incentive Plan, Executive Post-Retirement Life
Insurance Plan and Executive Excess Long-Term
Disability Plan are incorporated by reference to the
Registrant's proxy statement relating to the annual
meeting of shareholders which was held on May 5,
1992.
(11) A statement regarding the computation of per share
earnings.
(12) A statement regarding the computation of the ratio
of earnings to combined fixed charges and preferred
stock dividends.
(13) The Registrant's 1993 Annual Report to Shareholders.
The following portions of such annual report,
representing those portions expressly incorporated
by reference in this report on Form 10-K, are filed
as an exhibit to this report:
Portions of Annual Report for the Items in
this year ended December 31, 1993 report
----------------------------------- -------------
Consolidated Financial Statements Item 8
Notes to Consolidated Financial Statements Item 1,8
Independent Auditors' Report Item 8
Management's Discussion and Analysis Item 7
"Stock Trading" and "Stock Price and Dividend
Rate" portions of "Shareholder Information" Item 5
Eleven-year Summary of Selected
Financial Data Item 6
The Registrant's complete 1993 Annual Report to
Shareholders is furnished to the Commission in a
paper format pursuant to Rule 14a-3(c).
(21) List of subsidiaries of the Registrant.
(23) Consent of independent auditors to incorporation by
reference of certain reports into the Registrant's
Registration Statements on Form S-8 (SEC File No. 2-
69894, No. 33-15392, No. 33-20516, No. 33-23446, No.
33-23948, No. 33-24220, No. 33-24575, No. 33-26923
and No. 33-49273) and Form S-3 (SEC File No. 33-
33931 and No. 33-50115).
(24) Power of attorney.
(28) Information from reports furnished to state
insurance regulatory authorities.
(b) Reports on Form 8-K.
The Registrant filed a Form 8-K Current Report dated
October 12, 1993, pertaining to exhibits filed in
connection with the Registrant's Registration Statement
on Form S-3.
The Registrant filed a Form 8-K Current Report dated
October 21, 1993, pertaining to the Registrant's press
release relating to the announcement of third quarter
1993 financial results.
The Registrant filed a Form 8-K Current Report dated
January 24, 1994, pertaining to the Registrant's press
release relating to the announcement of financial results
for the year ended December 31, 1993.
The Registrant filed a Form 8-K Current Report dated
February 10, 1994, pertaining to the Registrant's press
release relating to the announcement of estimated losses
from catastrophes in January 1994 and to the possibility
of the Registrant repurchasing up to one million of its
common shares.
Pursuant to the requirements of Section 13 or 15(d) 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 March 18, 1994 By /s/ Bruce A. Backberg
-------------- ---------------------
Bruce A. Backberg
Vice President and
Corporate Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date March 18, 1994 By /s/ Douglas W. Leatherdale
-------------- --------------------------
Douglas W. Leatherdale, Director,
Chairman of the Board, President
and Chief Executive Officer
Date March 18, 1994 By /s/ Patrick A. Thiele
-------------- ---------------------
Patrick A. Thiele, Director,
Executive Vice President and
Chief Financial Officer
Date March 18, 1994 By /s/ Howard E. Dalton
-------------- --------------------
Howard E. Dalton, Senior
Vice President and
Chief Accounting Officer
Date March 18, 1994 By /s/ Michael R. Bonsignore
-------------- -------------------------
Michael R. Bonsignore*, Director
Date March 18, 1994 By /s/ John H. Dasburg
-------------- -------------------
John H. Dasburg*, Director
Date March 18, 1994 By /s/ W. John Driscoll
-------------- --------------------
W. John Driscoll*, Director
Date March 18, 1994 By /s/ Mark S. Fowler
-------------- ------------------
Mark S. Fowler*, Director
Date March 18, 1994 By /s/ Pierson M. Grieve
-------------- ---------------------
Pierson M. Grieve*, Director
Date March 18, 1994 By /s/ Roger L. Hale
-------------- -----------------
Roger L. Hale*, Director
Date March 18, 1994 By /s/ Ronald James
-------------- ----------------
Ronald James*, Director
Date March 18, 1994 By /s/ William H. Kling
-------------- --------------------
William H. Kling*, Director
Date March 18, 1994 By /s/ Bruce K. MacLaury
-------------- ---------------------
Bruce K. MacLaury*, Director
Date March 18, 1994 By /s/ Ian A. Martin
-------------- -----------------
Ian A. Martin*, Director
Date March 18, 1994 By /s/ Glen D. Nelson
-------------- ------------------
Glen D. Nelson*, Director
Date March 18, 1994 By /s/ Anita M. Pampusch
-------------- ---------------------
Anita M. Pampusch*, Director
Date March 18, 1994 *By /s/ Bruce A. Backberg
-------------- ----------------------
Bruce A. Backberg,
Attorney-in-fact
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholders
The St. Paul Companies, Inc.:
Under date of January 24, 1994, we reported on the consolidated
balance sheets of The St. Paul Companies, Inc. and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated
statements of operations, common shareholders' equity and cash
flows for each of the years in the three-year period ended December
31, 1993, as contained in the 1993 annual report to shareholders.
These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the
year 1993. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related
financial statement schedules listed in the index in Item 14(a) 2.
of said Form 10-K. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statement schedules based
on our audits.
In our opinion, such financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information
set forth therein.
St. Paul, Minnesota
January 24, 1994 /s/ KPMG Peat Marwick
---------------------
KPMG Peat Marwick
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1993
(In thousands of dollars)
1993
--------------------------------------------
Amount at
which shown
in the
Cost(1) Value(1) balance sheet
-------- -------- -------------
Type of investment:
Fixed maturities:
United States Government and
government agencies and
authorities $ 1,854,287 1,938,992 1,938,992
States, municipalities and
political subdivisions 4,108,680 4,610,918 4,610,918
Foreign governments 520,254 564,699 564,699
Corporate securities 957,526 1,016,074 1,016,074
Mortgage-backed securities 944,352 1,017,281 1,017,281
---------- --------- ----------
Total fixed maturities 8,385,099 9,147,964 9,147,964
---------- ========= ----------
Equity securities:
Common stocks:
Public utilities 40,389 44,025 44,025
Banks, trusts and insurance
companies 23,871 25,030 25,030
Industrial, miscellaneous and
all other 424,123 479,627 479,627
---------- --------- ----------
Total equity securities 488,383 548,682 548,682
---------- ========= ----------
Venture capital 224,523 297,982 297,982
---------- ========= ----------
Real estate 498,691(2) 488,691
Other investments 47,834 47,834
Short-term investments 725,261 725,261
---------- ----------
Total investments $10,369,791 11,256,414
========== ==========
(1) See Notes 1, 3 and 4 to the consolidated financial statements included in
the Registrant's 1993 Annual Report to Shareholders.
(2) The cost of real estate represents the cost of the properties
before the valuation provision. (See Schedule VIII on page 34).
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM
RELATED PARTIES, AND UNDERWRITERS, PROMOTERS AND
EMPLOYEES OTHER THAN RELATED PARTIES
Years Ended December 31, 1993, 1992 and 1991
(In thousands of dollars)
Balance at
Deductions End of Year
---------------------- -----------------
Balance at Foreign
Beginning of Amounts Currency Non-
Name of Employee Year Additions Collected Translation Current current
- ---------------- ---------- --------- --------- ----------- ------- ---------
1993
- ----
Murray, R.H. (1) $ 432 27 (71) - 388 -
Quick, S.J. (2) 36 - - (6) 30 -
Bedford, A.D. (3) 107 - (45) (17) 45 -
Burne, R.E. (4) 416 - (416) - - -
Roche, B.J. (4) 416 - (416) - - -
----- --- ---- --- ----- ---
$1,407 27 (948) (23) 463 -
===== === ==== === ===== ===
1992
- ----
Murray, R.H. $ 402 30 - - 432 -
Quick, S.J. 166 - (133) 3 36 -
Bedford, A.D. 105 - - 2 107 -
Burne, R.E. 409 - - 7 416 -
Roche, B.J. 409 - - 7 416 -
----- --- ---- --- ----- ---
$1,491 30 (133) 19 1,407 -
===== === ==== === ===== ===
1991
- ----
Murray, R.H. $ 375 27 - - 402 -
Quick, S.J. 178 - - (12) 166 -
Bedford, A.D. 112 - - (7) 105 -
Burne, R.E. - 409 - - - 409
Roche, B.J. - 409 - - - 409
----- --- ---- --- ----- ---
$ 665 845 - (19) 673 818
===== === ==== === ===== ===
(1) Represents demand note, interest rate at market.
(2) Represents interest free, unsecured loan.
(3) Represents housing loan at 2.5%.
(4) Represents interest free, secured loan.
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET INFORMATION
December 31, 1993 and 1992
(In thousands of dollars)
Assets
- ------ 1993 1992
----- -----
Investment in subsidiaries $3,555,191 2,752,740
Investments:
Fixed maturities (at estimated market value
in 1993; amortized cost in 1992) 49,134 49,237
Equity securities, at market 32,959 23,134
Short-term investments 2,478 7,387
Deferred income taxes 113,765 100,147
Notes and other receivables from subsidiaries 1,205 1,315
Other assets 31,920 37,107
--------- ----------
Total assets $3,786,652 2,971,067
========= ==========
Liabilities
- -----------
Debt $ 717,056 705,570
Dividends payable to shareholders 29,634 28,590
Other liabilities 36,155 34,981
--------- ---------
Total liabilities 782,845 769,141
--------- ---------
Convertible preferred stock 147,608 149,161
Guaranteed obligation - PSOP (148,929) (149,734)
--------- ---------
Net convertible preferred stock (1,321) (573)
--------- ---------
Common Shareholders' Equity
- ---------------------------
Common stock, authorized 120,000,000 shares;
issued 42,357,338 shares (42,059,277 in 1992) 438,559 422,249
Retained earnings 2,082,832 1,781,113
Guaranteed obligation - ESOP (56,005) (67,452)
Unrealized appreciation of investments 588,844 63,669
Unrealized gain (loss) on foreign
currency translation (49,102) 2,920
--------- ---------
Total common shareholders' equity 3,005,128 2,202,499
--------- ---------
Total liabilities, preferred stock and
common shareholders' equity $3,786,652 2,971,067
========= =========
See accompanying notes to condensed financial information.
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF INCOME INFORMATION
Years Ended December 31, 1993, 1992 and 1991
(In thousands of dollars)
1993 1992 1991
------- ------- -------
Revenues:
Realized investment gains (losses) $ 5,551 (7,022) 3,128
Net investment income 4,647 7,174 4,270
Realized gain on sale of minority
interest in Nuveen - 98,284 -
Other - - 43
------- ------- -------
Total revenues 10,198 98,436 7,441
------- ------- -------
Expenses:
Interest expense 43,349 36,933 39,157
Administrative and other 25,403 22,575 14,005
------- ------- -------
Total expenses 68,752 59,508 53,162
------- ------- -------
Income (loss) before income taxes (58,554) 38,928 (45,721)
Income tax benefit (24,977) (119,574) (14,017)
------- ------- -------
Income (loss) before cumulative
effects of accounting changes (33,577) 158,502 (31,704)
Cumulative effects of accounting
changes:
Income taxes - (23,264) -
Postretirement benefits - (2,934) -
------- ------- -------
Net income (loss) - Parent only (33,577) 132,304 (31,704)
Equity in net income (loss)
of subsidiaries 461,186 (288,342) 436,766
------- ------- -------
Consolidated net income (loss) $427,609 (156,038) 405,062
======= ======= =======
See accompanying notes to condensed financial information.
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF CASH FLOWS INFORMATION
Years Ended December 31, 1993, 1992 and 1991
(In thousands of dollars)
1993 1992 1991
-------- -------- --------
Operating Activities:
Net income (loss) $ (33,577) 132,304 (31,704)
Cash dividends from subsidiaries 208,333 109,788 200,676
Tax payments from subsidiaries 99,751 106,078 188,796
State and federal income tax payments (83,200) (107,100) (160,200)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred tax provision (benefit) (7,609) (109,994) 1,865
Realized gains (5,551) (91,262) (3,128)
Other (14,205) 2,951 (24,761)
-------- -------- --------
Cash provided by
operating activities 163,942 42,765 171,544
-------- -------- --------
Investing Activities:
Proceeds from sales and maturities
of investments 62,656 145,083 58,651
Purchases of investments (61,614) (193,626) (68,106)
Capital contributions to subsidiaries (75,136) (50,311) (44,080)
Proceeds from sale of Nuveen shares - 137,052 -
Other 1,356 (5,734) 788
-------- -------- --------
Cash provided by (used in)
investing activities (72,738) 32,464 (52,747)
-------- -------- --------
Financing Activities:
Dividends paid to shareholders (129,218) (126,067) (120,154)
Issuance of debt 77,243 102,646 64,831
Repayment of debt (51,735) (8,504) (45,011)
Repayment of intercompany debt - - (30,387)
Reacquired common shares (207) (57,722) (193)
Stock options exercised and other 12,713 14,418 12,117
-------- -------- --------
Cash used in financing activities (91,204) (75,229) (118,797)
-------- -------- --------
Effect of exchange rate changes
on cash - - -
-------- -------- --------
Change in cash - - -
Cash at beginning of year - - -
-------- -------- --------
Cash at end of year $ - - -
======== ======== ========
See accompanying notes to condensed financial information.
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
1. The accompanying condensed financial information should be
read in conjunction with the consolidated financial statements
and notes included in the Registrant's 1993 Annual Report to
Shareholders.
2. Carrying Value of Fixed Maturities: The Registrant adopted
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," as of Dec. 31, 1993. The fixed-maturity
portfolio is now recorded at estimated market value, with the
corresponding unrealized appreciation recorded, net of taxes,
in common shareholders' equity. The Registrant did not
restate its 1992 balance sheet to reflect this change. The
estimated market value of the Registrant's fixed-maturity
portfolio at Dec. 31, 1992 was $51.9 million.
3. Cash Flow Reclassification: In 1993, the Registrant changed
its classification of realized gains from an operating cash
flow to an investing cash flow. The Registrant's statements
of cash flows for 1992 and 1991 were restated to reflect this
change.
4. Debt consists of the following:
December 31,
---------------------
1993 1992
------- --------
Medium-term notes $210,780 133,534
Commercial paper 201,384 229,889
Guaranteed PSOP debt (1) 148,929 149,734
9-3/8% notes 99,959 99,947
Guaranteed ESOP debt 47,223 58,333
Guaranteed ESOP debt (1) 8,781 9,119
Pound sterling loan notes - 25,014
------- -------
Total debt $717,056 705,570
======= =======
(1) Eliminated in consolidation.
See Note 6 to the consolidated financial statements included
in the Registrant's 1993 Annual Report to Shareholders for
further information on the debt outstanding at Dec. 31, 1993.
The amount of debt, other than debt eliminated in
consolidation, that becomes due during each of the next five
years is as follows: 1994, $31.5 million; 1995, $11.1
million; 1996, $212.5 million; 1997, $111.1 million; 1998,
$27.8 million.
5. Common Shareholders' Equity: See Note 9 to the consolidated
financial statements included in the Registrant's 1993 Annual
Report to Shareholders.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE V-SUPPLEMENTARY INSURANCE INFORMATION
(In thousands of dollars)
At December 31,
--------------------------------------------------------
Deferred Gross Other policy
policy loss and Gross claims and
acquisition loss adjustment unearned benefits
expenses expense reserves premiums payable
----------- ---------------- -------- -----------
1993
- ----
Property-Liability Insurance
Underwriting:
Specialized Commercial $106,584 3,014,729 595,960 -
Medical Services 44,951 2,229,728 552,165 -
Business Insurance 46,328 1,471,664 215,125 -
Reinsurance 29,177 1,812,517 161,178 -
Personal Insurance 58,458 472,655 268,902 -
International 9,362 183,898 82,305 -
------- --------- --------- -----
Total $294,860 9,185,191 1,875,635 -
======= ========= ========= =====
1992
- ----
Property-Liability Insurance
Underwriting:
Specialized Commercial $107,443 2,921,368 595,691 -
Medical Services 45,551 2,309,568 493,399 -
Business Insurance 59,539 1,533,655 272,363 -
Reinsurance 25,536 1,758,949 134,949 -
Personal Insurance 28,019 200,760 116,806 -
International 14,042 88,259 95,803 -
------- --------- --------- -----
Total $280,130 8,812,559 1,709,011 -
======= ========= ========= =====
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE V-SUPPLEMENTARY INSURANCE INFORMATION
(In thousands of dollars)
Insurance
losses Amortization
Net and loss of policy Other
Premiums investment adjustment acquisition operating Premiums
earned income expenses expenses expenses written
-------- ---------- ---------- ----------- --------- ---------
1993
- ----
Property-Liability
Insurance Underwriting:
Specialized Commercial $1,011,439 - 751,406 263,138 91,570 1,000,255
Medical Services 688,980 - 389,483 122,323 48,777 710,281
Business Insurance 531,465 - 397,786 170,155 34,673 477,515
Reinsurance 395,008 - 327,696 74,026 38,152 431,242
Personal Insurance 372,734 - 258,300 70,221 66,405 387,864
International 178,712 - 179,067 32,274 30,042 171,388
Net investment income - 646,396 - - - -
Other - - - - 53,211 -
--------- ------- ---------- ------- ------- ---------
Total $3,178,338 646,396 2,303,738 732,137 362,830 3,178,545
========= ======= ========= ======= ======= =========
1992
- ----
Property-Liability
Insurance Underwriting:
Specialized Commercial $1,050,936 - 868,570 282,938 77,583 1,058,127
Medical Services 722,172 - 403,990 134,442 40,471 712,021
Business Insurance 676,265 - 567,768 203,045 49,515 623,434
Reinsurance 361,093 - 558,305 79,950 37,194 343,045
Personal Insurance 206,746 - 161,038 66,593 22,953 225,974
International 126,034 - 130,375 22,337 21,159 179,818
Net investment income - 642,301 - - - -
Other - - - - 61,525 -
--------- ------- --------- ------- ------- ---------
Total $3,143,246 642,301 2,690,046 789,305 310,400 3,142,419
========= ======= ========= ======= ======= =========
1991
- ----
Property-Liability
Insurance Underwriting:
Specialized Commercial $1,122,561 - 854,842 260,721 56,099 1,137,504
Medical Services 685,402 - 370,232 134,141 39,357 716,768
Business Insurance 699,225 - 568,544 209,228 43,119 730,425
Reinsurance 375,427 - 386,358 80,238 34,939 363,997
Personal Insurance 198,212 - 129,498 62,907 18,837 203,527
International 65,411 - 56,095 9,863 13,223 81,508
Net investment income - 640,856 - - - -
Other - - - - 31,747 -
--------- ------- --------- ------- ------- ---------
Total $3,146,238 640,856 2,365,569 757,098 237,321 3,233,729
========= ======= ========= ======= ======= =========
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE VI - REINSURANCE
Years Ended December 31, 1993, 1992 and 1991
(In thousands of dollars)
Percentage
Property-liability Ceded to Assumed of amount
insurance Gross other from other Net assumed to
premiums earned: amount companies companies amount net
- ------------------ ------ --------- --------- ------ ----------
1993 $3,021,203 523,491 680,626 3,178,338 21.4%
========= ======= ======= =========
1992 $3,027,243 545,502 661,505 3,143,246 21.0%
========= ======= ======= =========
1991 $2,985,674 547,293 707,857 3,146,238 22.5%
========= ======= ======= =========
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1992 and 1991
(In thousands of dollars)
Additions
---------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of year expenses accounts Deductions(1) of year
- ----------- ---------- ----------- ---------- ------------- -------
1993
- ----
Real estate valuation
adjustment $ - 10,000 - - 10,000
======= ====== ===== ====== ======
Allowance for uncollectible:
Agency loans $ 5,000 3,000 - 3,250 4,750
======= ====== ===== ====== ======
Premiums receivable from:
Underwriting activities $ 7,314 8,756 - 1,068 15,002
======= ====== ===== ====== ======
Brokerage activities $ 18,771 1,637 - 1,339 19,069
======= ====== ===== ====== ======
Reinsurance $ 32,768 2,947 - 9,513 26,202
======= ====== ===== ====== ======
1992
- ----
Oil and gas valuation
adjustment for ceiling
test write-down $ 65,636 - - 65,636 -
======= ====== ===== ====== ======
Allowance for uncollectible:
Agency loans $ 5,000 - - - 5,000
======= ====== ===== ====== =====
Premiums receivable from:
Underwriting activities $ 12,344 2,496 - 7,526 7,314
======= ====== ===== ====== ======
Brokerage activities $ 20,843 1,992 - 4,064 18,771
======= ====== ===== ====== ======
Reinsurance $ 13,708 21,508 - 2,448 32,768
======= ====== ===== ====== ======
1991
- ----
Oil and gas valuation
adjustment for ceiling
test write-down $126,838 17,000 - 78,202 65,636
======= ====== ===== ====== ======
Allowance for uncollectible:
Agency loans $ 5,000 - - - 5,000
======= ====== ===== ====== ======
Premiums receivable from:
Underwriting activities $ 10,578 3,842 - 2,076 12,344
======= ====== ===== ====== =======
Brokerage activities $ 21,235 3,216 - 3,608 20,843
======= ====== ===== ====== =======
Reinsurance $ 15,869 283 - 2,444 13,708
======= ====== ===== ====== =======
(1) Deductions include write-offs of amounts determined to be uncollectible
and unrealized foreign exchange gains and losses. For the oil
and gas valuation adjustment, the deduction in 1992 and 1991
represents that portion of the accumulated ceiling test write-down
allocated to properties sold in those years.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
Years Ended December 31, 1993, 1992 and 1991
(In thousands of dollars)
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest rate
at end of interest rate during the during the during the
year at end of year year year(3) year
-------- -------------- ---------- ---------- ------------
1993
- ----
Short-term
borrowings:
Securities sold
under agreement
to repurchase(1) $80,383 3.6% $ 80,383 $ 661 3.6%
Bank borrowings(2) $ - - $124,000 $ 3,057 4.8%
1992
- ----
Short-term bank
borrowings(2) $20,000 5.8% $139,000 $12,498 4.1%
1991
- ----
Short-term bank
borrowings(2) $22,000 5.4% $ 54,000 $ 1,567 6.1%
(1) Represents short-term borrowings of Nuveen.
(2) Represents the collateralized bank borrowings of Nuveen.
(3) Based on weighted average daily amounts outstanding.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE X-SUPPLEMENTAL INFORMATION - PROPERTY-LIABILITY INSURANCE
(In thousands of dollars)
Gross
Deferred Reserves for
Policy Losses Discount Gross
Acquisition and Loss on Loss Unearned
At December 31 Expenses Adjustment Expenses Reserves Premiums
- -------------- ----------- ------------------- -------- --------
1993 $294,860 9,185,191 - 1,875,635
1992 $280,130 8,812,559 - 1,709,011
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE X-SUPPLEMENTAL INFORMATION - PROPERTY-LIABILITY INSURANCE
(In thousands of dollars)
Losses and Loss
Adjustment
Expenses Incurred Amortization
Related to of Deferred Paid Losses
Net ----------------- Policy and Loss
Year Ended Earned Investment Current Prior Acquisition Adjustment Premiums
December 31, Premiums Income Year(1) Years(1) Expenses Expenses Written
- ------------ -------- -------- -------- -------- ------------ ------------- ----------
1993 $3,178,338 646,396 2,526,675 (222,937) 732,137 2,126,515 3,178,545
1992 $3,143,246 642,301 2,941,214 (251,168) 789,305 2,160,091 3,142,419
1991 $3,146,238 640,856 2,607,896 (242,327) 757,098 1,953,750 3,233,729
(1) Current year and prior year losses and loss adjustment
expenses incurred for 1992 and 1991 were reclassified to
conform to the 1993 presentation, which includes the
results of the Registrant's U.K.-based underwriting
operation, St. Paul UK, in the current and prior year
information.
EXHIBIT INDEX*
-----------------
How
Exhibit Filed
- ------- -----
(2) Plan of acquisition, reorganization, arrangement,
liquidation, or succession**. . . . . . . . . . . . . . . . .
(3) Articles of incorporation and by-laws*** . . . . . . . .. . . .
(4) Instruments defining the rights of security holders,
including indentures. . . . . . . . . . . . . . . . . . . . .
(a) Specimen Common Stock Certificate***. . . . . . . . . . .
(b) Shareholder Protection Rights Agreement***. . . . . . . .
(9) Voting trust agreements** . . . . . . . . . . . . . . . .. . . .
(10) Material contracts
(a) Non-Employee Director Stock Retainer Plan***. . . . . . ..
(b) Outside Directors' Retirement Plan*** . . . . . . . . . ..
(c) Amended 1988 Stock Option Plan*** . . . . . . . . . . . ..
(d) Restricted Stock Award Plan***. . . . . . . . . . . . . ..
(e) Benefit Equalization Plan***. . . . . . . . . . . . . . ..
(f) Special Severance Policy*** . . . . . . . . . . . . . . ..
(g) Amended 1980 Stock Option Plan*** . . . . . . . . . . . ..
(h) Deferred Management Incentive Awards Agreement
- Prime Rate*** . . . . . . . . . . . . . . . . . . . ..
(i) Deferred Management Incentive Awards Agreement
- Phantom Stock***. . . . . . . . . . . . . . . . . . ..
(j) Directors' Deferred Compensation Agreement
- Prime Rate*** . . . . . . . . . . . . . . . . . . . ..
(k) Directors' Deferred Compensation Agreement
- Phantom Stock***. . . . . . . . . . . . . . . . . . ..
(l) Alternative Long-Term Incentive Plan*** . . . . . . . . ..
(m) Annual Incentive Plan***. . . . . . . . . . . . . . . . ..
(n) Executive Post-Retirement Life Insurance Plan***. . . . ..
(o) Executive Excess Long-Term Disability Plan*** . . . . . ..
(11) Statement re computation of per share earnings. . . . . .. . . . (1)
(12) Statement re computation of ratios. . . . . . . . . . . .. . . . (1)
(13) Annual report to security holders . . . . . . . . . . . .. . . . (1)
(16) Letter re change in certifying accountant** . . . . . . .. . . .
(18) Letter re change in accounting principles** . . . . . . .. . . .
(21) Subsidiaries of the Registrant. . . . . . . . . . . . . .. . . . (1)
(22) Published report regarding matters submitted to vote
of security holders** . . . . . . . . . . . . . . . . . . .. .
(23) Consents of experts and counsel . . . . . . . . . . . . .. . . . (1)
(24) Power of attorney . . . . . . . . . . . . . . . . . . . .. . . . (1)
(27) Financial data schedule** . . . . . . . . . . . . . . . .. . . .
(28) Information from reports furnished to state insurance
regulatory authorities****. . .. . . . . . . . .. . Paper Page 3
(99) Additional exhibits** . . . . . . . . . . . . . . . . . .. . . .
*The exhibits are included only with the copies of this report that are
filed with the Securities and Exchange Commission. However, copies of
the exhibits may be obtained from the Registrant for a reasonable fee by
writing to the Corporate Secretary, The St. Paul Companies, Inc.,
385 Washington Street, St. Paul, Minnesota 55102.
**These items are not applicable.
***These items are incorporated by reference as described in Item 14(a)(3)
of this report.
****Filed on paper under cover of Form SE in accordance with Rule 202 of
Regulation S-T.
(1) Filed electronically.